China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for the
Six Months Ended June 30, 2016 and 2015 andIndependent Auditors’ Review ReportINDEPENDENT AUDITORS’ REVIEW REPORTThe Board of Directors and the Stockholders
China Airlines, Ltd.
We have reviewed the accompanying consolidated balance sheets of China Airlines, Ltd. (the“Company”) and its subsidiaries (collectively referred to as the “Group”) as of June 30, 2016 and2015, and the related consolidated statements of comprehensive income, changes in equity andcash flows for the six months ended June 30, 2016 and 2015. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to issue areport on these consolidated financial statements based on our reviews.
We conducted our reviews in accordance with Statement of Auditing Standards No. 36 “Review of
Financial Statements” issued by the Auditing Standards Committee of the Accounting Researchand Development Foundation of the Republic of China. A review consists principally of applying
analytical procedures to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit conducted in accordancewith auditing standards generally accepted in the Republic of China, the objective of which is theexpression of an opinion regarding the consolidated financial statements taken as a whole.
Accordingly, we do not express such an opinion.
As disclosed in Notes 14 and 15 to the consolidated financial statements, the financial statements ofsome non-significant subsidiaries and investments accounted for by the equity method were notreviewed. As of June 30, 2016 and 2015, total combined assets of these non-significant
subsidiaries were NT$14,998,501 thousand and NT$15,312,565 thousand, respectively,
representing 6.85% and 6.72%, respectively, of the total consolidated assets, and total combined
liabilities of these subsidiaries were NT$6,741,301 thousand and NT$6,933,817 thousand,respectively, representing 4.22% and 4.08%, respectively, of the total consolidated liabilities; forthe three months and six months ended June 30, 2016 and 2015, combined comprehensive incomeof these subsidiaries were NT$255,915 thousand, NT$203,215 thousand, NT$453,557 thousand
and NT$351,731 thousand, respectively, representing (659.18%), 10.06%, 32.36% and 7.91%,
respectively, of the consolidated total comprehensive income. As of June 30, 2016 and 2015,
investments accounted for by the equity method were NT$2,925,267 thousand and NT$2,612,667
thousand, respectively; for the three months and six months ended June 30, 2016 and 2015, shareof the profit of associates and joint ventures were NT$135,077 thousand, NT$132,569 thousand
NT$258,687 thousand and NT$248,885 thousand, respectively.

-1-Based on our reviews, except for the effects of adjustments, if any, as might have been determined
to be necessary had the financial statements and of these non-significant subsidiaries andinvestments accounted for by the equity method as described in the preceding paragraph beenreviewed, we are not aware of any material modifications that should be made to the consolidated
financial statements referred to above for them to be in conformity with the Regulations Governing
the Preparation of Financial Reports by Securities Issuers and the International AccountingStandard 34 “Interim Financial Reporting” endorsed by the Financial Supervisory Commission of
the Republic of China.

August 11, 2016

Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated
financial position, financial performance and cash flows in accordance with accounting principles
and practices generally accepted in the Republic of China and not those of any other jurisdictions.
The standards, procedures and practices to audit such consolidated financial statements are thosegenerally applied in the Republic of China.
For the convenience of readers, the independent auditors’ review 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.

-2-

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In Thousands of New Taiwan Dollars)

June 30, 2016
(Reviewed)
AmountASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6 and 19)
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 and 11)
Notes and accounts - related parties (Note 33)
Other receivables
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)

December 31, 2015
(Audited)
Amount%%June 30, 2015
(Reviewed)
Amount%$ 24,959,550
1,055,613
24,91311
1-$ 23,491,085
542,326
52,58211-$ 24,783,309
154,710
81,56811-

7,508,793
4,217
1,129,007
20,156
8,243,016
259,740
4,422,176

3
1
4
2

7,610,677
3,874
1,032,622
9,849
8,300,398
670,455
3,928,747

3
1
4
2

8,311,427
4,762
1,151,386
9,068
7,591,261
2,902,779

4
1
3
1

47,627,181

22

45,642,615

21

44,990,270

20

14,623219,920
2,925,267
125,418,264
2,076,042
1,104,369
6,840,681
32,585,664

1
57
1
1
3
15

1,710
19,08011,216
223,9112,877,777
129,628,866
2,076,182
1,009,678
7,188,415
33,246,859

1
58
1
1
3
15

19,481
467,450
2,612,667
135,990,333
2,076,321
858,315
7,616,394
33,194,996

1
60
1
3
15

171,184,830

78

176,283,694

79

182,835,957

80$ 218,812,011

100$ 221,926,309

100$ 227,826,227

100$

118,2263,863
244,210
829,505
492,969
11,154,917
97,28432,403
14,181,844
5,267,339
32,546,417
1,457,957
6,290,581

5
7
2
15
1
3

$

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

1
5
6
2
14
1
2

$

72,717,515

33

68,220,452

12,900,000
50,459,840
6,654,329
322,3104,464,572
1,795,075
9,823,624
436,909

6
23
3
2
1
5
-

Total noncurrent liabilities

86,856,659

Total liabilities

Total current 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 noncurrent assets
TOTAL

LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term loans (Note 20)
Short-term bills payable (Note 20)
Financial liability at fair value through profit or loss - current (Notes 4, 5, 7 and 32)
Derivative financial liabilities for hedging - current (Notes 4, 5, 9 and 32)
Notes and accounts payable
Notes and accounts payable - related parties (Note 33)
Other payable (Note 23)
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 27)
Total current liabilities
NONCURRENT LIABILITIESFinancial liability at fair value through profit or loss - noncurrent (Notes 4, 5, 7 and 32)
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

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 21 and 27)
Capital stock
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings
Total retained earnings
Other equity
Treasury shares
Total equity attributable to owners of the Company
NON-CONTROLLING INTERESTS (Note 27)
Total equity
TOTAL

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated August 11, 2016)-3-

1,900,185
899,876
33,329739,281
671,347
478,627
11,788,702
78,47013,877
12,074,230
2,400,000
20,497,599
2,508,433
4,448,865

1
1
1
5
5
1
9
1
2

31

58,532,821

26

11,291
10,900,000
57,691,505
6,167,295
340,681
5,197,147
1,863,929
10,553,574
423,892

5
26
3
2
1
5
-

1,828
6,995
13,430,223
73,963,427
5,128,983
381,1626,279,780
1,826,220
10,056,136
419,553

6
33
2
3
1
4
-

40

93,149,314

42

111,494,307

49

159,574,174

73

161,369,766

73

170,027,128

75

54,708,901
798,41525-

54,708,901
798,41525-

54,700,732
797,100

24-

287,224
76,486
1,289,165
1,652,875(73,736)(43,372)1
1-2,872,235
2,872,235(66,283)(43,372)1
1-

608,173
608,173(504,175)(43,372)-

57,043,083

26

58,269,896

26

55,558,458

24

2,194,754

1

2,286,647

1

2,240,641

1

59,237,837

27

60,556,543

27

57,799,099

25$ 218,812,011

100$ 221,926,309

100$ 227,826,227

100

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)(Reviewed, Not Audited)

For the Three Months Ended June 30
2016
2015
Amount%Amount

For the Six Months Ended June 30
2016
2015
Amount%Amount%%REVENUES (Notes 4, 28 and 33)$ 33,834,966

100$ 35,621,247

100$ 68,833,989

100$ 72,785,152

100

COSTS (Notes 9, 12, 25, 26, 28
and 33)29,955,893

88

31,056,441

87

59,206,151

86

62,503,770

86

GROSS PROFIT

3,879,073

12

4,564,806

13

9,627,838

14

10,281,382

14

OPERATING EXPENSES(Notes 26 and 28)

3,258,165

10

2,958,121

9

6,635,716

9

6,114,483

8

620,9082

1,606,685

4

2,992,122

5

4,166,899

6

245,606

1

454,0871

401,6501

717,4111(685,163)(329,371)(2)(1)(284,296)(463,501)(1)(1)(1,124,403)(674,637)(2)(1)(422,944)(948,355)(1)(1)

135,077-

132,5691

258,687-

248,885-(633,851)(2)(161,141)-(1,138,703)(2)(405,003)(1)

PROFIT (LOSS) BEFOREINCOME TAX(12,943)-

1,445,544

4

1,853,419

3

3,761,896

5

INCOME TAX EXPENSE(Notes 4, 5 and 29)

82,334-

277,2331

441,2311

711,3811

NET INCOME (LOSS)(95,277)-

1,168,311

3

1,412,1882

3,050,515

4(7,984)-(28,877)-(58,357)-(51,810)-(6,330)-(6,682)-(8,297)-(9,400)-83,882-

1,063,599

3

58,816-

1,743,782

2

OPERATING PROFITNONOPERATING INCOME
AND EXPENSES
Other income (Note 28)
Other gains and losses(Notes 9, 13, 28 and 36)
Finance cost (Notes 9 and 28)
Share of the profit of associates
and joint ventures (Note 15)
Total nonoperating
income and expenses

OTHER COMPREHENSIVEINCOME (LOSS)
Items that may be reclassified
subsequently to profit orloss:
Exchange differences ontranslating foreign
operations (Notes 4
and 27)
Unrealized gain (loss) on
available-for-sale financial
assets (Notes 4 and 27)
Cash flow hedges (Notes 4
and 27)
Share of the othercomprehensive income ofassociates and joint
ventures accounted forusing the equity method(Notes 4, 15 and 27)
Income tax relating to items
that may be reclassified
subsequently to profit orloss (Note 29)

987

-

-

-

-

-

-

-

(14,101)-(176,423)-(2,910)-(288,641)-

Other comprehensive
income (loss) for theyear, net of income tax

56,454-

851,6173(10,748)-

1,393,931

2(38,823)-

2,019,928

6

1,401,440

2

TOTAL COMPREHENSIVEINCOME FOR THE PERIOD

$

$

-4-

$

$

4,444,446
6(Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)(Reviewed, Not Audited)

For the Three Months Ended June 30
2016
2015
Amount%AmountNET INCOME (LOSS)ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

TOTAL COMPREHENSIVEINCOME (LOSS)ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

EARNING (LOSS) PER SHARE(NEW TAIWAN DOLLARS;
Note 30)
Basic
DilutedFor the Six Months Ended June 30
2016
2015
Amount%Amount%%$(169,612)
74,335-$

1,116,577
51,734

3-$

1,294,339
117,8492-$2,966,956
83,5594-$(95,277)-$

1,168,311

3$

1,412,1882$

3,050,515

4$(112,794)
73,971-$

1,973,018
46,9106-$

1,286,886
114,5542-$

4,368,479
75,967

6-$(38,823)-$

2,019,928

6$

1,401,440

2$

4,444,446

6$(0.03)$(0.03)$ 0.20$ 0.20$ 0.24$ 0.23$ 0.55$ 0.53

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated August 11, 2016)(Concluded)-5-

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(In Thousands of New Taiwan Dollars)(Reviewed, Not Audited)

Share Capital

Capital Surplus

Equity Attributable to Owners of the Company
Retained Earnings
Exchange
Unappropriated Differences on
Unrealized
Earnings
Translating
Gain (Loss) on(Accumulated
Foreign
Available-forLegal Reserve
Special Reserve
Deficit)Operations
sale$ 52,491,666$ 1,992,415

$

-

-

BALANCE AT JANUARY 1, 2015 AS RESTATED

52,491,666

Convertible bonds converted to ordinary shares

BALANCE AT JANUARY 1, 2015$$

99,852$4,015$ (2,009,565)

$

Total

Non-controlling

Total Equity(43,372)$ 48,670,135$ 2,326,973$ 50,997,108-$ (3,864,876)--(5,860)

-

-

-

-

(5,860)(5,236)(11,096)

1,992,415--(3,870,736)

99,8524,015(2,009,565)(43,372)

48,664,275

2,321,737

50,986,012

2,209,066

316,638

-

-

-

-

-

-

-

2,525,704-

2,525,704

Compensation of deficit - capital surplus for 2014-

(1,511,953)--

1,511,953

-

-

-

-

-

-

-

Net income for the six months ended June 30, 2015

-

-

-

-

2,966,956

-

-

-

-

2,966,956

83,5593,050,515

Other comprehensive income (loss) for the six months ended
June 30, 2015, net of income tax

-

-

-

-

-

(41,365)(4,451)

1,447,339-

1,401,523(7,592)

1,393,931

Total comprehensive income (loss) for the six months ended
June 30, 2015

-

-

-

-

2,966,956(41,365)(4,451)

1,447,339-

4,368,479

75,967

4,444,446

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

(157,063)(157,063)

Effect of retrospective application and retrospective restatement-

Treasury
SharesCash FlowBALANCE AT JUNE 30, 2015

$ 54,700,732$

797,100

$

-

$

-

$

608,173$

58,487

$

(436)

$

(562,226)$(43,372)$ 55,558,458$ 2,240,641$ 57,799,099

BALANCE AT JANUARY 1, 2016

$ 54,708,901$

798,415

$

-

$

-

$ 2,872,235$

157,959

$

1,755

$

(225,997)$(43,372)$ 58,269,896$ 2,286,647$ 60,556,543

Change in capital surplus from investments in associates and joint
ventures accounted for by using equity method

-

-

-

-

(1,638)

-

-

-

-

(1,638)-(1,638)Difference between cost and net value of acquisition subsidiaries

-

-

-

-

(3,536)

-

-

-

-

(3,536)(4,548)(8,084)

Appropriation of 2015 earnings
Legal reserve
Special reserve
Cash dividends - $0.458522382--

287,224-

76,486-(287,224)(76,486)(2,508,525)

-

-

-

-

(2,508,525)-(2,508,525)

Net income for the six months ended June 30, 2016

-

-

-

-

1,294,339

-

-

-

-

1,294,339

117,849

1,412,188

Other comprehensive loss for the six months ended June 30, 2016,
net of income tax

-

-

-

-

-

(49,978)(2,105)44,630-(7,453)(3,295)(10,748)

Total comprehensive income (loss) for the six months ended
June 30, 2016

-

-

-

-

1,294,339(49,978)(2,105)44,630-1,286,886

114,554

1,401,440

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

(201,899)(201,899)

76,486$ 1,289,165(43,372)$ 57,043,083$ 2,194,754$ 59,237,837

BALANCE AT JUNE 30, 2016

$ 54,708,901$

798,415$

287,224$

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated August 11, 2016)-6-$

107,981

$

(350)

$

(181,367)$

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands of New Taiwan Dollars)(Reviewed, Not Audited)

For the Six Months Ended
June 30
2016
2015
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 on fair value change of financial assets and liabilities held
for trading
Interest income
Dividend income
Share of profit of associates and joint ventures
Gain on disposal of property, plant and equipment
Loss on disposal of noncurrent assets held for sale
Loss on disposal of available-for-sale financial assets
Loss on inventory, property, plant and equipment
Net (gain) loss on foreign currency exchange
Finance costs
Recognition of provisions
Amortization of unrealized gain on sale-leaseback
Changes in operating assets and liabilities(Increase) decrease in financial assets and liabilities held for trading
Decrease in derivatives financial assets for hedging(Increase) decrease in notes and accounts receivable
Decrease in accounts receivable - related parties
Decrease in other receivables
Increase in inventories
Increase in other current assets(Decrease) increase in notes and accounts payable
Increase in accounts payable - related parties(Decrease) increase in other payables
Increase in deferred revenue
Decrease in provisions
Decrease in other current liabilities
Decrease in accrued pension liabilities
Decrease in other liabilities
Cash generated from operations
Interest received
Dividend received
Interest paid
Income tax paid
Net cash generated from operating activities-7-$

1,853,419$

3,761,896

8,612,943
48,00812,3888,815,722
31,37020,57919,043(144,223)(5,745)(258,687)(9,284)
26,42912
241,825
96,843
674,637
1,274,785(7,256)

48,384(224,619)(223,050)(248,885)(3,441)
160,434(69,532)
948,355
932,826(7,256)(528,513)
13,096(206,663)
53,732
66,901(37,791)(881,491)(356,128)
96,756(652,666)
1,014,648(765,172)(284,514)(742,482)(3,593)9,221,257
149,234
5,745(723,176)(100,998)

67,877
835,849
22,40636,335(465,113)(247,439)
300,615
185,679
894,708
932,018(71,823)(172,380)(145,005)(57,737)
16,058,773
218,525
286,842(1,167,770)(125,876)

8,552,062

15,270,494(Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands of New Taiwan Dollars)(Reviewed, Not Audited)

For the Six Months Ended
June 30
2016
2015
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on derivative financial assets for hedging
Payment for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of available-for-sale financial assets
Proceeds from disposal of noncurrent assets held for sale
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayment for equipment
Increase in computer software cost
Decrease (increase) in restricted assets
Refund in prepayment for aircraft
Net cash used in investing activities$(4,335,611)
14,46063
384,285(149,784)
83,961(4,896,105)(142,478)
330,224
5,126,799$(13,096)(1,868,779)
5,753(580,200)
475,316(7,476,675)(218,700)(149,408)
5,209,610(3,584,186)(4,616,179)

40,000(95,000)(9,995)4,700,000(2,400,000)
10,400,000(15,865,889)
57,115(34,770)(8,084)(201,899)

11,270,025(13,820,000)(1,098,262)(8,585,000)
14,722,951(8,586,225)
70,873(79,567)(157,063)(3,418,522)(6,262,268)(80,889)(76,889)

NET INCREASE IN CASH AND CASH EQUIVALENTS

1,468,465

4,315,158

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
PERIOD

23,491,085

20,468,151

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD$ 24,959,550$ 24,783,309

CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans
Decrease in short-term loans
Decrease in short-term bills payable
Proceeds from issue of bonds payable
Repayments of bonds payable
Proceeds of long-term debts and capital lease obligations
Repayments of long-term debts and capital lease obligations
Proceeds of guarantee deposits received
Refund of guarantee deposits received
Proceeds from acquisition of subsidiaries' shares
Cash dividends paid to non-controlling interests
Net cash used in financing activities
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIESThe accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated August 11, 2016)-8-(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)(Reviewed, Not Audited)

1. GENERAL INFORMATION
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) lease of aircraft.
The major stockholders of the Company are the China Aviation Development Foundation (CADF) and the
National Development Fund (NDF), Executive Yuan. As of June 30, 2016, December 31, 2015 and June30, 2015, CADF and NDF held 43.63%, 43.63% and 43.64% of the Company’s shares.

2. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements were approved by the board of directors and authorized for issue on
August 11, 2016.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
a. International Financial Reporting Standards (IFRS), International Accounting Standards (IAS),
Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC
Rule No. 1050026834 issued by the FSC endorsed the following IFRS, IAS, IFRIC and SIC(collectively, the “IFRSs”) for application starting January 1, 2017.
New, Amended or Revised Standards and Interpretations(the “New IFRSs”)
Annual Improvements to IFRSs 2010-2012 Cycle
Annual Improvements to IFRSs 2011-2013 Cycle
Annual Improvements to IFRSs 2012-2014 Cycle
Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities:
Applying the Consolidation Exception”
Amendment to IFRS 11 “Accounting for Acquisitions of Interests in
Joint Operations”
IFRS 14 “Regulatory Deferral Accounts”
Amendment to IAS 1 “Disclosure Initiative”
Amendments to IAS 16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”
Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants”
Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”

Effective Date
Announced by IASB (Note 1)
July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 3)
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
July 1, 2014
(Continued)-9-

New, Amended or Revised Standards and Interpretations(the “New IFRSs”)
Amendment to IAS 27 “Equity Method in Separate Financial
Statements”
Amendment to IAS 36 “Impairment of Assets: Recoverable Amount
Disclosures for Non-financial Assets”
Amendment to IAS 39 “Novation of Derivatives and Continuation of
Hedge Accounting”
IFRIC 21 “Levies”

Effective Date
Announced by IASB (Note 1)
January 1, 2016
January 1, 2014
January 1, 2014
January 1, 2014
(Concluded)Note 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods
beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on 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 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.
Except for the following, the initial application of the above New or amended IFRSs in 2017 would nothave any material impact on the Group’s accounting policies: Amendment to IAS36 “Impairment of assets”
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 3, the valuation technique and key assumptions used to measure the fairvalue are disclosed. The discount rate used is disclosed if such fair value less costs of disposal ismeasured by using present value technique. The amendment will be applied retrospectively fromJanuary 1, 2017.
b. New IFRSs in issue but not yet endorsed by the FSC
The Group has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC.
The FSC announced that IFRS 15 will take effect starting January 1, 2018. As of the date theconsolidated financial statements were authorized for issue, the FSC has not announced the effective
dates of other new IFRSs.
Effective Date
Announced by IASB (Note 1)

New IFRSs
Amendment to IFRS 2 “Classification and Measurement of
Share-based Payment Transactions”
IFRS 9 Financial Instruments

January 1, 2018
January 1, 2018
(Continued)- 10 -

Effective Date
Announced by IASB (Note 1)

New IFRSs
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 IFRS15 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”

January 1, 2018
To be determined by IASB
January 1, 2018
January 1, 2018
January 1, 2019
January 1, 2017
January 1, 2017(Concluded)

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:1) IFRS 9 “Financial Instruments”
Recognition and measurement of financial assets
With regards to financial assets, all recognized financial assets that are within the scope of IAS 39“Financial Instruments: Recognition and Measurement” are subsequently measured at amortizedcost or fair value. Under IFRS 9, the requirement for the classification of financial assets is statedbelow.
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: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;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.
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.

- 11 -

The impairment of financial assets
IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit
Losses Model”. The credit loss allowance is required for financial assets measured at amortized
cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets 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.
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.
Hedge accounting
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.
2) IFRS 16 “Leases”
IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number ofrelated interpretations.
Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for
all leases on the consolidated balance sheets except for low-value and short-term leases. The
Group 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 consolidated statements of comprehensive
income, the Group 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 consolidated statements of cash flows, cash payments for the
principal portion of the lease liability are classified within financing activities; cash payments forinterest portion are classified within operating activities.
The application of IFRS 16 is not expected to have a material impact on the accounting of theGroup as lessor.
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.
3) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”
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.
- 12 -

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

4. SIGNIFICANT ACCOUNTING POLICIESExcept for the statements listed below, accounting policy adopted by this consolidated financial statements
are the same as consolidated financial statements of 2015.
Statement of Compliance
The interim consolidated financial statements have been prepared in accordance with the Regulations
Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial
Reporting” as endorsed by the FSC. Disclosure information included in those interim consolidated
financial reports is less than disclosure information required in a complete set of annual financial
statements.
Basis of Consolidation
Principles for preparing consolidated financial statements
The consolidated financial statements incorporate the financial statements of the Company and the entities
controlled by the Company (i.e. its subsidiaries, including special purpose entities).
Control is achieved when the Company has the power to govern the financial and operating policies of anentity so as to obtain benefits from its activities.
When necessary, adjustments are made to the financial statements of subsidiaries, subsidiaries’ accounting
policies are consistent with the Company.
All intra-group transactions, balances, income and expenses are written of in consolidation financial
statement.
Non-controlling interests shall be presented in the consolidated balance sheets within equity, separatelyfrom the equity of the owners of the Company. Total comprehensive income of subsidiaries is attributed
to the owners of the Company and to the non-controlling interests even if this results in the non-controllinginterests having a deficit balance. Proportion of ownership and main businesses of subsidiaries can bereferred to Note 14 and Table 5.

- 13 -

Retirement Benefits
Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determinedpension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since thattime and for significant plan amendments, settlements, or other significant one-off events.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period
income taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax
income the tax rate that would be applicable to expected total annual earnings.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY
Material accounting judgements, estimates and assumptions adopted by the consolidated financial
statements are equivalent to the consolidated financial statements of 2015.

6. CASH AND CASH EQUIVALENTS

Cash on hand and revolving fund
Checking accounts and demand deposits
Cash equivalentTime deposits with original maturities less than
three months
Repurchase agreements collateralized by bonds$

June 30,
2016

December 31,
2015

392,4939,859,693$

478,223
6,070,236

June 30,
2015$

596,086
11,732,958

10,427,044
4,280,320

16,163,452
779,174

11,303,663
1,150,602$ 24,959,550$ 23,491,085$ 24,783,309

The market rate intervals of cash in bank and cash equivalent at the end of the reporting period were as
follows:

Bank balanceTime deposits with original maturities less than
three months
Repurchase agreements collateralized by bonds

June 30,
2016

December 31,
2015

June 30,
2015

0%-2%

0%-1.5%0%-2%

0.5%-2.45%
0.35%-1.1%

0.27%-7.25%
0.42%-0.51%

0.37%-4.25%
0.52%-0.54%

The amount of time deposits with original maturities more than three months for June 30, 2016, December
31, 2015 and June 30, 2015 were $1,649,640 thousand, $1,653,927 thousand and $846,646 thousand,respectively, and the market rate intervals were 0.1%-1.07%, 0.295%-4.1% and 0.3%-4.1%, which wererecognized as other current assets. (Refer to Note 19).

- 14 -

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)
June 30,
2016

December 31,
2015

June 30,
2015

Financial assets held for trading - current
Derivative financial instruments (not under hedge
accounting)Foreign exchange forward contracts
Non-derivative financial assets
Beneficial certificates

$

9,009

$

1,046,604

63,818$478,508

16,735
137,975$ 1,055,613$

542,326$

154,710

$

-

$

1,710

$

-

$
$

3,863
-

$
$

-

$
$

33,329
1,828

Financial assets held for trading - noncurrent
Derivative financial instruments (not under hedge
accounting)Foreign exchange forward contracts
Financial liabilities held for trading
Derivative financial instruments (not under hedge
accounting) - foreign exchange forward
contracts
Current
Noncurrent

At the end of the reporting period, the outstanding foreign exchange forward contracts not under hedge
accounting were as follows:

Currency

Maturity Date

Notional Amount(In Thousands)

June 30, 2016
Buy forward contracts

NTD/USD

2016.7.1-2017.1.26

NTD812,903/USD25,200

2016.1.8-2017.1.26

NTD3,276,316/USD99,600

2015.7.1-2017.1.26

NTD4,296,296/USD139,200

December 31, 2015
Buy forward contracts

NTD/USD

June 30, 2015
Buy forward contracts

NTD/USD- 15 -

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
June 30, 2016
% ofCarrying
OwnerValueship

December 31, 2015
% ofCarrying
OwnerValue
ship

June 30, 2015
% ofCarrying
OwnerValue
ship

$

$

$

Non-current
Domestic market
TransAsia Airways

14,623-19,080-19,481-9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING
June 30,
2016

December 31,
2015

June 30,
2015

Derivative financial assets under hedge
accounting
Foreign exchange forward contracts
Currency options
Fuel options

Current
Non-current$

24,095306
512$

51,06012,403
335

$

9,940
12,582
59,046$

24,913$

63,798$81,568$24,913-$52,582
11,216$

81,568-$24,913$

63,798$81,568$

10,331
139,327
91,6002,952$

12,702
12,660299,618

$

6,995
1,184
738,097

Derivative financial liabilities under hedge
accounting
Interest rate swaps
Foreign exchange forward contracts
Currency options
Fuel options

Current
Non-current$ 244,210$ 324,980$ 746,276$ 244,210-$ 313,689
11,291$ 739,281
6,995$ 244,210$ 324,980$ 746,276

The Group determined the fair value of each derivative contract based on price quotes from financial
institutions.

- 16 -Cash Flow Hedge
a. Interest rate swaps
The Group entered into interest rate swap contracts to mitigate the interest rate swap contracts exposure
resulted from the outstanding floating rate debts. All interest rate swap contracts exchange as fix
interest rate swaps are designated as cash flow hedges. The outstanding interest rate swap contracts at
the end of the reporting period were as follows:

Notional Amount(In Thousands)

Maturity Date

Range ofInterest Rates
Paid

Range of Interest Rates
Received2016.11.28-2017.6.22

1.01%-1.14%

TAIBOR Rate

2016.11.28-2017.6.22

1.01%-1.14%

TAIBOR Rate

2016.11.28-2017.6.22

1.01%-1.14%

TAIBOR Rate

June 30, 2016
NT$3,000,000
December 31, 2015
NT$3,000,000
June 30, 2015
NT$3,000,000

The interest rate swaps settle on a quarterly basis. The Group will settle the difference between the
fixed and floating interest rates on a net basis.
b. Currency options
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.
The outstanding currency options at the end of the reporting period were as follows:

Currency

Maturity Date

Notional Amount(In Thousands)

JPY/USD
JPY/USD

2016.7.12-2016.12.19
2016.7.12-2016.12.19

JPY2,446,080/USD20,500
JPY2,388,484/USD20,500

JPY/USD
JPY/USD

2016.1.8-2016.12.9
2016.1.8-2016.12.9

JPY3,446,570/USD28,400
JPY3,364,604/USD28,400

JPY/USD
JPY/USD

2015.7.15-2015.11.18
2015.7.15-2015.11.18

JPY2,006,760/USD16,700
JPY1,944,615/USD16,700

June 30, 2016
Buy USD call option
Sell USD put option
December 31, 2015
Buy USD call option
Sell USD put option
June 30, 2015
Buy USD call option
Sell USD put option- 17 -

c. Fuel options
The Group used fuel swaps to minimize the risk of changes in fuel price related to operating cost.
The outstanding fuel options at the end of the reporting period were as follows:
Notional Amount(In Thousands)

Currency

Maturity Date

USD
USD

2016.7.31-2017.1.31
2016.7.31-2017.1.31

NTD512
NTD2,952

USD
USD

2016.1.5-2016.12.7
2016.1.5-2016.12.7

NTD335NTD299,618

USD
USD

2015.8.31-2016.5.31
2015.8.31-2016.5.31

NTD59,046
NTD738,097

June 30, 2016
Buy fuel call option
Sell fuel put option
December 31, 2015
Buy fuel call option
Sell fuel put option
June 30, 2015
Buy fuel call option
Sell fuel put option

Based on the Taiwan Stock Exchanges regulation of monthly declaration on the trading of derivative
financial instruments for the public companies, the contractual amounts are shown at the absolute valueof fair value because fuel options contracts only have notional amounts.
d. Foreign exchange forward contracts
The Group entered into foreign exchange forward contracts to minimize the risk of changes in foreign
currency rate on the cash flow exposure related to fuel payments and aircraft lease, which will be paidin U.S. dollars.
The outstanding foreign exchange forward contracts at the end of the reporting period were as follows:

Currency

Maturity Date

Notional Amount(In Thousands)

NTD/USD

2016.7.1-2018.5.22

NTD7,936,835/USD246,027

NTD/USD

2016.1.18-2017.5.23

NTD1,076,882/USD32,920

NTD/USD

2015.7.23-2017.5.23

NTD699,200/USD23,000

June 30, 2016
Buy forward contracts
December 31, 2015
Buy forward contracts
June 30, 2015
Buy forward contracts- 18 -

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:For the Three Months Ended
June 30
2016
2015
Increase in operating cost
Increase in finance cost
Other foreign exchange gain
(loss)$(67,351)(2,633)$(15,860)$(85,844)(700,083)(837)

For the Six Months Ended
June 30
2016
2015
$

12,444$(688,476)$(315,897)(3,912)$ (1,671,471)(3,036)(16,076)

31,402(335,885)$ (1,643,105)

10. FINANCIAL ASSETS CARRIED AT COST

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
Unlisted preferred stocks
Everest Investment
Holdings Ltd. (AH)

Classified according tofinancial asset
measurement categories
Available-for-salefinancial assets

June 30, 2016
% ofCarrying
OwnerValueship

December 31, 2015
% ofCarrying
OwnerValue
ship

June 30, 2015
% ofCarrying
OwnerValue
ship

$

$

52,70414

52,70414$ 297,946

14

56,02315

56,02315

56,023

15

72,697

6

75,791

6

74,470

6

21,098

5

21,995

5

21,613

5

11,00011

11,00011

11,000

11

5,925
219,447

6

5,925
223,438

6

5,925
466,977

6

473

-

473

-

473

-

$ 219,920$ 223,911$ 467,450$ 219,920$ 223,911$ 467,450- 19 -

The Group and the other airlines in the Asian Region had set up Abacus International Holdings (AHcompany) which owned Abacus distributions systems company. Due to strategical adjustment AH
company disposed of shares of Abacus distribution systems company. The board of AH company
resolved and approved to return the gain on disposal to shareholders by cash dividends and shareredemption. The Group received cash dividends of $1,660,687 thousand and share redemption of$245,242 thousand. AH company changes its name to Everest Investment Holdings Ltd. after the disposalof its subsidiary.
Above unlisted stock investments held by the Group were measured at cost after deducting impairment
losses because the range of reasonable fair value estimates were significant and unable to be reasonably
evaluated, the management considered its fair value was unable to be evaluated.

11. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE
June 30,
2016
Notes receivable$

535,406

December 31,
2015$

344,479

June 30,2015$

528,273

Accounts receivable
Accounts receivable
Less: Allowance for impairment loss

7,095,388(122,001)
6,973,387

7,376,125(109,927)
7,266,198

7,870,915(87,761)
7,783,154$ 7,508,793$ 7,610,677$ 8,311,427

The average credit period on sales was 7 to 55 days. In determining the recoverability of a accounts
receivable, the Group considered any change in the credit quality of the accounts receivable since the datecredit was initially granted to the end of the reporting period, and allowance for impairment loss was basedon estimated irrecoverable amounts determined by reference to past default experience of the counterparties
and the analysis of their current financial position.
Movement in the allowance for impairment loss recognized as notes receivable and accounts receivables
was as follow:
For the Six Months Ended
June 302016
2015
Beginning balance
Impairment loss recognized on receivables
Amounts written off during current period
Exchange influence$ 109,927
12,388
(594)
280

$

66,131
20,579(80)
1,131Ending balance$ 122,001$

87,761- 20 -

12. INVENTORIES

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
OthersJune 30,
2016

December 31,
2015

June 30,2015$ 7,530,466
541,296
168,198
3,056$ 7,648,352
507,603
143,489954$ 6,939,409
489,988
158,494
3,370$ 8,243,016$ 8,300,398$ 7,591,261

The operating costs recognized as operating cost for the six months ended June 30, 2016 and 2015 included
loss from inventory write-downs of $104,781 thousand and $103,812 thousand, respectively.
The operating costs recognized as operating cost for the three months ended June 30, 2016 and 2015
included loss from inventory write-downs of $5,596 thousand and gain from reversal of $1,698 thousand,respectively. There was gains from reversal of inventory write-downs because inventory write-downs
were no longer applicable.

13. NON-CURRENT ASSETS HELD FOR SALE

Aircraft held for sale

June 30,
2016

December 31,
2015$ 259,740$ 670,455

June 30,
2015$-

To enhance the competitiveness, the Company plans to introduce new aircrafts and retire old aircrafts ontimely schedule. On August 13, 2015, the board of directors resolved to sell two 747-400 aircrafts and one
A340-300 aircraft. These aircrafts were recognized as noncurrent assets held for sale, and difference
between their original book value and the expected sale price was recognized as impairment loss of$1,899,372 thousand. However the actual amount of loss should be identified by actual sale price. The
A340-300 aircraft was sold in June 2016; difference between its actual price and book value is $26,429
thousand and was recognized as loss on disposal of noncurrent assets held for sale. The aircrafts above
were categorized by level 3 fair value input since their expected sale price were based on the second-handmarket prices and the conditions of aircrafts.

14. SUBSIDIARIES
Subsidiary included in the consolidated financial statements:

Investor Company
China Airlines, Ltd.

Investee Company
Cal-Dynasty International
Cal-Asia Investment
Hwa Hsia
Yestrip
Cal Park
Cal Hotel Co., Ltd.
Sabre Travel Network (Taiwan)
Mandarin Airlines
Taiwan Air Cargo Terminal (Note)

Main Businesses and Products
A holding company, real estate andhotel services
General investment
Cleaning of aircraft and maintenanceof machine and equipment
Travel business
Real estate lease and international
trade
Hotel business
Sale and maintenance of hardware andsoftware
Air transportation and maintenance of
aircraft
Air cargo and storage

June 30,
2016

Proportion of Ownership
December 31,
June 30,
2015
2015

100

100

100

100
100

100
100

100
100

100
100

100
100

100
100

100
94

100
94

100
94

94

94

94

59

59

59

(Continued)- 21 -

Investor Company

Investee Company

Taiwan Airport Services

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 Hsia

Hwa Shin Building Safeguard

Cal-Dynasty International

June 30,
2016

Main Businesses and Products

Proportion of Ownership
December 31,
June 30,
2015
2015

Travel businessAirport services

51
49

51
49

51
49

Airport services
Forwarding and storage of air cargo
Aircraft lease
Aircraft lease
Air transportation
Aircraft maintenance

48
25
100
100
90
100

47
25
100
100
90
100

47
25
100
100
90
100

Real estate management
Hotel businessAirport supporting service andinvestment
Building security and maintenanceservices

100
100
100

100
100
100

100
100
100

100

100

100

(Concluded)
Note: Proportion of ownership is considering by the Group view.
Considering the Group developing strategy, Mandarin Airlines had bought 323,367 shares of Taiwan
Airport Services by $8,084 thousand since current year.
The Company’s holdings of the issued share capital of Taoyuan International Airport Service, Taiwan
Airport Service and Global Sky Express did not each exceed 50%, but since the Company had control overthese investees, they were listed as subsidiaries. Except for Mandarin Airlines and Tigerair Taiwan Co.,
the financial information of the subsidiaries above six months ended June 30 2016 and 2015 has beenreported into the correspondent period as investees without reviewed.
The Group’s holding of the issued share capital of China Pacific Catering Services and China Pacific
Laundry Services exceeded 50%, the Group did not have controlling power over the investees. Related
information please refer to Note 15,b.

15. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

Investments in associates
Investments in jointly controlled entities

June 30,
2016

December 31,
2015

June 30,2015$ 1,957,590
967,677$ 2,010,774
867,003$ 1,841,090
771,577$ 2,925,267$ 2,877,777$ 2,612,667

December 31,
2015

June 30,
2015

a. The amount of investment in associates were as follows:
June 30,
2016
Unlisted companies
China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics$- 22 -

510,629
228,874
225,401
240,071$

490,824
244,903
263,091
185,226$

464,510214,886
210,649
175,088(Continued)

June 30,
2016
Airport Air Cargo Terminal (Xiamen)
Airport Air Cargo Service (Xiamen)
Eastern United International Logistics(Holdings) Ltd.

$

December 31,
2015

481,861
229,647$494,665
226,066

June 30,
2015$

509,904
229,939

41,107
1,957,590

41,908
1,946,683

36,114
1,841,090-

64,091-$ 1,957,590$ 2,010,774

Prepaid long-term investment - Science Park
Logistics$ 1,841,090(Concluded)

On December 18, 2015 the board of Science Park Logistics (SPL) approved the issuance of common
stock for cash and the record date of the stock issuance was December 25, 2015. The board of Grouphas reached an agreement to purchase $64,091 thousand which had been remitted to SPL. SPL
completed the registration of this subscription on January 22, 2016.
At the end of the reporting period, the proportion of ownership and voting rights of associates held by
the Group were as follows:
Proportion of Ownership and Voting Rights
June 30,
December 31,
June 30,
2016
2015
2015

Name of Associate
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.

20%
36%
25%
26%
28%
28%

20%
36%
25%
28%
28%
28%

20%
36%
25%
28%
28%
28%

35%

35%

35%

The recognized investment income of associates 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.

For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015

$

$

$

13,13921,362$

11,87815,56830,12135,900$23,35926,637

26,857
4,146

18,341
5,345

51,1078,230

40,933
6,005

5,014

5,321

5,977

6,954

8,125

5,589

12,232

9,473

517

1,966

937

4,219

64,008$ 144,504$ 117,580

79,160- 23 -$

The financial statements used as basis of the amounts of and related information on the investments
accounted for by the equity method and the share of profit or loss and other comprehensive income ofthose investments for the six months ended June 30, 2016 and 2015 had not been independently
reviewed.
b. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:

China Pacific Catering Services
China Pacific Laundry Services

June 30,
2016

December 31,
2015

June 30,2015$ 809,920
157,757$ 705,134
161,869$ 591,338
180,239$ 967,677$ 867,003$ 771,577

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:
Proportion of Ownership and Voting Rights
June 30,
December 31,
June 30,
2016
2015
2015
China Pacific Catering Services
China Pacific Laundry Services

51%
55%

51%
55%

51%
55%

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 sides have
major motion veto on the board, and therefore the Group does not have its control power.
Details of investment income attributable to investment in jointly controlled entitles were as follows:

China Pacific Catering Services
China Pacific Laundry Services

For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015

$

50,235
5,682$

63,143
5,418$ 104,785
9,398$ 117,258
14,047$55,917$

68,561$ 114,183$ 131,305

Other comprehensive income of associates accounted for using the equity method in the three months
and six months ended June 30, 2016 and 2015 are $987 thousand, $0 thousand, $0 thousand and $0
thousand, respectively.
The investments accounted for using the equity method and the share of profit or loss and othercomprehensive income of those investments were based on the jointly controlled entities’ financial
statements which had not reviewed.
Services, major business offices and the country of the Companies registered of above can be referred
to Tables 5 and 6 (names, locations, and related information of investees on which the Group exercises
significant influence and investment in Mainland China).

- 24 -

16. PROPERTY, PLANT AND EQUIPMENT
June 30,
2016

December 31,
2015

965,174
13,130,261
231,308,934
28,700,452
10,153,480
1,061,787
124,884
3,905,050
293,406$

June 30,
2015

Cost
Freehold land
Buildings
Flight equipment
Equipment under finance lease
Machinery equipment
Office equipment
Leased assets
Leasehold improvements
Construction in progress$

976,427
13,140,158
229,849,035
28,087,404
9,930,186
1,044,598
129,372
3,928,846
134,888$940,538
15,406,099
237,103,585
30,642,784
9,755,091
1,007,910
130,573
1,441,812
122,830$ 289,643,428$ 287,220,914$ 296,551,222

$

$

$

Accumulated depreciation and impairment
Buildings
Flight equipment
Equipment under finance lease
Machinery equipment
Office equipment
Leased assets
Leasehold improvements

Net value

Freehold Land5,598,377
134,441,894
14,880,901
6,775,453
863,436
104,374
1,560,729

5,355,804
128,953,990
14,201,904
6,598,390
839,931
113,276
1,528,753

5,077,677
130,986,561
15,647,313
6,399,077
790,681
114,666
1,544,914$ 164,225,164$ 157,592,048$ 160,560,889$ 125,418,264$ 129,628,866$ 135,990,333

Buildings

FlightEquipment

Equipment
under Finance
Lease

OthersTotal

Cost
Balance at January 1,
2015
Additions
Disposals
Reclassification
Net exchange difference
Balance at June 30, 2015$

953,614(13,076)$

13,085,921
9,224(27,844)2,361,124(22,326)$ 232,035,450
1,510,273(150,671)
3,708,533-$

33,985,116
128,598(3,470,930)-$

14,697,246
220,684(215,765)(2,241,866)(2,083)$ 294,757,347
1,868,779(394,280)
356,861(37,485)$

940,538$

15,406,099$ 237,103,585$

30,642,784$

12,458,216$ 296,551,222

$

-

$

(4,794,850)(303,981)
16,343(23)
4,834$ (121,645,204)(7,023,412)
103,692(2,421,637)-$ (16,998,403)(1,084,439)
2,435,529-$(8,663,824)(403,750)
213,6454,50685$ (152,102,281)(8,815,582)
333,680
18,375
4,919

$

-

$

(5,077,677)$ (130,986,561)$ (15,647,313)$(8,849,338)

Accumulated depreciation
Balance at January 1,
2015
Depreciation expense
Disposals
Reclassification
Net exchange difference
Balance at June 30, 2015

$ (160,560,889)(Continued)- 25 -

Freehold Land

Buildings

FlightEquipment

Equipment
under Finance
Lease

OthersTotal

Cost
Balance at January 1,
2016
Additions
Disposals
Reclassification
Net exchange difference
Balance at June 30, 2016$

976,427(11,253)$

13,140,158
11,342(1,811)(19,428)$ 229,849,035
3,080,280(2,154,876)
534,495-$

28,087,404
695,605(345,313)
262,756-$

15,167,890
548,384(158,619)(19,418)370$ 287,220,914
4,335,611(2,660,619)
777,833(30,311)$965,174$

13,130,261$ 231,308,934$

28,700,452$

15,538,607$ 289,643,428

$

-

$

(5,355,804)(252,875)
1,811
8,491

$ (128,953,990)(6,959,709)
2,017,605(545,800)-$ (14,201,904)(1,024,310)
345,313-$(9,080,349)(375,909)
156,269(5,362)
1,360$ (157,592,047)(8,612,803)
2,520,998(551,162)
9,851

$

-

$

(5,598,377)$ (134,441,894)$ (14,880,901)$(9,303,992)

Accumulated depreciationand impairment
Balance at January 1,
2016
Depreciation expense
Disposals
Reclassification
Net exchange difference
Balance at June 30, 2016

$ (164,225,164)(Concluded)
Property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of theasset:
Building
Main buildings
Others
Machinery equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersAssets leased to others
Flight equipment and equipment under finance lease
Airframe
Aircraft cabin
EngineHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

45-55 years
10-25 years
25 years
3-13 years
3-15 years
5 years
3-5 years
3-5 years
15-25 years
7-13 years
10-20 years
6-8 years
3-10 years
7-10 years
7-15 years
5-12 years

Refer to Note 34 for the carrying amounts of property, plant and equipment pledged by the Group.
Owing to the particularity of risk in aviation industry, all of our assets such as aircraft, real estate, andmovable property are adequately insured to diversify the potential risk related to operation.

- 26 -

17. INVESTMENT PROPERTIES

Carrying amount
Investment properties

June 30,
2016

December 31,
2015

June 30,2015$ 2,076,042$ 2,076,182$ 2,076,321

The investment properties held by the Group were a 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.
The fair value of the investment properties held by the Group is $2,348,759 thousand on June 30, 2016,
December 31, 2015 and June 30, 2015. The above amount were evaluated by taking into account thereport of real estate appraiser and the market transaction assessed by the management.
All of the Group’s investment properties were held under freehold interest.

Cost

Accumulated
Depreciation

Net Value

Balance on January 1, 2015
Additions$ 2,082,390-$(5,929)(140)$ 2,076,461(140)

Balance on June 30, 2015

$ 2,082,390$(6,069)$ 2,076,321

Balance on January 1, 2016
Additions$ 2,082,390-$(6,208)(140)$ 2,076,182(140)

Balance on June 30, 2016

$ 2,082,390$(6,348)$ 2,076,042

Computer
Software Cost

Accumulated
Amortization

Net Value

Balance at January 1, 2015
Additions
Amortization expense
Exchange influence$ 1,214,465
218,700-$(543,468)(31,370)(12)$

670,997
218,700(31,370)(12)

Balance at June 30, 2015

$ 1,433,165$(574,850)$

858,315

Balance at January 1, 2016
Additions
Amortization expense
Exchange influence$ 1,623,186
142,478-$(613,508)(48,008)221$ 1,009,678
142,478(48,008)
221

Balance at June 30, 2016

$ 1,765,664$(661,295)$ 1,104,369

18. OTHER INTANGIBLE ASSETS

The above other intangible assets were depreciated on a straight-line basis over 2-12 years.

- 27 -

19. OTHER ASSETS
June 30,
2016

December 31,
2015

June 30,2015$

1,649,640
1,053,678
1,260,096
61,298397,464$

1,653,927
632,661
1,146,659
500
495,000$

846,646
979,897
838,217
43,479194,540$

4,422,176$

3,928,747$

2,902,779

Current
Other financial assets
Temporary payments
Prepayments
Restricted assets
OthersNoncurrent
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
Others$ 28,427,494
2,516,555
1,491,711
126,040
14,217
9,647$ 28,714,476
2,522,891
1,489,112
504,924
14,144
1,312$ 29,061,606
2,180,357
1,388,164
540,882
13,985
10,002$ 32,585,664$ 33,246,859$ 33,194,996

The prepayments for aircraft were the prepaid deposit and capitalized interest from the purchase of
A350-900 and 777-300ER. For the related instruction of the contract, please refer to Note 35. Six of
777-300 ER and then leased them back. As of May 2016, all the airplanes have been handed over and theCompany receive the prepayment for aircraft.

20. BORROWINGSa. Short-term loans
June 30,
2016
Bank loans - unsecured$

Interest rates

December 31,
2015

118,226$

June 30,2015

173,289$ 1,900,185

1.54%-2.66%

1.25%-1.8636%

1.18%-1.22%

June 30,
2016

December 31,
2015

June 30,
2015

b. Short-term and bills payable

Commercial paper
Less: Unamortized discount on bills payable

Annual discount rate

$

-

$

10,0005$ 900,000
124

$

-

$

9,995

$ 899,876-- 28 -

1.3%

1.078%-1.088%

c. Long-term debts

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discountJune 30,
2016

December 31,
2015

June 30,2015$ 30,137,171
19,015,935$ 31,231,342
25,342,804$ 34,836,514
28,486,709

33,900,000
46,84983,006,257
32,546,417

31,275,000
65,52987,783,617
30,092,112

31,230,000
92,197
94,461,026
20,497,599$ 50,459,840$ 57,691,505$ 73,963,427

Less: Current portion

Secured bank loans were secured by freehold land, building, machinery equipment and flightequipment, please refer to Note 34.
Bank loans (New Taiwan dollars, U.S. dollars) are repayable quarterly, semiannually or in lump sum
upon maturity. Related information is summarized as follows:
Currency
New Taiwan
Dollars
U.S. Dollars
Original currency
June 30, 2016
December 31, 2015
June 30, 2015

$ 46,921,525
52,533,784
57,536,929$

69,179122,827
187,476$ 46,921,525
52,533,784
57,536,929$

2,231,581
4,040,362
5,786,294

1.0517%-2.613%
1.1432%-2.613%
1.2515%-2.613%

0.2724%-4.39%
0.4067%-4.39%
0.2708%-4.39%

Translated in New Taiwan dollars
June 30, 2016
December 31, 2015
June 30, 2015
Interest rates
June 30, 2016
December 31, 2015
June 30, 2015
Periods
June 30, 2016
December 31, 2015
June 30, 2015

2004.12.16-2029.2.4 2004.7.8-2017.9.21
2004.12.16-2029.2.4 2004.6.28-2017.9.21
2004.12.16-2029.2.4 2003.7.22-2020.2.26

The Group 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 June 30, 2016, December 31, 2015 and June 30, 2015, the commercial papers were
issued at discount rates 1.0917%-1.4917%, 1.2407%-1.5833% and 1.3895%-2.0895%, respectively.

- 29 -

21. BONDS PAYABLE
June 30,
2016
Secured corporate bond first-time issued in 2011
Unsecured corporate bond first-time issued in2013
Unsecured corporate bond first-time issued in2016
Convertible bond issued the fifth time$

December 31,
2015
-

$

2,400,000

June 30,2015$

2,400,000

10,900,000

10,900,000

10,900,000

4,700,000
2,567,339
18,167,339

2,544,106
15,844,106

2,530,223
15,830,223

5,267,339

4,944,106

2,400,000$ 12,900,000$ 10,900,000$ 13,430,223

Conditions

Rate (%)

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 annually
Except for converting to capitalstock or buying back, principal
repayable in December of 2018

1.35

Less: Current portion and put option of
convertible bounds

Related issuance conditions were as follows:
Category
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 convertible bonds - issued at discount in
December 2013; repayable in lump sum uponmaturity; 1.8245% discount rate p.a.

Period2011.5.20-2016.5.20

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

2013.12.26-2018.12.26

1.35

1.35

1.35

1.60

1.85

1.19

-

The Company issued unsecured corporate bond first-time in 2016 of $5,000,000 thousand, and purchaser ofthe bond includes Mandarin Airlines Co., Ltd. and Sabre Travel Network (Taiwan) Co., Ltd. holding facevalue of $300,000 thousand which be written off in consolidated financial report.
The Company issue the fifth issue of unsecured convertible bonds, and the issuance conditions were as
follows:
a. The holders may demand a lump-sum payment for the bonds upon maturity.
b. The holders can request the Company to 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.

- 30 -

c. The Company may redeem the bonds at face value between March 26, 2014 and November 16, 2018
under certain conditions.
d. Between January 26, 2014 and December 16, 2018 (except for the period between the ex-dividend date
and the date of dividend declaration on record), holders may convert the bonds to the Company’scommon shares. The initial conversion price was set at NT$12.24, subject to adjustment if there iscapital injection by cash, stock dividend distribution, and the proportion of cash dividend per share inmarket price exceed 1.5%. Due to distribution of cash dividend, the Company made an adjustment tothe conversion price. From July 31, 2016, the revised conversion would be $11.64. As of June 30,
2016, corporate bonds with a face value of $3,315,700 thousand had been converted to 270,890
thousand of common shares.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - option. The effective interest rate of the liability
component was 1.8245% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,000,000(518,621)

Liability component at the date of issuance$ 5,481,379

22. LEASING
a. Sale-leaseback finance lease
June 30,
2016

December 31,
2015

June 30,
2015

Within one year
Beyond one year and within five years$ 1,428,467
4,364,900$ 1,428,467
5,079,133$ 2,477,933
6,143,733

Present value of minimum lease payments$ 5,793,367$ 6,507,600$ 8,621,666Interest rates

1.1317%-1.63%

1.1828%1.5667%

1.43%-1.67%

Minimum lease payments - flight equipment

The Group had leased engines, A330-300, A340-300 and B747-400 in total of 5 aircrafts by undersale-leaseback finance leases as of June 30, 2016. The lease terms started from June 2006 to April
2019. During the lease term, the Group retained all risks and rewards attached to aircraft and engines,
and enjoyed the same substantive right prior to the transaction. Interest rate underlying all obligation
under finance leases were floated. Therefore, the minimum lease payments under sale-leaseback
aircraft contract are not inclusive of interest expense.

- 31 -

b. Finance leaseTaiwan Air Cargo Terminal Co. (TACT) entered into a terminal construction contract. Please refer toNote 35 for the terms of contract.
June 30,
2016

December 31,
2015

June 30,
2015

Minimum lease payments - cargo terminal
Within one year
Beyond one year and within five years$

29,809102,161
131,970(2,808)$37,697
117,433
155,130(7,626)$

31,483
144,345
175,828(9,281)$

129,162$

147,504$

166,547$

29,49099,672$29,490118,014$30,500136,047$

129,162$

147,504$

166,547

Less: Financial cost
Present value of minimum lease payments
Present value of minimum lease payments cargo terminal
Within one year
Beyond one year and within five years

Discount rate
Total amount of present value of minimum
lease payments
Current
Noncurrent

4.96%

4.96%

5.04%

$ 1,457,957
4,464,572$ 1,457,957
5,197,147$ 2,508,433
6,279,780$ 5,922,529$ 6,655,104$ 8,788,213

c. Operating lease arrangements (include sale-leaseback operating lease)
The Company, Mandarin Airlines, Tigerair Taiwan and Taiwan Air Cargo Terminal rented planes andhangars 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 thelease periods.
There are fixed and floated, the rental rates stated in the aircraft lease agreements. If the agreed-uponrental rate is floating and will be revised monthly or semiannually, subleasing is not allowed for all thelease arrangements. As of June 30, 2016, the Group has rented eleven A330-300 planes, nine
B737-800 planes, ten 777-300ER planes, six ERJ190 planes and eight A320-200 planes under operating
contracts which the lease terms range from 8 to 12 years.
As of June 30, 2016, December 31, 2015 and June 30, 2015, the refundable deposits paid by the Group
under operating lease contracts were $926,027 thousand, $952,520 thousand and $958,034 thousand,respectively. Part of the guarantees is secured by credit guarantees, and outstanding credit guarantee
as of June 30, 2016, December 31, 2015 and June 30, 2015 were $1,361,790 thousand, $1,304,259
thousand and $881,824 thousand.

- 32 -

The future minimum lease payments for the noncancelable operating lease commitments were as
follows:

Up to 1 year
Over 1 year to 5 years
Over 5 years$

June 30,
2016

December 31,
2015

9,917,790
37,158,329
36,512,606$$ 83,588,725

8,896,478
33,344,415
32,325,852$ 74,566,745

June 30,
2015$

7,205,233
26,725,587
25,991,707$ 59,922,527

The lease payments recognized in profit or loss for the current period were as follows:

Minimum lease payment

For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015$ 2,439,012$ 4,908,877$ 1,749,731$ 3,271,042

23. OTHER PAYABLES

Fuel cost
Ground service expense
Repair expense
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expense
Others$June 30,
2016

December 31,
2015

2,134,891
1,471,657
1,214,202
139,0092,432,144
697,842
303,341
2,761,831$

2,038,041
1,890,418
916,442
262,601
3,310,173
781,621450,492
2,646,760

June 30,2015$

3,030,634
1,463,609
1,475,544
200,200
2,479,280
656,378
578,658
1,904,399$ 11,154,917$ 12,296,548$ 11,788,702

June 30,
2016

December 31,
2015

June 30,
2015

2,408,905
13,568,014$

24. DEFERRED REVENUE

Frequent flyer program
Advance ticket sales

Current
Noncurrent$

2,610,667
12,365,348$

2,567,675
11,332,775$ 15,976,919$ 14,976,015$ 13,900,450$ 14,181,844
1,795,075$ 13,112,086
1,863,929$ 12,074,230
1,826,220$ 15,976,919$ 14,976,015$ 13,900,450- 33 -

25. PROVISIONS
June 30,
2016

December 31,
2015

June 30,
2015

Operating lease-aircraft$ 6,686,732$ 6,187,481$ 5,142,860

Current
Non-current

$

$

$

32,4036,654,329$ 6,686,732

20,186
6,167,295$ 6,187,481

13,877
5,128,983$ 5,142,860
Aircraft Lease
Contract

Balance at January 1, 2015
Additional provisions recognized
Usage
Effect of exchange rate changes$ 4,303,780
932,826(71,823)(21,923)

Balance at June 30, 2015

$ 5,142,860

Balance at January 1, 2016
Additional provisions recognized
Usage
Effect of exchange rate changes$ 6,187,481
1,274,785(765,172)(10,362)

Balance at June 30, 2016

$ 6,686,732

The Company and Mandarin Airlines leased flight equipment under operating lease agreements. Under
the contracts, when the lease expire to return the lessor, the flight equipment have to be repaired according
to the expected usage years, flight hours, flight cycle and the engine revolution times. The Company and
Mandarin Airlines had existing obligation to recognize provision when signing the lease or during the lease
term. Tigerair Taiwan Co., Ltd. also leased flight equipment under operating lease agreements, inaccordance to the contract, Tigerair had to pay the maintenance reverse accounted for using the flying
hours.

26. RETIREMENT BENEFIT PLANS
Employee benefit expense in respect of group’s defined benefit retirement plan were calculated using theactuarially determined pension cost discount rate as of December 31, 2015 and 2014.

Operating costs
Operating expenses

For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015$ 151,563
85,927$98,43332,426$ 301,195
149,797$ 196,126
70,377$ 237,490$ 130,859$ 450,992$ 266,503- 34 -

27. EQUITY
a. Share capital
Common shares

Numbers of shares authorized (in thousands)
Amount of shares authorized
Amount of shares issued

June 30,
2016

December 31,
2015

June 30,2015

6,000,000$ 60,000,000$ 54,708,901

6,000,000$ 60,000,000$ 54,708,901

6,000,000$ 60,000,000$ 54,700,732

June 30,
2016

December 31,
2015

June 30,2015$ 552,470$ 552,470$ 550,355

1,156
11,7471,019
232,023

1,156
11,7471,019
232,023

1,156
11,747955
232,887$ 798,415$ 798,415$ 797,100

b. Capital surplus

Issuance of stock in excess of par value andconversion premium
Distribution of cash dividends to treasury
shares held by subsidiaries
Employee stock options expired
Long-term investment
Bonds payable equity component

The capital surplus from shares issued in excess of par (including additional paid-in capital fromissuance of common shares and treasury stock transactions) and donations may be used to offset
deficits; in addition, when the Group has no deficit, such capital surplus may be distributed as cash
dividends or transferred to capital (but limited to a certain percentage of the Group’s paid-in capital on
yearly basis).
The capital surplus arising from long-term investments, employee stock options and distribution of cash
dividends to treasury shares held by subsidiaries may not be used for other purpose but to offset
deficits. The capital surplus arising from stock option for employees and convertible bonds, can not
be used.
c. Appropriation of earnings and dividend policy
The amended Company’s Articles of Incorporation provide that the following should be appropriatedfrom annual net income (less any deficit): (a) approved by stockholders’ meeting on June 24, 2016 inaccordance with the latest the Company act 10% as legal reserve, and (b) special reserve equivalent to a
debit balance of any stockholders’ equity account. From the remainder, the Company should also
appropriate at least 3% as bonus to employees. Of the final remainder, at least 50% should be
distributed to stockholders as cash or stock dividends (cash dividend should not be less than 30% of thetotal dividends). In determining the amount of cash dividends to be distributed, the board of directors
should take into account future cash requirements of the Company, primarily cash requirements for
future aircraft acquisitions. Distribution of earnings generated in prior years should also meet theforegoing guidelines.
For information about the accrual basis of the employees’ compensation and remuneration to directors
and supervisors and the actual appropriations, please refer to Note 27 in financial statement of 2015.

- 35 -

1) Appropriation of earnings in 2014
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 earning of $47,471 thousand, theunappropriated deficits of $3,161,115 thousand, the remaining amount of accumulated deficit was$3,864,876 thousand. The Company offset the accumulated deficit against legal reserve of$1,511,953 thousand. No bonus to employees was appropriated for 2014 because of a net loss inthat year.
2) Appropriation of earnings in 2015
On June 24, 2016 the stockholders resolved to the appropriations of earnings for 2015. The
appropriations and dividends per share were as follows:
Appropriationof Earnings
Legal reserve
Special reserve
Cash dividends$

287,224
76,4862,508,525

Dividends Per
Share (NT$)$ 0.458522382

Except for non-ROC resident stockholders, all stockholders receiving the unappropriated earnings
generated on and after January 1, 1998 are allowed a tax credit equal to their proportionate share of
the income tax paid by the Group.
d. Others equity items
The movement of other equity items is as follows:
Exchange
Unrealized
Differences on Gain (Loss) on
Translating
Available-forForeign
sale Financial
Operations
AssetsCash Flow
Hedge

Total

Balance on January 1, 2015
Exchange differences arising ontranslating the foreign
operations
Unrealized gain (loss) on
available-for-sale financial
assetsCumulative gain (loss) arisingon changes in fair value ofhedging instruments
Cumulative gain arising onchanges in fair value ofhedging instruments
reclassified to profit or loss
Effect of income tax

$

4,015

$ (2,009,565)$ (1,905,698)(49,838)--(49,838)-(4,451)-(4,451)--

100,677

100,677

8,473-

1,643,105(296,443)

1,643,105(287,970)

Balance on June 30, 2015$

99,85258,487- 36 -

$

$

(436)

$

(562,226)$(504,175)(Continued)

Exchange
Unrealized
Differences on Gain (Loss) on
Translating
Available-forForeign
sale Financial
Operations
AssetsCash Flow
Hedge

Balance on January 1, 2016
Exchange differences arising ontranslating the foreign
operations
Unrealized gain (loss) on
available-for-sale financial
assetsCumulative gain (loss) arisingon changes in fair value ofhedging instruments
Cumulative (loss) gain arisingon changes in fair value ofhedging instruments
reclassified to profit or loss
Effect of income tax$$

Balance on June 30, 2016$

157,959$

1,755(225,997)

Total$(66,283)(59,142)--(59,142)-(2,105)-(2,105)(281,608)(281,608)

334,635(8,397)

334,635
767

9,164
107,981

$

(350)

$

(181,367)$(73,736)(Concluded)e. Non-controlling interest
For the Six Months Ended
June 302016
2015
Beginning balance
Net income attributable to non-controlling interest
Exchange differences arising on translating the foreign
operations
Unrealized gain or loss on available-for-sale financial assets
Cumulative gain (loss) arising on changes in fair value ofhedging instruments
Cumulative (loss) gain arising on changes in fair value ofhedging instruments reclassified to profit or loss
Acquisition of non-controlling interests in subsidiaries
Effect of income tax
Dividends paid by subsidiaries$ 2,286,647
117,849$ 2,321,737
83,559785(6,192)(1,972)(4,949)

4,539

-

1,250
(4,548)(3,677)(201,899)(671)(157,063)

Ending balance$ 2,194,754$ 2,240,641- 37 -

f. Treasury shares
Treasury shares are the Company’s shares held by its subsidiaries as of June 30, 2016 and 2015 are as
follows:(Shares in Thousands)
Number of
Shares,Beginningof Year

Purpose of Treasury Stock

Reduction
Duringthe Year(Note)

Number of
Shares,Endof YearSix months ended June 30, 2016
Company’s shares held by its subsidiaries reclassified frominvestment in shares of stock to treasury stock

2,889

-

2,889

2,889

-

2,889

Six months ended June 30, 2015
Company’s shares held by its subsidiaries reclassified frominvestment in shares of stock to treasury stock

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value$ 20,103
7,889$ 20,103
7,889$ 27,992$ 27,992$ 24,895
9,770$ 24,895
9,770$ 34,665$ 34,665$ 27,281
10,706$ 27,281
10,706$ 37,987$ 37,987

June 30, 2016
Mandarin Airlines
Hwa Hsia

2,075
814

December 31, 2015
Mandarin Airlines
Hwa Hsia

2,075
814

June 30, 2015
Mandarin Airlines
Hwa Hsia

2,075
814

The acquisition of the Company’s stock by subsidiaries above in previous years was due to theinvestment planning.
The shares of the Company held by its subsidiaries were treated as treasury stock. The subsidiaries
can exercise stockholders’ right on these treasury stocks, except for the right to subscribe for theCompany’s new shares and voting right.

- 38 -

28. NET INCOME
a. Revenue
For the Three Months Ended
June 30
2016
2015
Passenger
Cargo
OthersFor the Six Months Ended
June 30
2016
2015$ 22,818,747
8,452,843
2,563,376$ 23,106,063
10,059,057
2,456,127$ 47,546,478
16,259,772
5,027,739$ 46,733,443
21,203,933
4,847,776$ 33,834,966$ 35,621,247$ 68,833,989$ 72,785,152

b. Other income

Interest income
Subsidy income
Dividend income
OthersFor the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015

$

52,994
92,935
5,745
93,932$ 117,378
39,575223,050
74,084$ 144,223
100,385
5,745
151,297$ 224,619
100,299
223,050
169,443$ 245,606$ 454,087$ 401,650$ 717,411

c. Other gains and losses
For the Three Months Ended
June 30
2016
2015
Gain on disposal property, plantand equipment
Loss on disposal of noncurrent
assets held for saleNet gain (loss) arising on
financial assets classified asheld for trading
Gain or loss on foreignexchange, net
Others

$

$

5,889

$

1,661

For the Six Months Ended
June 30
2016
2015

$

9,284

$

3,441

(26,429)-(26,429)-6,331(41,499)(19,043)(48,384)(217,279)(453,675)(4,557)(239,901)(452,066)(636,149)(3,035)(374,966)(284,296)$ (1,124,403)(685,163)$$(422,944)

The mediation of labor-management disputes between the Company and Taoyuan Flight Attendants
Union (TFAU) was unsuccessful, TFAU acquired the right to strike through strike vote, and started thestrike at twelve a.m. on June 24, 2016, and the scheduled flight resumed normal on June 25, 2016 after
reaching a consensus for both parties. Other related information please refer to the Taiwan Stock
Exchange Market Observation Post System.
The Company had provided compensatory plan to the passengers and the agents suffered loss from thestrike, and recognized estimated expense $287,000 thousand. Actual compensation amount depend on
the actual situation to decide.

- 39 -

d. Financial cost

Interest expense
Bonds payable
Bank loan
Interest on obligations underfinancial lease
Loss arising on derivatives as
designated hedging
instruments in cash flow
hedge accounting
relationship reclassified
from equity to profit orloss

For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015

$

71,507354,207$ 144,472
486,215$ 157,205
713,885

21,04436,95040,03874,229

2,633

837

3,912

3,036

$ 329,371$ 463,501$ 674,637$ 948,355

78,411
227,283$

Information of interest capitalization was as follows:
For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 302016
2015

Capitalization rate

1.61%-1.66%

1.74%-1.79%

1.61%-1.73%

1.74%-1.79%

Capitalization interest$ 111,331$$ 220,074$ 151,572

77,415e. Depreciation and amortization expense
For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015

Property, plant, equipment
Investment property
Intangible asset$ 4,344,946
70
24,696$ 4,381,392
70
15,902$ 8,612,803
140
48,008$ 8,815,582
140
31,370Depreciation and amortization
expense$ 4,369,712$ 4,397,364$ 8,660,951$ 8,847,092

An analysis of depreciation byfunction
Operating cost
Operating expense$ 4,173,340
171,676$ 4,157,826
223,636$ 8,270,132
342,811$ 8,368,576
447,146$ 4,345,016$ 4,381,462$ 8,612,943$ 8,815,722$

24,696$211
15,691$

32
47,976$422
30,948$24,696$

15,902$48,008$31,370An analysis of amortization byfunction
Operating cost
Operating expense- 40 -

f. Employment benefit expense
For the Three Months Ended
June 30
2016
2015
Post-employment benefit
Defined contribution plan
Defined benefit plan

Other employee benefits
Salary expenses
Personnel service expenses

An analysis of employee
benefit expense by function
Operating cost
Operating expense

For the Six Months Ended
June 30
2016
2015

$

105,537
237,490$

88,392130,859$

207,339
450,992$

175,520
266,503$

343,027$

219,251$

658,331$442,023$

4,422,432
1,096,383$

3,621,830
1,576,124$

9,421,104
2,499,577$

8,736,665
2,600,103$

5,518,815$

5,197,954$ 11,920,681$ 11,336,768$

4,880,415
981,427$

4,440,375
976,830$ 10,199,659
2,379,353$$

5,861,842$

5,417,205$ 12,579,012$ 11,778,791

9,525,670
2,253,121

To be in compliance with the Company Act as amended in May 2015, the proposed amended Articles
of Incorporation of the Company stipulate to distribute employees’ compensation at the rates no lessthan 3% of net profit before income tax and employees’ compensation in November 2015. For the six
months ended June 30, 2016, the employees’ compensation is $446,853 thousand of the base net profit.
The employee bonus for the three months and six months ended June 30, 2015 was calculated based on
the previous Article of Incorporation and both recognized $1,454 thousand.
For the year ended December 31, 2015, the employees’ compensation is $1,810,196 thousand of thebase net profit. The employees’ compensation in cash for the year ended December 31, 2015 havebeen approved by the Company’s board of directors on January 15, 2016 and are subject to theresolution of the amendments to the Company’s Articles of Incorporation for adoption by theshareholders in their meeting to be held on June 24, 2016, and in addition thereto a report of such
distribution shall be submitted to the shareholders’ meeting.
Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date the annual consolidated financial statements are authorized for issue areadjusted in the year the bonus and remuneration were recognized. If there is a change in the proposed
amounts after the annual consolidated financial statements were authorized for issue, the differences arerecorded as a change in accounting estimate.
Information on the employees’ compensation and remuneration to directors and supervisors resolved by
the Company’s board of directors in 2016 and bonus to employees, directors and supervisors resolvedby the shareholders’ meeting in 2016 and 2015 are available on the Market Observation Post System
website of the Taiwan Stock Exchange.

- 41 -

29. INCOME TAX
a. Income tax expense recognized in profit or loss
The major components of tax expense (benefit) were as follows:

Current tax
Current year
Prior year adjustment
Deferred tax
Current year
Income tax expense recognizedin profit or loss

For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015

$

73,9691,983$ 106,492(116)$ 121,628
1,983

25,120201,281334,855

587,770

82,334$ 277,233$ 441,231$ 711,381$

57,330(116)$

b. Income tax recognized in other comprehensive income
For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015

$

$

Deferred tax
Recognized in othercomprehensive income
Translation of foreign
operations
Fair value revaluation ofhedging instruments fairfor cash flow hedging
Total income tax recognized inother comprehensive income

(1)

$

4,389

(14,100)(180,812)$ (14,101)$ (176,423)

$

6,929

$

7,802

(9,839)(296,443)(2,910)$ (288,641)

c. Integrated income tax

Imputation credits accounts

June 30,
2016

December 31,
2015

June 30,
2015$ 585,895$ 551,908$ 465,608

Expected creditable tax ratio on December 31, 2015 was 20.22%. Since the Group had accumulated
deficit as of December 31, 2014, there was no expected creditable tax ratio.
Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputationcredits allocated to ROC resident shareholders of the Company was calculated based on the creditableratio as of the date of dividend distribution.
d. Income tax assessment
The income tax returns of the Company and its subsidiaries through 2013, except those of Taiwan Air
Cargo Terminal Limited (TACT), have been examined by the tax authorities.
- 42 -

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 to reinvestigation, administrative appeal andadministrative proceedings but was ruled as denied by tax authority, and the TACT took an appeal.
The ruling by the Supreme Administrative Court had only agreed to only waive the fine. The tax
authority disagreed with the Court’s decision on the waived fine and filed a retrial on December 29,
2010. In the meantime, TACT also filed a retrial on January 12, 2011 for the additional tax liability of$129,350 thousand. The Supreme Administrative Court dismissed both parties’ appeals on December
8, 2011.
As the tax authority still insisted to impose one fold of the amount of the excessive distribution of ICA,TACT therefore filed an administrative appeal to the Ministry of Finance on December 21, 2012. The
collection authority then revised the fine to 80% of the amount of the excessive distribution of ICA, but
TACT disagreed the decision and filed an administrative appeal to the Ministry of Finance and the fine
was revised to 60% of the amount of the excessive distribution of ICA on May 20, 2014. But TACT
still disagreed with the decision and filed an administrative proceeding on November 20, 2014.
During the hearing of the administrative proceeding, the tax authority proposed to reduce the fine to
50% of the amount of the excessive distribution of ICA based on a tax regulation No. 10304027120
issued by the Ministry of Finance on November 3, 2014.
High administrative court had reached a decision on June 15, 2016, and the verdict was 0.46 of theamount of the excessive distribution of ICA, TACT refused to accept the resolution, and appealed to thesupreme administrative court on July 4, 2016, and the amount of provision recognized by TACT forover-distributed tax and fine was $168,155 thousand.

30. EARNINGS (LOSS) PER SHARE
The numerators and denominators used in calculating loss per share were as follows:
For the Three Months Ended
June 30
2016
2015
Basic earnings (loss) per share
Diluted earnings (loss) per share

Earnings (loss) used in thecomputation of basic earnings
per share
Effect of potentially dilutive
ordinary shares:
Interest on convertible bonds(after tax)
Earnings (loss) used in thecomputation of diluted earnings
per share$ (0.03)$ (0.03)

$
$

0.20
0.20

For the Six Months Ended
June 30
2016
2015
$
$

0.24
0.23

$
$

0.55
0.53

For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015

$

$

(169,612)$ 1,116,577$ 1,294,339$ 2,966,956-

11,031

23,14527,025(169,612)$ 1,127,608$ 1,317,484$ 2,993,981- 43 -

For the Three Months Ended
June 302016
2015
Weighted average number ofordinary shares in computationof basic earnings (loss) per share
Effect of potentially dilutive
ordinary shares:
Convertible bonds
Employees’ compensation orbonus issue to employees
Weighted average number ofordinary shares used in thecomputation of diluted earnings(loss) per share

For the Six Months Ended
June 302016
2015

5,470,891

5,451,790

5,470,891

5,397,073-

236,617219,306

291,455-

28

58,35055

5,470,891

5,688,435

5,748,547

5,688,583

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.

31. CAPITAL MANAGEMENT
The goal, policies and procedures as well as the composition of the Group’s capital management are same
as consolidated financial statement in 2015.

32. FINANCIAL INSTRUMENTS
a. Financial instruments not evaluated at fair value
Except as detailed in the following table, the management considers the carrying amounts of financial
assets and financial liabilities recognized in the financial statements as approximating their fair values.
June 30, 2016
Carrying
AmountFair Value

December 31, 2015
Carrying
AmountFair Value

June 30, 2015
Carrying
AmountFair Value$ 18,167,339
83,006,257$ 15,844,106
87,783,617$ 15,830,223
94,461,026

Financial liabilities
Bonds payable
Loans and debt

$ 18,495,234
83,056,839$ 16,459,680
87,944,264$ 16,249,779
94,569,684

Some long-term debts and capital lease obligations are floating-rate financial liabilities, so theircarrying values are their fair values. As of June 30, 2016, December 31, 2015 and June 30, 2015, thefair 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 0.694%, 0.433% and 0.900%, respectively,
prevailing in the market for long-term debts (Level 2). Fair values of bond payable trading in OTC
and based on quoted market prices (Level 1).

- 44 -

b. Financial instrument evaluted at fair value
The following table provides an analysis of financial instruments that are measured subsequent to initialrecognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value isobservable:
1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;2) 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); and3) Level 3 fair value measurements are those derived from valuation techniques that include inputs forthe asset or liability that are not based on observable market data (unobservable inputs).
June 30, 2016
Level 1
Financial assets at FVTPL
Derivative instrument
Domestic money market fund$Level 2

Level 3

Total

1,046,604

$

9,009
-

$

-

$

9,009
1,046,604$ 1,046,604

$

9,009

$

-

$ 1,055,613

Financial liabilities at FVTPL
Derivative instrument

$

-

$

3,863

$

-

$

3,863

Available-for-sale financial
assetsSecurities listed in domestic$

14,623

$

-

$

-

$

14,623

Derivative financial assets forhedging$-$

24,095$818$

24,913

Derivative financial liabilities forhedging$-$

149,658$

94,552$

244,210December 31, 2015
Level 1
Financial assets at FVTPL
Derivative instrument
Domestic money market fundLevel 2

Level 3

Total$

478,508$

65,528-$-$65,528478,508$

478,508$

65,528$-$544,036

Available-for-sale financial
assetsSecurities listed in domestic$

19,080

$

-

$

-

$

19,080Derivative financial assets forhedging$-$

51,060$12,738$63,798Derivative financial liabilities forhedging$-$

12,702$

312,278$

324,980- 45 -

June 30, 2015
Level 1
Financial assets at FVTPL
Derivative instrument
Domestic money market fundLevel 2

Level 3

Total$

137,975$

16,735-$-$

16,735
137,975$

137,975$

16,735$-$

154,710

Financial liabilities at FVTPL
Derivative instrument

$

-

$

35,157$-$35,157Available-for-sale financial
assetsSecurities listed in domestic$

19,481

$

-

$

-

$

19,481

Derivative financial assets forhedging

$

-

$

9,940

$

71,628$81,568Derivative financial liabilities forhedging

$

-

$

6,995

$

739,281$746,276

There were no transfers between Levels 1 and 2 in the current period.
4) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value
measurement
Financial Instruments
Derivatives - foreign currency
forward contracts andinterest rate swaps

Valuation Techniques and Inputs
Discounted cash flow.
Future cash flows are estimated based on observable forward
exchange rates at the end of the reporting period and contract
forward rates, discounted at a rate that reflects the credit riskof various counterparties.

5) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value
measurement
The fair values of foreign exchanges and fuel options are determined using option pricing models
where the significant unobservable inputs are implied fluctuation. Change in the implied
fluctuation used in isolation would result in a increase or decrease in the fair value of foreignexchanges and fuel options.
Because some financial instruments and non-financial instruments can not show their fair value, thetotal fair value showed by these disclosure are not total value of the Group.

- 46 -

c. Categories of financial instruments
June 30,
2016

December 31,
2015

1,055,613
234,543
24,91336,944,473$

June 30,
2015

Financial assets
Financial assets at FVTPL
Available-for-sale financial assets (Note 3)
Derivative financial assets for hedging
Loans and receivables (Note 1)$

544,036
242,991
63,79835,800,865$

154,710
486,931
81,56837,084,040$ 38,259,542$ 36,651,690$ 37,807,249

$

$

$

Financial liabilities
Financial liabilities at FVTPL
Derivative financial liabilities for hedging
Financial liabilities at amortized cost (Note 2)

3,863
244,210
121,990,848$ 122,238,921

324,980
125,241,381$ 125,566,361

35,157746,276
135,749,879$ 136,531,312

Note 1: The balances included loans and receivables measured at amortized cost, which comprise cash
and cash equivalents, notes and accounts receivables, accounts receivable - related parties,
other receivables, refundable deposits, other financial asset and other restricted financial asset.
Note 2: The balances included financial liabilities measured at amortized cost, which compriseshort-term loans, short-term notes payable, notes and accounts payables, accounts payable related parties, other payable, bonds payable and long-term loans, capital lease obligation, partof other current liabilities, part of other noncurrent liability and guarantee deposit.
Note 3: Including the financial assets measured at cost.
d. Financial risk management objectives and policies
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.
In addition, the Group has a risk committee, which meets periodically to evaluate the performance of
derivative instruments and determine the appropriate hedging percentage. This committee informs theGroup of global economic and financial conditions, controls the entire financial risk resulting fromchanges in the financial environment and fuel prices, and develops the strategy and response to avoid
financial risk with the assistance of financial risk experts for effective risk management.
1) Market risk
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.

- 47 -

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.
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.
Sensitivity analysis
The Group was mainly exposed to the U.S. dollar.
The following details the Group’s sensitivity to increase and decrease in New Taiwan dollars(the functional currency) against the relevant foreign currencies.
U.S. dollars
increase/decrease one dollar against New Taiwan dollars used when reporting foreign currency
risk internally to key management personnel and represents management’s assessment of thereasonably 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 U.S. dollars increase/decrease one dollar against New Taiwan dollars change in
foreign currency rates.
When New Taiwan dollars increase one dollar against U.S. dollars and all other variables were
held constant, there would be an decrease in pre-tax profit by the end of June 30, 2016 $344,567
thousand and increase in pre-tax profit by the end of June 30, 2015 $185,156 thousand,respectively.
b) Interest rate risk
The Group enters into interest swap contracts to hedge against the risks on change in interest
rate on net liabilities portions.
The risk is managed by the Group through maintaining an appropriate mix of fixed and floating
rate borrowings, and using interest rate swap contracts and forward interest rate contracts.
The carrying amount of the Group’s financial liabilities with exposure to interest rates at the endof the reporting period were as follows.

Fair value interest rate risk
Financial liabilities
Cash flow interest rate risk
Financial liabilities

June 30,
2016

December 31,
2015

June 30,2015$ 18,745,358$ 16,723,881$ 19,497,352

88,468,993

93,742,231

102,382,171

Sensitivity analysis
The sensitivity analyses below were determined based on the Group’s exposure to interest rates
for both derivatives and non-derivative instruments at the end of the reporting period. 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.
- 48 -

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 six months ended June 30, 2016 would havedecreased by $110,586 thousand. Had interest rates increased one yard (25 basis) point andhad all other variables been held constant, the Group’s pretax profit for the six months ended
June 30, 2015 would have decreased by $127,978 thousand.
c) Other price risk
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.
Sensitivity analysis
The sensitivity analyses below were determined based on the exposure to fuel price risks at theend of the reporting period.
For the Six Months Ended June 30
2016
2015
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
Fuel price increase 5%
Fuel price decrease 5%

$

1,269
(2,345)$

1,730(1,617)$23,011(23,011)$ 207,921
76,6322) Credit risk
The goal, policies and procedure of credit risk management are same as consolidated financial
statement in 2015. Related illustration can be referred to Note 32.
3) Liquidity risk
The goal, policies and procedures of liquidity risk management are the same as consolidated
financial statement in 2015. Related illustration can be referred to Note 32.

33. RELATED-PARTY TRANSACTIONS
Details of transactions between the Group and its related parties are disclosed below:
a. Operating transactions
For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015

$
$
$

$
$
$

Sales of goods
Associates
Jointly controlled entities
Major stockholder

529
3,471
8,132

- 49 -

$
$
$

573
3,498
9,527

1,304
6,813
16,979

$
$
$

895
7,024
17,563

For the Three Months Ended
June 30
2016
2015

For the Six Months Ended
June 30
2016
2015$ 163,844$ 390,762$ 17,608$ 330,214$ 785,098$ 37,642

Purchases of goods
Associates
Jointly controlled entities
Major stockholder$ 137,680$ 387,543$ 20,868$ 267,200$ 749,357$ 39,441

The amount of accounts receivable - related parties at reporting dates were as follows:
June 30,
2016
Associates
Jointly controlled entities
Major stockholder

December 31,
2015

June 30,
2015

$

186
1,749
2,282

$

182
599
3,093

$

84
1,774
2,904

$

4,217

$

3,874

$

4,762

The amount of accounts payable - related parties at reporting dates were as follows:
June 30,
2016
Associates
Jointly controlled entities
Major stockholder$

90,360397,337
5,272$ 492,969

December 31,
2015$

98,245388,371
7,138$ 493,754

June 30,
2015$

79,889392,060
6,678$ 478,627

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 60 days; accounts receivable from related parties
does not gather any deposit, and no expense was recognized for allowance for impairment loss.
b. Lease of properties
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. As of June 30, 2016 and 2015, the Company had paid rentals of $37,642 thousand and $39,441
thousand, respectively; for the three months ended June 30, 2016 and 2015, were $17,608 thousand and$20,868 thousand.
c. Endorsements and guarantees
June 30, 2016
ActualAuthorized
AmountAmountUsed

December 31, 2015
ActualAuthorized
AmountAmountUsed

June 30, 2015
ActualAuthorized
AmountAmountUsed$ 3,850,000
1,080,000
180,000
919,742$ 3,400,000
1,080,000
236,629
180,000
937,895$ 3,400,000
1,080,000
272,596
180,000
880,000

The Company
Cal Park
Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan$ 2,776,000
471,877
3,171
438,740- 50 -$ 2,739,000
486,815
236,629
6,343
447,399$ 2,822,000
539,554
272,596
9,514
419,782

d. Compensation of key management personnel
For the Three Months Ended
June 30
2016
2015
Short-term employee benefits
Post-employment benefits$

For the Six Months Ended
June 30
2016
2015

9,786
719

$

8,901
620

$ 26,931
1,523$ 20,240
1,130$ 10,505$

9,521$ 28,454$ 21,370

The remuneration of directors and key executives was determined by the remuneration committee
having regard to the performance of individuals and market trends.

34. PLEDGED ASSETS
The following assets had been pledged or mortgaged as collaterals for long-term and short-term bank loans,lease obligations and business transactions:

Property, plant and equipment
Restricted assets - noncurrent
Pledged certificate deposits
US treasury bill

June 30,
2016

December 31,
2015

June 30,2015$ 85,581,321$ 90,642,565$ 108,289,837

187,338-

268,790236,634

311,765596$ 85,768,659$ 91,147,989$ 108,874,198

The above US treasury bill had been pledged as collaterals for Freighter Prince Ltd. classified as restrictedassets - noncurrent.

35. COMMITMENTS AND CONTINGENT LIABILITIESAs of June 30, 2016, the Group had commitments and contingent liabilities (except for those mentioned inother notes) as follows:a. In January 2008, the Group entered into a contract to buy fourteen A350-900 planes from Airbus, withthe option to buy six more A350-900 planes, with aggregate purchase prices of US$3,933,235 thousand
and US$1,802,645 thousand, respectively. Excepted delivery slots of aircraft are from 2016 to 2018.
Prepayments for aircraft purchases were as follows:
June 30, 2016

December 31, 2015

June 30, 2015

US$811,613 thousand

US$685,231 thousand

US$546,119 thousand

b. For the future development of the Group’s business, the Group made a lease contract with BOC
Aviation and letter to lease six 737-800 aircrafts. The expected delivery slot will be August 2016.
c. The Tigerair Taiwan entered into a lease contract of the four A320-200 aircrafts with 10 years leaseterm on July, November and December 2015, two of which had been delivered in January and June
2016. The expected delivery date of the rest aircrafts will be in January and December 2017.
- 51 -

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 in 2003.
The total estimated expense of the construction project was $8,490,000 thousand. Designation ofproject was from 2004 and the construction began in 2008. TACT filed application for a 10-year
extension of the COP for the cargo terminals in Taiwan Taoyuan International Airport and KaohsiungInternational Airport, and got the approvals from Taoyuan Airport Corporation and CAA in July 2013
and July 2015, respectively.
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.
As of June 30, 2016, TACT had signed the following construction contracts with unrelated parties:

Client NameContract Title

CECI Engineering
Consultant, Inc., Taiwan
Siemens Taiwan

Cargo Terminal Expansion Construction Consultant
Contract
Cargo Terminal Expansion Construction First-Stageand Second-Stage Storage and Transport Facilities
Contract
Paint steel columns and roof renewal works Contract

Chen-Jia Construction Co.

Contract
Amount (VAT
Included)$552,285
1,892,400

86,380

As of June 30, 2016, the cumulated consultant service expense and construction equipment had
amounted to $412,904 thousand (VAT included) and $4,148,846 thousand (VAT included),
respectively. Upon completion of the projects, the amount of $410,041 thousand (VAT included) and$4,067,453 thousand (VAT included) were reclassified to property, plant, and equipment. The
remaining cumulative payments were recognized under construction in progress.
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.
e. TACT should pay royalties to 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 CAA has the option to adjust the royalty rates every 3 years starting from thedate of transfer of the chartered operation right on the basis of actual revenue and expenditure. The
royalty rates are based on CAA letter order No. 1000021973 and have remained the same as those in theoriginal contract signed in April 2012; these rates were listed as follows:
Annual Operating AmountRoyalty Rate

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

6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%- 52 -

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.
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.
CAL Park should pay land rentals on the date of the registration of surface rights. The rates for thedevelopment stage differ from those for the operation period. It 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 amountbased on the National Building Land Rental Standard plus land value tax, value-added tax and thenecessary maintenance fee.
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 refunded
security deposits of $50,000 thousand with no interest.
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 an additional an royalties at 10% of this excess.
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 chartered period. If CAA decides not to keep thebuilding and equipment on the base, CAL Park Co., Ltd. should remove all related building andequipment within three months after the expiry date.
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 filed at the US Northern District Court of California by agroup of passengers, who alleged that there was an antitrust violation. The Company has properly
joined the defendants’ Joint Defense Group. The litigation is at the pretrial stage, and no evidence
supporting the plaintiffs’ allegation has been raised so far.
h. The Company has reached a settlement with the class plaintiffs of “Air Cargo Antitrust Class Action”
on May 6, 2014. One of plaintiffs - DHL Global Forwarding (DHL) et al. has opted out from classaction. In early 2015, DHL has filed a civil lawsuit against the Company at United States District
Court for the Eastern District of New York and the Company has responded to the notice of summons.
Settlement proceeding is considered and presumptive loss has been listed.

- 53 -

36. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIESThe 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:
June 30, 2016
Foreign
Currencies

Exchange Rate

Carrying
Amount571,016
16,848286,365
1,373,314
895,160

32.258135.8423
4.16100.31424.8591$ 18,419,902
603,875
1,191,620
430,092
4,349,670

213,355
5,814
75,3984,735,673
158,26232.258135.8423
4.16100.31424.8591

6,882,415
208,396
313,166
1,480,115
769,012Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY
December 31, 2015
Foreign
Currencies

Exchange Rate

Carrying
Amount371,091
16,153
230,469
1,769,067
2,105,839

32.8947
35.97124.24450.2731
5.0659$ 12,206,940
569,778
978,224
483,136
10,667,121

153,815
8,353
87,413
4,632,721
150,973

32.8947
35.97124.24450.2731
5.06595,059,699
299,732
371,024
1,265,198764,813

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

- 54 -

June 30, 2015
Foreign
Currencies

Carrying
AmountExchange Rate

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

278,425
16,626208,630
1,745,696
2,669,873

30.864234.60213.98570.25284.9776

330,631
5,910
74,5494,698,221
165,72630.864234.60213.98570.25284.9776$

8,596,194
575,282
831,535
443,940
13,290,038

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

10,205,104
204,493
297,128
1,187,956
824,917

For the three months ended June 30, 2016 and 2015, net foreign exchange losses were $217,279 thousand
and $4,557 thousand, respectively; for the six months ended June 30, 2016 and 2015, were $452,066
thousand and $3,035 thousand. It is impractical to disclose net foreign exchange gains (losses) by eachsignificant foreign currency due to the variety of the foreign currency transactions and functional currenciesof the group entities.

37. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided:

None2) Endorsement/guarantee provided: Table 1 (attached)
3) Marketable securities held: Table 2 (attached)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
5) Acquisition of individual real estates at costs or price of at least NT$100 million or 20% of thepaid-in capital: None
6) Disposal of individual real estates at cost or prices of at least NT$100 million or 20% of the paid-in
capital: None
7) Total purchase from or sale to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 3 (attached)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 4 (attached)- 55 -

9) Names, locations, and related information of investees on which the Company exercises significant
influence: Table 5 (attached)10) Derivative financial transactions (Notes 7 and 9)
b. Investment in Mainland China: Table 6 (attached)c. Business relationship and important transactions between China Airline, Ltd. and its subsidiaries:
Table 7 (attached)

38. SEGMENT INFORMATION
Segment Information
The Group mainly engages in air transportation services for passengers, cargo and others. The major
revenue-generating asset is the aircraft fleet, which is jointly used for passenger and cargo services. Thus,
the Group’s sole reportable segment is the flight segment. For operating segment reporting in the
consolidated financial statements, the reportable segment of the Group and its consolidated subsidiaries
comprises the flight and the non-flight business departments. Accounting policy applied for reportablesegment is consistent with the policy mentioned in Note 4.
For the Six Months Ended June 30, 2016
Air
Adjustment andTransportation
OthersWrite-off
Operating revenue$ 68,051,014$

3,888,563$(3,105,588)

Operating profit and losses
Interest revenue
Investment income accounted for by
the equity method
Revenue
Financial cost
Expense$$567,361$-

2,424,761$ 68,833,989$

2,992,122
144,223
258,687
222,952(674,637)(1,089,928)

Profit before income tax
Identifiable assets
Investment accounted for by the equity
methodAssetsTotal$$ 118,464,017$

9,599,284$-

1,853,419$ 128,063,301
2,925,267
87,823,443

Total assets$ 218,812,011- 56 -

For the Six Months Ended June 30, 2015
Air
Adjustment andTransportation
OthersWrite-off
Operating revenue$ 72,506,799$

3,699,546$(3,421,193)

Operating profit and losses
Interest revenue
Investment income accounted for by
the equity method
Revenue
Financial cost
Expense$$405,253$

18,2483,743,398$ 72,785,152$

4,166,899
224,619
248,885
469,418(948,355)(399,570)

Profit before income tax
Identifiable assets
Investment accounted for by the equity
methodAssetsTotal$$ 128,408,789$

9,660,956$(3,093)3,761,896$ 138,066,652
2,612,667
87,146,908

Total assets$ 227,826,227- 57 -TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIESENDORSEMENT/GUARANTEE PROVIDEDFOR THE SIX MONTHS ENDED JUNE 30, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Counter-party
Endorsement/
Guarantee
Provider

No.

0

Name

China Airlines
Cal Park(the “Company”) Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan Ltd.

Nature of Relationship100% subsidiary
54% subsidiary
100% subsidiary
100% subsidiary
90% subsidiary by direct
and indirect holdings

Limits on EachCounter-party’s
Maximum
Endorsement/
Balance for the Ending Balance
Guarantee
PeriodAmounts(Note 1)

$ 11,408,617
11,408,617
11,408,617
11,408,617
11,408,617$ 3,850,000
1,080,000
240,586
180,000
953,579$ 3,850,000
1,080,000
180,000
919,742ActualBorrowingAmount$ 2,776,000
471,877
3,171
438,740

Note 1:

Based on the Group’s guidelines, the maximum amount of guarantee to an individual counterparty is up to 20% of the Group’s stockholders’ equity.

Note 2:

Based on the Group’s guidelines, the allowable aggregate amount of collateral guarantee is up to 50% of the Group’s stockholders’ equity.

- 58 -

Ratio ofAccumulated
Value ofAmount ofCollaterals
Collateral toProperty, Plant, Net Equity ofor Equipment
the Latest
Financial
Statement (%)
$

-

6.75
1.89
0.32
1.61

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)

$ 28,521,542
28,521,542
28,521,542
28,521,542
28,521,542

Endorsement/ Endorsement/ Endorsement/
Guarantee
Guarantee
Guarantee
Given by Parent
Given byGiven on Behalf
on Behalf of
Subsidiaries on of Companies in
Subsidiaries Behalf of Parent Mainland China

Y
Y
Y
Y
Y

N
N
N
N
N

N
N
N
N
N

TABLE 2

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELDJUNE 30, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Relationship with
the Holding
Company

June 30, 2016
Percentage ofOwnership

Market Valueor Net Asset
Value

52,704473
11,00056,023
5,925

13.59
11.00
15.00
6.22

$ 233,454
174
34,525742

Note 1
Note 1-

58,745,395.66

600,255-

600,255-

Available-for-sale financial asset - current

2,074,628

20,103-

20,103-Financial assets at fair value through profit orloss - current
Financial assets at fair value through profit orloss - current
Financial assets at fair value through profit orloss - current

9,794,655.56

125,877-

125,877-

1,000,000

32,406-32,406-1,000,000

32,426-32,426--

72,69721,0985.83
5.45(2,549)2,211

Note 2
Note 2

265,726.48

3,316

-

3,316

-

4,637,002.66

57,499-57,499-5,523,757.68

56,441-

56,441

1,287,409.14

15,954-

15,954-

3,941,750.30

59,619-59,619-Holding Company Name

Marketable Securities Type and Issuer/Name

China Airlines (the “Company”)

Stock
Everest Investment Holdings Ltd. - common stockEverest Investment Holdings Ltd. - preferred stock
Chung Hua Express Co.
Jardine Air Terminal Services
Regal International Advertising-

Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent

1,359,368
135,937
1,100,000
12,000,000
592,500

Beneficial certificatesFranklin Templeton Sinoam Money Market Fund-

Financial assets at fair value through profit orloss - current

Parent company

Beneficial certificatesFuh Hwa Money Market Fund-

Barclays America Bonds Fund-

Deutsche America Bonds Fund

-

Stock
Taikoo (Xiamen) Landing Gear Services
Taikoo Spirit Aerospace Systems (Jinjiang) Composite-

Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent

Beneficial certificates
Mirae Asset Solomon Money Market Fund-

Mega Diamond Money Market Fund-

Franklin Templeton Sinoam Money Market Fund-

Allianz Taiwan Money Market Fund-FSITC Taiwan Money Market Fund-

Financial assets at fair value through profit orloss - current
Financial assets at fair value through profit orloss - current
Financial assets at fair value through profit orloss - current
Financial assets at fair value through profit orloss - current
Financial assets at fair value through profit orloss - current

Mandarin Airlines

Cal-Asia Investment

Sabre Distribution Network

Stock
China Airlines

Financial Statement AccountShares/Units

Carrying Value

$

Note

(Continued)- 59 -

Holding Company Name

Taiwan Airport Services

Hwa Hsia

Hwa SinMarketable Securities Type and Issuer/Name

Relationship with
the Holding
Company

June 30, 2016
Financial Statement AccountShares/UnitsFSITC Taiwan Money Market Fund-

Financial assets at fair value through profit orloss - current

317,541.32

Stock
TransAsia Airways-

Available-for-sale financial asset - noncurrent

Stock
China Airlines

Parent company

Percentage ofCarrying Value
Ownership$

56,032-

2,277,786

14,623Available-for-sale financial asset - current

814,152

Market Valueor Net Asset
Value
$

Note

56,032-

0.4

14,623

-

7,889

-

7,889

-

Beneficial certificates
Taishin 1699 Money Market Fund-

Financial assets at fair value through profit orloss - current

349,522.71

4,676

-

4,676

-

Beneficial certificates
Taishin 1699 Money Market Fund-

Financial assets at fair value through profit orloss - current

157,069.71

2,103

-

2,103

-

Note 1: The subsidiary’s net asset value was $233,454 thousand, which included common stock and preferred stock as of June 30, 2016.
Note 2: The net asset value was calculated using the investee’s financial statements for the five months ended May 31, 2016, because the group was unable to acquire the investee’s financial statements for the six months ended June 30, 2016.
(Concluded)- 60 -TABLE 3

CHINA AIRLINES, LTD. AND SUBSIDIARIESTOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE SIX MONTHS ENDED JUNE 30, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)Transaction Details
Company Name

China Airlines, Ltd.
(“China Airlines”)

Related Party

Mandarin Airlines
China Pacific Catering Services
Taoyuan International Airport Service
China Aircraft Services
Kaohsiung Catering Services
Tigerair Taiwan Co., Ltd.
Taiwan Air Cargo Terminal
Hwa Hsia
Taiwan Airport Services
Cal Park

Nature of Relationship

Subsidiary
Equity-method investee
Subsidiary
Equity-method investee
Equity-method investee
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary

Purchase/
Sale
Sale
Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
PurchaseAmount% toTotal$ (1,359,478)
732,794564,298
107,003
152,024(123,473)
191,029
143,447
189,674
108,605(2.19)
1.35
1.04
0.20
0.28
(0.20)
0.35
0.27
0.35
0.20

- 61 -

Note/Account Payable or
Receivable% toPayment Terms Ending Balance
Total

Abnormal Transaction
Payment Terms
2 months
60 days
40 days
30 days
60 days
1 month
30 days
2 months
40 days
2 months

Unit Price
$

-

-

$

490,571(379,000)(331,672)(34,455)(43,564)
64,745(35,159)(2,263)(62,881)(199,109)

5.51(14.04)(12.28)(1.28)(1.61)
0.76(1.30)(0.08)(2.33)(7.37)Note-

TABLE 4

CHINA AIRLINES, LTD. AND SUBSIDIARIESRECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
JUNE 30, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Overdue
Company Name

Related Party

Nature of RelationshipEnding Balance

Turnover Rate

$ 490,571

5.40

China Airlines, Ltd. (“China Airlines”)

Mandarin Airlines

Subsidiary

Mandarin Airlines

China Airlines

Parent company

277,065

China Pacific Catering Services

China Airlines

Parent company

Taoyuan International Airport Service

China Airlines

Cal Park

China Airlines

AmountAllowance for
Bad Debts--$ 260,961

0.38

-

-

242,527-

379,000

3.91

-

-

129,721-

Parent company

331,672

3.52

-

-

185,792-

Parent company

199,109

1.50

-

-

-

-

- 62 -$

Action Taken

Amounts Received
in Subsequent
Period$-TABLE 5

CHINA AIRLINES, LTD. AND SUBSIDIARIESNAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE SIX MONTHS ENDED JUNE 30, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company

China Airlines, Ltd.

Investee Company

Location

Main Businesses and Products

Investment Amount
December 31,
June 30, 20162015

Balance as of June 30, 2016
Percentage ofSharesCarrying Value
Ownership

Net Income(Loss) of theInvestee$

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
77,322150,000,000
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

100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
24.50

$

12,289140,240
465,000
214,745
137,500

12,289140,240
465,000
150,654
137,500

20,626,644
14,329,759
46,500,000
18,633,937
13,750,000

47.35
35.78
100.0026.00
55.00

77,27077,27077,27026,265
20,400
2,500
US$
1
US$
1
1,600,000
60,000

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

Taoyuan, Taiwan
Real estate lease and international trade
Taipei, Taiwan
Air transportation
Taoyuan, Taiwan
Air cargo and storage
Los Angeles, U.S.A.
A holding company, real estate and hotel services
Taoyuan, Taiwan
In-flight catering
Taoyuan, Taiwan
Airport services
Territory of the British Virgin Islands General investment
Taipei, Taiwan
Sale and maintenance of hardware and software
Hong Kong International Airport
Airport services
Taoyuan, Taiwan
Research, manufacture and maintenance of engines

Hwa Hsia

Taoyuan, Taiwan

Yestrip
Dynasty Holidays
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance andEngineering Co., Ltd.

Taipei, Taiwan
Tokyo, Japan
Taipei, Taiwan
Cayman Islands
Cayman Islands
Taipei, Taiwan
Taoyuan, Taiwan

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

Mandarin Airlines

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Taipei, Taiwan
Taipei, Taiwan

Air transportation
Airport services

Cal-Asia Investment

Eastern United International Logistics

Hong Kong

Forwarding and storage of air cargo

HK$

3,329

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

Hwa Hsia

Hwa Shin Building Safeguard

Taoyuan, Taiwan

Building security and maintenance services

Taipei, Taiwan
Kaohsiung, Taiwan
Taoyuan, Taiwan
Tainan, Taiwan
Taoyuan, Taiwan

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

26,265
20,400
2,500
US$
1
US$
1
1,600,000
60,000
JPY

$

6,819
(19,205)
6,488
20,184
104,785
102,748
6,862
86,45230,121
51,107Note 1
Note 2-

239,508
228,874
352,012240,071
157,757

77,393
100,336
38,13831,65417,08636,64635,90038,1388,230
9,398

Note 5-100.0083,984

10,662

10,662

Note 11,600,000
408
250,000
1,000
1,000
160,000,000
6,000,000

100.0051.00
25.00
100.00100.0080.00
100.0025,61333,9936,459
32
32
642,631
32,247

453
3,016
2,950
(422,429)(9,485)

453
1,538
737
(337,943)(9,485)-200,000
3,574

20,000,000
469,755

10.00
1.08

80,329343(422,429)
77,393(42,243)570

Note 4HK$

3,329

1,050,000

35.00

41,107

2,677

937

-

US$

5,877

-

100.00396,039

8,662

8,662

Note 3

10,0001,000,000

100.0020,015

3,340

3,340

-

200,000
11,65810,000Note 1:Adopted the treasury stock method in recognizing investment income or loss.

Note 2:

Represents the consolidated financial information of the foreign holding company disclosed in accordance with local regulations.

Note 3:

The Company does not issue stocks because it is a limited company.

Note 4:

Have acquired noncontrolling interests of Taiwan Airport Services from September 2015.

Note 5:On December 18, 2015 the board of Science Park Logistics (SPL) approved the issuance of common stock for cash and the record date of the stock issuance was December 25, 2015.
SPL. SPL completed the registration of this subscription on January 22, 2016.

- 63 -

1,517,643
1,344,694
1,266,583
1,235,310
809,920702,440
526,358
351,987
510,629
225,401

Note

6,819 $
(20,433)
12,014
20,184205,462
209,689
6,862
92,038150,606
208,599

JPY$

Investment
Income (Loss)

The board of Company has reached an agreement to purchase $64,091 thousand which had been remitted toTABLE 6

CHINA AIRLINES, LTD. AND SUBSIDIARIESINVESTMENTS IN MAINLAND CHINAFOR THE SIX MONTHS ENDED JUNE 30, 2016
(In Thousands of New Taiwan Dollars/Renminbi/U.S. Dollars, Unless Stated Otherwise)

China Airlines

Investee Company Name

Main Businesses andProducts

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan
Capitalas ofJanuary 1, 2016

Investment Flows

Outflow

Accumulated
Outflow ofInvestment
from Taiwan
as ofJune 30, 2016

Inflow

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Forwarding and storage $1,090,768
of air cargo(RMB 224,480)

Indirect(Note 1)$
(US$

135,032 $4,186)-

Airport Air Cargo Service(Xiamen) Co., Ltd.

Forwarding and storageof air cargo(RMB

68,027
14,000)Indirect(Note 1)62,806
1,947)-(US$

Taikoo (Xiamen) Landing
Gear Services

Landing gear
1,190,000
maintenance services (US$36,890)Indirect(Note 1)

69,3872,151)-(US$

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

Shanghai Eastern Aircraft
MaintenanceAircraft line
maintenance

Shanghai Eastern UnitedInternational

376,226
11,663)

Indirect(Note 1)

(US$

20,516
636)

-

(US$

100,000
3,100)

Indirect(Note 2)

(US$

8,000
248)

-

(US$

Forwarding of air cargo
and ocean freight(US$32,2581,000)

Indirect(Note 3)

5,548
172)

-

(US$

$

-

$
(US$

135,032 $4,186) (RMB

20,816
4,184)

14.00

62,806
1,947) (RMB

41,6428,370)

14.00

(US$

69,3872,151)

-

5.83

(US$

20,516
636)

-

(US$

8,000
248)

-

(US$

5,548
172)

-

(US$

-

-

-

-

-

Accumulated Investment in Mainland
China as of June 30, 2016

Investment Amounts
Authorized by Investment Commission,
MOEA

Limit on Investment$301,290 (US$9,340)$525,422 (Note 5)$35,542,702 (Note 6)% Ownershipof Direct orIndirect
Investment

Net Income(Loss) of
the Investee

5.45

8.00

17.15

Accumulated
Carrying Value
Inwardas ofRemittance ofJune 30, 2016 Earnings as ofJune 30, 2016

Investment
Gain (Loss)$(RMB

2,914 $
238,377 $
586) (RMB 49,058) (US$

(RMB

5,830
110,267
1,172) (RMB 22,693)(RMB

72,697
14,961)(RMB

21,0984,342)

(US$

8,000
248)

(US$

5,548
172)

-

-

-

58,516
1,814)(Note 4)

(Continued)- 64 -

Taiwan Airport Services

Investee Company

Accumulated
Outward
Remittance forMain Businesses andMethod ofPaid-in Capital
Investment
Products
Investment
from Taiwan asof January 1,
2016

Remittance of Funds

Outward

InwardAirport Air Cargo Terminal(Xiamen) Co., Ltd.

Forwarding and storage $1,090,768
of air cargo(RMB 224,480)

Indirect(Note 7)$
(US$

132,516 $4,018)-

Airport Air Cargo Service(Xiamen) Co., Ltd.

Forwarding and storageof air cargo(RMB

Indirect(Note 7)

62,161
1,927)-(US$

68,027
14,000)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof June 30, 2016

$

-

$
(US$

132,516 $4,018) (RMB

20,816
4,184)

14.00

62,161
1,927) (RMB

41,6428,370)

14.00

(US$

-

Accumulated Outward
Remittance for Investment in
Mainland China as of June 30, 2016

Investment Amounts Authorized by
Investment Commission, MOEA

Upper Limit on the Amount of
Investment Stipulated by
Investment Commission, MOEA

$191,774 (US$5,945)$191,774 (US$5,945)$303,494 (Note 6)

Net Income(Loss) of theInvestee% Ownershipof Direct orIndirect
Investment

Investment
Income (Loss)

Carrying
Amount as ofJune 30, 2016

Accumulated
Repatriation of
Investment
Income as ofJune 30, 2016$
(RMB

3,063 $
243,484 $
586) (RMB 49,592) (US$122,774
3,806)(RMB

6,402
119,380
1,172) (RMB 23,703) (US$45,387
1,407)

Note 1: China Airlines, Ltd. the “Company” invested in Cal-Asia Investment, 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.
Note 3: Cal-Asia Investment invested in Eastern United International Logistics (Holdings), which in turn, invested in a company located in Mainland China.
Note 4: The inward remittance of earnings as of June 30, 2016 amounted to US$1,814,300.
Note 5: The amount comprised US$14,518,757, RMB4,200,000 and NT$36,666,667.
Note 6: The limit stated in the Investment Commission’s regulation, “The Review Principle of Investment or Technical Cooperation in Mainland China”, is the larger of the Company’s net asset value or 60% of the consolidated net asset value.
Note 7: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which in return, invested in a company located in Mainland China.
Note 8: 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.
(Concluded)- 65 -TABLE 7

CHINA AIRLINES, LTD. AND SUBSIDIARIES
BUSINESS RELATIONSHIP AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINE, LTD. AND ITS SUBSIDIARIESFOR THE SIX MONTHS ENDED JUNE 30, 2016
(In Thousands of New Taiwan Dollars)Intercompany Transactions
No.

0

Company Name

China Airlines, Ltd.

Related Party

Natural of
Relationship(Note 1)

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 Airport Services

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

Accounts

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

Amount$40,976
1,163,955
7,156
195,523
1,714
1,263
5,886
4,636
863
1,255
2,733
2,891
123,473
6,723
564,298
189,674
143,447
50,056
10,985
191,029
24,21329,001
3,323
108,605
89,580
3,567
336
67
1,292
490,571590
2,971
15,695507
64,745
1,005

Transaction Criteria

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
The same as ordinary transactions% to Total
Consolidated
Total Revenue
or Assets
0.06
1.69
0.01
0.28
0.01
0.01
0.18
0.01
0.82
0.28
0.21
0.07
0.02
0.28
0.04
0.04
0.16
0.13
0.01
0.22
0.01
0.03
(Continued)- 66 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

Taiwan Aircraft Maintenance and Engineering
Global Sky Express
Hwa Hsia
Taoyuan International Airport Services
Taiwan Airport Services
Yestrip
Sabre Travel Network Taiwan
Taiwan Air Cargo Terminal
Mandarin Airlines
Taoyuan International Airport Services
Sabre Travel Network Taiwan
Taiwan Airport Services
Hwa Hsia
Yestrip
Cal Hotel
Cal Park
Mandarin Airlines
Mandarin Airlines
Sabre Travel Network Taiwan
Sabre Travel Network Taiwan

a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a

Accounts receivable - related parties
Dividends receivable
Dividends receivable
Dividends receivable
Dividends receivable
Dividends receivable
Dividends receivable
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
Bonds payable - noncurrent
Bonds payable - noncurrent
Interest payable

Accounts

Amount$Transaction Criteria% to Total
Consolidated
Total Revenue
or Assets

875
1,925
16,536
122,451
52,3893,991
172,566
35,159277,065
331,672
1,282
62,881
2,263
724
19,611
199,109336
250,000
50,00067

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

0.01
0.06
0.02
0.08
0.02
0.13
0.15
0.03
0.01
0.09
0.11
0.02
-

1

Taiwan Air Cargo Terminal

China Airlines, Ltd.
Mandarin Airlines
Taoyuan International Airport Services
China Airlines, Ltd.
Hwa Hsia
China Airlines, Ltd.
Mandarin Airlines
China Airlines, Ltd.

b
c
c
b
c
b
c
b

Sales revenue
Sales revenue
Operating costs
Operating costs
Operating costs
Accounts receivable - related parties
Accounts receivable - related parties
Accounts payable - related parties

191,029
5,806
3,015
7,156
5,476
35,1591,173
1,292

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

0.28
0.01
0.01
0.01
0.02
-

2

Mandarin Airlines

China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Airport Services
Taoyuan International Airport Services
Taiwan Air Cargo Terminal
China Airlines, Ltd.
China Airlines, Ltd.
Tigerair Taiwan
Tigerair Taiwan
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Airport Services
Taiwan Air Cargo Terminal
Taoyuan International Airport Services

b
b
c
c
c
b
b
c
c
b
b
b
c
c
c

Passenger revenue
Passenger costs
Terminal and landing fees
Terminal and landing fees
Terminal and landing fees
Operating expense
Interest revenue
Operating revenue
Accounts receivable - related parties
Accounts receivable - related parties
Interest receivable
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties

50,056
1,163,955
51,941
20,006
5,806
195,523
336
2,101
9,382
277,065336
490,571
12,761
1,173
3,391

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

0.07
1.69
0.08
0.03
0.01
0.28
0.01
0.13
0.22
0.01
(Continued)- 67 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

Accounts

China Airlines, Ltd.
Taiwan Airport Servicesbc

Held-to-maturity financial assets
Dividends receivable

Amount$Transaction Criteria% to Total
Consolidated
Total Revenue
or Assets

250,000
1,192

The same as ordinary transactions
The same as ordinary transactions

0.11
-

3

Taoyuan International Airport Services

Mandarin Airlines
Taiwan Air Cargo Terminal
Tigerair Taiwan
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
Mandarin Airlines
China Airlines, Ltd.

c
c
c
b
b
b
c
b

Airport service revenue
Airport service revenue
Airport service revenue
Airport service revenue
Operating expense
Accounts receivable - related parties
Accounts receivable - related parties
Dividends payable

20,006
3,015
26,996564,298
1,714
331,672
3,391
122,451

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

0.03
0.04
0.82
0.15
0.06

4

Cal-Dynasty International

China Airlines, Ltd.

b

Operating revenue

29,001The same as ordinary transactions

0.04

5

Sabre Travel Network Taiwan

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
b
b
b
b
b
b

Service revenue
Operating expense
Interest revenue
Accounts receivable - related parties
Interest receivable
Accounts payable - related parties
Dividends payable
Held-to-maturity financial assets

3,567
1,263
67
1,282
67
590
172,566
50,000The 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

0.01
0.08
0.02

6

Taiwan Airport Services

China Airlines, Ltd.
Mandarin Airlines
China Airlines, Ltd.
China Airlines, Ltd.
Mandarin Airlines
China Airlines, Ltd.
China Airlines, Ltd.
Mandarin Airlines

b
c
b
b
c
b
b
c

Operating revenue
Operating revenue
Operating expense
Accounts receivable - related parties
Accounts receivable - related parties
Accounts payable - related parties
Dividends payable
Dividends payable

189,674
51,941
5,886
62,881
12,761
1,005
52,3891,192

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

0.28
0.08
0.01
0.03
0.01
-

7

Hwa Hsia

China Airlines, Ltd.
Taiwan Air Cargo Terminal
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
c
b
b
b

Operating revenue
Operating revenue
Operating expense
Accounts receivable - related parties
Dividends payable

143,447
5,476
4,636
2,263
16,536The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.21
0.01
0.01
0.01

8

Dynasty Holidays

China Airlines, Ltd.
China Airlines, Ltd.

bb

Operating revenue
Operating expense

24,213863

The same as ordinary transactions
The same as ordinary transactions

0.04
-

9

Global Sky Express

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
b
b

Operating costs
Operating expense
Accounts payable - related parties
Dividends payable

40,976
1,255
2,971
1,925

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.06(Continued)- 68 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

Accounts

10

Yestrip

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
b
b
b

Operating revenue
Operating expense
Accounts receivable - related parties
Accounts payable - related parties
Dividends payable11

Cal Park

China Airlines, Ltd.
Cal Hotel
China Airlines, Ltd.

b
c
b

12

Cal Hotel

China Airlines, Ltd.
China Airlines, Ltd.
Cal Park
China Airlines, Ltd.
China Airlines, Ltd.

13

Tigerair Taiwan

14

Taiwan Aircraft Maintenance andEngineering

Amount$Transaction Criteria% to Total
Consolidated
Total Revenue
or Assets

3,323
2,733
724
15,695
3,991

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

0.01-

Operating revenue
Operating revenue
Accounts receivable - related parties

108,605
41,128199,109

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.16
0.06
0.09

b
b
c
b
b

Operating revenue
Operating expense
Operating costs
Accounts receivable - related parties
Accounts payable - related parties

89,5802,891
41,128
19,611507

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

0.13
0.06
0.01
-

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
Taoyuan International Airport Services
Mandarin Airlines
Mandarin Airlines

b
b
b
c
c
c

Operating expense
Accounts payable - related parties
Passenger revenue
Terminal and landing fees
Operating expense
Accounts payable - related parties

123,473
64,745
10,98526,9962,101
9,382

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

0.18
0.03
0.02
0.04
0.01

China Airlines, Ltd.
China Airlines, Ltd.

bb

Operating expense
Accounts payable - related parties

6,723
875

The same as ordinary transactions
The same as ordinary transactions

0.01-

Note 1: Three kinds of business relationships between China Airline, Ltd. and its subsidiaries were as follows:a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.
Note 2: Intercompany transactions were written off in consolidated financial report.
(Concluded)- 69 -