Spokesperson & Deputy Spokesman：
Name
Title
Tel
Fax
Email

SpokesmanPeng, Long-Min
Vice President,Corporate Communications Office886-3-399-8888
886-3-399-8640
daniel.peng@china-airlines.com

Deputy Spokesman
Chen, I-Chieh
Vice President,Finance Div.
886-3-399-8888
886-3-399-8313
jeffrey@china-airlines.com

Headquarter, Branches and Plant：
Organization Unit
Headquarter
Taipei Branch
Cargo Sales & Service, Taiwan
Kaohsiung Branch
Tainan Branch
Taichung Branch
Maintenance Div.
Cargo Sales & Services Mainland China
Beijing Office
Shanghai Office
Guangzhou OfficeShenzhen Office
Xian Office
Chengdu Office
Zhengzhou Office
Changsha Office
Shenyang Office
Xiamen OfficeNanjing OfficeNingbo OfficeHangzhou Office
Fuzhou Station
Chongqing Office
Dalian Station
Haikou OfficeNanchang Office
Sanya Station
Wenzhou Office
Wuxi Station
Yancheng Station
Qingdao Office
Yantai & Weihai Station
Urumqi OfficeWuhan Office
Changchun Office
Xuzhou OfficeHefei Office
Cargo Sales & Services, JapanTokyo Branch
Osaka Branch
Sapporo Branch
Shizuoka Station
Toyama Station
Kagoshima Branch
Miyazaki Station
Nagoya Branch
Fukuoka Branch
Hiroshima Branch
Takamatsu Station
Kumamoto Station
Okinawa Branch
Korea BranchBusan Branch
Hong Kong Branch
Thailand BranchBali Branch
Malaysia Branch
Penang Branch
Singapore Branch
Surabaya Branch
Cambodia Branch
Myanmar BranchPhilippines BranchIndonesia Branch
Vietnam Branch
Hanoi Branch
Palau Branch
Australia Branch
Brisbane Branch
Melbourne Branch
New Zealand Branch
India Branch
Los Angeles Branch
New York Branch
San Francisco Branch
Honolulu Branch
Anchorage Branch
Canada Branch
Cargo Sales & Services The Americas
Guam Branch
Netherlands Branch
Germany Branch
Italy Branch
Cargo Sales & Services, Europe
Austria Branch

Address
Tel
No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan
886-3-399-8888
No. 131, Section 3, Nanjing East Road, Taipei City 104, Taiwan
886-2-2715-2233
No.3, Aly. 123, Ln. 405, Dunhua N. Rd., Songshan Dist., Taipei City 105, Taiwan
886-2-2715-5151
6 Floor, Asia-Pacific Financial Plaza, No. 38 Of Xin Guang Road, Lingya District, Kaohsiung City 802, Taiwan
886-7-213-1200
Room A, 6 Floor, No. 358, Section 1, Tungmen Road, Tainan, Taiwan
886-6-235-8099
Room 2, 15th Floor, No. 218,Section 2, Taiwan Boulevard, West District, Taichung City 400, Taiwan
886-4-2325-9592
No.15, Hangqin S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan
886-3-383-4251
Suite 22i, No. 726 Of West Yanan Road, Changning District, Shanghai, China
86-21-2220-3292
Bright China Chang An Building, Tower 1, Unit 1111 7 Jianguomen Nei Avenue, Beijing, China
86-10-6510-2671
Suite 22a, No. 726 Of West Yanan Road, Changning District, Shanghai, China
86-21-2220-3389
Room 1210, 12th Floor, Teem Tower, No. 208 Of Tianhe Road, Tianhe District, Guangzhou, Guangdong, China
86-20-8527-2950
Room 4805, Office Tower, Shun Hing Di Wang Commercial Center, No. 5002 Of Shen Nan East Road, Luohu District,Shenzhen, Guangdong, China 86-755-8246-3560
Room 810, 8th Floor, Gaoxin Building 9, Gaoxin 4th Road, High-Tech Zone, Xi'an, Shaanxi, China
86-029-895-81909
1-1608,Baoli Centere Biilding.No.7,Consulate Rd,Chengdu, China
86-028-8602-7507
Rooms 1101-1102, Tower B, Yuhong International Building, No. 59 Of Zijingshan Road, Zhengzhou, Henan, China
86-371-5562-9880
Room 3404, Building 2, Block C, Kaifu Wanda Plaza, No. 589 Of Zhongshan Road, Changsha , Hunan, China
86-731-8224-0871
Room 2009, Tower E, Fortune Center, No. 59 Of North Station Road, Shen He District, Shenyang, Liaoning, China
86-24-3128-7021
Unit 3310, 33rd Floor, Bank Center, No. 189 Of Xiahe Road , Xiamen, Fujian, China
86-592-2388-388
Room B1-B2, Building38, Nanjing Center Building, No. 1 South Zhongshan Road, Qinhuai District, Nanjing, China
86-25-8467-1050
Room 1702, China Citic Building, No. 36 Of Zhenming Road, Haishu District, Ningbo, Zhejiang, China
86-574-8775-4090
Room2307 Building2,China Qian Tang Aviation,Shimin 'S Street 66,Jianggan District,Hangzhou, China
86-571-8668-4214
Room 2508, Zhonggeng Youth Plaza, No. 83. Of East Road, Gulou District, Fuzhou, Fujian, China
86-591-8755-9705
Room 2202,No.3 Building,Zhongyu Plaza,No.86 Of Hongjin Avenue, Yubei District, Chongqing, China
86-023-88280118
Room B4-008, Dalian International Airport, No. 96 Of Yingke Road, Ganjingzi District, Dalian, Liaoning, China
86-411-8388-6550
18e, Huanhai Business Building, No15, Jinmao W. Rd, Haukuo Hainan, China
86-898-6853-9677
Rm 701,Unit A,No.205 Guangchang S.Rd.,Nanchang,Jiangxi Province, China
86-0791-8378-0580
West Wing Office Area At Departure Terminal,Sanya Phoenix International Airport,Hainan
86-0898-8828-9677
Room 2310, Huameng Business Palace, No. 2 Of Chezhan Road, Lucheng District, Wenzhou, Zhejiang, China
86-0577-8605-2181
Room1403,No.8 Tianshan Road, New District,Jiangsu Province, China
86-510-8522-8710
Room B1207, East Building High-End Business Office (Hbo), Ren Min South Road No.1 , Yancheng, Jiangsu, China
86-515-8996-6950
Unit 2801,Office Tower,Shangri-La Centre,No.9 Xiang Gang Zhong Lu,Qingdao, China
86-532-6887-7106
Room25a15,No11 Nanda Street, Yitong International Building, Zhifu District, Yantai,Shandong, China
86-535-6223-802
H Unit 7th Floor, NO.16 Hongshan Road Tian Shan District, Urumqi Xinjiang, CHINA
86-991-2697788
Room 1315, 13 / F, New World International Trade Building, 568 Building Avenue, Wuhan, China
86-27-8555-8172
Rooms 6006, 6th Floor, Bai-Nau Technology Building, No. 1313 Of Gong Nong Road, Chaoyang District, Changchun, Jilin, China
86-431-89207672
Jiangsu Xuzhou, Jingpo West Rd Jitian Business E Building E110 Room, China
86-516-8379-0550
Rm 2505, Unit B,No18 Meishan Rd.Ifc,Hefei, Anhui, China
86-6377-0883
Nittochi-Uchisaiwaicho Bldg. 8f, 1-2-1 Uchisaiwaicho, Chiyoda-Ku, Tokyo, 100-0011, Japan
81-3-6378-8860
Nittochi-Uchisaiwaicho Bldg. 8f, 1-2-1 Uchisaiwaicho, Chiyoda-Ku, Tokyo, 100-0011, Japan
81-3-6378-8855
Nakanoshima Mitsui Bldg 9f 3-3, 3-Chome Nakanoshima Kita-Ku Osaka 530-0005, Japan
81-6-6459-5783
Kita 1 Jo Mitsui Building 3f, Kita 1, Nishi 5, Chuo-Ku, Sapporo Hokkaido, Japan
81-11-218-6766
Excelword Shizuoka Bldg 903, 11-30, Miyuki-Cho, Aoi-Ku Shizuoka-Shi, Shizuoka, 420-0857, Japan
81-54-205-0230
International Terminal Building 3f, 191 Akigashima, Toyama-Shi, 939-8252, Japan
81-76-461-7200
Kagoshima Chuo Terminal Bldg. 304, Chuo-Cho 11, Kagoshima, 890-0053, Japan
81-99-297-4900
Miyazaki Airport, Akae Miyazaki 880-0912, Japan
81-985-64-9277
3f, Nmf Nagoya-Fushimi Building, Nishiki2-9-27, Naka-Ku, Nagoya, Aichi, 460-0003 Japan
81-52-202-7253
8fl., Daihakata Bldg., 2-20-1 Hakata Ekimae, Hakata-Ku, Fukuoka 812-0011, Japan
81-92-471-7788
7f 2-7-10, Ote-Machi, Naka-Ku, Hiroshima-Shi, Hiroshima, 730-0051, Japan
81-82-542-0883
Takamatsu Airport Bldg.1312-7, Oka, Konan-Cho, Takamatsu-Shi, Kagawa, 761-1401 Japan
81-87-815-8702
Kumamoto Airport Int'l Terminal Bldg, 1802-2 Oyatsu, Mashiki-Machi, Kamimashiki-Gun, Kumamoto 861-2204, Japan
81-96-285-1090
Gojinsha Naha Matsuyama Bldg 3f, 2-1-12 Matsuyama, Naha City, Okinawa 900-0032, Japan
81-98-863-1013
12f, Donghwa Bldg. Seosomun-Ro 106 , Jung-Gu, Seoul, Korea 04513
82-2-317-8888
3f, Kyo-Won B/D, Jungang Daero 216 , Dong-Gu, Busan, Korea, 48733
82-51-462-8885
Suites 2701-2705, 27/F Devon House, Taikoo Place, 979 King's Road, Hong Kong852-2843-9800
4fl., The Golden Place Plaza,153 Rajadamri Rd.,Bangkok 10330,Thailand
66-2-250-9898
Departure Int'l Terminal 2nd FL., No A0-12B Ngurah Rai Airport. Tuban-Bali Indonesia
62-361-9357-298
Unit15.01-15.02, Level 15, Amoda Building, 22,Jalan Imbi, 55100 Kuala Lumpur, Malaysia
60-3-2148-9417
Unit 9.04, Level 9, Menara Boustead Penang, 39 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia
60-4-228-9227
302 Orchard Road, #14-01 Tong Building Singapore 238862
65-6-737-2144
Intiland Tower, 2nd Floor, Suite 9B, Jl. Panglima Sudirman No. 101-103 Surabaya 60271, Indonesia
62-31-547-0898
No. 32, Blvd Norodom, Sangkat Phsar Kandal Ii Khan Daun Penh, Phnom Penh, Cambodia
855-23-222-058
No. 353/355, Bo Aung Kyaw Street, Yangon, Myanmar
95-1-392-663
G/F Unit-1 Golden Empire Tower 1322 Roxas Boulevard Cor. Padre Faura St.Ermita Metro, Manila Philippines
63-2-354-6700~09
Intiland Tower, M1 Floor, Jl.Jend.Sudirman Kav.32, Jakarta 10220, Indonesia
62-21-251-0788
1b,7f Crescent Plaza 105 Ton Dat Tien St., Dist.7, Ho Chi Minh City, Vietnam84-28-5414-1008
4th Floor, Opera Business Center, 60 Ly Thai To Street, Hoan Kiem District, Hanoi, Vietnam84-24-39366-364
P.O. Box 10027 Koror, Republic Of Palau 96940
680-488-8888
Suite 1, Level 1, Central Terrace Building, 10 Arrivals Crt. Sydney International Airport Mascot Nsw 2020, Australia
61-2-8339-9188
Level 1, Brisbane International Terminal, Airport Drive, Brisbane Airport Qld 4008, Australia
61-7-3860-5611
Level 2, T2 North End, Terminal 2 Departure Drive Tullamarine, Melbourne Airport 3045
61-3-9907-0910
Gm60, Level 1, Auckland International Airport, Auckland 2150, New Zealand
64-9-256-8088
Office No. 323, 3rd Floor, MGF Metropolis, M.G. Road, Gurgaon 122001, Haryana, India
91-124-711-5000
200 N. Continental Blvd., Suite 100, El Segundo, Ca 90245, U.S.A.
1-310-322-2888
633 3rd Ave., 8th Fl., Suite 800, New York, NY 10017, U.S.A.
1-917-368-2000
433 Airport Blvd., Suite 501 Burlingame, Ca 94010, U.S.A.
1-650-931-8000
1600 Kapiolani Blvd., Suite 1401 Honolulu, Hi 96814, U.S.A.
1-808-955-0087
4600 Postmark Drive, Ste. Nb202, Anchorage, Ak99502, U.S.A.
1-907-249-2300
Suite 240-10451 Shellbridgeway, Richmond, British Columbia, V6x 2w8, Canada
1-604-242-1168
5651 West 96th Street, Los Angeles, CA 90045. U.S.A
1-310-646-1260
518 Pale San Vitores Road, Suite 202-203, Concorde Center, Tumon, Guam 96913, Usa
1-671-649-0861
Officia Gebouw I, De Boelelaan 7, 6th Floor, 1083 HJ Amsterdam, The Netherlands
31-20-646-1001
Gutleutstrasse 80, 60329 Frankfurt, Germany
49-69-297-0580
Viale Marco Polo, 71, 3f, Roma, Italy
39-06-474-5045
Room G2048, Cargo Center Luxair L-1360, Luxembourg
352-348-363-9504
Mariahilfer Strasse 123/8 O.G. 1060 Vienna, Austria
43-1-8130-156

Stock Transfer Agent：
Name：
CTBC Bank Co., Ltd.
Address：
5F., No.83, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei City 100, Taiwan
Website：http://www.ctbcbank.com
Tel：886-2-6636-5566

Overseas Securities Exchange：N/A
Corporate Website：http://www.china-airlines.com

Auditors：
Name：
Auditors：
Address：
Website：Tel：

Deloitte & Touche
Yang, Chen-Hsiu、Chen, Li-Chi
12F., No.156, Sec. 3, Minsheng E. Rd., Songshan Dist., Taipei City 105, Taiwan
http://www.deloitte.com.tw
886-2-2545-9988

Contents

I. Letter to Shareholders............................................................................................................................................. 1
II. Company Profile....................................................................................................................................................... 6
2.1 Date of Incorporation.............................................................................................................................................. 7
2.2 Company History..................................................................................................................................................... 7

III. Corporate Governance Report ......................................................................................................................... 10

3.1 Organization .......................................................................................................................................................... 11
3.2 Directors, and Management Team........................................................................................................................ 15
3.3 Implementation of Corporate Governance........................................................................................................... 36
3.4 Information Regarding the Company’s Audit Fee and Independence .................................................................. 61
3.5 Replacement of CPA .............................................................................................................................................. 62
3.6 Audit Independence.............................................................................................................................................. 62
3.7 Changes in Shareholding of Directors, Managers and Major Shareholders.......................................................... 63
3.8 Relationships among the Top Ten Shareholders ................................................................................................... 66
3.9 Ownership of Shares in Affiliated Enterprises....................................................................................................... 67

IV. Capital Overview................................................................................................................................................... 68

4.1 Capital and Shares................................................................................................................................................. 69
4.2 Bonds .................................................................................................................................................................... 73
4.3 Other Securities-Related Issues ............................................................................................................................ 74
4.4 Financing Plans and Implementation.................................................................................................................... 74

V. Operational Highlights ......................................................................................................................................... 75

5.1 Business Activities................................................................................................................................................. 76
5.2 Market and Sales Overview .................................................................................................................................. 85
5.3 Human Resources ................................................................................................................................................. 90
5.4 Environmental Protection Expenditure................................................................................................................. 90
5.5 Labor Relations ..................................................................................................................................................... 94
5.6 Important Contracts.............................................................................................................................................. 98

VI. Financial Information ........................................................................................................................................ 103

6.1 Five-Year Financial Summary .............................................................................................................................. 104
6.2 Five-Year Financial Analysis................................................................................................................................. 109
6.3 Consolidated Financial Statements for the Years Ended December 31, 2016 and 2015, and Independent
Auditors’ Report.................................................................................................................................................. 113
6.4 Parent Company Only Financial Statements for the Years Ended December 31, 2016 and 2015 andIndependent Auditors’ Report............................................................................................................................ 113
6.5 Audit Committee’s Review Report ...................................................................................................................... 113

VII. Review of Financial Conditions, Operating Results, and Risk Management ................................. 114

7.1 Analysis of Financial Status ................................................................................................................................. 115
7.2 Analysis of Financial Performance ...................................................................................................................... 116
7.3 Analysis of Cash Flow .......................................................................................................................................... 116
7.4 Major Capital Expenditure Items ........................................................................................................................ 116
7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans andInvestment Plans for the Coming Year................................................................................................................ 117
7.6 Analysis of Risk Management ............................................................................................................................. 117

VIII Special Disclosure ............................................................................................................................................. 121

8.1 Summary of Affiliated Companies ...................................................................................................................... 122
8.2 Private Placement Securities in the Most Recent Years ...................................................................................... 128
8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years .............................. 128
8.4 Special Notes....................................................................................................................................................... 128
8.5 Situations with Major Impacts on Shareholder Equity or Share Prices............................................................... 128(Appendix 1) Consolidated Financial Statements for the Years Ended December 31, 2016
and 2015 and Independent Auditors’ Report........................................................................ 129(Appendix 2) Parent Company Only Financial Statements for the Years Ended December 31,
2016 and 2015 and Independent Auditors’ Report ............................................................. 182(Summary Translation)
This document is prepared in accordance with the Chinese version and is for reference only. In theevent of any discrepancy between the English version and the Chinese version, the Chinese version
shall prevail.

Letter to Shareholders
1.1 Operating Performance in 2016
1.2 Business Plan for 2017
1.3 Development Strategies

Letter to Shareholders

1

I. Letter to Shareholders
2016 was an extraordinary year for China Airlines.
There were difficulties brought on by global politicaland economic changes and China Airlines
experienced the most serious internal labor dispute
since its founding 57 years ago. It was an arduous
year with the internal and external conflicts andthreats; however, we remained diligent amongst the
rapid changes of the airline industry. We believethat facing challenges head on and staying resoluteis the foundation that allows this Taiwanese airline
to flourish amidst adversity.
China Airlines’ new recruitments, Airbus A350-900
long-range jet airliners, were added to the fleet in
the end of September 2016. Aside from being
known as being the most technologically advanced,
environmentally friendly, energy-efficient, spacious,and quiet, this addition also helped to reduce theage of our fleet. Shortly after their introduction, the
new cabin layouts and products meticulously
designed by the China Airlines team have received
recognition in many countries, including Japan’s
Good Design Award 5, Global Traveler’s “BestBusiness Class Seat Design,” TheDesignAir’s “BestBusiness Class Cabin Design 2016” and “Best New
Business Class Cabin 2016,” another example of
China Airlines’ quest to increase competitivenessand gain the admiration of travelers the world over.
Each plane adorned with China Airlines’ plumblossom relies on the hard work of countless
employees to successfully complete each flight.
China Airlines maintained its profits in 2016, theresult of the cooperative efforts of shareholders,managers, and all team members in the face of any
circumstance.

1.1 Operating Performance in2016
Operating income was NT$127.525 billion, down
4.43% from last year; net profit after tax was
NT$572 million, equating to a profit of NT$0.10 per
share.

1.1.1 Results of the businessstrategy Fleet:98 planes as of the end of December: 77 passenger
jets (including rentals) and 21 cargo aircrafts.

2 Letter to Shareholders

Five Boeing 737-800 passenger jets were rented in2016 for a period of eight years and two Boeing
777-300ER passenger jets were rented for a periodof 12 years. Four A350-900 passenger jets werepurchased and one A340-300 passenger jet and two
737-800 passenger jets were sold.

 Passenger flights:
Passenger flight operating income was NT$86.298
billion, down 1.83% from last year and accountingfor 67.67% of total operating income. As of the endof December, China Airlines offers passenger flights
to 81 destinations in 22 countries; Yangzhou, China
is a newly added destination. The newly acquired
A350 jets improves flights to Europe, allowing
passengers to fly directly to Amsterdam and Rome,
increases the number of weekly flights to New York,
Sydney, Brisbane, Auckland, Osaka, Takamatsu,
Yangon, and Kuala Lumpur, and optimizes the flighttimes to Delhi, Nanchang, Singapore, Surabaya, andGuam.

 Cargo flights:
Cargo flight operating income was NT$35.354 billion,
down 11.43% from last year and accounting for27.72% of total operating income. As of the end of
December, China Airlines offers cargo flights to 96
destinations in 29 countries; among these, all-cargo
aircraft services are offered for 33 destinations
covering Asia, Europe, and the Americas making 89
flights each week.

 Other operating income:
Other operating income, including in-flight duty-freesales, was NT$5.873 billion, up 4.58% from last year
and accounting for 4.61% of total operating income.

 Investments and earnings:
As of the end of December, China Airlines has
invested in 36 projects, including aviation, grounds,
logistics, and cargo activities. Annual investment
earnings were NT$101 million.

1.1.2 Business cash flow budget andprofitability analysis
 Cash flow:
Operating income was NT$127.525 billion, down
NT$5.917 billion from last year. Operating costs andexpenditures was NT$123.049 billion, down
NT$2.508 billion from last year.

Net profits before taxes was NT$1.538 billion, down
NT$5.3 billion from last year.
Net profits after taxes was NT$572 million, down
NT$5.192 billion from last year.

 Budget execution:
Expected operating income was NT$141.874 billion;
actual operating income was NT$127.525 billion(89.89%). Expected operating costs andexpenditures was NT$134.043 billion; actual
operating costs and expenditures was NT$123.049
billion (91.80%). Expected non-operating losses was
NT$1.652 billion; actual non-operating losses was
NT$2.938 billion. Annual actual net profit before
taxes was NT$1.538 billion, achieving 24.89% of thebudget.

 Profitability:
Return on assets

0.75%

Return on equity

1.00%

After-tax profit margin

0.45%

After-tax earnings per share

NT$0.10

1.1.3 Research and development
China Airlines endeavors to improve our overall
service quality and strives for excellence andinnovation. We continuously optimize our online
reservation platform to support smartphones andvarious payment methods. Our official website isoffered in 14 languages and provides online
customer services to enhance the customer
experience. We also raise China Airlines’
competitiveness by improving the exchange of
information within the company, quickly responding
to sales demand, and increasing the flexibility andefficiency of each department using our five main
data innovation and smart mobile strategies:
information security, mobilization, big data, cloud
applications, and customization.

1.2 Business Plan for 2017
The aviation industry’s operating environment isdeeply affected by a variety of factors including
global economic growth, oil prices, and political andeconomic circumstances. According to the latest
forecast published by Oxford Economics, the global
economic growth rate in 2017 will be 2.6%, slightly
more than 2016’s rate of 2.3%, which shows higher
optimism towards 2017 growth than the previous
year. However, Taiwan’s primary trading nations,
China and Japan, are seeing slowed or even nearzero economic growth, so concerns remain about
the overall economic growth momentum. Fuel costs
make up the bulk of operating costs in the aviationindustry and oil prices are expected to remain low inthe short term. Oil price fluctuations cannot beignored and in December 2016, OPEC and non-OPEC
oil producing nations agreed for the first time to a
global pact to limit supply. In the long term,international fuel prices are still expected to rise.
According to the December 2016 International Air
Transport Association (IATA) global aviation market
outlook report, due to the rapid development of the
air passenger market, overall supply growth isoutstripping demand growth. IATA estimates that in2017 this trend will also be seen in the Asia-Pacificregion with the supply and demand growth rates
reaching 7.6% and 7.0% respectively. Due to weak
air cargo demand in recent years and increased
cargo capacity on passenger airliners there iscontinued oversupply in the air cargo market. IATA
estimates that in 2017 cargo demand growth withreach approximately 3.5% while ATK (available
tonne kilometers) will grow by 5.0% resulting in a
cautiously optimistic outlook regarding overall air
freight market development.

1.2.1 Overall Fleet Capacity Plan
In order to take advantage of the demand growth
momentum in the passenger and cargo markets,
China Airlines’ 2017 Overall Fleet Capacity Plan
comprises 84 aircraft, one more than 2016. Of these,
passenger aircraft total 66, while cargo aircraft total
18. The changes by aircraft model are listed below:
Aircraft
Model
A333-300
A340-300
A350-900

End 2017

End 2016

Difference

24
0
10

24
4
2

0
-4
8

737-800
747-400
777-300ER

17
4
10

17
7
10

0
-3
0

E90

1

1

0

66

65

1

18

18

0

84

83

1

Total
Passenger
Airliners
747-400F
Total
Passenger
and Freight
Airliners

Letter to Shareholders31.2.2 Passenger Service
In cooperation with the government’s “NewSouthbound Policy”, in addition to continued
evaluation of adding new destinations and more
flights on Southeast Asian, Australian and New
Zealand routes, cross-strait route capacity will be
adjusted as necessary to stay in line with tightening
market demand.

 Cross-Strait Routes:
Following mainland Chinese restrictions on tour
group travel to Taiwan beginning in March 2016,group travel volume to the island has decreased
significantly. Capacity on some routes has alreadybeen adjusted. In addition to responding tocross-strait policy development and market
conditions, on January 24, 2017, China Airlines (CAL)Group acquired new flying rights and is actively
assessing the feasibility of adding routes and flights
to increase profitability of cross-strait services.

 Northeast Asian Routes:
Last year, about 6 million tourists travelled between
Taiwan and Japan and this number is expected toreach a new high in 2017. To take advantage of thisopportunity, in addition to increasing summer
season Taipei – Takamatsu flights from four to six
per week, the feasibility of increasing flights onother routes is also being assessed. The largest
growth was seen last year in the numbers of Korean
tourists visiting Taiwan. After inaugurating theTaipei – Daegu and Taipei – Busan routes, subsidiary
Tigerair Taiwan will continue to add flights and newroutes. Within the Group, the Korea route network
will continue to be strengthened and expanded toincrease market share.

 European Routes:
To optimize our European flight network andtimetable, China Airlines began offering exclusively
non-stop service beginning in December 2016 to all
European destinations including Frankfurt, Vienna,
Amsterdam, and Rome. Each week there are a totalof 16 flights with an average of two non-stop flights
to Europe daily, the most for any airline operating
Taiwan-Europe routes. In 2017, China Airlines Groupwill continue to introduce A350-900 airliners into
the fleet, as we evaluate adding flights on existing
routes and expanding to potential new routes. At
the same time, the Company seeks to expand thescope of airline partnerships to increase transport

4 Letter to Shareholders

capacity in order to provide passengers with thegreatest number of convenient flight options.

 Australia and New Zealand Routes
To meet market demand, during the peak season in2016, the number of flights was increased along theSydney and Christchurch routes. To coordinate
Southeast Asian routes with the “New Southbound
Policy”, Yangon flights were increased to seven per
week and Kuala Lumpur to 12 flights. In response to
the signing of an open skies agreement with
Australia on December 16, China Airlines willcontinue to evaluate adding new destinations andflights to Australia, New Zealand, and Southeast Asiaand actively expand the two-way travel network tostrengthen passenger services.

1.2.3 Cargo Service
IATA expects growth in global cargo market demandin 2017 and estimates cargo volume will reach 55.70
million tons, which is an increase of 3.5% from 2016.
In addition, the continued decrease in cargo rates
seen over recent years has slowed, so there iscautious optimism towards trends in air cargo in
2017. However, as cargo space on passenger aircraftcontinues to increase, supply will continue tooutpace demand. Also, with the recent rise ofprotectionism, there is concern regarding thepotential negative effects on global trade and such
trends must be watched carefully.

 Long-Haul Routes
Each week, China Airlines has 41 scheduled
long-haul cargo flights (34 Trans-Pacific flights and 7
European flights). Through flexible adjustment ofroutes and cargo capacity, trans-Pacific cargo flights
keep up with seasonal fruit exports. Flights to andfrom the US can take advantage of fifth freedom
stopovers in Osaka in order to further expand
revenue from the US and Japanese markets.
Additionally, as Boeing 777-300ER passenger planes
are put into operation, the cargo capacity of thesenew planes is being fully utilized. To optimize ourEuropean flight network, in August 2016 China
Airlines added a Sunday cargo flight to Luxembourg
via Delhi, which strengthens service to India’s
emerging market and expands our flight network.
The feasibility of adding a second European flight via
Delhi is also being explored to strengthen the
Company’s market competitiveness.

 Asian Routes:
Each week there are 48 scheduled cargo flights. In
greater China, we have leveraged our advantages in
Guangzhou, Shenzhen, Xiamen, and Hong Kongflights to increase cargo shipments from Southern
China. In Japan, the Company continues to focus on
key air cargo products such as precision instruments/ machine equipment, cars, and car parts and utilize
fifth freedom traffic rights to expand import andexport cargo transit on transoceanic flights via Japan.
In ASEAN emerging markets, as the air cargodemand for electronics and textiles increases, wewill continue to cultivate Singapore, Vietnam,
Malaysia, Indonesia, the Philippines, and Thailand to
take advantage of inter-Asia freight transportationneeds. Depending on market demand, plans are inplace to add a Singapore – Penang cargo flight in thefirst quarter of 2017.

 Alliances Inside and Outside the Industry:In addition to actively working with companies
within the international air cargo industry (UPS,FedEx, SF Express) to expand express delivery cargobusiness, through code-share charters and signingcooperation agreements, China Airlines will further
expand our network to new markets in Central andSouth America and Africa. Through sharing
marketing, networks, and resources with othermembers of the SkyTeam Cargo alliance, theCompany’s global air cargo footprint has beenstrengthened.

1.3 Development Strategies
Looking towards 2017, further restrictions on
Chinese tourist visits, extreme competition in theJapanese and Korean markets, and potential
increases in oil prices are on the horizon. To breakfree from this difficult environment and market
turmoil, China Airlines will focus on our basic
promise to all stakeholders, “Safety” and“Profitability”.
China Airlines has consistently passed world’s moststringent aviation safety review, the IATA
Operational Safety Audit. With this strong
foundation and absolute commitment to safety
without compromise, we will continue to implement
concrete steps to further improve flight safety andensure that each safety measure meets the highest
international standards to best safeguard ourpassengers.
To increase profitability, China Airlines continues tooptimize
flightroutes,while
increasing
competitiveness of our products and services. In
coordination with the government’s “NewSouthbound Policy”, we will effectively utilize flightcapacity in potential Southeast Asian destinations tocreate new opportunities in this ultra-competitivemarket. Secondly, China Airlines will join with Japan
Airlines to offer code-share flights for all Taiwan –Japan routes, providing customers with morechoices and maintaining our competitive niche.
Following introduction of the A350 to our fleet,
China Airlines now provides non-stop only service toEurope and the most complete Taiwan to Europe
flight network, which will consolidate our leading
position in the Taiwan – Europe market.
In recent years, growth in civil aircraft numbers in
the Asia-Pacific region has accelerated. Taiwan iscentrally located within the region and prospects arebright for the development of airplane maintenanceservices. China Airlines is also discussing acollaboration plan with Airbus and Aerospace
Industrial Development Corporation. With thesupport of Airbus, CAL can upgrade our maintenance,engineering, and technical training capabilities toprovide services to Asian A350 airliners visiting
Taiwan, which is a long term development
opportunity for China Airlines.
China Airlines will continue to live up to our mostbasic promise to stakeholders, “Safety” and“Profitability”. Every member of the China Airline’s
family works together to burnish our brand image,earn the respect of our community, and lead theCompany to a new generation of development!

Chairman: Ho, Nuan-Hsuan
President: Hsieh, Su-Chien
Vice President, Finance Div.:
Chen, I-Chieh

Letter to Shareholders

5Company Profile
2.1 Date of Incorporation
2.2 Company History

6 Company Profile

II. Company Profile
2.1 Date of Incorporation
September 7, 1959

2.2 Company History
1959: China Airlines (CAL) was founded by 26 retired
members of the Air Force with TWD 400,000 incapital. The Company flew charter flights using two
rented PBY seaplanes.
1961: Provided military supply transport to Laos.
1962: Flew special cargo missions for the Vietnamese
government and USARV. Inaugurated the first
domestic route from Taipei to Hualien.
1966: Inaugurated the first international route from Taipei
to Saigon (now Ho Chi Minh City), marking ourofficial start in international aviation.
1967: Inaugurated Northeast Asia routes.
1970: Developed trans-Pacific routes to explore the US
market.

1994: New engine repair plant became operational andSongshan Training Minquan Building opened. Set up
China Pacific Catering Services as a joint venturewith the Swire Group.
1995: First flights to Switzerland and Italy. Entered into a
joint venture with Pratt & Whitney and SIA
Engineering Company Limited to establish AsianCompressor Technology Services Co. in Taiwan.
Invested in CAL-Asia Investments Inc. Launched our"plum blossom" logo.
1996: Inaugurated the Taipei-Penang cargo route.
1997: Inaugurated the Kaohsiung – Hong Kong – Jakarta
route. Established the first cargo only flights
between Asia and Miami. Established code share
flights with Continental Airlines and American
Airlines. Invested in Huasheng Investment Company
and China Pacific Laundry Services Ltd.
1998: Set up our Penang Branch Office and Hanoi Branch.
Began using the Third Maintenance Hangar.
1999: Inaugurated cargo flight routes to Sydney, Delhi,
and Colombo. Set up Kaohsiung Airport Catering
Services as a joint venture with TransAsia Airlines
and Far Eastern Air Transport. Established Chung
Hwa Express Corp. as a joint venture with Chunghwa
Post. Established TACT Logistics through investment
transfer.

1976: Inaugurated Middle East and Saudi Arabia Routes.
1978: Invested in Taoyuan International Airport Services
Co., Ltd.
1980: Invested in Dynasty Holidays, Inc.
1983: Expanded European routes.
1986: Divided the Operations Division into Passenger
Division and Cargo Division to expand operations.
1988: Twenty-seven shareholders donated shares toestablish the China Aviation Development
Foundation, transferring the rights of supervisionand management to society.
1989: Invested in Hwa Hsia Co., Ltd. and Tai Kong Ju
Investment Co., Ltd.
1990: Added Phuket and Bali destinations. Invested in
Abacus Distribution Systems (Taiwan) Ltd.

2000: Launched Canada, Australia and New Zealand routes
and Taipei-Guam, Taipei – Manila, Kaohsiung –Manila, Hakodate charter, and Taipei – Penang
passenger flights and Frankfurt cargo flights.
Established Shanghai office in Mainland China andnew branch offices in Canada, Australia, New
Zealand and Guam. Established YesTrip Travel
Internet Technology Co.
2001: Inaugurated cargo flight routes to Seattle andNashville. Made indirect investment in Xiamen
International Airport Co., Ltd. Set up code-share
flights with Delta Airlines. Introduced A340-300
passenger jets.
2002: Inaugurated passenger flight routes to Delhi andcargo routes to Manchester. Received approval toinvest in China Cargo Airlines. Ordered 18 Airbus
A330 passenger aircraft and 10 Boeing 747-400
cargo and passenger aircraft. Rejoined theInternational Air Transport Association (IATA).

1991: Established Hua Mei Investment Company and
Mandarin Airlines. The Ministry of Finance approved
the public offering of China Airlines shares.
1992: Resumed flights to Ho Chi Minh City. The Taiwan
Stock Exchange approved the listing of China
Airlines shares. The Company gained 100% equity
interest in Mandarin Airlines.
1993: First flight to Frankfurt. Established German Branch
Office. Officially listed on the Taiwan Stock
Exchange.

Company Profile7

2003: Inaugurated the first cross-strait Spring Festival
charter flight. Inaugurated charter flights to Seoul
and passenger routes to Brisbane and Hanoi andnon-stop flights to Hawaii. Inaugurated cargo flightroutes to Ho Chi Minh City and Delhi. Created theParagon Card, the highest Dynasty Flyer
membership tier. Received the Outstanding Service
Award from the R.O.C. President.
2004: Launched sea-air transport charter flights.
Inaugurated Hiroshima passenger flights and cargoroutes to Milan and Prague. Introduced three
A330-300 passenger jets, two Boeing 747-400
passenger jets and two Boeing 747-400 freighters.
2005: Flew the first direct charter flights to Beijing, andSpring Festival charters to Guangzhou and Shanghai.
Inaugurated Vienna passenger flight route andNagoya and Vienna cargo flight routes. Invested in
China Aircraft Services Limited.
2006: Inaugurated cargo flight routes to Osaka, Hanoi,
Houston and Stockholm. Flew the first cargo charter
flight to Shanghai. Invested in Yangtze River Express
Airlines Company. Began construction on the
Taoyuan International Airport Airline Business
Operation Center.
2007: Signed a letter of intent to purchase with Airbus.
Announced contract with AccorHotels for a new
airport hotel. Inaugurated regularly-scheduled
passenger flights between Kaohsiung and Chiang
Mai.
2008: Launched cross-strait humanitarian charter flights
direct to Chengdu to deliver disaster relief supplies
at no charge. Inaugurated cross-strait holiday
charter flights, weekend charter flights to Shanghai,
Beijing, Xiamen, and Guangzhou, and cross-strait
direct cargo charter flights.
2009: Inaugurated the Taipei-Osaka-Los Angeles cargoflight route. Inaugurated scheduled cross-strait
flights to Zhengzhou, Xiamen, Xi'an, Ningbo,
Shenyang, and Changsha. Became an official
member of IATA's e-Freight program. Inaugurated
Taiwan's largest 120,000-pound power plant testing
platform.
2010: New routes: Passenger routes between Taipei andthe cities of Miyazaki, London, and Qingdao,
Songshan Airport to Hongqiao and Haneda, andKaohsiung to Xiamen and Narita, direct cargo flights
to Xiamen, Nanjing and Fuzhou as well as the special
cargo charter flight direct to Xi'an. EstablishedCompany headquarters in China Airlines Park andwon the National Building Golden Award andNational First Award.
2011: New routes: Taipei-Brisbane-Auckland;
Taipei-Osaka-New York; flights to and from Taipei
and Wuhan, Sanya, Yancheng, Haikou, Nanchang
and Dalian; Taicheng to Chongqing and Nanchang;

8 Company Profile

Kaohsiung to Changsha, Chongqing, Beijing, andKuala Lumpur. Officially joined SkyTeam, becoming
the first Taiwanese airline member of aninternational airline alliance.
2012: New routes: Songshan to Wenzhou and Gimpo
Airport, Taipei to Kagoshima, Shizuoka and Toyama,
added Auckland leg to the Taipei – Sydney route,and Taipei to Seoul and Yangon. Joined SkyTeam
Cargo becoming the first Taiwanese airline to join aninternational air cargo alliance. Renovated thecabins of nine Boeing 747-400 passenger jets to
install new cabin seats and video systems. Signed a
Memorandum of Strategic Cooperation with
Chunghwa Telecom. Signed an OnPoint Fuel &Carbon Solutions Agreement with GE Aviation.
Awarded Business Next Magazine’s Super Green
Jury Award and First Place in the Green Brand
Awards 2012 Transportation Category, Gold Award
in Reader's Digest Trusted Brands 2012, the Sports
Activists Award from Sports Affairs Council, First
Place in Management Magazine’s Consumer Brand
Survey, and the 2012 Energy Conservation andCarbon Reduction Action Label Excellence Award.
The China Airlines Maintenance Facility received ISO
14001 Environment Management System
Certification. Launched the world's first trans-Pacificclimate observation aircraft. Became the world's
first airline to display our carbon footprint andcalories for in-flight meals.
2013: Formed Greater China Connection Partnership with
China Southern, China Eastern and Xiamen Airlines.
Launched code-sharing services with Russia's
Transaero Airlines and Hawaiian Airlines andexpanded code-sharing services with China
Southern Airlines. Launched Taipei-Takamatsu route,
Chiayi-Shizuoka charter flights, Taipei-Hawaii directflights, Taipei-Urumqi and Lijiang routes. Launched
Taipei-Ishigaki, Tainan-Hong Kong, and Taipei-Busanroutes as well as Songshan-Matsuyama charter
flights. Launched the Taipei-Nanjing-Zhengzhou
cargo route and Taipei-Weihai flights. Launchedtemperature-controlled product cargo services.
Again awarded Business Next Magazine’s Super
Green Jury Award and First Place in the Green Brand
Awards 2013 Transportation Category. Awarded Top
Aviation Brand in Manager Today‘s Power Brands
Survey 2013 and Reader's Digest Trusted Brands
Gold Award. Won the National Standardization
Awards’ Corporate Standardization Award, 3rd
Taiwan Green Classics Award, Global Views Service
Excellence Award 2013, and EPA’s 22nd Business
Environmental Award.
2014: Awarded the EPA’s 23rd Business Environmental
Award and the International Green Classics Award
2014 and earned ISO 14001 Environment
Management System Expansion Certification andISO 50001 Energy Management System Setup
Certification. Again awarded Business Next
Magazine’s Super Green Jury Award and earnedFirst Place in the Green Brand Awards
Transportation Category for the third time.

Inaugurated the Songshan-Fuzhou and Taipei toChangchun, Hefei, Yantai, and Xuzhou routes. Won
the Annual Best of Design Awards in the 2014
Golden Pin Design Award for our NextGen 777
aircraft cabin design and named the Best Airline inNorth Asia by Global Traveler.
2015: Launched Taipei-Wuxi; Kaohsiung to Changzhou,
Kumamoto, and Fukuoka; Taipei-Melbourne with anextension to Christchurch; and Tainan-Osaka flights.
Launched social media customer services, a first for
Taiwan. Established an airplane maintenancetraining center. Received the following awards:
 Brand Service:
CAA 2014 Golden Wing Awards, Second place in
TheDesignAir Global Passenger Choice Top 10
Airlines Awards 2015, Reader's Digest Trusted
Brands Gold Award, three top awards in the
Global Traveler reader survey.
 Corporate Social Responsibility:
2015 TCSA Taiwan Corporate SustainabilityAward, EPA’s Business Environmental Awards.

 Product Design:
Received 5 iF Design Awards for the Boeing
777-300ER passenger cabin, software userinterface, tableware design, Sky Lounge design
packaging, and Taiwan Taoyuan Airport Terminal
1 Lounge. A double win in TheDesignAir Awards
2016.
 Other:
Selected as a Dow Jones Sustainability Indicesconstituent stock, the first such honor for a
Taiwanese company and emerging market airline.
2017: Signed a memorandum of understanding with KLM.
Expanded codeshare operations with JAL to all
Taiwan-Japan flights operated by the two carriers.
Signed a memorandum of understanding with
Airbus to strengthen aircraft maintenancecooperation. Signed a memorandum of
understanding with NORDAM Aerospace
Maintenance Group to provide maintenanceservices for thrust reversers and composite
aerospace parts.

 Product Design:
The NextGen 777-300ER passenger cabin design
was awarded the Red Dot Design Award 2015,
Family Couch design received the Global Traveler
Leisure Travel Innovation Excellence Award, Won
National Industry Innovation Award for NexGen
Aesthetics.
 Other:
Centers for Disease Control Epidemic Prevention
Award 20152016: Launched Taipei-Yangzhou route and Taipei –Shenzhen cargo route. Inaugurated Chinese
passenger transit through Taiwan for onward China
Airlines flights. Increased free baggage allowanceby 10 kg and reduced regional excess baggage
charges. Took delivery of the first A350 airliner for
any Taiwanese carrier. Completed the Air Passenger
Transport Service – Product Carbon Footprint
Category Regulations together with the Civil
Aeronautics Administration. Received the below
awards: Brand Service:
PAX International magazine reader survey's 2016
Outstanding Food Service by a Carrier, Best
Premium Economy and Best Airline by Global
Traveler, China Airlines Dynasty In-flight
Magazine won APEX Award of Excellence, the CAL
website was named 2016 Best Airline Website by
WebAward.
 Corporate Social Responsibility:
Passed third-party audits for ISO 14001 and ISO
50001 Environmental Management Systems.
Received IOSA flight safety certification and the
TCSA Taiwan Corporate Sustainability Award
2016.

Company Profile

9

Corporate Governance Report
3.1 Organization
3.2 Directors and Management Team
3.3 Implementation of Corporate Governance
3.4 Information Regarding the Company’s Audit Fee andIndependence
3.5 Replacement of CPA
3.6 Audit Independence
3.7 Changes in Shareholding of Directors, Managers andMajor Shareholders
3.8 Relationships among the Top Ten Shareholders
3.9 Ownership of Shares in Affiliated Enterprises

10 Corporate Governance ReportIII. Corporate Governance Report
3.1 Organization
3.1.1 Organizational Chart

Corporate Governance Report113.1.2 Major Corporate Functions
Department
General Audit Office

Functions
Responsible for auditing the internal control system, results of implementation of theannual business plan.

Secretarial Office, Board Responsible for holding Board of Directors meetings, collating and sending meeting
Of Directors

proceedings and overseeing matters relating to resolutions, coordination channels
with general public stockholders, matters relating to juridical person shareholder
representatives, director communications and services, and budgeting and controls
for the Board and all functional committees.

Corporate Development Responsible for drafting the Company’s medium and long-term strategic operating
Officeplan, fleet plan, and annual business plan; seeking flying rights and building
relationships between the Company and civil aviation authorities in various countries;
establishing brand position and development strategies; planning medium andlong-term design and development of passenger cabins and entertainment systems;
purchasing, selling, and leasing of aircraft; evaluation and planning of Company
investments; and supervising the operational performance and management ofinvested enterprises.

Corporate Safety Office Drafts Company safety, security, quality assurance, environmental, and emergency
response policies and systems; establishes related management systems and carries
out educational training; implements related investigations, analysis, andexaminations; coordinates with government agencies and civil aviation authorities,
manufacturers, and groups to deal with Company safety, security, quality assurance,
environmental, and emergency response-related issues.
Corporate

Responsible for external Company communications, communication links with theCommunications Office legislature and the media, planning social welfare activities, sponsoring charitable
activities, organizing inaugural flights and other holiday or celebratory activities,
publishing CAL Park Magazine, supervising and coordinating publication of Dynasty
Magazine, organizing employee recreational activities, and setting the Company’s
brand image and advertising strategy.
Legal & Insurance Div.

Responsible for reviewing all outside agreements and contracts, handling litigation,and management of insurance matters for Company assets, such as the fleet andaeronautical parts, personnel, and passenger and cargo transportation.

Finance Div.

Responsible for planning financing sources, managing use of funds, controlling thebudget, auditing accounts receivable and payable items, preparing financial
statements, managing tax-related issues, fuel purchasing, and providing accounting
and cost analysis information.

Administration Div.

Responsible for procurement of general goods, managing renovation projects andland/real estate, land transport management and vehicle maintenance, supervising
CAL Park security and access control management, handling company licenses,
monitoring and safekeeping of Company seals, sending and receipt of prospectuses
and official documents, and document management.

12 Corporate Governance ReportDepartment
Cabin Crew Div.

Functions
Responsible for establishing cabin crew operating standards, managing training of
cabin crew, planning cabin crew manpower needs, and implementing assignment of
cabin crew personnel.

Ground Services Div.

Responsible for establishing ground services operating standards, development of theground services operating system, planning and implementation of a full range ofground services training, supervising ground services operations at each station,
providing ground services at Taiwan Taoyuan and Songshan Airports, and overallmanagement of ground service provider contracts.

In-Flight Service Supply Responsible for the R&D and planning for air and ground service supplies and in-flightDiv.

duty free products, planning and supply management for meal and drink service on
all routes, implementing and managing procurement, storage, preparation, andloading of all air and ground service supplies.

Service Quality

Established and implements the Company’s ISO 9001 quality management system

Assurance Dept.

and implements service quality education, internal quality auditor training, andmeasures to encourage better understanding of quality-related issues. Monitors
passenger satisfaction surveys and on-time targets, investigates and analyses
passenger satisfaction in relation to Company goals, and plans and implements
passenger service quality checks.

Passenger Sales Div.

Responsible for supervision of passenger flight route management, sales promotion
and supervision of passenger transport advertising and budget control at all stations,passenger seating controls, determining passenger ticket pricing and setting sales
quotas, and business performance evaluation. Established, develops, and maintains
the revenue management system and holds passenger sales training.

Passenger Marketing

Responsible for passenger service internet marketing, promoting Dynasty FlyerDiv.

membership, planning and promotion of Dynast Package products, and development
and management of related systems. Arranges the entire passenger flight table tooptimize aircraft use and revenue. Established and supervises the customer
relationship maintenance service mechanism, and handles and analyses passenger
opinions.

Information

Combines information technology with business knowledge to promote

Management Div.

computerization within the Company to upgrade operational competitiveness.

Human Resources Div.

Responsible for planning the Company organization and human resources,
establishment of a personnel management system, and setting pay standards.
Provides recruitment services, supervises personnel management, established theemployee training system and oversees future updates, provides employee healthmanagement, and manages personnel assignments to affiliated enterprises.

Occupational Safety &Writes the Company’s Occupational Health and Safety Manual and regulations;

Health Dept.

Drafts, plans, supervises, and promotes health and safety matters and guides
implementation in relevant departments in order to prevent occupational hazards
and ensure employee’s health and safety. Received OHSAS 18001 and CNS 15506
occupational health and safety certification following SGS audit to effectively control
occupational incident risk and improve occupational health and safety performance.

Corporate Governance Report13Department
Functions
Cargo Sales, Marketing Establishes the cargo development strategy, supervises cargo operations on all& Services Div.

routes, plans the cargo flight timetable and controls allocation of hold space, sets
cargo shipping rates and sales quotas, evaluates operating performance, drafts andoversees cargo services and operating standards, and is responsible for passenger
and cargo plane loading control operations, cargo equipment controls andreplenishment, Taipei cargo terminal operations, and accounting for the Cargo Sales,
Marketing & Services Division and Taiwan Cargo Center.

Flight Operations Div.

Responsible for cabin crew manpower requirement planning, training andmanagement of cabin crew, developing flight operating standards, controlling fuelconsumption, planning and implementation of crew and flight assignments, andmaintaining airplane flight manuals and flight simulators.

System Operation

Supervises the status of all flights, coordinates flight scheduling during abnormal

Control Div.

conditions, maintains flight on-time performance, provides real-time information toplanes in flight, ensures flight safety, investigates reasons behind major flight delays
to build complete aircraft and statistical analysis data; Implements and supervises
airline task assignments, arranges and receives overflight permits; Responsible for
operation-related safety management.

Maintenance Div.

Responsible for implementation of airplane maintenance, client aircraft maintenanceservices, support and supervision of station maintenance, and development ofmaintenance capabilities.

Engineering Div.

Responsible for the planning and control of airplane maintenance, materials supply
management, controlling maintenance costs, and planning the information systemdevelopment strategy.

Quality Assurance Div.

Responsible for coordination and communication with other countries’ civil aviation
authorities; maintaining the validity of operating standards, repair facility licenses,
and aircraft airworthiness certificates; authorization and management ofmaintenance personnel training and task assignments; formulation andimplementation of the quality audit system. Established and implements the aircraft
quality management and on-site inspection systems, implements introduction of new
aircraft and sale or return of aircraft as stipulated in the fleet plan, and assists inaircraft incident investigations.

Technical Training

Develops type training and license conversion training that comply with CAA 05-02A

Centerrequirements. By EMO(Engineering & Maintenance Organization) demands andcustomer requests, compose training plan and execute training accordingly.

Branch offices

Responsible for each branch’s development and promotion of passenger and freight
related operations.

14 Corporate Governance Report3.2 Directors and Management Team3.2.1 Directors
APR 24, 2017

Title

Name

China
Aviation
Development Foundation

Nationality/
Country of Gender
OriginR.O.C.

-

Date FirstElected

Date
Elected07/07/1988 06/26/2015

Ter
m
(Yea
rs)

3

Shareholding when
ElectedCurrent Shareholding

Spouse & Minor
Shareholding

Shares%Shares%Shares

%

Sh
ar
es

%

1,867,341,935

34.14%

1,867,341,935

34.13%

-

-

-

-

Cha
irm
an Represent
ative:
Ho,
Nuan-Hsuan

R.O.C.

Male

06/24/2016 06/26/2015

(Note
1)

R.O.C.

-

07/07/1988 06/26/2015

3

Shareholding byNomineeArrangem
ent

0

0.00%

0

0.00%

1,867,341,935

34.14%

1,867,341,935

34.13%

0 0.00%Experience(Education)

Other Position

Executives,
Directors or
Supervisors
who arespouses orwithin two
degrees ofkinship

Rel
Titl Na
ati
e me
on

-

-

-

-

-

Chairman, Taoyuan Metro
Chairman, China
No Non No
Corporation
Airlines Ltd.
ne e neMember, The Coordination
Chairman, CAL Park
Council for North American
Co., Ltd
Affairs, Executive Yuan
Chairman, CAL-Asia
Administrative Deputy
Investment Inc.
Minister, Ministry of
Chairman,Transportation and
CAL-Dynasty
Communications
International, Inc.
Chairman, Chunghwa Post
Chairman, CAL Hotel
Co., Ltd.
Co., Ltd.
Vice Chairman, China
0 0.00% Director-General, Taiwan
Railway Administration,
Pacific Catering
MOTC
Services Ltd.
Director-General, Bureau of Director, China
High Speed Rail, MOTC
Aviation
Director-General, Taiwan
Development
Area National Freeway
Foundation
Bureau, MOTC
PhD in Industrial Engineeringand Management, Chung Hua
University

China

Dir
AviationectDevelopmen
or

-

-

-

-

-

-

-

-

-

t Foundation

Represent
ative:
Hsieh,
Su-Chien

Represent
ative:Charles
C.Y., Chen

R.O.C.

Male

07/06/2016 06/26/2015

(Note
2)

48,5170.00%

48,5170.00%

0 0.00%Chairman, Taiwan Air Cargo President, China
No Non No
Terminal Ltd.
Airlines Ltd.
ne e neSenior Vice President ofChairman, Mandarin
Marketing, China Airlines Ltd. Airlines, Ltd.
Director of Taiwan Region
Director&President,
and General Manager of
CAL Park Co., Ltd.
Taipei Branch Office, China
Director, CAL Hotel
Airlines Ltd.
Co., Ltd.
General Manager, Australia Director, CAL-Asia
Branch Office, China Airlines Investment Inc.
Ltd.
Director, CAL-Dynasty
General Manager, Indonesia International, Inc.
Branch Office, China Airlines Director, Dynasty
Properties Co., Ltd.
0 0.00% Ltd.
General Manager, Kaohsiung Director, Taoyuan
Branch Office, China Airlines International Airport
Ltd.
Services Co., Ltd.
Director, China Aviation
Development Foundation
Chairman, Abacus
Distribution Systems Taiwan
Ltd.
Bachelor’s Degree,
Department of Economics,
Soochow University

Director, Wan Hai Lines Ltd.
Chairman, UTAC Group,
Singapore
Chairman, Epistar Corp.
Director, Formosa
International Hotels Corp.
Director, Ascendas Pte. Ltd.
MBA, New York University,
U.S.A.
R.O.C.

Male

07/01/2000 06/26/2015

3

190,166

0.00%

190,166

0.00%

155,849 0.00%

0 0.00%Chairman, Eyon
No Non No
Holding Groupne e neVice Chairman,
Taiwan Air Cargo
Terminal Ltd.
Vice Chairman, Taian
Insurance Co., Ltd.
Director, Epistar Corp.
Director, Ichia
Technologies, Inc.
Chairman, Wan Hai
International Pte. Ltd.
President, Chen-Yung
Foundation
Adjunct Associate
Professor, National
Tsing Hua University

Corporate Governance Report15

TitleName

Nationality/
Country of Gender
OriginDate FirstElected

Date
Elected

Ter
m
(Yea
rs)

Shareholding when
ElectedShares%Current Shareholding

Shares%Spouse & Minor
Shareholding

Shares%Shareholding byNomineeArrangem
ent
Sh
ar
es

Experience(Education)%
Chairman, Central Trading &Development Corp.
BA in Finance, Boston
University, U.S.A.

Represent
ative:
Ting,
Kwang-Hung

Represent
ative:
Jong,
Jia-shi

Represent
ative:
Lee, KuoFu

Represent
ative:
Cheng,
Chuan-Yi

Represent
ative:
Chen,
Han-Ming

R.O.C.

R.O.C.

R.O.C.

R.O.C.

Male

Male

Male

Male

01/28/2008 06/26/2015

08/09/2016 06/26/2015

07/13/2015 06/26/2015

07/26/2016 06/26/2015

3

0

(Note
3)

543

(Note
4)

10,859(Note
5)

R.O.C.

Male

07/26/2016 06/26/2015

(Note
5)

R.O.C.

-

06/15/2012 06/26/2015

3

0

0.00%

0.00%

0.00%

0.00%

0

543

10,85900.00%

0 0.00%

0.00%

0.00%

0 0.00%10,473 0.00%

0.00%

0

0.00%

0

0.00%

519,750,519

9.50%

519,750,519

9.50%

0 0.00%0 0.00%

Other Position

0 0.00%Member, Risk
Committee, China
Airlines Ltd.
Chairman, Central
Trading &Development Corp.
Chairman, Phu My
Hung Asia Holdings
Corp.
Chairman, Phu My
Hung Development
Corp.
Chairman, Hiep Phuoc
Power Co., Ltd.
Chairman, Macro
Technologies Inc.
(Vietnam) Ltd.
Vice Chairman, TVBSMedia Inc.
Visiting Professor,
College ofManagement of
National Taiwan
Normal University

Executives,
Directors or
Supervisors
who arespouses orwithin two
degrees ofkinship

Rel
Titl Naati
e meon
No Non No
ne e neStanding Director, China
Chairman, China
Airlines Employee Union
Airlines Employee
Mission Association
Union.
Representative, China
Technician, Surface
Airlines Employee Union
Treatment EMO
Mechanic, Engine Repair
Engine MaintenanceTechnician, R.O.C. Air Force Department China
Republic of China Air Force, Airlines Ltd.
0 0.00% Technical School,
non-commissioned officers
classes 85 Mechanical
Associate Degree, MechanicalEngineering Section,
Southeast Private JuniorCollege

No Non No
ne e neFirst Officer By AB6Fleet
First Officer And Cruise
Captain By 744Fleet
Director, Jiantan Community
Development Association
Test Pilot, R.O.C. Air Force
Lieutenant Colonel,R.O.C. Air
0 0.00% Force
Research Officer Of Flight
Safety, National Taiwan
University
Bachelor’s Degree of
Science,R.O.C. Air Force
Academy, Taiwan

No Non No
ne e ne744 Captain, China
Airlines Ltd.
Standing Director,
China Airlines
Employee Union
Director, Federationof Aviation
Employees, R.O.C.

President, EVA Air
None
Executive Vice President, EVA
Air
Bachelor’s Degree,
0 0.00%Department of International
Business, Tunghai University

Director, Yuan-Chin
Development Co., Ltd.
Member, Rotary Club Of
Taipei Tunhua
BA(Hons) Architecture,
0 0.00%
University of Plymouth, UK
MSc, Birmingham City
University, UK

No Non No
ne e neChairman, Prime
No Non No
Development Co., Ltd. ne e ne
Supervisor, Chang-Jia
M&E Engineering
Corp.
Director, Chyn-Tay
Bearing Co., Ltd.

National

Dir Developmen
ect t Fund,or Executive
Yuan

16 Corporate Governance Report

-

-

-

-

-

-

-

-

-

TitleName

Nationality/
Country of Gender
OriginDate FirstElected

Date
Elected

Ter
m
(Yea
rs)

Shareholding when
ElectedSharesRepresent
ative:
Lin,
Su-Ming

R.O.C.

Male

Chunghwa
Telecom Co.,
Ltd.

R.O.C.

-Dir
ect
or Represent
ative:
Huang,
Hsiu-Gu

Ind
epe
nde
Chung,
nt
Lo-Min
Dir
ect
or

Ind
epe
nde Luo,nt Hsiao-Hsie
Dir n
ect
or

06/15/2012 06/26/2015
R.O.C.

R.O.C.

R.O.C.

Male

06/15/2012 06/26/2015

%

0

0.00%

0

0.00%

263,622,116

4.82%

263,622,116

4.82%

0

06/15/2012 06/26/2015

SharesSpouse & Minor
Shareholding

Shares

%0 0.00%

-

-

3

Male

Male

%

Current Shareholding

3

3

0

0

0.00%

0.00%

0.00%

0

0

0

0.00%

0.00%

0.00%

0 0.00%0 0.00%0 0.00%Shareholding byNomineeArrangem
ent
Sh
ar
es

Experience(Education)%

Member, Tax Reform
Commission, Executive Yuan
Member, Administration
Appeals Commission, Taipei
City Government
Deputy Dean, College ofManagement, National
0 0.00% Taiwan University
Chairman, Department andGraduate Institute of
Accounting, National Taiwan
University
Ph.D. in Accounting, ArizonaState University, U.S.A.

-

Other Position--

Member, Risk
Committee, China
Airlines Ltd.
Public Director, Taipei
Exchange, R.O.C.
Independent Director,
Nan Shan Life
Insurance Co., Ltd.
Director, iPASS Corp.
Professor,
Department &Graduate Institute of
Accounting, National
Taiwan University-

Executives,
Directors or
Supervisors
who arespouses orwithin two
degrees ofkinship

Rel
Titl Naati
e meon
No Non No
ne e ne---Sen. Exe. VP & CTO,
Member, Risk
No Non No
Chunghwa Telecom Co., Ltd. Committee, China
ne e nePresident, International
Airlines Ltd.
Business Group, Chunghwa
Director, The Chinese
Telecom Co., Ltd.
Institute of Electrical
President, EnterpriseEngineering
Business Group, Chunghwa
Director, Taipei
Telecom Co., Ltd.
Computer Association
Managing Director,
Director, Taipei
0 0.00% Enterprise Business Division, Financial Center Corp.
Chunghwa Telecom Co., Ltd. Chairman, Smartfun
Managing Director, Design
Digital Co., Ltd.
Division, Chunghwa Telecom
Co., Ltd.
M.S. in Management Science,
National Chiao Tung
University
Chairman, China Steel
Chemical Corp.
Chairman, Universal
eXchange Inc.
Exec. VP, China Steel Corp.
0 0.00% VP of Finance, China Steel
Corp.
MBA, Arizona State
University, U.S.A.

Chairman, Audit
Committee, China
Airlines Ltd.

No Non No
ne e neCommissioner, Department Chairman,
No Non No
of Transportation, Taipei City Remunerationne e neGovernment
Committee, China
Mayor Advisor, Taipei City
Airlines Ltd.
Government
Chairman, Risk
President, Taipei Society for Committee, China
Traffic Safety
Airlines Ltd.
Acting Chairman, Managing Member, Audit
Director, Taipei Rapid Transit Committee, China
Corp.
Airlines Ltd.
Director, EasyCard
Associate Professor
Investment Holdings Corp.
and Dean of Generaland Easy Card Corp.
Affairs, Department
Chairman and Member,of Transportation
Transportation Committee,
Management,
Consumers' Foundation,
Tamkang University
Chinese Taipei
President, Chinese
Chairman, Department ofInstitute ofTransportation Management, Transportation
Tamkang University
Director, Eastern Asia
Ph.D. in Civil Engineering
Society for
0 0.00%(Transportation), National
Transportation
Taiwan University
Studies, EASTSSupervisor, Taipei
Rapid Transit Corp.
Director, Vehicle
Safety Certification
CenterDirector, Taipei Traffic
Foundation
Director, Jing Chuan
Child Safety
Foundation
Standing Director,
Taipei Society for
Traffic Safety
Standing Director,
China Road
Federation
Director, The General
Association of the
Scouts of China

Corporate Governance Report17TitleName

Nationality/
Country of Gender
OriginDate FirstElected

Date
Elected

Ter
m
(Yea
rs)

Shareholding when
ElectedShares

Ind
epe
nde
Ting,
nt
Tin-YuDir
ector

R.O.C.

Male

06/26/2015 06/26/2015

3

%

0

0.00%

Spouse & Minor
Shareholding

Current Shareholding

SharesShares

%

0

0.00%

%

0 0.00%Shareholding byNomineeArrangem
ent
Sh
ar
es

Experience(Education)

Other Position%

Vice Mayor, Taipei City
Member,Government
Remuneration
Consultant, USC Market
Committee, China
Research Corp.
Airlines Ltd.
Chief Consultant, Gallup
Member, Audit
Market Research Corp.,
Committee, China
TaiwanAirlines Ltd.
Chairman, Globalview Ltd.
Associate Professor,
Independent Director, Fubon Department of Urban
Life Insurance Co., Ltd.
Industrial
Independent Director, Fubon Management andInsurance Co., Ltd.
Marketing, University
Independent Director, Fubon of Taipei
Financial Holding Co., Ltd.
Director, Taipei Smart Card
Corporation
0 0.00% Associate Professor,
Department of Sociology,
National Taiwan University
Chairman, Public Opinion
Research Foundation
Assistant Professor, Kansas
State University, U.S.A.
Associate Professor,
Department of Sociology,
National Chengchi University
BA, Department of Sociology,
National Taiwan University
Ph.D., Department of
Sociology, University ofMichigan, U.S.A.

Note 1: On June 24, 2016, elected as a representative of juridical person shareholder China Aviation Development Foundation to the 20th Board Session.
Note 2: On July 6, 2016, elected as a representative of juridical person shareholder China Aviation Development Foundation to the 20th Board Session.
Note 3: On August 9, 2016, elected as a representative of juridical person shareholder China Aviation Development Foundation to the 20th Board Session.
Note 4: On July 13, 2015, elected as a representative of juridical person shareholder China Aviation Development Foundation to the 20th Board Session.
Note 5: On July 26, 2016, elected as a representative of juridical person shareholder China Aviation Development Foundation to the 20th Board Session.

Major shareholders among institutional shareholders
Name of Institutional Shareholders
China Aviation Development
Foundation
National Development Fund, Executive
Yuan

Major Shareholders
Non-corporate organization, not applicable

Chunghwa Telecom Co., Ltd.

Ministry of Transportation and Communications (35.29%), Fubon Life Insurance Co.,
Ltd. (5.79%), Nan Shan Life Insurance Co., Ltd. (3.48%), JP Morgan Chase Chunghwa
Telecom Depository Receipt Account (3.43%), CTBC Bank Chunghwa Telecom
Employee Stock Ownership Trust Property Account (3.28%), Cathay Life Insurance Co.,
Ltd. (2.77%), Shin Kong Life Insurance Co., Ltd. (1.81%), China Life Insurance Co., Ltd.
(1.75%), Chunghwa Post Co., Ltd. (1.68%), Labor Insurance Fund (1.09%)

Non-corporate organization, not applicable

Major shareholders among Company’s major institutional shareholders
Name of Institutional Shareholders
Ministry of Transportation andCommunications
Fubon Life Insurance Co., Ltd.
Nan Shan Life Insurance Co., Ltd
Cathay Life Insurance Co., Ltd.
Shin Kong Life Insurance Co., Ltd.
China Life Insurance Co., Ltd.

Chunghwa Post Co., Ltd.

Major Shareholders
Not Applicable
Fubon Financial Holding Co., Ltd. (100%)
Ruenchen Holdings Co., Ltd. investment trust account held under the Custody of FirstBank (76.46%), Ruenchen Investment Holding Co. (14.16%), Du Ying-Tzyong (3.25%)
Cathay Financial Holding Co., Ltd. (100%)
Shin Kong Financial Holding Co., Ltd. (100%)KGI Securities Co., Ltd. (9.74%), Saudi Arabian Monetary Agency account held under
the custody of JP Morgan Chase Bank N.A. Taipei Branch (4.64%), Government ofSingapore Investment Corp. under the custody of Citibank (3.24%), New York City
Group Trust Investment Account held under the custody of Deutsche Bank Taipei
Branch (2.41%), Videoland Television Network Co., Ltd. (2.35%), Labor Pension Fund
(New Scheme) (1.97%), Abu Dhabi Investment Authority account held under thecustody of JP Morgan Chase Bank N.A. Taipei Branch (1.83%), Chase in trust for
Invesco Ireland Asian Equity Core Fund (1.79%), Chase in trust for T. Rowe Price
Emerging Markets Stock (1.59%), Fubon Life Discretionary Investment Account with
SinoPac SITC (1.38%)
Ministry of Transportation and Communications (100%)(Note) Source: Chunghwa Telecom 2016 Shareholder Meeting Annual Report.

18 Corporate Governance Report

Executives,
Directors or
Supervisors
who arespouses orwithin two
degrees ofkinship

Rel
Titl Naati
e meon
No Non No
ne e neProfessional qualifications and independence analysis of directors

Name

Meets One of the Following Professional Qualification
Independence Criteria (Note 1)
Criteria Requirements, Together with at Least Five Years Work Experience
An Instructor A Judge, Public Prosecutor, Has Workor Higher
Attorney, Certified Public
Experience in the
Position in a
Accountant, or Other
Areas of Commerce,
Department of Professional or TechnicalLaw, Finance, orCommerce,
Specialist Who has Passed a Accounting, or
Number of Other
Law, Finance, National Examination andOtherwise
Public Companies in
Accounting, or been Awarded a Certificate Necessary for the
Which theOther
in a Profession Necessary for Business of the
Individual is
Academic
the Business of the Company Company
Concurrently
Department
1 2 3 4 5 6 7 8 9 10 Serving as an
Related to the
Independent
Business
Director
Needs of theCompany in a
Public orPrivate JuniorCollege,College or
University-- -  -  - -  --Hsieh, Su-Chien-Charles
C.Y. ,Chen



-



 - -  -  --Jong, Jia-shi
Cheng, Chuan-Yi

-

-




- -   - -  -

-

Ting,
Kwang-Hung

-

-



 -  -

-



-







 -  - -   -   -  -  

1(Note 2)

Chung, Lo-Min


-

Luo,
Hsiao-Hsien



-





-Ting, Tin-Yu



-





-Ho, Nuan-Hsuan

Chen, Han-Ming
Lee, Kuo- FuLin, Su-Ming
Huang, Hsiu-Gu-

Note 1: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during
their term in office.
1. Not an employee of the Company or any of its affiliates.
2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent
director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than
50% of the voting shares.
3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by
the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of theCompany 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 thepersons in the preceding three subparagraphs.
5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number ofoutstanding shares of the Company or who holds shares ranking in the top five holdings.
6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which
has a financial or business relationship with the Company.
7. Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership,company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any
affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the remuneration committee
who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers ofRemuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx“.
8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
9. Not been a person of any conditions defined in Article 30 of the Company Law.
10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.
Note 2: Served as independent director of Nan Shan Life Insurance Co., Ltd. since June 26, 2013.

Corporate Governance Report193.2.2 Management TeamAPR 24, 2017

Title

Name

Nationality
Date/ Country Gender
Effectiveof Origin

Shareholding

SharesPresident

General Audit
OfficeAuditor General

General Audit
OfficeDeputy Auditor
GeneralSenior Vice
President(VF)

Hsieh,
Su-Chien

Chung,
Chuar-Duan

Fang,
Juo-Ling

Chang,Young

R.O.C.

R.O.C.

R.O.C.

R.O.C.

％

Male 06/24/2016 48,517 0.00%

Male 12/26/2015 25,610 0.00%

Femal
09/01/2014eMale 06/24/2016

20 Corporate Governance Report

8,000 0.00%

0 0.00%Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement
Shares％SharesExperience (Education)

Other Positions％

Managers who are
Spouses or Within
Two Degrees ofKinship
Title

Employee
stock
optioncertific
Name Relation
ates

0 0.00%Chairman , Mandarin
Airlines, Ltd.
Director, CAL Hotel
Co., Ltd.
Chairman, Taiwan Air Cargo
Director, CAL-Asia
Terminal Ltd.
Investment Inc.
General Manager, Australia
Director & President,
Branch0 0.00%CAL Park Co., Ltd.
Senior Vice President of
Director, TaoyuanMarketingInternational Airport
Bachelor’s Degree from
Services Co., Ltd.
Soochow University
Director, CAL-Dynasty
International, Inc.
Director, Dynasty
Properties Co., Ltd.

None None

None

None

0 0.00%Supervisor, Taiwan
Airport Service Co.,
Ltd.
Supervisor, China
Vice President, Investment
Pacific Catering
Development &Services Ltd.
Management Office
Supervisor, CAL Park
0 0.00% General Manager,Co., Ltd.
Singapore BranchSupervisor, Taiwan
Bachelor’s Degree from
Aircraft Maintenance
Soochow University
and Engineering Co.,
Ltd.
Supervisor, CAL Hotel
Co., Ltd.

None None

None

None

0 0.00%

Auditor General, Taoyuan
International Airport
Services Co., Ltd.
Senior Auditor, General
0 0.00%
Audit Office
Master’s Degree from
Georgia State University,
U.S.A

None None

None

None

0 0.00%Chairman, Kaohsiung
Airport Catering
Services Ltd.
Chairman, Taiwan
Airport Service Co.,
Ltd.
Supervisor, Taiwan Air
Cargo Terminal Ltd.
Chairman, Taiwan Airport
Director, Taoyuan
Services Co., Ltd.
International Airport
Concurrently, President,
Services Co., Ltd.
Taiwan Airport Services Co.,
Director, Tiger Taiwan
Ltd.
0 0.00%Co., Ltd.
None None
President, Taoyuan
Director, Mandarin
International Airport
Airlines, Ltd.
Services Co., Ltd.
Director, Arport Air
Bachelor’s Degree from Fu
Terminal (Xiamen) Co.,
Jen University
Ltd.
Director, Arport Air
Cargo Service(Xiamen)
Co., Ltd.
Director, Taiwan
Aircraft Maintenanceand Engineering Co.,
Ltd.

None

None

Supervisor, Sabre
Travel Network(Taiwan) Ltd.

TitleName

Nationality
Date/ Country Gender
Effectiveof Origin

Spouse &Shareholding
Shareholding
Minor
by Nominee
Shareholding Arrangement
SharesSenior Vice
President(VV)

Chang,
Chih-Chieh

R.O.C.

％

Male 08/11/2016 96,553 0.00%

Shares％SharesExperience (Education)

Other Positions％

Managers who are
Spouses or Within
Two Degrees ofKinship
Title

Vice President, Passenger

Director, CAL Hotel

Sales Div.

Co., Ltd.

General Manager, New

Director,Mandarin

York Branch

Airlines, Ltd.

Bachelor’s Degree from

Director,Taiwan Air

Tunghai University

Cargo Terminal Ltd.

Employee
stock
optioncertific
Name Relation
ates

None None

None

None

None None

None

None

None None

None

None

None None

None

None

0 0.00%Assistant Vice President,
Human Resources Div.
General Manager, Human
0 0.00% Resources & Administration None
Dept., Maintenance Div.
Bachelor’s Degree from
Chinese Culture University

None None

None

None

0 0.00%Vice President, Corporate
Safety Office
Assistant Vice President,
0 0.00% Flight Operations Div.
Bachelor’s Degree from
National Cheng Kung
University

None None

None

None

None None

None

None

0 0.00%0 0.00%Vice President, Flight
Operations Div.
Senior Vice
President
(VO)

Kao,
Shing-Hwang

Director,Mandarin

Assistant Vice President,
R.O.C.

Male 06/01/2011 62,809 0.00%

0 0.00%Airlines, Ltd.

0 0.00% Flight Operations Div.

Director,CAL Hotel Co.,

Bachelor’s Degree fromLtd.

National Cheng Kung
University

Chairman, Taiwan
Aircraft Maintenanceand Engineering Co.,Ltd.
Director, Mandarin
Airlines, Ltd.

Vice President,
Senior Vice
President(VE)

Director, China Aircraft

Maintenance Div.
Huang,
Chwen-Jiun

R.O.C.

Male 03/01/2014 105,233 0.00% 27,281 0.00%

0 0.00%Services Limited.

Vice President,

Director, Taikoo

Engineering Div.

(Xiamen) Landing Gear

Bachelor’s Degree from

Services Co., Ltd.

Tamkang College

Director, Taikoo Spirit
Aerosystems (Jinjiang)
Composite Co., Ltd.
Director, Taoyuan
International Airport
Services Co., Ltd.
Director & President,
CAL-Asia Investment

Senior Vice
President

Lo, Ya-Mei

R.O.C.

Female 06/24/2016

0 0.00%0 0.00%0 0.00%(VW)Manager, China Pacific

Inc.

Catering Services Ltd.

Director, CAL Hotel

Confidential Consultant,Co., Ltd.

Executive Yuan

Director, Mandarin

Master’s Degree from

Airlines, Ltd.

National Taiwan University Director, Taoyuan
International Airport
Services Co., Ltd.

Acting Vice
President
Human Resources
Div.

Vice President
FlightOperations Div.

Assistant Vice
President
Flight Operations
Div.

Yeah,
Shao-Ting

Lai,
Ming-Hui

R.O.C.

R.O.C.

Male 01/03/2017

868 0.00%

Male 03/01/2016 19,127 0.00%

None

General Manager,
Standardization
Department, Flight
Operations Div.
Liao,
Wei-Chih

R.O.C.

Male 12/01/2014

0 0.00%0 0.00%0 0.00%Chief, Crew Evaluation
None
Section, Standardization
Department, Flight
Operations Div.
Master’s Degree from RMIT
University

Corporate Governance Report21TitleName

Nationality
Date/ Country Gender
Effectiveof Origin

Spouse &Shareholding
Shareholding
Minor
by Nominee
Shareholding Arrangement
SharesAssistant Vice
President
FlightOperations Div.

Hong,
Tsu-Kuang

Vice President
Chen,
System Operation
Shann-JuanControl Div.

Assistant Vice
President
Jeng,
System Operation Jong-Shinn
Control Div

Vice President
Passenger
Sales Div.

Assistant Vice
President
Passenger
Sales Div

Vice President
Passenger
Marketing Div.

Assistant Vice
President
Passenger
Marketing Div.

Wang,
Chen-Min

Peng, Pao
Chu

Tsao,
Jyh-FenR.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

％

Male 06/01/2016 11,816 0.00%

Male 01/16/2016 12,066 0.00%

Male 08/01/2013

1,494 0.00%

Male 12/10/2016 35,621 0.00%

Female 08/20/2016

Female 11/08/2013

8,434 0.00%

Shares％SharesExperience (Education)

％

Title

Employee
stock
optioncertific
Name Relation
ates

0 0.00%General Manager,
Administration
Department, Flight
Operations Div.
General Manager, Food &0 0.00%Beverage Services
Department, In-Flight
Service Supply Div.
Bachelor’s Degree fromSoochow University

None

None None

None

None

0 0.00%General Manager, Thailand
BranchAssistant Vice President,
0 0.00% System Operation Control NoneDiv.
Associate’s Degree from
Shih Hsin College

None None

None

None

0 0.00%General Manager, Base
Maintenance Department,
Maintenance Div.
General Manager, Line0 0.00% Operation Department,
Maintenance Div.
Associate’s Degree from
Lung Hwa College of
Science and Technology

None None

None

None

0 0.00%

Director, Dynasty
Holidays, Inc.
General Manager, Korea
Director, Sabre Travel
BranchNetwork (Taiwan) Ltd.
Assistant General Manager,
0 0.00%
Director, Everest
None None
Los Angeles Branch
Investment Holdings
Bachelor’s Degree fromLtd.
Feng Chia University
Director, Yestrip Co.,
Ltd.

None

None

0 0.00%General Manager, San
Francisco Branch
General Manager, Yestrip
0 0.00%None
Travel Service
Bachelor’s Degree from
National Taiwan University

None None

None

None

Director, Tiger Taiwan
Co., Ltd.
None None
Director, Dynasty
Holidays, Inc.

None

None

None

None None

None

None

None None

None

None

9,522 0.00% 16,948 0.00%

Assistant Vice President,
Corporate, Development
OfficeGeneral Manager,
International Affairs &0 0.00%Alliances Department,
Corporate Development
OfficeMaster’s Degree from
Surrey University, UK

None

General Manager,
E-Commerce Department,
Passenger Marketing Div.
General Manager,
Kung,
Yuan-Jau

R.O.C.

Male 12/29/2014

9,062 0.00%

0 0.00%0 0.00%Marketing System
Department, Information
Management Div.
Master’s Degree from
Tatung College ofEngineering
Vice President, Investment
Development &Management Div.

Vice President
Finance Div.

Other Positions

Managers who are
Spouses or Within
Two Degrees ofKinship

Chen,
I-Chieh

General Manager, Vietnam
R.O.C.

Male 02/16/2017

6,161 0.00%

0 0.00%0 0.00% Branch Concurrently,
General Manager, Hanoi
BranchMaster’s Degree from
National Taipei University

22 Corporate Governance ReportSupervisor, Hwa Hsia
Company Ltd.
Supervisor, CAL Hotel
Co., Ltd.
Supervisor, Mandarin
Airlines, Ltd.
Supervisor, Arport Air
Terminal (Xiamen) Co.,
Ltd.
Supervisor, Arport Air

TitleName

Nationality
Date/ Country Gender
Effectiveof Origin

Spouse &Shareholding
Shareholding
Minor
by Nominee
Shareholding Arrangement
Shares％Shares％SharesExperience (Education)

Other Positions％

Managers who are
Spouses or Within
Two Degrees ofKinship
Title

Employee
stock
optioncertific
Name Relation
ates

Cargo Service(Xiamen)
Co., Ltd.
Supervisor, China
Pacific Laundry
Services Ltd.

General Manager, Bali
Assistant Vice
President
Finance Div.

BranchHuang,
Tze-Chi

R.O.C.

Male 05/04/2013

110 0.00%

0 0.00%0 0.00%Supervisor, Global Sky

General Manager, Chengdu Express Ltd.

None None

None

None

None None

None

None

None

None None

None

None

None

None None

None

None

None

None None

None

None

None

None None

None

None

None

None None

None

None

BranchSupervisor, Yestrip Co.,

Bachelor’s Degree fromLtd.

Tamkang University.

Assistant Vice
President
Finance Div.

Ho, Hui-Fen

R.O.C.

Female 11/28/2013

0 0.00%0 0.00%General Manager, General

Supervisor, Kaohsiung

Accounting Department,

Airport Catering

Finance Div.

Services Ltd.

General Manager,

Supervisor, Dynasty

0 0.00% Business Management

Holidays, Inc.

Department, BusinessSupervisor, Taiwan

Development Office

Aircraft Maintenance

Master’s Degree fromand Engineering Co.,

Soochow University

Ltd.

Assistant Vice President,
Investment Development &Assistant Vice
President
Finance Div.

Lin,
Ming-Hsiu

Management Div.
R.O.C.

Female 03/14/2017 54,792 0.00%

0 0.00%0 0.00% Assistant Vice President,
Marketing Services Div.
Master’s Degree fromTamkang University
Vice President, Safety
Office, Mandarin Airlines,

Vice President
Corporate

Ltd.
Chen, I-Ko

R.O.C.

Male 03/01/2016 23,541 0.00%

0 0.00%0 0.00%

Safety Office

Assistant Vice President,
Corporate Safety Office
Associate’s Degree from
United College ofEngineering
Vice President, Taiwan

Assistant Vice
President
Corporate

Airport Services Co., Ltd.
Chou,
Jyh-Shyan

Assistant Vice President,
R.O.C.

Male 09/22/2016

9,171 0.00% 7,382 0.00%

0 0.00% System Operation Control
Div.

Safety Office

Master’s Degree from RMIT
University, AU
General Manager, System
Engineering Department,
Assistant Vice
President
Corporate

Engineering Div.
Tsai, Chih
Hung

General Manager, Hanger
R.O.C.

Male 01/01/2015

0 0.00%0 0.00%0 0.00% Eri Maintenance
Department, Maintenance

Safety OfficeDiv.
Master’s Degree from
Manchester University, UK
Director Of Legal Office,Taiwan Financial Asset
Vice President
Legal & Insurance
Div.

Service Corporation
Chien,
Feng-Nien

R.O.C.

Male 01/03/2017

0 0.00%0 0.00%0 0.00%

Head Prosecutor, Taichung
Prosecutors Office
Master’s Degree from
National Taiwan Ocean
University

Corporate Governance Report23TitleName

Nationality
Date/ Country Gender
Effectiveof Origin

Spouse &Shareholding
Shareholding
Minor
by Nominee
Shareholding Arrangement
Shares％Shares％SharesExperience (Education)

Other Positions％

Managers who are
Spouses or Within
Two Degrees ofKinship
Title

Employee
stock
optioncertific
Name Relation
ates

Chief Representative, China
And North China
Concurrently, General

Vice President
Corporate

Peng,

Communications

Long-Min

R.O.C.

Male 08/16/2016 32,843 0.00%

0 0.00%Manager, Beijing Office
0 0.00% Assistant Vice President,

None

None None

None

None

0 0.00%General Manager, Next
Generation Travel
Experience Program,
Corporate Development
Office0 0.00%
None
General Manager,
Customer Service Call
Center, Taipei Branch
Master’s Degree from
National Central University

None None

None

None

0 0.00%General Manager,
Corporate Affairs
Department, Corporate
Communications Office
Assistant General Manager,
0 0.00% Cabin Crew Management
None
Department, Cabin CrewDiv.
Master’s Degree from
National Sun Yat-sen
University

None None

None

None

0 0.00%President, Taiwan Airport
Services Co., Ltd.
Vice President, Investment
Development &0 0.00%Management Div.
Master’s Degree From
United States International
University

Director, Hwa Hsia
Company Ltd.
None None
Director, CAL Park Co.,
Ltd.

None

None

0 0.00%General Manager, Services
Items Planning
Department, In-Flight
Service Supply Div.
0 0.00%None
Mast Auditor, General
Audit Office
Master’s Degree From
University Of Michigan

None None

None

None

Director, Sabre Travel
None None
Network (Taiwan) Ltd.

None

None

None

None None

None

None

Director, China Pacific
Laundry Services Ltd.

None None

None

None

Ground Services Div.

OfficeBachelor’s Degree from
Chung Yuan Christian
University

Assistant Vice
President
Corporate
Communications
OfficeAssistant Vice
President
Corporate
Communications
OfficeVice President
Administration
Div.

Assistant Vice
President
Administration
Div.

Lu,
Shwu-Huoy

Yu, Yau

Ku,
Yueh-Han

Chen,
Jo-Ching

R.O.C.

R.O.C.

R.O.C.

R.O.C.

Female 12/01/2014 22,605 0.00%

Female 10/16/2016 34,154 0.00%

Male 08/16/2016

Female 10/01/2015

0 0.00%0 0.00%Assistant Vice President,
Next Generation Travel

Vice President
Information
Management Div.

Lu,
Shih-Ming

R.O.C.

Male 05/01/2015 24,917 0.00%

0 0.00%Assistant Vice
President,
Liu,
Information
Duan-Shiuh
Management Div.

R.O.C.

Male 04/20/2017 111,068 0.00%

0 0.00%Vice President
Cabin Crew Div.

Wei,
Yih-Jiun

R.O.C.

Male 08/16/2016 39,934 0.00%

24 Corporate Governance Report

0 0.00%Experience Program,
Corporate Development
Office0 0.00%Assistant Vice President,
Ground Services Div.
Master’s Degree From
National Chengchi
University
Assistant Vice President,
Ground Services Div.
General Manager,
Information Planning
0 0.00% Department, Information
Management Div.
Master’s Degree From
National Taipei University
Of Technology
General Manager, China
Pacific Catering Services
Ltd.
0 0.00%Master’s Degree from
National Sun Yat-sen
University

TitleName

Nationality
Date/ Country Gender
Effectiveof Origin

Spouse &Shareholding
Shareholding
Minor
by Nominee
Shareholding Arrangement
SharesAssistant Vice
President
Cabin Crew Div.

Vice President
Corporate
Development
OfficeAssistant Vice
President
Corporate
Development
OfficeAssistant Vice
President
Corporate
Development
OfficeVice President
In-Flight Service
SupplyDiv.

Assistant Vice
President
In-Flight Service
SupplyDiv.

Vice President
Ground Services
Div.

Pan,
Wen-Tsung

Chang,
Ming-Way

Tung, Wei

Wang, Wei

Liu,
Shyh-Hwa

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

Female 03/01/2014％

298 0.00%

Male 12/01/2014 30,512 0.00%

Male 03/01/2014

Shares

％0 0.00%0 0.00%Female 09/16/2016 33,627 0.00%

Other Positions

％

Title

General Manager, Cabin
Crew Management, Cabin
Crew Div.
General Manger, Media
Affairs Department,
0 0.00%None
Corporate Communications
OfficeMaster’s Degree from
National Chengchi
University

Vice President, Ground
Services Div.
Assistant Vice President,
0 0.00% New PSS Team, Passenger
Sales Div.
Bachelor’s Degree from Fu
Jen University

Employee
stock
optioncertific
Name Relation
ates

None None

None

None

Director, Tiger Taiwan
Co., Ltd.
Director, Taiwan
Airport Service Co.,Ltd.
Director, Global Sky
Express Ltd.
Director, Dynasty Hotel None Noneof Hawaii, Inc.
Director, Dynasty
Properties Co., Ltd.
Director, China Aircraft
Services Limited.
Director, Taiwan Air
Cargo Terminal Ltd.

None

None

Marketing Director, The
Americas
Assistant to Vice President,
Corporate Development
0 0.00%
None
Div.
Master’s Degree from
National Chengchi
University

None None

None

None

0 0.00%General Manager, Austria
BranchAssistant Vice President,
0 0.00% Finance Div.
Master’s Degree from
George Washington
University, U.S.A.

None None

None

None

0 0.00%Assistant Vice President,
Chairman, China
In-Flight Service Supply Div. Pacific Laundry
General Manager, Cabin
Services Ltd.
Crew Management
Director, China Pacific
0 0.00%Department, Cabin Crew
Catering Services Ltd.
Div.
Director, Kaohsiung
Master’s Degree from
Airport Catering
National Taipei University Services Ltd.-Director

None None

None

None

None None

None

None

None None

None

None

8,937 0.00% 4,049 0.00%

Female 02/02/2017 10,298 0.00%

SharesExperience (Education)

Managers who are
Spouses or Within
Two Degrees ofKinship

None

General Manager,
Purchasing Department
Administration Div.
Kao,
Shu-Chuan

Liu,
Tsao-Yang

R.O.C.

R.O.C.

Female 08/16/2016

7,879 0.00%

Male 09/16/2016 60,488 0.00%

0 0.00%0 0.00%General Manager,
0 0.00% Personnel Administration
Department, Human
Resources Div.
Associate’s Degree from
Ming Chuan College

None

Chief Representative, South
China Concurrently,
General Manager,
Guangzhou OfficeDirector, China Pacific
0 0.00%Assistant Vice President,
Laundry Services Ltd.
Cabin Crew Div.
Bachelor’s Degree from
Chinese Culture University

Corporate Governance Report25TitleName

Nationality
Date/ Country Gender
Effectiveof Origin

Spouse &Shareholding
Shareholding
Minor
by Nominee
Shareholding Arrangement
SharesAssistant Vice
President
Ground Services
Div.

Assistant Vice
President
Ground Services
Div.

Vice President
Cargo Sales,
Marketing &Services Div.

Assistant Vice
President
Cargo Sales,
Marketing &Services Div.

Assistant Vice
President
Cargo Sales,
Marketing &Services Div.

Vice President
Maintenance Div.

Hsiao, Kuo
Chih

Chu,
Te-Hsiu

Liu,
Der-Chuan

Hsueh,
Po-WenLin,
Hsiao-Feng

Wang,
Houng

Assistant Vice
President
Li, Chih-Wei
Maintenance Div.

Vice President
Quality
Assurance Div.

Lee,
Jung-Hui

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

％

Shares％SharesExperience (Education)

Other Positions％

Managers who are
Spouses or Within
Two Degrees ofKinship
Title

Employee
stock
optioncertific
Name Relation
ates

0 0.00%Assistant Vice President,
Information Management
Div.
General Manager, Sapporo
0 0.00%None
BranchBachelor’s Degree from
National Cheng Kung
University

None None

None

None

Male 09/16/2016 43,382 0.00% 8,277 0.00%

Station Manager, Germany
BranchStation Manager, Hong0 0.00%
None
Kong Branch
Bachelor’s Degree from
Chinese Culture University

None None

None

None

Male 10/01/2016

0 0.00%

Director, Taiwan Air
Cargo Terminal Ltd.
Director, Hwa Hsia
Vice President, Cargo Sales Company Ltd.
& Marketing Div.
Director, Science Park
Vice President, Cargo
Logistics Co., Ltd.
0 0.00%Services & Logistics Div.
Director, Global Sky
Bachelor’s Degree from Fu Express Ltd.
Jen University
Director, Eastern
United International
Logistics (Holdings)
Ltd.

None None

None

None

0 0.00%Assistant Vice President,
Cargo Sales & Marketing
Div.
General Manager, Cargo0 0.00% Marketing & Planning
None
Department, Cargo Sales &Marketing Div.
Bachelor’s Degree from
Chinese Culture University

None None

None

None

0 0.00%Assistant Vice President,
Cargo Services & Logistic
Div.
Assistant Vice President,
0 0.00% Cargo Sales & Marketing
Div.
Master’s Degree from
National Chiao Tung
University

None

None None

None

None

0 0.00%Vice President, Engineering
Div.
Vice President, Quality
0 0.00%Assurance Div.
Bachelor’s Degree fromFeng Chia University

Director, Hwa Hsia
Company Ltd.
Director, Taiwan
Aircraft Maintenanceand Engineering Co.,
Ltd.

None None

None

None

0 0.00%General Manager, LineOperation Department,
Maintenance Div.
General Manager, Audit
0 0.00%Department, Quality
Assurance Office
Master’s Degree from
Kainan University

None

None None

None

None

0 0.00%Assistant Vice President,
Maintenance Div.
General Manager, Base0 0.00% Maintenance Department,
Maintenance Div.
Master’s Degree from
Tatung University

Director&President,
Taiwan Aircraft
Maintenance andEngineering Co., Ltd.

None None

None

None

Male 04/20/2017

Male 10/01/2016

Male 10/01/2016

0 0.00%172 0.00%

328 0.00%

506 0.00%

Male 11/16/2014 12,069 0.00%

Male 02/18/2014 10,295 0.00%

Male 02/16/2014 10,298 0.00%

26 Corporate Governance ReportTitleName

Nationality
Date/ Country Gender
Effectiveof Origin

Spouse &Shareholding
Shareholding
Minor
by Nominee
Shareholding Arrangement
SharesVice President
Engineering Div.

Vice President
TaiwanSun,
Jia-MinTong,
Huai-Ming

R.O.C.

R.O.C.

％

Male 11/16/2014 62,602 0.00%

Shares

％0 0.00%Female 08/16/2016 50,878 0.00% 15,946 0.00%

SharesExperience (Education)

Other Positions％

Managers who are
Spouses or Within
Two Degrees ofKinship
Title

Director, AsianVice President, Corporate
Compressor
Safety Office.
Technology Services
Vice President, Engineering
Co., Ltd.
0 0.00% Div.
Director,Taiwan
Master’s Degree From
Aircraft Maintenance
National Taiwan University
and Engineering Co.,Of Science And Technology
Ltd.

Employee
stock
optioncertific
Name Relation
ates

None None

None

None

Vice President, Cabin Crew
Director,Sabre Travel
Div.
General Manager,
Network (Taiwan) Ltd.
None None
0 0.00%
Director,Yestrip Co.,
Kaohsiung Branch
Graduated From Taipei First Ltd.
Girls High School

None

None

Vice President, Europe
Chairman, Dynasty
Concurrently, General
Hotel of Hawaii, Inc.
Manager, Netherland
Chairman&President,
BranchVice President
Lee,
Dynasty Properties Co.,
R.O.C.
Male 12/16/2014 25,000 0.00%
0 0.00%0 0.00% Assistant Vice President,
None None None None
The Americas
Hsien-Kuang
Ltd.
Passenger Sales Div.
Director&President,
Bachelor’s Degree fromCAL-Dynasty
National Taiwan Ocean
International, Inc.
College
Chairman, Taiwan Airport
Services Co., Ltd.
Senior Vice President ofVice President
Shih,Chairman/President,
R.O.C.
Male 11/11/2013 155,294 0.00%
None None None None
0 0.00%0 0.00% Service
Japan
Ping-Huang
Dynasty Holidays, Inc.
Bachelor’s Degree from
National Chengchi
University
Assistant Vice President,
Passenger Sales Div.
General Manager,
Indonesia Concurrently,
Vice President
Ouyang,R.O.C.
Male 12/29/2014 13,903 0.00%
0 0.00%0 0.00% General Manager,
None
None None None None
EuropeJohn
Surabaya Branch
Associate’s Degree from St.
John’s and Mary’s InstituteTechnology
Chief Representative, East
China Concurrently,
General Manager, Shanghai
BranchVice President
Lo,
0 0.00%0 0.00% Vice President, Taiwan
None
None None None None
R.O.C.
Male 09/08/2016 80,552 0.00%
Mainland China
How-Min
Concurrently, General
Manager, Taipei Branch
Associate’s Degree from
Chihlee College
Auditor General, General
Audit Office
Chairman, Sabre Travel
Network (Taiwan) Ltd.
Wu,
Director, Sabre Travel
Vice President
0 0.00%0 0.00% Concurrently, President,
R.O.C.
Male 11/01/2015 12,167 0.00%
None None None None
Wen-Kuo
Network (Taiwan) Ltd.
Oceania
Sabre Travel Network(Taiwan) Ltd.
Master’s Degree from
National Taiwan University
Note: Company presidents, senior vice presidents, vice presidents, assistant vice presidents, and department and branch general managers have not worked for the Company's currently designatedaccounting firm or affiliated enterprises within the specified period and do not hold Company stock under the name of a different person.

Corporate Governance Report27

3.2.3 Remuneration of Directors, President, and Vice President
Remuneration of Directors
Remuneration

Title

Name
(Note 1)

Base Compensation (A)(Note 2)CAL

ChairmanHo, Nuan-Hsuan

ChairmanSun, Huang-Hsiang

Director

Hsieh, Su-Chien

Director

Charles C.Y. ,Chen

Director

Ting, Kwang-Hung

DirectorJong, Jia-shi

Director

Lee, Kuo- Fu

Director

Cheng, Chuan-Yi

Director

Chen, Han-Ming

Director

Lin, Su-Ming

Director

Huang, Hsiu-Gu

Director

Chang, Yu-Hern

DirectorLai, Ching-Chyi

Director

Lee, Cho-Ping

Director

Ko, Tso-Liang

Independent
Director

Chung, Lo-Min

Independent
Director

Luo, Hsiao-Hsien

Independent
Director

Ting, Tin-Yu

Consolidated
Subsidiaries
of CAL(Note 7)

6,979

6,979

Severance Pay (B)

CAL

8,223

Consolidated
Subsidiaries of
CAL(Note 7)

8,223

Bonus to Directors (C)(Note 3)
Consolidated
Subsidiaries of
CAL(Note 7)

CAL

0

0

Allowances (D)(Note 4)

CAL

5,322

Consolidated
Subsidiaries
of CAL(Note 7)

5,596

Ratio of Total
Remuneration(A+B+C+D) to Net
Income (%) (Note 10)
Consolidated
Subsidiaries
CAL
of CAL(Note 7)

3.59%

3.64%

Note 1: Aside from independent directors, all other directors are representatives of the Company’s juridical person shareholders China Aviation Development
Foundation, National Development Fund (Executive Yuan), Chunghwa Telecom Co., Ltd. On June 24, 2016, China Aviation Development Foundation
reassigned Mr. Ho, Nuan-Hsuan to serve as its juridical person representative and on the same date he was elected chairman of the Board of Directors.
On July 6, 2016, Mr. Hsieh, Su-Chien was reassigned as juridical person representative. On July 26, 2016, Mr. Cheng, Chuan-Yi and Mr. Chen, Han-Ming
were reassigned as juridical person representatives. On August 9, 2016, Mr. Jong, Jia-shi was reassigned as juridical person representative.
Note 2: Refers to director remuneration over the past year (includes director salary, additional compensation, severance pay, various bonuses, incentive pay).
Note 3: As stipulated in the Company’s Articles of Association, directors are not awarded bonuses.
Note 4: Refers to relevant business expenses incurred by directors (including travel expenses, special disbursements, various allowances, living quarters,company car). If provided with housing, a car or other transportation, or exclusive personal expenses, the type and cost, rent (actual or fair market
calculation), fuel cost, and other costs of the assets provided must be disclosed. The above figures do not include remuneration paid to drivers, which
totaled NT$970,000.
Note 5: Refers to salary, bonuses, and allowances received by directors who are also employed by the Company (including as president, vice president, othermanagement, or regular employee) over the past year and includes salary, additional compensation, severance pay, various bonuses, incentive pay,travel expenses, special disbursements, various allowances, living quarters, and company car. If provided with housing, a car or other transportation,
or exclusive personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be
disclosed. The above figures do not include remuneration paid to drivers, which totaled NT$875,000. As stipulated in IFRS 2, Share Based Payments
including obtaining employee stock options and employee restricted stock awards, and participation in a cash capital increase shall be calculated asremuneration.
＊The remuneration content disclosed in the table is different than required under the Income Tax Act. The content is provided for information disclosure, nottax purposes.

28 Corporate Governance ReportUnit: NT$ thousands

Dec 31, 2016

Relevant Remuneration Received by Directors Who are Also Employees
Salary, Bonuses, and Allowances(E)(Note 5)
Consolidated
Subsidiaries
of CAL(Note 7)

CAL

13,047

13,458Severance Pay (F)

CAL

7,056

Consolidated
Subsidiaries
of CAL(Note 7)

Ratio of Total Compensation(A+B+C+D+E+F+G) to Net Income Compensation Paid to(%) (Note 10)
Directors from an
Invested Company
Consolidated
Consolidated
Other than theSubsidiaries of CAL
Subsidiaries of Company’s Subsidiary
CAL(Note 7)
CAL
(Note 11)
(Note 7)
Cash
Stock

Employees’ Compensation (G)(Note 6)
CAL
Cash

7,056

Stock

152

0

152

0

7.14%

7.26%

0

Note 6: Refers to employee compensation (including stock or cash) received by directors who are also employed by the Company (including as president, vicepresident, other management, or regular employee) over the past year, and the amount of employee compensation approved for distribution by the
Board for the most recent year must be disclosed. On January 17, 2017, the Company’s Board of Directors approved the 2016 Employee Compensation
Proposal.
Note 7: The total remuneration provided by the Company and subsidiaries to directors is disclosed per the consolidated financial statement.
Note 8: The remuneration distributed to each member of the Company’s Board is disclosed as a range and the names of directors are disclosed by range ofcompensation received.
Note 9: The total remuneration provided by the Company and subsidiaries to directors is disclosed per the consolidated financial statement and names of
directors are disclosed by range of compensation received.
Note 10: Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax) reported
on the individual financial statement for the most recent year. The Company’s 2016 individual financial statement net income (after tax) totaled
NT$571,540,000.
Note 11:(1) Compensation paid to directors from an invested company other than a Company subsidiary.
(2) Compensation refers to pay, bonuses (including bonuses to employees, directors, or supervisors), or expenses paid in the execution of business toCompany directors who serve as director, supervisor, or manager of an invested company other than a Company subsidiary.
(3) Compensation paid to directors from an invested company other than a Company subsidiary is included in Column I (Consolidated Subsidiaries of
CAL) of the Director Remuneration by Compensation Level Table.

Note 12:(1) Aside from Chairman Ho, Nuan-Hsuan, Chairman Sun, Huang-Hsiang, Director Hsieh, Su-Chien, and Director Chang, Yu-Hern, all other directors
received a travel allowance.
(2) Director Ting, Kwang-Hu, Director Lee, Kuo- Fu, Director Jong, Jia-shi, and Director Ko, Tso-Liang donated the travel allowances received to the
China Airlines Employee Union.
(3) The directors who also serve as employees of the Company are Director Hsieh, Su-Chien; Director Jong, Jia-shi; Director Lee, Kuo- Fu; Director Chang,
Yu-Hern; and Director Ko, Tso-Liang. Of these, Mr. Chang, Yu-Hern resigned from his position on July 6, 2016 and Mr. Ko, Tso-Liang resigned fromhis position on August 9, 2016.

Corporate Governance Report29Director Remuneration by Compensation Level
Total of (A+B+C+D)
Range of Remuneration

Under NT$2,000,000

NT$2,000,001～
NT$5,000,000
NT$5,000,001～
NT$10,000,000
NT$10,000,001～
NT$15,000,000
Total

CAL
(Note 8)

Total of (A+B+C+D+E+F+G)

Consolidated Subsidiaries of
CAL(Note 9) Ｈ

CAL
(Note 8)Charles C.Y., Chen; Ting,
Charles C.Y., Chen; Ting,
Charles C.Y., Chen; Ting,
Kwang-Hu; Jong, Jia-shi;
Kwang-Hu; Jong, Jia-shi;
Kwang-Hu; Jong, Jia-shi;
Lee, Kuo- Fu; Cheng,
Lee, Kuo- Fu; Cheng,
Chuan-Yi; Chen, Han-Ming; Chuan-Yi; Chen, Han-Ming; Cheng, Chuan-Yi; Chen,
Han-Ming; Lin, Su-Ming;
Lin, Su-Ming; Huang,
Lin, Su-Ming; Huang,
Huang, Hsiu-Gu; Lai,
Hsiu-Gu; Chang, Yu-Hern; Hsiu-Gu; Chang, Yu-Hern;
Ching-Chyi; Lee, Cho-Ping;
Lai, Ching-Chyi; Hsieh,Lai, Ching-Chyi; Hsieh,
Su-Chien; Lee, Cho-Ping; Ko, Su-Chien; Lee, Cho-Ping; Ko, Chung, Lo-Min; Luo,
Tso-Liang; Chung, Lo-Min; Tso-Liang; Chung, Lo-Min; Hsiao-Hsi; Ting, Tin-Yu
Luo, Hsiao-Hsi; Ting, Tin-Yu Luo, Hsiao-Hsi; Ting, Tin-Yu
Ho, Nuan-Hsuan; Hsieh
Ho, Nuan-Hsuan
Ho, Nuan-Hsuan
Su-Chien; Chang, Yu-Hern
Lee, Kuo- Fu;
Ko, Tso-Liang

Consolidated Subsidiaries of
CAL(Note 9) Ｉ

Charles C.Y., Chen; Ting,
Kwang-Hu; Jong, Jia-shi;
Cheng, Chuan-Yi; Chen,
Han-Ming; Lin, Su-Ming;
Huang, Hsiu-Gu; Lai,
Ching-Chyi; Lee, Cho-Ping;
Chung, Lo-Min; Luo,
Hsiao-Hsi; Ting, Tin-Yu
Ho, Nuan-Hsuan; Hsieh
Su-Chien; Chang, Yu-Hern
Lee, Kuo- Fu;
Ko, Tso-Liang

Sun, Huang-HsiangSun, Huang-HsiangSun, Huang-HsiangSun, Huang-Hsiang

18

18

18

18

30 Corporate Governance ReportPresident and Senior Vice President Remuneration
Salary (A)Name(Note 1)

Title

CAL

President
Senior Vice
President
Senior Vice
President
Senior Vice
President
Senior Vice
President
Senior Vice
President
Senior Vice
President
Senior Vice
President
Senior Vice
President(Note 3)

Consolidated

Consolidated

Consolidated

Subsidiaries of

Subsidiaries of

Subsidiaries of

CAL

CAL

(Note 5)President

Bonuses and Allowances (C)Severance Pay (B)(Note 2)CAL

CAL

(Note 5)CAL
(Note 5)

Hsieh, Su-Chien(Note 10)
Chang, Yu-Hern(Note 10)
Lo, Ya-Mei(Note 11)
Kao, Shing-Hwang
Chang, Chih-Chieh(Note 12)

19,646

19,646

26,40926,409

7,730

8,856

Huang, Chwen-Jiun
Chang, Young(Note 13)
Yu, Chien-Pao(Note 14)
Tung, Hsiao-Hsing(Note 15)
Yang, Steve Chen
(Note 16)

President and Senior Vice President Remuneration by Compensation Level
Range of Remuneration

Under NT$2,000,000

Name of President and Senior Vice President
CAL (Note 6)
Consolidated Subsidiaries of CAL (Note 7)ELo, Ya-Mei; Chang, Chih-Chieh;

Lo, Ya-Mei; Chang, Chih-Chieh;Tung, Hsiao-Hsing

Tung, Hsiao-Hsing

Hsieh, Su-Chien; Chang, Yu-Hern;

Hsieh, Su-Chien; Chang, Yu-Hern;

Huang, Chwen-Jiun; Chang, Young

Huang, Chwen-Jiun; Chang, Young

NT$5,000,001 ~ NT$10,000,000

Kao, Shing-Hwang

Kao, Shing-Hwang

NT$10,000,001 ~ NT$15,000,000

Yu, Chien-Pao

Yu, Chien-Pao

NT$15,000,001 ~ NT$30,000,000

Yang, Steve Chen

Yang, Steve Chen

10

10

NT$2,000,001 ~ NT$5,000,000

Total

Note 1: President Hsieh, Su-Chien and President Chang, Yu-Hern also concurrently serve as directors. Their remuneration is listed above and also in
the Remuneration of Directors table.
Note 2: Refers to president and senior vice president salary, additional compensation, and severance pay over the past year.
Note 3: Refers to various bonuses, incentive pay, travel expenses, special disbursements, various allowances, living quarters, and company car
distributed to presidents and senior vice presidents over the past year. If provided with housing, a car or other transportation, or exclusive
personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be
disclosed. The above figures do not include remuneration paid to drivers, which totaled NT$4,636,000. As stipulated in IFRS 2, Share Based
Payments including obtaining employee stock options and employee restricted stock awards, and participation in a cash capital increase shallbe calculated as remuneration.
Note 4: Refers to employee compensation (including stock or cash) approved for distribution by the Board to presidents and senior vice presidents
over the past year. Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net
income (after tax) reported on the individual financial statement for the most recent year. On January 17, 2017, the Company’s Board of
Directors approved the 2016 Employee Compensation Proposal.
＊The remuneration content disclosed in the table is different than required under the Income Tax Act. The content is provided for information
disclosure, not tax purposes.

Corporate Governance Report31Unit: NT$ thousands December 31, 2016
Ratio of total compensation

Employees’ Compensation (D)(A+B+C+D) to net income (%)(Note 4)Compensation paid to the Presidents and(Note 8)

Senior Vice Presidents from an Invested

Consolidated
CAL

Subsidiaries of CAL
CAL(Note 5)
Cash

Stock

283

Cash

0

Company Other Than the Company’s Subsidiary

Subsidiaries of(Note 9)

CAL (Note 5)

Stock

283

Consolidated

0

9.46%

9.66%

225

Note 5: The total remuneration provided by the Company and subsidiaries to Company presidents and senior vice presidents is disclosed per
the consolidated financial statement.
Note 6: The remuneration distributed to each president and senior vice president is disclosed as a range and the names of the presidents andsenior vice presidents are disclosed by range of compensation received.
Note 7: The total remuneration provided by the Company and subsidiaries to presidents and senior vice presidents is disclosed per the
consolidated financial statement and names of the presidents and senior vice presidents are disclosed by range of compensation
received.
Note 8: Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income(after tax) reported on the individual financial statement for the most recent year. The Company’s 2016 individual financial statement
net income (after tax) totaled NT$571,540,000.
Note 9: This column represents compensation paid to presidents and senior vice presidents from an invested company other than a Company
subsidiary.
(1) Compensation paid to presidents and senior vice presidents from an invested company other than a Company subsidiary is included
in Column E (Consolidated Subsidiaries of CAL) of President and Senior Vice President Remuneration by Compensation Level Table.
(2) Compensation refers to pay, bonuses (including bonuses to employees, directors, or supervisors), or expenses paid in the executionof business to Company presidents and senior vice presidents who serve as director, supervisor, or manager of an invested
company other than a Company subsidiary.
(3) Of the presidents and senior vice presidents, only Mr. Chang, Young, Mr. Yang, Steve Chen, and Mr. Yu, Chien-Pao received
compensation from an invested company other than the Company’s subsidiaries.
Note 10: Mr. Hsieh, Su-Chien assumed the position of President on June 24, 2016; Mr. Chang, Yu-Hern was dismissed from the position of
President on June 24, 2016.
Note 11: Ms. Lo, Ya-Mei assumed the position of Senior Vice President on June 24, 2016.
Note 12: Mr. Chang, Chih-Chieh assumed the position of Senior Vice President on August 11, 2016.
Note 13: Mr. Chang, Young assumed the position of Senior Vice President on June 24, 2016.
Note 14: Mr. Yu, Chien-Pao was dismissed from the position of Senior Vice President on February 24, 2016.
Note 15: Mr. Tung, Hsiao-Hsing was dismissed from the position of Senior Vice President on June 27, 2016.
Note 16: Mr. Yang, Steve Chen was dismissed from the position of Senior Vice President on August 9, 2016.

32 Corporate Governance ReportEmployees’ Compensation of the Management Team
Unit: NT$ thousands Dec 31, 2016
Title
President

Name
Hsieh, Su-Chien (Assumed Post
On 06/24/2016)
Lo, Ya-Mei (Assumed Post On
06/24/2016)

Employees’
Compensationin Stocks

Employees’
Compensation in
Cash

0

2,450

Total

2,450

Ratio of Total Amount to Net
Income (%)

0.43%

Senior Vice
President
Senior Vice
Kao, Shing-Hwang
President
Senior Vice
Chang, Chih-Chieh
President
Senior Vice
Huang, Chwen-Jiun
President
Senior Vice
Chang, Young (Assumed Post On
President
06/24/2016)
Auditor
Chung, Chuar-Duan
GeneralVice
Chen, I-Chieh
President
Vice
Chen, I-Ko (Assumed Post On
President
03/01/2016)
Vice
Lai, Ming-Hui
President
Vice
Wang, Chen-Min (Assumed Post
President
On 12/10/2016)
Vice
Tsao, Jyh-Fen
President
Vice
Liu, Der-Chuan
President
Vice
Peng, Long-Min (Assumed Post
President
On 08/16/2016)
Vice
Ku, Yueh-Han (Assumed Post On
President
08/16/2016)
Vice
Wei, Yih-Jiun (Assumed Post On
President
08/16/2016)
Vice
Liu, Shyh-Hwa
President
Vice
Chen, Shann-Juan (Assumed Post
President
On 01/16/2016)
Vice
Liu, Tsao-Yang (Assumed Post On
President
09/16/2016)
Vice
Chang, Ming-Way
President
Vice
Lu, Shih-Ming
President
Vice
Wang, Houng
President
ViceSun, Jia-Min
President
Vice
Lee, Jung-Hui
President
DeputyAuditorFang, Juo-Ling
GeneralAssistant Vice
Lin, Ming-Hsiu
President
Assistant Vice
Tsai, Chih Hung
President
Assistant Vice Chou, Jyh-Shyan (Assumed Post
President
On 09/22/2016)
Assistant ViceLiao, Wei-ChihPresident
Assistant Vice Hong, Tsu-Kuang (Assumed Post
President
On 06/01/2016)
Assistant Vice
Jeng, Jong-Shinn
President
Assistant Vice Peng, Pao Chu (Assumed Post On
President
08/20/2016)

Corporate Governance Report33TitleName

Assistant Vice
Kung, Yuan-Jau
President
Assistant Vice Hsueh, Po-Wen (Assumed Post
President
On 09/01/2016)
Assistant Vice
Lin, Hsiao-Feng
President
Assistant Vice
Lu, Shwu-Huoy
President
Assistant Vice Yu, Yau (Assumed Post On
President
07/16/2016)
Assistant Vice
Yeah, Shao-Ting
President
Assistant Vice
Chen, Jo-Ching
President
Assistant Vice
Ho, Hui-Fen
President
Assistant Vice
Huang, Tze-Chi
President
Assistant Vice
Pan, Wen-Tsung
President
Assistant Vice Kao, Shu-Chuan (Assumed Post
President
On 08/16/2016)
Assistant Vice
Liu, Duan-Shiuh
President
Assistant Vice Chu, Te-Hsiu (Assumed Post On
President
09/16/2016)
Assistant Vice
Tung, Wei
President
Assistant Vice Hsiao, Kuo Chih (Assumed Post
President
On 01/01/2016)
Assistant Vice
Li, Chih-Wei
President
Assistant Vice Chen, Wei-Tau (Dismissed On
President
01/06/2016)
Vice
Liu, Yah-Chuan (Dismissed On
President
01/11/2016)
Vice
Kuo, Hsin-Chang (Dismissed On
President
02/15/2016)
Assistant Vice Tung, Da-Wei (Dismissed On
President
02/22/2016)
Vice
Young, Ding-Hwai (Dismissed On
President
02/23/2016)
Senior Vice
Yu, Chien-Pao (Dismissed On
President
02/29/2016)
Vice
Yang, Tzu-Pao (Dismissed On
President
05/20/2016)
Assistant Vice Chen, Ming-Hui (Dismissed On
President
05/31/2016)
Assistant Vice Chung, Kang (Dismissed On
President
05/31/2016)
Assistant Vice Chen, Chung-Ming (Dismissed On
President
06/06/2016)
Senior Vice
Tung, Hsiao-Hsing (Dismissed On
President
06/27/2016)
Chang, Yu-Hern (Dismissed On
President
06/24/2016)
Senior Vice
Yang, Steve Chen (Dismissed On
President
08/09/2016)
Assistant Vice Tseng, Yu-Ping (Dismissed On
President
08/15/2016)
Vice
Tong, Huai-Ming (Dismissed On
President
08/16/2016)
Vice
Cheng, Tien-Yuan (Dismissed On
President
08/16/2016)
Vice
Chang, Cheng-Hao (Dismissed On
President
08/16/2016)
Vice
Yu, Chih (Dismissed On
President
09/20/2016)34 Corporate Governance Report

Employees’
Compensationin Stocks

Employees’
Compensation in
Cash

Total

Ratio of Total Amount to Net
Income (%)

TitleName

Employees’
Compensationin Stocks

Employees’
Compensation in
Cash

Total

Ratio of Total Amount to Net
Income (%)

Assistant Vice Fang, Yuan-Hua (Dismissed On
President
09/26/2016)
Vice
Huang, Ta-Fang (Dismissed On
President
12/21/2016)
Chung, Ming-Jyh (Dismissed On
VicePresident
01/03/2017)
Assistant Vice Kuey, Kuo-Ching (Dismissed On
President
01/26/2017)
Assistant Vice Teng, Shu Hua (Dismissed On
President
02/21/2017)
Vice
Chung, Wan-Chun (Dismissed On
President
03/01/2017)
Assistant Vice Yeh, Jin-Fu (Dismissed On
President
03/13/2017)
Assistant Vice Wei, Shih-Kai (Dismissed On
President
03/21/2017)
Note 1: Individual names and titles are disclosed, but the distributed compensation is disclosed as a grand total.
Note 2: On January 17, 2017, the Company’s Board of Directors approved the 2016 Employee Compensation Proposal.
Note 3: The management team includes:(1) Presidents and their equivalent(2) Vice presidents and their equivalent(3) Assistant vice presidents their the equivalent(4) Chief financial officers(5) Chief accounting officers(6) Other persons authorized to manage affairs and sign documents on behalf of the Company

3.2.4 Comparison of Remuneration for Directors, Presidents, and Vice
Presidents in the Most Recent Two Fiscal Years and Remuneration Policy
for Directors, Presidents, and Vice Presidents
A. The ratio of total remuneration paid by the Company and by all companies includedin the consolidated financial statements for the two most recent fiscal years to
directors, presidents, and vice presidents of the Company, to their net income.
CAL

2015
Consolidated Subsidiaries of CAL

CAL

2016
Consolidated Subsidiaries of CAL

Directors

0.44%

0.45%

7.14%

7.26%

Presidents and SeniorVice Presidents

0.57%

0.59%

9.46%

9.66%

Title

B. The policies, standards, and portfolios for the payment of remuneration, theprocedures for determining remuneration, and the correlation with businessperformance.
As stipulated in the Articles of Association, the Board of Directors is authorized to set the chairman’s
remuneration in accordance with the Company’s policies regarding manager compensation andbased on the extent of his or her participation in Company operations. The travel allowances andremuneration of other directors are determined the Board in reference to the compensation levels
provided by related-industries and public companies. In accordance with Article 29 of the Company
Act, president and senior vice president remuneration is set by Board of Directors resolution basedon Company employee salary related regulations. Bonuses and employee compensation arecalculated based on the Company’s overall operating performance and the employee’s individual
performance achievement rate.

Corporate Governance Report35

3.3 Implementation of Corporate Governance3.3.1 Board of Directors:
From January 1, 2016 through April 24, 2017, a total of nine meetings of the Board of Directors were held.
Director attendance is detailed below:
Title

Name
(Note 1)Chairman

Juridical Person
Shareholder
Represented

Attendance in
PersonBy ProxyAttendance Rate (%)(Note 2)

Ho, Nuan-Hsuan

6

0

100%

Director

Hsieh, Su-Chien

5

0

100%

Director

Charles C.Y., Chen

8

1

89%

Director

Ting, Kwang-Hung

6

3

67%

Director

Lee, Kuo- Fu

8

1

89%

Director

Cheng, Chuan-Yi

5

0

100%

Director

Chen, Han-Ming

5

0

100%

DirectorJong, Jia-shi

5

0

100%

Director

Lin, Su-Ming

9

0

100%

Director

Huang, Hsiu-Gu

8

1

89%

Chunghwa Telecom
Co., Ltd.

Independent
Chung, Lo-Min
Director

9

0

100%

-

Independent
Luo, Hsiao-Hsien
Director

9

0

100%

-

Reappointed as independent
director on 06/26/2015

Independent
Ting, Tin-Yu
Director

9

0

100%

-

Newly appointed as independent
director on 06/26/2015

China Aviation
Development
Foundation
China Aviation
Development
Foundation
China Aviation
Development
Foundation
China Aviation
Development
Foundation
China Aviation
Development
Foundation
China Aviation
Development
Foundation
China Aviation
Development
Foundation
China Aviation
Development
Foundation
National
Development Fund,
Executive Yuan

ChairmanSun, Huang-Hsiang

3

0

100%

China Aviation
Development
Foundation

Director

Chang, Yu-Hern

3

1

75%

China Aviation
Development
Foundation

Director

Lee, Cho-Ping

4

0

100%

China Aviation
Development
Foundation

DirectorLai, Ching-Chyi

4

0

100%

China Aviation
Development
Foundation

Director

Ko, Tso-Liang

4

0

100%

China Aviation
Development
Foundation

36 Corporate Governance Report

Remarks
Newly appointed as juridical
person director representative on
06/24/2016 and elected Chairman
on the same day
Newly appointed as juridical
person director representative on
07/06/2016
Reappointed as juridical person
director representative on
06/26/2015
Reappointed as juridical person
director representative on
06/26/2015
Newly appointed as juridical
person director representative on
07/13/2015
Newly appointed as juridical
person director representative on
07/26/2016
Newly appointed as juridical
person director representative on
07/26/2016
Newly appointed as juridical
person director representative on
08/09/2016
Reappointed as juridical person
director representative on
06/26/2015
Reappointed as juridical person
director representative on
06/26/2015
Reappointed as independent
director on 06/26/2015

Reappointed as juridical person
director representative on
06/26/2015 and dismissed on
06/24/2016
Appointed as juridical person
director representative on
104/07/20 and dismissed on
07/06/2016
Reappointed as juridical person
director representative on
06/26/2015 and dismissed on
07/26/2016
Reappointed as juridical person
director representative on
06/26/2015 and dismissed on
07/26/2016
Reappointed as juridical person
director representative on
06/26/2015 and dismissed on

08/09/2016
Other mentionable items:
1. In the operation of the Board of Directors, should one of the below situations occur, the Board Meeting date, session, content of the resolution, opinions of all
independent directors, and the Company’s response to said opinions shall be properly recorded:(1) Matters listed in Article 14-3 of the Securities and Exchange Act.
Any Independent Director
Meeting Dates

Resolution

Had a Dissenting Opinion or
Qualified Opinionth

5th meeting of the 20 Board session held on
March 25, 2016

Proposal to lift non-compete restrictions on Director Chang,
Yu-HernIssuance of 2016 domestic unsecured corporate bonds
Proposal to lift concurrent position non-compete restrictions on
Chairman Ho, Nuan-Hsuan
Proposal to lift concurrent position non-compete restrictions on
Director Hsieh, Su-Chien

7th meeting of the 20th Board session held on

Proposal to lift concurrent position non-compete restrictions on

August 11, 2016

Senior Vice President Chang, Young
Proposal to lift concurrent position non-compete restrictions on
Senior Vice President Lo, Ya-Mei
Proposal to lift concurrent position non-compete restrictions on
Senior Vice President Chang, Chih-Chieh

None

Two 737-800 Passenger Airliner (B-18608/B-18607) Sales
8th meeting of the 20th Board session held

Proposal 2016

November 10, 2016

Proposal to lift concurrent position non-compete restrictions on
Senior Vice President Chang, Young

3rd extraordinary meeting of the 20th Board
session held on December 14, 2016

Tigerair Taiwan Equity Transaction Proposalth

9th meeting of the 20 Board session held on
January 17, 2017
10th meeting of the 20th Board session held on
March 30, 2017

Financial Division Vice President Position Change Proposal
Issuance of domestic unsecured straight bond 2017
Revision to the Procedures Governing the Acquisition and
Disposal of Assets(2) Other matters up for decision by the Board not listed in Article 14-3 of the Securities and Exchange Act, but that were opposed by independent directors or
about which said directors have reservations and their opinion has been recorded or submitted in a written statement: None.
2. Should a director recuse him or herself from a decision about which he or she has a conflict of interest, the name of the director, contents of the resolution,
reasons for recusal, and the results of the vote should be noted:(1) 4th meeting of the 20th Board session held on January 15, 2016: Chairman and Manager 2015 Annual Bonus; Bonus and 2016 Salary Adjustment Proposal:
Chairman Sun, Huang-Hsiang and Director Chang, Yu-Hern recused themselves.
Provisional Motion: Directors Ko, Tso-Liang and Lee, Kuo- Fu suggested the Company distribute incentive bonuses to improve employee morale and create
more harmonious relations between labor and management. After their proposal, Directors Ko, Tso-Liang and Lee, Kuo- Fu refrained from discussions on
the subject and abstained from voting on the proposal.
(2) 5th meeting of the 20th Board session held on March 25, 2016: Proposal to lift non-compete restrictions on Director Chang, Yu-Hern: Director Chang,
Yu-Hern recused himself as required by law.
(3) 2nd extraordinary meeting of the 20th Board session held on June 24, 2016: Senior Vice President Position Adjustment Proposal: Senior Vice President
Tung, Hsiao-Hsing recused himself.
(4) 7th meeting of the 20th Board session held on August 11, 2016:
Senior Manager Remuneration Adjustment Proposal: Chairman, president, and all senior vice presidents recused themselves.
Chairman Ho, Nuan-Hsuan Remuneration Proposal: Chairman, president, and all senior vice presidents recused themselves.
Proposal to lift concurrent position non-compete restrictions on Chairman Ho, Nuan-Hsuan: Chairman,president, and all senior vice presidents recused
themselves.
President Hsieh, Su-Chien Remuneration Proposal: President and all senior vice presidents recused themselves.
Proposal to lift concurrent position non-compete restrictions on Director Hsieh, Su-Chien: President and all senior vice presidents recused themselves.
Senior Vice President Chang, Young Remuneration Proposal: Senior Vice President Chang, Young recused himself.
Proposal to lift concurrent position non-compete restrictions on Senior Vice President Chang, Young: Senior Vice President Chang, Young recused himself.
Senior Vice President Lo, Ya-Mei Remuneration Proposal: Senior Vice President Lo, Ya-Mei recused herself.
Proposal to lift concurrent position non-compete restrictions on Senior Vice President Lo, Ya-Mei: Senior Vice President Lo, Ya-Mei recused herself.
Senior Vice President Appointment Proposal: Vice President Chang, Chih-Chieh recused himself.
Proposal to lift concurrent position non-compete restrictions on Senior Vice President Chang, Chih-Chieh: Senior Vice President Chang, Chih-Chieh recused

Corporate Governance Report37himself.
(5) 8th meeting of the 20th Board session held November 10, 2016:
Proposal to lift concurrent position non-compete restrictions on Senior Vice President Chang, Young: Senior Vice President Chang, Young recused himself.
Senior Vice President Chang, Chih-Chieh Remuneration Proposal: Senior Vice President Chang, Chih-Chieh recused himself.
(6) 9th meeting of the 20th Board session held on January 17, 2017:
Chairman and Manager Annual Bonus 2016 and Spring Festival Incentive Pay 2017: Chairman, president, and all senior vice presidents recused
themselves.
3. Board of Director functional improvement goals for the last year and the current year (such as establishing an audit committee and improving informationtransparency) and implementation assessment:(1) In order to strengthen management mechanisms and oversight, three functional committees, Remuneration Committee, Audit Committee, and Risk
Committee, were set up under the Board of Directors. Each are convened based on their charters, which were approved by the Board. The committees
meet to review and discuss relevant issues and report their conclusions and suggestions to the Board for resolution. The committees have been a success.
The regulations governing functional committees passed by the Board specify the number of committee members, term of office, committee powers, rulesof procedure, and resources to be provided by the Company when the committees exercise their powers.
(2) For more information regarding China Airlines Corporate Governance, please refer to our website (http://www.china-airlines.com): Corporate Social
Responsiblity→Corporate Sustainability Site→Investors→Corporate Governance

Note 1: For directors that are juridical persons, the name of the juridical person shareholder and its representatives must be disclosed.
Note 2: (1) When a director resigns before the year’s end, the remark column shall note the date of resignation and actual attendance rate (%) calculated basedon the number of meetings held during the period prior to resignation and the director’s actual number of meetings attended.
(2)Before year’s end, if there is a change of directors, the new and old directors shall be included in the table and the remark column shall note whether
the director has been reelected or newly elected and the date of the (re)election. Actual attendance rate (%) is calculated based on the number of
meetings held during the period of service and the director’s actual number of meetings attended.

3.3.2 Audit Committee:
The Audit Committee convened seven meetings from January 1, 2016 through April 24, 2017. Committee member
attendance is detailed below:
Name

Title

Attendancein Person

By Proxy

Remarks

Attendance Rate (%)

Independent Director

Chung, Lo-Min

7

0

100%

Independent Director

Luo, Hsiao-Hsien

7

0

100%

Independent Director

Ting, Tin-Yu

7

0

100%

Served as independent director from
06/15/2012 and continued in the position
on 06/26/2015
Served as independent director from
06/15/2012 and continued in the position
on 06/26/2015
Newly appointed independent director on
06/26/2015

Other mentionable items:
1. In the operation of the Audit Committee, should one of the below situations occur, the Board Meeting date, session, content of the resolution, result of
the Audit Committee resolution, and the Company’s response to said opinions shall be properly recorded:(1) Matters listed in Article 14-5 of the Securities and Exchange Act:
Meeting Dates

3rd Audit Committee Meeting of the 20th Board
Session held on March 25, 2016
4th Audit Committee Meeting of the 20th Board
Session held on May 12, 2016
5th Audit Committee Meeting of the 20th Board
Session held on August 11, 2016
2nd Audit Committee Extraordinary Meeting of
the 20th Board Session held on January 17, 2017

7th Audit Committee Meeting of the 20th Board
Session held on March 30, 201738 Corporate Governance Report

Resolution

Any Independent Director
Had a Dissenting Opinion
or Qualified Opinion

2015 Annual Operations Report and Financial Statements
2016 Appointment and Remuneration for Certified Public
Accountants
2015 Internal Control System Statement
Deloitte & Touche CPA Replacement Proposal
Consolidated Financial Statement for the Second quarter of2016 (including the first half of the year)
Financial Division Vice President Position Change Proposal
2016 Annual Operations Report and Financial Statements
2017 Appointment and Remuneration for Certified Public
Accountants
Revision to the Procedures Governing the Acquisition and
Disposal of Assets
2016 Internal Control System Statement

None(2) Other matters up for decision by the Board not listed in Article 14-5 of the Securities and Exchange Act that were not passed by the Audit Committee
but approved by a two-thirds majority of the entire Board: None.
2. In situations where independent directors recuse themselves due to conflict of interest, the independent director's name, content of the resolution,
reason for recusal, and his or her voting participation should be properly recorded: None.
3. Communication between independent directors and internal audit managers and auditors (regarding issues such as Company financial and operational
status, procedures, and results):(1) Internal audit managers provide Audit Committee members with regular updates on audit report results and report additional findings during thequarterly Audit Committee Meeting. If a special situation should arise, internal audit managers shall immediately report to the Audit Committee.
Independent directors freely offer opinions and communicate with the management team to reach a consensus, then dutifully record and implement.
From the year 2016 through the publication of this report, the Company’s Audit Committee and internal audit managers maintain free and frequent
communication.
(2) The company retains CPAs who report the results of their financial statement audit to the Audit Committee during the quarterly meeting and discuss
any additional matters as required by law. If a special situation should arise, CPAs shall immediately report to the Audit Committee. The Company’s
Audit Committee and CPAs maintain strong communication.
(3) Resolutions approved by the Audit Committee and relevant content:
 3rd Audit Committee Meeting of the 20th Board Session held on March 25, 2016:2015 Annual Operations Report and Financial Statements; 2015 Earnings Distribution; 2016 Appointment and Remuneration for Certified Public
Accountants; 2015 Internal Control System Statement: The above proposals were approved by all committee members in attendance and submitted
to the Board.
 4th Audit Committee Meeting of the 20th Board Session held on May 12, 2016:
Deloitte & Touche CPA Replacement Proposal: Approved by all committee members in attendance and submitted to the Board.
 5th Audit Committee Meeting of the 20th Board Session held on August 11, 2016:
Consolidated Financial Statement for the Second quarter of 2016 (including the first half of the year): Approved by all committee members inattendance and submitted to the Board.
 6th Audit Committee Meeting of the 20th Board Session held on November 10, 2016:2017 Audit Plan; Two 737-800 Passenger Airliner (B-18608/B-18607) Sales Proposal 2016: Approved by all committee members in attendance andsubmitted to the Board.
 1st Audit Committee Extraordinary Meeting of the 20th Board Session held on December 13, 2016:
Tigerair Taiwan Equity Transaction Proposal: Approved by all committee members in attendance and submitted to the Board.
 2nd Audit Committee Extraordinary Meeting of the 20th Board Session held on January 17, 2017:
Financial Division Vice President Position Change Proposal: Approved by all committee members in attendance and submitted to the Board.
 7th Audit Committee Meeting of the 20th Board Session held on March 30, 2017:2016 Annual Operations Report and Financial Statements; 2016 Deficit Compensation Proposal; 2017 Appointment and Remuneration for Certified
Public Accountants; Revision to the Procedures Governing the Acquisition and Disposal of Assets; 737-800 Passenger Airliner (B-186067) Sales
Proposal; 2016 Internal Control System Statement: The above proposals were approved by all committee members in attendance and submitted to
the Board.

3.3.3 Risk Committee:
The Risk Committee convened six meetings from January 1, 2016 through April 24, 2017. Committee member
attendance is detailed below:
Title

Name

Attendance in Person

By ProxyAttendance Rate (%)

Remarks

Chairman

Luo, Hsiao-Hsien

6

0

100%

Assumed post on May 6, 2014

MemberTing, Kwang-Hung

6

0

100%

Assumed post on May 6, 2014

MemberCharles C.Y. ,Chen

2

1

67%

Assumed post on August 11, 2016

MemberHuang, Hsiu-Gu

6

0

100%

Assumed post on May 6, 2014

MemberLin, Su-Ming

6

0

100%

Assumed post on May 6, 2014

Member

Lee, Cho-Ping

2

1

67%

Dismissed on July 26, 2016

Corporate Governance Report39

3.3.4 Corporate Governance Implementation Status and Deviations from “theCorporate Governance Best-Practice Principles for TWSE/TPEx Listed
Companies”
Implementation Status

Evaluation Item

Yes

No

Brief Explanation

Deviations
from “theCorporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons
No Difference

1. Did the Company establish its Corporate
Governance Best Practice Principles inaccordance with Corporate GovernanceBest-Practice Principles for TWSE/TPEx
Listed Companies and disclose those
Principles?
2. Company ownership structure andshareholder rights(1) Did the Company establish internal
operational procedures for dealing
with shareholder suggestions,questions, disputes, and lawsuits andput these procedures into practice?



The China Airlines Co., Ltd. Corporate Governance Best Practice Principles were
established in accordance with the Corporate Governance Best-Practice Principles for
TWSE/TPEx Listed Companies. The Principles were passed during the 6th meeting of the
19th Board session held on March 29, 2013 and disclosed on the TWSE Market
Observation Post System.

(1) To better implement corporate governance, CAL established the Regulations
Governing Investor Relations, which set up fixed procedures to handle investor
suggestions and concerns to ensure open communication channels between the
Company and investors and the quality of information disclosure.

No Difference(2) Does China Airlines keep maintain alist of the major Company
shareholders and the ultimate
owners of these shareholders?

(2) The China Aviation Development Foundation is China Airlines’ largest shareholder
and maintains full communication and contact with the Company.

No Difference(3) Did China Airlines establish andimplement risk control mechanisms
and firewalls at the Company andaffiliated enterprises?

(3) The Company has established Operational Procedures for
No Difference
Endorsements/Guarantees, Operational Procedures for Lending Funds to Others, andRegulations Governing Management of Invested Enterprises. All capital loans andfunding, endorsements/guarantees, and operational supervision and management ofCompany subsidiaries shall proceed in accordance with these procedures andregulations. Audit units perform quarterly audits of Company
endorsements/guarantees and capital loans/funding, which are provided to
management and independent directors. The Corporate Development Office is
responsible for overseeing implementation at invested enterprises and should any
faults be discovered, an improvement deadline is set and the progress is tracked.

(4) Did the Company establish internal
standards to prevent insider tradingon undisclosed information?

(4) The Company established the Directors Code of Conduct, Procedures for Handling
No Difference
Material Inside Information, and High-Level Manager Code of Conduct to specify
insider trading prevention and processing of secret stock trading and operating
information as required of employees by law. Those with undisclosed material inside
information are prohibited from engaging in securities trading.

(1) Members of the Company’s Board of Directors generally have the necessary
No Difference
expertise, experience, and character to perform their duties. Their backgrounds
include aviation, sea cargo, transportation, finance and accounting, insurance,
telecommunications, academia, construction, public utilities, and international trade.
In addition they have an international viewpoint, decision-making leadership, andcrisis management capabilities.

(2) In addition to the establishment of
the Remuneration Committee andAudit Committee as required by law,
did the Company establish
committees with other functions of
its own accord?

(2) In addition to establishing the Audit and Remuneration Committees as required bylaw, we also set up the Risk Committee, which is convened as outlined in theorganization charter approved by the Board of Directors. The Committee isaccountable to the Board of Directors and examines and discusses relevant issues
and brings conclusions and suggestions to the Board for resolution. Results havebeen quite successful.

(3) Has the Company establishedperformance evaluation guidelines
and evaluation methods for the
Board of Directors and does it
evaluate its performance regularly
each year?

(3) The Company’s Board comprises ten juridical person shareholder representatives and No Difference
three independent directors. Of these, the 10 juridical person shareholder
representatives are assessed as determined by the juridical person shareholders,
while the responsibilities of the three independent directors shall be faithfully
fulfilled in accordance with the powers conferred by law.

(4) Does the Company periodicallyassess the independence of external
CPAs?



(4) The Company’s Audit Committee and Board of Directors, as stipulated in Article 29 of No Difference
the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies,
assess the independence and suitability of auditors on a yearly basis. Important
requirements are as follows:
1. Issued an accountant independence declaration.
2. Not served as Company director or manager.
3. Not a shareholder in the Company and has never been on the payroll.
4. The accounting firm for which they work is not a Company affiliated enterprise.
5. Has not provided any non-auditing services to the Company that could affect

3. Structure and responsibilities of the Boardof Directors(1) Has the Company established policies
calling for diversity among membersof the Board of Directors and put said
policies into practice?

40 Corporate Governance Report

No DifferenceImplementation Status

Evaluation Item

Yes

No

Deviations
from “theCorporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Brief Explanation

complete independence.
After evaluation, Accountants Yang, Chen-Hsiu and Chen, Li-Chi of Deloitte &Touche, were found to meet the above independence standards and qualified toserve as the Company CPAs.
The Secretarial Office of the Board of Director is responsible for holding Board of
Directors meetings and assisting in related affairs, including furnishing information
required for business decisions by Directors, handling matters relating to Board
meetings, Committees meetings and recording minutes of relevant meetings, etc.; theFinance Div. is responsible for handling matters relating to Shareholders meeting; theAdministration Div. is responsible for handling corporate registration and amendment
registration.

4. Has the Company set up a full- (or part-)
time corporate governance unit or
personnel to be in charge of corporate
governance affairs (this may include but is
not limited to furnishing directors andsupervisors information required forbusiness execution, handling mattersrelating to board meetings andshareholders meetings according to laws,
handling corporate registration andamendment registration, and producing
minutes of board meetings andshareholders’ meetings)?



5. Has the Company establishedcommunication channels withstakeholders (including but not limited toshareholders, employees, customers, andsuppliers) and set up an area dedicated to
stakeholders on the Company website?
Does the Company respond appropriately
to corporate social responsibility issues
that stakeholders consider important?
6. Has the Company appointed aprofessional shareholder services agent tohandle shareholders meeting matters?
7. Information disclosure(1) Has the Company established apublic website to disclose financial,
operational, and corporate
governance information?



The China Airlines website features a Stakeholder Contact section(https://www.china-airlines.com/tw/en/about-us/stakeholder) that lists the available
communication channels for each of the Company’s stakeholders and where they canreach the appropriate staff who can provide the required response.

No Difference

The Company’s professional services organization is CTBC Bank, which has been
appointed to handle shareholder meeting matters.

No Difference(2) Has the Company adopted othermethods of information disclosure(e.g., setting up an English website,
designating a specialist responsible
for gathering and disclosing Company
information, setting up a
spokesperson system, uploading
recordings of investor conferences
onto the Company website)?



No Difference(1) Dedicated units within the Company provide information to be disclosed on the
China Airlines corporate website (http://www.china-airlines.com) regarding
marketing, operations, finance, administration, aircraft operations, humanresources, training, Shareholders’ Meeting, and the annual report, prospectus, andany material information. Through this easily available information, consumers,
suppliers, and investors can better understand China Airlines operations.
No Difference(2) The Company has set up an English version of our corporate website, designatedspecialists responsible for gathering and disclosing Company information and set up
a spokesperson system overseen by a dedicated unit (Corporate Communication
Office) responsible for releasing information through press releases, media
interviews, and press conferences.

8. Does China Airlines have other important
information to facilitate better
understanding of the Company's
corporate governance practices(including, but not limited to employee
rights, employee care, investor relations,
supplier relations, stakeholder rights,
director and supervisor training regimes,
risk management policies, and risk
measurement standards as well as theimplementation of client policies and theCompany's purchase of liability insurance
for its directors and supervisors)?



No Difference(1) To educate employees regarding the Company’s management activities and
No Difference
decision-making objectives, while ensuring they can receive information and express
their opinions , the Company has implemented the three below areas:
1. Information:
Regularly share the latest business news and decision-making developments on
the internal CAL website and send important information by email to all
employees.
Establish the WECARE Mailbox, Employee Suggestion Mailbox, and Team+ instantcommunication platform to provide employees with several direct channels ofcommunication to express their opinions or lodge complaints.
2. Organization:
Depending on the scope and attributes of each Company unit, we haveestablished employee care departments or positions that are responsible formaintaining open communication channels and the overall management ofrelated issues.
3. Systems:
Regularly hold labor-management meetings and supervisor and staff
communication meetings, employee welfare committee meetings, and a variety ofunion and employee representative meetings during which the Company candisclose information regarding corporate governance operations and resolutions
that fully respect the rights and opinions of employees.
(2) Beginning in 2016, in addition to arranging risk management training courses for
directors, the Secretarial Office of the Board of Directors regularly schedules
related classes, lectures, and seminars as part of director continued education

Corporate Governance Report41Implementation Status

Evaluation Item

Yes

No

Brief Explanation

Deviations
from “theCorporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons(including topics such as professional ethics, code of conduct, securities laws andregulations, accounting, finance, corporate governance, risk management, internal
controls, and internal auditing) available to both directors and managers.
(3) The Company’s Internal Control System covers all operational activities. Transactions
are divided into 10 categories on the internal control cycle to properly implement
internal auditing and strengthen supervision and management.
(4) Internal and external Company risk factors change as management activities andsocioeconomic factors change and our business plan and budget are revised
accordingly. Internal and external factors at each operating level change as eachlevel’s management activities and organizational structures change. Throughcommunication and proper adjustments and training regarding the Company’sorganizational structure and responsibilities, negative factors can be eliminated andthe Company can effectively respond to changes and immediately implement
suitable measures to protect the interests of the Company.
(5) Customer opinions serve as the Company’s core consideration. In order tostrengthen customer service, we has established the Optimized Services Working
Group directly under the Chairman. Through establishing a service strategy andprocedure that exceeds our customers’ expectations and coordinatesinterdepartmental communication, we work to develop service improvement
strategies to comprehensively upgrade China Airlines’ service quality.
(6) The Company has purchased liability insurance for the entire Board of Directors to
reduce and disperse the risk to directors should a mistake or negligent behavior
result in Company liabilities.
9. Please explain improvements that have been made in response to the results of the Corporate Governance Evaluation issued by the Taiwan Stock Exchange
Corporate Governance Center:
Communication between independent directors and internal audit managers and auditors (including method of communication, matter, and result) has been
disclosed on the Company website and an investor relations contact window has been set up for investor communications. Beginning in 2017, ethical corporate
management units within the Company will provide an annual report to the Board of Directors and discuss their progress of implementation on the Company
website. An English version of the Annual Report will also be uploaded seven days prior to the Shareholders’ General Meeting.

42 Corporate Governance Report3.3.5 Composition, Responsibilities and Operations of the Remuneration
Committee
The objective of the Remuneration Committee is to assist the Board to implement and assess theCompany’s overall compensation and benefits policy and director and manager remuneration.

A. Professional Qualifications and Independence Analysis of Remuneration Committee
Members
Meets One of the Following Professional Qualification
Requirements, Together with at Least Five Years’ Work
Experience

Numbe
r of
Other
PublicCompanies inWhich
the
Individ
ual isConcurrentlyServing
as anRemun
eration
Commi
ttee
Memb
er

Remarks

An instructor or
higher position
in a departmentof commerce,law, finance,accounting, orother academic
department
related to thebusiness needsof the Company
in a public or
private juniorcollege, college
or university

A judge, publicprosecutor,
attorney, Certified
Public Accountant,or otherprofessional or
technical specialist
who has passed anational
examination andbeen awarded acertificate in a
professionnecessary for thebusiness of theCompany

Has work
experiencein the areasofcommerce,
law, finance,oraccounting,or otherwise
necessary forthe businessof theCompanyLuo,
Hsiao-H
sien



-



       

0

-

Ting,
Tin-Yu-       

0-Criteria
Title(Note 1)Name

Independent
Director
Independent
Director

Independence Criteria (Note 2)

1

2

3

4

5

6

7

8

He,
Jyun-Hu       
0eiNote 1: Please tick the corresponding boxes that apply to a member during the two years prior to being elected or during their term(s) in office.
1. Not an employee of the Company or any of its affiliates.
2. Not a director or supervisor of affiliated companies. Not applicable in cases where the person is an independent director of the parent
company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.
3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the
person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company, or
ranking in the top 10 in holdings.
4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in thepreceding three sub-paragraphs.
5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding
shares of the Company, or who holds shares ranking in the top five holdings.
6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution which has afinancial or business relationship with the Company.
7. Not a professional individual, who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or
institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of theCompany, or a spouse thereof.
8. Not a person of any conditions defined in Article 30 of the Company Law.
Note 2: The Remuneration Committee is composed of four members. For the Remuneration Committee Charter, please refer to the Company
website: http://www.china-airlines.com.
Other

Corporate Governance Report43

B. Attendance of Members at Remuneration Committee Meetings
The Remuneration Committee convened six meetings over the past year (from January 1, 2016 throughApril 24, 2017). Committee member attendance is detailed below:
Title

Name

Chairman

Luo, Hsiao-Hsien

Attendance in
Person6

By ProxyAttendance Rate (%)

0

100%

Remarks
Assumed post on July 24, 2015.
Assumed post on July 24, 2015 and was represented

MemberTing, Tin-Yu

5

1

83%

by Luo, Hsiao-Hsien during the March 11, 2016
meeting.

MemberCao, Shou-Min

3

0

100%

Member

He, Jyun-Huei

6

0

100%

Assumed post on July 24, 2015 and resigned on July
1, 2016.
Assumed post on July 24, 2015.

Other mentionable items:
1. If the Board of Directors declines to adopt or modifies a recommendation of the Remuneration Committee, the date of the meeting, session,
content of the motion, resolution by the Board of Directors, and the Company’s response to the Remuneration Committee’s opinion (e.g., theremuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for thedifference shall be specified) shall be recorded: None.
2. Resolutions of the Remuneration Committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the dateof the meeting, session, content of the motion, all members’ opinions and the response to members’ opinion should be specified: None.

44 Corporate Governance Report3.3.6 Corporate Social Responsibility
Implementation Status

Evaluation Item

1. Corporate governance implementation(1) Has the Company established corporatesocial responsibility policies or a CSR
system and reviewed the effectivenessof implementation?

Yes



No

Deviations
from “theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Brief Explanation

No Difference(1) CAL’s six CSR missions are:
1. Satisfy shareholders with our integrity.
2. Move customers with our enthusiasm.
3. Support partners with our actions.
4. Protect our Earth through sustainability.
5. Nurture employees with our care.
6. Give back to society through culture.
To codify the Company’s CSR implementation, the Corporate Social
Responsibility and Sustainable Development Code of Practice was approvedthduring the 6th meeting of the 20 session of the Board of Directors held on May
12, 2016, which will serve as our guiding principles to meet our corporate social
responsibilities.
(2) China Airlines holds annual sustainable development training courses andhigh-level management seminars to educate colleagues on sustainable
development concepts.

(2) Does the Company regularly hold CSR
training?

(3) Has the Company designated full- (orpart-) time personnel to implement
corporate social responsibility policy
with senior management authorized by
the Board of Directors to manage them,and do they give status reports to theBoard of Directors?

No Difference(3) CAL established our highest-tier corporate sustainability organization, theCorporate Sustainability Committee, with China Airlines’ President directlysupervising and managing its operations. The Corporate Development Officeserves as the executive secretary of the Committee helping to promotesustainability operations and reports quarterly to the Board of Directors regarding
related initiatives.

(4) Has the Company establishedreasonable remuneration policies andintegrated the employee performance
evaluation system and CSR policies, andestablished a clear and effective
incentive and discipline system?



No Difference(4) The Company’s Human Resource Manual clearly stipulates a code of practice forrelated operations including performance evaluations, rewards and penalties, andremuneration.

(1) Through establishing corporate environmental and energy management systems No Difference
and continuing to improve related operations, China Airlines endeavors toincrease the benefits of our overall operations on the environment. Each year, we
set KPI for a variety of important areas such as energy usage, waste management,
and environmental services. Through quarterly meetings of the Environmental
Management Committee convened by the President, performance is reviewed
and improvements are evaluated. The Company has implemented resource
management based on the principle of the 3 R’s (Reduce, Reuse, Recycle) andpurchasing decisions now take into account if goods include recycled materials.
The policy highlights are as follows:
1. The CAL Park Headquarters houses a rain reclamation facility that captures
rainwater for use in building toilets.
2. Reclaimed water from the maintenance facility (water treated by thewastewater treatment plant and approved for reuse) is used for washingvehicles, in fountains, and watering the landscaping.
3. The Cargo Sales, Service, and Marketing Division procures mixed material
rain-resistant plastic sheeting (recycled material) that has a smaller
environmental impact than 100% new plastic material sheeting.
4. In-flight service related items are produced with recycled materials such as ricehusk chopsticks and headrest covers made of coffee grounds.
5. Magazines and important printed materials (such as calendars and menus) are
printed on recycled or FSC-certified paper.

(2) Has China Airlines established anenvironmental management system thatis specifically designed with theCompany's operations in mind?

(2) In 2012, the Company began taking a systematic approach to risk management
and launched phased implementation of the ISO14001 Environmental
Management System and ISO 50001 Energy Management System. Added to ISO
14064-1 Greenhouse Gasses (GSG) Management System already being
implemented, these systems enable China Airlines to achieve our goal of acomprehensive, effective environmental and energy management mechanism.

(3) Does the Company pay close attention
to the potential impacts of climatechange on operations, has it undertaken
an examination of greenhouse gas



No Difference(3) Beginning in 2008, the Company began actively implementing the ISO 14064-1
GHG Management System and launched an inventory for all greenhouse gas
emissions caused by our operations, which is verified by a third-party. In addition,in 2011 in order to keep up with international trends, we actively established a

2. Sustainable environmental development(1) Has the Company endeavored to makemore efficient use of resources and use
renewable materials that have a lower
impact on the environment?

No Difference

No Difference

Corporate Governance Report45Implementation Status

Evaluation ItemYesemissions, and has it established acarbon and greenhouse gas reduction
strategy?

3. Social welfare(1) Has the Company establishedmanagement policies and procedures inaccordance with relevant laws andregulations and international humanrights conventions?

No

Brief Explanation

Deviations
from “theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasonscarbon risk management system and began participating in the Carbon Disclosure
Project (CDP). In October 2014, we announced a voluntary GHG reduction goal.
Prior to the International Civil Aviation Organization’s announcement of a global
carbon management scheme, the Company had already begun actively promoting
self-management of carbon. In 2009, we signed on to IATA’s three phased
environmental goals, which include average annual fuel use efficiency increasesof 1.5% through 2020, Carbon Neutral Growth by 2020 (CNG2020), and a 50%
reduction in emissions by 2050 compared to 2005 figures. Our actions will help tospur the strategic goals and overall value of Taiwanese civil aviation GHG
emissions reductions.
(1) To ensure the health of our management mechanisms and organizational
capacities, the Company drew up an Employee Code of Conduct and Employee
Work Guidelines in accordance with R.O.C. labor laws and international labor
conventions.

No Difference(2) Does the Company have an employee
complaint mechanism and channels anddoes it take care of said complaints
appropriately?

(2) To protect the rights and interests of employees and maintain good relations
between management and labor, the Company established internal rules such as
the Regulations Governing Employee Complaints and Regulations Governing
Employee Safety Report Incentives. In addition, we have provided the Chairman
and President email addresses and other complaint mechanisms to the entire
workforce and all complaints received are handled according to these operatingprocedures.

No Difference(3) Does the Company provide employeeswith a safe and healthy work
environment and regularly implement
health and safety education programsfor employees?

(3) 1.CAL regularly holds health and safety inspections to identify and eliminate No Difference
hazards. There were 100 inspections held in 2016 that identified 64 faults, ofwhich 64 were improved for an improvement rate of 100%.
2.Utilizing the CAL Aviation Quality Database (AQD) integrated safety management
system, we can discover hidden hazards in the operating environment andimplement risk assessments to reduce the incidence of workplace accidents. In
2016, there were 97 AQD-related health and safety cases and all 97 have been
improved and the cases closed, for a 100% improvement rate.
3.Because of the high incidence of major traffic accidents in Taiwan, random
checks are performed on leased CAL transportation vehicles to ensure employee
safety.
4.To provide employees with safe, nutritious meals in the employee cafeteria,
regular checks are made to ensure a hygienic environment and food quality.
5. Perform health and safety training(1) General health and safety training (implemented in coordination with “CALand me”)(2) New manager health and safety e-learning training.
(3) Defensive driving training (e-learning).

(4) Has the Company established amechanism enabling periodic
communication with employees and areasonable method of informing
employees of those operational changes
that could significantly affect their
work?



No Difference(4) In addition to quarterly high-level manager/employee communication meetings,
monthly labor-management meetings, and labor-management negotiations asneeded, CAL provides employees and management with channels to communicate
important operating information and exchange ideas to create a positive
consensus.

(5) Has the Company established aneffective career skill developmenttraining program for employees?

(5) In order to nurture company talent, CAL’s training units hold an annual training
program that includes strategic skills training, management skills training, andon-the-job training to give employees essential skills to execute their work while
improving service quality and ensuring flight safety.

(6) Has the Company established policies
regarding R&D, procurement,
production, operations, and service
processes and complaint procedures tosafeguard the rights of customers?



No Difference(6) 1.In our drive to protect customer personal information, CAL has established
Privacy and Personal Information Protection Mechanisms and disclosed themon our website.
2.CAL provides consumers with several channels to lodge complaints regarding our
No Difference
products or services, which include in-flight surveys, CAL website, service
hotlines at various subsidiaries, or customers can directly contact us by mail.
The customer will be contacted after the complaint is processed.

(7) Does the Company's product and service
marketing and labeling adhere to
relevant laws and regulations andinternational standards?



46 Corporate Governance Report(7) CAL’s services and products meet the rules and regulations of all relevant nations.
In order to provide passengers with better online services and an improved user
experience, in 2015 the China Airlines website was redesigned to meet US DOT
airline website accessibility standards and WCAG AA certifications. Users withdisabilities can utilize alternative options to access website content making theexperience more user friendly and convenient.

No Difference

No DifferenceImplementation Status

Evaluation Item

Yes

No

Brief Explanation

Deviations
from “theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons
No Difference(8) Prior to entering a business relationshipwith a supplier, does the Company first
determine whether or not the supplier
has any record of negatively impacting
society or the environment?

(8) Potential CAL suppliers must issue a “tender declaration” prior to submitting atender. CAL requires that suppliers meet conflict of interest avoidance principles,anti-bribery regulations, and supplier integrity standards, while at the same time
following all local laws. CAL carefully assesses suppliers’ impact on theenvironment and society and their image, including their reputation and any
record of previous illegal activities.

(9) Do the Company's contracts with its
major suppliers include provisions forterminating the agreement at any timein the event that the suppliers are
involved in any activities that violate
Company CSR policies and thatsignificantly adversely impact theenvironment or society?

(9) The Company developed the China Airlines Supplier Code of Conduct clearly
No Difference
stating that the code shall be signed and followed. Topics covered include legal
and regulatory compliance, human rights and labor standards, occupational healthand safety, environmental protection, fair trade and ethics, quality and safety, andcyber security. Should a supplier violate the code, China Airlines shall terminate
the business relationship. In addition, in 2016 CAL was chosen as a constituent
stock of the DJSI Emerging Markets Index and our supply chain management score
was the highest in the industry.

(1) The China Airlines website features a dedicated CSR section to highlight our
related programs and we have disclosed our “CSR Report/Sustainability Report”
and “GHG Emissions and Reduction Information” on the Taiwan Stock Exchange
Market Observation Post System.

4. Strengthening information disclosure(1) Does the Company disclose on its
website and TWSE Market Observation
Post System relevant and reliable
information about Company CSR?

No Difference

5. If the Company has drawn up a code for CSR based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies please
describe any differences between said code and the Best Practice Principles:
In order to comprehensively implement CSR, China Airlines has established the Corporate Social Responsibility and Sustainable Development Code of Practicebased on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies. The Code of Practice was approved during the 6ththmeeting of the 20 session of the Board of Directors held on May 12, 2016 and comprehensively reviews the Company’s operating structure and provides
feedback regarding management and execution. From the broad categories of environmental, social, and governance perspectives, CAL is committed to fulfilling
our corporate social responsibility. Over the past year, there were no differences between the CAL Code of Practice and TWSE/TPEx best-practice principles.
6. Other important information for facilitating the understanding of CSR and its implementation:(1) Environmental protection: We actively participate in carbon reduction and energy conservation while continuing to improve fuel efficiency. Starting in 2015,
the next generation, environmentally-friendly, fuel efficient Boeing 777-300 ER and Airbus A350–900 passenger aircraft began joining the fleet. With 20% andhigher reductions in carbon emissions, the planes meet both service efficiency and environmental demands.
(2) Social welfare: CAL has long supported educational outreach through participating in the Friendly Campus remote area elementary education advocacy
program along with the Global Views Magazine’s Sharing Knowledge Platform charitable project for children. We invited young elementary students from
Shi-Hai Primary School, Shan Fong Elementary, Jhuwei Elementary, and Hai-Hu Elementary to meet NBA star point guard Jeremy Lin. CAL also sponsored the
Bornanew Youth Caring Association’s 616 Youth Dream Factory program, worked together with the Fisher’s Association of Taoyuan District to hold the 2016
Warm Hearth activity, and continued to provide complementary flights to children with serious medical conditions through the Make a Wish Foundation.
(3) Promotion of CSR: CAL participated in travel exhibitions in Taiwan and abroad, and sponsored the Tourism Bureau, the Taiwan Visitors Association’s 2016
Taiwan Lantern Festival, 2016 Fulong International Sand Sculpture Art Festival, and Taipei City Government’s Velo-city Global expo. The Company alsosponsored the Tourism Bureau’s 10 Millionth Foreign Visitor program, showing our concrete support for the promotion of Taiwan’s tourism industry. Becauseof China Airlines’ long-term implementation of corporate governance and sustainable development, in 2016 CAL was selected as a constituent stock of the
DJSI Emerging Markets Index, which represents international recognition of our commitment and hard work and gives us more confidence as we continue toimprove our performance.
7. If the Company CSR report has received certification from relevant certification bodies, please detail below:
The CAL 2015 CSR Report was certified by SGS Taiwan Ltd. in May 2016 as meeting GRI G4 core indicators and passed AA1000AS TYPE II high-level assurance.

3.3.7 Ethical Corporate Management
Implementation Status

Evaluation Item
Yes

No

Brief Explanation

Deviations
from “theEthicalCorporate
Management
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reason

1. Establishment of ethical operation policies
and programs(1) Do the Company's Articles of
Association and external documents
explicitly express its ethical policies
and methods and are the Board andmanagement committed to the active(1) CAL has established Ethical Corporate Management Best Practice Principles and No Difference
Procedures for Ethical Management and Guidelines for Conduct, which werepassed in 2016 at the 5th meeting of the 20th Board session. These guidelines andprinciples clearly spell out the Company’s ethical operating policies, methods, andcommitments. They are published on the CAL website and the Taiwan Stock

Corporate Governance Report47

Implementation Status

Evaluation Item
Yes

implementation of thesecommitments?

No

Brief Explanation

Deviations
from “theEthicalCorporate
Management
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reason

Exchange Market Observation Post System.

(2) Has the Company established andimplemented programs to prevent
unethical conduct and do these
programs clearly specify relevant
procedures, conduct guidelines, and adiscipline and appeals system for ruleviolations?

(2) CAL’s Procedures for Ethical Management and Guidelines for Conduct specifies No Differenceprohibited unethical behavior, reporting mechanisms, and a disciplinary system,
and is being implemented in each division of the Company. In addition, CAL has
also established a dedicated Ethics Management Unit responsible for reporting
annually to the Board regarding implementation.

(3) Does the Company implement
preventative measures for each item
under Clause 2, Article 7 of the EthicalCorporate Management Best PracticePrinciples for TWSE/TPEx Listed
Companies or other operations thathave higher risk of unethical behavior?

(3) China Airlines’ Ethical Corporate Management Best Practice Principles expressly No Difference
state that the scope of these regulations shall cover all business operations with ahigher risk of unethical behavior, while also strengthening related measures toprevent those situations listed under Clause 2, Article 7 of the Ethical Corporate
Management Best Practice Principles for TWSE/TPEx Listed Companies.

(1) Does the Company evaluate theethical records of the businesses withwhich it has dealings and include clear
ethical corporate behavior provisions
in contracts with such counterparties?

(1) In the process of business dealings with other companies, CAL employees explain No Difference
our ethical management policy and related regulations to counterparties andexpressly refuse to directly or indirectly provide, promise, demand or accept any
form of improper benefit. When signing contracts with others, CAL fully reviews thecounterparty’s ethical corporate behavior and includes complying with our ethicalcorporate management policies as a provision in contracts.

(2) Has the Company established anorganization under the direct
jurisdiction of the Board of Directorsthat promotes ethical management
principles and also regularly reports to
the Board concerning
implementation?

(2) The CAL Human Resources Division is the unit tasked with promoting ethicalmanagement and is responsible for collating information regarding ethical No Difference
operations implementation from all relevant units and reporting these findings to
the Board of Directors.

(3) Has the Company formulated andimplemented policies to prevent
conflicts of interest and provide
appropriate ways to record any
potential conflicts found?

(3) CAL Procedures for Ethical Management and Guidelines for Conduct expressly state No Difference
that should a conflict of interest arise in the execution of Company duties,
employees shall report the situation to their direct supervisor, who should provide
appropriate guidance.

(4) Has the Company implemented
effective accounting and internal
control systems and does it have aninternal auditing unit or independentaccountant periodically review them?

(4) In order to implement ethical management, the Company has established effective(5) Does the Company periodically holdinternal and external ethical corporate
behavior training?

(5) When a new employee joins the Company, CAL educates him or her on ethical No Difference
conduct and ethical corporate management standards. Managers both in Taiwan
and in overseas posts also take a related e-learning online course. The EthicalCorporate Management Best Practice Principles and Procedures for EthicalManagement and Guidelines for Conduct are published on the Company’s internal
website and the China Airlines website for the reference of employees and others.

(1) Has the Company established aconcrete violation reporting andrewards system, set up convenientreporting channels, and appointed
suitable personnel to handle thesecases?

(1) Article 20 of CAL’s Procedures for Ethical Management and Guidelines for Conduct
clearly sets out and discloses the violation reporting system, reporting channels,
and procedures for handling reported violations. The CAL corporate website andinternal website provides the independent reporting mailbox:
auditor@china-airlines.com for any person inside or outside the company to reportviolations. All violation report cases are handled exclusively by the CAL General
Audit Office and all information, related handling methods, and follow-up
improvement measures are reported to the Board of Directors.

No Difference(2) Has the Company established aninvestigation SOP for violation

(2) All reports of violations and related follow up investigations are kept strictly
confidential and CAL has set up clear and effective awards and punishments,

No Difference

2. Implementing ethical corporate
management

accounting and internal control systems, which are reviewed annually by internal
auditors. The unit under review shall issue a corrective plan for each issue
discovered during the audit and follow ups will be held regularly to review
implementation.

No Difference

3. Operation of the Company's Violation
Reporting System

48 Corporate Governance ReportDeviations
from “theEthicalCorporate
Management
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reason

Implementation Status

Evaluation Item
Yes

No

Brief Explanation

reporting and a relevant
confidentiality mechanism?

appeals system, violation reporting confidentiality mechanism, and investigation
SOP.

(3) Does the Company have any measuresin place to protect individuals frompossible mistreatment arising from
reporting violations?

(3) According to CAL Procedures for Ethical Management and Guidelines for Conduct, No Difference
employees who process violation reports must sign a written statement pledging tomaintain confidentiality of the reporters and the details of the case. CAL also
promises to protect the whistleblower from being improperly punished due to thereporting.



CAL’s Ethical Corporate Management Best Practice Principles and Procedures for No Difference
Ethical Management and Guidelines for Conduct are disclosed on the China Airlines
website and the Taiwan Stock Exchange Market Observation Post System, along withthe effectiveness of ethical operations and fair trade principles.

4. Strengthening information disclosure(1) Does the Company disclose thecontent of our Ethical Corporate
Management Best Practice Principles
and their effectiveness on our website
and the TWSE Market Observation
Post System?

5. If the Company has established a code of ethical corporate management based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx
Listed Companies, please describe any differences between said code and the Best Practice Principles: No Differences
6. Other information that will assist in the understanding of Company ethical corporate management practices: None.

3.3.8 Corporate Governance Guidelines and Regulations
The Company has adopted the Articles of Association, Corporate Governance Best Practice Principles, Rules ofProcedure for Board Meetings, Codes of Ethical Conduct for Directors and Supervisors, Procedures Governing theElection of Directors and Supervisors, Ethical Corporate Management Best Practice Principles, and Rules ofProcedure for Shareholders’ Meetings and set up the Audit, Remuneration, and Risk Committees under the Boardof Directors and drafted each committee charter. The above regulations are posted on the Taiwan Stock Exchange
Market Observation Post System (http://mops.twse.com.tw) and the Company website(http://www.china-airlines.com).

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

Name

Date ofAppointment

Date of Dismissal

ChairmanPresident
Vice President
Finance Div.

Sun, Huang-Hsiang
Chang, Yu-Hern

03/07/2013
08/01/2015

06/24/2016
06/24/2016

Reason for
Resignation or
Dismissal
Dismissal
Dismissal

Chung, Wan-Chun

02/16/2012

03/01/2017

Dismissal

3.3.10 Other Important Information Regarding Corporate Governance
A. The organization and operations of Company internal auditing are disclosed on
the Company website: http://www.china-airlines.com.
B. Company financial staff certifications and licenses: Institute of Internal Auditors-Chinese
Taiwan Internal Auditor Certificate: 7 people, International Internal Auditor Certificate: 5 people,
R.O.C. Certified Public Accountant License: 3 people, R.O.C. Securities (Senior) Specialist: 10 people,
R.O.C. Securities Investment Trust and Consulting Professional: 6 people, R.O.C. Futures Specialist:
4 people, R.O.C. Financial Planning Personnel Proficiency Test Passing Certificate: 4 people, R.O.C.
Stock Affairs Specialist Proficiency Test Passing Certificate: 7 people, USA Certified Public
Accountant License: 1 people, R.O.C. Basic Enterprise Internal Audit Proficiency Test Passing
Certificate: 6 people.

Corporate Governance Report49

C. Company Director Continuing Education:

Title

Name

Traininghours
3hr

Chairman

Ho,
Nuan-Hsuan
3hr

3hr

3hr
Director

Hsieh, Su-Chien
3hr

3hr

3hr

Director

Charles
C.Y. ,Chen

3hr

3hr
3hr
9hr
DirectorJong, Jia-shi
3hr

3hr
Director

Ting,
Kwang-Hung
3hr

3hr

Director

Lee, Kuo- Fu

9hr

3hr

50 Corporate Governance Report

From January 1, 2016 through April 24, 2017
Sponsoring
Date(s)CourseOrganization
Guidance for Corporate
Taiwan Corporate
Governance – A Comprehensive
11/10/2016
Governance
Overview of Principles, Practice, andAssociation
TrendsCommissioned Course:
Performance Analysis andTaiwan Corporate
Improvement Suggestions for the
11/10/2016
Governance
Aviation Industry
Association
Taiwan Corporate
Business Operator Concerns –10/17/2016
GovernanceWorker Holidays
Association
Commissioned Course:
Performance Analysis andTaiwan Corporate
Improvement Suggestions for the
11/10/2016
Governance
Aviation Industry
Association
Practical Operation of Independent
Taiwan Corporate
Directors and Functional
11/24/2016
GovernanceCommittees
Association
Taiwan Corporate
11/29/2016
GovernanceConglomerate Governance
Association
Upturning Competitiveness Taiwan Institute of International Situation and Response
03/08/2016
Directors
Strategies After the Cop21 Paris
SummitCommissioned Course:
Taiwan Corporate
International Finance and Risk
03/25/2016
Management Seminar
Governance
Association
Rise of the Innovation Economy –Taiwan Institute of
The Changes and Challenges of
02/25/2017
Directors
Enterprise Management
Taiwan Institute of
The Thinking and Challenge of
03/28/2017
Directors
Online Economy in Power Industry
Labor Director Professional
09/12/2016-09/13/2016
Ministry of Labor
Competencies Training Course 2016
Commissioned Course:
Performance Analysis andTaiwan Corporate
Improvement Suggestions for the
11/10/2016
Governance
Aviation Industry
Association
Commissioned Course:
Taiwan Corporate
International Finance and Risk
03/25/2016
GovernanceManagement Seminar
Association
Taiwan Corporate
Corporate Governance and
09/09/2016
Governance
Securities Regulations
Association
Commissioned Course:
Taiwan Corporate
International Finance and Risk
03/25/2016
GovernanceManagement Seminar
Association
Labor Director Professional
09/12/2016-09/13/2016
Ministry of Labor
Competencies Training Course 2016
Commissioned Course:
Performance Analysis andTaiwan Corporate
11/10/2016
Improvement Suggestions for theGovernance
Aviation Industry
Association

TitleDirector

Name

Traininghours

Date(s)Sponsoring
Organization

Course3hr

10/04/2016

Securities & Futures
Institute

Legal Issues of Importance toDirectors and Supervisors of PublicCompanies

11/10/2016

Commissioned Course:
Taiwan Corporate
Governance
Association

Performance Analysis andImprovement Suggestions for the
Aviation Industry

Cheng,
Chuan-Yi
3hr

Director

Director

Director

Chen,
Han-Ming

3hr

09/30/2016

Securities & Futures
Institute

3hr

09/30/2016

Securities & Futures
Institute

3hr

10/18/2016

Securities & Futures
Institute

3hr

11/10/2016

3hr

03/25/2016

3hr

11/10/2016

3hr

03/25/2016

3hr

11/10/2016

3hr

04/21/2016

Lin, Su-Ming

Huang, Hsiu-Gu

Independent
Chung, Lo-Min
Director

Independent
Director

Independent
Director

Luo,
Hsiao-Hsien

3hr

11/10/2016

3hr

03/25/2016

3hr

11/10/2016

3hr

04/11/2017

3hr

07/14/2016

3hr

11/10/2016

Ting,
Tin-YuCommissioned Course:
Taiwan Corporate
Governance
Association
Commissioned Course:
Taiwan Corporate
Governance
Association
Commissioned Course:
Taiwan Corporate
Governance
Association
Commissioned Course:
Taiwan Corporate
Governance
Association
Commissioned Course:
Taiwan Corporate
Governance
Association
Securities & Futures
Institute
Commissioned Course:
Taiwan Corporate
Governance
Association
Commissioned Course:
Taiwan Corporate
Governance
Association
Commissioned Course:
Taiwan Corporate
Governance
Association
Ministry ofTransportation andCommunications
Taiwan Corporate
Governance
Association
Commissioned Course:
Taiwan Corporate
Governance
Association

Legal Responsibilities and Risk
Control for Directors and Supervisors
in the Case of Financial Statement
Inaccuracies - Focus on Practical
Case Studies
How Can Directors and Supervisors
Avoid Insider Trading
Financial Statement Review for
Directors and Supervisors Withoutan Accounting Background
Performance Analysis andImprovement Suggestions for the
Aviation Industry
International Finance and Risk
Management Seminar
Performance Analysis andImprovement Suggestions for the
Aviation Industry
International Finance and Risk
Management Seminar
Performance Analysis andImprovement Suggestions for the
Aviation Industry
Corporate Governance Forum Series
2016 – Insider Trading andCorporate Social Responsibility
Performance Analysis andImprovement Suggestions for the
Aviation Industry
International Finance and Risk
Management Seminar
Performance Analysis andImprovement Suggestions for the
Aviation Industry
Financial statement analysis andpractical application
Investigating the Legal
Responsibilities of Independent
Directors
Performance Analysis andImprovement Suggestions for the
Aviation Industry

Corporate Governance Report51

D. Corporate Governance Related Training Attended by Company Managers:
Title
Vice
President
FinanceDiv.
Assistant
Vice
President
FinanceDiv.
General
Audit
OfficeAuditor
GeneralName

Date(s)Chung,
Wan-Chun(Note)

05/23/201605/24/2016

Accounting Research and Continued Education for Principal Accounting
Development
Officers of Issuers, Securities Firms, andFoundation
Securities Exchanges

12hr

Ho, Hui-Fen

10/06/201610/07/2016

Accounting Research and Continued Education for Principal Accounting
Development
Officers of Issuers, Securities Firms, andFoundation
Securities Exchanges

12hr

01/20/201601/22/2016
Chung,
Chuar-Duan

11/03/2016
11/22/2016

Sponsoring Organization

From January 1, 2016 through April 24, 2017
Training
Coursehours

Securities & Futures
Institute
Institute of Internal
Auditors-Chinese Taiwan
Institute of Internal
Auditors-Chinese Taiwan
Accounting Research andDevelopment
Foundation

Preemployment Training Workshop for FirstTime Enterprise Internal Auditors
Internal Auditing Course – Subsidiary
Supervision in PracticeInternal Auditing Course – How to Establish
Internal Audit Implementation Rules”The Forefront of Internal Controls” An
Internal Control System Based in Risk
Management

General
06/02/2016
Audit
OfficeFang, Juo-Ling
DeputyInstitute of InternalInternal Auditing Course – Subsidiary
11/03/2016
Auditor
Auditors-Chinese Taiwan
Supervision in PracticeGeneral(Note) Ms. Chung, Wan-Chun was dismissed from the position of Vice President of the Finance Division on March 1, 2017.

18hr
6hr
6hr
6hr

6hr

E. On December 6, 2012, after approval by the Board of Directors, the Company
established the China Airlines Ltd. Procedures for Handling Material Inside
Information. In addition to announcing the new procedures to the Board,
management, and employees, they were also published under Important Company
Regulations on the Investor Relations section of the CAL website so the Board,
management, and employees can reference them at any time in order to avoid
violations and the occurrence of insider trading.

52 Corporate Governance ReportChina Airlines Ltd. Procedures for Handling Material Inside Information:
Article 1: These Procedures are specially adopted to establish sound mechanisms for the handling anddisclosure of material inside information by the Company, in order to prevent improper
information disclosures and to ensure the consistency and accuracy of information released by
the Company to the public.
Article 2: The Company shall implement its handling and disclosure of material inside information inaccordance with applicable laws and regulations, the rules and regulations of the Taiwan Stock
Exchange Corporation, and these Procedures.
Article 3: These Procedures shall apply to all directors, managerial officers, and employees of the Company.
The Company shall ensure that any other person who acquires knowledge of the Company's
material inside information due to their position, profession, or relationship of control shallcomply with the applicable provisions of these Procedures.
Article 4: For the purposes of these Procedures, the term "material inside information" refers to
information that is defined as material inside information by the Securities and Exchange Act,
other applicable laws and regulations, and the applicable rules and regulations of the Taiwan
Stock Exchange Corporation or the GreTai Securities Market.
Article 5: The Company’s Finance Division is tasked with handling material inside information. The division
shall have the following functions and authorities:
1. Responsibility for formulating the drafts of these Procedures and any amendments to them.
2. Responsibility for receiving inquiries in connection with the methods of handling material inside
information, and for consultation, review, and recommendations relating to these Procedures.
3. Responsibility for receiving reports on unauthorized disclosures of material inside informationand formulation of corresponding measures.
4. Responsibility for designing a system for preserving all documents, files, electronic records, andother materials related to these Procedures.
5. Other activities related to these Procedures.
Article 6: The Company's directors, managerial officers, and employees shall exercise the due care andfiduciary duty of a good administrator and act in good faith when performing their duties. No
director, manager, or employee with knowledge of material inside information of the Company
may divulge the information to others before it is made public. No director, managerial officer, or
employee of the Company may inquire about or collect any non-public material inside informationof the Company not related to their individual duties from a person with knowledge of suchinformation, nor may they disclose to others any non-public material inside information of theCompany of which they become aware for reasons other than the performance of their duties.
Article 7: Proper protection of confidentiality shall be given to files and documents containing the Company's
material inside information when transmitted in written form. When transmitted by email orother electronic means, such files and documents must be processed with appropriate security
technology such as encryption or electronic signatures.
Files and documents containing the Company's material inside information shall be backed up andstored in a secure location.
Article 8: The Company shall ensure that the firewalls specified in the preceding two articles are established,
and take the following additional steps:
1. Adopt adequate control measures for the firewalls and perform periodic testing.
2. Enhance measures for custody and maintaining the secrecy of files and documents containing
non-public material inside information of the Company.
Article 9: Any organization or person outside of the Company that is involved in any corporate action of theCompany relating to a merger or acquisition, major memorandum of understanding, strategic
alliance, other business partnership plans, or the signing of a major contract shall be required tosign a confidentiality agreement, and may not disclose to another party any material inside
information of the Company's thus acquired.
Article 10: The Company shall comply with the following principles when making external disclosures ofmaterial inside information:
1. The information disclosed shall be accurate, complete, and timely.
2. There shall be a well-founded basis for the information disclosure.
3. The information shall be disclosed fairly.

Corporate Governance Report53Article 11: Any disclosure of the Company's material inside information, except as otherwise provided by law
or regulation, shall be made by the Company's spokesperson, or by a deputy spokesperson acting
in such capacity in a confirmed sequential order. When necessary, the disclosure may be madedirectly by a responsible person of the Company.
The Company's spokesperson or deputy spokesperson shall communicate to outside parties only
information within the scope authorized by the Company, and no personnel of the Company
other than those serving as the Company's responsible person, spokesperson, or deputy
spokesperson may disclose any material inside information of the Company to outside parties
without authorization.
Article 12: The Company shall keep records of the following in respect of any disclosure of information tooutside parties:
1. The person who discloses the information, the date, and the time.
2. How the information is disclosed.
3. What information is disclosed.
4. What written material is delivered.
5. Any other relevant details.
Article 13: If a media agency releases information that is in any respect inconsistent with material
information disclosed by the Company, the Company shall promptly issue a clarification on theMarket Observation Post System (MOPS) and request the media agency to correct the
information.
Article 14: Any director, managerial officer, or employee of the Company that becomes aware of any
unauthorized disclosure of the Company's material inside information shall report to the
responsible unit and the internal audit department of the Company as soon as practicable.
Upon receipt of a report made pursuant to the preceding paragraph, the responsible unit shallformulate corresponding measures. When necessary, it may invite members from the internal
audit and other departments to meet for discussion of the measures, and shall keep a record of
the results of the measures for future reference. The internal auditors shall also perform suchaudits as their duties may require.
Article 15: The Company shall take measures to discover those responsible and take appropriate legal action
against any personnel under either of the following circumstances:
1. Personnel of the Company disclose material inside information without authorization to any
outside party, or otherwise violate these Procedures or any other applicable law or regulation.
2. A spokesperson or deputy spokesperson of the Company communicates to any outside party
any information beyond the scope authorized by the Company, or otherwise violates these
Procedures or any other applicable law or regulation.
If any person outside the Company divulges any material inside information of the Company,
thereby causing damage to any property or interest of the Company, the Company shall pursue
appropriate measures to hold the person divulging the information legally liable.
Article 16: These Procedures shall be incorporated into the Company's internal control system. The internal
auditors shall keep themselves regularly informed of the status of compliance with these
Procedures and shall prepare related audit reports, so as to ensure full implementation of theprocedures for handling material inside information.
Article 17: At least once per year, the Company shall conduct educational campaigns to promote awarenessamong all directors, managerial officers, and employees with respect to these Procedures andrelated laws and regulations.
The Company shall also provide educational campaigns to new directors, managerial officers, andemployees in a timely manner.
Article 18: These Procedures, and any amendments to them, shall be implemented upon approval by the
Board of Directors.

54 Corporate Governance Report3.3.11 Internal Control Systems
A. Internal Control Statement

Corporate Governance Report55

B. If the company has commissioned external auditors to review the Company’s
internal control system, the external auditor’s report should be disclosed: None.

3.3.12 Any disciplinary measures taken against the Company or its internal staff
due to violations of legal requirements or taken by the Company against
its own staff due to violations of the internal control system. The detailsof the disciplinary measures, major faults, and improvement measures
should be noted: None.

56 Corporate Governance Report3.3.13 Major Resolutions of Shareholders’ Meeting and Board Meetings
A. Major Resolutions of Shareholders’ Meeting in 2016
Item
Major resolutions
1. Amendment to the Articles of Association The proposal was passed.

2. Proposal to lift non-compete restrictions
on Director Chang, Yu-Hern

The proposal was passed.

3. 2015 Annual Operations Report and
Financial Statements
4. 2015 Earnings Distribution Proposal

The proposal was passed.
The proposal was passed.

Execution
The amended Articles of Association were approved by
the Ministry of Economic Affairs on August 16, 2016 andpublished on the Company website.
As resolved by the Shareholders’ Meeting, non-compete
restrictions were lifted on Director Chang, Yu-Hern.
Published after Shareholders’ Meeting resolution.
Set July 31, 2016 as the record date and August 24, 2016as the cash dividend distribution date. (Cash dividend of
NT$0.458522382 per share).

B. Major Resolutions of Board Meetings (January 1, 2016 to April 24, 2017)20 Board

Date

Item

4th meeting

01/15/2016

1. 2015 Employee Compensation
Proposal

1. Approved.

Opinions of
independent
directors
1. Recommended
that employee
bonuses bysystematized.

5th meeting

03/25/2016

1. Amendment to the Articles of
Association
2. Proposal to lift non-compete
restrictions on Director Chang,
Yu-Hern
3. Establishment of Ethical Corporate
Management Best PracticePrinciples and Procedures for
Ethical Management andGuidelines for Conduct
4. 2015 Annual Operations Report
and Financial Statements
5. Proposal for 2015 Earnings
Distribution
6. 2015 Annual Operations Report
7. Convened the 2016 Annual General
Shareholders’ Meeting
8. 2015 Internal Control System
Statement
9. Proposal to lift non-compete
restrictions on Senior Vice
Presidents
10. 2016 Appointment andRemuneration for Certified Public
Accountants
11. Through self-evaluation, CAL has
determined that the Company has
the ability to independently
complete financial statements, so
in accordance with regulations,
there is no need to draw up a
Capability Upgrade Plan.
12. Issuance of 2016 domestic
unsecured corporate bonds

1. Approved.

1. None.

1. TheArticles of
Association
were thusly
revised andpassed theShareholders’ General
Meeting on
June 24,2016.
1. None.

2. Approved.

2. None.

2. None.

3. Approved.

3. None.

3. None.

4. Approved.

4. None.

4. None.

5. Approved.

5. None.

5. None.

6. Approved.
7. Approved.

6. None.
7. None.

6. None.
7. None.

8. Approved.

8. None.

8. None.

9. Approved.

9. None.

9. None.

10. Approved.

10. None.

10. None.

11. Approved.

11. None.

11. None.

12. Approved.

12. None.

12. None.

th

Major
resolutions

Execution

Corporate Governance Report

57

th

20 Board

Date

Item

6th meeting

05/12/2016

1. Revisions to the Audit Committee
Charter and Rules Governing the
Scope of Powers of Independent
Directors
2. Established the Corporate Social
Responsibility and Sustainable
Development Code of Practice
3. Deloitte & Touche CPA
Replacement Proposal
1. Election of the new Chairman

Extraordinary
session

06/24/2016

2. President Appointment Proposal

3. Senior Vice President Position
Adjustment Proposal
4. Set the record date for disbursal of
the 2015 cash dividend and related
matters
5. Current status of dispute with
Taoyuan Flight Attendants' Union(TFAU) and response measures

7th meeting

08/11/2016

58 Corporate Governance Report

1. Consolidated Financial Statement
for the Second quarter of 2016
(including the first half of the year)
2. First Half of 2016 Internal Audit
Report
3. Senior Manager Remuneration
Standard Adjustment Proposal

1. Approved.

Opinions of
independent
directors
1. None.

2. Approved.

2. None.

2. None.

3. Approved.

3. None.

3. None.

1. Director Ho,
Nuan-Hsuan
was elected
Chairman andthis tookeffect on June24, 2016.
2. Mr. Hsieh,
Su-Chien was
appointed
President andthis tookeffect on June24, 2016.
3. Approved.

1. None.

1. None.

2. None.

2. None.

3. None.

3. None.

4. Approved.

4. None.

4. None.

5. Approved.

5. Recommended
that duringnegotiations,the rights andinterested of
employees,
passengers,
andshareholders
should beconsideredalong with CAL
operations andfinances.

1. Approved.

1. None.

5. Reachedanagreementwith TFAU
during thelabordisputemediation
meeting
held onJune 24,2016 andareproceedingaccordingly.
1. None.

2. Approved.

2. None.

2. None.

3. Managerial
departments
set up a
moreexhaustivehigh-level
managerremuneration standard
plan and wassent to theBoard ofDirectors forresolution

3. None.

3. None.

Major
resolutions

Execution
1. None.

th

20 Board

Date

Item

4. Chairman Ho, Nuan-Hsuan
Remuneration Proposal
5. Proposal to lift non-compete
restrictions on Chairman Ho,
Nuan-Hsuan
6. President Hsieh, Su-Chien
Remuneration Proposal
7. Proposal to lift non-compete
restrictions on President Hsieh,
Su-Chien
8. Senior Vice President Chang, Young
Remuneration Proposal
9. Proposal to lift non-compete
restrictions on Senior Vice Chang,
Young
10. Senior Vice President Lo, Ya-Mei
Remuneration Proposal
11. Proposal to lift non-compete
restrictions on Senior Vice
President Lo, Ya-Mei
12. Senior Vice President
Appointment Proposal

8th meeting

Extraordinary
session

11/10/2016

12/14/2016

13. Proposal to lift non-compete
restrictions on Senior Vice
President Chang, Chih-Chieh
1. 2017 Annual Business Plan andBudget Proposal

2. Two 737-800 Passenger Airliner(B-18608/B-18607) Sales Proposal
2016
3. 2017 Audit Plan
4. Proposal to lift non-compete
restrictions on Senior Vice Chang,
Young
5. Senior Vice President Chang,
Chih-Chieh Remuneration Proposal
1. Tigerair Taiwan Equity Transaction
Proposal
2. Revisions to 2017 Annual Business
Plan and Budget Proposal

Opinions of
independent
directors

Execution

after
approval bytheRemuneration Committee.
4. Approved.

4. None.

4. None.

5. Approved.

5. None.

5. None.

6. Approved.

6. None.

6. None.

7. Approved.

7. None.

7. None.

8. Approved.

8. None.

8. None.

9. Approved.

9. None.

9. None.

10. Approved.

10. None.

10. None.

11. Approved.

11. None.

11. None.

12. Mr. Chang,
Chih-Chiehwas
appointed
Senior Vice
President
and this
took effecton August11, 2016.
13. Approved.

12. None.

14. None.

13. None.

12. None.

1. Approved.

1. Recommended
that the annual
operatingresults beseparated from
asset
impairment.

2. Approved.

2. None.

1. Revised
theproposalaccordingly and waspassed by
the Boardof
DirectorsonDecember
14, 2016.
2. None.

3. Approved.
4. Approved.

3. None.
4. None.

3. None.
4. None.

5. Approved.

5. None.

5. None.

1. Approved.

1. None.

1. None.

2. Approved

2. None.

2. None.

Major
resolutions

Corporate Governance Report

59

th

20 Board

Date

Item

9th meeting

01/17/2017

1. 2016 Employee Compensation
Proposal
2. Chairman and Manager Annual
Bonus 2016 and Spring Festival
Incentive Pay 2017
3. Financial Division Vice President
Position Change Proposal
1. Internal Audit Report for Second
Half of 2016
2. 737-800 Passenger Airliner Sales
Proposal
3. Convened the 2016 Annual General
Shareholders’ Meeting
4. Issuance of 2017 domestic
unsecured corporate bonds
5. 2016 Annual Operations Report
and Financial Statements
6. 2016 Business Report
7. 2016 Deficit Compensation
Proposal
8. 2017 Appointment andRemuneration for Certified Public
Accountants
9.Revisions to Procedures Governing
the Acquisition and Disposal of
Assets10. 2016 Internal Control System
Statement
11. Revisions to Internal Audit
Implementation Rules
12. Revisions to the Corporate Social
Responsibility and Sustainable
Development Code of Practice10th meeting

03/30/2017

1. Approved.

Opinions of
independent
directors
1. None.

2. Approved.

2. None.

2. None.

3. Approved.

3. None.

3. None.

1. Approved.

1. Approved.

1. None.

2. Approved.

2. Approved.

2. None.

3. Approved.

3. Approved.

3. None.

4. Approved.

4. Approved.

4. None.

5. Approved.

5. Approved.

5. None.

6. Approved.
7. Approved.

6. Approved.
7. Approved.

6. None.
7. None.

8. Approved.

8. Approved.

8. None.

9. Approved.

9. Approved.

9. None.

10. Approved.

10. Approved.

10. None.

11. Approved.

11. Approved.

11. None.

12. Approved.

12. Approved

12. None.

Major
resolutions

Execution
1. None.

3.3.14 Major Issues of Record or Written Statements Made by Any Director orSupervisor Dissenting with Important Resolutions Passed by the Board of
Directors: None.

60 Corporate Governance Report3.4 Information Regarding the Company’s Audit Fee andIndependence
3.4.1 Audit Fee
Accounting Firm

Name of CPA

Period Covered by CPA’s Audit

Remarks

Deloitte & Touche

Huang, Jui-chan

Chen, Li-Chi

01/01/2016~03/31/2016

Primarily due to personnel rotation

Deloitte & Touche

Yang, Chen-Hsiu

Chen, Li-Chi

04/01/2016~12/31/2016

within the auditing firm.
Unit: NT$ thousands

Fee Items
Fee Range
1

Under 2,000

22,000～4,000

34,000～6,000

46,000～8,000

58,000～10,000

6Over 10,000

Audit Fee

Non-audit Fee

Total





3.4.2 Audit and Non-Audit Fees Paid to CPAs, the Certified Accounting Firm toWhich Said CPAs Belong and Any Affiliated Enterprises and Details
Regarding Non-Audit Fees. See Below:
Unit: NT$ thousands
Accounti Name of Audit
ng Firm

CPA

Fee

Non-audit Fee
System ofCompany

Human

DesignRegistration

Resource

PeriodOthers Subtotal

Covered by

Remarks

CPA’s Audit
Primarily due to personnel
rotation within the auditing
firm, the CPAs were changed
to Yang, Chen-Hsiu and Chen,
Li-Chi from the second
quarter 2016 financial
statement.
Other fees include review fee

Huang,

Deloitte

Jui-chan& Touche

Chen,

1,787

-

-

-

2,771

4,558

01/01/2016~03/31/2016

Li-Chifor dual-status business
entities using the direct
deduction method, transfer
pricing report service fee,
corporate bond conversion
capital review fee, IAS 17
lease draft statement letter
fee, personal information
project fee and US Airport
Passenger Facility Charge tax
collection review fee.

Yang,

Deloitte& ToucheChen-Hsiu
Chen,
Li-Chi

5,363

-

-

-

293

5,656

04/01/2016~12/31/2016

Other fees include fees
related to corporate bondissuance certification.

3.4.3 Changed audit firms and the audit fee paid was less than the audit fees
paid in the previous year prior to the change: Not Applicable.

Corporate Governance Report613.4.4 Those with audit fees amounting to a reduction of 15% or more comparedto the previous year: None.

3.5 Replacement of CPA:
Primarily due to personnel rotation within the auditing firm, the CPAs were changed toYang, Chen-Hsiu and Chen, Li-Chi in 2016.

3.6 Audit Independence: None.

62 Corporate Governance Report3.7 Changes in Shareholding of Directors, Managers and Major
Shareholders
2016
Title

Major
Shareholder
Chairman

Director

Director
Director

Name

China Aviation Development Foundation (Note 1)
China Aviation Development Foundation
Representative: Ho, Nuan-Hsuan
China Aviation Development Foundation
Representative: Hsieh, Su-Chien; Charles C.Y., Chen;
Ting, Kwang-Hung; Jong, Jia-Shi; Lee, Kuo- Fu; Cheng,
Chuan-Yi; Chen, Han-Ming
Chunghwa Telecom Co., Ltd.
Representative: Huang, Hsiu-Gu
National Development Fund, Executive Yuan
Representative: Lin, Su-Ming

Independent
Chung, Lo-Min
Director
Independent
Ting, Tin-Yu
Director
Independent
Luo, Hsiao-Hsien
Director
President
Hsieh, Su-Chien (Assumed Post On 06/24/2016)
Senior Vice
Lo, Ya-Mei (Assumed Post On 06/24/2016)
President
Senior Vice
Kao, Shing-Hwang
President
Senior Vice
Chang, Chih-Chieh
President
Senior Vice
Huang, Chwen-Jiun
President
Senior Vice
Chang, Young (Assumed Post On 06/24/2016)
President
Auditor General Chung, Chuar-DuanVice President Chien, Feng-Nien (Assumed Post On 01/03/2017)
Vice President Chen, I-Ko (Assumed Post On 03/01/2016)
Vice President Lai, Ming-Hui
Vice President Wang, Chen-Min (Assumed Post On 12/10/2016)
Vice President Tsao, Jyh-Fen
Vice President Liu, Der-Chuan
Vice President Peng, Long-Min (Assumed Post On 08/16/2016)
Vice President Ku, Yueh-Han (Assumed Post On 08/16/2016)
Vice President Chen, I-Chieh
Vice President Wei, Yih-Jiun (Assumed Post On 08/16/2016)
Vice President Liu, Shyh-Hwa
Vice President Chen, Shann-Juan (Assumed Post On 01/16/2016)
Vice President Liu, Tsao-Yang (Assumed Post On 09/16/2016)
Vice President Chang, Ming-Way
Vice President Lu, Shih-Ming

Pledged
Holding
Holding
Increase
Increase(Decrease)(Decrease)

Unit: Shares
The current year throughApril 24, 2017
Pledged
Holding
Holding
Increase
Increase(Decrease)(Decrease)
83,160,083
0(83,160,083)

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

519,750,519(519,750,519)

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
(693)
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Corporate Governance Report63

Wang, Houng
Sun, Jia-Min
Lee, Jung-Hui

Pledged
Holding
Holding
Increase
Increase(Decrease)(Decrease)0034,844000

The current year throughApril 24, 2017
Pledged
Holding
Holding
Increase
Increase(Decrease)(Decrease)
0
0
0
0
0
0

Fang, Juo-Ling

0

0

0

0

Tsai, Chih Hung

0

0

0

0

Chou, Jyh-Shyan (Assumed Post On 09/22/2016)

0

0

0

0

Liao, Wei-Chih

0

0

0

0

Hong, Tsu-Kuang (Assumed Post On 06/01/2016)

0

0

0

0

Jeng, Jong-Shinn

0

0

0

0

Peng, Pao Chu (Assumed Post On 08/20/2016)

0

0

0

0

Kung, Yuan-Jau

0

0

0

0

Hsueh, Po-Wen (Assumed Post On 09/01/2016)

0

0

0

0

Lin, Hsiao-Feng

0

0

0

0

Lu, Shwu-Huoy

0

0

0

0

Yu, Yau (Assumed Post On 07/16/2016)

0

0

0

0

Yeah, Shao-Ting

0

0

0

0

Chen, Jo-Ching

0

0

0

0

Ho, Hui-Fen

0

0

0

0

Huang, Tze-Chi

0

0

0

0

Lin, Ming-Hsiu

0

0

0

0

Pan, Wen-Tsung

0

0

0

0

Kao, Shu-Chuan (Assumed Post On 08/16/2016)

0

0

0

0

Liu, Duan-Shiuh

0

0

0

0

Chu, Te-Hsiu (Assumed Post On 09/16/2016)

0

0

0

0

Wang, Wei (Assumed Post On 02/02/2017)

0

0

0

0

Tung, Wei

0

0

0

0

Hsiao, Kuo Chih (Assumed Post On 01/01/2016)

0

0

0

0

2016
Title

Vice President
Vice President
Vice President
Deputy Auditor
GeneralAssistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President

Name

64 Corporate Governance Report

Pledged
Holding
Holding
Increase
Increase(Decrease)(Decrease)

The current year throughApril 24, 2017
Pledged
Holding
Holding
Increase
Increase(Decrease)(Decrease)

Li, Chih-Wei

0

0

0

0

Chen, Wei-Tau (Dismissed On 01/06/2016)

0

0

0

0

Liu, Yah-Chuan (Dismissed On 01/11/2016)
Kuo, Hsin-Chang (Dismissed On 02/15/2016)

0
0

0
0

0
0

0
0

Tung, Da-Wei (Dismissed On 02/22/2016)

0

0

0

0

Young, Ding-Hwai (Dismissed On 02/23/2016)

0

0

0

0

Yu, Chien-Pao (Dismissed On 02/29/2016)

0

0

0

0

Yang, Tzu-Pao (Dismissed On 05/20/2016)

0

0

0

0

Chen, Ming-Hui (Dismissed On 05/31/2016)

86,965000Chung, Kang (Dismissed On 05/31/2016)

0

0

0

0

Chen, Chung-Ming (Dismissed On 06/06/2016)

0

0

0

0

Sun, Huang-Hsiang (Dismissed On 06/24/2016)

0

0

0

0

Tung, Hsiao-Hsing (Dismissed On 06/27/2016)

0

0

0

0

Chang, Yu-Hern (Dismissed On 06/24/2016)
China Aviation Development Foundation
Representative:
Lee, Cho-Ping (Dismissed On 07/26/2016)
Lai, Ching-Chyi (Dismissed On 07/26/2016)
Ko, Tso-Liang (Dismissed On 08/09/2016)

0

0

0

0

27,0000

00Yang, Steve Chen (Dismissed On 08/09/2016)

0

0

0

0

Tseng, Yu-Ping (Dismissed On 08/15/2016)

0

0

0

0

Tong, Huai-Ming (Dismissed On 08/16/2016)
Cheng, Tien-Yuan (Dismissed On 08/16/2016)
Chang, Cheng-Hao (Dismissed On 08/16/2016)
Yu, Chih (Dismissed On 09/20/2016)

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

Fang, Yuan-Hua (Dismissed On 09/26/2016)

0

0

0

0

Huang, Ta-Fang (Dismissed On 12/21/2016)
Chung, Ming-Jyh (Dismissed On 01/03/2017)

0
0

0
0

0
0

0
0

Kuey, Kuo-Ching (Dismissed On 01/26/2017)

0

0

0

0

Teng, Shu Hua (Dismissed On 02/21/2017)

0

0

0

0

Chung, Wan-Chun (Dismissed On 03/01/2017)

0

0

0

0

Yeh, Jin-Fu (Dismissed On 03/13/2017)

0

0

0

0

Wei, Shih-Kai (Dismissed On 03/21/2017)

0

0

0

0

2016
Title

Assistant Vice
President
Assistant Vice
President
Vice President
Vice President
Assistant Vice
President
Vice President
Senior Vice
President
Vice President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Chairman
Senior Vice
President
President

Director

Senior Vice
President
Assistant Vice
President
Vice President
Vice President
Vice President
Vice President
Assistant Vice
President
Vice President
Vice President
Assistant Vice
President
Assistant Vice
President
Vice President
Assistant Vice
President
Assistant Vice
President

Name

Note 1: Refers to major shareholders holding more than 10% of company shares.

3.7.1 Shares Trading with Related Parties: Not Applicable.
Corporate Governance Report65

3.7.2 Shares Pledge with Related Parties: Not Applicable.

3.8 Relationships among the Top Ten Shareholders

Name

Current Shareholding

April 24, 2017
Name and Relationship
Spouse’s/min Shareholding Between the Company’sor’sby Nominee Top Ten Shareholders, or Remar
Shareholding Arrangement
Spouses or Relatives
ks
Within Two Degrees
Shares % Shares %Name
Relationship

Shares%

1,867,341,935

34.13%

0

0%

0

0%

None

None

None

519,750,519

9.50%

0

0%

0

0%

None

None

None

263,622,116

4.82%

0

0%

0

0%

None

None

None

52,840,352

0.97%

0

0%

0

0%

None

None

None

49,500,000

0.90%

0

0%

0

0%

None

None

None

47,644,353

0.87%

0

0%

0

0%

None

None

None

42,870,050

0.78%

0

0%

0

0%

None

None

None

42,477,000

0.78%

0

0%

0

0%

None

None

None

New Labor Pension Fund

37,758,000

0.69%

0

0%

0

0%

None

None

None

Ishares Msciemerging Markets
Minimum Volatility ETF

35,445,828

0.65%

0

0%

0

0%

None

None

None

China Aviation Development
Foundation(Representative：Wang, Kwo-Tsai)National Development Fund,
Executive Yuan
(Representative：Dr. Chen,Ten-Jy)
Chunghwa Telecom Co., Ltd.
(Representative：Cheng,Yu)
China Airlines Ltd. Employee Stock
Ownership Trust Plan
Cathay Life Insurance Co., Ltd.
(Representative：Tsai, Hong-Tu)
Citibank Taiwan Was
Commissioned And Management
Investor Account Of Dimension
Emerging Market Estimate Fund
Vanguard Emerging Markets Stock
Index Fund, A Series Of VanguardInternational Equity Index Funds
Ocean Investment Holding Co., Ltd.
(Representative：Wang,Yun-E)

66 Corporate Governance Report3.9 Ownership of Shares in Affiliated Enterprises
Dec 31, 2016
Unit: shares; %AffiliatedEnterprises

Ownership by the Company

Direct or Indirect Ownership by
Directors, Managers
Shares%5,000
100.00400,000
100.00-Total Ownership

Shares%Shares
1. Cal-Dynasty International, Inc.
2,614,500
100.002,614,500
1A Dynasty Properties Co., Ltd.
5,000
1B Dynasty Hotel Of Hawaii, Inc.
400,000
2. Cal-Asia Investment Inc.
7,172,346
100.007,172,346
2A Eastern United International
1,050,000
35.00
1,050,000
Logistics (Holdings) Ltd.
2B Arport Air Terminal (Xiamen)
28.00(Note 1)
(Note 1)
Co., Ltd.
(Note 2)
2C Arport Air Cargo
28.00(Note 1)
(Note 1)Service(Xiamen) Co., Ltd.
(Note 2)
2D Taikoo (Xiamen) Landing Gear
(Note 1)
5.83
(Note 1)Services Co., Ltd.
2E Taikoo Spirit Aerosystems(Note 1)
5.45
(Note 1)
(Jinjiang) Composite Co., Ltd.
3. Hwa Hsia Company Ltd.
77,270100.0077,2704. Freighter Prince
1,000
100.001,000
5. Freighter Princess
1,000
100.001,000
6. Yestrip Co., Ltd.
1,600,000
100.001,600,000
7. Cal Park Co., Ltd.
150,000,000
100.00150,000,000
8. Cal Hotel Co., Ltd.
46,500,000
100.0046,500,000
9. Taiwan Aircraft Maintenance And
16,000,000
100.0016,000,000
Engineering Co., Ltd.
10. Mandarin Airlines, Ltd.
188,154,025
93.99
188,154,025
11. Sabre Travel Network (Taiwan)
93.93
13,021,042
13,021,042
Ltd.
12. Tiger Taiwan Co., Ltd.
160,000,000
80.00
20,000,000
10.00
180,000,000
13. China Pacific Laundry Services
13,750,000
55.00
13,750,000
Ltd.
14. Taiwan Air Cargo Terminal Ltd.
135,000,000
54.00
12,500,000
5.00
147,500,000
15. Dynasty Holidays, Inc.
408
51.00
408
16. China Pacific Catering Services
43,911,000
51.00
43,911,000
Ltd.
17. Taoyuan International Airport
34,300,000
49.00
34,300,000
Services Co., Ltd.
18. Taiwan Airport Service Co., Ltd.
20,626,644
47.35
469,755
1.08
21,096,399
18A Taiwan Airport Service(Note 1)100.00(Note 1)(Samoa) Co., Ltd.
19. Kaohsiung Airport Catering
14,329,759
35.78
14,329,759
Services Ltd.
20. Global Sky Express Ltd.
250,000
25.00
250,000
21. Asian Compressor Technology
7,732,200
24.50
7,732,200
Services Co., Ltd.
22. Science Park Logistics Co., Ltd.
13,293,000
26.00
13,293,000
23. China Aircraft Services Limited.
28,400,000
20.00
28,400,000
24. Jardine Air Terminal Services
15.00
12,000,000
12,000,000
Limited
25. Everest Investment Holdings
13.59(Note 3)(Note 3)
Ltd.
26. Chung-Hwa Express Co., Ltd.
11.00
1,100,000
1,100,000
Note 1: This company has not issued shares.
Note 2: CAL-Asia Investments Inc. directly holds 14% stake, Taiwan Airport Service (Samoa) Co., Ltd. directly holds 14% stake.
Note 3: Includes 1,359,368 shares of common stock and 135,937 shares of preferred stock.

%100.00100.00100.00100.0035.00
28.00(Note 2)28.00
(Note 2)5.83
5.45
100.00100.00100.00100.00100.00100.00100.00
93.99
93.93
90.00
55.00
59.00
51.00
51.00
49.00
48.43
100.00

Corporate Governance Report

35.78
25.00
24.50
26.00
20.00
15.00
13.59
11.00

67

Capital Overview
4.1 Capital and Shares
4.2 Corporate Bonds
4.3 Other Depository Receipts
4.4 Financing Plans and Implementation

68 Capital Overview

IV. Capital Overview
4.1 Capital and Shares
4.1.1 Source of Capital
A. Issued Shares:
Authorized Capital
Par
Month/
Value
Year
(NT$)

12/2015

10

Paid-in Capital

SharesAmountSharesAmount6,000,000

60,000,000

5,470,000

54,700,000

APR 24, 2017
Unit: Thousand shares; NT$ thousands
RemarkApproval Date andDocument No. by
Sources of Capital
Ministry of Economic
Affairs
Corporate Bond

December 8, 2015

Conversion

Jing-Shou-Shang-Zi No.

NT$ 86,169,930

10401250360

Note: There was no “Capital Increase by Assets Other than Cash”.

B. Type of Stock:

APR 24, 2017; Unit: Thousand shares

Share Type
Common Stock
InscribedIssued Shares

Authorized Capital
Un-issued Shares

Total Shares (Note)

5,470,891

529,1106,000,000

Remarks
Listed Stocks

Note: On June 18, 2014, the Company approved revision to the Articles of Association at the Shareholders’ Meeting that
adjusted the total authorized capital to 7 billion shares.

4.1.2 Status of Shareholders
Item

Government
Agencies

APR 24, 2017; Unit: shares

Financial
Institutions

Other Juridical
Persons

Foreign Institutions & Domestic Natural
Natural Persons
Persons

Total

Number of

4

25

281

734

132,886

133,930

Shareholding

519,750,824

143,588,934

2,486,712,419

828,376,150

1,492,461,822

5,470,890,149

9.50%

2.62%

45.46%

15.14%

27.28%

100.00%%4.1.3 Shareholding Distribution Status
Class of Shareholding
1-999
1,000-5,000
5,001-10,000
10,001-15,000
15,001-20,000
20,001-30,000
30,001-40,000
40,001-50,000
50,001-100,000
100,001-200,000
200,001-400,000
400,001-600,000
600,001-800,000
800,001-1,000,000
1,000,001 or over
Total

Number of Shareholders
35,682
57,41917,250
6,302
4,693
4,094
2,060
1,506
2,662
1,172
500
177
81
73
259
133,930

APR 24, 2017; Unit: shares
Shareholding
11,972,809
140,181,013
138,524,423
78,601,946
87,338,256
104,341,799
73,648,752
70,586,549
194,486,013
166,602,280
141,368,647
87,688,608
57,334,317
66,487,922
4,051,726,815
5,470,890,149

Percentage(%)
0.22%
2.56%
2.53%
1.44%
1.60%
1.91%
1.35%
1.29%
3.55%
3.05%
2.58%
1.60%
1.05%
1.22%
74.05%
100.00%Capital Overview

694.1.4 List of Major Shareholders:
APR 24, 2017; Unit: shares
Shareholding

SharesShareholder's Name
China Aviation Development Foundation
National Development Fund, Executive Yuan

Percentage

1,867,341,935

34.13%

519,750,519

9.50%

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share
Unit: thousand shares; NT$
Year
Items

2015

2016

2017

(Distributed in 2016)(Distributed in 2017)(As of APR 24)(Note 9)

Highest Market Price

18.25

12.05

10.70

Lowest Market Price

10.65

9.07

9.20

Average Market Price

13.82

10.22

9.92

10.65

10.20

9.46

10.19

-

-

Weighted Average Shares

5,432,728

5,468,002

5,468,002

Diluted Earnings Per Share

1.06

0.10

(0.69)

0.458522382 (Note 10)--- (Note 10)--- (Note 10)--- (Note 10)--

Price / Earnings Ratio (Note 5)

12.80 (Note 10)101.40-Return on
Price / Dividend Ratio (Note 6)
Investment

29.60 (Note 10)

N/A(Note 11)-3.38% (Note 10)

N/A(Note 11)-

MarketPrice perShare

Net Worth Before Distribution
per Share
After Distribution
Earnings
per Share

Cash Dividends
Dividends
per Share(Note 8)Dividends from Retained
Stock Earnings
DivideDividends from Capitalnds
Surplus
Accumulated Undistributed
Dividends (Note 4)

Cash Dividend Yield Rate (Note 7)＊If shares are distributed in connection with a capital increase out of earnings or capital reserve, further disclose information onmarket prices and cash dividends retroactively adjusted based on the number of shares after distribution.
Note 1: Annual Average Market Price = Annual Turnover Value / Trading Volume.
Note 2: Based both on the number of issued shares at the end of the year, and on the distribution decided on at the Shareholders’Meeting the following year.
Note 3: For those requiring retroactive adjustment due to stock grants, both the pre-and post-adjustment EPS should be listed.
Note 4: In issuing equity securities, provisions may be made to accumulate undistributed dividends for the year and postpone
distribution until a year when profit is made. The dividends accumulated over the period ending in the year of distribution
should be disclosed.
Note 5: P/E Ratio＝Average market price of a share in the current year／EPS.
Note 6: P/D Ratio＝Average market price of a share in the current year／cash dividend per share.
Note 7: Cash dividend yield＝cash dividend per share／average market price of a share in the current year.
Note 8: In accordance with Taiwan Stock Exchange regulations, treasury share effects have already been considered.
Note 9: Net worth per share and EPS are calculated based on the financial statement for the most recent quarter that has beenverified by an accountant. All other fields are based on the current year data through the publication date of the annual
report. As of publication of this report, the Q1 2017 financial information has not been reviewed by Deloitte & Touche yet.
thNote 10: 2015 Earnings Distribution Proposal was passed at the 5th meeting of the 20 Board session held on March 25, 2016 andwas reported to the Shareholders’ General Meeting.
Note 11: As there was an operating loss in 2016, there is no surplus available for distribution.

70 Capital Overview

4.1.6 Dividend Policy and Implementation Status
A. Dividend Policy:
The CAL Articles of Association outlines the below dividend policy:
If the company makes a profit over the year, an amount of no less than 3% of the profit must be
distributed as employee compensation. If the Company has accumulated losses, funds must be
retained to offset the deficit.
The aforementioned employee compensation is primarily disbursed as stock or cash and theresolution must be approved at a meeting of the Board of Directors with two-thirds of directors inattendance and must receive support from half of participating members.
Should the Company make a profit over the year, said profit must first be used to pay all taxes andoffset accumulated losses, then 10% of the remaining amount is to be set aside as a legal reserve.
After setting aside or reversing a special reserve, any remaining amount along with accumulated
undistributed earnings shall be distributed as shareholder dividends and bonuses according to a
resolution drawn up by the Board and approved by the Shareholders’ Meeting that follows the
below principles:(1) Not less than 50% of the amount shall be distributed as shareholder dividends and bonuses.
After pretax profits are deducted as outlined above, should the amount left not be sufficient for
distribution, the difference will be made up by accumulated undistributed profit.
(2) In the case of a yearly loss, depending on financial, operation, and management considerations,
all or part of the legal reserve may be distributed as new stock or cash as prescribed by law andcompetent authority regulations.
(3) Dividends and bonuses are distributed as stock or cash, with cash dividends making up no lessthan 30% of the total distributable dividends.

B. Proposed Distribution of Dividend:
The Deficit Compensation Proposal was approved by the Board of Directors on March 30, 2017,
which determined no dividends would be distributed for 2016.

C. No significant change in expected future dividend policy

4.1.7 Impact of Stock Dividends issuance on Company’s Business Performanceand Earnings per Share: Not Applicable.
4.1.8 Employees’ Compensation and Directors' Remuneration
A. Articles of Association regulations: See 4.1.6 Dividend Policy and Implementation
Status.
B.The basis for estimating the amount of employee compensation and director
bonuses, for calculating the number of shares to be distributed as stock bonuses,
and the accounting treatment of the discrepancy, if any, between the actual
distributed amount and the estimated figure, for the current period:
As stipulated in the Company’s Articles of Association, directors are not awarded bonuses. Should
the actual amount of employee compensation, due to Board of Director resolution prior to the
publication date of the annual individual financial statement, differ significantly from the estimatedvalue of employee compensation, the difference is charged to the earnings of the year making theinitial estimate. If there are changes in the amount after the publication of the annual individual
financial statement, the adjustment shall be recorded in the following year as a result of change inaccounting estimate.

Capital Overview

71

C. Board approved employee compensation and director bonus proposal:(1) Amount of employee bonuses (including stock and cash) and director bonuses distributed. If theactual amount distributed differs from the original estimated amount, the difference, reason, andhow this was handled should be disclosed:
On January 17, 2017, the Company’s Board of Directors approved the 2016 Employee
Compensation Proposal, which specified distribution of employee compensation totaling
NT$382,318,000. As stipulated in the Company’s Articles of Association, directors are notawarded bonuses. If the above estimated amount is different from the actual distributed amount,
the adjustment shall be recorded in the following year as a result of change in accounting
estimate.
(2) The amount of any proposed distribution of employee stock bonuses, and the size of such an
amount as a percentage of the sum of the net income for the current period and total employee
bonuses: Not Applicable.

E. The actual employee compensation and director bonuses distributed for theprevious year (2015) (including number of shares distributed, value, and stock
price). Should there be a discrepancy with the proposed amount of employeecompensation and director bonuses, the difference, reason, and how this washandled should be stated:(1) Employee compensation: None.
(2) Director bonuses: Not Applicable.

4.1.9 Buyback of Treasury Stock: None.

72 Capital Overview

4.2 Bonds
4.2.1 Corporate Bonds:
APR 24, 2017
Corporate Bond Type
Issue date
Denomination

Domestic Unsecured
straight bond (102)01/17/2013

Domestic Unsecured
Domestic Unsecured
Domestic Unsecured
convertible bond (102) straight bond (105-1)
straight bond (105-2)
12/26/2013
05/26/2016
09/27/2016

NT$1,000,000

NT$100,000

NT$1,000,000

NT$1,000,000

Republic of China
Par

Republic of China
Par

Republic of China
Par

Issuing and transaction location Republic of China
Par
Issue priceTotal price

NT$10,900,000,000

NT$6,000,000,000

NT$5,000,000,000

NT$5,000,000,000

Coupon rate

Tranche A: 1.60% p.a.;Tranche B: 1.85% p.a.

0.00% p.a.

1.19% p.a.

1.08% p.a.

Tranche A: 5 years
Maturity: 01/17/2018
Tranche B: 7 years
Maturity: 01/17/2020
Not applicable

5 years Maturity:
12/26/2018

5 years Maturity:
05/26/2021

5 years Maturity:
09/27/2021

Not applicableNot applicableNot applicable

Consignee

CTBC Bank Trust
Department

CTBC Bank Trust
Department

Hua Nan Commercial
Bank

Hua Nan Commercial
Bank

Underwriting institution

Not applicableKGI Securities

YuanTa Securities

MasterLink Securities

Chiu, Ya-Wen
Kuo, Hui-Chi(Hsi Endai Lawyer Office) (Handsome
Attorney-at-Law)

Kuo, Hui-Chi(Ture Honesty
International Law
Office)Kuo, Hui-Chi(Ture Honesty
International Law
Office)CPA

Huang, Jui-chan, Chen,
Li-Chi (Deloitte &Touche)Not applicable

Huang, Jui-chan(Deloitte & Touche)

Yang, Chen-Hsiu(Deloitte & Touche)

Repayment method

Tranche A: Repaymentof 50% of the principal
in the fourth year andthe remaining 50% in
the fifth year
Tranche B: Repaymentof 50% of the principal
in the sixth year and theremaining 50% in theseventh year

According to theoffering ofDomestic Unsecured
convertible bond (102)section 6

Repayment of 50% of
the principal in the
fourth year and theremaining 50% in thefifth year

Repayment of 50% of
the principal in the
fourth year and theremaining 50% in thefifth year

Outstanding principal

NT$8,200,000,000

Terms of redemption oradvance repayment

None.

Restrictive clause

None.

Tenor
Guarantee agency

Certified lawyer

Name of credit rating agency,
rating date, rating of corporate None.
bonds
As of the printing
date of this annual
report, converted
amount of(exchanged or
subscribed)
Other
ordinary shares,
rightsNot applicable
GDRs or otherattached securities
Issuance andconversion(exchange orsubscription)
method

NT$5,000,000,000
NT$1,697,000,000
According to theoffering ofNone.
Domestic Unsecured
convertible bond (102)section 18 and 19
None.
None.

NT$5,000,000,000

None.

None.

None.

Not applicableNot applicable

None.

None.

NT$3,315,700,000

According to theoffering ofDomestic Unsecured
convertible bond (102)section 8 and 9

Issuance and conversion,exchange or subscription
Not applicable(Note)
Not applicableNot applicable
method, issuing condition
dilution, and impact on existing
shareholders’ equity
None.
None.
None.
None.
Transfer agent
Note: Based on an conversion price of NT$11.64 and assuming a full conversion of Company bonds, the shareholding ratios of thethree largest shareholders, China Aviation Development Foundation, National Development Fund(Executive Yuan), andChunghwa Telecom Co., Ltd., would go down from 48.45% to 47.19%. The ownership structure would not be significantly
changed nor would shareholder rights and interests be seriously impacted.

Capital Overview

734.2.2 Corporate Bonds Undergoing Private Placement: None.
4.2.3 Convertible Bonds:
Types of Corporate Bonds
Year
Item

Unit: NT$
Fifth Tranche of Unsecured Convertible Corporate Bonds
The current year through2016
April 24, 2017

Convertib Highest
le Bond
LowestMarketPrice
Average
Conversion Price (Note)

112.00106.50100.20100.50102.43103.4512.24 (July 30, 2016 and earlier)11.64 (July 31, 2016 and later)

11.64

Issued on December 26, 2013
Issuance date and conversion Issued on December 26, 2013 with awith a conversion price of
price at the time of issue
conversion price of NT$ 12.24.
NT$ 12.24.
Conversion method
Issue new shares.
Issue new shares.
Note: Because a cash dividend was distributed in 2016, according to the terms of issuance and conversion for theCompany’s fifth tranche of unsecured convertible corporate bonds the conversion price should be adjusted.
Therefore on July 31, 2016, the conversion price was adjusted from NT$12.24 to NT$11.64.

4.2.4 Exchangeable Bond, Shelf Registration, Shelf Registration: None.

4.3 Other Securities-Related Issues
4.3.1 Preferred shares: None.
4.3.2 Global Depository Receipts: None.
4.3.3 Employee Stock Options: None.
4.3.4 Employee Restricted Stock: None.
4.3.5 Status of New Shares Issuance in Connection with Mergers andAcquisitions: None.

4.4 Financing Plans and Implementation
As of April 24, 2017, the use of funds earned through previously issued securities areprogressing as planned and are in line with expected results.

74 Capital Overview

Operational Highlights
5.1 Business Activities
5.2 Market and Sales Overview
5.3 Human Resources
5.4 Environmental Protection Expenditure
5.5 Labor Relations
5.6 Important Contracts

Operational Highlights

75

V. Operational Highlights
5.1 Business Activities
5.1.1 Business Scope
A. Main areas of business operations(1) Air passenger transport and regularly-scheduled and non-scheduled international contract
charter flight services.
(2) Air cargo services.
(3) Ground handling services for international civil airports and transiting aircraft.
(4) In-flight merchandise sales.
(5) Provision of in-flight meal and beverage services and other related products.
(6) Laundry services for textiles and clothing used aboard aircraft and general laundry services forthe hospitality industry.
(7) Warehousing services for import, export, or transit cargo.
(8) Aircraft maintenance.
(9) Civil aviation personnel training.
(10) Other: In addition to permitted operations, the Company may engage in any other operations
not prohibited or restricted by law.

B. Revenue distribution
Proportion of Overall Business
Item
Passenger Revenue
Cargo Revenue
Other
Total

Unit: NT$ thousands
2016
Net Revenue
Proportion of Revenue
95,282,373
68%
35,721,425
25%
10,075,309
7%141,079,107
100%

C. Main products(1) Passenger service: Air passenger transport and regularly-scheduled and non-scheduled contract
international charter flight services.
(2) Cargo service: Transport services for cargo, courier, mail, and packages.
(3) Ground services: Handling of luggage and cargo, aircraft cleaning, and ground support
equipment.
(4) In-flight sales: Providing in-flight duty free sales services.
(5) Airline catering: Providing meal services to airlines.
(6) Warehousing and logistics services: Provide airfreight forwarding and logistics services.
(7) Aircraft maintenance services: Airframe, engine, and aircraft component maintenance.
(8) Tourism and leisure services: General hotel industry and travel services.
(9) Investment and leasing services: Engaged in real estate investment, building management, andleasing.
(10) Civil aviation personnel training: Provide maintenance training courses, develop professional
maintenance personnel.

76 Operational Highlights

D. Product Development(1) All Non-Stop Flights on European Routes
With the introduction of new Airbus A350-900 aircraft into the fleet, non-stop flights to Amsterdam andRome have been added to our existing non-stop service to Vienna and Frankfurt. Now all four European
routes are non-stop and flown on the newly introduced aircraft. There are 16 flights each week and on
average two non-stop flights per day to Europe. In coordination with inter-European flights offered by ourcodeshare partners, China Airlines provides the most-comprehensive Taiwan to Europe flight network of
any airline. This will attract more business travelers and tourists to visit Europe, further consolidating China
Airlines as the leader in the Taiwan to Europe airline market.

(2) Upgraded service on the A350: A feast for the senses at 30,000 feet
To enhance the unique identity of the China Airlines brand, the A350’s contemporary, next generation cabin
designs are complimented by different ambient lighting moods and feature distinctive boarding anddeplaning music and a bespoke fragrance. The Sky Bistro serves Tapas and other creative delicacies.
Together, these youthful, innovative features bring Europe to travelers before even taking off, creating awhole new experience.

(3) Strengthening our long-haul and regional networks
In addition to adding aircraft to our long-haul fleet, CAL is also drafting a narrow-body aircraft introduction
plan in response to market demand growth. This will enhance the capacity of our route networks in North
America, Europe, Southeast Asia, and Northeast Asia. Not only can we provide Taiwanese customers with awider variety of choices, more convenient transfer flights will strengthen Taiwan’s position as a Northeast
Asia transit hub.

5.1.2 Industry Overview
A. State of the industry and future development(1) Economic growth
According to the latest forecast published by Oxford Economics, the global economic growth rate in 2017
will be 2.6%, slightly higher than 2016’s rate of 2.3%, which shows higher optimism towards 2017 growththan the previous year. However, Taiwan’s primary trading nations, China and Japan, are seeing slowed oreven near zero economic growth, so concerns remain about the overall economic growth momentum.

(2) Oil prices
Fuel costs make up the bulk of operating costs in the aviation industry and oil prices have decreased
significantly in recent years helping reduce operating costs in the industry and are expected to remain low inthe short term. Oil price fluctuations cannot be ignored and in December 2016, OPEC and non-OPEC oil
producing nations agreed for the first time to a global pact to limit supply. In the long term, international
fuel prices are still expected to rise.

(3) Air passenger market
According to the December 2016 International Air Transport Association (IATA) global aviation market
outlook report, from 2012 through 2015 global demand growth outstripped supply leading to higher
passenger load factors. Since then, however, rapid development of the air passenger transport market has
led to higher overall supply growth rates compared to demand growth. IATA estimates that in 2017 global
RPK (revenue passenger kilometers) will grow by 5.1%, while ASK (available seat kilometers) will grow 5.6%
leading to a downward trend in passenger load factors. This trend will also be seen in the Asia-Pacific region
with the estimated supply and demand growth rates reaching 7.6% and 7.0% respectively.

(4) Air cargo market
Due to weak air cargo demand in recent years and increased cargo capacity on passenger airliners, there iscontinued oversupply in the air cargo market. IATA estimates that in 2017 cargo demand growth with reachapproximately 3.5% while AFTK (available freight tonne kilometers) will grow by 5.0% resulting in a
cautiously optimistic outlook regarding the overall air freight market development.

Operational Highlights

77

B. Relationship between upstream, midstream, and downstream firms
The air transport service industry primarily provides transportation for passengers and cargo. These operations rely on
the support and assistance of upstream, midstream, and downstream industries that enable us to provide
comprehensive services and meet our customers’ needs.

(1)Upstream industries
Primarily aircraft, aircraft engine, and ground service equipment (such as towing vehicles and loading vehicles
and equipment needed on the apron) manufacturers. Currently, in addition to purchasing aircraft, Taiwanese
airlines also utilize leasing to add to their fleets, so the aircraft leasing industry is also an upstream industry for
air transport providers.

(2)Midstream industries
Primarily airlines themselves and related support industries such as the oil industry that provides aviation fuel,the aircraft maintenance industry that repairs and maintains airlines’ aircraft and components, and the airline
catering industry that provides in-flight meals. In response to the changing needs of downstream industries, theair transport industry’s strategic adjustments in their operating scale, fleets, or flight networks will also affectthe development of upstream industries.

(3)Downstream industries
In terms of passenger transport, the air transport industry primarily serves the public and travel agencies, whilecargo transport services are provided to the courier and freight forwarding industries. As a member of the airtransport industry, the needs of downstream customers are at the core of the CAL’s product and services
planning. Our mission is to provide safe, convenient, and comprehensive services.

C. Product development trends(1)Air cargo market liberalization, airlines continue to add capacity
As integration within the global airline industry becomes more mature, air cargo liberalization is expanding
within the Asia-Pacific region. The USA, Japan, Singapore, Malaysia, and Thailand have already opened theirskies to Taiwanese carriers. In recent years, Korea, Vietnam, and the Philippines have considerably relaxed
regulations, enabling further expansions in destinations and capacity. However, in addition to domestic airlines
continuing to expand their networks, low-cost and foreign carriers are also adding capacity making the industry
increasingly competitive. China Airlines is fully aware of these trends and will continue to develop new
business opportunities and expand market share.

(2)Taiwan Taoyuan Airport expansion, a new East Asian hub
In recent years, the government has aimed to develop Taiwan Taoyuan Airport into an East Asian transit hub.
In addition to actively expanding policies and freedoms of the air, the R.O.C. government promulgated the“Taoyuan International Airport Park Master Conceptual Plan” and “Implementation Plan” in 2011 and 2012
respectively and successively launched Terminal 1 renovations, airport roadway improvements, and plans for
Terminal 3 and satellite terminal, and a third runway. China Airlines is working in coordination withgovernment policies to gradually expand fleet capacity and create a new transfer hub in Asia.

(3)Future freight sources, the rise of new industries and emerging markets
Impacted by a weak global economy and sluggish international trade, short-term air cargo growth is limited.
This is especially true for semiconductor and electronic components, which make up the bulk of air cargo, butwhose growth has recently fallen sharply. However, emerging industries such as e-commerce, cold chain
logistics, and biotechnology medical products and emerging markets including ASEAN nations, India, andCentral America are bucking these slowing trends. CAL will take advantage of our third highest cargo capacityin Asia to establish an Asia-Pacific cargo transshipment center and grow Taiwan’s share of the air cargo market.

(4)Increased passenger aircraft payload, improved cargo carrying capacity
With advances in aeronautic engineering, the capacity of passenger airliner cargo holds have increased
dramatically. Compared to the 747-400, the new 777-300ER airliner can hold 45% more cargo. Other airlines in
the industry also primarily utilize passenger airliner cargo capacity and will need to adjust dedicated cargoplane capacity in line with these market changes. In the first half of 2016, all of China Airlines’ 10 new
777-300ER passenger aircraft came online, while the new A350s were also gradually introduced in the second
half of the year. In the future, we will strive to make the most efficient possible use of lower-hold space on
airliners.

78 Operational Highlights

D. Product competition
China Airlines primarily operates international passenger and cargo air transport services. Because of ourcontinued focus on stable revenue and cost controls, CAL is not only the Taiwan market leader, but also an
important player on the international stage. According to R.O.C. Civil Aeronautics Administration statistics, China
Airlines is the market leader in both passenger and cargo air transport. Also, released in 2016, the IATA 2015
international passenger and cargo capacity rankings showed that China Airlines was 33rd in the world and 11th in
the Asia-Pacific region for passenger air transport with 36.533 billion Revenue Passenger Kilometers (RPK). Whilecargo capacity reached 5.343 billion Freight Revenue Ton Kilometers (FRTK) earning China Airlines 10th place
globally and 4th place in the Asia-Pacific region.

Taiwan National Airlines International and Cross-Strait Market Share for Passengers and Cargo in 2016
AirlinePassenger

Cargo

China Airlines
EVA Air
TransAsia Airways
Mandarin Airlines
UNI Air
Far Eastern Air Transport
Tigerair Taiwan
V Air
Other-Foreign Carriers

25.04%
21.48%
3.18%
2.61%
1.50%
0.45%
2.72%
0.83%
42.19%

38.12%
24.84%
0.56%
0.86%
0.50%
0.04%
35.08%

Source: Civil Aeronautics Administration Monthly Statistics from January to December 2016－Taiwan National Airlines
International and Cross-Strait Market Share for Passengers and Cargo

IATA Global International Route Passenger and Cargo Rankings 2015
Passenger (Passenger-Kilometers) Rankings
Unit: 1 million
1
2
3
4
5
6
7
8
9

Emirates
United Airlines
Lufthansa
British Airways
Delta Air Lines
Air France
Ryanair
American Airlines
Cathay Pacific Airways

Cargo (Ton-Kilometer) Rankings
Unit: 1 million

251,190
145,543
141,329
137,455
133,949
131,281
125,194
113,965
108,868

1
2
3
4
5
6
7
8
9

Emirates
Cathay Pacific Airways
Korean Air
Qatar Airways
Federal Express
Lufthansa
Cargolux
Singapore Airlines
United Parcel Service

12,157
9,935
7,733
7,660
7,242
6,884
6,309
6,083
5,412

10

Qatar Airways

108,327 10

China Airlines

5,343

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Turkish Airlines
Singapore Airlines
KLM
Etihad Airways
easyJet
Qantas Airways
Korean Air
Air Canada
Thai Airways International
Air China
China Southern Airlines
Aeroflot Russian Airlines
Lan Airlines
IberiaAir Berlin
China Eastern Airlines
All Nippon Airways
NorwegianJapan Airlines
Asiana Airlines
Virgin Atlantic Airways
Saudi Arabian Airlines

101,359
93,623
93,15983,22774,58373,211
68,224
61,96856,87652,605
46,976
46,79442,30041,88341,03939,55839,03237,74937,646
37,466
36,66536,555

Air China
Etihad Airways
AirBridgeCargo Airlines
British Airways
China Southern Airlines
China Eastern Airlines
Asiana Airlines
EVA Air
KLM
Air France
All Nippon Airways
Polar Air Cargo
Nippon Cargo Airlines
United Airlines
American Airlines
Turkish Airlines
Lan Airlines
Delta Air LinesThai Airways International
Qantas Airways
Japan Airlines
Saudi Arabian Airlines

4,644
4,400
4,069
4,050
3,768
3,720
3,578
3,575
3,567
3,415
3,324
3,205
2,941
2,911
2,789
2,699
2,695
2,505
2,065
1,791
1,784
1,725

33

China Airlines

36,533 33

Malaysia Airlines

1,680

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Source: IATA WATS 2016

Operational Highlights

795.1.3 Research and Development
A. Costs of R&D investment and successfully developed technologies or products
From January 1, 2016 through the publication date of this report, the Company invested
approximately NT$155 Million in research and development. The following table summarizes thetechnologies and products developed:
Project

R&D Project Description
In order to integrate the existing decentralized data warehousing system and expand corporate businessintelligence analysis, an industry-university collaboration between CAL and National Taiwan University andNational Chengchi University is educating and recruiting talented big data analysts. The four main areas ofEnterprise Big

focus are customer service, operations monitoring, revenue management, and cost controls (which

Data Platform

include market analysis, passenger source analysis, purchasing behavior analysis, flight revenue estimation
analysis, fuel management, and budget management). Individual operating units at CAL can now collectinformation, perform targeted analysis, and publish their final reports and decisions, which enhances thevalue of data warehousing and business intelligence.
The China Airlines Cargo Website was relaunched with new features to meet the needs of mobile users on

Redesign of the
Official Cargo
Websitea variety of devices and upgrade the user experience on touchscreen devices to improve ease of use, andincrease the repeat visit rate and overall page views. In addition, a Website Content Management System
was added to enable real-time maintenance to easily keep content correct and up-to-date. The new
website went live on July 25, 2016 with Traditional Chinese, Simplified Chinese, and English versions
available for both desktop and mobile formats.

Next Generation
Passenger

In coordination with the introduction of the next generation passenger transport operations system, we

Transport

also set up a system integration platform to support the integration of the peripheral application system

Operations

and passenger transport operations system. We also established an operations database for passenger

Systemreservations, ticket issuance, and airport check-in related activities to ease the subsequent development

Integration

and utilization of passenger application services.

Platform
CAL is committed to upgrading airplane maintenance capabilities and quality. By creating mobile
Mobileapplications for flight information, fuel orders, and task assignment operations, we can provide correct,

Maintenancereal-time flight information, fuel level information, and in-time task assignment to reduce working hours

Operating System and fuel consumption while keeping tabs on work progress. This system will streamline and upgrade
maintenance operations.
China Airlines constructed an information technology system to assist on-site operations and integratewith the system operation cycle to establish an integrated control information system that combines
Construction of an
Integrated Control
Network

operations and centralizes information. Through four function modules: flight status check, control
operations support information, control operations record check and civil aviation authorities permit
management, we can “integrate upstream and downstream system information flow to ensure that all
decision are based on real-time, correct information to guarantee the quality of decision making”,“strengthen ground-to-air support capabilities to improve flight safety” and “implement operations
reviews and human capital quality management to continuously improve flight control operations.”
CAL established a new reliability analysis control system, which integrates maintenance shortcomings,

New Reliability

reasons for delays, abnormal situations, and overhaul issues. Through multidimensional analysis, we canAnalysis Control

not only regularly provide reports to the Civil Aeronautics Administration, maintenance staff can also

Systemquickly determine the reasons for a problem and formulate solutions to improve reliability of aircraft
operations and reduce maintenance costs.

Construction of a In order to integrate the Company’s global postal accounts, we constructed a postal account distribution
Postal Accountsystem to accurately account for postal income, flight routes and segments, and postal delivery

Distribution

transactions. The system accelerates account operations, improves management efficiency, saves

80 Operational Highlights

Systemmanpower, and strengthens internal controls.

Construction of

The Mobile 3.0 App utilizes scenario-based interactive design to meet passenger needs at various points in

Phase 1 of thetheir travels. At the appropriate time in their itinerary, the app reminds passengers to complete necessary

Next Generation

travel-related procedures, and enables passengers to book and purchase tickets, manage their itinerary,

Mobile Platform

perform self-service check-in, and check baggage, so passengers can instead focus on enjoying their(Mobile 3.0)

journey.
In order to better protect the personal information of Dynasty members, in May 2016, we establishedStrengthening the member information modification capabilities and set up a personal information modification approval
Security ofprocess within our internal member system to effectively reduce the risk of front line staff directly

Member Personal accessing member data. Furthermore, we proceeded with an on-site audit of the management andInformation

security of our member system by SGS (Societe Generale de Surveillance) Taiwan Ltd. and in October 2016
we officially received BS10012 (Personal Information Management (UK)) certification.
In order to improve the competitiveness of our mobile services, the Company has developed flight

Mobile Interactive information push notification capabilities for our 3rd generation app. To expand communication channels
Flight Notification with our passengers beyond text messages and email, we have added support for push notifications on
Systemmobile devices to provide passengers with information about their flight such as schedule changes, flightcancellation, seat changes, and boarding gate information.
Integrated a variety of online marketing information services with the Amadeus online ticketing

Online Ticket(eRetail/MERCI) system to achieve diversified online ticket marketing in coordination with credit cards,

Marketingenterprises, and banks resulting in increased online sales. From January through December 2016, a total

Campaign

of 798,940 tickets were sold through the China Airlines website, an increase of 188,083 tickets or 30.8%
over the previous year (610,857 tickets).
In order to promote the Family Couch product, additional sales channels were added and booking wasStrengthening
Family Couch
Sales Channels

made available through GDS PNR, so others in the travel industry can offer more products to theircustomers. Since the service went live in June 2016 through April 2017, sales increased by 104% to a totalof more than 5300 Family Couch groups. A Dynasty member mile redemption feature was also added,
enabling members to use miles to upgrade to the Family Couch. Since this option became available inFebruary 2017, 8 upgrades have been made at a cost of 180,000 miles.

B. Future R&D Projects(1) In order to meet future development needs, China Airlines will continue to invest in R&D projects.
Over the next two years, we plan to invest a total of NT$225 million into R&D. The following tablesummarizes future projects:
Project

Future R&D Project Description

Estimated
Completion Date

With advances in smart airport technologies, airports around the world are installing
Construction andself-service bag drop equipment for departing passengers. This self-service option

November 2017

Promotion of theprovides passengers with a whole new travel experience and reduces check-in waiting As of the date ofPassenger

time. In the spirit of IATA Fast Travel self-service options, the bag drop system reduces publication of thisSelf-Service Bag

staffing requirements and increases the efficiency of ground services. As airports

report, 20% has

Drop System

adopt self-service bag drop technology, CAL will complete system integration andbeen completed

provide passengers with this new service.

Operational Highlights

81

CAL is constructing an information system for the active flight plan system’s
assignment dispatch mode, to provide a user-friendly interface that allows dispatch
managers to quickly set up the three key related elements: system operation flight
Construction of a
Dispatch Service
Management
Systemwork schedule, flight plan required assignments, and qualified human resources to be September 2017assigned. Creating a systematic mechanism for completing preliminary assignments,

As of the date ofassignment adjustments, and dispatcher shift change handovers will effectively raise

publication of thisefficiency of staff allocation. By achieving a consolidated process for assigned

report, 15% has

personnel quality management (System Control Network), dispatch assignments (this been completed
project), dispatch operations (Dispatch Control System), we can ensure that theappropriate personnel are assigned to appropriate tasks and raise the efficiency offollow up dispatch controls.
To improve integration of shared system resources, CAL set up a new cabin mobile

Construction of a
New Cabin Mobile
Service System(iCabin 2.0)

service system that includes an iPad electronic document management system, cabin December 2017
announcement system, and preflight, inflight, and post-flight information integration. As of the date of
The system also includes a newly added preflight (permit validity evaluation,

publication of thisindividual work hours/rest evaluation, pick-up time confirmation) and inflightreport, 6% has(transfer flight information, passenger upgrade services, communication language

been completedchange, holiday and rest period control, training signup sheet) features.
September 2017
Mobile Apron

A mobile PreFlight (PF) and TranSit (TS) apron work order system to provide

As of the date ofWork Ordermaintenance staff with correct, real-time work order information and improve thepublication of this

Systemoverall quality of maintenance operations.

report, 12% has

In order to enhance enterprise collaboration, CAL is utilizing search integration to

February 2018

construct the next generation China Airlines Enterprise Information Portal (EIP) that

As of the date ofserves as an information and communication platform for all CAL employees. The

publication of thisplatform will hasten the Company’s uptake of mobile technologies and strengthenreport, 20% has

links between units to improve overall work efficiency.

been completed

In addition to optimizations to Phase 1 as suggested by travelers, new features andAs of the date ofbeen completed
Next Generation
China Airlines
Enterprise
Information Portal
Construction of
Phase 2 of the

December 2017

Next Generationinteractive content will improve service quality and provide new experiences to our

publication of thisMobile Platform

customers. Phase 2 will increase app stickiness and usage rate.

report, 10% has(Mobile 3.0)

been completed
The Company is constructing a Dynasty Flyer Courtesy Promotion Recommendation

Dynasty Flyer

Application System to create a systematic procedure for courtesy promotion

Courtesy

application, confirmation, and execution to replace the current manual process that

Promotionrequires email communication between different units within the Company. Not only

Recommendation will the system simplify procedures and improve courtesy record checks, theApplication

information will be included in member contribution information to be used as

Systemreference for promotion approvals thereby strengthening the member courtesy

October 2017
As of the date of
publication of thisreport, 16% has
been completed

promotion mechanism.
To maintain real-time understanding of travel agency tour group sign ups, properly
adjust seat sales, and reduce manual communication between the Company andTravel Industry

travel agency staff, CAL will enter into an information exchange service collaboration

B2B Information

with major domestic travel agencies. Travel agency operators can quickly receive

Exchange Service

booking record change information for their tour groups and directly update group

Collaboration

participant numbers to enable CAL to adjust seat reservations, thereby increasing theefficiency of information exchange and employee productivity. The collaboration isestimated to bring a 2-4% increase in tour group passengers.

82 Operational Highlights

December 2017
As of the date of
publication of thisreport, 30% has
been completed

To make it easier for our frequent flier members to purchase tickets online while also
Member Package increasing ticket sales, CAL is constructing an online member ticket package sales

September 2017
As of the date of

Ticket Cloud Sales system. The system will migrate sales channels to the website and provide passengers publication of this
Systemwith quick and convenient booking services. Members can purchase five tickets for the report, 35% hassame route at one time and provide follow up flight registration features.

been completed

Currently the Dynasty Lite Package Travel Sales System Platform software andDynasty Lite

hardware is undergoing development and maintenance to establish safer and more

December 2017

Package Travel

flexible services. Taking advantage of the latest technology, we are also planning for

As of the date ofSales System

the system to be transferred into the cloud where the Company can maintain andpublication of thisPlatform Cloud

operate the system in house to better handle large sales volume and changes to thereport, 10% has

Maintenancecomputer program in the future. Each year CAL will save an estimated NT$2 million to been completed
US$2.5 million in hosting and maintenance fees.

(2) Major Factors Affecting the Success of Future R&D
A. Full support of operational managers
B. Proper grasp of operational needs
C. Utilization of the latest IT know-how and technology
D. Information system architecture upgrades
E. Implementation of project management
F. Strict budget control

5.1.4 Long-term and Short-term Development
To promote sustainable operations and strengthen international competitiveness, CAL has planned thefollowing short- and long-term passenger and cargo transport developments:

A. Short-term Development(1) Passenger
 Increase transport capacity to accommodate flourishing Japanese tourism
Benefitting from a depreciating Yen, Taiwanese travelers are visiting Japan in droves. CAL has not only expanded
capacity, but also offered extra flights / charter flights to meet seasonal demand to increase revenue.

 Explore the potential of new markets under the “New Southbound Policy”
CAL has added new flights to high-potential destinations in the region (such as Kuala Lumpur, Yangon, Penang). The
Jakarta route is now served by the new 77W aircraft. The government is offering preferential entry visa measures formany Southeast Asian nations, which will spur tourism from the region to Taiwan.

(2) Cargo Strengthen strategic cooperation and adjust capacity to keep on top of cargo demand trends
Utilizing China Airlines’ capacity advantage in Eastern and Southern China, we will continue to strengthen cooperation
with the international couriers UPS, FedEx, and SF Express. Through these strategic partnerships, we will increase
cross-border cargo sources in the Asian region. In addition, we flexibly adjust cargo capacity based on the needs ofvarious regions. North American routes are modified and capacity increased to coincide with the seasonal fruit
shipping schedule and extra and charter flights are added to meet demand. In addition to our usual cargo flight service
to Europe, from August 2016 European cargo flights with a stopover in Delhi were resumed to strengthen expansion in
the developing Indian market. For regional routes, we will seek out commonly air freighted Japanese exports such as
semiconductor machine equipment and automobile parts and utilize fifth freedom rights to import to and export fromJapan on transpacific flights. In Southeast Asia, we will continue to build business in Singapore, Vietnam, Malaysia,
Indonesia, the Philippines, and Thailand through flexible intermediary flight segments (such as Singapore – Penang) toreap the benefits of interregional direct flights.

Operational Highlights83

B. Long-term Development(1) Passenger
 Optimize Long-Haul Routes, Increase Australia and New Zealand Capacity
Beginning in December 2016, all European routes are serviced by exclusively non-stop flights aboard our new 359
airliner, one of the most advanced in our fleet. The 359 is known as the “most technologically advanced, most energy
efficient, most environmentally friendly, most spacious, and quietest” aircraft and will give CAL a great advantage infuture operations. These enhancements to our European offerings will attract business travelers and upgrade ouroverall corporate image. In May 2016, New York flights were increased from three to five per week to provide
Taiwanese travelers with more options to reach the Eastern US. In the future, mainland Chinese travelers can also takeadvantage of added flights making travel to and from Southeast Asia via Taiwan more convenient.

 Launch of “Let’s Go” in response to low cost competition
According to the Centre for Asia Pacific Aviation (CAPA) statistics, Low Cost Carriers (LCC) had a 13.4% share of the
Taiwan market in 2016 compared to only 3.6% in 2012. In view of this fierce competition, CAL launched the new fare
product “Let’s Go” for short-haul flights on May 25, 2016. Tickets are sold exclusively on the China Airlines website andexclude a free baggage allowance. “Let’s Go” not only provides passengers with another option when purchasing
tickets, it can expand market share by attracting customers with different needs who may not otherwise consider
China Airlines.

 Optimized Services, Warming Passengers’ Hearts
Originally, only the few Hong Kong flights scheduled around dinnertime featured hot meal service. Most flights onlyoffered HOT PACK snack service. To strengthen the quality of cabin service and raise our competitive advantage,
beginning in August 2016, all Hong Kong flights resumed hot meal service. We continually work to enhance ourofferings to keep up with international trends and attract more travelers to fly China Airlines. From July 2016, baggage
allowances were increased for zones on the weight system, which include Asia (Southeast Asia, Northeast Asia, andMainland China), Australia and New Zealand, and Europe. Economy passenger allowances were increased from 20 to
30 kilograms, premium economy increased from 25 to 35 kilograms, and business class increased from 30 to 40
kilograms.

(2) Cargo
 Optimize Global Channels, Develop High Yield / High Growth Cargo Sources
Through strategic cooperation and customer relationship and performance management, we can strengthen
cooperation with major global freight forwarders and achieve stable cargo volumes. CAL will increase revenue by
expanding high yield services (such as courier cargo, special cargo, cold chain products, and charter flight services) andincrease cross-strait and global e-commerce and mail cargo volumes.

 Increase Code Share / Alliance Cooperation, Expand Cargo Route Network and Strengthen
Cargo Information Development
To build our business in emerging cargo markets such as ASEAN nations, India, Mexico, and Brazil, China Airlines will
strengthen code-share cooperation to expand our service network. Working with SkyTeam Cargo, we will jointly
develop a courier cargo transport platform to improve transshipment efficiency and expand our flight network.
Additionally, through the integrated and real-time information provided by upgraded Cargo Business / Service
Information Systems, internal operating efficiency, customer service quality, and customer satisfaction will increase.

84 Operational Highlights

5.2 Market and Sales Overview
5.2.1 Market Analysis
A. Main Sales (Service) Region
Overview of Company passengers/cargo (RPK/FRTK, REV) by region and passenger and cargotransport market share over the past two years:(1)Passenger routes:
Item
Area
Trans-Pacific
EuropeSouth-East Asia

2015

2016

No. of

RPK

Revenue

No. of

RPK

Revenue

Passengers(Million)(NT$ Million)

Passengers(Million)(NT$ Million)

1,285,491

11,137

17,7201,386,818

12,280635,100

4,492

7,758

601,381

4,328

18,571
7,063

3,340,271

8,240

16,5293,450,709

8,457

16,385
1,574

Domestic

901,340

312

1,529

1,000,915

254

Hong Kong

2,707,661

2,074

7,459

2,738,184

2,096

7,594

North-East Asia

4,477,364

8,021

24,287

5,142,683

9,275

25,042

Oceania

466,570

2,204

3,812

558,714

2,795

4,542

Mainland China

2,841,285

2,900

15,8682,702,393

2,698

14,511

Total

16,655,082

39,38094,962

17,581,797

42,183

95,282

Note 1: Revenue passenger kilometers (RPK) equal the total number of revenue passengers multiplied by the flight
distance travelled (kilometers).
Note 2: The above data includes scheduled flights, charter flights, and extra flights.
Note 3: The above data includes Mandarin Airlines and Tigerair Taiwan.

(2) Cargo routes:
Item
Area

2015

2016

FRTK

Revenue

FRTK

Revenue(Million)(NT$ Million)(Million)(NT$ Million)

Trans-Pacific

3,624

24,6443,500

20,547

Europe

708

4,698

716

4,625

South-East Asia

697

6,435

718

6,034

North-East Asia

167

1,911

185

1,842

Oceania

70

484

72

481

Mainland China

123

2,121

135

2,192

Total
5,389
40,293
5,326
Note 1: Freight revenue ton-kilometer (FRTK) equals the revenue cargo load (tons) multiplied by the flight distancetravelled (kilometers).
Note 2: The above data includes scheduled flights, charter flights, and extra flights.
Note 3: The above data includes Mandarin Airlines and Tigerair Taiwan.

35,721

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

Cargo
2016

2015

2015

2016

China Airlines

26.74%

25.04%

37.89%

38.12%EVA Air

20.90%

21.48%

26.24%

24.84%

TransAsia Airways

3.45%

3.18%

0.51%

0.56%

Mandarin Airlines

3.02%

2.61%

0.81%

0.86%

UNI Air

1.57%

1.50%

0.41%

0.50%

0.66%

0.45%

-

-

Tigerair Taiwan

1.37%

2.72%

0.04%

0.04%

V Air

0.46%

0.83%

-

-

41.83%

42.19%

34.10%

35.08%Far Eastern Air
Transport

Other – Foreign
Carriers

Source: Civil Aeronautics Administration Monthly Statistics from January to December 2015 and 2016－Taiwan National
Airlines International and Cross-Strait Market Share for Passengers and Cargo

Operational Highlights

85

C. Market Analysis of Major Product Categories(1) Passenger
The overall demand for air travel to and from Taiwan is expected to grow by 3.8% in 2017 compared to 2016. Supply is expected
to rise 2.1% over that period. Regional routes, impacted by government and economic factors, are expected to grow by 3.3%,
while overall capacity with remain relatively flat with just 0.6% growth, which is expected to push the overall load factor to 81%,an increase of three percentage points over last year. With both national and Middle Eastern carriers increasing capacity,
long-haul route supplies are expected to increase by 16.3% which will also help push demand growth to 10.5%. However, supply
growth is still rising faster than demand, so the overall passenger load factor is expected to fall.

(2) Cargo
In 2017, the Asian export market is expected to rise by just 1.7% and several political and economic factors (Brexit, European
refugee crisis, slower than expected US economic recovery) threaten economic growth, so concerns remain about overall cargodemand growth. With downbeat forecasts for the Asian market in 2017, dedicated cargo plane capacity will remain flat. However,with the increase in passenger capacity, the added cargo capacity in passenger airplanes will result in an overall cargo market
supply increase of 2.7%, with a 7.8% capacity increase coming from passenger plane cargo holds and only a 0.1% increase incargo plane capacity. Looking to the overall cargo market in 2017, supply will continue to outstrip demand and the average cargoload factor is expected to decrease by 0.7 percentage points while earnings for the unit are also predicted to continue to fall.

D. Competitive Niche(1) Next Generation Long-Haul Fleet Taking Shape
China Airlines’ 10 Boeing 777-300ER next generation design airliners all entered service in the first half of 2016.
Additionally, in the second half of the year, deliveries began on the Company’s 14 new Airbus A350-900. With these new
introductions, the fleet lineup is younger and the next generation design concepts help promote Taiwanese culture on
the world stage. This transformation retains the soul of China Airlines while bringing the airline into a new era andprovides long-haul route passengers with an entirely new experience.

(2) Extensive Route Network, Leader in the Region and Australia/New Zealand Markets
China Airlines has operated in the airline industry for 57 years. Our passenger transport routes span 81 destinations in 22
countries across Europe, the Americas, Asia, and Australia, while our cargo transport serves 96 destinations in 29 countries (as ofDecember 31, 2016). Together these routes form a dense passenger and cargo transportation network. The Company is also
actively expanding Australia/New Zealand and regional routes, which include cross-strait and Northeast and Southeast Asia flights.
China Airlines enjoys the highest market share for regional flights of any airline.

(3) A Leader in Collaboration
In addition to our own routes, China Airlines was the first Taiwanese airline to join a global airline alliance and develop code-share
flights with other carriers. Currently the Company already operates code-share flights with 19 airlines, the highest of any
Taiwanese carrier. China Airlines is actively growing our global footprint to enable passengers to utilize our extensive route
network to easily travel between Taiwan and cities around the world.

(4) Variety of Innovative Marketing Strategies
Mobile technologies have changed both the way passengers purchase tickets and the overall travel experience. China
Airlines is actively developing a variety of new marketing and sales strategies: new Dynasty Package travel products,
optimized production and marketing channels, and innovative promotions. Using a variety of resources, the Company isimproving product competitiveness and increasing added value. Themed charter flights, new backpacking holidays, CI
Mobile App, and online customer service through the China Airlines WeChat and Facebook accounts will attract moreyoung customers and build buzz for the airline.

86 Operational Highlights

E. Corporate Governance and Policies(1) Corporate Human Rights Policy
China Airlines respects and abides by internationally-recognized human rights norms and principles. The Company firmly
believes that respect for and protections of human rights are the foundation upon which to build sustainable operations.
Therefore, China Airlines’ human rights policy, implemented at the Company and its subsidiaries, focuses on respect,
protection, assessment, and compensation for any employee or customer who may experience a human rights violation.
In addition, we expect and require that China Airline’s suppliers and contractors follow the spirit and basic principles
outlined in our policy.

(2) Sustainable Supply Chain Management
In order to achieve sustainable supply chain management goals, in 2015 China Airlines established a supplier code of
conduct covering legal compliance, human rights and labor conditions, occupational health and safety, environmental
protection, fair trade and ethics, quality and safety, and cyber security. To enhance the sustainability of a large number of
CAL suppliers, in 2016 we further required suppliers to sign the code of conduct and together commit to developing asustainable industry environment and working towards common prosperity. In 2016, China Airlines was also included as aconstituent stock in the DJSI Emerging Markets Index, achieving the highest score in the industry for supply chain
management.

(3) Environmental Sustainability Management
China Airlines is committed to environmental sustainability management, as the environment is a key factor in achieving
sustainable operations. In 2007, we drafted environmental and energy management principles. In 2011 the dedicatedEnvironmental Department and Environmental Committee were established. Each quarter, our President reviews
environmental and energy management performance and sets up incentives. In 2013, China Airlines released anenvironmental and energy policy statement and was the first airline in Taiwan to establish a dedicated environmentalorganization and establish related policies.

(4) Corporate Social Responsibility
China Airlines is deeply aware that our success is solely thanks to public support and we have long been committed togiving back to our community. Bringing value to the community we serve is an important part of our strategy to achievesustainable development. Through a variety of public welfare programs, China Airlines supports disadvantaged groups,
nurtures new sporting talent, and helps cultivate the next generation of young people, thereby also creating the greatest
value for our customers, shareholders, and employees.

(5) Enterprise Risk Management Architecture and Process
China Airlines understands the importance of proper risk management and pays special attention to the potential
interaction between risks. Referencing Enterprise Risk Management (ERM) related literature and practices, while also
considering the specific environmental and operational characteristics of the airline industry, we found that the threemain sources of risk for the industry are: safety, operational, and financial risk. Using the four ERM steps of risk
identification, risk analysis, risk assessment, and risk control, the Company identified the potential risk events in thesethree risk sources. These are then analyzed and evaluated according to the probability of occurrence and severity to
distinguish the degree of risk for each event. Finally, for high risk events, the Company developed a response program tomitigate operational impact.

F. Favorable and Unfavorable Factors in the Long Term
(1) Favorable Factors
 Although at the end of 2016 OPEC and non-OPEC oil producing nations agreed for the first time to a global pact to limit
supply and in the long term oil prices are expected to rise, over the short term oil prices should remain low to thebenefit of the global aviation industry.

Operational Highlights87 The Asia-Pacific Region has recently benefitted from the growth of emerging economies and demand for air travel inthe region has surged. IATA estimates that Asia-Pacific air travel volume growth will outpace the global average.
Passenger volume is expected to rise. For cargo, the above positives could bring demand growth, but supply is still
higher than demand in the overall market, so business could simply remain stable.
 Air cargo market growth is impacted not only by the economy, but geographic location is also an important factor.
Taiwan is located at the center of the Asia-Pacific region and the air cargo market potential is nearly unlimited. Thisbusiness opportunity can be tapped by developing an air cargo center. Therefore, in recent years the government haslaunched the expansion of Taiwan Taoyuan Airport to build an East Asian transport hub.

(2) Unfavorable Factors
 The fate of the airline industry is inextricably linked with the health of the global economy. The operating environmentis therefore easily affected by natural disasters and the global political situation, which includes cross-strait relations,terrorist threats in Europe, and elections in the US and Europe.
 Changes in population and structure in nations around the world will affect the number and types of foreign travelers
visiting Taiwan and Taiwanese travelling overseas. Therefore, airlines must adjust capacity, products, and marketing in
response to the changing market.
 As air transportation has been gradually liberalized in recent years, Taiwanese, foreign, and low cost carriers haveentered the market and the added capacity has put downward pressure on ticket prices and impacted the bottom line.
In addition, liberalization has also caused increased congestion at large airports around the world. According to IATA
statistics, over 170 airports worldwide have been classified as Level 3, the most congested. The problem is difficult toalleviate in the short term and the air transport market is facing extreme challenges.

(3) Response Measures Through information gathering and management, we will keep a tight grasp on global political and economic
developments. To respond to unpredictable events in the operating environment, we will adapt flight schedules,
aircraft deployment, and capacity to increase the passenger load factor and profitability of those routes.
 To respond to changes in passenger behavior and the popularity of mobile devices, the Company will adapt to changing
passenger needs. Launching a variety of promotional activities, providing mobile, electronic information features andmarketing directed at target customer groups will strengthen the Company’s competitiveness.
 In coordination with the arrival of the new long-haul fleet and new opportunities afforded by Open Skies, the Company
is actively adding new routes and destinations to maintain our regional advantage and optimize our long-haul network.
With Taiwan’s geographical advantage, we will build an East Asian transfer hub while expanding cooperation with our
airline partners to build a global flight network and generate more revenue.

5.2.2 Production Procedures of Main Products
A. Major Products and Their Main Uses
Major ProductsPassenger services
Cargo services
In-flight sales

Main Uses
International passenger air transport and scheduled, non-scheduled,
and charter flights.
International cargo, courier, mail, and package transport.
Providing passengers with in-flight duty free sales services.

B. Major Products and Their Production Processes
The Company is a member of the airline industry and not a manufacturer, so there is no production
process.

5.2.3 Supply Status of Main Materials
CAL is a member of the airline industry, not a manufacturer. Therefore, there is no need for production
raw materials. Aviation fuel makes up the largest proportion of operating costs. In addition to aviationfuel supplied at Taiwan Taoyuan Airport by CPC Corporation and Formosa Petrochemical Corporation,
the Company also purchases fuel from large oil companies around the world at the various destinations
served, so fuel supplies are very fragmented.

88 Operational Highlights

5.2.4 Major Suppliers and Clients
A. Major Clients in the Last Two Calendar Years:
CAL is a member of the airline industry and clients are members of the general public.

B. Major Suppliers in the Last Two Calendar Years:
CPC Corporation, Formosa Petrochemical Corporation etc.
Unit: NT$ thousands
2015
Item

1

Company
Name
CPC
Corporation

2016
RelationwithIssuerCompanyName

Amount%13,630,688

10.90 None

3,801,458

3.04 None Petrochemical

CPC
Corporation

Formosa

2

Petrochemical

2017 (As of March 31)
CompanyName

Amount%11,593,459

9.42 None

3,193,911

2.60 None Petrochemical

Formosa

Corporation

RelationwithIssuerRelationwithIssuerAmount%3,366,269

10.20 None

1,035,938

3.14 None

Other

28,594,878

86.66

Net Total

32,997,085 100.00

CPC
Corporation
Formosa

Corporation

Corporation

Other

107,610,673

86.06

Other

108,285,831

Net Total

125,042,819

100.00Net Total

123,073,201 100.00

87.98

Reasons for changes:
Fuel is the Company’s primary operating expense. Overall, purchases have remained stable.

5.2.5 Production in the Last Two Years
Year
Capacity and Traffic
Available Seat Kilometers (ASK)

Unit: thousand kilometers
2015

Rate of Increase(Decrease)2016

50,125,745

54,192,310

39,379,835

42,183,064

7.12%

78.56%

77.84%-0.72 ppt

Freight Available Ton Kilometers (FATK)

7,608,117

7,669,755

0.81%

Freight Revenue Ton Kilometers (FRTK)

5,388,800

5,325,986-1.17%

70.83%

69.44%-1.39 ppt

Available Ton Kilometers (ATK)12,113,673

12,535,724

3.48%

Revenue Ton Kilometers (RTK)

8,928,878

9,114,419

2.08%

73.71%

72.71%-1.00 ppt

Revenue Passenger Kilometers (RPK)
(%)

(%)

(%)

8.11%

Note 1: The above data includes scheduled flights, charter flights, and extra flights.
Note 2: The above data includes Mandarin Airlines and Tigerair Taiwan.

Reasons for Changes:
CAL is a member of the airline industry. In 2016, the Company increased passenger capacity resulting in
ASK and RPK increases compared to 2015. In addition, RPK and FRTK increased less than ASK and FATK,
so the passenger and cargo load factors decreased slightly.

Operational Highlights

895.2.6 Shipments and Sales in the Last Two Years
Unit: thousand kilometers; NT$ thousands
2015

Item

RPK/FRTK

2016
Amount

RPK/FRTK

AmountPassenger Revenue

39,379,835

94,962,055

42,183,064

95,282,373

Cargo Revenue

5,388,800

40,292,840

5,325,986

35,721,425-

9,801,322-

10,075,309

145,056,217
Note 1: The above data includes scheduled flights, charter flights, and extra flights.

-

141,079,107

Other Operating Revenue
Total

Note 2: The above data includes Mandarin Airlines and Tigerair Taiwan.

Reasons for Changes:
Sales for passenger operations rose in 2016 over 2015. In 2016, increased passenger capacity resulted inincreased volume and revenues. In the first quarter of 2015, the US West Coast port closure pushed up
cargo demand and raised rates. Also, due to lower oil prices, 2016 fuel surcharges were lower than in
2015. These factors resulted in lower net cargo revenue than the previous year.

5.3 Human ResourcesYear
Numberof
Employee
s

2015

2016
6,419

6,554

Female

6,008

6,094

6,121

Total

12,437

12,648

12,683

40.00

40.20

40.11

Average Age
Average Years of Service

6,562

12.70

12.90

12.98

0.11%

0.11%

0.11%

Master’s Degrees

9.73%

10.34%

10.35%

Bachelor’s Degrees

82.94%

82.74%

82.75%

PhDs
Education

APR 24, 2017

Male

Senior High School

6.69%

6.25%

6.30%

Below Senior High School

0.53%

0.56%

0.49%

5.4 Environmental Protection Expenditure
5.4.1 Total Losses and Penalties: None.

90 Operational Highlights

5.4.2 Company Countermeasures to Future Environmental Protection Issues
A. ISO 14001 Environmental Management System and ISO 50001 Energy Management
SystemThe Company’s corporate environmental management mechanism has introduced theinternationally accepted ISO 14001 Environmental Management System (EMS) and ISO 50001
Energy Management System (EnMS) standards and their PDCA management cycle tocomprehensively identify and manage environmental and energy issues arising from businessactivities. The systems cover flight operations, maintenance, logistics, and administrative support.
With the rise of corporate benchmarking, China Airlines has not only implemented an internal
self-auditing mechanism, each year we also commission an international auditing team to certify theCompany under ISO 14001 and ISO 50001 standards. The scope of ISO 14001 certification covers ourmaintenance facility, CAL Park Headquarters, and the Taipei and Kaohsiung Branches. ISO 50001
energy management system certification covers CAL Park and our maintenance facility. The 2016
third-party audit was completed on December 15, 2016.
China Airlines is the second airline globally and the first in Taiwan to receive both ISO 14001 and ISO
50001 certification and the scope of certification is the broadest of any airline in the country.

B. Environmental KPI Controls
The Company’s five major Environmental Management Committees and the Carbon Management
Taskforce have adopted and implemented environmental KPI (key performance indicators). The
annual review by the Environmental Committee, convened and chaired by China Airline’s President,
encourages all divisions to implement environmental protections.
In 2016, a total of 64 KPI were completed and carbon emissions were reduced by 9,133 tons of CO2e
through conservation of aviation fuel, energy, and vehicle fuel. In 2017, we set up a further 59 KPI
and expect to reduce emissions by 105,582 tons of CO2e over the year.

C. Environmental Management Inspection Mechanism
As part of the Company’s environmental management inspection mechanism, each unit performs astage one environmental management self-audit then Company headquarters performs a stage two
audit. Through this double audit system, we can ensure that environmental management is
implemented from the ground up within each unit.
Stage two audits (including corrective/preventive measures and inspection) were completed in thesecond and fourth quarters of 2016. In addition to carrying out audits according to the inspection
checklist, auditors also review areas of concern from previous audits, environmental and energy KPI
implementation, and any corrective or preventive measures listed on the Taoyuan Department ofEnvironmental Protection audit result.

D. Employee Environmental Education and Training
In order to comprehensively implement Company environmental policies, environmental
management procedures, and increase employee environmental awareness, China Airlines offers
employee environmental education and training. CAL headquarters holds training regarding
environmental policies and systems, while each individual unit holds environmental training as it
pertains to its own operations. Such training can promote a higher level of ecological awareness andconcern for our Earth among employees and build a culture of environmental sustainability at theCompany. Between 2013 and 2015, all employees in the Taiwan region received training and in 2016
trainings were held at Company out-stations around the world and for foreign employees.

E. Carbon Inventory and Reduction Project(1) Annual GHG (greenhouse gas) Inventory

Operational Highlights

91

In accordance with ISO/CNS 14064-1 standards, the Company began performing an annual GHG
inventory in 2009 covering flight, ground service, and administrative operations, which is verified
by a third party.
In April 2017, third-party verification on our 2016 inventory was completed and we received
Reasonable Assurance certification. In 2016, verified GHG emissions totaled 7,067,935 tons ofCO2e.
(2) EU ETS (European Emission Trading Scheme)
In accordance with new EU regulations in effect April 2014, in March 2017 the Company
completed carbon dioxide emissions inventory and verification for 2016 intra-EU flights. The
verified results are as follows: 102 flights, carbon dioxide emissions equaled 3,260 tons. The
annual carbon rights allocated to the Company by the EU for the period 2013 – 2016 equaled
7,157 tons per year, so 3,897 tons of the allowance remained unused in 2016.

F. Participation in an International Environmental Research Project
The Company took part in the Pacific Greenhouse Gases Measurement Project (PGGM) in
collaboration with the Environmental Protection Administration, National Central University, andthe EU’s IAGOS-ERI program. In June 2012 and July 2016, IAGOS equipment was installed on our
B-18806 and B-18317 aircraft to automatically collect atmospheric gas data during flight, which isprovided to important research groups in Taiwan and overseas to detect and understandhigh-altitude gas changes and perform other environmental research. From July 1, 2012 throughDecember 31, 2016, atmospheric data was collected during 3,559 flights. With the help of China
Airlines, this project will contribute to global ecological protection efforts and raise Taiwan’s
environmental profile.
In accordance with the needs of the Environmental Protection Administration Project Team, theCompany expanded the scope of cooperation with PGGM. In July 2017 we will install IAGOS
equipment on B-18316, then B-18316 and B-18317 are expected to continue collecting data until
2027.

G. Building and Energy-Efficient, Environmental Fleet
In planning our new fleet, the primary concern was to select planes that met international flightnoise and emissions standards while also prioritizing fuel efficient models.
Since the first delivery in September 2014 of our new fuel-saving Boeing 777-300ER models, we
received a total of eight such planes through the end of 2015. In 2016, we took delivery of anadditional two planes bringing the total to 10.
In 2016, we received four Airbus A350-900 and will receive a further ten planes between 2017 and2018 for a total of 14.

H. Promote Continuous Improvement in Maintenance Operations(1) Maintenance Facility Environmental Management TeamThe maintenance facility established an Environmental Management Committee, in which an
assistant vice president-level manager serves as Environmental Management representative. The
Committee is made up of members employed in the maintenance facility andenvironmental-related units. Through the committee platform, the effectiveness of maintenancefacility environmental management is regularly monitored and reviewed to meet legal
requirements, international trends, company policies, and our corporate social responsibilities.
(2) Establishing Maintenance Facility Environmental KPI
Each year, the maintenance facility sets environmental KPI in accordance with Company goals andin consideration of potential maintenance facility environmental impacts. The KPI include fuel,

92 Operational Highlights

energy, and water conservation, green procurement, waste recycling, and environmental
education and training. Each goal is regularly monitored and reviewed by the Environmental
Management Committee to continuously improve environmental management and keep up withdomestic and international environmental protection trends.
(3) Continue to Implement Maintenance Facility ISO 14001 Environmental Management System/ISO
50001 Energy Management System
In accordance with ISO14001 and ISO 50001 provisions, the maintenance facility completed the
management systems’ PDCA model in the areas of environmental policy establishment,
environmental management document formulation, environmental assessment, environmental
objective setting, education and training, environmental performance assessment, internal
auditing, and environmental management review. Each year these efforts are certified by athird-party auditor.
(4) Air Pollution Control
Each year air pollution emissions testing is performed on the heating boilers in our maintenancefacility’s engine plant and plating factory based on related standards and regulations and aquarterly air pollution control fee declaration is made (because the facility uses super diesel, noinspection is required, but a declaration must be made).
(5) Wastewater Treatment
Our maintenance facility wastewater treatment plant treats wastewater produced by airplanecleaning, paint stripping, and plating. The plant has obtained a wastewater discharge permit andour water pollution prevention measures program has been updated to meet legal regulations.
Improvements are implemented and equipment added as necessary to ensure compliance withnew environmental regulations.
(6) Waste Disposal
Waste produced by the maintenance facility is sorted and stored as required by law into recycling,
reusable waste, and industrial waste then collected by EPA-approved recyclers and waste disposal
companies. Maintenance facility units perform scheduled reviews to ensure the legality of the
final disposal. The waste disposal program is updated regularly as required by law and each year’s
actual waste amount is updated and declared. Soil and groundwater remediation fees are paid
based on the latest laws and the declared amount of waste produced.
(7) Procurement
The maintenance facility has received all necessary authorizations for the toxic chemicals
purchased and in use, which are properly stored, labelled, managed, and declared. In order tomaintain compliance, improvements to these processes are implemented, new equipment added,
and applications for revisions are made based on the latest environmental laws and regulations.
(8) Airport Noise Control
In order to control employee noise exposure while working on the apron, the Company regularlycommissions professional testing organizations to perform operating environment noise
inspections at the Taipei Taoyuan and Kaohsiung Airports. The Company purchases and distributes
hearing protection equipment to protect employees working on the apron from hearing loss. As
required in the Civil Aviation Law of The Republic of China, CAL pays aviation noise control fees(see below table) and supports related education campaigns implemented by the authorities.

Operational Highlights

935.4.3 Countermeasures

Unit: NT$ thousands
Item

Year
Environmental protection equipment and maintenancecosts (does not include depreciation)
Fees for wastewater equipment regular samplinginspections by inspection agencies and permitting
Waste disposal costs
Aviation noise control fees (paid to the terminal basedon airplane model and number of flights)
Fees for establishment of an environmental control
system and strategic research projectGreen procurement

2016

2017

2018

2019

13,99313,00013,00013,000

262

260

260

260

4,164

4,100

4,100

4,100

185,864

185,000

185,000

185,000

5,881

5,500

5,500

5,500

13,38513,00013,00013,0005.4.4 Effect of Environmental Expenditures on Earnings
Energy-saving equipment and improved management expenditures reduce both Company energy use
and operating costs.

5.4.5 Effect of Environmental Expenditures on Competitiveness
Environmental performance has already become an important benchmark in achieving corporate social
responsibility. With the rise of green consumers, actively investing in environmental improvements canpositively affect our competitive position and improve brand image.

5.5 Labor Relations
5.5.1 List of employee benefits, training, retirement program, and status of theirimplementation, and labor-management agreements and protections of
employee rights and interests
A. Good Labor-Management Relations
On May 4, 1988, the China Airlines Union was established. On July 29, 2011, in accordance withrevisions to the Labor Union Act, it was renamed the China Airlines Employee Union. In 2002, acollective agreement was signed between labor and management, which is regularly negotiated andrenewed. Since its inception, the agreement has played a role in promoting harmonious relations
between labor and management.

B. Retirement Program and Pension Preparations(1) Labor Standards Act Old Pension System: The Company’s Labor Retirement Reserve OversightCommittee was established in June 1987. All allocations and payments under the old pension
system are made in accordance with the Labor Standards Act.
(2) Labor Pension Act New Pension System: As stipulated in the Labor Pension Act, since July 2005
the Company has made monthly deposits for each employee on the new system to the Bureau ofLabor Insurance.

C. Labor-Management Communications(1) Units within the Company with a relatively large number of employees, such as the maintenancefacility, Ground Services Division, Cabin Crew Division, Flight Operations Division, and Taipei and
Kaohsiung Branches hold regular communication meetings. In addition, elected employee and

94 Operational Highlights

union representatives attend monthly company-wide labor-management conferences to improveunderstanding and communication.
(2) From March 2015 through the end of May 2016, each unit held regular Town Hall Meetings
during which division senior vice presidents or vice presidents met with employees to exchange
opinions. The more than 1,000 issues mentioned by employees regarding their work environment,rights and interests, salary, and benefits received timely responses.
(3) Establish an employee complaint mechanism and channels to ensure proper response:
When employee rights have been violated or a situation is improperly handled, as stipulated in
the Regulations Governing Employee Complaints, employees can lodge a complaint with the
responsible operating unit or the Human Resources Division. If the employee objects to the
response, he or she can file an appeal with the Human Resources Division. Use of employee
complaint channels: From April 2016 through the end of March 2017, a total of 17 complaintcases were handled.

D. Benefits(1) Employee care
Pension appropriation, labor and health insurance, employer liability insurance, group insurance,
employee physical examination, and providing a nursing room.
(2) Profit sharing
In August 1998, the Company set up an employee stock ownership trust. Employees are free toparticipate and the amount, depending on employee position, is deducted directly from theirmonthly salary. Through the end of March 2017, a total of 1,917 employees have participated.
(3) Welfare system
The Company’s Employee Welfare Committee was set up in December 1967. As stipulated by law,
the Committee distributes benefits, handles the disbursement of wedding allowances, funeralallowances, disaster allowances, employee children excellence scholarships, birthday bonuses,and birth allowances, arranges visits to nursing homes, holds recreational sports activities,
distributes meals and holiday gift certificates, and offers distress or purchase loans.
(4) Employee leisure
Employee group activity subsidies, employee group travel subsidies, discounted tickets for
current and former employees.
(5) Working environment
Workplace compliant with occupational safety standards, gender equality.
(6) Employee training
In order to encourage participation in independent study as promoted by the Workforce
Development Agency, the Company will provide subsidies of up to NT$ 5,000 per person per year
to any employee who takes part in courses related to their job (those eligible for full government
subsidy will not receive further assistance).

Operational Highlights

95

E. Collective Agreement
The CAL Collective Agreement was renewed on January 5, 2015 and went into effect on thefollowing day. On January 19 of the same year, the Council of Labor Affairs issued a written approval.
The full text of the agreement is available through the CAL Enterprise Information Portal.

F. CounselingTo take care of our colleagues needs and participate in employee personal growth, the Company has
employed professional counselors and psychiatrists to provide counseling services to employees.
From January 2016 through March 31, 2017, 129 people participated in 245.95 hours of individual
counseling.

G. In addition to promoting employee education and training to strengthen staff knowledge and skills,
we also continue to accumulate knowledge and encourage exchange within the Company to build alearning organization. Through the management personnel training program and the “China Airlines
Lecture Hall” training system, the Company holds courses to strengthen employees’ strategic,
management, professional, and general workplace skills.
 To encourage employee participation in the Workforce Development Agency’s Industrial Human
Resource Investment Plan, all credit and non-credit classes are recorded in the E-Learning systemas outside training and out of pocket costs are subsidized.
 Received China Aviation Development Foundation 2016 training grant of NT$1.2 million andWorkforce Development Agency 2016 training grant of NT$737,557.
 Launched strategic, management, professional, and general workplace skills training courses.
 Marketing Training: included marketing strategy, passenger operations, cargo operations, andrelevant OJT training. A total of 7,122 people attended the 247 classes held.
 Professional Technical Training: included corporate safety/inspection operations, flight operations,system operations, and EMO operations. A total of 55,683 people attended the 2,532 classes held.
 Service Training: included service quality assurance, public relations, service operations, groundservice and transport operations, and in-flight service operations. A total of 56,194 people
attended the 749 classes held.
 Other Training: included investment management unit operations, legal protections, finance,
information technology, and human resource management planning. A total of 8,837 people
attended the 239 classes held.

8. In the case of legal punishment of the Company, describe any penalties incurred by
employees involved: None.

96 Operational Highlights

5.5.2 CAL has established an employee behavior or ethical code of conduct andarranges pre-employment Employee Rights and Responsibilities classes
for new hires. The Company’s Employee Code of Conduct primarycontent is as follows:
The Company’s Employee Code of Conduct was renamed the Employee Workplace Code of Conduct in
May 2016. The Code primarily consists of workplace ethics, privacy, occupational safety, discriminationand harassment, moral integrity, media and public image, conflict of interest avoidance, anti-trust andfair competition, exchanging gifts and anti-corruption, CAL asset and intellectual property protections,
reporting responsibilities, respect for human rights, and commitment to environmental protection.

5.5.3 Implementation of work environment and employee personal safety
protection measures
The Company complies with the requirements outlined in the Occupational Safety and Health Act andother relevant regulations. Therefore, we formulated and follow our Occupational Health and Safety
Manual and actively promote the Occupational Health and Safety Management system to implement
related operations. To address potential dangers in the work environment, in addition to hazard
identification, risk assessment, engineering controls, government management, and providing
employees with personal protective equipment, we also arrange employee physicals, health promotion
activities, and health education counseling to reduce occupational incidents. The Company has also
strictly implemented automatic safety checks, workplace environmental monitoring, and safety
inspections. Furthermore, we launched workplace incident education to strengthen employee safety
awareness. As part of health and safety education and emergency response training, the Company
provides essential health and safety training to both new hires and existing employees. Through theparticipation of all employees in harm prevention, we are committed to continuous improvement andcreating a safe and healthy work environment.

5.5.4 Over the most recent year through the date of publication of this report,
the estimated value of any loss or potential future loss due to labor
disputes
From the beginning of 2016 through the end of March, 2017, the Company was fined NT$3.45 million
by the government due to labor disputes or issues found in previous labor inspections that were notcompletely improved. Should labor disputes expand further in the future, there is no way to estimate
the damage to the Company’s operations and reputation. In view of this, the Company is currently inphased negotiations with the Union in the hopes of maintaining positive interactions between the twosides to achieve the goal of protecting employee welfare and improving the quality of the work
environment. By comprehensively improving employee satisfaction, we hope to eliminate any
controversy caused by unnecessary labor disputes.

Operational Highlights

975.6 Important Contracts
Agreement
Lease
Lease

Counterparty
Ragusa, Ltd.
International Lease FinanceCorporation

PeriodMajor Contents

Restrictions

11/2001-01/2017

Aircraft Type: 747-400F/No.: B-18708－

02/2006-02/2018

Aircraft Type: A330-300/No.: B-18351

－

Lease

AWA Leasing Co., Ltd.

06/2006-06/2018

Aircraft Type: A330-300/No.: B-18308

－

Lease

Zhong Hang Co., Ltd.

06/2006-06/2018

Aircraft Type: A330-300/No.: B-18309

－

Lease

Zhong Hang Co., Ltd.

12/2006-12/2018

Aircraft Type: 747-400F/No.: B-18723

－

Lease

Whitney Leasing Limited

02/2007-02/2019

Aircraft Type: A330-300/No.: B-18352

－

Lease

Zhong Hang Co., Ltd.

04/2007-04/2019

Aircraft Type: A330-300/No.: B-18315

－

Lease

Whitney Leasing Limited

05/2008-05/2020

Aircraft Type: A330-300/No.: B-18353

－

Lease

IGAF MSN 769 B.V.

12/2008-12/2018

Aircraft Type: A330-300/No.: B-18312;

－

Lease

Bluesky Magical 1001 Leasing Co

11/2010-11/2022

Aircraft Type: A330-300/No.: B-18355－

12/2011-12/2023

Aircraft Type: A330-300/No.: B-18356－

01/2012-01/2024

Aircraft Type: A330-300/No.: B-18357－

10/2012-10/2024

Aircraft Type: A330-300/No.: B-18358－

12/2012-12/2024

Aircraft Type: A330-300/No.: B-18359－

12/2013-12/2025

Aircraft Type: A330-300/No.: B-18360

－

Lease
Lease
Lease
Lease
Lease

MSN 1272&1278 Aircraft
Leasing (Cayman) Limited
MSN 1272&1278 Aircraft
Leasing (Cayman) Limited
Panamera Aviation Leasing
Panamera Aviation Leasing V
LimitedCelestial Aviation Trading 21
LimitedLease

Wilmington Trust SP Services

04/2013-04/2021

Aircraft Type: 737-800/No.: B-18651

－

Lease

Wilmington Trust SP Services

05/2013-05/2021

Aircraft Type: 737-800/No.: B-18652

－

Lease

Wilmington Trust SP Services

06/2013-06/2021

Aircraft Type: 737-800/No.: B-18653－

03/2014-03/2022

Aircraft Type: 737-800/No.: B-18655－

05/2014-05/2022

Aircraft Type: 737-800/No.: B-18656－

06/2014-06/2022

Aircraft Type: 737-800/No.: B-18657－

06/2014-06/2026

Aircraft Type: A330-300/No.: B-18361－

10/2014-09/2026

Aircraft Type: 777-300ER/No.: B-18051－

10/2014-10/2026

Aircraft Type: 777-300ER/No.: B-18052－

11/2014-11/2017

Aircraft Type: A340-300/No.: B18803－

11/2014-11/2026

Aircraft Type: 777-300ER/No.: B-18053－

01/2015-01/2027

Aircraft Type: 777-300ER/No.: B-18055－

05/2015-05/2027

Aircraft Type: 777-300ER/No.: B-18001－

06/2015-06/2027

Aircraft Type: 777-300ER/No.: B-18002－

08/2015-08/2027

Aircraft Type: 777-300ER/No.: B-18003

－

Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease

Avolon Aerospace AOE 73
Limited
Avolon Aerospace AOE 78
LimitedSMBC Aviation Capital (UK)
LimitedCelestial Aviation Trading 23
LimitedOriental Leasing 3 Company
LimitedOriental Leasing 4 Company
Limited
AWA Leasing Co., Ltd.
Celestial Aviation Trading 34
LimitedCelestial Aviation Trading 36
LimitedSky High XXXVII Leasing
Company Limited
Sky High XXXVII Leasing
Company Limited
Sky High XXXVII Leasing
Company Limited

Lease

ALC Blarney Aircraft Limited

09/2015-09/2023

Aircraft Type: 737-800/No.: B-18658

－

Lease

ALC Blarney Aircraft Limited

10/2015-10/2023

Aircraft Type: 737-800/No.: B-18659－

98 Operational Highlights

Agreement
Lease
Lease

Counterparty
Sky High XXXVII Leasing
Company Limited
Sky High XXXVIII Leasing
Company Limited

PeriodMajor Contents

Restrictions

10/2015-10/2027

Aircraft Type: 777-300ER/No.: B-18005－

01/2016-01/2028

Aircraft Type: 777-300ER/No.: B-18006

－

Lease

ALC Blarney Aircraft Limited

03/2016-03/2024

Aircraft Type: 737-800/No.: B-18660

－

Lease

Sky High XXXIX Leasing Company
Limited05/2016-05/2028

Aircraft Type: 777-300ER/No.: B-18007

－

Lease

Chilli Leasing LLC

09/2016-09/2024

Aircraft Type: 737-800/ No.: B-18661

－

Lease

Pacific Triangle Leasing Limited

09/2016-09/2024

Aircraft Type: 737-800/ No.: B-18662

－

Lease

BOC Aviation Limited

10/2016-10/2024

Aircraft Type: 737-800/ No.: B-18663

－

Lease

BOC Aviation Limited

11/2016-11/2024

Aircraft Type: 737-800/ No.: B-18665

－

Loan

CIB (ECA Guarantee)

06/2004-06/2016

Aircraft Type: A330-300/No.: B-18301

－

Loan

CIB (ECA Guarantee)

07/2004-07/2016

Aircraft Type: A330-300/No.: B-18302

－

Loan

Citi Bank (EXIM Guarantee)

08/2004-05/2016

Aircraft Type: 747-400F/No.: B-18717

－

Loan

Citi Bank (EXIM Guarantee)

08/2004-05/2016

Aircraft Type: 747-400F/No.: B-18718

－

Loan

CIB (ECA Guarantee)

12/2004-12/2016

Aircraft Type: A330-300/No.: B-18303

－

Loan

Bank of Taiwan

12/2004-12/2016

Aircraft Type: 747-400/No.: B-18210

－

Loan

BNP Paribas(EXIM Guarantee)

01/2005-01/2017

Aircraft Type: 747-400F/No.: B-18719

－

Loan

Chang Hwa Commercial Bank

03/2005-01/2017

Aircraft Type: 747-400/No.: B-18211

－

Loan

Mega International Commercial
Bank

04/2005-04/2017

Aircraft Type: 747-400/No.: B-18212

－

Loan

Bank of Taiwan

05/2005-05/2017

Aircraft Type: 747-400/No.: B-18215

－

Loan

BNP Paribas(EXIM Guarantee)

05/2005-05/2017

Aircraft Type: 747-400F/No.: B-18720

－

Loan

CIB (ECA Guarantee)

06/2005-06/2017

Aircraft Type: A330-300/No.: B-18305

－

Loan

CIB (ECA Guarantee)

07/2005-07/2017

Aircraft Type: A330-300/No.: B-18306

－

Loan

BNP Paribas (EXIM Guarantee)

08/2005-08/2017

Aircraft Type: 747-400F/No.: B-18721

－

Loan

CIB (ECA Guarantee)

09/2005-09/2017

Aircraft Type: A330-300/No.: B-18307

－

Loan

Mega International Commercial
Bank

02/2006-02/2016

Aircraft Type: A330-300/No.: B-18310

－

Loan

Hua Nan Commercial Bank

06/2006-06/2016

Aircraft Type: A330-300/No.: B-18311

－

Loan

Mega International Commercial
Bank

07/2006-07/2018

Aircraft Type: 747-400F/No.: B-18722

－

Loan

First Commercial Bank

05/2007-05/2019

Aircraft Type: A330-300/No.: B-18316

－

Loan

Cathay United Bank

08/2007-08/2019

Aircraft Type: 747-400F/No.: B-18725

－

Loan

Taiwan Cooperative Bank

02/2008-02/2020

Aircraft Type: A330-300/No.: B-18317

－

Loan

ICBC (Macau)

01/2010-01/2017

Aircraft Type: 747-400/No.: B-18208

－

Loan

Taiwan Business Bank

10/2010-10/2017

Test Cell－

Loan

Taiwan Business Bank

04/2011-04/2018

Test Cell－

Loan

Hua Nan Commercial Bank

05/2011-05/2016

Unsecured Loan

－

Loan

KGI Bank

06/2011-06/2016

Hangar－Loan

Industrial Bank of Taiwan

07/2014-07/2017

Unsecured Loan－

Operational Highlights

99

Agreement

Counterparty

PeriodMajor Contents

Restrictions

Loan

KGI Bank

09/2011-06/2016

Hangar－Loan

Hua Nan Commercial Bank

05/2012-05/2017

Unsecured Loan

－

Loan

Cathay United Bank

06/2012-05/2016

－

Loan

Taipei Fubon Commercial Bank

10/2012-10/2019

Aircraft Type: 747-400F/No.: B-18203 &B18206
Aircraft Type: 737-800/No.:
B-18610&B18617

Loan

First Commercial Bank

06/2013-09/2016

Aircraft Type: 737-800/No.: B18605&B18606

－

Loan

Mega International Commercial
Bank

09/2013-09/2016

Unsecured Loan

－

Loan

First Commercial Bank

09/2013-09/2018

Unsecured Loan

－

Loan

First Commercial Bank

10/2013-10/2018

Unsecured Loan

－

Loan

Taiwan Cooperative Bank

12/2013-12/2018

Unsecured Loan

－

Loan

Ta Chong Commercial Bank

01/2014-01/2016

Unsecured Loan

－

Loan

Mega International Commercial
Bank

01/2014-07/2016

Aircraft Type: 747-400/No.:
B-18201&B18202

－

Loan

Taipei Fubon Commercial Bank

02/2014-02/2017

Unsecured Loan

－

Loan

Taipei Fubon Commercial Bank

02/2014-02/2017

Unsecured Loan

－

Loan

Bank SinoPac

03/2014-03/2017

Unsecured Loan

－

Loan

Far Eastern International Bank

03/2014-03/2017

Unsecured Loan

－

Loan

CTBC Bank

03/2014-03/2017

Unsecured Loan

－

Loan

Bank SinoPac

03/2014-03/2017

Unsecured Loan

－

Loan

Bank of Taiwan

03/2014-03/2017

Unsecured Loan

－

Loan

Taichung Commercial Bank

03/2014-06/2016

Unsecured Loan

－

Loan

Chang Hwa Commercial Bank

06/2014-06/2017

Unsecured Loan

－
－

－

Loan

Bank of Taiwan

07/2014-10/2016

Aircraft Type: A340-300/No.:
B-18805/18806/18807

Loan

The Shanghai Commercial &Savings Bank

07/2014-07/2017

Unsecured Loan

－

Loan

Land Bank of Taiwan

09/2014-09/2016

Unsecured Loan－

09/2014-09/2017

Unsecured Loan－

12/2014-12/2016

Unsecured Loan

－

Loan
Loan

JihSun International Commercial
Bank
The Export-Import Bank of the
Republic of China

Loan

Chang Hwa Commercial Bank

12/2014-12/2017

Unsecured Loan

－

Loan

Taichung Commercial Bank

12/2014-12/2017

Unsecured Loan

－

Loan

Taishin International Bank

12/2014-12/2017

Unsecured Loan

－

Loan

Bank of Taiwan

12/2014-12/2019

Aircraft Type: 747-400F/No.: B-18701

－

Loan

Chang Hwa Commercial Bank

01/2015-01/2018

Unsecured Loan

－

Loan

Land Bank of Taiwan

01/2015-01/2018

Unsecured Loan

－

Loan

Taipei Fubon Commercial Bank

02/2015-02/2021

Aircraft Type: 747-400F/No.: B-18707

－

Loan

Hua Nan Commercial Bank

03/2015-03/2020

Unsecured Loan

－

Loan

Yuanta Commercial Bank

04/2015-01/2016

Unsecured Loan－

100 Operational Highlights

Agreement

Counterparty

PeriodMajor Contents

Loan

Mega International Commercial
Bank

07/2015-07/2020

Aircraft Type: 747-400F/No.: B-18711

－

Loan

Bank of America Corporation

01/2016-01/2018

Unsecured Loan

－

Loan

Ta Chong Commercial Bank

01/2016-01/2018

Unsecured Loan

－

Loan

E.SUN Commercial Bank

02/2016-02/2019

Unsecured Loan

－

Loan

Hua Nan Commercial Bank

06/2016-06/2021

Unsecured Loan

-

Loan

Mega International Commercial
Bank

08/2016-08/2019

Unsecured Loan

-

Loan

Land Bank of Taiwan

09/2016-09/2018

Unsecured Loan

-

Loan

KGI Bank

09/2016-09/2019

Unsecured Loan

-

Loan

Bank of Taiwan

10/2016-10/2028

Aircraft Type: A350-900/No.: B-18901

-

Loan

Bank of Communications

11/2016-11/2019

Unsecured Loan

-

Loan

Bank of Communications

01/2017-01/2029

Aircraft Type: A350-900/No.: B-18902

-

Loan

Taipei Fubon Commercial Bank

03/2017-01/2020

Unsecured Loan

-

Loan

Bank SinoPac

03/2017-03/2020

Unsecured Loan

-

Bills

International Bills Finance Corp

03/2009-03/2017

Aircraft Type: 737-800/No.: B-18601FRCP

－

Bills

China Bills Finance Corporation

03/2011-03/2016

FRCP

－

Bills

Mega Bills

03/2011-03/2016

FRCP

－

Bills

China Bills Finance Corporationand syndicate

09/2013-09/2016

FRCP Joint Underwriting, NT$4,300,000,000

－

Bills

International Bills Finance Corp

09/2013-09/2016

FRCP

－

Bills

China Bills Finance Corporationand syndicate

06/2014-11/2017

FRCP Joint Underwriting,
NT$10,100,000,000

－

Bills

Mega Bills and syndicate

08/2014-11/2017

FRCP Joint Underwriting, NT$5,000,000,000

－

Bills

Union Bank of Taiwan

01/2015-02/2018

FRCP

－

Bills

International Bills Finance Corp

02/2015-02/2021

Aircraft Type: 747-400F/No.: B-18710

－

Bills

Mega Bills

03/2015-05/2018

FRCP

－

Bills

International Bills Finance Corp
and syndicate

12/2015-03/2019

FRCP Joint Underwriting, NT$5,000,000,000

－

Bills

China Bills Finance Corporation

04/2016-04/2020

FRCP

－

Bills

Mega Bills

07/2016-07/2020

FRCP

-

Bills

International Bills Finance Corp

09/2016-09/2020

FRCP

-

Bills

China Bills Finance Corporationand syndicate

12/2016-12/2020

FRCP Joint Underwriting, NT$5,000,000,000-

Taipei CI
Building
Superficies
Contract

Northern Region Branch,
National Property
Administration, MOF

12/31/2016-12/30/2026

Taipei CAL
Building
Lease
contract

FX Hotels Group Inc.

09/01/2010-12/30/2026

Renew lease period for 10 years according
to original contract.
Rental price adjust base on Announced Land
Current Value and assessed and publicly
announced land value.
Rental subject:
Located at No.131, Sec. 3, Nanjing E. Rd.,
Songshan Dist., Taipei City, CAL Building.
Part of B1F 560.7 ㎡,1F 471.1 ㎡,10-13F
7,091 ㎡.Total 8,016.9 ㎡.
11 parking space at B1F

Restrictions－－

Operational Highlights

101

Agreement
Taipei CAL
Building
Lease
contract

Counterparty

OEC Group

Nankan CAL
Park Land
Costco Co.
Lease
contract

PeriodMajor Contents

Restrictions

03/01/2016-12/31/2026

Rental subject:
Located at No.131, Sec. 3, Nanjing E. Rd.,
Songshan Dist., Taipei City, CAL Building.
7F 1,796.8 ㎡, part of B1F 50.4 ㎡
1 parking space at B1F, 12 parking space at
B2F.

－

Construction date:
01/2012-07/2012
Lease inception: Since business
day or The day following the
expiry of one year sinceconstruction commencement
date
Rental period: 20 years sincelease inception

Rental subject:Land located at No.705 and No.705-1
Jinzhong part, Lujhu Dist., Taotuan City.
Total 27,709.21 ㎡

In accordancewith notarized
text

Kaohsiung
CAL Building
FX Hotels Group Co.
Lease
contract

12/31/2012-12/30/2032

Rental subject:
Located at No.81, Zhonghua 3rd Rd., Qianjin
Dist., Kaohsiung City.
B1F 383.2 ㎡, 1F 336.8 ㎡, mezzanine 79.4㎡, 2F-12F 3,583.3 ㎡, Roof protrusion 117.2㎡.
Total 4,499.9 ㎡

CAL BOTPark
Building
Lease
contract

01/01/2017-12/31/2018
Renew every 2 years

Rental subject:
Administration Center Building, Crew Center
Building, Flight Training Center Building,Basement Parking Lot. Total 83107.4 ㎡.

CAL Park Co., Ltd

102 Operational Highlights－－

Financial Information
6.1 Five-Year Financial Summary
6.2 Five-Year Financial Analysis
6.3 Consolidated Financial Statements for the Years
Ended December 31, 2016 and 2015, andIndependent Auditors’ Report
6.4 Parent Company Only Financial Statements for theYears Ended December 31, 2016 and 2015 andIndependent Auditors’ Report
6.5 Audit Committee’s Review Report

Financial Information

103VI. Financial Information
6.1 Five-Year Financial Summary
6.1.1 Consolidated Condensed Balance Sheet – Based on IFRS
Unit: NT$ thousands
Year
2012
30,977,730

Financial Summary for the Last Five Years (Note 1)
20132014 (Note 2)2015 (Note 5)
37,085,072
40,910,490
45,642,615

161,024,343

149,662,068

142,655,066

129,628,866

140,136,737

425,000

489,412670,997

1,009,678

1,137,115

1,118,115

26,872,622

33,739,347

44,837,474

45,645,150

35,888,706

34,356,163

Item
Current assets
Property, Plant andEquipment
Intangible assets
Other assets
Total assets
Current
liabilities

2016 (Note 6)
47,338,201

2017 (As of March 31) (Note 3)
46,656,143
138,040,700

219,299,695

220,975,899

229,074,027

221,926,309

224,500,759

220,171,121

Beforedistribution

52,051,044

61,906,028

61,357,995

68,220,452

68,605,724

73,571,496

After
distribution

52,051,044

61,906,028

61,357,995

70,728,977--

Non-current liabilities

113,957,742

106,179,511

116,730,020

93,149,314

98,027,837

92,792,528

Beforedistribution

166,008,786

168,085,539

178,088,015

161,369,766

166,633,561

166,364,024

After
distribution

166,008,786

168,085,539

178,088,015

163,878,291--

Equity attributable toshareholders of the parent

51,459,772

50,806,464

48,664,275

58,269,896

55,783,817

51,732,579

Capital stock

52,000,000

52,000,000

52,491,666

54,708,901

54,708,901

54,708,901

Capital surplus (Note 4)

1,405,394

1,924,015

480,462

798,415

799,932

799,932

Beforedistribution(1,841,688)(3,161,115)(3,870,736)

2,872,235

206,092(3,557,052)

After
distribution(1,841,688)(3,161,115)(2,358,783)

363,710-(175,830)

Total liabilities

Retainedearnings

Other equity interest(60,562)

86,936(1,905,698)(66,283)

112,264

Treasury shares(43,372)(43,372)(43,372)(43,372)(43,372)(43,372)

Non-controlling interest

1,831,137

2,083,896

2,321,737

2,286,647

2,083,381

2,074,518

Beforedistribution

53,290,909

52,890,360

50,986,012

60,556,543

57,867,198

53,807,097

Total equity

After
53,290,909
52,890,360
50,986,012
58,048,018
distribution
Note 1: 2012 – 2016 annual financial information was verified by Deloitte & Touche.
Note 2: Beginning in 2015, the Company began implementing the revised Regulations Governing the Preparation of Financial Reports by Securities Issuers andthe 2013 version of IFRS, International Accounting Standards, IFRIC and SIC Interpretations recognized by the Financial Supervisory Commission.
Therefore, the aforementioned standards and interpretations have been applied retroactively to affected sections of the previous year’s (2014) financial
statement.
Note 3: As of the date of printing of this annual report, 2017 Q1 financial information has not yet been reviewed by Deloitte & Touche.
Note 4: The 2014 Deficit Compensation Proposal was passed by the Shareholders’ General Meeting held on June 26, 2015 and additional paid-in capital of
NT$1,511,953,000 was used to compensate for the deficit.
Note 5: The 2015 Earnings Distribution Proposal resolution was passed by the Shareholders’ General Meeting held on June 24, 2016. As required by law, theCompany appropriated a legal reserve of NT$287,224,000 and special reserve of NT$76,486,000 and distributed cash dividends totaling
NT$2,508,525,000.
Note 6: The 2016 Deficit Compensation Proposal was passed during the 10th meeting of the 20th Board session held on March 30, 2017, but has not yet passed
the Shareholders’ General Meeting.

104 Financial Information

6.1.2 Consolidated Condensed Statement of Comprehensive Income – Based on
IFRS
Unit: NT$ thousands; EPS (net) = NT$
Year
Item

Financial Summary for the Last Five Years (Note 1)
2012

2013

2014 (Note 2)

2015

2016

2017 (As of March 31)(Note 3)

Revenue

140,972,139

141,702,545

150,581,742

145,056,217

141,079,107

35,796,465

Gross profit

9,878,771

11,027,385

13,631,370

20,268,374

18,005,906

2,799,380

Operating Profit(279,951)

726,268

2,518,747

8,129,197

4,564,687(369,430)

Non-operating Income and Expenses

107,946(1,087,448)(2,156,321)(994,312)(2,684,836)(3,147,460)

Pretax Profit (Loss)
Income from operations of continued
segments - after tax
Income from discontinued operations(172,005)(361,180)

362,426

7,134,885

1,879,851(3,516,890)(220,158)(948,880)(597,488)

5,926,210

710,940(3,713,367)

－

－

－

－

－

-

Net Income (Loss)(220,158)(948,880)(597,488)

5,926,210

710,940(3,713,367)

Other comprehensive income(Income/Loss after taxes)(611,568)

121,723(1,947,078)

1,269,760(681,669)(297,073)

Total Comprehensive Gain (Loss) for
the Year(831,726)(827,157)(2,544,566)

7,195,970

29,271(4,010,440)

Net income attributable toshareholders of the parent(418,356)(1,274,046)(749,073)

5,763,714

571,540(3,760,875)

Net income attributable tonon-controlling interest

198,198

325,166

151,585

162,496

139,400

47,508Comprehensive income attributable to
Shareholders of the parent(972,318)(1,171,929)(2,693,811)

7,072,042

26,103(4,048,969)

Comprehensive income attributable tonon-controlling interest

140,592

344,772

149,245

123,928

3,168

38,529(0.08)(0.25)(0.14)

1.06

0.10(0.69)

Earnings (Loss) per share

Note 1: 2012 – 2016 annual financial information was verified by Deloitte & Touche.
Note 2: Beginning in 2015, the Company began implementing the revised Regulations Governing the Preparation of Financial Reports by Securities Issuers andthe 2013 version of IFRS, International Accounting Standards, IFRIC and SIC Interpretations recognized by the Financial Supervisory Commission.
Therefore, the aforementioned standards and interpretations have been applied retroactively to affected sections of the previous year’s (2014) financial
statement.
Note 3: As of the date of printing of this annual report, the 2017 Q1 financial information has not yet been reviewed by Deloitte & Touche.

Financial Information

1056.1.3 Condensed Balance Sheet – Based on IFRS (The Parent Company Only)
Unit: NT$ thousands
Year

Financial Summary for the Last Five Years (Note 1)2017 (As of March 31)(Note 3)

Item

2012

2013

Current assets

26,291,653

31,333,434

34,477,533

37,904,039

39,908,492－

Property, Plant andEquipment

151,677,995

139,946,013

131,178,428

118,446,472

129,121,632－

408,222473,064

649,614990,307

1,115,101－

Intangible assets

2014 (Note 2)2015 (Note 5)2016 (Note 6)

Other assets

31,440,804

39,304,463

51,594,035

51,802,032

41,394,218－

Total assets

209,818,674

211,056,974

217,899,610

209,142,850

211,539,443－

50,800,740

59,940,257

59,079,846

64,725,525

64,339,805－

50,800,740

59,940,257

59,079,846

67,234,050-－

107,558,162

100,310,253

110,155,489

86,147,429

91,415,821－

158,358,902

160,250,510

169,235,335

150,872,954

155,755,626－

Current
liabilities

Beforedistribution
After
distribution

Non-current liabilities
Total
liabilities

Beforedistribution
After
distribution

158,358,902

160,250,510

169,235,335

153,381,479-－

Equity attributable toshareholders of the parent

51,459,772

50,806,464

48,664,275

58,269,896

55,783,817－

Capital stock

52,000,000

52,000,000

52,491,666

54,708,901

54,708,901－

Capital surplus (Note 4)

1,405,394

1,924,015

480,462

798,415

799,932－(1,841,688)(3,161,115)(3,870,736)

2,872,235

206,092－(1,841,688)(3,161,115)(2,358,783)

363,710-－－Retainedearnings

Beforedistribution
After
distribution

Other equity interest(60,562)

86,936(1,905,698)(66,283)

112,264

Treasury shares(43,372)(43,372)(43,372)(43,372)(43,372)

－

－

－

－

－

-

－

Non-controlling interest

Before51,459,772
50,806,464
48,664,275
58,269,896
55,783,817－
distribution
After51,459,772
50,806,464
48,664,275
55,761,371－
distribution
Note 1: 2012 – 2016 annual financial information was verified by Deloitte & Touche.
Note 2: Beginning in 2015, the Company began using the financial reporting standards in the revised Regulations Governing the Preparation of Financial Reports
by Securities Issuers and these standards have been applied retroactively to affected sections of the previous year’s (2014) financial statement.
Note 3: The Company has not yet prepared an individual financial statement for Q1 2017.
Note 4: The 2014 Deficit Compensation Proposal was passed by the Shareholders’ General Meeting held on June 26, 2015 and additional paid-in capital of
NT$1,511,953,000 was used to compensate for the deficit.
Note 5: The 2015 Earnings Distribution Proposal resolution was passed by the Shareholders’ General Meeting held on June 24, 2016. As required by law, theCompany appropriated a legal reserve of NT$287,224,000 and special reserve of NT$76,486,000 and distributed cash dividends totaling
NT$2,508,525,000.
Note 6: The 2016 Deficit Compensation Proposal was passed during the 10th meeting of the 20th Board session held on March 30, 2017, but has not yet passed
the Shareholders’ General Meeting.
Totalequity106 Financial Information

6.1.4 Condensed Statement of Comprehensive Income – Based on IFRS (TheParent Company Only)
Unit: NT$ thousands; EPS (net) = NT$
Year
Item

Financial Summary for the Last Five Years (Note 1)
2012

2013

2014 (Note 2)

2015

2016

2017 (As of March 31)(Note 3)

Revenue

132,135,468

131,752,677

139,726,168

133,441,725

127,524,864－

Gross profit

8,101,923

8,307,802

10,917,174

17,623,801

15,275,980－

Operating Profit(776,590)(283,782)

1,870,191

7,885,097

4,475,707－

317,827(660,555)(1,820,766)(1,047,275)(2,938,456)－(458,763)(944,337)

49,425

6,837,822

1,537,251－(418,356)(1,274,046)(749,073)

5,763,714

571,540－

Non-operating Income
and Expenses
Pretax Profit(Loss)
Income from operationsof continued segments after tax
Income fromdiscontinued operations

－

－

－

－

－

－

Net Income(Loss)(418,356)(1,274,046)(749,073)

5,763,714

571,540－

Other comprehensive
income(income/Loss after tax)

(553,962)

102,117(1,944,738)

1,308,328(545,437)－

Total Comprehensive
Gain (Loss) For The
Year(972,318)(1,171,929)(2,693,811)

7,072,042

26,103－

Net income
attributable to(0.08)(0.25)(0.14)
1.06
0.10－
shareholders of theparentNote 1: 2012 – 2016 annual financial information was verified by Deloitte & Touche.
Note 2: Beginning in 2015, the Company began using the financial reporting standards in the revised Regulations Governing the Preparation of Financial Reports
by Securities Issuers and these standards have been applied retroactively to affected sections of the previous year’s (2014) financial statement.
Note 3: The Company has not yet prepared an individual financial statement for Q1 2017.

Financial Information1076.1.5 Condensed Balance Sheet – Based on ROC GAAP (The Parent Company Only)
Unit: NT$ thousands
Financial Summary for the Last Five Years (Note 1)

Year
Item

2012
28,317,304

Current assets

2016

Not Applicable

Not Applicable

Not Applicable

Not Applicable467,358

Intangible assets

18,288,053

Other assets

190,324,814

Total assets
Before distribution

45,583,604

After distribution

45,583,604
80,214,485

Long-term liabilities

12,385,494

Other liabilities
Before distribution

138,183,583

After distribution

138,183,583
52,000,000

Capital stock

1,405,394

Capital surplus
Retained earnings(Note 2)

2015

133,555,450

Fixed assets

Total liabilities

2014

9,696,649

Funds & long-term investments

Current liabilities

2013

Before distribution

4,248,184

After distribution

4,248,184(182)

Unrealized gain or loss on financial
instruments(2,599,694)

Cumulative translation adjustments
Unrealized revaluation increments
Treasury shares(2,917,215)
41,298(36,554)
52,141,231

Before distribution
52,141,231
After distribution
Note 1: 2012 annual financial information was verified by Deloitte & Touche.
Note 2: The above after distribution figures are filled in based on the resolution passed at the previous year’s Shareholders’ Meeting.
Total equity

6.1.6 Condensed Statement of Comprehensive Income – Based on ROC GAAP (TheParent Company Only)
Unit: NT$ thousands; EPS (net) = NT$
Financial Summary for the Last Five Years (Note 1)

Year
Item

2012

Revenue

132,608,831

Gross profit

9,182,377

Operating profit

2,116,262

Non-operating expenses and lLoss

2,324,009

Pretax profit (loss)

135,343

Income from operations of continued segments after tax

58,804

Income from discontinued operations－

Extraordinary gain or loss－

Cumulative effect of accounting principle changes－

Earnings (loss) per share

2014

2015

2016

Not Applicable

Not Applicable

Not Applicable

Not Applicable

343,090

Non-operating income and gain

Net Income (loss)

2013

58,8040.01
Note 1: 2011 – 2012 annual financial information was verified by Deloitte & Touche.

108 Financial Information

6.1.7 Auditors’ Opinions from 2012 to 2016
Year

Accounting Firm

Name of CPA

Audit Opinion

2012

Deloitte & Touche

Huang, Jui-chan; Chen, Li-Chi

Unqualified Opinion

2013

Deloitte & Touche

Huang, Jui-chan; Chen, Li-Chi

Unqualified Opinion

2014

Deloitte & Touche

Huang, Jui-chan; Chen, Li-Chi

Unqualified Opinion

2015

Deloitte & Touche

Huang, Jui-chan; Chen, Li-Chi

Qualified Opinion (Note)

2016
Deloitte & Touche
Yang, Chen-Hsiu; Chen, Li-Chi
Unqualified Opinion
Note: Beginning in 2015, the Company began implementing the revised Regulations Governing the Preparation of Financial Reports by
Securities Issuers and the 2013 version of IFRS, International Accounting Standards, IFRIC and SIC Interpretations recognized by the
Financial Supervisory Commission. Therefore, the aforementioned standards and interpretations have been applied retroactively toaffected sections of the previous period’s financial statement.

6.2 Five-Year Financial Analysis
6.2.1 Consolidated Financial Analysis – Based on IFRSYear

Financial Summary for The Last Five Years (Note 1)
2012

2013

2014 (Note 2)

2015

2017
(As of March 31)(Note 4)

2016

Item (Note 5)
Financial
structure (%)

Solvency (%)

Operatingperformance

Profitability

Cash flow

Leverage

Debt Ratio

75.70

76.07

77.74

72.71

74.22

75.56

Ratio of long-term capital toproperty, plant and equipment

103.87106.29117.57118.57111.24106.20Current ratio

59.51

59.91

66.68

66.90

69.00

63.42

Quick ratio

45.30

47.96

53.49

53.06

53.16

48.16

Interest earned ratio (times)

89.91

77.14

115.55496.25265.40(744.76)

Accounts receivable turnover(times)

15.89

18.50

17.45

16.98

17.67

17.18

Average collection period

22.97

19.73

20.91

21.49

20.66

21.25

Inventory turnover (times)

-

-

-

-

-

-

Accounts payable turnover(times)

-

-

-

-

-

-

Average days in sales

-

-

-

-

-

-

Property, plant and equipment
turnover (times)

0.84

0.91

1.03

1.07

1.05

1.03

Total assets turnover (times)

0.62

0.64

0.67

0.64

0.63

0.64

Return on total assets (%)

0.83

0.37

0.48

3.28

0.80

(6.19)

Return on stockholders' equity(%)(0.44)(1.79)(1.15)

10.63

1.20

(26.60)Pre-tax income to paid-in capital(%)(0.33)(0.69)

0.69

13.04

3.44

(25.71)

Profit ratio (%)(0.16)(0.67)(0.40)

4.09

0.50(10.37)

Earnings per share (NT$)(0.08)(0.25)(0.14)

1.06

0.10(0.69)Cash flow ratio (%)

34.58

34.71

27.56

46.60

25.71

18.67

Cash flow adequacy ratio (%)

83.83

129.04207.19233.25251.61225.74

Cash reinvestment ratio (%)

6.43

7.50

5.48

10.56

4.83

4.61

(62.01)

25.65

8.19

3.21

4.99

(2.27)

Operating leverage

Financial leverage
0.10(0.52)
5.04
1.28
1.40
0.53
Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%)
1.
Interest earned ratio: Because 2016 pre-tax net income was lower than the previous year, the interest earned ratio also decreased.
2.
Profitability: Because 2016 net income was lower than the previous year, all profitability items also decreased.
3.
Cash flow ratio and cash reinvestment ratio: Because 2016 net cash inflows from business operations were lower than the same period last year, the cash
flow ratio and cash reinvestment ratio also declined.
4.
Operating leverage: Operating leverage increased primarily due to lower operating profits in 2016 compared to the same period the previous year.

Financial Information

1096.2.2 Financial Analysis – Based on IFRS (The Parent Company Only)
Year
Item (Note 5)
Financial structure(%)

Solvency (%)

Operatingperformance

Cash flow

Leverage

2013

2014 (Note 3)

2015

2017
(As of March 31)(Note 4)2016

Debt Ratio

75.47

75.93

77.67

72.14

73.63

-

Ratio of long-term capital to
fixed assets

104.84107.98121.07121.93114.00-Current ratio

51.75

52.27

58.36

58.56

62.03

Quick ratio

37.67

40.36

45.32

44.54

45.82

-

Interest earned ratio (times)

78.36

49.95

100.38495.43246.03-

Accounts receivable turnover(times)

15.14

17.26

16.23

15.56

15.92

-

Average collection period

24.10

21.14

22.49

23.46

22.92

-

Inventory turnover (times)

-

-

-

-

-

-

Accounts payable turnover(times)

-

-

-

-

-

-

-

-

-

-

-

Fixed assets turnover (times)

0.84

0.90

1.03

1.07

1.03

-

Total assets turnover (times)

0.61

0.63

0.65

0.62

0.61

-

Average days in sales

Profitability

Financial Summary for the Last Five Years (Note 1)
2012

Return on total assets (%)

0.75

0.20

0.41

3.36

0.75

-

Return on stockholders' equity(%)(0.86)(2.49)(1.51)

10.78

1.00

-

Pre-tax income to paid-in capital(%)(0.88)(1.82)

0.09

12.50

2.81

-

Profit ratio (%)(0.32)(0.97)(0.54)

4.32

0.45

-

Earnings per share (NT$)(0.08)(0.25)(0.14)

1.06

0.10

-

Cash flow ratio (%)

32.95

33.43

25.44

47.38

26.71

-

Cash flow adequacy ratio (%)

79.69

135.16

209.68232.93252.92-

Cash reinvestment ratio (%)

6.25

7.31

5.10

10.74

4.94

-

Operating leverage(20.73)(59.39)

10.21

3.15

4.85

-

Financial leverage

0.24

0.12

(19.66)

1.28

1.38

-

Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%)
1.
Interest earned ratio: Because 2016 pre-tax net income was lower than the previous year, the interest earned ratio also decreased.
2.
Profitability: Because 2016 net income was lower than the previous year, all profitability items also decreased.
3.
Cash flow ratio and cash reinvestment ratio: Because 2016 net cash inflows from business operations were lower than the same period last year, the cash
flow ratio and cash reinvestment ratio also declined.
4.
Operating leverage: Operating leverage increased primarily due to lower operating profits in 2016 compared to the same period the previous year.
Note 1: 2012 – 2016 annual financial information was verified by Deloitte & Touche.
Note 2: Beginning in 2015, the Company began implementing the revised Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013
version of IFRS, International Accounting Standards, IFRIC and SIC Interpretations recognized by the Financial Supervisory Commission. Therefore, theaforementioned standards and interpretations have been applied retroactively to affected sections of the previous year’s (2014) financial statement.
Note 3: Beginning in 2015, the Company began using the financial reporting standards in the revised Regulations Governing the Preparation of Financial Reports by
Securities Issuers and these standards have been applied retroactively to affected sections of the previous year’s (2014) financial statement.
Note 4: As of printing of this annual report, Q1 2017 consolidated financial information has not yet been reviewed by Deloitte & Touche. The Company has not yet
prepared an individual financial statement for Q1 2017.
Note 5: The calculations of the above financial ratios utilize the formulas listed below:
1. Financial structure(1) Debt ratio = total liabilities / total assets(2) Ratio of long-term capital to property, plant and equipment = (total shareholders' equity + non-current liabilities) / net property, plant and equipment
2. Solvency(1) Current ratio = current assets / current liabilities(2) Quick ratio = (current assets – inventory – prepaid expenses) / current liabilities(3) Interest earned ratio (times) = earnings before interest and taxes / interest expenses
3. Operating performance(1) Accounts receivable turnover (including accounts receivable and notes receivable arising from business activities) = net sales / average accounts
receivable (including accounts receivable and notes receivable arising from business activities)(2) Average collection period = 365 / average accounts receivable turnover(3) Inventory turnover = cost of goods sold / average inventory(4) Accounts payable turnover (including accounts payable and notes payable arising from business activities) = cost of goods sold / average accounts
payable (including accounts payable and notes payable arising from business activities)(5) Average inventory turnover days = 365 / inventory turnover ratio(6) Property, Plant and Equipment Turnover = net sales / net property, plant and equipment(7) Total asset turnover = net sales / average total assets
4. Profitability(1) Return on total assets = [net income + interest expense x (1 - effective tax rate)] / average total assets(2) Return on stockholders’ equity = net income / average stockholders’ equity

110 Financial Information

(3) Net margin = net income / net sales(4) Earnings per share = (net income attributable to owners of the parent – preferred stock dividends) / weighted average number of shares outstanding
5. Cash flow
(1) Cash flow ratio = net cash flows from operating activities / current liabilities(2) Cash flow adequacy ratio = five year sum of net cash flows from operating activities / five year sum of (capital expenditures + increase in inventory + cash
dividends)(3) Cash Flow Cash Reinvestment Ratio = (net cash flows from operating activities – cash dividends) / (gross property, plant and equipment + long-term
investments + other non-current assets + working capital)
6. Leverage(1) Operating Leverage = (net sales – variable operating costs and expenses) / operating profit(2) Financial Leverage = operating profit / (operating profit – interest expenses)

6.2.3 Consolidated Financial Analysis – Based on ROC GAAP
Year
2012

Item (Note 3)
Financial structure(%)

Solvency (%)

Operatingperformance

Debt Ratio

72.33

Ratio of long-term capital to fixed
assets95.87

Current ratio

71.81

Quick ratio

52.10

Interest earned ratio (times)

115.43

Accounts receivable turnover(times)

15.92

Average collection period

23.00

Inventory turnover (times)-

Accounts payable turnover (times)-

Average days in sales
Fixed assets turnover (times)

Profitability

Total assets turnover (times)
Return on total assets (%)

1.01

Return on stockholders' equity (%)

0.46

Ratio to issued Operating income

1.86

capital (%)

0.86

Pre-tax income

Leverage

2016(Note 2)0.99 Not Applicable
0.72

Profit ratio (%)

Cash flow

Financial Summary for The Last Five Years (Note 1)
2013
2014
2015
(Note 2)
(Note 2)
(Note 2)

Not Applicable

Not Applicable

Not Applicable

0.17

Earnings per share (NT$)

0.01

Cash flow ratio (%)

27.73

Cash flow adequacy ratio (%)

66.06

Cash reinvestment ratio (%)

4.99

Operating leverage

13.14

Financial leverage(0.77)
Analysis of financial ratio differences for the last two years (Not required if the difference does not exceed 20%): Not Applicable.

Financial Information1116.2.4 Financial Analysis – Based on ROC GAAP (The Parent Company Only)
Year
2012

Item (Note 3)
Financial
structure (%)

Solvency (%)

Operatingperformance

Profitability

Debt Ratio

72.60

Ratio of long-term capital to fixed
assets

99.10

Current ratio

62.12

Quick ratio

42.43

Interest earned ratio (times)

106.26

Accounts receivable turnover (times)

15.20

Average collection period

24.02

Inventory turnover (times)-

Accounts payable turnover (times)-

Average days in sales

0.99

Total assets turnover (times)

0.70

Return on total assets (%)

0.94

Return on stockholders' equity (%)

0.12

Operating income

0.66

Pre-tax income

0.26

Ratio to issued
capital (%)

Leverage

2016(Note 2)-

Fixed assets turnover (times)

Profit ratio (%)

Cash flow

Financial Summary for the Last Five Years(Note 1)
2013
2014
2015
(Note 2)
(Note 2)
(Note 2)

Not Applicable

Not Applicable

Not Applicable

Not Applicable

0.04

Earnings per share (NT$)

0.01

Cash flow ratio (%)

24.75

Cash flow adequacy ratio (%)

57.56

Cash reinvestment ratio (%)

4.58

Operating leverage

34.68

Financial leverage(0.19)
Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%): Not Applicable.
Note 1: 2012 annual financial information was verified by Deloitte & Touche.
Note 2: 2013-2016 financial statements were prepared according to IFRS, so there are no financial statements in these years prepared according to ROC
GAAP.
Note 3: The calculations of the above financial ratios utilize the formulas listed below:
1. Financial structure(1) Debt Ratio = total liabilities / total assets(2) Ratio of long-term capital to fixed assets = (shareholders' equity + long-term liabilities) / net fixed assets
2. Solvency(1) Current ratio = current assets / current liabilities(2) Quick ratio = (current assets – inventory – prepaid expenses) / current liabilities(3) Interest earned ratio (times) = earnings before interest and taxes / interest expenses
3. Operating performance(1) Accounts receivable turnover (including accounts receivable and notes receivable arising from business activities) = net sales / average
accounts receivable (including accounts receivable and notes receivable arising from business activities)(2) Average collection period (days) = 365 / average accounts receivable turnover(3) Inventory turnover = cost of goods sold / average inventory(4) Accounts payable turnover (including accounts payable and notes payable arising from business activities)(5) Average days in sales = 365 / inventory turnover ratio(6) Fixed Asset Turnover = net sales / net fixed assets(7) Total Asset Turnover = net sales / average total assets
4. Profitability(1) Return on total assets = [net income + interest expense x (1 – effective tax rate)] / average total assets(2) Return on stockholders' equity = net income / average stockholders’ equity(3) Net Margin = net income / net sales(4) Earnings per Share = (net income after tax – preferred stock dividends) / weighted average number of shares outstanding
5. Cash flow
(1) Cash Flow Ratio = net cash flows from operating activities / current liabilities(2) Cash Flow Adequacy Ratio = five year sum of net cash flows from operating activities / five year (sum of capital expenditures+ increase ininventory + cash dividends)(3) Cash Flow Reinvestment Ratio = (net cash flows from operating activities – cash dividends) / (gross fixed assets + long-term investments +other assets + working capital)
6. Leverage(1) Operating Leverage = (net sales – variable operating costs and expenses) / operating profit(2) Financial Leverage = operating profit / (operating profit – interest expenses)

112 Financial Information

6.3 Consolidated Financial Statements for the Years Ended
December 31, 2016 and 2015, and Independent Auditors’ Report:
Please refer to Appendix 1.
6.4 Parent Company Only Financial Statements for the Years Ended
December 31, 2016 and 2015 and Independent Auditors’ Report:
Please refer to Appendix 2.
6.5 Audit Committee’s Report for the Most Recent Year
Audit Committee Report
The Board of Directors shall create and send (1) the 2016 consolidated financial statement
and individual financial statement that have been jointly audited by Deloitte CPAs Chen-Hsiu
Yang and Li-Chi Chen who released an official unqualified opinion by March 30, 2017 and (2)the 2016 business report and Deficit Compensation Statement, after having been found tohave no discrepancies by this audit committee and, thereupon, issue a report in accordancewith the items stipulated in Article 14-4 of the Securities and Exchange Act and Article 219 of
the Company Act.

China Airlines

Convener of the audit committee: CHUNG, LO-MIN

30 March 2017

Financial Information

113

Review of Financial
Conditions, Financial
Performance, and Risk
Management
7.1 Analysis of Financial Status
7.2 Analysis of Operation Results
7.3 Analysis of Cash Flow
7.4 Major Capital Expenditure Items
7.5 Investment Policy in Last Year, Main Causes for Profits
or Losses, Improvement Plans and the Investment
Plans for the Coming Year
7.6 Analysis of Risk Management

114 Review of Financial Conditions, Financial Performance, and Risk Management

VII. Review of Financial Conditions, Financial
Performance, and Risk Management
7.1 Analysis of Financial Status (Consolidated)
Analysis of changes in assets, liabilities and equity over the past two years:
Year
Item

2016

Unit: NT$ thousands
Difference

2015
Amount%Current Assets

47,338,201

45,642,615

1,695,586

Property, Plant and Equipment

140,136,737

129,628,866

10,507,871

8.11

1,137,115

1,009,678

127,437

12.62

Intangible Assets

3.71

Other Assets

35,888,706

45,645,150(9,756,444)(21.37)

Total Assets

224,500,759

221,926,309

2,574,450

1.16

Current Liabilities

68,605,724

68,220,452

385,272

0.56

Non-Current Liabilities

98,027,837

93,149,314

4,878,523

5.24

Total Liabilities

166,633,561

161,369,766

5,263,795

3.26

Capital stock

54,708,901

54,708,901--

Capital surplus

799,932

798,415

1,517

0.19

Retained Earnings

206,092

2,872,235(2,666,143)(92.82)269.37

Other Equity

112,264(66,283)

178,547

Treasury shares(43,372)(43,372)--

Non-Controlling Interests

2,083,381

2,286,647(203,266)(8.89)

57,867,198
60,556,543(2,689,345)(4.44)
Total Equity
Analysis of changes in financial ratios:
1. Other assets: Primarily due to the delivery of four A350 airliners, the prepayment for the purchase then transferred to property, plant andequipment. Additionally, with the delivery of all 777 aircraft, they have been transferred to leasing companies and the prepaid deposits
were returned.
2. Retained earnings: Primarily due to earnings distributed as cash dividends of NT$2.509 billion. In 2016, net income after tax was NT$572
million and the 2016 defined benefit plan remeasurement reduced retained earnings by NT$724 million.
3. Other equity: Primarily due to 2015 unrealized losses of cash flow hedging recorded as income (loss).
Future response actions: The above changes do not have a large effect on the Company.

Review of Financial Conditions, Financial Performance, and Risk Management1157.2 Analysis of Financial Performance (Consolidated)
Financial Performance Analysis Table

Unit: NT$ thousands
Difference

Year

2016

Item

2015

Amount%Revenue

141,079,107

145,056,217(3,977,110)(2.74)

Cost

123,073,201

124,787,843(1,714,642)(1.37)(11.16)Gross Profit

18,005,906

20,268,374(2,262,468)

Operating Expenses

13,441,219

12,139,177

1,302,042

10.73

Operating Income

4,564,687

8,129,197(3,564,510)(43.85)(2,684,836)(994,312)(1,690,524)(170.02)(73.65)Non-operating Income andExpenses
Pretax Profit

1,879,851

7,134,885(5,255,034)

Income Tax Expense

1,168,911

1,208,675(39,764)(3.29)Net Income (Loss)

710,940

5,926,210(5,215,270)(88.00)

Other Comprehensive Income(681,669)

1,269,760(1,951,429)(153.68)

Total Comprehensive Gain (Loss)

29,271
7,195,970(7,166,699)(99.59)For The Year
Analysis of changes in financial ratios:
1. Operating income, pretax profit, and net income for the period: 2016 cargo transport revenue was lower than in 2015 primarily due tothe impact of the overall economic situation and trade demand slowing, which resulted in lower operating income, pre-tax net income,and net income for the period.
2. Non-operating income and expenses: Primarily due to the NT$1.661 billion dividend from the disposal of ABACUS in 2015.
3. Other comprehensive income (net): Primarily due to 2015 unrealized losses of cash flow hedging recorded as income (loss).
4. Total comprehensive income for the period: 2016 cargo transport revenue was lower than in 2015 primarily due to the impact of theoverall economic situation and trade demand slowing and 2016 non-operating income and expenses showed a larger loss than in 2015,
primarily due to the NT$1.661 billion dividend from the disposal of ABACUS. 2015 unrealized losses of cash flow hedging recorded asincome (loss).

7.3 Analysis of Cash Flow (Consolidated)
7.3.1 Cash Flow Analysis for the Current Year
Unit: NT$ thousands
Year
Item

2016

Difference

2015
AmountCash and Cash Equivalents, Beginning of
Year
Net Cash Flow from Operating Activities
Net Cash Flow from Investing Activities
Net Cash Flow from Financing Activities
Exchange Rate Adjustment
Cash and Cash Equivalents, End of Year

23,491,085%

20,468,151

3,022,934

14.77

17,636,372

31,790,693(14,154,321)(44.52)(21,021,616)(10,441,578)(10,580,038)(101.33)

4,208,402(17,985,994)

22,194,396

123.40(47,046)(340,187)

293,141

86.17

24,267,197

23,491,085

776,1123.30

Analysis of change in cash flow in the current year:
1. The reduction in cash flow from operating activities was primarily due to reduced operational performance in 2016 compared to theprevious year and a one-time supplemental payment to top up the Bank of Taiwan pension account.
2. The difference in cash flow from investing activities is primarily due to the payment remittance to purchase Airbus A350 airliners.
3. The difference in cash flow from financing activities is primarily due to issuance of corporate bonds in 2016.

7.3.2 Remedy for Cash Deficit and Liquidity Analysis: None.
7.3.3 Cash Flow Analysis for the Coming YearThe cash balance at the beginning of the year was NT$19.73 billion and estimated net cash flow from operating activity for theyear is NT$26.87 billion. Cash flow from investment and financing activities are estimated to total NT$26.7 billion and NT$36.88
billion respectively. The cash shortfall was made up through mortgage loans, corporate bond issuance, and medium-term
Unsecured Loans of NT$37.7 billion and the cash and cash equivalents at the end of the year totaled NT$20.72 billion.

7.4 Major Capital Expenditure Items (The Parent Company Only)
Major capital expenditures primarily include purchases of new airplanes as part of operational expansion,
which does not have a significant impact on the Company’s financial operations.

116 Review of Financial Conditions, Financial Performance, and Risk Management

7.5 Investment Policy in the Last Year, Main Causes for Profits or
Losses, Improvement Plans and Investment Plans for the ComingYear
In order to support our primary airline operations and strengthen competitiveness of the CAL Group,
investments are primarily in airline industry-related companies. Currently, these include air transport,
ground services, logistics and warehousing, air cargo terminals, airline catering, laundry, information
networks, aeronautics, tourism services, and investing and leasing industries to create a comprehensive
air service network and wide-ranging services. Calculated under the equity method, reinvestment
revenues for 2016 totaled NT$101 million.
Over the next year, the invested enterprises will continue China Airlines Hotel expansion and Taiwan
Aircraft Maintenance and Engineering Co., Ltd. hangar construction. In addition, we will assess potential
investments in passenger transport, cargo transport, airplane maintenance, and aviation training.

7.6 Analysis of Risk Management
7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation
on Corporate Finance, and Future Response Measures
A. Impact of changes in interest rates, foreign exchange rates, and inflation on Company income:
Although changes in interest and foreign exchange rates do have a level of impact on Company
income, through effective controls the impact is limited.
B. Response measures to changes in interest rates, foreign exchange rates, and inflation:
To prevent changes in interest rates, foreign exchange rates, and inflation from creating risks to theCompany’s overall finances, we hold regular meetings of the Board of Directors Risk Committee, andkeep on top of economic and financial developments both in Taiwan and overseas to develop a
hedging strategy, evaluate performance of derivatives, and set the appropriate hedge ratio. These
controls help prevent changes by utilizing financial hedging instruments in the financial environmentand oil prices from creating systemic financial risks and enable CAL to achieve proper risk
management.

Review of Financial Conditions, Financial Performance, and Risk Management1177.6.2 Policies, Main Causes of Gain or Loss and Future Response Measures with
Respect to High-risk, High-leveraged Investments, Lending or Endorsement
Guarantees, and Derivatives Transactions
A. The Company does not engage in high-risk, highly-leveraged investments.
B. The Company has developed Operational Procedures for Lending Funds to Others and Operational
Procedures for Endorsements/Guarantees and risks of such operations are controlled through strict
assessment. Therefore, loans and endorsements/guarantees do not lead to profits or losses for theCompany.
C. Company derivative products include forward foreign exchange and foreign exchange options
contracts and oil options contracts, which are primarily to hedge against the risk of fluctuations in oil
prices, interest rates, and foreign exchange rates. Transactions are performed in accordance with theCompany’s Operational Procedures for Derivatives Trading and are regularly evaluated to ensure
effective risk controls.

7.6.3 Future Research & Development Projects and Corresponding Budget:
Please refer to page 81.
7.6.4 Effects of and Response to Changes in Policies and Regulations Relating toCorporate Finance and Sales: None.
7.6.5 Effects of and Response to Changes in Technology and the Industry
Relating to Corporate Finance and Sales: None.
7.6.6 The Impact of Changes in Corporate Image on Corporate Risk
Management, and the Company’s Response Measures:
China Airlines has tirelessly worked to build a positive image. We continue to enhance our transport
services and airplane maintenance to ensure flying safety. In the spirit of SOP+, we properly implement
every service detail. The Company actively promotes social welfare to fulfil our corporate social
responsibility. Environmental management has become an operational focus, to do our part to protect
the Earth. In the case of a false negative news story, information, or situation that damages our brandimage, the Company will react instantly and hold a press conference or issue a press release correction.
We will communicate with the media immediately and issue clarification on our website or throughsocial media platforms to reduce negative impact.

7.6.7 Expected Benefits from, Risks Relating to and Response to Merger andAcquisition Plans: None.
7.6.8 Expected Benefits from, Risks Relating to and Response to Factory
Expansion Plans: None.
7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing
Sources and Excessive Customer Concentration: None.
7.6.10 Effects of, Risks Relating to and Response to Large Share Transfers or
Changes in Shareholdings by Directors or Shareholders with
Shareholdings of over 10%: None.
7.6.11 Effects of, Risks Relating to and Response to the Changes in Management
Rights: None.
118 Review of Financial Conditions, Financial Performance, and Risk Management7.6.12 Litigation or Non-litigation Matters
A. Any major litigation, non-litigation or administrative disputes involving theCompany that are already finalized or still pending.
No.
1

2

Disputed
AmountLitigants
Current Status(NT$)
Litigation for 1. In 2002, the Civil
More than 1.2 Plaintiff: China
CAL appointed a lawyer on August
refunding
Aeronautics Administration billion
Airlines
31, 2016 to file a civil complaint in
overpayment (CAA) unilaterally
Defendant: Civil the Taiwan Taipei District Courton aircraft terminated an aircraft
Aeronautics
and the lawyer is currently
rentalrental contract with the
Administration
proceeding with the argument
Company for six aircraft,
procedures.
resulting in earlytermination of the contract,which changed the natureof the lease and the rent
calculation basis andresulted in rent
overpayment by theCompany.
2. In 2010, the CAA resolvedthat the Civil Aeronautics
Administration should pay
the Company more than
NT$1.5 billion and in 2015
the Supreme Court revoked
the arbitration judgement,
which resulted in the
Company filing a civil
lawsuit against the CAA torecoup the aforementioned
rent overpayment.
US Passenger In December 2007, because
Currently no
Plaintiff: Global CAL has joined the common
Faremajor global passenger
specific claim passenger group defense group set up by the
Antitrustairlines charged passenger
figures. The
representative
defendant airlines’ lawyer.
Class Action transport fees and fuelclaim is for
Defendant: China The pre-trial evidence disclosure
Lawsuitsurcharges and as a member punitive
Airlines and more deadline was on January 31, 2014of Association of Asia Pacific damages ofthan 10 otherand the plaintiffs were not able to
Airlines, the Company was
three times the airlines
provide evidence that proved thelisted as a joint defendant. The fuel surcharge
claim at the basis of the lawsuit.
case is being heard by theovercharged
District Court of California, San during theFrancisco.
disputed period
Case Name

Summary

Review of Financial Conditions, Financial Performance, and Risk Management119

B. Major litigation, non-litigation or administrative disputes involving a subsidiary(TACT Logistics) that are already finalized or still pending:
TACT Logistics’ 2001 income tax filing had already been approved by the tax authorities, but after
review, the same authority found over-allocation of that year’s imputation tax credit by
NT$129,350,000 and required this amount be paid and issued a fine for the same amount. TACT
Logistics did not accept this finding and, in accordance with the law, filed a review, appeal, and civil
action. On December 8, 2011, the Supreme Administrative Court ruled to confirm the additional
tax payment of NT$129,350,000. In accordance with this ruling, TACT Logistics paid this amount inadditional taxes. In regards to recalculation of the fine, because the competent authority
continued the previous approval, TACT Logistics applied for administrative relief in a separate case.
The Supreme Administrative Court ruled on June 15, 2016 and TACT refused to accept the result so
appealed to the Court on July 4, 2016 and has already estimated a fine of NT$59,501,000. As of
March 31, 2017 no ruling has been made, but based on the current status of the case, no serious
impact will be experienced by the Company nor will it affect shareholder rights and interests or thestock price.

7.6.13 Other Major Risks:
CAL fully understands the importance of risk management and the potential for interaction between
different types of risk. We established the Risk Committee directly under the supervision of the Boardof Directors to strengthen risk management and require subordinate units to control for each majorrisk category.
The CAL risk management organization and units responsible for implementation:
Type of Risk

Responsible

Risk Management Measures

Department

The aviation industry operating environment is ever changing. Major political andCorporate
Operating Risk

Development
Officeeconomic events as well as unexpected internal or external incidents can have a huge
impact on Company operations. The Corporate Development Office analyses potential
political, economic, aviation industry, and internal Company situations that could affect
the Company and proposes concrete response plans to reduce their impact on China
Airlines’ strategic direction and annual business plan.
Safety is the cornerstone of airline operations and only a good record of flight safety can

Safety Risk

Corporate
Safety Officeearn passenger trust. The Corporate Safety Office utilizes the Safety Management System(SMS) to identify and evaluate important internal and external operating risks including
flights, aircraft, in-flight service, and ground handling, then proposes improvement
measures.
The domestic and global economy affects Company operating results. Primary operating
costs for airlines include interest rate, exchange rate, and fuel and influence by outside

Financial Risk

Finance Div.

factors can result in significant volatility. Therefore, the Finance Division utilizes financial
hedging instruments to fix the above factors within a certain range, regularly monitors
financial risk, and establishes relevant strategies and measures to effectively manage
financial risk.

7.7 Other Important Matters: None.

120 Review of Financial Conditions, Financial Performance, and Risk Management

Special Disclosure
8.1 Summary of Affiliated Companies
8.2 Private Placement Securities in the Most Recent
Years
8.3 The Shares in the Company Held or Disposed of by
Subsidiaries in the Most Recent Years
8.4 Special Notes
8.5 Situations with Major Impacts on Shareholder
Equity or Share Prices

Special Disclosure

121

)
a
o
m
a
S
(
e
c
i
v
r
e
S
t
r
o
p
r
i
A
n
a
w
i
a
T
1.08%
2.5%

100%

2.5%

s
e
c
i
v
r
e
S
t
r
o
p
r
i
A
l
a
n
o
i
t
a
n
r
e
t
n
I
n
a
u
y
o
a
T

s
e
c
i
v
r
e
S
y
r
d
n
u
a
L
c
i
f
i
c
a
P
a
n
i
h
C

s
y
a
d
i
l
o
H
y
t
s
a
n
y
D

l
a
n
i
m
r
e
T
o
g
r
a
C
r
i
A
n
a
w
i
a
T

i
i
a
w
a
H
f
o
l
e
t
o
H
y
t
s
a
n
y
D
10%

e
c
i
v
r
e
S
t
r
o
p
r
i
A
n
a
w
i
a
T

s
e
c
i
v
r
e
S
y
r
d
n
u
a
L
c
i
f
i
c
a
P
a
n
i
h
C

n
a
w
i
a
T
r
e
g
i
T

)
n
a
w
i
a
T
(
k
r
o
w
t
e
N
l
e
v
a
r
T
e
r
b
a
S

s
e
n
i
l
r
i
A
n
i
r
a
d
n
a
M

l
e
t
o
H
L
A
C

k
r
a
P
L
A
C

p
i
r
t
s
e
Y

s
s
e
c
n
i
r
P
r
e
t
h
g
i
e
r
F

e
c
n
i
r
P
r
e
t
h
g
i
e
r
F

s
e
i
t
r
e
p
o
r
P
y
t
s
a
n
y
D
100%

y
n
a
p
m
o
C
a
i
s
H
a
w
H

g
n
i
r
e
e
n
i
g
n
E
d
n
a
e
c
n
a
n
e
t
n
i
a
M
t
f
a
r
c
r
i
A
n
a
w
i
a
T

l
a
n
o
i
t
a
n
r
e
t
n
I
y
t
s
a
n
y
D
L
A
C

t
n
e
m
t
s
e
v
n
I
a
i
s
A
L
A
C

100% 100% 100% 100% 100% 100% 100% 100% 94%

s
s
e
r
p
x
E
y
k
S
l
a
b
o
l
G

122 Special Disclosure
titi※China Pacific Laundry Services and China Pacific Catering Services Ltd. are both jointly controlled
100%

100%

94% 80% 55% 54% 51% 51% 49% 47% 25%

China Airlines
Dec 31, 2016

A. Affiliated Companies Chart

8.1.1 Basic information of Affiliated Companies

8.1 Summary of Affiliated Companies

VIII. Special Disclosure

B. Basic information of Affiliated Company
Company
1. CAL-Dynasty International, Inc.
1A Dynasty Properties Co., Ltd.
1B Dynasty Hotel of Hawaii, Inc.
2. CAL-Asia Investment Inc.
3. Hwa Hsia Company Ltd.
4. Freighter Prince Ltd.
5. Freighter Princess Ltd.
6. Yestrip Co., Ltd.

Date
FoundedAddress

200 Continental Blvd. Suite #101 El Segundo,
07/01/1991
CA90245, U.S.A.
200 Continental Blvd. Suite #101 El Segundo,
08/15/1973
CA90245, U.S.A.
12/10/1973 1830 Ala Moana Blvd. Honolulu, Hawaii 96815, U.S.A.
263 Main Street, P.O. Box 2196, Road Town, Tortola,
06/29/1995
British Virgin Island
No. 9, Hangqin South Road, Dayuan District
05/11/1989
Taoyuan City
Ugland House, P.O.Box 309, George Town, Grand
09/06/2001
Cayman, Cayman Islands, British WestUgland House, P.O.Box 309, George Town, Grand
01/11/2002
Cayman, Cayman Islands, British West
10F, No.9,Section 3,Nanjing E Rd, Zhongshan District,
01/18/2001
Taipei City

Dec 31, 2016/Unit: NT$ thousands
CapitalPrincipal Activities(Note)
843,387 Holding & investing
Real estate investing, property
leasing
129,032 Hotel service
16,129231,366 Holding & investing
77,270Aviation ground handlingservice, cleaning service

33 Aircraft leasing
33 Aircraft leasing
16,000 Travel service

09/06/2006 No. 1, Hangzhan S Rd, Dayuan District ,Taoyuan City

8. CAL Hotel Co., Ltd.

01/03/2007 No. 1-1, Hangzhan S Rd, Dayuan District ,Taoyuan City

465,000 Hotel business9. Taiwan Aircraft Maintenance andNo. 15, Hangqin South Road, Dayuan District, Taoyuan
01/16/2015
City160,000 aircraft maintenance and repair

Engineering Co., Ltd.
10. Mandarin Airlines, Ltd.
11. Sabre Travel Network (Taiwan)Ltd.
12. Tiger Taiwan Co., Ltd.

04/29/1991

No. 3, Alley 123, Lane 405, Dunhua North Road,
Songshan District, Taipei City

10/09/1990

No. 57, Fuxing North Road, Songshan District, Taipei
City

138,618 IT service & GDS

04/21/2014 No. 1, Hangzhan S Rd, Dayuan District ,Taoyuan City

2,000,000 Civil air transport

No. 7, Lane 54, Sande Street, Luzhu District, Taoyuan
13. China Pacific Laundry Services Ltd. 09/08/1997
City
No. 10-1, Hangqin North Road, Dayuan District,
12/22/1999
14. Taiwan Air Cargo Terminal Ltd.
Taoyuan City
5F, You Ei Ginza Second Building,
10/28/1980 9-7, 1Chome, Ginza, Chuo-Ku,
15. Dynasty Holidays, Inc.
Tokyo, Japan
16. China Pacific Catering Services
Ltd.
17. Taoyuan International Airport
Services Co., Ltd.

1,500,000

Real estate leasing, parking lot
management

7. CAL Park Co., Ltd.

2,001,825 Civil air transport

250,000 laundry service
2,500,000 Air cargo and storage service
11,080 Travel service

08/19/1994

No. 22, Lane 156, Section 2, Haishan Rd, Luzhu
District, Taoyuan City

861,000 Catering service

11/08/1978

No. 15, Hangqin North Road, Dayuan District, Taoyuan
City

700,000 Aviation ground handling service

18. Taiwan Airport Service Co., Ltd.

07/19/1966 No. 340, Dunhua N Rd, Songshan District, Taipei City435,600 Aviation ground handling service

18A Taiwan Airport Service (Samoa)

TrustNet Chambers, Lotemau Centre, P. O. Box 1225,
03/22/2004
Apia, Samoa

222,728 Holding & investingCo., Ltd.

No. 186, Section 4, Nanjing East Road, Songshan
10,000 Air freight forwarder
District
Note: Capital was calculated using the exchange rate at the end of 2016: 1TWD=0.0310USD, 3.6101JPY, 0.2154CNY.
19. Global Sky Express Ltd.

09/29/1994

Special Disclosure123

C. Overall Description of the Industries in which Affiliated Companies (Including
Subsidiaries and Other Invested Companies) Operate
China Airlines’ affiliated companies can be divided into seven categories, each of which is highly
dependent on the Company’s operations, and include airlines, ground services, air transport support,
aerospace technology, logistics and warehousing, tourism and leisure, and investment and leasing.
The categories are described below:
Classification
Airlines

Description
Mandarin Airlines provides domestic and international passenger and cargo air transport services to further capitalize on ourcompetitive advantage in the cross-strait market. Tigerair Taiwan is tasked with operating in the Asian low-cost carrier market todevelop new business opportunities.

GroundGround services at Taiwan Taoyuan and Taitung Airports are provided by Taoyuan International Airport Services Co., Ltd., while

Handling

Kaohsiung Airport and all other domestic airports are serviced by Taiwan Airport Service Co., Ltd. Overseas, the Company has invested

Servicesin Jardine Aviation Services in Hong Kong, which serves as China Airlines’ ground handling agent in Hong Kong. Cleaning and repair
ground services are provided by Hwa Hsia Company Ltd..

Air Transport

The Company has invested in domestic airline reservation system operations and maintenance provider Sabre Travel Network (Taiwan)

SupportLtd. Overseas, the Company invested in Singapore’s Everest Company.
In-flight catering services are provided for northern Taiwan by China Pacific Catering Services Ltd. and by Kaohsiung Airport Catering
Services in the South.
China Pacific Laundry Services Ltd. provides laundry services for textiles and clothing used aboard aircraft and general laundry services
for the hospitality industry.

Logistics andDomestically, TACT Logistics is responsible for providing warehousing services at Taiwan Taoyuan Airport and Kaohsiung International

Warehousing

Airport. In Mainland China, the Company made indirect investments in Xiamen International Airport Co., Ltd and Xiamen International
Airport Air Cargo Service Co., Ltd.
Logistics services are provided domestically by invested companies Global Sky Express Ltd., Chung Hwa Express Corp., and Science Park
Logistics. Overseas, the Company has indirectly invested in Hong Kong’s Eastern United International Logistics.

Aerospace

Aerospace technology industry investments in Taiwan included Taiwan Aircraft Maintenance and Engineering Co., Ltd., which isTechnology

responsible for maintenance of Boeing 777 and 737 aircraft and Airbus A320 and A350 aircraft, while Asian Compressor Technology
Services Co. repairs PW4000 engines and other high-value added parts. In Mainland China, invested company Taikoo (Xiamen) Landing
Gear Services Co., Ltd. produces and maintains landing gear and Taikoo Spirit AeroSystems (Jinjiang) Composite Co., Ltd. provides
composite material maintenance services. The Company also invested in China Aircraft Services Limited to improve China Airlines’
aircraft maintenance capabilities in Hong Kong.

Tourism andDomestic investments include Yestrip and CAL Hotel Co., Ltd. Overseas investments include an indirect investment in Dynasty Hotel of

LeisureHawaii in the USA and investment in Japan’s Dynasty Holidays.

Investment and Established CAL-Dynasty International that makes indirect investments in Chinese and American companies engaged in real estate
Leasing

investments and leasing management. CAL-Asia Investment Inc. and Taiwan Airport Service (Samoa) Co., Ltd. are engaged in general

Business Group investment holdings.
Freighter Prince and Freighter Princess are special purpose entities set up to meet financial structuring needs.

124 Special Disclosure

D. Directors, Supervisors and Presidents of Affiliated Companies
Dec 31, 2016
Units: Shares; %Company

Title

Shareholding
Shares2,614,500

Name

1. CAL-Dynasty International, Inc. Chairman
Director
Director (President)
1A Dynasty Properties Co.,
Chairman (President)
Ltd.
Director
1B Dynasty Hotel of Hawaii,
ChairmanInc.
Director
Director (President)
2. CAL-Asia Investment Inc.
Chairman
Director
Director (President)
3. Hwa Hsia Company Ltd.
Chairman
Director
Supervisor
Director (President)

Chen, I-Chieh (Note 2)
Wang, Chih-Hsien (Note 1)
Ho, Nuan-Hsuan (Note 1)
Hsieh, Su-Chien (Note 1)
Lo, Ya-Mei (Note 1)
Chao, Lin (Note 1)
Liu, Der-Chuan; Wang, Houng; Ku, Yueh-Han (Note 1)
Chung, Wan-Chun (Note 1)
Chang, Hsu-Yu (Note 1)

4. Freighter Prince

Director

Chang, Chiung-Tsang; Han, Liang-Chong (Note 1)

5. Freighter Princess

Director

Chang, Chiung-Tsang; Han, Liang-Chong (Note 1)

6. Yestrip Co., Ltd.

Chairman
Director
Supervisor
President
Chairman
Director
Supervisor
Director (President)
Chairman

Supervisor

Hsieh, Hsin-Ni (Note 1)
Tong, Huai-Ming; Wang, Chen-Min (Note 1)
Chung, Wan-Chun (Note 1)
Liou, Yea-Ling (Nominated By China Airlines )Ho, Nuan-Hsuan (Note 1)
Hsieh, Su-Chien; Ku, Yueh-Han (Note 1)
Chung, Chuar-Duan (Note 1)
Hsieh, Su-Chien (Note 1)
Ho, Nuan-Hsuan (Note 1)
Hsieh, Su-Chien; Kao, Shing-Hwang; Chang, Chih-Chieh;
Lo, Ya-Mei (Note 1)
Chung, Chuar-Duan; Chen, I-Chieh (Note 1)

ChairmanHuang, Chwen-Jiun (Note 1)

7. CAL Park Co., Ltd.

8. CAL Hotel Co., Ltd.

Director

9. Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

11. Sabre Travel Network(Taiwan) Ltd.

Ho, Hann-Yeh (Note 1)

Director

Lu, Shih-Ming; Tong, Huai-Ming; Wang, Chen-Min(Note 1)

Director

Belle Hans (Represent Sabre Travel Network Asia
Pacific)

12. Tiger Taiwan Co., Ltd

400,000

Supervisor

Chung, Chuar-Duan

Chairman

Chang, Horng-Jong (Note 1)

Director

Chang, Young; Chang, Ming-Way; Tsao, Jyh-Fen (Note1)

Director

Ho Yuen Sang (Represent Roar Aviation III)

Supervisor

Han, Liang-Chong (Represent Mandarin Airlines)

Supervisor

Lee Lik Hsin

President

Chang, Horng-Jong

100(USD100, share)

Lee, Hsien-Kuang (Note 2)

Chairman (President)

Director

100

5,000

Hsieh, Su-Chien; Chen, I-Chieh (Note 2)

Supervisor
Director (President)

Supervisor
President
Chairman%(USD10, share)

Lee, Hsien-Kuang (Note 2)

Chang, Young; Wang, Houng; Sun, Jia-Min;
Lee, Jung-Hui (Note 1)
Chung, Chuar-Duan; Chen, I-Chieh (Note 1)
Lee, Jung-Hui (Nominated By China Airlines )Hsieh, Su-Chien (Note 1)
Chang, Young; Kao, Shing-Hwang; Han, Liang-Chong;Huang, Chwen-Jiun; Chang, Chih-Chieh; Lo, Ya-Mei(Note 1)
Chung, Wan-Chun
Han, Liang-Chong (Note 1)

Director

10. Mandarin Airlines, Ltd.

Ho, Nuan-Hsuan (Note 1)
Hsieh, Su-Chien (Note 1)
Lee, Hsien-Kuang (Note 1)

100(USD10, share)
7,172,346(USD1, share)

100

77,270100

1,000(USD1, share)
1,000(USD1, share)
1,600,000

100

150,000,000

100

46,500,000

100

16,000,000

100

188,154,025

93.99

13,021,042

93.93

609,000

4.39

160,000,000

80

20,000,000
20,000,000

10
10

100
100

Special Disclosure

125Company

Title

13.China Pacific Laundry Services Chairman
Ltd.
Director

15

3,750,000

Lee Peter (Represent Heathlee Int’l)

3,750,000

15Supervisor

Yin, Mei Fong (Represent Merton Lake)

3,750,000

15Supervisor

Chung, Wan-Chun
Hsieh, Su-Chien (Note 1)
Charles C. Y. Chen (Represent Eyon Industrial Co.)
Chang, Chih-Chieh; Liu, Der-Chuan; Chen, I-Chieh (Note1)
UPSMichael Shea (Represent Hsin Feng Corp.)
Chang, Young (Represent Taiwan Airport Service Co.)
Chen, Jyi-Fu (Represent Express Container Terminal
Corp.)
Chang, Cheng-Hao (Nominated By China Airlines)
Shih, Ping-Huang (Note 1)
Wang, Chen-Min; Tsao, Jyh-Fen (Note 1)
Koizumi Kazuhisa; Yamada Keisuke (Represent Koizumi
Group)
Chen, I-Chieh (Note 1)
Ishihara Tetsu (Represent Koizumi Group)

135,000,000
6,000,000

54
2.4

20,000,000
7,000,000
6,250,000

8
2.8
2.5

15,000,000

6

408

51

392

49

Lai, Se-Jhen (Note 1)

43,911,000

51

21,045,500

24.5

21,045,500

24.5

Director
Director
Supervisor
Supervisor
President
Chairman (President)
Director
Director
Supervisor
Supervisor
16. China Pacific Catering Services
ChairmanLtd.
Director
Director
Supervisor
Supervisor
President
17. Taoyuan International Airport
ChairmanServices Co., Ltd.
Director (President)

Shih, Hui-Huang (Nominated By China Airlines)

Wei, Yih-Jiun; Liu, Shyh-Hwa (Note 1)
Yin, Mei Fong; Loo, Kar Pui (Represent Aldeburgh
Limited)Chung, Chuar-Duan
Yeung, Wai Tim (Represent Deli Holdings Limited)
Cheng, Tien-Yuan (Nominated By China Airlines)
Lin, Hsin-Te (Represent Motc)

31,500,000

45

34,300,000

49

Director
Supervisor

Huang, Chin-Feng (Note 1)
Hsieh, Su-Chien; Chang, Young; Lo, Ya-Mei; Chen, I-Ko
(Note 1)
Chen, Yen-Po; Chang, Chang-Chi;
Li, Hung-Sheng; Liu, Chin-Tang (Represent Motc)
Pi, Chung-Wei (Represent Ups)
Li, Mi; Li, Shen-Yi

4,200,000

6

Chairman (President)

Chang, Young (Note 1)

20,626,644

47.35

Director
Director

9,405,300

21.59

7,405,200

17Supervisor
Supervisor

Chen, I-Chieh (Note 1)
Chung, Ting-Chun
Chang, Chieh-Tang (Represent Goldsun Building
Materials)
Chung, Chuar-Duan
Chen, Yao-Ming

Authorized Signatory

Chang, Young (Represent Taiwan Airport Service Co.)

Director
Director

Director

Li, Chung-Hui
Liu, Der-Chuan; Tsao, See-Dee; Lin, Ming-Hsiu (Note 1)
Pao, Hsueh-Chao
Huang, Nan-Sheng
Wei, Ching-Li
Hsiao, Yu-Hsin
Chung, Mei-Chih (Represent Leader Mutual Freight
Director
System)Supervisor
Huang, Tze-Chi
Supervisor
Yeh, Chien-Tien
Supervisor
Chu, Ssu-Ching (Represent Morrison Express)
President
Hsu, Chih-Chiang (Nominated By China Airlines)
Note 1: Representative of juridical person shareholder China Airlines.
Note 2: Representative of juridical person shareholder Hua Mei Investment Company.

126 Special Disclosure

55

Wei, Yih-Jiun; Liu, Tsao-Yang (Note 1)
Shiu, Sai Cheung (Represent Hendriz Holding)

Director

18A Taiwan Airport Service(Samoa) Co., Ltd.
19. Global Sky Express Ltd.

%13,750,000

Director

14. Taiwan Air Cargo Terminal Ltd Chairman
Deputy Chairman

18. Taiwan Airport Service
Co., Ltd.

Liu, Shyh-Hwa (Note 1)

Shareholding
SharesDirector

President

15. Dynasty Holidays, Inc.

Name

Chairman
Director
Director
Director
Director
Director

5,876,976(USD1, share)
50,000250,000
40,00050,00020,00020,000

100
5
25
4
5
2
2

20,0002

10,00050,0001
5

E. Affiliated Company Business Overview
Dec 31, 2016
Unit: NT$ thousands; EPS=NT$
Company

Capital

Total

Total

Total

OperatingOperatingAssetsLiabilities

EquityRevenue

Income(Loss)

Profit(Loss)

EPS (Dollars)

1. CAL-Dynasty International, Inc.

843,387

792,519

1,335

791,184

11,5002,903

29,135

11.14

1A Dynasty Properties Co., Ltd.

16,129760,627

274,008

486,619

95,65425,305

10,2142042.80

1B Dynasty Hotel of Hawaii, Inc.

129,032

545,364

133,678

411,686

250,035

25,176

13,24633.12

2. CAL-Asia Investment Inc.

231,366

450,3050450,3050(794)(47,074)(6.56)

3. Hwa Hsia Company Ltd.

77,270234,674

155,568

79,106368,275

18,703

19,412251.22

4. Freighter Prince Ltd.

33

33

0

33

0

0

0

0

5. Freighter Princess Ltd.

33

33

0

33

0

0

0

0

6. Yestrip Co., Ltd.

16,00065,27039,80625,46440,673

(655)

304

0.19

7. CAL Park Co., Ltd.

1,500,000

4,352,985

2,823,611

1,529,374

299,465

60,253

18,551

0.12

8. CAL Hotel Co., Ltd.

465,000

466,779

79,404387,375

592,775

71,17573,5001.58

160,000

133,952

23,824

110,1280(31,640)(31,603)(1.98)

2,001,825

3,853,889

2,637,535

1,216,355

7,610,391(65,246)(227,787)(1.14)

138,618

604,789

137,951

466,839

384,184

220,871

186,47913.45

2,000,000

3,329,598

2,876,022

453,576

4,335,835(795,844)(778,025)(3.89)

250,000

369,556

65,833

303,724

216,71747,47339,3241.57

2,500,000

3,834,500

1,497,660

2,336,840

1,535,684

80,76625,5370.10

11,080155,476

94,76760,709738,362

8,970

5,139

6423.75

861,000

2,517,839

1,274,692

1,243,147

2,614,493

468,954407,9204.62

700,000

2,636,534

1,311,659

1,324,875

3,104,140

318,699

277,247

3.96

435,600

1,059,668

571,143

488,524

997,733

137,269

116,081

2.66

222,728

349,2110349,2110(1)

19,581

3.33

10,00040,191

10,52029,671

112,506

8,220

6,783

6.78

9. Taiwan Aircraft Maintenance andEngineering Co., Ltd.
10. Mandarin Airlines, Ltd.
11. Sabre Travel Network (Taiwan)Ltd.
12. Tiger Taiwan Co., Ltd.
13. China Pacific Laundry Services
Ltd.
14. Taiwan Air Cargo Terminal Ltd.
15. Dynasty Holidays, Inc.
16. China Pacific Catering Services
Ltd.
17. Taoyuan International Airport
Services Co., Ltd.
18. Taiwan Airport Service Co., Ltd.
18A Taiwan Airport Service(Samoa) Co., Ltd.
19. Global Sky Express Ltd.

Note 1: Capital, total assets, total liabilities, total equity were calculating using the exchange rate at the end of 2016.
Note 2: Operating revenue, operating profit, income for the period were calculated using the 2016 average exchange rates.
Note 3: Exchange rates at the end of 2016 were 1TWD=0.0310USD, 3.6101JPY, 0.2154CNY.
Note 4: Average exchange rates in 2016 were 1TWD=0.0310USD, 3.3836JPY, 0.2051CNY.

(2) Affiliated Company Consolidated Financial Statements: Information required
to be disclosed regarding affiliated company consolidated financial
statements is included in Appendix 1 Consolidated Financial Statements. The
Company will no longer prepare a separate consolidated financial statement
for affiliated companies(3) Relationship Report: China Airlines is not the subsidiary of any company, so a
relationship report is not required.

Special Disclosure

1278.2 Private Placement Securities in the Most Recent Years: None.
8.3 Shares in the Company Held or Disposed of by Subsidiaries in the
Most Recent Years:
APR 24, 2017
Units: NT$; shares; ％Number of

Number of Number ofCompany

Hwa Hsia
Company Ltd.
Mandarin
Airlines, Ltd.

Capital77,270,000
2,001,825,000

Source of % Stake in
Funds

EquityFund
EquityFund

Subsidiary

Date of

Shares and Shares andAcquisition

Value of

Value ofor Disposal

StocksStocksAcquired

Disposed ofShares and Value
Investment of Stock Held as
Gain/Lossof the Printing
Date of thisReport

100%

-

-

-

-

93.99%----

814,152 shares
8,793,000
2,074,628 shares
22,406,000

Amount ofCompany
Endorsement/Guaranteeof Subsidiary-

Note: No subsidiary has a Company stock pledge nor has the Company leant money to any subsidiary.

8.4 Special Notes: None.
8.5 Situations with Major Impacts on Shareholder Equity or Share
Prices:Change in the chairman of the board, general manager, or one-third or more of the directors of theCompany.
The Company’s juridical person director China Aviation Development Foundation assigned Mr. Ho,
Nuan-Hsuan to serve as its representative on the 20th Board on June 24, 2016. On the same day, theBoard approved the appointment of Mr. Ho, Nuan-Hsuan to serve as Chairman. On July 6, 2016, Mr. Hsieh,
Su-Chien was assigned to serve as representative on the 20th Board. On July 26, 2016, Mr. Cheng,
Chuan-Yi and Chen, Han-Ming were assigned to serve as representatives on the 20th Board. On August 9,
2016, Mr. Jong, Jia-shi was assigned to serve as representative on the 20th Board.

128 Special Disclosure129

Opinionwith the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports andRelevant information that should be disclosed in the consolidated financial

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 awhole, and in forming our opinion thereon, and we do not provide a separate opinion on thesematters.

Key Audit Matters

We conducted our audits in accordance with the Regulations Governing Auditing and Attestationof Financial Statements by Certified Public Accountants and auditing standards generally acceptedin 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 ourreport. 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 ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.

March 30, 2017

Basis for Opinion

In our opinion, 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, andits consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with the Regulations Governing the Preparation of Financial Reports by Securities
Issuers, and International Financial Reporting Standards (IFRS), International AccountingStandards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued
into effect by the Financial Supervisory Commission of the Republic of China.

By

Hence, we have not prepared a separate set of consolidated financial statements

CHINA AIRLINES, LTD.

Very truly yours,of affiliates.

subsidiary companies.

statements of affiliates has all been disclosed in the consolidated financial statements of parent and

Financial Statements.”

and subsidiary companies as provided in International Financial Reporting Standard 10 “Consolidated

all the same as the companies required to be included in the consolidated financial statements of parent

We have audited the accompanying consolidated financial statements of China Airlines, Ltd. andits 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 andcash flows for the years then ended, and the notes to the consolidated financial statements,
including a summary of significant accounting policies.

The Board of Directors and the Stockholders
China Airlines, Ltd.

The companies required to be included in the consolidated financial statements of affiliates in accordanceConsolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2016 are

INDEPENDENT AUDITORS’ REPORTDECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES(Appendix 1)

130Conducting an assessment on the transaction value based on industry-recognized publications,
historical selling prices of similar aircraft models, and the suggested price proposed by abroker and observing the subsequent transactions.

Discussing the retirement schedule with the accountable department, and reviewing whether
the correspondences and the latest quote were consistent with the market value claimed bymanagement.

1.

2.

The following were the main audit procedures for the key audit matter mentioned above:

Due to the lack of an open trading market for aircrafts, prices for the disposal of aircrafts varies
significantly, and the expected transaction value of aircrafts reflecting the carrying amount of
non-current assets held for sale was difficult to evaluate. Therefore, we identified non-current
assets held for sale as a key audit matter.

The board of directors of the Group resolved to dispose of several aircrafts. According to IFRS 5“Non-current Assets Held for Sale and Discontinued Operations”, impairment losses from thedisposal of aircrafts were recognized as the differences between the expected transaction value andthe carrying amount of the aircrafts, and then the aircrafts were reclassified as non-current assets
held for sale. As of December 31, 2016, the carrying amount of the non-current assets held forsale was NT$185,100 thousand. Refer to Notes 4, 5 and 13 in the accompanying consolidated
financial statements for the related detailed information.

Non-current Assets Held for Sale

Those charged with governance, including the audit committee and supervisors, are responsible foroverseeing the Group’s financial reporting process.

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

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

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

We have also audited the parent company only financial statements of China Airlines, Ltd. as ofand for the years ended December 31, 2016 and 2015 on which we have issued an unmodified
opinion.

Other Matter

Acquiring information about the differences between the Group’s financial position and its tax
base, and assessing the rationality of reconciliations and the realization schedule of temporary
differences to verify whether they are consistent with management’s financial forecasts.

2.

Conducting an assessment on the rationality of useful life on the basis of fleet performance in
the industry, historical experience of fleet operations, and documents that described the basis
used by management to determine the useful life of its new fleet.

2.

Acquiring the internal financial forecasts and the estimate of future taxable income, andreviewing the rationality of management’s assumptions.

Reviewing the certificates issued by the aircraft and engine manufacturers, the suggested
operating cost of the aircraft manufacturer, and the historical experience of the maintenancedepartment to assess the rationale used to determine the division amount by management.

1.

The following were the main audit procedures for the key audit matter mentioned above:

Since the Group introduced a brand new fleet of A350-900s this year, the allocation base should be
adjusted. Moreover, the carrying amount related to the aircrafts and the amount of depreciation
expense recognized would be subject to the allocation of acquisition costs and the applied usefullife, which were made in accordance with management’s judgment. Therefore, we identified theacquisition costs of the new fleet as a key audit matter.

In accordance with IAS 16 “Property, Plant and Equipment”, acquisition costs of aircrafts shouldbe allocated into several significant components, including airframe, airframe overhaul, engine,engine overhaul, landing gear, etc., and should be depreciated over different useful lives. As of
December 31, 2016, the carrying amount of flight equipment was NT$112,368,971 thousand.
Refer to Notes 4, 5, and 16 in the accompanying consolidated financial statements for the related
detailed information.

Acquisition Costs of a New Fleet

1.

The following are the main audit procedures for the key audit matter mentioned above:

The difference between the amount representative of the Group’s financial position and its tax baseare material to the consolidated financial statements as a whole in the aviation industry. Moreover,deferred tax assets arising from tax losses are dependent on future taxable income and the reversalof existing taxable temporary differences, which involve management’s judgment when assessing
the realization of tax losses. As there is a significant level of judgment involved in valuing thedeferred tax assets, we have deemed this to be a key audit matter.

Due to suffering tax losses in previous years, the Group was granted loss carryforwards which canbe used against taxable income in a certain period. The Group recognized the loss carryforwards
as deferred tax assets to the extent that the taxable profit in the future will be available against theloss carryforwards. As of December 31, 2016, the Group recognized tax losses as deferred tax
assets, in New Taiwan dollars (NT$), in the amount of NT$2,380,873 thousand. Refer to Notes 4,
5 and 29 in the accompanying consolidated financial statement for the related detailed information.

Deferred Income Tax Assets

The key audit matters in the audit of the consolidated financial statements of the Group are statedbelow:

131

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 ofaccounting 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 tocontinue 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
Ourfinancial statements or, if such disclosures are inadequate, to modify our opinion.
conclusions are based on the audit evidence obtained up to the date of our auditors’ report.
However, future events or conditions may cause the Group to cease to continue as a going
concern.

2.

3.

4.

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

6.

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

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.

1.

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

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 toissue an auditors’ report that includes our opinion. Reasonable assurance is a high level ofassurance, 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 orin the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Notice to Readers

For the convenience of readers, the independent auditors’ report and the accompanying
consolidated financial statements have been translated into English from the original Chineseversion 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 shallprevail.

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 thosegenerally applied in the Republic of China.

March 30, 2017

Deloitte & Touche
Taipei, Taiwan
Republic of China

The engagement partners on the audit resulting in this independent auditors’ report are Chen-Hsin
Yang and Li-Chi Chen.

From the matters communicated with those charged with governance, we determine those mattersthat 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 ourreport because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.

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

132

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

TOTAL

Total equity

NON-CONTROLLING INTERESTS (Note 27)

Total equity attributable to owners of the Company

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 21 and 27)
Share capital
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficit)
Total retained earnings
Other equity
Treasury shares

Total liabilities

Total noncurrent liabilities

NONCURRENT LIABILITIES
Derivative financial liabilities for hedging - noncurrent (Notes 4, 5, 9 and 32)
Bonds payable - noncurrent (Notes 4, 21, 27 and 32)
Loans and debts - noncurrent (Notes 20, 32 and 34)
Provisions - noncurrent (Notes 4, 5 and 25)
Deferred tax liabilities (Notes 4 and 29)
Capital lease obligations - noncurrent (Notes 4, 22, 32 and 34)
Deferred revenue - noncurrent (Notes 4, 5 and 24)
Accrued pension costs (Notes 4, 5 and 26)
Other noncurrent liabilities (Note 32)

Total current liabilities

CURRENT LIABILITIESShort-term loans (Note 20)
Short-term bills payable (Note 20)
Derivative financial liabilities for hedging - current (Notes 4, 5, 9 and 32)
Notes and accounts payable (Note 32)
Notes and accounts payable - related parties (Notes 32 and 33)
Other payables (Notes 23 and 28)
Current tax liabilities (Notes 4 and 29)
Provisions - current (Notes 4, 5 and 25)
Deferred revenue - current (Notes 4, 5 and 24)
Bonds payable and put option of convertible bonds - current portion (Notes 4, 21, 27 and 32)
Loans and debts - current portion (Notes 20, 32 and 34)
Capital lease obligations - current portion (Notes 4, 22, 32 and 34)
Other current liabilities (Note 32)

LIABILITIES AND EQUITY

TOTAL

Total noncurrent assets

NONCURRENT ASSETS
Financial assets at fair value through profit or loss - noncurrent (Notes 4, 5, 7 and 32)
Available-for-sale financial assets - noncurrent, net of current portion (Notes 4, 8 and 32)
Derivative financial assets for hedging - noncurrent (Notes 4, 5, 9 and 32)
Financial assets carried at cost - noncurrent, net of current portion (Notes 10 and 32)
Investments accounted for by the equity method (Notes 4 and 15)
Property, plant and equipment (Notes 4, 5, 16 and 34)
Investment properties (Notes 4 and 17)
Other intangible assets (Notes 4 and 18)
Deferred income tax asset (Notes 4, 5 and 29)
Other assets - noncurrent (Notes 19, 22, 32, 34 and 35)

Total current assets

CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6, 19 and 32)
Financial assets at fair value through profit or loss - current (Notes 4, 5, 7 and 32)
Derivative financial assets for hedging - current (Notes 4, 5, 9 and 32)
Receivables:
Notes and accounts, net (Notes 4, 5, 11 and 32)
Notes and accounts - related parties (Notes 32 and 33)
Other receivables (Notes 4 and 32)
Current tax assets (Notes 4 and 29)
Inventories, net (Notes 4 and 12)
Noncurrent assets held for sale (Notes 4, 5 and 13)
Other assets - current (Notes 6 and 19)

ASSETSCONSOLIDATED BALANCE SHEETSDECEMBER 31, 2016 AND 2015
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

25
1
26
100

287,224
76,486(157,618)
206,092
112,264(43,372)
55,783,817
2,083,381
57,867,198$ 224,500,759

74

166,633,561

25
-

44

98,027,837

54,708,901
799,932

9
25
3
2
1
4
-

30

68,605,724

2,775
19,538,044
56,962,187
7,408,229
273,610
3,645,304
1,808,903
7,956,835
431,950

5
7
1
14
1
2

100

$ 224,500,759

135,000
900,000
20,854
869,712555,829
11,465,254
48,687
81,925
14,820,860
2,700,000
32,268,540
1,284,001
3,455,062

79

177,162,558

$

1
62
1
1
3
11

3,268
140,357
2,866,431
140,136,737
2,075,903
1,137,115
6,256,665
24,546,082

21

4
4
2

8,353,785
3,562
952,320
28,2598,434,386
185,100
4,638,502
47,338,201

11
-

%

$ 24,267,197
416,641
58,4492016
Amount

-

1
27
100

60,556,543$ 221,926,309

26

58,269,896

1
1

2,872,235
2,872,235(66,283)(43,372)73

161,369,766

25
-

42

93,149,314

54,708,901
798,415

5
26
3
2
1
5
-

31

1
5
6
2
14
1
2

11,291
10,900,000
57,691,505
6,167,295
340,681
5,197,147
1,863,929
10,553,574
423,892

68,220,452

173,289
9,995
313,689
1,229,575
493,754
12,296,548
75,64520,186
13,112,086
4,944,106
30,092,112
1,457,957
4,001,510

100

79

1
58
1
1
3
15

2,286,647$$ 221,926,309

176,283,694

1,710
19,08011,216
223,9112,877,777
129,628,866
2,076,182
1,009,678
7,188,415
33,246,859

21

3
1
4
2

7,610,677
3,874
1,032,622
9,849
8,300,398
670,455
3,928,747
45,642,615

11
-

%

$ 23,491,085
542,326
52,582

2015
AmountItems that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations (Notes 4 and 27)

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement of defined benefit plans (Note 26)
Share of the other comprehensive income ofassociates and joint ventures accounted forusing the equity method (Notes 4, 15 and 27)
Income tax relating to items that will not bereclassified subsequently to profit or loss
(Note 29)

(112,092)

159,935(847,675)(66,815)(940,795)

710,940

1,168,911

INCOME TAX EXPENSE (Notes 4, 5 and 29)
NET INCOME

1,879,851(2,684,836)

Total nonoperating income and loss
PRETAX PROFIT

536,986

NONOPERATING INCOME AND LOSS
Other income (Notes 4, 10 and 28)
Other gains and losses (Notes 9, 13, 16 and 28)
Finance cost (Notes 9 and 28)
Share of the profit of associates and joint ventures(Note 15)759,139(2,688,096)(1,292,865)

4,564,687

13,441,219

OPERATING EXPENSES (Notes 4, 26 and 28)
OPERATING PROFIT

18,005,906

123,073,201

-

-

-

-

-

-

-

-

4

1

5

(1)

-

2
(2)
(1)

6

8

14

86

100

%

67,515(Continued)

115,062(566,199)(4,428)(676,833)

5,926,210

1,208,675

7,134,885

1
1(994,312)

516,140

3,231,179(2,957,838)(1,783,793)

8,129,197

12,139,177

20,268,374

124,787,843$ 145,056,217

2015
Amount

(2)

-

1
(2)
(1)

3

10

13

87

100

$ 141,079,107

GROSS PROFITCOSTS (Notes 4, 9, 12, 26, 28 and 33)

REVENUES (Notes 4, 28 and 33)%

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

CHINA AIRLINES, LTD. AND SUBSIDIARIES

133

-

(33,955)
166,006

$
$

0.10
0.10

29,271

$

$

$

-

$

$

$

$

-

-

-

-

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

EARNING PER SHARE (NEW TAIWAN DOLLARS;
Note 30)
Basic
Diluted26,103
3,168$

710,940$TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

571,540
139,400$

NET INCOME ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

29,271--(41)(681,669)-%

312,094$$

TOTAL COMPREHENSIVE INCOME FOR THE
YEAR

Other comprehensive income (loss) for the year,
net of income tax

Unrealized gain (loss) on available-for-salefinancial assets (Notes 4 and 27)
Cash flow hedges (Notes 4 and 27)
Share of the other comprehensive income ofassociates and joint ventures accounted forusing the equity method (Notes 4, 15 and 27)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Note 29)

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

CHINA AIRLINES, LTD. AND SUBSIDIARIES

$
$

5

5
-

4

4
-

5

1

1

-

1

%

(Concluded)

1.06
1.06

7,195,970

7,072,042
123,928

5,926,210

5,763,714
162,496

7,195,970

1,269,760(374,281)
1,835,959

765(6,393)
2,148,353

2015
Amount---

Appropriation of 2015 the earning
Legal reserve
Special reserve
Cash dividends - $0.458522382 per share

Change in capital surplus from dividends distributed to subsidiaries

Net income for the year ended December 31, 2016

Other comprehensive income (loss) for the year ended December 31, 2016,
net of income tax

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

Cash dividend from subsidiaries paid to non-controlling interest

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

$ 54,708,901-

Difference between cost of the acquisition of subsidiaries and net value

BALANCE AT DECEMBER 31, 2016-

Change in capital surplus from investments in associates and joint ventures
accounted for by using equity method

54,708,901-

Cash dividend from subsidiaries paid to non-controlling interest

BALANCE AT DECEMBER 31, 2015-

Total comprehensive income (loss) for the year ended December 31, 2015-

Net income for the year ended December 31, 2015

Other comprehensive income (loss) for the year ended December 31, 2015,
net of income tax-

Difference between cost of the acquisition of subsidiaries and net value

2,217,235

Change in capital surplus from investments in associates and joint ventures
accounted for by using equity method

Convertible bonds converted to common shares-$ 52,491,666

Share CapitalCompensation of deficit - capital surplus

BALANCE AT JANUARY 1, 2015

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

CHINA AIRLINES, LTD. AND SUBSIDIARIES

134
$

$

799,932

-

-

-

-

1,517

-

-

-

798,415

-

-

-

-

-

317,889

64(1,511,953)

1,992,415

Capital Surplus$$

287,224

-

-

-

-

-

287,224
-

-

-

-

-

-

-

-

-

-

-

-

-

Legal Reserve$$

76,486

-

-

-

-

-

76,486
-

-

-

-

-

-

-

-

-

-

-

-

-

Special Reserve$(157,618)-(152,444)(723,984)

571,540-(287,224)(76,486)(2,508,525)(3,536)(1,638)2,872,235-

5,232,627(531,087)

5,763,714(1,609)--1,511,953$ (3,870,736)

UnappropriatedEarnings(Accumulated
Deficit)$$

78,564-(79,395)(79,395)

-

-

-

-

-

157,959-

58,107

58,107

-

-

-

-

-

99,852

Exchange
Differences on
Translating
Foreign
Operations

Other Equity

$

$

1,714

-

(41)

(41)

-

-

-

-

-

1,755

-

(2,260)(2,260)

-

-

-

-

-

4,015

Unrealized Gain
(Loss) on
Available-for-saleFinancial Assets

Equity Attributable to Owners of the Company
Retained Earnings$

31,986-257,983

257,983

-

-

-

-

-

(225,997)-

1,783,568

1,783,568

-

-

-

-

-

$ (2,009,565)

Cash Flow
Hedges$$(43,372)

-

-

-

-

-

-

-

-

(43,372)

-

-

-

-

-

-

-

-

(43,372)

Treasury Shares
Held by
Subsidiaries$ 55,783,817-

26,103(545,437)

571,540

1,517(2,508,525)(3,536)(1,638)58,269,896-

7,072,042

1,308,328

5,763,714(1,609)2,535,124

64-$ 48,664,275

Total

$

$

2,083,381(201,886)

3,168(136,232)

139,400--(4,548)-2,286,647(157,053)

123,928(38,568)

162,496(1,965)---2,321,737

Non-controlling
Interests

Total Equity$ 57,867,198(201,886 )

29,271(681,669 )

710,940

1,517(2,508,525)(8,084)(1,638)60,556,543(157,053 )7,195,970

1,269,760

5,926,210(3,574)2,535,124

64-$ 50,986,012

135

Net cash generated from operating activities

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax
Adjustments to reconcile to net cash generated from (used in)operating activities:
Depreciation expenses
Amortization expenses
Bad-debt expense
Net loss (gain) on fair value change of financial assets and liabilities
held for trading
Interest income
Dividend income
Share of profit of associates and joint ventures
Loss on disposal of financial assets measured at cost
Gain on disposal of property, plant and equipment and noncurrent
assests held foe saleImpairment loss recognized on available-for-sale financial assets
Impairment loss recognized on property, plant, equipment andnoncurrent assets held for sale
Loss on inventories and property, plant and equipment
Impairment loss recognized on financial assets carried at cost
Net loss (gain) on foreign currency exchange
Finance costs
Recognition of provisions
Amortization of unrealized gain on sale-leaseback
Loss on repurchase of bonds payable
Changes in operating assets and liabilities
Decrease (increase) in financial assets held for trading
Decrease on derivate financial assets for hedging
Decrease (increase) in notes and accounts receivable
Increase in other receivables
Increase in inventories
Increase in other current assets(Decrease) increase in notes and accounts payable(Decrease) increase in other payables
Increase in deferred revenue
Decrease in provisions
Increase in other current liabilities
Decrease in accrued pension liabilities
Increase (decrease) in other liabilities
Cash generated from operations
Interest received
Dividends received
Interest paid
Income tax paid$

(150,871)(466,923)(1,884,052)(516,140)(13,155)
3,408
2,468,372
389,274
487,075
1,783,793
2,079,169(14,512)(157,350)
1,770,746(205,127)(1,248,012)(1,252,816)
828,156
569,765
2,006,907(237,716)
512,938(296,385)(14,555)
30,958,146
487,0092,382,066(1,797,212)(239,316)
31,790,693(Continued)

35,678(242,801)(59,099)(536,986)
346(53,419)
19,005
1,065,626
207,019
71,826(3,855)
1,292,865
2,613,011(14,512)41,94391,72913,096(731,012)(15,595)(358,861)(293,137)(514,807)(1,166,447)
1,651,689(1,393,565)
399,500(3,532,023)
22,045
18,265,776
239,461
513,203(1,195,427)(186,641)
17,636,372

7,134,885

17,261,774
70,04049,458$17,545,523
147,486
83,657

1,879,851

2015$ 24,267,197

23,491,085

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

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR(Concluded)$ 23,491,085

20,468,151

3,022,934

776,112(17,985,994)(4,190,523)(2,078,113)(8,585,000)
16,626,343(19,601,536)
124,621(121,159)(157,053)(3,574)(10,441,578)

245,242(13,096)(64,091)(6,711,363)
20,914(915,853)
780,503(13,472,830)
10,186,049(408,721)(88,332)

NET INCREASE IN CASH AND CASH EQUIVALENTS$(340,187)

4,208,402(35,000)
890,0059,700,000(994,705)(2,400,000)
35,241,000(35,501,395)
121,440(94,448)(2,508,525)(201,886)(8,084)(21,021,616)

63
5,579
384,285(9,906,807)
519,489(250,177)
333,973(17,754,915)
5,693,791(277,235)
230,338

2015(47,046)$

2016

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIESNet cash generated from (used in) financing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term loans(Decrease) increase in short-term bills payable
Proceeds from issue of bonds payable
Exercise the put option of bonds payable
Repayments of bonds payable
Proceeds of long-term debts
Repayments of long-term debts and capital lease obligations
Proceeds of guarantee deposits received
Refund of guarantee deposits received
Dividends paid to owners of the Company
Cash dividends paid to non-controlling interest
Acquisition of subsidiaries' shares

Net cash used in investing activities

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of available-for-sale financial assets
Proceeds on share redemption of financial assets measured at cost
Proceeds of the sale of financial assets measured at cost
Payments to acquire financial assets for hedging
Acquisition of associates
Proceeds from disposal of noncurrent assets held for sale
Payment for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Refund in prepayments for aircrafts
Increase in computer software cost
Decrease (increase) in restricted assets

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

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

2016

CHINA AIRLINES, LTD. AND SUBSIDIARIESCHINA AIRLINES, LTD. AND SUBSIDIARIES136

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”
Amendment to IAS 1 “Disclosure Initiative”
Amendments to IAS 16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”

New, Amended or Revised Standards and Interpretations(the “New IFRSs”)

January 1, 2016
January 1, 2016
January 1, 2016

January 1, 2016

(Continued)

July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 3)
January 1, 2016

Effective Date
Announced by IASB (Note 1)

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.

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

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

The consolidated financial statement of the Company and its subsidiaries (collectively the “Group”) wereapproved by the board of directors and authorized for issue on March 30, 2017.

2. APPROVAL OF FINANCIAL STATEMENTS

The major stockholders of the Company are the China Aviation Development Foundation (CADF) and the
National Development Fund (NDF), Executive Yuan. As of December 31, 2016 and 2015, CADF and
NDF held 43.63% of the Company’s shares.

China Airlines, Ltd. (the “Company”) was founded in 1959 and its stocks have been listed on the Taiwan
Stock Exchange since February 26, 1993. The Company primarily provides air transport services forpassengers and cargo. Its other operations include (a) mail services; (b) ground services and routine
aircraft maintenance; (c) major maintenance of flight equipment; (d) communications and data processing
services to other airlines; (e) the sale of aircraft parts, equipment and entire aircraft; and (f) leasing ofaircrafts.

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

CHINA AIRLINES, LTD. AND SUBSIDIARIESJanuary 1, 2014

January 1, 2014

January 1, 2014

January 1, 2016

January 1, 2016
July 1, 2014

(Concluded)

Effective Date
Announced by IASB (Note 1)

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

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

The amendments stipulate that other companies or institutions of which the chairman of the boardof 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 theGroup 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 hassignificant 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 disclosedby the name of each related party.

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.

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

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:

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.

Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on orafter 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; theremaining amendments are effective for annual periods beginning on or after July 1, 2014.

Note 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods
beginning on or after their respective effective dates.

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”

New, Amended or Revised Standards and Interpretations(the “New IFRSs”)

137

January 1, 2018
January 1, 2018

January 1, 2019
January 1, 2017
January 1, 2017

January 1, 2018
January 1, 2018

To be determined by IASB

January 1, 2018
January 1, 2018

January 1, 2018

Note 2January 1, 2018

Effective Date
Announced by IASB (Note 1)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after their respective effective dates.

Annual Improvements to IFRSs 2014-2016 Cycle
Amendment to IFRS 2 “Classification and Measurement of
Share-based Payment Transactions”
Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments withIFRS 4 Insurance Contracts”
IFRS 9 “Financial Instruments”
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”
IFRS 15 “Revenue from Contracts with Customers”
Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue fromContracts with Customers”
IFRS 16 “Leases”
Amendment to IAS 7 “Disclosure Initiative”
Amendments to IAS 12 “Recognition of Deferred Tax Assets for
Unrealized Losses”
Amendments to IAS 40 “Transfers of Investment Property”
IFRIC 22 “Foreign Currency Transactions and Advance
Consideration”

New IFRSs

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

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

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

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, andwill disclose these other impacts when the assessment is completed.

The amendment clarifies that the recoverable amount of an asset or a cash-generating unit isdisclosed only when an impairment loss on the asset has been recognized or reversed during theperiod. 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, theGroup 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 ofdisposal is measured by using present value technique. The amendment will be applied
retrospectively.

2) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-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 arisingfrom IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments andfinancial 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 fulllifetime expected credit losses is required for trade receivables that do not constitute a financing
transaction.

The impairment of financial assets

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 fairvalue 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 othercomprehensive income cannot be reclassified from equity to profit or loss.

b) For debt instruments, if they are held within a business model whose objective is achieved byboth 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 areassessed 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 reclassified, the cumulative gain or loss previously recognizedin other comprehensive income is reclassified from equity to profit or loss.

a) For debt instruments, if they are held within a business model whose objective is to collect thecontractual 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;

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

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 amortizedcost or fair value. Under IFRS 9, the requirement for the classification of financial assets is statedbelow.

Recognition and measurement of financial assets

1) IFRS 9 “Financial Instruments”

The initial application of the above New IFRSs, whenever applied, would not have any material impact
on the Group’s accounting policies, except for the following:

Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or afterJanuary 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods
beginning on or after January 1, 2018.

138

In addition, in determining whether to recognize a deferred tax asset, the Group should assess adeductible temporary difference in combination with all of its other deductible temporary
differences, unless the tax law restricts the utilization of losses to deduction against income of a
specific type, in which case, a deductible temporary difference is assessed in combination only withother deductible temporary differences of the appropriate type. The amendment also stipulates
that, when determining whether to recognize a deferred tax asset, the estimate of probable futuretaxable profit may include some of the Group’s assets for more than their carrying amount if there issufficient evidence that it is probable that the Group will achieve this, and that the estimate for
future taxable profit should exclude tax deductions resulting from the reversal of deductible
temporary differences.

The amendment clarifies that the difference between the carrying amount of the debt instrument
measured at fair value and its tax base gives rise to a temporary difference, even though there are
unrealized losses on that asset, irrespective of whether the Group expects to recover the carrying
amount of the debt instrument by sale or by holding it and collecting contractual cash flows.

3) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

When IFRS 16 becomes effective, the Group may elect to apply this Standard either retrospectively
to each prior reporting period presented or retrospectively with the cumulative effect of the initial
application of this Standard recognized at the date of initial application.

The application of IFRS 16 is not expected to have a material impact on the accounting of theGroup as lessor.

Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for
all leases on the balance sheets except for low-value and short-term leases. The Group may electto apply the accounting method similar to the accounting for operating lease under IAS 17 to the
low-value and short-term leases. On the statements of comprehensive income, the Group shouldpresent the depreciation expense charged on the right-of-use asset separately from interest expense
accrued on the lease liability; interest is computed by using effective interest method. On thestatements of cash flows, cash payments for the principal portion of the lease liability are classified
within financing activities; cash payments for interest portion are classified within operating
activities.

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number ofrelated interpretations.

2) IFRS 16 “Leases”

The main changes in hedge accounting amended the application requirements for hedge accounting
to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes
include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening
the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging
derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing
retrospective effectiveness assessment with the principle of economic relationship between thehedging instrument and the hedged item.

Hedge accounting

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 acorresponding gain or loss recognized in profit or loss.

Identify the contract with the customer;
Identify the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; andRecognize revenue when the entity satisfies a performance obligation.

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

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

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

Basis of Preparation

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

Statement of Compliance

4. SIGNIFICANT ACCOUNTING POLICIESExcept for the above impact, as of the date the financial statements were authorized for issue, the Groupis 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.

Under IFRS 15, the Group will allocate the transaction price to each performance obligation
identified in the contract on a relative stand-alone selling price basis. Under current standard, theGroup applies residual value method to allocate the amount of revenue to be recognized.

In identifying performance obligations, IFRS 15 and related amendment require that a good orservice is distinct if it is capable of being distinct (for example, the Group regularly sells it
separately) and the promise to transfer it is distinct within the context of the contract (i.e. the natureof the promise in the contract is to transfer each of those goods or services individually rather thanto transfer combined items). The Group enters into contracts with its customers. In eachcontract, each product or service has its stand-alone selling price. Under the contract, the Group
provides a significant service of integrating the goods and services into the combined output
specified in the contract. Therefore, the goods and services promised in the contract are notconsidered as distinct.







When applying IFRS 15, an entity shall recognize revenue by applying the following steps:

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers,
and will supersede IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number ofrevenue-related interpretations from January 1, 2018.

4) IFRS 15 “Revenue from Contracts with Customers” and related amendment

139

For the purposes of presenting consolidated financial statement, the assets and liabilities of the Group’s
foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of eachreporting period. Income and expense items are translated at the average exchange rates for the period.
Exchange differences arising are recognized in other comprehensive income (attributed to the owners of theCompany and non-controlling interests as appropriate).

Exchange differences arising on the retranslation of non-monetary items are included in profit or loss forthe period except for exchange differences arising from the retranslation of non-monetary items in respectof which gains and losses are recognized directly in other comprehensive income, in which case, theexchange differences are also recognized directly in other comprehensive income.

b. Exchange differences on transactions entered into in order to hedge certain foreign currency risks.

a. Exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment
to interest costs on those foreign currency borrowings;

Exchange differences on monetary items arising from settlement or translation are recognized in profit orloss in the period in which they arise except for:In preparing the consolidated financial statement of the Group, transactions in currencies other than theentity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at thedates 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. Non-monetary items that are measured athistorical cost in a foreign currency are not retranslated. Non-monetary items measured at fair value thatare denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value
was determined.

Foreign Currencies

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.
Total comprehensive income of subsidiaries is attributed to the owners of the Company and to thenon-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with those used by the Company.

The consolidated financial statements incorporate the financial statements of the Company and the entities
controlled by the Company.

Basis of Consolidation

Current liabilities include liabilities held primarily for the purpose of trading, liabilities due to be settled
within twelve months after the reporting period. Terms of a liability that could, at the option of thecounterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Current assets include assets held primarily for the purpose of trading, assets expected to be realized withintwelve months after the reporting period, and cash and cash equivalents unless the asset is restricted frombeing exchanged or used to settle a liability for at least twelve months after the reporting period. All otherassets such as property, plant and equipment, investment properties, intangible assets and other assets thatare not classified as current are classified as noncurrent.

Current and Noncurrent Assets and Liabilitiesc. Level 3 inputs are unobservable inputs for the asset or liability.

When the Group subscribes for additional new shares of the associate and joint venture at a percentage
different from its existing ownership percentage, the resulting carrying amount of the investment differsfrom the amount of the Group’s proportionate interest in the associate and joint venture. The Group
records such a difference as an adjustment to investments with the corresponding amount charged or
credited to capital surplus - changes in the Group’s share of equity of associates and joint ventures. If theGroup’s ownership interest is reduced due to the additional subscription of the new shares of associate andjoint venture, the proportionate amount of the gains or losses previously recognized in other comprehensive
income in relation to that associate and joint venture is reclassified to profit or loss on the same basis as
would be required if the investee had directly disposed of the related assets or liabilities. When the

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets
and liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which isincluded within the carrying amount of the investment and is not amortized. Any excess of the Group’s
share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after
reassessment, is recognized immediately in profit or loss.

Under the equity method, investments in an associate and a joint venture are initially recognized at cost andadjusted 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 equity of
associates and joint venture attributable to the Group.

The Group uses the equity method to account for its 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. Joint venture is a joint arrangement whereby the Group and other parties thathave joint control of the arrangement have rights to the net assets of the arrangement.

Investments in Associates and Joint Ventures

Non-current assets classified as held for sale are measured at the lower of their previous carrying amountand fair value less costs to sell. Recognition of depreciation of those assets would cease.

Non-current assets are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This condition is regarded as met only when
the sale is highly probable and the non-current asset is available for immediate sale in its present condition.
To meet the criteria for the sale being highly probable, the appropriate level of management must be
committed to the sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.

Noncurrent Assets Held for Sale

Inventories are primarily expendable and nonexpendable parts and materials, supplies used in operations
and items for in-flight sale and are stated at the lower of cost or net realizable value. The costs ofinventories sold or consumed are determined using the weighted-average method.

Inventories

Cash equivalents, consisting of commercial paper and time deposits, are highly liquid financial instrumentswith maturities of three months or less when acquired and with carrying amounts that approximate their fairvalues.

Cash Equivalents

On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect ofthat operation attributable to the owners of the Company are reclassified to profit or loss.

140

Investment properties are properties held to earn rentals or for capital appreciation.
also include land held for a currently undetermined future use.

Investment Properties
Investment properties

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment isdetermined as the difference between the sales proceeds and the carrying amount of the asset and isrecognized in profit or loss.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets. Assets are depreciated over the shorter of the lease term and their useful lives using thestraight-line method.

Depreciation is recognized using the straight-line method. Each significant part is depreciated separately.
The estimated useful lives, residual values and depreciation method are reviewed at the end of eachreporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Freehold land is not depreciated.

Property, plant and equipment are tangible items that are held for use in the production or supply of goods
or services, for rental to others, or for administrative purposes; and are expected to be used more than one
period. The cost of an item of property, plant and equipment shall be recognized as assets if, and only if itis probable that future economic benefits associated with the item will flow to the entity; and the cost of theitem can be measured reliably. Property, plant and equipment are stated at cost, less recognizedaccumulated depreciation and recognized accumulated impairment loss.

Property, Plant and Equipment

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 fairvalue is regarded as its fair value on initial recognition as a financial asset. The difference between theprevious 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 inrelation to that associate and the joint venture on the same basis as would be required if that associate had
directly disposed of the related assets or liabilities. If an investment in an associate becomes aninvestment in a joint venture or an investment in a joint venture becomes an investment in an associate, theGroup continues to apply the equity method and does not remeasure the retained interest.

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 isdeducted from 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.

When the Group’s share of losses of an associate and a joint venture equals or exceeds its interest in thatassociate and joint venture (which includes any carrying amount of the investment accounted for by theequity method and long-term interests that, in substance, form part of the Group’s net investment in theassociate and joint venture), the Group discontinues recognizing its share of further losses. Additional
losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, orconstructive obligations, or made payments on behalf of that associate and joint venture.

adjustment should be debited to capital surplus, but the capital surplus recognized from investments
accounted for by the equity method is insufficient, the shortage is debited to retained earnings.

The estimated useful life residual value are

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

Financial Instruments

When an impairment loss subsequently is 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 amountthat 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.

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.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the Company use the estimated cash flows to be discounted by future pre-tax discount rate, the discount rate
reflects current market time value of money and the specific risks to the asset that the estimated future cash
flows have not yet adjusted to the market.

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.

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 todetermine 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 theasset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable andconsistent basis; otherwise corporate assets are allocated to the smallest group of cash-generating units on areasonable and consistent allocation basis.

Impairment of Tangible and Intangible Assets Other Than Goodwill

Intangible assets with finite useful lives that are acquired separately are initially measured at cost andsubsequently measured at cost less accumulated amortization and accumulated impairment loss.
The estimated useful life, residual value, andAmortization is recognized on a straight-line basis.
amortization method are reviewed at the end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis. The residual value of an intangible asset with a finite
useful life shall be assumed to be zero unless the Group expects to dispose of the intangible asset before theend of its economic life.

Intangible Assets

Any gain or loss arising on derecognition of the property is calculated as the difference between the net
disposal proceeds and the carrying amount of the asset and is included in profit or loss in the period inwhich the property is derecognized.

Depreciation is recognized using the straight-line method.
reviewed at the end of each reporting period.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initialrecognition, investment properties are measured at cost less accumulated depreciation and accumulated
impairment loss.

141

For financial assets carried at amortized cost, such as trade receivables and other receivables, assets
are assessed for impairment on a collective basis even if they were assessed not to be impaired
individually. Objective evidence of impairment for a portfolio of receivables could include theGroup’s past experience of collecting payments, an increase in the number of delayed payments inthe portfolio past the average credit period of 60 days, as well as observable changes in national or
local economic conditions that correlate with default on receivables.

Financial assets are classified into the following specified categories: Financial assets at fair The
value
through profit or loss, available-for-sale financial assets and loans and receivables.
classification of financial assets is depending on their nature and purpose of the original recognition.
Financial assets are classified into the following categories: Financial assets at fair value throughprofit or loss and available-for-sale financial assets.

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 asfinancial 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 profit or loss or other comprehensive
income on financial assets.

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

Changes in the carrying amount of available-for-sale financial assets are recognized in othercomprehensive income and will be reclassified to profit or loss when the investment is disposedof or is determined to be impaired.

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

In respect of available-for-sale equity securities, impairment loss previously recognized in profit orloss are 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-saledebt securities, impairment loss are subsequently reversed through profit or loss if an increase in thefair value of the investment can be objectively related to an event occurring after the recognition of
the impairment loss.

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.

d) The disappearance of an active market for that financial asset because of financial difficulties.

c) It becoming probable that the borrower will enter bankruptcy or financial re-organization; orb) Breach of contract, such as a default or delinquency in interest or principal payments;a) Significant financial difficulty of the issuer or counterparty;

For all other financial assets, objective evidence of impairment could include the followings:

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.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of theimpairment 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 orloss 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.

Financial assets at fair value through profit or loss are stated at fair value, with any gains orlosses arising on remeasurement recognized in profit or loss. The net gain or loss recognizedin profit or loss incorporates any dividend or interest earned on the financial asset. Fair value
is determined in the manner described in Note 32.

b) Available-for-sale financial assets

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

Financial assets are classified as at fair value through profit or loss when the financial asset iseither held for trading or it is designated as at fair value through profit or loss.

a) Financial assets at fair value through profit or loss

1) Measurement category

Financial assets, other than those at fair value through profit or loss and available-for-sale financial
assets, 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.

2) Impairment of financial assets

Loans and receivables (including trade receivables, cash and cash equivalent, debt investmentswith no active market, and other receivables 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.

c) Loans and receivables

All regular way purchases or sales of financial assets are recognized and derecognized on a trade datebasis. All regular way purchases or sales of financial assets means buy or sell financial assets in the
period made by regulation or market convention.

a. Financial assets

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 thanfinancial assets and financial liabilities at fair value through profit or loss) are added to or deducted fromthe 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 fairvalue through profit or loss are recognized immediately in profit or loss.

142
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately in profit or loss.

Except for derivative financial instruments, all the financial liabilities are measured at amortizedcost using the effective interest method.

The Group derecognizes financial liabilities only when the obligation is discharged, canceled or
expired. The difference between the carrying amount of the financial liability derecognized andthe consideration paid, including any non-cash assets transferred or liabilities assumed, isrecognized in profit or loss.

2) Derecognition of financial liabilities

The Company enters into some derivative transactions that aim to manage interest rates, exchange rates,
fuel prices, and other factors affecting gains or losses on assets and liabilities. The hedging transactions
are defined as cash flow hedge. When entering into hedging transactions, the Company has prepared
official documents that describe the hedging relationship between hedging instruments and items been
hedged, objective of risk management, hedging strategy, and the way to evaluate the effectiveness of thehedging instrument.

1) Subsequent measurementc. Financial liabilities

Hedge Accounting

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into andare subsequently remeasured to their fair value at the end of each reporting period. The resulting gainor loss is recognized in profit or loss immediately unless the derivative is designated and effective as ahedging instrument, in which event the timing of the recognition in profit or loss depends on the natureof the hedge relationship. When the fair value of derivative financial instruments is positive, thederivative is recognized as a financial asset; when the fair value of derivative financial instruments isnegative, the derivative is recognized as a financial liability.

An equity instrument is residual interest in any contract after the Group’s assets minus all liabilities.
Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue
costs.

Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity.
No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of theCompany’s own equity instruments.

The Group enters into a variety of derivative financial instruments to manage its exposure to interest
rate, foreign exchange rate and fuel price risks, including foreign exchange forward contracts, interest
rate swaps, currency options and fuel swaps.

e. Derivative financial instruments

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity
components in proportion to the allocation of the gross proceeds. Transaction costs relating to theequity component are recognized directly in equity. Transaction costs relating to the liability
component are included in the carrying amount of the liability component.

The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognized andincluded in equity, net of income tax effects, and is not subsequently remeasured. In addition, theconversion option classified as equity will remain in equity until the conversion option is exercised, inwhich case, the balance recognized in equity will be transferred to capital surplus - share premium.
When the conversion option remains unexercised at maturity, the balance recognized in equity will betransferred to capital surplus - share premium.

On initial recognition, the fair value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible instruments. This amount is recorded as a liability on anamortized cost basis using the effective interest method until extinguished upon conversion or the
instrument’s maturity date. Any embedded derivative liability is measured at fair value.

The component parts of compound instruments (convertible bonds) issued by the Company areclassified separately as financial liabilities and equity in accordance with the substance of thecontractual arrangements and the definitions of a financial liability and an equity instrument.

d. Convertible bonds

Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity
in accordance with the substance of the contractual arrangements and the definitions of a financial
liability and an equity instrument.

b. Equity instruments

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.

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

3) Derecognition of financial assets

The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables and other receivables, where the carrying
amount is reduced through the use of an allowance account. When a trade receivable and otherreceivables are considered uncollectable, it is 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 foruncollectable trade receivables and other receivables that are written off against the allowanceaccount.

For financial assets that are carried at cost, the amount of the impairment loss is measured as thedifference 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.

143

The value ofLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks andrewards of ownership to the lessee. All other leases are classified as operating leases.

Leasing

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

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 theamount of income can be measured reliably.

b. Dividend and interest income

Passenger fares and cargo revenue are recognized when transport service is provided.
unused passenger tickets is recognized as “advance ticket - sales”.

a. Rendering of services

Revenue Recognition

When the aircraft lease contracts expire and will be returned to lessor, should assess if existing obligations
exist and required to recognize as provision when signing of the lease contract.

Aircraft lease contracts

1) Financial lease

The amount recognized as a provision is the best estimate of the expenditure required to settle the present
obligation, taking into account the risks and uncertainties surrounding the obligation as of the balance sheet
date. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows.

In the event that lease incentives are received to enter into operating leases, such incentives arerecognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental
expense on a straight-line basis, except where another systematic basis is more representative of thetime pattern in which economic benefits from the leased asset are consumed.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rents arising under operating leases arerecognized as an expense in the period in which they are incurred.

2) The Group as lessee

Rental income from operating leases is recognized on a straight-line basis over the term of therelevant lease unless another systematic basis is representative of the time pattern of the lessee’s
benefit from the use of the leased asset.

1) The Group as lessor

c. Operating lease

If the selling price is equal to the fair value, the transaction gain or loss should be recognized
immediately. If selling price is above fair value, the difference between the fair value and thebook value of the gain or loss should be recognized immediately; only the part of selling price
above fair value shall be deferred and amortized over the period of the lease.

2) Operating lease

This transaction does not actually dispose of the assets, the accounting treatment deemedtransaction did not occur, and use the book value of the asset before sale continuing recognition of
the asset.

For a sale and leaseback transaction, if it meets the condition that all the risks and rewards of ownershipof the leased asset is essentially transferred to the lessee, the sale and leaseback type is a finance lease.
If part of the significant risks and rewards of the leased asset ownership remain with the lessor (thebuyer), the sale and leaseback type is an operating lease.

b. Sales and leasebacks

Minimum lease payments are apportioned between finance expenses and reduction of the leaseobligation so as to achieve a constant rate of interest on the remaining balance of the liability. Financeexpenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying
assets, in which case they are capitalized in accordance with the Company’s general policy on
borrowing costs. Contingent rents are recognized as expenses in the periods in which they are
incurred.

Assets held under finance leases are initially recognized as assets of the Company at the lower of theirfair value at the inception of the lease or the present value of the minimum lease payments. The
corresponding liability to the lessee is included in the balance sheets as a finance lease obligation.

The Group as lessee

a. Financial leases

The Group recognizes provisions when the Group has a present obligation (legal or constructive) arisingfrom past events (legal or constructive obligation), payment for the obligation is probable, and theexpenditure for settling the obligation can be estimated reliably.

Provisions

Hedge accounting is discontinued prospectively when the Group revokes the designated hedging
relationship, or when the hedging instrument expires or is sold, terminated, or exercised, or when it nolonger meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument thathas been previously recognized in other comprehensive income from the period when the hedge was
effective remains separately in equity until the forecast transaction occurs. When a forecast transaction is
no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit orloss.

The associated gains or losses that were recognized in other comprehensive income are reclassified fromequity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in thesame period when the hedged item affects profit or loss. If a hedge of a forecast transaction subsequently
results in the recognition of a non-financial asset or a non-financial liability, the associated gains and losses
that were recognized in other comprehensive income are removed from equity and are included in the initialcost of the non-financial asset or non-financial liability.

144

The fair value determined at the grant date of the equity-settled share-based payments is expensed on astraight-line basis over the vesting period, based on the Group’s estimate of equity instrument that will
eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value
determined at the grant date of the equity-settled share-based payments is recognized as an expense in fullat the grant date when the share options granted vest immediately.

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments
at the grant date.

Share-based Payment Arrangements

A portion of passenger revenue attributable to the rewards for the frequent flyer program is deferred. The
entity should recognize this deferred revenue as revenue only when the entity has fulfilled its obligations on
the granting of rewards or when the period for converting the mileage to rewards has expired.

The Company has a “Dynasty Flyer Program” through which program members can convert accumulated
mileage to a cabin upgrade, free tickets and other member reward.

Frequent Flyer Program

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which
they are incurred.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets(assets are substantially ready for their intended use or sale through a fairly long period) are added to thecost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Borrowing Costs

Net defined benefit liability represents the actual deficit in the Group’s defined benefit plan.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined
contribution retirement benefit plan are determined using the projected unit credit method. Service
cost (including current service cost, past service cost, and net interest on the net defined benefit liability(asset) are recognized as employee benefits expense in the period in which they occur.
Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest),
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 bereclassified to profit or loss.

Payments to the defined contribution retirement benefit plan are recognized as an expense whenemployees have rendered services entitling them to the contributions.

b. Retirement benefits

Current and deferred tax are recognized in profit or loss, except when they relate to items that arerecognized 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.

c. Current and deferred tax for the year

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period inwhich the liability is settled or the asset realized, based on tax rates (and tax laws) that have beenenacted 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 theGroup expects, at the end of the reporting period, to recover or settle the carrying amount of its assets
and liabilities.

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 orpart of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at theend of each reporting period and recognized to the to the extent that it has become probable that futuretaxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures, except where the Group is able to control thereversal 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 associatedwith 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 is recognized on temporary differences between the carrying amounts of assets andliabilities in the consolidated financial statements and the corresponding tax bases used in thecomputation 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, unused loss carry forward and unused tax credits for purchases of machinery, equipment
and technology, research and development expenditures, and personnel training expenditures to theextent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilized.

b. Deferred tax

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

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided foras income tax in the year the stockholders approve the retention of these earnings.

The Group’s current tax liabilities are calculated by the tax rate has been legislative or substantial
legislative at the balance sheet date.

The current tax liabilities are based on current taxable profit. Since part of the income and expenses
are taxable or deductible in other periods, or in accordance with the relevant tax laws are taxable ordeductible, current taxable profit differs from net profit reported in the consolidated statements ofcomprehensive income.

a. Current tax

Income tax expense represents the sum of the current tax and deferred tax.

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.

Taxation

Employee Benefits

145

The Group assesses the receivables portfolios monthly for impairment. Impairment evidences may
include observable changes in debtors’ solvency and national or local economic conditions that correlatewith default on receivable settlement. Management’s analysis of expected cash flows is based on pastexperience of loss on assets with similar credit risk characteristics. The Group periodically reviews themethods of determining, and assumptions on, the expected amount and timing of cash flows to reduce thedifference between the estimated and the actual losses.

Estimated Impairment of Trade Receivables

The Group is subject to income taxes in numerous jurisdictions. Where the final tax payable differs fromthe amounts that were initially recognized, these differences will affect the income tax and deferred tax
provisions in the period in which the differences are determined. Deferred tax assets are recognized for
deductible temporary differences to the extent that it is probable that taxable profits will be available
against which the deductible temporary differences can be used. When evaluating the realizability of thedeferred tax asset, management uses significant accounting judgments and estimates, including expected
future revenue growth and profit margins, income tax exemption periods, the use of tax credits, tax
planning and certain assumptions. Changes in the industry environment and regulations will result in amaterial adjustment of the deferred tax asset.

Income Taxes

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of thereporting period that have a significant risk of causing a material adjustment to the carrying amounts ofassets and liabilities within the next financial year are discussed below.

Key Sources of Estimation Uncertainty

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

In the application of the Group’s accounting policies shown on Note 4, management is required to makejudgments, estimates and assumptions about the carrying amounts of assets and liabilities that are notreadily apparent from other sources. The estimates and associated assumptions are based on historicalexperience and other factors that are considered relevant. Actual results may differ from these estimates.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY

The overhaul costs of the owned or leased aircraft that meet the criteria for fixed asset capitalization andengines as replacement parts for aircraft and engines are capitalized, and amortized over the expectedannual overhaul cycle using straight-line depreciation method.

Routine maintenance costs are recognized in profit or loss in the period in which they are incurred.

Maintenance and Overhaul Costs

When the carrying amount of non-current assets held for sale are lower than fair value, the difference
between carrying amount and fair value recognized as impairment loss, and the fair value was determinedbased on the quote of potential buyers, and the market price of similar assets.

Impairment of Non-Current Assets Held For Sale

The impairment of flight equipment was based on the recoverable amount of those assets, which is thehigher of fair value less costs to sell or value-in-use of those assets. Any changes in the market price or
future cash flows will affect the recoverable amount of those assets and may lead to recognition of
additional or reversal of impairment losses.

Impairment of Flight Equipment

As stated in Note 4, Frequent Flyer Program, a portion of passenger revenue attributable to the awarding of
frequent flyer benefits is deferred until the awards are given out. The deferment of the revenue isestimated on the basis of historical trends of breakage and redemption, which is then used to project the
expected claiming of these benefits. Changes in fair value per mileage or redemption rate may have amaterial impact on deferred revenue.

Frequent Flyer Program

Maintenance reserve is based on the requirement under lease contracts to reflect maintenance costs that may
arise on lease expiry. Estimation of this reserve is based on the past maintenance experience on the sameor similar type of aircraft; incurred overhaul costs; and historical operating performance data. Changes injudgment or estimations may have a material impact on the amount of maintenance reserve.

Maintenance Reserve for Operating Lease Aircraft

The present value of defined benefit obligations at the end of the reporting period are calculated using
actuarial assumptions. Those assumptions, which are based on management’s judgment and estimates,
comprise the discount rate and expected return on plan assets. Changes in actuarial assumptions may havea material impact on the amount of defined benefit obligations.

Defined Benefit Obligations

Flight equipment are depreciated on a straight-line basis at rates that can be used to write down their cost to
their estimated residual values at the end of their useful lives. The estimates of the useful lives andresidual values of the flight equipment are made by the Group on the basis of past experience and fleet
operation performance in the industry.

Depreciation of Property, Plant and Equipment - Flight Equipment

The Group’s management uses its judgment in selecting an appropriate valuation technique for financial
instruments with no quoted market prices in an active market. Valuation techniques commonly used bymarket practitioners are applied. For derivative financial instruments, assumptions are based on quoted
market rates adjusted for specific features of the instruments. Other financial instruments are valued using
a discounted cash flow analysis based on assumptions supported, where possible, by observable market
prices or rates. The chosen valuation techniques and assumptions used are possible effecting in
determining the fair value of financial instruments.

Fair Value of Derivatives and Other Financial Instruments

146$ 23,491,085

478,223
6,070,236$ 24,267,197

$

2015

16,163,452
779,174

359,106
9,266,679

December 31

3,698,109
10,943,303

$

2016

0.05%-2%
0.13%-12.9%
0.33%-1.40%
0%-1.5%
0.27%-7.25%
0.42%-0.51%

2015

Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts

Financial assets held for trading - noncurrent

Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts
Non-derivative financial assets
Beneficial certificates

Financial assets held for trading - current

$

$

1,710

$ 542,326

63,818$ 416,641$

2015

478,508

1,200

December 31

415,441$

2016

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)The amount of time deposits with original maturities more than three months for the years ended December
31, 2016 and 2015 were $1,267,927 thousand and $1,653,927 thousand, respectively, and the market rateintervals were 0.16%-2.45% and 0.295%-4.1%, which were recognized as other current assets. (Refer toNote 19).

Bank balanceTime deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

2016

December 31

The market rate intervals of cash in bank and cash equivalents at the end of the reporting period were as
follows:

Cash on hand and revolving fund
Checking accounts and demand deposits
Cash equivalents
Time deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

6. CASH AND CASH EQUIVALENTS

NTD/USD

NTD/USD

Currency

$

-

-

% of
Ownership

2015$ 19,080

Carrying
Value

December 31-% ofOwnership

NTD3,276,316/USD99,600

NTD32,258/USD1,000

Notional Amount(In Thousands)

Current
Non-current

Foreign exchange forward contracts
Currency options
Fuel options

Derivative financial assets under hedge accounting

9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING

58,4493,268
61,717$61,717

61,634
83

$

$

$

$

52,582
11,216

63,79851,06012,403335

2015

63,798(Continued)

December 31

$

$

$

2016

On November 22, 2016, the board of the directors of TransAsia Airways (TNA) resolved to dissolve TNA.
Therefore, the Group recognized an impairment loss on its investment related to TNA of $19,005 thousand.
Furthermore, the Group recognized a full allowance for bad debts to the accounts receivable related toTNA.

Domestic listed company
Trans Asia Airways

Non-current

2017.01.26

Maturity Date

2016.01.08-2017.01.26

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Buy forward contracts

December 31, 2015

Buy forward contracts

December 31, 2016

Carrying
Value

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:

2016

147

TAIBOR rate

TAIBOR rate

The Group entered into currency option to minimize the risk of changes in foreign currency rate on the
cash flow exposure related to fuel payments, which will be paid in U.S. dollars.

b. Currency options

1.01%-1.14%

1.01%-1.14%

Range of Interest Rates
Received

The Company will settle the difference between the2016.11.28-2017.06.22

2017.03.09-2017.06.22

The interest rate swaps settle on a quarterly basis.
fixed and floating interest rates on a net basis.

NT$3,000,000

December 31, 2015

NT$2,500,000

December 31, 2016

Maturity Date

Range ofInterest Rates
Paid

JPY3,446,570/USD28,400
JPY3,364,604/USD28,400

Notional Amount(In Thousands)

USD
USD

USD

Currency

2016.01.05-2016.12.07
2016.01.05-2016.12.07

2017.01.05-2018.02.08

Maturity Date

NTD335NTD299,618

NTD83

Notional Amount(In Thousands)

Buy forward contracts

December 31, 2015

Buy forward contracts

December 31, 2016

NTD/USD

NTD/USD

Currency

2016.01.18-2017.05.23

2017.01.03-2018.10.25

Maturity Date

NTD1,076,882/USD32,920

NTD5,381,178/USD167,078

Notional Amount(In Thousands)

The outstanding foreign exchange forward contracts at the end of the reporting period were as follows:

The Group entered into foreign exchange forward contracts to minimize cash flow exposure related tofuel payments and aircraft payments, which will be paid in U.S. dollars.

d. Foreign exchange forward

Based on the Taiwan Stock Exchange’s regulation for the public companies’ monthly declarations on
the trading of derivative financial instruments, the contractual amounts are shown at the absolute valuesof the fair values because fuel swap contracts only have notional amounts.

Buy fuel call option
Sell fuel put option

December 31, 2015

Notional Amount(In Thousands)

2016.01.08-2016.12.09
2016.01.08-2016.12.09

Maturity Date

The outstanding fuel options at the end of the reporting period were as follows:a. Interest rate swaps

The Group entered into interest rate swap contracts to mitigate the risk of changes in interest rates on
the cash flow exposure related to the outstanding floating rate debt. All swapped fixed interest rate
swap out the floating rate interest rate swap contracts are designated as cash flow hedges. The
outstanding interest rate swap contracts at the end of the reporting period were as follows:

JPY/USD
JPY/USD

Currency

The Group used fuel options to minimize the risk of changes in fuel price related to operating cost.

Buy fuel call option$ 324,980(Concluded)$ 313,689
11,291c. Fuel options

Buy USD call option
Sell USD put option

December 31, 2015

Cash Flow Hedge

23,629$12,702
12,660299,618-$ 324,980$

December 31, 2016

20,854
2,775

23,629$$3,855
19,774$2015

The outstanding currency options at the end of the reporting period were as follows:

The fair value of each derivative contract is determined using quotes from financial institutions.

Current
Non-current

Interest rate swaps
Currency options
Fuel options
Foreign exchange forwards contracts

Derivative financial liabilities under hedge accounting

2016

December 31

148(352,960)(10,390)(71,460)(434,810)$$$ (2,554,845)$ (2,582,480)(7,151)
34,786

For the Year Ended December 31
2016
2015

5
11

20,157
11,000139,884$ 140,357

-

6

--

473

14
15

52,70456,023$ 140,357$% ofOwnership

2015

473

21,995
11,0005,925
223,438

75,791

52,70456,023$ 223,911$ 223,911$

Carrying
Value

December 31

-

5
11
6

6

14
15

% of
Ownership

The Company and the other airlines in the Asian Region set up Abacus International Holdings (AH
Company), which owned Abacus Distribution Systems. Due to strategic adjustments, AH Company
disposed of its shares of Abacus Distribution Systems. The board of directors of AH Company resolved
and approved of the return of the gain on the disposal to stockholders by cash dividends and shareredemptions. The Company received cash dividends of $1,660,687 thousand and share redemptions of$245,242 thousand from AH Company. AH Company changed its name to Everest Investment Holdings
Ltd. after the disposal of its aforementioned subsidiary.

The Group recognized an impairment loss of $71,826 thousand, which was classified as other gains (losses)
for the year ended December 31, 2016, due to the permanent decline of the value of Taikoo (Xiamen)
Landing Gear Service Co., Ltd.

Classified according to financial asset
measurement categories
Available-for-sale financial assets

Unlisted preferred stocks
Everest Investment Holdings Ltd. (AH)

Unlisted common stocks
Everest Investment Holdings Ltd. (AH)
Jardine Aviation Service
Taikoo (Xiamen) Landing Gear Service
Co., Ltd.
Taikoo Spirt Aerospace Systems (Jin
Jiang) Composite Co., Ltd.
Chung Hwa Express Co.
Regal International Advertising

10. FINANCIAL ASSETS CARRIED AT COST

The amount of gains and losses on hedging instruments reclassified from profit or loss to prepayments
for equipment was $154,970 thousand in 2016.

Increase in operating cost
Increase in finance cost
Other foreign exchange gain (loss)

Carrying
Value

2016
Gains and losses of hedging instruments reclassified from equity to profit or loss were included in thefollowing line items in the consolidated statements of comprehensive income:

8,019,386(191,398)
7,827,988

525,797

7,376,125(109,927)
7,266,198

344,4792015$ 7,610,677$

December 31$ 8,353,785

$

2016

66,13149,458(5,292)(370)$ 8,300,398$ 8,434,386

2015$ 7,648,352
507,603
143,489
954

December 31$ 109,927$$ 7,713,264
553,327
166,684
1,111

2016

$ 191,398$ 109,927
83,657(2,462)276

The operating costs recognized for the years ended December 31, 2016 and 2015 included losses frominventory write-downs of $196,000 thousand and $151,688 thousand, respectively.

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
Others12. INVENTORIESEnding balance

Beginning balance
Impairment loss recognized on receivables
Amounts written off during current period
Exchange influence

For the Year Ended December 31
2016
2015

Movement in the allowance for impairment loss recognized on notes receivable and trade receivables wereas follow:

The average credit period was 7 to 55 days. In determining the recoverability of an account receivable,
the Group considered any change in the credit quality of the account receivable since the date credit was
initially granted to the end of the reporting period, and any allowance for impairment loss was based on theestimated irrecoverable amounts determined by reference to the Group’s past default experience with thecounterparty and an analysis of the counterparty’s current financial position.

Accounts receivable
Less: Allowance for impairment loss

Accounts receivable

Notes receivable

11. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

On the reporting date, the above unlisted stock investments held by the Group were measured at cost after
deducting impairment losses because their range of reasonable fair value estimates were significant andunable to be reasonably evaluated. Thus, the management considered their fair values unable to bemeasured.

149

2015
$ 670,455

December 31$ 185,100

2016

Note:

Investee Company

Taiwan Air Cargo Terminal(Note)
Dynasty Holidays
Taoyuan International Airport
Services
Taiwan Airport Services (Note)
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Tigerair Taiwan Co., Ltd. (Note)
Taiwan Aircraft Maintenance
And Engineering Co., Ltd.
Dynasty Properties Co., Ltd.
Dynasty Hotel of Hawaii, Inc.
Taiwan Airport Service (Samoa)
Hwa Shin Building Safeguard

Mandarin Airlines

Yestrip
Cal Park
Cal Hotel Co., Ltd.
Sabre Travel Network (Taiwan)

Cal-Asia Investment
Hwa Hsia

Cal-Dynasty International

100
100
100

48
25
100
100
90
100

Airport services
Forwarding and storage of air cargo
Aircraft lease
Aircraft lease
Air transportation
Aircraft maintenanceReal estate management
Hotel businessAirport supporting service and investment
Building security and maintenanceservices

51
49

51
49

Travel businessAirport services

100
100
100
100

47
25
100
100
90
100

94

100
100
100
94

100
100

100

59

Main Businesses and Products

Proportion of
Ownership
December 31
2015
100 2016

A holding company, real estate and hotel
services
100
General investment
100
Cleaning of aircraft and maintenance ofmachine and equipment
Travel business
100
Real estate lease and international trade 94 100
Hotel business
100
94
Sale and maintenance of hardware andsoftware
Air transportation and maintenance of
aircraft
Air cargo and storage
59

Proportion of ownership is considered from the perspective of the Group.

Taiwan Airport Services
Hwa Hsia

Cal-Dynasty
International

China Airlines, Ltd.

Investor Company

Subsidiary included in the consolidated financial statements:

14. SUBSIDIARIESTo enhance its competitiveness, the Company implemented a replacement plan to introduce new aircrafts
and retire old aircrafts. From August 2015, several resolutions were successively made by the Company’sboard of directors to dispose of several aircrafts and the Company reclassified those aircrafts as non-current
assets held-for-sale. The difference between the original carrying amount and the expected transaction
value was recognized as an impairment loss, and the Company will assess if further impairment arises insubsequent periods. The actual amount of loss is determined based on the actual selling price of eachaircraft. In 2016 and 2015, the Company recognized impairment losses of $347,868 thousand and$1,899,372 thousand, respectively. In 2016, the Company recognized a loss on the disposal of non-current
assets held for sale of $26,429 thousand.

Aircrafts held for sale

13. NON-CURRENT ASSETS HELD FOR SALE

Prepaid long-term investments - Science Park Logistics

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics
Airport Air Cargo Terminal (Xiamen)
Airport Air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

Unlisted companies

a. The amount of investment in associates were as follows:

Investments in associates
Investments in jointly controlled entities

15. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

515,051
267,371
279,176
257,928
467,041
230,888
42,9482,060,403$ 2,060,403$

490,824
244,903
263,091
185,226
494,665
226,066
41,908
1,946,683
64,091$ 2,010,774

$

2015

$ 2,877,777$ 2,866,431

December 31$ 2,010,774
867,003$ 2,060,403
806,028

2016

2015

2016

December 31

The Group’s holding of the issued share capital of China Pacific Catering Services and China Pacific
Laundry Services exceeded 50%, yet the Group did not have control over the investees. For related
information, refer to Note 15,b.

Each of the Company’s holdings of the issued share capital of Taoyuan International Airport Service,Taiwan Airport Service and Global Sky Express did not exceed 50%, but since the Company had control
over these investees, they were listed as subsidiaries. The financial information for the years ended
December 31, 2016 and 2016 of these subsidiaries was reported according to information that was
independently audited.

To integrate the resources of the Group, the board of directors reached an agreement to purchase 10% of theshares of Tigerair Taiwan, which were held by Roar Aviation III Pte. Ltd., in December 2016. The
transaction was completed in January 2017.

The Company increased its investments with a payment of $100,000 thousand to Taiwan Aircraft
Maintenance and Engineering Co., Ltd. in October 2016 for the purpose of building hangars.

Considering the Group’s development strategy, Mandarin Airlines bought 323,367 shares of Taiwan
Airport Services for a total of $8,084 thousand over the course of the current year.

To facilitate the integration of resources and business management of the Group, on August 1, 2016, Hwa
Hsia Co., Ltd. merged with Hwa Shin Building Safeguard Co., Ltd. (the dissolved company) and was thesurviving entity. All of the assets, liabilities and other rights and obligations were transferred to Hwa Hsia
Co., Ltd.

150
20%
36%
25%
26%
28%
28%
35%

20%
36%
25%
28%
28%
28%
35%

51,02875,674
109,815
26,136
14,307
24,742
5,617$ 307,319$
46,24758,084
93,375
16,37318,44922,362
6,759$ 261,649$

2015

China Pacific Catering Services
China Pacific Laundry Services

The investments in jointly controlled entities were as follows:b. Investments in jointly controlled entities$ 867,003$ 806,028

2015$ 705,134
161,869

December 31$ 638,980
167,048

2016

The financial statements used as a basis of the amounts of and related information on the investments
accounted for by using the equity method and the share of profit or loss and other comprehensive
income of those investments for the years ended December 31, 2016 and 2015 were all independently
audited, except those of China Aircraft Services and Eastern United International Logistics (Holding)Ltd. However, the management determined that there would have been no significant adjustments had
this investee’s financial statements been independently audited.

Other comprehensive income of associates accounted for by using the equity method in 2016 and 2015
are losses in the amounts of $(1,325) thousands and $(1,720) thousand, respectively.

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics
Airport air Cargo Terminal (Xiamen)
Airport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

2016

The investment income of associates recognized accounted for using equity method were as follows:

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics
Airport air Cargo Terminal (Xiamen)
Airport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

Name of Associate

Proportion of Ownership andVoting Rights
December 31
2016
2015

At the end of the reporting period, the proportion of ownership and voting rights of associates held by
the Group were as follows:

On December 18, 2015 the board of Science Park Logistics (SPL) approved the issuance of commonshares for cash with the date of right issuances granted on was December 25, 2015. The board of theCompany reached an agreement to purchase $64,091 thousand of common shares, which were remitted
to SPL. SPL completed the registration of this subscription on January 22, 2016.

51%
55%

51%
55%

$ 229,667$ 208,039
21,628$ 254,491$ 231,012
23,479Freehold land
Buildings
Flight equipment
Equipment under finance leases
Machinery equipment
Office equipment
Leased assets

Cost

16. PROPERTY, PLANT AND EQUIPMENT

$

$

2015

976,427
13,140,158
229,849,035
28,087,404
9,930,186
1,044,598
129,372(Continued)

December 31

965,174
13,104,983
248,262,079
28,898,891
10,317,327
1,086,015
120,1002016

For details on services, major business offices and the country where the above associates and jointly
controlled entities are registered, refer to Table 5, “Names, Locations, And Other Information Of
Investees On Which The Company Exercises Significant Influence” and Table 6, “Investments In
Mainland China” following these Notes to Consolidated Financial Statements.

The investments in jointly controlled entities accounted for by using the equity method and the Group’s
shares of their profit or loss and other comprehensive income were based on the jointly controlled
entities’ financial statements which had not been reviewed by independent auditors.

Other comprehensive income of associates accounted for by using the equity method in 2016 and 2015
are losses in the amounts of $(65,531) thousand and $(1,943) thousand, respectively.

China Pacific Catering Services
China Pacific Laundry Services

For the Year Ended December 31
2016
2015

Details of investment income attributable to investment in jointly controlled entitles were as follows:

The Group entered into a joint venture agreement with the Taikoo Group to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both parties havethe majority power in the board of directors to pose a motion for veto, and therefore the Group does nothave control.

China Pacific Catering Services
China Pacific Laundry Services

Proportion of Ownership andVoting Rights
December 31
2016
2015

At the end of the reporting period, the proportion of ownership and voting rights in jointly controlled
entities held by the Group were as follows:151

Balance at December 31,
2016

Balance at January 1,
2016
Additions
Disposals
Reclassification
Net exchange difference

Cost

Balance at January 1,
2015
Depreciation expense
Disposals
Impairment loss
Reclassification
Net exchange difference
Balance at December 31,
2015

Accumulated depreciationand impairment

Balance at December 31,
2015

Balance at January 1,
2015
Additions
Disposals
Reclassification
Net exchange difference

Cost

Net value$965,174

976,427(11,253)

-

$

$

-

976,427

953,614
22,813$$$

Freehold Land

Buildings
Flight equipment
Equipment under finance leases
Machinery equipment
Office equipment
Leased assets
Leasehold improvements

$

$

$

$

$

$

13,104,983

13,140,158
93,660(110,227))406(19,014(5,355,804)(4,794,850)(562,749)
18,015-)(55 )(16,165

13,140,158

13,085,921
45,404(31,102)590
39,345

Buildings

Accumulated depreciation and impairment loss

Leasehold improvements
Construction in progress

5,781,555
135,893,108
15,846,688
6,964,422
894,997
101,882
1,593,538$ 248,262,079$ 229,849,035
7,964,882(6,339,141)
16,787,303-$$

28,898,891

28,087,404
1,017,510(410,271)
204,248-$ (14,201,904)$ (128,953,990)

28,087,404

33,985,116
394,939(550,429)(5,742,222)-$ (16,998,403)(2,104,460)
550,430
4,350,529-$$

Equipment
under FinanceLeases

$

$

$

$

$

$

3,928,846
134,8882015

5,355,804
128,953,990
14,201,904
6,598,390
839,931
113,276
1,528,753

15,981,800

15,167,890
858,094(293,592)
252,436(3,028)(9,080,350)(8,663,824)(741,629)
325,893
2,250(3,040)15,167,890

$

$

-

-

$

$

(5,781,555)(5,355,804)(508,403)
74,3498,303

Buildings$ (135,893,108)$ (128,953,990)(14,209,081)
5,612,149(717,758)
2,375,572-

FlightEquipment$ (15,846,688)$ (14,201,904)(2,061,900)
410,2716,690
155

Equipment
under FinanceLeases$$(9,554,839)(9,080,350)(765,860)
288,884631
1,856

Others(Concluded)$ (167,076,190)$ (157,592,048)(17,545,244)
6,385,653(717,758)
2,382,893
10,314

Total(Continued)$ 307,212,927$ 287,220,914
9,934,146(7,153,231)
17,244,393(33,295)

Based on the particularity of risk in the aviation industry, all of the Group’s assets such as aircrafts, realestate, and movable property are adequately insured to diversify the potential risk related to operations.

Refer to Note 34 for the carrying amounts of property, plant and equipment pledged by the Group.

$ (157,592,048)

15-25 years
7-20 years
10-20 years
6-8 years
3-10 years
7-12 years
3-15 years
5-12 years

5 years
3-5 years
3-5 years

25 years
3-13 years
3-15 years

45-55 years
10-25 years

Regarding changes in fleet composition, current and forecasted market value, and other technical factors,
the Group recognized impairment losses on aircraft equipment in 2016 and 2015 of $717,758 thousand and$569,000 thousand, respectively.

Building
Main buildings
Others
Machinery equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersAssets leased to others
Flying equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircrafts
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

Property, plant and equipment were depreciated on a straight-line basis over the estimated useful life of theasset:

Balance at December 31,
2016

Balance at January 1,
2016
Depreciation expense
Disposals
Impairment loss
Reclassification
Net exchange difference

Accumulated depreciationand impairment

Freehold Land$ (152,102,281)(17,261,495)
3,773,247(569,000)
8,586,686(19,205)$ 287,220,914$ 294,757,347
6,711,363(3,997,684)(10,316,868)
66,756Total$ 129,628,866(Concluded)$ 157,592,048$$ 287,220,914$

14,697,246
630,493(330,385)
165,938
4,598

Others$ 140,136,737$ 167,076,190$$ (121,645,204)(13,852,657)
2,878,909(569,000)
4,233,962-$ 229,849,035$ 232,035,450
5,640,527(3,085,768)(4,741,174)-

FlightEquipment

3,958,811
499,547

December 31$ 307,212,927

$

2016

152
$ 2,075,903

2015$ 2,076,182

December 31

$

$
$

$

$ 2,082,390-$ 2,082,390$ 2,082,390-$ 2,082,390

Balance on January 1, 2015
Additions

Balance on December 31, 2015

Balance on January 1, 2016
Additions

Balance on December 31, 2016

Cost

(6,487)(6,208)(279)(6,208)(5,929)(279)

Accumulated
Impairment
andDepreciation

All of the Group’s investment properties were held under freehold interest.

$ 2,075,903$ 2,076,182(279)$ 2,076,182$ 2,076,461(279)

Net Value

The fair value valuation was performed by independent qualified professional valuers, and the future
income evaluated by management was based on market transactions.

The fair value of the investment properties held by the Group was $2,348,759 thousand as of both
December 31, 2016 and 2015.

The investment properties held by the Group were land located in Nankan and buildings in Taipei, whichwere all leased to others. The buildings were depreciated on a straight-line basis over 55 years.

Carrying amount
Investment properties

2016$ 9,906,807

Purchase of property, plant and equipment paid

17. INVESTMENT PROPERTIES$ 9,934,146(25,647)(1,692)

Increase in property, plant and equipment
Increase in retentions payable on construction contracts
Capitalized interest paid

December 31,
2016

The Group generated the following non-cash investment activities related to the purchase of property, plantand equipment in 2016:$ 1,898,154$ 1,623,186
277,235(2,267)$$(761,039)(613,508)(147,486)(45)(613,508)

4,638,502

1,267,927
355,0032,429,741
178,193
407,638$ 24,546,082

3,928,747

1,653,927
632,661
1,146,659
500
495,0002015$ 33,246,859$ 28,714,476
2,522,891
1,489,112
504,924
14,144
1,312$$

December 31$ 20,942,278
2,020,389
1,389,464
144,835
18,82730,289$$2016$ 1,137,115$ 1,009,678
277,235(147,486)(2,267)(45)$ 1,009,678

The prepayments for aircrafts comprised the prepaid deposits and capitalized interest from the purchase of
A350-900 and 777-300ER aircrafts. For details of the contract for the purchase of the A350-900 aircrafts,
refer to Note 35. The rights to the six confirmed orders of 777-300 ER aircrafts were transferred to theaircraft leasing company upon delivery of the aircrafts. Then, all six aircrafts were leased back. As of
May 2016, all the aircrafts had been delivered, and the Group was refunded with deposits for the aircraft
purchases.

Prepayments for aircrafts
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
OthersNoncurrent

Other financial assets
Temporary payments
Prepayments
Restricted assets
OthersCurrent

19. OTHER ASSETS

The above other intangible assets were depreciated on a straight-line basis over 2-12 years.

Balance at December 31, 2016

Balance at January 1, 2016
Additions
Amortization expense
Reclassification
Exchange influence$$ 1,623,186

Balance at December 31, 2015

670,997408,721(70,040)$$$ 1,214,465
408,721-

Balance at January 1, 2015
Additions
Amortization expense(543,468)(70,040)

Net Value

Accumulated
Amortization

Computer
Software Cost

18. OTHER INTANGIBLE ASSETS153

Current portion$$ 900,000

31,275,000
65,52987,783,617
30,092,112$ 57,691,505

37,200,000
64,18689,230,727
32,268,540$ 56,962,187

2015$ 31,231,342
25,342,804

December 31

1.3%

9,995

10,0005

2015$ 33,993,999
18,100,914

2016

0.758%$

December 31$ 900,000-

2016

1.25%-1.8636%

For information on secured bank loans which were secured by freehold land, buildings, machinery
equipment and flight equipment, refer to Note 34.

Less:

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discountc. Long-term debts

Annual discount rate

Commercial paper
Less: Unamortized discount on bills payableb. Short-term and bills payable

1.51%-2%

Interest rates

2015$ 173,289

December 31$ 135,000

2016

Bank loans - unsecured

a. Short-term loans

20. BORROWINGSThe Group designated its time deposits with original maturities of more than three months which wereclassified as other financial instruments as cash flow hedges to hedge exchange rate exposure from theexpenditure of aircraft rentals. As of December 31, 2016, the book value of the hedging instruments was$455,037 thousand. The losses on the effective portion of the cash flow hedges reclassified from equity
for 2016 were $2,884 thousand, which were classified as operating costs in the statement of comprehensive
income.

2016
2005/3/42029/2/4
2004/12/162029/2/4

0.92%-2.27%
1.1432%2.613%

51,045,365
52,533,784$ 51,045,365
52,533,784

1,049,548
4,040,362

32,536
122,827

2005/1/182017/9/21
2004/6/282017/9/21

0.8539%-4.39%
0.4067%4.39%

$

Less:

Current portion and put option of convertible bonds

Secured corporate bonds first-time issued in 2011
Unsecured corporate bonds first-time issued in 2013
Unsecured corporate bonds first-time issued in 2016
Unsecured corporate bonds second-time issued in 2016
Convertible bonds - fifth time

21. BONDS PAYABLE

10,900,000
4,700,000
5,000,000
1,638,044
22,238,044
2,700,000$ 19,538,044$

2,400,000
10,900,000
2,544,106
15,844,106
4,944,1062015$ 10,900,000$

December 31

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The
NIFs, with various maturities until February 2021, were used by the Group to guarantee commercial
papers issued. As of December 31, 2016 and 2015, the commercial papers were issued at discountrates of 1.0510%-1.4580% and 1.2407%-1.5833%, respectively.

December 31, 2015

December 31, 2016

Periods

December 31, 2016
December 31, 2015

Interest rates

December 31, 2016
December 31, 2015

Translated to New Taiwan dollars

December 31, 2016
December 31, 2015

Original currency

Currency
New Taiwan
Dollars
U.S. Dollars

Bank loans (New Taiwan dollars and U.S. dollars) are repayable quarterly, semiannually or in lumpsum upon maturity. Related information is summarized as follows:

154

2011.05.20-2016.05.20

Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year private unsecured bonds - issued at par in
January 2013; repayable in January 2017 and 2018;
1.6% interest p.a., payable annually
Seven-year private unsecured bonds - issued at par in
January 2013; repayable in January 2019 and 2020;
1.85% interest p.a., payable annually
Five-year unsecured bonds - issued at par in May
2016; repayable in May 2020 and 2021; 1.19%
interest p.a., payable annually
Five-year unsecured bonds - issued at par in
September 2016; repayable in September 2020 and2021; 1.08% interest p.a., payable annually
Five-year convertible bonds - issued at discount in
December 2013; repayable in lump sum uponmaturity; 1.8245% discount rate p.a.
Principal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in January of2017 and 2018; indicator rate;
payable annuallyPrincipal repayable in January of2019 and 2020; indicator rate;
payable annuallyPrincipal repayable in May of2020 and 2021; interest p.a.
payable annuallyPrincipal repayable in May of2020 and 2021; interest p.a.
payable annually
Except for converting to sharecapital or buying back, principal
repayable in December of 2018

Conditions

-

1.08

1.19

1.85

1.6

1.35

1.35

1.35

1.35

Rate (%)

c. The Company may redeem the bonds at face value between March 26, 2014 and November 16, 2018
under certain conditions.

b. The holders can request that the Company repurchase their bonds at 100.75% face value on the third
anniversary of the offering date. Because the holders can exercise selling rights on December 26,
2016, the Company reclassified the bonds payable to “current portion of bonds payable” in December
2015. The Company paid $994,705 thousand to the holders of the bonds payable who exercised theput options, and the difference between the payment amount and carrying amount recognized was a loss
on the bonds payable buy back of $41,943 thousand, for which the Company reclassified the remaining
face value to non-current asset.

a. The holders may demand a lump-sum payment for the bonds upon maturity.

The Company issued the fifth issue of unsecured convertible bonds, and the issuance conditions were as
follows:

The Company issued its 2016 first unsecured corporate bonds with a face value of $5,000,000 thousand,and the purchasers of the bonds included Mandarin Airlines Co., Ltd. and Sabre Travel Network (Taiwan)Co., Ltd., who held a face value of $300,000 thousand which was eliminated from the consolidated
financial statements.

The above indicator rate is the 90 days’ commercial paper rates of Taiwan’s secondary market.

2013.12.26-2018.12.26

2016.09.27-2021.09.27

2016.05.26-2021.05.26

2013.01.17-2020.01.17

2013.01.17-2018.01.17

2011.05.20-2016.05.20

2011.05.20-2016.05.20

2011.05.20-2016.05.20

PeriodCategory

Related issuance conditions were as follows:

1.1828%1.5667%$ 6,507,600$ 1,428,467
5,079,1332015

As of December 31, 2016, the Company leased engines and a total of four A330-300 and B747-400
aircrafts by sale-leaseback contracts under finance leases. The lease terms are from April 2006 to
April 2019. During the lease term, the Company retained all risks and rewards attached to the aircrafts
and engines and enjoyed the same substantive rights as were enjoyed prior to the transactions. Interest
rate underlying all obligation under finance leases were floated. Therefore, the minimum lease
payments under the sale-leaseback aircraft contracts are not inclusive of interest expense.

1.0323%1.0980%$ 4,816,000

Present value of minimum lease payments
Interest rates$ 1,254,000
3,562,000

Within one year
Later than one year and no later than five years

Minimum lease payments -flight equipmenta. Sale-leasebacks - finance leases
December 31$ 5,481,379

Liability component at the date of issuance

22. LEASING$ 6,000,000(518,621)

Proceeds from issuance
Equity component

2016

The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability
component was 1.8245% per annum on initial recognition.

d. Between January 26, 2014 and December 16, 2018 (except for the period between the former dividend
date and the date of the dividend declaration on record), holders may convert the bonds to theCompany’s common shares. The initial conversion price was set at NT$12.24, which is subject toadjustment if there is a capital injection by cash, stock dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of July 31, 2016, there was adjustment the conversion price to NT$11.64, corporate bonds with aface value of $3,315,700 thousand had been converted to 270,890 thousand of common shares.

155

Financial cost

113,305$

147,504$$ 1,457,957
5,197,147$ 6,655,104$ 4,929,305

4.96%

29,490118,014

147,504

37,697
117,433
155,130(7,626)

$

$

$

2015

$ 1,284,001
3,645,304

4.756%

30,001
83,304

113,305

30,131
85,244
115,375(2,070)$$$Current
Noncurrent

Frequent flyer program
Advance ticket sales

The rental rates stated in the aircraft lease agreements some are fixed and some are floated. If theagreed-upon rental rate is floating and will be revised monthly or semiannually, subleasing is notallowed for all the lease arrangements. As of December 31, 2016, the Group has rented elevenA330-300 planes, thirteen B737-800 planes, ten 777-300ER planes, six ERJ 190 planes and eight
A320-200 planes under operating contracts which the lease terms range from 8 to 12 years, with anextension option.

Fuel costs
Ground service expenses
Repair expenses
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expenses
Others

23. OTHER PAYABLES

Minimum lease payments

24. DEFERRED REVENUEAs of December 31, 2016 and 2015, the refundable deposits paid by the Group under operating lease
Part of the refundable
contracts were $982,988 thousand and $952,520 thousand, respectively.
deposits is secured by credit guarantees, and outstanding credit guarantee as of December 31 2016 and2015 were $1,459,935 thousand and $1,304,259 thousand.

$ 83,485,120$ 10,431,969
39,692,972
33,360,179

8,896,478
33,344,415
32,325,852

2015

2,664,944
902,879
968,371294,751
1,926,538
748,070
391,857
3,567,844

2,038,041
1,135,152
916,442
262,601
3,310,173
781,621450,492
3,402,026

2,427,565
14,202,198$ 16,629,763$ 14,820,860
1,808,903

2,610,667
12,365,348$ 14,976,015

13,112,086
1,863,929$ 14,976,015

$

2015

$ 12,296,548

$

2015

7,896,856

December 31$ 16,629,763

$

2016

$

December 31$ 11,465,254

$

2016

$ 10,723,726

For the Year Ended December 31
2016
2015

$ 74,566,745$

December 31

The lease payments recognized in profit or loss for the current period were as follows:

Up to 1 year
Over 1 year to 5 years
Over 5 years

2016

The future minimum lease payments for the non-cancelable operating lease commitments were as follows:

China Airlines, Ltd., Mandarin Airlines, Tigerair Taiwan and Taiwan Air Cargo Terminal rented
planes, hangars and etc. under various operating lease contracts expiring on various dates until May
2028. The Group does not have a bargain purchase option to acquire the leased planes and hangar at
the expiration of the lease periods.

c. Operating lease arrangements (include sale-leaseback-operating lease)

Total amount of present value of minimum lease payments
Current
Noncurrent

Discount rate

Within one year
Beyond one year and within five years

Present value of minimum lease payments - cargoterminal and other

Present value of minimum lease payments

Less:

Within one year
Beyond one year and within five years

Minimum lease payments - cargo terminal and other2016

December 31

Taiwan Air Cargo Terminal Co. (TACT) entered into a terminal construction contract. Refer to Note
35 for the terms of the contract. Dynasty Holiday Co., Ltd. signed a long-term equipment lease
contract, and the lease contract is a finance lease contract.

b. Finance leases

156$ 7,490,154

Balance at December 31, 2016

Employees in U.S. and Japan of China Airlines Co., Ltd. and subsidiaries are members of U.S. andJapan government retirement benefit plans. Subsidiaries should appropriate specific portion to
retirement benefit plans. The obligation to the government retirement benefit plans of China Airlines
Co., Ltd. and subsidiaries is appropriating specific portion amount.

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.

a. Defined contribution plans

26. RETIREMENT BENEFIT PLANS

The Company and Mandarin Airlines leased flight equipment under operating lease agreements. Under
the contracts, when the leases expire and the equipment is returned to the lessor, the flight equipment has tobe repaired according to the expected years of use, number of flight hours, flight cycles and the number ofengine revolutions. The Group had existing obligations to recognize provisions when signing a lease or
during the lease term. Tigerair Taiwan Co., Ltd. also leased flight equipment under operating leaseagreements. In accordance to the contract, Tigerair had to pay the maintenance reverse accounted for thenumber of flying hours.

Deficit (net defined benefit liability)$ 6,187,481
2,613,011(1,393,565)
83,227

Balance at January 1, 2016
Additional provisions recognized
Usage
Effect of exchange rate changes

Balance at January 1, 2015
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial (gain) loss - changes indemographic assumptions
Actuarial (gain) loss - changes in financial
assumptions
Actuarial (gain) loss - experience
adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
OthersBalance at December 31, 2015

7,956,835(40,100)(768,025)
874,179(3,882,634)

512,165
716,933(874,179)(123,796)
14,436,208

189,433

15,335(40,100)(67,747)(67,747)

400,144
243,257
643,401-$ (3,880,941)

Fair Value ofthe Plan Assets$$ 15,119,110(7,162,275)

2015

512,165
676,833(768,025)(123,796)
10,553,574(Continued)

189,433

15,335(40,100)

400,144
175,510575,654$ 10,192,908

Net Defined
BenefitLiability (Asset)$ 10,553,574$ 14,436,208(3,882,634)

December 31$ 14,073,849

Present Valueof the Defined
BenefitObligation

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

Present value of funded defined benefit obligation
Fair value of plan assets$ 6,187,481

Balance at December 31, 20152016

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans
were as follows:$ 4,303,780
2,079,169(237,716)
42,248

Aircraft Lease
Contract$ 6,187,481

The defined benefit plan adopted by the Company and in accordance with the Labor Standards Law isoperated by the government. Pension benefits are calculated on the basis of the length of service andaverage monthly salaries of the six months before retirement. The Company and subsidiary contributeamounts equal to 2%-15% of total monthly salaries and wages to a pension fund administered by thepension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in thecommittee’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 ismanaged by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right toinfluence the investment policy and strategy.

b. Defined benefit plans

Balance at January 1, 2015
Additional provisions recognized
Usage
Effect of exchange rate changes$ 7,490,154

20,186
6,167,295$

Current
Non-current$$ 6,187,481$ 7,490,154

Operating lease-aircraft
81,925
7,408,229

2015

December 31
2016

25. PROVISIONS

157

7,254
(4,221,019)
979,274
114(233,100)
1,160,547
933,541(979,274)(175,245)$ (7,162,275)

-

6,094

(45,264)(45,264)

7,254

$

-

742,100
161,780
903,880$ 15,119,110$

Fair Value ofthe Plan Assets$$

7,956,835(Concluded)

1,160,547
940,795(4,221,019)(175,131)(233,100)

6,094

7,254

742,100
116,516
858,616

Net Defined
BenefitLiability (Asset)

Discount rate(s)Expected rate(s) of salary increase

1.000%-1.625%
1.000%-2.000%

2016

2015
1.250%-2.000%
1.000%-2.250%

December 31

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 wereas follows: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.

2) Interest risk: A decrease in the government bond interest rate will increase the present value of thedefined benefit obligation; however, this will be partially offset by an increase in the return on theplan’s debt investments.

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 byplan assets should not be below the interest rate for a 2-year time deposit with local banks.

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

Balance at December 31, 2016

Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial (gain) loss - changes indemographic assumptions
Actuarial (gain) loss - changes in financial
assumptions
Actuarial (gain) loss - experience
adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
OthersPresent Valueof the Defined
BenefitObligation(688,912)
646,851$ (659,696)
715,1396,000,000$ 60,000,000$ 54,708,901

2015
6,000,000$ 60,000,000$ 54,708,901

December 31

7-13 years$ 757,933

2015

Issuance of stock in excess of par value and conversion premium
Employee stock options expired
Long-term investment
Gain on sale of treasury shares held by subsidiaries
Bonds payable equity component
Othersb. Capital surplus$ 799,932

2015$ 798,415$ 552,470
11,7471,019
1,156
232,023-

December 31$ 552,470
11,747
1,019
2,673
146,684
85,3392016

The Company issued the 5th domestic unsecured convertible bonds, and the convertible bonds holders
applied for conversion in the amount of $2,713,900 thousand. The common shares exchanged were in
the amount of $221,724 thousand and are entitled to have their registration changed after the issuance of
new shares.

Numbers of shares authorized (in thousands)
Amount of shares authorized
Amount of shares issued

Common sharesa. Share capital

2016

7-13 years

The average duration of the defined benefit obligation

27. EQUITY$ 880,886

December 31

The expected contributions to the plan for the next year

2016

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 inisolation of one another as some of the assumptions may be correlated.

Discount rate(s)0.5% increase
0.5% decrease
Expected rate(s) of salary increase
0.5% increase
0.5% decrease

December 31,
2016

If possible reasonable change in each of the significant actuarial assumptions will occur and all otherassumptions will remain constant, the present value of the defined benefit obligation would increase(decrease) as follows:158

Legal reserve
Special reserve
Cash dividends$

287,224
76,4862,508,525

Appropriationof Earnings$0.458522382

Dividends Per
Share (NT$)

The appropriation of earnings for 2015 was resolved in the stockholders’ meeting on June 24, 2016.
The appropriations and dividends per share were as follows:

2) Appropriation of earnings in 2015

On June 26, 2015, the stockholders resolved to offset the accumulated deficit in 2014. The deficit
included a net loss of $751,232 thousand, other retained earnings of $47,471 thousand,unappropriated deficits of $3,161,115 thousand, and a remaining amount of accumulated deficit of$3,864,876 thousand. The Company offset the accumulated deficit against the legal reserve of$1,511,953 thousand. No bonus to employees was appropriated for 2014 because of the net loss inthat year.

1) Appropriation of earnings in 2014

The distribution of dividends should be resolved and recognized in the stockholders’ meeting in thefollowing year.

For the earnings distribution under the Articles before the amendment, refer to Note 27 of theconsolidated financial statements for the year ended December 31, 2015.

Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”)
amended on June 24, 2016 based on the amended Company Act, where the Company 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 inaccordance with the laws and regulations, and then any remaining profit together with any undistributed
retained earnings shall be used by the Company’s board of directors as the basis for proposing a
distribution plan with due consideration of any future aircraft acquisition plans and fund demand, whichshould be resolved in the stockholders’ meeting for the distribution of dividends and bonuses tostockholders by cash or stock (cash dividends cannot be less than 30% of total dividends distributed).
However, if the Company’s profit before tax in a fiscal year after deductions for the abovementioned
items is not sufficient for earnings distribution, retained earnings can be used as a supplement for the
deficiency. If the Company has no deficit in a fiscal year, the Company can distribute all or part of thecapital surplus by cash or stock with due consideration of finance, marketing and management
requirements in accordance with the laws and regulations.

c. Appropriation of earnings and dividend policy

The capital surplus from long-term investments and employee stock options expired may not be used
for any purpose. Besides, capital surplus from conversion of employee stock and convertible bonds
payable may not be used for any purpose.

The capital surplus from shares issued in excess of par (including additional paid-in capital fromissuance of common shares and treasury share transactions) and donations may be used to offset
deficits; in addition, when the Company has no deficit, such capital surplus may be distributed as cash
dividends or transferred to capital (but limited to a certain percentage of the Company’s paid-in capitalon yearly basis).

The

Balance on December 31, 2016

Balance on January 1, 2016
Exchange differences arising ontranslating the foreign
operations
Cash flow hedge on changes infair value of hedging
instruments
Cumulative gain (loss) arisingon changes in fair value ofhedging instruments
reclassified to profit or loss
Share of associates accounted
for using the equity method
Effect of income tax

Balance on December 31, 2015

Balance on January 1, 2015
Exchange differences arising ontranslating the foreign
operations
Unrealized gain (loss) on
available-for-sale financial
assetsCash flow hedge on changes infair value of hedging
instruments
Cumulative gain (loss) arisingon changes in fair value ofhedging instruments
reclassified to profit or loss
Share of associates accounted
for using the equity method
Effect of income tax

$

$

$

$

78,564

13,618--(93,013)

157,959

157,959(9,306)

$

$

$

1,714

(41)
-

-

-

-

1,755

1,755

765
-

-

$

$

$

-

-

-

-

(3,025)-31,986(52,840)

589,024(278,201)-(225,997)(225,997)(366,060)

2,555,302(405,674)--

67,413

Cash FlowHedge$ (2,009,565)$

Unrealized
Gain (Loss) on
Available-forsale Financial
Assets
4,015

99,852

Exchange
Differences on
Translating
Foreign
Operations

The movement of other equity items is as follows:d. Others equity items

$

$

$

112,264(41)(39,222)589,024(278,201)(93,013)(66,283)(66,283)765(375,366)

2,555,302(405,674)(3,025)67,413$ (1,905,698)

Total

When the Company distributes undistributed earnings for the years after 1998, except for non-ROC
residents stockholders, all stockholders can receive the imputation tax credit calculated by the Tax
Deduction Ratio on the distribution date.

The board of directors proposed to use a legal reserve of $81,132 thousand to offset the deficit.
compensation of deficit for 2016 is still to be approved in the stockholders’ meeting.

159$ 2,286,647

(457)
8,278
(1,965)(157,053)

756
65,007(4,548)(201,886)$ 2,083,381$ 2,321,737
162,496102(3,368)(42,305)(818)$ 2,286,647
139,400(19,079)(183,431)
515

For the Year Ended December 31
2016
2015

Mandarin Airlines
Hwa Hsia

December 31, 2015

Mandarin Airlines
Hwa Hsia

December 31, 2016

Subsidiary

2,075
814

2,075
814

Shares(In Thousands)

Company’s shares held by its subsidiaries reclassified frominvestments in shares to treasury sharesYear ended December 31, 2015

Company’s shares held by its subsidiaries reclassified frominvestments in shares to treasury sharesYear ended December 31, 2016

Purpose of Treasury Shares$ 24,895
9,770$ 34,665$ 34,665$ 26,866$ 26,866$ 24,895
9,770$ 19,294
7,572

Market Value

2,889

2,889

Number of
Shares,Endof Year$ 19,294
7,572

-

-

Reduction
Duringthe Year(Note)

Carrying
Amount

2,889

2,889

Number of
Shares,Beginningof YearTreasury shares are the Company’s shares held by its subsidiaries as of December 31, 2016 and 2015
were as follows:(Shares in Thousands)

f. Treasury sharesEnding balance

Beginning balance
Net income attributable to non-controlling interest
Foreign exchange difference
Unrealized gain or loss on financial instrument
Actuarial gains and losses on defined benefit plan
Cash flow hedge on changes in fair value of hedging instruments
Cumulative gain (loss) arising on changes in fair value ofhedging instruments reclassified to profit or loss
Effect on income tax
Acquisition of non-controlling interests in subsidiaries
Dividends paid by subsidiaries

e. Non-controlling interest$ 145,056,217$ 94,962,055
40,292,840
9,801,322

759,139

242,801
168,377
59,099288,862

466,923
184,5121,884,052
695,692$ 3,231,179$(35,678)(629,965)(347,868)(717,758)(1,010,246)

53,419$ (2,688,096)$

150,871
244,045(1,899,372)(569,000)(897,537)

13,155$ (2,957,838)$

For the Year Ended December 31
2015
2016

$

$

For the Year Ended December 31
2015
2016

$ 141,079,107$ 95,282,373
35,721,425
10,075,309

For the Year Ended December 31
2016
2015

The mediation of labor-management disputes between the Company and Taoyuan Flight Attendants
Union (TFAU) was unsuccessful. TFAU acquired the right to strike through a strike vote and started
the strike at 12 a.m. on June 24, 2016, and the scheduled flights resumed as usual on June 25, 2016 after
both parties reached a consensus. For other related information, refer to the Taiwan Stock Exchange
Market Observation Post System.

Gain on disposal property, plant and equipment and noncurrent
assets held for saleNet gain (loss) arising on financial assets classified as held for
tradingGain or loss on foreign exchange, net
Impairment loss on noncurrent assets held for saleImpairment loss on property, plant and equipment
Othersc. Other gains and losses

Interest income
Subsidy income
Dividend income
Othersb. Other income

Passenger
Cargo
Othersa. Revenue

28. NET INCOME

The shares of the Company held by its subsidiaries were treated as treasury shares. The subsidiaries
can exercise stockholders’ right on these treasury shares, except for the rights to subscribe for theCompany’s new shares and voting rights.

Above subsidiaries acquisition of the Company’s shares in previous years was due to investment
planning.

160$ 344,835
1.74%-1.80%

147,486$

810
69,23070,040$$$ 17,261,774$ 17,545,523

32
147,454$ 16,507,474
754,300$ 16,839,497
706,026

An analysis of depreciation by function
Operating costs
Operating expenses$$ 17,331,814$ 17,693,009

Depreciation and amortization expense

An analysis of amortization by function
Operating costs
Operating expenses$ 17,261,495
279
70,040$ 17,545,244
279
147,486

For the Year Ended December 31
2016
2015

$ 421,285
1.45%-1.73%

For the Year Ended December 31
2015
2016

$ 1,783,793

292,242
1,343,488
140,912$ 1,292,865

$

7,151

294,890
912,945
74,640

10,390$For the Year Ended December 31
2015
2016

Property, plant, equipment
Investment property
Intangible asset

e. Depreciation and amortization expense

Capitalization interest
Capitalization rate

Information of interest capitalization was as follows:

Interest expense
Bonds payable
Bank loans
Interest on obligations under financial leases
Loss arising on derivatives as designated hedging instruments
in cash flow hedge accounting relationship reclassified fromequity to profit or loss

d. Finance costs

The Company provided a compensatory plan to the passengers and the agents who suffered losses fromthe strike, and the related compensation expense was about $201,000 thousand.

1,284,476

425,860
858,616$ 25,465,431$ 20,827,112
4,638,319$ 24,180,955$ 18,931,016
5,249,939$$

951,542

375,888575,654$ 24,266,845$ 19,701,524
4,565,321$ 23,315,303$ 18,509,223
4,806,080$$

For the Year Ended December 31
2016
2015

Information on the employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors in 2016 and 2015 is available on the Market Observation Post System
website of the Taiwan Stock Exchange.

Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date that the annual consolidated financial statements are authorized for issue
are adjusted in the year that the bonuses and remuneration were recognized. If there is a change in the
proposed amounts after the annual consolidated financial statements are authorized for issue, thedifferences are recorded as a change in the accounting estimate.

To be in compliance with the Company Act as amended in June 2016, the Articles stipulate the
distribution of employees’ compensation at rates of no less than 3% of the net profit before income tax
and employees’ compensation. For the years ended December 31, 2016 and 2015, the employees’
compensation was $382,318 thousand and $1,810,196 thousand, respectively, of the base net profit.
The employees’ compensation in cash for the years ended December 31, 2016 and 2015 was approvedby the Company’s board of directors on January 17, 2017 and January 15, 2016, respectively.

An analysis of employee benefits expense by function
Operating costs
Operating expenses

Other employee benefits
Salary expenses
Personnel service expenses

Post-employment benefits
Defined contribution plan
Defined benefit planf. Employee benefits expense

161992,790

3,085

173,195(159)$ 1,168,911$

Total income tax recognized in other comprehensive income

Recognized in other comprehensive income
Translation of foreign operations
Hedging instruments fair value revaluation for cash flow
hedging
Actuarial gain or loss on defined benefit plan

Deferred tax$ 125,980(53,056)
159,935

19,101(365,220)115,062(9,061)$ (259,219)$$ 1,208,675$ 1,168,911$

43,866
1,985

642,481
(159)

2015

944,522350,3092016

16,798517,465(67,063)
1(1,648,737)
108,570
57,378145,181(478,805)(88,767)
3,085(12,495)
235,828
19,624

Income tax expense recognized in profit or loss

$ 1,212,930
20,960$

Income tax expense calculated at the statutory rate (17%)
Effect on different tax of subsidiaries govern by other region
Effect on adjustment to income tax
Non-deductible expenses in determining taxable income
Temporary differences
Tax-exempt income
Additional income tax under the Alternative Minimum Tax Act
Loss carryforwards - current used
Loss carryforwards - generated
Oversea income tax expense
Deferred tax
Temporary differences
Unrecognized loss carryforwards, investment tax credits andtemporary difference
Adjustments for prior years’ tax$ 7,134,885

319,574
33,055$ 1,879,851

For the Year Ended December 31
2015
2016

Profit before tax

b. Income tax recognized in other comprehensive income

997,5041

209,185
1,985$ 1,208,675$

For the Year Ended December 31
2015
2016

A reconciliation of accounting profit and income tax expense were as follows:

Income tax expense recognized in profit or loss

Deferred tax
Current year

Current tax
Current year
Prior year adjustment
Income tax on unappropriated earnings

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

29. INCOME TAX

Deferred tax assets

2,534
125,008
213,139
340,681$$Deferred tax assets

Temporary differences
Unrealized foreign exchange gain
Depreciation difference from fixed assets
Defined benefits plan
OthersDeferred tax liabilities

Temporary differences
Defined benefit plan
Frequent flyer program
Maintenance reserve
Allowance for reduction of inventory
OthersLoss carryforward

108,903
126,488
9,792
178,406
423,589$$$ 8,524,043$ 1,735,354
432,196
726,728
150,185
1,080,038
4,399,542

Beginning
Balance(53,622)(2,534)(39,059)(12,029)(50,813)20,753
310,761
24,465)
180,419(1,560,854(106,369)(1,480)20,968(86,881)$$$ (1,075,269)$

Recognized in
Profit or Loss$$

$ (1,046,412)$ 7,188,415(598,541)(31,254)
212,586
26,191)(197,579)(457,815$

Recognized in
Profit or Loss

$ 1,789,811
452,949
1,037,489
174,650
894,828
2,838,688

For the year ended December 31, 2015

Temporary differences
Unrealized foreign exchange gain
Depreciation difference from fixed assets
OthersDeferred tax liabilities

Temporary differences
Defined benefit plan
Frequent flyer program
Maintenance reserve
Allowance for reduction of inventory
OthersLoss carryforward

Beginning
Balance

For the year ended December 31, 2016c. Deferred tax assets and liabilities(10,756)(10,756)

115,224

159,935(44,711)
-

$

$

$

$

(754)

(9,792)
9,038(259,973)

105,270(365,243)-

Recognized in
Other
Comprehensive
Income$$$$Recognized in
Other
Comprehensive
Income(2,693)

$

$

$

$

4,727

4,727

(386)

(386)
-

EndingBalance273,61085,949187,661$$

340,6812,534
125,008
213,139$ 7,188,415$ 1,789,811
452,949
1,037,489
174,650
894,828
2,838,688$$$ 6,256,665(562)(2,693)$ 1,351,205
421,695
1,250,075
200,841
651,976
2,380,873

EndingBalance(562)-

Exchange
Difference

$

$

$

$

Exchange
Difference

162
$

2020
2021
2022

Cal Hotel Co., Ltd.

2024
2025
2026

Tigerair Taiwan Co., Ltd.

2023
2026

Mandarin Airline Co., Ltd.

2019
2021
2022
2026

China Airlines, Ltd.

Expiry Year229,761

22,02045,156
9,617
76,793(Continued)$

1,538,876$$

199,654586,357
752,865

651,465$$

50,917
600,548$$ 102,527$ 551,908

The income tax return of TACT for 2001 was assessed by the tax authorities with an additional income
tax payable amounting to $129,350 thousand for the excessive distribution of the imputation credit
account (“ICA”) to TACT’s shareholder and a fine equivalent to one fold of the excessive distribution.
TACT disagreed with the assessment and appealed for reinvestigation, administrative appeal andadministrative proceedings but the Supreme Administrative Court affirmed the additional tax paymentof $129,350 thousand on December 8, 2011, and TACT made the additional tax payment. Because thedecision of the court on the amount of fine remained the same, TACT filed an administrative remedy,
and the High Administrative Court had reached a decision on June 15, 2016, however, TACT refused toaccept the resolution and appealed to the Supreme Administrative Court on July 4, 2016.
Nevertheless, TACT recognized a provision for fine in the amount of $59,501 thousand.

The income tax returns for 2014 of the Company and its subsidiaries, except for the matters mentioned
below, have been examined by the tax authorities.

f. Income tax assessment

Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputationcredits allocated to ROC resident stockholders of the Company was calculated based on the creditableratio as of the date of dividend distribution.

The actual creditable tax ratio on December 31, 2015 was 20.22%. The Company accumulated a
deficit for which to be compensated for the year ended December 31, 2016, and therefore there was notax deduction ratio resulting from earnings distribution.

Imputation credit accounts

2015

14,964(Concluded)

49,600$$18,124
31,476362,440$$

34,923
115,951
102,248
34,04833,77541,495$

UnusedAmountDecember 31$ 20,964,421

e. Integrated income tax

2026

Hwa Hsia

2025
2026

2016

UnusedAmount6,743

Taiwan Aircraft Maintenance And Engineering Co., Ltd.

2021
2022
2023
2024
2025
2026

Taiwan Air Cargo Terminal Limited

Expiry Year$ 17,328,027
2,899,496
619,799
117,099$$ 5,801,302$ 9,653,435

2015$ 4,500,000
95,68280,080125,538
127,797
233,703
638,502-

December 31$ 7,300,000
22,02080,080125,568
127,707
233,693638,257
1,126,110d. Unused tax loss carryforwards as of December 31, 2016 were as follows:

Difference in depreciation

Loss carryforwards
2019
2020
2021
2022
2023
2024
2025
2026

2016

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

163

$

Earnings used in the computation of diluted earnings per share

$
$

1.06
1.00

$ 5,811,430

47,716

571,540$ 5,763,714

571,540

5,838,764

255,186
150,850

47,337

5,515,339

5,432,728

5,468,002$ 22,238,044
89,230,727$ 22,580,069
91,315,640

Fair Value

Fair Value$ 16,459,680
87,944,264

2015$ 15,844,106
87,783,617

Carrying
AmountDecember 31$$

Derivative financial assets
for hedging
Derivative financial
liabilities for hedging--

415,441$

To support its operating activities and purchase of aircraft, the Group needs to maintain sufficient capital.
Therefore, the goal of capital management is to ensure financial resources and operating plan is able tosupport the future working capital, capital expenditures, debt repayment and dividend expenses and otherneeds.

415,441

Level 1$

Financial assets at FVTPL
Derivative instrument
Beneficial certificates

December 31, 2016

$

$

$

$

23,62961,634

1,200

1,200
-

Level 2

$

$

$

$

Level 3

-

83

-

-

$

$

$

$

23,62961,717

416,6411,200
415,441

Totalc) Level 3 fair value measurements are those derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data (unobservable inputs).

b) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); anda) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;

The following table provides an analysis of financial instruments that are measured subsequent toinitial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fairvalue is observable:

2) Fair value measurements recognized in the balance sheets

Some long-term debts and capital lease obligations are floating-rate financial liabilities, so theircarrying values are their fair values. As of December 31, 2016 and 2015, the fair values oflong-term debts and private bonds with fixed interest rates are estimated at the present value of
expected cash flows discounted at rates of 1.191% and 0.433%, respectively, prevailing in themarket for long-term debts (Level 2). Fair values of bond payable trading in OTC and based onquoted market prices (Level 1).

Bonds payable
Loans and debt

Financial liabilities

Carrying
Amount2016

Except as detailed in the following table, the management considers the carrying amounts offinancial assets and financial liabilities recognized in the financial statements as approximating theirfair values.

1) Financial instruments not evaluated at fair value

a. Fair values of financial instruments

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, other equity andnon-controlling interests.

31. CAPITAL MANAGEMENT

If the Group offered to settle compensation or bonuses paid to employees in cash or shares, the Groupassumed the entire amount of the compensation or bonus would be settled in shares and the resulting
potential shares were included in the weighted average number of shares outstanding used in thecomputation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential
shares was 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.

Weighted average number of common shares used in thecomputation of diluted earnings per share

0.10
0.10

For the Year Ended December 31
2016
2015

$

Weighted average number of common shares in computation of basic
earnings per share
Effect of potentially dilutive common shares:
Convertible bonds
Employees’ compensation or bonus issue to employees$$
For the Year Ended December 31
2016
2015

Earnings used in the computation of basic earnings per share
Effect of potentially dilutive common shares:
Interest on convertible bonds (after tax)

Basic earnings per share
Diluted earnings per share

For the Year Ended December 31
2016
2015

The numerators and denominators used in calculating earnings per share were as follows:

30. EARNING PER SHARE

32. FINANCIAL INSTRUMENTS

164

$

Derivative financial
liabilities for hedging
-

-

$

$

$

$

$

12,70251,060-65,52865,528-

Level 2

$

$

$

$

$

-

-

-

$

$

$

$

$

324,980

63,79819,080544,036

65,528478,508

Total

Future cash flows are estimated based on observable forward
exchange rates at the end of the reporting period andcontract forward rates, discounted at a rate that reflects thecredit risk of various counterparties.

Discounted cash flow.

Valuation Techniques and Inputs

Because some financial instruments and non-financial instruments cannot show their fair value,
the total fair value showed by these disclosure are not total value of the Group.

The fair values of foreign exchanges and fuel options are determined using option pricing
models where the significant unobservable inputs are implied fluctuation. An increase in theimplied fluctuation used in isolation would result in a decrease in the fair value of foreignexchanges and fuel options.

e) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value
measurement

Derivatives - foreign currency
forward contracts andinterest rate swaps

Financial Instrumentsd) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value
measurement

312,278

12,738

Level 3

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

$

Derivative financial assets
for hedging

19,080478,508$$

478,508

Level 1$

Available-for-sale financial
assetsSecurities listed indomestic

Financial assets at FVTPL
Derivative instrument
Beneficial certificates

December 31, 2015

416,641
140,357
61,71736,576,111

23,629130,110,449$ 130,134,078$

544,036
242,991
63,79835,800,865

2015

324,980
125,241,381$ 125,566,361$$ 36,651,690$

December 31$ 37,194,826

$

2016

The Group is primarily exposed to the financial risks of changes in foreign currency exchange rates
and interest rates. The Group entered into derivative financial instruments to manage its exposure
to foreign currency risk and interest rate risk.

1) Market risk

In addition, the Group has a risk management committee, which meets periodically to evaluate theperformance of derivative instruments and determine the appropriate hedging percentage. This
committee informs the Group of global economic and financial conditions, controls the entire financial
risk resulting from changes in the financial environment and fuel prices, and develops the strategy andresponse to avoid financial risk with the assistance of financial risk experts to effect risk management.

The Group has risk management and hedging strategies to respond to changes in the economic andfinancial environment and in the fuel market. To reduce the financial risks from changes in interest,
exchange rates and in fuel prices, the Group has its operating costs stay within a specified range byusing appropriate financial hedging instruments and hedging percentages in accordance with the“Processing Program of Derivative Financial Instrument Transactions” approved by the Groupstockholders to reduce the impact of market price changes on earnings. These risks include market
risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

c. Financial risk management objectives and policies

Note 3: The balances include financial assets measured at cost.

Note 2: The balances include financial liabilities measured at amortized cost, which compriseshort-term loans, short-term notes payable, notes and accounts payable, accounts payable related parties, other payables, bonds payable and long-term loans, capital lease obligations,part of other current liabilities, part of other noncurrent liabilities and guarantee deposits.

Note 1: The balances include loans and receivables measured at amortized cost, which comprise cash
and cash equivalents, notes and accounts receivable, accounts receivable - related parties,
other receivables, refundable deposits, other financial assets and other restricted financial
assets.

Derivative financial liabilities for hedging
Financial liabilities at amortized cost (Note 2)

Financial liabilities

Financial assets at FVTPL
Available-for-sale financial assets (Note 3)
Derivative financial assets for hedging
Loans and receivables (Note 1)

Financial assets

b. Categories of financial instruments

165$ 26,093,421
91,339,655

2015$ 16,723,881
93,742,231

December 31

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. For
floating rate liabilities, the analysis was prepared assuming the amount of the liability
outstanding at the end of the reporting period was outstanding for the whole year. A one yard
(25 basis) point increase or decrease was used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in interest rates.

Sensitivity analysis

Fair value interest rate risk
Cash flow interest rate risk

2016

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

The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rateborrowings, and using interest rate swap contracts and forward interest rate contracts.

The Group enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates.

b) Interest rate risk

When the New Taiwan dollar strengthens one dollar against the U.S. dollar and all othervariables were held constant, there would be a decrease in pre-tax profit in 2016 of $47,622
thousand and a decrease in pre-tax profit in 2015 of $157,849 thousand.

The following details the Group’s sensitivity to a one dollar increase or decrease in the New
Taiwan dollar (the functional currency) against the relevant foreign currencies (i.e. the U.S.
dollar). This 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 foreign currency forward contracts designated as
cash flow hedges and adjusts their translation at the end of the reporting period for a one U.S.
dollars increase/decrease against the New Taiwan dollar.

The Group was mainly exposed to the U.S. dollar.

Sensitivity analysis

$

-

75

$

(185)

(110)

$

(10,188)

10,084(110,077)$ (29,805)

Since the customers of the industry is dispersed and non-related, the credit risk concentration is notcritical aviation.

To assess individual customers, the Group consider into the financial condition of the customers,
the credit rating agency rating, the Group’s internal credit rating, transaction history and current
economic conditions and many other factors that may affect the repayment. Sometimes, the Group
uses certain credit enhancement tools to reduce the credit risk of specific customers.

The Group has established procedures to management operations related credit risk to maintain thequality of accounts receivable.

Operation - related credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting
in financial loss to the Group. The Group’s credit risk, primarily comes from accounts receivable
generated from operating activities and bank deposits generated from investing activities, fixed
investment income and other financial instruments, operation related credit risk and financial credit
risk are managed separately.

2) Credit risk

Fuel price increase of5%
Fuel price decrease of5%

For the Year Ended December 31
2016
2015
Other
Other
CompreComprehensive
hensive
IncomePre-tax Profit
Pre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)

The sensitivity analyses below were determined based on the exposure to fuel price risks at theend of the reporting period.

Sensitivity analysis

The Group was exposed to fuel price risk on its purchase of aviation fuel. The Group enters
into fuel swaps contract to hedge against adverse risks on fuel price changes.

c) Other price risk

Had interest rates increased one yard (25 basis) point and had all other variables been held
constant, the Group’s pretax profit for the year ended December 31, 2015 would have decreased
by $63,464 thousand.

a) Foreign currency risk

The Group enters into foreign currency option contracts to hedge against the risks on change in
related exchange rates, enters into forward contracts to hedge against the risks on changes inforeign-currency assets, liabilities and commitments in the related exchange rates.

Had interest rates been one yard (25 basis) points higher and had all other variables been held
constant, the Group’s pretax profit for the year ended December 31, 2016 would have decreased
by $228,349 thousand.

The Group enters into forward contracts, foreign currency option contracts, and interest swap
contracts with fair values that are highly negatively correlated to the fair values of hedged items andevaluates the hedging effectiveness of these instruments periodically.

166

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments
Bonds payable

2,655
-

1.3384

5,151,941

401,268$

4,426,559

321,459

1.192$

1-3 Months

0.016

1.1462

The Weighted
Average
Effective
Interest Rate(%)

December 31, 2016

18,2002,700,000

419,109

27,023,603

962,542$ 31,123,454$

3 Months to
1 Year

2,775
4,338,044-

15,047,722

2,998,391$ 22,386,932$

1-2 Years

15,200,000-

32,803,858

648,913$ 48,652,771$

2-5 Years$$-

7,340,794--

7,340,794

5+ Years

1,101,266

205,861
4,944,106475,464

22,453,633$ 29,180,330$

3 Months to
1 Year1,548,611

4,664-

463,574

33,930,613

3,647,955

10,900,000

413,789

20,588,242-

2,323,333-

97,6642,225,669

2015

$

$

5+ Years$ 22,172,000

December 31$ 35,549,986$

2-5 Years$ 14,424,006

2016$ 35,947,462$

1-2 Years

$
$
$

2,552
14,32528,328

$
$
$

2,321
13,95034,835

Sales of Goods
For the Year Ended
December 31
2016
2015

$ 657,104$ 1,613,899$
63,084

Associates
Jointly controlled entities
Major stockholders

500
1,550
1,512
3,562

$

182
599
3,093
3,874

$

2015
$

December 31

$

2016

$ 581,173$ 1,531,649$
78,374Purchases of Goods
For the Year Ended
December 31
2016
2015

The amount of accounts receivable - related parties at reporting dates were as follows:

Associates
Jointly controlled entities
Major stockholders

a. Operating transactions

The transactions, accounts balances, income and expenses between related parties were eliminated from theconsolidated report and, therefore, were not disclosed in this note. Except for the disclosures stated inother notes, transactions between the Group and its related parties are disclosed below:

33. RELATED-PARTY TRANSACTIONSUnused bank loan limit (unsecured)Bank loans with a repayment on demand clause were included in the second column of the tablebelow regardless of whether or not the banks would choose to exercise early their rights to
repayment. The maturity dates for other non-derivative financial liabilities were based on theagreed-upon repayment dates. The Group’s liquidity analysis for its derivative financial
instruments is also shown in the following table. The table was based on the undiscounted
contractual net cash inflows and outflows on derivative instruments that settle on a net basis, andthe undiscounted gross cash inflows and outflows on those derivatives that require gross settlement.
When the amount payable or receivable is not fixed, the amount disclosed has been determined byreference to the projected interest rates as illustrated by yield curves at the end of the reporting
period.

7,641,922

114,455-

1.3798$

175,109

4.374

364,897
6,987,461

$

1.325

1.29341-3 Months

Loan commitments

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments
Bonds payable

The Weighted
Average
Effective
Interest Rate(%)

December 31, 2015

The following table shows the remaining contractual maturity analysis of the Group’s financial
liabilities with agreed-upon repayment periods, which were based on the date the Group may berequired to pay the first repayment and financial liabilities is evaluated based on undiscounted cash
flows, including cash flows of interest and principal.

Liquidity and interest risk rate tables

The objective of the Group’s management of liquidity is to maintain cash and cash equivalents are
sufficient for operating purpose, marketable securities with high liquidity and sufficient Loan
Commitments and ensure the Group has adequate financial flexibility.

3) Liquidity risk

Credit risk on bank deposits, investments income and other financial instruments are measured andmonitor by the Group’s finance department. The Group’s trading partners and other parties were
well-performing banks and financial institutions, corporations, and government agencies, the risk ofCounterparties fail to discharge an obligation is low, therefore there is no significant credit risk.

Financial credit risk

167

$ 493,754$ 555,829

98,245388,371
7,138

$

2015

$ 120,824
431,502
3,503

December 31$ 3,850,000
1,080,000
180,000
919,742

Authorized
Amount$ 2,783,000
436,418
438,740$ 2,739,000
486,815
236,629
6,343
447,399

ActualAmount Used2015

$ 45,813
3,865$ 49,678$ 47,748
12,269$ 60,017

For the Year Ended December 31
2016
2015

$ 3,400,000
1,080,000
236,629
180,000
937,895

Authorized
AmountDecember 31
ActualAmount Used2016

The remuneration of directors and key executives was determined by the remuneration committee
having regard to the performance of individuals and market trends.

Short-term employee benefits
Post-employment benefits

d. Compensation of key management personnel

Cal Park
Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan

The Company

c. Endorsements and guarantees

Under an operating lease agreement, the Company rented flight training machines and flight simulatorsfrom China Aviation Development Foundation to train pilots, the Company paid the rental on usage
hours. In 2016 and 2015, the Company had paid rentals of about $63,084 thousand and $78,374
thousand, respectively.

b. Lease of properties (operating leases)

The outstanding accounts payable from related parties are unsecured and will be paid in cash, the termsof making collections and payables is from 30 days to 90 days; accounts receivable from related parties
does not gather any deposit, and no expense was recognized for allowance for impairment loss.

Associates
Jointly controlled entities
Major stockholders

2016

The amount of accounts payable - related parties at reporting dates were as follows:

268,790236,634$ 91,147,989

323,028$ 78,170,799$ 90,642,565$ 77,847,771

The original total expenditure of the previous main construction project was $8,490,000 thousand.
However, TACT filed an arbitration for the total amount of expenditure in 2012 to revise the total
amount to $6,840,000 thousand.

d. Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract with the Civil
Aeronautics Administrations (CAA) on January 14, 2000. The chartered operation period (COP) is 20
years from the date of transfer of the chartered operation rights from CAA to TACT. The terminal
expansion and improvements and the equipment installation and upgrade in the Taiwan Taoyuan
International Airport cargo terminal and Kaohsiung cargo terminal were expected to be completed in
the first 10 years of the COP. This construction project was approved by TACT’s board of directors in
2003. The total estimated expense of the construction project was $8,490,000 thousand. The
designated start of the project was from 2004 and the construction began in 2008. TACT filed an
application for a 10-year extension of the COP for the cargo terminals in the Taiwan Taoyuan
International Airport and Kaohsiung International Airport and received the approval from the Taoyuan
Airport Corporation and CAA in July 2013 and July 2015, respectively.

c. Tigerair Taiwan entered into a lease contract for four A320-200 aircrafts with a 10-year lease term on
July, November and December 2015. Two of the four aircrafts were delivered in January and June
2016. The expected delivery date of the remaining aircrafts are in February and December 2017.

b. For the future development of the Company’s business, the Company entered into a lease contract with
BOC Aviation with a letter to lease six 737-800 aircrafts. The expected delivery period would begin
from September 2016. As of December 31, 2016, four of the aircrafts have been handed over to theCompany.

a. In January 2008, the Company entered into a contract to buy fourteen A350-900 aircrafts from Airbus,
with the option to buy six more A350-900 aircrafts, with aggregate purchase prices of US$3,933,235
thousand and US$1,802,645 thousand, respectively. The expected period of delivery of the aircrafts
was from 2016 to 2018. As of December 31, 2016, four of the aircrafts had been handed over to theCompany, and the total list price of the remaining ten aircrafts was US$2,839,377 thousand, which has
been paid in the amount of US$637,908 thousand (recognized as prepayments for aircrafts).

As of December 31, 2016, the Group had commitments and contingent liabilities (except for thosementioned in other notes) as follows:

35. COMMITMENTS AND CONTINGENT LIABILITIESThe above US Treasury bill had been pledged as collaterals for Freighter Prince Ltd., which classified as
restricted assets - noncurrent.

Property, plant and equipment
Restricted assets - noncurrent
Pledged certificate deposits
US treasury bill

2015

2016

December 31

The following assets had been pledged or mortgaged as collaterals for long-term bank loans, leaseobligations and business transactions:34. PLEDGED ASSETS

168

Cargo Terminal Expansion Construction Consultant
Contract
Paint steel columns and roof renewal works Contract

CECI Engineering
Consultant, Inc., Taiwan
Chen-Jia Construction Co.
$
86,380552,285

6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%

Royalty Rate

CAL Park should pay land rentals on the date of the registration of surface rights. The rental rates forthe development stage differ from those for the operation period. The rental rates should follow
Article No. 2 of the “Regulations for Favorable Rentals Regarding Public Land Lease and Superficies
in Infrastructure Projects,” which states that rental calculation in the development stage should include
the land value added tax plus the necessary maintenance fee; in the operation period, rentals are 60% of
the amount based on the National Building Land Rental Standard plus land value tax, value-added tax
and the necessary maintenance fee.

CAL Park’s business scope includes providing business and other operating space related to civil airtransport, hotels, aviation service and related industries adhered to the base and essential services law
and approved by the Taoyuan Airport Corporation.

f. CAL Park Co., Ltd. (“CAL Park”) signed “Taiwan Taoyuan International Airport Aviation Operation
Center (including Airport Hotel) Construction Operating Contract” with the CAA on September 20,
2006. However, on November 1, 2010, the Taoyuan Airport Corporation took over the CAA’s rights
on this contract from the CAA. The contract is effective for 50 years (consisting of the development
stage and operating period) from the contract date. Three years before contract expiry date, CAL Park
has the first option to renew the contract once with a 20-year extension.

Below $2 billion
Above $2 billion but below $4 billion
Above $4 billion but below $6 billion
Above $6 billion but below $8 billion
Above $8 billion but below $10 billion
Above $10 billion but below $12 billion
Above $12 billion

Annual Operating Amounte. TACT should pay royalties to Taoyuan Airport Corporation and CAA during the chartered operation
period. The calculation is based on annual sales (including operating revenue and nonoperating
revenue but excluding the rental revenue from specific district), and Taoyuan Airport Corporation and
CAA has the option to adjust the royalty rates every 3 years starting from the date of transfer of thechartered operation right on the basis of actual revenue and expenditure. These rates were listed asfollows:

Assets acquired from cargo terminal improvements, equipment acquisition and subsequent equipment
acquisition and replacement will be transferred to the government without any compensation when thechartered operating license expires.

As of December 31, 2016, the cumulated consultant service expense and construction equipment had
amounted to $464,642 thousand (VAT included) and $4,952,609 thousand (VAT included),
respectively. Upon completion of the projects, the amount of $459,850 thousand (VAT included) and$4,874,635 thousand (VAT included) were reclassified to property, plant, and equipment. The
remaining cumulative payments were recognized under construction in progress.

Contract Title

Client NameContract
Amount (VAT
Included)

As of December 31, 2016, TACT had signed the following construction contracts with unrelatedparties:Monetary items
USD
EUR
HKD
JPY
CNY

Financial liabilities

Monetary items
USD
EUR
HKD
JPY
CNY

Financial assets

December 31, 2016$

259,1456,512
94,831
4,442,045
137,773

310,384
15,665
273,060
5,138,687
483,548

Foreign
Currencies

32.258134.0136
4.15800.27704.642532.258134.0136
4.15800.27704.6425

Exchange Rate

8,359,536
221,486
394,306
1,230,446
639,614$ 10,012,403
532,807
1,135,385
1,423,417
2,244,088

Carrying
Amount

The following information was aggregated by the foreign currencies other than functional currencies of thegroup entities and the exchange rates between foreign currencies and respective functional currencies weredisclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

36. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

g. The Group has been named as a defendant, together with other airline members of the Association ofAsia Pacific Airlines, in a civil class action lawsuit filed at the U.S. Northern District Court ofCalifornia by a group of passengers who alleged that there was an antitrust violation in December 2007.
The Company has properly joined the defendants’ Joint Defense Group.

CAL Park should submit the asset transfer plan within five years before the expiry date of the charteredoperation period, begin the negotiation of the asset transfer contract, and complete the assignation nolater than three years before the expiry date of the chartered period. If CAA decides not to keep thebuilding and equipment on the base area, CAL Park should remove all related building and equipment
within three months after the expiry date.

During the 50 years beginning from the initial operation date of CAL Park to the end of the construction
period, CAL Park should pay royalties based on the operating revenue estimated in the financial plan of
its investment execution proposal. If the sales and business tax declared and filed by a business entity
for a single year exceeds 10% of the operating revenue as estimated in the financial plan in its
investment execution proposal, CAL Park should pay additional royalties at 10% of this excess.

CAL Park should pay construction and operation security deposits of $100,000 thousand (using a
refundable certificate deposit recognized under deposits-in). If CAL Park complies with the contract
terms within three months after the initial operation date, half of the security deposits will be refundedinterest free, and the remaining amount will be refunded within three months after the end of theoperating period and the completion of asset transfer. In May 2011, CAL Park received the refunded
security deposits of $50,000 thousand without interest.

169

153,815
8,353
87,413
4,632,721
150,973

371,091
16,153
230,469
1,769,067
2,105,839

32.8947
35.97124.24450.2731
5.065932.8947
35.97124.24450.2731
5.06595,059,699
299,732
371,024
1,265,198764,813$ 12,206,940
569,778
978,224
483,136
10,667,121

None

Table 2 (attached)

Table 1 (attached)

8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 4 (attached)7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 3 (attached)6) Disposal of individual real estates at costs or prices of at least NT$100 million or 20% of the paid-in
capital: None

5) Acquisition of individual real estates at costs or price of at least NT$100 million or 20% of thepaid-in capital: None

4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: None

3) Marketable securities held:

2) Endorsement/guarantee provided:

1) Financing provided:a. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:

37. ADDITIONAL DISCLOSURESFor the years ended December 31, 2016 and 2015, the Group’s net foreign exchange gains (losses) were$(629,965) thousand and $244,045 thousand, respectively. It is impractical to disclose net foreignexchange gains (losses) by each significant foreign currency due to the variety of the foreign currencytransactions and functional currencies of the group entities.

Monetary items
USD
EUR
HKD
JPY
CNY

Financial liabilities$

Total assets$

9,666,123$ 142,212,640$ 132,546,517$ 224,500,759

2,866,431
79,421,688

4,564,687
242,801

Identifiable assets
Investment accounted for by theequity method
Assets$1,879,851-$$

Profit before income tax$

536,986
535,162(1,292,865)(2,706,920)

3,614,617

950,070$ 141,079,107$(6,265,636)

Operation profit and losses
Interest revenue
Investment income accounted forby the equity method
Revenue
Financial cost
Expense$7,873,653

Total$ 139,471,090$

For the Year Ended December 31, 2016
Adjustment andOthersWrite-off

Operating revenue

Air
Transportation

The Group mainly engages in air transportation services for passengers and cargo; the services include
airport service, storage service, and other air transportation services which are below the financial
threshold for an operating segment of the Group. Therefore, the Group’s main reportable segment is
air transportation. The accounting policies of the reportable segment are consistent with theaccounting policies described in Note 4.

a. Segment information

38. SEGMENT INFORMATION

Table 6 (attached)10) Derivative financial transactions (Notes 7 and 9)

c. Business relationship and important transactions between China Airlines, Ltd. and its subsidiaries:
Table 7 (attached)

Carrying
AmountMonetary items
USD
EUR
HKD
JPY
CNY

Exchange Rate
b. Investment in Mainland China:

Foreign
Currencies

9) Names, locations, and related information of investees on which the Company exercises significant
influence: Table 5 (attached)

Financial assets

December 31, 2015

170

$ 122,602,185$

9,671,914$(53)

8,129,197
466,923$ 221,926,309

2,877,777
86,774,486$ 132,274,046$$

Total assets

Identifiable assets
Investment
accounted for by
the equity
methodAssetsProfit before
income tax

Operation profit
and losses
Interest revenue
Investment income
accounted for by
the equity
methodRevenue
Interest expense
ExpenseOperating revenue

Total assets

Identifiable assets
Investment
accounted for by
the equity
methodAssetsProfit before
income tax

Operation profit
and losses
Interest revenue
Investment income
accounted for by
the equity
methodRevenue
Interest expense
ExpenseOperating revenue

$

$

$

$

$

$

1,459,834

2,439,067

43,255,614

America

1,434,169

1,305,147

40,063,516

America$$

11,477$$

1,321,000

26,519,512$$

98,711(429,148 )

30,470,044

145,471(827,756 )

31,150,308

Southeast Asia$

17,785$

Northeast Asia$$

(215,992 )

27,017,443

Southeast Asia$$

Northeast Asia

$

$

$

$

$

$

$

$

$

3,026

89,4105,047,106

Australia

$

$

$

China

5,229

69,964

12,529,410

Europe

$

$

$

4,354

229,823

4,318,055

Australia$$$

14,0912,141,393

20,470,330

China

13,7401,560,699

19,267,568

For the Year Ended December 31, 2015

5,160

(19,411 )

11,770,672

EuropeFor the Year Ended December 31, 2016

2,273,982

13,708,394

Domestic

2,734,416

13,507,497

Domestic$ 130,633,643$$$ 140,640,049

$

$

-

-

(6,265,636 )

$

$

$

(53 )

21,290(6,694,509 )Adjustment andEliminations

$

$

$

Adjustment andEliminations

1,879,851

536,986
535,162(1,292,865 )(2,706,920 )

4,564,687
242,801

7,134,885

516,140
3,038,744(1,783,793 )(3,232,326 )

8,129,197
466,923$ 221,926,309

2,877,777
86,774,486$ 132,274,046$$$ 145,056,217

Consolidation$ 224,500,759

2,866,431
79,421,688$ 142,212,640$$$ 141,079,107

Consolidation

The geographical segment information of the Company and its subsidiaries in 2016 and 2015 are listed
below:

b. Geographical segment

Total assets

Identifiable assets
Investment accounted for by theequity method
Assets21,291

7,134,885$

Profit before income tax$

516,140
3,038,744(1,783,793)(3,232,326)

7,264,754

843,152$ 145,056,217$(6,694,509)

Operation profit and losses
Interest revenue
Investment income accounted forby the equity method
Revenue
Financial cost
Expense$7,526,765

Total$ 144,223,961$

For the Year Ended December 31, 2015
Adjustment andOthersWrite-off

Operating revenue

Air
Transportation

$ 3,850,000
1,080,000
240,586
180,000
953,579$ 3,850,000
1,080,000
180,000
919,742$ 2,783,000
436,418
438,740$

Based on the Company’s guidelines, the allowable aggregate amount of collateral guarantee is up to 50% of the Company’s stockholders’ equity.

$ 11,156,763
11,156,763
11,156,763
11,156,763
11,156,763

Note 2:

100% subsidiary
54% subsidiary
100% subsidiary
100% subsidiary
90% subsidiary by direct
and indirect holdings

Nature of Relationship

ActualBorrowingAmount

6.90
1.94
0.32
1.65

Ratio ofAccumulated
Value ofAmount ofCollaterals
Collateral toProperty, Plant Net Equity ofor Equipment
the Latest
Financial
Statement (%)

Based on the Company’s guidelines, the maximum amount of guarantee to an individual counter-party is up to 20% of the Company’s stockholders’ equity.

China Airlines
Cal Park(the “Company”) Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan Ltd.

Name

Limit on EachCounter-party’s
Maximum
Endorsement/
Balance for the Ending Balance
Guarantee
PeriodAmount(Note 1)

Note 1:0No.

Endorsement/
Guarantee
ProviderCounter-party

ENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

171$ 27,891,909
27,891,909
27,891,909
27,891,909
27,891,909

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)

Y
Y
Y
Y
Y

N
N
N
N
N

N
N
N
N
N

Endorsement/ Endorsement/ Endorsement/
Guarantee
Guarantee
Guarantee
Given byGiven on Behalf
Given by Parent
on Behalf of
Subsidiaries on of Companies in
Subsidiaries Behalf of Parent Mainland China

TABLE 1Marketable Security Type and Issuer/Name

Beneficiary certificates
Mirae Asset Solomon Money Market Fund
Mega Diamond Money Market Fund
Franklin Templeton SinoAm Money Market FundFSITC Taiwan Money Market FundFSITC Money Market Fund

Stock
TransAsia Airways

Stock
China Airlines

Sabre Travel Network (Taiwan)

Taiwan Airport Services

Hwa Hsia-

Parent company

-

-

-

-

Parent company-

Relationshipwith the Holding
Company

Financial assets at fair value through profit or loss - current

Available-for-sale financial asset - current

Available-for-sale financial asset - noncurrent

Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current

Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent

Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current

Available-for-sale financial asset - 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 Statement AccountNote 2: The Company does not issue stocks because it is a limited company.

Note 1: The subsidiary’s net asset value was $64,474 thousand, which included common stock and preferred stock as of and for the year ended December 31, 2016.

Beneficiary certificates
Taishin 1699 Money Market Fund

Stock
Taikoo (Xiamen) Landing Gear Services
Taikoo Spirit Aerospace Systems (Jinjiang)
Composite

Beneficiary certificatesFuh Hwa Money Market Fund
Barclays America Bonds Fund

Stock
China Airlines

Cal-Asia Investment

Mandarin Airlines

China Airlines (“Parent company”) Stock
Everest Investment Holdings Ltd. - common stockEverest Investment Holdings Ltd. - preferred stock
Chung Hua Express Co.
Jardine Air Terminal Services

Holding Company Name

MARKETABLE SECURITIES HELDDECEMBER 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

172
349,523

814,152

2,277,786

265,726
4,637,003
5,360,663
3,360,289
155,632-

15,302,543
1,000,000

2,074,628

1,359,368
135,937
1,100,000
12,000,000

Number of
Shares/Units

$

4,683

7,572

-

3,321
57,58454,85550,90027,502

20,157

184,235
32,361

19,29452,704473
11,00056,023

-

-

0.4

-

5.83
5.45

-

-

13.59
11.00
15.00

December 31, 2016
Percentage
ofCarrying Value
Ownership
(%)

$

4,683

7,572

-

3,321
57,58454,85550,90027,502(48,552)
24,577

184,235
32,361

19,29464,474
21,487
6,921

Market Valueor Net Asset
Value

-

-

-

-

Note 2
Note 2--

Note 1
Note 1-Note

TABLE 2

China Airlines, Ltd.
(“China Airlines”)

Company Name

Taiwan Air Cargo Terminal
Hua Hsia
Mandarin Airlines
China Pacific Catering Services
Cal Park
Taiwan Airport Services
Taoyuan International Airport Service
Kaohsiung Catering Services
China Aircraft Services
Cal Hotel
Tigerair Taiwan
China Pacific Laundry Services

Related Party

Subsidiary
Subsidiary
Subsidiary
Equity-method investee
Subsidiary
Subsidiary
Subsidiary
Equity-method investee
Equity-method investee
Subsidiary
Subsidiary
Equity-method investee

Nature of Relationship

Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Sale
Purchase

Purchase/
Sale$

427,875
314,048(2,575,551)
1,504,966
217,210369,255
1,148,069
291,814210,390
180,110(313,019)
108,933

Amount
0.38
0.28
2.02
1.34
0.19
0.33
1.02
0.26
0.19
0.16
0.25
0.10

% to
Total

Transaction Details

30 days
2 months
2 months
90 days
2 months
40 days
40 days
60 days
30 days
1 month
1 month
2 months

Payment Terms

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

173$

Unit Price-$(43,767)(55,480)
377,970(411,698)(57,018)(61,101)(323,510)(68,324)(34,786)(17,772)
37,418(19,804)(2.99)(3.79)
4.06(28.14)(3.90)(4.18)(22.11)(4.67)(2.38)(1.21)
0.40(1.35)

Note/Account Payable or
Receivable% toPayment Terms Ending Balance
Total

Abnormal Transaction

-

Note

TABLE 3

China Airlines

China Airlines

China Pacific Catering Services

Taoyuan International Airport Service

Parent company

Parent company

Parent company

Subsidiary

Nature of RelationshipTransactions with subsidiaries have been written off in consolidated financial report.

China Airlines

Mandarin Airlines

Note:

Mandarin Airlines

Related Party

China Airlines, Ltd. (“China Airlines”)

Company Name

323,510411,698

227,693$ 377,970

Ending Balance(Note)

3.63

3.85

0.36

5.76

Turnover Rate

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALDECEMBER 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

174$

Amount

-

-

-

-

-

-

-

-

Action Taken

Overdue323,510

265,889

18,230$ 208,856

Amounts Received
in Subsequent
Period

$

-

-

-

-

Allowance for
Bad Debts

TABLE 4

3,329
5,877

HK$
US$

Forwarding and storage of air cargo
Airport services and investment

Hong Kong

Samoa

Eastern United International Logistics

Taiwan Airport Service (Samoa)

Cal-Asia Investment

Taiwan Airport Services

The Company does not issue stocks because it is a limited company.

Have acquired non-controlling interests of Taiwan Airport Services from September 2015.

On December 18, 2015 the board of Science Park Logistics (SPL) approved the issuance of common stock for cash and with the date of right issues granted on was December 25, 2015.
to SPL by December 31, 2015. SPL completed the registration of this subscription on January 22, 2016.

Note 5:Note 3

5,617
19,581

16,04919,581

42,948349,21135.00
100.001,050,000-

The board of Company has reached an agreement to purchase $64,091 thousand which had been remitted

5,877

US$

Note 4:

Represents the consolidated financial information of the foreign holding company disclosed in accordance with local regulations.

Note 2:

3,329

HK$

Note 3:Adopted the treasury stock method in recognizing investment income or loss.

Note 1:

Note 4(77,803)
1,003(778,025)
116,081
45,358
5,261
10.00
1.08
20,000,000
469,755
200,000
3,574

Air transportation and maintenance of aircraft
Airport services

Taipei, Taiwan
Taipei, Taiwan

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Mandarin Airlines

200,000
11,658

304
2,621
1,695
(622,420)(31,603)
304
5,139
6,783
(778,025)(31,603)25,46430,9617,418
32
32
362,861
110,128100.0051.00
25.00
100.00100.0080.00
100.001,600,000
408
250,000
1,000
1,000
160,000,000
16,000,000
JPY

26,265
20,400
2,500
US$
1
US$
1
1,600,000
60,000JPY

Taipei, Taiwan
Tokyo, Japan
Taipei, Taiwan
Cayman Islands
Cayman Islands
Taipei, Taiwan
Taoyuan, Taiwan

Yestrip
Dynasty Holidays
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance andEngineering Co., Ltd.

26,265
20,400
2,500
US$
1
US$
1
1,600,000
160,000

Note 1$

19,037

1,529,375
1,125,057
1,261,894
1,244,328
638,980
649,189
450,305
438,502515,051
279,176
231,316
267,371387,375
257,928
167,048

19,412100.0077,27077,27077,270$71,534Note

Note 1
Note 2
Note 5-Investment
Income (Loss)

18,551(215,240)
13,791
29,135208,039
135,850(47,074)
175,169
51,028109,815
54,96675,67473,50026,136
21,628Net Income(Loss) of theInvestee

TABLE 5

18,551 $(227,787)
25,537
29,135407,920
277,247(47,074)
186,479
255,141448,224
116,081
211,499
73,500100,522
39,324100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
24.50
47.35
35.78
100.0026.00
55.00
150,000,000
188,154,025
135,000,000
2,614,500
43,911,000
34,300,000
7,172,346
13,021,042
28,400,000
7,732,200
20,626,644
14,329,759
46,500,000
18,633,937
13,750,000

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
77,322
12,289140,240
465,000
150,654
137,500$$

Taoyuan, Taiwan

China Airlines, Ltd.

Balance as of December 31, 2016
PercentageofSharesCarrying Value
Ownership

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
77,322
12,289140,240
465,000
214,745
137,500

December 31,
2015

Investment Amount
December 31,
2016

Hwa Hsia

Main Business and Product

Real estate lease and international trade
Air transportation and maintenance of aircraft
Air cargo and storage
A holding company, real estate and hotel services
In-flight catering
Airport services
General investment
Sale and maintenance of hardware and software
Airport services
Research, manufacture and maintenance of engines
Airport services
In-flight catering
Hotel business
Storage and customs of services
Cleaning and leasing of the towel of airlines, hotels,
restaurants and health clubs
Cleaning of aircraft and maintenance of machine andequipment
Travel businessTravel business
Forwarding and storage of air cargo
Aircraft lease
Aircraft lease
Air transportation and maintenance of aircraft
Aircraft maintenance

Location

Taoyuan, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan
Los Angeles, U.S.A.
Taoyuan, Taiwan
Taoyuan, Taiwan
Territory of the British Virgin Islands
Taipei, Taiwan
Hong Kong International Airport
Taoyuan, Taiwan
Taipei, Taiwan
Kaohsiung, Taiwan
Taoyuan, Taiwan
Tainan, Taiwan
Taoyuan, Taiwan

Investee Company

Cal Park
Mandarin Airlines
Taiwan Air Cargo Terminal
Cal-Dynasty International
China Pacific Catering Services
Taoyuan International Airport Services
Cal-Asia Investment
Sabre Travel Network (Taiwan)
China Aircraft Service
Asian Compressor Technology Services
Taiwan Airport Services
Kaohsiung Catering Services
Cal Hotel Co., Ltd
Science Park Logistics
China Pacific Laundry Services

Investor Company

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE YEAR ENDED DECEMBER 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

175

Forwarding and storage64,995of air cargo(RMB 14,000)

Landing gear
1,190,000
maintenance services (US$ 36,890)

(US$

(US$

Composite material

Aircraft line
maintenance

Forwarding of air cargo
and ocean freight(US$

Airport Air Cargo Service(Xiamen) Co., Ltd.

Taikoo (Xiamen) Landing
Gear Services

Taikoo Spirit Aerospace
Systems (Jinjang)

Shanghai Eastern Aircraft
Maintenance

Shanghai Eastern UnitedInternational

Investment Amount
Authorized by Investment
Commission, MOEA

$464,423 (Note 5)

Accumulated Investment in
Mainland China as ofDecember 31, 2016

$241,194 (US$7,477)

32,2581,000)

100,000
3,100)

376,226
11,663)Forwarding and storage $ 1,042,154of air cargo(RMB 224,480)

Main Business andProduct

Indirect(Notes 3
and 8)

Indirect(Note 2)

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

5,532
172)

8,000
248)

20,516636)

69,3942,151)

62,821
1,947)$34,720,319 (Note 6)

Limit on Investment

(US$

(US$

(US$

(US$

(US$

$
135,031 $(US$4,186)

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof January 1,
2016

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company Name

China Airlines

INVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2016
(In Thousands of New Taiwan Dollars/Renminibi/U.S. Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

176
Outflow

-

-

-

-

-

-

(US$

$
(US$

-

-

-

-

(US$

(US$

(US$

(US$

18,258566) (US$Net Income(Loss) of
the Investee

5,532
172)

8,000
248)

20,516636)

69,3942,151)----

44,56384,691
1,381) (RMB 18,242)

93,200 $48,9722,889) (RMB 10,549)

Accumulated
Outflow ofInvestment
from Taiwan asof December 31,
2016

41,831 $1,297) (US$

Inflow

Investment Flow

-

8.00

5.45

5.83

14.00

14.00

% Ownershipof Direct orIndirect
Investment

(RMB

$
(RMB

-

-

-

-

(RMB

-

-

20,157
4,342)

-

-

-

-

-

28,236875)(Note 4)90,3792,802)(Note 4)

(Continued)

12,371
115,330
2,554) (RMB 24,842) (US$7,153 $
234,169 $1,477) (RMB 50,440) (US$Investment
Gain (Loss)

Accumulated
Carrying Value
Inwardas ofRemittance ofDecember 31, Earnings as of2016
December 31,
2016

TABLE 6

(US$

-

-

$

Inward$293,115 (Note 6)

Upper Limit on the Amount of
Investment Stipulated by
Investment Commission, MOEA

62,161
1,927)$
132,516 $(US$4,108)

Outward

Remittance of Funds

-

-

(US$

62,161
84,691
1,927) (RMB 18,242)

14.00

14.00

% Ownershipof Direct orIndirect
Investment

(RMB

$
(RMB

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2016

12,371
115,558
2,554) (RMB 24,891) (US$Note 9: The RMB and U.S. dollar amounts of assets are translated at year-end rates and those of gains (losses), at the average of the year-end rates of refer for the reporting period.

Note 8: Eastern United International Logistics (Holdings) Ltd. had disposed the investee company, and the company was preparing for declaration to Investment Commission.

Note 7: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which in return, invested in a company located in mainland China.

(Concluded)

45,374
1,407)

7,154 $
232,872 $
122,785
1,477) (RMB 50,160) (US$3,806)

Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2016

Note 6: The limit stated in the Investment Commission’s regulation, “Investment or Technical Cooperation in Mainland China Adjustment Rule,” is the larger of the Company’s net asset value or 60% of the consolidated net asset value.

Note 5: The amount comprised US$12,655,978, RMB4,200,000 and NT$36,666,667.

Note 4: The inward remittance of earnings in 2016 amounted to US$2,801,749 and US$875,330.

Note 3: Cal-Asia Investment invested in Eastern United International Logistics (Holdings), which in turn, invested in a company located in mainland China.

Note 2: The Company invested in China Aircraft Services, which in turn, invested in a company located in mainland China.

Net Income(Loss) of theInvestee$
132,516 $48,972(US$
4,108) (RMB 10,549)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2016

Note 1: China Airlines, Ltd. the “Company” invested in Cal-Asia Investment, which, in turn, invested in a company located in mainland China.

$191,778 (US$5,945)$191,778 (US$5,945)

Indirect(Note 7)

Investment Amounts Authorized by
Investment Commission, MOEA

Forwarding and storage64,995of air cargo(RMB 14,000)

Airport Air Cargo Service(Xiamen) Co., Ltd.

Indirect(Note 7)

Accumulated Outward
Remittance for Investment in
Mainland China as of December 31, 2016

Forwarding and storage $ 1,042,154of air cargo(RMB 224,480)

Main Business andProduct

Accumulated
Outward
Remittance for
Method ofPaid-in Capital
Investment
Investment
from Taiwan asof January 1,
2016

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company

Taiwan Airport Services

177

0

No.

China Airlines, Ltd.

Company Name

Global Sky Express
Mandarin Airlines
Taiwan Air Cargo Terminal
Mandarin Airlines
Taoyuan International Airport Services
Sabre Travel Network Taiwan
Taiwan Airport Services
Hwa Hsia
Dynasty Holidays
Global Sky Express
Yestrip
Cal Hotel
Tigerair Taiwan
Taiwan Aircraft Maintenance and Engineering
Taoyuan International Airport Services
Taiwan Airport Services
Hwa Hsia
Mandarin Airlines
Tigerair Taiwan
Taiwan Air Cargo Terminal
Dynasty Holidays
Cal-Dynasty International
Yestrip
Cal Park
Cal Hotel
Sabre Travel Network Taiwan
Mandarin Airlines
Sabre Travel Network Taiwan
Taiwan Air Cargo Terminal
Mandarin Airlines
Sabre Travel Network Taiwan
Global Sky Express
Yestrip
Cal Hotel
Tigerair Taiwan
Taiwan Aircraft Maintenance and Engineering

Related Party

a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a

Natural of
Relationship(Note 1)Other operating revenue
Passenger revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Terminal and landing fees
Terminal and landing fees
Terminal and landing fees
Passenger costs
Passenger costs
Other operating cost
Other operating cost
Other operating cost
Other operating cost
Other operating cost
Other operating cost
Operating expense
Interest expense
Interest expense
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties

Accounts

BUSINESS RELATIONSHIP AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINE, LTD. AND ITS SUBSIDIARIESFOR THE YEAR ENDED DECEMBER 31, 2016
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

178$

80,8912,207,698
12,270367,853
3,013
8,570
10,970
9,391
1,793
2,520
14,8205,808
313,019
13,299
1,148,069
369,255
314,048
87,823
12,070427,875
47,59058,094
16,904217,210
180,111
2,926
1,785
357
1,021
377,970914
2,887
13,547535
37,418977

AmountThe same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

Transaction Criteria

Intercompany Transactions(Continued)

0.06
1.56
0.01
0.26
0.01
0.01
0.01
0.01
0.22
0.01
0.81
0.26
0.22
0.06
0.01
0.30
0.03
0.04
0.01
0.15
0.13
0.17
0.01
0.02
-

% to Total
Consolidated
Total Revenue
or Assets

TABLE 7

179

Taiwan Air Cargo Terminal

Mandarin Airlines

2

Company Name

1

No.

China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Airport Services
Taoyuan International Airport Services
Taiwan Air Cargo Terminal
Hwa Hsin
Tigerair Taiwan
Tigerair Taiwan
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Airport Services
Taoyuan International Airport Services
Taiwan Air Cargo Terminal

China Airlines, Ltd.
Mandarin Airlines
Taoyuan International Airport Services
China Airlines, Ltd.
Hwa Hsia
China Airlines, Ltd.
China Airlines, Ltd.
Taoyuan International Airport Services
Mandarin Airlines
Hwa Hsia

Taiwan Airport Services
Taiwan Air Cargo Terminal
Mandarin Airlines
Taoyuan International Airport Services
Sabre Travel Network (Taiwan)
Taiwan Airport Services
Hwa Hsia
Yestrip
Cal Hotel
Cal Park
Tigerair Taiwan
Mandarin Airlines
Sabre Travel Network (Taiwan)
Mandarin Airlines
Sabre Travel Network (Taiwan)

Related Party

b
b
c
c
c
c
c
c
b
b
b
b
b
b
c
c
c

b
c
c
b
c
b
b
c
c
c

a
a
a
a
a
a
a
a
a
a
a
a
a
a
a

Natural of
Relationship(Note 1)

Passenger revenue
Passenger costs
Terminal and landing fees
Terminal and landing fees
Terminal and landing fees
Terminal and landing fees
Operating revenue
Accounts receivable - related parties
Operating expense
Interest revenue
Notes accounts payable - related parties
Interest receivable
Held-to-maturity financial assets
Notes accounts payable - related parties
Notes accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties

Sales revenue
Sales revenue
Sales revenue
Operating costs
Operating costs
Accounts receivable - related parties
Accounts payable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts payable - related parties

Accounts receivable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Interest payable
Interest payable
Bond payable - noncurrent
Bond payable - noncurrent

Accounts$

87,8232,207,698
105,426
38,71914,656
1,105
5,868
249
367,853
1,785
227,693
1,785
250,000
377,970
13,2083,439
1,484

427,875
14,656
7,628
12,27011,67943,767
1,021
797
1,484
1,110

677
43,767
227,693
323,510
16
61,101
55,4803,376
17,77257,018
1,446
1,785
357
250,000
50,000

Amount(Continued)

0.06
1.56
0.07
0.03
0.01
0.26
0.10
0.11
0.17
0.01
-

0.30
0.01
0.01
0.01
0.02
-

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.02
0.10
0.14
0.03
0.02
0.01
0.03
0.11
0.02

% to Total
Consolidated
Total Revenue
or Assets

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

Transaction Criteria

Intercompany Transactions

180

Company Name

Taoyuan International Airport Services

Cal-Dynasty International

Sabre Travel Network Taiwan

Taiwan Airport Services

Hwa Hsia

Dynasty Holidays

Global Sky Express

Yestrip

No.

3

4

5

6

7

8

9

10

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

China Airlines, Ltd.
China Airlines, Ltd.

China Airlines, Ltd.
Taiwan Air Cargo Terminal
Mandarin Airlines
China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Air Cargo Terminal

China Airlines, Ltd.
Mandarin Airlines
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
Mandarin Airlines

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

China Airlines, Ltd.

Mandarin Airlines
Tigerair Taiwan
China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Air Cargo Terminal
China Airlines, Ltd.
Mandarin Airlines
Tigerair Taiwan
Taiwan Air Cargo Terminal

Related Party

Operating costs
Operating expense
Accounts payable - related parties
Operating revenue
Operating expense
Accounts receivable - related parties
Accounts payable - related parties

b
b
b
b

Operating revenue
Operating expense

Operating revenue
Operating revenue
Operating revenue
Operating expense
Accounts receivable - related parties
Accounts receivable - related parties

b
b
b

b
b

b
c
c
b
b
c

16,904
14,2803,367
13,54780,891
2,520
2,887

47,5901,793

314,048
11,6791,105
9,391
55,4801,110

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

369,255
105,426
10,97061,101
677
13,208Operating revenue
Operating revenue
Operating expense
Accounts receivable - related parties
Accounts payable - related parties
Accounts receivable - related parties

b
c
b
b
b
c

(Continued)

0.01
0.01
0.01

0.06
-

0.03
-

0.22
0.01
0.01
0.02
-

0.26
0.07
0.01
0.03
0.01

0.01
0.02
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
2,926
8,570
357
16
357
50,000914

Service revenue
Operating expense
Interest revenue
Accounts receivable - related parties
Interest receivable
Held-to-maturity financial assets
Accounts payable - related parties

b
b
b
b
b
b
b

0.03
0.06
0.81
0.14
0.01
0.04

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

38,71990,3181,148,069
3,013
7,628
323,510
3,439
11,657797

Transaction Criteria

58,094$

Amount% to Total
Consolidated
Total Revenue
or Assets

Operating revenue

Airport service revenue
Airport service revenue
Airport service revenue
Operating expense
Operating costs
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts payable - related parties

Accounts

Intercompany Transactions

b

c
c
b
b
c
b
c
c
c

Natural of
Relationship(Note 1)

Cal Park

Cal Hotel

Tigerair Taiwan

Taiwan Aircraft Maintenance andEngineering

12

13

14

Company Name

11

No.

China Airlines, Ltd.
China Airlines, Ltd.

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
Mandarin Airlines
Mandarin Airlines
Taoyuan International Airport Services
Taoyuan International Airport Services

China Airlines, Ltd.
China Airlines, Ltd.
Cal Park
China Airlines, Ltd.
China Airlines, Ltd.
Cal Park

China Airlines, Ltd.
Cal Hotel
China Airlines, Ltd.
Cal Hotel

Related Party

Note 2: Intercompany transactions were written off in consolidated financial report.

a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.

bb

Operating expense
Accounts payable - related parties

13,299977

The same as ordinary transactions
The same as ordinary transactions(Concluded)

0.01
-

0.22
0.01
0.02
0.04
0.01
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
313,019
12,0701,446
37,4185,868
249
90,318
11,657

Operating expense
Passenger revenue
Accounts receivable - related parties
Accounts payable - related parties
Operating expense
Accounts payable - related parties
Terminal and landing fees
Accounts payables

b
b
b
b
c
c
c
c

0.15
0.06
0.03
0.13
0.06
0.01
-

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

217,210
82,25657,018294

Transaction Criteria

180,111
5,808
82,256
17,772535
294$

Amount% to Total
Consolidated
Total Revenue
or Assets

Operating revenue
Operating expense
Operating costs
Accounts receivable - related parties
Accounts payable - related parties
Accounts payable - related parties

Operating revenue
Operating revenue
Accounts receivable - related parties
Accounts receivable - related parties

Accounts

Intercompany Transactions

b
b
c
b
b
c

b
c
b
c

Natural of
Relationship(Note 1)

Note 1: Three kinds of business relationships between China Airline, Ltd. and its subsidiaries were as follows:

181

182
Acquiring information about the differences between the Company’s financial position and its
tax base, and assessing the rationality of reconciliations and the realization schedule oftemporary differences to verify whether they are consistent with management’s financial
forecasts.

2.

Discussing the status of the transaction with the department accountable for disposing ofaircrafts, and reviewing whether the correspondences and the latest quote were consistent withthe market value estimated by management.

2.

Acquisition Costs of a New Fleet
In accordance with IAS 16 “Property, Plant and Equipment”, acquisition costs of aircrafts shouldbe allocated into several significant components, including airframe, airframe overhaul, engine,engine overhaul, landing gear, etc., and should be depreciated over different useful lives. As of
December 31, 2016, the carrying amount of flight equipment was NT$111,179,027 thousand. Refer
to Notes 4, 5, and 14 in the accompanying financial statements for the related detailed information.

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 wereaddressed 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.

Deferred Income Tax Assets

Due to suffering tax losses in previous years, the Company was granted loss carryforwards which
can be used against taxable income in a certain period. The Company recognized the loss
carryforwards as deferred tax assets to the extent that the taxable profit in the future will beavailable against the loss carryforwards. As of December 31, 2016, the Company recognized tax
losses as deferred tax assets, in New Taiwan dollars (NT$), in the amount of NT$2,322,951
thousand. Refer to Notes 4, 5 and 27 in the accompanying financial statement for the related
detailed information.

Key Audit Matters

Conducting an assessment on the transaction value by obtaining reference prices from
authoritative publications recognized within the aviation industry, historical selling prices ofsimilar types of aircrafts, and the suggested price proposed by a broker and observing thesubsequent transactions.

The following were the main audit procedures for the key audit matter mentioned above:

Due to the lack of an open trading market for aircrafts, the range of disposal prices for aircrafts
varies significantly, and the expected transaction value of aircrafts reflecting the carrying amountof non-current assets held for sale was difficult to evaluate. Therefore, we identified non-current
assets held for sale as a key audit matter.

The board of directors of the Company resolved to dispose of several aircrafts. According to
IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, impairment losses fromthe disposal of aircrafts were recognized as the differences between the expected transaction value
and the carrying amount of the aircrafts, and then the aircrafts were reclassified as non-current
assets held for sale. As of December 31, 2016, the carrying amount of the non-current assets held
for sale was NT$185,100 thousand. Refer to Notes 4, 5 and 12 in the accompanying financial
statements for the related detailed information.

Non-current Assets Held for Sale

Acquiring the internal financial forecasts and the estimate of future taxable income, andreviewing the rationality of management’s assumptions.

1.

The following are the main audit procedures for the key audit matter mentioned above:

The difference between the amount representative of the Company’s financial position and its tax
base are material to the financial statements as a whole in the aviation industry. Moreover,deferred tax assets arising from tax losses are dependent on future taxable income and the reversalof existing taxable temporary differences, which involve management’s judgment when assessing
the realization of tax losses. As there is a significant level of judgment involved in valuing thedeferred tax assets, we have deemed this to be a key audit matter.

1.

We conducted our audits in accordance with the Regulations Governing Auditing and Attestationof Financial Statements by Certified Public Accountants and auditing standards generally acceptedin 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 Company 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 issufficient and appropriate to provide a basis for our opinion.

Basis for Opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the Company as of December 31, 2016 and 2015, and its financial
performance and its cash flows for the years then ended in accordance with the Regulations
Governing the Preparation of Financial Reports by Securities Issuers and other regulations.

We have audited the accompanying financial statements of China Airlines, Ltd. (the Company),
which comprise the balance sheets as of December 31, 2016 and 2015, and the statements ofcomprehensive income, changes in equity and cash flows for the years then ended, and the notes tothe financial statements, including a summary of significant accounting policies.

OpinionThe Board of Directors and the Stockholders
China Airlines, Ltd.

INDEPENDENT AUDITORS’ REPORT(Appendix 2)

183

From the matters communicated with those charged with governance, we determine those mattersthat 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 theadverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.

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’ reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee 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 ofthese financial statements.

1.

Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof 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.

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

Auditors’ Responsibilities for the Audit of the Financial Statements

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

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.

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

Those charged with governance, including the audit committee and supervisors, are responsible foroverseeing the Company’s financial reporting process.

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

6.

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

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

4.

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

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

3.

5.

Conducting an assessment on the rationality of useful life on the basis of fleet performance in
the industry, historical experience of fleet operations, and documents that described the basis
used by management to determine the useful life of its new fleet.

2.

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

2.

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

Reviewing the certificates issued by the aircraft and engine manufacturers, the suggested
operating cost of the aircraft manufacturer, and the historical experience of the maintenancedepartment to assess the rationale used to determine the division amount by management.

1.

The following were the main audit procedures for the key audit matter mentioned above:

Since the Company introduced a brand new fleet of A350-900s this year, the adjusted allocationbase should be applied. Moreover, the carrying amount of flight equipment and the amount ofdepreciation expense recognized would be subject to the allocation of acquisition costs and theapplied useful life, which were made in accordance with management’s judgment. Therefore, we
identified the acquisition costs of the new fleet as a key audit matter.

184

Notice to Readers

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 usedin 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.

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 appliedin the Republic of China.

March 30, 2017

Deloitte & Touche
Taipei, Taiwan
Republic of China

The engagement partners on the audit resulting in this independent auditors’ report are Chen-Hsin
Yang and Li-Chi Chen.

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

TOTAL

Total equity

EQUITY (Notes 19 and 25)
Share capital
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficit)
Total retained earnings
Other equity
Treasury shares

Total liabilities

Total noncurrent liabilities

NONCURRENT LIABILITIES
Derivative financial liabilities for hedging - noncurrent (Notes 4, 5, 8 and 30)
Bonds payable - noncurrent (Notes 4, 19, 25, 30 and 31)
Loans and debts - noncurrent (Notes 18, 30 and 32)
Provisions - noncurrent (Notes 4, 5 and 23)
Deferred tax liabilities (Notes 4 and 27)
Capital lease obligations - noncurrent (Notes 4, 20, 30 and 32)
Deferred revenue - noncurrent (Notes 4, 5 and 22)
Net defined benefit liabilities - noncurrent (Notes 4, 5 and 24)
Other noncurrent liabilities (Note 30)

Total current liabilities

CURRENT LIABILITIESShort-term bills payable (Note 18)
Derivative financial liabilities for hedging - current (Notes 4, 5, 8 and 30)
Notes and accounts payable (Note 30)
Notes and accounts payable - related parties (Notes 30 and 31)
Other payables (Notes 21 and 26)
Current tax liabilities (Notes 4 and 27)
Deferred revenue - current (Notes 4, 5 and 22)
Bonds payable and put option of convertible bonds - current (Notes 4, 19, 25, 30 and 31)
Loans and debts - current (Notes 18, 30 and 32)
Capital lease obligations - current (Notes 4, 20, 30 and 32)
Other current liabilities (Note 30)

LIABILITIES AND EQUITY

TOTAL

Total noncurrent assets

NONCURRENT ASSETS
Financial assets at fair value through profit or loss - noncurrent (Notes 4, 5, 7 and 30)
Derivative financial assets for hedging - noncurrent (Notes 4, 5, 8 and 30)
Financial assets carried at cost - noncurrent (Notes 9 and 30)
Investments accounted for by the equity method (Notes 4 and 13)
Property, plant and equipment (Notes 4, 5, 14 and 32)
Investment properties (Notes 4 and 15)
Other intangible assets (Notes 4 and 16)
Deferred tax assets (Notes 4, 5 and 27)
Other noncurrent assets (Notes 17, 20, 30, 32 and 33)

Total current assets

CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6 and 30)
Financial assets at fair value through profit or loss - current (Notes 4, 5, 7 and 30)
Derivative financial assets for hedging - current (Notes 4, 5, 8 and 30)
Receivables:
Notes and accounts, net (Notes 4, 5, 10 and 30)
Notes and accounts - related parties (Notes 30 and 31)
Other receivables
Current tax assets (Notes 4 and 27)
Inventories, net (Notes 4 and 11)
Noncurrent assets held for sale (Notes 4, 5 and 12)
Other current assets (Note 17)

ASSETSBALANCE SHEETSDECEMBER 31, 2016 AND 2015
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD.

171,630,951

91,415,821

86,147,429

58,269,896$ 209,142,850

26
100

287,224
76,486(157,618)
206,092
112,264(43,372)
55,783,817

2,872,235
2,872,235(66,283)(43,372)

26-

54,708,901
798,415150,872,954

4374

54,708,901
799,932

155,755,626

64,725,525

301,9121,000,050
1,347,675
10,722,052
10,572
11,951,128
4,944,106
29,683,086
1,428,467
3,336,477

11,291
10,900,000
53,849,371
5,033,257
172,451
5,079,133
1,863,929
8,965,529
272,468

$

9
25
3
2
1
3
-

31
64,339,805

2,775
19,838,044
52,833,478
6,770,951
114,772
3,562,000
1,808,903
6,217,346
267,552

1
1
5
6
1
15
1
1

171,238,811$ 209,142,850

81
100

900,000
20,854
638,876
1,347,007
9,634,022
2
13,404,227
2,700,000
31,816,140
1,254,000
2,624,677$ 211,539,443$$ 211,539,443

1,710
11,216
126,125
11,007,620
118,446,472
2,047,448
990,3076,690,802
31,917,111

5
61
1
3
11

37,904,039

19
39,908,492

3,268
120,200
10,051,325
129,121,632
2,047,448
1,115,101
5,749,714
23,422,263

7,207,984
546,141
762,9887,124
8,203,921
670,455
1,788,406$ 18,507,429
163,847
45,7442015
Amount

4
1
4
1

9
-

%

7,825,504
439,509
833,754
21,652
8,338,980
185,100
2,476,800$ 19,734,590
1,200
51,403

2016
Amount

100

28

1
1
-

26
1

72

41

5
26
2
3
1
4
-

31

1
5
6
2
14
1
2

100

82

5
57
1
1
3
15

18

4
4
1

9
-

%

185

-7-

-

-

(234,797)

100,195

-

-

4

1

92,088(Continued)(81,484)(541,691)

5,763,714--

1,074,108

1

6,837,822

1

5

(1)

(1,047,275)(2)(589,382)

571,540NET INCOME

OTHER COMPREHENSIVE INCOME
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement of defined benefit plans (Notes 4
and 24)
Share of the other comprehensive loss of
associates and joint ventures accounted forusing the equity method
Income tax relating to items that will not bereclassified subsequently to profit or loss
(Note 27)

965,711

1,537,251(2,938,456)

INCOME TAX EXPENSE (Notes 4, 5 and 27)

PRETAX PROFIT

Total nonoperating loss

2
(2)
(1)

6

7

-

-

100,6022,949,765(2,900,099)(1,711,983)

7,885,097

9,738,704

13

87

100

%

615,0421(2)(1)

593,451(2,410,921)(1,221,588)

3

9

NONOPERATING LOSS
Other income (Notes 9 and 26)
Other losses (Notes 8, 12, 14 and 26)
Finance cost (Notes 8, 26 and 32)
Share of the profit of associates and joint ventures(Note 13)

10,800,273

OPERATING EXPENSES (Notes 4, 24 and 26)

17,623,801

12

4,475,707

15,275,980

GROSS PROFIT

115,817,924$ 133,441,725

2015
Amount88

OPERATING PROFIT

112,248,884

100$ 127,524,864

COSTS (Notes 4, 8, 11, 24, 26 and 31)

REVENUES (Notes 4, 26 and 31)

%

$

$

$
$

0.10
0.10

26,103(545,437)(37,401)(4,057)(80,104)
300,109-8-

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

EARNINGS PER SHARE (NEW TAIWANDOLLARS; Note 28)
Basic
DilutedTOTAL COMPREHENSIVE INCOME (LOSS) FOR
THE YEAR

Other comprehensive income (loss) for the year,
net of income tax

Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations (Notes 4 and 25)
Cash flow hedges (Notes 4 and 25)
Share of the other comprehensive income (loss) of
associates and joint ventures accounted forusing the equity method (Notes 4 and 25)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Notes 25 and 27)

2016
Amount

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

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

2016
AmountCHINA AIRLINES, LTD.

CHINA AIRLINES, LTD.

%

-

-

-

-

-

$

$

$
$

5

1

-

-

1

%

(Concluded)

1.06
1.00

7,072,042

1,308,328(375,366)(6,397)67,886
2,153,292

2015
Amount--

Other comprehensive income (loss) for the year ended
December 31, 2015, net of income tax

Total comprehensive income (loss) for the year ended
December 31, 2015

-

-

-

-

Appropriation of 2015 earnings
Legal reserve
Special reserve
Cash dividends - $0.458522382 per share

Change in capital surplus from dividends distributed tosubsidiaries

Net income for the year ended December 31, 2016

Other comprehensive income (loss) for the year ended
December 31, 2016, net of income tax

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

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

$ 54,708,901-

Difference between cost of the acquisition of subsidiaries
and net value

BALANCE AT DECEMBER 31, 2016-

Change in capital surplus from investments in associates
and joint ventures accounted for by using equity method

54,708,901-

Net income for the year ended December 31, 2015

BALANCE AT DECEMBER 31, 2015-

Difference between cost of the acquisition of subsidiaries
and net value

2,217,235-

Change in capital surplus from investments in associates
and joint ventures accounted for by using equity method

Convertible bonds converted to common shares-$ 52,491,666

Compensation of deficit - capital surplus

BALANCE AT JANUARY 1, 2015

Share Capital

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

CHINA AIRLINES, LTD.

186$

799,932

-

-

-

1,517

-

-

-

798,415

-

-

-

-

317,889

64(1,511,953)$ 1,992,415

Capital Surplus$$

287,224

-

-

-

-

287,224
-

-

-

-

-

-

-

-

-

-

-

-

Legal Reserve

$

$

-9-

76,486----76,486
-

-

-

-

-

-

-

-

-

-

-

-

Special Reserve

Retained Earnings$(157,618)(152,444)(723,984)

571,540-(287,224)(76,486)(2,508,525)(3,536)(1,638)2,872,235

5,232,627(531,087)

5,763,714(1,609)--1,511,953$ (3,870,736)

UnappropriatedEarnings(Accumulated
Deficit)$$

78,564(79,395)(79,395)

-

-

-

-

-

157,959

58,107

58,107

-

-

-

-

-

99,852

Exchange
Differences on
Translating
Foreign
Operations

$

$

1,714

(41)

(41)

-

-

-

-

-

1,755

(2,260)(2,260)

-

-

-

-

-

4,015

Other Equity
Unrealized
Gain (Loss) on
Available-forsale Financial
Assets$31,986257,983

257,983

-

-

-

-

-

(225,997)

1,783,568

1,783,568

-

-

-

-

-

$ (2,009,565)

Cash Flow
Hedges$$(43,372)

-

-

-

-

-

-

-

(43,372)

-

-

-

-

-

-

-

(43,372)

Treasury
Shares Held by
Subsidiaries$ 55,783,817

26,103(545,437)

571,540

1,517(2,508,525)(3,536)(1,638)58,269,896

7,072,042

1,308,328

5,763,714(1,609)2,535,124

64-$ 48,664,275

Total Equity

187

Net cash generated from operating activities- 10 -

CASH FLOWS FROM OPERATING ACTIVITIESPretax profit
Adjustments to reconcile pretax profit to net cash generated fromoperating activities:
Debt expenses
Depreciation expenses
Amortization expenses
Net (gain) loss on fair value change of financial assets and liabilities
held for trading
Interest income
Dividend income
Share of profit of associates and joint ventures
Loss on disposal of financial assets carried at cost
Gain on disposal of property, plant and equipment and noncurrent
assets held for sale
Loss on inventories and property, plant and equipment
Impairment loss recognized on property, plant and equipment andnoncurrent assets held for sale
Net loss (gain) on foreign currency exchange
Loss on repurchase of bonds payable
Finance costs
Recognition of provisions
Amortization of unrealized gain on sale-leaseback
Changes in operating assets and liabilities
Decrease in financial assets held for trading
Decrease on derivative financial assets for hedging
Decrease (increase) in notes and accounts receivable
Decrease (increase) in accounts receivable - related parties
Increase in other receivables
Increase in inventories
Increase in other current assets
Increase (decrease) in notes and accounts payable
Decrease in accounts payable - related parties
Increase (decrease) in other payables
Increase in deferred revenue
Decrease in provisions
Increase in other current liabilities
Decrease in accrued pension liabilities
Cash generated from operations
Interest received
Dividends received
Interest paid
Income tax paid$

(150,714)(367,360)(1,883,826)(615,042)(13,137)
388,738
2,468,372
427,715
1,711,983
1,620,216(14,512)31,9691,619,067(49,269)(232,794)(1,281,193)(319,672)
864,228(94,291)
436,951
1,522,238(3,560)360,431(246,731)
29,391,125
388,351
2,663,110(1,725,744)(51,742)
30,665,100(Continued)

29,909(188,006)(59,099)(100,602)
346(54,188)
207,019
1,065,626(10,773)
41,943
1,221,588
2,011,115(14,512)
134,448
13,096(785,159)
106,633(61,401)(359,928)(355,393)(353,373)(668)(1,490,845)
1,398,073(366,218)
275,042(3,337,565)
17,281,549
178,640
893,380(1,121,355)(44,606)
17,187,608

6,837,822

46,50016,266,952
60,044$49,878
16,588,758
138,554

1,537,2512015- 11 -

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

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

NET INCREASE IN CASH AND CASH EQUIVALENTS

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIESNet cash generated from (used in) financing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term loans(Decrease) increase in short-term bills payable
Proceeds from issue of bonds payable
Exercise of put option of bonds payable
Repayments of bonds payable
Proceeds of long-term debts
Repayments of long-term debts and capital lease obligations
Proceeds of guarantee deposits received
Refund of guarantee deposits received
Dividends paid to owners of the Company

Net cash used in investing activities

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds of the sale of financial assets measured at cost
Proceeds of share redemption of financial assets measured at cost
Acquisition of derivative financial assets for hedging
Acquisition of investments accounted for by the equity method
Payments for property, plant and equipment
Proceeds of the disposal of property, plant and equipment
Proceeds from disposal of noncurrent assets held for sale
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Refund in prepayments for aircraft
Increase in computer software costs
Decrease in restricted assets

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

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

2016

CHINA AIRLINES, LTD.

CHINA AIRLINES, LTD.

18,507,429

1,227,161

35,288(Concluded)$ 18,507,429

15,828,488

2,678,941(273,494)(18,342,134)

4,464,850(9,370,531)

245,242(13,096)(124,091)(6,175,287)
18,700(423,231)
644,532(13,382,155)
10,186,049(400,737)
53,543(4,160,000)(1,998,138)(9,025,000)
16,020,000(19,181,883)
71,540(68,653)
-

$

2015

900,000
10,000,000(994,705)(2,400,000)
34,499,000(35,052,725)
98,282(76,477)(2,508,525)(20,460,585)

5,579(100,000)(9,347,785)
514,561
384,285(146,408)
167,312(17,573,019)
5,693,791(265,615)
206,714$ 19,734,590

$

2016

188

- 12 -

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”
Amendment to IAS 1 “Disclosure Initiative”
Amendments to IAS 16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”

New, Amended or Revised Standards and Interpretations(the “New IFRSs”)

January 1, 2016
January 1, 2016
January 1, 2016

January 1, 2016

(Continued)

July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 3)
January 1, 2016

Effective Date
Announced by IASB (Note 1)

Rule No. 1050050021 and Rule No. 1050026834 issued by the FSC stipulated that starting January 1,
2017, the Company 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.

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

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

The financial statements were approved by the board of directors and authorized for issue on March 30,
2017.

2. APPROVAL OF FINANCIAL STATEMENTS

The major stockholders of the Company are the China Aviation Development Foundation (CADF) and the
National Development Fund (NDF), Executive Yuan. As of both December 31, 2016 and 2015, CADF
and NDF held a combined 43.63% of the Company’s shares. As of December 31, 2016 and 2015, theCompany had 12,648 and 12,437 employees, respectively.

China Airlines, Ltd. (the “Company”) was founded in 1959 and its stocks have been listed on the Taiwan
Stock Exchange since February 26, 1993. The Company primarily provides air transport services forpassengers and cargo. Its other operations include (a) mail services; (b) ground services and routine
aircraft maintenance; (c) major maintenance of flight equipment; (d) communications and data processing
services to other airlines; (e) sale of aircraft parts, equipment and entire aircraft; and (f) leasing of aircrafts.

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

CHINA AIRLINES, LTD.

January 1, 2014

January 1, 2014

January 1, 2014

January 1, 2016

January 1, 2016
July 1, 2014

(Concluded)

Effective Date
Announced by IASB (Note 1)- 13 -The Company has not applied the following IFRSs issued by the IASB but not yet endorsed by the
FSC.

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

Except for the above impacts, as of the date the consolidated financial statements were authorized for
issue, the Company 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 Company’s financial position and financial performance,
and will disclose these other impacts when the assessment is completed.

The amendment clarifies that the recoverable amount of an asset or a cash-generating unit isdisclosed only when an impairment loss on the asset has been recognized or reversed during theperiod. 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, theCompany is required to disclose the fair value hierarchy. If the fair value measurements are
categorized within Level 2 and/or Level 3, the valuation technique and key assumptions used tomeasure the fair value are disclosed. The discount rate used is disclosed if such fair value lesscosts of disposal is measured by using the present value technique.

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

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 Company’s accounting policies, except for the following:

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.

Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on orafter July 1, 2014; the amendment to IFRS 3 applies to business combinations withacquisition 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 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods
beginning on or after their respective effective dates.

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”

New, Amended or Revised Standards and Interpretations(the “New IFRSs”)

189

January 1, 2018
January 1, 2018

January 1, 2019
January 1, 2017
January 1, 2017

January 1, 2018
January 1, 2018

To be determined by IASB

January 1, 2018
January 1, 2018

January 1, 2018

Note 2January 1, 2018

Effective Date
Announced by IASB (Note 1)- 14 -

a) For debt instruments, if they are held within a business model whose objective is to collect thecontractual 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;

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

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 amortizedcost or fair value. Under IFRS 9, the requirement for the classification of financial assets is statedbelow.

Recognition and measurement of financial assets

1) IFRS 9 “Financial Instruments”

The initial application of the above New IFRSs, whenever applied, would not have any material impact
on the Company’s accounting policies, except for the following:

Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or afterJanuary 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods
beginning on or after January 1, 2018.

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after their respective effective dates.

Annual Improvements to IFRSs 2014-2016 Cycle
Amendment to IFRS 2 “Classification and Measurement of
Share-based Payment Transactions”
Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments withIFRS 4 Insurance Contracts”
IFRS 9 “Financial Instruments”
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”
IFRS 15 “Revenue from Contracts with Customers”
Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue fromContracts with Customers”
IFRS 16 “Leases”
Amendment to IAS 7 “Disclosure Initiative”
Amendments to IAS 12 “Recognition of Deferred Tax Assets for
Unrealized Losses”
Amendments to IAS 40 “Transfers of Investment Property”
IFRIC 22 “Foreign Currency Transactions and Advance
Consideration”

New IFRSs

The FSC announced that amendments to IFRS 4 (of which only the overlay approach can be applied),
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.

- 15 -IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number ofrelated interpretations.

2) IFRS 16 “Leases”

The main changes in hedge accounting amended the application requirements for hedge accounting
to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes
include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening
the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging
derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing
retrospective effectiveness assessment with the principle of economic relationship between thehedging instrument and the hedged item.

Hedge accounting

For purchased or originated credit-impaired financial assets, the Company 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 acorresponding gain or loss recognized in profit or loss.

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 atamortized 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 isrequired 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 allowancefor full lifetime expected credit losses is required for trade receivables that do not constitute a
financing transaction.

The impairment of financial assets

Except for above, all other financial assets are measured at fair value through profit or loss.
However, the Company may make an irrevocable election to present subsequent changes in the fairvalue 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 othercomprehensive income cannot be reclassified from equity to profit or loss.

b) For debt instruments, if they are held within a business model whose objective is achieved byboth 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 areassessed 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 reclassified, the cumulative gain or loss previously recognizedin other comprehensive income is reclassified from equity to profit or loss.

190







- 16 -

Identify the contract with the customer;
Identify the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; andRecognize revenue when the entity satisfies a performance obligation.

When applying IFRS 15, an entity shall recognize revenue by applying the following steps:

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers,
and will supersede IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number ofrevenue-related interpretations from January 1, 2018.

4) IFRS 15 “Revenue from Contracts with Customers” and related amendment

In addition, in determining whether to recognize a deferred tax asset, the Company should assess adeductible temporary difference in combination with all of its other deductible temporary
differences, unless the tax law restricts the utilization of losses to deduction against income of a
specific type, in which case, a deductible temporary difference is assessed in combination only withother deductible temporary differences of the appropriate type. The amendment also stipulates
that, when determining whether to recognize a deferred tax asset, the estimate of probable futuretaxable profit may include some of the Company’s assets for more than their carrying amount if
there is sufficient evidence that it is probable that the Company will achieve this, and that theestimate for future taxable profit should exclude tax deductions resulting from the reversal of
deductible temporary differences.

The amendment clarifies that the difference between the carrying amount of the debt instrument
measured at fair value and its tax base gives rise to a temporary difference, even though there are
unrealized losses on that asset, irrespective of whether the Company expects to recover the carrying
amount of the debt instrument by sale or by holding it and collecting contractual cash flows.

3) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”- 17 -

When preparing its parent company only financial statements, the Company used the equity method toaccount for its investments 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 Company in its
consolidated financial statements, adjustments arising from the differences in accounting treatments
between the parent company only basis and the consolidated basis were made to investments accounted forby the equity method, share of profit or loss of subsidiaries, associates and joint ventures, share of othercomprehensive income of subsidiaries, associates and joint ventures and related equity items, as
appropriate, in the parent company only financial statements.

c. Level 3 inputs are unobservable inputs for the asset or liability.

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

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:

Basis of Preparation

The financial statements have been prepared in accordance with the Regulations Governing the Preparationof Financial Reports by Securities Issuers and other regulations.

Statement of Compliance

4. SIGNIFICANT ACCOUNTING POLICIESExcept for the above impact, as of the date the financial statements were authorized for issue, theCompany is continuously assessing the possible impact that the application of other standards andinterpretations will have on the Company’s financial position and financial performance, and will
disclose the relevant impact when the assessment is completed.

Under IFRS 15, the Company will allocate the transaction price to each performance obligation
identified in the contract on a relative stand-alone selling price basis. Under current standard, theCompany applies residual value method to allocate the amount of revenue to be recognized.

The application of IFRS 16 is not expected to have a material impact on the accounting of theCompany as lessor.

When IFRS 16 becomes effective, the Company may elect to apply this Standard either
retrospectively to each prior reporting period presented or retrospectively with the cumulative effectof the initial application of this Standard recognized at the date of initial application.

In identifying performance obligations, IFRS 15 and related amendment require that a good orservice is distinct if it is capable of being distinct (for example, the Company regularly sells it
separately) and the promise to transfer it is distinct within the context of the contract (i.e. the natureof the promise in the contract is to transfer each of those goods or services individually rather thanto transfer combined items). The Company enters into contracts with its customers. In eachcontract, each product or service has its stand-alone selling price. Under the contract, theCompany provides a significant service of integrating the goods and services into the combined
output specified in the contract. Therefore, the goods and services promised in the contract are notconsidered as distinct.

Under IFRS 16, if the Company is a lessee, it shall recognize right-of-use assets and lease liabilities
for all leases on the balance sheets except for low-value and short-term leases. The Company may
elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to
the low-value and short-term leases. On the statements of comprehensive income, the Company
should present the depreciation expense charged on the right-of-use asset separately from interest
expense accrued on the lease liability; interest is computed by using effective interest method. On
the statements of cash flows, cash payments for the principal portion of the lease liability areclassified within financing activities; cash payments for interest portion are classified within
operating activities.

191- 18 -

Inventories are primarily expendable and nonexpendable parts and materials, supplies used in operations
and items for in-flight sale and are stated at the lower of cost or net realizable value. The costs ofinventories sold or consumed are determined using the weighted-average method.

Inventories

Cash equivalents, consisting of commercial paper and time deposits, are highly liquid financial instrumentswith maturities of three months or less when acquired and with carrying amounts that approximate their fairvalues.

Cash Equivalents- 19 -

Profits and losses from downstream transactions with a subsidiary are eliminated in full. Profits andlosses from upstream with a subsidiary and side stream transactions between subsidiaries arerecognized in the Company’s financial statements only to the extent of interests in the subsidiary thatare not related to the Company.

When the Company ceases to have control over a subsidiary, any retained investment is measured atfair value at that date and the difference between the previous carrying amount of the subsidiary
attributable to the retained interest and its fair value is included in the determination of the gain or loss.
Furthermore, the Company accounts for all amounts previously recognized in other comprehensive
income in relation to that subsidiary on the same basis as would be required if the Company had
directly disposed of the related assets or liabilities.

The acquisition cost in excess of the acquisition-date fair value of the identifiable net assets acquired isrecognized as goodwill. Goodwill 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.

For the purposes of presenting financial statements, the assets and liabilities of the Company’s foreign
operations are translated into New Taiwan dollars using exchange rates prevailing at the end of eachreporting period. Income and expense items are translated at the average exchange rates for the period.
Exchange differences arising are recognized in other comprehensive income.

On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect ofthat operation attributable to the owners of the Company are reclassified to profit or loss.

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

Exchange differences arising on the retranslation of non-monetary items are included in profit or loss forthe period except for exchange differences arising from the retranslation of non-monetary items in respectof which gains and losses are recognized directly in other comprehensive income, in which case, theexchange differences are also recognized directly in other comprehensive income.

b. Exchange differences on transactions entered into in order to hedge certain foreign currency risks.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company’s lossof control over the subsidiaries are accounted for as equity transactions. Any difference between the
carrying amounts of the investment and the fair value of the consideration paid or received isrecognized directly in equity.

Under the equity method, the investment is initially recognized at cost and the carrying amount isincreased or decreased to recognize the Company’s share of the profit or loss and other comprehensive
income of the subsidiary after the date of acquisition. Besides, the Company also recognizes theCompany’s share of the change in other equity of the subsidiary.

Exchange differences on monetary items arising from settlement or translation are recognized in profit orloss in the period in which they arise except for:a. Exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment
to interest costs on those foreign currency borrowings;

Subsidiaries (including special purpose entities) are the entities controlled by the Company.

a. Investment in subsidiaries

Investments in subsidiaries, associates and jointly controlled entities are accounted for by the equity
method.

Investments Accounted for by the Equity Method

Non-current assets classified as held for sale are measured at the lower of their previous carrying amountand fair value less costs to sell. Recognition of depreciation of those assets would cease.

Non-current assets are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This condition is regarded as met only when
the sale is highly probable and the non-current asset is available for immediate sale in its present condition.
To meet the criteria for the sale being highly probable, the appropriate level of management must be
committed to the sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.

Noncurrent Assets Held for Sale

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at
the rates prevailing at that date. Non-monetary items that are measured at historical cost in a foreign
currency are not retranslated. 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.

In preparing the financial statements of the Company, transactions in currencies other than the entity’sfunctional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of
the transactions.

Foreign Currencies

Current liabilities include liabilities held primarily for the purpose of trading, liabilities due to be settled
within twelve months after the reporting period. Terms of a liability that could, at the option of thecounterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Current assets include assets held primarily for the purpose of trading, assets expected to be realized withintwelve months after the reporting period, and cash and cash equivalents unless the asset is restricted frombeing exchanged or used to settle a liability for at least twelve months after the reporting period. All otherassets such as property, plant and equipment, investment properties, intangible assets and other assets thatare not classified as current are classified as noncurrent.

Current and Noncurrent Assets and Liabilities

192- 20 -The Company discontinues the use of the equity method from the date on which it ceases to havesignificant influence and joint control. 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 jointly controlled entity 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 jointly controlled entity. The Company accounts for all amounts previously
recognized in other comprehensive income in relation to that associate and the jointly controlled entity
on the same basis as would be required if that associate had directly disposed of the related assets or
liabilities.

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 isrecognized to the extent that the recoverable amount of the investment subsequently increases.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable
assets and liabilities of an associate and joint ventures recognized at the date of acquisition isrecognized as goodwill, which is included within the carrying amount of the investment and is notamortized. Any excess of the Company’s share of the net fair value of the identifiable assets andliabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

When the Company’s share of losses of an associate and joint ventures equals or exceeds its interest inthat associate and joint ventures which includes any carrying amount of the investment accounted forby the equity method and long-term interests that, in substance, form part of the Company’s net
investment in the associate and joint ventures entity, the Company discontinues recognizing its share offurther losses. Additional losses and liabilities are recognized only to the extent that the Company has
incurred legal obligations, or constructive obligations, or made payments on behalf of that associate andjoint ventures.

When the Company subscribes for additional new shares of the associate and joint ventures at apercentage different from its existing ownership percentage, the resulting carrying amount of theinvestment differs from the amount of the Company’s proportionate interest in the associate and joint
ventures. The Company records such a difference as an adjustment to investments with thecorresponding amount charged or credited to capital surplus. If the Company’s ownership interest is
reduced due to the additional subscription of the new shares of associate and jointly controlled entity,
the proportionate amount of the gains or losses previously recognized in other comprehensive income inrelation to that associate and joint ventures is reclassified to profit or loss on the same basis as would be
required if the investee had directly disposed of the related assets or liabilities. When the adjustment
should be debited to capital surplus, but the capital surplus recognized from investments accounted forby the equity method is insufficient, the shortage is debited to retained earnings.

Under the equity method, an investment in an associate and jointly controlled entity is initiallyrecognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss andother comprehensive income of the associate and jointly ventures. The Company also recognizes thechanges in the Company’s share of equity of associates and jointly ventures attributable to theCompany.

The Company uses the equity method to account for its investments in associates and joint ventures.

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

b. Investments in associates and joint ventures

Investment properties- 21 -At the end of each reporting period, the Company reviews the carrying amounts of its tangible andintangible assets, excluding goodwill, to determine whether there is any indication that those assets havesuffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimatedin order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable

Impairment of Tangible and Intangible Assets Other Than Goodwill

Intangible assets with finite useful lives that are acquired separately are initially measured at cost andsubsequently measured at cost less accumulated amortization and accumulated impairment loss.
Amortization is recognized on a straight-line basis. The estimated useful life, residual value, andamortization method are reviewed at the end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis. The residual value of an intangible asset with a finite
useful life shall be assumed to be zero unless the Company expects to dispose of the intangible asset before
the end of its economic life.

Intangible Assets

Any gain or loss arising on derecognition of the property is calculated as the difference between the net
disposal proceeds and the carrying amount of the asset and is included in profit or loss in the period inwhich the property is derecognized.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initialrecognition, investment properties are measured at cost less accumulated depreciation and accumulated
impairment loss.

Investment properties are properties held to earn rentals or for capital appreciation.
also include land held for a currently undetermined future use.

Investment Properties

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment isdetermined as the difference between the sales proceeds and the carrying amount of the asset and isrecognized in profit or loss.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as
owned assets. Assets are depreciated over the shorter of the lease term and their useful lives using thestraight-line method.

Depreciation is recognized using the straight-line method. Each significant part is depreciated separately.
The estimated useful lives, residual values and depreciation method are reviewed at the end of eachreporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Freehold land is not depreciated.

Property, plant and equipment are tangible items that are held for use in the production or supply of goods
or services, for rental to others, or for administrative purposes; and are expected to be used more than one
period. The cost of an item of property, plant and equipment shall be recognized as assets if, and only if itis probable that future economic benefits associated with the item will flow to the entity; and the cost of theitem can be measured reliably. Property, plant and equipment are stated at cost, less subsequentaccumulated depreciation and subsequent accumulated impairment loss.

Property, Plant and Equipment

When the Company transacts with its associate and joint ventures, profits and losses resulting from thetransactions with the associate are recognized in the Company’ financial statements only to the extent
of interests in the associate and the jointly controlled entity that are not related to the Company.

193- 22 -

Financial assets at fair value through profit or loss are stated at fair value, with any gains orlosses arising on remeasurement recognized in profit or loss. The net gain or loss recognizedin profit or loss incorporates any dividend or interest earned on the financial asset. Fair value
is determined in the manner described in Note 30.

Financial assets are classified as at fair value through profit or loss when the financial asset iseither held for trading or it is designated as at fair value through profit or loss.

a) Financial assets at fair value through profit or loss

value
Financial assets are classified into the following specified categories: Financial assets at fair The
through profit or loss, available-for-sale financial assets and loans and receivables.
classification of financial assets is depending on their nature and purpose of the original
recognition. Financial assets are classified into the following categories: Financial assets at fairvalue through profit or loss and available-for-sale financial assets.

1) Measurement category

All regular way purchases or sales of financial assets are recognized and derecognized on a trade datebasis. All regular way purchases or sales of financial assets means buy or sell financial assets in the
period made by regulation or market convention.

a. Financial assets

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 thanfinancial assets and financial liabilities at fair value through profit or loss) are added to or deducted fromthe 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 fairvalue through profit or loss are recognized immediately in profit or loss.

Financial assets and financial liabilities are recognized when the Company becomes a party to thecontractual provisions of the instruments.

Financial Instruments

When an impairment loss subsequently is 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 amountthat 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.

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.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the Company use the estimated cash flows to be discounted by future pre-tax discount rate, thediscount rate reflects current market time value of money and the specific risks to the asset that theestimated future cash flows have not yet adjusted to the market.

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.

amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit towhich the asset belongs. Corporate assets are allocated to the individual cash-generating units on areasonable and consistent basis; otherwise corporate assets are allocated to the smallest group of
cash-generating units on a reasonable and consistent allocation basis.

- 23 -For financial assets measured at amortized cost, if, in a subsequent period, the amount of theimpairment 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 orloss 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 financial assets carried at amortized cost, the amount of the impairment loss recognized is thedifference 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 carried at amortized cost, such as trade receivables and other receivables, assets
are assessed for impairment on a collective basis even if they were assessed not to be impaired
individually. Objective evidence of impairment for a portfolio of receivables could include theCompany’s past experience of collecting payments, an increase in the number of delayed paymentsin the portfolio past the average credit period of 60 days, as well as observable changes in nationalor local economic conditions that correlate with default on receivables.

Financial assets, other than those at fair value through profit or loss and available-for-sale financial
assets, 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.

2) Impairment of financial assets

Loans and receivables (including trade receivables, cash and cash equivalent, debt investmentswith no active market, and other receivables 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.

c) Loans and receivables

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 asfinancial 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 profit or loss or other comprehensive
income on financial assets.

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

Changes in the carrying amount of available-for-sale financial assets are recognized in othercomprehensive income and will be reclassified to profit or loss when the investment is disposedof or is determined to be impaired.

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

b) Available-for-sale financial assets

194- 24 -

An equity instrument is residual interest in any contract after the Company’s assets minus all liabilities.
Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue
costs.

Debt and equity instruments issued by the Company are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of afinancial liability and an equity instrument.

b. Equity instruments

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.

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

3) Derecognition of financial assets

The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables and other receivables, where the carrying
amount is reduced through the use of an allowance account. When a trade receivable and otherreceivables are considered uncollectable, it is 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 foruncollectable trade receivables and other receivables that are written off against the allowanceaccount.

For financial assets that are carried at cost, the amount of the impairment loss is measured as thedifference 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.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit orloss are 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-saledebt securities, impairment loss are subsequently reversed through profit or loss if an increase in thefair value of the investment can be objectively related to an event occurring after the recognition of
the impairment loss.

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.

d) The disappearance of an active market for that financial asset because of financial difficulties.

c) It becoming probable that the borrower will enter bankruptcy or financial re-organization; orb) Breach of contract, such as a default or delinquency in interest or principal payments;a) Significant financial difficulty of the issuer or counterparty;

For all other financial assets, objective evidence of impairment could include the followings:

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.

- 25 -

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into andare subsequently remeasured to their fair value at the end of each reporting period. The resulting gainor loss is recognized in profit or loss immediately unless the derivative is designated and effective as ahedging instrument, in which event the timing of the recognition in profit or loss depends on the natureof the hedge relationship. When the fair value of derivative financial instruments is positive, thederivative is recognized as a financial asset; when the fair value of derivative financial instruments isnegative, the derivative is recognized as a financial liability.

The Company enters into a variety of derivative financial instruments to manage its exposure to interest
rate, foreign exchange rate and fuel price risks, including foreign exchange forward contracts, interest
rate swaps, currency options and fuel swaps.

e. Derivative financial instruments

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity
components in proportion to the allocation of the gross proceeds. Transaction costs relating to theequity component are recognized directly in equity. Transaction costs relating to the liability
component are included in the carrying amount of the liability component.

The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognized andincluded in equity, net of income tax effects, and is not subsequently remeasured. In addition, theconversion option classified as equity will remain in equity until the conversion option is exercised, inwhich case, the balance recognized in equity will be transferred to capital surplus - share premium.
When the conversion option remains unexercised at maturity, the balance recognized in equity will betransferred to capital surplus - share premium.

On initial recognition, the fair value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible instruments. This amount is recorded as a liability on anamortized cost basis using the effective interest method until extinguished upon conversion or the
instrument’s maturity date. Any embedded derivative liability is measured at fair value.

The component parts of compound instruments (convertible bonds) issued by the Company areclassified separately as financial liabilities and equity in accordance with the substance of thecontractual arrangements and the definitions of a financial liability and an equity instrument.

d. Convertible bonds

The Company derecognizes financial liabilities only when the obligation is discharged, canceled or
expired. The difference between the carrying amount of the financial liability derecognized andthe consideration paid, including any non-cash assets transferred or liabilities assumed, isrecognized in profit or loss.

2) Derecognition of financial liabilities

Except for derivative financial instruments, all the financial liabilities are measured at amortizedcost using the effective interest method.

1) Subsequent measurementc. Financial liabilities

Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity.
No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of theCompany’s own equity instruments.

195- 26 -

Passenger fares and cargo revenue are recognized when transport service is provided.
unused passenger tickets is recognized as “advance ticket - sales”.

a. Rendering of services

Revenue Recognition

The value of

When the aircraft lease contracts expire and will be returned to lessor, should assess if existing obligations
exist and required to recognize as provision when signing of the lease contract.

Aircraft lease contracts

The amount recognized as a provision is the best estimate of the expenditure required to settle the present
obligation, taking into account the risks and uncertainties surrounding the obligation as of the balance sheet
date. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows.

The Company recognizes provisions when the Company has a present obligation (legal or constructive)
arising from past events (legal or constructive obligation), payment for the obligation is probable, and theexpenditure for settling the obligation can be estimated reliably.

Provisions

Hedge accounting is discontinued prospectively when the Company revokes the designated hedging
relationship, or when the hedging instrument expires or is sold, terminated, or exercised, or when it nolonger meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument thathas been previously recognized in other comprehensive income from the period when the hedge was
effective remains separately in equity until the forecast transaction occurs. When a forecast transaction is
no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit orloss.

The associated gains or losses that were recognized in other comprehensive income are reclassified fromequity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in thesame period when the hedged item affects profit or loss. If a hedge of a forecast transaction subsequently
results in the recognition of a non-financial asset or a non-financial liability, the associated gains and losses
that were recognized in other comprehensive income are removed from equity and are included in the initialcost of the non-financial asset or non-financial liability.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately in profit or loss.

The Company enters into some derivative transactions that aim to manage interest rates, exchange rates,
fuel prices, and other factors affecting gains or losses on assets and liabilities. The hedging transactions
are defined as cash flow hedge. When entering into hedging transactions, the Company has prepared
official documents that describe the hedging relationship between hedging instruments and items been
hedged, objective of risk management, hedging strategy, and the way to evaluate the effectiveness of thehedging instrument.

Hedge Accounting- 27 -

If the selling price is equal to the fair value, the transaction gain or loss should be recognized
immediately. If selling price is above fair value, the difference between the fair value and thebook value of the gain or loss should be recognized immediately; only the part of selling price
above fair value shall be deferred and amortized over the period of the lease.

2) Operating lease

This transaction does not actually dispose of the assets, the accounting treatment deemedtransaction did not occur, and use the book value of the asset before sale continuing recognition of
the asset.

1) Financial lease

For a sale and leaseback transaction, if it meets the condition that all the risks and rewards of ownershipof the leased asset is essentially transferred to the lessee, the sale and leaseback type is a finance lease.
If part of the significant risks and rewards of the leased asset ownership remain with the lessor (thebuyer), the sale and leaseback type is an operating lease.

b. Sales and leasebacks

Minimum lease payments are apportioned between finance expenses and reduction of the leaseobligation so as to achieve a constant rate of interest on the remaining balance of the liability. Financeexpenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying
assets, in which case they are capitalized in accordance with the Company’s general policy on
borrowing costs. Contingent rents are recognized as expenses in the periods in which they are
incurred.

Assets held under finance leases are initially recognized as assets of the Company at the lower of theirfair value at the inception of the lease or the present value of the minimum lease payments. The
corresponding liability to the lessee is included in the balance sheets as a finance lease obligation.

The Company as lessee

a. Financial leases

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

Leasing

Interest income from a financial asset is recognized when it is probable that the economic benefits willflow to the Company 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.

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 Company andthe amount of income can be measured reliably.

b. Dividend and interest income

196- 28 -

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which
they are incurred.

Investment income earned on the temporary investment of specific borrowings pending their expenditureon qualifying assets is deducted from the borrowing costs eligible for capitalization.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets(assets are substantially ready for their intended use or sale through a fairly long period) are added to thecost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Borrowing Costs

Net defined benefit liability represents the actual deficit in the Company’s defined benefit plan.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined
contribution retirement benefit plan are determined using the projected unit credit method. Service
cost (including current service cost), past service cost and net interest on the net defined benefit liability(asset) are recognized as employee benefits expense in the period in which they occur.
Remeasurement, comprising actuarial gains and losses and the return on plan assets (excludinginterest), 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.

Payments to the defined contribution retirement benefit plan are recognized as an expense whenemployees have rendered services entitling them to the contributions.

b. Retirement benefits- 29 -

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures, except where the Company is able to control
the reversal of the temporary difference and it is probable that the temporary difference will not reversein the foreseeable future. Deferred tax assets arising from deductible temporary differences associatedwith 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 is recognized on temporary differences between the carrying amounts of assets andliabilities in the financial statements 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, unused loss carryforward and unused tax credits for purchases of machinery, equipment and technology, research anddevelopment expenditures, and personnel training expenditures to the extent that it is probable thattaxable profits will be available against which those deductible temporary differences can be utilized.

b. Deferred tax

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

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided foras income tax in the year the stockholders approve the retention of these earnings.

The Company’s current tax liabilities are calculated by the tax rate has been legislative or substantial
legislative at the balance sheet date.

The current tax liabilities are based on current taxable profit. Since part of the income and expenses
are taxable or deductible in other periods, or in accordance with the relevant tax laws are taxable ordeductible, current taxable profit differs from net profit reported in the income statement.

a. Current tax

Income tax expense represents the sum of the current tax and deferred tax.

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.

Taxation

The fair value determined at the grant date of the equity-settled share-based payments is expensed on astraight-line basis over the vesting period, based on the Company’s estimate of equity instrument that will
eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value
determined at the grant date of the equity-settled share-based payments is recognized as an expense in fullat the grant date when the share options granted vest immediately.

In the event that lease incentives are received to enter into operating leases, such incentives arerecognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental
expense on a straight-line basis, except where another systematic basis is more representative of thetime pattern in which economic benefits from the leased asset are consumed.

Employee Benefits

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments
at the grant date.

Share-based Payment Arrangements

A portion of passenger revenue attributable to the rewards for the frequent flyer program is deferred. The
entity should recognize this deferred revenue as revenue only when the entity has fulfilled its obligations on
the granting of rewards or when the period for converting the mileage to rewards has expired.

The Company has a “Dynasty Flyer Program” through which program members can convert accumulated
mileage to a cabin upgrade, free tickets and other member reward.

Frequent Flyer Program

Operating lease payments are recognized as an expense on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rents arising under operating leases arerecognized as an expense in the period in which they are incurred.

2) The Company as lessee

Rental income from operating leases is recognized on a straight-line basis over the term of therelevant lease unless another systematic basis is representative of the time pattern of the lessee’s
benefit from the use of the leased asset.

1) The Company as lessor

c. Operating lease197- 30 -The Company is subject to income taxes in numerous jurisdictions. Where the final tax payable differsfrom the amounts that were initially recognized, these differences will affect the income tax and deferred
tax provisions in the period in which the differences are determined. Deferred tax assets are recognizedfor deductible temporary differences to the extent that it is probable that taxable profits will be available
against which the deductible temporary differences can be used. When evaluating the realizability of thedeferred tax asset, management uses significant accounting judgments and estimates, including expected

Income Taxes

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of thereporting period that have a significant risk of causing a material adjustment to the carrying amounts ofassets and liabilities within the next financial year are discussed below.

Key Sources of Estimation Uncertainty

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

In the application of the Company’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 andother factors that are considered relevant. Actual results may differ from these estimates.

- 31 -As stated in Note 4 Frequent Flyer Program, a portion of passenger revenue attributable to the awarding of
frequent flyer benefits is deferred until the awards are given out. The deferment of the revenue isestimated on the basis of historical trends of breakage and redemption, which is then used to project the
expected claiming of these benefits. Changes in fair value per mileage or redemption rate may have amaterial impact on deferred revenue.

Frequent Flyer Program

Maintenance reserve is based on the requirement under lease contracts to reflect maintenance costs that
may arise on lease expiry. Estimation of this reserve is based on the past maintenance experience on thesame or similar type of aircraft; incurred overhaul costs; and historical operating performance data.
Changes in judgment or estimations may have a material impact on the amount of maintenance reserve.

Maintenance Reserve for Operating Lease Aircraft

The present value of defined benefit obligations at the end of the reporting period are calculated using
actuarial assumptions. Those assumptions, which are based on management’s judgment and estimates,
comprise the discount rate and expected return on plan assets. Changes in actuarial assumptions may havea material impact on the amount of defined benefit obligations.

Defined Benefit Obligations

Flight equipment are depreciated on a straight-line basis at rates that can be used to write down their cost to
their estimated residual values at the end of their useful lives. The estimates of the useful lives andresidual values of the flight equipment are made by the Company on the basis of past experience and fleet
operation performance in the industry.

The overhaul costs of the owned or leased aircraft that meet the criteria for fixed asset capitalization andengines as replacement parts for aircraft and engines are capitalized, and amortized over the expectedannual overhaul cycle using straight-line depreciation method.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY

Depreciation of Property, Plant and Equipment - Flight Equipment

The Company’s management uses its judgment in selecting an appropriate valuation technique for financial
instruments with no quoted market prices in an active market. Valuation techniques commonly used bymarket practitioners are applied. For derivative financial instruments, assumptions are based on quoted
market rates adjusted for specific features of the instruments. Other financial instruments are valued using
a discounted cash flow analysis based on assumptions supported, where possible, by observable market
prices or rates. The chosen valuation techniques and assumptions used are possible effecting in
determining the fair value of financial instruments.

Fair Value of Derivatives and Other Financial Instruments

The Company assesses the receivables portfolios monthly for impairment. Impairment evidences may
include observable changes in debtors’ solvency and national or local economic conditions that correlatewith default on receivable settlement. Management’s analysis of expected cash flows is based on pastexperience of loss on assets with similar credit risk characteristics. The Company periodically reviews themethods of determining, and assumptions on, the expected amount and timing of cash flows to reduce thedifference between the estimated and the actual losses.

Estimated Impairment of Trade Receivables

Routine maintenance costs are recognized in profit or loss in the period in which they are incurred.

Maintenance and Overhaul Costs

Current and deferred tax are recognized in profit or loss, except when they relate to items that arerecognized 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.

c. Current and deferred tax for the year

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 beenenacted 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 theCompany expects, at the end of the reporting period, to recover or settle the carrying amount of its
assets and liabilities.

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 orpart of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at theend of each reporting period and recognized to the to the extent that it has become probable that futuretaxable profit will allow the deferred tax asset to be recovered.

future revenue growth and profit margins, income tax exemption periods, the use of tax credits, tax
planning and certain assumptions. Changes in the industry environment and regulations will result in amaterial adjustment of the deferred tax asset.

198$ 18,507,429

68,883
4,385,543$ 19,734,590$

14,053,003-

34,1297,208,550

2015

3,078,150
9,413,761$

December 31

0.13%-1.7%
0.48%-7.25%-

0.08%-2%
1.3%-12.9%
0.42%-1.40%- 32 -

Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts

Financial assets held for trading - noncurrent

Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts
Non-derivative financial assets
Beneficial certificates

Financial assets held for trading - current

$

$

$

-

1,200

-

100,029

63,818

2015

$

1,710

$ 163,847$

December 31

1,200

2016

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)Bank balanceTime deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

2015

2016

December 31

The market rate intervals of cash in bank and cash equivalents at the end of the reporting period were as
follows:

Cash on hand and revolving fund
Checking accounts and demand deposits
Cash equivalents
Time deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

6. CASH AND CASH EQUIVALENTS

Buy forward contracts

When the carrying amount of non-current assets held for sale are lower than fair value, the difference
between carrying amount and fair value recognized as impairment loss, and the fair value was determinedbased on the quotes of potential buyers, and the market price of similar assets.
NTD/USD

NTD/USD

2016.01.08-2017.01.26

2017.01.26

Maturity Date

23,62920,854
2,775
23,629$$$54,671$

3,855
19,774-51,403
3,268$$

54,671

54,671$$- 33 -

12,702
12,660287,841

56,96045,744
11,21656,96044,222
12,403335

2015$ 313,203$ 301,912
11,291$ 313,203

$

$

$

$

$

December 31

NTD3,276,316/USD99,600

NTD32,258/USD1,000

Notional Amount(In Thousands)

The fair value of each derivative contract is determined using quotes from financial institutions.

Current
Noncurrent

Cash flow hedges
Interest rate swaps
Foreign exchange forward contracts
Currency options
Fuel options

Derivative financial liabilities under hedge accounting

Current
Noncurrent

Cash flow hedges
Foreign exchange forward contracts
Currency options
Fuel options

Derivative financial assets under hedge accounting

8. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING

Buy forward contracts

December 31, 2015

December 31, 2016

Currency

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:

Impairment of Non-Current Assets Held For Sale

The impairment of flight equipment was based on the recoverable amount of those assets, which is thehigher of fair value less costs to sell or value-in-use of those assets. Any changes in the market price or
future cash flows will affect the recoverable amount of those assets and may lead to recognition of
additional or reversal of impairment losses.

Impairment of Flight Equipment

199

TAIBOR rate

TAIBOR rate

JPY/USD
JPY/USD

2016.01.8-2016.12.09
2016.01.8-2016.12.09

Maturity Date

JPY3,446,570/USD28,400
JPY3,364,604/USD28,400

USD
USD

2016.01.31-2016.07.31
2016.01.31-2016.07.31

Maturity Date

NTD335
NTD287,841

Notional Amount(In Thousands)- 34 -

Based on the Taiwan Stock Exchange’s regulation for public companies’ monthly declarations on the
trading of derivative financial instruments, the contractual amounts are shown at the absolute values ofthe fair values because fuel option contracts only have nominal amounts.

Buy fuel call options
Sell fuel put options

December 31, 2015

Currency

The outstanding fuel options at the end of the reporting period were as follows:

The Company used fuel options to minimize the risk of changes in fuel price related to operating cost.

c. Fuel options

Buy USD call option
Sell USD put option

December 31, 2015

Currency

Notional Amount(In Thousands)

The outstanding currency options at the end of the reporting period were as follows:

The Company entered into currency options to minimize the risk of changes in foreign currency rate on
the cash flow exposure related to fuel payments, which will be paid in U.S. dollars.

b. Currency options

1.01%-1.14%

1.01%-1.14%

Range of Interest Rates
Received

The Company will settle the difference between the2016.11.28-2017.06.22

2017.03.09-2017.06.22

The interest rate swaps settle on a quarterly basis.
fixed and floating interest rates on a net basis.

NT$ 3,000,000

December 31, 2015

NT$ 2,500,000

December 31, 2016

Maturity Date

Range ofInterest Rates
Paid

NTD/USD

NTD/USD

2016.01.22-2017.05.23

2017.01.13-2018.10.25

Maturity Date

NTD822,368/USD25,000

NTD5,019,355/USD155,600

Notional Amount(In Thousands)$$(427,695)(345,675)(10,390)(71,630)$ (2,556,615)$ (2,581,321)(7,151)
31,857

Unlisted preferred stocks
Everest Investment Holdings Ltd.
(AH)

Unlisted common stocks
Everest Investment Holdings Ltd.
(AH)
Jardine Air Terminal Services
Chung Hwa Express Co.
Regal International Advertising473

52,70456,023
11,000119,727- 35 -$ 120,200

$

-

14
15
11
-

473

52,70456,023
11,0005,925
125,652$ 126,125$(Continued)

-

14
15
11
6

December 31
2016
2015
Carrying% ofCarrying% ofAmountOwnership
AmountOwnership

9. FINANCIAL ASSETS CARRIED AT COST

The amount of gains and losses on hedging instruments reclassified from profit or loss to prepayments
for equipment was $154,970 thousand in 2016.

Increase in operating cost
Increase in finance cost
Other gain and losses - foreign exchange gain

For the Year Ended December 31
2016
2015

Gains and losses on hedging instruments reclassified from equity to profit or loss were included in thefollowing line items in the statements of comprehensive income:Buy forward contracts

December 31, 2015

Buy forward contracts

December 31, 2016

Currency

The outstanding foreign exchange forward contracts at the end of the reporting period were as follows:

The outstanding interest rate swap contracts at the end of the reporting period were as follows:

Notional Amount(In Thousands)

The Company entered into foreign exchange forward contracts to minimize the risk of changes inforeign currency rates on the cash flow exposure related to fuel payments and aircraft payments, which
will be paid in U.S. dollars.

d. Foreign exchange forward

The Company entered into interest rate swap contracts to mitigate the risk of changes in interest rates
on the cash flow exposure related to the outstanding floating rate debt. All swapped fixed interest rate
swap out the floating rate interest rate swap contracts are designated as cash flow hedges.

a. Interest rate swaps

200$ 120,200$ 126,125(Concluded)$ 7,207,984

343,647$ 7,825,504

$

2015

6,964,125(99,788)6,864,337

522,523

December 31

7,450,185(147,204)
7,302,981

$

2016

$

$ 147,204

Ending Balance- 36 -$

99,78849,878(2,462)$Beginning balance
Impairment loss of accounts receivable
Less: Amounts written off as uncollectable

99,78855,09346,500(1,805)

Movements in the allowance for impairment loss recognized on notes receivable and accounts receivable
were as follow:
For the Year Ended December 31
2015
2016

The average credit period was 7 to 45 days. In determining the recoverability of an account receivable,
the Company considered any change in the credit quality of the account receivable since the date credit was
initially granted to the end of the reporting period. Any allowance for impairment loss was based on theestimated irrecoverable amounts determined by reference to the Company’s past default experience withthe counterparty and an analysis of the counterparty’s current financial position.

Accounts receivable
Less: Allowance for impairment loss

Accounts receivable

Notes receivable

10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

The unlisted common shares held by the Company are measured at cost less impairment losses at thereporting date. Because a reasonable estimate of the fair value range is significant and cannot bereasonably assessed, the Company’s management believes that its fair value cannot be reliably measured.

The Company and the Asian airlines set up Abacus International Holdings (AH Company), which owned
Abacus Distribution Systems. Due to strategic adjustments, AH Company disposed of its shares of
Abacus Distribution Systems. The board of AH Company resolved to return the gain on the disposal tostockholders by cash dividends and share redemptions, and this resolution was also approved. The
Company received cash dividends of $1,660,687 thousand and share redemptions of $245,242 thousand.
AH Company changed its name to Everest Investment Holdings Ltd. after the disposal of its
aforementioned subsidiary.

Classified according to financial asset
measurement categories
Available-for-sale financial assets

December 31
2016
2015
Carrying% ofCarrying% ofAmountOwnership
AmountOwnership$ 8,203,921$ 7,552,829
507,603
143,489$ 7,625,731
546,565
166,684$ 8,338,980

2015

December 31
2016

2016

2015
$ 670,455$ 185,100

December 31
2016

Cal Park
Mandarin Airlines
Cal-Dynasty International

Unlisted companies

a. Investment in subsidiaries

Investments in subsidiaries
Investments in associates
Investments in jointly controlled entities- 37 -

7,925,771
1,319,526
806,0282015$ 1,510,824
1,367,156
1,239,445(Continued)

December 31$ 1,529,375
1,125,057
1,244,328

2016

8,892,482
1,248,135
867,0032015$ 11,007,620$

December 31$ 10,051,325$

13. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

To enhance its competitiveness, the Company plans to introduce new aircrafts and retire old aircrafts
according to a planned schedule. From August 2015, the board of directors resolved to sell several
aircrafts. These aircrafts were reclassified as non-current assets held for sale, and the difference between
the original carrying amount and the expected sale price was recognized as an impairment loss of $347,868
thousand and $1,899,372 thousand in 2016 and 2015, respectively. However, the actual amount of loss
should be identified according to the actual sale price. Thus, the loss on the disposal was $26,429
thousand in 2016. The abovementioned measurement of fair value was a Level 3 measurement whichreferred to the second-hand market and the conditions of aircrafts.

Aircrafts held for sale

12. NON-CURRENT ASSETS HELD FOR SALE

The cost of inventories recognized as operating costs due to write-downs of inventories was $196,000
thousand and $151,688 thousand in 2016 and 2015, respectively.

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services

11. INVENTORIES

201$ 1,260,095
977,323
722,143
604,029
438,101
313,875
262,493
89,85841,731
29,15228,5447,647
33
33$ 8,892,482(Concluded)$ 1,261,894
362,861
649,189
450,305
438,502387,375
231,316
71,534
110,128
25,46430,9617,418
32
32$ 7,925,771

80%
54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
100%
51%
100%
25%
100%
100%

80%
54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
100%
51%
100%
25%
100%
100%

2015

- 38 -The Company increased investments of $100,000 thousand in Taiwan Aircraft Maintenance andEngineering Co., Ltd. in October 2016 for the purpose of building hangars.

The subsidiaries, Freighter Princess Ltd. and Freighter Prince Ltd., were established for leasing theCompany’s aircrafts. On its balance sheets, the Company recognized the fixed assets and liabilities
related to the leased aircrafts as leasing transactions.

Each of the Company’s holdings of the issued share capital of Taoyuan International Airport Service,Taiwan Airport Service and Global Sky Express did not exceed 50%, but since the Company had
control over these investees, they were listed as subsidiaries.

Tigerair Taiwan Co., Ltd.
Taiwan Air Cargo Terminal
Cal Park
Mandarin Airlines
Cal-Dynasty International
Taoyuan International Airport Services
Cal-Asia Investment
Sabre Travel Network (Taiwan)
Taiwan Airport Services
Cal Hotel
Hwa Hsia
Taiwan Aircraft Maintenance And Engineering Co., Ltd.
Dynasty Holidays
Yestrip
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.

2016

December 31

At the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by
the Company were as follows:

Taiwan Air Cargo Terminal
Tigerair Taiwan Co., Ltd.
Taoyuan International Airport Services
Cal-Asia Investment
Sabre Travel Network (Taiwan)
Cal Hotel
Taiwan Airport Services
Hwa Hsia
Taiwan Aircraft Maintenance And Engineering Co., Ltd.
Yestrip
Dynasty Holidays
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.

2015

2016

December 31

515,051
267,371
279,176
257,928
1,319,526-

490,824
244,903
263,091
185,226
1,184,044
64,0912015$ 1,248,135$

December 31$ 1,319,526

$

2016

$ 146,472$ (391,718)

20%
36%
25%
26%

December 31

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics- 39 -

51,02875,674
109,815
26,136$ 262,653$

2016

46,24758,084
93,375
16,373

2015

20%
36%
25%
28%

2015

$ 214,079$

The share of profit or loss of associates recognized under the equity method were as follows:

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics

2016

As the end of the reporting period, the proportion of ownership and voting rights in associates held by
the Company were as follows:

On December 18, 2015 the board of Science Park Logistics (SPL) approved the issuance of commonshares for cash with the date of right issuances granted on was December 25, 2015. The board of theCompany reached an agreement to purchase $64,091 thousand of common shares, which were remitted
to SPL. SPL completed the registration of this subscription on January 22, 2016.

Prepayments of long-term investments - Science Park Logistics

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics

Unlisted companies

b. Investments in associates

The share of profit or loss

2015

2016

The share of profit or loss of subsidiaries recognized under the equity method was as follows:

To integrate the resources of the Company, the board of directors reached an agreement to purchase a
10% shareholding in Tigerair Taiwan, which was held by Roar Aviation III Pte. Ltd, in December 2016.
The transaction was completed in January 2017.

202
2015
$ 705,134
161,869$ 867,003

2016$ 638,980
167,048$ 806,028

December 31

51%
55%

December 31

51%
55%

2015

$ 231,012
23,479$ 254,491$ 208,039
21,628$ 229,667- 40 -For details on services, major business offices and the country where the above associates and jointly
controlled entities are registered, refer to Table 5, “Names, Locations, And Other Information Of
Investees On Which The Company Exercises Significant Influence” and Table 6, “Investments In
Mainland China” following the Notes to Financial Statements.

The investments in jointly controlled entities accounted for by the equity method and the Company’s
shares of their profit or loss and other comprehensive income were based on the jointly controlled
entities’ financial statements which had not been reviewed by independent auditors. However, theCompany’s management determined that there would have been no significant adjustments had thisinvestee’s financial statements been independently audited.

The Company’s shares of other comprehensive income of subsidiaries, associates and jointly controlled
entities were $(238,854) thousand and $(87,881) thousand in 2016 and 2015, respectively.

China Pacific Catering Services
China Pacific Laundry Services

2015

2016

December 31

The share of profit or loss of jointly ventures recognized under the equity method were as follows:

The Company signed a joint venture agreement with the Taikoo Company to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both parties havethe majority power in the board of directors to pose a motion for veto, and therefore the Company does
not have control.

China Pacific Catering Services
China Pacific Laundry Services

2016

At the end of the reporting period, the percentages of ownership and voting rights in jointly controlled
entities held by the Company were as follows:

China Pacific Catering Services
China Pacific Laundry Services

The investments in jointly controlled entities were as follows:c. Investments in jointly controlled entities

Balance at December 31,
2015

Balance at January 1,
2015
Depreciation expense
Disposals
Impairment losses
Reclassification

Accumulated depreciationand impairment

Balance at December 31,
2015

Balance at January 1,
2015
Additions
Disposals
Reclassification

Cost

Net value

$

$

$

$

-

-

193,013

193,013-

Freehold Land

Buildings
Flight equipment
Equipment under finance leases
Machinery equipment
Office equipment
Leasehold improvements

$

$

$

$

(3,449,160)(3,289,776)(176,506)
17,144(22)

7,323,803

7,314,028
37,830(28,645)590

Buildings

Accumulated depreciation and impairment

Freehold land
Buildings
Flight equipment
Equipment under finance leases
Machinery equipment
Office equipment
Leasehold improvements
Construction in progress

Cost

14. PROPERTY, PLANT AND EQUIPMENT- 41 -$ (128,886,336)$ (121,708,296)(13,719,690)
2,876,688(569,000)
4,233,962$ 228,454,181$ 230,661,285
5,632,381(3,083,547)(4,755,938)

FlightEquipment

193,013
7,277,753
246,308,549
28,307,255
4,335,044
732,839984,668
23,67627,481,679

33,379,391
394,939(550,429)(5,742,222)$ (13,715,235)$ (16,542,230)(2,073,963)
550,429
4,350,529$$

Equipment
under FinanceLeases$$$$(4,847,510)(4,758,859)(296,793)
208,223(81)

5,892,037

5,929,872
110,137(210,516)
62,544

Others(Continued)$ (150,898,241)$ (146,299,161)(16,266,952)
3,652,484(569,000)
8,584,388$ 269,344,713$ 277,477,589
6,175,287(3,873,137)(10,435,026)

Total$ 118,446,472

3,449,160
128,886,336
13,715,235
3,432,009
580,340
835,161$ 129,121,632$$ 150,898,241

3,550,002
135,129,522
15,347,140
3,532,640
612,787
869,074$ 159,041,165$

193,013
7,323,803
228,454,181
27,481,679
4,180,095
699,420
1,000,947
11,5752015$ 269,344,713$

December 31$ 288,162,797

$

2016

203

28,307,255

27,481,679
1,014,523(393,403)
204,456

16. OTHER INTANGIBLE ASSETS- 42 -

Based on the particularity of risk in the aviation industry, all of the Company’s assets such as aircrafts, realestate, and movable property are adequately insured to diversify the potential risk related to operations.

Refer to Note 32 for the carrying amounts of property, plant and equipment pledged by the Company.

Regarding changes in fleet composition, current and forecasted market values, and other technical factors,
the Company recognized impairment losses on a part of aircraft equipment of $717,758 thousand and$569,000 thousand in 2016 and 2015, respectively.

18-25 years
10-20years
12-20 years
6-8 years
3-10 years
8-12 years
3-15 years
5-12 years$(668,302)(529,748)(138,554)-(529,748)

990,307265,615(138,554)(2,267)990,307$ 1,115,101$$

649,614400,737(60,044)$$(469,704)(60,044)

Net Value

Accumulated
Amortization

Temporary payments
Prepayments
OthersCurrent

17. OTHER ASSETS- 43 -

166,236
2,091,371
219,1932,476,800$$$

527,289874,452
386,6652015

1,788,406(Continued)

December 31

$

2016

The above items of other intangible assets were amortized on a straight-line basis over 2-10 years.

$ 1,119,318
400,737-

Computer
Software Cost

All of the Company’s investment properties were held under freehold interest.

The fair value of the investment properties held by the Company was $2,316,300 thousand as of both
December 31, 2016 and 2015. The fair value valuation was performed by independent qualified
professional valuers, and the future income evaluated by management was based on market transactions.

$ 1,783,403

5 years
3-5 years

25 years
3-13 years
3-15 years

45-55 years
10-25 years

2015$ 2,047,448

December 31$ 2,047,448

2016

The investment properties (land) held by the Company located in Nankan were leased to others.

Carrying amount
Investment properties

Balance at December 31, 2016(Concluded)$ (159,041,165)$ (150,898,241)(16,588,758)
6,232,664(717,758)
2,930,928$ 288,162,797$ 269,344,713
9,347,785(6,996,628)
16,466,927$(5,014,501)(4,847,510)(323,492)
155,518983

6,076,227

5,892,037
320,106(158,177)
22,261$ 1,520,055
265,615(2,267)

$

$

$

$

Balance at January 1, 2016
Additions
Amortization expense
Reclassification$ (15,347,140)$ (13,715,235)(2,031,998)
393,403
6,690

$

$

$

$ (135,129,522)$ (128,886,336)(14,058,579)
5,609,896(717,758)
2,923,255$ 246,308,549$ 228,454,181
7,951,452(6,336,888)
16,239,804$ 1,520,055(3,550,002)(3,449,160)(174,689)
73,847-

7,277,753

7,323,803
61,704(108,160)
406

Balance at December 31, 2015

$

$

$

$

Total

Building
Main buildings
Others
Machinery and equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersFlight equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircrafts
Engine overhauls
Landing gear overhauls
Repairable spare parts
Improvement of aircrafts--

193,013

193,013-

Others

15. INVESTMENT PROPERTIES

Balance at January 1, 2015
Additions
Amortization expense

$

$

$

$

Buildings

Equipment
under FinanceLeases

The above items of property, plant and equipment were depreciated on a straight-line basis over theestimated useful life of the asset:

Balance at December 31,
2016

Balance at January 1,
2016
Depreciation expense
Disposals
Impairment losses
Reclassification

Accumulated depreciationand impairment

Balance at December 31,
2016

Balance at January 1,
2016
Additions
Disposals
Reclassification

Cost

Freehold Land

FlightEquipment

204$ 28,714,476
2,392,347
559,510
236,634
14,144$ 31,917,111(Concluded)$ 20,942,278
1,939,929
521,229
18,827$ 23,422,263

2015

Current portion$$ 900,000$ 31,225,000
21,097,986
31,275,000
65,52983,532,457
29,683,086$ 53,849,371$ 31,183,999
16,329,805
37,200,000
64,186
84,649,618
31,816,140$ 52,833,478

-

-

2015

-

2015

2016

December 31

0.758%$$ 900,000-

2016

December 31- 44 -For information on secured bank loans which were secured by buildings, machinery equipment andflight equipment, refer to Note 32.

Less:

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discountb. Long-term debts

Annual discount rate

Commercial paper
Less: Unamortized discount on bills payablea. Short-term bills payable

18. BORROWINGS

The prepayments for aircrafts comprised the prepaid deposits and capitalized interest from the purchase of
A350-900 and 777-300ER aircrafts. For details of the A350-900 aircrafts purchase contracts, refer toNote 33. The rights to purchase the six confirmed orders of 777-300ER aircrafts were transferred to theaircraft leasing company upon delivery of the aircrafts. Then, all six aircrafts were leased back. As of
May 2016, all the aircrafts had been delivered, and the Company was refunded with deposits for the aircraft
purchases.

Prepayments for aircrafts
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets

Noncurrent

2016

December 31

2005/3/42028/10/18
2004/12/162021/3/12

0.92%-1.60%
1.1432%-1.83%

46,464,267
48,282,617$ 46,464,267
48,282,617

1,049,537
4,040,369

32,536
122,827

2005/1/182017/9/21
2004/6/282017/9/21

0.8539%-4.39%
0.4067%-4.39%

$

Less:

- 45 -

Current portion and put option of convertible bonds

Secured corporate bonds - first issue in 2011
Unsecured corporate bonds first-time issued in 2013
Unsecured corporate bonds first-time issued in 2016
Unsecured corporate bonds second-time issued in 2016
Convertible bonds - fifth issue

19. BONDS PAYABLE

10,900,000
5,000,000
5,000,000
1,638,044
22,538,044
2,700,000

2,400,000
10,900,000
2,544,106
15,844,106
4,944,1062015$ 10,900,000$

December 31$ 19,838,044

$

2016

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until February 2021, were used by the Company to guarantee commercial paper
which it issued. The commercial paper was issued at discount rates of 1.0510%-1.4580% in 2016 and1.2407%-1.5833% in 2015.

December 31, 2015

December 31, 2016

Periods

December 31, 2016
December 31, 2015

Interest rates

December 31, 2016
December 31, 2015

Translated to New Taiwan dollars

December 31, 2016
December 31, 2015

Original currency

Currency
New Taiwan
Dollars
U.S. Dollars

Bank loans (New Taiwan dollars and U.S. dollars) are repayable quarterly, semiannually or in lumpsum upon maturity. Related information is summarized as follows:205

Principal repayable in May of 2014, 2015 and2016; indicator rate; payable annuallyPrincipal repayable in May of 2014, 2015 and2016; indicator rate; payable annuallyPrincipal repayable in May of 2014, 2015 and2016; indicator rate; payable annuallyPrincipal repayable in January of 2017 and2018; indicator rate; payable annuallyPrincipal repayable in January of 2019 and2020; indicator rate; payable annuallyPrincipal repayable in May of 2020 and 2021;
interest p.a. payable annuallyPrincipal repayable in May of 2020 and 2021;
interest p.a. payable annually
Unless bonds are converted to share capital orredeemed, principal repayable one time in
December 2018; 1.8245% discount rate p.a.

2011.5.20-2016.5.20

2011.5.20-2016.5.20

2011.5.20-2016.5.20

2013.1.17-2018.1.17

2013.1.17-2020.1.17

2016.05.26-2021.05.26

2016.09.27-2021.09.27

2013.12.26-2018.12.26

Conditions
Principal repayable in May of 2014, 2015 and2016; indicator rate; payable annually

Period2011.5.20-2016.5.20$ 1,428,467
5,079,133$ 6,507,600
1.1828%1.5667%$ 1,254,000
3,562,000$ 4,816,000
1.0323%1.0980%

Current
Noncurrent- 46 -

d. Between January 26, 2014 and December 16, 2018 (except for the period between the former dividend
date and the date of the dividend declaration on record), holders may convert the bonds to theCompany’s common shares. The initial conversion price was set at NT$12.24, which is subject toadjustment if there is a capital injection by cash, stock dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of July 31, 2016, the conversion price was adjusted to NT$11.64, and corporate bonds with a facevalue of $3,315,700 thousand were converted to 270,890 thousand of common shares.

c. The Company may redeem the bonds at face value between March 26, 2014 and November 16, 2018
under certain conditions.

b. The holders can request that the Company repurchase their bonds at 100.75% face value on the third
anniversary of the offering date. Because the holders can exercise put options on December 26, 2016,
the Company reclassified the bonds payable to “current portion of bonds payable” on December 26,
2015. The Company paid a total of $994,705 thousand to the holders who exercised the put options,and the difference between the payment amount and carrying amount was recognized as a loss of$41,943 thousand. When the options expired, the remaining amount of bonds payable werereclassified as non-current liabilities.

a. The holders may demand a lump-sum payment for the bonds upon maturity.

The Company made the fifth issue of unsecured convertible bonds, and the issue conditions are as follows:- 47 -

As of December 31, 2016 and 2015, the refundable deposits paid by the Company under operating lease
contracts were $293,188 thousand and $329,155 thousand, respectively. Part of the refundable
deposits is secured by credit guarantees. The credit guarantees were $1,459,935 thousand and$1,213,309 thousand, respectively.

The rental rates stated in the aircraft lease agreements are fixed or floated. If the agreed-upon rental
rate is floating and will be revised monthly or semiannually. Subleasing is not allowed for all thelease arrangements. As of December 31, 2016, the Company has rented eleven A330-300 aircrafts,
thirteen 737-800 aircrafts and ten 777-300ER aircrafts under operating contracts; the lease terms range
from 8 to 12 years.

The Company rented planes, headquarters, and hangars under various operating lease contracts expiring
on various dates until May 2028. The Company does not have a bargain purchase option to acquire
the leased planes and hangars at the expiration of the lease periods.

b. Operating leases (including sale-leasebacks - operating leases)

As of December 31, 2016, the Company entered into sale-leaseback contracts for leasing 4 aircrafts
including A330-300 and B747-400 aircrafts under finance leases. The lease terms are from June 2006
to April 2019. During the lease term, the Company retained all risks and rewards attached to theaircrafts and engines and enjoyed the same substantive rights as were enjoyed prior to the transaction.
Interest rate underlying all obligations under finance leases were floated. Therefore, the minimum
lease payments under the sale-leaseback aircraft contracts are not inclusive of interest expense.

Interest rate

$ 6,507,600$ 4,816,000

Present value of minimum lease payments$ 1,428,467
5,079,133-$ 1,254,000
3,562,000

2015

Not later than one year
Later than one year and not later than five years

Minimum lease payments - aircrafts

a. Sale-leasebacks - finance leases
December 31$ 5,481,379

Liability component at the date of issue

20. CAPITAL LEASE OBLIGATIONS$ 6,000,000(518,621)

Proceeds from issue
Equity component

The convertible bonds contain both liability and equity components. The equity component was presented
2016 surplus - options. The effective interest rate for the liability
in equity under the heading of capitalcomponent was 1.8245% per annum on initial recognition.

1.08

1.19

1.85

1.60

1.35

1.35

1.35

1.35

Rate (%)

In May 2016, the Company made a first issue of 2016 private unsecured bonds with an aggregate facevalue of $5,000,000 thousand. The investors included the following affiliates: Mandarin Airlines andSabre Travel Network (Taiwan). These investors held $300,000 thousand of the face value in aggregate
which would be written off in the consolidation financial report.

Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year private unsecured bonds - issued at par in
January 2013; repayable in January 2017 and2018; 1.6% interest p.a., payable annually
Seven-year private unsecured bonds - issued at par in
January 2013; repayable in January 2019 and2020; 1.85% interest p.a., payable annually
Five-year unsecured bonds - issued at par in May
2016; repayable in May 2020 and 2021; 1.19%
interest p.a., payable annually
Five-year unsecured bonds - issued at par in
September 2016; repayable in September 2020 and2021; 1.08% interest p.a., payable annually
Five-year convertible bonds - issued at discount in
December 2013; repayable in lump sum uponmaturity; 1.8245% discount rate p.a.

Category

Related issuance conditions were as follows:

206

2016

9,889,910
38,106,256
33,266,660$ 81,262,826$

Current
Noncurrent

Frequent flyer program
Advance ticket sales

22. DEFERRED REVENUE

Fuel costs
Ground handling service expenses
Maintenance expenses
Interest expenses
Short-term employee benefits
Terminal surcharges
Commission expenses
Others

21. OTHER PAYABLES

Minimum lease payments- 48 -

8,571,767
31,781,215
32,297,131$ 72,650,113

$

2015

$ 11,951,128
1,863,929$ 13,815,057$ 15,213,130

2,610,666
11,204,391$ 13,404,227
1,808,903$$ 13,815,057

2,427,565
12,785,565

2015$ 15,213,130$

1,879,615
1,792,920
871,757
255,933
3,045,476
702,261
450,492
1,723,598$ 10,722,052$

December 31

9,634,022$

2016

2,490,290
1,543,174
848,200
288,038
1,668,366
668,710
391,857
1,735,387$

2015$ 7,210,055

December 31$ 9,662,625

For the Year Ended December 31
2015
2016

The lease payments recognized in profit or loss for the current period were as follows:

Up to 1 year
Over 1 year to 5 years
Over 5 years

2016

December 31

The minimum lease payments in the future for the non-cancelable operating lease commitments were as
follows:
2015$ 5,033,257

December 31$ 6,770,951

2016$ 6,770,951- 49 -

Before the end of each year, the Company 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 toretirement requirements in the next year, the Company 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 ismanaged by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Company has no right toinfluence the investment policy and strategy.

The Company adopted the defined benefit plan under the Labor Standards Law, under which pension
benefits are calculated on the basis of the length of service and average monthly salaries of the six
months before retirement. The Company contribute amounts equal to 15% 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.

b. Defined benefit plans

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is astate-managed defined contribution plan. Under the LPA, an entity makes monthly contributions toemployees’ individual pension accounts at 6% of monthly salaries and wages.

a. Defined contribution plans

24. RETIREMENT BENEFIT PLANS

Balance at December 31, 2016

$ 5,033,257
2,011,115(366,218)
92,797$ 5,033,257

Balance at December 31, 2015
Balance at January 1, 2016
Additional provisions recognized
Usage
Effect of exchange rate changes$ 3,416,601
1,620,216(3,560)

Balance at January 1, 2015
Additional provisions recognized
Usage

Aircraft Lease
Contract

The Company rented flight equipment under operating lease agreements. Under the contracts, when the
Company returns an aircraft to the lessor, the flight equipment has to be repaired on the basis of operating
years and flight hours, flight cycle and the number of engine revolutions. For these contracts, theCompany recognizes a provision after entering into the lease contracts or during the lease terms.

Operating leases - aircrafts

23. PROVISIONS

207

Balance at December 31, 2016

Balance at January 1, 2015
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial loss - changes in financial
assumptions
Actuarial loss - experience adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
Balance at December 31, 2015
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial gain - changes in financial
assumptions
Actuarial loss - experience adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
Payment to employees direct from theemployer$ (1,852,469)(28,564)(28,564)(25,230)(25,230)(582,644)
685,017(1,803,890)(18,079)(18,079)(4,826)(4,826)(3,908,253)
776,190$ (4,958,858)$ 10,523,038
301,607
177,835
479,442

94,375472,546
566,921(799,982)
10,769,419
639,972
114,773754,745(147,479)
741,687594,208(776,190)(165,978)$ 11,176,204- 50 -

Fair Value ofthe Plan Assets

Present Valueof the Defined
BenefitObligation

Movements in net defined benefit liability were as follows:$$

Net defined benefit liability$$

6,217,346(165,978)(147,479)
741,687
589,382(3,908,253)-(4,826)

639,972
96,694
736,666

94,375472,546
541,691(582,644)(114,965)
8,965,529(25,230)

301,607149,271
450,878

8,670,569

Net Defined
BenefitLiability (Asset)

8,965,529$ 10,769,419(1,803,890)$ 11,176,204(4,958,858)

Present value of defined benefit obligation
Fair value of plan assets
6,217,346

2015

2016

December 31

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

1.29%
1.00%

2015
1.11%
1.00%

December 31$ (475,494)$ 515,961$ 495,727$ (465,377)$ 517,191$ (485,527)2015$ (496,081)$ 538,301

December 31- 51 -

The average duration of the defined benefit obligation

The expected contributions to the plan for the next year

10 years

2015

9.9 years$ 583,456

December 31$ 691,530

2016

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 inisolation of one another as some of the assumptions may be correlated.

Discount rate
0.5% increase
0.5% decrease
Expected rate of salary increase
0.5% increase
0.5% decrease2016

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

Discount rate
Expected rate of salary increase2016

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 wereas follows:3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the
future salaries of plan participants. Thus, an increase in the salaries of the plan participants will
increase the present value of the defined benefit obligations.

2) Interest risk: A decrease in the government bond interest rate will increase the present value of thedefined benefit obligation; however, this will be partially offset by an increase in the return on theplan’s debt investments.

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. Based on relevant regulations, the return generated by plan assets should
not be below the interest rate for a two-year time deposit with local banks.

Through the defined benefit plans under the Labor Standards Law, the Company is exposed to thefollowing risks:

208
2015
6,000,000$ 60,000,000$ 54,708,901

6,000,000$ 60,000,000$ 54,708,901

December 31
2016

2015
$ 552,470
11,7471,019
1,156
232,023$ 798,415

2016$ 552,470
11,747
1,019
2,673
146,684
85,339$ 799,932

December 31- 52 -

Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”)
amended on June 24, 2016 based on the amended Company Act, where the Company 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 inaccordance with the laws and regulations, and then any remaining profit together with any undistributed
retained earnings shall be used by the Company’s board of directors as the basis for proposing a
distribution plan with due consideration of any future aircraft acquisition plans and fund demand, whichshould be resolved in the stockholders’ meeting for the distribution of dividends and bonuses tostockholders by cash or stock (cash dividends cannot be less than 30% of total dividends distributed).
However, if the Company’s profit before tax in a fiscal year after deductions for the abovementioned
items is not sufficient for earnings distribution, retained earnings can be used as a supplement for the
deficiency. If the Company has no deficit in a fiscal year, the Company can distribute all or part of thecapital surplus by cash or stock with due consideration of finance, marketing and management
requirements in accordance with the laws and regulations.

c. Appropriation of earnings and dividend policy

The capital surplus from long-term investments and employee stock options expired and dividends
distributed to subsidiaries may not be used for any purpose, expect for offsetting a deficit. As forcapital surplus from conversion of convertible bonds payable may not be used for any purpose.

The capital surplus from shares issued in excess of par (additional paid-in capital from issuance ofcommon shares) may be used to offset a deficit; in addition, when the Company has no deficit, suchcapital surplus may be distributed as cash dividends or transferred to capital (limited to a certain
percentage of the Company’s paid-in capital).

Issue of stock in excess of par value and conversion premium
Employee stock options expired
Long-term investments
Gain on sale of treasury shares held by subsidiaries
Bonds payable equity component
Other

b. Capital surplus

The Company issued the 5th domestic unsecured convertible bonds amounting to $2,713,900 thousand
for which convertible bond holders can apply for conversion, and the common shares exchanged were221,724 thousand which are entitled to have their registration changed after the issuance of new shares.

Numbers of shares authorized (in thousands)
Amount of shares authorized
Amount of shares issued

Common sharesa. Share capital

25. EQUITY$

287,224
76,4862,508,525$0.458522382

Dividends Per
Share (NT$)

Balance at January 1, 2015
Exchange differences arising ontranslating the foreign
operations
Cash flow hedge on change infair value$- 53 -

-

-

4,015

-

$

Unrealized
Gain (Loss) on
Available-forsale Financial
Assets

67,88699,852

Exchange
Differences on
Translating
Foreign
Operations

The movement of other equity items is as follows:d. Other equity items(403,323)-$ (2,009,565)

Cash Flow
Hedge(403,323)(Continued)

67,886$ (1,905,698)

Total

On March 30, 2017, the board of directors proposed to use a capital surplus of $81,132 thousand tooffset the Company’s deficit. The compensation should be resolved in the stockholders’ meeting heldon June 22, 2017.

Compensation of 2016 deficit

Legal reserve
Special reserve
Cash dividends

Appropriationof Earnings

The appropriations resolved in the stockholders’ meeting on June 24, 2016 were as follows:

Appropriation of earnings in 2015

On June 26, 2015, the stockholders resolved to offset the accumulated deficit in 2014. The deficit
included a net loss of $751,232 thousand, other retained earnings of $47,471 thousand, andunappropriated deficits of $3,161,115 thousand. Therefore, the remaining amount of accumulated
deficit was $3,864,876 thousand. The Company offset the accumulated deficit against the legal
reserve of $1,511,953 thousand before compensation. No bonus to employees was appropriated for2014 because of the net loss in that year.

Appropriation of earnings in 2014

The distribution of dividends should be resolved and recognized in the stockholders’ meeting in thefollowing year.

For the earnings distribution under the Articles before the amendment, refer to Note 25 of the financial
statements for the year ended December 31, 2015.

209

$

1,714

$

$

$

31,986

8,893(51,019)582,665(282,556)-(225,997)(225,997)(3,664)(366,060)$ 2,556,615

Cash Flow
Hedge

$

$

$

112,264(Concluded)(4,057)(37,401)

582,665(282,556)(80,104)(66,283)(66,283)(6,397)(375,366)$ 2,556,615

Total- 54 -

Company’s shares held by its subsidiaries reclassified frominvestment in shares to treasury shares

For the year ended December 31, 2015

Company’s shares held by its subsidiaries reclassified frominvestment in shares to treasury shares

For the year ended December 31, 2016

Purpose of Treasury Shares

2,889

2,889

Number of
Shares,Beginningof Year--

Reduction
Duringthe Year(Note)

2,889

2,889

Number of
Shares,Endof YearTreasury shares, which are the Company’s shares held by its subsidiaries, as of December 31, 2016 and2015 were as follows:(Shares in Thousands)e. Treasury shares

78,564(41)-(12,909)
13,618$--

Balance at December 31, 2016

-

-

1,755

-

$

157,959$

Balance at January 1, 2016
Exchange differences arising ontranslating the foreign
operations
Cash flow hedge on change infair value
Cumulative gain arising onchanges in fair value ofhedging instruments
reclassified to profit or loss
Share of associates accounted
for using the equity method
Effect of income tax

1,755(2,260)--(80,104)$

157,959$

Balance at December 31, 2015

$

(473)
(9,306)-$

Unrealized
Gain (Loss) on
Available-forsale Financial
AssetsCumulative gain arising onchanges in fair value ofhedging instruments
reclassified to profit or loss
Share of associates accounted
for using the equity method
Effect of income tax

Exchange
Differences on
Translating
Foreign
Operations

2,075
814

2,075
814

Shares(In Thousands)$ 34,665$ 34,665$ 24,895
9,770$ 26,866$ 26,866$ 24,895
9,770$ 19,294
7,572

Market Value$ 19,294
7,572

Carrying
AmountInterest income
Subsidy income
Dividend income
Othersb. Other income

Passenger
Cargo
Othersa. Revenue

26. NET INCOME- 55 -$ 133,441,725$ 127,524,864$$

593,451

188,006
168,377
59,099177,969

367,360
184,5121,883,826
514,067$ 2,949,765$

For the Year Ended December 31
2015
2016

$ 87,908,718
39,916,992
5,616,015$ 86,298,238
35,353,349
5,873,277

For the Year Ended December 31
2016
2015

The shares of the Company held by its subsidiaries were treated as treasury shares. The subsidiaries can
exercise stockholders’ rights on these treasury shares, except the right to subscribe for the Company’s newshares and the right to vote.

The above acquisitions of the Company’s shares by subsidiaries in previous years were based oninvestment planning.

Mandarin Airlines
Hwa Hsia

December 31, 2015

Mandarin Airlines
Hwa Hsia

December 31, 2016

Subsidiary

The Company’s shares held by its subsidiaries as the ended of the reporting periods were as follows:210$ (2,900,099)

13,137$ (2,410,921)$
150,714248,626(1,899,372)(569,000)(844,204)

54,188(29,909)(495,350)(347,868)(717,758)(874,224)$

For the Year Ended December 31
2016
2015

Capitalized interest
Capitalization rate

- 56 -

Information about capitalized interest is as follows:

Interest expense
Bonds payable
Bank loans
Interest on obligations under finance leases
Loss arising on derivatives as designated hedging instruments
in cash flow hedge accounting relationship reclassified fromequity to profit or loss

d. Finance costs$ 419,593
1.45%-1.73%$ 344,835
1.74%-1.80%

For the Year Ended December 31
2016
2015

$ 1,711,983

292,242
1,280,181
132,409$ 1,221,588

$

7,151

297,032
845,987
68,17910,390$For the Year Ended December 31
2016
2015

The Company provided a compensation plan to the passengers and the agents who suffered losses fromthe strike, and the related compensation expense was about $201,000 thousand.

The mediation of labor-management disputes between the Company and Taoyuan Flight Attendants
Union (TFAU) was unsuccessful. TFAU acquired the right to strike through a strike vote and started astrike at 12 a.m. on June 24, 2016, and the scheduled flights resumed as usual on June 25, 2016 after
both parties reached a consensus. For other related information, refer to the Taiwan Stock Exchange
Market Observation Post System.

Gain on disposal property, plant and equipment and noncurrent
assets held for saleNet gain (loss) arising on financial assets classified as held for
tradingGain or loss on foreign exchange, net
Impairment loss on noncurrent assets held for saleImpairment loss on flight equipment
Othersc. Other gains and losses$

60,044$ 19,719,635$ 15,901,817
3,817,818$ 19,116,761$ 15,375,171
3,741,590$ 18,393,221

723,540

272,662
450,878$ 18,670,458$$$ 14,186,351
1,052,067
3,154,803

1,049,178

312,512736,666$ 14,176,230
1,175,417
3,318,811$$

For the Year Ended December 31
2016
2015

138,554$ 16,266,952$ 16,588,758$$ 15,991,635
275,317$ 16,326,996$ 16,266,952
60,044$ 16,290,250
298,508$ 16,727,312$ 16,588,758
138,554

For the Year Ended December 31
2016
2015

- 57 -

Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date the annual financial statements are authorized for issue are adjusted in
the year that the bonus and remuneration were recognized. If there is a change in the proposed
amounts after the annual financial statements were authorized for issue, the differences are recorded asa change in the accounting estimate.

To be in compliance with the Company Act as amended in June 2016, the Articles stipulate the
distribution of employees’ compensation at rates of no less than 3% of net profit before income tax andemployees’ compensation. For the years ended December 31, 2016 and 2015, employees’
compensation was $382,318 thousand and $1,810,196 thousand, respectively, of the base net profit.

An analysis of employee benefits expense by function
Operating costs
Operating expenses

Other employee benefits
Salary expenses
Labor and health insurance
Personnel service expenses

Post-employment benefits
Defined contribution plans
Defined benefit plans

f. Employee benefits expense

An analysis of amortization by function
Operating expenses

An analysis of deprecation by function
Operating costs
Operating expenses

Property, plant and equipment
Intangible assets

e. Depreciation and amortization

211

$

$

$ 1,074,108

965,71157,3781,983
1,014,747$

946,203

19,624(116)

For the Year Ended December 31
2016
2015

1,048,747(34,000)
1,983

470,203
476,000(116)$

Income tax expense recognized in profit or loss

- 58 -

Total income tax recognized in other comprehensive income

Recognized in other comprehensive income
Translation of foreign operations
Fair value changes of hedging instruments for cash flow
hedgesActuarial gain or loss on defined benefit plan

Deferred tax

b. Income tax recognized in other comprehensive income

11,716478,850(87,683)(1,565,313)
57,378142,079(393,931)(9,481)
19,624$$$ (283,278)

62,794(9,306)(366,060)
92,088$(51,019)
100,195

13,618For the Year Ended December 31
2016
2015

$ 1,074,108$ 1,162,430

261,333$

Income tax expense calculated at the statutory rate (17%)
Add (deduct) tax effects of:Nondeductible expenses in determining taxable income
Temporary differences
Tax-exempt income
Loss carryforwards - current used
Overseas income tax expense
Deferred tax
Temporary differences
Unrecognized loss carryforwards and investment tax credits
Adjustments for prior years’ tax
965,711$ 6,837,822$ 1,537,251

Profit before tax

For the Year Ended December 31
2016
2015

A reconciliation of accounting profit and income tax expense is as follows:

Income tax expense recognized in profit or loss

Current tax
Current year
Prior year adjustment
Deferred tax
Current year

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

27. INCOME TAX

Information on the employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors in 2016 and 2015 are available on the Market Observation Post
System website of the Taiwan Stock Exchange.

$$

Temporary differences
Defined benefit plan
Frequent flyer program
Maintenance reserve
Allowance for reduction of
inventory
OthersLoss carryforwards

Deferred tax assets- 59 -$ 8,055,966

148,436
1,038,650
4,380,524$ 1,475,338
432,196
580,822

Beginning
Balance

172,451

125,008
47,443$ 6,690,802

172,901
849,476
2,834,341$ 1,525,482
452,949855,653

For the year ended December 31, 2015

Temporary differences
Depreciation difference fromfixed assets
OthersDeferred tax liabilities

Temporary differences
Defined benefit plan
Frequent flyer program
Maintenance reserve
Allowance for reduction of
inventory
OthersLoss carryforwards

Deferred tax assets

Beginning
Balance

For the year ended December 31, 2016c. Deferred tax assets and liabilities(49,519)(39,059)(10,460)(995,722)

26,191(210,207)(511,390)(564,470)(31,254)
295,408

24,465
176,908(1,546,183)(41,944)
20,753274,831$ (1,091,170)$

Recognized in
Profit or Loss

$

$

$

$

Recognized in
Profit or Loss

(8,160)(8,160)54,634(45,561)-

100,195-$$(273,994)(366,082)-

92,088-

Recognized in
Other
Comprehensive Income

$

$

$

$

Recognized in
Other
Comprehensive Income

EndingBalance

114,772

85,94928,823$ 6,690,802(Continued)

172,901
849,476
2,834,341$ 1,525,482
452,949855,653$$$ 5,749,714

199,092
593,708
2,322,951$ 1,061,207
421,695
1,151,061

EndingBalance

212

$

$

239,590

126,488
34,977

78,125

Beginning
Balance$$(76,423)(1,480)3,182(78,125)

Recognized in
Profit or Loss

$

$

9,284

9,284

-

Recognized in
Other
Comprehensive Income

$

$

-

172,451(Concluded)

125,008
47,443EndingBalance$ 102,527$ 551,908

2015$ 20,964,421$ 17,328,027
2,899,496
619,799
117,099

UnusedAmount- 60 -

f. The income tax returns of the Company through 2014 have been examined by the tax authorities.

Under the Income Tax Law for the distribution of earnings generated after January 1, 1998, theimputation credits allocated to ROC resident stockholders of the Company was calculated based at thecreditable ratio as of the date of the dividends distribution.

The actual creditable tax ratio in 2015 was 20.22%, and the Company accumulated deficit as ofDecember 31, 2016; thus, there were no expected creditable tax ratios.

Imputation credit accounts

e. Integrated income tax

2019
2021
2022
2026

Expiry Year2015
$ 4,500,000

December 31$ 7,300,000

d. Unused tax loss carryforwards as of December 31, 2016 were as follows:

Loss carryforwards
Expiry in 2019

December 31

Deductible temporary differences, unused loss carryforwards and unused investment credits for which
no deferred tax assets have been recognized in the balance sheets are as follows:2016

Temporary differences
Unrealized foreign exchange
gain
Depreciation difference fromfixed assets
OthersDeferred tax liabilities

2016

$

$

571,540

5,515,339

47,337

5,838,764

255,186
150,850

5,432,728$ 5,811,430

47,716

-

1.06
1.00
$ 5,763,714$$

571,5400.10
0.10

5,468,002$$- 61 -

To support its operating activities and purchase of aircraft, the Company needs to maintain sufficient
capital. Therefore, the goal of capital management is to ensure financial resources and operating plan isable to support the future working capital, capital expenditures, debt repayment and dividend expenses andother needs.

The Company manages its capital to ensure that entities in the Company 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 Company consists of net debt (borrowings offset by cash and cash
equivalents) and equity of the Company comprising issued capital, reserves, retained earnings, other equity
and non-controlling interests.

29. CAPITAL MANAGEMENT

If the Company offered to settle compensation or bonuses paid to employees in cash or shares, theCompany assumed the entire amount of the compensation or bonus would be settled in shares, and theresulting potential shares were included in the weighted average number of shares outstanding used in thecomputation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential
shares was 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.

Weighted average number of common shares used in thecomputation of diluted earnings per share

Weighted average number of common shares in computation of basic
earnings per share
Effect of potentially dilutive common shares:
Convertible bonds
Employees’ compensation or bonus issue

Earnings used in the computation of diluted earnings per share

Earnings used in the computation of basic earnings per share
Effect of potentially dilutive common shares:
Interest on convertible bonds (after tax)

Basic earnings per share
Diluted earnings per share

For the Year Ended December 31
2016
2015

The numerators and denominators used in calculating earnings per share were as follows:

28. EARNINGS PER SHARE

213$ 22,538,044
84,649,618

Fair Value$ 22,580,069
86,734,531

2016
Fair Value$ 16,459,680
83,693,104

2015$ 15,844,106
83,532,457

Carrying
AmountDecember 31

Financial assets at FVTPL
Derivative instrument
Derivative financial assets forhedging
Derivative financial liabilities forhedging

December 31, 2016

-

-

-

$

$

$

- 62 -

Level 1$$$

23,62954,671

1,200

Level 2$$$

Level 3

-

-

-

$

$

$

23,62954,671

1,200

Total

c) Level 3 fair value measurements are those derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data (unobservable inputs).

b) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); anda) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;

The following table provides an analysis of financial instruments that are measured subsequent toinitial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fairvalue is observable:

2) Fair value measurements recognized in the balance sheets

Some long-term debts and capital lease obligations are floating-rate financial liabilities, so theircarrying amounts are their fair values. The fair values of long-term debts and private bonds with
fixed interest rates are estimated at the present value of expected cash flows discounted at rates of
1.191% in 2016 and 0.433% in 2015 prevailing in the market for long-term debts (Level 2). The
fair values of bonds payable are based on those which are traded in the stock exchange and based onquoted market prices (Level 1).

Bonds payable
Bank loans

Financial liabilities

Carrying
Amount1) Fair value of financial instruments not carried at fair value

a. Fair values of financial instruments

30. FINANCIAL INSTRUMENTS

100,029-$$$ 100,029$

Level 1

$

$

$

$

12,70244,222

65,52865,528-

Level 2

12,738--$ 300,501$$$

Level 365,528100,029

56,960$ 313,203$$ 165,557

$

Total

Discounted cash flow. Future cash flows are estimated basedon observable forward exchange rates at the end of thereporting period and contract forward rates, discounted at a
rate that reflects the credit risk of various counterparties.

Derivatives - foreign exchange
forward contracts andinterest rate swaps

Financial assets at FVTPL
Available-for-sale financial assets (3)Derivative financial assets for hedging
Loans and receivables (1)Financial assets

b. Categories of financial instruments- 63 -

1,200
120,200
54,671
29,522,622$ 29,698,693$

165,557
126,125
56,96027,834,830

2015$ 28,183,472(Continued)$

December 31

Because some financial instruments and non-financial instruments are not required to have their fairvalues disclosed, the total fair value shown in this note does not represent the total value of theCompany.

The fair values of foreign exchanges and fuel options are determined using option pricing models
where the significant unobservable inputs are historical volatility. An increase in the historicalvolatility used in isolation would result in a decrease in the fair value of foreign exchanges and fueloptions.

e) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value
measurement

Valuation Techniques and Inputs

Financial Instruments

2016d) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value
measurement

There were no transfers between Level 2 and 3 in the current and prior periods.

Derivative financial assets forhedging
Derivative financial liabilities forhedging

Financial assets at FVTPL
Derivative instrument
Beneficial certificates

December 31, 2015

214
23,629122,866,720$ 122,890,349$
313,203
119,588,050$ 119,901,253(Concluded)

$

2015

- 64 -The Company enters into foreign currency option contracts to hedge against the risks on change
in related exchange rates, enters into forward contracts to hedge against the risks on changes inforeign-currency assets, liabilities and commitments in the related exchange rates.

a) Foreign currency risk

The Company enters into forward contracts, foreign currency option contracts, and interest swap
contracts with fair values that are highly negatively correlated to the fair values of hedged items andevaluates the hedging effectiveness of these instruments periodically.

The Company is primarily exposed to the financial risks of changes in foreign currency exchange
rates and interest rates. The Company entered into derivative financial instruments to manage its
exposure to foreign currency risk and interest rate risk.

1) Market risk

In addition, the Company has a risk management committee, which meets periodically to evaluate theperformance of derivative instruments and determine the appropriate hedging portion. This committee
informs the Company of global economic and financial conditions, controls the entire financial risk
resulting from changes in the financial environment and fuel prices, and develops the strategy andresponse to avoid financial risk with the assistance of financial risk experts to effect risk management.

The Company has risk management and hedging strategies to respond to changes in the economic,
financial environment and in the fuel market. To reduce the financial risks from changes in interest,
exchange rates and fuel prices, the Company has its operating costs stay within a specified range byusing appropriate financial hedging instruments and hedging percentages in accordance with the“Processing Program of Derivative Financial Instrument Transactions” approved by Company
stockholders to reduce the impact of changes in market price on earnings. These risks include market
risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

c. Financial risk management objectives and policies

3) The balances include financial assets measured at cost.

2) The balances include financial liabilities measured at amortized cost, which comprise short-termloans, short-term notes payable, notes and accounts payable, accounts payable - related parties,
other payables, bonds payable and long-term loans, capital lease obligations, part of other current
liabilities, part of other noncurrent liabilities and guarantee deposits.

1) The balances include loans and receivables measured at amortized cost, which comprise cash andcash equivalents, notes and accounts receivable, accounts receivable - related parties, otherreceivables, refundable deposits, other financial assets and other restricted financial assets.

Derivative financial liabilities for hedging
Financial liabilities at amortized cost (2)Financial liabilities

December 31$ 16,540,596
89,343,567$ 26,258,421
86,645,240- 65 -The Company is exposed to fuel price risk on its purchase of aviation fuel. The Company
enters into fuel option contract to hedge against adverse risks on fuel price changes.

c) Other price risk

Had interest rates increase one yard (25 basis) and had all other variables been held constant, theCompany’s pretax profit for the year ended December 31, 2015 would have decreased by$160,250 thousand.

Had interest rates increased one yard (25 basis) and had all other variables been held constant,
the Company’s pretax profit for the year ended December 31, 2016 would have decreased by$216,613 thousand.

The sensitivity analyses below were determined based on the Company’s exposure to interest
rates for both derivatives and non-derivative instruments at the end of the reporting period.
For floating rate liabilities, the analysis was prepared assuming the amount of the liability
outstanding at the end of the reporting period was outstanding for the whole year. One yard
(25 basis) increase or decrease was used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in interest rates.

Sensitivity analysis

Fair value interest rate risk
Cash flow interest rate risk

2015
2016

December 31

The carrying amount of the Company’s financial liabilities with exposure to interest rates at theend of the reporting period were as follows.

The risk is managed by the Company by maintaining an appropriate mix of fixed and floating
rate borrowings, and using interest rate swap contracts and forward interest rate contracts.

The Company enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates.

b) Interest rate risk

When the New Taiwan dollar increases one dollar against the U.S. dollar and all other variables
were held constant, there would be an increase in pre-tax profit in 2016 of $9,026 thousand anda decrease in pre-tax profit in 2015 of $127,516 thousand.

The following details the Company’s sensitivity to a one dollar increase and decrease in the
New Taiwan dollar (the functional currency) against the relevant foreign currencies (i.e. theU.S. dollar). This 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 foreign currency forward contracts designated as
cash flow hedges and adjusts their translation at the end of the reporting period for a one U.S.
dollar increase/decrease against the New Taiwan dollar.

The Company is mainly exposed to the U.S. dollar.

Sensitivity analysis

215

$

-

$

-

$

9,799
(9,799)$ (32,769)(106,002)- 66 -The objective of the Company’s management of liquidity is to maintain cash and cash equivalents
are sufficient for operating purpose, marketable securities with high liquidity and sufficient Loan
Commitments and ensure the Company has adequate financial flexibility.

3) Liquidity risk

Endorsements given by the Company on behalf of its subsidiaries can be found in Note 31,c.

Credit risk on bank deposits, investments income and other financial instruments are measured andmonitor by the Company’s finance department. The Company’s trading partners and other parties
were well-performing banks and financial institutions, corporations, and government agencies, therisk of Counterparties fail to discharge an obligation is low, therefore there is no significant creditrisk.

Financial credit risk

Since the customers of the industry is dispersed and non-related, the credit risk concentration is notcritical aviation.

To assess individual customers, the Company consider into the financial condition of the customers,
the credit rating agency rating, the Company’s internal credit rating, transaction history and current
economic conditions and many other factors that may affect the repayment. Sometimes, theCompany uses certain credit enhancement tools to reduce the credit risk of specific customers.

The Company has established procedures to management operations related credit risk to maintainthe quality of accounts receivable.

Operation - related credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting
in financial loss to the Company. The Company’s credit risk, primarily comes from accounts
receivable generated from operating activities and bank deposits generated from investing activities,
fixed investment income and other financial instruments, operation related credit risk and financial
credit risk are managed separately.

2) Credit risk

Fuel price increase 5%
Fuel price decrease 5%

For the Year Ended December 31
2016
2015
Other
Other
CompreComprehensive
hensive
IncomeIncomePre-tax Profit
Pre-tax Profit
Increase
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)

The sensitivity analyses below were determined based on the exposure to fuel price risks at theend of the reporting period.

Sensitivity analysis

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments
Bonds payable

110,660-

1.37981,517,133$ 28,861,242$ 35,220,705

4,664
-

197,880
4,944,106

33,457,662
241,246$

1-2 Years$ 23,886,102

341,433

22,306,473

1,071,350

3 Months to
1 Year$- 67 -

7,475,423

113,8110.0437357,118
6,893,834$$
1.22331.29341-3 Months$ 30,776,075

2,775
4,338,044

18,2002,700,000
2,655
4,983,499

2,000,000

419,109401,268

2,966,000

1.3384$

1.2477

940,500

0.016$

1-2 Years

14,579,283

313,500

3 Months to
1 Year26,698,266$$

1-3 Months

4,266,076

1.0508The Weighted
Average
Effective
Interest Rate(%)

December 31, 2015

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments
Bonds payable

The Weighted
Average
Effective
Interest Rate(%)

December 31, 2016

596,000

15,500,000-

31,315,615

3,562,000

10,900,000-

19,898,375$ 34,360,375$

2-5 Years$ 47,411,615$

2-5 Years

$

$

$

$

-

-

260,688--

260,688

5+ Years

4,970,000--

4,970,000

5+ Years

Bank loans with a repayment on demand clause were included in the second column of the tablebelow regardless of whether or not the banks would choose to exercise early their rights to
repayment. The maturity dates for other non-derivative financial liabilities were based on theagreed-upon repayment dates. The Company’s liquidity analysis for its derivative financial
instruments is also shown in the following table. The table was based on the undiscounted
contractual net cash inflows and outflows on derivative instruments that settle on a net basis, andthe undiscounted gross cash inflows and outflows on those derivatives that require gross settlement.
When the amount payable or receivable is not fixed, the amount disclosed has been determined byreference to the projected interest rates as illustrated by yield curves at the end of the reporting
period.

The following table shows the remaining contractual maturity analysis of the Company’s financial
liabilities with agreed-upon repayment periods, which were based on the date the Company may berequired to pay the first repayment and financial liabilities is evaluated based on undiscounted cash
flows, including cash flows of interest and principal.

Liquidity and interest risk rate tables

216
2015
$ 22,172,000$ 14,424,006

December 31
2016$ 3,053,926$
14,325$28,328$ 3,449,074$
13,950$34,835

Sales of Goods
For the Year Ended
December 31
2016
2015
$ 3,539,079$ 1,613,899$
63,084436,447
1,550
1,512
439,509$$912,002431,5023,503$ 1,347,007$

952,166
388,371
7,138$ 1,347,675

$

2015

546,141

542,449
599
3,093

2015

- 68 -The Company rented out planes to Mandarin Airlines under an operating lease contract. The monthly
rent received is based on flight hours. In 2016 and 2015, the rentals received amounted to $1,022,817
thousand and $1,388,499 thousand, respectively.

b. Lease of properties (operating leases)

The outstanding accounts payable from related parties are unsecured and will be paid in cash, and theterms of making collections and payables is from 30 days to 90 days; accounts receivable from relatedparties does not gather any deposit, and no expense was recognized for allowance for impairment loss.

Associates
Jointly controlled entities
Major stockholders$$

December 31

The amount of accounts payable - related parties at reporting dates were as follows:

Associates
Jointly controlled entities
Major stockholders

December 31$ 3,568,025$ 1,531,649$
78,374Purchases of Goods
For the Year Ended
December 31
2016
2015

The amount of accounts receivable - related parties at reporting dates were as follows:

Associates
Jointly controlled entities
Major stockholders

2016
a. Operating transactions

Details of transactions between the Company and its related parties are disclosed below:

31. RELATED-PARTY TRANSACTIONSUnused bank loan limit (unsecured)

Loan commitments
2016$ 3,850,000
1,080,000
180,000
919,742

Authorized
Amount2016$ 2,783,000
436,418
438,740

ActualAmountUsed$ 3,400,000
1,080,000
236,629
180,000
937,895

Authorized
AmountDecember 31
2015$ 2,739,000
486,815
236,629
6,343
447,399

ActualAmount
Used

250
50

$

250,000
50,000

Short-term employee benefits
Post-employment benefits

e. Compensation of key management personnel- 69 -

47,74812,26960,017$$$$49,67845,813
3,865

For the Year Ended December 31
2016
2015

In 2016, interest expenses was $2,142 thousand. This bonds payable will be paid off in May 2021.
As of December 31, 2016 the interest payable was $2,142 thousand.

Mandarin Airlines
Sabre Travel Network (Taiwan)

The first issue of unsecured bonds in 2016

Related Party

December 31, 2016
Aggregate
Units
Par/Dollars

Related parties that invested in the first issue of unsecured bonds in 2016 (Note 19) are summarized asfollows:

d. Bonds payable - related parties

Cal Park
Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan

The Company

c. Endorsements and guarantees

In March 2010, the Company signed with CAL Park a yearly renewable operating lease agreement to
use the Operating and Aviation Headquarters building of the Taiwan Taoyuan International Airport at a
fixed rental of $18,101 thousand monthly. In both 2016 and 2015, the Company paid rentals of$217,210 thousand.

Under an operating lease agreement, the Company rented flight training machines and flight simulatorsfrom China Aviation Development Foundation to train pilots. The Company paid the rental based on
usage hours. In 2016 and 2015, the Company paid rentals of about $63,084 thousand and $78,374
thousand, respectively.

For fleet scheduling, the Company rented planes from Mandarin Airlines under an operating leaseagreements beginning from July 2003. The Company paid the rental by flight hours. The paymentsof flight rentals were $17,519 thousand in 2016 and $205,604 thousand in 2015.

217$ 88,609,505
236,634$ 88,846,139$ 76,096,729$ 76,096,729

2015- 70 -

c. The Company has been named as a defendant, together with other airline members of the Associationof Asia Pacific Airlines, in a civil class action lawsuit filed at the U.S. Northern District Court ofCalifornia by a group of passengers who alleged that there was an antitrust violation in December 2007.
The Company has properly joined the defendants’ Joint Defense Group.

b. For the future development of the Company’s business, the Company entered into lease contracts with
BOC Aviation with a letter to lease six 737-800 aircrafts. The expected delivery period would begin
from September 2016. As of December 31, 2016, four of the aircrafts had been delivered.

a. In January 2008, the Company entered into a contract to buy fourteen A350-900 aircrafts from Airbus,
with the option to buy six more A350-900aircrafts, with aggregate listing purchase prices of
US$3,933,235 thousand and US$1,802,645 thousand, respectively. The expected period of delivery of
the aircrafts was from 2016 to 2018. As of December 31, 2016, four of the aircrafts had beendelivered to the Company, and the aggregated listing purchase price of the remaining ten aircrafts was$2,839,377 thousand, which has been paid in the amount of US$637,908 thousand (recognized as
prepayments for aircrafts).

As of December 31, 2016, the Company had commitments and contingent liabilities which were as follows:

33. COMMITMENTS AND CONTINGENT LIABILITIESThe above US treasury bills had been pledged as collaterals for Freighter Prince Ltd., which classified as
restricted assets - noncurrent.

Property, plant and equipment
Restricted assets - noncurrent
US treasury bills

December 31

The following assets had been pledged or mortgaged as collaterals for long-term bank loans, leaseobligations and business transactions:32. PLEDGED ASSETS

The remuneration of directors and key executives was determined by the remuneration committee
having regard to the performance of individuals and market trends.

250,734
6,511
84,4504,408,042
106,305

240,758
15,642
273,058
4,799,620
428,196$

113,609
8,332
76,421
4,515,925
121,287

283,326
15,820229,643
1,472,009
1,713,347

Foreign
Currencies$

Foreign
Currencies

32.8947
35.97124.24450.2731
5.065932.8947
35.97124.24450.2731
5.0659Exchange Rate

32.258134.0136
4.15800.27704.642532.258134.0136
4.15800.27704.6425

Exchange Rate

3,737,148
299,726
324,371
1,233,299
614,428$ 9,319,930
569,057
974,720
402,006
8,679,643

Carrying
Amount8,088,204
221,448
351,141
1,221,028
493,520$ 7,764,768
532,068
1,135,374
1,329,495
1,987,898

Carrying
Amount- 71 -For the years ended December 31, 2016 and 2015, the Company’s net foreign exchange gains (losses) were$(495,350) thousand and $248,626 thousand, respectively. It is impractical to disclose net foreign exchange
gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions.

Monetary items
USD
EUR
HKD
JPY
RMB

Financial liabilities

Monetary items
USD
EUR
HKD
JPY
RMB

Financial assets

December 31, 2015

Monetary items
USD
EUR
HKD
JPY
RMB

Financial liabilities

Monetary items
USD
EUR
HKD
JPY
RMB

Financial assets

December 31, 2016

The following information was aggregated by the foreign currencies other than functional currencies of theCompany entities and the exchange rates between foreign currencies and respective functional currencies
were disclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

34. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

218

None.

Table 2 (attached).

Table 1 (attached).

Table 6 (attached).

Notes 7 and 8.

- 72 -The Company mainly engages in air transportation services for passengers, cargo and others. The major
revenue-generating asset is the fleet, which is jointly used for passenger and cargo services. Thus, theCompany’s sole reportable segment is the flight segment. For operating segment reporting in the financial
statements, the Company’s reportable segment comprises the flight and the non-flight businessdepartments.

36. SEGMENT INFORMATION

b. Investment in Mainland China:

10) Derivative financial transactions:9) Names, locations, and related information of investees on which the Company exercises significant
influence: Table 5 (attached).

8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 4 (attached).

7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 3 (attached).

6) Disposal of individual real estates at costs or prices of at least NT$100 million or 20% of the paid-in
capital: None.

5) Acquisition of individual real estates at costs or price of at least NT$100 million or 20% of thepaid-in capital: None.

4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: None.

3) Marketable securities held:

2) Endorsement/guarantee provided:

1) Financing provided:a. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:

35. ADDITIONAL DISCLOSURES

$ 3,850,000
1,080,000
240,586
180,000
953,579$ 3,850,000
1,080,000
180,000
919,742$ 2,783,000
436,418
438,740$- 73 -

Based on the Company’s guidelines, the allowable aggregate amount of collateral guarantee is up to 50% of the Company’s stockholders’ equity.

$ 11,156,763
11,156,763
11,156,763
11,156,763
11,156,763

Note 2:

100% subsidiary
54% subsidiary
100% subsidiary
100% subsidiary
90% subsidiary by direct
and indirect holdings

Nature of Relationship

ActualBorrowingAmount

6.90
1.94
0.32
1.65

Ratio ofAccumulated
Value ofAmount ofCollaterals
Collateral toProperty, Plant Net Equity ofor Equipment
the Latest
Financial
Statement (%)

Based on the Company’s guidelines, the maximum amount of guarantee to an individual counter-party is up to 20% of the Company’s stockholders’ equity.

China Airlines
Cal Park(the “Company”) Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan Ltd.

Name

Limit on EachCounter-party’s
Maximum
Endorsement/
Balance for the Ending Balance
Guarantee
PeriodAmount(Note 1)

Note 1:0No.

Endorsement/
Guarantee
ProviderCounter-party

ENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

219$ 27,891,909
27,891,909
27,891,909
27,891,909
27,891,909

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)

Y
Y
Y
Y
Y

N
N
N
N
N

N
N
N
N
N

Endorsement/ Endorsement/ Endorsement/
Guarantee
Guarantee
Guarantee
Given byGiven on Behalf
Given by Parent
on Behalf of
Subsidiaries on of Companies in
Subsidiaries Behalf of Parent Mainland China

TABLE 1Marketable Security Type and Issuer/Name

Beneficiary certificates
Mirae Asset Solomon Money Market Fund
Mega Diamond Money Market Fund
Franklin Templeton SinoAm Money Market FundFSITC Taiwan Money Market FundFSITC Money Market Fund

Stock
TransAsia Airways

Stock
China Airlines

Sabre Travel Network (Taiwan)

Taiwan Airport Services

Hwa Hsia-

Parent company

-

-

-

-

Parent company-

Relationshipwith the Holding
Company

Financial assets at fair value through profit or loss - current

Available-for-sale financial asset - current

Available-for-sale financial asset - noncurrent

Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current

Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent

Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current

Available-for-sale financial asset - 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 Statement AccountNote 2: The Company does not issue stocks because it is a limited company.

- 74 -

Note 1: The subsidiary’s net asset value was $64,474 thousand, which included common stock and preferred stock as of and for the year ended December 31, 2016.

Beneficiary certificates
Taishin 1699 Money Market Fund

Stock
Taikoo (Xiamen) Landing Gear Services
Taikoo Spirit Aerospace Systems (Jinjiang)
Composite

Beneficiary certificatesFuh Hwa Money Market Fund
Barclays America Bonds Fund

Stock
China Airlines

Cal-Asia Investment

Mandarin Airlines

China Airlines (“Parent company”) Stock
Everest Investment Holdings Ltd. - common stockEverest Investment Holdings Ltd. - preferred stock
Chung Hua Express Co.
Jardine Air Terminal Services

Holding Company Name

MARKETABLE SECURITIES HELDDECEMBER 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

220
349,523

814,152

2,277,786

265,726
4,637,003
5,360,663
3,360,289
155,632-

15,302,543
1,000,000

2,074,628

1,359,368
135,937
1,100,000
12,000,000

Number of
Shares/Units

$

4,683

7,572

-

3,321
57,58454,85550,90027,502

20,157

184,235
32,361

19,29452,704473
11,00056,023

-

-

0.4

-

5.83
5.45

-

-

13.59
11.00
15.00

December 31, 2016
Percentage
ofCarrying Value
Ownership
(%)

$

4,683

7,572

-

3,321
57,58454,85550,90027,502(48,552)
24,577

184,235
32,361

19,29464,474
21,487
6,921

Market Valueor Net Asset
Value

-

-

-

-

Note 2
Note 2--

Note 1
Note 1-Note

TABLE 2

China Airlines, Ltd.
(“China Airlines”)

Company Name

Taiwan Air Cargo Terminal
Hua Hsia
Mandarin Airlines
China Pacific Catering Services
Cal Park
Taiwan Airport Services
Taoyuan International Airport Service
Kaohsiung Catering Services
China Aircraft Services
Cal Hotel
Tigerair Taiwan
China Pacific Laundry Services

Related Party

Subsidiary
Subsidiary
Subsidiary
Equity-method investee
Subsidiary
Subsidiary
Subsidiary
Equity-method investee
Equity-method investee
Subsidiary
Subsidiary
Equity-method investee

Nature of Relationship

Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Sale
Purchase

Purchase/
Sale
427,875
314,048(2,575,551)
1,504,966
217,210369,255
1,148,069
291,814210,390
180,110(313,019)
108,933- 75 -$

Amount
0.38
0.28
2.02
1.34
0.19
0.33
1.02
0.26
0.19
0.16
0.25
0.10

% to
Total

Transaction Details

30 days
2 months
2 months
90 days
2 months
40 days
40 days
60 days
30 days
1 month
1 month
2 months

Payment Terms

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

221$

Unit Price-$(43,767)(55,480)
377,970(411,698)(57,018)(61,101)(323,510)(68,324)(34,786)(17,772)
37,418(19,804)(2.99)(3.79)
4.06(28.14)(3.90)(4.18)(22.11)(4.67)(2.38)(1.21)
0.40(1.35)

Note/Account Payable or
Receivable% toPayment Terms Ending Balance
Total

Abnormal Transaction

-

Note

TABLE 3

China Airlines

China Airlines

China Pacific Catering Services

Taoyuan International Airport Service

Parent company

Parent company

Parent company

Subsidiary

Nature of RelationshipTransactions with subsidiaries have been written off in consolidated financial report.

China Airlines

Mandarin Airlines

Note:

Mandarin Airlines

Related Party

China Airlines, Ltd. (“China Airlines”)

Company Name

- 76 -

323,510411,698

227,693$ 377,970

Ending Balance(Note)

3.63

3.85

0.36

5.76

Turnover Rate

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALDECEMBER 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

222$

Amount

-

-

-

-

-

-

-

-

Action Taken

Overdue323,510

265,889

18,230$ 208,856

Amounts Received
in Subsequent
Period

$

-

-

-

-

Allowance for
Bad Debts

TABLE 4

3,329
5,877

HK$
US$

Forwarding and storage of air cargo
Airport services and investment

Hong Kong

Samoa

Eastern United International Logistics

Taiwan Airport Service (Samoa)

Cal-Asia Investment

Taiwan Airport Services

On December 18, 2015 the board of Science Park Logistics (SPL) approved the issuance of common shares for cash and with the date of right issues granted on was December 25, 2015.
remitted to SPL by December 31, 2015. SPL completed the registration of this subscription on January 22, 2016.

Note 5:- 77 -The Company does not issue stocks because it is a limited company.

Have acquired non-controlling interests of Taiwan Airport Services from September 2015.

Note 3

5,617
19,581

16,04919,581

42,948349,21135.00
100.001,050,000-

The board of Company has reached an agreement to purchase $64,091 thousand which had been

5,877

US$

Note 4:

Represents the consolidated financial information of the foreign holding company disclosed in accordance with local regulations.

Note 2:

3,329

HK$

Note 3:Adopted the treasury stock method in recognizing investment income or loss.

Note 1:

Note 4(77,803)
1,003(778,025)
116,081
45,358
5,261
10.00
1.08
20,000,000
469,755
200,000
3,574

Air transportation and maintenance of aircraft
Airport services

Taipei, Taiwan
Taipei, Taiwan

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Mandarin Airlines

200,000
11,658

304
2,621
1,695
(622,420)(31,603)
304
5,139
6,783
(778,025)(31,603)25,46430,9617,418
32
32
362,861
110,128100.0051.00
25.00
100.00100.0080.00
100.001,600,000
408
250,000
1,000
1,000
160,000,000
16,000,000
JPY

26,265
20,400
2,500
US$
1
US$
1
1,600,000
60,000JPY

Taipei, Taiwan
Tokyo, Japan
Taipei, Taiwan
Cayman Islands
Cayman Islands
Taipei, Taiwan
Taoyuan, Taiwan

Yestrip
Dynasty Holidays
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance andEngineering Co., Ltd.

26,265
20,400
2,500
US$
1
US$
1
1,600,000
160,000

Note 1$

19,037

1,529,375
1,125,057
1,261,894
1,244,328
638,980
649,189
450,305
438,502515,051
279,176
231,316
267,371387,375
257,928
167,048

19,412100.0077,27077,27077,270$71,534Note

Note 1
Note 2
Note 5-Investment
Income (Loss)

18,551(215,240)
13,791
29,135208,039
135,850(47,074)
175,169
51,028109,815
54,96675,67473,50026,136
21,628Net Income(Loss) of theInvestee

TABLE 5

18,551 $(227,787)
25,537
29,135407,920
277,247(47,074)
186,479
255,141448,224
116,081
211,499
73,500100,522
39,324100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
24.50
47.35
35.78
100.0026.00
55.00
150,000,000
188,154,025
135,000,000
2,614,500
43,911,000
34,300,000
7,172,346
13,021,042
28,400,000
7,732,200
20,626,644
14,329,759
46,500,000
18,633,937
13,750,000

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
77,322
12,289140,240
465,000
150,654
137,500$$

Taoyuan, Taiwan

China Airlines, Ltd.

Balance as of December 31, 2016
PercentageofSharesCarrying Value
Ownership

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
77,322
12,289140,240
465,000
214,745
137,500

December 31,
2015

Investment Amount
December 31,
2016

Hwa Hsia

Main Business and Product

Real estate lease and international trade
Air transportation and maintenance of aircraft
Air cargo and storage
A holding company, real estate and hotel services
In-flight catering
Airport services
General investment
Sale and maintenance of hardware and software
Airport services
Research, manufacture and maintenance of engines
Airport services
In-flight catering
Hotel business
Storage and customs of services
Cleaning and leasing of the towel of airlines, hotels,
restaurants and health clubs
Cleaning of aircraft and maintenance of machine andequipment
Travel businessTravel business
Forwarding and storage of air cargo
Aircraft lease
Aircraft lease
Air transportation and maintenance of aircraft
Aircraft maintenance

Location

Taoyuan, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan
Los Angeles, U.S.A.
Taoyuan, Taiwan
Taoyuan, Taiwan
Territory of the British Virgin Islands
Taipei, Taiwan
Hong Kong International Airport
Taoyuan, Taiwan
Taipei, Taiwan
Kaohsiung, Taiwan
Taoyuan, Taiwan
Tainan, Taiwan
Taoyuan, Taiwan

Investee Company

Cal Park
Mandarin Airlines
Taiwan Air Cargo Terminal
Cal-Dynasty International
China Pacific Catering Services
Taoyuan International Airport Services
Cal-Asia Investment
Sabre Travel Network (Taiwan)
China Aircraft Service
Asian Compressor Technology Services
Taiwan Airport Services
Kaohsiung Catering Services
Cal Hotel Co., Ltd
Science Park Logistics
China Pacific Laundry Services

Investor Company

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE YEAR ENDED DECEMBER 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES223

Forwarding and storage64,995of air cargo(RMB 14,000)

Landing gear
1,190,000
maintenance services (US$ 36,890)

(US$

(US$

Composite material

Aircraft line
maintenance

Forwarding of air cargo
and ocean freight(US$

Airport Air Cargo Service(Xiamen) Co., Ltd.

Taikoo (Xiamen) Landing
Gear Services

Taikoo Spirit Aerospace
Systems (Jinjang)

Shanghai Eastern Aircraft
Maintenance

Shanghai Eastern UnitedInternational

Investment Amount
Authorized by Investment
Commission, MOEA

$464,423 (Note 5)

Accumulated Investment in
Mainland China as ofDecember 31, 2016

$241,194 (US$7,477)

32,2581,000)

100,000
3,100)

376,226
11,663)Forwarding and storage $ 1,042,154of air cargo(RMB 224,480)

Main Business andProduct

Indirect(Notes 3
and 8)

Indirect(Note 2)

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

5,532
172)

8,000
248)

20,516636)

69,3942,151)

62,821
1,947)$34,720,319 (Note 6)

Limit on Investment

(US$

(US$

(US$

(US$

(US$

$
135,031 $(US$4,186)

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof January 1,
2016

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company Name

China Airlines

INVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2016
(In Thousands of New Taiwan Dollars/Renminibi/U.S. Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES224
Outflow

-

-

-

-

-

-

- 78 -

(US$

$
(US$

-

-

-

-

(US$

(US$

(US$

(US$

18,258566) (US$Net Income(Loss) of
the Investee

5,532
172)

8,000
248)

20,516636)

69,3942,151)----

44,56384,691
1,381) (RMB 18,242)

93,200 $48,9722,889) (RMB 10,549)

Accumulated
Outflow ofInvestment
from Taiwan asof December 31,
2016

41,831 $1,297) (US$

Inflow

Investment Flow

-

8.00

5.45

5.83

14.00

14.00

% Ownershipof Direct orIndirect
Investment

(RMB

$
(RMB

-

-

-

-

(RMB

-

-

20,157
4,342)

-

-

-

-

-

28,236875)(Note 4)90,3792,802)(Note 4)

(Continued)

12,371
115,330
2,554) (RMB 24,842) (US$7,153 $
234,169 $1,477) (RMB 50,440) (US$Investment
Gain (Loss)

Accumulated
Carrying Value
Inwardas ofRemittance ofDecember 31, Earnings as of2016
December 31,
2016

TABLE 6

(US$

-

-

$

Inward$293,115 (Note 6)

Upper Limit on the Amount of
Investment Stipulated by
Investment Commission, MOEA

62,161
1,927)$
132,516 $(US$4,108)

Outward

Remittance of Funds

-

-

(US$

62,161
84,691
1,927) (RMB 18,242)

14.00

14.00

% Ownershipof Direct orIndirect
Investment

(RMB

$
(RMB

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2016

12,371
115,558
2,554) (RMB 24,891) (US$- 79 -

Note 9: The RMB and U.S. dollar amounts of assets are translated at year-end rates, and those of gains (losses) are translated at the average of the year-end rates for the reporting period.

Note 8: Eastern United International Logistics (Holdings) Ltd. had disposed of the investee company, and the Company was preparing for a declaration to Investment Commission.

Note 7: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which in return, invested in a company located in mainland China.

(Concluded)

45,374
1,407)

7,154 $
232,872 $
122,785
1,477) (RMB 50,160) (US$3,806)

Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2016

Note 6: The limit stated in the Investment Commission’s regulation, “Investment or Technical Cooperation in Mainland China Adjustment Rule,” is the larger of the Company’s net asset value or 60% of the consolidated net asset value.

Note 5: The amount comprised US$12,655,978, RMB4,200,000 and NT$36,666,667.

Note 4: The inward remittance of earnings in 2016 amounted to US$2,801,749 and US$875,330.

Note 3: Cal-Asia Investment invested in Eastern United International Logistics (Holdings), which in turn, invested in a company located in mainland China.

Note 2: The Company invested in China Aircraft Services, which in turn, invested in a company located in mainland China.

Net Income(Loss) of theInvestee$
132,516 $48,972(US$
4,108) (RMB 10,549)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2016

Note 1: China Airlines, Ltd. the “Company” invested in Cal-Asia Investment, which, in turn, invested in a company located in mainland China.

$191,778 (US$5,945)$191,778 (US$5,945)

Indirect(Note 7)

Investment Amounts Authorized by
Investment Commission, MOEA

Forwarding and storage64,995of air cargo(RMB 14,000)

Airport Air Cargo Service(Xiamen) Co., Ltd.

Indirect(Note 7)

Accumulated Outward
Remittance for Investment in
Mainland China as of December 31, 2016

Forwarding and storage $ 1,042,154of air cargo(RMB 224,480)

Main Business andProduct

Accumulated
Outward
Remittance for
Method ofPaid-in Capital
Investment
Investment
from Taiwan asof January 1,
2016

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company

Taiwan Airport Services

225

China Airlines Co.,Ltd.
Chairman：Ho,Nuan-Hsuan