China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for theThree Months Ended March 31, 2016 and 2015 andIndependent Accountants’ Review ReportINDEPENDENT ACCOUNTANTS’ REVIEW REPORTThe Board of Directors and the Stockholders
China Airlines, Ltd.
We have reviewed the accompanying balance sheets of China Airlines, Ltd. and subsidiaries as ofMarch 31, 2016 and 2015, and the related consolidated statements of comprehensive income,changes in equity and cash flows for the three months ended March 31, 2016 and 2015. These
consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to issue a report 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 March 31, 2016 and 2015, total combined assets of these non-significant
subsidiaries were NT$15,401,755 thousand and NT$15,615,224 thousand, respectively,
representing 7.05% and 6.81%, respectively, of the total consolidated assets, and total combined
liabilities of these subsidiaries were NT$6,508,560 thousand NT$6,928,731 thousand, respectively,
representing 4.16% and 3.97%, respectively, of the total consolidated liabilities; for the threemonths ended March 31, 2016 and 2015, combined comprehensive income of these subsidiaries
were NT$197,642 thousand and NT$148,516 thousand, respectively, representing 13.72% and6.13%, respectively, of the consolidated total comprehensive income. As of March 31, 2016 and2015, investments accounted for by the equity method were NT$2,975,485 thousand andNT$2,914,431 thousand, respectively; for the three months ended March 31, 2016 and 2015, shareof the profit of associates and joint ventures were NT$123,610 thousand NT$116,316 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.

May 12, 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’ 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)

March 31, 2016
(Reviewed)
Amount%ASSETS
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%March 31, 2015
(Reviewed)
Amount%$ 22,745,106
418,644
31,20510-$ 23,491,085
542,326
52,58211-$ 20,752,727
350,547
62,9739-

7,148,855
5,388
1,002,518
16,4898,089,709
670,455
4,372,146

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

9,343,879
10,472644,702
7,631
7,191,651
2,255,687

41
3
1

44,500,515

20

45,642,615

21

40,620,269

18

17,113
222,256
2,975,485
127,935,480
2,076,112
1,079,349
6,875,284
32,838,779

1
59
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

1,177
26,163
468,7102,914,431
139,220,801
2,076,391
832,935
8,009,602
35,026,146

1
61
1
4
15

174,019,858

80

176,283,694

79

188,576,356

82$ 218,520,373

100$ 221,926,309

100$ 229,196,625

100$

118,215
13,297323,139
710,351
491,009
10,618,410
116,343
30,798
11,540,960
7,655,696
27,911,852
1,457,957
4,348,474

5
5
4
13
1
2

$

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

$

65,336,501

30

68,220,452

6,640
8,200,000
58,987,517
6,176,767
325,040
4,830,828
1,789,354
10,448,204
432,900

4
27
3
2
1
5
-

Total noncurrent liabilities

91,197,250

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
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 (accumulated deficit)
Unappropriated retained earnings (accumulated deficit)
Other equity
Treasury shares
Total equity attributable to owners of the Company
NONCONTROLLING INTERESTS (Note 27)
Total equity
TOTAL

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated May 12, 2016)-3-

2,960,938
1,198,973
18,381
1,784,247
956,802465,577
10,587,049
113,949
10,794
10,419,396
1,800,000
18,616,394
2,633,433
4,161,519

1
1
5
5
1
8
1
2

31

55,727,452

24

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
-

67
7,791
16,963,744
76,550,370
4,703,541
395,0026,690,034
1,850,447
10,144,581
1,374,075

7
33
2
3
1
5
1

42

93,149,314

42

118,679,652

52

156,533,751

72

161,369,766

73

174,407,10476

54,708,901
798,41525-

54,708,901
798,41525-

53,700,079
2,162,993

24
1

4,331,012(130,554)(43,372)2-2,872,235(66,283)(43,372)1-(2,020,357)(1,360,616)(43,372)

(1)
(1)
-

59,664,402

27

58,269,896

26

52,438,727

23

2,322,220

1

2,286,647

1

2,350,794

1

61,986,622

28

60,556,543

27

54,789,521

24$ 218,520,373

100$ 221,926,309

100$ 229,196,625

100

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

For the Three Months Ended March 31
2016
2015
Amount%Amount%REVENUES (Notes 4, 28 and 33)$ 34,999,023

100$ 37,163,905

100

COSTS (Notes 4, 9, 12, 25, 26, 28 and 33)

29,250,258

83

31,447,329

85

GROSS PROFIT

5,748,765

17

5,716,576

15

OPERATING EXPENSES (Notes 4, 26 and 28)

3,377,551

10

3,156,362

8

OPERATING PROFIT

2,371,214

7

2,560,2147

156,044(439,240)(345,266)(1)(1)

263,324(138,648)(484,854)

1
(1)
(1)

123,610-116,316-(504,852)(2)(243,862)(1)

1,866,362

5

2,316,352

6

358,8971

434,1481

1,507,465

4

1,882,204

5(50,373)-(22,933)-(1,967)(25,066)-(2,718)680,183
2(Continued)

NONOPERATING INCOME AND LOSS
Other income (Note 28)
Other gains and losses (Notes 9, 16 and 28)
Finance cost (Notes 9 and 28)
Share of the profit of associates and joint ventures(Note 15)
Total nonoperating income and loss
PRETAX PROFITINCOME TAX EXPENSE (Notes 4, 5 and 29)
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS)
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations (Notes 4 and 27)
Unrealized gain (loss) on available-for-salefinancial assets (Notes 4 and 27)
Cash flow hedges (Notes 4 and 27)-4-

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

For the Three Months Ended March 31
2016
2015
Amount%Amount%Share of the other comprehensive income ofassociates and joint ventures accounted forusing the equity method (Notes 4 and 27)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Note 29)

$

-

-

-

(112,218)-(67,202)-542,3142$

1,440,263

4$

2,424,518

7$

1,463,951
43,5144-$1,850,379
31,8255-$

1,507,465

4$

1,882,204

5$

1,399,680
40,583

4-$

2,395,461
29,0577-$1,440,263

4$

2,424,518

7

Other comprehensive income (loss) for the year,
net of income tax
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR
NET INCOME ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

EARNING PER SHARE (NEW TAIWAN DOLLARS;
Note 30)
Basic
Diluted

$
$

(987)

-

11,191

0.27
0.26

$

$
$

0.35
0.33

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated May 12, 2016)-5-(Concluded)

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

Share Capital

Capital Surplus

Retained Earnings
UnappropriatedEarnings(Accumulated
Deficit)$ 52,491,666$ 1,992,415$ (3,864,876)--(5,860)

BALANCE AT JANUARY 1, 2015 AS RESTATED

52,491,666

1,992,415

Convertible bonds converted to ordinary shares

1,208,413

Net income for the three months ended March 31, 2015

BALANCE AT JANUARY 1, 2015

Equity Attributable to Owners of the Company
Other Equity
Exchange
Unrealized Gain
Differences on(Loss) on
Translating
Available-for-sale
Foreign Operations
Financial Assets
99,852$

Non-controlling
Interests

Total Equity(43,372)$ 48,670,135$ 2,326,973$ 50,997,108$ (2,009,565)

-

-

-

-

(5,860)(5,236)(11,096)(3,870,736)

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

48,664,275

2,321,737

50,986,012

170,578

-

-

-

-

-

1,378,991-

1,378,991--

1,850,379

-

-

-

-

1,850,379

31,825

1,882,204

Other comprehensive income (loss) for the three months ended
March 31, 2015, net of income tax

-

-

-

(18,183)(1,287)564,552-545,082(2,768)542,314

Total comprehensive income (loss) for the three months ended
March 31, 2015--

1,850,379(18,183)(1,287)564,552-

2,395,461

29,0572,424,518

BALANCE AT MARCH 31, 2015

$ 53,700,079$ 2,162,993$ (2,020,357)$

81,669$2,728$ (1,445,013)$(43,372)$ 52,438,727$ 2,350,794$ 54,789,521

BALANCE AT JANUARY 1, 2016

$ 54,708,901$

798,415$ 2,872,235$

157,959

$

1,755

$

$

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

$

Total

4,015

Effect of retrospective application and retrospective restatement$

Treasury Shares
Held by
Subsidiaries

Cash Flow
HedgesChange 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)

Net income for the three months ended March 31, 2016--

1,463,951

-

-

-

-

1,463,951

43,514

1,507,465

Other comprehensive loss for the three months ended March 31,
2016, net of income tax

-

-

-

(41,924)(1,925)(20,422)-(64,271)(2,931)(67,202)

Total comprehensive income (loss) for the three months ended
March 31, 2016--

1,463,951(41,924)(1,925)(20,422)-

1,399,680

40,583

1,440,263

Cash dividend from subsidiaries paid to non-controlling interest

-

-

-

-

-

-

-

-

(462)

(462)

798,415$ 4,331,012(43,372)$ 59,664,402$ 2,322,220$ 61,986,622

BALANCE AT MARCH 31, 2016

$ 54,708,901$$

116,035

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated May 12, 2016)

-6-

$

(170)

$

(246,419)$

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

For the Three Months Ended
March 31
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
Share of profit of associates and joint ventures
Gain on disposal of property, plant and equipment
Loss on inventories and property, plant and equipment
Net 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 in notes and accounts receivable
Decrease in accounts receivable - related parties
Increase in other receivables
Decrease (increase) in inventories(Increase) decrease in other current assets(Decrease) increase in notes and accounts payable
Decrease in accounts payable - related parties
Decrease in other payables
Decrease in deferred revenue
Decrease in provisions
Increase in other current liabilities
Decrease in accrued pension liabilities
Decrease in other liabilities
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities-7-$

1,866,362$

2,316,352

4,267,927
23,312
10,7854,434,260
15,4685,540

25,374(91,229)(123,610)(3,395)
156,507624,537
345,266
600,052(3,628)6,885(107,241)(116,316)(1,780)118,297
185,775
484,854433,676(3,628)111,347
13,096(314,199)
67,282
26,228111,184(490,565)(207,305)(254,060)(1,742,458)(1,126,462)(567,391)
404,120(116,749)(55,220)
3,557,108
91,260(439,257)(15,513)(107,042)(133,376)
162,905
183,692(74,480)
398,129
659,412(141,439)(224,138)(697,989)(11,918)
496,451(56,835)(36,627)
8,188,887
102,268(616,664)(16,975)

3,193,598

7,657,516(Continued)

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

For the Three Months Ended
March 31
2016
2015
CASH FLOWS FROM INVESTING ACTIVITIESPayment for property, plant and equipment
Proceeds from disposal of property, plant and equipment
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$ (2,376,090)
5,768(122,105)
87,305(3,038,066)(92,935)
436,1082,858,833$(759,467)
1,780(173,806)
223,181(4,333,369)(177,410)(91,540)-(2,241,182)(5,310,631)

20,000(75,000)(9,995)
7,371,000(8,550,385)
30,165(15,322)(8,084)(462)

9,030,025(10,520,000)(799,165)(6,785,000)
11,721,586(4,402,817)
12,261(14,203)-(1,238,083)(1,757,313)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES(460,312)(304,996)

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS(745,979)

284,576

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

23,491,085

20,468,151

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 22,745,106$ 20,752,727

CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans
Decrease in short-term loans
Decrease in short-term bills 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 of subsidiaries shares
Cash dividend paid to non-controlling interest
Net cash used in financing activities

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated May 12, 2016)-8-(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 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 March 31, 2016, December 31, 2015 andMarch 31, 2015, CADF and NDF held 43.63%, 43.63% and 44.45% of the Company’s shares.

2. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statement were approved by the board of directors and authorized for issue on
May 12, 2016.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS The International Financial Reporting Standards (IFRS), International Accounting Standards (IAS),
Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) are issued by the International
Accounting Standard Board (IASB) but not yet endorsed by the FSC.
The Company and entities controlled by the Company (collectively, the “Group”) have not applied thefollowing IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) issued by the International AccountingStandards Board (IASB) but not yet endorsed by the FSC.
On March 10, 2016, the FSC announced the scope of IFRSs to be endorsed and will take effect fromJanuary 1, 2017. The scope includes all IFRSs that were issued by the IASB before January 1, 2016and have effective dates on or before January 1, 2017, which means the scope excludes those that are
not yet effective as of January 1, 2017 such as IFRS 9 “Financial Instruments” and IFRS 15 “Revenue
from Contracts with Customers” and those with undetermined effective date. In addition, the FSC
announced that the Group should apply IFRS 15 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, amended and revised standards and interpretations.

New, Amended or Revised Standards and Interpretations
Annual Improvements to IFRSs 2010-2012 Cycle
Annual Improvements to IFRSs 2011-2013 Cycle
Annual Improvements to IFRSs 2012-2014 Cycle
IFRS 9 “Financial Instruments”-9-

Effective Date
Announced by IASB (Note 1)
July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 3)
January 1, 2018
(Continued)

New, Amended or Revised Standards and Interpretations
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”
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”
IFRS 15 “Revenue from Contracts with Customers”
IFRS 16 “Leases”
Amendment to IAS 1 “Disclosure Initiative”
Amendment to IAS 7 “Disclosure Initiative”
Amendments to IAS 12 “Recognition of Deferred Tax Assets for
Unrealized Losses”
Amendments to IAS 16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”
Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants”
Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”
Amendment to IAS 27 “Equity Method in Separate Financial
Statements”
Amendment to IAS 36 “Impairment of Assets: Recoverable Amount
Disclosures for Non-financial Assets”
Amendment to IAS 39 “Novation of Derivatives and Continuation of
Hedge Accounting”
IFRIC 21 “Levies”

Effective Date
Announced by IASB (Note 1)
January 1, 2018
To be determined by IASB
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2018
January 1, 2019
January 1, 2016
January 1, 2017
January 1, 2017
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
January 1, 2014
January 1, 2014
(Concluded)Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after the respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant
date is on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations forwhich the acquisition date is on or after July 1, 2014; the amendment to IFRS 13 is effective
immediately; the remaining amendments are effective for annual periods beginning on or after
July 1, 2014.
Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that
occur in annual periods beginning on or after January 1, 2016; the remaining amendments are
effective for annual periods beginning on or after January 1, 2016.

- 10 -

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.
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.

- 11 -

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) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”
In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to thedisclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose inevery reporting period the recoverable amount of an asset or each cash-generating unit. The
amendment clarifies that such disclosure of recoverable amounts is required only when an
impairment loss has been recognized or reversed during the period. Furthermore, the Group isrequired to disclose the discount rate used in measurements of the recoverable amount based on fairvalue less costs of disposal measured using a present value technique.
3) 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.
4) 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.
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 is- 12 -

sufficient 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 statement listed below, accounting policy adopted by this consolidated financial statements
are same as 2015 consolidated financial statements.
Statement of Compliance
The 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” asendorsed by the FSC. Disclosure information included in interim financial reports is less than disclosuresrequired in a full set of annual financial reports.
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 be saw
in Note 14 and Table 5.
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.

- 13 -

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

6. CASH AND CASH EQUIVALENTS
March 31,2016
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$

351,302
7,844,273

December 31,
2015$

478,223
6,070,236

March 31,2015$

413,392
6,340,346

13,880,888
668,643

16,163,452
779,174

13,180,182
818,807$ 22,745,106$ 23,491,085$ 20,752,727

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

March 31,2016

December 31,
2015

March 31,2015

0%-1.11%0%-1.5%0%-2%

0.3%-7.25%
0.38%-0.46%

0.27%-7.25%
0.42%-0.51%

0.3%-4%
0.63%-0.8%

The amount of time deposits with original maturities more than three months for March 31, 2016,
December 31, 2015 and March 31, 2015 were $2,030,162 thousand, $1,653,927 thousand and $872,763
thousand, respectively, and the market rate intervals were 0.41%-1.23%, 0.295%-4.1% and 4%, which wererecognized as other current assets. (Refer to Note 19).

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)March 31,2016

December 31,
2015

March 31,2015

Financial assets held for trading - current
Derivative financial instruments (not under hedge
accounting)Foreign exchange forward contracts
Non-derivative financial assets
Beneficial certificates- 14 -$

12,393$63,818$20,284406,251478,508

330,263$ 418,644$ 542,326$ 350,547(Continued)

March 31,
2016

December 31,
2015

March 31,2015

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

$

-

$

1,710

$

1,177

$
$

13,297
-

$
$

-

$
$

18,381
67(Concluded)

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, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:

Maturity Date

Notional Amount(In Thousands)

NTD/USD

2016.4.1-2017.1.26

NTD1,993,569/USD62,000

NTD/USD

2016.1.8-2017.1.26

NTD3,276,316/USD99,600

NTD/USD

2015.4.1-2017.1.26

NTD4,405,660/USD140,100

Currency
March 31, 2016
Buy forward contracts
December 31, 2015
Buy forward contracts
March 31, 2015
Buy forward contracts

8. AVAILABLE-FOR-SALE FINANCIAL ASSETSMarch 31, 2016
% ofCarrying
OwnerValueship

December 31, 2015
% ofCarrying
OwnerValue
ship

March 31, 2015
% ofCarrying
OwnerValueship$ 17,113$ 19,080$ 26,163

Non-current
Domestic market
TransAsia Airways-- 15 ---

9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING
March 31,2016

December 31,
2015

March 31,2015$

25,8105,355
40$

51,06012,403335$

26,45936,514$

31,205$63,798$62,973$31,205-$52,582
11,216$

62,973-$31,205$63,798$62,973$

12,457
157,00951,705
108,608$

12,702
12,660299,618

$

7,791
8,348
1,775,899$

329,779$

324,980$ 1,792,038$

323,1396,640$

313,689
11,291$ 1,784,247
7,791

$

329,779$

324,980$ 1,792,038

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

Current
Non-current

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

Current
Non-current

The fair value of each derivative contract is determined using quotes from financial institutions.
a. Interest rate swaps
The Company entered into interest rate swap contracts to mitigate the risk of changes in interest rates on
the cash flow exposure related to the outstanding floating rate debt. All swapped fixed interest rate
swap out the floating rate interest rate swap contracts are designated as cash flow hedges. 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(Continued)

March 31, 2016
NT$3,000,000
December 31, 2015
NT$3,000,000- 16 -

Notional Amount(In Thousands)

Maturity Date

Range ofInterest Rates
Paid

2015.5.24-2017.6.22

0.9%-1.14%

Range of Interest Rates
Received

March 31, 2015
NT$4,500,000

TAIBOR Rate(Concluded)

The interest rate swaps settle on a quarterly basis. The Company 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

2016.4.1-2016.12.19
2016.4.1-2016.12.19

JPY3,957,720/USD33,100
JPY3,865,889/USD33,100

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

2015.4.15-2015.11.18
2015.4.15-2015.11.18

JPY3,715,310/USD31,200
JPY3,594,675/USD31,200

March 31, 2016
Buy USD call option
Sell USD put option
December 31, 2015
Buy USD call option
Sell USD put option
March 31, 2015
Buy USD call option
Sell USD put optionc. Fuel options
The Group used fuel swaps to minimize the risk of changes in fuel price related to operating cost.
The outstanding fuel swaps at the end of the reporting period were as follows:

Currency

Maturity Date

USD
USD

2016.4.30-2017.1.31
2016.4.30-2017.1.31

Notional Amount(In Thousands)

March 31, 2016
Buy fuel call option
Sell fuel put option

NTD40
NTD108,608(Continued)- 17 -

Notional Amount(In Thousands)

Currency

Maturity Date

USD
USD

2016.1.5-2016.12.7
2016.1.5-2016.12.7

NTD335NTD299,618

USD
USD

2015.4.30-2016.3.31
2015.4.30-2016.3.31

NTD36,514
NTD1,775,899

December 31, 2015
Buy fuel call option
Sell fuel put option
March 31, 2015
Buy fuel call option
Sell fuel put option(Concluded)
Based on the Taiwan Stock Exchanges regulation for the public companies monthly declaration on the
trading of derivative financial instruments, the contractual amounts are shown at the absolute values offair value because fuel swap contracts only have notional amounts.
d. Foreign exchange forward
The Group entered into foreign exchange forward 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 paid in 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

2016.4.1-2018.3.16

NTD6,462,532/USD200,882

NTD/USD

2016.1.18-2017.5.23

NTD1,076,882/USD32,920

March 31, 2016
Buy forward contracts
December 31, 2015
Buy forward contracts

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
March 312016
2015
Increase in operating cost
Increase in finance cost
Other foreign exchange gain (loss)- 18 -$ (248,546)(1,279)(216)$ (971,388)(2,199)18,958$ (250,041)$ (954,629)

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

March 31, 2016
% ofCarrying
OwnerValueship

December 31, 2015
% ofCarrying
OwnerValue
ship

March 31, 2015
% ofCarrying
OwnerValue
ship

$

$

52,70414

52,70414$ 297,946

14

56,02315

56,02315

56,02315

74,507

6

75,791

6

75,447

6

21,624

5

21,995

5

21,896

5

11,00011

11,00011

11,00011

5,925
221,783

6

5,925
223,438

6

5,925
468,237

6

473

-

473

-

473

-

$ 222,256$ 223,911$ 468,710$ 222,256$ 223,911$ 468,710

The Group and other airline companies in Asia region had set up Abacus International Holdings (AHcompany) which owned Abacus distributions systems company. Due to strategy and adjustment, AH
company disposed of shares of Abacus distribution system company. The board of AH company resolved
to return the gain on disposal to shareholders by cash dividends and share redemption and which isapproved. 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 disposal of its
subsidiary.
Above unlisted stock investments held by the Group were evaluated by 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 unable to evaluate.

- 19 -

11. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

Notes receivable

March 31,2016

December 31,
2015

March 31,
2015

$

$

$

374,216

344,479

470,504

Accounts receivable
Accounts receivable
Less: Allowance for impairment loss

6,896,252(121,613)
6,774,639

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

8,944,518(71,143)
8,873,375$ 7,148,855$ 7,610,677$ 9,343,879

The average credit period was 7 to 55 days. In determining the recoverability of a accounts receivable, theCompany considered any change in the credit quality of the accounts receivable since the date credit was
initially granted to the end of the reporting period, allowance for impairment loss were based on estimatedirrecoverable amounts determined by reference to past default experience of the counterparties and ananalysis of their current financial position.
Movement in the allowance for impairment loss recognized on notes receivable and trade receivables wereas follow:
For the Three Months Ended
March 312016
2015
Beginning balance
Impairment loss recognized on receivables
Amounts written off during current period
Amounts recovered during current period
Exchange influence$ 109,927
10,785
(226)
1,127

$

66,131
5,540
(81)
(281)
(166)

Ending balance$ 121,613$

71,143

12. INVENTORIES

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
OthersMarch 31,2016

December 31,
2015

March 31,2015

$ 7,409,023
528,151
149,560
2,975$ 7,648,352
507,603
143,489954$ 6,612,745
470,632
104,393
3,881$ 8,089,709$ 8,300,398$ 7,191,651

The cost of inventories recognized as operating costs due to write-downs of inventories was $99,185
thousand and $105,510 thousand.

- 20 -

13. NON-CURRENT ASSETS HELD FOR SALE

Aircraft held for sale

March 31,2016

December 31,
2015$ 670,455$ 670,455

March 31,
2015
$

-

To enhance the competitiveness, the Company plans to introduce new aircrafts and retire old aircrafts on aplanned schedule. On August 13, 2015, the board of directors resolved to sell two 747-400 aircrafts andone A340-300 aircraft. These aircrafts as non-current assets held for sale, and difference between theoriginal 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. Above measurement of fairvalue is Level 3 measure which referred to the second-hand market 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 Airport Services

Taiwan Air Cargo Terminal (Note)
Dynasty Holidays
Taoyuan International Airport
Services
Taiwan Airport Services (Note)
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Tigerair Taiwan Co., Ltd. (Note)
Taiwan Aircraft Maintenance And
Engineering Co., Ltd.
Dynasty Properties Co., Ltd.
Dynasty Hotel of Hawaii, Inc.
Taiwan Airport Service (Samoa)

Hwa Hsia

Hwa Shin Building Safeguard

Cal-Dynasty International

Main Businesses and Products

March 31,2016

Proportion of Ownership
December 31,
March 31,
2015
2015

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
Travel businessAirport services

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
51
49

59
51
49

59
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
-

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

100
100
100

100
100
100

100
100
100

100

100

100

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 the Company had control over theseinvestees, they were listed as subsidiaries. Except for Mandarin Airlines and Tigerair Taiwan Co., Ltd.,the financial information of the subsidiaries above three months ended 2016 and 2015 has been reported
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.

- 21 -

15. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

Investments in associates
Investments in jointly controlled entities

March 31,2016

December 31,
2015

March 31,2015

$ 2,051,203
924,282$ 2,010,774
867,003$ 1,941,677
972,754$ 2,975,485$ 2,877,777$ 2,914,431

March 31,2016

December 31,
2015

March 31,
2015

$

$

$

a. The amount of investment in associates were as follows:

Unlisted companies
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.

497,550
259,441
287,340
251,764
487,233
226,263

490,824
244,903
263,091
185,226
494,665
226,066

457,680
243,174
282,196
189,679
508,036
226,160

41,612
2,051,203

41,908
1,946,683

34,752
1,941,677-

64,091-$ 2,051,203$ 2,010,774$ 1,941,677

Prepaid long-term investment - Science Park
Logistics

On December 18, 2015 the board of Science Park Logistics (SPL) approved the issuance of common
stock for cash and with the date of right issues granted on December 25, 2015. The board of Company
has 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
March 31,
December 31,
March 31,
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.

- 22 -

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

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

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

35%

35%

35%

The investment income of associates recognized accounted for using equity method were as follows:
For the Three Months Ended
March 312016
2015
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.

$ 16,982
14,53824,250
4,084
963
4,107
420

$ 11,481
11,06922,592
660
1,633
3,884
2,253

$ 65,344$ 53,572

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 three months ended March 31, 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

March 31,2016

December 31,
2015

March 31,2015

$ 758,697
165,585$ 705,134
161,869$ 797,933
174,821$ 924,282$ 867,003$ 972,754

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
March 31,
December 31,
March 31,
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.

- 23 -

Details of investment income attributable to investment in jointly controlled entitles were as follows:
For the Three Months Ended
March 312016
2015
China Pacific Catering Services
China Pacific Laundry Services$ 54,550
3,716$ 54,115
8,629$ 58,266$ 62,744

Other comprehensive income of associates accounted for using the equity method in the three months
ended March 31, 2016 and 2015 are $(987) 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 was based on the jointly controlled entities’ financial
statement had not been independently reviewed.
Service, major business offices and country of company registered of above can be referred to Tables 5
and 6 (names, locations, and related information of investees on which the Company exercises
significant influence and investment in Mainland China).

16. PROPERTY, PLANT AND EQUIPMENT
March 31,2016

December 31,
2015

963,341
13,122,524
230,445,927
28,432,531
10,066,439
1,066,987
126,366
3,900,340
178,553$

March 31,
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

$947,357
15,439,881
236,227,222
30,606,753
9,602,538
1,009,712
130,741
1,439,395
111,677$ 288,303,008$ 287,220,914$ 295,515,276

$

$

$

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

Net value

5,471,714
131,333,579
14,357,279
6,698,945
851,562
108,110
1,546,339

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

4,945,285
127,525,711
15,106,788
6,306,455
770,502115,201
1,524,533$ 160,367,528$ 157,592,048$ 156,294,475$ 127,935,480$ 129,628,866$ 139,220,801- 24 -

Freehold Land

Buildings

FlightEquipment

Equipment
under Finance
Lease

OthersTotal

Cost
Balance at January 1,
2015
Additions
Disposals
Reclassification
Net exchange difference
Balance at March 31,
2015$953,614(6,257)$

13,085,921
4,527
(988)
2,361,124(10,703)$ 232,035,450
567,563(85,318)
3,709,527-$

33,985,116
92,567(3,470,930)-$

14,697,246
94,810(149,225)(2,347,753)(1,015)$ 294,757,347
759,467(235,531)
251,968(17,975)$

947,357$

15,439,881$ 236,227,222$

30,606,753$

12,294,063$ 295,515,276

$

-

$

(4,794,850)(156,244)
988
(13)
4,834

$ (121,645,204)(3,531,435)
79,147(2,428,219)-$ (16,998,403)(543,914)
2,435,529-$(8,663,824)(202,597)
148,380
1,321
29$ (152,102,281)(4,434,190)
228,515
8,618
4,863

$

-

$

(4,945,285)$ (127,525,711)$ (15,106,788)$(8,716,691)$ (156,294,475)$

976,427(13,086)$

13,140,158
5,782
(871)
(22,545)$ 229,849,035
1,727,202(1,677,594)
547,284-$

28,087,404
371,453(345,312)
318,986-$

15,167,890
271,653(72,155)(26,438)(2,265)$ 287,220,914
2,376,090(2,095,932)
839,832(37,896)$

963,341$

13,122,524$ 230,445,927$

28,432,531$

15,338,685$ 288,303,008

$

-

$

(5,355,804)(126,548)
871
9,767

$ (128,953,990)(3,454,578)
1,622,352(547,363)-$ (14,201,904)(500,687)
345,312-$(9,080,350)(186,044)
64,821(5,098)1,715$ (157,592,048)(4,267,857)
2,033,356(552,461)
11,482$-$(5,471,714)$ (131,333,579)$ (14,357,279)$(9,204,956)$ (160,367,528)

Accumulated depreciationand impairment
Balance at January 1,
2015
Depreciation expense
Disposals
Reclassification
Net exchange difference
Balance at March 31,
2015
Cost
Balance at January 1,
2016
Additions
Disposals
Reclassification
Net exchange difference
Balance at March 31,
2016
Accumulated depreciationand impairment
Balance at January 1,
2016
Depreciation expense
Disposals
Reclassification
Net exchange difference
Balance at March 31,
2016

Property, plant and equipments were depreciated on a straight-line basis over the estimated useful life of theasset:
Building
Main buildings
Others
Machinery equipments
Electro-mechanical equipment
Others
Office equipments
Leasehold improvements
Building improvements
OthersAssets leased to others

45-55 years
10-25 years
25 years
3-13 years
3-15 years
5 years
3-5 years
3-5 years(Continued)- 25 -

Flight equipments and equipment under finance lease
Airframe
Aircraft cabin
EngineHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

15-25 years
7-13 years
10-20 years
6-8 years
3-10 years
7-10 years
7-15 years
5-12 years(Concluded)

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, movable
property are adequately insured to diversify the potential risk related to operation.

17. INVESTMENT PROPERTIES

Carrying amount
Investment properties

March 31,2016

December 31,
2015

March 31,2015

$ 2,076,112$ 2,076,182$ 2,076,391

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 March 31, 2016,
December 31, 2015 and March 31, 2015.
All of the Group’s investment properties were held under freehold interest.

Cost

Accumulated
Impairment
andDepreciation

Net Value

Balance on January 1, 2015
Additions$ 2,082,390-$(5,929)(70)$ 2,076,461(70)

Balance on March 31, 2015

$ 2,082,390$(5,999)$ 2,076,391

Balance on January 1, 2016
Additions$ 2,082,390-$(6,208)(70)$ 2,076,182(70)

Balance on March 31, 2016

$ 2,082,390$(6,278)$ 2,076,112- 26 -

18. OTHER INTANGIBLE ASSETS
Computer
Software Cost

Accumulated
Amortization

Net Value

Balance at January 1, 2015
Additions
Amortization expense
Exchange influence$ 1,214,465
177,410-$(543,468)(15,468)(4)$

670,997
177,410(15,468)(4)

Balance at March 31, 2015

$ 1,391,875$(558,940)$

832,935

Balance at January 1, 2016
Additions
Amortization expense
Exchange influence$ 1,623,186
92,935-$(613,508)(23,312)48$ 1,009,678
92,935(23,312)
48

Balance at March 31, 2016

$ 1,716,121$(636,772)$ 1,079,349

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

19. OTHER ASSETSMarch 31,2016

December 31,
2015

March 31,2015

Current
Other financial assets
Temporary payments
Prepayments
Restricted assets
Others$2,030,162
963,196
1,154,207
36,367
188,214$

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

872,763366,203
836,506
43,479136,736$

4,372,146$

3,928,747$

2,255,687

Noncurrent
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
Others$ 28,810,244
2,411,274
1,497,098
96,29014,2299,644$ 28,714,476
2,522,891
1,489,112
504,924
14,144
1,312$ 31,203,655
2,069,022
1,242,547
483,289
13,941
13,692$ 32,838,779$ 33,246,859$ 35,026,146

The prepayments for aircraft were the prepaid deposit and capitalized interest from the purchase of
A350-900 and 777-300ER. The related instruction of the contract, please refer to Note 35.

- 27 -

20. BORROWINGSa. Short-term loans
March 31,2016

December 31,
2015

March 31,2015

Bank loans - unsecured$$

173,289$ 2,960,938

Interest rates

1.53%-1.65%

1.25%-1.8636%

1.18%-1.21%

March 31,2016

December 31,
2015

March 31,2015

118,215b. Short-term and bills payable

Commercial paper
Less: Unamortized discount on bills payable

$

-

$

10,0005$ 1,200,000
1,027

$

-

$

9,995

$ 1,198,973

Annual discount rate

-

1.3%

1.108%-1.188%

March 31,2016

December 31,
2015

March 31,2015

$ 31,079,090
22,965,525$ 31,231,342
25,342,804$ 34,623,941
31,402,023

32,900,000
45,24686,899,369
27,911,852

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

29,230,000
89,20095,166,764
18,616,394$ 58,987,517$ 57,691,505$ 76,550,370

c. Long-term debts

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discountLess: 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 and Japanese yen) are repayable quarterly, semiannuallyor in lump sum upon maturity. Related information is summarized as follows:
Currency
New Taiwan
Dollars

U.S. Dollars

Japanese Yen$$

Original currency
March 31, 2016
December 31, 2015
March 31, 2015

$ 50,953,369
52,533,784
59,075,969- 28 -

96,138122,827
222,085

37,782(Continued)

Currency
New Taiwan
Dollars

U.S. Dollars

Japanese Yen$ 50,953,369
52,533,784
59,075,969$ 3,091,246
4,040,362
6,940,154$

1.0833%-3.15%
1.1432%-2.613%
1.277%-2.2242%

0.2376-4.39%
0.4067%-4.39%
0.2511%-4.39%

Translated in New Taiwan dollars
March 31, 2016
December 31, 2015
March 31, 2015

9,841

Interest rates
March 31, 2016
December 31, 2015
March 31, 2015

1.975%

Periods
March 31, 2016
December 31, 2015
March 31, 2015

2004.12.16-2029.2.4 2004.6.28-2017.9.21
2004.12.16-2029.2.4 2004.6.28-2017.9.21
2002.4.11-2029.2.4 2003.7.22-2020.2.26

2013.9.1-2016.8.1(Concluded)

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The
NIFs, with various maturities until February 2021, were used by the Group to guarantee commercial
papers issued. As of March 31, 2016, December 31, 2015 and March 31, 2015, the commercial papers
were issued at discount rates 1.2213%-1.5213%, 1.2407%-1.5833% and 1.3895%-2.0868%,
respectively.

21. BONDS PAYABLE
March 31,2016
Secured corporate bond first-time issued in 2011
Unsecured corporate bond first-time issued in2013
Convertible bond issued the fifth time$

Less: Current portion and put option of
convertible bonds$- 29 -

2,400,000

December 31,
2015$

2,400,000

March 31,2015$

4,200,000

10,900,000
2,555,696
15,855,696

10,900,000
2,544,106
15,844,106

10,900,000
3,663,744
18,763,744

7,655,696

4,944,106

1,800,000

8,200,000$ 10,900,000$ 16,963,744

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 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

2013.12.26-2018.12.26

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

1.35

1.35

1.35

1.35

1.60

1.85

-

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, the Company
reclassified the bonds payable to “current portion of bonds payable”.
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%. As of March 31, 2016, there was no adjustment to the conversion price,
but corporate bonds with a face value of $3,315,700 thousand had been converted to 270,890 thousandof common shares.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - option. The effective interest rate of the liability
component was 1.8245% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,000,000(518,621)

Liability component at the date of issuance$ 5,481,379- 30 -

22. LEASING
a. Sale-leaseback finance lease
March 31,2016

December 31,
2015

March 31,2015

Within one year
Beyond one year and within five years$ 1,428,467
4,722,017$ 1,428,467
5,079,133$ 2,602,933
6,544,467

Present value of minimum lease payments$ 6,150,484$ 6,507,600$ 9,147,400

Interest rates

1.1317%-1.63%

1.1828%1.5667%

1.31%-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 March 31, 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.
b. Finance leaseTaiwan Air Cargo Terminal Co. (TACT) entered into a terminal construction contract. Please refer toNote 35 for the terms of contract.
March 31,2016

December 31,
2015

March 31,2015$

29,718
118,959
148,677(10,376)$

37,697
117,433
155,130(7,626)$

31,657
152,104
183,761(7,694)$

138,301$

147,504$

176,067$

29,490108,811$29,490118,014$30,500145,567$

138,301$

147,504$

176,067

Minimum lease payments - Cargo Terminal
Within one year
Beyond one year and within five years
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
4,830,828$ 1,457,957
5,197,147$ 2,633,433
6,690,034$ 6,288,785$ 6,655,104$ 9,323,467- 31 -

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 January 2028. The
Group does not have a bargain purchase option to acquire the leased planes and hangar at the expirationof the lease periods.
The rental rates stated in the aircraft lease agreements some are fixed and some are floated. If theagreed-upon rental rate is floating and will be revised monthly or semiannually, subleasing is notallowed for all the lease arrangements. As of March 31, 2016, the Group has rented eleven A330-300
planes, nine B737-800 planes, nine B777-300ER planes, six ERJ190 planes and seven A320-200 planes
under operating contracts which the lease terms range from 8 to 12 years.
As of March 31, 2016, December 31, 2015 and March 31, 2015, the refundable deposits paid by theGroup under operating lease contracts were $956,214 thousand, $952,520 thousand and $843,358
thousand, respectively. Part of the guarantees is secured by credit guarantees, and outstanding credit
guarantee as of March 31, 2016, December 31, 2015 and March 31, 2015 were $1,274,903 thousand,$1,304,259 thousand and $805,531 thousand.
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$

March 31,2016

December 31,
2015

9,253,207
38,207,457
43,696,760$$ 91,157,424

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

March 31,2015$

6,983,644
25,246,093
20,874,252$ 53,103,989

The lease payments recognized in profit or loss for the current period were as follows:
For the Three Months Ended
March 312016
2015
Minimum lease payment$ 2,469,865$ 1,521,311

December 31,
2015

March 31,2015

23. OTHER PAYABLES
March 31,2016
Fuel cost
Ground service expense
Repair expense
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expense
Others$1,780,709
1,427,763
908,379
117,417
2,338,115
823,576
442,0392,780,412$ 10,618,410- 32 -$

2,038,041
1,890,418
916,442
262,601
3,310,173
781,621450,492
2,646,760$ 12,296,548$

2,966,987
1,475,043
806,057
155,957
2,014,653
639,968
633,094
1,895,290$ 10,587,049

24. DEFERRED REVENUE

Frequent flyer program
Advance ticket sales

March 31,2016

December 31,
2015

2,460,154
10,870,160$$

2,610,667
12,365,348

March 31,2015$

2,578,187
9,691,656$ 13,330,314$ 14,976,015$ 12,269,843$ 11,540,960
1,789,354$ 13,112,086
1,863,929$ 10,419,396
1,850,447$ 13,330,314$ 14,976,015$ 12,269,843

March 31,2016

December 31,
2015

March 31,2015

Operating lease-aircraft$ 6,207,565$ 6,187,481$ 4,714,335

Current
Non-current

$

$

$

Current
Noncurrent

25. PROVISIONS

30,7986,176,767$ 6,207,565

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

10,794
4,703,541$ 4,714,335
Aircraft Lease
Contract

Balance at January 1, 2015
Additional provisions recognized
Usage
Effect of exchange rate changes$ 4,303,780
433,676(11,918)(11,203)

Balance at March 31, 2015

$ 4,714,335

Balance at January 1, 2016
Additional provisions recognized
Usage
Effect of exchange rate changes$ 6,187,481
600,052(567,391)(12,577)

Balance at March 31, 2016

$ 6,207,565

The Company and Mandarin Airlines leased flight equipments 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 using years, flight hours, flight cycle and the engine revolution times. The Company and
Mandarin had existing obligation to recognize provision when signing the lease or during the lease term.
Tigerair Taiwan Co., Ltd. also leased flight equipments under operating lease agreements, in accordance tothe contract, Tigerair had to pay the maintenance reverse accounted for using the flying hours.

- 33 -

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.
For the Three Months Ended
March 312016
2015
Operating costs
Operating expenses$ 149,632
63,870$97,69337,951$ 213,502$ 135,644

March 31,2016

December 31,
2015

March 31,2015

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

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

6,000,000$ 60,000,000$ 53,700,079

March 31,2016

December 31,
2015

March 31,
2015

$

$

552,470$ 1,810,380

1,156
11,7471,019
232,023

1,156
11,747955
338,755

798,415$ 2,162,993

27. EQUITY
a. Share capital
Common shares

Numbers of shares authorized (in thousands)
Amount of shares authorized
Amount of shares issued
b. Capital surplus

Issuance of stock in excess of par value andconversion premium
Gain on sale of treasury shares held bysubsidiaries
Employee stock options expired
Long-term investment
Bonds payable equity component

552,470
1,156
11,7471,019
232,023$

798,415$

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 and employee stock options may not be used fornothing but to offset deficits. The capital surplus arising from stock option for employees andconvertible bonds, can not be used.

- 34 -

c. Appropriation of earnings and dividend policy
The Company’s Articles of Incorporation provide that the following should be appropriated fromannual net income (less any deficit): (a) 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.
In accordance with the amendments to the Company Act in May 2015, the recipients of dividends arelimited to shareholders and do not include employees. The consequential amendments to theCompany’s Articles of Incorporation had been proposed by the Company’s board of directors and are
subject to the resolution of the shareholders in their meeting to be held in 2016. For information about
the accrual basis of the employees’ compensation and remuneration to directors and supervisors and theactual appropriations, please refer to Note 28.
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$1,511,953 thousand. No bonus to employees was appropriated for 2014 because of a net loss inthat year.
2) Appropriation of earnings in 2015
The appropriations of earnings for 2015 had been proposed by the Company’s board of directors on
March 25, 2016. The appropriations and dividends per share were as follows:
Appropriationof Earnings
Legal reserve
Special reserve
Cash dividends$

287,224
76,4862,508,526

Dividends Per
Share (NT$)$ 0.458522382

The appropriations of earnings for 2015 are subject to the resolution of the shareholders’ meeting to
be held on June 24, 2016.
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.

- 35 -

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 (loss) arisingon changes in fair value ofhedging instruments
reclassified to profit or loss
Share of exchange difference of
associates accounted forusing the equity method
Effect of income tax

$

4,015

$ (2,009,565)$ (1,905,698)(21,909)--(21,909)-(1,287)-(1,287)--(274,446)(274,446)--

954,629954,629

3,726-(115,631)(111,905)

Balance on March 31, 2015$

81,669$2,728$ (1,445,013)$ (1,360,616)

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 gain (loss) arisingon changes in fair value ofhedging instruments
reclassified to profit or loss
Share of exchange difference of
associates accounted forusing the equity method
Effect of income tax$

157,959

$

1,755

$

$

Balance on March 31, 2016$

99,852$(225,997)(66,283)(49,976)--(49,976)

-

(938)

-

(938)

-

-

(273,112)(273,112)--

249,168

249,168

8,052

(987)
-

3,522

(987)
11,574116,035- 36 -

$

(170)

$

(246,419)$(130,554)

e. Non-controlling interest
For the Three Months Ended
March 312016
2015
Beginning balance
Net income attributable to non-controlling interest
Foreign exchange differences arising on translating the foreign
operations
Unrealized gain (loss) on financial assets
Acquisition of non-controlling interests in subsidiaries
Effect of income tax
Cash flow hedge
Dividends paid by subsidiaries$ 2,286,647
43,514$ 2,321,737
31,825(397)(1,029)(4,548)(383)(1,122)(462)(1,024)(1,431)(313)-

Ending balance$ 2,322,220$ 2,350,794

f. Treasury shares
Treasury shares are the Company’s shares held by its subsidiaries as of March 31, 2016 and 2015 wereas follows:(Shares in Thousands)
Number of
Shares,Beginningof Year

Purpose of Treasury Stock

Reduction
Duringthe Year(Note)

Number of
Shares,Endof YearThree months ended March 31, 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

Three months ended March 31, 2015
Company’s shares held by its subsidiaries reclassified frominvestment in shares of stock to treasury stock

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value$ 23,858
9,363$ 23,858
9,363$ 33,221$ 33,221$ 24,895
9,770$ 24,895
9,770$ 34,665$ 34,665(Continued)

March 31, 2016
Mandarin Airlines
Hwa Hsia

2,075
814

December 31, 2015
Mandarin Airlines
Hwa Hsia

2,075
814

- 37 -

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value$ 33,298
13,067$ 33,298
13,067$ 46,365$ 46,365(Concluded)

March 31, 2015
Mandarin Airlines
Hwa Hsia

2,075
814

Above subsidiaries acquisition of the Company’s stock in previous years was due to the investment
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.

28. NET INCOME
a. Revenue
For the Three Months Ended
March 312016
2015
Passenger
Cargo
Others$ 24,727,731
7,806,929
2,464,363$ 23,627,380
11,144,876
2,391,649$ 34,999,023$ 37,163,905

b. Other income
For the Three Months Ended
March 312016
2015
Interest income
Subsidy income
Others$- 38 -

91,2297,450
57,365$ 107,241
60,72495,359$ 156,044$ 263,324

c. Other gains and losses
For the Three Months Ended
March 312016
2015
Gain on disposal property, plant and equipment
Net loss arising on financial assets classified as held for trading
Gain or loss on foreign exchange, net
Others$3,395(25,374)(234,787)(182,474)$ (439,240)

$

1,780
(6,885)
1,522(135,065)$ (138,648)

d. Financial cost
For the Three Months Ended
March 312016
2015
Interest expense
Bonds payable
Bank loan
Interest on obligations under financial lease
Loss arising on derivatives as designated hedging instruments
in cash flow hedge accounting reclassified from equity to
profit or loss$

66,061
258,932
18,994$85,698359,678
37,279

1,279

2,199

$ 345,266$ 484,854

Information of interest capitalization was as follows:
For the Three Months Ended
March 312016
2015
Capitalization interest$ 108,743$

74,157

Capitalization rate

1.6670%1.7347%

1.7529%1.8065%

e. Depreciation and amortization expense
For the Three Months Ended
March 312016
2015
Property, plant, equipment
Investment property
Intangible asset
Depreciation and amortization expense- 39 -$ 4,267,857
70
23,312$ 4,434,190
70
15,468$ 4,291,239$ 4,449,728(Continued)

For the Three Months Ended
March 312016
2015
An analysis of depreciation by function
Operating cost
Operating expense

An analysis of amortization by function
Operating cost
Operating expense$ 4,096,792
171,135$ 4,210,750
223,510$ 4,267,927$ 4,434,260$

32
23,280$211
15,257$23,312$

15,468(Concluded)

f. Employment benefit expense
For the Three Months Ended
March 31
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$

101,802
213,502$87,128135,644$

315,304$

222,772$ 4,998,672
1,403,194$ 5,114,835
1,023,979$ 6,401,866$ 6,138,814$ 5,319,244
1,397,926$ 5,085,295
1,276,291$ 6,717,170$ 6,361,586

The existing Articles of Incorporation of the Company stipulate to distribute bonus to employees at therates 3% of net income. No bonus to employees was estimated for three months ended March 31,
2015 because of a net loss in that year.
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 thethree months ended March 31, 2016, the employees’ compensation is $490,826 thousand of the base net
profit. For the year ended December 31, 2015, the employees’ compensation is $1,810,196 thousandof the base net profit. The employees’ compensation in cash for the year ended December 31, 2015
have been 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.
- 40 -

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 2015 and 2014 are available on the Market Observation Post System
website of the Taiwan Stock Exchange.

29. INCOME TAX
a. Income tax expense recognized in profit or loss
The major components of tax expense (benefit) were as follows:
For the Three Months Ended
March 312016
2015
Current tax
Current year
Deferred tax
Current year$

Income tax expense recognized in profit or loss

49,162$47,659309,735

386,489$ 358,897$ 434,148

b. Income tax recognized in other comprehensive income
For the Three Months Ended
March 312016
2015
Deferred tax
Recognized in other comprehensive income
Translation of foreign operations
Hedging instruments fair value revaluation for cash flow
hedging
Total income tax recognized in other comprehensive income

$

$

6,930

$

3,413

4,261

(115,631)

11,191$ (112,218)

c. Integrated income tax

Imputation credits accounts

March 31,2016

December 31,
2015

March 31,2015

$ 554,402$ 554,402$ 385,435

Expected creditable tax ratio on December 31, 2015 was 19.30%.
Since the Group had accumulated deficit as of December 31, 2014, there was no expected creditable tax
ratio.
- 41 -

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.
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 denying by tax authority, and the TACT took an appeal. The
ruling by the Supreme Administrative Court had 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.
As of March 31, 2016, the court have not reached any decision concerning the above trial, and theamount of provision recognized by TACT for over-distributed tax and fine was $168,155 thousand.

30. EARNING PER SHARE
The numerators and denominators used in calculating loss per share were as follows:
For the Three Months Ended
March 312016
2015
Basic earnings per share
Diluted earnings per share

$0.27
$0.26

$0.35
$0.33

Earnings used in the computation of basic earnings per share
Effect of potentially dilutive ordinary shares:
Interest on convertible bonds (after tax)

$ 1,463,951$ 1,850,379

10,223

15,994

Earnings used in the computation of diluted earnings per share$ 1,474,174$ 1,866,373- 42 -

For the Three Months Ended
March 312016
2015
Weighted average number of ordinary shares in computation of basic
earnings per share
Effect of potentially dilutive ordinary shares:
Convertible bonds
Employees’ compensation or bonus issue to employees
Weighted average number of ordinary shares used in thecomputation of diluted earnings per share

5,470,891

5,341,748

219,306
67,188346,902-5,757,385

5,688,650

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. Fair values of financial instruments
1) Financial instruments not evaluated at fair value
Except as detailed in the following table, the management considers the carrying amounts offinancial assets and financial liabilities recognized in the financial statements as approximating theirfair values.
March 31, 2016
Carrying
AmountFair Value

December 31, 2015
Carrying
AmountFair Value

March 31, 2015
Carrying
AmountFair Value$ 15,855,696
86,899,369$ 15,844,106
87,783,617$ 18,763,744
95,166,764

Financial liabilities
Bonds payable
Loans and debt

$ 16,279,481
86,956,059$ 16,459,680
87,944,264$ 18,773,841
95,247,789

Some long-term debts and capital lease obligations are floating-rate financial liabilities, so theircarrying values are their fair values. As of March 31, 2016, December 31, 2015 and March 31,
2015, the fair values of long-term debts and private bonds with fixed interest rates are estimated at
the present value of expected cash flows discounted at rates of 0.749%, 0.433% and 0.805%,
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).

- 43 -

2) Financial instruments evaluated at fair value
The following table provides an analysis of financial instruments that are measured subsequent toinitial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fairvalue is observable:a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;b) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); andc) Level 3 fair value measurements are those derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data (unobservable inputs).
March 31, 2016
Level 1
Financial assets at FVTPL
Derivative instrument
Domestic money market
fund$

Level 2-$

Level 3

12,393406,251

$

Total

-

-

$

-

12,393406,251$

406,251$

12,393$-$

418,644

Financial liabilities at
FVTPL
Derivative instrument

$

-

$

13,297$-$

13,297Available-for-sale financial
assetsSecurities listed indomestic$

17,113

$

-

$

-

$

17,113

Derivative financial assets
for hedging

$

-

$

25,810

$

5,395

$

31,205Derivative financial
liabilities for hedging

$

-

$

169,466$

160,313$329,779

December 31, 2015
Level 1
Financial assets at FVTPL
Derivative instrument
Domestic money market
fund$

Level 2-$478,508$

478,508- 44 -

Level 365,528$$65,528

Total

-

$

$

-

65,528478,508$

544,036(Continued)

Level 1

Level 2

Level 3

Total

Available-for-sale financial
assetsSecurities listed indomestic$

19,080

$

-

$

-

$

19,080Derivative financial assets
for hedging

$

-

$

51,060$12,738$63,798Derivative financial
liabilities for hedging

$

-

$

12,702$

312,278$

324,980(Concluded)

March 31, 2015
Level 1
Financial assets at FVTPL
Derivative instrument
Domestic money market
fund$

Level 2-$

Level 3

21,461

330,263

$

-

Total

-

$

-

21,461
330,263$

330,263$

21,461$-$

351,724

Financial liabilities at
FVTPL
Derivative instrument

$

-

$

18,448$-$18,448Available-for-sale financial
assetsSecurities listed indomestic$

26,163

$

-

$

-

$

26,163

Derivative financial assets
for hedging

$

-

$

-

$

62,973$62,973

Derivative financial
liabilities for hedging

$

-

$

7,791

$ 1,784,247$ 1,792,038

There were no transfers between Levels 1 and 2 in the current periods.
d) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value
measurement
Financial Instruments
Derivatives instruments foreign currency forward
contracts and interest 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 andcontract forward rates, discounted at a rate that reflects thecredit risk of various counterparties.

- 45 -e) 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. An increase in theimplied fluctuation used in isolation would result in an decrease in the fair value of foreignexchanges and fuel options.
Because some financial instruments and non financial instruments can not show their fair value,
the total fair value showed by these disclosure are not total value of the Group.
b. Categories of financial instruments
March 31,2016

December 31,
2015418,644
239,369
31,20534,576,012$

March 31,2015

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
63,79835,862,163$

351,724
494,873
62,97333,407,799$ 35,265,230$ 36,712,988$ 34,317,369

$

$

$

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

13,297329,779
121,703,514$ 122,046,590

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

18,448
1,792,038
141,310,511$ 143,120,997

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.
c. 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.

- 46 -

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 to effect 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.
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 March 31, 2016
$338,346 thousand and increase in pre-tax profit by the end of March 31, 2015 $55,782
thousand, respectively.
b) Interest rate risk
The Group enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates.
The Group was exposed to interest rate risk because entities in the Group borrowed funds atboth fixed and floating interest rates. The risk is managed by the Group by maintaining anappropriate mix of fixed and floating rate borrowings, and using interest rate swap contracts andforward interest rate contracts.

- 47 -

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

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

March 31,2016

December 31,
2015

March 31,2015

$ 16,543,475$ 16,723,881$ 23,909,681

92,618,590

93,742,231

103,514,999

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.
Had interest rates increased one yard (25 basis) points and had all other variables been held
constant, the Group’s pretax profit for the three months ended March 31, 2016 would havedecreased by $57,887 thousand.
Had interest rates increased one yard (25 basis) point and had all other variables been held
constant, the Group’s pretax profit for the three months ended March 31, 2015 would havedecreased by $64,697 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 Three Months Ended March 31
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%

$

7,031
(7,113)$

21,375(11,128)$

28,716(28,716)$ 385,170
118,721

2) 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.

- 48 -

3) Liquidity risk
The goal, policies and procedures of liquidity risk management are 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

Associates
Jointly controlled entities
Major stockholder

Sales of Goods
For the Three Months Ended
March 31
2016
2015

Purchases of Goods
For the Three Months Ended
March 31
2016
2015

$
$
$

$ 166,370$ 394,336$ 20,034

775
3,342
8,847

$
$
$

322
3,526
8,036

$ 129,520$ 361,814$ 18,573

The amount of accounts receivable - related parties at reporting dates were as follows:
March 31,2016
Associates
Jointly controlled entities
Major stockholder

December 31,
2015

March 31,
2015

$

307
1,735
3,346

$

182
599
3,093

$

257
1,777
8,438

$

5,388

$

3,874

$

10,472

The amount of accounts payable - related parties at reporting dates were as follows:
March 31,2016
Associates
Jointly controlled entities
Major stockholder$

81,788401,9197,302$ 491,009

December 31,
2015$

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

March 31,2015$

87,632
370,257
7,688$ 465,577

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 March 31, 2016 and 2015, the Company had paid rentals of $20,034 thousand and$18,573 thousand, respectively.

- 49 -

c. Endorsements and guarantees
March 31, 2016
ActualAuthorized
AmountAmountUsed

December 31, 2015
ActualAuthorized
AmountAmountUsed

March 31, 2015
ActualAuthorized
AmountAmountUsed$ 3,400,000
1,080,000
180,000
916,785$ 3,400,000
1,080,000
236,629
180,000
937,895$ 3,400,000
1,080,000
276,003
180,000
891,000

The Company
Cal Park
Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan$ 2,656,000
491,515
4,757
437,329$ 2,739,000
486,815
236,629
6,343
447,399$ 2,822,000
559,192
276,003
11,100210,642d. Compensation of key management personnel
For the Three Months Ended
March 312016
2015
Short-term employee benefits
Post-employment benefits$ 17,145
804$ 11,339510$ 17,949$ 11,849

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

March 31,2016

December 31,
2015

March 31,2015

$ 86,496,097$ 90,642,565$ 105,074,645

132,657-

268,790236,634

250,765
276,003$ 86,628,754$ 91,147,989$ 105,601,413

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

35. COMMITMENTS AND CONTINGENT LIABILITIESAs of March 31, 2016, the Group had commitments and contingent liabilities (except for those mentioned
in other 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 from 2016 to 2018.

- 50 -

Prepayments for aircraft purchases were as follows:
March 31, 2016

December 31, 2015

March 31, 2015

US$769,086 thousand

US$685,231 thousand

US$504,544 thousand

b. In December 2012, the Group entered into a contract to buy six 777-300ER planes from the Boeing
Company, with the option to buy six more 777-300ER planes, at aggregate purchase prices of
US$2,068,783 thousand and US$2,213,015 thousand, respectively. Expected delivery slots of aircrafts
are from 2015 to 2016. The board of the Group has resolved to transfer the purchase right of theconfirm orders for six aircrafts to the aircraft leasing Group then lease back.
The Group had signed lease contract with SKY HIGH XXXVII/XXXVIII Leasing Company Limited.
As of March 31, 2016, five aircrafts had been delivered and had received prepayment.
Prepayments for aircraft purchase were as follows:
March 31, 2016

December 31, 2015

March 31, 2015

US$93,884 thousand

US$197,912 thousand

US$470,352 thousandc. For the future development of Company business, the Company made a lease contract with BOC
Aviation and letter to lease six 737-800 aircrafts. The expected delivery slot will be August 2016.
d. The Tigerair Taiwan entered into the four A320-200 aircrafts lease contract with 10 years term on July
2015, November 2015 and December 2015. One of aircraft had been delivered in January 2016. The
expected delivery of other three aircrafts will be in June 2016, January 2017 and December 2017.
e. 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 Toayuan International Airport and KoahsiungInternational Airport, and got the approvals from Toayuan 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 revised the total
amount to $6,840,000 thousand.
As of March 31, 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.

- 51 -

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

86,380As of March 31, 2016, the cumulated consultant service expense and construction equipment had
amounted to $412,904 thousand (VAT included) and $4,131,895 thousand (VAT included),
respectively. Upon completion of the projects, the amounts 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.
f. 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%

g. 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 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 amount after the initial operation date, half of the security deposits will be
refunded interest free, and the remaining amount will be refunded within three months after the end of
the operating period and the completion of asset transfer. In May 2011, CAL Park received refunded
security deposits of $50,000 thousand with no interest.

- 52 -

In 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 executing proposal. If the sales and business tax declared and filed by a business entity
for a single year exceeds 10% of the operating revenue as estimated in the financial plan in its
investment execution proposal, CAL Park should pay additional 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 day 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.
h. The Company has been named as a defendant, together with other airline members of the Association ofAsia Pacific Airlines, in a civil class action filed with the US Northern District Court of California bysome 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.
i.

The Company has reached a settlement with class plaintiffs of “Air Cargo Antitrust Class Action”.
One of plaintiffs - DHL Global Forwarding (DHL) et al. has opted out from class plaintiffs. In early
2015, DHL has filed civil lawsuit against the Company. The Company already appointed lawyer toduly react.

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:
March 31, 2016
Foreign
Currencies

Exchange Rate

Carrying
Amount552,552
16,459276,464
1,698,945
1,144,666

32.1543
36.3636
4.15110.28644.9801$ 17,766,940
598,496
1,147,628
516,426
5,700,544

238,219
6,028
74,542
4,781,895
157,067

32.1543
36.3636
4.15110.28644.9801

7,659,750
219,206
309,433
1,369,527
782,209

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

- 53 -

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
March 31, 2015
Foreign
Currencies

Carrying
AmountExchange Rate

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

234,831
15,491
217,0882,861,191
2,334,275

31.2500
33.8983
4.03550.26055.0429439,472
5,536
73,7695,051,098
146,074

31.2500
33.8983
4.03550.26055.0429$7,338,460
525,111876,058
745,329
11,771,501

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

13,733,509
187,669
297,696
1,315,806
736,634

For the three months ended March 31, 2016 and 2015, net foreign exchange gains (losses) were $(234,787)
thousand and $1,522 thousand, respectively. It is impractical to disclose net foreign exchange gains(losses) by each significant foreign currency due to the variety of the foreign currency transactions andfunctional currencies of 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:None- 54 -

2) 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).
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 Company 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 Company’s sole reportable segment is the flight segment. For operating segment reporting in the
consolidated financial statements, the reportable segment of the Company 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 Three Months Ended March 31, 2016
Air
Adjustment andTransportation
OthersWrite-off
Operating revenue$ 34,645,086$

1,907,887$(1,553,950)

Operation profit and losses
Interest revenue
Investment income accounted for by
the equity method$$

236,977$-

2,134,237

Total$ 34,999,023$

2,371,214
91,229123,610(Continued)- 55 -

For the Three Months Ended March 31, 2016
Air
Adjustment andTransportation
OthersWrite-off

Total

Revenue
Financial cost
Expense$48,047(345,266)(422,472)

Profit before income tax$

1,866,362

Identifiable assets
Investment accounted for by the equity
methodAssets$ 120,961,758$

9,618,832$-$ 130,580,590
2,975,485
84,964,297

Total assets$ 218,520,372(Concluded)
For the Three Months Ended March 31, 2015
Air
Adjustment andTransportation
OthersWrite-off
Operating revenue$ 37,066,060$

1,827,743$(1,729,898)

Operation profit and losses
Interest revenue
Investment income accounted for by
the equity method
Revenue
Financial cost
Expense$$166,998$

9,125

2,384,091$ 37,163,905$

2,560,214
107,241
116,316
155,005(484,854)(137,570)

Profit before income tax
Identifiable assets
Investment accounted for by the equity
methodAssetsTotal$$ 131,622,223$

9,687,184$(12,220)

2,316,352$ 141,297,187
2,914,431
84,985,007

Total assets$ 229,196,625- 56 -TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIESENDORSEMENT/GUARANTEE PROVIDEDFOR THE THREE MONTHS ENDED MARCH 31, 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)

$ 11,932,880
11,932,880
11,932,880
11,932,880
11,932,880$ 3,400,000
1,080,000
240,586
180,000
953,579$ 3,400,000
1,080,000
180,000
916,785

ActualBorrowingAmount$ 2,656,000
491,515
4,757
437,329

Note 1:

Based on the Group’s guidelines, the maximum amount of guarantee to an individual counter-party 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.

- 57 -

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

-

5.70
1.81
0.30
1.54

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)

$ 29,832,201
29,832,201
29,832,201
29,832,201
29,832,201

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 HELDMARCH 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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

Mandarin Airlines

Cal-Asia Investment

Sabre Travel Network (Taiwan)

Stock
China Airlines

Relationship with
the Holding
Company-

Parent company

March 31, 2016
Shares/Units

Carrying Value

Percentage ofOwnership

Market Valueor Net Asset
Value

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$ 52,704
473
11,00056,023
5,925

13.59
11.00
15.00
6.22

$ 96,249
22,94844,374189

Note 1
Note 1-

Available-for-sale financial asset - current

2,074,628

23,858-23,858-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

5,245,428.9

60,405-60,405-1,000,000

32,392-32,392-

1,000,000

32,007-32,007--74,507
21,6245.83
5.45

17,60819,930Note 2
Note 2

265,726

3,314

-

3,314

-

1,908,518

25,516-25,516-

2,137,590

30,011

4,637,002

57,450-57,450-5,523,758

56,391-

56,391-

5,041,011

62,417-62,417-2,618,737

39,575-39,575-

Financial Statement AccountBeneficial 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-

Taishin 1699 Money Market Fund-

Taishin Ta Chong 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
Financial assets at fair value through profit orloss - current
Financial assets at fair value through profit orloss - current

Note30,011(Continued)- 58 -

Holding Company Name

Taiwan Airport Services

Hwa Hsia

Hwa SinMarketable Securities Type and Issuer/Name

StockTransAsia Airways
Stock
China Airlines

March 31, 2016

Relationship with
the Holding
Company

Financial Statement Account-

Available-for-sale financial asset - noncurrent

Parent company

Carrying Value

Percentage ofOwnership

Market Valueor Net AssetValue

2,287,786$ 17,113

0.4$ 17,113-

Available-for-sale financial asset - current

814,152

9,363

-

9,363

-

Shares/Units

Note

Beneficial certificates
Taishin 1699 Money Market Fund-

Financial assets at fair value through profit orloss - current

349,523

4,673

-

4,673

-

Beneficial certificates
Taishin 1699 Money Market Fund-

Financial assets at fair value through profit orloss - current

157,070

2,100

-

2,100

-

Note 1: The subsidiary’s net asset value was $96,249 thousand, which included common stock and preferred stock as of and for the three months ended March 31, 2016.
Note 2: The net asset value was calculated using the audited financial statements for the year ended December 31, 2015, because the investee’s audited financial statements were not prepared on time.

(Concluded)- 59 -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 THREE MONTHS ENDED MARCH 31, 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

Nature of Relationship

Subsidiary
Equity-method investee
Subsidiary

Purchase/
Sale

Amount

% to
Total

Sale
Purchase
Purchase$ (737,326)
368,858
275,184

2.33
1.38
1.03

- 60 -

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

Abnormal Transaction
Payment Terms
2 months
60 days
40 days

Unit Price$--$ 606,247(384,309)(335,764)

7.46
21.70
18.96

Note

-

TABLE 4

CHINA AIRLINES, LTD. AND SUBSIDIARIESRECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALMARCH 31, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Overdue
Company Name

Related Party

Nature of RelationshipEnding Balance

Turnover Rate

$ 606,247

5.26

China Airlines, Ltd. (“China Airlines”)

Mandarin Airlines

Subsidiary

Mandarin Airlines

China Airlines

Parent company

217,926

China Pacific Catering Services

China Airlines

Parent company

Taoyuan International Airport Service

China Airlines

Parent company

AmountAllowance for
Bad Debts--$ 277,142

0.37

-

-

203,535-

384,309

3.91

-

-

128,569-

335,764

3.41

-

-

193,194-

Note: Transaction with subsidiaries have been written off in consolidated financial report.

- 61 -$

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 THREE MONTHS ENDED MARCH 31, 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,
March 31, 20162015

Balance as of March 31, 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
7,732,000

100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
24.50

$

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

Taoyuan, Taiwan
Real estate lease and international trade
Taipei, Taiwan
Air transportation and maintenance of aircraft
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

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

Taipei, Taiwan
Kaohsiung, Taiwan

Airport services
In-flight catering

12,289140,240

12,289140,240

20,626,644
14,329,759

47.35
35.78

Cal Hotel Co., Ltd
Science Park Logistics
China Pacific Laundry Services

Taoyuan, Taiwan
Tainan, Taiwan
Taoyuan, Taiwan

465,000
214,745
137,500

465,000
150,654
137,500

46,500,000
18,633,937
13,750,000

Hwa Hsia

Taoyuan, Taiwan

50,00050,000

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

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 and maintenance of aircraft
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

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

$

3,557
(18,958)(7,261)
10,23554,55041,881
2,769
38,41816,982
24,250Note 1
Note 2-275,800
259,441

35,54940,631

16,832
14,538-100.0026.00
55.00

335,964
251,764
165,585

22,08915,7096,757

22,0894,084
3,716

Note 5-50,000100.0093,589

3,732

3,732

Note 1

26,265
20,400
2,500
US$
1
US$
1
1,600,000
60,0001,600,000
408
250,000
1,000
1,000
160,000,000
6,000,000

100.0051.00
25.00
100.00100.0080.00
100.0025,32029,8587,954
32
32
848,600
37,103

159
769
1,229
(157,293)(4,628)

159
392
307
(125,835)(4,628)-200,000
3,574

20,000,000
469,755

10.00
1.08

106,075
6,273(157,293)
35,549(15,729)
119

Note 4HK$

3,329

1,050,000

35.00

41,612

1,200

420

-

US$

5,877

-

100.00440,741

2,534

2,534

Note 3

10,0001,000,000

100.0023,164

1,658

1,658

-

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 with the date of right issues granted on was December 25, 2015.
to SPL. SPL completed the registration of this subscription on January 22, 2016.

- 62 -

1,514,381
1,344,299
1,252,834
1,221,453
758,697764,024596,515
476,519
497,550
287,340Note

3,557 $
(20,171)(13,447)
10,235
106,961
85,471
2,769
40,901
84,911
98,978JPY$

Investment
Income (Loss)

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

TABLE 6

CHINA AIRLINES, LTD. AND SUBSIDIARIESINVESTMENTS IN MAINLAND CHINAFOR THE THREE MONTHS ENDED MARCH 31, 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 as
Capitalof
January 1, 2016

Outflow

Accumulated
Outflow ofInvestment
from Taiwan asofMarch 31, 2016

Inflow

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

Forwarding and storage $ 1,117,928
of air cargo(RMB 224,480)

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

Forwarding and storage
69,721of air cargo(RMB 14,000)

Indirect(Note 1)62,605
1,947)-(US$

Taikoo (Xiamen) Landing
Gear Services

Landing gear
1,186,174
maintenance services (US$ 36,890)

Indirect(Note 1)

69,1642,151)-(US$

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

Shanghai Eastern Aircraft
MaintenanceAircraft line
maintenance

Shanghai Eastern UnitedInternational

Indirect(Note 1)$
134,598 $(US$4,186)

Investment Flows-

375,016
11,663)

Indirect(Note 1)

(US$

20,450
636)

-

(US$

99,6783,100)

Indirect(Note 2)

(US$

7,974
248)

-

(US$

Forwarding of air cargo
and ocean freight(US$32,1541,000)

Indirect(Note 3)

5,531
172)

-

(US$

$

-

$
134,598 $(US$4,186) (RMB

14.00

62,605
14,665
1,947) (RMB 2,886)

14.00

(US$

69,1642,151)

5.83(US$

20,450
636)

5.45

(US$

7,974
248)

8.00

(US$

5,531
172)

17.15

(US$

-

-

-

-

Investment Amounts
Authorized by Investment Commission,
MOEA

Limit on Investment$300,322 (US$9,340)$524,424 (Note 5)$37,191,973 (Note 6)% Ownershipof Direct orIndirect
Investment

3,440
677)

-

Accumulated Investment in Mainland
China as of March 31, 2016

Net Income(Loss) of
the Investee

Investment
Gain (Loss)

$
(RMB

(RMB

Accumulated
Carrying Value
Inwardas ofRemittance ofMarch 31, 2016 Earnings as ofMarch 31, 2016

482 $
244,313 $95) (RMB 49,058) (US$58,3281,814)(Note 4)

2,054
113,012404) (RMB 22,693)
74,507(RMB 14,961)(RMB

21,624
4,342)

(US$

7,974
248)

(US$

5,531
172)

(Continued)- 63 -

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

OutwardAccumulated
Outward
Remittance forInvestment
from Taiwan asof March 31,
2016

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

Forwarding and storage $ 1,117,928
of air cargo(RMB 224,480)

Indirect(Note 7)$
(US$

132,090 $
4,108)-

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

Forwarding and storage
69,721of air cargo(RMB 14,000)

Indirect(Note 7)61,961
1,927)

-

(US$

$

-

$
132,090 $(US$4,108) (RMB

(US$

Accumulated Outward
Remittance for Investment in
Mainland China as of March 31, 2016

Investment Amounts Authorized by
Investment Commission, MOEA

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

$191,158 (US$5,945)$191,158 (US$5,945)$349,482 (Note 6)

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

3,440
677)

14.00

61,961
14,665
1,927) (RMB 2,886)

14.00

Accumulated
Carrying
Repatriation of
Investment
Amount as ofInvestment
Income (Loss)
March 31, 2016 Income as ofMarch 31, 2016

$
(RMB

(RMB

481 $
242,920 $108,18995) (RMB 48,778) (US$3,365)
2,053
113,251404) (RMB 22,741) (US$36,6631,140)

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 in 2015 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)- 64 -TABLE 7

CHINA AIRLINES, LTD. AND SUBSIDIARIES
BUSINESS RELATIONSHIP AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINE, LTD. AND ITS SUBSIDIARIESFOR THE THREE MONTHS ENDED MARCH 31, 2016
(In Thousands of New Taiwan Dollars)Intercompany Transactions
No.

0

Company Name

China Airlines, Ltd.

Related Party

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
Taiwan Air Cargo Terminal
Cal-Dynasty International
Yestrip
Cal park
Cal Hotel
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
Taiwan Aircraft Maintenance and Engineering
Yestrip
Taiwan Air Cargo Terminal

Natural of Relationship(Note 1)

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

Cargo 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
Other operating cost
Other operating cost
Other operating cost
Other operating cost
Other operating cost
Operating expense
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Dividends receivable
Accounts payable - related parties

Amount$21,379633,867
3,578
103,459
1,120
1,784
2,869
2,338
550
628
1,146
1,445
58,994
3,389
275,184
97,49356,58821,56885,28015,4081,434
54,30243,2871,784
1,292
606,247590
4,073
15,913474
51,089
1,054
1,046
3,991
32,403

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% to Total
Consolidated
Total Revenue
or Assets
0.06
1.81
0.01
0.30
0.01
0.01
0.01
0.17
0.01
0.79
0.28
0.16
0.06
0.24
0.04
0.16
0.12
0.01
0.28
0.01
0.02
0.01
(Continued)- 65 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of Relationship(Note 1)

Accounts

Mandarin Airlines
Taoyuan International Airport Services
Sabre Travel Network (Taiwan)
Taiwan Airport Services
Hwa Hsia
Yestrip
Cal Hotel
Cal park

a
a
a
a
a
a
a
a

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

AmountTransaction Criteria% to Total
Consolidated
Total Revenue
or Assets$ 217,926
335,764
502
66,78053,731
2,068
16,98354,302The 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

0.10
0.15
0.03
0.02
0.01
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
Hwa Hsia
China Airlines, Ltd.

b
c
c
b
c
b
c
c
b

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

85,280
2,038
738
3,578
2,121
32,403
1,079
1,117
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
The same as ordinary transactions

0.24
0.01
0.01
0.01
0.01
-

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

b
b
c
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
Accounts receivable - related parties
Notes and accounts payable - related parties
Notes and accounts payable - related parties
Notes and accounts payable - related parties
Accounts payable - related parties

21,568633,867
23,958
10,221
2,038
103,459
217,926
606,247
14,302
1,079
3,931

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

0.06
1.81
0.07
0.03
0.01
0.30
0.10
0.28
0.01
-

3

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

c
c
c
b
b
b
c

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

10,221
738
8,820
275,184
1,120
335,764
3,931

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
0.03
0.79
0.15
-

4

Cal-Dynasty International

China Airlines, Ltd.

b

Operating revenue

15,408The same as ordinary transactions

0.04

5

Sabre Travel Network (Taiwan)

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

b
b
b
b

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

1,784
1,784
502
590

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

0.01
0.01
(Continued)- 66 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of Relationship(Note 1)

Accounts

6

Taiwan Airport Services

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

b
c
b
b
c
b

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

7

Hwa Hsia

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

b
c
b
b
c

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

8

Dynasty Holidays

China Airlines, Ltd.

b

Operating expense

9

Global Sky Express

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

b
b
b

10

Yestrip

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

11

Cal park

12

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

97,493
23,9582,869
66,78014,302
1,054

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
0.07
0.01
0.03
0.01
-

56,5882,121
2,338
53,731
1,117

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

0.16
0.01
0.01
0.02
-

550

The same as ordinary transactions-

Operating costs
Operating expense
Accounts payable - related parties

21,379628
4,073

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

0.06
-

b
b
b
b
b

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

1,434
1,146
2,068
15,913
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-

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

bcbOperating revenue
Operating revenue
Accounts receivable - related parties

54,302
20,56454,302The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.16
0.06
0.02

Cal Hotel

China Airlines, Ltd.
China Airlines, Ltd.
Cal park
China Airlines, Ltd.
China Airlines, Ltd.

b
b
c
b
b

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

43,287
1,445
20,564
16,983474

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

0.12
0.06
0.01
-

13

Tigerair Taiwan

China Airlines, Ltd.
China Airlines, Ltd.
Taoyuan International Airport ServicesbbcOperating expense
Accounts payable - related parties
Terminal and landing fees

58,99451,0898,820

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

0.17
0.02
0.03

14

Taiwan Aircraft Maintenance and Engineering China Airlines, Ltd.
China Airlines, Ltd.

bb

Operating expense
Accounts payable - related parties

3,389
1,046

The same as ordinary transactions
The same as ordinary transactions

0.01(Continued)- 67 -

Note 1: Three kinds of business relationships between China Airlines, 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)- 68 -