China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for theNine Months Ended September 30, 2016 and 2015 andIndependent Auditors’ Review ReportINDEPENDENT AUDITORS’ REVIEW REPORTThe Board of Directors and the Stockholders
China Airlines, Ltd.
We have reviewed the accompanying consolidated balance sheets of China Airlines, Ltd. (the“Company”) and its subsidiaries (collectively referred to as the “Group”) as of September 30, 2016
and 2015, and the related consolidated statements of comprehensive income, for the three months
ended and the nine months ended September 30, 2016 and 2015, and the changes in equity andcash flows for the nine months ended September 30, 2016 and 2015. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to issue areport on these consolidated financial statements based on our reviews.
We conducted our reviews in accordance with Statement of Auditing Standards No. 36 “Review of
Financial Statements” issued by the Auditing Standards Committee of the Accounting Researchand Development Foundation of the Republic of China. A review consists principally of applying
analytical procedures to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit conducted in accordancewith auditing standards generally accepted in the Republic of China, the objective of which is theexpression of an opinion regarding the consolidated financial statements taken as a whole.
Accordingly, we do not express such an opinion.
As disclosed in Notes 14 and 15 to the consolidated financial statements, the financial statements ofsome non-significant subsidiaries and investments accounted for by the equity method were notreviewed. As of September 30, 2016 and 2015, total combined assets of these non-significant
subsidiaries were NT$14,629,533 thousand and NT$15,452,440 thousand, respectively,
representing 6.76% and 6.88%, respectively, of the total consolidated assets, and total combined
liabilities of these subsidiaries were NT$6,692,131 thousand and NT$6,728,848 thousand,respectively, representing 4.27% and 4.11%, respectively, of the total consolidated liabilities; forthe three months ended and the nine months ended September 30, 2016 and 2015, the amounts ofcombined comprehensive income of these subsidiaries were NT$165,207 thousand, NT$348,040
thousand, NT$618,764 thousand and NT$699,771 thousand, respectively, representing 32.52%,
12.74%, 32.41% and 9.75%, respectively, of the consolidated total comprehensive income. As of
September 30, 2016 and 2015, investments accounted for by the equity method were
NT$2,809,980 thousand and NT$2,787,227 thousand, respectively; for the three months ended andthe nine months ended September 30, 2016 and 2015, the amounts of the Group’s share of the
profit of associates and joint ventures were NT$138,821 thousand, NT$141,035 thousand,
NT$397,508 thousand and NT$389,920 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 of the non-significant subsidiaries and investments
accounted for by the equity method as described in the preceding paragraph been reviewed, 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 Accounting Standard
34 “Interim Financial Reporting” endorsed by the Financial Supervisory Commission of the
Republic of China.

November 10, 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 review such consolidated financial statements arethose generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ review report and the accompanying
consolidated financial statements have been translated into English from the original Chineseversion prepared and used in the Republic of China. If there is any conflict between the English
version and the original Chinese version or any difference in the interpretation of the two versions,the Chinese-language independent auditors’ review report and consolidated financial statements
shall prevail.

-2-

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

September 30, 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%September 30, 2015
(Reviewed)
Amount%$ 22,192,084
437,847
7,017

10
-

$ 23,491,085
542,326
52,58211-$ 24,481,251
409,818
76,71911-

7,154,355
3,955
1,037,262
50,2188,361,307
121,406
4,032,780

31
42

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

3
1
4
2

7,568,642
4,862
716,844
60,3497,799,758
670,455
3,030,433

4
4
1

43,398,231

20

45,642,615

21

44,819,131

20

14,099140,6032,809,980
128,208,152
2,075,972
1,148,515
6,462,820
32,313,108

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

15,403367,357
2,787,227
132,189,152
2,076,251
896,575
7,095,593
34,206,086

1
59
1
1
3
15

173,173,249

80

176,283,694

79

179,633,644

80$ 216,571,480100$ 221,926,309

100$ 224,452,775

100$

208,135
5,419
237,253
1,486,299
517,401
11,343,881
120,995
35,497
12,784,380
5,279,164
27,949,134
1,457,957
3,291,300

1
5
6
2
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

$

225,145
9,963
245,335
1,786,768
497,233
11,849,661
107,524
19,874
11,284,169
2,400,000
27,256,465
2,208,966
4,345,637

1
6
5
1
12
1
2

64,716,815

30

68,220,452

31

62,236,740

28

17,900,000
53,278,932
7,096,907
302,914
4,098,317
1,802,227
7,202,558
425,485

8
25
3
2
1
3
-

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
-

12,065
13,432,442
64,360,017
5,661,411
399,614
5,562,775
1,825,118
9,984,500
438,313

6
29
3
2
1
4
-

Total noncurrent liabilities

92,107,340

42

93,149,314

42

101,676,255

45

Total liabilities

156,824,155

72

161,369,766

73

163,912,995

73

54,708,901
799,93225
1

54,708,901
798,41525-

54,708,901
798,35125-

287,224
76,486
1,802,594
2,166,304(146,098)(43,372)1
1-2,872,235
2,872,235(66,283)(43,372)1
1-2,741,764
2,741,764
7,201(43,372)

1
1-

57,485,667

27

58,269,896

26

58,212,845

26

2,261,658

1

2,286,647

1

2,326,935

1

59,747,325

28

60,556,543

27

60,539,780

27$ 216,571,480100$ 221,926,309

100$ 224,452,775

100

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 LIABILITIES
Derivative financial liabilities for hedging - noncurrent (Notes 4, 5, 9 and 32)
Bonds payable - noncurrent (Notes 4, 21, 27 and 32)
Loans and debts - noncurrent (Notes 20, 32 and 34)
Provisions - noncurrent (Notes 4, 5 and 25)
Deferred tax liabilities (Notes 4 and 29)
Capital lease obligations - noncurrent (Notes 4, 22, 32 and 34)
Deferred revenue - noncurrent (Notes 4, 5 and 24)
Accrued pension costs (Notes 4, 5 and 26)
Other noncurrent liabilities

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

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated November 10, 2016)-3-

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 September 30
2016
2015
Amount%Amount%

For the Nine Months Ended September 30
2016
2015
Amount%Amount%REVENUES (Notes 4, 28 and 33)$ 36,552,871

100$ 37,089,144

100$ 105,386,860

100$ 109,874,296

100

COSTS (Notes 9, 12, 25, 26, 28
and 33)31,627,877

86

31,798,540

86

90,834,028

86

94,302,310

86

GROSS PROFIT

4,924,994

14

5,290,604

14

14,552,832

14

15,571,986

14

OPERATING EXPENSES(Notes 26 and 28)

3,499,398

10

3,002,563

8

10,135,114

10

9,117,046

8

OPERATING PROFIT

1,425,596

4

2,288,041

6

4,417,718

4

6,454,940

6

181,036-

2,221,936

6

582,68612,939,347

3(418,914)(303,921)(1)(1)(1,509,840)(444,256)(4)(1)(1,543,317)(978,558)(1)(1)(1,932,784)(1,392,611)

(2)
(1)

138,821-141,035-

397,508-

389,920-(402,978)(2)408,875

1(1,541,681)

(1)

3,872

-

PROFIT BEFORE INCOME
TAX

1,022,618

2

2,696,916

7

2,876,037

3

6,458,812

6

INCOME TAX EXPENSE(Notes 4, 5 and 29)

435,7371

483,6421

876,968

1

1,195,023

1

NET INCOME

586,88112,213,274

6

1,999,069

2

5,263,789

5(72,231)-145,053-(130,588)-

93,243

-

(637)

-

(4,079)-(8,934)-(13,479)-(16,623)-

484,027

1

42,193-2,227,809

2

-

-

(182)

-

-

-

(182)

-

10,568-(106,498)

-

7,658

-

(395,139)-(78,923)-

518,321

1(89,671)-

1,912,252

2

507,9581

2,731,595

7

1,909,398

2

NONOPERATING INCOME
AND EXPENSES
Other income (Note 28)
Other gains and losses(Notes 9, 10, 13, 28 and 36)
Finance cost (Notes 9 and 28)
Share of the profit of associates
and joint ventures (Note 15)
Total nonoperating
income and expenses

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

$

$

-4-

$

$

7,176,041
7(Continued)

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 September 30
2016
2015
Amount%Amount%NET INCOME
ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

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

EARNINGS PER SHARE (NEWTAIWAN DOLLARS;
Note 30)
Basic
DilutedFor the Nine Months Ended September 30
2016
2015
Amount%Amount%$513,42973,4522-$

2,133,705
79,5696-$

1,807,768
191,3012-$

5,100,661
163,1285-$

586,8812$

2,213,274

6$

1,999,069

2$

5,263,789

5$441,067
66,8911-$2,645,081
86,514

7-$

1,727,953
181,4452-$

7,013,560
162,4817-$

507,9581$

2,731,595

7$

1,909,398

2$

7,176,0417$ 0.09$ 0.09$ 0.39$ 0.38$ 0.33$ 0.32$ 0.94$ 0.90

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated November 10, 2016)(Concluded)-5-

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

Share Capital

Capital Surplus

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

$

-

-

BALANCE AT JANUARY 1, 2015 AS RESTATED

52,491,666

Convertible bonds converted to ordinary shares

BALANCE AT JANUARY 1, 2015$$

99,852$

Treasury
Shares4,015$ (2,009,565)

$

Total

Non-controlling

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

-

-

-

-

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

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

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

48,664,275

2,321,737

50,986,012

2,217,235

317,889

-

-

-

-

-

-

-

2,535,124-

2,535,124Compensation of deficit - capital surplus for 2014-

(1,511,953)--

1,511,953

-

-

-

-

-

-

-

Differences between cost and net value from acquiring
subsidiaries

-

-

-

-

(114)

-

-

-

-

(114)

(230)

(344)

Net income for the nine months ended September 30, 2015

-

-

-

-

5,100,661

-

-

-

-

5,100,661

163,128

5,263,789

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

-

-

-

-

-

70,820(6,564)

1,848,643-

1,912,899(647)

1,912,252

Total comprehensive income (loss) for the nine months ended
September 30, 2015

-

-

-

-

5,100,661

70,820(6,564)

1,848,643-

7,013,560

162,481

7,176,041

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

(157,053)(157,053)

Effect of retrospective application and retrospective restatement-

Cash Flow
Hedge

BALANCE AT SEPTEMBER 30, 2015

$ 54,708,901$

798,351

$

-

$

-

$ 2,741,764$

170,672$(2,549)$(160,922)$(43,372)$ 58,212,845$ 2,326,935$ 60,539,780

BALANCE AT JANUARY 1, 2016

$ 54,708,901$

798,415

$

-

$

-

$ 2,872,235$

157,959

$

1,755

$

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

Change in unappropriated earnings from investments in associates
and joint ventures accounted for by using equity method

-

-

-

-

(1,638)

-

-

-

-

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

-

-

-

-

(3,536)

-

-

-

-

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

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

287,224-

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

-

-

-

-

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

Change in capital surplus from dividends distributed tosubsidiaries

-

1,517

-

-

-

-

-

-

-

1,517

-

1,517

Net income for the nine months ended September 30, 2016

-

-

-

-

1,807,768

-

-

-

-

1,807,768

191,301

1,999,069

Other comprehensive loss for the nine months ended September
30, 2016, net of income tax

-

-

-

-

-

(107,804)(2,359)30,348-(79,815)(9,856)(89,671)

Total comprehensive income (loss) for the nine months ended
September 30, 2016

-

-

-

-

1,807,768(107,804)(2,359)30,348-1,727,953

181,445

1,909,398

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

(201,886)(201,886)

76,486$ 1,802,594(43,372)$ 57,485,667$ 2,261,658$ 59,747,325

BALANCE AT SEPTEMBER 30, 2016

$ 54,708,901$

799,932$

287,224$

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated November 10, 2016)-6-$50,155

$

(604)

$

(195,649)$

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

For the Nine Months Ended
September 30
2016
2015
CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax
Adjustments to reconcile to net cash generated from (used in)operating activities:
Depreciation expenses
Amortization expenses
Bad-debt expense
Net loss (gain) on fair value change of financial assets and liabilities
held for trading
Interest income
Dividend income
Share of profit of associates and joint ventures
Gain on disposal of property, plant and equipment
Loss on disposal of financial assets measured at cost
Loss on disposal of noncurrent assets held for saleImpairment loss on financial assets measured at cost
Loss on disposal of available-for-sale financial assets
Loss on inventory, property, plant, equipment and noncurrent assets
held for sale
Net (gain) loss on foreign currency exchange
Finance costs
Recognition of provisions
Amortization of unrealized gain on sale-leaseback
Changes in operating assets and liabilities
Decrease in financial assets held for trading
Decrease in derivatives financial assets for hedging
Decrease in notes and accounts receivable(Increase) decrease in accounts receivable - related parties
Decrease in other receivables
Increase in inventories
Increase in other current assets
Increase in notes and accounts payable
Increase (decrease) in accounts payable - related parties(Decrease) increase in other payables(Decrease) increase in deferred revenue
Decrease in provisions
Decrease in other current liabilities
Decrease in accrued pension liabilities
Decrease in other liabilities
Cash generated from operations
Interest received
Dividend received
Interest paid
Income tax paid
Net cash generated from operating activities-7-$

2,876,037$

6,458,812

13,002,138
92,197
13,943

13,052,784
49,74035,62130,580(193,002)(59,927)(397,508)(11,337)
346
26,42971,826
12(148,628)(343,536)(1,883,736)(389,920)(8,078)-496,002(43,618)
978,558
1,908,338(10,884)

2,131,104
294,172
1,392,611
1,495,803(10,884)

75,416
13,096
186,095(69,169)
45,003(210,303)(152,009)
325,835
134,720(997,371)(383,111)(936,054)(630,705)(3,363,329)(15,358)
12,802,886
150,200
437,812(956,914)(166,088)

4,625
1,709,854
315,888
203,181(678,480)(521,572)
1,397,202(94,317)625,952
139,919(160,021)(174,816)(217,469)(100,821)
24,574,990
339,955
2,332,974(1,576,476)(209,736)

12,267,896

25,461,707(Continued)

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

For the Nine Months Ended
September 30
2016
2015
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds of share redemption of financial assets measured at cost
Proceeds of derivative financial assets for hedging
Payment for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of available-for-sale financial assets
Proceeds from disposal of noncurrent assets held for sale
Proceeds from disposal of financial assets measured at cost
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayment for equipment
Refund in prepayment for aircraft
Increase in computer software cost
Decrease (increase) in restricted assets
Net cash used in investing activities$(6,625,710)
17,94863
384,285
5,579(276,592)
145,051(9,493,653)
5,126,799(231,034)
474,589$

103,975(13,096)(4,292,644)
13,383(802,955)
763,812(11,738,052)
7,916,479(275,309)(150,764)(10,472,675)(8,475,171)

115,000(80,000)(9,995)9,700,000(2,400,000)
19,430,500(27,007,433)
84,851(54,633)(8,084)(2,508,525)(201,886)

13,530,025(17,759,000)(1,988,138)(8,585,000)
16,123,172(14,184,194)
97,479(91,304)(344)(157,053)(2,940,205)(13,014,357)(154,017)

40,921

NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS(1,299,001)

4,013,100

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
PERIOD

23,491,085

20,468,151

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD$ 22,192,084$ 24,481,251

CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans
Decrease in short-term loans
Decrease in short-term bills payable
Proceeds from issue of bonds payable
Repayments of bonds payable
Proceeds of long-term debts and capital lease obligations
Repayments of long-term debts and capital lease obligations
Proceeds of guarantee deposits received
Refund of guarantee deposits received
Proceeds from acquisition of subsidiaries' shares
Dividends paid to owners of the Company
Cash dividends paid to non-controlling interests
Net cash used in financing activities
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIESThe accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated November 10, 2016)-8-(Concluded)

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

1. GENERAL INFORMATION
China Airlines, Ltd. (the “Company”) was founded in 1959 and its stocks have been listed on the Taiwan
Stock Exchange since February 26, 1993. The Company primarily provides air transport services forpassengers and cargo. Its other operations include (a) mail services; (b) ground services and routine
aircraft maintenance; (c) major maintenance of flight equipment; (d) communications and data processing
services to other airlines; (e) sale of aircraft parts, equipment and entire aircraft; and (f) lease of aircraft.
The major stockholders of the Company are the China Aviation Development Foundation (CADF) and the
National Development Fund (NDF), Executive Yuan. As of September 30, 2016, December 31, 2015 and
September 30, 2015, CADF and NDF held all 43.63% of the Company’s shares.

2. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements were approved by the Company’s board of directors and authorized
for issue on November 10, 2016.

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

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

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

Effective Date
Announced by IASB (Note 1)
January 1, 2016
January 1, 2014
January 1, 2014
January 1, 2014
(Concluded)Note 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods
beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on orafter July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition
date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; theremaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that
occur in annual periods beginning on or after January 1, 2016; the remaining amendments are
effective for annual periods beginning on or after January 1, 2016.
Except for the following, the initial application of the above New or amended IFRSs in 2017 would nothave any material impact on the Group’s accounting policies: Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”
The amendment clarifies that the recoverable amount of an asset or a cash-generating unit isdisclosed only when an impairment loss on the asset has been recognized or reversed during theperiod. Furthermore, if the recoverable amount of an item of property, plant and equipment for
which impairment loss has been recognized or reversed is fair value less costs of disposal, theGroup is required to disclose the fair value hierarchy. If the fair value measurements are
categorized within Level 3, the valuation technique and key assumptions used to measure the fairvalue are disclosed. The discount rate used is disclosed if such fair value less costs of disposal ismeasured by using present value technique. The amendment will be applied retrospectively
starting January 2017.
Except for the above impacts, as of the date the consolidated financial statements were authorized for
issue, the Group continues assessing other possible impacts that application of the aforementioned
amendments will have on the Group’s financial position and financial performance, and will disclose
these other impacts when the assessment is completed.
b. New IFRSs in issue but not yet endorsed by the FSC
The Group has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC.

- 10 -

The FSC announced that IFRS 15 will take effect starting January 1, 2018. As of the date theconsolidated financial statements were authorized for issue, the FSC has not announced the effective
dates of other new IFRSs.
Effective Date
Announced by IASB (Note 1)

New IFRSs
Amendment to IFRS 2 “Classification and Measurement of
Share-based Payment Transactions”
Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments withIFRS 4 Insurance Contracts”
IFRS 9 “Financial Instruments”
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”
IFRS 15 “Revenue from Contracts with Customers”
Amendment to IFRS 15 “Clarification of IFRS 15”
IFRS 16 “Leases”
Amendment to IAS 7 “Disclosure Initiative”
Amendments to IAS 12 “Recognition of Deferred Tax Assets for
Unrealized Losses”

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
To be determined by IASB
January 1, 2018
January 1, 2018
January 1, 2019
January 1, 2017
January 1, 2017

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.

- 11 -

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.
Hedge accounting
The main changes in hedge accounting amended the application requirements for hedge accounting
to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes
include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening
the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging
derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing
retrospective effectiveness assessment with the principle of economic relationship between thehedging instrument and the hedged item.
2) IFRS 16 “Leases”
IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number ofrelated interpretations.
Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for
all leases on the consolidated balance sheets except for low-value and short-term leases. The
Group may elect to apply the accounting method similar to the accounting for operating lease under
IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive
income, the Group should present the depreciation expense charged on the right-of-use asset
separately from interest expense accrued on the lease liability; interest is computed by using
effective interest method. On the consolidated statements of cash flows, cash payments for the
principal portion of the lease liability are classified within financing activities; cash payments forinterest portion are classified within operating activities.
The application of IFRS 16 is not expected to have a material impact on the accounting of theGroup as lessor.
When IFRS 16 becomes effective, the Group may elect to apply this Standard either retrospectively
to each prior reporting period presented or retrospectively with the cumulative effect of the initial
application of this Standard recognized at the date of initial application.
- 12 -

3) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”
The amendment clarifies that the difference between the carrying amount of the debt instrument
measured at fair value and its tax base gives rise to a temporary difference, even though there are
unrealized losses on that asset, irrespective of whether the Group expects to recover the carrying
amount of the debt instrument by sale or by holding it and collecting contractual cash flows.
In addition, in determining whether to recognize a deferred tax asset, the Group should assess adeductible temporary difference in combination with all of its other deductible temporary
differences, unless the tax law restricts the utilization of losses to deduction against income of a
specific type, in which case, a deductible temporary difference is assessed in combination only withother deductible temporary differences of the appropriate type. The amendment also stipulates
that, when determining whether to recognize a deferred tax asset, the estimate of probable futuretaxable profit may include some of the Group’s assets for more than their carrying amount if there issufficient evidence that it is probable that the Group will achieve this, and that the estimate for
future taxable profit should exclude tax deductions resulting from the reversal of deductible
temporary differences.
Except for the above impact, as of the date the consolidated financial statements were authorized for
issue, the Group is continuously assessing the possible impact that the application of other standards
and interpretations will have on the Group’s financial position and financial performance, and will
disclose the relevant impact when the assessment is completed.

4. SIGNIFICANT ACCOUNTING POLICIESExcept as discussed below, the accounting policies adopted in these consolidated financial statements are
the same as those adopted in the consolidated financial statements for the year ended December 31, 2015.
Statement of Compliance
These interim consolidated financial statements have been prepared in accordance with the Regulations
Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial
Reporting” as endorsed by the FSC. Disclosure information included in these interim consolidated
financial statements is less than the disclosure information required in a complete set of annual financial
statements.
Basis of Consolidation
Principles for preparing consolidated financial statements
The consolidated financial statements incorporate the financial statements of the Company and the entities
controlled by the Company (i.e. its subsidiaries, including special purpose entities).
Control is achieved when the Company has the power to govern the financial and operating policies of anentity so as to obtain benefits from its activities.
When necessary, adjustments are made to the financial statements of subsidiaries, subsidiaries’ accounting
policies are consistent with the Company.
All intra-group transactions, balances, income and expenses are written of in consolidation financial
statement.

- 13 -

Non-controlling interests are presented in the consolidated balance sheets within equity, separate from theequity of the owners of the Company. Total comprehensive income of subsidiaries is attributed to theowners of the Company and to the non-controlling interests even if this results in the non-controllinginterests having a deficit balance. Proportions of ownership and main businesses of subsidiaries aredisclosed 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.
Fair Value Hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognizedin profit or loss in the line item relating to the hedged item immediately, together with any changes in thefair value of the hedged asset or liability that are attributable to the hedged risk.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY
Material accounting judgments, estimates and assumptions adopted in these consolidated financial
statements are the same as those adopted in the consolidated financial statements for the year ended
December 31, 2015.

6. CASH AND CASH EQUIVALENTS

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

September 30,
2016

December 31,
2015

September 30,
2015

$

$

$

438,192
7,301,543

478,223
6,070,236

546,867
8,353,214

5,667,223
8,785,126

16,163,452
779,174

14,536,536
1,044,634$ 22,192,084$ 23,491,085$ 24,481,251- 14 -

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

September 30,
2016

December 31,
2015

September 30,
2015

0%-1.9%0%-1.5%0%-2%

0.3%-4.82%
0.33%-0.95%

0.27%-7.25%
0.42%-0.51%

0.4%-4.3%
0.48%-0.65%

The amounts of time deposits with original maturities more than three months at September 30, 2016,
December 31, 2015 and September 30, 2015 were $1,393,713 thousand, $1,653,927 thousand and$1,587,466 thousand, respectively, and the market rate intervals were 0.21%-2.45%, 0.295%-4.1% and0.75%-4.3%; the time deposits were recognized as other current assets. (Refer also to Note 19).
The Group designated its time deposits with original maturities less than three months and repurchaseagreements collateralized by bonds as fair value hedges to hedge exchange rate exposure to the A350-900
aircraft purchase commitment. As of September 30, 2016, the book value of the hedging instrument was$6,666,667 thousand, and the gain on fair value changes due to the fluctuations of exchange rates in theamount of $191,121 thousand had been recognized in profit or loss for the nine months ended September 30,
2016 with corresponding adjustment to prepayments for aircraft.

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

December 31,
2015

September 30,
2015

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

$

1,010

$

63,818$ 164,848

436,837

478,508

244,970$ 437,847$ 542,326$ 409,818

$

-

$

1,710

$

-

$

5,419

$

-

$

-

Financial assets held for trading - noncurrent
Derivative financial instruments (not under hedge
accounting)Foreign exchange forward contracts
Financial liabilities held for trading - current
Derivative financial instruments (not under hedge
accounting)Foreign exchange forward contracts- 15 -

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

Currency

Notional Amount(In Thousands)

Maturity Date

September 30, 2016
Buy forward contracts

NTD/USD

2016.10.14-2017.01.26

NTD263,323/USD8,400

2016.01.08-2017.01.26

NTD3,276,316/USD99,600

2015.10.01-2017.01.26

NTD2,749,980/USD88,400

December 31, 2015
Buy forward contracts

NTD/USD

September 30, 2015
Buy forward contracts

NTD/USD

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

December 31, 2015
% ofCarrying
OwnerValue
ship

September 30, 2015
% ofCarrying
OwnerValueship$ 14,099$ 19,080$ 15,403

Non-current
Domestic market
TransAsia Airways

-

-

-

9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING
September 30,
2016

December 31,
2015

September 30,
2015

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

Current
Non-current- 16 -

$

6,818
11
188

$

51,06012,403335$

57,47013,176
6,073

$

7,017

$

63,798$76,719

$

7,017
-

$

52,582
11,216$76,719
-

$

7,017

$

63,798$76,719(Continued)

September 30,
2016

December 31,
2015

September 30,
2015

Derivative financial liabilities under hedge
accounting$

Interest rate swaps
Foreign exchange forward contracts
Currency options
Fuel options

Current
Non-current

6,914
185,648
44,684
7$

12,702
12,660299,618$

12,065
16,916228,419$ 237,253$ 324,980$ 257,400$ 237,253-$ 313,689
11,291$ 245,335
12,065$ 237,253$ 324,980$ 257,400(Concluded)

The Group determined the fair value of each derivative contract based on price quotes from financial
institutions.
Cash Flow Hedge
a. Interest rate swaps
To mitigate the cash flow exposure generated by outstanding floating rate debts, all interest rate swap
contracts exchanged either as fix interest rate swaps or as floating interest rate swaps are designated as
cash flow hedges by the Group. The outstanding interest rate swap contracts at the end of thereporting period were as follows:

Notional Amount(In Thousands)

Maturity Date

Range ofInterest Rates
Paid

Range of Interest Rates
Received2016.11.28-2017.06.22

1.01%-1.14%

TAIBOR Rate

2016.11.28-2017.06.22

1.01%-1.14%

TAIBOR Rate

2016.11.28-2017.06.22

1.01%-1.14%

TAIBOR Rate

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

The interest rate swaps are settled on a quarterly basis. The Group will settle the difference between
the fixed and floating interest rates on a net basis.
b. Currency options
The Group entered into contracts for currency option to minimize cash flow exposure of fluctuating
foreign exchange rate relate to the fuel payments in U.S. dollars.

- 17 -

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

2016.10.12-2016.12.19
2016.10.12-2016.12.19

JPY1,120,340/USD9,400
JPY1,091,095/USD9,400

JPY/USD
JPY/USD

2016.01.08-2016.12.09
2016.01.08-2016.12.09

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

JPY/USD
JPY/USD

2015.10.15-2016.05.18
2015.10.15-2016.05.18

JPY3,319,230/USD27,300
JPY3,241,805/USD27,300

September 30, 2016
Buy USD call option
Sell USD put option
December 31, 2015
Buy USD call option
Sell USD put option
September 30, 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:
Notional Amount(In Thousands)

Currency

Maturity Date

USD
USD

2016.10.31-2017.01.31
2016.10.31-2017.01.31

NTD188
NTD7

USD
USD

2016.01.05-2016.12.07
2016.01.05-2016.12.07

NTD335NTD299,618

USD
USD

2015.10.13-2016.09.08
2015.10.13-2016.09.08

NTD6,073
NTD228,419

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

Because there were only nominal amounts of fuel options contracts, in accordance with the Derivative
Instruments Trading Information issued by Taiwan Stock Exchange in respect to monthly declaration
by public companies, the contract amounts were referred to the absolute value of their fair value.
d. Foreign exchange forward contracts
The Group entered into foreign exchange forward contracts to minimize the cash flow exposure offluctuating foreign exchange rate relate to the fuel payments and aircraft leases paid in U.S. dollar.

- 18 -

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

2016.10.03-2018.05.22

NTD5,933,347/USD189,180

NTD/USD

2016.01.18-2017.05.23

NTD1,076,882/USD32,920

NTD/USD

2015.10.08-2017.05.23

NTD861,981/USD27,920

September 30, 2016
Buy forward contracts
December 31, 2015
Buy forward contracts
September 30, 2015
Buy forward contracts

The gains and losses of hedging instruments for the three months ended September 30, 2016 and 2015
and nine months ended September 30, 2016 and 2015 were reclassified from equity to profit or loss andincluded in the following line items of consolidated statements of comprehensive income:

Increase in operating cost
Increase in finance cost
Other foreign exchange gain
(loss)For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$

$

(20,777)(2,989)$(37,018)$(60,784)(782,456)(1,494)
1,264$(782,686)$(336,674)(6,901)$ (2,453,927)(4,530)(53,094)

32,666(396,669)$ (2,425,791)

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.

September 30, 2016
% ofCarrying
OwnerValueship

December 31, 2015
% ofCarrying
OwnerValue
ship

September 30, 2015
% ofCarrying
OwnerValue
ship

$

$

52,70414

52,70414$ 193,971

14

56,02315

56,02315

56,02315-

675,791

6

77,4806

20,403

5

21,995

5

22,485- 19 -

5(Continued)

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

September 30, 2016
% ofCarrying
OwnerValueship

December 31, 2015
% ofCarrying
OwnerValue
ship

September 30, 2015
% ofCarrying
OwnerValue
ship

$

$

$

11,00011

11,00011

140,130-

5,925
223,438

473

-

473

11,000

11

6

5,925
366,884

6

-

473

-

$ 140,603$ 223,911$ 367,357$ 140,603$ 223,911$ 367,357(Concluded)

The Group recognized impairment loss of $71,826 thousand for the three months and nine months ended
September 30, 2016, because the value of Taikoo (Xiamen) Landing Gear Service Co., Ltd. haspermanently declined, and classified as other gains (losses).
The Company and the other airlines in the Asian Region had set up Abacus International Holdings (AHcompany) which owned the Abacus Distributions Systems Company. Due to strategical adjustment, AH
company disposed shares of Abacus Distribution Systems Company. The board of AH company resolved
and approved to return the gain on disposal to shareholders by cash dividends and share redemption. The
Company received cash dividends of $1,660,687 thousand and share redemption of $245,242 thousand
from AH company. AH company changes its name to Everest Investment Holdings Ltd. after the disposalof its subsidiary.
On the reporting date, the above unlisted stock investments held by the Group were measured at cost after
deducting impairment losses because their range of reasonable fair value estimates were significant andunable to be reasonably evaluated. Thus, the management considered their fair values were unable to bemeasured.

11. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

Notes receivable

September 30,
2016

December 31,
2015

September 30,
2015

$

$

$

485,228

344,479

372,424

Accounts receivable
6,791,152(122,025)
6,669,127

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

7,299,942(103,724)
7,196,218$ 7,154,355$ 7,610,677$ 7,568,642

Accounts receivable
Less: Allowance for impairment loss

- 20 -

The average credit period of sales was 7 to 55 days. In determining the recoverability of accounts
receivable, the Group considered any change in the credit quality of the accounts receivable since the datecredit was initially granted to the end of the reporting period, and allowance for impairment loss was basedon estimated irrecoverable amounts determined by reference to past default experience of the counterparties
and the analysis of their current financial position.
Movements in the allowance for impairment loss recognized on notes receivable and accounts receivable
were as follows:
For the Nine Months Ended
September 30
2016
2015
Beginning balance
Impairment loss recognized on receivables
Amounts written off during current period
Exchange influence$ 109,927
13,943(2,098)
253$

66,131
35,621(80)
2,052

Ending balance$ 122,025$ 103,724

September 30,
2016

December 31,
2015

September 30,
2015$ 7,666,251
529,406
163,140
2,510$ 7,648,352
507,603
143,489954$ 7,174,378
486,098
135,649
3,633$ 8,361,307$ 8,300,398$ 7,799,758

12. INVENTORIES

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
OthersThe operating costs recognized for the nine months ended September 30, 2016 and 2015 included loss frominventory write-downs of $158,457 thousand and $126,103 thousand, respectively.
The operating costs recognized for the three months ended September 30, 2016 and 2015 included loss
from inventory write-downs of $53,676 thousand and $22,291 thousand, respectively.

13. NON-CURRENT ASSETS HELD FOR SALE
September 30,
2016

December 31,
2015

September 30,
2015$ 121,406$ 670,455$ 670,455

Aircraft held for saleTo enhance the competitiveness, the Company planned to introduce new aircraft and retire old aircraft on atimely schedule. On August 13, 2015, the Company’s board of directors resolved to sell two 747-400
aircraft and one A340-300 aircraft. These aircraft were recognized as noncurrent assets held for sale, andthe difference between their original book value and the expected selling price was recognized as
impairment loss of $1,899,372 thousand. The actual amount of loss is determined based on actual selling
price of the aircraft. The A340-300 aircraft was sold in June 2016 and the actual selling price and bookvalue had a difference of $26,429 thousand recognized as loss on sale of asset. The other two aircraft
mentioned above were assessed for impairment and an impairment loss of $138,335 thousand was- 21 -

recognized based on the estimated market price. The aircraft were categorized under level 3 fair value
measurement since their expected selling prices were based on the market prices of second-hand aircraft insimilar condition as the two aircraft.

14. SUBSIDIARIES
Subsidiaries 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 Holdings
Taoyuan International Airport
Services
Taiwan Airport Services
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

Note:

Main Businesses and Products

Proportion of Ownership
September 30,
December 31,
September 30,
2016
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
100

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

100
100
100

100
100
100

100
100
100

-

100

100

Proportion of ownership is considering by the Group view.

In view of enhancing the resources integration and management of the Group, on August 1, 2016, Hwa
Hsia Co., Ltd. merged and assumed all the assets, liabilities and other rights and obligations of Hwa Shin
Building Safeguard Co., Ltd, the dissolved company.
Considering the Group developing strategy, Mandarin Airlines had bought 323,367 shares of Taiwan
Airport Services by $8,084 thousand since current year.
The Company’s holdings of the issued share capital of Taoyuan International Airport Service, Taiwan
Airport Service and Global Sky Express did not each exceed 50%, but since the Company had control overthese investees, they were listed as subsidiaries. The financial information of the above subsidiaries forthe nine months ended September 30, 2016 and 2015, which had not been reviewed except for Mandarin
Airlines and Tigerair Taiwan Co., Ltd.
The Group’s holding of the issued share capital of China Pacific Catering Services and China Pacific
Laundry Services exceeded 50%, yet the Group did not have controlling power over the investees.
Related information please refer to Note 15,b.

- 22 -

15. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

Investments in associates
Investments in jointly controlled entities

September 30,
2016

December 31,
2015

September 30,
2015$ 2,000,345
809,635$ 2,010,774
867,003$ 1,977,588
809,639$ 2,809,980$ 2,877,777$ 2,787,227

September 30,
2016

December 31,
2015

September 30,
2015

$

$

$

a. The investments 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.

509,095
253,363
247,795
248,254472,486
227,641

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

506,936
230,132
242,255
180,905
534,057
245,52141,7112,000,345

41,908
1,946,683

37,782
1,977,588-

64,091-$ 2,000,345$ 2,010,774$ 1,977,588

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 the record date of the stock issuance was December 25, 2015. The board of theGroup 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:

Name of Associate

Proportion of Ownership and Voting Rights
September 30,
December 31,
September 30,
2016
2015
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.

- 23 -

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

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

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

35%

35%

35%

The recognized investment income amounts from associates accounted for using equity method were as
follows:

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology
Services
Science Park Logistics
Airport Air Cargo Terminal(Xiamen)
Airport Air Cargo Service(Xiamen)Eastern United International
Logistics (Holdings) Ltd.

For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$

$

$

10,86527,327$

14,51831,60740,98678,434$37,87772,54024,4898,183

15,428
5,821

60,38916,41342,065
11,826

6,713

3,467

12,69010,421

5,615

6,138

17,847

15,611

2,027

178

2,964

4,397

77,157$ 229,723$ 194,737

85,219$The investments accounted for by the equity method, the Group’s share of their profit or loss and theshare of comprehensive income were based on the associates’ financial statements for the nine months
ended September 30, 2016 and 2015 that had not been reviewed by independent auditors.
b. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:
September 30,
2016

December 31,
2015

September 30,
2015$ 646,277
163,358$ 705,134
161,869$ 650,352
159,287$ 809,635$ 867,003$ 809,639

China Pacific Catering Services
China Pacific Laundry Services

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
September 30,
December 31,
September 30,
2016
2015
2015
China Pacific Catering Services
China Pacific Laundry Services

51%
55%

51%
55%

51%
55%

The Company entered into a joint venture agreement with the Taikoo Group to jointly invest in China
Pacific Catering Services and China Pacific Laundry Services. According to the agreement, bothparties have authority to veto privileged motions at the board of director’s meeting, and therefore theGroup does not have control.

- 24 -

The investment income amounts from jointly controlled entities accounted for under equity method
were as follows:

China Pacific Catering Services
China Pacific Laundry Services

For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$

48,001
5,601$

59,013
4,865$ 152,786
14,999$ 176,271
18,912$53,602$

63,878$ 167,785$ 195,183

The Group’s shares of other comprehensive income of associates and jointly controlled entities
accounted for by the equity method in the three months ended September 30, 2016 and 2015 were $0
thousand and $(182) thousand, respectively, and $0 thousand and $(182) thousand for nine months
ended September 30, 2016 and 2015, respectively.
The investments in jointly controlled entities accounted for by the equity method and the Group’s sharesof their profit or loss and other comprehensive income were based on the jointly controlled entities’
financial statements which had not been reviewed by independent auditors.
For details on services, major business offices and the country where the above associates and jointly
controlled entities registered, please refer to Table 5, “Names, Locations, And Other Information Of
Investees On Which The Company Exercises Significant Influence” and Table 6, “Investments In
Mainland China”.

16. PROPERTY, PLANT AND EQUIPMENT
September 30,
2016

December 31,
2015

September 30,
2015

$

$

$

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

949,089
13,140,658
237,787,465
28,617,154
10,231,023
1,063,699
121,918
3,947,134
355,286$ 296,213,426- 25 -

976,427
13,140,158
229,849,035
28,087,404
9,930,186
1,044,598
129,372
3,928,846
134,888$ 287,220,914

976,427
13,114,810
229,763,814
28,587,309
9,853,536
1,020,889
130,530
3,877,461
126,794$ 287,451,570(Continued)

September 30,
2016

December 31,
2015

September 30,
2015

$

$

$

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

Net value

Freehold Land5,713,459
137,448,382
15,405,038
6,882,676
876,327
102,342
1,577,050

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

5,229,838
126,889,459
14,136,863
6,508,661
818,789
113,901
1,564,907$ 168,005,274$ 157,592,048$ 155,262,418$ 128,208,152$ 129,628,866$ 132,189,152(Concluded)

Buildings

FlightEquipment

Equipment
under Finance
Lease

OthersTotal

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

953,614
22,813$13,085,921
17,608(28,645)
1,846
38,080$ 232,035,450
3,491,284(1,028,978)(4,733,942)-$

33,985,116
285,176(119,866)(5,563,117)-$

14,697,246
498,576(259,957)
69,7293,616$ 294,757,347
4,292,644(1,437,446)(10,225,484)
64,509$976,427$

13,114,810$ 229,763,814$

28,587,309$

15,009,210$ 287,451,570

$

-

$

(4,794,850)(436,046)
17,144(23)(16,063)$ (121,645,204)(10,408,587)
932,453
4,231,879-$ (16,998,403)(1,608,855)
119,866
4,350,529-$(8,663,824)(599,086)
257,594
2,219(3,161)$ (152,102,281)(13,052,574)
1,327,057
8,584,604(19,224)$-$(5,229,838)$ (126,889,459)$ (14,136,863)$(9,006,258)$ (155,262,418)$

976,427(27,338)$

13,140,158
49,441(1,981)
406(47,366)$ 229,849,035
5,026,019(2,754,814)
5,667,225-$

28,087,404
777,700(247,950)-$

15,167,890
772,550(218,261)
2,486(5,605)$ 287,220,914
6,625,710(3,223,006)
5,670,117(80,309)$949,089$

13,140,658$ 237,787,465$

28,617,154$

15,719,060$ 296,213,426

$

-

$

(5,355,804)(380,351)
1,981
20,715$ (128,953,990)(10,502,147)
2,554,703(546,948)-$ (14,201,904)(1,548,447)
345,313-$(9,080,350)(570,983)
214,503(5,349)3,784$ (157,592,048)(13,001,928)
3,116,500(552,297)
24,499$-$(5,713,459)$ (137,448,382)$ (15,405,038)$(9,438,395)$ (168,005,274)

Accumulated depreciationand impairment
Balance at January 1,
2015
Depreciation expense
Disposals
Reclassification
Net exchange difference
Balance at September 30,
2015
Cost
Balance at January 1,
2016
Additions
Disposals
Reclassification
Net exchange difference
Balance at September 30,
2016
Accumulated depreciationand impairment
Balance at January 1,
2016
Depreciation expense
Disposals
Reclassification
Net exchange difference
Balance at September 30,
2016- 26 -

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

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

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

17. INVESTMENT PROPERTIES

Carrying amount
Investment properties

September 30,
2016

December 31,
2015

September 30,
2015$ 2,075,972$ 2,076,182$ 2,076,251

The investment properties held by the Group are land located in Nankan and buildings in Taipei, which are
all leased to others. The buildings are depreciated on a straight-line basis over 55 years.
The fair value of the investment properties held by the Group was unchanged at $2,348,759 thousand on
September 30, 2016, December 31, 2015 and September 30, 2015. The above amount was evaluated bytaking into account the report of real estate appraiser and the market transaction assessed by the
management.

- 27 -

All of the Group’s investment properties are held under freehold interest.

Cost

Accumulated
Depreciation

Net Value

Balance on January 1, 2015
Additions$ 2,082,390-$(5,929)(210)$ 2,076,461(210)

Balance on September 30, 2015

$ 2,082,390$(6,139)$ 2,076,251

Balance on January 1, 2016
Additions$ 2,082,390-$(6,208)(210)$ 2,076,182(210)

Balance on September 30, 2016

$ 2,082,390$(6,418)$ 2,075,972

Computer
Software Cost

Accumulated
Amortization

Net Value

Balance at January 1, 2015
Additions
Amortization expense
Exchange influence$ 1,214,465
275,309-$(543,468)(49,740)9$

670,997
275,309(49,740)
9Balance at September 30, 2015

$ 1,489,774$(593,199)$

896,575

Balance at January 1, 2016
Additions
Amortization expense$ 1,623,186
231,034-$(613,508)(92,197)$ 1,009,678
231,034(92,197)

Balance at September 30, 2016

$ 1,854,220$(705,705)$ 1,148,515

18. OTHER INTANGIBLE ASSETS

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

19. OTHER ASSETS
September 30,
2016

December 31,
2015

September 30,
2015$

1,393,713
1,137,769
1,206,491
36,367
258,440$

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

1,587,466
267,093998,115
43,479134,280$

4,032,780$

3,928,747$

3,030,433(Continued)

Current
Other financial assets
Temporary payments
Prepayments
Restricted assets
Others- 28 -

September 30,
2016

December 31,
2015

September 30,
2015$ 26,995,647
3,731,180
1,554,189
8,536
22,297
1,259$ 28,714,476
2,522,891
1,489,112
504,924
14,144
1,312$ 29,983,618
2,283,992
1,354,944
558,816
13,753
10,963$ 32,313,108$ 33,246,859$ 34,206,086(Concluded)

Noncurrent
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
OthersThe prepayments for aircraft were the prepaid deposit and capitalized interest from the purchase of
A350-900 and 777-300ER. For details of the A350-900 contract, please refer to Note 35. The right topurchase the six confirmed orders of 777-300 ER was transferred to the aircraft leasing company upondelivery of aircraft. Then, all the six aircraft were leased back. As of May 2016, all the aircraft had beendelivered and the Group had been refunded with deposits for the aircraft purchase.
The Group designated its time deposits with original maturities more than three months classified as otherfinancial instruments as cash flow hedges to hedge exchange rate exposure to the expenditure of aircrafts
rental. As of September 30, 2016, the book value of the hedging instrument was 439,068 thousand. For
three months and nine months ended September 30, 2016, the losses on effective portion of cash flow
hedges reclassified from equity were $1,449 thousand, and be classified as operating cost in comprehensive
income statement.

20. BORROWINGSa. Short-term loans
September 30,
2016

December 31,
2015

September 30,
2015

Bank loans - unsecured$ 208,135$ 173,289$ 225,145

Interest rates

1.11%-2.83%

1.25%-1.8636%

1.39%-2.3%

September 30,
2016

December 31,
2015

September 30,
2015

b. Short-term and bills payable

Commercial paper
Less: Unamortized discount on bills payable$-$ 10,000
5$ 10,000
37

$

-

$

$

-

Annual discount rate

- 29 -

9,995
1.3%

9,963

1.298%

c. Long-term debts

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

December 31,
2015

September 30,
2015$ 30,732,418
16,290,334$ 31,231,342
25,342,804$ 32,367,929
28,390,464

34,250,000
44,686
81,228,066
27,949,134

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

30,955,000
96,911
91,616,482
27,256,465$ 53,278,932$ 57,691,505$ 64,360,017

Less: Current portion

Secured bank loans were secured by freehold land, building, machinery equipment and flightequipment, please refer to Note 34.
Bank loans (New Taiwan dollars, U.S. dollars) are repayable quarterly, semiannually or in lump sum
upon maturity. Related information is summarized as follows:
Currency
New Taiwan Dollars
U.S. Dollars
Original currency$ 45,453,151
52,533,784
55,752,818

September 30, 2016
December 31, 2015
September 30, 2015$

50,070122,827
152,170

Translated in New Taiwan dollars
September 30, 2016
December 31, 2015
September 30, 2015

45,453,151
52,533,784
55,752,818

1,569,601
4,040,362
5,005,575

0.55%-1.945%
1.1432%-2.613%
1.2385%-2.613%

0.8539%-4.39%
0.4067%-4.39%
0.27238%-4.39%

Interest rates
September 30, 2016
December 31, 2015
September 30, 2015
Periods
2004.12.16-2029.02.04 2004.12.10-2017.09.21
2004.12.16-2029.02.04 2004.06.28-2017.09.21
2004.12.16-2029.02.04 2003.12.03-2020.02.26

September 30, 2016
December 31, 2015
September 30, 2015

The Group has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until February 2021, were used by the Group to guarantee commercial papers
issued. As of September 30, 2016, December 31, 2015 and September 30, 2015, the commercial
papers were issued at discount rates 1.056%-1.4563%, 1.2407%-1.5833% and 1.3425%-2.0868%,
respectively.

- 30 -

21. BONDS PAYABLE

Secured corporate bond first-time issued in 2011
Unsecured corporate bond first-time issued in2013
Unsecured corporate bond first-time issued in2016
Unsecured corporate bond second-time issued in2016
Convertible bond issued the fifth time

September 30,
2016

December 31,
2015

September 30,
2015

$

$

$

-

2,400,000

2,400,000

10,900,000

10,900,000

10,900,000

4,700,000--

5,000,000
2,579,164
23,179,164

2,544,106
15,844,106

2,532,442
15,832,442

5,279,164

4,944,106

2,400,000$ 17,900,000$ 10,900,000$ 13,432,442

Less: Current portion and put option of
convertible bonds

Related issuance conditions were as follows:
Category

PeriodConditions

Rate (%)

Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year private unsecured bonds - issued at par in
January 2013; repayable in January 2017 and 2018;
1.6% interest p.a., payable annually
Seven-year private unsecured bonds - issued at par in
January 2013; repayable in January 2019 and 2020;
1.85% interest p.a., payable annually
Five-year unsecured bonds - issued at par in May
2016; repayable in May 2020 and 2021; 1.19%
interest p.a., payable annually
Five-year unsecured bonds - issued at par in
September 2016; repayable in September 2020 and2021; 1.08% interest p.a., payable annually
Five-year convertible bonds - issued at discount in
December 2013; repayable in lump sum uponmaturity; 1.8245% discount rate p.a.

2011.05.20-2016.05.20

Principal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in January of2017 and 2018; indicator rate;
payable annuallyPrincipal repayable in January of2019 and 2020; indicator rate;
payable annuallyPrincipal repayable in May of2020 and 2021; interest p.a.
payable annuallyPrincipal repayable in May of2020 and 2021; interest p.a.
payable annually
Except for converting to capitalstock or buying back, principal
repayable in December of 2018

1.35

2011.05.20-2016.05.20

2011.05.20-2016.05.20

2011.05.20-2016.05.20

2013.01.17-2018.01.17

2013.01.17-2020.01.17

2016.05.26-2021.05.26

2016.09.27-2021.09.27

2013.12.26-2018.12.26

1.35

1.35

1.35

1.6

1.85

1.19

1.08

-

The Company issued its 2016 first unsecured corporate bonds with face value of $5,000,000 thousand, andthe purchasers of the bonds include Mandarin Airlines Co., Ltd. and Sabre Travel Network (Taiwan) Co.,
Ltd. holding face value of $300,000 thousand which was eliminated from the consolidated financial
statements.
The Company issued 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.

- 31 -

b. The holders can request the Company to repurchase their bonds at 100.75% face value on the third
anniversary of the offering date. Because the holders can exercise selling rights on December 26,
2016, the Company reclassified the bonds payable to “current portion of bonds payable” in December
2015.
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%. Because the company distributed cash dividend as of July 31, 2016, there
was adjustment the conversion price to NT$11.64, corporate bonds with a face value of $3,315,700
thousand had been converted to 270,890 thousand of common shares.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - option. The effective interest rate of the liability
component was 1.8245% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,000,000(518,621)

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

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

December 31,
2015

September 30,
2015

Within one year
Beyond one year and within five years$ 1,428,467
4,007,783$ 1,428,467
5,079,133$ 2,178,466
5,436,250

Present value of minimum lease payments$ 5,436,250$ 6,507,600$ 7,614,716

Interest rates

1.0672%-1.63%

1.1828%1.5667%

1.4%-1.67%

Minimum lease payments - flight equipment

The Company had leased back engines and A330-300, A340-300, B747-400 in total of 5 aircrafts underfinance leases as of September 30, 2016. The lease terms started from June 2006 to April 2019.
During the lease term, the Company retained all risks and rewards attached to aircraft and engines, andenjoyed the same substantive right prior to the transaction. Floated interest rate was stated in all
obligations under finance leases. Therefore, the minimum lease payments under sale-leaseback
aircraft contract were not inclusive of interest expense.

- 32 -

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

December 31,
2015

September 30,
2015$

29,902
92,885
122,787(2,763)$37,697
117,433
155,130(7,626)$31,308
136,561
167,869(10,844)$

120,024$

147,504$

157,025$

29,49090,534$29,490118,014$30,500126,525$

120,024$

147,504$

157,025

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

4.97%

4.96%

5.036%$ 1,457,957
4,098,317$ 1,457,957
5,197,147$ 2,208,966
5,562,775$ 5,556,274$ 6,655,104$ 7,771,741

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

c. Operating lease arrangements (include sale-leaseback operating lease)
The Company, Mandarin Airlines, Tigerair Taiwan and Taiwan Air Cargo Terminal rented planes andhangars under various operating lease contracts expiring on various dates until May 2028. The Group
does not have a bargain purchase option to acquire the leased planes and hangar at the expiration of thelease periods.
There are both fixed and floating rental rates stated in the aircraft lease agreements. If theagreed-upon rental rate is floating and will be revised monthly or semiannually, subleasing is notallowed for all the lease arrangements. As of September 30, 2016, the Group has rented elevenA330-300 planes, eleven B737-800 planes, ten B777-300ER planes, six ERJ190 planes and eight
A320-200 planes under operating lease contracts in which the lease terms range from 8 to 12 years.
As of September 30, 2016, December 31, 2015 and September 30, 2015, the refundable deposits paidby the Group under operating lease contracts were $1,033,792 thousand, $952,520 thousand and$883,568 thousand, respectively. Part of the guarantees is secured by credit guarantees, andoutstanding credit guarantees as of September 30, 2016, December 31, 2015 and September 30, 2015
were $1,379,874 thousand, $1,304,259 thousand and $1,116,671 thousand.

- 33 -

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

September 30,
2016

December 31,
2015

September 30,
2015$ 10,234,381
37,017,468
36,484,496$$$ 83,736,345$ 74,566,745

8,896,478
33,344,415
32,325,852

8,417,755
31,477,625
30,620,314$ 70,515,694

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

Minimum lease payment

For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$ 2,925,994$ 7,834,871$ 5,280,731

September 30,
2016

December 31,
2015

September 30,
2015

$

$

$

$ 2,009,689

23. OTHER PAYABLES

Fuel cost
Ground service expense
Repair expense
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expense
Others2,498,113
1,017,807
966,679
187,043
2,353,631
751,942
408,813
3,159,853

2,038,041
1,135,152
916,442
262,601
3,310,173
781,621450,492
3,402,026

2,859,550
1,237,670
572,614207,577
3,297,289
693,652
539,730
2,441,579$ 11,343,881$ 12,296,548$ 11,849,661

September 30,
2016

December 31,
2015

September 30,
2015

$

$

$

24. DEFERRED REVENUE

Frequent flyer program
Advance ticket sales

Current
Noncurrent

2,375,105
12,211,502

2,610,667
12,365,348

2,579,774
10,529,513$ 14,586,607$ 14,976,015$ 13,109,287$ 12,784,380
1,802,227$ 13,112,086
1,863,929$ 11,284,169
1,825,118$ 14,586,607$ 14,976,015$ 13,109,287- 34 -

25. PROVISIONS
September 30,
2016

December 31,
2015

September 30,
2015

Operating lease-aircraft$ 7,132,404$ 6,187,481$ 5,681,285

Current
Non-current

$

$

$

35,497
7,096,907$ 7,132,404

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

19,874
5,661,411$ 5,681,285
Aircraft Lease
Contract

Balance at January 1, 2015
Additional provisions recognized
Usage
Effect of exchange rate changes$ 4,303,780
1,495,803(160,021)
41,723

Balance at September 30, 2015

$ 5,681,285

Balance at January 1, 2016
Additional provisions recognized
Usage
Effect of exchange rate changes$ 6,187,481
1,908,338(936,054)(27,361)

Balance at September 30, 2016

$ 7,132,404

The Company and Mandarin Airlines leased flight equipment under operating lease agreements. Whenthe lease expires and before returning the flight equipment to the lessor, such flight equipment have to be
repaired according to the expected usage years, flight hours, flight cycle and the engine revolution times.
The Company and Mandarin Airlines had existing obligation to recognize provision when signing the leaseor during the lease term. Tigerair Taiwan Co., Ltd. also leased flight equipment under operating leaseagreements, in accordance to the contract, Tigerair Taiwan Co., Ltd. had to pay the maintenance monthly
based on the actual flying hours.

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

Operating costs
Operating expenses

For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$ 151,143
111,237$

99,513
69,771$ 452,338
261,034$ 295,639
140,148$ 262,380$ 169,284$ 713,372$ 435,787- 35 -

27. EQUITY
a. Share capital
Common shares

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

September 30,
2016

December 31,
2015

September 30,
2015

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

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

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

September 30,
2016

December 31,
2015

September 30,
2015$ 552,470$ 552,470$ 552,470

2,673
11,7471,019
232,023

1,156
11,7471,019
232,023

11,747955
1,156
232,023$ 799,932$ 798,415$ 798,351

b. Capital surplus

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

The capital surplus from shares issued in excess of par (including additional paid-in capital fromissuance of common shares and treasury stock transactions) and donations may be used to offset
deficits; in addition, when the Group has no deficit, such capital surplus may be distributed as cash
dividends or transferred to capital (but limited to a certain percentage of the Group’s paid-in capital on
yearly basis).
The capital surplus arising from long-term investments and employee stock options may not be used forother purpose but to offset deficits. The capital surplus arising from stock option for employees andconvertible bonds, cannot be used for any purpose.
c. Appropriation of earnings and dividend policy
Under the dividend policy as set forth in the Articles amended on June 24, 2016 based on the amended
Company Act, where the Company made profit in a fiscal year, the profit shall be first utilized forpaying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining
profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then
any remaining profit together with any undistributed retained earnings shall be used by the Company’sboard of directors as the basis for proposing a distribution plan with due consideration of future aircraft
acquisition plan and fund demand, which should be resolved in the shareholders’ meeting for
distribution of dividends and bonus to shareholders by cash or stock (cash dividends cannot be less than
30% of total dividends distributed). However, if the Company’s profit before tax in a fiscal year after
deductions for the abovementioned items is not sufficient for earnings distribution, retained earnings
can be used as supplement for the deficiency. If the Company has no deficit in a fiscal year, theCompany can distribute all or part of the capital surplus by cash or stock with due consideration offinance, marketing and management requirements in accordance with the laws and regulations.

- 36 -

For the earnings distribution under the Company’s Articles of Incorporation before the amendment,
please refer to Note 27 of the consolidated financial statements for the year ended December 31, 2015.
Distribution of dividends should be resolved and recognized in the shareholders’ meeting in thefollowing year.
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 earnings 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$1,511,953 thousand. No bonus to employees was appropriated for 2014 because of a net loss inthat year.
2) Appropriation of earnings in 2015
The appropriations of earnings for 2015 had been resolved of shareholders’ meeting on June 24,
2016. The appropriations and dividends per share were as follows:
Appropriationof Earnings$

Legal reserve
Special reserve
Cash dividends

287,224
76,4862,508,525

Dividends Per
Share (NT$)$0.458522382

Except for non-ROC resident stockholders, all stockholders receiving the unappropriated earnings
generated on and after January 1, 1998 are allowed a tax credit equal to their proportionate share of
the income tax paid by the Group.
d. Others equity items
The movement of other equity items were as follows:

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

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

Total

$

4,015

$ (2,009,565)$ (1,905,698)

85,324--85,324-(6,382)-(6,382)--(199,375)(199,375)--

2,425,899

2,425,899(Continued)

99,852- 37 -$

Exchange
Unrealized
Differences on Gain (Loss) on
Translating
Available-forForeign
sale Financial
Operations
AssetsCash Flow
Hedge$(14,504)

$

(182)
-

$

(377,881)$(182)(392,385)

Balance on September 30, 2015$

170,672$(2,549)$(160,922)

$

7,201

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

157,959

$

1,755

$

(225,997)$(66,283)

Balance on September 30, 2016$

Income of associates and joint
ventures accounted for using
the equity method
Effect of income tax

Total(127,828)--(127,828)-(2,359)-(2,359)--(358,448)(358,448)

20,024-

396,032(7,236)

396,032
12,78850,155

$

(604)

$

(195,649)$(146,098)(Concluded)e. Non-controlling interest
For the Nine Months Ended
September 30
2016
2015
Beginning balance
Net income attributable to non-controlling interest
Exchange differences arising on translating the foreign
operations
Unrealized gain or loss on available-for-sale financial assets
Cumulative gain (loss) arising on changes in fair value ofhedging instruments
Cumulative (loss) gain arising on changes in fair value ofhedging instruments reclassified to profit or loss
Effect of income tax
Acquisition of non-controlling interests in subsidiaries
Dividends paid by subsidiaries$ 2,286,647
191,301$ 2,321,737
163,128(2,760)(6,575)

7,919(7,097)

2,523

1,393

2,086
(5,130)(4,548)(201,886)(108)(2,754)(230)(157,053)

Ending balance$ 2,261,658$ 2,326,935- 38 -

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

Purpose of Treasury Stock

Reduction
Duringthe Year(Note)

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

2,889

-

2,889

2,889

-

2,889

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

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value$ 19,398
7,612$ 19,398
7,612$ 27,010$ 27,010$ 24,895
9,770$ 24,895
9,770$ 34,665$ 34,665$ 23,340
9,159$ 23,340
9,159$ 32,499$ 32,499

September 30, 2016
2,075
814

Mandarin Airlines
Hwa Hsia

December 31, 2015
2,075
814

Mandarin Airlines
Hwa Hsia

September 30, 2015
2,075
814

Mandarin Airlines
Hwa Hsia

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

- 39 -

28. NET INCOME
a. Revenue
For the Three Months Ended
September 30
2016
2015
Passenger
Cargo
OthersFor the Nine Months Ended
September 30
2016
2015

$ 25,267,766
8,775,508
2,509,597$ 25,371,204
9,257,257
2,460,683$ 72,814,244
25,035,280
7,537,336$ 72,104,647
30,461,190
7,308,459$ 36,552,871$ 37,089,144$ 105,386,860$ 109,874,296

b. Other income

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

For the Nine Months Ended
September 30
2016
2015

$

48,7799,991
54,182
68,084$

118,91750,836
1,660,686
391,497$

193,002110,376
59,927219,381$$

181,036$ 2,221,936$

582,686$ 2,939,347

343,536
151,135
1,883,736
560,940c. Other gains and losses

Gain on disposal property, plantand equipment
Loss on disposal of non-current
assets held for sale
Gain (loss) arising on financial
assets classified as held for
tradingGain (loss) on foreignexchange, net
Impairment loss on assets held
for sale
Loss on disposal of investments
OthersFor the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$

$

$

2,053

$

4,637

11,337

$

8,078

-

-

(26,429)-(11,537)

197,012(30,580)

148,628(203,421)

414,751(655,487)

411,716(138,335)(358)(67,316)(1,899,372)(226,868)(138,335)(358)(703,465)(1,899,372)(601,834)(418,914)$ (1,509,840)$ (1,543,317)$ (1,932,784)

The mediation of labor-management disputes between the Company and Taoyuan Flight Attendants
Union (TFAU) was unsuccessful, TFAU acquired the right to strike through strike vote, and started thestrike at twelve a.m. on June 24, 2016, and the scheduled flight resumed normal on June 25, 2016 after
reaching a consensus for both parties. Other related information please refer to the Taiwan Stock
Exchange Market Observation Post System.
The Company had provided compensatory plan to the passengers and the agents suffered loss from thestrike, and related compensation expense was about $201,000 thousand.
- 40 -

d. Financial cost

Interest expense
Bonds payable
Bank loan
Interest on obligations underfinancial lease
Loss arising on derivatives as
designated hedging
instruments in cash flow
hedge accounting
relationship reclassified
from equity to profit orloss
OthersFor the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$

$

$

73,557
209,386$

67,447338,387

212,798
700,832$

224,652
1,052,272

17,91736,86457,955

111,093

2,989
72

1,494
64

6,901
72

4,530
64

978,558$ 1,392,611

303,921$444,256$

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

For the Nine Months Ended
September 30
2016
2015

Capitalization rate

1.53%-1.62%

1.74%-1.79%

1.53%-1.73%

1.74%-1.79%

Capitalization interest$ 109,360$$ 329,434$ 241,392

89,820e. Depreciation and amortization expense

Property, plant, equipment
Investment property
Intangible asset
Depreciation and amortization
expenseAn analysis of depreciation byfunction
Operating cost
Operating expense

For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$

4,389,12570
44,189$4,236,992
70
18,370$ 13,001,928
210
92,197$ 13,052,574
210
49,740$4,433,384$

4,255,432$ 13,094,335$ 13,102,524$

4,216,759
172,436$

4,069,872
167,190$ 12,486,891
515,247$ 12,438,448
614,336$

4,389,195$

4,237,062$ 13,002,138$ 13,052,784(Continued)- 41 -

An analysis of amortization byfunction
Operating cost
Operating expense

For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$

454
43,735$211
18,159$486
91,711$

633
49,107$44,189$18,370$92,197$49,740(Concluded)

f. Employment benefit expense

Post-employment benefit
Defined contribution plan
Defined benefit plan

Other employee benefits
Salary expenses
Personnel service expenses

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

For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$

108,722
262,380$

94,514
169,284$

316,061
713,372$

270,034
435,787$

371,102$

263,798$

1,029,433$

705,821$

4,902,196
1,310,920$

4,909,655
1,017,934$ 14,323,300
3,810,497$ 13,646,320
3,618,037$

6,213,116$

5,927,589$ 18,133,797$ 17,264,357$

5,410,357
1,173,861$

5,100,766
1,090,621$ 15,610,016
3,553,214$ 14,626,436
3,343,742$

6,584,218$

6,191,387$ 19,163,230$ 17,970,178

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 thenine months ended September 30, 2016, the employees’ compensation was $681,690 thousand
representing x% of the base net profit. The employee bonus for the three months and nine months
ended September 30, 2015 was calculated based on the previous Article of Incorporation andrecognized $70,135 thousand and $71,589 thousand, respectively. For the year ended December 31,
2015, the employees’ compensation is $1,810,196 thousand of the base net profit. The employees’
compensation in cash for the year ended December 31, 2015 have been approved by the Company’sboard of directors on January 15, 2016 and are subject to the resolution of the amendments to theCompany’s Articles of Incorporation for adoption by the shareholders in their meeting to be held on
June 24, 2016, and in addition thereto a report of such distribution shall be submitted to theshareholders’ meeting. 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 resolved by the shareholders’ meeting in 2015 are available on the Market
Observation Post System website of the Taiwan Stock Exchange.

- 42 -

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 and adjusted in the subsequent year.

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

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

For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$

$

57,455-$378,282$

63,757
419,885435,737$

483,642$

163,947(116)$

185,385
1,983

713,137

1,007,655

876,968$ 1,195,023

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

For the Nine Months Ended
September 30
2016
2015

$

$

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

$

8,829

$ (24,214)

15,758$ (16,412)

1,739(82,284)(8,100)(378,727)

10,568$ (106,498)

7,658$ (395,139)

September 30,
2016

December 31,
2015

September 30,
2015$ 128,967$ 551,908$ 539,835$

c. Integrated income tax

Imputation credits accounts

Expected creditable tax ratio on December 31, 2015 was 20.22%. Since the Group had accumulated
deficit as of December 31, 2014, there was no expected creditable tax ratio.

- 43 -

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 2014, 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 for reinvestigation, administrative appeal andadministrative proceedings but the Supreme Administrative Court affirmed the additional tax paymentof $129,350 thousand on December 8, 2011, and TACT made the additional tax payment. Because thedecision of the court on the amount of fine remained the same, TACT filed an administrative remedy,
and the High Administrative Court had reached a decision on June 15, 2016 that TACT should pay 0.46
of the amount of the excessive distribution of ICA. However, TACT refused to accept the resolution
and appealed to the Supreme Administrative Court on July 4, 2016. Nevertheless, TACT recognized aprovision for fine in the amount of $38,805 thousand.

30. EARNINGS PER SHARE
The numerators and denominators used in calculating earning per share were as follows:
For the Three Months Ended
September 30
2016
2015
Basic earnings per share
Diluted earnings per share
Earnings used in the computationof basic earnings per share
Effect of potentially dilutive
ordinary shares:
Interest on convertible bonds(after tax)
Earnings used in the computationof diluted earnings per share
Weighted average number ofordinary shares in computationof basic earnings per share
Effect of potentially dilutive
ordinary shares:
Convertible bonds
Employees’ compensation orbonus issue to employees
Weighted average number ofordinary shares used in thecomputation of diluted earnings
per share$$

For the Nine Months Ended
September 30
2016
2015

$0.09
$0.09

$0.39
$0.38

$0.33
$0.32

$0.94
$0.90

513,429$ 2,133,705$ 1,807,768$ 5,100,661

11,573

10,35534,71837,380525,002$ 2,144,060$ 1,842,486$ 5,138,041

5,468,002

5,467,395

5,468,002

5,420,841

230,610

219,714230,610267,278

1,587

3,190

81,2344,760

5,700,199

5,690,299

5,779,846

5,692,879- 44 -

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, as the effect is dilutive. Such dilutive effect of the potential
shares is included in the computation of diluted earnings per share until the number of shares to be
distributed to employees is resolved in the following year.

31. CAPITAL MANAGEMENT
The goal, policies and procedures as well as the composition of the Group’s capital management are thesame as those stated in the consolidated financial statements for the year ended December 31, 2015; forrelated information, please refer to Note 31.

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

December 31, 2015
Carrying
AmountFair Value

September 30, 2015
Carrying
AmountFair Value

Financial liabilities
Bonds payable
Loans and debt

$ 23,179,164
81,228,066$ 23,507,176
81,279,447$ 15,844,106
87,783,617$ 16,459,680
87,944,264$ 15,832,442
91,616,482$ 16,252,367
91,730,709

Some long-term debts and capital lease obligations are floating-rate financial liabilities, so theircarrying values are their fair values. As of September 30, 2016, December 31, 2015 and September
30, 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 0.935%, 0.433% and 0.747%,
respectively, prevailing in the market for long-term debts (Level 2). Fair values of bond payable
trading in OTC are based on quoted market prices (Level 1).
b. Fair value measurements recognized in the balance sheets
The following table provides an analysis of financial instruments that are measured subsequent to initialrecognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value isobservable:
1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;2) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); and3) Level 3 fair value measurements are those derived from valuation techniques that include inputs forthe asset or liability that are not based on observable market data (unobservable inputs).

- 45 -

September 30, 2016
Level 1
Financial assets at FVTPL
Derivative instrument
Domestic money market fund$Level 2

Level 3

Total

436,837

$

1,010
-

$

-

$

1,010
436,837$ 436,837

$

1,010

$

-

$ 437,847

Financial liabilities at FVTPL
Derivative instrument

$

-

$

5,419

$

-

$

5,419

Available-for-sale financial
assetsSecurities listed in domestic$

14,099

$

-

$

-

$

14,099Derivative financial assets forhedging

$

-

$

6,818

$

199

$

7,017

Derivative financial liabilities forhedging$-$ 192,562$

44,691$ 237,253

December 31, 2015
Level 1
Financial assets at FVTPL
Derivative instrument
Domestic money market fund$Level 2

Level 3

Total

478,508$

65,528-$-$$ 478,508$

65,528$-$ 544,036

Available-for-sale financial
assetsSecurities listed in domestic$

19,080

$

-

$

-

$

19,080Derivative financial assets forhedging$-$

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

12,702$ 312,278- 46 -

65,528478,508$ 324,980

September 30, 2015
Level 1

Level 2244,970$ 164,848-$-$ 164,848
244,970$ 244,970$ 164,848$-$ 409,818

Available-for-sale financial
assetsSecurities listed in domestic$

15,403

$

-

$

-

$

15,403

Derivative financial assets forhedging$-$

57,470$19,249$76,719Derivative financial liabilities forhedging$-$

12,065$ 245,335

Financial assets at FVTPL
Derivative instrument
Domestic money market fund$Level 3

Total

$ 257,400

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

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

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

- 47 -

c. Categories of financial instruments
September 30,
2016

December 31,
2015

September 30,
2015

$

$

$

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

437,847
154,702
7,017
33,402,758

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

409,818
382,760
76,71936,238,501$ 34,002,324$ 36,651,690$ 37,107,798

$

$

$

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

5,419
237,253
123,293,645$ 123,536,317

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

257,400
130,617,224$ 130,874,624

Note 1: The balances included loans and receivables measured at amortized cost, which comprise cash
and cash equivalents, notes and accounts receivables, accounts receivable - related parties,
other receivables, refundable deposits, other financial asset and other restricted financial asset.
Note 2: The balances included financial liabilities measured at amortized cost, which compriseshort-term loans, short-term notes payable, notes and accounts payables, accounts payable related parties, other payable, bonds payable and long-term loans, capital lease obligation, partof other current liabilities, part of other noncurrent liability and guarantee deposit.
Note 3: Including the financial assets measured at cost.
d. Financial risk management objectives and policies
The Group has risk management and hedging strategies to respond to changes in the economic andfinancial environment and in the fuel market. To reduce the financial risks from changes in interest
rates, exchange rates and in fuel prices, the Group controls its operating costs to stay within a specified
range by using appropriate financial hedging instruments and hedging percentages in accordance withthe “Processing Program of Derivative Financial Instrument Transactions” approved by the Groupstockholders to reduce the impact of market price changes on earnings. These risks include market
risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
In addition, the Group has a risk management committee, which meets periodically to evaluate theperformance of derivative instruments and determine the appropriate hedging percentage. This
committee informs the Group of global economic and financial conditions, controls the entire financial
risks resulting from changes in the financial environment and fuel prices, and develops the strategy andresponse to avoid financial risk with the assistance of financial risk experts for effective risk
management.
1) Market risk
The Group is primarily exposed to the financial risks of changes in foreign exchange rates andinterest rates. The Group entered into derivative financial instruments to manage its exposure toforeign currency risk and interest rate risk.

- 48 -

The Group enters into forward contracts, foreign currency option contracts, and interest swap
contracts to hedge against risks through derivative financial instruments that are highly negatively
correlated to the fair values of hedged items, then evaluates 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 a decrease in pre-tax profit of $140,444 thousand by the end of
September 30, 2016 and increase in pre-tax profit of $15,058 thousand, by the end of September
30, 2015.
b) Interest rate risk
The Group enters into interest swap contracts to hedge against the risks on change in interest
rate on net liabilities portions.
The risk is managed by the Group through maintaining an appropriate mix of fixed and floating
rate borrowings, and using interest rate swap contracts and forward interest rate contracts.
The carrying amount of the Group’s financial liabilities with exposure to interest rates at the endof the reporting period were as follows.

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

September 30,
2016

December 31,
2015

September 30,
2015$ 23,725,660$ 16,723,881$ 16,877,850

86,445,979

93,742,231

98,577,922- 49 -

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 been one yard (25 basis) point higher and had all other variables been held
constant, the Group’s pretax profit for the nine months ended September 30, 2016 would havedecreased by $162,086 thousand. Had interest rates increased one yard (25 basis) point andhad all other variables been held constant, the Group’s pretax profit for the nine months ended
September 30, 2015 would have decreased by $184,834 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 Nine Months Ended September 30
2016
2015
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
Fuel price increase 5%
Fuel price decrease 5%

$

-

$

180
(180)

$ 19,820(21,423)$ 90,243(61,802)2) Credit risk
The goal, policies and procedure of credit risk management are same as consolidated financial
statement in 2015. Related instruction please referred to Note 32.
3) Liquidity risk
The goal, policies and procedures of liquidity risk management are the same as consolidated
financial statement in 2015. Related instruction can be referred to Note 32.

- 50 -

33. RELATED-PARTY TRANSACTIONS
The transactions, accounts balances, income and expenses between related parties were eliminated from theconsolidated report and, therefore, were not disclosed in this note. Except for the disclosures stated inother notes, transactions between the Group and its related parties are disclosed below:
a. Operating transactions
For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$
$
$

439
3,634
6,203

$
$
$

755
3,618
9,133

$
$
$

$
$
$

159,276
405,836
14,027$$$

152,659
406,163
21,107

Sales of goods
Associates
Jointly controlled entities
Major stockholder

1,743
10,44723,182

$
$
$

1,650
10,642
26,696

Purchases of goods
Associates
Jointly controlled entities
Major stockholder$ 489,490$ 1,190,934$
51,669$ 419,859$ 1,155,520$
60,548The accounts receivable - related parties at reporting dates were as follows:
September 30,
2016
Associates
Jointly controlled entities
Major stockholder

December 31,
2015

September 30,
2015

$

2
1,815
2,138

$

182
599
3,093

$

238
1,796
2,828

$

3,955

$

3,874

$

4,862

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

December 31,
2015$ 100,354
412,443
4,604$

98,245388,371
7,138$ 517,401$ 493,754

September 30,
2015$

79,612411,077
6,544$ 497,233

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.

- 51 -

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 September 30, 2016 and 2015, the Company had paid rentals of about $51,669 thousand
and $60,548 thousand, respectively; for the three months ended September 30, 2016 and 2015, were
$14,027 thousand and $21,107 thousand.
c. Endorsements and guarantees
September 30, 2016
ActualAuthorized
AmountAmountUsed

December 31, 2015
ActualAuthorized
AmountAmountUsed

September 30, 2015
ActualAuthorized
AmountAmountUsed$ 3,850,000
1,080,000
180,000
893,793$ 3,400,000
1,080,000
236,629
180,000
937,895$ 3,400,000
1,080,000
290,530
180,000
937,895

The Company
Cal Park
Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan$ 2,728,000
456,056
1,586
426,362$ 2,739,000
486,815
236,629
6,343
447,399$ 2,739,000
506,453
290,530
7,929
447,399d. Compensation of key management personnel

Short-term employee benefits
Post-employment benefits

For the Three Months Ended
September 30
2016
2015

For the Nine Months Ended
September 30
2016
2015

$

11,677
9,944$

10,4152,105$

38,608
11,467$30,655
3,235$

21,621$

12,520$50,075$33,890The compensation of directors and key executives was determined by the remuneration committee
based on the individual performance 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

September 30,
2016

December 31,
2015

September 30,
2015$ 86,827,242$ 90,642,565$ 89,859,894

44,903-

268,790236,634

311,765
290,530$ 86,872,145$ 91,147,989$ 90,462,189

The above US Treasury bill had been pledged as collaterals for Freighter Prince Ltd.

- 52 -

35. COMMITMENTS AND CONTINGENT LIABILITIESAs of September 30, 2016, the Group had commitments and contingent liabilities (except for thosementioned 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. The aircraft are expected to be delivered from 2016 to
2018, and one aircraft had been handed over in September 2016.
Prepayments for aircraft purchases were as follows:
September 30, 2016

December 31, 2015

September 30, 2015

US$801,351 thousand

US$685,231 thousand

US$629,587 thousand

b. For the future development of the Group’s business, the Group made a lease contract with BOC
Aviation and letter to lease six 737-800 aircrafts. The expected delivery slot will start from August
2016.
c. The Tigerair Taiwan entered into a lease contract of the four A320-200 aircrafts with 10 years leaseterm on July, November and December 2015, two of which had been delivered in January and June
2016. The expected delivery date of the rest aircrafts will be in January and December 2017.
d. Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract with the Civil
Aeronautics Administrations (CAA) on January 14, 2000. The chartered operation period (COP) is 20
years from the date of transfer of the chartered operation rights from CAA to TACT. The terminal
expansion and improvements and the equipment installation and upgrade in the Taiwan Taoyuan
International Airport cargo terminal and Kaohsiung cargo terminal were expected to be completed in
the first 10 years of the COP. This construction project was approved by TACT’s board in 2003.
The total estimated expense of the construction project was $8,490,000 thousand. Designation ofproject was from 2004 and the construction began in 2008. TACT filed application for a 10-year
extension of the COP for the cargo terminals in Taiwan Taoyuan International Airport and KaohsiungInternational Airport, and got the approvals from Taoyuan Airport Corporation and CAA in July 2013
and July 2015, respectively.
The original total expenditure of the previous main construction project was $8,490,000 thousand.
However, TACT filed an arbitration for the total amount of expenditure in 2012 to revise the total
amount to $6,840,000 thousand.
As of September 30, 2016, TACT had signed the following construction contracts with unrelatedparties:

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.

- 53 -

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

86,380As of September 30, 2016, the cumulated consultant service expense and construction equipment had
amounted to $413,327 thousand (VAT included) and $4,160,937 thousand (VAT included),
respectively. Upon completion of the projects, the amount of $410,041 thousand (VAT included) and$4,101,052 thousand (VAT included) were reclassified to property, plant, and equipment. The
remaining cumulative payments were recognized under construction in progress.
Assets acquired from cargo terminal improvements, equipment acquisition and subsequent equipment
acquisition and replacement will be transferred to the government without any compensation when thechartered operating license expires.
e. TACT should pay royalties to CAA during the chartered operation period. The calculation is based on
annual sales (including operating revenue and nonoperating revenue but excluding the rental revenue
from specific district), and CAA has the option to adjust the royalty rates every 3 years starting from thedate of transfer of the chartered operation right on the basis of actual revenue and expenditure. The
royalty rates are based on CAA letter order No. 1000021973 and have remained the same as those in theoriginal contract signed in April 2012; these rates were listed as follows:
Annual Operating AmountRoyalty Rate

Below $2 billion
Above $2 billion but below $4 billion
Above $4 billion but below $6 billion
Above $6 billion but below $8 billion
Above $8 billion but below $10 billion
Above $10 billion but below $12 billion
Above $12 billion

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

f. CAL Park Co., Ltd. (“CAL Park”) signed “Taiwan Taoyuan International Airport Aviation Operation
Center (including Airport Hotel) Construction Operating Contract” with the CAA on September 20,
2006. However, on November 1, 2010, the Taoyuan Airport Corporation took over the CAA’s rights
on this contract from the CAA. The contract is effective for 50 years (consisting of the development
stage and operating period) from the contract date. Three years before contract expiry date, CAL Park
has the first option to renew the contract once with a 20-year extension.
CAL Park’s business scope includes providing business and other operating space related to civil airtransport, hotels, aviation service and related industries adhered to the base and essential services law
and approved by the Taoyuan Airport Corporation.
CAL Park should pay land rentals on the date of the registration of surface rights. The rental rates forthe development stage differ from those for the operation period. The rental rates should follow
Article No. 2 of the “Regulations for Favorable Rentals Regarding Public Land Lease and Superficies
in Infrastructure Projects,” which states that rental calculation in the development stage should include
the land value added tax plus the necessary maintenance fee; in the operation period, rentals are 60% of
the amount based on the National Building Land Rental Standard plus land value tax, value-added tax
and the necessary maintenance fee.
CAL Park should pay construction and operation security deposits of $100,000 thousand (using a
refundable certificate deposit recognized under deposits-in). If CAL Park complies with the contract
terms within three months after the initial operation date, half of the security deposits will be refundedinterest free, and the remaining amount will be refunded within three months after the end of theoperating period and the completion of asset transfer. In May 2011, CAL Park received the refunded
security deposits of $50,000 thousand without interest.

- 54 -

During the 50 years beginning from the initial operation date of CAL Park to the end of the construction
period, CAL Park should pay royalties based on the operating revenue estimated in the financial plan of
its investment execution proposal. If the sales and business tax declared and filed by a business entity
for a single year exceeds 10% of the operating revenue as estimated in the financial plan in its
investment execution proposal, CAL Park should pay additional royalties at 10% of this excess.
CAL Park should submit the asset transfer plan within five years before the expiry date of the charteredoperation period, begin the negotiation of the asset transfer contract, and complete the assignation nolater than three years before the expiry date of the chartered period. If CAA decides not to keep thebuilding and equipment on the base area, CAL Park should remove all related building and equipment
within three months after the expiry date.
g. The Group has been named as a defendant, together with other airline members of the Association ofAsia Pacific Airlines, in a civil class action filed at the U.S. Northern District Court of California by agroup of passengers, who alleged that there was an antitrust violation in December 2007. 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.

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:
September 30, 2016
Foreign
Currencies

Exchange Rate

Carrying
Amount434,535
13,559202,420
2,893,598
632,39631.3480
35.2113
4.04200.30994.6992$ 13,621,811
477,431
818,185896,729
2,979,025

83,408
1,535
27,097250,087
59,87231.3480
35.2113
4.04200.30994.69922,616,827
54,030110,01477,438282,913

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

- 55 -

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
September 30, 2015
Foreign
Currencies

Carrying
AmountExchange Rate

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

278,019
16,663
196,492
2,353,734
2,454,023

32.8947
37.0370
4.24630.27475.1787348,297
6,082
73,043
5,021,645
169,104

32.8947
37.0370
4.24630.27475.1787$

9,145,345
605,582
834,366
646,582
12,708,633

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

11,457,115
225,274
310,163
1,379,452
875,740

For the three months ended and nine months ended September 30, 2016 and 2015, net foreign exchange
losses and gains were $(203,421) thousand and $414,751 thousand, $(655,487) thousand and $411,716
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 and functional currencies of theGroup entities.

- 56 -

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

None2) Endorsement/guarantee provided: Table 1 (attached)
3) Marketable securities held: Table 2 (attached)4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: None
5) Acquisition of individual real estates at costs or price of at least NT$100 million or 20% of thepaid-in capital: None
6) Disposal of individual real estates at cost or prices of at least NT$100 million or 20% of the paid-in
capital: None
7) Total purchase from or sale to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 3 (attached)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 4 (attached)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 9b. Investment in Mainland China: Table 6 (attached)c. Business relationship and important transactions between China Airline, Ltd. and its subsidiaries:
Table 7 (attached)

38. SEGMENT INFORMATION
Segment Information
The Group mainly engages in air transportation services for passengers and cargo; the services include
airport service, storage service, and other air transportation services which are below the financial thresholdfor an operating segment of the Group. Therefore, the Group’s main reportable segment is airtransportation. The accounting policies of the reportable segment are consistent with the accounting
policies described in Note 4.

- 57 -

For the Nine Months Ended September 30, 2016
Air
Adjustment andTransportation
OthersWrite-off
Total
Operating revenue$ 104,254,198$

5,883,493$(4,750,831)

Operating profit and losses
Interest revenue
Investment income accounted for by
the equity method
Revenue
Financial cost
Expense$$871,633$-

Profit before income tax$ 121,298,921

3,546,085$ 105,386,860$

4,417,718
193,002397,508
332,601(978,558)(1,486,234)$

9,554,197$-$

2,876,037

Identifiable assets
Investment accounted for by the equity
methodAssets$ 130,853,118

Total assets$ 216,571,480

2,809,980
82,908,382

For the Nine Months Ended September 30, 2015
Air
Adjustment andTransportation
OthersWrite-off
Total
Operating revenue$ 109,353,002$

5,585,603$(5,064,309)

Operating profit and losses
Interest revenue
Investment income accounted for by
the equity method
Revenue
Financial cost
Expense$$674,483$

21,292

5,759,165$

6,454,940
343,536
389,920
2,827,722(1,392,611)(2,164,695)

Profit before income tax
Identifiable assets
Investment accounted for by the equity
methodAssets$ 109,874,296$$ 124,527,204$

9,738,251$(53)

6,458,812$ 134,265,402
2,787,227
87,400,146

Total assets$ 224,452,775- 58 -TABLE 1

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

Counterparty
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 EachCounterparty’s
Maximum
Endorsement/
Balance for the Ending Balance
Guarantee
PeriodAmounts(Note 1)

ActualBorrowingAmount$ 11,497,133
11,497,133
11,497,133
11,497,133
11,497,133$ 2,728,000
456,056
1,586
426,362$ 3,850,000
1,080,000
240,586
180,000
953,579$ 3,850,000
1,080,000
180,000
893,793

Note 1:

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

Note 2:

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

- 59 -

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

-

6.70
1.88
0.31
1.55

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)

$ 28,742,834
28,742,834
28,742,834
28,742,834
28,742,834

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 HELDSEPTEMBER 30, 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

Mandarin Airlines

Cal-Asia Investment

Sabre Distribution Network

Taiwan Airport Services

Stock
China Airlines

Relationship with
the Holding
Company-

Parent company

September 30, 2016
Financial Statement AccountShares/Units

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

Available-for-sale financial asset - 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

Beneficial certificatesFuh Hwa Money Market Fund-

Barclays America Bonds Fund-

Deutsche America Bonds Fund

-

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

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

Beneficial certificates
Mirae Asset Solomon Money Market Fund-

Mega Diamond Money Market Fund-

Franklin Templeton Sinoam Money Market Fund-

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

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

Stock
TransAsia Airways-

Available-for-sale financial asset - noncurrent

Carrying Value$

Percentage ofOwnership

52,704473
11,00056,023

13.59
11.00
15.00

2,074,628

19,39819,702,811.6

Market Valueor Net Asset
Value

$

Note

62,744
21,487
21,053Note 1
Note 1--

19,398-249,329-

249,329-

1,000,000

31,576-

31,576-1,000,000

30,599-30,599--20,403

5.83
5.45(2,549)2,211

Note 2
Note 2

265,726.48

3,319

-

3,319

-

4,637,002.66

57,544-57,544-

3,166,097.86

32,375-32,375-1,000,696.31

12,409-12,409-991,355.30

15,006-15,006-

2,277,786

14,0990.4

14,099(Continued)- 60 -

Holding Company Name

Hwa Hsia

Marketable Securities Type and Issuer/Name

Stock
China Airlines
Beneficial certificates
Taishin 1699 Money Market Fund

Relationship with
the Holding
Company

Parent company-

September 30, 2016
Financial Statement AccountShares/Units

Available-for-sale financial asset - current

814,152

Financial assets at fair value through profit orloss - current

349,522.71

Percentage ofCarrying Value
Ownership

$

7,612

-

4,680

-

Market Valueor Net Asset
Value

$

Note

7,612

-

4,680

-

Note 1: The subsidiary’s net asset value was $62,744 thousand, which included common stock and preferred stock as of September 30, 2016.
Note 2: The net asset value was calculated using the investee’s financial statements for the five months ended May 31, 2016, because the group was unable to acquire the investee’s financial statements for the nine months ended September 30,
2016.
(Concluded)- 61 -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 NINE MONTHS ENDED SEPTEMBER 30, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)Transaction Details
Company Name

China Airlines, Ltd.
(“China Airlines”)

Related Party

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

Nature of Relationship

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

Purchase/
Sale
Sale
Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
PurchaseAmount% toTotal$ (2,040,950)
1,110,618
851,462
158,815
221,010(233,167)
301,979
229,933
279,166
162,907
132,842(2.15)
1.34
1.03
0.19
0.27
(0.25)
0.36
0.28
0.34
0.20
0.16

- 62 -

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

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

Unit Price
$

-

-

$

482,960(393,224)(333,883)(34,158)(50,772)
60,549(36,264)(72,015)(59,692)(54,302)(153,859)

6.09(31.83)(27.03)(2.77)(4.11)
0.71(2.94)(5.83)(4.83)(4.40)(8.26)Note-

TABLE 4

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

Overdue
Company Name

Related Party

Nature of RelationshipEnding Balance

Turnover Rate

$ 482,960

5.45

China Airlines, Ltd. (“China Airlines”)

Mandarin Airlines

Subsidiary

Mandarin Airlines

China Airlines

Parent company

276,982

China Pacific Catering Services

China Airlines

Parent company

Taoyuan International Airport Service

China Airlines

Cal Hotel

China Airlines

AmountAllowance for
Bad Debts--$ 288,375

0.34

-

-

268,262-

393,224

3.88

-

-

139,461-

Parent company

333,883

3.53

-

-

187,098-

Parent company

153,859

2.08

-

-

14,750-- 63 -$

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 NINE MONTHS ENDED SEPTEMBER 30, 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company

China Airlines, Ltd.

Investee Company

Location

Main Businesses and Products

Investment Amount
September 30, December 31,
2016
2015

Balance as of September 30, 2016
Percentage ofSharesCarrying Value
Ownership

Net Income(Loss) of theInvestee$

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
77,322150,000,000
188,154,025
135,000,000
2,614,500
43,911,000
34,300,000
7,172,346
13,021,042
28,400,000
7,732,200

100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
24.50

$

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

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

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

47.35
35.78
100.0026.00
55.00

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

Cal Park
Mandarin Airlines
Taiwan Air Cargo Terminal
Cal-Dynasty International
China Pacific Catering Services
Taoyuan International Airport Services
Cal-Asia Investment
Sabre Travel Network (Taiwan)
China Aircraft Service
Asian Compressor Technology
Services
Taiwan Airport Services
Kaohsiung Catering Services
Cal Hotel Co., Ltd
Science Park Logistics
China Pacific Laundry Services

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

Hwa Hsia

Taoyuan, Taiwan

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

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

Airport services
In-flight catering
Hotel business
Storage and customs of services
Cleaning and leasing of the towel of airlines, hotels,
restaurants and health clubs
Cleaning of aircraft and maintenance of machine andequipment
Travel businessTravel business
Forwarding and storage of air cargo
Aircraft lease
Aircraft lease
Air transportation
Aircraft maintenance

Mandarin Airlines

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Taipei, Taiwan
Taipei, Taiwan

Air transportation
Airport services

Cal-Asia Investment

Eastern United International Logistics

Hong Kong

Forwarding and storage of air cargo

HK$

3,329

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

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

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
77,322

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

12,374(25,763)
17,59831,215
152,786
156,915(57,129)
130,444
40,98678,434Note 1
Note 2-

253,352
253,363
363,351
248,254
163,358

117,076
168,780
49,477
63,12727,27155,43860,38949,477
16,413
14,999Note 5-100.0091,546

18,225

17,851

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

100.0051.00
25.00
100.00100.0080.00
100.0024,37033,8076,941
31
31
511,751
20,344

(791)
3,568
4,875
(582,680)(21,387)

(791)
1,820
1,219
(466,144)(21,387)-

200,000
3,574

20,000,000
469,755

10.00
1.08

63,9695,763(582,680)
117,076(58,268)
999

Note 4HK$

3,329

1,050,000

35.00

41,711

8,649

2,964

-

US$

5,877

-

100.00351,524

15,22915,229Note 3200,000
11,658Note 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 non-controlling interests of Taiwan Airport Services from September 2015.

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

- 64 -

1,523,198
1,333,241
1,277,693
1,211,283
646,277
756,607446,405
395,971
509,095
247,795

Note

12,374 $(26,193)
32,58931,215299,580
320,235(57,129)
138,864
204,931
320,137

JPY$

Investment
Income (Loss)

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

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

China Airlines

Investee Company Name

Main Businesses andProducts

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof
January 1, 2016

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

Forwarding and storage $1,054,887
of air cargo(RMB 224,480)

Indirect(Note 1)

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

Forwarding and storageof air cargo(RMB

65,78914,000)

Taikoo (Xiamen) Landing
Gear Services

Investment Flows

Outflow

Accumulated
Outflow ofInvestment
from Taiwan asof
September 30,
2016

Inflow$(US$131,223 $
4,186)-

Indirect(Note 1)-

(US$

61,034
1,947)

Landing gear
1,156,426
maintenance services (US$36,890)Indirect(Note 1)

67,4292,151)-(US$

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

Shanghai Eastern Aircraft
MaintenanceAircraft line
maintenance

Shanghai Eastern UnitedInternational

365,611
11,663)

Indirect(Note 1)

(US$

19,937
636)

-

(US$

97,1793,100)

Indirect(Note 2)

(US$

7,774
248)

-

(US$

Forwarding of air cargo
and ocean freight(US$31,3481,000)

Indirect(Note 3)

5,392
172)

-

(US$

$

-

44,157
9,198)

14.00

62,103
12,936)

14.00

(US$

61,034
1,947) (RMB
67,4292,151)

-

5.83

-

(US$

19,937
636)

-

5.45

-

(US$

7,774
248)

-

(US$

5,392
172)

-

(US$

-

-

-

Limit on Investment$292,790 (US$9,340)$511,537(Note 5)$35,848,395 (Note 6)

Investment
Gain (Loss)

131,223 $
4,186) (RMB-

Investment Amounts
Authorized by Investment Commission,
MOEA

Net Income(Loss) of
the Investee

Accumulated
Carrying Value
Inwardas ofRemittance of
September 30, Earnings as of2016
September 30,
2016

$
(US$

-

Accumulated Investment in Mainland
China as of September 30, 2016

% Ownershipof Direct orIndirect
Investment

8.00

17.15

$
(RMB

6,182 $
230,536 $1,288) (RMB 49,058) (US$97,524
3,111)(Note 4)

(RMB

8,694
106,640
1,811) (RMB 22,693) (US$17,743566)-(Note 4)

20,404
4,342)

-

(RMB

7,774
248)

-

(US$

5,392
172)

-

(US$

-

-

(Continued)- 65 -

Taiwan Airport Services

Investee Company

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

Remittance of Funds

Outward

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

Forwarding and storage $1,054,887
of air cargo(RMB 224,480)

Indirect(Note 7)$
(US$

125,956 $4,018)-

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

Forwarding and storageof air cargo(RMB

Indirect(Note 7)60,4081,927)-(US$

65,78914,000)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof
September 30,
2016

$

-

Investment Amounts Authorized by
Investment Commission, MOEA

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

$186,364 (US$5,945)$186,364 (US$5,945)$321,038 (Note 6)% Ownershipof Direct orIndirect
Investment$(US$125,956 $4,018) (RMB

44,157
9,198)

14.00

60,4081,927) (RMB

62,103
12,936)

14.00

(US$

-

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

Net Income(Loss) of theInvestee

Investment
Income (Loss)

Accumulated
Carrying
Repatriation ofAmount as ofInvestment
September 30, Income as of2016
September 30,
2016

$
(RMB

6,508 $
241,950 $1,288) (RMB 50,294) (US$119,3103,806)(RMB

9,153
121,001
1,811) (RMB 24,342) (US$44,107
1,407)

Note 1: China Airlines, Ltd. the “Company” invested in Cal-Asia Investment, which, in turn, invested in a company located in Mainland China.
Note 2: The Company invested in China Aircraft Services, which in turn, invested in a company located in Mainland China.
Note 3: Cal-Asia Investment invested in Eastern United International Logistics (Holdings), which in turn, invested in a company located in Mainland China.
Note 4: The inward remittance of earnings as of September 30, 2016 amounted to US$3,110,776 and US$566,003.
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)- 66 -TABLE 7

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

0

Company Name

China Airlines, Ltd.

Related Party

Natural of
Relationship(Note 1)

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

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

Accounts

Other operating revenue
Passenger revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Terminal and landing fees
Terminal and landing fees
Terminal and landing fees
Passenger costs
Passenger costs
Other operating cost
Other operating cost
Other operating cost
Other operating cost
Other operating cost
Other operating cost
Operating expense
Interest expense
Interest expense
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties

Amount$61,473
1,756,078
9,629
284,872
2,415
2,898
8,941
7,006
1,503
1,907
8,274
4,349
233,167
10,240851,462
279,166
229,933
68,527
11,598301,979
24,21343,226
9,212
162,907
132,842
5,887
1,035
207
980
482,960
944
3,077
8,553
508
60,5491,061

Transaction Criteria

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions% to Total
Consolidated
Total Revenue
or Assets
0.06
1.67
0.01
0.27
0.01
0.01
0.01
0.22
0.01
0.81
0.26
0.22
0.07
0.01
0.29
0.02
0.04
0.01
0.15
0.13
0.01
0.22
0.03
(Continued)- 67 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

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

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

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

Accounts

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

1,153
3,991
36,264
276,982
333,883
1,282
59,69272,015
2,477
153,859
54,3021,035
207
250,000
50,000The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.02
0.13
0.15
0.03
0.03
0.07
0.03
0.12
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

301,979
9,997
5,343
9,629
8,477
36,264
1,484
1,110
980

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

0.29
0.01
0.01
0.01
0.01
0.02
-

2

Mandarin Airlines

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

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

Passenger revenue
Passenger costs
Terminal and landing fees
Terminal and landing fees
Terminal and landing fees
Operating expense
Interest revenue
Operating revenue
Accounts receivable - related parties
Accounts receivable - related parties
Interest receivable
Notes accounts payable - related parties
Held-to-maturity financial assets
Notes accounts payable - related parties
Notes accounts payable - related parties
Accounts payable - related parties

68,527
1,756,078
79,65630,318
9,997
284,872
1,035
4,260
249
276,982
1,035
482,960
250,000
13,2081,484
3,439

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

0.07
1.67
0.08
0.03
0.01
0.27
0.13
0.22
0.12
0.01
-

3

Taoyuan International Airport Services

Mandarin Airlines
Taiwan Air Cargo Terminal
Tigerair Taiwanccc

Airport service revenue
Airport service revenue
Airport service revenue

30,318
5,343
59,222The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.03
0.01
0.06
(Continued)- 68 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

Accounts

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

b
b
b
c

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

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

851,462
2,415
333,883
3,439

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

0.81
0.15
-

4

Cal-Dynasty International

China Airlines, Ltd.

b

Operating revenue

43,226The same as ordinary transactions

0.04

5

Sabre Travel Network Taiwan

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

b
b
b
b
b
b
b

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

5,887
2,898
207
1,282
207
944
50,000The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.01
0.02

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

279,166
79,656
8,941
59,692
13,208
1,061

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

0.26
0.08
0.01
0.03
0.01
-

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

229,933
8,477
7,006
72,015
1,110

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

0.22
0.01
0.01
0.03
-

8

Dynasty Holidays

China Airlines, Ltd.
China Airlines, Ltd.

bb

Operating revenue
Operating expense

24,213
1,503

The same as ordinary transactions
The same as ordinary transactions

0.02
-

9

Global Sky Express

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

bbbOperating costs
Operating expense
Accounts payable - related parties

61,4731,907
3,077

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

0.06
-

10

Yestrip

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

b
b
b
b
b

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

9,212
8,274
2,477
8,553
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
0.01
-

11

Cal Park

China Airlines, Ltd.
Cal Hotel
China Airlines, Ltd.
Cal HotelbcbcOperating revenue
Operating revenue
Accounts receivable - related parties
Accounts receivable - related parties

162,907
61,69254,302294

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

0.15
0.06
0.03
(Continued)- 69 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

Accounts

12

Cal Hotel

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

b
b
c
b
b
c

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

13

Tigerair Taiwan

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

b
b
c
c
c
b

14

Taiwan Aircraft Maintenance andEngineering

China Airlines, Ltd.
China Airlines, Ltd.

bb

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

132,842
4,349
61,692
153,859508
294

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

0.13
0.06
0.07
-

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

233,167
60,54959,222
4,260
249
11,598The 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

0.22
0.03
0.06
0.01

Operating expense
Accounts payable - related parties

10,2401,153

The same as ordinary transactions
The same as ordinary transactions

0.01-

Note 1: Three kinds of business relationships between China Airline, Ltd. and its subsidiaries were as follows:a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.
Note 2: Intercompany transactions were written off in consolidated financial report.
(Concluded)- 70 -