China Airlines Co., Ltd. ChairmanCargo Sales & Services, Europe Room G2045-G2050, 2nd Floor, Cargo...

China Airlines Co., Ltd.

Chairman Hsieh, Su-Chien

Spokesperson & Deputy Spokesman

Name Spokesman Deputy Spokesman Liu, Tsao-Yang Chen, I-Chieh

Title Vice President, CORPORATE COMMUNICATIONS OFFICE Vice President, FINANCE DIV. Tel 886-3-399-8888 886-3-399-8888 Fax 886-3-399-8640 886-3-399-8313 Email [email protected] je [email protected] Headquarter, Branches and Plant

Organiza on Unit Address Tel Headquarter No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan 886-3-399-8888 Taipei Branch No.131, Sec on 3, Nanjing East Road, Taipei City 104, Taiwan 886-2-2715-2233 Cargo Sales & Service, Taiwan No.3, Aly. 123, Ln. 405, Dunhua N. Rd., Songshan Dist., Taipei City 105, Taiwan 886-2-2715-5151 Kaohsiung Branch 6 Floor, Asia-Paci c Financial Plaza, No.38 Of Xin Guang Road, Lingya District, Kaohsiung City 802, Taiwan 886-7-213-1200 Tainan O ce Room A, 6 Floor, No.358, Sec on 1, Tungmen Road, Tainan, Taiwan 886-6-235-8099 Taichung Branch Room 2, 15th Floor, No.218, Sec on 2, Taiwan Boulevard, West District, Taichung City 403, Taiwan 886-4-2325-9592 Maintenance Div. No.15, Hangqin S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan 886-3-383-4251 Cargo Sales & Services Mainland China Suite 22i, No.726 Of West Yanan Road, Changning District, Shanghai, China 86-21-2220-3292

Beijing O ce Bright China Chang An Building, Tower 2, Unit 1025, No.7 Jianguomen Nei Avenue, Beijing, China 86-10-6510-2671 Shanghai O ce Suite 22a, No.726 Of West Yanan Road, Changning District, Shanghai, China 86-21-2220-3333 Guangzhou O ce Room 1210, 12th Floor, Teem Tower, No.208 Of Tianhe Road, Tianhe District, Guangzhou, Guangdong, China 86-20-8527-2950

Shenzhen O ce Room 4805, O ce Tower, Shun Hing Di Wang Commercial Center, No.5002 Of Shen Nan East Road, Luohu District, Shenzhen, Guangdong, China 86-755-8246-3560

Xian O ce Room 810, 8th Floor, Gaoxin Building 9, Gaoxin 4th Road, High-Tech Zone, Xi'an, Shaanxi, China 86-29-895-81909 Chengdu O ce Room 1608, South Tower, Baoli Center Building, No.7, Consulate Rd. Chengdu, China 86-28-8602-7508 Zhengzhou O ce Rooms 1101-1102, Tower B, Yuhong Interna onal Building, No.59 Of Zijingshan Road, Zhengzhou, Henan, China 86-371-5562-9880 Changsha O ce Room 3404, Building 2, Block C, Kaifu Wanda Plaza, No.589 Of Zhongshan Road, Changsha , Hunan, China 86-731-8224-0871 Shenyang O ce Room 2009, Tower E, Fortune Center, No.59 Of North Sta on Road, Shen He District, Shenyang, Liaoning, China 86-24-3128-7021 Xiamen O ce Unit 3310, 33rd Floor, Bank Center, No.189 Of Xiahe Road , Xiamen, Fujian, China 86-592-2388-388 Nanjing O ce Room B1-B2, Building 38, Nanjing Center Building, No.1 South Zhongshan Road, Qinhuai District, Nanjing, China 86-25-8467-1050 Ningbo O ce Room 1702, China Ci c Building, No.36 Of Zhenming Road, Haishu District, Ningbo, Zhejiang, China 86-574-8775-4090 Hangzhou O ce Room 2307, Building 2, China Qian Tang Avia on Building, No.66, Shimin St., Jianggan District, Hangzhou, China 86-571-8668-4214 Fuzhou Sta on Room 2508, Zhonggeng Youth Plaza, No.83 Of East Road, Gulou District, Fuzhou, Fujian, China 86-591-8755-9705 Chongqing Sta on Room 2202, No.3 Building, Zhongyu Plaza, No.86 Of Hongjin Avenue, Yubei District, Chongqing, China 86-023-8828-0118 Haikou O ce 18e, Huanhai Business Building, No.15, Jinmao W. Rd., Haukuo Hainan, China 86-898-6853-9677 Nanchang Sta on Rm 701, Unit A, Building 16, No.205 Guangchang S. Rd., Nanchang, Jiangxi Province, China 86-0791-8378-0580 Sanya Sta on Room No.110, 5F, Block B, Sanya Avia on City, Sanya Phoenix Int'l Airport, Hainan 86-0898-8802-4956 Wenzhou Sta on Room 2310, Huameng Business Palace, No.2 Of Chezhan Road, Lucheng District, Wenzhou, Zhejiang, China 86-0577-8605-2181 Wuxi Sta on Room A207, No.18 Airport Second Road, New District, Wuxi City, Jiangsu Province, China 86-0510-8522-8710 Qingdao O ce Unit 2801, O ce Tower, Shangri-La Centre, No.9 Xiang Gang Zhong Lu, Qingdao, China 86-532-6887-7106 Weihai Sta on Unit 2801, O ce Tower, Shangri-La Centre, No.9 Xiang Gang Zhong Lu, Qingdao, China 86-532-6887-7106 Wuhan O ce Room 1315, 13F, New World Interna onal Trade Building, 568 Jianshe Avenue , Wuhan, China 86-27-8555-8172 Xuzhou Sta on Room 537, CUMT University Science Park, Jiefang S. Road, Xuzhou City, Jiangsu, China 86-516-8379-0550 Cargo Sales & Services, Japan Ni ochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan 81-3-6378-8860 Tokyo Branch Ni ochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan 81-3-6378-8855 Osaka Branch Nakanoshima Mitsui Bldg. 9F 3-3, 3-Chome Nakanoshima Kita-Ku Osaka-Shi, Osaka 530-0005, Japan 81-6-6459-5783 Sapporo Branch Kita 1 Jo Mitsui Bldg. 3F, Kita 1, Jo Nishi 5, Chuo-ku, Sapporo-Shi, Hokkaido, 060-0001, Japan 81-11-218-6766 Shizuoka Sta on Shizuoka Airport Terminal Bldg. 1F, 3336-4, Sakaguchi, Makinohara-Shi, Shizuoka, 421-0411, Japan 81-548-29-2668 Toyama Sta on Toyama Airport Interna onal Terminal Building 3F, 191 Akigashima, Toyama-Shi, 939-8252, Japan 81-76-461-7200 Kagoshima Sta on Kagoshima Airport Interna anl Terminal Bldg. 1355-4 Fumoto, Kirishima, Kagoshima 899-6404, Japan 81-995-57-6151 Miyazaki Sta on Miyazaki Airport, Akae Miyazaki 880-0912, Japan 81-985-64-9288 Nagoya Branch NMF Nagoya-Fushimi Bldg. 3F, Nishiki 2-9-27, Naka-ku, Nagoya-Shi, Aichi, 460-0003, Japan 81-52-202-7253 Fukuoka Branch Daihakata Bldg. 8F, 2-20-1 Hakata Ekimae, Hakata-Ku, Fukuoka 812-0011, Japan 81-92-471-7788 Hiroshima Branch Hiroshima-Mitsui Bldg. 7F 2-7-10, Ote-Machi, Naka-Ku, Hiroshima-Shi, Hiroshima, 730-0051, Japan 81-82-542-0883 Takamatsu Sta on Takamatsu Airport Bldg. 1312-7, Oka, Konan-cho, Takamatsu-shi, Kagawa, 761-1401, Japan 81-87-815-8702

Kumamoto Sta on Kumamoto Airport Int'l Terminal Bldg., 1802-2 Oyatsu, Mashiki-machi, Kamimashiki-gun, Kumamoto 861-2204, Japan 81-96-285-1814

Okinawa Branch Gojinsha Naha Matsuyama Bldg. 3F, 2-1-12 Matsuyama, Naha-Shi, Okinawa 900-0032, Japan 81-98-863-1013 Korea Branch 12F, Donghwa Bldg. Seosomun-Ro 106, Jung-Gu, Seoul, Korea 04513 82-2-317-8888 Busan Branch 3F, Kyo-Won B/D, Jungang Daero 216, Dong-Gu, Busan, Korea, 48733 82-51-462-8885 Hong Kong Branch Suites 2701-2705, 27F Devon House, Taikoo Place, 979 King's Road, Hong Kong 852-2843-9800 Thailand Branch 4Fl., The Peninsula Plaza Bangkok, 153 Rajadamri Rd., Bangkok 10330, Thailand 66-2-250-9898 Chiang Mai Branch 4Fl., The Peninsula Plaza Bangkok, 153 Rajadamri Rd., Bangkok 10330, Thailand 66-2-250-9898 Bali Branch Departure Int'l Terminal 2nd FL., No.A0-12B Ngurah Rai Airport, Tuban-Bali, Indonesia 62-361-9357-298 Malaysia Branch Unit 15.01-15.02, Level 15, AMODA Building, 22, Jalan Imbi, 55100 Kuala Lumpur, Malaysia 60-3-2148-9417 Penang Branch Unit 9.04, Level 9, Menara Boustead Penang, 39 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia 60-4-228-9227 Singapore Branch 302 Orchard Road, #14-01 Tong Building Singapore 238862 65-6-737-2144 Cambodia Branch #10, St.596 Toul Kork, Sangkat Beoung Kok II, Khan Toul Kork, Phnom Penh, Cambodia 855-23-222-058 Myanmar Branch No.353/355, Bo Aung Kyaw Street, Kyauktada Township, Yangon, Myanmar 95-1-8392-663 Philippines Branch G/F Unit-1 Golden Empire Tower 1322 Roxas Boulevard Cor. Padre Faura St., Ermita Manila, Philippines 63-2-354-6700 to 09 Cebu Branch G/F Unit-1 Golden Empire Tower 1322 Roxas Boulevard Cor. Padre Faura St., Ermita Manila, Philippines 63-2-354-6700 to 09 Indonesia Branch In land Tower, M1 Floor, Jl. Jend. Sudirman Kav.32, Jakarta 10220, Indonesia 62-21-251-0788 Vietnam Branch 1B, 7F Crescent Plaza 105 Ton Dat Tien St., Dist.7, Ho Chi Minh City, Vietnam 84-28-5414-1008 Hanoi Branch 4th Floor, Opera Business Center, 60 Ly Thai To Street, Hoan Kiem District, Hanoi, Vietnam 84-24-3936-6364 Palau Branch P.O. BOX 10027 Koror, Republic of Palau 96940 680-488-8888 Australia Branch Suite 1, level 1, Nigel love Building, 10 Arrivals Crt. Sydney Interna onal Airport Mascot NSW 2020, Australia 61-2-8339-9188 Brisbane Branch 1G 35, Brisbane Interna onal Terminal, Airport Drive, Brisbane Airport QLD 4008, Australia 61-7-3860-5611 Melbourne Branch Level 2, North End, Terminal 2, Melbourne Airport, Tullamarine 3045 61-3-9907-0910 New Zealand Branch GM60, Level 1, Auckland Interna onal Airport, Auckland 2150, New Zealand 64-9-256-8088 India Branch Unit 023/025, 3rd Floor, MGF Metropolis, M.G. Road, Gurgaon 122001, Haryana, India 91-124-711-5000 Los Angeles Branch 200 N. Con nental Blvd., Suite 100, El Segundo, CA 90245, U.S.A. 1-310-322-2888 New York Branch 633 3rd Ave., 8th Fl., Suite 800, New York, NY 10017, U.S.A. 1-917-368-2000 San Francisco Branch 433 Airport Blvd., Suite 501 Burlingame, CA 94010, U.S.A. 1-650-931-8000 Honolulu Branch 300 Rodgers Blvd., #14, Honolulu, HI 96819, U.S.A. 1-808-955-0088 Anchorage Branch 4600 Postmark Drive, Ste. NA 142, Anchorage, AK99502, U.S.A. 1-907-249-2300 Canada Branch Suite 240-10451 Shellbridge Way, Richmond, Bri sh Columbia, V6X 2W8, Canada 1-604-242-1168 Cargo Sales & Services The Americas 5651 West 96th Street, Los Angeles, CA 90045, U.S.A. 1-310-646-1260 Guam Branch 518 Pale San Vitores Road, Suite 202-203, Concorde Center, Tumon, Guam 96913, U.S.A. 1-671-649-0861 Netherlands Branch O cia Gebouw I, De Boelelaan 7, 6th Floor, 1083 HJ Amsterdam, The Netherlands 31-20-646-1001 Germany Branch Gutleutstrasse 80, 60329 Frankfurt, Germany 49-69-297-0580 Italy Branch Viale Marco Polo, 71, 3F, 00154 Roma, Italy 39-06-474-5045 Cargo Sales & Services, Europe Room G2045-G2050, 2nd Floor, Cargo Center Luxair, L-1360 Luxembourg, Luxembourg 352-348-363-9500 Austria Branch Mariahilfer Strasse 123/8 O.G. 1060 Vienna, Austria 43-1-8130-156 The United Kingdom Branch Minstrel House, 1F, 2 Chapel Place, Rivington Street, London, EC2A 3DQ 44-208-587-3688

Stock Transfer Agent:

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

Auditors: Name: Deloi e & Touche Auditors: Huang, Jui-Chan ; Cheng, Shiuh-Ran Address: 20F., No. 100, Songren Rd., Xinyi Dist., Taipei City 110, Taiwan Website: h p://www.deloi e.com.tw Tel: 886-2-2725-9988

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

Contents I. Letter to Shareholders............................................................................................................................................. 1

II. Company Profile....................................................................................................................................................... 7 2.1 Date of Incorporation.............................................................................................................................................. 8 2.2 Company History..................................................................................................................................................... 8

III. Corporate Governance Report ......................................................................................................................... 12 3.1 Organization .......................................................................................................................................................... 13 3.2 Directors, and Management Team........................................................................................................................ 17 3.3 Implementation of Corporate Governance........................................................................................................... 35 3.4 Information Regarding the Company’s Audit Fee and Independence ...................................................................76 3.5 Replacement of CPA.............................................................................................................................................. 77 3.6 Audit Independence.............................................................................................................................................. 77 3.7 Changes in Shareholding of Directors, Managers and Major Shareholders.......................................................... 78 3.8 Relationships among the Top Ten Shareholders ................................................................................................... 81 3.9 Ownership of Shares in Affiliated Enterprises ....................................................................................................... 82

IV. Capital Overview................................................................................................................................................... 83 4.1 Capital and Shares................................................................................................................................................. 84 4.2 Bonds .................................................................................................................................................................... 88 4.3 Other Securities‐Related Issues ............................................................................................................................ 90 4.4 Financing Plans and Implementation ................................................................................................................... 90

V. Operational Highlights ......................................................................................................................................... 91 5.1 Business Activities................................................................................................................................................. 92 5.2 Market and Sales Overview ................................................................................................................................ 100 5.3 Human Resources ............................................................................................................................................... 105 5.4 Environmental Protection Expenditure............................................................................................................... 105 5.5 Labor Relations ................................................................................................................................................... 110 5.6 Major Contracts .................................................................................................................................................. 113

VI. Financial Information........................................................................................................................................ 116 6.1 Five‐Year Financial Summary .............................................................................................................................. 117 6.2 Five‐Year Financial Analysis................................................................................................................................. 121 6.3 Consolidated Financial Statements for the Years Ended December 31, 2019 and 2018, and Independent

Auditors’ Report.................................................................................................................................................. 123 6.4 Parent Company Only Financial Statements for the Years Ended December 31, 2019 and 2018 and

Independent Auditors’ Report............................................................................................................................ 123 6.5 Audit Committee’s Report .................................................................................................................................. 124

VII. Review of Financial Conditions, Financial Performance, and Risk Management ........................ 125 7.1 Analysis of Financial Status ................................................................................................................................. 126 7.2 Analysis of Financial Performance .......................................................................................................................127 7.3 Analysis of Cash Flow...........................................................................................................................................127 7.4 Major Capital Expenditure Items ........................................................................................................................ 128 7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and

Investment Plans for the Coming Year................................................................................................................ 128 7.6 Analysis of Risk Management ............................................................................................................................. 128 7.7 Other important Matters .................................................................................................................................... 132

VIII. Special Disclosure ............................................................................................................................................ 133 8.1 Summary of Affiliated Companies....................................................................................................................... 134 8.2 Private Placement Securities in the Most Recent Years ...................................................................................... 140 8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years...................................... 140 8.4 Special Notes....................................................................................................................................................... 140 8.5 Situations with Major Impacts on Shareholder Equity or Share Prices............................................................... 140

(Appendix 1) Consolidated Financial Statements for the Years Ended December 31, 2019 and 2018 and Independent Auditors’ Report........................................................................ 142

(Appendix 2) Parent Company Only Financial Statements for the Years Ended December 31, 2019 and 2018 and Independent Auditors’ Report ..............................................................197

(Summary Translation) This document is prepared in accordance with the Chinese version and is for reference only. In the event of any discrepancy between the English version and the Chinese version, the Chinese version shall prevail.

Letter to Shareholders 1.1 Operating Performance in 2019

1.2 Business Plan for 2020

1.3 Development Strategies

Letter to Shareholders 1

I. Letter to Shareholders China Airlines develops its sustainable business strategies in six major directions: “safety, governance, fleet and flight network, products and services, group cooperation, and brand perception,” and adopts a quality policy of “discipline and safety, customer-orientation, green energy and environmental protection, and pursuit of excellence” to implement its strategic objectives. China Airlines is committed to providing a gratifying flight experience for every passenger. It is also devoted to making China Airlines a sustainable, eco-friendly enterprise that promotes the economic development of society.

Looking back on air transportation business promotion in 2019, we note that passenger flights have been increased on the existing Taoyuan-Nagoya, Taoyuan-Takamatsu, Taoyuan-Fukuoka, Taoyuan-Palau, and other routes in regional markets;On long-haul routes, next-generation fleets have been used to continually increase flights on routes such as Taoyuan-Los Angeles, Taoyuan-Honolulu, and Taoyuan-Melbourne, and inter-airline cooperation has been strengthened to deepen market layout. As for cargo transport, potential markets have been thoroughly developed, as in the multi-leg route for US west coast return flights to Nagoya, which was launched at the end of March, and the Mumbai-Amsterdam route, which was launched in November, to increase revenue;at the end of October, a second cargo flight to Chongqing was added to work with the shipping schedules of major customers; the loading performance was quite good;and to respond to the needs of postal customers, Zhengzhou customized charter service was implemented in Q4 to maximize the utilization efficiency of cargo aircraft.

In 2019, China Airlines’ sustainable operations continued to win important domestic and foreign awards: we were selected for the “Global Corporate Sustainability Awards” for the first time;selected for the “Top 5% in Corporate Governance Evaluation” and the “TW ESG Index” for the second time;selected for the “TWSE RAFI® Taiwan High Compensation 100 Index” and the “TWSE RA Taiwan Employment Creation 99 Index” for the third time;selected for the Dow Jones Sustainability Index (DJSI) and the FTSE4Good Index Series for the fourth time;winning the Taiwan Corporate Sustainability Awards (TCSA) for the sixth consecutive year. Other important awards include winning the 2020 APEX

Five Star Global Airline and the Top Service Awards held by Next Magazine for three consecutive years.

In recent years, to actively respond to global warming and to reduce the impact of climate change on the industry, China Airlines continues to formulate sound extreme climate response mechanisms and operating procedures, and implements greenhouse gas reduction through the establishment of short, medium and long-term carbon reduction targets for air and ground operations. In 2019, China Airlines was again ranked by the Carbon Disclosure Project (CDP) with an A-/Leadership level, a grade above that of global airlines.

With the concerted efforts of the management team and all of its employees, China Airlines continues to be recognized by the public for the results of its overall operations and various policies. In the future, China Airlines will continue to move towards sustainable development with proactive, stable, prudent, and flexible strategies.

1.1 Operating Performance in 2019

Operating revenue in NT dollars (same hereafter) was NT$146.372 billion, a 2.59% decrease over the past year, and after-tax net loss was NT$1.20 billion, for a basic after-tax net loss of NT$0.22 per share.

1.1.1 Results of the business strategy A. Fleet:

China Airlines completed the selection of cargo aircraft 777F and regional narrow-body passenger aircraft A321neo in 2019, which are expected to be introduced successively starting from 2020 and 2021, respectively. China Airlines actively optimized its fleet structure, completed the A330-300 sale-leaseback operation to reduce book losses and residual value risk, and was successful in leasing the 747-400F sealed cargo aircraft to activate asset utilization. As of the end of December, our fleet size was 91 vessels, including 70 passenger aircraft (including leased aircraft) and 21 cargo aircraft. China Airlines is committed to improving our fleet’s operating fitness. In the future, with the introduction of new aircraft and phasing out of old aircraft, our operating efficiency will more comprehensive and more fully improved.

2 Letter to Shareholders

B. Passenger flights:

Revenue from passenger business was NT$96.177 billion, a 2.05% increase over the past year and accounting for 65.71% of total operating revenue. As of the end of 2019, the China Airlines Group flew to 23 countries and 72 passenger destinations, spanning Asia, Europe, the Americas, and Oceania. On average, there are 712 round-trip flights per week.

C. Cargo flights:

Revenue from cargo business was NT$43.406 billion, a 12.17% decrease over the past year and accounting for 29.65% of total operating revenue. As of the end of 2019, the China Airlines Group flew 18 cargo planes in cargo operations to 15 countries and 37 destinations. On average, there were an average of 90 cargo flights per week.

D. Other operating income:

Other operating revenue included in-flight duty-free sales revenue, the total from which was NT$6.789 billion, a 2.96% increase over the past year and accounting for 4.64% of total operating revenue.

E. Investments and earnings:

As of the end of 2019, the Company had investment in a total of 32 companies, in areas of business such as air business, ground services, logistics, aircraft maintenance, air cargo station business, etc., which contributed NT$1.812 billion in revenue over the year.

1.1.2 Business cash-flow budget and profitability analysis

A. Cash flow:

Operating revenue was NT$146.372 billion, which is a reduction of 3.892 billion from last year.

Operating costs and expenses were NT$146.292 billion, which is a reduction of NT$2.125 billion from last year.

Pre-tax net loss was NT$1.187 billion, which is a reduction of NT$3.502 billion from the past year. After-tax net profit was NT$1.20 billion, which is a reduction of NT$2.990 billion from last year.

B. Budget execution:

Projected operating revenue was NT$154.121 billion, and actual operating revenue was NT$146.372 billion, for a 94.97% attainment; projected operating costs and fees were NT$151.887 billion, and actual operating costs were NT$146.292 billion, for a spend

rate of 96.32%. Projected losses from non-operating activities totalled NT$1.384 billion, with actual losses from non-operating activities at NT$1.267 billion. Projected annual pre-tax net profit was NT$0.85 billion, and actual pre-tax net loss was NT$1.187 billion.

C. Profitability: Return on assets 0.51% Return on equity -2.11% After-tax profit margin -0.82% After-tax earnings per share -NT$0.22

1.1.3 Research and development In 2019, China Airlines’ information strategy development focused on enhancing the operational competitiveness and industrial technology of the Company and the airlines group. Following the seven main themes of artificial intelligence, smart technology/vehicles, big data, mobile applications, cloud computing/edge computing, virtual reality/augmented reality, and information security, China Airlines continued to perceive the pulse of the industry, utilize technology to understand customer value, understand profit-earing trends, find opportunities for innovation, strengthen information security risk management, and enhance the company’s operational competitiveness.

In addition, China Airlines is committed to improving its website experience quality; expanding the development of website functions to optimize the ticket purchasing process; introducing 3D verification functions for credit card transactions to ensure the security of customer transactions and prevent credit card fraud; and building multiple payment tools and supporting multi-currency payments. To better service our passengers, new fare products were launched in September 2019. Passengers can choose additional products according to their travel needs, such as baggage allowance, preferred seats, and mileage accumulation standards, for them to select a la carte or package fares.

1.2 Business Plan for 2020 Benefiting from the government’s continued promotion of tourism policy in Taiwan and the relatively stable price of oil, the passenger load factor in 2019 was slightly higher by about 1% than that in 2018. However, the overall operation performance has been affected by the anti-China extradition movement in Hong Kong, restriction on Chinese tourists, and the rise of low-cost carriers, which have caused fierce industrial competition and a drop in rate of return. Cargo transport has been


affected by international trade protectionism and the US-China tariff dispute, and market growth has slowed down.

In order to respond to changes in the external business environment, China Airlines has been optimizing the aviation network for passenger transport through aircraft model adjustment and flexible capacity allocation, based on market conditions and to meet travel and transportation needs. For cargo transport, shifts were flexibly adjusted, and the shipping space allocation of each zone was flexibly used to increase revenue. For the delivery of special cargoes, such as precision machinery, cold chain products, and aviation materials, continuous development and shipping price segmentation were carried out to enhance the overall revenue.

1.2.1 Passenger Service

China Airlines actively cooperates with the government’s new southbound and foreign policies, and continuously evaluates the development of potential markets and increase of flights for Southeast Asian routes. At the same time, we concentrate our layout in Japanese and Korean markets in response to market demand. For the long-haul route markets of New Zealand, Australia, Europe, and America, we have adjusted the structure of the aviation network and strengthened the transit hub position of Taoyuan Airport; as for cross-strait routes, China Airlines will closely follow market dynamics and adjust transport capacity in a timely manner.

A. Northeast Asian Routes:

In response to the high demand of the Taiwanese people for travel in Japan and South Korean, China Airlines continues to expand routes in Japan and South Korea every year. Since the end of March 2019, Taoyuan-Nagoya flights were increased from 12 per week to 14 per week, Taoyuan-Takamatsu flights were increased from 4 per week to 5 per week, and Taoyuan-Fukuoka flights were increased from 17 per week to 18 per week. In addition, in order to meet the demand for people in central and southern Taiwan wanting to travel to Japan, Taichung-Okinawa flights were increased from 5 per week to 6 per week since the end of March 2019. To take the initiative in securing the increasing market demand, we further plan to increase Taoyuan-Takamatsu flights to 7 flights per week beginning March 2020, and increase Taoyuan-Fukuoka flights to 19 flights per week beginning April 2020. Seasonal, holiday/festival, and thematic charter flights have been continuously

arranged to meet seasonal demand, which strengthen China Airlines’ leading position in the market.

B. Southeast Asian Routes:

In line with the government’s new southbound and foreign policy, China Airlines continued its increase of flights to Bangkok, Penang, Hanoi, Phnom Penh, and other routes in 2018, and increased the Taoyuan-Palau flights from 2 to 3 per week since February 2019, and further increased such number to 4 flights per week since June 2019. In addition, in order to actively expand the Southeast Asian aviation network layout and to strengthen the aviation network transfer market, we have announced plans in 2020 to launch the Taoyuan-Cebu and Taoyuan-Chiang Mai routes.

C. Cross-Strait Routes:

Due to the impact of China’s policy of restricting Chinese tourists coming to Taiwan and the anti-China extradition movement in Hong Kong, cross-strait travel demand is not as robust as in previous years;China Airlines takes the initiative to respond to market movements according to market demand and passenger composition through aircraft model adjustment and flexible regulation of transportation capacity, which maintains profit margins for the routes. In the future, China Airlines will continue to flexibly adjust transportation capacity depending on the cross-strait policy development and market conditions.

D. Long-Haul Routes:

In order to actively increase the benefits of China Airlines’ Californian (North America) destinations and aviation network and to expand customer sources, beginning at the end of October 2019, we resumed having three CI006/CI005 Taoyuan-Los Angeles flights per week, increasing Taoyuan-Los Angeles flights to 10 per week, with the addition of 7 flights on the Taoyuan-Ontario route per week, totaling to 17 flights per week to and from the Greater Los Angeles area, making it easier for travelers to reach major inland cities in the United States. In addition, the aircraft model on the Taoyuan-Ontario route was adjusted from Airbus A350-900 to Boeing 777-300ER, providing more Premium Economy Class seats for passengers. Also, in order to continue to stimulate the North American tourism market, flights on the Taoyuan-Honolulu route were increased from 2 flights per week to 3 flights per week in the summer schedule, providing a variety of choices for visitors to the United States.


E. European Routes:

To stabilize China Airlines’ leading position in Taiwan’s Continental Europe flight market, beginning in 2018, flights on the Taoyuan-Vienna route have been increased from 3 flights per week to 5 flights per week, and we have maintained 5 flights per week throughout the year of 2019; meanwhile, during peak season from September to October, flights were increased to 6 per week. In addition, the enlarged aircraft model on Taoyuan-Amsterdam was changed to 777-300ER during the summer schedule in 2019 to increase the supply of seats. In the future, a more dense and convenient European aviation network will be provided to enhance the efficiency of China Airlines’ extension of the European aviation network.

F. Australia and New Zealand Routes:

In order to continuously improve the New Zealand and Australian aviation networks, China Airlines has increased the flights on the Taoyuan-Melbourne route to 4 flights per week from the end of October 2019. During the winter season, in addition to increasing flights to New Zealand and Australia to 22 flights per week, it has also expanded its seat supply to meet market demand. In addition to securing its market share, China Airlines will also actively expand bidirectional connections market among New Zealand, Australia, Europe and Northeast Asia, strengthening China Airlines’ travel services.

1.2.2 Cargo Service In 2019, due to the disturbance of US-China trade war and the slowdown in the growth of global trade, the overall air cargo transport market was full of challenges. The Company continues to cultivate potential cargo transport markets, and launched the Nagoya, Japan route at the end of March to provide direct import and export services for the manufacturing industries in Nagoya and Central Japan; also, taking advantage of the rapid growth of India’s emerging markets, the Mumbai-Amsterdam route was launched in mid-November and achieved impressive results. Fighting for cross-strait cargo aircraft traffic rights, the second cargo aircraft flight to Chongqing has been added since the end of October, and the flight loading performance was quite good.

To meet the needs of postal business clients, China Airlines plans to implement 15 customized charter flights to Zhengzhou in Q4, and continue the regular charter flights on Taoyuan-Columbus, Hong Kong-Chicago, and other routes from Asian cities to major U.S. cities.

Recently, in response to the impact of the pandemic situation and the uncertainty of US-China trade on cargo aircraft operations, short-term flight reduction measures have been adopted for cross-strait and Hong Kong routes; also, European and American flights were combined accordingly. The overall business plan is described as follows:

A. Long-Haul Routes

China Airlines plans 34 flights per week and strives for regular annual cargo charter flights to Columbus, USA. Through inter-airline cooperation, expanding the import and export sources of goods in Central and South America, extending aviation network services, and increasing loading capacity. After the introduction of the new 777F cargo aircraft at the end of 2020, China Airlines will prioritize flights to US West Coast destinations to improve flight payload and optimize economic efficiency.

B. European Routes:

China Airlines will maintain the operation of 6 flights per week in cooperation with the Indian market development plan, and continue to promote the potential markets of Delhi and Mumbai in India, so as to achieve two-stage revenue benefits.

C. Regional routes:

China Airlines will optimize the transportation capacity of Singapore, Penang, Ho Chi Minh City, Hanoi, and other Southeast Asian routes. Weekly flights will be gradually increased to 55 flights in the summer schedule of 2020. Through the increase in the proportion of regional cargo sources, we look to improve the profitability of Southeast Asian cargo aircraft.

China Airlines will continue to evaluate the flight increase plan for potential destinations on the cross-strait cargo aircraft route (including Guangzhou, Chongqing, and Zhengzhou) to strengthen the cross-strait profitable route layout. For Hong Kong and Northeast Asia, in addition to maintaining the operation of 16 and 5 flights per week, respectively, China Airlines will strive to secure non-regular charter flight business and develop high-priced sources of goods.

D. Improving revenue management and extending chartered flight business and high-growth source of goods:

(1)Improving revenue management:

In order to meet the demand for machine driven by the emerging 5G industry, China Airlines will


take advantage of using Boeing 747-400F cargo-only aircraft to load large cargoes for the transport of large machinery, which will increase revenue by providing differentiated services.

(2)Customized charter flights business:

China Airlines will deeply cultivate emerging markets such as Southeast Asia, and promote customized charter flight business on a regular/irregular basis.

(3)Deepening cooperation with inter-airline express delivery companies:

Maintaining cooperation with UPS, DHL, FedEx, SF Express, and other international express delivery companies to strengthen partnerships with Japanese and American airlines in the Asian region.

(4)Promoting cold chain cargoes:

China Airlines obtained CEIV Pharma certification from the International Air Transport Association (IATA CEIV Pharma) in April 2019. It is the first airline in Taiwan to receive this honor, and the certification can effectively increase the growth rate of the high-value cargo market.

1.3 Development Strategies As the aviation industry provides international passenger and cargo transportation services, its operations are susceptible to global economic growth and political and economic conditions. According to the economic forecast published by IHS Markit in February 2020, the estimated global economic growth rate is 2.5%, slightly lower than the 2.6% of 2019; the growth rate in Taiwan is 2.1%.

The International Air Transport Association (IATA) originally estimated in December 2019 that in 2020, the growth rate of demand for the air passenger transport market would be 4.1% globally, 4.8% in the Asia-Pacific region, and that air cargo transport volume would increase by 2.0%. However, as the COVID-19 pandemic has increased in severity, the IATA estimates that the growth rate of demand for the air passenger transport market in 2020 will become negative, and the passenger transport revenue will be reduced by about 63 billion to 113 billion USD due to the implementation of tourism restrictions on the grounds of epidemic prevention in various countries.

Faced with such a highly competitive external environment, political and economic ripple effects, climate change and environmental protection issues, geopolitical risks, changes in exchange rates and oil prices, various uncertainties with the added uncertainty of the epidemic that is currently affecting the air transport market, this year (2020) will be a very difficult year for airlines.

The Company will take a proactive and rigorous attitude to carry out risk management and control, and establish corresponding response strategies. For pandemic prevention operations, we will follow the guidance of the World Health Organization (WHO) and other public health authorities and implement disease prevention work to ensure passenger safety. For passenger transport, we will continue to flexibly adjust transport capacity to respond to changes in the market. Through the solid establishment of the aviation network and the deepening of inter-airline cooperation, we aim to expand benefits, increase revenue, optimize cabin products, and strengthen brand marketing, so as to optimize passenger experience and enhance customer loyalty. For cargo transport, we aim to increase the overall revenue through introducing next-generation aircraft, strengthening operational efficiency, implementing revenue management improvement, and promoting customized charter business and cold chain transportation services. In addition, to accommodate to digital technology trends, we will expand online sales to improve the efficiency of mobile business applications, and promote electronic services to improve the convenience of passenger and cargo transport.

Through professional operation and management, we will focus on businesses with niche and development potential, integrate group resources to strengthen our overall competitiveness, and expand economic scale and scope, so as to effect business synergy and thus reach business sustainability.

Chairman: Hsieh, Su-Chien

President: Hsieh, Su-Chien

Vice President, Finance Div.:

Chen, I-Chieh


Company Profile 2.1 Date of Incorporation

2.2 Company History

Company Profile 7

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

2.2 Company History

1959: China Airlines (CAL) was founded by 26 retired members of the Air Force with TWD 400,000 in capital. The Company flew charter flights using two rented PBY seaplanes.

1961: Provided military supply transport to Laos.

1962: Flew special cargo missions for the Vietnamese government and USARV. Inaugurated the first domestic route from Taipei to Hualien.

1966: Inaugurated the first international route from Taipei to Saigon (now Ho Chi Minh City), marking our official start in international aviation.

1967: Inaugurated Northeast Asia routes.

1970: Developed trans-Pacific routes to explore the US market.

1976: Inaugurated Middle East and Saudi Arabia Routes.

1978: Invested in Taoyuan International Airport Services Co., Ltd.

1980: Invested in Dynasty Holidays, Inc.

1983: Expanded European routes.

1986: Divided the Operations Division into Passenger Division and Cargo Division to expand operations.

1988: Twenty-seven shareholders donated shares to establish the China Aviation Development Foundation, transferring the rights of supervision and management to society.

1989: Invested in Hwa Hsia Co., Ltd. and Tai Kong Ju Investment Co., Ltd.

1990: Added Phuket and Bali destinations. Invested in Abacus Distribution Systems (Taiwan) Ltd.

1991: Established Hua Mei Investment Company and Mandarin Airlines. The Ministry of Finance approved the public offering of China Airlines shares.

1992: Resumed flights to Ho Chi Minh City. The Taiwan Stock Exchange approved the listing of China Airlines shares. The Company gained 100% equity interest in Mandarin Airlines.

1993: First flight to Frankfurt, Germany. Established German Branch Office. Officially listed on the Taiwan Stock Exchange.

1994: New engine repair plant became operational and Songshan Training Minquan Building opened. Set up China Pacific Catering Services as a joint venture with the Swire Group.

1995: First flights to Switzerland and Italy. Entered into a joint venture with Pratt & Whitney and SIA Engineering Company Limited to establish Asian Compressor Technology Services Co. in Taiwan. Invested in CAL-Asia Investments Inc. Launched our “plum blossom” logo.

1996: Inaugurated the Taoyuan-Penang cargo route.

1997: Inaugurated the Kaohsiung-Hong Kong-Jakarta route. Established the first cargo-only flights between Asia and Miami. Established code share flights with Continental Airlines and American Airlines. Invested in Huasheng Investment Company and China Pacific Laundry Services Ltd.

1998: Set up our Penang Branch Office and Hanoi Branch. Began using the Third Maintenance Hangar.

1999: Inaugurated cargo flight routes to Sydney, Delhi, and Colombo. Set up Kaohsiung Airport Catering Services as a joint venture with TransAsia Airlines and Far Eastern Air Transport. Established Chung Hwa Express Corp. as a joint venture with Chunghwa Post. Established TACT Logistics through investment transfer.

2000: Launched Canada, Australia, and New Zealand routes; Taoyuan-Guam, Taoyuan-Manila, Kaohsiung-Manila, Hakodate charter, and Taoyuan-Penang passenger flights; Frankfurt cargo flights. Established Shanghai office in Mainland China and new branch offices in Canada, Australia, New Zealand and Guam. Established YesTrip Travel Internet Technology Co.

2001: Inaugurated cargo flight routes to Seattle and Nashville. Made indirect investment in Xiamen International Airport Co., Ltd. Set up code-share flights with Delta Airlines. Introduced A340-300 passenger jets.

2002: Inaugurated passenger flight routes to Delhi and cargo routes to Manchester. Received approval to invest in China Cargo Airlines. Ordered 18 Airbus A330 passenger aircraft and 10 Boeing 747-400 cargo and passenger aircraft. Rejoined the International Air Transport Association (IATA).

2003: Inaugurated the first cross-strait Spring Festival charter flight. Inaugurated charter flights to Seoul and passenger routes to Brisbane and Hanoi and non-stop flights to Hawaii. Inaugurated cargo flight routes to Ho Chi Minh City and Delhi. Created the Paragon Card, the highest Dynasty Flyer membership tier. Received the Outstanding Service Award from the R.O.C. President.

8 Company Profile

2004: Launched sea-air transport charter flights. Inaugurated Hiroshima passenger flights and cargo routes to Milan and Prague. Introduced three A330-300 passenger jets, two Boeing 747-400 passenger jets and two Boeing 747-400 freighters.

2005: Flew the first direct charter flights to Beijing, and Spring Festival charters to Guangzhou and Shanghai. Inaugurated Vienna passenger flight route and Nagoya and Vienna cargo flight routes. Invested in China Aircraft Services Limited.

2006: Inaugurated cargo flight routes to Osaka, Hanoi, Houston and Stockholm. Flew the first cargo charter flight to Shanghai. Invested in Yangtze River Express Airlines Company. Began construction on the Taoyuan International Airport Airline Business Operation Center.

2007: Signed a letter of intent to purchase with Airbus. Announced contract with AccorHotels for a new airport hotel. Inaugurated regularly-scheduled passenger flights between Kaohsiung and Chiang Mai.

2008: Launched cross-strait humanitarian charter flights direct to Chengdu to deliver disaster relief supplies at no charge. Inaugurated cross - strait holiday charter flights, weekend charter flights to Shanghai, Beijing, Xiamen, and Guangzhou, and cross - strait direct cargo charter flights.

2009: Inaugurated the Taoyuan-Osaka-Los Angeles cargo flight route. Inaugurated scheduled cross-strait flights to Zhengzhou, Xiamen, Xi'an, Ningbo, Shenyang, and Changsha. Became an official member of IATA's e-Freight program. Inaugurated Taiwan's largest 120,000-pound power plant testing platform.

2010: New routes: Passenger routes between Taoyuan and the cities of Miyazaki, London, and Qingdao, Songshan Airport to Hongqiao and Haneda, and Kaohsiung to Xiamen and Narita, direct cargo flights to Xiamen, Nanjing and Fuzhou as well as the special cargo charter flight direct to Xi'an. Established Company headquarters in China Airlines Park and won the National Building Golden Award and National First Award.

2011: New routes: Taoyuan - Brisbane - Auckland; Taoyuan - Osaka - New York; flights to and from Taoyuan and Wuhan, Sanya, Yancheng, Haikou, Nanchang and Dalian; Taicheng to Chongqing and Nanchang; Kaohsiung to Changsha, Chongqing, Beijing, and Kuala Lumpur. Officially joined SkyTeam, becoming the first Taiwanese airline member of an international airline alliance.

2012: New routes: Songshan to Wenzhou and Gimpo Airport, Taoyuan to Kagoshima, Shizuoka and Toyama, added Auckland leg to the Taoyuan-Sydney route, and Taoyuan to Seoul and Yangon. Joined SkyTeam Cargo, becoming the first Taiwanese

airline to join an international air cargo alliance. Renovated the cabins of nine Boeing 747-400 passenger jets to install new cabin seats and video systems. Signed a Memorandum of Strategic Cooperation with Chunghwa Telecom. Signed an OnPoint Fuel & Carbon Solutions Agreement with GE Aviation. Awarded Business Next magazine’s Super Green Jury Award and First Place in the Green Brand Awards 2012 Transportation Category, Gold Award in Reader's Digest Trusted Brands 2012, the Sports Activists Award from Sports Affairs Council, First Place in Management magazine’s Consumer Brand Survey, and the 2012 Energy Conservation and Carbon Reduction Action Label Excellence Award. The China Airlines Maintenance Facility received ISO 14001 Environment Management System Certification. Launched the world's first trans-Pacific climate observation aircraft. Became the world's first airline to display our carbon footprint and calories for in-flight meals.

2013: Formed Greater China Connection Partnership with China Southern, China Eastern and Xiamen Airlines. Launched code-sharing services with Russia's Transaero Airlines and Hawaiian Airlines and expanded code-sharing services with China Southern Airlines. Launched Taoyuan-Takamatsu route, Chiayi-Shizuoka charter flights, Taoyuan-Hawaii direct flights, Taoyuan-Urumqi and Lijiang routes. Launched Taoyuan-Ishigaki, Tainan-Hong Kong, and Taoyuan-Busan routes as well as Songshan-Matsuyama charter flights. Launched the Taoyuan-Nanjing-Zhengzhou cargo route and Taoyuan-Weihai flights. Launched temperature-controlled product cargo services. Once again awarded Business Next magazine’s Super Green Jury Award and First Place in the Green Brand Awards 2013 Transportation Category. Awarded Top Aviation Brand in Manager Today‘s Power Brands Survey 2013 and Reader's Digest Trusted Brands Gold Award. Won the National Standardization Awards’ Corporate Standardization Award, 3rd Taiwan Green Classics Award, Global Views Service Excellence Award 2013, and EPA’s 22nd Business Environmental Award.

2014: Awarded the EPA’s 23rd Business Environmental Award and the International Green Classics Award 2014; earned ISO 14001 Environment Management System Expansion Certification and ISO 50001 Energy Management System Setup Certification. Once again awarded Business Next magazine’s Super Green Jury Award and earned First Place in the Green Brand Awards Transportation Category for the third time. Inaugurated the Songshan-Fuzhou and Taoyuan to Changchun, Hefei, Yantai, and Xuzhou routes. Won the Annual Best of Design Awards in the 2014 Golden Pin Design Award for our NextGen 777 aircraft cabin design and named the Best Airline in North Asia by Global Traveler.

2015: Launched Taoyuan-Wuxi; Kaohsiung to Changzhou, Kumamoto, and Fukuoka; Taoyuan-Melbourne with

Company Profile 9

an extension to Christchurch; and Tainan-Osaka flights. Launched social media customer services, a first for Taiwan. Established an airplane maintenance training center. Received the following awards:

Brand Service: CAA 2014 Golden Wing Awards, second place in TheDesignAir Global Passenger Choice Top 10 Airlines Awards 2015, Reader's Digest Trusted Brands Gold Award, three top awards in the Global Traveler reader survey.

Corporate Social Responsibility: TCSA Taiwan Corporate Sustainability Award, EPA’s Business Environmental Awards.

Product Design: The NextGen 777-300ER passenger cabin design was awarded the Red Dot Design Award 2015, Family Couch design received the Global Traveler Leisure Travel Innovation Excellence Award, won National Industry Innovation Award for NexGen Aesthetics.

Other: Centers for Disease Control Epidemic Prevention Award 2015.

2016: Launched Taoyuan-Yangzhou route and Taoyuan-Shenzhen cargo route. Inaugurated Chinese passenger transit through Taiwan for outbound China Airlines flights. Increased free baggage allowance by 10 kg and reduced regional excess baggage charges. Took delivery of the first A350 airliner for any Taiwanese carrier. Completed the Air Passenger Transport Service-Product Carbon Footprint Category Regulations together with the Civil Aeronautics Administration. Received the following awards:

Brand Service: PAX International magazine reader survey's 2016 Outstanding Food Service by a Carrier, Best Premium Economy and Best Airline by Global Traveler; China Airlines Dynasty In-flight Magazine won the APEX Award of Excellence; the CAL website was named 2016 Best Airline Website by WebAward.

Corporate Social Responsibility: Passed third-party audits for ISO 14001 and ISO 50001 Environmental Management Systems. Received IOSA flight safety certification and the TCSA Taiwan Corporate Sustainability Award. Selected as a Dow Jones Sustainability Indices constituent stock, the first such honor for a Taiwanese company and emerging market airline.

Product Design: Received 5 iF Design Awards for the Boeing 777-300ER passenger cabin, software user interface, tableware design, Sky Lounge design packaging, and Taiwan Taoyuan Airport Terminal 1 Lounge. A double win in TheDesignAir Awards 2016.

2017: Inaugurated the Taoyuan-London route, becoming the only airline in Taiwan to offer nonstop service to London. Partnered with Air France on a codeshare nonstop flight from Taoyuan to Paris. Added codeshares on Taiwan-Japan routes with Air Japan. Signed a memorandum of cooperation with KLM. Signed an agreement to enhance cooperation with American Airlines. Signed a letter of intent with Airbus, comprehensively strengthening cooperation on maintenance. Established a joint venture in Taoyuan with NORDAM Aerospace (USA) as “NORDAM Asia Ltd.” with both parties cooperating to drive business investment and training of aerospace maintenance personnel. Signed a memorandum of cooperation with Changgeng Hospital of Linkou for air medical treatment. Obtained AS 9110 Airbus certification for maintenance facility. Transported Taiwanese satellites to the US on four occasions. Hosted the 2017 AAPA annual conference to empower development in the Asia-Pacific airline industry. Provided the second A330-300 to work on plans for greenhouse gas observation and testing in the Pacific. Signed the Buckingham Palace Declaration against illegal wildlife shipments. Used sustainable alternative fuels and setting a milestone in carbon reduction among Taiwanese airlines. Received many awards:

Brand Service: Excellence in Global Airline Cargo Service award. Cheers magazine's 2017 TOP 20 Most Influential Enterprises of the New Era. Awarded a Gold Medal for reputation by Reader’s Digest for the 19th consecutive year. Awarded a 2017 Global Vision magazine five-star service rating. Remained on top as Global Traveler's Best Airline in Northeast Asia.

Corporate Social Responsibility: Won the Taiwan Top 50 Enterprises Sustainability Report Gold Medal for Cargo Division, Climate Leader Award, and Harmony with Society award. Selected for the Dow Jones Sustainability Index for the second consecutive year.

2018: The new US destination Taoyuan-Ontario, California, route formally went into operation. Served as one of the ten major members in the IATA Nominating Committee in 2018. Launched Kaohsiung-Hong Kong-Jakarta and Taoyuan-Chongqing passenger transportation routes. Developed the cargo transport destination in Columbus, Ohio, United States. Joined hands with Japan Airlines in developing the new destinations of Japan inland routes, including Sapporo-Niigata, Sapporo- Hanamaki, Fukuoka-Miyazaki, Fukuoka-Hanamaki, Fukuoka-Amami, Kagoshima-Amami and Kagoshima-Tokunoshima.

Brand Service: Selected as Cheers magazine's “2018 Top 20 Employers of the New Generation.” China Airlines’

10 Company Profile

in-flight magazine Dynasty received the 2018 APEX Awards for Publication Excellence in the US.

Corporate Governance: Ranked among top 5% in the 4th Corporate Governance Review.

Corporate Social Responsibility: China Airlines Group donated NT$10 million in disaster relief for the Hualien earthquake. The second airline worldwide to be certified by dual systems, ISO 14001 and ISO 50001, maintaining the highest standards for environmental risk management. AL Park was awarded the Diamond Level of Green Building Label, with an annual electricity savings of 23,000 kWh. Cooperated with ClimateCare, a British professional environmental facility, to launch the “ECO Travel” carbon exchange program. Selected as a constituent stock in the Dow Jones Sustainability Index (DJSI). Awarded the Taiwan Corporate Sustainability Award.

Product Design: Awarded the “Best Premium Economy Class Amenities Kit” of the Onboard Hospitality Award by OBH Magazine.

2019: Flight addition to Taoyuan-Palau route. Developed cargo transport destination in Nagoya, Japan. Signed a letter of intent with Chung Yuan Christian University to jointly cultivate aviation talent. Approved by the US Transportation Security Administration to join the precheck program. More evolution in digital services: non-stop, 24-hour automated customer service.

Brand Service: Won the APEX 5-Star Award. The first cold chain transportation of pharmaceuticals in Taiwan to achieve international certification.

Corporate Governance: Placed in Top 5% of the Corporate Governance Ranking once again.

Corporate Social Responsibility: Evaluated as role-model company for the global airlines by the International Carbon Disclosure Project. Selected as a constituent stock in the “TW ESG Index” for the first time. Selected as a constituent stock in the DJSI for the fourth consecutive year. Selected for the Global Corporate Sustainability Awards for the first time and presented with TCSA for the sixth consecutive year.

Company Profile 11

Corporate Governance Report 3.1 Organization

3.2 Directors and Management Team

3.3 Implementation of Corporate Governance

3.4 Information Regarding the Company’s Audit Fee and

Independence

3.5 Replacement of CPA

3.6 Audit Independence

3.7 Changes in Shareholding of Directors, Managers, and

Major Shareholders

3.8 Relationships among the Top Ten Shareholders

3.9 Ownership of Shares in Affiliated Enterprises

12 Corporate Governance Report

III. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart (APR 25, 2020)

Corporate Governance Report 13

SHAREHOLDERS MEETING

BOARD OF DIRECTORS

CORPORATE COMMUNICATIONS OFFICE

GENERAL AUDIT OFFICE

CHAIRMAN OF THE BOARD

PRESIDENT

CORPORATE DEVELOPMENT OFFICE

SECRETARIAL OFFICE, BOARD OF DIRECTORS

(VW)SENIOR VP

CABIN CREW DIV.

GROUND SERVICES DIV.

INFLIGHT SUPPLY CHAIN& MARKETING DIV.

HUMAN RESOURCES DIV.

EDUCATION TRAINING CENTER

SENIOR VICE PRESIDENT,EUROPE

(VF)SENIOR VP

(VE)SENIOR VP

FINANCE DIV.

LEGAL & INSURANCE DIV.

INFORMATIONMANAGEMENT DIV.

PASSENGER SALES & MARKETING DIV.

CARGO SALES MARKETING& SERVICES DIV.

MAINTENANCEDIV.

ENGINEERINGDIV.

QUALITYASSURANCE DIV.

LOS ANGELESBRANCH

VICE PRESIDENT,TAIWAN

VICE PRESIDENT,THE AMERICAS

SAN FRANCISCOBRANCH

NEW YORKBRANCH

HONOLULUBRANCH

ANCHORAGEBRANCH

CARGO SALES &SERVICES

THE AMERICAS

CANADA BRANCH

FUKUOKA BRANCH

KAGOSHIMASTATION

HIROSHIMABRANCH

SAPPORO BRANCH

OKINAWA BRANCH

TAIPEI BRANCH

KAOHSIUNGBRANCH

CARGO SALES &SERVICE, TAIWAN

VIETNAM BRANCH

PHILIPPINESBRANCH

MALAYSIA BRANCH

MYANMARBRANCH

PENANGBRANCH

PALAU BRANCH

SINGAPOREBRANCH

GUAM BRANCH

INDIA BRANCH

NEW ZEALANDBRANCH

INDONESIABRANCH

AUSTRALIABRANCH

BALI BRANCH

BRISBANEBRANCH

KOREA BRANCH

(VO)SENIOR VP

FLIGHT

OPERATIONS DIV.

SYSTEM OPERATIONCONTROL DIV.

NETHERLANDSBRANCH

U.K. Branch

GERMANYBRANCH

ITALY BRANCH

AUSTRIA BRANCH

CARGO SALES &SERVICES, EUROPE

CORPORATESAFETY OFFICE

HANOI BRANCH

CAMBODIABRANCH

OCCUPATIONAL SAFETY & HEALTH DEPT.

ADMINISTRATION DIV.

VICE PRESIDENT,JAPAN

HONG KONGBRANCH

THAILANDBRANCH

OSAKA BRANCHTOKYO BRANCH

SHIZUOKASTATION

NAGOYA BRANCH

TOYAMASTATION

MIYAZAKISTATION

TAKAMATSUSTATION

CARGO SALES & SERVICES, JAPAN

ORGANIZATION CHART OF CHINA AIRLINES

2020 / 02 / 19

TAICHUNG BRANCH

BUSAN BRANCH

TECHNICALTRAINING CENTER

MELBOURNEBRANCH

KUMAMOTOSTATION

VICE PRESIDENT,OCEANIA

(VV)SENIOR VP

GUANGZHOU

OFFICE

SHENZHEN

OFFICE

CHENGDU OFFICE

ZHENGZHOU

OFFICE

SHENYANG

OFFICE

CHANGSHA

OFFICE

CARGO SALES &

SERVICES MAINLAND CHINA

XIAN OFFICE

WUHAN OFFICE

NANCHANG

STATION

HAIKOU OFFICE

SANYA STATION

ASSISTANT VP, SOUTH CHINA

CHONGQING

STATION

SHANGHAI OFFICE

XIAMEN OFFICE

NANJING OFFICE

HANGZHOU

OFFICE

NINGBO OFFICE

QINGDAO OFFICE

XUZHOU STATION

WUXI STATION

WEIHAI STATION

ASSISTANT VP, EAST CHINA

WENZHOU STATION

FUZHOUSTATION

BEIJING OFFICE

SENIOR VICE PRESIDENT, MAINLAND CHINA

ASSISTANT VP, NORTH CHINA

DATA PROTECTION & QUALITY MANAGEMENT OFFICE

AUDIT COMMITTEE

REMUNERATION COMMITTEE

RISK COMMITTEE

TAINAN SALES OFFICE

CEBU BRANCH

CHIANG MAI BRANCH

3.1.2 Major Corporate Functions

Department Functions

General Audit Office Responsible for auditing the internal control system, results of implementation of

the annual business plan.

Secretarial Office,

Board of Directors

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

proceedings and overseeing matters relating to resolutions, coordination channels

with general public stockholders, matters relating to juridical person shareholder

representatives, director communications and services, and budgeting and controls

for the Board and all functional committees.

Corporate

Development Office

Responsible for drafting the Company’s medium- and long-term strategic operating

plan, fleet plan, and annual business plan; seeking flying rights and building

relationships between the Company and civil aviation authorities in various

countries; establishing brand position and development strategies; planning

medium- and long-term design and development of passenger cabins and

entertainment systems; purchasing, selling, and leasing of aircraft.

Corporate Safety Office Drafts Company safety, security, quality assurance, environmental, and emergency

response policies and systems; establishes related management systems and carries

out educational training; implements related investigations, analysis, and

examinations; coordinates with government agencies and civil aviation authorities,

manufacturers, and groups to deal with Company safety, security, quality assurance,

environmental, and emergency response-related issues.

Corporate

Communications Office

Responsible for external Company communications, communication links with the

legislature and the media, planning social welfare activities, sponsoring charitable

activities, organizing inaugural flights and other holiday or celebratory activities,

publishing CAL Park Magazine, supervising and coordinating publication of Dynasty

magazine, organizing employee recreational activities, and setting the Company’s

brand image and advertising strategy.

Legal & Insurance Div. Responsible for reviewing all outside agreements and contracts, handling litigation,

and management of insurance matters for Company assets, such as the fleet and

aeronautical parts, personnel, and passenger and cargo transportation.

Finance Div. Responsible for planning financing sources, managing use of funds, controlling the

budget, auditing accounts receivable and payable items, preparing financial

statements, managing tax-related issues, fuel purchasing, and providing accounting

and cost analysis information. Supervising the operational performance and

management of invested enterprises.

Administration Div. Responsible for procurement of general goods, managing renovation projects and

land/real estate, land transport management and vehicle maintenance, handling

company licenses, monitoring and safekeeping of Company seals, sending and

receipt of prospectuses and official documents, and document management.

Cabin Crew Div. Responsible for establishing cabin crew operating standards, managing training of

cabin crew, planning for cabin crew manpower needs, and implementing assignment

of cabin crew personnel.



Ground Services Div. Responsible for establishing ground services operating standards, development of

the ground services operating system, planning and implementation of a full range of

ground services training, supervising ground services operations at each station,

providing ground services at Taiwan Taoyuan and Songshan Airports, and overall

management of ground service provider contracts.

In-Flight Service Supply

Chain & Marketing Div. Responsible for the research and development, marketing and planning of various

in-flight service supplies and products for sale; planning and supply management of

meals and beverages in all flights of the entire route; supervising and controlling the

logistics and supply management such as the purchasing, warehousing, preparation

and loading of various in-flight service supplies; working on improving the quality of

in-flight service products based on customer feedbacks and market trends.

Data Protection &

Quality Management

Office

Implements personal information and quality management system, and reports the

implementation results and improvement measures to the top management;masters

the content of laws and regulations related to the protection of personal information

in various countries to ensure compliance with the laws and the regulation

enforcement process in each country;establishes and implements the Company’s ISO

9001 quality management system, and implements service quality education,

internal quality auditor training and encourages further understanding of measures

regarding quality-related issues.

Passenger Sales &

Marketing Div. Responsible for supervising the passenger transport network planning and route

management of the entire route, seat control, business promotion, digital marketing,

customer relationship maintenance, membership marketing and inter-airline

cooperation, cross-industry collaboration, determination of passenger transport

rates and various quotas, performance evaluation, and developing and maintaining

revenue management systems and passenger transport business training at all levels.

Information

Management Div. Combines information technology with business knowledge to promote

computerization within the Company to upgrade operational competitiveness.

Human Resources Div. Responsible for planning the Company organization and human resources,

establishment of a personnel management system, and setting pay standards.

Provides recruitment services, supervises personnel management, established the

employee training system and oversees future updates, provides employee health

management, and manages personnel assignments to affiliated enterprises.

Occupational Safety &

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

drafts, plans, supervises, and promotes health and safety matters and guides

implementation in relevant departments in order to prevent occupational hazards

and ensure employee health and safety. Received ISO45001:2018 and TOSHMS

occupational health and safety certification following SGS audit to effectively control

occupational incident risk and improve occupational health and safety performance.



Cargo Sales, Marketing

& Services Div.

Establishes the cargo development strategy, supervises cargo operations on all

routes, plans the cargo flight timetable and controls allocation of hold space, sets

cargo shipping rates and sales quotas, evaluates operating performance, drafts and

oversees cargo services and operating standards, and is responsible for passenger

and cargo plane loading control operations, cargo equipment controls and

replenishment, Taipei cargo terminal operations, and accounting for the Cargo Sales,

Marketing & Services Division and Taiwan Cargo Center.

Flight Operations Div. Responsible for cabin crew manpower requirement planning, training and

management of cabin crew, developing flight operating standards, controlling fuel

consumption, planning and implementation of crew and flight assignments, and

maintaining airplane flight manuals and flight simulators.

System Operation

Control Div.

Manages coordination of all airports in the system, oversees flight status,

coordinates and manages adjustment of flights in response to anomalies, guarantees

on-time performance rates, provides real-time information to aircraft in flight,

ensures flight safety, investigates reasons for major delays to flights, establishes

comprehensive aircraft and statistical analysis data; operates and guides crew

allocation, plans and manages flight permits; responsible for safety management and

liability related to business.

Maintenance Div. Responsible for implementation of airplane maintenance, client aircraft maintenance

services, support and supervision of station maintenance, and development of

maintenance capabilities.

Engineering Div. Responsible for the planning and control of airplane maintenance, materials supply

management, controlling maintenance costs, and planning the information system

development strategy.

Quality Assurance Div. Responsible for coordination and communication with other countries’ civil aviation

authorities; maintaining the validity of operating standards, repair facility licenses,

and aircraft airworthiness certificates; authorization and management of

maintenance personnel training and task assignments; formulation and

implementation of the quality audit system. Established and implements the aircraft

quality management and on-site inspection systems, implements introduction of

new aircraft and sale or return of aircraft as stipulated in the fleet plan, and assists in

aircraft incident investigations.

Technical Training

Center

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

requirements. Compose training plan and execute training in accordance with EMO

(Engineering & Maintenance Organization) demands and customer requests.

Branch offices Responsible for each branch’s development and promotion of passenger and

freight-related operations.


3.2 Directors and Management Team 3.2.1 Directors

APR 25, 2020 Title Name

Nationality/ Country of

Origin Gender Date First

Elected Date

Elected Term

(Years)

Shareholding when Elected Current Shareholding

Spouse & Minor

Shareholding

Shareholding by Nominee

Arrangement Experience

(Education) Other Position

Executives, Directors or Supervisors who are Spouses or within Two Degrees of Kinship

Remark

Shares % Shares % Shares % Shares % Title Name Relation

Chairman

China Aviation Developm

ent Foundation

R.O.C. - 07/07/1988 06/27/2018 3 1,867,341,935 34.13% 1,867,341,935 34.45% - - - - - - - - - -

Representative: Hsieh, Su-Chien

R.O.C. Male 07/06/2016 06/27/2018 3 48,517 0.00% 48,517 0.00% 0 0.00% 0 0.00%

Chairman, Taiwan Air Cargo Terminal Ltd. Senior Vice President of Marketing, China Airlines Ltd. Director, Taiwan Region and General Manager of Taipei Branch Office, China Airlines Ltd. General Manager, Australia Branch Office, China Airlines Ltd. General Manager, Indonesia Branch Office, China Airlines Ltd. General Manager, Kaohsiung Branch Office, China Airlines Ltd. Vice President, Passenger Sales Div. Chairman, Abacus Distribution Systems Taiwan Ltd. Bachelor’s Degree, Department of Economics, Soochow University

President, China Airlines Ltd. Chairman, Mandarin Airlines, Ltd. Chairman, CAL Park Co., Ltd. Chairman, CAL Hotel Co., Ltd.. Chairman, CAL-Asia Investment Inc. Chairman, CAL-Dynasty International, Inc. Director, Dynasty Properties Co., Ltd. Director, Taoyuan International Airport Services Co., Ltd.

None None None Note 1

Director

China Aviation Developm

ent Foundation

R.O.C. - 07/07/1988 06/27/2018 3 1,867,341,935 34.13% 1,867,341,935 34.45% - - - - - - - - - -

Representative: Chen, Charles C.Y.

R.O.C. Male 07/01/2000 06/27/2018 3 190,166 0.00% 190,166 0.00% 155,849 0.00% 0 0.00%

Director, Wan Hai Lines Ltd. Chairman, UTAC Group, Singapore Chairman, Epistar Corp. Director, Formosa International Hotels Ltd. Director, Ascendas Pte. Ltd. Director, Ichia Technologies, Inc. Adjunct Associate Professor, National Tsing Hua University MBA, New York University, U.S.A.

Chairman, Eyon Holding Group Vice Chairman, Taiwan Air Cargo Terminal Ltd. Vice Chairman, Taian Insurance Co., Ltd. Chairman, Wan Hai International Pte. Ltd. President, Chen-Yung Foundation Vice Chairman, Wan Hai Lines (Singapore) Pte. Ltd. Director, Epistar Corp. Director, Shihlin Paper Co., Ltd.

None None None None

Representative: Ting, Kw

ang-Hung

R.O.C. Male 01/28/2008 06/27/2018 3 0 0.00% 0 0.00% 0 0.00% 0 0.00%

Chairman, Central Trading & Development Corp. BA in Finance, Boston University, U.S.A.

Member, Risk Committee, China Airlines Ltd. Group Chairman, Phu My Hung Holdings Group Chairman, Phu Yung An Corp. Chairman, Hiep Phuoc Power Co., Ltd. Chairman, Macro Technologies Inc. (Vietnam) Ltd. Chairman, Phu My Hung Asia Holdings Corp. Vice Chairman, TVBS Media Inc. Director, Phu My Hung Development Corp.

None None None None


Title Name Nationality/ Country of


Elected Date

Elected Term

(Years)


Spouse & Minor

Shareholding





Remark


Representative: Chen, Han-M

ing

R.O.C. Male 07/26/2016 06/27/2018 3 0 0.00% 0 0.00% 0 0.00% 0 0.00%

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

Chairman, Tigerair Taiwan Co., Ltd. Chairman, Prime Development Co., Ltd. Director, Chyn-Tay Bearing Co., Ltd.

None None None None

Representative: Ko, Sun-Ta

R.O.C. Male 06/27/2018 06/27/2018 3 0 0.00% 0 0.00% 0 0.00% 0 0.00%

PT Lecturer, National Open University PT Lecturer, National Open College President, Keelung Fund for Children & Families MBA, Keio University, Japan

Chairman, K Hotels Group Chairman, The Tango Group Chairman, Kodak Trading Co., Ltd. Chairman, Kota Enterprise Co., Ltd.

None None None None

Representative: W

ei, Yung-Yeh

R.O.C. Male 06/27/2018 06/27/2018 3 3,737 0.00% 3,737 0.00% 0 0.00% 0 0.00%

Jet Airplane Maintenance Group, Air Force Technical School

Member of Council, China Airlines Employees Union Foreman, Line Maintenance Department, Engineering & Maintenance Division, China Airlines Ltd.

None None None None

Director

National

Development

Fund, Executive Yuan

R.O.C. - 06/15/2012 06/27/2018 3 519,750,519 9.50% 519,750,519 9.59% - - - - - - - - - -

Representative: Lin, Su-M

ing

R.O.C. Male 06/15/2012 06/27/2018 3 0 0.00% 0 0.00% 0 0.00% 0 0.00%

Member, Tax Reform Commission, Executive Yuan Member, Administration Appeals Commission, Taipei City Government Deputy Dean, College of Management, National Taiwan University Chairman, Department and Graduate Institute of Accounting, National Taiwan University Ph.D. in Accounting, Arizona State University, U.S.A.

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

None None None None

Representative: W

ang, Shih-Szu

R.O.C Female 06/27/2018 06/27/2018 3 0 0.00% 0 0.00% 0 0.00% 0 0.00%

Director General, Tourism Bureau of Tainan City Government Chairperson, Research, Development and Evaluation Commission of Tainan City Government Director General, Ketagalan Foundation Director General, Information Department of Kaohsiung City Government Director General, Judicial Reform Foundation Director General, Taiwan Association for Human Rights Master’s Degree, International Development Policy, Duke University, U.S.A.

Deputy Mayor, Tainan City Government

None None None None




Elected Date

Elected Term

(Years)


Spouse & Minor

Shareholding





Remark


Independent Director

Chung, Lo-Min

R.O.C. Male 06/15/2012 06/27/2018 3 0 0.00% 0 0.00% 0 0.00% 0 0.00%

Chairman, China Steel Chemical Corp. Chairman, Universal exchange Inc. Executive Vice President, China Steel Corp. Vice President of Finance, China Steel Corp. MBA, Arizona State University, U.S.A.

Chairman, Risk Committee, China Airlines Ltd. Member, Audit Committee, China Airlines Ltd.

None None None None


Chang, Hsieh G

en-Sen

R.O.C. Female 06/27/2018 06/27/2018 3 0 0.00% 0 0.00% 0 0.00% 0 0.00%

Consultant, Legislative Council Office Director, Shian CPA Firm Adjunct Associate Professor, Chinese Culture University Controller, Amagic Holographics, Inc. Senior Associated CPA, Wu, Liang, and Huang CPAs Staff Accountant, AAA (Auto Club of S. California) MBA, University of California, Irvine, U.S.A.

Chairman, Audit Committee, China Airlines Ltd. Member, Remuneration Committee, China Airlines Ltd. Member, Risk Committee, China Airlines Ltd. Member, Foundation Management Committee, Environmental Protection Administration Independent Director, K Laser Technology Inc.

None None None None


Shen, Hui-Ya

R.O.C. Female 06/27/2018 06/27/2018 3 0 0.00% 0 0.00% 0 0.00% 0 0.00%

Independent Director of First Financial Holding Co., Ltd. Independent Director of Taiwan Fertilizer Co., Ltd. Committee of Securities and Futures Investors Protection Center Master of Laws, National Chung Hsing University

Chairman, Remuneration Committee, China Airlines Ltd. Member, Audit Committee, China Airlines Ltd. Member, Risk Committee, China Airlines Ltd. Consultant of Public Service Pension Fund Management Board, Ministry of Civil Service, Examination Yuan Lawyer, Lian Yung Law Office Independent Director, Formosa Advanced Technologies Co., Ltd. Independent Director, Hua Nan Securities Co., Ltd.

None None None None

Note 1: In recent years, the industry competition in the aviation industry is fierce. In order to increase the operating efficiency and streamline the decision-making and implementation, Chairman Hsieh, Su-Chien is temporarily appointed as the President of the Company. However, the manager remains responsible for the implementation of all important proposals after the approval of the Board of Directors. In order to prevent the concurrent appointment from influencing the objectivity and supervision of the Board of Directors, except for Chairman Hsieh, Su-Chien and Director Wei, Yung-Yeh, who are concurrently Directors and employees, none of the other members of the 21st Board of Directors are concurrently employees of the Company.

Note 2: The average term of the members of the 21st Board of Directors as Directors of the Company was 6 years. Note 3: The three Independent Directors of the 21st Board of Directors have not been appointed for more than 3 terms.


Major shareholders among institutional shareholders Name of Institutional Shareholders Major Shareholders

China Aviation Development Foundation A non-corporate organization. In February 1988, all 27 shareholders of the Company (Note) donated the shares held and 100% of the shareholders’ equity to set up the foundation, which was reported to the Ministry of Transportation and Communications on March 2 of the same year. Its establishment was approved on July 6 of the same year.

National Development Fund, Executive Yuan Government

Note: The source is “Charter for Donations to the China Aviation Development Foundation”.

Professional qualifications and independence analysis of directors

Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during their term in office. 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or its affiliated enterprise (except for independent directors appointed in accordance

with the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary, or a subsidiary of the same parent).

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

4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the managers listed in (1) or the personnel listed in (2) or (3).

5. Not a director, supervisor, or employee of a corporate shareholder who directly holds more than 5% of the total shares issued by the Company, is within the top five shareholders, or appointed a representative to be a director or supervisor of the Company in accordance with Article 27, Paragraph 1 or 2 of the Company Act (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary, or a subsidiary of the same parent).

6. Not a director, supervisor, or employee of another company controlled by the same person who holds more than half of the Company's director seats or voting shares (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary, or a subsidiary of the same parent).

Criteria

Name

Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years Work

Experience Independence Criteria (Note)

Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director

An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University

A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company

Has Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company

1 2 3 4 5 6 7 8 9 10 11 12

Hsieh, Su-Chien - - - - - - - Chen, Charles C.Y. - - - - Ting, Kwang-Hung - - - - - Chen, Han-Ming - - - - - - Ko, Sun-Ta - - - - - Wei, Yung-Yeh - - - - - Lin, Su-Ming - - 1 Wang, Shih-Szu - - - - - Chung, Lo-Min - - - Chang, Hsieh Gen-Sen - 1 Shen, Hui-Ya - 2


7. Not a director, supervisor or employee of another company or institution with the same person or spouse as the chairman, general manager or equivalent of the company (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary or a subsidiary of the same parent).

8. Not a director, supervisor, manager or shareholder holding more than 5% of shares of a specific company or institution that has financial or business dealings with the Company (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary or a subsidiary of the same parent and if the specific company or institution holds more than 20% but less than 50% of the total issued shares of the Company).

9. Not a professional who provides auditing related services to the Company or its affiliates and who does not provide commercial, legal, financial, or accounting related services to the Company or its affiliates with a cumulative amount of remuneration obtained in the last two years exceeding NT$500,000; and is not an owner, partner, director, supervisor, or manager, or the spouse of any of the above, of a sole proprietorship, partnership, company, or organization that provides such services to the Company or its affiliates. However, this does not apply to the members of the Remuneration Committee, the Special Committee for Merger/consolidation and Acquisition who perform their functions and powers in accordance with the relevant laws and regulations of the Securities and Exchange Act or the Business Mergers and Acquisitions Act.

10. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company. 11. Not been a person of any conditions defined in Article 30 of the Company Act. 12. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Act.


3.2.2 Management Team APR 25, 2020


Origin Gender

Date Effective

Shareholding Spouse &

Minor Shareholding


Arrangement Experience (Education) Other Positions

Managers Who Are Spouses or Within Two

Degrees of Kinship Remark

Shares ％ Shares ％ Shares ％ Title Name Relation

Chairman & President

Hsieh, Su-Chien R.O.C. Male 06/24/2016 48,517 0.00% 0 0.00% 0 0.00%

Senior Vice President of Marketing, China Airlines Ltd. General Manager, Australia Branch Office, China Airlines Ltd. Chairman, Taiwan Air Cargo Terminal Ltd. Bachelor’s Degree, Department of Economics, Soochow University

Chairman, Mandarin Airlines, Ltd. Chairman, CAL Park Co., Ltd. Chairman, CAL Hotel Co., Ltd.. Chairman, CAL-Asia Investment Inc. Chairman, CAL-Dynasty International, Inc. Director, Dynasty Properties Co., Ltd. Director, Taoyuan International Airport Services Co., Ltd.

None None None Note 1

Auditor General, General Audit Office

Fang, Juo-Ling R.O.C. Female 05/11/2018 8,000 0.00% 0 0.00% 0 0.00%

Vice President, Administration Div. Deputy Auditor General, General Audit Office Master’s Degree, Georgia State University, U.S.A.

Supervisor, Taiwan Airport Service Co., Ltd. Supervisor, China Pacific Catering Services Ltd. Supervisor, CAL Park Co., Ltd. Supervisor, Taiwan Aircraft Maintenance And Engineering Co., Ltd. Supervisor, CAL Hotel Co., Ltd..

Assistant Vice

President, Cabin

Crew Div.

Fang,

Yuan-Hua Siblings None

Deputy Auditor General, General Audit Office

Ho, Hui-Fen R.O.C. Female 02/01/2018 0 0.00% 0 0.00% 0 0.00%

Assistant Vice President, Finance Div. General Manager, General Accounting Department, Finance Div. Master’s Degree, Soochow University

Supervisor, Sabre Travel Network (Taiwan) Ltd. Supervisor, Taiwan Air Cargo Terminal Ltd.

None None None None

Senior Vice President (VF)

Chang, Young R.O.C. Male 06/24/2016 0 0.00% 0 0.00% 0 0.00%

Chairman & President, Taiwan Airport Services Co., Ltd. President, Taoyuan International Airport Services Co., Ltd. Bachelor’s Degree, Fu Jen University

Chairman, Kaohsiung Airport Catering Services Ltd. Chairman, Taiwan Airport Service Co., Ltd. Chairman, Taiwan Airport Service (Samoa) Co., Ltd. Director, Taoyuan International Airport Services Co., Ltd. Director, Tigerair Taiwan Co., Ltd. Director, Mandarin Airlines, Ltd. Vice Chairman, Arport Air Terminal (Xiamen) Co., Ltd. Vice Chairman, Arport Air Cargo Service (Xiamen) Co., Ltd. Director, Taiwan Aircraft Maintenance And Engineering Co., Ltd. Director & President, CAL Park Co., Ltd. Director, CAL-Asia Investment Inc.

None None None None

Senior Vice President (VV)

Wang, Chen-Min

R.O.C. Male 01/01/2019 35,621 0.00% 0 0.00% 0 0.00%

Vice President, Passenger Sales Div. & Passenger Marketing Div. General Manager, Korea Branch Bachelor’s Degree, Feng Chia University

Director, CAL Hotel Co., Ltd.. Director, Mandarin Airlines, Ltd. Chairman, Taiwan Air Cargo Terminal Ltd. Director, Tigerair Taiwan Co., Ltd. Director, Taiwan Aircraft Maintenance And Engineering Co., Ltd. Director, CAL-Dynasty International, Inc. Director & President, CAL-Asia Investment Inc.

None None None None



Origin Gender

Date Effective


Minor Shareholding






Senior Vice President (VO)

Kao, Shing-Hwang

R.O.C. Male 05/01/2012 62,809 0.00% 0 0.00% 0 0.00%

Vice President, Flight Operations Div. Assistant Vice President, Flight Operations Div. Bachelor’s Degree, National Cheng Kung University

Director, Mandarin Airlines, Ltd. Director, CAL Hotel Co., Ltd..

None None None None

Senior Vice President (VE)

Wang, Houng R.O.C. Male 08/16/2017 12,069 0.00% 0 0.00% 0 0.00%

Vice President, Maintenance Div. Vice President, Engineering Div. Bachelor’s Degree, Feng Chia University

Chairman, Taiwan Aircraft Maintenance And Engineering Co., Ltd. Director, Mandarin Airlines, Ltd. Director, Taoyuan International Airport Services Co., Ltd. Vice Chairman, NORDAM Asia Ltd. Director, CAL Hotel Co., Ltd..

None None None None

Data Protection Officer, Data Protection & Quality Management Office

Wu, Hsiao-Sui R.O.C. Male 07/21/2018 0 0.00% 52 0.00% 0 0.00%

General Manager, Korea Branch General Manager, Honolulu Branch Master’s Degree, Cranfield University, UK

None None None None None

Vice President, Human Resources Div.

Yeah, Shao-Ting R.O.C. Male 04/01/2019 868 0.00% 0 0.00% 0 0.00%

Assistant Vice President, Human Resources Div. General Manager, Human Resources & Administration Department, Maintenance Div. Bachelor’s Degree, Chinese Culture University


Assistant Vice President, Human Resources Div.

Lee, Pei-Chen R.O.C. Female 04/01/2019 58,430 0.00% 7,144 0.00% 0 0.00%

General Manager, Human Resources Development Dept., Human Resources Div. General Manager, Administration Dept., Ground Services Div. Master’s Degree, National Taiwan Normal University


Vice President, Flight Operations Div.

Lai, Ming-Hui R.O.C. Male 03/01/2016 19,127 0.00% 0 0.00% 0 0.00%

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


Assistant Vice President, Flight Operations Div.

Tung, Hsing-Hua

R.O.C. Male 03/16/2018 587 0.00% 0 0.00% 0 0.00%

General Manager, Legal Affairs Department, Legal & Insurance Div. General Manager, Business Management Department, Business Development Office Master’s Degree, Tunghai University


Assistant Vice President, Flight Operations Div.

Chen, Chwen-Der

R.O.C. Male 08/01/2018 19,299 0.00% 0 0.00% 0 0.00%

General Manager, Flight Operations Training Dept., Flight Operations Div. General Manager, Planning & Development Dept., Flight Operations Div. Master’s Degree, National Cheng Chi University


Vice President, System Operation Control Div.

Chou, Jyh-Shyan

R.O.C. Male 12/01/2017 9,171 0.00% 7,382 0.00% 0 0.00%

Assistant Vice President, Corporate Safety Office Vice President, Taiwan Airport Services Co., Ltd. Master’s Degree, RMIT University, AU




Origin Gender

Date Effective


Minor Shareholding






Assistant Vice President, System Operation Control Div.

He, Cheng R.O.C. Male 11/01/2019 251 0.00% 0 0.00% 0 0.00%

Control Manager , Flight Control Dept., System Operation Control Div. General Manager, Bali Branch, Indonesia Branch Master’s Degree, Assumption University, Thailand


Assistant Vice President, System Operation Control Div.

Huang, Hsiang-Piao R.O.C. Male 08/01/2017 1,000 0.00% 0 0.00% 0 0.00%

General Manager, Safety Assurance Department, Corporate Safety Office General Manager, Administration Department, Ground Services Div. Bachelor’s Degree, National Sun Yat-Sen University


Vice President, Passenger Sales & Passenger Marketing Div.

Peng, Pao Chu R.O.C. Female 01/01/2019 8,434 0.00% 0 0.00% 0 0.00%

Vice President, Corporate Development Office Assistant Vice President, Passenger Sales Div. Bachelor’s Degree, National Taiwan University

Director, Sabre Travel Network (Taiwan) Ltd. Director, Everest Investment Holdings Ltd. Director, Yestrip Co., Ltd. Director, Mandarin Airlines, Ltd.

None None None None

Assistant Vice President, Passenger Sales & Passenger Marketing Div.

Chen, Pei-Ti R.O.C. Female 11/01/2018 926 0.00% 0 0.00% 0 0.00%

Assistant Vice President, Passenger Sales & Marketing Div. General Manager, Sales Management Department Bachelor’s Degree, National Taiwan University


Vice President, Finance Div. (concurrently finance and accounting manager)

Chen, I-Chieh R.O.C. Male 02/16/2017 6,161 0.00% 0 0.00% 0 0.00%

Vice President, Investment Development & Management Div. General Manager, Vietnam Branch Concurrently, General Manager, Hanoi Branch Master’s Degree, National Taipei University

Supervisor, Dynasty Aerotech International Corp. Supervisor, CAL Hotel Co., Ltd.. Supervisor, Mandarin Airlines, Ltd. Supervisor, China Pacific Laundry Services Ltd. Director, Tigerair Taiwan Co., Ltd.

None None None None

Assistant Vice President, Finance Div.

Yen, Yang R.O.C. Female 05/01/2018 0 0.00% 0 0.00% 0 0.00%

General Manager, Finance & Treasury Department, Finance Div. General Manager, Economics Analysis Department, Finance Div. Master’s Degree, The City University of New York, U.S.A.

Supervisor, Taiwan Aircraft Maintenance And Engineering Co., Ltd. Supervisor, Kaohsiung Airport Catering Services Ltd.

None None None None

Assistant Vice President, Finance Div.

Huang, Hui Na R.O.C. Female 09/01/2017 16,661 0.00% 0 0.00% 0 0.00%

General Manager, Passenger Sales Revenue Audit & Control Department, Finance Div. General Manager, Accounting And Administration Department, Taipei Branch Master’s Degree, Soochow University

Supervisor, Global Sky Express Ltd. Supervisor, Yestrip Co., Ltd.

None None None None

Vice President, Corporate Safety Office

Chen, I-Ko R.O.C. Male 03/01/2016 23,541 0.00% 0 0.00% 0 0.00%

Assistant Vice President, Corporate Safety Office Vice President, Safety Office, Mandarin Airlines, Ltd. Associate’s Degree, United College of Engineering




Origin Gender

Date Effective


Minor Shareholding






Assistant Vice President, Corporate Safety Office

Yu, Yueh Han R.O.C. Male 12/06/2018 0 0.00% 0 0.00% 0 0.00%

General Manager, Safety Department Corporate Safety Office Vice President of Safety, Security, Quality & Environment, Tigerair Taiwan Co., Ltd. Master’s Degree, National Sun Yat-sen University


Vice President, Legal & Insurance Div.

Chien, Feng-Nien

R.O.C. Male 01/03/2017 0 0.00% 0 0.00% 0 0.00%

Director of Legal Office, Taiwan Financial Asset Service Corporation Head Prosecutor, Taichung Prosecutors Office Master’s Degree, National Taiwan Ocean University


Vice President, Corporate Communications Office

Liu, Tsao-Yang R.O.C. Male 11/05/2018 60,488 0.00% 0 0.00% 0 0.00%

Vice President, Ground Services Div. Chief Representative, South China, Concurrently General Manager, Guangzhou Office Bachelor’s Degree, Chinese Culture University


Assistant Vice President, Corporate Communications Office

Lin, Herng-Shan R.O.C. Male 04/16/2019 0 0.00% 0 0.00% 0 0.00%

General Manager, Corporate Affairs Department, Corporate Communications Office General Manager, Employee Relations Department, Human Resources Div. Master’s Degree, RMIT University, AU


Vice President, Administration Div.

Chen, Wei-Tau R.O.C. Male 11/18/2019 36,165 0.00% 2,196 0.00% 0 0.00%

Vice President, Ground Services Division President, Taiwan Airport Services Co. Ltd. Bachelor’s Degree, Fu Jen Catholic University

Director, Dynasty Aerotech International Corp. Director, CAL Park Co., Ltd.

None None None None

Vice President, Information Management Div. (concurrently research and development manager)

Chung, Ming-Jyh

R.O.C. Male 11/18/2019 638 0.00% 0 0.00% 0 0.00%

Vice President, Administration Div. Deputy Auditor General, General Audit Office Master’s Degree, National Taiwan University

Director, Sabre Travel Network (Taiwan) Ltd.

None None None None

Assistant Vice President, Information Management Div.

Liu, Duan-Shiuh R.O.C. Male 04/20/2017 92,608 0.00% 0 0.00% 0 0.00%

Assistant Vice President, Ground Services Div. General Manager, Information Planning Department, Information Management Div. Master’s Degree, National Taipei University of Technology


Vice President, Cabin Crew Div.

Hong, Tsu-Kuang R.O.C. Male 05/04/2017 11,816 0.00% 0 0.00% 0 0.00%

Assistant Vice President, Flight Operations Div. General Manager, Food & Beverage Services Department, In-Flight Service Supply Div. Bachelor’s Degree, Soochow University

Director, China Pacific Laundry Services Ltd. Director, China Pacific Catering Services Ltd Director, CAL Hotel Co., Ltd..

None None None None



Origin Gender

Date Effective


Minor Shareholding






Assistant Vice President, Cabin Crew Div.

Fang, Yuan-Hua R.O.C. Male 08/04/2018 30,348 0.00% 0 0.00% 0 0.00%

President, Dynasty Hotel of Hawaii, Inc. General Manager, Qingdao Office Master’s Degree, RMIT University, AU

None

Auditor General, General

Audit Office

Fang, Juo-Ling

Siblings None

Vice President, Corporate Development Office

Chang, Cheng-Hao R.O.C. Male 01/21/2019 11,803 0.00% 0 0.00% 0 0.00%

Vice President, Cargo Sales & Marketing Div. President, Taiwan Air Cargo Terminal Ltd. Master’s Degree, Cranfield University, UK

Director, Tigerair Taiwan Co., Ltd. Director, Taiwan Airport Service Co., Ltd. Director, Global Sky Express Ltd. Director, Dynasty Hotel of Hawaii, Inc. Director, Dynasty Properties Co., Ltd. Director, China Aircraft Services Ltd. Director, Taiwan Air Cargo Terminal Ltd.

None None None None

Assistant Vice President, Corporate Development Office

Wang, Wei R.O.C. Female 02/02/2017 54,297 0.00% 0 0.00% 0 0.00%

General Manager, Austria Branch Assistant Vice President, Finance Div. Master’s Degree, George Washington University, U.S.A.

Supervisor, NORDAM Asia Ltd. Director, Kaohsiung Airport Catering Services Ltd.

None None None None

Assistant Vice President, Corporate Development Office

Liu, Shou-Shu R.O.C. Female 12/01/2018 0 0.00% 0 0.00% 0 0.00%

Special Assistant of President Office, Mandarin Airlines Bachelor’s Degree, National Taiwan University


Vice President, In-Flight Service Supply Chain & Marketing Div.

Chung, Wan-Chun

R.O.C. Female 11/23/2019 27,687 0.00% 0 0.00% 0 0.00%

General Manager, Hong Kong Branch Vice President, Finance Div. Master's Degree, University of Illinois At Urbana-Champaign, U.S.A.

Chairman, China Pacific Laundry Services Ltd. Director, China Pacific Catering Services Ltd. Director, Kaohsiung Airport Catering Services Ltd.

None None None None

Assistant Vice

President,

In-Flight Service

Supply Chain &

Marketing Div.

An, Long Chi R.O.C. Male 04/01/2020 77,308 0.00% 0 0.00% 0 0.00%

President, China Pacific

Catering Services Ltd.

General Manager, Xiamen

Office

Bachelor’s Degree,

Chinese Culture University


Vice President, Ground Services Div.

Chu, Te-Hsiu R.O.C. Male 11/18/2019 43,382 0.00% 8,277 0.00% 0 0.00%

Chief Representative, East China, and Concurrently General Manager, Shanghai Office Assistant Vice President, Flight Operations Div. Bachelor’s Degree, Chinese Culture University

Director, China Pacific Laundry Services Ltd. Director, Taoyuan International Airport Services Co., Ltd.

None None None None

Assistant Vice President, Ground Services Div.

Huang, Chin-Feng

R.O.C. Male 10/16/2019 139,659 0.00% 589 0.00% 0 0.00%

President, Taoyuan International Airport Services Company Ltd. Senior Auditor, General Audit Office Bachelor’s Degree, Soochow University


Assistant Vice President, Ground Services Div.

Hsu, Hsueh Wen

R.O.C. Male 02/01/2020 13,149 0.00% 0 0.00% 0 0.00%

Station Manager, Customer Service, Taoyuan International Airport, Ground Services Div. Station Manager, Customer Service, Songshan International Airport, Ground Services Div. Bachelor’s Degree, Fengjia University


Vice President, Cargo Sales, Marketing & Services Div.

Liu, Der-Chuan R.O.C. Male 07/17/2010 172 0.00% 0 0.00% 0 0.00%

Vice President, Cargo Sales & Marketing Div. Vice President, Cargo Services & Logistics Div. Bachelor’s Degree, Fu Jen University

Director, Taiwan Air Cargo Terminal Ltd. Director, Dynasty Aerotech International Corp. Director, Global Sky Express Ltd. Director, Eastern United International Logistics (Holdings) Ltd.

None None None None



Origin Gender

Date Effective


Minor Shareholding






Assistant Vice President, Cargo Sales, Marketing & Services Div.

Sheu, Yuh-Shy R.O.C. Male 01/22/2019 24,648 0.00% 0 0.00% 0 0.00%

General Manager, Cargo Sales & Services, Mainland China General Manager, Cargo Sales Management Department, Cargo Sales, Marketing & Services Div. Bachelor’s Degree, Feng Chia University



Shann, Da-Sin R.O.C. Male 01/01/2018 29,818 0.00% 17,982 0.00% 0 0.00%

General Manager, Cargo Sales Management Department, Cargo Sales, Marketing & Services Div. General Manager, Cargo Revenue & Route Management Department, Cargo Sales, Marketing & Services Div. Master’s Degree, National Taipei University

Director, Global Sky Express Ltd. Director, Chung-Hwa Express Co., Ltd.

None None None None


Mao, Li-Chung R.O.C. Male 12/20/2019 0 0.00% 0 0.00% 0 0.00%

Chief Representative, South China Concurrently, General Manager, Guangzhou Office General Manager, Nanking Office Master’s Degree, Chung Yuan Christian University


Vice President, Maintenance Div.

Sun, Jia-Min R.O.C. Male 09/16/2017 62,602 0.00% 0 0.00% 0 0.00%

Vice President, Engineering Div. Vice President, Corporate Safety Office Master’s Degree, National Taiwan University

Chairmanr, Dynasty Aerotech International Corp. Director, Taiwan Aircraft Maintenance And Engineering Co., Ltd. Director, China Aircraft Services Ltd.

None None None None

Assistant Vice President, Maintenance Div.

Hsiao, Jui-Fu R.O.C. Male 09/16/2017 0 0.00% 0 0.00% 0 0.00%

General Manager, Line Maintenance Department, Maintenance Div. General Manager, Line Operation Department, Maintenance Div. Master’s Degree, Kainan University


Vice President Quality, Assurance Div.

Li, Chih-Wei R.O.C. Male 09/16/2017 10,295 0.00% 0 0.00% 0 0.00%

Assistant Vice President, Maintenance Div. General Manager, Line Operation Department, Maintenance Div. Master’s Degree, Kainan University

Director, NORDAM Asia Ltd.

None None None None

Vice President, Engineering Div.

Lee, Jung-Hui R.O.C. Male 09/16/2017 10,298 0.00% 0 0.00% 0 0.00%

Vice President Quality, Assurance Div. Assistant Vice President, Maintenance Div. Master’s Degree, Tatung University

Director, Taiwan Aircraft Maintenance And Engineering Co., Ltd. Director, Taikoo (Xiamen) Landing Gear Services Co., Ltd. Director, Haeco Composite Structures (Jinjiang) Co., Ltd.

None None None None

Vice President, Taiwan

Chiu, Wei-Tuan R.O.C. Male 03/19/2020 4,901 0.00% 0 0.00% 0 0.00%

Assistant Vice President, Passenger Sales & Marketing Div. General Manager, Osaka Branch Bachelor’s Degree, National Chung Hsing University

Director, Sabre Travel Network (Taiwan) Ltd. Director, Yestrip Co., Ltd.

None None None None

Vice President, Europe

Han, Liang Chung

R.O.C. Male 06/12/2017 11,498 0.00% 0 0.00% 0 0.00%

Senior Vice President President, Mandarin Airlines Co., Ltd. Master’s Degree, Business of Administration, University of Pittsburgh, U.S.A.


Vice President, Mainland China

Chang, Chih-Chieh

R.O.C. Male 10/08/2018 96,553 0.00% 0 0.00% 0 0.00%

Senior Vice President, President Office Vice President, Passenger Sales Div. Bachelor’s Degree, Tunghai University




Origin Gender

Date Effective


Minor Shareholding






Vice President, Oceania

Chen, Chung-Ming R.O.C. Male 05/10/2017 32,779 0.00% 0 0.00% 0 0.00%

General Manager, Fukuoka Branch Assistant Vice President, Passenger Sales Div. Bachelor’s Degree, Department of Transportation & Logistics Management of National Chiao Tung University


Note1: In recent years, competition in the aviation industry has been fierce. In order to increase our operating efficiency and streamline our decision-making and implementation, Chairman Hsieh, Su-Chien has been temporarily appointed as the President of the Company. However, the manager remains responsible for the implementation of all important proposals after approval by the Board of Directors. In order to prevent concurrent appointment from influencing the objectivity and supervision of the Board of Directors, except for Chairman Hsieh, Su-Chien and Director Wei, Yung-Yeh, who are concurrently directors and employees, none of the other members of the 21st Board of Directors are concurrently employees of the company.

Note2: Company presidents, senior vice presidents, vice presidents, data protection officer, assistant vice presidents, and department and branch general managers have not worked for the Company's currently designated accounting firm or affiliated enterprises within the specified period and do not hold Company stock under the name of a different person.


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

Title Name

(Note 1)

Remuneration Ratio of Total Remuneration

(A+B+C+D) to Net Loss (%) (Note 10)

Base Compensation (A) (Note 2)

Severance Pay (B) Bonus to Directors (C)

(Note 3) Allowances (D)

(Note 4)

CAL

Consolidated Subsidiaries of

CAL (Note 7)

CAL


CAL (Note 7)

CAL


CAL (Note 7)

CAL

Consolidated Subsidiaries

of CAL (Note 7)

CAL

Consolidated Subsidiaries

of CAL (Note 7)

Chairman Hsieh, Su-Chien 4,574 4,574 0 0 0 0 468 1,556 -0.42% -0.51%

Chairman Ho, Nuan-Hsuan 1,676 1,676 2,866 2,866 0 0 241 608 -0.40% -0.43%

Director Chen, Charles C.Y. 40 40 0 0 0 0 530 770 -0.05% -0.07%

Director Ting, Kwang-Hung 40 40 0 0 0 0 540 540 -0.05% -0.05%

Director Chen, Han-Ming 40 40 0 0 0 0 530 530 -0.05% -0.05%

Director Ko, Sun-Ta 40 40 0 0 0 0 530 530 -0.05% -0.05%

Director Wei, Yung-Yeh 40 40 0 0 0 0 530 530 -0.05% -0.05%

Director Lin, Su-Ming 40 40 0 0 0 0 545 545 -0.05% -0.05%

Director Wang, Shih-Szu 0 0 0 0 0 0 102 102 -0.01% -0.01%


Chung, Lo-Min 60 60 0 0 0 0 880 880 -0.08% -0.08%


Chang, Hsieh Gen-Sen

60 60 0 0 0 0 900 900 -0.08% -0.08%


Shen, Hui-Ya 60 60 0 0 0 0 900 900 -0.08% -0.08%

1.State the policy, system, standard and structure of independent directors’ remuneration, and the relationship between the remuneration amount and factors such as responsibilities, risks, and contributed time: The remuneration of the independent directors of the Company shall be handled in accordance with the Articles of Association and shall be determined by the Board of Directors with reference to the standards of relevant industries and listed companies, and shall be paid as fixed remuneration, transportation fees, and attendance fees.

Note 1: Aside from independent directors, all other directors are representatives of the Company’s juridical person shareholders China Aviation Development Foundation, National Development Fund (Executive Yuan). Mr. Ho, Nuan-Hsuan was dismissed as Chairman on April 2, 2019; Mr. Hsieh, Su-Chien has been elected as Chairman on April 2, 2019.

Note 2: Refers to director remuneration over the past year (includes director salary, additional compensation, severance pay, various bonuses, incentive pay).

Note 3: As stipulated in the Company’s Articles of Incorporation, directors are not awarded bonuses.

Note 4: Refers to relevant business expenses incurred by directors (including travel expenses, special disbursements, various allowances, living quarters, company car). If provided with housing, a car or other transportation, or exclusive personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be disclosed. The above figures do not include remuneration paid to drivers, which totaled NT$970,000.

Note 5: Refers to salary, bonuses, and allowances received by directors who are also employed by the Company (including as president, vice president, other management, or regular employee) over the past year and includes salary, additional compensation, severance pay, various bonuses, incentive pay, travel expenses, special disbursements, various allowances, living quarters, and company car. If provided with housing, a car or other transportation, or exclusive personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be disclosed. The above figures do not include remuneration paid to drivers, which totaled NT$196,000. As stipulated in IFRS 2 Share Based Payments including obtaining employee stock options and employee restricted stock awards and participation in a cash capital increase shall be calculated as remuneration.

* The content is provided for information disclosure, not tax purposes.


Unit: NT$ thousands Dec 31,2019 Relevant Remuneration Received by Directors Who are Also Employees Ratio of Total Compensation

(A+B+C+D+E+F+G) to Net Loss (%)

(Note 10)

Compensation Paid to

Directors from an

Invested Company or

Parent Company Other

than the Company’s

Subsidiary

(Note 11)

Salary, Bonuses, and Allowances

(E)(Note 5) Severance Pay (F)

Employees’ Compensation (G)

(Note 6)

CAL

Consolidated

Subsidiaries

of CAL

(Note 7)

CAL

Consolidated

Subsidiaries

of CAL

(Note 7)

CAL

Consolidated

Subsidiaries of CAL

(Note 7) CAL

Consolidated

Subsidiaries of

CAL

(Note 7) Cash Stock Cash Stock

1,579 1,942 0 0 0 0 0 0 -0.55% -0.67% None

0 0 0 0 0 0 0 0 -0.40% -0.43% None

0 0 0 0 0 0 0 0 -0.05% -0.07% None

0 0 0 0 0 0 0 0 -0.05% -0.05% None

0 0 0 0 0 0 0 0 -0.05% -0.05% None

0 0 0 0 0 0 0 0 -0.05% -0.05% None

1,589 1,589 0 0 0 0 0 0 -0.18% -0.18% None

0 0 0 0 0 0 0 0 -0.05% -0.05% None

0 0 0 0 0 0 0 0 -0.01% -0.01% None

0 0 0 0 0 0 0 0 -0.08% -0.08% None

0 0 0 0 0 0 0 0 -0.08% -0.08% None

0 0 0 0 0 0 0 0 -0.08% -0.08% None

2.Except as disclosed in the above table, the remuneration received by the Directors of the Company for the services provided for all companies in the

financial report (such as serving as a consultant who is not an employee) in the most recent year: None

Note 6: Refers to employee compensation (including stock or cash) received by directors who are also employed by the Company (including as president, vice president, other management, or regular employee) over the past year, and the amount of employee compensation approved for distribution by the Board for the most recent year must be disclosed. The Company has no distributable earnings in 2019, so it does not plan to distribute employee compensation.

Note 7: The total remuneration provided by the Company and subsidiaries to directors is disclosed per the consolidated financial statement. Note 8: The remuneration distributed to each member of the Company’s Board is disclosed as a range and the names of directors are disclosed by range of

compensation received. Note 9: The total remuneration provided by the Company and subsidiaries to directors is disclosed per the consolidated financial statement and names of

directors are disclosed by range of compensation received. Note 10: Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax) reported

on the individual financial statement for the most recent year. The Company’s 2019 individual financial statement net loss (after tax) totaled NT$1,199,798,000.

Note 11: (1) The directors of the Company do not receive any remuneration related to the reinvestment of enterprises other than subsidiaries. (2) Compensation refers to pay, bonuses (including bonuses to employees, directors, or supervisors), or expenses paid in the execution of business to

Company directors who serve as director, supervisor, or manager of an invested company other than a Company subsidiary. (3) Compensation paid to directors from an invested company other than a Company subsidiary is included in Column I (Consolidated Subsidiaries of CAL)

of the Director Remuneration by Compensation Level Table. Note 12: (1) Aside from Chairman Ho, Nuan-Hsuan, and Chairman Hsieh, Su-Chien, all other directors received a travel allowance.

(2) Transportation subsidies for Director Ting, Kwang-Hung, and Director Wei, Yung-Yeh were partially donated to the China Airlines Employee Union. (3) Directors who also serve as employees of the Company are Chairman Hsieh, Su-Chien and Director Wei, Yung-Yeh.


Director Remuneration by Compensation Level

Range of Remuneration

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

CAL (Note 8)

Consolidated Subsidiaries of CAL (H) (Note 9)

CAL (Note 8)

Consolidated Subsidiaries of CAL (I)

(Note 9)

Under NT$1,000,000

Chen, Charles C.Y.; Ting, Kwang-Hung;

Chen, Han-Ming; Ko, Sun-Ta; Wei, Yung-Yeh; Lin, Su-Ming;

Wang, Shih-Szu; Chung, Lo-Min;

Chang, Hsieh Gen-Sen; Shen, Hui-Ya


Chen, Han-Ming; Ko, Sun-Ta; Wei, Yung-Yeh; Lin, Su-Ming;

Wang, Shih-Szu; Chung, Lo-Min;

Chang, Hsieh Gen-Sen; Shen, Hui-Ya


Chen, Han-Ming; Ko, Sun-Ta; Lin, Su-Ming; Wang, Shih-Szu;

Chung, Lo-Min; Chang, Hsieh Gen-Sen;

Shen, Hui-Ya


Chen, Han-Ming; Ko, Sun-Ta; Lin, Su-Ming; Wang, Shih-Szu;

Chung, Lo-Min; Chang, Hsieh Gen-Sen;

Shen, Hui-Ya

NT$1,000,000 - NT$1,999,999 - - - -

NT$2,000,000 - NT$3,499,999 - - Wei, Yung-Yeh Wei, Yung-Yeh

NT$3,500,000 - NT$4,999,999 Ho, Nuan-Hsuan - Ho, Nuan-Hsuan -

NT$5,000,000 - NT$9,999,999 Hsieh, Su-Chien Hsieh, Su-Chien; Ho, Nuan-Hsuan

Hsieh, Su-Chien Hsieh, Su-Chien; Ho, Nuan-Hsuan

Total 12 12 12 12


President and Senior Vice President Remuneration

Title Name (Note 1)

Salary (A) (Note 2)

Severance Pay (B) Bonuses and Allowances (C)

(Note 3)

CAL


CAL (Note 5)

CAL


CAL (Note 5)

CAL


CAL (Note 5)

President Hsieh, Su-Chien 1,403 1,403 0 0 176 539

Senior Vice President Lo, Ya-Mei(Note 10) 1,779 1,779 0 0 540 990

Senior Vice President Kao, Shing-Hwang 3,103 3,103 0 0 5,492 5,852

Senior Vice President Wang, Chen-Min (Note 11) 3,157 3,157 0 0 765 1,516

Senior Vice President Wang, Houng 3,314 3,314 0 0 841 1,358

Senior Vice President Chang, Young 3,363 3,363 0 0 791 2,107

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

Name of President and Senior Vice President CAL (Note 6) Consolidated Subsidiaries of CAL (E)(Note 7)

Under NT$1,000,000 - -

NT$1,000,000 - NT$1,999,999 Hsieh, Su-Chien Hsieh, Su-Chien

NT$2,000,000 - NT$3,499,999 Lo, Ya-Mei Lo, Ya-Mei

NT$3,500,000 - NT$4,999,999 Wang, Chen-Min; Wang, Houng; Chang, Young Wang, Chen-Min; Wang, Houng

NT$5,000,000 - NT$9,999,999 Kao, Shing-Hwang Kao, Shing-Hwang; Chang, Young

Total 6 6

Note 1: President Hsieh, Su-Chien concurrently serves as director. Their remuneration is listed above and also in the Remuneration of Directors table. Note 2: Refers to president and senior vice president salaries, additional compensation, and severance pay over the past year. Note 3: Refers to various bonuses, incentive pay, travel expenses, special disbursements, various allowances, living quarters, and company car

distributed to presidents and senior vice presidents over the past year. If provided with housing, a car or other transportation, or exclusive personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be disclosed. The above figures do not include remuneration paid to drivers, which totaled NT$4,165,000. As stipulated in IFRS 2, Share Based Payments including obtaining employee stock options and employee restricted stock awards and participation in a cash capital increase shall be calculated as remuneration.

Note 4: Refers to employee compensation (including stock or cash) approved for distribution by the Board to presidents and senior vice presidents over the past year. Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax) reported on the individual financial statement for the most recent year. The Company has no distributable earnings in 2019, so it does not plan to distribute employee compensation.

* The content is provided for information disclosure, not tax purposes.


Unit: NT$ thousands December 31, 2019

Employees’ Compensation (D) (Note 4)

Ratio of Total Compensation (A+B+C+D) to Net Loss (%)

(Note 8) Compensation paid to the Presidents and Senior Vice

Presidents from an Invested Company or Parent Company Other Than the Company’s Subsidiary

(Note 9) CAL

Consolidated Subsidiaries of CAL

(Note 5) CAL

Consolidated Subsidiaries of CAL (Note 5)

Cash Stock Cash Stock

0 0 0 0 -0.13% -0.16% None

0 0 0 0 -0.19% -0.23% None

0 0 0 0 -0.72% -0.75% None

0 0 0 0 -0.33% -0.39% None

0 0 0 0 -0.35% -0.39% None

0 0 0 0 -0.35% -0.46% None

Note 5: The total remuneration provided by the Company and subsidiaries to Company presidents and senior vice presidents is disclosed per the consolidated financial statement.

Note 6: The remuneration distributed to each president and senior vice president is disclosed as a range and the names of the presidents and senior vice presidents are disclosed by range of compensation received.

Note 7: The total remuneration provided by the Company and subsidiaries to presidents and senior vice presidents is disclosed per the consolidated financial statement and names of the presidents and senior vice presidents are disclosed by range of compensation received.

Note 8: Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax) reported on the individual financial statement for the most recent year. The Company’s 2019 individual financial statement net loss (after tax) totaled NT$1,199,798,000.

Note 9: The President and Senior Vice President of the Company do not receive any remuneration related to the reinvestment of enterprises other than subsidiaries.

Note 10: Miss Lo, Ya-Mei was dismissed from the position of Senior Vice President on August 1, 2019. Note 11: Mr. Wang, Chen-Min assumed the position of Senior Vice President on January 1, 2019.


3.2.4 Comparison of Remuneration for Directors, Presidents, and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Presidents, and Vice Presidents

A. The ratio of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the two most recent fiscal years to directors, presidents, and vice presidents of the Company, to their net income (loss).

Title 2018 2019

CAL Consolidated Subsidiaries of CAL CAL Consolidated Subsidiaries of CAL

Directors 1.18% 1.33% -1.62% -1.79%

Presidents and Senior Vice Presidents 1.58% 1.82% -2.06% -2.37%

B. The policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance.

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

C. Procedure for establishing remuneration In the case of remuneration for board members and managers, as per regulation, the Company's

Salary and Remuneration Committee meets regularly to assess and set salaries and remuneration, which decisions are implemented after being submitted to the Board of Directors.

D. Linkage to business outcomes

The remuneration of the president has already taken into account his professional capability and the Company's operations and financial situation; the experienced senior vice presidents handle matters based on the Company's employee achievement provisions, using a linkage of individual performance on goals management and work evaluations, and assessing performance after overall consideration.

E. Linkage to future risk Major decision making for operational levels of this company always balances various risk factors;

major decision-making performance will be reflected in the Company's profits, and thereby is related to salaries and remuneration to management levels; specifically, the salaries and remuneration of the chairman of the board, the president, and senior vice presidents are related to the results of controlling and managing future risk.


3.3 Implementation of Corporate Governance 3.3.1 Board of Directors

A. From January 1, 2019, through April 25, 2020, a total of eleven meetings of the Board of Directors were held. Average attendance rate was 89%. Director attendance is detailed below:

Title Name

(Note 1) Attendance

in Person By Proxy

Attendance Rate (%) (Note 2)

Juridical Person Shareholder Represented

Remarks

Chairman Hsieh, Su-Chien 11 0 100% China Aviation Development Foundation

Elected as Chairman on April 2, 2019.

Director Chen, Charles C.Y. 8 3 73% China Aviation Development Foundation

On May 8, 2019, Hsieh, Su-Chien was entrusted to attend as a proxy; On July 3, 2019, Chen, Han-Ming was entrusted to attend as a proxy; On October 8, 2019, Hsieh, Su-Chien was entrusted to attend as a proxy.

Director Ting, Kwang-Hung 8 3 73% China Aviation Development Foundation

On April 2, 2019, Hsieh, Su-Chien was entrusted to attend as a proxy; On June 25, 2019, Hsieh, Su-Chien was entrusted to attend as a proxy; On November 7, 2019, Hsieh, Su-Chien was entrusted to attend as a proxy.

Director Chen, Han-Ming 11 0 100% China Aviation Development Foundation

None

Director Ko, Sun-Ta 10 1 91% China Aviation Development Foundation

On October 8, 2019, Chen, Han-Ming was entrusted to attend as a proxy.

Director Wei, Yung-Yeh 11 0 100% China Aviation Development Foundation

None

Director Lin, Su-Ming 10 1 91% National Development Fund (Executive Yuan)

On November 7, 2019, Wang, Shih-Szu was entrusted to attend as a proxy.

Director Wang, Shih-Szu 7 4 64% National Development Fund (Executive Yuan)

On January 21, 2019, Hsieh, Su-Chien was entrusted to attend as a proxy; On April 2, 2019, Lin, Su-Ming was entrusted to attend as a proxy; On June 25, 2019, Lin, Su-Ming was entrusted to attend as a proxy; On July 3, 2019, Lin, Su-Ming was entrusted to attend as a proxy.

Independent Director Chung, Lo-Min 10 1 91% - On March 18, 2020, Chang, Hsieh Gen-Sen was entrusted to attend as a proxy.

Independent Director Chang, Hsieh Gen-Sen 11 0 100% - None

Independent Director Shen, Hui-Ya 10 1 91% - On April 2, 2019, Chang, Hsieh Gen-Sen was entrusted to attend as a proxy.

Chairman Ho, Nuan-Hsuan 2 0 100% China Aviation Development Foundation

Dismissed as Chairman on April 2, 2019. Obligated to attend twice. Actual attendance was twice. Attendance rate is 100%.

Other mentionable items: 1. In the operation of the Board of Directors, should one of the below situations occur, the Board Meeting date, session, content of the resolution, opinions of all independent

directors, and the Company’s response to said opinions shall be properly recorded: (1) Matters listed in Article 14-3 of the Securities and Exchange Act.: The Company has set up an Audit Committee, thus this does not apply. (2) Other matters up for decision by the Board not listed in Article 14-3 of the Securities and Exchange Act but that were opposed by independent directors or about which

said directors have reservations and their opinion has been recorded or submitted in a written statement: None. 2. Should a director recuse him or herself from a decision about which he or she has a conflict of interest, the name of the director, contents of the resolution, reasons for

recusal, and the results of the vote should be noted:

Meeting Dates Agenda content Directors recused for conflicting interest Reason for recusal Participation in vote

May 8, 2019: 6th meeting of the 21st Board of Directors

Proposal on salary and remuneration of Chairman Hsieh, Su-Chien Proposal to release the non-competition restriction on Chairman Hsieh, Su-Chien

Chairman Hsieh, Su-Chien Personal interest in this matter

Except for Chairman Hsieh, Su-Chien, who recused according to the law due to interests involved and did not participate in discussion or voting, the remaining 10 attending Directors approved the matter.

January 13, 2020: 9th meeting of the 21st Board of Directors

Chairman and Managers' 2020 Lunar New Year Incentive Chairman Hsieh, Su-Chien Personal interest in

this matter

Except for Chairman Hsieh, Su-Chien, who recused according to the law due to interests involved and did not participate in discussion or voting, the remaining 10 attending Directors approved the matter.

3. Board of Director functional improvement goals for the last year and the current year (such as establishing an audit committee and improving information transparency) and implementation assessment: (1) In order to strengthen management mechanisms and oversight, three functional committees, namely the Remuneration Committee, Audit Committee, and Risk

Committee, were set up under the Board of Directors. Each is convened based on its charter, and the charters were approved by the Board. The committees meet to review and discuss relevant issues and report their conclusions and suggestions to the Board for resolution. The committees have been a success. The regulations governing functional committees passed by the Board specify the number of committee members, term of office, committee powers, rules of procedure, and resources to be provided by the Company when the committees exercise their powers.


(2) In order to implement corporate governance and enhance the functions of the Board of Directors of the Company, and establish performance objectives to enhance the efficiency of the Board of Directors, the Company has formulated the "Regulations Governing the Board Performance Evaluation," which is implemented once at the end of each year. The evaluation method is divided into the performance evaluation of the entire Board of Directors, individual Board members, and the functional committees. The Company has conducted performance evaluation in 2019. The self-evaluation results by the entire Board of Directors, individual Board members, and the functional committees are all excellent.

(3) The Company regularly arranges advanced courses for directors every year which cover corporate governance related topics, such as finance, risk management, sales, business, legal affairs, accounting, internal control system, financial reporting responsibility, corporate social responsibility, etc., and encourages members of the Board to continue to participate in courses related to corporate governance topics in their new or existing term of office in order to enable the members of the Board to have different professional functions, and to implement the diversification policy of directors.

(4) For more information regarding China Airlines Corporate Governance, please refer to our website (http://www.china-airlines.com): Corporate Social Responsibility, “Stakeholders' Area” and “Investor Information”.

4. Independent director attendance record for 2019 through April 25, 2020: Dates

Name 01/21/2019 03/20/2019 04/02/2019 05/08/2019 06/25/2019 07/03/2019 08/07/2019 10/08/2019 11/07/2019 01/13/2020 03/18/2020

Chung, Lo-Min ○ Chang, Hsieh Gen-Sen

Shen, Hui-Ya ○ Note: Indicates attendance in person. ○ indicates attendance by proxy. indicates the director did not attend.

Note 1: For directors that are juridical persons, the name of the juridical person shareholder and its representatives must be disclosed. Note 2: (1) When a director resigns before the year’s end, the remark column shall note the date of resignation and actual attendance rate (%) calculated based on the number

of meetings held during the period prior to resignation and the director’s actual number of meetings attended. (2) If there is a change of directors prior to the end of the year, both the new and old directors shall be included in the table and the remark column shall note whether

the director has been reelected or newly elected and the date of the (re)election. Actual attendance rate (%) is calculated based on the number of meetings held during the period of service and the director’s actual number of meetings attended.

B. Evaluation of the Board of Directors Evaluation cycle

Evaluation period

Scope of evaluation

Evaluation method Evaluation content

(1)Engage in one internal evaluation per year.

(2)An external evaluation shall be carried out every three years by an external professional independent organization or a team of experts and scholars.

January 1 to December 31, 2019

Covers the evaluation of the board as a whole, the individual directors, and functional committees

Evaluation by the business team of the Board of Directors, self-evaluation by the Board members, and performance evaluation by the functional committee members

(1)Board of Directors performance evaluation: 11 metrics in total, including 5 measurement items, i.e., the degree of participation in the Company's operations, the Board of Directors’ decision-making quality, the composition and structure of the Board of Directors, the selection and continuing education of Directors, and internal control.

(2)Individual Board members: 18 metrics in total, including 6 measurement items, i.e., mastery of Company’s goals and tasks, recognition of Directors' responsibilities, participation in Company’s operations, internal relationship management and communication, Director's expertise and continuing education, and internal control.

(3)Evaluating Functional Committee Performance:10 metrics in total, including 5 measurement items, i.e., the degree of participation in the Company's operations, functional committee responsibility awareness, decision-making quality of functional committee, composition and member selection of functional committee, and internal control.


3.3.2 Audit Committee The Audit Committee convened night meetings from January 1, 2019, through April 25, 2020. Committee member attendance is detailed below:

Title Name Attendance in Person By Proxy Attendance Rate (%) Remarks Independent Director (Chairman)

Chang, Hsieh Gen-Sen 9 0 100% None

Independent Director Chung, Lo-Min 9 0 100% None

Independent Director Shen, Hui-Ya 9 0 100% None

Other mentionable items: 1. Key functions of the Audit Committee:

The Committee consists of three Independent Directors. The key functions of the year is to assist the Board of Directors in supervising the Company on the fair presentation of the relevant financial statements, the appointment (dismissal) of a CPA and its independence and performance, the auditing of the Company's internal control system, the compliance with related laws, regulations and rules of the Company (such as: internal control system, acquisition or disposal of assets, derivative commodity transactions, loaning funds to others, providing endorsements or guarantees for others), and other matters included in its statutory functions (appointment and dismissal of financial supervisors or internal audit executive, mergers and acquisitions related matters).

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

Meeting Dates Agenda content

Results of the vote by the Board of Auditors

and company's handling of the Board's opinion

Results of Board of Directors decision

January 21, 2019 3rd Extraordinary Meeting of the Audit Committee of the 21st Board of Directors

Listing Application Plan of Tigerair Taiwan

Passed to the Board of Directors upon unanimous approval by all members in attendance.

Approved by all attending Directors in the 4th meeting of the 21st Board of Directors on January 21, 2019.

March 20, 2019 3rd Meeting of the Audit Committee of the 21st Board of Directors

2018 Financial Report and Consolidated Financial Report 2018 Surplus Earnings Distribution 2019 CPA Appointment and Remuneration Revision of “Procedures for the Acquisition or Disposal of Assets” Revision of “Procedures Governing Derivatives Trading” 2018 Internal Control System Effectiveness Audit and Statement

Approved by all attending Directors in the 5th meeting of the 21st Board of Directors on March 20, 2019.

May 8, 2019 4th Meeting of the Audit Committee of the 21st Board of Directors

Amendment to the “Operational Procedures for Lending Funds to Others” and the “Operational Procedures for Endorsements/Guarantees” Disposal of 5 A330-300 aircraft through sale and leaseback transaction Evaluation and selection of new narrow body passenger aircraft and introduction of new aircraft

Approved by all attending Directors in the 6th meeting of the 21st Board of Directors on May 8, 2019.

June 25, 2019 4th Extraordinary Meeting of the Audit Committee of the 21st Board of Directors

777F new cargo aircraft introduction case Introduction of A321neo new narrow body passenger aircraft

Approved by all attending Directors in the 6th Extraordinary meeting of the 21st Board of Directors on June 25, 2019.

July 3, 2019 5th Extraordinary Meeting of the Audit Committee of the 21st Board of Directors

Plan to handle the matters relevant to releasing shares of Tigerair Taiwan

Approved by all attending Directors in the 7th Extraordinary meeting of the 21st Board of Directors on July 3, 2019.

August 7, 2019 5th Meeting of the Audit Committee of the 21st Board of Directors

Issuing NT $3 billion in total face value of domestic unsecured convertible corporate bonds Carry out three 777F aircraft purchases to order

Approved by all attending Directors in the 7th meeting of the 21st Board of Directors on August 7, 2019.

October 8, 2019 6th Extraordinary Meeting of the Audit Committee of the 21st Board of Directors

Engine selection of A321neo new narrow body passenger aircraft

Approved by all attending Directors in the 8th Extraordinary meeting of the 21st Board of Directors on October 8, 2019.

November 7, 2019 6th Meeting of the Audit Committee of the 21st Board of Directors

2020 audit plan

Approved by all attending Directors in the 8th meeting of the 21st Board of Directors on November 7, 2019.

March 18, 2020 7th Meeting of the Audit Committee of the 21st Board of Directors

2019 Financial Report and Consolidated Financial Report 2019 Deficit Compensation 2020 CPA Appointment and Remuneration 2019 Internal Control System Effectiveness Audit and Statement

Approved by all attending Directors in the 10th meeting of the 21st Board of Directors on March 18, 2020.


(2) Other matters up for decision by the Board not listed in Article 14-5 of the Securities and Exchange Act that were not passed by the Audit Committee but approved by a two-thirds majority of the entire Board: None.

3. In situations where independent directors recuse themselves due to conflict of interest, the independent director's name, content of the resolution, reason for recusal, and his or her voting participation should be properly recorded: None.

4. Communication between independent directors and internal audit managers and auditors (regarding issues such as Company financial and operational status, procedures, and results): (1) In addition to the independent directors of the Company receiving the audit report on a monthly basis, the audit officer submits the annual audit plan

and the implementation of the semi-annual audit work to independent directors through the Audit Committee and the Board of Directors. The audit officer replies to the independent director's questions, provides necessary information, strengthens the audit work in accordance with his instructions, and ensures the effectiveness of internal controls. In addition, in non-routine communication, the audit value shall be continuously improved. In case of any major violation, the independent director shall be informed immediately.

(2) Before the audit committee meeting held in each quarter, the certified public accountant and the independent directors shall convene a communication meeting to report to the independent director and explain the audit plan, implementation situation, or review results of the financial statements; the certified public accountant shall provide the financial statements and relevant necessary information to the audit committee and the Board of Directors in each quarter, and attend the meeting in a nonvoting capacity.

(3) Directors shall contact the audit supervisor or accountants when needed for full communication. Communication between independent directors and accountants:

Means of communication

Communication matters Communication results

Primary matter Proposal by independent director Results Company’s processing status

March 20, 2019 Audit Committee

Accountant to explain audit results of the 2017 financial report, and take questions from the attendees of the meeting for discussion.

To pay attention to the impact of rising oil prices on the operational aspect and the reasons for changes in operating expenses for two quarters; it was also recommended to adjust the expression of some financial statements according to the principle of consistency.

Approved by all attending Independent Directors.

1.The managerial department provided the explanation and response forthwith during the meeting.

2.Continued to submit for the Board of Directors’ approval, and completed the 2018 financial report announcement and declaration on April 1, 2019.

May 8, 2019 Audit Committee

Before the meeting, the accountant shall separately report and explain the review situation to the independent director. At the meeting, the financial director of the Company shall explain the review results of the financial report in the first quarter of 2019 and the amendment of laws and regulations, and discuss and communicate the issues raised by the participants.

For the expression of the impact of the IFRS16 Leases bulletin on the balance sheet, it is suggested to describe in the notes.

Noted by all attending Independent Directors.

1. The managerial department has provided the explanation and response forthwith during the meeting.

2. Continued to report to the Board of Directors, and completed the Q1 2019 financial report was completed on May 15, 2019.

August 7, 2019 Audit Committee

Before the meeting, the accountant separately reported and explained the review situation to the independent director. At the meeting, the financial director of the Company explained the review results of the financial report in the second quarter of 2019 and the impact of the new bulletin on financial statements, and discussed and communicated the issues raised by the participants.

After discussing the implementation of the new IFRS16 Leases bulletin, discussed the increase in operating expenses in the first half of the year, and inquired about the reasons for the difference between financial results and budget in the first half of the year.


1. The managerial department has provided the explanation and response forthwith during the meeting.

2. Continued to report to the Board of Directors, and completed the Q2 2019 financial report announcement and declaration on August 14, 2019.

November 7, 2019 Audit Committee

Before the meeting, the accountant separately reported and explained the review situation to the independent director. At the meeting, the financial director of the company explained the review results of the financial report for the third quarter of 2019, the amendment of laws and regulations and the 2019

Discussed the impact of falling revenue from cargo transport on the company's overall business operations and asked the managerial department to explain the reasons and benefits of the recent cargo aircraft procurement plan. Also the management authorities are

Noted by all attending Independent Directors.

1. The managerial department has replied in the meeting immediately. The purchase of cargo aircraft is a strategy for phasing-out of old with new aircraft, which can effectively save costs and improve the overall fleet efficiency.

2. Continued to report to the Board of Directors, and completed the Q3 2019 financial report announcement and declaration on November 14, 2019.


financial report audit plan and key audit matters, and discussed and communicated the issues raised by the participants.

reminded to prepare countermeasures as soon as possible and adjust the operation mode of passenger and cargo transportation in time for the overall global economic situation, such as the China-US trade war.


Before the meeting, the accountant separately reported and explained the audit situation to the independent director. At the meeting, the financial director of the company explained the audit results of the financial report in 2019, and discussed and communicated the issues raised by the participants.

The impact of the COVID-19 pandemic on the Company's passenger revenue was addressed, and the adjustment to items of loss allocation were discussed.


1. The managerial department provided the explanation and response forthwith during the meeting.

2. Continued to submit for the Board of Directors’ approval, and completed the 2019 financial report announcement and declaration on March 31, 2020.

Communication between independent directors and internal audit supervisor:

Means of communication

Communication matters Communication results

Primary matter Proposal by independent

director Results Company’s processing status

January 21, 2019 Audit Committee

Internal audit business report for Q4 2018

To pay attention to whether there is a control mechanism for online sales.

Approved by all attending members and reported to the Board of Directors.

Reported to the Board of Directors on January 21, 2019.


2018 Internal Control System Effectiveness Audit and Statement

None Approved by all attending members and reported to the Board of Directors.

Resolved by the Board of Directors on March 20, 2019, and the 2018 Statement of Internal Control was announced and declared on March 22, 2019 and disclosed in the 2018 annual report.

Internal audit business report for January and February 2019


Reported to the Board of Directors on March 20, 2019.

May 8, 2019 Audit Committee

Internal audit business report for March 2019


Reported to the Board of Directors on May 8, 2019.

August 7, 2019 Audit Committee



Reported to the Board of Directors on August 7, 2019.

November 7, 2019 Audit Committee



Reported to the Board of Directors on November 7, 2019.

2020 Audit plan Sample the rationality of the passenger and freight pricing system.

1. As for the items inquired by committee member Chung, the audit officer replied on-site: after being included in the annual audit and spot check items, the finance division also has a complete audit mechanism for the expression of accounting rights and responsibilities.

2. Approved by all attending members and reported to the Board of Directors for discussion.

Resolved by the Board of Directors on November 7, 2019, and completed the announcement and declaration of 2020 internal audit plan on December 6.




Reported to the Board of Directors on March 18, 2020.

2019 Internal Control System Effectiveness Audit and Statement


Resolved by the Board of Directors on March 18, 2020, and the 2019 Statement of Internal Control System was announced and declared on March 23 and disclosed in the 2019 annual report.

Amendment to 2020 Audit Plan None

Approved by all attending members and reported to the Board of Directors.

Resolved by the Board of Directors on March 18, 2020, and completed the announcement and declaration of 2020 internal audit plan on March 24.


3.3.3 Risk Committee The Risk Committee convened five meetings from January 1, 2019, through April 25, 2020. Committee member attendance is detailed below:

Title Name Attendance in

Person By Proxy Attendance Rate (%) Remarks

Independent Director (Chairman)

Chung, Lo-Min 5 0 100% None

Independent Director Chang, Hsieh Gen-Sen 5 0 100% None

Independent Director Shen, Hui-Ya 5 0 100% None

Director Lin, Su-Ming 4 1 80% On November 7, 2019, Chung, Lo-Min was entrusted to attend as a proxy.

Director Ting, Kwang-Hung 3 2 60%

On May 9, 2019, Lin, Su-Ming was entrusted to attend as a proxy; On November 7, 2019, Chang, Hsieh Gen-Sen was entrusted to attend as a proxy.

Other mentionable items: 1. Key functions of the Risk Committee:

The Committee assists the Board of Directors in reviewing the establishment, implementation results, and response measures of Company's management strategies for overall finance, economy, flight safety, and other risks, and submits its conclusions and recommendations to be resolved by the Board of Directors.

2. Professional competence of risk management committee members: Independent director Shen, Hui-Ya has the professional ability of legal affairs; Independent directors Chang, Hsieh Gen-Sen, Chung, Lo-Min, and director Lin, Su-Ming all have the professional ability of financial accounting and practical practice and management experience; Director Ting, Kwang-Hung has the ability to perform business judgments, leadership and decision making, operation and management, crisis handling, and has outlook on international markets.

2. The operation of the Risk Committee:

Meeting Dates Agenda content

Risk Committee resolution results and

company action on Risk Committee opinions

Results of Board of Directors decision

March 20, 2019 3rd Meeting of the Risk Management Committee of the 21st Board of Directors

Safety management report 2019Q1-Q2 Operations risk management analysis Financial status report Operations outlook and financing, crude oil market analysis Financial risk hedging strategy Oil risk hedging strategy

Passed to the Board of Directors upon unanimous approval by all members in attendance.

Unanimously passed by all members of the Board of Directors in attendance.

May 9, 2019 4th Meeting of the Risk Management Committee of the 21st Board of Directors

Safety management report 2019Q2-Q3 Operations risk management analysis Financial status report Operations outlook and financing, crude oil market analysis Financial risk hedging strategy Oil risk hedging strategy

August 8, 2019 5th Meeting of the Risk Management Committee of the 21st Board of Directors

Safety management report 2019Q3 Operations risk management analysis Financial status report Operations outlook and financing, crude oil market analysis Financial risk hedging strategy Oil risk hedging strategy

November 7, 2019 6th Meeting of the Risk Management Committee of the 21st Board of Directors


March 18, 2020 7th Meeting of the Risk Management Committee of the 21st Board of Directors



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

Evaluation Item

Status of Implementation Deviations from the

Corporate Governance Best-Practice Principles for TWSE/TPEx

Listed Companies

and Reasons

Yes No Brief Explanation

1. Did the Company establish its Corporate Governance Best-Practice Principles in accordance with Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and disclose those Principles?

The Corporate Governance Principles of the Company has been established in compliance with the Corporate Governance Best-Practice Principles for TSEC/TPEx Listed Companies; its amendment has been approved in the 6th meeting of the 21st Board of Directors on May 8, 2019 and disclosed under the “Important Company Regulations” on the Company’s website.

No Difference

2. Company ownership structure and shareholder rights (1)Did the Company

establish internal operational procedures for dealing with shareholder suggestions, questions, disputes, and lawsuits and put these procedures into practice?

(1) The Company's website has a portal for shareholder services and a “Method for Handling Investor Relations” has been set so that investor suggestions and concerns are dealt with by shareholder service personnel and shareholder service agents using relevant procedures. This ensures a smooth channel of communication between the Company and its shareholders and the quality of disclosed information.

No Difference

(2)Does China Airlines keep maintain a list of the major Company shareholders and the ultimate owners of these shareholders?

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

No Difference

(3)Did China Airlines establish and implement risk control mechanisms and firewalls at the Company and affiliated enterprises?

(3) The Company has established Operational Procedures for Endorsements/Guarantees, Operational Procedures for Lending Funds to Others, and Regulations Governing Management of Invested Enterprises. All capital loans and funding, endorsements/guarantees, and operational supervision and management of Company subsidiaries shall proceed in accordance with these procedures and regulations. Audit units perform quarterly audits of Company endorsements/guarantees and capital loans/funding, which are provided to management and independent directors. The Finance Div. is responsible for overseeing implementation at invested enterprises and should any faults be discovered, an improvement deadline is set and the progress is tracked.

No Difference

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

(4) The Company established the Directors Code of Conduct, Procedures for Handling Material Inside Information, and High-Level Manager Code of Conduct to specify insider trading prevention and processing of secret stock trading and operating information as required of employees by law. Those with undisclosed material inside information are prohibited from engaging in securities trading.

No Difference

3. Structure and responsibilities of the Board of Directors (1)Has the Company

established policies calling for diversity among members of the

(1) China Airlines advocates and respects the director diversity policy, and is convinced that diversity can improve the overall performance of the Company. Members of the Board of Directors shall be based on personal capability and the diversification from different aspects shall also be taken into consideration, including basic characteristics (e.g., age, gender and nationality, etc.), experience and skills (e.g., aviation, sea freight, transportation, finance and accounting, law and insurance, electricity, technology, and public utilities, etc.), operation and management, leadership and decision-making, and crisis management ability. In order to strengthen the Board's functions to achieve the ideal goals of corporate governance, the Company has established the Corporate Governance Principles, Article 20 of which specifies the overall abilities the Board of Directors shall be equipped with, which are as follows: A. The ability to make operational judgment.

No Difference


Evaluation Item



Listed Companies

and Reasons


Board of Directors and put said policies into practice?

B. The ability to perform accounting and financial analysis. C. The ability to conduct management administration. D. The ability to conduct crisis management. E. Industrial knowledge. F. Perspective of the international market. G. The ability to lead. H. The ability to make decisions. The diversification policies of the current executives of the Company and its progress are as follows: APR 25, 2020

Diversified Core Nam

e

Basic composition Industrial experience Professional competence

Nationality

Gender

Has employee status

Age

Length of office of

independent director

Airlines

Transport

Professional services and m

arketing

Financial and Finance

Construction and engineering

Banking, insurance and real estate

Business and supply

Information and technology

Metal and m

achinery

Law

Accounting

Risk managem

ent

40-50

51-60

61-70

Less than 3 years

Six to nine years

Hsieh, Su-Chien

R.O.C

Male - - - - - ○ - - ○ - - ○

Chen, Charles C.Y.

R.O.C

Male - - - - - - ○ - ○ - - -

Ting, Kw

ang-Hung

R.O.C

Male - - - - - - - - - - ○

Chen, Han-M

ing

R.O.C

Male - - - - - - ○ - - -

Ko, Sun-Ta

R.O.C

Male - - - - - - - ○ - - - - - -

Wei,

Yung-Yeh

R.O.C

Male - - - - - - - - - - - - - ○

Lin, Su-Ming

R.O.C

Male - - - - - - - - - ○ - - - ○ ○

Wang,

Shih-Szu

R.O.C

Female

- - - - - - - - - - - - - ○ -

Chung, Lo-M

in

R.O.C

Male - - - - - - ○ - - ○ ○ ○ -

Chang, Hsieh

Gen-Sen

R.O.C

Female

- - - - - - - - - - - - - ○

Shen, Hui-Ya

R.O.C

Female

- - - - - - - - - - - - - - ○

Note: Indicates the director has the capability ○ indicates the director has some capability.


Evaluation Item



Listed Companies

and Reasons


a. Considering that the 11 directors (including 3 independent directors) of the 21st Board of Directors of the Company have business judgment, leadership decision-making, operation and management, international market outlook, crisis management, and other capabilities, as well as industrial experience, and professional ability; Among which, those with experience in transportation and tourism industry are Chairman Hsieh, Su-Chien, director Chen, Charles C.Y., director Ko, Sun-ta, and Director Wei, Yung-Yeh; Those who are good at marketing are Chairman Hsieh, Su-Chien, director Charles C.Y. Chen, director Ting, Kwang-Hung, director Chen, Han-Ming and director Ko, Sun-ta; Director Chen, Charles C.Y., who has made significant contributions to public welfare; Independent director Shen, Hui-Ya, who is competent in legal affairs; Director Wang, Shih-Szu, current politician (vice mayor of Tainan City); Independent director Chang, Hsieh Gen-Sen, independent director Chung, Lo-Min, director Lin, Su-Ming and director Ting, Kwang-Hung have the professional ability of accountant or finance and have practical practice, management, or teaching experience.

b. The average term of office of the company's directors is 6 years, among which two independent directors Chang, Hsieh Gen-Sen and Shen, Hui-Ya have tenure of less than 3 years; The term of office of independent director Chung, Lo-Min is 8 years, and the consecutive term of office of all independent directors does not exceed 3 terms. The directors are all local citizens, and three independent directors constitute 27% of the board; there is one director who is also an employee (9%). The age distribution range of directors includes 2 directors aged 40-50, 5 directors aged 51-60, and 4 directors aged 61-70. In addition to the above, the Company also pays attention to gender equality in the composition of the Board. The current board of directors consists of three female members (two of which are independent directors), and the proportion of female directors is high, at 27%. In the future, the Company will remain committed to improving the proportion of female directors.

c. The diversity, complementarity, and implementation of directors comply with and exceed the standards specified in Article 20 of the Corporate Governance Principles of China Airlines;In the future, the board of directors will continue to update its diversified policies according to board operations, operation style, and development needs, including but not limited to the standards of basic conditions and values, professional knowledge and skills, so as to ensure that board members generally have the necessary knowledge, skills, and literacy to perform their duties.

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

(2) In addition to setting up the Audit Committee and the Remuneration Committee according to law, in order to improve the risk management of the Company, the Company has voluntarily set up a Risk Management Committee, with five directors (including three Independent Directors) as members. Meetings are held on a quarterly basis according to the organization regulations approved by the Board of Directors. The Committee answers to the Board of Directors and assists the Board of Directors in reviewing the establishment, implementation results, and response measures of Company's management strategies for overall finance, economy, flight safety, and other risks, and submits its conclusions and recommendations to be resolved by the Board of Directors. Good operational effectiveness has been achieved.

No Difference

(3)Has the Company established performance evaluation guidelines and evaluation methods for the Board of Directors and does it evaluate its performance regularly each year， and, furthermore, does it report the evaluation results to the Board of Directors and use them as references for deciding on the remuneration of individual directors and nomination for continuing terms as directors?

(3) The Company approved the “Regulations Governing the Board Performance Evaluation” in the 8th meeting of the 21st Board of Directors on November 7, 2019. The internal evaluation of Board performance shall be performed at the end of each year. The evaluation is divided into the performance evaluation of the entire Board of Directors, the individual Board members, and the functional committees. The evaluation shall be completed by the end of January of the following year, and the results of which shall be submitted by the Human Resources Department to be reported in the Board meeting held by the end of March and referred to in deciding directors' remuneration and nomination for renewal. In December 2019, the Company completed the 2019 Board Performance Evaluation in accordance with the above regulations; which has been reported at the 10th meeting of the 21st Board of Directors on March 18, 2020 and disclosed on the Company’s official website. The self-evaluation results are as follows: A.Entire Board of Directors

a.Evaluation items: 10 items in total, including 5 major aspects, i.e., the degree of participation in the Company's operations, the improvement of Board of Directors’ decision-making quality, the composition and structure of the Board of Directors, the continuing education of Directors, and internal control.

b.Results of self-evaluation: Above standards. B.Individual Board members

a.Evaluation items: 18 items in total, including 6 major aspects, i.e., mastery of Company’s goals and tasks, recognition of Directors' responsibilities, participation in Company’s operations, internal relationship management and communication, Director's expertise and continuing education, and internal control.

b.Results of self-evaluation: Above standards. C. Functional Committees

a.Evaluation items: 10 items in total, including the degree of participation in the Company’s operations, functional committee responsibility awareness, improvement to functional committees’ decision-making quality, composition and member selection of functional committee, and internal control.

b.Results of self-evaluation: Above standards. In addition, the implementation of the performance evaluation of the Board of Directors of the Company will be performed by an external professional independent institution or a team of external experts and scholars every three years.

No Difference

(4)Does the Company periodically assess the independence of external CPAs?

(4) The Audit Committee and the Board of Directors of the Company regularly assess the independence and competence of the accountants each year in accordance with the Company's Corporate Governance Principles, completing the “Accountant Independence Evaluation Form,” and acquiring the “Accountant Independence Declaration.” The evaluation results are as follows:

Item Assessed Assessment Results Conforms to independence Yes No

1. Issued an accountant independence declaration. Yes 2. Has not gone seven continuous years without changing accountants. Yes 3. Not served as Company director or manager. Yes 4. Not a shareholder in the Company and has never been on the payroll. Yes 5. The accounting firm for which they work is not a Company affiliated enterprise. Yes 6. Has not provided any non-auditing services to the Company that could affect

complete independence. Yes After assessment by the Company, accountants Huang, Jui-Chan and Cheng, Shiuh-Ran of Deloitte & Touche both conform to the above assessment standards for independence, and are suitable to act as CPAs for this company. After the 7th meeting of the 21st Audit Committee on March 18, 2020, a report will be made to the 10th meeting of the 21st Board of Directors on the appointment of accountants.

No Difference


Evaluation Item



Listed Companies

and Reasons


4. Does the TWSE/TPEx listed company have in place an appropriate number of qualified corporate governance officers, and a designated chief corporate governance manager to be responsible for corporate governance related matters (including but not limited to providing directors and supervisors with the information required to conduct business, assisting directors and supervisors in legal compliance, handling matters related to board meetings and shareholders’ meetings in accordance with the law, and producing minutes of the board and shareholders’ meetings)?

(1)The Company approved the establishment of the Chief Corporate Governance Officer in the 6th meeting of the 21st Board of Directors on May 8, 2019, which is served by the Vice President Chien, Feng-Nien, who has the professional qualifications and conducts legal related affairs as head of department for more than three years. The Chief Corporate Governance Officer’s main duties include handling relevant meeting affairs of the Board of Directors and Shareholders Meetings in accordance with the law, producing meeting minutes of the Board meetings and Shareholders’ Meetings, assisting Directors in assuming their positions and continuing education, providing Directors with information required to perform their duties, assisting Directors in complying with the laws and regulations, and other matters provided in laws, regulations, the Company’s Articles of Incorporation, or contracts.

(2)The Chief Corporate Governance Officer supervises the relevant units carrying out corporate governance matters: A. The Chief Corporate Governance Officer concentrates on the following matters which are handled by the personnel of the Board of

Directors Business Task Force when conducting matters related to the Board of Directors and Committees (including the production meeting minutes), assisting Directors in assuming their positions, legal compliance and continuing education, and providing Directors with the information required to conduct business: a. Notifying respective members of meetings 7 days prior to the convening of meetings of Board of Directors and Committees, with

cause(s) or subject(s) of the meeting and sufficient meeting materials attached; having the minutes of each meeting signed or sealed by the Chairman and recorder of each meeting, and be distributed to the members of the meeting within 20 days after the meeting.

b. Providing new Director training to first-time Directors, introducing the Company's business, organization and other matters needing attention, and providing newly-elected Directors with regulatory guidance manuals regarding insiders and directors to assist Directors in taking office and legal compliance; also, assisting Directors in completing annual training courses in accordance with the Company's business characteristics and Directors' requirements.

c. Providing necessary Company information for the Directors, maintaining smooth communication and exchange between the Directors and supervisors, and assisting in arranging communication meetings between Independent Directors and chief audit executive, CPAs, or other internal units to facilitate conducting of business by Independent Directors.

d. Amending internal regulations related to corporate governance in cooperation with the latest laws and regulations relevant to the Company's field of business and corporate governance, and submitting the amendments to be resolved by the Board of Directors.

B. As for the Company’s registration and change of registration, the Administration Division shall be responsible for completing the relevant registration with the competent authority within the time limit for matters required to be registered or changes to registered matters of the Company.

C. In addition, the Finance Division shall be responsible for the handling of matters related to the shareholders' meetings (the planning and convening of the shareholders' meetings, the production of meeting minutes and other stock affairs related business). It shall provide sufficient information to the shareholders to ensure that the shareholders' rights and interests are well protected.

(3)From January 1, 2019 through April 25, 2020, the Chief Corporate Governance Officer has attended the following courses: Sponsoring Organization Course Date(s) Training hours

Taiwan Corporate Governance Association How will Taiwanese companies respond to and manage the huge risks caused by the China-US trade war 2019/08/07 3hr

Taiwan Corporate Governance Association Discussion on the responsibilities of directors and supervisors and corporate governance practices 2019/10/16 3hr

Taiwan Stock Exchange Inc. Promotional session for effective exercising of directors’ functions 2019/11/06 3hr

Taiwan Corporate Governance Association Corporate Governance Forum - strengthen corporate governance ecology and implement independent director system

2019/11/27 6hr

No Difference

5. Has the Company established communication channels with stakeholders (including but not limited to shareholders, employees, customers, and suppliers) and set up an area dedicated to stakeholders on the Company website? Does the Company respond appropriately to corporate social responsibility issues that stakeholders consider important?

The Company identifies stakeholders in accordance with the five principles of the AA1000 Stakeholder Engagement Standard (SES). In order to fully and effectively communicate with stakeholders, a spokesperson and “Stakeholders Section” have been established on the Company’s official website to provide contact information of the units associated with various issues, so as to facilitate stakeholders’ contact with corresponding personnel based on different issues (including contact personnel, e-mails, and telephone numbers); also, the webpage for communication with stakeholders has been disclosed on the corporate social responsibility website, explaining stakeholders’ issues of concern, communication channels, response frequency and communication results. The communication situation with various stakeholders is also reported to the Board of Directors each year. The implementation results from 2019 have been reported at the 9th meeting of the 21st Board of Directors on January 13, 2020. Relevant content and frequency of the actual implementation show proper responses to various issues that include corporate social responsibility. See below for details: (1)Company website - stakeholders section: https://www.china-airlines.com/tw/en/about-us/stakeholder (2)Company Corporate Social Responsibility (CSR) website - stakeholder engagement:

http://calec.china-airlines.com/csr/en/management_interested.html (3)Explanatory table:

Item Category

Focus of Communication Contact Person Channel of Communication Frequency Result of

Communication

Employees

•Labor/management relations and engagement •Governance and

business integrity

Human Resource Div. Miss Chi Tel: +886(0)-3-3998917

Labor-Management Conference Monthly

Employee satisfaction surveys are conducted every two years; the score in 2019 was 6.4 (Note: highest score is 10)

Union Real time

Employee concerns mailbox (Wecare listens mailbox, Speak Out employee communication mailbox, Team+ real-time information platform)

Real time

Website for retired employees and those who have left employment

Real time

No Difference


Evaluation Item



Listed Companies

and Reasons


Item Category

Focus of Communication Contact Person Channel of Communication Frequency Result of

Communication

Customers

•Flight safety management • Passenger

services management • Privacy and

information security

Passenger Service Passenger dedicated phone line: +886(0)-2-412-9000 Cargo Service Mr. Lin Tel: +886(0)-3-3998262 Aircraft Maintenance Mr. Chou Tel: +886(0)-3-3987215

Customer satisfaction surveys Real time

2019: 1. Passenger

satisfaction rate was 87.70%

2. Cargo satisfaction rate was 88.6%

3. Maintenance factory satisfaction score was 8.76

(Note: highest score is 10)

Global business meetings Annually Taiwan district business meetings Annually

Discussions with travel agencies Quarterly

Company website, industry social responsibility network, Facebook, e-mail, and message

Real time

Customer-service hotline Real time

Corporate customer visits Occasional

Investors

•Financial performance

•Risk and crisis management

Finance Div. Mr. Yang Tel: +886(0)-3-3998331 Finance Div. Mr. Lin Tel: +886(0)-3-3998361

Shareholders meeting Annually

Continues to announce and respond with operation-related results according to laws, regulations, and investors’ demand

Shareholder hotline/mailbox Real time Corporate customer hotline Real time Corporate customer hotline Annually

Corporate information meeting Occasional

Partners (Suppliers)

•Financial performance • Governance and

business integrity

General Products Administration Div. Miss Xiao Tel: +886(0)-3-3999143 Aircraft Parts Engineering Div. Mr. Tsai Tel: +886(0)-3-3834251 Ext.7507 e-Shopping / Duty Free In-Flight Service Supply Chain & Marketing Div. Miss Tseng Tel: +886(0)-3-3993913

Telephone, e-mail Occasional

A general supplier meeting was held at the end of 2019

Consultative conferences Occasional Business visits Occasional

Site inspections At least once every 6 months

Society

•Governance and business integrity •Flight safety

management • Brand

management

Corporate Development Office Mr. Zhong Tel: +886(0)-3-3998530 Corporate Communications Office Mr. Lee Tel: +886(0)-3-3998639

Hold activities for the public good, participate in activities in society

Occasional

A total of 157,701 individuals benefited in 2019

Press releases and messages Monthly Occasional

Network mailbox Occasional Daily

6. Has the Company appointed a professional shareholder services agent to handle shareholders meeting matters?

The Company’s professional services organization is CTBC Bank, which has been appointed to handle shareholder meeting matters. No Difference

7. Information disclosure (1)Has the Company

established a public website to disclose financial, operational, and corporate governance information?

(1)Dedicated units within the Company provide information to be disclosed on the China Airlines corporate website (http://www.china-airlines.com) regarding marketing, operations, finance, administration, aircraft operations, human resources, training, shareholders’ meetings, and the annual report, prospectus, and any material information. Through this easily available information, consumers, suppliers, and investors can better understand China Airlines operations.

No Difference


Evaluation Item



Listed Companies

and Reasons


(2)Has the Company adopted other methods of information disclosure (e.g., setting up an English website, designating a specialist responsible for gathering and disclosing Company information, setting up a spokesperson system, uploading recordings of investor conferences onto the Company website)?

(2)The Company has set up an English language website, the China Airlines Corporate Website (https://www.china-airlines.com/tw/en), with the Office of Public Relations as the spokesperson who is responsible for gathering and disclosing company information on a monthly basis and for announcing corporate information to the outside world, including press releases, new interviews, and press conferences.

No Difference

(3)Does the Company publicly announce and register the annual financial report within two months after the end of the fiscal year, and publicly announce and register the first, second, and third quarter financial reports and the monthly operating status earlier than the prescribed time limit?

(3)The financial statement announcements of the first, second, third quarter and annual financial reports of the Company in 2019 have all been handled several days earlier than the prescribed registration time limit; the monthly operating status has also been registered within the time limit specified by the regulations.

No Difference

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

(1)Employee rights: In addition to obeying the Labor Standards Act, in 2002 the Company signed a collective agreement that remains in force today. Salaries and remuneration, benefits and insurance are adjusted annually based on the remuneration policy and revenue, and there are also procedures for merit pay and higher pay for promotions to select and promote outstanding employees.

(2)Employee care: Primarily in three areas: A. Information:

a. China Airlines has set up a China Airlines electronic bulletin board on the Company’s internal information webpage to announce welfare information of the Company (such as childcare measures, various welfare subsidies, complimentary/discounted tickets and employee stock ownership trust). We have also set up a retirement/resignation section to thoroughly explain various procedures for handling retirement/resignation. In addition, a mailbox for all employees and the Team+ real-time messaging platform have been established to inform employees of important messages.

b. Wecare listens mailbox, Speak Out employee communication mailbox, Team+ real-time messaging platform, etc. have been established to provide employees with two-way channels to fully express personal opinions and demands.

B. Organizational: Based on the scale and dependencies of each unit in the Company, employee relations departments or dedicated personnel have been established to be responsible for good communication channels and overall management of relations, assisting in publicizing various beneficial policies of the Company and eliminating misunderstandings by improving internal employee satisfaction, cohesiveness, feeling of identification with the Company, and work achievements at appropriate times.

C. Systematic: Periodically hold labor-management conferences and supervisor-employee communication meetings and have employee benefits committee members participate in meetings with various types of unions and employee representatives to tell employees about related governance actions at appropriate moments; each resolution gives full respect to employee opinions and interests.

(3)Investor relations: The Company has established Rules for Handling Investor Relations by which it handles all investor concerns or opinions. A total of 6 were handled in 2019, and the company will continue to announce and respond with operation-related results according to laws, regulations, and investors’ demand.

(4)Supplier relations: In accordance with the Company’s Regulations Governing the Procurement and Inspection of General Items, except for patents and emergency procurement, all procurement shall be processed through open tendering and the tender announcement shall be disclosed on the Company’s website to establish a transparent, open, fair, and competitive trading environment. At the same time, the Company requires suppliers to issue a “Tenderer Declaration” before bidding, which regulates that suppliers must comply with the integrity and ethical requirements including the principle of conflict of interest avoidance, anti-bribery regulations, and supplier integrity, as well as requiring suppliers to abide by relevant local laws and regulations.

(5)Stakeholder interests:

No Difference


Evaluation Item



Listed Companies

and Reasons


The Company website has a “Stakeholder Contact” and other diverse communications channels and platforms to appropriately and effectively address all manner of stakeholder complaints and wishes.

(6)Continuing education for directors and supervisors: see P.66 for details. (7)Status of implementation for risk management policy and risk balance standards:

The Company's operations are enormously impacted by both the domestic and international environment. So as to further improve the risk management system mechanism and reduce the effect created by interplay among risks, the Company has established a Risk Committee answering directly to the Board of Directors. The committee meets once per quarter and issues periodic reports to the Board of Directors, assisting the Board in oversight of the setting, and results and adaptive measures related to company risk management strategies. See P.40 for operation details. Moreover, to establish a solid internal governance system, the Company has additionally set up the China Airlines Procedures for Handling Important Internal Information, Ethical Code of Conduct for Directors, Ethical Code of Conduct for Senior Supervisors and Rules for Employee Conduct in the Course of Work.

(8)Implementation of customer policies: The Company takes the initiative to send service satisfaction questionnaires to members’ mailboxes (non-members can also fill out the questionnaire on the official website) to obtain passenger experience satisfaction with the Company’s passenger flights and their suggestions;A total of 314,754 effective customer satisfaction questionnaires were completed in 2019, with a satisfaction rate of 87.70%. After compiling and analyzing statistics, the above data have been reviewed and the products and services will be improved, where necessary, to comprehensively enhance customer satisfaction.

(9)Company purchase of liability insurance for directors and supervisors: The Company purchased liability insurance for all Directors in both 2019 and 2020 to reduce and diversify the Directors' legal liability risks. Important contents, such as Directors' liability insurance insured amount, coverage and premium rate, have been reported in the 5th meeting of the 21st Board of Directors on March 20, 2019, and the 10th meeting of the 21st Board of Directors on March 18, 2020, respectively.

9. Please explain improvements that have been made in response to the results of the Corporate Governance Evaluation issued by the Taiwan Stock Exchange Corporate Governance Center: (1)The Company’s annual report and website have fully disclosed the specific management goals, current achievements, and other information of the Board members’ diversification

policy, providing detailed descriptions of the diversification policy and implementation situation; it has also been disclosed that the selection of Board members is based on the their abilities while also considering diversity, including basic components (for example: age, gender and nationality, etc.), experience and skills (for example: aviation, sea freight, transportation, finance and accounting, law and insurance, electricity, technology, and public utilities, etc.), as well as business judgment, business management, leadership and decision-making, and crisis management capabilities-sufficient to fully demonstrate that the existing Directors have a high degree of cross-industry, diversified, and complementary capabilities.

(2)The Company has set up a Chief Corporate Governance Manager to be responsible for corporate governance related matters, and has explained in the Company’s annual report its functions and powers, and the operation and execution situation of its key businesses.

(3)The Company has, by the resolution of the Board of Directors in January 2019, approved the “Regulations Governing the Board Performance Evaluation,” and completed the 2018 and 2019 performance self-evaluation of the Board of Directors. The evaluation results have been published in the annual report and on the website of the Company;in addition, on the Company’s website and the corporate social responsibility website, the communication situation between the Independent Directors and the chief audit executive and accountants; the operation status of functional committees other than those required by laws; the implementation status of ethical corporate management; and the information relevant to stakeholder communication, etc., have also been disclosed.


3.3.5 Composition, Responsibilities, and Operations of the Remuneration Committee The objective of the Remuneration Committee is to assist the Board in implementing and assessing the Company’s overall compensation and benefits policy and director and manager remuneration. A. Professional Qualifications and Independence Analysis of Remuneration Committee

Members

Title (Note 1)

Criteria

Name

Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years’ Work Experience

Independence Criteria (Note 1)

Number of Other Public Companies in Which the Individual is Concurrently Serving as a Remuneration Committee Member

Remarks

An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university

A judge, public prosecutor, attorney, Certified Public Accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the business of the Company

Has work experience in the areas of commerce, law, finance, or accounting, or otherwise necessary for the business of the Company

1 2 3 4 5 6 7 8 9 10


Shen, Hui-Ya 1 -


Chang, Hsieh Gen-Sen 1 -

Other He, Jyun-Huei - 0 -

Note 1: Please tick the corresponding boxes that apply to a member during the two years prior to being elected or during their term(s) in office. 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or its affiliated enterprise (except for independent directors appointed in accordance with

the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary or a subsidiary of the same parent).

3. Does not hold more than 1% of the Company's outstanding shares in their own names or under the name of spouse, underage children, or proxy shareholder; nor is a top-10 natural-person shareholder of the Company.

4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the manager listed in (1) or the personnel listed in (2) and (3).

5. Not a director, supervisor or employee of a corporate shareholder who directly hold more than 5% of the total issued shares of the company, is within the top five shareholders, or appointed a representative to be a director or supervisor of the company in accordance with Article 27, Paragraph 1 or 2 of the Company Act (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary or a subsidiary of the same parent).

6. Not a director, supervisor or employee of another company controlled by the same person who hold more than half of the Company's director seats or voting shares (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company or its parent company, its subsidiary or a subsidiary of the same parent).

7. Not a director, supervisor or employee of another company or institution with the same person or spouse as the chairman, general manager or equivalent of the Company (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary or a subsidiary of the same parent).

8. Not a director, supervisor, manager or shareholder holding more than 5% of shares of a specific company or institution that has financial or business dealings with the Company (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary or a subsidiary of the same parent and if the specific company or institution holds more than 20% but less than 50% of the total issued shares of the Company).

9. Not a professional who provides auditing related services to the Company or its affiliates and did not provide commercial, legal, financial or accounting related services to the Company or its affiliates with cumulative amount of remuneration obtained in the last two years exceeding NT$500,000; and is not an owner, partner, director, supervisor, or manager, or the spouse of any of the above, of a sole proprietorship, partnership, company, or organization that provides such services to the Company or its affiliates. However, this does not apply to the members of the Remuneration Committee, the Public Takeover Review Committee or the Special Merger and Acquisition Committee who perform their functions and powers in accordance with the relevant laws and regulations of the Securities and Exchange Act or the Business Mergers and Acquisitions Act.

10. Not a person of any of the conditions defined in Article 30 of the Company Act. Note 2: The Remuneration Committee is composed of four members. For the Remuneration Committee Charter, please refer to the Company

website: https://www.china-airlines.com/tw/en/investor-relations/important-company-regulations


B. Attendance of Members at Remuneration Committee Meetings The Company's Remuneration Committee has a total of 3 members, and the term of the current Committee members: June 27, 2018, to June 26, 2021. The Remuneration Committee convened four meetings over the past year (from January 1, 2019, through April 25, 2020). Committee member attendance is detailed below:

Title Name Attendance in Person By Proxy Attendance Rate (%) Remarks


Shen, Hui-Ya 4 0 100% None

Independent Director Chang, Hsieh Gen-Sen 4 0 100% None

Other He, Jyun-Huei 4 0 100% None

Other mentionable items: 1. The members of the Committee shall exercise the due care of a good administrator, perform the following functions and duties faithfully, and shall

be responsible to the Board of Directors and submit their recommendations to the Board of Directors for discussion: (1)Establishment and regularly review of policies, systems, standards, and structures for performance evaluation and salary and compensation for

Directors and managers. (2)Regular evaluation and setting up of salary and compensation for Directors and managers. (3)Regular review of matters related to the organization regulations for the Board of Directors’ revision. (4)Other matters handed over for discussion by the Board of Directors.

2. If the Board of Directors declines to adopt or modifies a recommendation of the Remuneration Committee, the date of the meeting, session, content of the motion, resolution by the Board of Directors, and the Company’s response to the Remuneration Committee’s opinion (e.g., the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be recorded): None.

3. Resolutions of the Remuneration Committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the date of the meeting, session, content of the motion, all members’ opinions and the response to members’ opinion should be specified:

Meeting Dates Agenda content Resolution Handling of members’ opinions by the Company

January 21, 2019 4th Meeting of the Remuneration Committee of the 21st Board of Directors

Chairman and Managers' 2018 Year-end Bonus and 2019 Lunar New Year Incentive

Approved by all attending members to be reported to the Board of Directors for discussion.

No further business

May 8, 2019 5th Meeting of the Remuneration Committee of the 21st Board of Directors

Adjustment of travel expense for Directors (including Independent Directors)

Proposal for salary and remuneration of Chief Corporate Governance Manager

Proposal for salary and remuneration of Chairman Hsieh, Su-Chien

Proposal for the service pay of former Chairman Ho, Nuan-Hsuan

The inclusion of the Chief Corporate Governance Manager in the management of the Remuneration Committee was approved in accordance with regulations governing the Chief Corporate Governance Manager; this matter has been reported to the Board of Directors for discussion.

No further business

October 23, 2019 6th Meeting of the Remuneration Committee of the 21st Board of Directors

Amendment to the Remuneration Committee Foundation Policy

Amendment to the Regulations Governing the Board Performance Evaluation


No further business

January 13, 2020 7th Meeting of the Remuneration Committee of the 21st Board of Directors

Chairman and Managers' 2020 Lunar New Year Incentive


No further business


3.3.6 Corporate Social Responsibility and Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies

Evaluation Item

Implementation Status Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons


1. Does the Company, based on the materiality principle, conduct risk assessments on environmental, social and corporate governance issues related to the Company’s operations and formulate relevant risk management policies or strategies?

The Company has set up a “Risk Management Committee” under the Board of Directors to assist the Board of Directors in reviewing the formulation of Company’s various risk management strategies, their implementation results, and response measures on a quarterly basis, and requires each unit to be responsible for controlling each major type of risk. Among which, safety and operation risks are cross-unit operational risks and shall be handled by the Company’s management level. The “Corporate Safety Committee” and the “Corporate Sustainability Committee” have been established under the President of the Company to be responsible for such risks and report the environmental and energy management performance to the top management on a quarterly basis. In addition, through the routine “Sustainability Committee” and “Board of Directors and Risk Management Committee” meetings, reports have been made to the Directors on environmental and climate risks, opportunity issues, and various responding control operations and development plans.

No Difference

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

The Company has set up a Corporate Sustainability Committee in 2014, which is solely responsible for the promotion of sustainability and is the highest governance organization for sustainability governance promotion, with the President sitting as its Chairman. There are six major task forces in the Committee, based on different aspects of sustainability, which are “Trust Value Team, Manpower Value Team, Joint Creation Value Team, Environmental Value Team, Social Value Team, and Sustainable Development Foundation Team.” Their main responsibilities are strategy formulation, business planning, and promotion of different aspects of sustainability; the teams report the implementation status to the Board of Directors on a regular basis every year in accordance with the Corporate Social Responsibility and Sustainable Development Best-Practice Principles. The results of the 2018 CSR operation and the 2019 CSR operation plan were reported in the 9th meeting of the 21st Board of Directors on January 13, 2020.

No Difference

3.Environmental issues (1)Has China Airlines established an

environmental management system that is specifically designed with the Company's operations in mind?

(1)Environmental management organization and system A. In 2011, the Company was the first in Taiwan’s industry to establish a “Corporate

Environmental Committee,” in which the President serves as the representative of the top management, and the Corporate Safety Office serves as the executive secretary. According to the business attributes, five major environment management committees were established to respectively control and carry out aviation, maintenance and cargo transport service, headquarters and branch administration, environmental, energy, climate change and other risk and opportunity management related affairs of the operational activities, fully covering the corporate business scope. The Corporate Environmental Committee coordinates and integrates various environmental, energy, and climate change risk and opportunity response strategies and management resources through quarterly management meetings. Related important resolutions are also reported to the Directors through routine Board meetings and Risk Management Committee meetings.

B.In order to integrate environmental protection operations into the daily operational risk management operations of the enterprise, China Airlines has introduced a number of international standard management systems since 2009, and has established and improved the environmental management operation mechanism of the enterprise, covering risk issues such as greenhouse gases, environmental management, and energy management. The Company has formulated management strategies and action measures for relevant risks and opportunities identified in various aspects of the environment. Beginning in 2017, the Company has introduced life cycle thinking and completed control over every link of the organization's operations; also, considering the issues of interest to stakeholders, the Company has further improved the level and perspective of environmental and energy risk management, and become comprehensively in line with the standard thinking of international enterprises’ sustainable development governance. System standards covered by China Airlines’ environmental management mechanism:

Standard

ISO 14064-1 Greenhouse gas inventory and management

system

ISO 14001 Environmental management

system

ISO 50001 Energy

management system

Time of introduction 2009 2012

(Note1) 2013

(Note2)

No Difference


Evaluation Item



Standard

ISO 14064-1 Greenhouse gas inventory and management

system

ISO 14001 Environmental management

system

ISO 50001 Energy

management system

Scope

(1)Global aviation fuel

(2)Ground operations in Taiwan, including CAL Park, maintenance facility, Taipei branch (floors B1, 1, 2, and 9), Songshan Park, and Kaohsiung branch.

(1)Aircraft/engine maintenance operation

(2)Flight operation and management

(3)Cargo transport service

(4)Passenger transport service

(1)Aircraft/engine maintenance operation

(2)Flight operation and management

Note 1: The ISO 14001: 2015 version transferring operation was completed in 2017, and the certificate is valid through March 28, 2022.

Note 2: The ISO 50001:2018 version transferring operation was completed in 2019, and the certificate is valid through April 11, 2022.

(2)Has the Company endeavored to make more efficient use of resources and use renewable materials that have a lower impact on the environment?

(2)The Company’s implementation of environmental and energy performance management mainly promotes various resource conservation and reuse strategies and practices based on the “Environmental and Energy Management Policies,” as follows:

Concepts Policies Promotion strategies Plans of action

Complying with environmental laws and regulations

Performing compliance obligations and fulfilling environmental protection and energy conservation responsibilities.

˙Understanding environmental protection trends in Taiwan and abroad, and improving the negotiation channel and platform for stakeholders.

˙Actively participating in international cooperation and understanding mainstream issues.

˙Perfecting management/supervision and evaluation mechanism

˙Regular regulatory requirements checks and self-commitment reviews

˙Actively participating in domestic and foreign industry and government meetings to grasp the trends of regulations.

˙Implementation of checking mechanism for management system compliance obligation

˙Participation in DJSI, CDP, and other leading international evaluations

Conserving the Earth's resources

Establishing environmental and energy management systems, and management performance indicators.

˙Continuously improving the operational quality of the corporate environmental and energy management system

˙Developing and implementing environmental performance and carbon reduction targets

˙Understanding updates to ISO standards, implementing and perfecting the improvement of enterprise Environmental Management System, EMS.

˙Improving the checking, oversight and evaluation mechanism for environmental, energy, and carbon emission risks

No Difference


Evaluation Item



˙Establishing and implementing various energy conservation, carbon reduction and environmental performance targets

˙Implementing internal audit and management review mechanisms and conducting third party verification.

˙Establishing a Task Force on Climate-Related Financial Disclosures (TCFD) system

˙Establishing a corporate “Environmental Management Information System” to understand and document historical environmental performance.

Improving eco-efficiency

Implementing environmental and energy conservation education to foster employees’ environmental awareness.

˙Creating diversified guidance and communication channels

˙Establishing incentive programs to motivate colleagues to practice and develop environmental protection ideas.

˙Implementing environmental and energy-saving education for all employees

˙Organizing an annual “environmental protection education seminar” and “environmental protection competition”

˙Establishing a platform to promote new knowledge of environmental protection and energy conservation from time to time

˙Establishing a reward system for proposals

Implementing green supply chain management to enhance overall eco-efficiency.

˙Establishing a supply chain risk assessment and management system

˙Establishing environment and energy management capacity for companies of the Group

˙Cultivating the Group’s and key suppliers’ environmental talent

˙Holding value chain environmental protection and energy saving education and training

˙Performing supply chain risk assessment operation


Evaluation Item



˙Organizing conferences and regular meetings for suppliers to communicate China Airlines' sustainability and environmental protection requirements.

Fulfilling social responsibility

Creating a low-carbon operating environment to establish continual improvement of energy and environmental performance.

˙Optimizing devices performance

˙Promoting energy-saving education and establishing corporate energy-saving culture.

˙Introducing low-carbon and renewable energy facilities

˙Checking and optimizing energy equipment and management measures

˙Establishing and implementing energy conservation management and educational programs

˙Mastering technology and regulatory trends, and introducing renewable energy equipment in a timely manner.

Supporting green design and procurement to promote environmental sustainability.

˙Deepening the awareness of planners in environmental protection and energy conservation

˙Promoting green procurement and green consumer culture

˙Incorporating service process into the operation scope of the Environmental Management System (EMS) and strengthening personnel training.

˙Including environmental protection and energy saving effects as the key considerations for procurement

˙Establishing and promoting “Green Fares - Carbon Exchange Service”

˙Using environment-friendly certified on-board spare products and selling environment-friendly duty-free products

˙Diversifying the promotion of green consumer awareness

(3) Does the Company assess the potential corporate risks and opportunities created by climate change now and in the future and does it take measures to deal with climate related issues?

(3)The Company's climate change risk and opportunity management is as follows: A. Climate risk and opportunity management mechanism

With respect to specific issues, the Company has established functional task forces under the corporation's Environmental Committee, including the following task forces: Carbon management task force, aircraft alternative fuel research task force, TCFD work task force, among others, to facilitate cooperation among units and flexible allocation of required resources.

B. Climate risk and opportunity response measures Through the carbon management and the TCFD work task forces, the Company

No Difference


Evaluation Item



identifies its environmental risk opportunity matrix, considers the identification and adjustment of changes in external specifications and technological development environmental conditions, brings the top nine topics into the scope of corporate environmental risk management and actively controls the response. Other issues have also been continuously improved through the operation of the corporate Environmental Management System (EMS).

Potential risks Potential opportunities Response measures ˙ Poor weather

conditions lead to flight delays, cancellations, etc., and increase business operation costs.

˙ The maintenance frequency and quality assurance requirements are increased, meaning increased costs.

˙ The operational efficiency of related equipment is reduced, and operational costs are increased.

˙ The demand for passenger and cargo transport is reduced, and revenue is reduced.

˙ Enhance emergency response ability, properly handle customer needs, improve service quality and reputation.

˙ Properly handle and meet customer needs, and improve the corporate tenacity and reputation.

˙ Continue to strengthen operational procedures and emergency response mechanisms, strengthen personnel training, and improve the inter-unit coordination and business operational efficiency within the organization.

˙ Bring in a professional meteorological team, improve the accuracy of meteorological forecasts, and activate the aircraft dispatching operation as early as possible.

˙ Enhance the coordination of supply chain management and partnership, ensure the safe and easy transportation of goods and personnel at all stages.

˙ Higher oil prices increase business operation costs.

˙ The use of aviation sustainable fuel increased, the ratio of fuel added increased, and the operational cost increased.

˙ Effectively adjust the risk of rising fossil fuel prices

˙ Improve the consumption and efficiency of low-carbon energy and reduce energy expenditure.

˙ Use aviation sustainable fuel to improve brand benefits and revenue.

˙ Diversified financing channels

˙ Continuous evaluation and introduction of new technology (new energy-saving aircraft, fuel-saving technology, etc.)

˙ Continue to promote the measures of aviation fuel saving

˙ Energy consumption inventory and improved efficiency in flight and ground operations

˙ Promote the development of alternative fuels in Taiwan

˙ With the growth of business, carbon emissions continue to grow, increasing carbon exchange and regulatory costs.

˙ Install/purchase renewable energy facilities or adjust work details, increasing business operation cost.

˙ Continue to reduce greenhouse gas (GHG) emissions and reduce our sensitivity to changes in carbon transaction prices.

˙ Derivative income from carbon rights sales

˙ Improve the energy efficiency of flight and ground operations and reduce energy expenditure.

˙ Proactively participate in negotiation and communication between public departments and international organizations

˙ Establish a carbon discharge monitoring and management system

˙ Understand fluctuations in the carbon market and manage carbon rights appropriately.

˙ Planning and implementation of each item in carbon reduction measures

˙ Unstable supply of raw materials

˙ Increase in procurement costs

˙ Open up new markets and increase revenue.

˙ Use raw materials of the current season to adjust meals and

˙ Carry out supply chain management guidance and strengthen supply chain fitness.

˙ Coordinate with the


Evaluation Item



reduce costs. ˙ Sign long-term

contracts with relevant supply partners to maintain stable services.

season to flexibly adjust raw materials used in meals to adapt to climate change trends, understand the compliance of goods carried, and strive for new market opportunities.

˙ Investors reduce their willingness to invest

˙ Capital investment is required to promote the consideration of highly efficient aircraft/sustainable fuel investment.

˙ Work with stakeholders to adapt to the climate and capture business opportunities by using innovative solutions.

˙ Discuss across departments, develop new routes and services.

˙ Develop a travel mode to save fuel and time

˙ Continue to research and analyze new technologies, facilities, and services, and introduce feasibility evaluation.

˙ The risk of infectious diseases has increased, reducing the demand for tourism and changing the demand for cargo transport.

˙ The consumer market attaches great importance to low-carbon and environmental protection of corporations, both of which affect brand trust and reduce revenue.

˙ Improvements in the awareness of carbon reduction changed the demand for air transport (such as changing to cruise lines, high-speed rail, etc.).

˙ Plan to promote low-carbon services and thereby enhance consumer support for our brand.

˙ Master the market model of low-carbon economy/transportation issues and create business opportunities and increase competitiveness.

˙ Cooperate with the governments of all countries to manage the disease properly, strengthen self-protection and response, and reduce the degree of impact.

˙ Develop all kinds of new products/services, improve service efficiency, and meet market demand.

˙ Launch environmentally friendly travel service ECO TRAVEL, invite passengers to participate in carbon reduction and enhance green/low-carbon business opportunities.

˙ Continuous research and development of new market channels or customer groups

˙ Develop diversified green and low-carbon activities and strengthen customer communication.

˙ Does not meet the expectations of stakeholders, affects brand reputation.

˙ Failure to properly manage supply chain issues, affecting operations.

˙ Strengthen the prediction system mechanism, maintain the rights and interests of customers, and stabilize revenue.

˙ We process emergency situations properly, increasing the public's trust.

˙ Promote supply chain cooperation and enhance corporate sustainable competitiveness.

˙ Cooperate with and support the government's environmental protection policies, enhance industrial cooperation opportunities, and promote industrial competitiveness.

˙ We continue to strengthen communication between external stakeholders, support scientific research, participate in international environmental sustainability comparison assessments, and enhance the corporate sustainable image.

˙ Strengthen employee education and training, hold environmental protection and energy conservation activities, and improve employee awareness.

˙ Strengthen cooperation with domestic and overseas suppliers of low-carbon products to enhance the sustainable value of the supply chain.


Evaluation Item



(4) Has the Company compiled statistics on the past two years of GHG emissions, water usage, and waste amounts, and has it devised policies for energy conservation and carbon emissions reduction, GHG emissions reduction, water conservation, and other waste management?

(4)The Company's environmental/carbon/energy performance management is as follows:

A. Greenhouse gas inventory and verification Since 2009, the Company has actively implemented ISO14064-1 greenhouse gas management, conducted and organized inventory of greenhouse gas emissions generated by operations, and carried out third-party verification.

Greenhouse gas emissions Scope of GHG 2018 2019

Scope 1 Aviation operations 7,229,903 7,059,083 Ground operations 3,511 4,981

Scope 2 Ground operations 19,949 18,169 Total (Tons CO2e) 7,253,363 7,082,233

B. Greenhouse gas management and reduction strategy The Company’s greenhouse gas management and reduction strategy takes into account the international industrial carbon reduction targets, strategy implementation and benchmarking technology of the same and different industries. It combines its corporate financial operation plan and technical feasibility to formulate air and ground carbon-reduction targets. In the future, it will continue to incorporate the Science-Based Target (SBT) concept to carry out rolling inspection of corporate carbon reduction objectives and management paths through the corporate risk management mechanism and platform.

Carbon reduction goals Target description 2019 Achievement rate

Aviation

2020 To increase aviation fuel efficiency by 1.5% every year on average

In 2019, the actual performance of fuel consumption efficiency was 0.2459 tons/thousand RTK, and the pre-established target value of 0.2147 tons/thousand RTK was not achieved. Follow CORSIA, carry out MRV operations on international routes in 2019.

2025

To increase aviation fuel efficiency by 1.5% every year on average Cooperate with CORSIA to promote CNG2020 operations

2030 Reduce carbon emissions by 50% by 2050

Ground

2020 38% reduction in carbon emissions

The actual ground emissions in 2019 amounted to 23,150 CO2e; when compared to the expected target value of 22,712 tons of CO2e for that year, the achievement rate is 97%.

2025 42.34% reduction in carbon emissions

2030 50% reduction in carbon emissions

Aviation operations was the first phase carbon reduction target to be achieved for the airlines industry: "By 2020, fuel consumption efficiency will be increased by 1.5% every year." The Company will continue to strengthen fuel consumption efficiency countermeasures, and has formulated four major fuel saving strategies, including "promoting green energy flights," "improving ground service controls," "continuous regular maintenance" and "fuselage weight reduction,” as well as a number of specific implementation measuresHowever, due to changes in the internal and external business environments in 2019, although total aviation fuel consumption decreased by 53,986 tons, a decrease of 2.36% compared with 2018, performance in revenue ton kilometer (RTK) decreased by 471,498 kiloton-kilometers, a decrease of 4.94% compared with 2018; the overall fuel consumption efficiency was 0.2459 tons/thousand RTK, which failed to reach the target value set in 2019 (0.2147 tons/thousand RTK). For ground operations, 57 environmental management KPIs and 15 fuel saving measures were promoted in 2019, which resulted in a total annual carbon reduction of 124,365 metric tons of CO2e; among which, carbon reduction in ground operations amounted to 1,747 metric tons of CO2e. Various data are as follows:

No Difference


Evaluation Item



Item Savings Unit Carbon reduction (Tons CO2e)

Aircraft fuel savings 48,447 Kiloliter 122,618 Ground fuel conservation 236 Kiloliter 620

Energy conservation 1,940 1,000 kilowatt hours 1,075

Water conservation 3 1,000 kilowatt hours 1

Paper conservation 12 Tons 51 2019 total carbon reduction 124,365

C.Targets and achievements in energy resource reduction The Company sets various environmental protection and energy conservation objectives in accordance with sustainable development goals (SDGs):

Item 2019 targets Achievements 2020 expected targets

Aviation fuel efficiency

Improvement of 1.5% over 2018

Did not meet target (Note)

Improvement of 1.5% over 2018

Ground carbon emissions

Reduction of 36.7% over 2009 97% Reduction of 38% over

2009

Water resources Reduction of 0.75% over 2018 100% Reduction of 1.5% over

2018

Domestic waste Reduction of 1% over 2018 100% Reduction of 2% over

2018 Hazardous industrial waste

Recycling ratio reached 40% 100% Recycling ratio reached

40%

Photocopy paper Reduction of 2.5% over 2018 100% Reduction of 5% over

2018 Note: Affected by the operating environment, the efficiency of fuel

consumption is poor. D.Increased energy efficiency

After obtaining "Diamond Green Building Label" certification in 2017, the headquarters for China Airlines continued to promote equipment renewal, optimize operational processes, and improve overall energy efficiency of buildings; in 2019, the Company further responded to Taiwan's green energy policy. It completed the installation of 99kW solar photovoltaic facilities on the roof of the simulator training building for parallel power generation to support Taiwan's renewable energy through practical actions. As of December 31, 2019, it has generated about 90,000 kWh of electricity and reduced emissions by about 48 tons of CO2e. The Company was awarded the Bureau of Energy’s (MOEA) Conservation Benchmark–Silver Award, Taipei Energy Conservation Leadership Award, and No. 1 in the Taoyuan Airport Energy Conservation and Carbon Reduction Reward Competition.

E.Water resource utilization increase The total water consumption of the Company in 2019 was 146,490 kWh, which is about 1.17% less than that in 2018. Among which, the China Airlines headquarters park is located in a specific area of the airport. The airport management unit collectively applies for and obtains tap water from the water supply unit and pays the sewage treatment fee. The domestic sewage is collected and sent to the domestic sewage treatment plant for treatment. The maintenance facility, Songshan Park, and Taipei branch apply directly for water supply from the water company. In order to reduce the risk associated with water resources, the Company has successively set up water meters at important water line nodes, and it tracks and analyzes the direction of water resource flow and water consumption hot spots, and promotes water reduction and recycling measures, including: Purchasing water conservation label products, promoting water conservation advocacy, setting up a rainwater recovery system, recycling cooling water and introducing Eco-shine, etc.

Item Unit 107 108 Tap water use volume Kilotons 148.22 146.49 Recycled water use volume Kilotons 31.94 17.41 Recycling percentage % (recycled volume/water use total volume) % 21.55% 11.88%


Evaluation Item



F.Waste Management The Company processes waste management in accordance with the five following principles: Refuse, Reduce, Reuse, Recycle, Repair. We have set a goal for 100% resource reclamation of waste and have annually increased waste reuse rate.

Waste Management

Principles Strategies and goals Actions

Refuse Through green design and procurement, reduce resource consumption and waste disposal demand at the source.

Cooperate with suppliers to develop and purchase non-disposable plastic products (such as: wooden cocktail stir rods);Increase green procurement.

Reduce

Accurately plan business and service supplies to reduce consumption; improve maintenance processes and reduce end waste;Implement electronic teaching materials and operations, conserve paper arising from training and communication.

Reuse Through improvement of operation processes, improve the reuse rate of waste and reduce the opportunities where waste would be generated.

Improve the reuse ratio (e.g: plastic waste bucket) of hazardous industrial waste.

Recycle

Working with the environmental protection agency's plastic film recycling platform, improving the recycling ratio of packaging plastics.

Repair Continue to use passenger and freight equipment (such as pallets or containers/netting) after repair.

In 2019, the production of ground operation and domestic waste was 702,966 kg, which is about 5.9% less than that of 747,202 kg in 2018. In 2019, the amount of business waste also decreased by 5.9% compared with that in 2018.

Item Handling method 2018 2019

Ground Operational

Domestic waste

Non-recyclable Incineration

399,266 381,626

Recyclable: Resources recycled

347,936 321,340

Hazardous industrial waste

Non-toxic: Entrust qualified organization to remove/dispose

251,317 233,018

Toxic: solidification and burial/chemical treatment

16,434 18,815

In the air Service

General industrial/domestic waste

Non-recyclable Incineration

2,674,334 3,052,461

Recyclable: Resources recycled

995,369 1,116,396

Total waste (kg) 4,684,656 5,123,656

4. Social issues (1)Has the Company established

management policies and procedures in accordance with relevant laws and regulations and international human rights conventions?

(1)In the area of comprehensive management systems and organizational capacity, the Company not only abides by the Employee Code of Conduct and Employee Work Standards set forth in various labor laws, but also refers to the Universal Declaration of Human Rights, the United Nations Global Compact, the International Labor Organization's basic compact on core labor standards, the UN Guiding Principles on Business and Human Rights, and local laws and regulations. The company has established a Human Rights Policy based on the aforementioned norms as guiding principles for the Company's management.

No Difference

(2)Does the company establish and implement reasonable employee welfare measures (including compensation, vacation, and other benefits) that appropriately reflect the operating performance or results through employee compensation?

(2)Employees are the most important assets of a company. In addition to improved planning and setting standards for the implementation of salary, work bonuses, flight safety bonuses, vacation, preferential air tickets, and a number of welfare measures, the Company allocates performance bonuses, annual bonuses, year-end bonuses, promotions, and employee compensation with reference to the performance of employees after the end of each fiscal year and based on the Company's annual profit situation. The Company takes this opportunity to care for its employees and treat them as the core of its sustainable operations. The average salary adjustment of all employees of the Company increased by about 2% in 2019.

No Difference


Evaluation Item



(3)Does the Company provide employees with a safe and healthy work environment and regularly implement health and safety education programs for employees?

(3)In order to protect the rights of employees, provide a healthy and safe working environment, and create a friendly workplace, the Company has established internal rules and regulations related to "employee complaint measures" and "employee safety report reward operation measures," and provides multiple communications channels, such as a speaking area, regularly scheduled labor-management consultation meetings, and special e-mails for complaints in various cases (including WeCare, workplace sexual harassment, professional ethics). Such channels are made available to all employees, and complaints are accepted in accordance with the operational procedures.

A. Keep pace with international double certification in this new era of workplace safety To adapt to trends of global international labor development, improve the efficiency of safety and health management, and promote systematic management measures, the Company established an independent safety and health management system and obtained ISO45001:2018 and TOSHMS certification on April 20, 2019, which serve as the management basis of occupational safety and health management system certification. Self-management and preventive measures based on the PDCA cycle mode are used to effectively control occupational disaster risk, improve occupational disease preventive management, improve occupational safety and health management performance, and actively implement occupational safety policies;Provide a safe, healthy, and comfortable working environment for employees, and promote industry competitiveness.

B. Occupational safety and health committee for two-way effective communication The Company has established an Occupational Safety and Health Committee in accordance with law. The committee is tasked with the objective of preventing occupational hazards and protecting the safety and health of all employees by reviewing, coordinating, and making recommendations pertaining to safety and health related matters. The position of chairman is served by the president. There is one vice chairman and one executive secretary under the chairman. The committee consists of the first-level management of designated units, occupational safety and health personnel, engineering and technical personnel, medical personnel, and labor representatives appointed by the labor union as members. A meeting is held once every three months to gather statistics and analyze the Company’s occupational accidents and to report and follow up on subsequent safety and health management plans. A total of 14 safety and health proposals were reviewed, coordinated, and provided with suggestions in the meetings in 2019, and all proposals have been concluded; relevant meeting minutes have been announced on the Company’s internal website.

C. Regular implementation of safety and health inspections to discover hazards and make improvements A total of 1,488 inspections were conducted in 2019, 402 deficiencies were found, and those 402 cases were improved, with an improvement rate of 100%; random checks on various necessary equipment or facilities of the Company’s leased transportation vehicles were performed, in addition, maternal health protection for employee workplace and operation hazard risk and management classification was conducted, with a total of 260 persons. The workplace environmental risk levels all belong to level-1 management.

D. Full AQD for comprehensive risk assessment Taking advantage of China Airlines’ Aviation Quality Database (AQD) of all personnel to reflect hidden hazards of the operating environment and implement risk assessment to reduce occupational accidents; in 2019, a total of 98 AQD safety and health related cases were received, and 98 cases were improved and settled, with an improvement rate of 100%.

E. Strengthening safety and health education and popularizing safety and health concepts We strengthen the promotion of safety and health education at all levels. Every three years, each person receives at least 3 hours of education and training. Education and training for supervisors will be held depending on the promotion and transferring of the supervisors. The members of the Occupational Safety and Health Committee must complete at least three hours of safety and health education and training every three years to cultivate correct attitudes towards safety and health work;assisting in the training of safety and health officers at all levels to disseminate safety and health knowledge;holding necessary education and training sessions for newly hired labor, transferred labor, safety and health management personnel, special operators, and supervisors to perform work and prevent disasters, as follows:

a.A total of 4 batches of new general personnel’s safety and health education and training sessions were implemented, with a total of 76 participants.

b.A total of 4 batches of industry-academia interns’ safety and health education and training sessions were implemented, with a total of 76 participants.

No Difference


Evaluation Item



c.A total of 2 batches of new supervisors’ safety and health education and training sessions were implemented, with a total of 59 participants.

d.One education and training session for all members of the Occupational Safety and Health Committee.

e.A total of 14 batches of occupational safety and health training sessions for in-service employees.

f.First-aid personnel training. g.A total of 21 batches of safety and health training sessions for special

operators. F. Hierarchical safety and health management, and the establishment of safety

and health officers at all levels Implementing safe and healthy work;initiating a safety and health hazard identification proposal system to extend the participation in safety and health to all personnel;regularly strengthening the on-the-job training for safety and health officers of various units, including how to identify hazards in the workplace, risk classification, how to compose management plans, and occupational accident identification process and operations. Guiding the risk assessment of units at all levels and conduct prevention and improvement to build the concept of a corporate community.

G. The Company held various health promotion activities in 2019. The topics included cardiovascular disease, infectious disease prevention, physical and mental stress relief, cancer screening, first aid education, pregnancy care, and vision care. The number of sessions and the number of participating employees are as follows: a. There were 5 health promotion activities in CAL Park, with a total of 252

participants. b. There were 6 health promotion activities at the Taipei branch, with a total

of 209 participants. c. There were 4 health promotion activities at the Kaohsiung branch, with a

total of 153 participants. d. Flu shots: A total of 1,622 persons vaccinated (including 217 persons in

Taipei, 1,325 persons in Taoyuan, and 80 persons in Kaohsiung). e. A total of 636 cabin crew and first-line ground staff have received MMR

vaccination. f. Providing a total of 4 issues of “Disease Management Information and

Business / Travel Suggestion” periodicals to enable colleagues to understand domestic and foreign health knowledge, enrich the knowledge of epidemic diseases, and establish disease prevention concepts.

(4)Has the Company established an effective career skill development training program for employees?

(4) In order to cultivate the Company's human resources, the Company has a Training Advisory Committee, which is responsible for the planning of annual education and training for all colleagues, including strategic occupational training, management occupational training, and job training. At the same time, in accordance with the Company's operational development strategy, and to deepen the Company's various levels of management professionals and broaden the horizon of potential talents, strategic and management occupational training was held on a regular basis to refine employees’ necessary knowledge and skills. In addition, since 2009, the Company has established a Management Talent Training and Development System to cultivate talents with international vision and management capabilities, and to strengthen the management knowledge of management professionals through job experience, management course training, and rigorous assessment systems. As of today, more than 100 outstanding management professionals have been cultivated and are now serving in key units in Taiwan and foreign branches. In 2019, a total of NT$253 million was invested in the training and development. The total number of training hours exceeded 52,865 hours.

No Difference

(5)With regard to customer health and safety, customer privacy, marketing and labeling of the products and services, does the Company follow relevant regulations and international standards, and formulate relevant policies and complaint procedures for consumer rights protection?

(5)In addition to stipulating service commitments, transportation terms and conditions, and disclaimer clauses in accordance with the law, regarding the consumer rights policies, the Company has also established and disclosed on the Company’s website the information security policy with its “privacy protection policy” and “privacy protection statement.” It is committed to protecting the privacy of all customer personal information. Also, to protect the rights and interests of the passengers, reservation and ticket-related rules upon flight changes have been clearly disclosed in the FAQs on the official website. Furthermore, the Company has in place consumer complaint procedures to provide consumers with complaint channels for products and services, including: company website (including: stakeholders section, customer feedback, and service satisfaction survey), Facebook fan page, customer service e-mail, and global branches’ addresses and phone numbers; consumers may also send letters to the Company directly. All complaints will be replied to after processing.

No Difference


Evaluation Item



(6)Has the Company formulated supplier management policies that require suppliers to follow relevant regulations on issues such as environmental protection, occupational safety and health or labor human rights, and their implementation status?

(6)The Company has formulated the “Supplier Code of Conduct” which specifies that suppliers shall provide a healthy and safe working environment and shall ensure that workers respect each other, enjoy dignity and fairness, and abide by professional ethical standards;in any case, when providing products and services, suppliers shall strictly comply with the legal, ethical requirements and their commitment to be responsible to the society and environment;if the Code is violated, the Company may terminate the business relationship between the two parties. Moreover, the Company evaluates the supplier’s past credit history, and reviews the supplier’s quality, delivery date, and whether there are any negative reports before dealing with the supplier. In 2019, a total of 118 suppliers were reviewed. According to the operation of Collaborative Value Task Force under the CSR policy of the Company, risk assessment of “Supply Chain Sustainability Questionnaire (SAQ)” is conducted annually for key first-tier suppliers. The questionnaire includes aspects such as legal, environmental, social and quality, and information security. Among them, the legal aspect includes questions concerning ethics, legal compliance and compliance practices. If high-risk vendors are identified, on-site inspection will be conducted and guidance will be given to reduce potential risks and improve existing impact. In 2019, the Company surveyed 72 suppliers (mainly key first-tier suppliers) according to the supplier’s sustainable supply chain mechanism. The questionnaire response rate reached 65%, and the average supply chain sustainability performance score was 88.88, showing that most of the Company’s suppliers have internalized the concept of sustainability in their management mechanisms. In addition, in accordance with the “Sustainable Supply Chain Management Policy Statement” of the Company, since 2016, we have requested that every supplier sign the “Supplier Code of Conduct” when making a tender, jointly undertaking to create a sustainable industrial environment;we have also continued to promote the procurement of Green Mark certified products: by the end of 2019, we have completed green procurement of approximately NT$19,258,000 in total.

No Difference

5. Does the Company make reference to internationally accepted report preparation standards or guidelines to prepare its Corporate Social Responsibility (CSR) Report and other reports that disclose the Company’s non-financial information? Has the aforementioned report been assured, verified, or certified by a third-party verification unit?

The Company follows the GRI Standards - Core option issued by the Global Sustainability Standards Board and refers to the UN Global Compact when preparing its CSR Report. In May 2020, the Company’s limited level report verification was completed by KPMG based on the GRI Standards and ISAE3000 Assurance Standard, and a third-party verification statement was issued, which has been disclosed on the Company’s “Corporate Social Responsibility” section on its website.

No Difference

6. If the Company has drawn up a code for CSR based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any differences between said code and the Best-Practice Principles: In order to fully implement the scope of corporate social responsibility, comply with the government's direction of CSR promotion, and accord with international practice, the Company has added to and amended the Company's Corporate Social Responsibility and Sustainable Development Best-Practice Principles in March 2017 based on the revised Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies; through this CSR's highest guiding principle, we have comprehensively reviewed the Company's operational constitution, reflected to the management and execution aspects, and striven to fulfill corporate social responsibility in three major aspects: environmental, social, and governance (economic) (ESG); there was no operational difference this year. For related information, please refer to the Company's corporate social responsibility website.

7. Other important information for facilitating the understanding of CSR and its implementation: (1)Promoting the internationalization of local education:

A. Strengthening education: 45,578 persons benefited in 2019 Educational exchange: The Company firmly believes that education is the only way to cultivate more future talent. Therefore, upholding the spirit of deeply cultivating the community, giving back to local neighborhoods, and caring for the disadvantaged and the society, we have been cultivating the reading habits of school children through educational volunteers since 2010, and starting from 2013, we began to have long-term cooperation with universities in Taiwan to provide opportunities to learn professional knowledge and practical skills, strengthening industry-academia collaboration to achieve the ultimate goal of talent cultivation. Lectures by volunteers: Since its establishment in 2011, the “China Airlines Volunteers Club” has been dedicated to supporting disadvantaged groups in society. Every year, it regularly visits neighboring schools to give lectures, encourage students to cultivate an international vision, and pass on aviation knowledge and English lessons. In 2019, 16 lectures in schools such as Xihai Elementary School, Zhuwei Elementary School, Shanfeng Elementary School, and Kuolin Elementary School in Dayuan District were held. In total, there were 92 participating volunteers and 32 hours of service, benefiting 1,106 students. Upholding the spirit of mutual support and spreading love, the China Airlines Volunteers Club gives back to the society and community with actual actions. In order to realize remote students’ dreams to fly, Mandarin Airlines specially launched a charity dream-come-true journey, arranging for students from Hualian Tafalong Elementary School and Nantou Chin-ai Music Experimental School to take the Mandarin Airlines’ Taichung-Hualien flight to visit each other. It allows students from the two schools in eastern and central Taiwan to conduct educational and cultural exchanges and have a precious experience that will last as a lifetime memory Since 2014, China Airlines has been working with the Global Views Educational Foundation to collaborate on the “Common Knowledge Platform Public Welfare Project” sponsorship plan and to donate subscriptions to the “Global Kids Junior Monthly” to students in various elementary schools in Taoyuan City, Taitung County, Nantou County, and Hualien County to help students develop reading habits and to contribute to the cultural education of children. In 2019, 102 schools and about 44,472 students benefited. Continuing to hold the “Mandarin Airlines Flying Experience Camp” to provide localized flight training opportunities for young Taiwanese students.

B. Environmental coexistence: 552 participants in 2019 Responding to environmental protection: In response to international coastal cleanup activities, the Zhuwei Fishing Port Coastal Cleanup has been held on a yearly basis since 2011. For the first time, in 2019, we moved the activity to Shalun, Tamsui, where a total of 552 employees and their family


Evaluation Item



members from various units in the China Airlines Group participated. In addition, we extended the activity to be held in Cijin, Kaohsiung. We cherish the earth with concrete actions and playing our part in environmental protection. Animal conservation: Mandarin Airlines continued its blue-tailed bee-eater eggs incubation project with the Taipei Zoo, and Kinmen County assisted in air transporting these little VIP eggs to Taipei for incubation. Through the participation of Mandarin Airlines in the “Kinmen Blue-Tailed Bee-Eater Abandoned Eggs Incubation and Research Project,” this flock of cute “summer fairies,” i.e. the blue-tailed bee-eaters, was successfully born in the Taipei Zoo in 2019 and made their debut with the establishment of the Tropical Rainforest Area in July.

(2)Enhancing international visibility of local brands in Taiwan: A. Humanitarian relief: 419 persons benefited in 2019

In 2019, the Company continued to promote the “In-flight Doctors” project, combining the resources of aviation industry with medical professions, so that passengers can have safer and more protected flights. China Airlines has been cooperating with Chang Gung Hospital since 2017. In July 2018, we expanded such cooperation and established the “In-flight Doctors” project with the Taiwan Medical Association and the Paujar Charity Foundation, inviting doctors to volunteer and take the initiative to lend a helping hand during flight and assist China Airlines and the ground medical support team in jointly protecting the health of passengers with urgent medical needs. In 2019, based on the concept of “compassion for society and kindness for the country,” China Airlines’ “In-flight Doctors” project was actively joined by the Tzu Chi medical system.

B. Sports activist: 303 participants in 2019 The Company has supported the development of Taiwan’s sports for many years. Through our own air transportation expertise, we help Taiwanese athletes participate in international sports events, supporting Taiwanese athletes and teams to win international fame with concrete actions. In 2019, China Airlines sponsored a number of sports events to jointly improve the sports environment in Taiwan and enhance Taiwan’s international reputation. Moreover, China Airlines continued to support Taiwan’s local teams and players, and sincerely received many Taiwanese sports players. In the future, we will continue to support various sports activities with actual actions and help Taiwanese athletes to win international fame with concrete actions. Sports events supported in 2019: “2019 Taiwan Legends Championship”. Sports players and teams supported in 2019: “2019 Formosa Dreamers Basketball Team, Taoyuan Pauian Archiland Basketball Team, basketball player Jeremy Lin, baseball player Wei-Chung Wang / Wei-Yin Chen, tennis player Chun-Hsin Tseng, fencer Yi-Tong Chan, volleyball player Pei-Hung Huang, ultra marathon runner Tommy Chen, Rising Star RG, and others.”

(3)Charity support: 61,448 persons benefited in 2019 A. Disadvantaged students and the general public:

“Love All Around Team” is a spontaneous China Airlines volunteer group. On their days off, volunteers visit remote rural schools to spread love and flight knowledge to balance the urban-rural education gap. Since 2014, it has covered 15 counties and cities in Taiwan, including 27 townships, 53 junior high and elementary schools and social welfare groups, and cared for 3,207 students. In addition, colleagues from China Airlines also organized a group by themselves to visit remote rural schools in Taitung and have deep cultivation interactions with 345 students. Such efforts have broadened their understanding of the aviation industry in order to cultivate more future talent. In 2019, the cabin crew held a total of 15 fundraising and charity bazaar activities to provide assistance needed by disadvantaged groups, benefiting a total of 58,035 people. China Airlines plays its part in fulfilling corporate social responsibilities. Along with the sponsored sports players, we organize public welfare sharing sessions to benefit students from rural areas. In 2019, the “China Airlines 60 New GO Jeremy Lin Charity Sharing Session” was held;baseball stars back from the U.S. Wei-Yin Chen and Wei-Chung Wang were invited to hold the joint “China Airlines Charity Baseball Camp,” with expectations for fostering future stars in Taiwanese sports through charity sharing sessions. Mandarin Airlines has cared for disadvantaged groups in Hualien and Taitung for many years. Upon the 28th anniversary celebration, Mandarin Airlines especially held a charity bazaar carnival and donated all the income from the bazaar, amounting to NT$100,000, and 5 boxes of charity goods to Hannah’s Hope Home in Taitung, to build a warm new home for dispossessed children under the age of two in Hualien and Taitung. After more than two years of fundraising and construction by the Taitung Christian Hospital and public welfare partners, along with the help of kind people from all walks of life, Hsin Shih Hall, a place that can provide both day care for the disabled or elders with dementia and a better quality new home for dispossessed children under the age of two, was finally officially completed.

B. Elders: Upholding the spirit of “extending the same care for our own elders to all elders in general,” the Company has maintained long-term cooperation with the Huashan Social Welfare Foundation to care for local disadvantaged elders. In 2019, a total of three charity events were held: “Love the Elderly and Reunite,” “Love the Elderly and be Active on the Dragon Boat Festival,” and “Love the Elderly and Light Up the Mid-Autumn Festival.” A total of 400 elders were cared for. During holiday reunions, volunteers from the Volunteers Club visited the elders’ homes, from door to door, to give care and gifts and accompany the elders. China Airlines continues to invest in social care, bringing warmth to the cold winter.


3.3.7 Ethical Corporate Management and Deviations from“the Ethical Corporate Management Best-Practice Principles for TWSE/GTSM Listed Companies”

Evaluation Item

Implementation Status Deviations from the Ethical Corporate

Management Best-Practice Principles for

TWSE/TPEx Listed Companies and

Reason


1. Establishment of ethical operation policies and programs (1)Has the Company formulated an ethical

management policy approved by the Board of Directors, and expressly stated in the regulations and external documents the policies and practices of ethical management, as well as the Board of Directors and senior management’s commitment to actively implement the management policy?

(1) CAL has established Ethical Corporate Management Best-Practice Principles and Procedures for Ethical Management and Guidelines for Conduct, which were passed in 2016 at the 5th meeting of the 20th Board session. These guidelines and principles clearly spell out the Company’s ethical operating policies, methods, and commitments. They are published on the CAL website and the Taiwan Stock Exchange Market Observation Post System.

No Difference

(2)Has the Company established an assessment mechanism for the risk of unethical behaviors, regularly analyzed and evaluated business activities with a higher risk of being unethical within the business scope, and formulated a plan accordingly to prevent unethical behaviors, which covers at least the preventive measures provided in Article 7, Paragraph 2 of the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies?

(2) The Company’s Ethical Corporate Management Best Practice Principles sets out various business activities with a higher risk of being unethical to be prevented within the business scope to strengthens relevant preventive measures, which include behaviors provided in the subparagraphs under Article 7, Paragraph 2 of the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies.

No Difference

(3)Has the Company specified the operating procedures, behavioral guidelines, disciplinary penalties, and grievance system in its plan for unethical conduct prevention, and has it implemented said program while also periodically reviewing and revising it?

(3) The Company's Procedures and Guidelines of Conduct for Ethical Management clearly sets out all unethical and prohibited conduct, the whistleblowing system, and the disciplinary system. These procedures and guidelines are implemented in the operations of all units.

No Difference

2. Implementing ethical corporate management (1)Does the Company evaluate the ethical

records of the businesses with which it has dealings and include clear ethical corporate behavior provisions in contracts with such counterparties?

(1) In the process of business dealings with other companies, CAL employees explain our ethical management policy and related regulations to counterparties and expressly refuse to directly or indirectly provide, promise, demand, or accept any form of improper benefit. When signing contracts with others, CAL fully reviews the counterparty’s ethical corporate behavior and includes complying with our ethical corporate management policies as a provision in contracts.

No Difference

(2)Has the Company set up a special unit affiliated to the Board of Directors to promote corporate ethical management that periodically (at least once per year) reports to the Board of Directors on the status of the implementation of ethical management policies, the plan for unethical conduct prevention, and its supervision?

(2)A. The Company’s Human Resources Management Division, which is the dedicated unit for ethical management, is responsible for consolidating the ethical management implementation status in relevant units of the Company and reporting periodically to the Board of Directors once per year. The 2019 implementation status has been reported at the 8th meeting of the 21st Board of Directors on November 7, 2019.In addition, the Company encourages the reporting of unethical conduct and misconduct. An independent reporting mailbox has been set up and announced. The General Audit Office reports the received cases, handling methods, and follow-up review and rectification to the Board of Directors.

B. Relevant status of the Company’s implementation of ethical management policies in 2019: a. An E-learning training course was held to raise awareness of service principles

and code of conduct. b. Whistleblowing channels such as the following have been announced:

chairman’s mailbox, General Audit Office’s confidential mailbox, the Speak Out area, and the WeCare listens mailbox. These facilitate employees’ immediate reporting to management and the Human Resources Management Division.

c. "Employee Workplace Code of Conduct", "Employee Job Specifications", and relevant reward and disciplinary procedures have been established; clear standards and an effective disciplinary system have been set out.

d. Ethical management is implemented through scheduled and unscheduled annual inspection mechanisms to prevent fraud and corruption.

No Difference


Evaluation Item




Reason


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

(3)CAL Procedures for Ethical Management and Guidelines for Conduct expressly state that should a conflict of interest arise in the execution of Company duties, employees shall report the situation to their direct supervisor, who should provide appropriate guidance.

No Difference

(4)Has the Company established an effective accounting system and an internal control system in efforts to implement ethical management? Has the Company’s internal audit unit used the results of ethical management risk assessments to draw up relevant audit plans and examined compliance with the plan for unethical conduct prevention or entrusted an accountant to perform such an audit?

(4)The Company has established effective systems, including an accounting system and internal control system. Annual audit plans are formulated every year based on risk assessments to examine the Company’s accounting and internal control systems. The systems are continuously inspected to implement ethical management.

No Difference

(5)Does the Company periodically hold internal and external ethical corporate behavior training?

(5)The Company promotes ethical behavior and corporate ethics when new employees assume office, and conducts E-Learning online courses for supervisors dispatched in Taiwan and abroad. The Ethical Corporate Management Best-Practice Principles, the Procedures and Guidelines of Conduct for Ethical Management, and other documents have been disclosed on the Company's internal and official website for the reference of internal and external personnel. In order to strengthen employees' understanding of the Company's corporate culture of ethical management, employees have been receiving training since 2017 through the E-learning system. The training situation for the last two years is as follows: A. 2018:

a.Trainee(s): Current foreign branch office/agency staff (excluding foreign cabin crew members and personnel on leave of absence during training).

Number of trainees: 1,596 persons. Number of completions: 1,356 persons. Completion rate: 85%

b.Trainee(s): Taiwanese and foreign cabin crew members (excluding personnel on leave of absence during training).

Number of trainees: 3,439 persons. Number of completions: 3,439 persons. Completion rate: 100%

B. 2019: Trainee(s): Taiwanese and foreign cabin crew members (excluding personnel on

leave of absence during training). Number of trainees: 1,293 persons. Number of completions: 1,293 persons. Completion rate: 100%

No Difference

3. Operation of the Company's Violation Reporting System (1)Has the Company established a

concrete violation reporting and rewards system, set up convenient reporting channels, and appointed suitable personnel to handle these cases?

(1) Article 20 of the Company's Procedures and Guidelines of Conduct for Ethical Management expressly provides and discloses the rules of reporting, the reporting channel, and the processing procedures; the reporting mailbox [email protected] is disclosed and announced on the Company's website and internal website for the use of Company’s internal personnel and external personnel. The reported cases will be handled by the General Audit Office of the Company and the circumstances of the report, its handling methods, follow-up review, and improvement measures will be reported to the Board of Directors.

No Difference

(2) Has the Company established the standard operating procedures for the investigation of received reports, the follow-up measures to be taken after the investigation is completed, and the relevant confidentiality mechanism?

(2) According to CAL Procedures for Ethical Management and Guidelines for Conduct, all reports of violations and related follow up investigations are kept strictly confidential and CAL has set up clear and effective awards and punishments, an appeals system, violation reporting confidentiality mechanism, and investigation SOP. In addition, the Company also incorporates ethical management into employee performance evaluation and human resources policies. A clear and effective reward and disciplinary system, grievance system, and the standard operating procedures for the investigation of reports have also been established.

No Difference

(3)Does the Company have any measures in place to protect individuals from possible mistreatment arising from reporting violations?

(3) Employees who process violation reports must sign a written statement pledging to maintain confidentiality of the reporters and the details of the case. CAL also promises to protect the whistleblower from being improperly punished due to the reporting.

No Difference

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

CAL’s Ethical Corporate Management Best-Practice Principles and Procedures for Ethical Management and Guidelines for Conduct are disclosed on the China Airlines website and the Taiwan Stock Exchange Market Observation Post System, along with the effectiveness of ethical operations and fair trade principles.

No Difference


Evaluation Item




Reason


5. If the Company has established a code of ethical corporate management based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any differences between said code and the Best-Practice Principles: No Differences.

6. Other information that will assist in the understanding of Company ethical corporate management practices: None.

3.3.8 Corporate Governance Guidelines and Regulations The Company has established a Corporate Charter, Rules for Discussions of Official Business at Shareholder Meetings, Rules for Discussions of Official Business by the Board of Directors, Ethical Code of Conduct for Directors, Election of Directors, Rules for Corporate Governance, Guiding Principles for Operational Integrity, Guide to Integrity in Management and Business Procedures and Conduct, Practical Guidelines for Corporate Social Responsibility and Sustainable Development, Ethical Code of Conduct for Directors, Ethical Code of Conduct for Senior Supervisors, Employee Workplace Rules of Conduct, China Airlines Group Rules of Conduct, Supplier Code of Conduct, and Human Rights Policy; it has formed 3 committees under the Board of Directors for audit, remuneration, and risk, and has established various organizational rules. The relevant rules listed above are all made public on the Company's website (http://www.china-airlines.com) and the Company's social responsibility network (https://calec.china-airlines.com/csr/en/index.html).

3.3.9 Summary table of the resignation and dismissal of relevant persons of the Company April 25, 2020

Title Name Date of

Appointment Date of Dismissal

Reason for Resignation or Dismissal

Chairman Ho, Nuan-Hsuan 06/24/2016 04/02/2019 Removal of juridical person

director representative

Vice President, Information Management Div.

(concurrently research and development manager)

Lu, Shih-Ming 01/05/2015 11/18/2019 Transfer

Note: "Relevant persons in the Company" refers to the chairman, general manager, accounting management, financial management, internal audit management, corporate governance manager, R&D management, and others.

3.3.10 Other Important Information Regarding Corporate Governance A. The organization and operations of Company’s internal auditing

The Company’s internal audit operations are handled by the General Audit Office. In compliance with Article 11 of the "Regulations Governing Establishment of Internal Control Systems by Public Companies," the General Audit Office is under the jurisdiction of the Board of Directors. The main internal audit operation methods are announced via the quality document management system in the Company's corporate internal information network. Information announced include the manual of "Detailed Rules for Internal Audit Implementation" and relevant operational methods. A summary is provided as follows: (1)Day-to-day audit (pre-incident audit and post-incident audit). (2)Annual audit (on-site inspection of the head office, branch units, and subsidiaries). (3)Project audit. (4)Supervision of construction, maintenance, and procurement. (5)Financial inventory.


(6)Self-assessment of the internal control system. (7)Periodical audit required by the Financial Supervisory Commission. (8)Other units that need unscheduled audits.

B. Certifications of the personnel related to the Company's internal audits Institute of Internal Auditors-Chinese Taiwan Internal Auditor Certificate: 1 person, International Internal Auditor Certificate: 1 person, R.O.C. Certified Public Accountant License: 2 people, R.O.C. Securities (Senior) Specialist: 1 person, R.O.C. Futures Specialist: 2 people, R.O.C. Financial Planning Personnel Proficiency Test Passing Certificate: 1 person, R.O.C. Stock Affairs Specialist Proficiency Test Passing Certificate: 1 person.

C. Company financial staff certifications and licenses: Institute of Internal Auditors-Chinese Taiwan Internal Auditor Certificate Institute of Internal Auditors-Chinese Taiwan Internal Auditor Certificate: 4 people, International Internal Auditor Certificate: 3 people, R.O.C. Certified Public Accountant License: 2 people, R.O.C. Securities (Senior) Specialist: 6 people, R.O.C. Securities Investment Trust and Consulting Professional: 5 people, R.O.C. Futures Specialist: 4 people, R.O.C. Financial Planning Personnel Proficiency Test Passing Certificate: 4 people, R.O.C. Stock Affairs Specialist Proficiency Test Passing Certificate: 7 people, USA Certified Public Accountant License: 1 person, R.O.C. Basic Enterprise Internal Audit Proficiency Test Passing Certificate: 3 people.

D. Company Director Continuing Education From January 1, 2019, through April 25, 2020

Title Name Training

hours Date(s) Sponsoring Organization Course

Chairman Hsieh,

Su-Chien

3hr 05/08/2019 Training by: Taiwan Corporate Governance Association

Developing Trends and Prevention of Corporate Corruption


How Taiwanese companies respond to and manage the huge risks caused by the China-US trade war

Director Chen,

Charles C.Y. 3hr 08/07/2019

Training by: Taiwan Corporate Governance Association


3hr 11/12/2019 Taiwan Institute of Directors The 8th Annual Chinese Family Businesses Forum

Director Ting,

Kwang-Hung





Director Chen,

Han-Ming





Director Ko, Sun-Ta 3hr 05/08/2019

Training by: Taiwan Corporate Governance Association




Director Wei,

Yung-Yeh





Director Lin, Su-Ming





2.5hr 10/01/2019 Taiwan Insurance Institute Analysis of Laws and Regulations related to Anti-Money Laundering and Counter-Financing of Terrorism (2019)


Title Name Training

hours Date(s) Sponsoring Organization Course

3hr 11/12/2019 Taiwan Insurance Institute Financial Consumer Protection Act and the Principle of Fair Hospitality

3hr 11/21/2019 Taiwan Insurance Institute Impact of IFRS17 on the business strategy of the Insurance Enterprise

3hr 12/24/2019 Taiwan Corporate Governance Association

IFRS17 Conversion and Insurance enterprise response strategy

Director Wang,

Shih-Szu






Chang, Hsieh Gen-Sen






Chung, Lo-Min






Shen, Hui-Ya



3hr 05/24/2019 Taipei Foundation of Finance Corporate Governance - Analysis of Financial Crime Practices

3hr 09/20/2019 Taipei Foundation of Finance Corporate Governance Training - The UN Convention Against Corruption, Anti-Fraud and Whistleblower Protection

3hr 11/15/2019 Securities and Futures Institute Avoid Unintentionally Violating the Securities and Exchange Act - Starting with Untruthful Financial Statements and Insider Trading

E. Corporate Governance Related Training Attended by Company Managers From January 1, 2019 through April 25, 2020

Title Name Training hours Date(s) Sponsoring Organization Course

Vice President,

Finance Div.

Chen, I-Chieh 12hr 10/21/2019- 10/22/2019

Accounting Research and Development Foundation

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

Assistant Vice

President, Finance

Div.

Yen, Yang 12hr 01/09/2020- 01/10/2020

Accounting Research and Development Foundation

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

Deputy Auditor General, General

Audit Office

Fang, Juo-Ling

6hr 07/19/2019 Accounting Research and Development Foundation

Internal Audit and Internal Control Practices of Reward Systems for Corporate Employees

6hr 10/21/2019 Institute of Internal Auditors-Chinese Taiwan

Internal Auditing Professional Course- How Audit Supervisors Assist the Board of Directors and Advisory Service

Deputy Auditor General, General

Audit Office

Ho, Hui-Fen


Internal Auditing Professional Course- The Functions and Duties of Corporate Governance Personnel in the Corporate Governance Blueprint


Internal Auditing Professional Course- How Audit Supervisors Assist the Board of Directors and Advisory Service


F. Succession plan for the Board of Directors and key management of the Company

The selection and nomination of China Airlines’ directors are carried out in accordance with the Company Act, Securities and Exchange Act, China Airlines’ Rules Governing the Election of Directors, and Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies. All elections of directors are conducted in accordance with the candidate nomination system. Shareholders may nominate director candidates; through shareholders' voting in the annual general meeting, directors (including independent directors) are elected from the list of candidates nominated by shareholders. The term of office of a director is 3 years.

As for the selection of director successors, the director representative successors should generally have the required abilities stated in the chapter within China Airlines’ "Corporate Governance Principles" describing reinforced competencies of the Board of Directors. As required by the law, independent directors must have obtained certain professional qualification and work experience. Professionals who are experienced in the industry, including the governmental and academic fields, are the main direction of selection that forms the basis of succession planning (please refer to P.41 for diversification). In addition, the independence of all Board members is ensured in accordance with the law, and the results of its annual evaluation are an important reference for whether continued nomination is needed.

In order to enhance the directors' ability to exercise the powers of their posts and ensure that the Board's effectiveness is up-to-date, scheduled advanced studies are arranged every year to help elevate the professional competencies of the directors. The studies involve courses on corporate governance-related topics, including finance, accounting, business, commerce, legal affairs, information, risk management, internal control systems, and corporate social responsibility. To ensure that the succession plan is comprehensive, the study contents align with the updates of regulations and conditions of the internal and external environments, as well as topics applicable to future development needs.Furthermore, regarding the succession plan for important management, in addition to having excellent professional management ability, its behavior, ethics, and instructions shall be based on the resolutions of the Board of Directors, and be handled in accordance with the “China Airlines Executives Code of Ethical Conduct” and related laws and regulations to maintain the best interests of the Company, employees, and shareholders.

In the training plan for the Company's important management, regular senior management lectures are held every year, where there are invited personages from the fields of industry, public sector, and academia to give special lectures on the state of the global market and the development of the aviation industry, so that the Company's supervisors can better understand the state of the market and that the height and breadth of professional competence development may be improved. Periodic inter-agency transfers shall be handled according to the Company's rules to comprehensively cultivate diversified management capabilities of important management. In addition, to deepen the Company's various levels of management professionals and broaden the horizon of potential talent, strategic


and management occupational training sessions are held on a regular basis and talent training programs have been established to refine the necessary knowledge and skills of mid-level supervisors, cultivate talent with international vision and management capabilities, and strengthen the management knowledge of management professionals through job experience, management course training, and rigorous assessment systems. As of today, more than 100 outstanding management professionals have been thus cultivated and are now serving in key units in Taiwan and foreign branches.

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


3.3.11 Internal Control Systems A. Internal Control Statement


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

3.3.12 Any disciplinary measures taken against the Company or its internal staff due to violations of legal requirements or taken by the Company against its own staff due to violations of the internal control system. The details of the disciplinary measures, major faults, and improvement measures should be noted

No. Penalty Deficiency Improvement 1 A fine of

NT$1,000,000. The Company underwent labor inspection on January 16, 2019. There was a violation of Article 49, Paragraph 1 of the Labor Standards Act, because cabin crew members’ nighttime work had not been approved by the labor union.

(1)In the case of female workers' nighttime work, the Company union refused to acknowledge the provisions of the collective agreement; the Company believes that the outcome of the case was unfair, since the competent authority was biased towards the union’s claim and imposed the penalty.

(2)An administrative appeal has been filed for this case to protect the Company's rights and interests.

(3)The Company and the Company union have initiated negotiation, and will reconfirm the provisions allowing female workers' nighttime work.

2 A fine of NT$40,000.

The Company underwent labor inspection on February 13, 2019. There was a violation of Article 49, Paragraph 1 of the Labor Standards Act, because female workers’ nighttime work

(1) In the case of female workers' nighttime work, the Company union refused to acknowledge the provisions of the collective agreement; the Company believes that the outcome of the case was unfair, since the


No. Penalty Deficiency Improvement at the customer service center of the Taipei office had not been approved by the labor union. There was also a violation of Article 34, Paragraph 2, because the interval between two shifts was less than 11 hours.

competent authority was biased towards the union’s claim and imposed the penalty.

(2) An administrative appeal has been filed for this case to protect the Company's rights and interests.

(3) The Company and the Company union have initiated negotiation, and will reconfirm the provisions allowing female workers' nighttime work.

(4) As for the case in which the interval between two shifts was less than 11 hours, it was caused by the large influx of calls triggered by the short-notice strike by the Pilots Union. The Company has rectified this case, and an administrative appeal will be filed because the case was due to the need to respond to a particular emergency.

3 A fine of NT$1,000,000.

The Company underwent labor inspection on April 22, 2019. There was a violation of Article 49, Paragraph 1 of the Labor Standards Act, because cabin crew members’ nighttime work had not been approved by the labor union.




4 A fine of NT$1,000,000.

The Company underwent labor inspection on October 16, 2019. There was a violation of Article 49, Paragraph 1 of the Labor Standards Act, because cabin crew members’ nighttime work had not been approved by the labor union.




5 A fine of NT$20,000.

The Company underwent labor inspection on January 9, 2020. There was a violation of Article 38, Paragraph 2 of the Labor Standards Act (leave arranged by workers), because the request for paid leave raised by pilots in the Flight Operations Division was not granted due to worker allocation.

(1)In this case, paid leave could not be scheduled due to pilot allocation issues; the Company and the pilots had communicated to schedule the leave on other days. The competent authority insisted that the law stated the leave could only be arranged by workers and issued the penalty.


(3)The Company will strengthen communication with employees to coordinate paid leave dates.

In addition, from 2019 to the printing of the annual report, the Company was fined NT$60,000 by the Ministry of Labor due to the ruling in the case of an unfair labor practice dispute with the Taoyuan Flight Attendants Union, and we continue to seek administrative remedies. The relevant statistics of cases and content of the disputes are as follows:

Number of cases Main dispute Total amount of fines

1 Dispute regarding granting of leave for union related business of the union’s cadre.

NT$60,000


3.3.13 Major Resolutions of Shareholders’ Meeting and Board Meetings A. Major Resolutions of Shareholders’ Meeting in 2019

Item Major resolutions Execution 1. Business Report and Financial Statements

for the year 2018 This resolution was passed as proposed upon voting.

Announcement was made after resolution of Shareholders’ Meeting on June 25, 2019

2. 2018 Surplus Earnings Distribution This resolution was passed as proposed upon voting.

Announcement was made after resolution of Shareholders’ Meeting on June 25, 2019

3. Amendment to the Articles of Incorporation

This resolution was passed as proposed upon voting.

Announcement was made after resolution of Shareholders’ Meeting on June 25, 2019, and has been complied with since that day.

4. Amendment to the Procedures Governing the Election of Directors



5. Amendment to the Procedures Governing the Acquisition and Disposal of Assets



6. Amendment to the Operational Procedures for Derivatives Trading



7. Amendment to the Operational Procedures for Lending Funds to Others



8. Amendment to the Operational Procedures for Endorsements/Guarantees



9. The Release of Tigerair Taiwan Stock This resolution was passed as proposed upon voting.


10. Proposal to release the non-competition restriction of holding concurrent positions on Chairman Hsieh, Su-Chien


The non-competition restriction on Chairman Hsieh, Su-Chien was lifted based on the resolution of Shareholders’ Meeting on June 25, 2019, which was subsequently announced.

B. Major Resolutions of Board Meetings (January 1, 2019 to April 25, 2020)

Date Item Opinions of independent directors

Handling of Independent

Directors’ opinions by the Company

January 21, 2019 21st Board of Directors 4th Meeting

(1)The Selling of Two A340-300 Aircrafts: B-18806 and B-18807 (2)Selling of Shares in “Huachuan Travel Agency” (3)Listing Application Plan of Tigerair Taiwan (4)Provision of General Financing Limit and Financial Commodity

Trading Risk Limit by Five Financial Institutions, Including Mega International Commercial Bank

(5)Regular Review of Performance Evaluation Systems of Directors and Managers

(6)Regular Review of Policies, Systems, Standards, and Structures for Salary and Compensation of Directors and Managers

(7)2018 Employee Salary and 2019 Lunar New Year Incentive (8)2019 Employee Salary Adjustment (9)Chairman and Managers' 2018 Year-end Bonus and 2019 Lunar

New Year Incentive (10) Proposal of Salary and Compensation for the Senior Vice

President (VV) Wang, Chen-Min (11) Lifting of Non-competition Restriction on Holding Concurrent

Posts for Wang, Chen-Min, Senior Vice President

Approved by all attending Independent Directors

None

March 20, 2019 21st Board of Directors 5th Meeting

(1)2018 Internal Control System Effectiveness Audit and Statement (2)The Convening of the 2019 Annual General Meeting (3)Amendment to “Directors Election Regulations” (4)2018 Financial Report and Consolidated Financial Report (5)2018 Business Report


None





(6)2018 Surplus Earnings Distribution (7)2019 CPA Appointment and Remuneration (8)Amendment to “Company’s Articles of Incorporation” (9)Revision of “Procedures for the Acquisition or Disposal of Assets” (10) Revision of “Procedures Governing Derivatives Trading” (11) Provision of General Financing Limit and Financial Commodity

Trading Risk Limit by Six Financial Institutions, Including the Bank of Taiwan

(12) Revision of Definition of Employee Compensation and 2018 Employee Compensation

(13) The handling status of four meetings between the Company and the Taoyuan Union of Pilots at the Ministry of Transportation and Communications and the signing of a collective agreement on February 21, 2019, at the meeting with the Department of Labor, Taoyuan City Government.

April 2, 2019 21st Board of Directors 5th Extraordinary Meeting

Election of new Chairman Approved by all attending Independent Directors

None

May 8, 2019 21st Board of Directors 6th Meeting

(1)Proposal on salary and remuneration of Chairman Hsieh, Su-Chien.

(2)Proposal to release the non-competition restriction of holding concurrent positions on Chairman Hsieh, Su-Chien.

(3)Proposal on the service pay of former Chairman Ho, Nuan-Hsuan. (4)Adjustment of travel expenses for Directors (including

Independent Directors). (5)Establishment of Corporate Governance Manager. (6)Proposal on Salary and Remuneration of Chief Corporate

Governance Officer. (7)Establishment of Domestic Tier-1 Division. (8)Amendment to “Rules of Procedure for Board of Directors

Meetings”. (9)Amendment to “Corporate Governance Principles”. (10) Amendment to “Operational Procedures for Loaning Funds to

Others” and “Procedures for Endorsement and Guarantee”. (11) The Plan for the Stock Release of “Tigerair Taiwan”. (12) Provision of General Financing Limit and Financial Commodity

Trading Risk Limit by Five Financial Institutions, Including Cathay United Bank.

(13) NT$5.5 Billion Five-year Non-guaranteed Commercial Paper Financing.

(14) The Sale-leaseback Operation of Five Company-owned A330-300 Aircrafts.

(15) Evaluation and Selection of New Narrow-body Passenger Aircraft and Introduction of New Aircraft.


None

June 25, 2019 21st Board of Directors 6th Extraordinary Meeting

(1)Introduction of new 777F cargo aircraft. (2)Introduction of the New A321neo Narrow-body Passenger

Aircraft. Approved by all attending Independent Directors

None

July 3, 2019 21st Board of Directors 7th Extraordinary Meeting

Plan to handle the relevant matters of releasing the shares of Tigerair Taiwan Approved by all

attending Independent Directors

None

August 7, 2019 21st Board of Directors 7th Meeting

(1)Dismissal of Senior Vice President (VW). (2)Issuing NT$3 Billion of Total Face Value of Domestic Unsecured

Convertible Corporate Bonds. (3)Provision of General Financing Limit and Financial Commodity


None





Trading Risk Limit by Five Financial Institutions, Including Taishin International Bank.

(4)Execute the Conversion of Three Options for Boeing 777F into Firm Orders.

October 8, 2019 21st Board of Directors 8th Extraordinary Meeting

(1)The Case of “Engine Selection and the Procurement of 4 Backup Engines for the New A321neo Narrow-body Passenger Aircraft.”

(2)The Company’s provision of endorsement and guarantee to Tigerair Taiwan Co., Ltd.


None

November 7, 2019 21st Board of Directors 8th Meeting

(1)2020 Audit Plan (2)Decision on the Authorization of the Chairman to Pre-determine

the Transaction Limit of Contracts in which the Company Leases Real Estate to Subsidiaries.

(3)Amendment to the "Regulations Governing the Board Performance Evaluation"

(4)Amendment to the "Remuneration Committee Foundation Policy"

(5)2020 Business Plan and Budget (6)Stock Release of “Tigerair Taiwan” Prior to Emerging Stock

Market Registration (7)Provision of General Financing Limit and Financial Commodity

Trading Limit by Five Financial Institutions, Including CTBC Bank


None

January 13, 2020 21st Board of Directors 9th Meeting

(1)Provision of General Financing Limit and Financial Commodity Trading Risk Limit by Four Financial Institutions, Including DBS Bank (Taiwan)

(2)2019 Year-end Bonus and 2020 Lunar New Year Incentive (3)Matters Regarding the Signing of Agreement with the CAL

Employees Union on Issues of “13th Month Full Salary (Flight Safety Bonus)” and “Working Hours Rearrangement and Female Employees’ Nighttime Work” on December 31, 2019

(4)2020 Employee Salary Adjustment (5)Chairman and Managers’ 2020 Lunar New Year Incentive (6)Lifting of Non-competition Restriction on Holding Concurrent

Posts for Senior Vice President (7)Report on the Company’s Lease on Real Estate with a Subsidiary


None

March 18, 2020 21st Board of Directors 10th Meeting

(1)Amendment to 2020 Audit Plan (2)2019 Internal Control System Effectiveness Audit and Statement (3)New Branch Unit in Response to Route Launch (4)Change in Personnel and Position (5)The Convening of the 2020 Annual General Meeting (6)2019 Financial Report and Consolidated Financial Report (7)2019 Business Report (8)2019 Deficit Make-Up (9)2020 CPA Appointment and Remuneration (10) Issuance of Domestic Unsecured Ordinary Corporate Bonds (11) Provision of General Financing Limit and Financial Commodity

Trading Risk Limit by Three Financial Institutions, Including First Commercial Bank

(12) Amendment to “Company’s Articles of Incorporation” (13) Amendment to “Rules of Procedure for Shareholders Meetings” (14) Amendment to “Rules of Procedure for Board of Directors

Meetings” (15) Amendment to “Audit Committee Organizational Rules”


None

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


3.4 Information Regarding the Company’s Audit Fee and Independence

3.4.1 Audit Fee Accounting Firm Name of CPA Period Covered by CPA’s Audit Remarks

Deloitte & Touche Huang, Jui-Chan Cheng, Shiuh-Ran 01/01/2019-12/31/2019 None

Unit: NT$ thousands

Fee Items Fee Range

Audit Fee Non-audit Fee Total

1 Under 2,000 2 2,000 - 3,999 3 4,000 - 5,999 4 6,000 - 7,999 5 8,000 - 9,999 6 Over 10,000

3.4.2 Audit and Non-Audit Fees Paid to CPAs, the Certified Accounting Firm to Which Said CPAs Belong and Any Affiliated Enterprises and Details Regarding Non-Audit Fees. See Below:

Unit: NT$ thousands Accounting

Firm Name of

CPA Audit Fee

Non-audit Fee Period Covered by CPA’s Audit

Remarks System of Design

Company Registration

Human Resource

Others Subtotal

Deloitte & Touch

Huang, Jui-Chan Cheng, Shiuh-Ran

7,350 - - - 5,829 5,829 01/01/2019- 12/31/2019

Others include the business tax audit fee of dual-status business entities adopting direct deduction, the transfer pricing report service fee, the related accountant certification fee for issuance of corporate bond, the US airport Passenger Facility Charge (PFC) tax collection and audit fee, and the consulting fee of General Data Protection Regulation (GDPR).

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

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


3.5 Replacement of CPA: 3.5.1 On the previous accountant

Date of change March 20, 2019

Reason and explanation for change

Due to internal reorganization at the CPA firm, the resolution was passed at the 5th meeting of the 21st Board of Directors on March 20, 2019 that from the financial report for Q1 of 2019, the CPAs would be switched to Huang, Jui-Chan and Cheng, Shiuh-Ran.

Explanation was termination of the person or accountant appointed or refusal of appointment

Involved party Situation

Accountant Appointee

Proactive termination of appointment

None. Did not accept further (continuing) appointment

Newest check report within two years other than one signed and issued without disclaimer and reason

None.

Objection from issuer

Yes

Accounting principles or customary practice

Financial report disclosure

Scope of check or steps

Other

None

Explanation

Other items disclosed (for which disclosure is required under Article 10, Clause 6, items 1d through 1g)

None.

3.5.2 On successor accountants

Name of firm Deloitte & Touche

Accountant Name Huang, Jui-Chan; Cheng, Shiuh-Ran

Date of appointment March 20, 2019

Pre-appointment consultations for opinions on method of accounting or accounting principles for specific transactions and consultation on possibility of signing and results of same

None.

Written opinions of successor accountants at odds with those of previous accountants

None.

3.6 Audit Independence: None.


3.7 Changes in Shareholding of Directors, Managers, and Major Shareholders

Unit: Shares

Title Name

2019 The current year through April 25, 2020

Holding Increase

(Decrease)

Pledged Holding Increase

(Decrease)

Holding Increase

(Decrease)


(Decrease) Major Shareholder China Aviation Development Foundation (Note)

0 0 0 0 Chairman China Aviation Development Foundation

Representative: Hsieh, Su-Chien

Director

China Aviation Development Foundation Representative: Chen, Charles C.Y.; Ting, Kwang-Hung; Chen, Han-Ming; Ko, Sun-Ta; Wei, Yung-Yeh

Director National Development Fund, Executive Yuan Representative: Lin, Su-Ming; Wang, Shih-Szu 0 0 0 0

Independent Director Chung, Lo-Min 0 0 0 0

Independent Director Chang, Hsieh Gen-Sen 0 0 0 0

Independent Director Shen, Hui-Ya 0 0 0 0

President Hsieh, Su-Chien 0 0 0 0 Senior Vice President Kao, Shing-Hwang 0 0 0 0

Senior Vice President Wang, Chen-Min 0 0 0 0

Senior Vice President Wang, Houng 0 0 0 0

Senior Vice President Chang, Young 0 0 0 0

Auditor General Fang, Juo-Ling 0 0 0 0 Data Protection Officer Wu, Hsiao-Sui 0 0 0 0

Vice President Chien, Feng-Nien 0 0 0 0 Vice President Chen, I-Ko 0 0 0 0 Vice President Lai, Ming-Hui 0 0 0 0 Vice President Peng, Pao Chu 0 0 0 0 Vice President Liu, Der-Chuan 0 0 0 0 Vice President Liu, Tsao-Yang 0 0 0 0 Vice President Yeah, Shao-Ting 0 0 0 0 Vice President Chen, Wei-Tau 0 0 0 0 Vice President Chen, I-Chieh 0 0 0 0 Vice President Hong, Tsu-Kuang 0 0 0 0 Vice President Chung, Wan-Chun (Assumed post on 11/23/2019) 0 0 0 0 Vice President Chou, Jyh-Shyan 0 0 0 0 Vice President Chu, Te-Hsiu (Assumed post on 11/18/2019) 0 0 0 0 Vice President Chang, Cheng-Hao (Assumed post on 01/21/2019) 0 0 0 0 Vice President Chung, Ming-Jyh 0 0 0 0 Vice President Sun, Jia-Min 0 0 0 0 Vice President Lee, Jung-Hui 0 0 0 0 Vice President Li, Chih-Wei 0 0 0 0 Deputy Auditor General Ho, Hui-Fen 0 0 0 0

Assistant Vice President Yu, Yueh-Han 0 0 0 0


Title Name


Holding Increase

(Decrease)


(Decrease)

Holding Increase

(Decrease)


(Decrease) Assistant Vice President Chen, Chwen-Der 0 0 0 0

Assistant Vice President Tung, Hsing-Hua 0 0 0 0

Assistant Vice President Huang, Hsiang-Piao 0 0 0 0

Assistant Vice President He, Cheng (Assumed post on 11/01/2019) 0 0 0 0

Assistant Vice President Chen, Pei-Ti 0 0 0 0

Assistant Vice President Mao, Li-Chung (Assumed post on 12/20/2019) 0 0 0 0

Assistant Vice President Sheu, Yuh-Shy (Assumed post on 01/22/2019) 0 0 0 0

Assistant Vice President Shann, Da-Sin 0 0 0 0

Assistant Vice President Lin, Herng Shan (Assumed post on 04/16/2019) 0 0 0 0

Assistant Vice President Lee, Pei-Chen (Assumed post on 04/01/2019) 46,455 0 0 0

Assistant Vice President Yen, Yang 0 0 0 0

Assistant Vice President Huang, Hui-Na 0 0 0 0

Assistant Vice President Fang, Yuan-Hua 0 0 0 0

Assistant Vice President An, Long-Chi (Assumed post on 04/01/2020) 0 0 0 0

Assistant Vice President Huang, Chin-Feng (Assumed post on 10/16/2019) 0 0 0 0

Assistant Vice President Hsu, Hsueh-Wen (Assumed post on 02/01/2020) 0 0 0 0

Assistant Vice President Wang, Wei 0 0 0 0

Assistant Vice President Liu, Shou-Shu 0 0 0 0

Assistant Vice President Liu, Duan-Shiuh 0 0 0 0

Assistant Vice President Hsiao, Jui-Fu 0 0 0 0

Assistant Vice President Wei, Shi-Jong (Dismissed on 01/21/2019) 0 0 0 0

Assistant Vice President Ouyang, John (Dismissed on 01/24/2019) 0 0 0 0

Assistant Vice President Hung, I-Lan (Dismissed on 03/21/2019) 0 0 0 0

Vice President Chen, Kang-Reuy (Dismissed on 03/31/2019) 0 0 0 0

Chairman China Aviation Development Foundation Representative: Ho, Nuan-Hsuan (Dismissed on 04/02/2019)

0 0 0 0

Vice President Chiu, Chang-Hsin (Dismissed on 08/01/2019) 0 0 0 0 Senior Vice President Lo, Ya-Mei (Dismissed on 08/01/2019) 0 0 0 0

Assistant Vice President Hsiao, Kuo-Chih (Dismissed on 08/05/2019) 0 0 0 0


Title Name


Holding Increase

(Decrease)


(Decrease)

Holding Increase

(Decrease)


(Decrease) Assistant Vice President Yu, Yau (Dismissed on 10/01/2019) 0 0 0 0

Assistant Vice President Fang, Cheng-Ru (Dismissed on 10/01/2019) 0 0 0 0

Assistant Vice President Jeng, Jong-Shinn (Dismissed on 10/31/2019) 0 0 0 0

Vice President Lu, Shih-Ming (Dismissed on 11/18/2019) 0 0 0 0 Assistant Vice President

Chiu, Wei-Tuan (Assumed post on 08/10/2019)(Dismissed on 03/19/2020) 0 0 0 0

Assistant Vice President Chen, Jo-Ching (Dismissed on 04/01/2020) 0 0 0 0

Assistant Vice President Kao, Shu-Chuan (Dismissed on 04/01/2020) 0 0 0 0

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

3.7.1 Shares Trading with Related Parties: None.

3.7.2 Shares Pledge with Related Parties: None.


3.8 Relationships among the Top Ten Shareholders April 25, 2020

Name Current Shareholding Spouse’s/minor’s Shareholding


Arrangement

Name and Relationship Between the Company’s Top Ten Shareholders, or

Spouses or Relatives Within Two Degrees

Remarks

Shares % Shares % Shares % Name Relationship

China Aviation Development Foundation

(Representative: Wang, Kwo-Tsai) 1,867,341,935 34.45% 0 0% 0 0% None None None

National Development Fund of The

Executive Yuan

(Representative: Dr. Chen, Mei-Ling)

519,750,519 9.59% 0 0% 0 0% None None None

Chunghwa Telecom Co. Ltd.

(Representative: Sheih, Chi-Mau) 263,622,116 4.86% 0 0% 0 0% None None None

China Airlines Ltd. Employee Stock

Ownership Trust Plan 63,333,017 1.17% NA NA 0 0% None None None

New Labor Pension Fund 60,727,000 1.12% NA NA 0 0% None None None

Vanguard Total International Stock Index

Fund, a series of Vanguard Star Funds 53,130,442 0.98% NA NA 0 0% None None None

Ocean Investment Holding Co., Ltd.

(Representative: Wang, Yun-E) 48,727,000 0.90% 0 0% 0 0% None None None

Vanguard Emerging Markets Stock Index

Fund, a Series of Vanguard International

Equity Index Funds

35,442,146 0.65% NA NA 0 0% None None None

JPMorgan Chase Bank N.A. Taipei Branch

in custody for Norges Bank 35,300,821 0.65% NA NA 0 0% None None None

iShares MSCI Taiwan Index 33,591,761 0.62% NA NA 0 0% None None None


3.9 Ownership of Shares in Affiliated Enterprises Dec 31, 2019

Unit: shares; %

Affiliated Enterprises Ownership by the Company Direct or Indirect Ownership by

Directors, Managers Total Ownership

Shares % Shares % Shares % 1. CAL-Dynasty International, Inc. 2,614,500 100.00 - - 2,614,500 100.00 1A Dynasty Properties Co., Ltd. - - 5,000 100.00 5,000 100.00 1B Dynasty Hotel of Hawaii, Inc. - - 400,000 100.00 400,000 100.00 2. CAL-Asia Investment Inc. 7,172,346 100.00 - - 7,172,346 100.00 2A Eastern United International

Logistics (Holdings) Ltd. - - 1,050,000 35.00 1,050,000 35.00

2B Arport Air Terminal (Xiamen) Co., Ltd. - - (Note1)

28.00 (Note2)

(Note1) 28.00

(Note2) 2C Arport Air Cargo Service

(Xiamen) Co., Ltd. - - (Note1) 28.00

(Note2) (Note1)

28.00 (Note2)

2D Taikoo (Xiamen) Landing Gear Services Co., Ltd. - - (Note1) 2.59 (Note1) 2.59

2E Haeco Composite Structures (Jinjiang) Co., Ltd. - - (Note1) 5.45 (Note1) 5.45

3. Dynasty Aerotech International Corp. 77,270 100.00 - - 77,270 100.00

4. Yestrip Co., Ltd. 1,600,000 100.00 - - 1,600,000 100.00 5. CAL Park Co., Ltd. 150,000,000 100.00 - - 150,000,000 100.00 6. CAL Hotel Co., Ltd.. 46,500,000 100.00 - - 46,500,000 100.00 7. Taiwan Aircraft Maintenance And

Engineering Co., Ltd. 135,000,000 100.00 - - 135,000,000 100.00

8. Mandarin Airlines, Ltd. 188,154,025 93.99 - - 188,154,025 93.99 9. Sabre Travel Network (Taiwan)

Ltd. 13,021,042 93.93 - - 13,021,042 93.93

10. Tigerair Taiwan Co., Ltd. 138,906,275 69.45 15,433,000 7.72 154,339,275 77.17 11. China Pacific Laundry Services

Ltd. 13,750,000 55.00 - - 13,750,000 55.00

12. Taiwan Air Cargo Terminal Ltd. 135,000,000 54.00 12,500,000 5.00 147,500,000 59.00 13. Kaohsiung Airport Catering

Services 21,494,637 53.67 - - 21,494,637 53.67

13A Delica International Co., Ltd. - - 1,020,000 51.00 1,020,000 51.00 14. Dynasty Holidays, Inc. 160 20.00 - - 160 20.00 15. China Pacific Catering Services

Ltd. 43,911,000 51.00 - - 43,911,000 51.00

16. Taoyuan International Airport Services Co., Ltd. 34,300,000 49.00 - - 34,300,000 49.00

17. Taiwan Airport Service Co., Ltd. 20,626,644 47.35 469,755 1.08 21,096,399 48.43 17A Taiwan Airport Service

(Samoa) Co., Ltd. - - (Note1) 100.00 (Note1) 100.00

18. NORDAM Asia Ltd. 3,797,500 49.00 - - 3,797,500 49.00 19. Global Sky Express Ltd. 250,000 25.00 - - 250,000 25.00 20. China Aircraft Services Ltd. 28,400,000 20.00 - - 28,400,000 20.00 21. Jardine Air Terminal Services

Ltd. 12,000,000 15.00 - - 12,000,000 15.00

22. Everest Investment Holdings Ltd. (Note3) 13.59 - - (Note3) 13.59

23. Chung-Hwa Express Co., Ltd. 1,100,000 11.00 - - 1,100,000 11.00 Note 1: This company has not issued shares. Note 2: CAL-Asia Investments Inc. directly holds 14% stake, Taiwan Airport Service (Samoa) Co., Ltd. directly holds 14% stake. Note 3: Includes 1,359,368 shares of common stock and 135,937 shares of preferred stock.


Capital Overview 4.1 Capital and Shares

4.2 Corporate Bonds

4.3 Other Depository Receipts

4.4 Financing Plans and Implementation

Capital Overview 83

IV. Capital Overview 4.1 Capital and Shares 4.1.1 Source of Capital

A. Issued Shares APR 25, 2020 Unit: shares; NT$

Month/ Year

Par Value (NT$)

Authorized Capital Paid-in Capital Remark

Shares Amount Shares Amount Sources of Capital Approval Date and

Document No. by Ministry of Economic Affairs

02/2012 10 5.2 billion 52 billion 5.2 billion 52 billion Cash increase NT$5,683,776,490

Jing Shou Shang No. 10101028630, February 20,

2012

05/2015 10 6 billion 60 billion 5.24 billion 52.4 billion Corporate debt for

equity swap NT$491,665,650

Jing Shou Shang No. 10401079310, May 7, 2015


equity swap NT$1,208,413,350



equity swap NT$1,000,652,560

Jing Shou Shang No. 10401186200, September

17, 2015


equity swap NT$8,169,930

Jing Shou Shang No. 10401250360, December 8,

2015


equity swap, NT$945,010


2017

12/2018 10 6 billion 60 billion 5.42 billion 54.2 billion Treasury Stock Retired NT$500,000,000


2018

05/2019 10 7 billion 70 billion 5.42 billion 54.2 billion

Adjustment of authorized capital in accordance with the

Articles of Incorporation


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

B. Type of Stock: APR 25, 2020; Unit: Thousand shares Share Type Authorized Capital Remarks Issued Shares Un-issued Shares Total Shares

Common Stock Inscribed 5,420,985 1,579,015 7,000,000 Listed Stocks

4.1.2 Status of Shareholders APR 25, 2020; Unit: shares

Item Government Agencies

Financial Institutions

Other Juridical Persons

Foreign Institutions & Natural Persons

Domestic Natural Persons

Treasury Stock Total

Number of Shareholders 4 19 217 711 143,275 0 144,226

Shareholding 519,754,485 67,439,391 2,484,721,933 728,144,422 1,620,924,419 0 5,420,984,650 % 9.59% 1.24% 45.84% 13.43% 29.90% 0.00% 100.00%

4.1.3 Shareholding Distribution Status APR 25, 2020; Unit: shares Class of Shareholding Number of Shareholders Shareholding Percentage

1-999 33,523 10,849,315 0.20% 1,000-5,000 66,491 160,343,416 2.96% 5,001-10,000 18,991 154,440,495 2.85%

10,001-15,000 6,602 83,509,579 1.54% 15,001-20,000 5,091 95,134,934 1.75% 20,001-30,000 4,461 115,451,031 2.13% 30,001-40,000 2,139 76,948,793 1.42% 40,001-50,000 1,698 80,038,450 1.48%

50,001-100,000 2,859 208,967,105 3.85% 100,001-200,000 1,290 185,797,043 3.43% 200,001-400,000 516 146,905,639 2.71% 400,001-600,000 201 98,028,565 1.81% 600,001-800,000 80 54,717,582 1.01%

800,001-1,000,000 50 45,051,240 0.83% 1,000,001 or over 234 3,904,801,463 72.03%

Total 144,226 5,420,984,650 100.00%

84 Capital Overview

4.1.4 List of Major Shareholders APR 25, 2020; Unit: shares

Shareholding Shareholder's Name

Shares Percentage

China Aviation Development Foundation

1,867,341,935 34.45% National Development Fund of The Executive Yuan

519,750,519 9.59%

Chunghwa Telecom Co. Ltd.

263,622,116 4.86% China Airlines Ltd. Employee Stock Ownership Trust Plan 63,333,017 1.17% New Labor Pension Fund 60,727,000 1.12%

Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds 53,130,442 0.98%

Ocean Investment Holding Co., Ltd.

48,727,000 0.90% Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard International Equity Index Funds

35,442,146 0.65%

JPMorgan Chase Bank N.A. Taipei Branch in custody for Norges Bank 35,300,821 0.65% iShares MSCI Taiwan Index 33,591,761 0.62%

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

Year

Items

2018 (Distributed in 2019)

(Note 10)

2019 (Distributed in 2020)

(Note 11)

2020 (As of APR 25)

(Note 9) Market

Price per Share

(Note 1)

Highest Market Price 12.90 11.25 9.12

Lowest Market Price 8.97 9.00 5.50

Average Market Price 10.44 9.69 7.40 Net Worth per Share (Note 2)

Before Distribution 10.54 10.44 9.68

After Distribution 10.44 10.44 -

Earnings per Share

Weighted Average Shares 5,456,579 5,418,096 5,418,367 Diluted Earnings Per Share (Note 3) 0.33 (0.22) (0.70)

Dividends per Share (Note 8)

Cash Dividends 0.20960737 - - Stock Dividends

Dividends from Related Earnings - - - Dividends from Capital Surplus - - -

Accumulated Undistributed Dividends (Note 4) - - -

Return on Investment

Price / Earnings Ratio (Note 5) 31.21 NA - Price / Dividend Ratio (Note 6) 49.14 NA - Cash Dividend Yield Rate (Note 7) 2.04% NA -

*If shares are distributed in connection with a capital increase out of earnings or capital reserve, further disclose information on market prices and cash dividends retroactively adjusted based on the number of shares after distribution. Note 1: Annual Average Market Price=Annual Turnover Value/Trading Volume. Note 2: Based both on the number of issued shares at the end of the year, and on the distribution decided on at the Shareholders’

Meeting the following year. Note 3: For those requiring retroactive adjustment due to stock grants, both the pre-and post-adjustment EPS should be listed. Note 4: In issuing equity securities, provisions may be made to accumulate undistributed dividends for the year and postpone

distribution until a year when profit is made. The dividends accumulated over the period ending in the year of distribution should be disclosed.

Note 5: P/E Ratio=Average market price of a share in the current year/EPS. Note 6: P/D Ratio=Average market price of a share in the current year/cash dividend per share. Note 7: Cash dividend yield=cash dividend per share/average market price of a share in the current year. Note 8: In accordance with Taiwan Stock Exchange regulations, treasury share effects have already been considered. Note 9: Net worth per share and EPS are calculated based on the financial statement for the most recent quarter that has been

verified by an accountant. All other fields are based on the current year data through the publication date of the annual report. As of publication of this report, the Q1 2020 financial information has not yet been reviewed by Deloitte & Touche.

Note 10: 2018 surplus allocation plan resolution passed at the 5th meeting of the 21st Board of Directors on March 20, 2019, and it will be sent to the 2019 shareholders' meeting for recognition.

Note 11: The Company’s EPS for 2019 was negative and thus it will not distribute earnings; it has been decided by the 10th meeting of the 21st Board of Directors on March 18, 2020, that the Company will not pay dividends for 2019, thus this does not apply.

Note 12: The Company's 2019 final daily closing price was NT$9.06.

Capital Overview 85

4.1.6 Dividend Policy and Implementation Status A. Dividend Policy

The CAL Articles of Incorporation outlines the following dividend policy: If the Company makes a profit over the year, an amount of no less than 3% of the profit must be distributed as employee compensation. If the Company has accumulated losses, funds must be retained to offset the deficit. The aforementioned employee compensation is primarily disbursed as stock or cash and the resolution must be approved at a meeting of the Board of Directors with two-thirds of directors in attendance and must receive support from half of participating members. Should the Company make a profit over the year, said profit must first be used to pay all taxes and offset accumulated losses, then 10% of the remaining amount is to be set aside as a legal reserve. After setting aside or reversing a special reserve, any remaining amount along with accumulated undistributed earnings shall be distributed as shareholder dividends and bonuses according to a resolution drawn up by the Board: (1)Not less than 50% of the amount shall be distributed as shareholder dividends and bonuses. After

pretax profits are deducted as outlined above, should the amount left not be sufficient for distribution, the difference will be made up by accumulated undistributed profit.

(2)In the event of a yearly loss, depending on financial, operation, and management considerations, all or part of the legal reserve may be distributed as new stock or cash as prescribed by law and competent authority regulations.

(3)Dividends and bonuses are distributed as stock or cash, with cash dividends making up no less than 30% of the total distributable dividends.

B. Proposed Distribution of Dividend The Company does not have distributable earnings for 2019; it has been decided by the 10th meeting of the 21st Board of Directors on March 18, 2020, that the Company will not pay dividends for 2019.

C. No significant change in expected future dividend policy.

4.1.7 Impact of Stock Dividends Issuance on Company’s Business Performance and Earnings per Share: Not Applicable.

4.1.8 Employees’ Compensation and Directors' Remuneration A. Articles of Incorporation regulations: See 4.1.6 Dividend Policy and Implementation

Status. B. The basis for estimating the amount of employee compensation and director

bonuses, for calculating the number of shares to be distributed as stock bonuses, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period The Company has not allocated employee compensation for this period. In addition, in accordance with the Articles of Incorporation, it will not pay remuneration to the directors.

C. Board approved employee compensation and director bonus proposal (1) Amount of employee bonuses (including stock and cash) and director bonuses distributed. If the

actual amount distributed differs from the original estimated amount, the difference, reason, and how this was handled is to be disclosed: It has been decided by the 10th meeting of the 21st Board of Directors on March 18, 2020, that the Company will not pay dividends for 2019.

(2) The amount of any proposed distribution of employee stock bonuses and the size of such an amount as a percentage of the sum of the net income for the current period and total employee bonuses: Not Applicable.

86 Capital Overview

D. The actual employee compensation and director bonuses distributed for the previous year (2018) (including number of shares distributed, value, and stock price). Should there be a discrepancy with the proposed amount of employee compensation and director bonuses, the difference, reason, and how this was handled should be stated (1) Employee compensation: There is no difference between the proposed employee compensation

approved by the Board of Directors and the actual amount paid. (2) Director bonuses: Not Applicable.

4.1.9 Buyback of Treasury Stock: None.

Capital Overview 87

4.2 Bonds 4.2.1 Corporate Bonds

APR 25, 2020

Corporate Bond Type Domestic Unsecured Straight Bond (2016-1)

Domestic Unsecured Straight Bond (2016-2)



Issue date 05/26/2016 09/27/2016 05/19/2017 10/12/2017

Denomination NT$1,000,000 NT$1,000,000 NT$1,000,000 NT$1,000,000

Issuing and transaction location Republic of China Republic of China Republic of China Republic of China

Issue price Par Par Par Par

Total price NT$5,000,000,000 NT$5,000,000,000 NT$2,350,000,000 NT$3,500,000,000

Coupon rate 1.19% per annum. 1.08% per annum

Tranche A: 1.20% per annum Tranche B: 1.75% per annum


Tenor 5 year (May 26, 2016 to May 26, 2021)

5 year (September 27, 2016 to September 27, 2021)

Tranche A: 3 years (May 19, 2017 to May 19, 2020); Tranche B: 7 years (May 19, 2017 to May 19, 2024)

Tranche A: 3 years (October 12, 2017 to October 12, 2020); Tranche B: 5 years (October 12, 2017 to October 12, 2022)

Guarantee agency Not applicable Not applicable Not applicable Not applicable

Consignee Huanan Commercial Bank

Huanan Commercial Bank



Underwriting institution YuanTa Securities Ltd.

Masterlink Securities Ltd.

Masterlink Securities Ltd.

Fubon Integrated Securities Ltd.

Certified lawyer

Ture Honesty International Law Office Kuo, Hui-Chi, Attorney At Law




CPA Huang, Jui-chan (Deloitte & Touche)

Yang, Chen-Hsiu (Deloitte & Touche)



Repayment method

Repayment of 50% of the principal in the fourth year and the remaining 50% in the fifth year

Repayment of 50% of the principal in the fourth year and the remaining 50% in the fifth year

One-time repayment of capital upon maturity.

Tranche A: one-time payment upon maturity; Tranche B: return of 50% of capital 4 and 5 years from the start date, respectively.

Outstanding principal NT$5,000,000,000 NT$5,000,000,000 NT$2,350,000,000 NT$3,500,000,000

Terms of redemption or advance repayment None None None None

Restrictive clause None None None None Name of credit rating agency, rating date, rating of corporate bonds

None None None None

Other rights attached

As of the printing date of this annual report, converted amount of (exchanged or subscribed) ordinary shares, GDRs, or other securities

Not applicable Not applicable Not applicable Not applicable

Issuance and conversion (exchange or subscription) method

Issuance and conversion, exchange or subscription method, issuing condition dilution, and impact on existing shareholders’ equity

Not applicable Not applicable Not applicable Not applicable

Transfer agent None None None None

88 Capital Overview

APR 25, 2020

Corporate Bond Type Domestic Unsecured 6th Convertible Bond

Domestic Unsecured Ordinary Corporate Bonds (2018-1)

Domestic Unsecured Ordinary Corporate Bonds (2019-1)

Issue date 01/30/2018 10/30/2018 06/21/2019

Denomination NT$100,000 per unit NT$1,000,000 per unit NT$1,000,000 per unit

Issuing and transaction location Republic of China Republic of China Republic of China

Issue price Issued at 100.2% of par value Par Par

Total price NT$6,012,000,000 NT$4,500,000,000 NT$3,500,000,000

Coupon rate 0.00% per annum Tranche A: 1.32% per annum Tranche B: 1.45% per annum


Tenor 5 years (January 30, 2018, to January 30, 2023)

Tranche A: 5 years (November 30, 2018, to November 30, 2023) Tranche B: 7 years (November 30, 2018, to November 30, 2025)

Tranche A: 5 years (June 21, 2019, to June 21, 2024) Tranche B: 7 years (June 21, 2019, to June 21, 2026)

Guarantee agency Not applicable Not applicable Not applicable

Consignee Chinatrust Commercial Bank Trust Department Huanan Commercial Bank Taishin International Bank

Underwriting institution Taishin Integrated Securities Ltd. Fubon Integrated Securities Ltd. Fubon Integrated Securities Ltd.

Certified lawyer Handsome Attorney-at-Law Chiu, Ya-Wen, Attorney At Law



CPA Not applicable Yang, Cheng-Hsiu (Deloitte & Touche)

Huang, Jui-chan (Deloitte & Touche)

Repayment method According to the offering of Domestic Unsecured 6th convertible bond section 6

Tranche A: Repayment of 50% of the principal at the end of the fourth year and the remaining 50% at the end of the fifth year; Tranche B: Repayment of 50% of the principal at the end of the sixth year and the remaining 50% at the end of the seventh year

Tranche A: Repayment of 50% of the principal at the end of the fourth year and the remaining 50% at the end of the fifth year; Tranche B: Repayment of 50% of the principal at the end of the sixth year and the remaining 50% at the end of the seventh year

Outstanding principal NT$6,000,000,000 NT$4,500,000,000 NT$3,500,000,000

Terms of redemption or advance repayment

According to the offering of Domestic Unsecured 6th convertible bond section 18 and 19

None None

Restrictive clause None None None Name of credit rating agency, rating date, rating of corporate bonds

None None None

Other rights attached

As of the printing date of this annual report, converted amount of (exchanged or subscribed) ordinary shares, GDRs, or other securities

Not yet converted

Not applicable Not applicable Issuance and conversion (exchange or subscription) method as per the 5th issue of domestic unsecured convertible bonds

According to the offering of Domestic Unsecured 6th convertible bond section 8 and 9

Issuance and conversion, exchange or subscription method, issuing condition dilution, and impact on existing shareholders’ equity

(Note) Not applicable Not applicable

Transfer agent None None None Note: As of April 25, 2020, according to the conversion price NT$12.60 of the sixth unsecured convertible bonds, and assuming the

convertible bonds have been fully converted, the shareholdings percentage of the three major shareholders, namely China Aviation Development Foundation, National Development Fund, and Chunghwa Telecom, will be reduced from 48.90% to 44.95%, but there will be no significant change in the shareholding structure, thus it has little effect on shareholder equity.

Capital Overview 89

4.2.2 Corporate Bonds Undergoing Private Placement A. At the 7th meeting of the 21st Board of Directors on August 7, 2019, the

Company’s seventh issuance of 30,000 domestic unsecured convertible corporate bonds was approved, each with a face value of NT$100,000, to be issued at 100% - 100.5% of the face value. The total issuance amount was capped at NT$3,015,000 thousand. It has been reported and put into effect by the approval of Financial Supervisory Commission letter Jin-Guan-Zheng-Fa-Zi No. 1080341270 dated January 3, 2020.

B. Due to the recent changes in the domestic capital market conditions and the COVID-19 pandemic’s continuing impact on the air transport industry, and considering that rash pricing and non-ideal issuance conditions might damage shareholders’ rights, we applied for a three-month extension of the offering period for the seventh issuance of domestic unsecured convertible corporate bonds. It was approved and filed for future reference in letter Jin-Guan-Zheng-Fa-Zi No. 1090334953 dated March 20, 2020, and the offering period was extended to July 3, 2020. Once the market stabilizes, we will find the correct timing for pricing in order to protect the Company’s interests and shareholders’ rights.

4.2.3 Convertible Bonds Unit: NT$ Types of Corporate Bonds Domestic Unsecured 6th convertible bond

Year Item 2019 The current year through April 25, 2020

Convertible Bond Market Price

Highest 102.00 100.00 Lowest 99.15 98.55 Average 99.91 99.21

Conversion Price 12.90 12.60

Issuance date and conversion price at the time of issue

The convertible bonds were listed on the Taipei Exchange on January 30, 2018; the conversion price upon issuance was NT$13.20. Due to the distribution of 2018 cash dividends, according to the provisions of the sixth unsecured convertible bonds’ issuance and conversion regulations, the conversion price shall be adjusted. The conversion price was thus reduced to NT$12.60.

Conversion method Issue new shares.

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

4.3 Other Securities-Related Issues 4.3.1 Preferred shares: None.

4.3.2 Global Depository Receipts: None.

4.3.3 Employee Stock Options: None.

4.3.4 Employee Restricted Stock: None.

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

4.4 Financing Plans and Implementation As of April 25, 2020, the use of funds earned through previously issued securities are progressing as planned and are in accordance with expected results.

90 Capital Overview

Operational Highlights 5.1 Business Activities

5.2 Market and Sales Overview

5.3 Human Resources

5.4 Environmental Protection Expenditure

5.5 Labor Relations

5.6 Important Contracts

Operational Highlights 91

V. Operational Highlights 5.1 Business Activities 5.1.1 Business Scope

A. Main areas of business operations (1)Civil air transport business: Air passenger transport, regular and irregular contracting of

international charter flights business, and training of civil aviation personnel.

(2)General aviation business: In-flight commodity sales.

(3)Airport ground service business: Ground services for civil international airports and transit

aircraft.

(4)Air cargo terminal entrepot operation: Air cargo transport services.

(5)Aircraft and parts maintenance and manufacturing business: Aircraft body maintenance.

(6)Inflight catering service: Provision of in-flight catering or other related supplies.

(7)Laundry, dyeing, printing and finishing, and wholesale and retail of dyeing mills and dyestuff

cleaning supplies: Washing of cloth and clothing inside the aircraft and general washing business

in the hospitality industry.

(8)Warehouse and storage: Warehousing services for import, export, and entrepot air cargo.

(9)Other: All business items that are not prohibited or restricted by law, except for those that are

subject to special approval.

B. Revenue distribution Unit: NT$ thousands Proportion of Overall Business

Item 2019

Net Revenue Proportion of Revenue Passenger Revenue 111,413,435 66% Cargo Revenue 43,793,256 26% Other 13,237,469 8% Total 168,444,160 100%

C. Main products (1)Passenger service: Air passenger transport and regularly scheduled and non-scheduled contract

international charter flight services.

(2)Cargo service: Transport services for cargo, courier, mail, and packages.

(3)Ground services: Handling of luggage and cargo, aircraft cleaning, and ground support

equipment.

(4)In-flight sales: Providing in-flight duty free sales services.

(5)Airline catering: Providing meal services to airlines.

(6)Warehousing and logistics services: Provide airfreight forwarding and logistics services.

(7)Aircraft maintenance services: Airframe, engine, and aircraft component maintenance.

(8)Tourism and leisure services: General hotel industry and travel services.

(9)Investment holding and leasing services: Engaged in real estate investment, building management,

and leasing.

(10)Civil aviation personnel training: Provide maintenance training courses, develop professional

maintenance personnel.

92 Operational Highlights

D. Product Development (1)Website optimization

The Company is committed to improving its website experience quality; expanding the development of website functions to optimize the ticket purchasing process; introducing 3D verification functions for credit card transactions to ensure the security of customer transaction and prevent credit card fraud; and building multiple payment tools and supporting multi-currency payments.

(2)New fare products To better service the passengers, new fare products were launched in September 2019. Passengers can choose additional products according to their travel needs, such as baggage allowance, preferred seats, and mileage accumulation standards, for them to select a la carte or package fares.

(3)Developing potential destinations and optimizing the aviation network extension In order to actively expand the Southeast Asian aviation network layout and to strengthen the aviation network transfer market, the Company plans to launch several routes in 2020, including the Taoyuan-Cebu and Taoyuan-Chiang Mai routes.

5.1.2 Industry Overview A. State of the industry and future development

(1)Economic growth According to the economic forecast published by IHS Markit in February 2020, the estimated global economic growth rate is 2.5%; Taiwan’s economic growth rate has been revised down to 2.1% (originally 2.4%) due to the impact of COVID-19 pandemic situation on consumption and trade. The economic growth rates of other major economies and countries are as follows: United States at 2.1% and the Eurozone at 0.9%. Affected by the COVID-19 pandemic, countries have adopted unprecedented measures for isolation, quarantine, and control, resulting in the stagnation of production and consumption activities in many regions. Therefore, in 2020, Japan’s economic growth rate has been revised down to 0.5% (originally 0.6%), and China’s to 5.4% (originally 5.8%).

(2)Oil prices The price of aviation fuel has been kept stable, at around US$80 per barrel at the beginning of 2018, and began to rise at the end of Q1, with an increase of more than 20%, reaching the highest price of US$96 per barrel in October 2018. However, in November and December, sharp market decline, subpar global economic performance, along with the strong supply of oil shale manufacturers in the United States led to a rapid decline in prices, a decline more than 25% by the end of 2019. The average oil price in December was about US$72. In 2020, the aviation industry was affected by the pandemic, which resulted in the declined demand for oil. The fuel price is estimated to be US$48.60 per barrel on average.

(3)Air passenger market The IATA originally estimated in December 2019 that in 2020, the growth rate of demand for the air passenger transport market would be 4.1% globally, and 4.8% in the Asia-Pacific region. However, as the COVID-19 pandemic has increased in severity, the IATA estimates that the growth rate of demand in the air passenger transport market in 2020 will turn negative, and passenger transport revenue will be reduced by about US$63 billion to US$113 billion due to the implementation of tourism restrictions on the grounds of pandemic prevention in various countries.

(4)Air cargo market Demand in the global cargo transport market shrank by 3.3% in 2019, which was the first year of cargo transport volume decline since 2012 and the weakest performance since the global financial crisis in 2009. The tense international trade situation leading to insufficient global economic growth momentum was the key factor in the 2019 air cargo transport volume decline. Cargo supply volume has increased slightly by 2.1%, resulting in a decrease in the loading rate by 2.6%. The IATA estimated in December 2019 that in 2020, benefiting from the revival of trade, the growth rate of demand for the air cargo transport market would be around 2%. However, due to the uncertain geographical distribution and duration of the pandemic at this stage, its impact on the air cargo transport market can not yet be accurately estimated.

B. Relationship between upstream, midstream, and downstream firms The air transport service industry primarily provides transportation for passengers and cargo. These operations rely on the support and assistance of upstream, midstream, and downstream industries that enable us to provide comprehensive services and meet our customers’ needs. (1)Upstream industries

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


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

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

C. Product development trends (1)Aviation alliance cooperation

With the liberalization of the air transport market, airports have become increasingly congested. There being limited resources, airlines provide passenger transportation services in the form of alliance teams, with such mechanisms as code-sharing, extended route agency systems, and combined mileage cumulation frequent flyer programs. Aviation alliance cooperation also includes operating in the same terminal at major airports, sharing maintenance facilities and operating equipment, mutual support of personnel, and cooperation in ground handling and inflight catering to reduce costs. Benefiting from alliance cooperation, passengers can purchase flight tickets at a lower price. As long as they take alliance airlines, they can earn flight miles. Flight schedules provided by the alliance are more flexible with less transfers, making it easier for passengers to reach their destination. At present, there are three major alliances in the aviation industry, namely SkyTeam, Star Alliance, and One World. The Company is currently one of the 19 member airlines of SkyTeam. Through extensive global network cooperation, we provide transportation services in 170 countries and 1,036 destinations.

(2)Joint Venture (JV) In order to establish a closer strategic alliance relationship, airlines further share their route network with business partners and perform joint marketing and bear risks together in order to obtain more revenue and route profit. Joint ventures share revenue on cooperative routes, sometimes including cost sharing. The economies of scale, aviation network revenue, cost reduction and management efficiency improvements generated through cooperation can effectively improve operational efficiency, surpassing the benefits of alliance cooperation. For example, United Airlines (UA) and All Nippon Airways (ANA / NH) have launched joint ventures since 2012. Passengers can take ANA from Taipei via Tokyo Narita or from Songshan via Tokyo Haneda to gateway cities in the United States, or choose United Airlines’ daily Taipei - San Francisco direct flight and transfer to major cities in the United States. Under the JV fare structure, due to the unified fare for the same cabin class and greater flight interoperability, the sales process is simpler.

(3)Grasping logistics trends and expanding business territory In response to the different transportation needs of special cargoes, such as semiconductor precision machinery, aircraft engine materials and the demand for equipment driven by the emerging 5G technology products, the Company provides professional large cargoes loading services with its Boeing 747-400 cargo-only aircraft. In addition, having obtained IATA CEIV Pharma certification, we are strongly developing the potential markets for special goods, such as the temperature-controlled cold chain and biotechnology and pharmaceutical markets. In response to the development of cross-border e-commerce, we are strengthening cooperation with express delivery companies and inter-airline cooperation, developing e-commerce postal air-bridge service transport, so as to expand business and increase the added value of transportation services.

D. Product competition The Company is mainly engaged in international passenger and cargo transport services. Due to our continuous commitment to stable revenue and controlling costs, we not only stand in the leading position in the domestic aviation market, but are also fairly representative world-wide;according to the statistics of the Civil Aeronautics Administration (CAA), the Company’s share in the passenger and cargo transport market is ahead of its peers;According to the IATA’s 2018 international passenger and cargo transport volume rankings published in 2019, the Company ranked 34th in the world, with a passenger transport volume reaching 41,390 million Revenue Passenger Kilometers ( RPK）；In terms of cargo transport, the Company ranked 12th in the world, with a cargo transport volume reaching 5,804 million Freight Revenue Ton Kilometers (FRTK).


Taiwan National Airlines International and Cross-Strait Market Share for Passengers and Cargo in 2019 Airline Passenger Cargo

China Airlines 23.45% 37.37% EVA Air 21.70% 24.12%

Mandarin Airlines 2.17% 0.64% UNI Air 1.43% 0.56%

Far Eastern Air Transport 0.46% - Tigerair Taiwan 4.70% 0.04%

Other-Foreign Carriers 46.09% 37.27% Source: Civil Aeronautics Administration Monthly Statistics from January to December 2019-Taiwan National Airlines

International and Cross-Strait Market Share for Passengers and Cargo

IATA Global International Route Passenger and Cargo Rankings 2018 Passenger (Passenger-Kilometers) Rankings

Unit: 1 million Cargo (Ton-Kilometer) Rankings

Unit: 1 million 1 Emirates 302,298 1 Emirates 12,713 2 Ryanair(4) 170,900 2 Qatar Airways 12,695 3 United Airlines 155,178 3 Cathay Pacific Airways 11,284 4 Lufthansa(3) 153,639 4 Federal Express 8,455 5 Qatar Airways 152,210 5 Korean Air 7,815 6 British Airways(3) 148,477 6 Lufthansa(3) 7,391 7 Delta Air Lines 136,647 7 Cargolux 7,322 8 Air France(3) 136,476 8 Singapore Airlines 6,491 9 Turkish Airlines(3) 125,229 9 United Parcel Service 6,252

10 American Airlines 121,416 10 Air China 5,912 11 Cathay Pacific Airways 114,699 11 Turkish Airlines 5,860 12 KLM(3) 107,676 12 China Airlines 5,804 13 Singapore Airlines 100,492 13 AirBridgeCargo Airlines 5,511 14 easyJet(3) 93,609 14 China Southern Airlines 5,309 15 Air Canada 86,069 15 British Airways 4,270 16 Etihad Airways 84,252 16 All Nippon Airways(4) 4,113 17 Norwegian(3)(4) 79,825 17 United Airlines 4,064 18 Korean Air 77,327 18 Asiana Airlines 4,052 19 Air China 74,611 19 Polar Air Cargo 4,010 20 LATAM Airlines Group(3) 67,335 20 Atlas Air 3,792 21 Thai Airways International 66,263 21 Air France(4) 3,672 22 Aeroflot Russian Airlines 64,019 22 KLM(4) 3,604 23 China Southern Airlines(3) 63,016 23 EVA Air 3,580 24 China Eastern Airlines 62,463 24 American Airlines 3,550 25 Qantas Airways 59,056 25 Etihad Airways 3,471 26 Saudi Arabian Airlines 55,652 26 Kalitta Air(2)(3) 3,121 27 Iberia(3) 52,340 27 LATAM Group(3) 3,044 28 All Nippon Airways(3) 50,747 28 AeroLogic(1) 2,803 29 EVA Air 48,281 29 China Cargo Airlines 2,702 30 Wizz Air(1)(5) 45,050 30 Saudi Arabian Airlines 2,487 31 Asiana Airlines 44,220 31 Thai Airways International 2,438 32 Japan Airlines 44,175 32 Delta Air Lines 2,417 33 Ethiopian Airlines 41,804 33 Japan Airlines 2,410 34 China Airlines 41,390 34 Silk Way West Airlines 2,354

Source: IATA WATS 2019

E. Intellectual Property The Company has internal regulations governing corporate identity system management and has a brand management platform to perform control and management. The scope includes the Company’s office buildings and airport terminals (indoor and external signboards, marks and signs, etc.), transportation, advertisements, printed matters, in-flight and ground service supplies, logos, products, and other installations, publishing, or broadcasting with the application of corporate identity covered by the Corporate Identity System Guideline (hereinafter referred to as the “CIS Guideline”).By managing the Company’s corporate identity, application, and authorization of corporate logos (i.e., trademarks), and through reviewing the plan, we maintain the consistency of corporate identity exposure, unify the Company’s visual identity, and strengthen the Company’s corporate image.According to the application situation of corporate identity in units in Taiwan and abroad, the Company will discuss and report the implementation method every two years, and notify the units to be audited by e-mail or memo. The units to be audited shall upload the audit samples on the brand management platform for the responsible unit to review (or an on-site audit shall be performed) to maintain the Company’s trademark rights being under the protection of the law.


5.1.3 Research and Development A. Costs of R&D investment and successfully developed technologies or products

From January 1, 2019, through the publication date of this report, the Company invested approximately NT$95 million in research and development. The following table summarizes the technologies and products developed:

Project R&D Project Description

Robotic Process Automation, RPA

To improve employee productivity and efficiency, we have built a robotic process automation platform, using robots to simulate the work flow of human beings at the computer to replace the repetitive operations of manual data input and reduce the omissions caused by manual input errors, thereby allowing employees more time to focus on creativity and decision-making judgments and thinking, and use manpower for high yield work. The platform was completed and went live in May 2019.

Ticket purchasing instant marketing platform

Completion in the stage of online ticket purchasing user log collecting and tracking, instantly grasping online user activities and conducting customer analysis, and cooperating with online sales activities to achieve marketing models, such as targeting and remarketing. Integration and application with Artificial Intelligence (AI) and Big Data technologies and systems can be planned in the future. This was completed and went live in June 2019.

New generation crew member shift arrangement system

In response to the substantial growth in the number of Company’s flights and crew members, as well as the needs of passenger and cargo flight dispatch, we planned to build a next generation crew member dispatch system, to quickly meet the requirements of civil aviation regulations, optimize manpower dispatch, and fairly and efficiently allocate crew members’ shifts, ensuring crew members’ dispatch quality. The system was completed and went live in June 2019.

In-Flight Equipment Management System, IEMS

The system was built to implement the systematic management of the cabin in-flight service supplies data, promptly provide external agents with complete and accurate loading information, and use data analysis to further improve the loading efficiency and operation quality. The system was completed and went live in August 2019.

New sub-accounting system

In order to respond to the significant changes in the industry’s prorating rules for joint venture account settlement in the future and be able to make modifications in due course, the new prorating system introduces interfacing with the passenger transport revenue system, to reduce manual intervention in fare prorating, improve prorating accuracy and account settlement quality of joint ventures. New prorating system uses the cloud construction method, which can reduce the use cost and maintenance risk of the Company’s own physical facilities. The system was completed and went live in December 2019.

Flight Control & Monitoring System, FCMS

To enable flight control personnel to fully grasp the Company’s flight transport capacity and current flight status and to produce the most appropriate flight operation decisions, through the automated analysis of the system, flight operation decision-making supplementary information was generated, such as flight on-time, late departure or arrival status, current and estimated flight transportation capacity, airport airworthiness, flight schedule surveillance and real-time flight trajectory. In addition to taking into account the flight operation cost and service quality, emergencies can be responded to at all times to ensure that flights arrive on time and safely. The system was completed and went live in December 2019.

B. Future R&D Projects In order to meet future development needs, China Airlines will continue to invest in R&D projects. Over 2020, we plan to invest a total of NT$61 million into R&D. The following table summarizes future projects:

Project Future R&D Project Description Estimated Completion Date

Customer Relationship Management, CRM

To establish the Company’s consistent customer relationship service system and to expand business opportunities through data analysis in integrated systems. The primary goal is to serve passengers. We plan to consolidate data platforms such as membership, ticket files, reservations, in-flight duty-free products, and customer feedback. Through one single platform, data visualization and other operations, we can effectively accelerate customer service processing and improving service quality.

December 2020 The implementation progress was 12% as of the annual report printing date

Robotic Process Automation, RPA

Promoting relevant application of robotic process automation to all business units in China Airlines, reducing the manpower requirements for indirect manual operations, so to avoid the oversights caused by repetitive data input and manual input errors, improve work efficiency, and improve operating performance. Related projects carried out in 2020 include: (1)Audit tool improvement-establishment of automatic pricing function robotic

system (2)Establishment of IATA account settlement, receipt, and disbursement automated

system (3)Establish the automatic fare-downloading function.

December 2020 The implementation progress was 17% as of the annual report printing date


Project Future R&D Project Description Estimated Completion Date

Establish the

relevant mechanism of Cyber Security

Management Act

The Cyber Security Management Act will be the focus of information security protection work in 2020. Annual protection operations will be implemented according to the Company’s information security protection plan. Plans to obtain the PCI DSS certification will be implemented; reinspections on the information security management system against the international standard ISO27001:2013 and the certification of the privacy information management system against the international standard ISO27701:2019 will be performed. These will ensure the security of the Company’s credit card transaction environment as well as the legality and effectiveness of the Company's privacy protection system.

December 2020

The implementation progress was 30% as of the annual report printing date

iCabin Service 2.0, iCS 2.0

The cabin team leader/manager/head attendant can obtain information about passengers/flights/team members right away through mobile devices. They can write up cabin reports with flexibility, regardless of time or location. In addition, the digitized cabin manual is not only available for team members to read at any time, it also ensures that the content is kept up-to-date at all times. This effectively achieves synergy across improved passenger service quality, cabin management, and flight safety.

June 2020


e-Shopping

The "e-Shopping Duty-free Website" has been in use since the first project revision in 2013. After observing the functions and web designs of other airlines' websites and online shopping platforms, improvements will continue to be made to the website. In order to uphold the company's service spirit through continuous innovation and optimization while keeping up with today's trend of smart technology, plans to revise and optimize the website will be implemented. This will provide a more novel shopping experience that will in turn increase sales.

November 2020


CI Mobile APP

In order to enhance user experience on mobile devices, the Company continues to optimize CI mobile app functionality. The planned improvement projects cover car rental, accommodation booking/ticket refund application/chatbot customer services/pre-stored travel documents/passport scanning (OCR)/China Airlines eMall home delivery/push notification of system records/Google Pay-supported electronic boarding pass service/seat preselection/collaboration with credit card companies/proof of purchase application/function upgrade for the membership app/the establishment of an app for co-branded cards.

December 2020


Chatbot

Provide an innovative channel that reaches passengers and provides flight status in real time. During peak seasons or when significant changes are made to flights due to force majeure, provide passengers with an online instant chatbot conversational service to minimize the time passengers spend waiting on the customer service hotline. In addition, continue to utilize AI services and AI’s continuously-growing sematic understanding to enhance passenger experience and improve service quality.

March 2020

Implementation progress was 100% as of the annual report printing date

OnlineCC

The China Airlines Customer Service Center was established in October 2003. The customer service system was introduced in 2004 and has been in use for more than 16 years. The equipment of the system must keep up with the times to cope with today’s multifaceted business environment. In response to customer service center’s heavy workload, changing times, and technological advancements, China Airlines plans to establish a next-generation multimedia customer service system. It involves several functions, including telephone services, fax, automated voice answering systems, voice outbound dialing, e-mail, Facebook, and online customer service on the official website. The system will not only increase passenger access channels, but also help managers obtain workload information and staff status in real time, promptly allocate human resources, and improve service effectiveness and quality.

May 2020



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

(1) Passenger Make short-term adjustments to ASK in response to the impact of the COVID-19 pandemic.

Since the outbreak of COVID-19 in late January 2020, the cross-strait and Hong Kong routes have been heavily impacted, and the passenger loads and booking volumes of Northeast Asian routes continue to decline due to the spread of the disease. The pandemic continues to worsen as it inflicts heavy losses on the aviation and tourism industries in the Asia-Pacific region. In addition to cancelling some flights, China Airlines proactively adjusted ASK according to market conditions in response to the sharp decline in passenger volume and revenue. Considering that the pandemic has yet to ebb, the China Airlines Group will continue to review market demand trends, adjust ASK accordingly, and reduce operational costs with the intention of minimizing losses. Cooperate with the government in promoting the New Southbound Policy; expand the aviation

network in the ASEAN market through inter-airline cooperation. China Airlines has formulated plans to start flight routes in potential destinations in Southeast Asia (such as Cebu, Philippines; Chiang Mai, Thailand). In addition, as visa benefits for travelers from Southeast Asia are in place and the demand for exchange between Taiwan and ASEAN countries has been increasing, the Company will continue to review the potential of expanding in the markets of Southeast Asia routes for ASEAN countries(including Thailand, Malaysia, and Vietnam) and increasing flights. At the same time, increasing the number of charter flights for specific seasons, holidays, and themes will be arranged according to different needs to increase revenue. Through inter-airline cooperation (such as: code sharing, SPAs), China Airlines will expand its aviation network in the ASEAN market. Open up new routes and explore market potential.

Open up Cebu and Chiang Mai flight routes to seize business opportunities in the Southeast Asia travel market, and strengthen the positioning of transfers to North America. For many years, Taiwanese people have frequently travelled to Southeast Asia, and with the support of the government’s New Southbound Policy, the number of tourists from Southeast Asia to Taiwan has increased year by year. According to statistics recorded by the Tourism Bureau, Ministry of Transportation and Communications, 5.57 million tourists travelled between Taiwan and Southeast Asia in 2019. They made up 19% of Taiwan's travel demand, which showed an annual growth rate of 12%. Among which, the number of Taiwanese people who travelled to Southeast Asia grew by 17%, while the number of people who travelled from Southeast Asia to Taiwan grew by 6.7%. Both numbers are higher than the growth rate of the overall market, showing promising future prospects. Taking these into consideration, in 2020, China Airlines Group started successively opening up the Taoyuan-Cebu route and resuming the Taoyuan-Chiang Mai route to seize business opportunities in the market. At the same time, the schedules of these flights are arranged alongside the existing North America aviation network, so they can be connected to flights going to Los Angeles, Ontario, San Francisco, Vancouver, New York, and vice versa. This way, more convenient and comfortable services are provided to passengers travelling between Southeast Asia and North America.

(2) Cargo Make adjustments to market layout in response to the impact of the COVID-19 pandemic.

Due to the impact of the global COVID-19 outbreak at the start of 2020, most factories in Mainland China delayed resumption of production, resulting in a slow recovery of production capacity. The transportation of goods has also been restricted due to the restrictions on the passage of people and vehicles at different key import and export destinations. In addition, different airlines' passenger flights flying into Mainland China have been reduced or canceled. This has also significantly impacted the airfreight market connected to Mainland China's imports and exports. Furthermore, the impact of last year's (2019) China-US trade war still continues, resulting in many uncertainties in the airfreight market this year. Regarding this matter, China Airlines has begun planning and successively adjusting the market strategy for the Southeast Asia region to strengthen the company's foothold in the export markets of Taiwan and Southeast Asia. At the same time, China Airlines continues to closely observe changes in market capacity and demands, and it will flexibly adjust its ASK and freight rate strategy accordingly. The Company is making an effort to secure urgent orders of goods and short-notice charter flight demands that are coming up in the short period of time after production resumed in Mainland China.

Improve revenue management and promote customized services. We will continue to improve revenue management. Regarding the different transportation needs of special cargo, such as time limit, volume, and special loading procedures, we will continue to enhance price differentiation and increase the added value of transportation services by utilizing the advantages of large cargo loading and professional services of our Boeing 747-400 all-cargo aircrafts. In addition, in recent years, the promotion of the charter business has been strengthened. Customized charter services have been tailored to meet the needs of individual customers, which has contributed significantly to the increase in revenue. In 2020, we will continue to deepen our development in emerging markets, such as Southeast Asia, secure the efficiency of the overall aviation network in response to market changes, promote the customized routine and regular charter flight business, and maximize the benefits of the cargo fleet.


B. Long-term Development (1) Passenger Roll out fleet plans.

In order to improve operational efficiency, in 2019, the Company finished its plans to replace the old cargo fleet and the old narrow-body fleet. Between 2021 and 2023, we will introduce 25 A321neo aircrafts, which will gradually replace the narrow-body aircrafts currently in operation. The new cabin design will enhance passenger service quality and strengthen product competitiveness. Efficiently establish aviation networks and deepen inter-airline cooperation to increase

revenue. Utilize the new-generation, long-haul aircrafts 777 and A350 to proactively maximize the benefits of China Airlines' aviation network in California (North America) and expand the customer base for long-haul flights; provide a more interconnected, and convenient aviation network in Europe to secure China Airlines' leading position in the market of flights flying from Taiwan to Europe; continue to expand the aviation network covering bi-directional transfers in routes between New Zealand/Australia, Europe, and Northeast Asia to strengthen China Airlines' travel services. Furthermore, increase flight destinations and expand into major cities and tourist destinations around the world through inter-airline cooperation; increase the overall earnings generated by the aviation network by increasing flight frequencies and interconnectivity. Optimize cabin products and strengthen brand marketing to enhance passenger experience and

increase loyalty. Continue to improve personnel service and cabin hardware; provide passengers with the best flight quality and pleasant in-flight services. Establish brand positioning and a marketing direction that is in line with the brand improvement plan and based on the corporate philosophy; enhance the brand recognition of China Airlines; further ensure the consistency of passenger experience and strengthen the brand loyalty passengers have for China Airlines' products.

(2) Cargo Improve revenue management and promote charter flight business.

Continuing efforts made in 2019, we will continue to improve revenue management. Regarding the different transportation needs of special cargo, such as time limit, volume, special ground treatment, and machinery requirements brought about by emerging 5G technology products, we will continue to enhance price differentiation and increase the added value of transportation services by utilizing our Boeing 747-400 all-cargo aircrafts, which not only provide advantages in large cargo loading and professional services, but also meet the standards of carrying large machinery cargo.We will also strengthen the promotion of bidding mechanisms for shipping space in peak seasons to enhance unit revenue. In response to customer demand, we will continue to promote scheduled and non-scheduled customized charter flight business. Fifty-five such flights were operated in 2019. In 2020, we will continue to deepen our development in emerging markets, such as Southeast Asia, flexibly adjust the aviation network in response to market changes, promote the customized charter flight business, and maximize the benefits of the cargo fleet. Work with inter-airline express delivery companies and promote cold chain cargo.

Strengthen and deepen cooperation with inter-airline express delivery companies and mutual benefits; continue to work with international express delivery companies, including UPS, DHL, FedEx, and SF Express. This includes cooperation with UPS in regard to the shipping space at flight destinations on the Taoyuan-Shenzhen freighter route as well as charter flights to the United States. We will also strengthen our partnerships with Japanese and American airlines operating in the Asia region. We hope that, through inter-airline cooperation, we will be able to provide more diversified products, generate mutual benefits from the aviation network, and prosper together with our partners. Furthermore, to innovate cargo transportation, we have upgraded our cold chain services. China Airlines has been actively promoting IATA’s CEIV Pharma certification. In April 2019, China Airlines officially obtained certification, becoming the first aviation company in Taiwan to have such honorable achievement and become one of the 17 internationally certified airline companies in the world. We have significantly improved our cold chain transportation capability. We hope that the international certification will enable us to enhance our service quality and provide clients with more sophisticated cold-chain transportation services. Start cargo fleet renewal.

In 2019, the Board of Directors of China Airlines approved the plan to bring in six new 777F cargo aircrafts between 2020 and 2023. Since the fuel efficiency of the aircraft can increase payload capacity, after they are acquired, they will be prioritized to fly transoceanic routes and replace parts of the 747-400F cargo fleet. This will effectively increase fuel efficiency, increase the carrying capacity of transoceanic flights, improve operational efficiency, and significantly reduce operational noise, reaching environmental sustainability goals.


5.2 Market and Sales Overview 5.2.1 Market Analysis

A. Main Sales (Service) Region Overview of Company passengers/cargo (RPK/FRTK, REV) by region and passenger and cargo transport market share over the past two years: (1)Passenger routes:

Item Area

2018 2019 No. of

Passengers RPK

(Million) Revenue

(NT$ Million) No. of

Passengers RPK

(Million) Revenue

(NT$ Million) Trans-Pacific 984,161 10,404 14,478 1,017,031 10,780 15,282 Europe 603,342 5,678 9,661 623,389 5,863 10,209 South-East Asia 3,769,593 9,334 18,396 3,890,748 9,604 18,685 Domestic 1,239,130 292 1,967 1,467,638 344 2,252 Hong Kong/Macau 2,687,782 2,136 7,730 2,532,308 2,033 7,567 North-East Asia 6,805,685 12,129 35,454 7,023,173 12,589 36,752 Oceania 662,302 3,808 5,954 651,793 3,832 6,279 Mainland China 2,642,732 2,475 14,706 2,624,929 2,417 14,387 Total 19,394,727 46,256 108,346 19,831,009 47,462 111,413

Note 1: Revenue passenger kilometers (RPK) equal the total number of revenue passengers multiplied by the flight distance travelled (kilometers).

Note 2: The above data includes scheduled flights, charter flights, and extra flights. Note 3: The above data includes Mandarin Airlines and Tigerair Taiwan.

(2) Cargo routes: Item

Area 2018 2019

FRTK(Million) Revenue(NT$ Million) FRTK(Million) Revenue(NT$ Million) Trans-Pacific 3,764 27,742 3,358 23,896 Europe 779 6,106 717 5,284 South-East Asia 814 8,879 756 7,901 North-East Asia 255 3,250 229 2,907 Oceania 156 794 161 780 Mainland China 147 3,076 149 3,025 Total 5,915 49,847 5,370 43,793

Note 1: Freight revenue ton-kilometer (FRTK) equals the revenue cargo load (tons) multiplied by the flight distance travelled (kilometers).

Note 2: The above data includes scheduled flights, charter flights, and extra flights. Note 3: The above data includes Mandarin Airlines and Tigerair Taiwan.

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

Airline Passengers Cargo

2018 2019 2018 2019 China Airlines 24.23% 23.45% 38.60% 37.37% EVA Air 22.13% 21.70% 24.44% 24.12% Mandarin Airlines 2.34% 2.17% 0.71% 0.64% UNI Air 1.52% 1.43% 0.52% 0.56% Far Eastern Air Transport 0.40% 0.46% - - Tigerair Taiwan 4.52% 4.70% 0.05% 0.04% Other-Foreign Carriers 44.86% 46.09% 35.68% 37.27%

Source: Civil Aeronautics Administration Monthly Statistics from January to December 2018 and 2019-Taiwan National Airlines International and Cross-Strait Market Share for Passengers and Cargo

C. Market Analysis of Major Product Categories (1) Passenger

According to statistics on the Taiwanese passenger transport market in 2019 published by the Tourism Bureau of the Ministry of Transportation and Communications, approximately 11.86 million foreigners entered Taiwan (a growth rate of 7.2%) and 17.1 million Taiwanese people went abroad (a growth rate of 2.7%). The growth rate of the number of foreigners entering Taiwan increased, showing that Taiwan’s tourism market has potential for development. However, as the COVID-19 pandemic has been growing more sever since late January 2020, the IATA estimates that the air passenger transport market will see negative growth in demand in 2020, and global passenger transport revenue will drop by 11% to 19%, which is equivalent to 63 billion to 113 billion USD. The twists and turns in COVID-19's unfolding are almost unprecedented. Within approximately two months, the implementation of tourism restrictions on the grounds of pandemic response in various countries caused a significant drop in passenger traffic, which in turn resulted in flight cancellations and decline in ASK. The aviation industry is experiencing dramatic downturn in most parts of the world. While airlines are performing the important job of connecting the world economy, they are also doing their best to sustain their operations. The COVID-19 outbreak will be a global crisis which tests not only the aviation industry, but also the resilience of the global economy.


(2)Cargo In 2019, the global economy was affected by factors such as protectionism, the China–US trade war, and the slow down in airfreight businesses growth. January 2020 was the 10th consecutive month in which the global freight volume was less than that of the same period in the previous year. Global freight supply increased by 0.9% compared to the same period in the previous year, marking the 21st consecutive month in which the supply growth exceeded demand growth. It was originally expected that the signing of the US-China trade deal on January 15, 2020, would effectively boost market demand. However, the global supply chain was disrupted by the COVID-19 pandemic. Due to the overly-significant changes in the unfolding of the pandemic, at this stage the IATA remains unable to forecast future impacts on airfreight businesses.

D. Competitive Niche (1) The new-generation fleet can help to enhance service quality.

All aircrafts of China Airlines' new-generation long-haul fleet, which includes 10 Boeing 777-300ER and 14 Airbus A350-900, were delivered at the end of 2018 and were all allocated to fly long-haul routes. Flights for several routes, including the Taoyuan-Los Angeles, Taoyuan-Honolulu, and Taoyuan-Melbourne routes, will continue to increase. The overall cabin design concept was formulated from the perspective of passengers. It combines ideas of environmental protection, life aesthetics, and cultural creativity. The design has won recognition from many Taiwanese and foreign awards, including Japan's Good Design Award, Red Dot Design Award, Golden Pin Design Award, and Taiwan International Creative Design Competition. In the future, as the plan to phase out and renew the narrow-body aircraft fleet is implemented, the diversified, advanced, thoughtful, consistent hardware and software plan for the new-generation products will once again introduce a new look and new concept for the aviation industry, enabling China Airlines' passengers to have premium in-flight experiences.

(2) Highly-efficient cargo aircrafts to be introduced. In June 2019, China Airlines’ Board of Directors confirmed the purchase of three 777F cargo aircrafts from Boeing. Then, in August, the Board of Directors converted three option orders for 777F into firm orders. Six Boeing 777F cargo aircraft are expected to be introduced into the fleet between 2020 and 2023. Between 2014 and 2016, ten 777-300ER passenger aircrafts were introduced, and the benefits generated from their fuel efficiency are significant. Those aircraft are in the same series as the 777F cargo aircraft that China Airlines has discussed with Boeing. The 777F cargo aircraft is installed with the GE90 engine, which is the same as that used in passenger aircraft. This helps with engine management optimization and the lowering of maintenance costs. After the aircrews complete training on aircraft differences, they will be able to perform flight missions. This will enable flexible crew allocation. In addition, China Airlines' Board of Directors agreed in 2019 that new A321neo passenger aircrafts will be introduced successively starting in 2021. Detailed cabin and system designs are underway. We look forward to providing products that better meet market demands and the most comfortable flying experience. China Airlines has also started selecting new-generation regional wide-body passenger aircrafts, which will provide the Company with the final puzzle piece for its new-generation product provision and give passengers a more consistent service standard.

(3) CEIV Pharma Certification In April, 2019, China Airlines officially obtained IATA’s CEIV Pharma Certification, becoming the first aviation company in Taiwan to earn such an honorable achievement and become one of the 17 internationally certified airline companies in the world. The certification shows that China Airlines has reached international standards in the field of medicinal air transport, which is sensitive to time and temperature. This not only enhances the Company’s competitiveness and benefits generated in the highly valued freight market, but also strengthens the Company’s leading position in the airfreight market in the Asia-Pacific region.

(4) Steady development of aviation networks. In February 2019, the flight frequency for the Taoyuan-Palau route increased from 2 flights a week to 3 flights a week; in June, it further increased to 4 flights a week. In addition, in order to actively expand the Southeast Asian aviation network and strengthen the aviation network transfer market, China Airlines announced plans in 2020 to open up several routes, including the Taoyuan-Cebu and Taoyuan-Chiang Mai routes. As of the end of December 2019, China Airlines (including Mandarin Airlines) flew to a total of 23 countries across Asia, Europe, America, and Oceania, 72 passenger flight destinations, and operated an average of 712 flights a week.

(5) The Group’s integrated resources increase overall efficacy. China Airlines Group's overall combined fleet ASK provides differentiated aviation services and products to target markets with differentiated market positioning. Tigerair Taiwan operates with a low-cost airline business model and mainly flies regional routes. In the civil aviation market, Tigerair Taiwan, China Airlines, and Mandarin Airlines have each established its own positioning in different segments, providing consumers with a diversity of product options.

(6) Taken a leading position in the inter-airline cooperation market In addition to self-owned routes, China Airlines is the first airline in Taiwan to join the global aviation alliance. We are also the first Taiwanese airlines to conduct code-sharing cooperation. Currently, we have cooperated with 23 airlines in code-sharing, ranking first among all Taiwanese airlines. The Company is active in its global market layout and provides more convenient and comprehensive services for passengers to travel between Taiwan and major cities around the world through the tightly-woven aviation network of China Airlines.


E. Corporate Policies (1) Corporate Human Rights Policy

To implement the concept of corporate respect for human rights, the Company formulates human rights policies and management mechanisms based on the UN Guiding Principles on Business and Human Rights (hereinafter referred to as “UN Human Rights Guiding Principles”), international human rights trends, and local laws and regulations. The scope of application covers the members in the China Airlines Group and their suppliers, and the Talent Value Task Force under the Company’s Corporate Sustainability Committee is responsible for human rights management. China Airlines sees its employees as its family and aspires to communicate and reach mutual understanding with the union through equal and respectful negotiation procedures, to create a more harmonious and friendly working environment, one based on a mutually beneficial situation for both labor and management. The Company and the union shall maintain an equal, cooperative, and respectful relationship. It is our core attitude to promote rational communication through open and transparent negotiations, so that labor and management can reach consensus and achieve common good, and can conduct two-way friendly communication on collective agreement issues. China Airlines believes that employees are the Company’s most important assets. The Company gradually strengthens and optimizes the working conditions and environments of colleagues to ensure they have employment safety and room for growth. The Company will treat each union with empathy and communicate and negotiate with them on their individual needs; give priority to fair protection of the labor rights of every employee; and perform the obligation to stay neutral in accordance with the law, showing the unions consistent respect and providing them with equal resources.

(2) Sustainable Supply Chain Management Based on the corporate vision of “becoming the top airline in Taiwan,” the Company, based in Taiwan and flying around the world, is committed to pursuing the business goal of corporate sustainable development. We deeply understand that only by cooperating with business partners can we truly implement corporate sustainable development and create sustainable value. Therefore, the Company has been promoting sustainable supply chain management since the beginning of 2014. Subsequently, we established a Joint Creation Value Team for important procurement categories, including “aviation materials, aviation fuel, in-flight meals, service procurement, and general business affairs”; formulated long-term sustainability goals based on the United Nations’ Sustainable Development Goals (SDGs); and established China Airlines’ Sustainable Supply Chain Management Policy Statement and Supplier Code of Conduct with reference to the Global Reporting Initiative (GRI), ISO 26000, United Nations Global Compact (UNGC), International Labour Organization (ILO), and other international standards. In addition, the Company has also established a risk investigation mechanism, performed audit operations, organized supplier meetings to enhance the effectiveness of engagement, and set up other management measures, and has regularly reported the management results to the Corporate Sustainability Committee for follow-up inspection on a quarterly basis.

(3) Environmental Sustainability Management The Company adheres to the belief of environmental sustainable management and regards “environment” as one of the key elements for the implementation of sustainable management. Since 2007, we have established the concept of environmental and energy management. In 2011, a dedicated environmental department and Environmental Committee were set up; every quarter, the president reviews the Company’s environmental and energy management performance and has set incentive measures. In 2013, an environmental and energy policy statement was issued; the Company became the first domestic airline to establish a dedicated environmental organization and formulate policies. While pursuing business development, China Airlines recognizes the value and irreversibility of the global environment, and understands the corporation’s responsibility and obligation for protecting natural resources and environment. Based on this understanding, the Company established the four environmental and energy management concepts and six environmental and energy policies according to the codes of practice for “Sustainable Environment Development” in the China Airlines Corporate Social Responsibility and Sustainable Development Best Practice Principles announced by the Board of Directors. The Company also referred to the UN’s SDGs when devising instructional strategies, to ensure the business operation direction is towards sustainable development, namely environmental friendliness, low-carbon emissions, and energy conservation.

(4) Corporate Social Responsibility China Airlines is deeply aware that its achievements come from the support of the society, and “social support” is the key to promoting China Airlines’ success. The Company continues to make contributions and adheres to its core concept of “giving back to society” to build a loving society and fulfill its corporate responsibilities as a member of Taiwan. As a leader in Taiwan’s aviation industry and a corporate citizen of Taiwan, the Company takes “continuous creation of social value” as an important commitment for sustainable development. In 2019, China Airlines continued to use “brand perception,” one of the major directions in its sustainable strategy blueprint, to extend its development strategy to give back to the society: with “promoting the internationalization of local education” and “enhancing international visibility of local brands in Taiwan” as its main directions, and adding “promoting disadvantaged groups to obtain equal opportunities in society,” it looks to create co-prosperity and common good with the society through specific actions, such as “improving the overall quality of Taiwan’s education,” “strengthening Taiwan’s international visibility,” and “helping disadvantaged groups ameliorate their difficulties”.


(5) Enterprise Risk Management Architecture and Process China Airlines understands the importance of risk management, and places great emphasis on possible interactions between risks. It refers to Enterprise Risk Management (ERM) and other publications and practical methods while also considering the environment and operational characteristics of the industry. The airline industry is currently facing three major risk sources: security, operations, and financial risk management structures, and uses four major steps, identification, risk analysis, risk assessment, and risk management”. The Company identifies potential risks in these three areas and, based on frequency of occurrence and seriousness of the risk, performs analysis and assessment, distinguishing the degree of risk and finally developing response plans for high-risk items to reduce the impact on company operations.

F. Favorable and Unfavorable Factors in the Long Term (1) Favorable Factors The government strongly develops a diversified market, continues to promote the simplification of visa

process for New Southbound countries, and combines local resources to complete transportation and ticket services, effectively increasing the number of international tourists visiting Taiwan.

Global aviation has benefited from the growth of emerging economies and the middle class. The growth in the passenger transportation volume is most prominent in the Asia-Pacific region. The total number of passengers in Taiwan has grown steadily and is dominated by passengers on international routes.

With increasingly updated technology, transportation has become convenient, online security trading platforms have matured, cross-border e-commerce has changed business models, and the demand for logistics networks is increasing.

(2) Unfavorable Factors Labor awareness is rising. Striving for labor rights through strikes not only causes inconvenience to

passengers, but also affects company’s business performance. Geopolitical conflicts and economic and trade disputes will affect the global supply chain layout, which in

turn will affect the overall aviation industry operations. Most air traffic rights lean towards the Treaty on Open Skies, in addition to allowing existing operators to

increase flights, it also provides new operators with opportunities to join and LCCs with opportunities to have significant growth, intensifying competition in the route market.

The development of air transport infrastructure is not as fast as that of the aviation industry, making it difficult to obtain or adjust time slots in airports at various locations. The airlines’ route planning and aviation network expansion are thus limited, which is not conducive to business.

International aviation environmental protection related regulations have developed rapidly. For example, ICAO CORSIA has been officially implemented, and many countries have also planned to levy aviation environment related taxes and promote sustainable aviation fuel policies, which will all affect the operation and operating costs of airlines.

(3) Response Measures We adapt to the unpredictable passenger transport market by increasing the passenger load factor and

profit margins for the routes through the flexible adjustment of flights, deployment of aircrafts, and regulation of transportation capacity. Furthermore, based on the seasonal market demand in various places, adding extra flights or irregular charter flights for potential profitable destinations can grasp business opportunities and increase revenue.

Through inter-airline cooperation, extending destinations, expanding the global aviation network and increasing the number of passengers, deepening resource sharing with alliance member airlines, and in turn reduce operating costs.

Faced with the growth of new operators and low-cost carriers (LCC) in Asia, China Airlines Group will also combine the transportation capacity of Tigerair Taiwan’s fleet to provide differentiated aviation service products to target customers based on market positioning, so as to consolidate the overall interests of the Group.

It is planned to launch various marketing activities and improve the quality of website experience; expand the development of website functions to optimize the ticket purchasing process; and build multiple payment tools and support multi-currency payments. In addition, new fare products were launched. Passengers can choose fares and additional products on their own, such as baggage allowance, preferred seats, and mileage accumulation standards, to meet the different needs of passengers.

In response to the development of cross-border e-commerce, for air cargo transport, we strengthen cooperation with express delivery companies and inter-airline cooperation to expand the air-bridge service transport for e-commerce postal services, providing more diversified products through cooperation to achieve mutual benefit and common prosperity in the aviation network.

Through the development of the CEMS system, continuing to review and correct to comply with the CORSIA management measures and operational procedures, and continuing to promote the TCFD project to deepen carbon management operations and enhance resilience to the climate change. Continuing to pay attention to the development of SAF related policies to respond to the international trend of carbon reduction and sustainable energy that are growing in seriousness as early as possible.


5.2.2 Production Procedures of Main Products A. Major Products and Their Main Uses

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

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

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

5.2.4 Major Suppliers and Clients A. Major Clients in the Last Two Calendar Years

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

CPC Corporation, Formosa Petrochemical Corporation, and Chevron Corporation, etc. Unit: NT$ thousands

Item

2018 2019 2020 (as of March 31)

Company Name Amount %

Relation with

Issuer


Relation with

Issuer


Relation with

Issuer

1 CPC Corporation 18,413,016 12.00 None CPC

Corporation 17,197,546 11.33 None CPC Corporation 3,337,695 10.32 None

2 Formosa

Petrochemical Corporation

5,372,889 3.50 None Chevron Corporation 5,126,545 3.38 None Chevron

Corporation 1,024,781 3.17 None

3 Chevron Corporation 5,117,227 3.33 None

Formosa Petrochemical Corporation

4,939,381 3.25 None Formosa

Petrochemical Corporation

857,008 2.65 None

Other 127,600,944 81.17 Other 124,493,760 82.04 Other 27,116,778 83.86 Net Total 153,504,076 100.00 Net Total 151,757,232 100.00 Net Total 32,336,262 100.00

Reasons for changes:

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

5.2.5 Production in the Last Two Years Unit: thousand kilometers Year

Capacity and Traffic 2018 2019 Rate of Increase

(Decrease) Available Seat Kilometers (ASK) 58,043,562 58,590,098 0.94% Revenue Passenger Kilometers (RPK) 46,256,379 47,462,113 2.61% Load Factor (%) 79.69% 81.01% 1.32 ppt Freight Available Ton Kilometers (FATK) 8,290,378 8,012,739 -3.35% Freight Revenue Ton Kilometers (FRTK) 5,914,889 5,370,078 -9.21% Load Factor (%) 71.35% 67.02% -4.33 ppt Available Ton Kilometers (ATK) 13,498,780 13,269,365 -1.70% Revenue Ton Kilometers (RTK) 10,065,315 9,627,913 -4.35% Load Factor (%) 74.56% 72.56% -2.00 ppt Note 1: The above data includes scheduled flights, charter flights, and extra flights. Note 2: The above data includes Mandarin Airlines and Tigerair Taiwan.


Reasons for Changes: In 2019, the Company had new transportation capacity of passenger transport put into the market, and the available seat kilometer (thousand) and the revenue passenger kilometer (thousand) increased compared with 2018; in response to the decrease in demand for cargo transport, the FTK (thousand) of FRTK (thousand) also decreased compared with 2018.

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

Item 2018 2019

RPK/FRTK Amount RPK/FRTK Amount Passenger Revenue 46,256,379 108,345,648 47,462,113 111,413,435 Cargo Revenue 5,914,889 49,847,065 5,370,078 43,793,256 Other Operating Revenue - 12,518,894 - 13,237,469 Total - 170,711,607 - 168,444,160 Note 1: The above data includes scheduled flights, charter flights, and extra flights. Note 2: The above data includes Mandarin Airlines and Tigerair Taiwan.

Reasons for Changes: The sales volume of the Company’s passenger transportation business in 2019 has increased compared to 2018, mainly due to the introduction of additional passenger transportation capacity into the market in 2019, which led to the increase in the Revenue Passenger Kilometer (RPK) and sales;however, due to the continued downturn of the cargo transport market in 2019 and the slowdown in international trade demand, the cargo transport sales in the entire year of 2019 has declined.

5.3 Human Resources Year 2018 2019 APR 25, 2020

Number of Employees

Male 6,379 6,302 6,048 Female 6,030 5,937 5,126 Total 12,409 12,239 11,174

Average Age 41.10 41.40 42.44 Average Years of Service 13.90 14.00 15.00

Education

PhDs 0.10% 0.09% 0.10% Master’s Degrees 10.94% 11.10% 11.99%

Bachelor’s Degrees 82.71% 82.63% 81.83% Senior High School 5.94% 5.89% 5.77%

Below Senior High School 0.31% 0.29% 0.31%

5.4 Environmental Protection Expenditure

5.4.1 Total Losses and Penalties: None.

5.4.2 Company Countermeasures to Future Environmental Protection Issues A. ISO 14001 Environmental Management System and ISO 50001 Energy Management

System In order to integrate environmental protection operations into the daily operational risk management operations of the enterprise, China Airlines has introduced a number of international standard management systems (ISO 14064-1, ISO 14001, ISO 50001) since 2009, and has established and improved the environmental management operation mechanism of the enterprise, covering risk issues such as greenhouse gases, environmental management and energy management. The Company has formulated management strategies and action measures for relevant risks and opportunities identified in various aspects of the environment. (1)Management system operations

In 2017, we completed the revision of the ISO 14001: 2015 standard, incorporating the “life cycle thinking,” “stakeholder engagement,” “risk and opportunity management” and other aspects into the operation of the Corporate Environmental Management System (EMS). Following that, in 2019, we further developed ISO 50001:2018 version transferring operation, strengthening the identification and operation control of energy use, comprehensively reviewing and optimizing


energy performance indicators, to fit with the international enterprise benchmark mode of thinking on sustainable development and governance.

(2)Value chain and outstation environment management In order to fully grasp the global operational risks, the Company has initiated outstation risk/opportunity investigation and evaluation operation since 2018, strengthening the grasp of international environmental protection control trends, and entrenching the identification and handling of environmental energy-related risks and opportunities in operation. In 2019, we further focused on the current operational status of various issues of concern, and used best-case sharing to assist each station in seeking room for continuous improvement and implementing related operations. In addition to strengthening its own environmental sustainability management capacity, the Company also actively strengthens the sustainability value of the overall industrial chain. In 2018, it started the value chain environmental management operation and asked Group partners to set up environmental protection seeds, and by holding environmental/energy/carbon management workshop to promote Group partners’ understanding of the meaning and benefits of environmental/energy/carbon management. In 2019, it further cultivated Group’s corporate environmental energy risk management capacity through environmental risk/opportunity investigation and communication meetings

(3) Green maintenance operation and pollution prevention In order to reduce the environmental impact of the Company’s maintenance operations, in addition to implementing and continuously improving the aforementioned risk management operations, the EMO (park maintenance) Environmental Management Committee under the Company’s Corporate Environmental Committee also tracks and inspects on a quarterly basis the results of the environmental management of the maintenance plant area, in order to comply with environmental regulations, international trends, headquarters policies, and corporate environmental sustainability obligations. Its operating unit performs declaration and fee payment in accordance with the regulations every year, and operates in accordance with the water pollution prevention measures plan, waste disposal plan and related permit documents, and actively follows the principles of source reduction, poison reduction, and end-of-pipe recycling, continuously improving and enhancing environmental performance and ecological benefits.

The Company is the second airline in the world and the first Taiwanese airline to pass certification for ISO14001 and ISO50001 at the same time. The scope of certification is also the most complete in the domestic service industry. It has continued to complete the annual third party audit and verification operations for ISO 14001 and ISO 50001 on December 20, 2019.

B. Environmental KPI Controls The Company has followed the United Nations’ SDGs and set a number of short-, medium-, and long-term environmental protection and energy conservation objectives, including those for aviation fuel efficiency, ground carbon emissions, water consumption, domestic waste, business waste, and photocopy paper consumption. The five major environmental management committees and the carbon management task force develop and implement annual environmental protection KPI, and the Corporate Environmental Committee chaired by the President conducts the annual audit and review. The Company completed a total of 72 KPIs in 2019 and reduced carbon emissions by 124,365 tons CO2e. 69 KPIs are further planned in 2020, and it is expected to reduce emissions by 58,106 tons CO2e.

C. Strengthening adaptability to climate risks and opportunitiesIn order to strengthen our grasp of climate-related risks and opportunities, in 2018, the Company signed the initiative supporting the international Task Force on Climate-Related Financial Disclosures, TCFD, and launched project operations, through interviews, questionnaires, workshops, high-level forums, and other engagement processes, exploring the current or future climate risks and opportunities faced by business operations in different climate scenarios, and their potential impacts and corresponding costs, to gradually establish the Company’s climate risk and opportunity management mechanism.

D. Solidifying environmental management supervision mechanismThe Company promotes environmental management supervision mechanisms. Each unit independently implements the first-level audit of environmental management; second-level audit of environmental management is


implemented by the headquarters. The double audit mechanism ensures that environmental management is implemented in the basic level operations of all units. The Company has completed the second-level audit in 2019 Q2 and Q4. In addition to the checklist items, the audit items conducted also included the improvement on the previous audit findings, the degree of implementation of external stakeholders’ concerns and annual KPI implementation review.

E. Entrenching environmental education and training for all employees To implement the corporate environmental and energy policy of “implementing environmental and energy conservation education to foster employees’ environmental awareness,” as well as to achieve the goal of “environmental protection by all employees,” the Company has set up an annual “environmental protection education campaign” to implement online or in-class environmental management education and training in Taiwan. The implementation performance is as follows: (1)New employee and outstation supervisor environmental education and training implementation

rate is 100%. (2)The implementation rate of professional knowledge training on environmental/energy/carbon

management system is 100%. (3)A total of 151 participants in the environmental protection forum for all employees on the

theme of climate change. (4)A total of 2,229 participants in interactive employee activities. (5)Published 35 promotional articles on the internal communication platform; set up “green

footprint” stickers on the ground and posters in the headquarters and maintenance park to convey information on 21 environmental protection measures, and set up plant identification placards.

F. Carbon Inventory and Reduction Project (1)Annual organization level greenhouse gas emission inventory operations

According to the ISO/CNS 14064-1 standard, the Company has conducted a greenhouse gas inventory each year since 2009, covering aviation, ground service and office administration operations, and has conducted third-party verification operations in accordance with the requirements of “Reasonable Assurance”. The greenhouse gas emissions in 2018 and 2019 were 7,253,363 tons CO2e and 7,082,233 tons CO2e, respectively, a decrease of approximately 2.36%.

(2)EU ETS (European Emission Trading Scheme) operations According to the EU regulations, because the CO2e emissions of the Company’s 2019 Intra-EU Flights were all less than 3,000 metric tons, carbon emissions may be calculated by the EUROCONTROL tool; the calculation result for 2019 is as follows: CO2e emissions of 988 tons from 26 flights in total. The carbon credit allocated by the EU to the Company between the period from 2017 to 2020 is 7,157 metric tons per year. Therefore, in 2019, the Company’s carbon credit account balance was 23,781 metric tons. We will continue to conduct trading operations based on market demand and pricing trends.

G. Improving business eco-efficiency After obtaining the “Diamond Green Buildings Label” certification in 2017, in the headquarters of China Airlines, CAL Park, we continued to promote equipment renewal, optimize the operation process, and improve the overall energy efficiency of the buildings; In 2019, we further responded to the government’s green energy policy and completed the installation of 99kW of solar photovoltaic facilities grid-connected power generation on the rooftop of the simulator training building. As of December 31, 2019, it had generated 90,000 kWh of electricity and reduced CO2e emissions by approximately 48 tons; Relevant actions have been recognized by the Energy


Conservation Benchmark - Silver Award of the Ministry of Economic Affairs, Bureau of Energy; Energy Conservation Leadership Award of Taipei City; No. 1 in the Carbon Reduction and Electricity Conservation Reward Competition of Taoyuan Airport. Moreover, to reduce the risk of water resources, the Company has successively set up water meters at important water route nodes to track and analyze the flow direction of water resources and water consumption hot spots, and has promoted water reduction and recycling measures, including: purchasing water conservation label products, promoting water conservation advocacy, setting up a rainwater recovery system, promoting cooling water recycling and introducing Eco-Shine environmentally friendly cleaning solution;The amount of tap water used dropped from 148.22 kilotons in 2018 to 146.49 kilotons in 2019, a decrease of about 1.17%. Data relevant to this has been disclosed in the Company’s 2019 CSR report and assured by third parties. In terms of waste management, the Company manages waste based on five main principles: refuse, reduce, reuse, recycle, and repair. And with the goal of 100% waste resource recovery, the Company is increasing its waste reuse rate year by year. In addition, considering that waste management in aviation services involves a wide range of businesses, the Company established a waste management team in 2019. Service and supply planning and quality assurance units, as well as aviation catering, cabin cleaning, and other suppliers and partners are invited to form a periodical communication platform, where all parties come together to analyze the trends in international aviation service waste management and discuss response strategies. Domestic waste output from employees in 2018 and 2019 were 747,202 kg and 702,966, respectively, showing a decrease of approximately 5.9%.Data relevant to this has been disclosed in the Company’s 2019 CSR report and assured by a third party.

H. Promote Green Consumption The Company actively reveals its environmentalism philosophy and implementation performance irregularly through different platforms, such as social networks and in-flight magazines, with the intention of establishing and promoting the awareness of green consumption.In 2017, in a further effort to follow international trends, the Company started promoting the voluntary carbon offsetting program for passengers: the "ECO TRAVEL - Carbon Offsetting" service. Diversified electronic-friendly service platforms, including the official website, ticket-purchasing system, and travel reminders, are used to invite passengers to practice "zero-carbon" flying. In 2019, a total of 156 people took part in the carbon offsetting program, in which a total of 258.45 metric tons of carbon was offset. Such performance exceeded all other Taiwanese companies in the same industry during the same period. Other actions to elevate and promote green consumption include: (1) Selecting 12 environmental films to play on airplanes. (2) Presenting 5 posts about environmental topics and reports on social media. (3) Interactive educational work, such as promoting closing windows in summer. (4) Adding environmentalism products in the catalogue of home-delivery duty-free goods, and

include China Airlines' sustainability logo. The heating boilers in the engine plant and the electroplate plant of the companies’ repair factory are inspected yearly against relevant regulations for air pollutant emissions; air pollution control fees are also reported and paid quarterly (the repair factory uses super diesel, so it is exempted from inspections, but reports are required).

I. Continue to Support International Environmental Protection Research Projects The Company is working with several environmental protection organizations, including the Environmental Protection Administration, National Central University, and the European Union’s IAGOS-ERI in the implementation of the Pacific Greenhouse Gases Measurement (PGGM) project. In June 2012, July 2016, and July 2017, IAGOS instruments were installed onto the Company’s B-18806, B-18317 and B-18316 aircrafts, respectively. Since then, atmospheric gas data have been automatically collected during flights. The data is observed by important Taiwanese and foreign


research organizations to gain understanding of the changes in high-altitude gasses. This facilitates the understanding of environmental quality changes and provides reference material for important decision-making platforms, such as the UNFCCC. During the period from July 1, 2012 to December 31, 2019, atmospheric data collected from a total of 11,254 flights was collected, contributing to the ecosystems on Earth and Taiwan's image in the environmentalism field.

J. Transparent Disclosure of Environmental Protection Responses and Performances Since 2012, the Company has been publishing its Corporate Social Responsibility (CSR) Report every year (former titles include the Environmental Sustainability Report and Corporate Sustainability Report). The Company has also been establishing and updating the CSR network. It publicly and transparently discloses its sustainability governance strategies, as well as the results and performances in the environmental, social, and financial aspects of its operations. The reports are an important tool and channel that facilitates discussions with stakeholders.

5.4.3 Countermeasures Unit: NT$ thousands Item

Year 2019 2020 2021 2022

Environmental protection equipment and maintenance costs (does not include depreciation) 13,969 14,000 14,000 14,000

Fees for wastewater equipment regular sampling inspections by inspection agencies and permitting 123 100 100 100

Waste disposal costs 4,062 4,000 4,000 4,000 Aviation noise control fees (paid to the terminal based on airplane model and number of flights) 188,787 193,318 193,318 193,318

Fees for establishment of an environmental control system and strategic research project 2,541 4,000 4,000 4,000

Green procurement 19,258 20,000 20,000 20,000

5.4.4 Effect of Environmental Expenditures on Earnings Energy-saving equipment and improved management expenditures reduce both Company energy use and operating costs.

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


5.5 Labor Relations 5.5.1 List of employee benefits, training, retirement program, and status of

implementation, and labor-management agreements and protection of employee rights and interests A. Good Labor-Management Relations

On May 4, 1988, the China Airlines Union was established. On July 29, 2011, in accordance with revisions to the Labor Union Act, it was renamed the “China Airlines Employee Union.” In 2002, a collective agreement was signed between labor and management, which is regularly negotiated and renewed.

B. Retirement Program and Pension Preparations (1) Labor Standards Act Old-Age Pension System

The Labor Pension Reserve Supervisory Committee of the Company was established in June 1987 in compliance with letter Bei-Shi-She-II-Zi No. 43791 from the Taipei City Government. In past years, the appropriation and payment of pensions in the old system of the Labor Standards Act were handled according to the Labor Standards Act. In 2019, employees who may claim from the old system pension account accounts for approximately 51.2% of the employees of the Company (56.3% of Company employees are subject to both the new and old systems). The monthly appropriation rate of old system pensions has been increasing year by year since 2014 and has risen to 15% since January 2016, reaching the statutory limit. For employees who meet the retirement qualifications of the Labor Standards Act and whose retirement has taken effect, the responsible unit shall take the initiative to settle the pension, and shall apply to the local government for expenditure approval and reference or submit to the Taiwan Bank for payment application according to the relevant regulations of the government; it shall notify the employees to receive the payment once the check is produced. The deposit of pension reserve funds is supervised by the Labor Pension Reserve Supervisory Committee of the Company. The business unit regularly holds a pension supervision committee meeting every three months to report the use of the pension reserve funds to the members, including the estimated result of the next year’s appropriation, number of retirements of each quarter, and designated pension reserve funds account balance, and exchange of retirement related issues.

(2) Labor Pension Act New Pension System According to the Labor Pension Statutes promulgated by the government on June 30, 2004, in order Zong-Tong-Hua-Zong-(I)-Yi-Zi No. 09300121821, for employees who are subject to the statutes, new system pensions shall be appropriated on a monthly basis to the Bureau of Labor Insurance according to the statutes starting from July 2005. In 2019, employees who may claim from the new system pension account accounts for approximately 67.2% of the employees of the Company (37.8% of Company employees are subject to both the new and old systems). The new system pension appropriation rate is 6% per month, and is deposited into the employee's designated personal pension account at the Bureau of Labor Insurance. After the retirement conditions are met, the employee shall apply for payment to the Bureau of Labor Insurance.

C. Labor-Management Communications (1) Units within the Company with a relatively large number of employees, such as the maintenance

facility, Ground Services Division, Cabin Crew Division, Flight Operations Division, and Taipei and Kaohsiung branches hold regular communication meetings. In addition, elected union representatives attend regular company-wide labor-management conferences to improve understanding and communication.


(2) Establish an employee complaint mechanism and channels to ensure proper response: When employee rights have been violated or a situation is improperly handled, as stipulated in

the Regulations Governing Employee Complaints, employees can lodge a complaint with the responsible operating unit or the Human Resources Division. If the employee objects to the response, he or she can file an appeal with the Human Resources Division. Use of employee complaint channels: a total of 9 written complaints were handled in 2019.

D. Benefits (1) Employee care

Pension appropriation, labor and health insurance, employer liability insurance, group insurance, employee physical examination, and providing a nursing room.

(2) Employee stock ownership trust In August 1998, the Company set up an employee stock ownership trust, in which employees are free to participate. The amount, depending on employee position, is deducted directly from their monthly salary. Through the end of 2019, a total of 2,063 employees participated.

(3) Profit sharing As per the Company charter, if the Company posts a profit in a given year, it must allocate no less than three percent as employee bonuses. However, if the Company still has accumulated losses, it shall first retain a sum of money to make up the deficiency.

(4) Welfare system The Company’s Employee Welfare Committee was set up in December 1967. As stipulated by law, the Committee distributes benefits; handles the disbursement of wedding allowances, funeral allowances, disaster allowances, employee children excellence scholarships, birthday bonuses, and birth allowances; arranges visits to nursing homes, holds recreational sports activities, distributes meals and holiday gift certificates, and offers distress or purchase loans.

(5) Employee leisure Employee group activity subsidies, employee group travel subsidies, discounted tickets for current and former employees.

(6) Working environment Workplace compliance with occupational safety standards, gender equality.

E. Signing of Collective Agreement In 2019, the Company and the Pilots Union Taoyuan signed a collective agreement for the first time, the effective period being 3 years and 6 months. Since signing the collective agreement with the China Airlines Corporate Union in 2002, the agreement is extended every 3 years. The two parties are currently negotiating the extension of the agreement, and the relevant negotiation records have been published on the Company’s internal enterprise information network.

F. Counseling To take care of our colleagues needs and participate in employee personal growth, the Company has employed professional counselors and psychiatrists to provide counseling services to employees. In 2019, there was a total of 58 counseling visits totaling 58 hours.

G. In addition to promoting employee education and training to enhance staff knowledge and skills, we also continue to accumulate knowledge and encourage exchange within the Company to build an organization for learning. Through the management personnel training program and the “China Airlines Lecture Hall” training system, the Company holds courses to improve employees’ strategic, management, professional, and general workplace skills.


(1) To encourage employees to participate in various classes and self-study opportunities provided by the ROC Workforce Development Agency under the Ministry of Labor, the self-pay portions of the costs for such courses will be subsidized by the Company after work-relate courses are successfully completed by an employee.

(2) Obtained the ROC Ministry of Labor Workforce Development Agency's 2019 training subsidy of NT$950,000.

(3) Popularize and hold strategic work, management, professional and general skills courses. Marketing training:

including marketing strategies, customer operations, freight business and related OJT training, with a total of 174 in-person classes and 158 e-classes, and total of 17,745 people trained. Professional technical classes:

including enterprise safety/inspection work, flight services, joint management and EMO, with a total of 2,069 in-person classes and 265 e-classes, and a total of 72,479 people trained. Service:

including service quality assurance, introduction to public relations, service business, ground services operations, and in-flight products, with a total of 533 in-person classes and 316 e-classes, and a total of 26,109 people trained. Other:

including investment management unit business, law and insurance, financial, information technology, and human resources management, with a total of 182 in-person classes and 26 e-classes, and a total of 13,925 people trained.

5.5.2 CAL has established an employee code of conduct or ethical code and arranges pre-employment Employee Rights and Responsibilities classes for new hires. The main content of the Company’s Employee Code of Conduct is as follows: The Company’s Employee Code of Conduct primarily consists of workplace ethics, privacy, occupational safety, discrimination and harassment, moral integrity, media and public image, conflict of interest avoidance, anti-trust and fair competition, exchanging gifts and anti-corruption, CAL asset and intellectual property protections, reporting responsibilities, respect for human rights, and commitment to environmental protection. The Company includes an assessment and consideration of the foregoing items of workplace behavior in its annual results; employees unable to respect or who violate the foregoing regulations governing workplace behavior are penalized based on the Company's regulations governing rewards and penalties, based on the severity of the offense.

5.5.3 Implementation of work environment and employee personal safety protection measures The Company has established an Occupational Safety and Health Committee in accordance with law. The committee is tasked with the objective of preventing occupational hazards and protecting the safety and health of all employees by reviewing, coordinating, and making recommendations pertaining to safety and health related matters. The Chairman is served by the President. There is one vice chairman and one executive secretary under the Chairman. The Committee consists of the head of designated units, occupational safety and health personnel, engineering and technical personnel, medical personnel, and labor representatives appointed by the labor union as members. Formulate and follow the Occupational Safety and Health Management Manual; to adapt to trends of global international labor development, improve the efficiency of safety and health management, and promote systematic management measures, the Company established an independent safety and health management system and obtained ISO45001:2018 and TOSHMS certification on April 20, 2019, which serve as the management basis of occupational safety and health management system


certification. Self-management and preventive measures based on the PDCA cycle mode are used to effectively control occupational disaster risk, improve occupational disease preventive management, improve occupational safety and health management performance, and actively implement occupational safety policies; provide safe, healthy and comfortable working environment for employees, and promote industrial competitiveness; proactively promote the occupational safety and health management system; strengthen the promotion of safety and health education at all levels. Every three years, each person receives at least 3 hours of education and training. Education and training for supervisors is held depending on the promotion and transferring of the supervisors. The members of the Occupational Safety and Health Committee must complete at least three hours of safety and health education and training every three years to cultivate the correct attitude towards safety and health work;assist in the training of safety and health officers at all levels to implement safety and health work;initiate a safety and health hazard identification proposal system to extend the participation in safety and health to all personnel;regularly strengthen the on-the-job training for safety and health officers of various units, including how to identify hazards in the workplace, risk classification, how to compose management plans, and occupational accident identification process and operations; guide the risk assessment of units at all levels and conduct prevention and improvement to build the concept of corporate community.

5.5.4 Over the most recent year through the date of the publication of this report, the estimated value of any losses or potential future losses due to labor disputes From 2019 to April 25, 2020, the Company was fined a total of NT$3.12 million by the government labor authorities for labor disputes or imperfections after labor inspections. As for matters that the Company is not at fault for, the Company has proposed procedures for administrative remedies through appropriate channels to protect the Company’s rights and interest.In addition, if labor disputes turn into petitions and protest activities, they will cause losses that cannot be estimated in the Company’s operations and reputation. In regard to this matter, the Company will continue to maintain a genial interaction mechanism through diversified communication channels to achieve the goal of caring for employees’ welfare and improving the quality of the work environment, and through comprehensive improvement of the satisfaction of employees in all categories, eliminating the issues that may arise from unnecessary labor disputes.

5.6 Major Contracts Agreement Counterparty Period Major Contents Restrictions

Lease SASOFIV Aviation Ireland DAC 02/2006-02/2022 Aircraft Type:A330-300/No.:B-18351 - Lease SASOFIV Aviation Ireland DAC 02/2007-02/2023 Aircraft Type:A330-300/No.:B-18352 - Lease Zhong Hang Co., Ltd. 04/2007-04/2019 Aircraft Type:A330-300/No.:B-18315 - Lease AerCap Ireland Ltd. 05/2008-05/2024 Aircraft Type:A330-300/No.:B-18353 - Lease Bluesky Magical 1001 Leasing Co. 11/2010-11/2022 Aircraft Type:A330-300/No.:B-18355 -

Lease MSN 1272&1278 Aircraft Leasing (Cayman) Ltd. 12/2011-12/2023 Aircraft Type:A330-300/No.:B-18356 -

Lease MSN 1272&1278 Aircraft Leasing (Cayman) Ltd. 01/2012-01/2024 Aircraft Type:A330-300/No.:B-18357 -

Lease AS Air Lease 83 Ireland Ltd. 10/2012-10/2024 Aircraft Type:A330-300/No.:B-18358 - Lease AS Air Lease 83 Ireland Ltd. 12/2012-12/2024 Aircraft Type:A330-300/No.:B-18359 - Lease Dianbao Aviation Leasing Ltd. 12/2013-12/2025 Aircraft Type:A330-300/No.:B-18360 -

Lease Wilmington Trust SP Services (Dublin) Ltd. 04/2013-04/2021 Aircraft Type:737-800/No.:B-18651 -



Lease Avolon Aerospace AOE 73 Ltd. 03/2014-03/2022 Aircraft Type:737-800/No.:B-18655 - Lease Avolon Aerospace AOE 78 Ltd. 05/2014-05/2022 Aircraft Type:737-800/No.:B-18656 - Lease SMBC Aviation Capital (UK) Ltd. 06/2014-06/2022 Aircraft Type:737-800/No.:B-18657 - Lease Jade Aviation (Ireland) AOE 5 Ltd. 06/2014-06/2026 Aircraft Type:A330-300/No.:B-18361 -


Agreement Counterparty Period Major Contents Restrictions Lease FPG Amentum 10/2014-09/2026 Aircraft Type:777-300ER/No.:B-18051 - Lease Oriental Leasing 4 Company Ltd. 10/2014-10/2026 Aircraft Type:777-300ER/No.:B-18052 - Lease Zeus Aircraft Owner 1 Ltd. 11/2014-11/2026 Aircraft Type:777-300ER/No.:B-18053 - Lease Korea Investment & Securities (KIS) 01/2015-01/2027 Aircraft Type:777-300ER/No.:B-18055 - Lease Sky High XXXVII Leasing Company Ltd. 05/2015-05/2027 Aircraft Type:777-300ER/No.:B-18001 - Lease Sky High XXXVII Leasing Company Ltd. 06/2015-06/2027 Aircraft Type:777-300ER/No.:B-18002 - Lease Sky High XXXVII Leasing Company Ltd. 08/2015-08/2027 Aircraft Type:777-300ER/No.:B-18003 -


Lease ALC Blarney Aircraft Ltd. 10/2015-10/2023 Aircraft Type:737-800/No.:B-18659 - Lease Sky High XXXVII Leasing Company Ltd. 10/2015-10/2027 Aircraft Type:777-300ER/No.:B-18005 - Lease Zeus Aircraft Owner 2 Ltd. 01/2016-01/2028 Aircraft Type:777-300ER/No.:B-18006 - Lease UMB Bank N.A. 03/2016-03/2024 Aircraft Type:737-800/No.:B-18660 - Lease Zeus Aircraft Owner 3 Ltd. 05/2016-05/2028 Aircraft Type:777-300ER/No.:B-18007 - Lease Chilli Leasing LLC 09/2016-09/2024 Aircraft Type:737-800/No.:B-18661 - Lease Pacific Triangle Leasing Ltd. 09/2016-09/2024 Aircraft Type:737-800/No.:B-18662 - Lease BOC Aviation Ltd. 10/2016-10/2024 Aircraft Type:737-800/No.:B-18663 - Lease BOC Aviation Ltd. 11/2016-11/2024 Aircraft Type:737-800/No.:B-18665 - Lease BOC Aviation Ltd. 01/2017-01/2025 Aircraft Type:737-800/No.:B-18666 - Lease BOC Aviation Ltd. 02/2017-12/2025 Aircraft Type:737-800/No.:B-18667 - Lease Altitude Aircraft CAL I Ltd. 09/2019-113/09 Aircraft Type:A330-300/No.:B-18301 - Lease Altitude Aircraft CAL I Ltd. 09/2019-113/09 Aircraft Type:A330-300/No.:B-18302 - Lease Altitude Aircraft CAL I Ltd. 09/2019-113/09 Aircraft Type:A330-300/No.:B-18303 - Lease Altitude Aircraft CAL I Ltd. 09/2019-113/09 Aircraft Type:A330-300/No.:B-18305 - Lease Altitude Aircraft CAL I Ltd. 09/2019-113/09 Aircraft Type:A330-300/No.:B-18306 - Loan First Commercial Bank 05/2007-05/2019 Aircraft Type:A330-300/No.:B-18316 - Loan Cathay United Bank 08/2007-08/2019 Aircraft Type:747-400F/No.:B-18725 - Loan Taiwan Cooperative Bank 02/2008-02/2020 Aircraft Type:A330-300/No.:B-18317 - Loan Taipei Fubon Commercial Bank 10/2012-10/2019 Aircraft Type:737-800/No.:B-18610&B18617 - Loan Bank of Taiwan 12/2014-12/2019 Aircraft Type:747-400F/No.:B-18701 - Loan Hua Nan Commercial Bank 03/2015-03/2020 Unsecured Loan - Loan Mega International Commercial Bank 07/2015-07/2020 Aircraft Type:747-400F/No.:B-18711 - Loan Bank of America Corporation 01/2016-01/2019 Unsecured Loan - Loan E.SUN Commercial Bank 06/2016-06/2019 Unsecured Loan - Loan Hua Nan Commercial Bank 06/2016-06/2021 Unsecured Loan - Loan E.SUN Commercial Bank 02/2020-02/2022 Unsecured Loan Loan KGI Bank 02/2020-02/2022 Unsecured Loan Loan Taishin International Bank 02/202002/2021 Unsecured Loan Loan Bank SinoPac 02/2020-02/2023 Unsecured Loan Loan Bank of Taiwan 10/2016-10/2028 Aircraft Type:A350-900/No.:B-18901 - Loan Bank of Communications 11/2016-11/2019 Unsecured Loan - Loan Bank of Communications 01/2017-01/2029 Aircraft Type:A350-900/No.:B-18902 - Loan Agricultural Bank of Taiwan 04/2017-04/2029 Aircraft Type:A350-900/No.:B-18905 - Loan Taiwan Business Bank 04/2017-04/2029 Aircraft Type:A350-900/No.:B-18905 - Loan Mega International Commercial Bank 05/2017-08/2019 Unsecured Loan - Loan Hua Nan Commercial Bank 06/2017-06/2029 Aircraft Type:A350-900/No.:B-18906 - Loan China Construction Bank Corporation 11/2017-11/2029 Aircraft Type:A350-900/No.:B-18903 - Loan Bank of Taiwan 04/2018-04/2030 Aircraft Type:A350-900/No.:B-18907 - Loan Bank of Taiwan 04/2020-10/2022 Partial Credit Guarantee Loan -

Bills International Bills Finance Corp. and syndicate

12/2015-03/2019 FRCP Joint Underwriting, -

Bills China Bills Finance Corporation 04/2016-04/2020 FRCP - Bills Mega Bills 07/2016-07/2020 FRCP - Bills International Bills Finance Corp. 09/2016-09/2020 FRCP - Bills China Bills Finance Corporation 04/2020-04/2023 FRCP - Bills International Bills Finance Corp. 03/2020-03/2025 FRCP -

Bills China Bills Finance Corporation and syndicate


Bills China Bills Finance Corporation and syndicate



Agreement Counterparty Period Major Contents Restrictions

Bills Mega Bills and syndicate 11/2017-05/2021 FRCP Joint Underwriting, -

Bills International Bills Finance Corp. and syndicate 07/2019-8/2024 FRCP Joint Underwriting, -

Surface Rights Registration Contract of Taipei CAL Building

Northern Region Branch of National Property Administration of the Ministry of Finance

2016/12/31-2026/12/30

According to the original contract, it was agreed that the contract would be renewed for 10 years (the third period); rent is adjusted according to the government assessed land value and government published land value of the land authority, and is collected at an annual rent rate of 5%.

-

Taipei CAL Building Lease Contract

FX Hotels Taiwan 99/09/01-2026/12/30

Leasing premises: Part of floor B1 of the CAL Building, which is located at No. 131, Sec. 3, Nanjing E. Rd., Taipei City, the area is 169.6 ping (approximately 561 square meters); 1st floor, an area of 142.5 ping (approximately 471 square meters); 4 floors from the 10th floor to 13th floor, a total area of 2,145 ping (approximately 7,091 square meters). The total area of the above-mentioned is 2,457.1 ping (approximately 8,123 square meters). Leasing of 11 parking spaces on the 1st floor and floor B1.

-

Taipei CAL Building Lease Contract

OEC Freight Worldwide Co., Ltd. of the OEC Group 2016/03/01-115/12/31

Leasing premises: Entire area of the 7th floor of the CAL Building, which is located at No.131, Sec. 3, Nanjing E. Rd., Taipei City; the total area is 543.54 ping (approximately 1,797 square meters); part of floor B1, an area of 15.25 ping (approximately 50 square meters); 1 parking space on floor B1 and 12 parking spaces on floor B2.

-

Nankan CAL Park Land Lease Contract

Costco President Taiwan Inc.

Inception of the lease: 2012/08/30

Period of leasing: 20 years since the leasing start date.

Leasing premises: One parcel of land at Jinzhong Section, Luzhu District, Taoyuan City with parcel number of 705, and one parcel of land used for road facing Nankan Road with parcel number 705-1 and total area of 8,382.05 ping (27,709.21 square meters).

In accordance

with notarized

text

Kaohsiung CAL Building Lease Contract

FX Hotels Taiwan 2012/12/31-2032/12/30

Leasing premises: CAL Building, which is located at No.81, Zhonghua 3rd Rd., Qianjin Dist., Kaohsiung City Floor B1, an area of 115.91 ping (approximately 471 square meters); 1st floor, an area of 101.89 ping (approximately 337 square meters); double layer of 24.07 ping (approximately 80 square meters); 11 floors from 2nd floor to 12th floor, total area of 1,083.94 ping (approximately 3,583 square meters); penthouse of 35.45 ping (approximately 117 square meters). The total area of the aforementioned is 1,361.26 ping (approximately 4,500 square meters).

-

CAL Park Building Lease Contract

CAL Park Co., Ltd.

2019/01/01-2021/12/31 The contract will be

automatically renewed for 1 year upon expiration of this period and contract renewal

shall be made every two years.

Leasing premises: Administration Center Building of the corporate headquarters, Crew Center Building, Flight Training Center Building, Basement (Parking Lot). The total area is 25,140 ping (approximately 83,107 square meters).

-

Engineering consulting company commissioned technical service category

T.Y.Lin Taiwan Consulting Engineers. inc. 2019/03/01-2020/11/30

Operating space requirements and interface management for China Airlines Group’s stationing in the terminal 3 area of the Taoyuan International Airport.

-


Financial Information 6.1 Five-Year Financial Summary

6.2 Five-Year Financial Analysis

6.3 Consolidated Financial Statements for the Years

Ending December 31, 2019 and 2018, and

Independent Auditors’ Report

6.4 Parent Company Only Financial Statements for the

Years Ending December 31, 2019 and 2018 and

Independent Auditors’ Report

6.5 Audit Committee’s Review Report

116 Financial Information

VI. Financial Information 6.1 Five-Year Financial Summary 6.1.1 Consolidated Condensed Balance Sheet – Based on IFRS

Unit: NT$ thousands Year

Item Financial Summary for the Last Five Years (Note 1) 2020 (As of March 31)

(Note 2) 2015 (Note 3) 2016 (Note 4) 2017 (Note 5) 2018 (Note 6) 2019 (Note 7) Current assets 45,642,615 47,338,201 47,411,834 52,827,560 51,822,342 59,527,646 Property, plant and equipment 129,628,866 140,136,737 153,617,531 163,107,718 145,886,971 142,531,989 Intangible assets 1,009,678 1,137,115 1,019,345 1,210,796 1,182,692 1,151,247 Other assets 45,645,150 35,888,706 23,850,922 12,990,508 94,155,974 92,025,311 Total assets 221,926,309 224,500,759 225,899,632 230,136,582 293,047,979 295,236,193 Current liabilities

Before distribution 68,220,452 68,605,724 60,289,113 60,949,892 76,351,527 82,993,316 After distribution 70,728,977 68,605,724 61,482,783 62,086,170 - Not yet allocated

Non-current liabilities 93,149,314 98,027,837 106,453,000 109,139,606 156,564,335 156,248,299

Total liabilities

Before distribution

161,369,766 166,633,561 166,742,113 170,089,498 232,915,862 239,241,615

After distribution 163,878,291 166,633,561 167,935,783 171,225,776 - Not yet allocated Equity attributable to shareholders of the parent

58,269,896 55,783,817 57,023,237 57,081,572 56,553,772 52,453,446

Capital stock 54,708,901 54,708,901 54,709,846 54,209,846 54,209,846 54,209,846 Capital surplus 798,415 799,932 799,999 1,241,214 2,488,907 2,484,998 Retained earnings

Before distribution 2,872,235 206,092 1,664,405 1,615,661 (1,297,842) (5,072,909) After distribution 363,710 206,092 470,735 479,383 - Not yet allocated

Other equity interest (66,283) 112,264 (107,641) 58,223 1,196,233 862,386 Treasury shares (43,372) (43,372) (43,372) (43,372) (43,372) (30,875) Non-controlling interest 2,286,647 2,083,381 2,134,282 2,965,512 3,578,345 3,541,132 Total equity

Before distribution 60,556,543 57,867,198 59,157,519 60,047,084 60,132,117 55,994,578 After distribution 58,048,018 57,867,198 57,963,849 58,910,806 - Not yet allocated

Note 1: 2015-2019 annual financial information was verified by Deloitte & Touche. Note 2: As of the date of printing of this annual report, Q1 2020 financial information has not yet been reviewed by Deloitte & Touche. Note 3: The 2015 Earnings Distribution Proposal resolution was passed by the Shareholders’ General Meeting held on June 24, 2016. As required by law, the

Company appropriated a legal reserve of NT$287,224,000 and special reserve of NT$76,486,000 and distributed cash dividends totaling NT$2,508,525,000.

Note 4: The 2016 Deficit Compensation Proposal was passed at the shareholder meeting held on June 22, 2017, with legal reserve bonds of NT$81,132,000 and reversal of special reserve of 76,486,000 making up the shortfall.

Note 5: For the matter of 2017 surplus earnings distribution, after approved by the resolution of the general meeting on June 27, 2018, the legal reserve appropriated was NT$145,831,000, the special reserve appropriated was NT$118,810,000 and the cash dividend distributed was NT$1,193,670,000.

Note 6: For the matter of 2018 surplus earnings distribution, after approval by the resolution of the general meeting on June 25, 2019, the legal reserve appropriated was NT$ 114,493,000, the cash dividend distributed was NT$1,136,278,000, and reversal of special reserve of 105,843,000.

Note 7: The 2019 deficit make-up plan was approved by the resolution of the 10th meeting of the 21st Board of Directors on March 18, 2020, but has yet to be approved at the shareholders’ general meeting.

Financial Information 117

6.1.2 Consolidated Condensed Statement of Comprehensive Income – Based on IFRS

Unit: NT$ thousands; EPS (net) = NT$ Year


(Note 3) 2015 2016 2017 2018 2019 Revenue 145,056,217 141,079,107 156,121,785 170,711,607 168,444,160 32,557,130 Gross profit 20,268,374 18,005,906 21,972,411 17,207,531 16,686,928 220,868 Operating profit 8,129,197 4,564,687 8,826,160 4,022,383 2,665,821 (2,970,856) Non-operating income and expenses (994,312) (2,684,836) (5,302,197) (941,134) (2,762,638) (835,626) Pretax profit (loss) 7,134,885 1,879,851 3,523,963 3,081,249 (96,817) (3,806,482) Income from operations of continued segments - after tax

5,926,210 710,940 2,490,792 2,272,684 (675,002) (3,810,565)

Income from discontinued operations - - - - - - Net income (loss) 5,926,210 710,940 2,490,792 2,272,684 (675,002) (3,810,565) Other comprehensive income (income/loss after taxes)

1,269,760 (681,669) (1,113,176) (578,363) 462,758 (333,828)

Total comprehensive gain (loss) for the year

7,195,970 29,271 1,377,616 1,694,321 (212,244) (4,144,393)

Net income attributable to shareholders of the parent

5,763,714 571,540 2,208,066 1,790,361 (1,199,798) (3,773,333)

Net income attributable to non-controlling interest

162,496 139,400 282,726 482,323 524,796 (37,232)

Comprehensive income attributable to Shareholders of the parent

7,072,042 26,103 1,240,677 1,258,035 (647,085) (4,107,180)

Comprehensive income attributable to non-controlling interest

123,928 3,168 136,939 436,286 434,841 (37,213)

Earnings (Loss) per share 1.06 0.10 0.40 0.33 (0.22) (0.70) Note 1: 2015-2019 annual financial information was verified by Deloitte & Touche. Note 2: As of the date of printing of this annual report, the Q1 2020 financial information has not yet been reviewed by Deloitte & Touche.


6.1.3 Condensed Balance Sheet – Based on IFRS (Parent Company Only) Unit: NT$ thousands

Year Item

Financial Summary for the Last Five Years (Note 1) 2020 (As of March 31) (Note 2) 2015 (Note 3) 2016 (Note 4) 2017 (Note 5) 2018 (Note 6) 2019 (Note 7)

Current assets 34,477,533 37,904,039 39,908,492 37,933,696 42,932,859 - Property, plant and equipment 131,178,428 118,446,472 129,121,632 142,265,548 149,029,054 - Intangible assets 649,614 990,307 1,115,101 989,327 979,708 - Other assets 51,594,035 51,802,032 41,394,218 30,729,421 21,972,600 - Total assets 217,899,610 209,142,850 211,539,443 211,917,992 214,914,221 -

Current liabilities

Before distribution

59,079,846 64,725,525 64,339,805 54,925,364 55,179,834 -

After distribution 59,079,846 67,234,050 64,339,805 56,119,034 - - Non-current liabilities 110,155,489 86,147,429 91,415,821 99,969,391 102,652,815 -

Total liabilities

Before distribution

169,235,335 150,872,954 155,755,626 154,894,755 157,832,649 - After distribution 169,235,335 153,381,479 155,755,626 156,088,425 - -

Equity attributable to shareholders of the parent

48,664,275 58,269,896 55,783,817 57,023,237 57,081,572 -

Capital stock 52,491,666 54,708,901 54,708,901 54,709,846 54,209,846 - Capital surplus 480,462 798,415 799,932 799,999 1,241,214 -

Retained earnings

Before distribution

(3,870,736) 2,872,235 206,092 1,664,405 1,615,661 -

After distribution (2,358,783) 363,710 206,092 470,735 - - Other equity interest (1,905,698) (66,283) 112,264 (107,641) 58,223 - Treasury shares (43,372) (43,372) (43,372) (43,372) (43,372) - Non-controlling interest - - - - - -

Total equity

Before distribution

48,664,275 58,269,896 55,783,817 57,023,237 57,081,572 -

After distribution 48,664,275 55,761,371 55,783,817 55,829,567 - - Note 1: 2015-2019 annual financial information was verified by Deloitte & Touche. Note 2: The Company has not prepared an individual financial statement for Q1 2020. Note 3: The 2015 Earnings Distribution Proposal resolution was passed by the Shareholders’ General Meeting held on June 24, 2016. As required by law, the

Company appropriated a legal reserve of NT$287,224,000 and special reserve of NT$76,486,000 and distributed cash dividends totaling NT$2,508,525,000.

Note 4: The 2016 Deficit Compensation Proposal was passed by the Shareholders’ General Meeting held on June 22, 2017, using a legal reserve of NT$81,132,000 and reversal of special reserve of 76,486,000 to cover the deficit.

Note 5: For the matter of 2017 surplus earnings distribution, after approved by the resolution of the general meeting on June 27, 2018, the legal reserve appropriated was NT$145,831,000, the special reserve appropriated was NT$118,810,000, and the cash dividend distributed was NT$1,193,670,000.

Note 6: For the matter of 2018 surplus earnings distribution, after approval by the resolution of the general meeting on June 25, 2019, the legal reserve appropriated was NT$ 114,493,000, the cash dividend distributed was NT$1,136,278,000, and reversal of special reserve of 105,843,000.

Note 7: The 2019 deficit make-up plan was approved by the resolution of the 10th meeting of the 21st Board of Directors on March 18, 2020, but has yet to be approved at the shareholders’ general meeting.


6.1.4 Condensed Statement of Comprehensive Income – Based on IFRS (Parent Company Only)

Unit: NT$ thousands; EPS (net) = NT$ Year


(Note 2) 2015 2016 2017 2018 2019 Revenue 133,441,725 127,524,864 139,815,211 150,264,792 146,372,401 - Gross profit 17,623,801 15,275,980 17,966,397 12,649,836 11,364,235 - Operating profit 7,885,097 4,475,707 7,358,114 1,847,567 80,235 - Non-operating income and expenses

(1,047,275) (2,938,456) (4,269,911) 468,064 (1,267,561) - Pretax profit (loss) 6,837,822 1,537,251 3,088,203 2,315,631 (1,187,326) - Income from operations of continued segments - after tax

5,763,714 571,540 2,208,066 1,790,361 (1,199,798) - Income from discontinued operations

- - - - - - Net income (loss) 5,763,714 571,540 2,208,066 1,790,361 (1,199,798) - Other comprehensive income (income/loss after tax)

1,308,328 (545,437) (967,389) (532,326) 552,713 - Total comprehensive gain (loss) for the tear

7,072,042 26,103 1,240,677 1,258,035 (647,085) - Net income attributable to shareholders of the parent

1.06 0.10 0.40 0.33 (0.22) - Note 1: 2015-2019 annual financial information was verified by Deloitte & Touche. Note 2: The Company has not prepared an individual financial statement for Q1 2020.

6.1.5 Condensed Balance Sheet – Based on ROC GAAP (Parent Company Only): Not Applicable.

6.1.6 Condensed Statement of Comprehensive Income – Based on ROC GAAP (Parent Company Only): Not Applicable.

6.1.7 Auditors’ Opinions from 2015 to 2019 Year Accounting Firm Name of CPA Audit Opinion

2015 Deloitte & Touche Huang, Jui-chan; Chen, Li-Chi Qualified Opinion (Note1) 2016 Deloitte & Touche Yang, Chen-Hsiu; Chen, Li-Chi Unqualified Opinion 2017 Deloitte & Touche Yang, Chen-Hsiu; Chen, Li-Chi Unqualified Opinion 2018 Deloitte & Touche Yang, Chen-Hsiu; Huang, Jui-chan Unqualified opinions and other matters (Note2) 2019 Deloitte & Touche Huang, Jui-chan; Cheng, Shiuh-Ran Unqualified opinions and other matters (Note2)

Note1: In 2015, the Company began implementing the revised Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of IFRS, International Accounting Standards, IFRIC and SIC Interpretations recognized by the Financial Supervisory Commission. Therefore, the aforementioned standards and interpretations have been applied retroactively to affected sections of the previous period’s financial statement.

Note 2: The financial statements and related information of some subsidiaries have not been audited by Deloitte & Touche since 2018; they have been audited by other accountants. The information on how the Company’s equity-accounted investments and overall gains are affected is explained in the paragraphs for "other matters".


6.2 Five-Year Financial Analysis 6.2.1 Consolidated Financial Analysis – Based on IFRS

Year

Item (Note 3)

Financial Summary for the Last Five Years (Note 1) 2020 (As of March 31) (Note 2) 2015 2016 2017 2018 2019

Financial structure (%)

Debt ratio 72.71 74.22 73.81 73.91 79.48 81.03 Ratio of long-term capital to property, plant, and equipment

118.57 111.24 107.81 103.73 148.54 148.91

Solvency (%) Current ratio 66.90 69.00 78.64 86.67 67.87 71.73 Quick ratio 53.06 53.16 59.46 67.50 54.57 60.60 Interest earned ratio (times) 496.25 265.40 369.02 338.05 103.79 (334.02)

Operating performance

Accounts receivable turnover (times) 16.98 17.67 18.40 18.30 18.13 16.71 Average collection period 21.49 20.66 19.84 19.95 20.13 21.84 Inventory turnover (times) - - - - - - Accounts payable turnover (times) - - - - - - Average days in sales - - - - - - Property, plant, and equipment turnover (times)

1.07 1.05 1.06 1.08 1.09 0.90

Total assets turnover (times) 0.64 0.63 0.69 0.75 0.64 0.44

Profitability

Return on total assets (%) 3.28 0.80 1.60 1.48 0.76 (4.29) Return on stockholders' equity (%) 10.63 1.20 4.26 3.81 (1.12) (26.25) Pre-tax income to paid-in capital (%) 13.04 3.44 6.44 5.68 (0.18) (28.09) Profit ratio (%) 4.09 0.50 1.60 1.33 (0.40) (11.70) Earnings per share (NT$) 1.06 0.10 0.40 0.33 (0.22) (0.70)

Cash flow Cash flow ratio (%) 46.60 25.71 47.35 44.34 49.15 (32.48) Cash flow adequacy ratio (%) 233.25 303.17 351.58 366.94 518.35 399.31 Cash reinvestment ratio (%) 10.56 4.83 8.82 8.17 12.24 (9.02)

Leverage Operating leverage 3.21 4.99 3.16 6.00 14.20 (1.94) Financial leverage 1.28 1.40 1.18 1.52 (3.95) 0.78

Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%) 1. Degree of operating leverage: Mainly due to the decrease in the operating margin in 2019 compared with the same period of the previous year, IFRS 16 was

implemented to recognize depreciation. This caused the decrease in variable costs, and in turn resulted in the increase in the degree of operating leverage. 2. Degree of financial leverage: Mainly due to the decrease in the operating margin in 2019 compared with the same period of the previous year, IFRS 16 was

implemented to recognize the increase in interest expenses. This resulted in the negative value of the degree of operating leverage. 3. Due to the start of IFRS 16 Leases implementation in 2019, items such as right-of-use asset and lease liabilities were added. This increased the ratios related

to the financial structure and cash flow from the previous year; the current ratio and quick ratio decreased from the previous year.Also, factors such as the China-US trade war, protests over the Hong Kong extradition bill, and limits on Chinese tour groups caused a decline in profits and affected profitability and ratios related to degrees of leverage.The reduction in interest protection multiples was also affected by IFRS 16 and the decrease in profits.


6.2.2 Financial Analysis – Based on IFRS (Parent Company Only) Year

Item (Note 3)

Financial Summary for the Last Five Years (Note 1) 2020 (As of March 31) (Note 2) 2015 2016 2017 2018 2019

Financial structure (%)

Debt ratio 72.14 73.63 73.09 73.44 78.97 - Ratio of long-term capital to fixed assets

121.93 114.00 110.35 107.18 153.31 -

Solvency (%) Current ratio 58.56 62.03 69.06 77.81 60.28 - Quick ratio 44.54 45.82 49.03 57.87 45.87 - Interest earned ratio (times) 495.43 246.03 350.56 292.02 60.78 -

Operating performance

Accounts receivable turnover (times)

15.56 15.92 16.62 16.57 16.72 -

Average collection period 23.46 22.92 21.96 22.46 21.83 - Inventory turnover (times) - - - - - - Accounts payable turnover (times) - - - - - - Average days in sales - - - - - - Fixed assets turnover (times) 1.07 1.03 1.03 1.03 1.05 - Total assets turnover (times) 0.62 0.61 0.66 0.70 0.61 -

Profitability

Return on total assets (%) 3.36 0.75 1.54 1.33 0.51 - Return on stockholders' equity (%) 10.78 1.00 3.91 3.14 (2.11) - Pre-tax income to paid-in capital (%) 12.50 2.81 5.64 4.27 (2.19) - Profit ratio (%) 4.32 0.45 1.58 1.19 (0.82) - Earnings per share (NT$) 1.06 0.10 0.40 0.33 (0.22) -

Cash flow Cash flow ratio (%) 47.38 26.71 47.41 43.61 48.16 - Cash flow adequacy ratio (%) 232.93 309.01 357.86 381.09 557.30 - Cash reinvestment ratio (%) 10.74 4.94 8.48 7.68 11.34 -

Leverage Operating leverage 3.15 4.85 3.46 11.25 372.72 - Financial leverage 1.28 1.38 1.21 3.45 (0.03) -

Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%) 1. Degree of operating leverage: Mainly due to the decrease in the operating margin in 2019 compared with the same period of the previous year, IFRS 16 was

implemented to recognize depreciation. This caused the decrease in variable costs, and in turn resulted in the increase in the degree of operating leverage. 2. Degree of financial leverage: Mainly due to the decrease in the operating margin in 2019 compared with the same period of the previous year, IFRS 16 was

implemented to recognize the increase in interest expenses. This resulted in the negative value of the degree of operating leverage. 3. Due to the start of IFRS 16 Leases implementation in 2019, items such as right-of-use asset and lease liabilities were added. This increased the ratios related

to the financial structure and cash flow from the previous year; the current ratio and quick ratio decreased from the previous year.Also, factors such as the China-US trade war, protests over the Hong Kong extradition bill, and limits on Chinese tour groups caused a decline in profits and affected profitability and ratios related to degrees of leverage.The reduction in interest protection multiples was also affected by IFRS 16 and the decrease in profits.

Note 1: 2015-2019 annual financial information was verified by Deloitte & Touche. Note 2: As of printing of this annual report, Q1 2020 consolidated financial information has not yet been reviewed by Deloitte & Touche. The Company has not prepared

an individual financial statement for Q1 2020. Note 3: The calculations of the above financial ratios utilize the formulas listed below:

1. Financial structure (1) Debt ratio = total liabilities / total assets (2) Ratio of long-term capital to property, plant, and equipment = (total shareholders' equity + non-current liabilities) / net property, plant, and equipment

2. Solvency (1) Current ratio = current assets / current liabilities (2) Quick ratio = (current assets – inventory – prepaid expenses) / current liabilities (3) Interest earned ratio (times) = earnings before interest and taxes / interest expenses

3. Operating performance (1) Accounts receivable turnover (including accounts receivable and notes receivable arising from business activities) = net sales / average accounts

receivable (including accounts receivable and notes receivable arising from business activities) (2) Average collection period = 365 / average accounts receivable turnover (3) Inventory turnover = cost of goods sold / average inventory (4) Accounts payable turnover (including accounts payable and notes payable arising from business activities) = cost of goods sold / average accounts

payable (including accounts payable and notes payable arising from business activities) (5) Average inventory turnover days = 365 / inventory turnover ratio (6) Property, plant, and equipment turnover = net sales / net property, plant, and equipment (7) Total asset turnover = net sales / average total assets

4. Profitability (1) Return on total assets = [net income + interest expense x (1 - effective tax rate)] / average total assets (2) Return on stockholders’ equity = net income / average stockholders’ equity (3) Net margin = net income / net sales (4) Earnings per share = (net income attributable to owners of the parent – preferred stock dividends) / weighted average number of shares outstanding

5. Cash flow (1) Cash flow ratio = net cash flows from operating activities / current liabilities (2) Cash flow adequacy ratio = five year sum of net cash flows from operating activities / five year sum of (capital expenditures + increase in inventory + cash

dividends) (3) Cash flow cash reinvestment ratio = (net cash flows from operating activities – cash dividends) / (gross property, plant, and equipment + long-term

investments + other non-current assets + working capital) 6. Leverage

(1) Operating leverage = (net sales – variable operating costs and expenses) / operating profit (2) Financial leverage = operating profit / (operating profit – interest expenses)


6.2.3 Consolidated Financial Analysis – Based on ROC GAAP: Not Applicable.

6.2.4 Financial Analysis – Based on ROC GAAP (Parent Company Only): Not Applicable.

6.3 Consolidated Financial Statements for the Years Ended December 31, 2019 and 2018, and Independent Auditors’ Report: Please refer to Appendix 1.

6.4 Parent Company Only Financial Statements for the Years Ended December 31, 2019 and 2018, and Independent Auditors’ Report: Please refer to Appendix 2.


6.5 Audit Committee’s Report Audit Committee Report

The Board of Directors shall create and send (1) the 2019 consolidated financial statement and

individual financial statement that have been jointly audited by Deloitte CPAs Huang, Jui-Chan and

Cheng, Shiuh-Ran, who released an official unqualified opinion by March 18, 2020, and (2) the 2019

business report and Earnings Distribution Statement, after having been found to have no

discrepancies by this audit committee and, thereupon, issue a report in accordance with the items

stipulated in Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act.

China Airlines

Convener of the audit committee: Chang, Hsieh Gen-Sen

March 18, 2020


Review of Financial Conditions, Financial Performance, and Risk Management 7.1 Analysis of Financial Status

7.2 Analysis of Operation Results

7.3 Analysis of Cash Flow

7.4 Major Capital Expenditure Items

7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the Investment Plans for the Coming Year

7.6 Analysis of Risk Management

Review of Financial Conditions, Financial Performance, and Risk Management 125

VII. Review of Financial Conditions, Financial Performance, and Risk Management

7.1 Analysis of Financial Status (Consolidated) Analysis of changes in assets, liabilities, and equity over the past two years: Unit: NT$ thousands

Year Item 2019 2018

Difference

Amount %

Current assets 51,822,342 52,827,560 (1,005,218) (1.90)

Property, plant and equipment 145,886,971 163,107,718 (17,220,747) (10.56)

Intangible assets 1,182,692 1,210,796 (28,104) (2.32)

Other assets 94,155,974 12,990,508 81,165,466 624.81

Total assets 293,047,979 230,136,582 62,911,397 27.34

Current liabilities 76,351,527 60,949,892 15,401,635 25.27

Non-current liabilities 156,564,335 109,139,606 47,424,729 43.45

Total liabilities 232,915,862 170,089,498 62,826,364 36.94

Capital stock 54,209,846 54,209,846 - -

Capital surplus 2,488,907 1,241,214 1,247,693 100.52

Retained earnings (1,297,842) 1,615,661 (2,913,503) (180.33)

Other equity 1,196,233 58,223 1,138,010 (1,954.57)

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

Non-controlling interests 3,578,345 2,965,512 612,833 20.67

Total equity 60,132,117 60,047,084 85,033 0.14 Analysis of changes in financial ratios: 1. Other assets: Mainly due to the start of IFRS 16 Leases implementation in 2019, a total of NT$71.034 billion was added in right-of-use assets. 2. Liabilities: Mainly due to the start of IFRS 16 Leases implementation in 2019, a total of NT$18.143 billion was added in lease liabilities.The lease

agreement valued in US dollars is used as a hedging instrument to avoid future exchange rate fluctuations in passenger and cargo incomes; financial liabilities for hedging purposes increased by NT$50.998 billion.

3. Capital surplus: In 2019, parts of the shares held by subsidiary company Tigerair Taiwan were sold. The relevant gain on disposal is recognized under capital reserves and non-controlling interest.

4. Other equity: Mainly due to the changes in the fair value of financial assets and hedging instruments measured by fair value through other comprehensive income.

5. Non-controlling interest: In 2019, parts of the shares held by subsidiary company Tigerair Taiwan were sold. The relevant gain on disposal is recognized under capital reserves and non-controlling interest.

Future response actions: The above changes do not significantly affect the Company.

126 Review of Financial Conditions, Financial Performance, and Risk Management

7.2 Analysis of Financial Performance (Consolidated) Financial Performance Analysis Table Unit: NT$ thousands

Year Item 2019 2018

Difference Amount %

Revenue 168,444,160 170,711,607 (2,267,447) (1.33)

Cost 151,757,232 153,504,076 (1,746,844) (1.14)

Gross profit 16,686,928 17,207,531 (520,603) (3.03)

Operating expenses 14,021,107 13,185,148 835,959 6.34

Operating income (loss) 2,665,821 4,022,383 (1,356,562) (33.73)

Non-operating income and expenses (2,762,638) (941,134) (1,821,504) (193.54)

Pretax profit (loss) (96,817) 3,081,249 (3,178,066) (103.14)

Income tax expense 578,185 808,565 (230,380) (28.49)

Net income (loss) (675,002) 2,272,684 (2,947,686) (129.70)

Other comprehensive income 462,758 (578,363) 1,041,121 180.01

Total comprehensive gain (loss) for the year (212,244) 1,694,321 (1,906,565) (112.53) Analysis of changes in financial ratios: 1. Operating income, pretax profit, and net income for the period: All profits in 2019 decreased from the previous year mainly due to factors

such as the China-US trade war, protests over the Hong Kong extradition bill, and limits on Chinese tour groups. 2. Non-operating income and expenses: In 2019, the implementation of IFRS 16 Leases started and interest expenses was added under lease

liability. This caused an increase of NT$1.96 billion in financial costs compared with the previous year. 3. Other comprehensive income (net): Mainly due to the changes in the fair value of financial assets and hedging instruments measured by

fair value of other comprehensive profit and loss cases. 4. Total comprehensive income for the period: The combined effects of the above descriptions 1, 2, and 3.

7.3 Analysis of Cash Flow (Consolidated) 7.3.1 Cash Flow Analysis for the Current Year

Unit: NT$ thousands Year

Item 2019 2018 Difference

Amount % Cash and Cash Equivalents, Beginning of Year 24,937,537 22,585,332 2,352,205 10.41 Net Cash Flow from Operating Activities 37,526,612 27,026,957 10,499,655 38.85 Net Cash Flow from Investing Activities (16,053,122) (20,279,612) 4,226,490 20.84 Net Cash Flow from Financing Activities (17,614,558) (4,386,909) (13,227,649) (301.53) Exchange Rate Adjustment (336,941) (8,231) (328,710) 3,993.56 Cash and Cash Equivalents, End of Year 28,459,528 24,937,537 3,521,991 14.12

Analysis of change in cash flow in the current year: 1. The difference in cash flow from operating activities was mainly due to the new implementation of IFRS 16 Leases in 2019. The

“rights-of-use assets” item was added, causing the increase in depreciation compared with the previous year. 2. The difference in cash flow from investment activities was mainly due to factors such as the payments received from selling parts of the

shares held by subsidiary company Tigerair Taiwan in 2019. 3. The reasons for the difference in cash flow from financing activities were mainly the issuance of corporate bonds and long-term loan

amount in 2019, which were both lower than the previous year.

7.3.2 Remedy for Cash Deficit and Liquidity Analysis: None. 7.3.3 Cash Flow Analysis for the Coming Year

The cash balance at the beginning of the year was around NT$20.6 billion and estimated net cash flow from operating activity for the year is NT$23.6 billion. However, the Company’s operations have been affected by the COVID-19 pandemic that started at the end of January 2020. Assuming that the pandemic will start to ebb in June, it is estimated that the financing needs of the year will increase by NT$12 billion to NT$35.6 billion. After the COVID-19 outbreak, the Company quickly used credit to increase cash levels, and simultaneously planned to apply for mortgage loans and obtain mid- and long-term funds from the issuance of corporate bonds. A total of NT$45.3 billion (Note) has been used as funds to respond to the pandemic. Also, depending on the development of the pandemic, other financing tools will be used to obtain funds and keep the end-of-period cash balance at NT$30.3 billion. Note: In 2020, the Company was received additional NT$20 billion loan with 80% credit guarantees from

government.


7.4 Major Capital Expenditure Items (Parent Company Only) Major capital expenditures primarily include purchases of new airplanes as part of operational expansion, which does not have a significant impact on the Company’s financial operations.

7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year In order to support our primary airline operations and enhance competitiveness of the CAL Group, investments are primarily in airline industry-related companies. Currently, these include air transport, ground services, logistics and warehousing, air cargo terminals, airline catering, laundry, information networks, aeronautics, tourism services, and investing and leasing industries to create a comprehensive air service network and wide-ranging services. Calculated under the equity method, reinvestment revenues for 2019 totaled NT$1.812 billion. In the coming year, the Company will continue to carry out NORDAM Asia’s hangar construction. We will also evaluate various potential investment possibilities in aspects such as passenger transport, cargo transport, aircraft maintenance, and aviation training.

7.6 Analysis of Risk Management 7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation

on Corporate Finance, and Future Response Measures A. Impact of changes in interest rates, foreign exchange rates, and inflation on Company income

Although changes in interest and foreign exchange rates do have a level of impact on Company income, effective control on the impact is limited.

B. Response measures to changes in interest rates, foreign exchange rates, and inflation To prevent changes in interest rates, foreign exchange rates, and inflation from creating risks to the Company’s overall finances, we hold regular meetings of the Board of Directors Risk Committee, and remain aware of economic and financial developments both in Taiwan and overseas to develop a hedging strategy, evaluate performance of derivatives, and set an appropriate hedge ratio. These controls help prevent changes by utilizing financial hedging instruments in the financial environment and oil prices from creating systemic financial risks and enable CAL to achieve proper risk management.

7.6.2 Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions A. The Company does not engage in high-risk, highly-leveraged investments.

B. The Company has developed the Operational Procedures for Lending Funds to Others and Operational Procedures for Endorsements/Guarantees, and risks of such operations are controlled through strict assessment. Therefore, loans and endorsements/guarantees do not lead to profits or losses for the Company.

C. Company derivative products include forward foreign exchange and foreign exchange options contracts and oil options contracts, which are primarily to hedge against the risk of fluctuations in oil prices, interest rates, and foreign exchange rates. Transactions are performed in accordance with the Company’s Operational Procedures for Derivatives Trading and are regularly evaluated to ensure effective risk controls.

7.6.3 Future Research & Development Projects and Corresponding Budget: Please refer to page 96.


7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales: None.

7.6.5 Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales: 1. Information Security and Governance System

To continuously improve the information security governance system, strengthen protection capabilities, and cultivate a positive information security awareness among staff, all of the Company’s information operations are to comply with international information security standards as well as Taiwan’s information security law. Relevant security policies and operating procedures are formulated, and they are implemented in daily business operations. Also, information security management review meetings are held periodically to assess and reflect on the appropriateness of the relevant policies and procedures. In order to improve its information security governance system and organization operations, and to avoid being subjected to internal or external deliberate or accidental threats, an information security promotion team was established. The team is responsible for jobs including the formulation of the Company’s information security policies, the implementation of information security training, assessing information and intelligence of information security, emergency notification/handling contingencies. In addition, the deputy general manager of the Information Management Department, who is also the convener, is responsible for supervising the Company’s information security governance system planning, promotion, and implementation. The deputy general manager also reports the status of information security implementation to the Board of Directors every year.

2. Information Security Management Mechanism

The major directions of the Company's information security strategy have been focused on three aspects, including information security governance, daily maintenance and operation, and infrastructure protection, in which there are contained risk management, legal compliance, and corporate policies; the strategy fully enhances the Company's information security protection capabilities from internal systems to external regulations, and from the level of personnel to that of organization. In each stage of system development and maintenance, weakness identification and repair are performed with various testing technologies to ensure the safety of service usage. In


response to various external attack methods, such as DDoS, APT, and social engineering attacks, the Company has adopted relevant defense mechanisms. Every year, the Company commissions external information security experts to assist in penetration testing and information security assessment. The Company also regularly stays informed of information security issues and plans responses accordingly. In addition, the Company performs information security incident reporting and carries out response drills on its own. These are performed to examine the effectiveness of defense and the ability to respond to incidents, with the hope of being able to immediately detect incidents and complete the handling. Per examination by the Information Management Division in 2019, neither the monitoring or warning information from the defense system, which detects threats to information security, was confirmed to be a security incident caused by hacker intrusion or virus infection. In order to enhance employees' awareness of information security, every employee in the Company receives basic information security training so that they understand information security risks and the discipline and principles of self-management. Every year, information security policies and goals are promoted to every internal company employee through different methods, including education and training, internal meetings, and announcements.

3. Information Security Verification and Audit The Company's core information system obtained the ISO/IEC 27001: 2013 certification for ISMS in 2019, and the credit card processing system obtained the PCI DDS certification in December 2018. In addition, in order to ensure the security of transaction data and transmission accuracy, message confidentiality, integrity, usability, and security design in data transmission and processing measures are strengthened. The Company also complies with the Cyber Security Management Act to strengthen security control mechanisms. The information security promotion team performs at least one internal audit every year to not only confirm that employees are complying with these standards and the Company's requirements for management procedures, but also to effectively apply and maintain the management system.

4. Personal Information Protection Management System The Company places great importance on customer privacy and regards it as a basic service principle. In addition to complying with international laws and different foreign laws related to personal information, in 2014 the Company established the Personal Information Management Committee and established the personal information management system. The system explains the standards for the collection and usage of customer data, passengers' personal information rights, revision of privacy protection/declaration of security, and the commitment to maintaining data confidentiality. In order to comply with the General Data Protection Regulation (GDPR) put into effect by the European Union on May 25, 2018, the role of data protection officer (DPO) has been established in the Company. Externally, on the website of China Airlines, we publicly disclose relevant privacy protection policies and statements. Internally, we revise SOPs, hold personal data event drills on an annual basis, comprehensively strengthen employee data protection notions and code of conduct through education and training, finalize a personal data auditing system, and continue to take inventory of annual personal data work. Report the implementation results and improvement measures of the personal data management system to the Board of Directors every year, and maintain customer privacy in accordance with high standards.


7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures The Company continues to improve its navigational matters and aircraft maintenance, guard flight safety, and implement various service details in the SOP+ spirit; actively invest in social welfare and fulfill the responsibilities of corporate citizenship; incorporate environmental management into our operational focuses. If there is any untrue or negative news, message, or incident that affects the Company’s image, we will respond immediately and explain and clarify to the public, and post explanations on our website or social media platform if necessary, to reduce the negative effects.

For example, in the ongoing case of the controversy over chartered flights carrying duty-free cigarettes, in the future, the Company will not allow the pre-sale of duty-free cigarettes but will operate in the same manner as that in ordinary flights. The number of cigarettes loaded will be limited to the total number of passengers who can carry them. We have also established a mechanism to control the number of duty-free products on chartered flights, to accurately carry out loading of duty-free goods within the limits of aircraft space and load, and complete the delivery of goods on board the aircraft.

7.6.7 Expected Benefits from, Risks Relating to, and Response to Merger and Acquisition Plans: None.

7.6.8 Expected Benefits from, Risks Relating to, and Response to Factory Expansion Plans: None.

7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration: None.

7.6.10 Effects of, Risks Relating to, and Response to Large Share Transfers or Changes in Shareholdings by Directors or Shareholders with Shareholdings of over 10%: None.

7.6.11 Effects of, Risks Relating to, and Response to the Changes in Management Rights: None.

7.6.12 Litigation or Non-litigation Matters Any major litigation, non-litigation, or administrative disputes involving the Company that are already finalized or still pending.

No. Case Name Summary Disputed Amount

(NT$) Litigants Current Status

1 Litigation for refunding overpayment on aircraft rental

1. In 2002, the Civil Aeronautics Administration (CAA) unilaterally terminated an aircraft rental contract with the Company for six aircraft, resulting in early termination of the contract, which changed the nature of the lease and the rent calculation basis and resulted in rent overpayment by the Company.

2. In 2010, the CAA resolved that the Civil Aeronautics Administration should pay the Company more than NT$1.5 billion and in 2015 the Supreme Court revoked the arbitration judgment, which resulted in the Company filing a civil lawsuit against the CAA to recoup the aforementioned rent overpayment.

More than 1.2 billion

Plaintiff: China Airlines Defendant: Civil Aeronautics Administration

This case has gone through the first and second instance trials. The court agreed that there was an overpayment of rent in this case and that the amount of overpayment is NT$258,073,030. However, due to incorrect logic used in the calculation, it mistakenly recognized that the Company had offset NT$363,027,179 in the final rent payment, so it was judged that the Company had no reason to request the CAAC to return the overpayment of rent. In order to fully protect the rights and interests of the Company and investors, the Company filed all appeals in the third instance on November 27, 2019. They are now being adjudicated.


7.6.13 Other Major Risks: 1.CAL fully understands the importance of risk management and the potential for interaction

between different types of risk. We established the Risk Committee directly under the supervision of the Board of Directors to improve risk management and require subordinate units to control for each major risk category. The CAL risk management organization and units responsible for implementation:

Type of Risk Responsible Department Risk Management Measures

Operating Risk Corporate Development Office

The operating environment for the aviation industry is ever changing. Major political and economic events as well as unexpected internal or external incidents can have a huge impact on company operations. The Corporate Development Office analyses potential political, economic, aviation industry, and internal Company situations that could affect the Company and proposes concrete response plans to reduce their impact on China Airlines’ strategic direction and annual business plan.

Safety Risk Corporate Safety Office

Safety is the most basic principle and core value of China Airlines' business operation, as well as our responsibility and commitment to each customer. According to the Safety Management System (SMS), the Company constructs safety risk management. Aiming at internal and external operation risks, such as navigation, maintenance, air service, and ground operation, the Company maintains operational risk within the acceptable range through continuous hazard identification and risk management, and proposes improvement measures to effectively enhance the overall safety performance of the Company.

Financial Risk Finance Div.

The domestic and global economy affects the operating results of the Company. Primary operating costs for airlines include interest rate, exchange rate, and fuel, and influence by outside factors can result in significant volatility. Therefore, the Finance Division utilizes financial hedging instruments to fix the above factors within a certain range, regularly monitors financial risk, and establishes relevant strategies and measures to effectively manage financial risk.

2. By the end of January 2020, the Coronavirus that originated from Wuhan, the capital city of Hubei province in China became a pandemic. The Company has complied and continues to comply with the travel alerts issued by the Taiwan Centers for Disease Control and has cancelled flights between several countries like China, Hong Kong, Japan and Korea. Other flights have flexible capacity depending on the demand. So far, the air transport services for passengers have been severely affected. In addition to adjusting the operation, the Company also takes measures about funding assistance, human resources, reducing expenditure, and asks the government for help in three main areas including guarantee for its operation, relief from the burden, and a recovery plan.

7.7 Other Important Matters: None.


Special Disclosure 8.1 Summary of Affiliated Companies

8.2 Private Placement Securities in the Most Recent

Years

8.3 The Shares in the Company Held or Disposed of by

Subsidiaries in the Most Recent Years

8.4 Special Notes

8.5 Situations with Major Impacts on Shareholder

Equity or Share Prices

Special Disclosure 133

VIII. Special Disclosure 8.1 Summary of Affiliated Companies 8.1.1 Basic information of Affiliated Companies

A. Affiliated Companies Chart Dec 31, 2019

Note: The affiliates listed above are companies in which the company has invested and has a 50% or higher voting share, or the means to

control, either directly or through a subsidiary company. China Pacific Laundry Services, China Pacific Catering Services, and Nordam Asia are joint ventures.

100%

China Airlines

CAL-Dynasty

100%

CAL-Asia Investment

100%

Dynasty Aerotech

100%

Nordam

Asia

49%

Yestrip

100%

Dynasty Properties

100%

Dynasty Hotel of Hawaii

CAL Park

100%

Sabre Travel Network

93.93%

Tigerair Taiwan

69.45%

Taiwan Air Cargo Terminal

54%

China Pacific Catering Services

51%

Taiwan Airport Service

47.35%

Cal Hotel

100%

Mandarin Airlines

93.99%

Global Sky Express

25%

2.5%

2.5%

Taiwan Airport Service (Sam

oa)

100%

Delica International

51%

7.72%

1.08%

Taiwan A

ircraft Maintenance

and Engineering

100%

China Pacific Laundry Services

55%

Kaohsiung Airport Catering Services

53.67%

Taoyuan International Airport Services

49%

134 Special Disclosure

B. Basic information of Affiliated Company Dec 31, 2019/Unit: NT$ thousands

Company Date

Founded Address

Capital (Note)

Principal Activities

1. CAL-Dynasty International, Inc. 07/01/1991 200 Continental Blvd. Suite #101 El Segundo, CA90245, U.S.A.

785,135 Holding & investing

1A Dynasty Properties Co., Ltd. 08/15/1973 200 Continental Blvd. Suite #101 El Segundo, CA90245, U.S.A.

15,015 Real estate investing, property leasing

1B Dynasty Hotel of Hawaii, Inc. 12/10/1973 1830 Ala Moana Blvd. Honolulu, Hawaii 96815, U.S.A.

120,120 Hotel service

2. CAL-Asia Investment Inc. 06/29/1995 Mandar House, 3rd Floor, P.O. Box 2196, Johnson’s Ghut, Tortola, VG1110, Virgin Islands, British


3. Dynasty Aerotech International Corp.

05/11/1989 No.6, Hangqin S. Rd., Dayuan District, Taoyuan City 77,270 Aviation ground handling service, cleaning service

4. Yestrip Co., Ltd. 01/18/2001 10F, No.9, Section 3, Nanjing E Rd., Zhongshan District, Taipei City

16,000 Travel service

5. CAL Park Co., Ltd. 09/06/2006 No.1, Hangzhan S. Rd., Dayuan District, Taoyuan City

1,500,000 Real estate leasing, parking lot management

6. CAL Hotel Co., Ltd.. 01/03/2007 No.1-1, Hangzhan S. Rd., Dayuan District, Taoyuan City

465,000 Hotel business

7. Taiwan Aircraft Maintenance and

Engineering Co., Ltd. 01/16/2015

No.15, Hangqin S. Rd., Dayuan District, Taoyuan City

1,350,000 Aircraft maintenance and repair

8. Mandarin Airlines, Ltd. 04/29/1991 No.3, Alley 123, Lane 405, Dunhua N. Rd., Songshan District, Taipei City

2,001,825 Civil air transport

9. Sabre Travel Network (Taiwan) Ltd. 10/09/1990 15F, No.57, Fuxing N. Rd., Songshan District, Taipei City

138,618 IT service & GDS

10. Tigerair Taiwan Co., Ltd. 04/21/2014 No.1, Hangzhan S. Rd., Dayuan District, Taoyuan City

2,000,000 Civil air transport

11. China Pacific Laundry Services Ltd. 09/08/1997 No.7, Lane 54, Sande Street, Luzhu District, Taoyuan City

250,000 Laundry service

12. Taiwan Air Cargo Terminal Ltd. 12/22/1999 No.10-1, Hangqin N. Rd., Dayuan District, Taoyuan City

2,500,000 Air cargo and storage service

13. Kaohsiung Airport Catering

Services Ltd. 09/27/1999

No.2-10, Zhongshan 4th Rd., Xiaogang District, Kaohsiung City

400,500 Catering service

13A Delica International Co., Ltd. 05/24/2016 No.2-10, Zhongshan 4th Rd., Xiaogang District, Kaohsiung City


14. China Pacific Catering Services

Ltd. 08/19/1994

No.22, Lane 156, Section 2, Haishan Rd., Luzhu District, Taoyuan City


15. NORDAM Asia Ltd. 12/07/2017 No.15, Hangqin S. Rd., Dayuan Dist., Taoyuan City 77,500 Aircraft maintenance and repair

16. Taoyuan International Airport

Services Co., Ltd. 11/08/1978

No.15, Hangqin N. Rd., Dayuan District, Taoyuan City

700,000 Aviation ground handling service

17. Taiwan Airport Service Co., Ltd. 07/19/1966 3F, No.340, Dunhua N. Rd., Songshan District, Taipei City

435,600 Aviation ground handling service

17A Taiwan Airport Service (Samoa)

Co., Ltd. 03/22/2004

TrustNet Chambers, Lotemau Centre, P. O. Box 1225, Apia, Samoa


18. Global Sky Express Ltd. 09/29/1994 8F-3, No.186, Section 4, Nanjing East Rd., Songshan District, Taipei City

10,000 Air freight forwarder

Note: Capital was calculated using the exchange rate at the end of 2019: 1TWD=0.0333 USD, 3.6156 JPY, 0.2323 CNY.


C. Overall Description of the Industries in which Affiliated Companies (Including Subsidiaries and Other Invested Companies) Operate

China Airlines’ affiliated companies can be divided into seven categories, each of which is highly dependent on the Company’s operations, and include airlines, ground services, air transport support, aerospace technology, logistics and warehousing, tourism and leisure, and investment holdings and leasing. The categories are described below:

Classification Description

Airlines Mandarin Airlines provides domestic and international passenger and cargo air transport services to further capitalize on our competitive advantage in the cross-strait market. Tigerair Taiwan is tasked with operating in the Asian low-cost carrier market to develop new business opportunities.

Ground Handling Services

Ground services at Taiwan Taoyuan and Taitung Airports are provided by Taoyuan International Airport Services Co., Ltd., while those for Kaohsiung Airport and all other domestic airports are serviced by Taiwan Airport Service Co., Ltd. Overseas, the Company has invested in Jardine Aviation Services in Hong Kong, which serves as China Airlines’ ground handling agent in Hong Kong. Cleaning and repair ground services are provided by Dynasty Aerotech International Corp.

Air Transport Support The Company has invested in domestic airline reservation system operations and maintenance provider Sabre Travel Network (Taiwan) Ltd. Overseas, the Company has invested in Singapore’s Everest Company.

In-flight catering services are provided for northern Taiwan by China Pacific Catering Services Ltd. and by Kaohsiung Airport Catering Services in the South. Delica International Co., Ltd. is the subsidiary of Kaohsiung Airport Catering Services.

China Pacific Laundry Services Ltd. provides laundry services for textiles and clothing used aboard aircraft and general laundry services for the hospitality industry.

Logistics and Warehousing

Domestically, Taiwan Air Cargo Terminal Ltd. is responsible for providing warehousing services at Taiwan Taoyuan Airport and Kaohsiung International Airport. In Mainland China, the Company made indirect investments in Arport Air Cargo Terminal (Xiamen) Co., Ltd. and Arport Air Cargo Service (Xiamen) Co., Ltd.

Logistics services are provided domestically by invested companies Global Sky Express Ltd. and Chung Hwa Express Corp. Overseas, the Company has indirectly invested in Hong Kong’s Eastern United International Logistics.

Aerospace Technology

In the aerospace technology industry in Taiwan, the Company has invested in Taiwan Aircraft Maintenance and Engineering Ltd., which is responsible for all aspects of maintenance and repair services for Boeing 777 and 737 and Airbus A320 and A350 models; NORDAM Asia provides thrust reverser and composite material maintenance services in the Asian region; overseas, the Company invests in Xiamen Taiko Landing Gear Co. in Mainland China, which provides and maintains landing gear, and HAECO Composite Structures (Jinjiang) Co. Ltd., which provides composite material maintenance. In Hong Kong, the Company invests in the China Aircraft Services Ltd., which provides aircraft maintenance capacity.

Tourism and Leisure Domestic investments include Yestrip and CAL Hotel Co., Ltd.. Overseas investments include an indirect investment in Dynasty Hotel of Hawaii, Inc. in the USA and investment in Japan’s Dynasty Holidays.

Investment Holdings and Leasing Business Group

Established CAL-Dynasty International, Inc., which makes indirect investments in Chinese and American companies engaged in real estate investments and leasing management. CAL-Asia Investment Inc. and Taiwan Airport Service (Samoa) Co., Ltd. are engaged in general investment holdings.


D. Directors, Supervisors, and Presidents of Affiliated Companies Dec 31, 2019

Units: Shares; %

Company Title Name Shareholding

Shares % 1. CAL-Dynasty International, Inc. Chairman Hsieh, Su-Chien (Note 1) 2,614,500 100 Director Wang, Chen-Min (Note 1) (USD10, share)

Director (President) Lee, Hsien-Kuang (Note 1) 1A Dynasty Properties Co., Ltd. Chairman (President) Lee, Hsien-Kuang (Note 2) 5,000 100 Director Hsieh, Su-Chien; Chang, Cheng-Hao (Note 2) (USD100, share) 1B Dynasty Hotel of Hawaii,

Inc. Chairman Lee, Hsien-Kuang (Note 2) 400,000 100

Director Chang, Cheng-Hao (Note 2) (USD10, share) Director (President) Pan, Wen-Tsung (Note 1) 2. CAL-Asia Investment Inc. Chairman Hsieh, Su-Chien (Note 1) 7,172,346 100

Director Chang, Young (Note 1) (USD1, share) Director (President) Wang, Chen-Min (Note 1)

3. Dynasty Aerotech International Corp. (Note 3)

Chairman Chao, Lin (Note 1) 77,270 100

Director Liu, Der-Chuan; Sun, Jia-Min; Chen, Wei-Tau (Note 1) Supervisor Chen, I-Chieh (Note 1) Director (President) Lu, Yung-Nan (Note 1)

4. Yestrip Co., Ltd. Chairman Chou, Ling-wen (Note 1) 1,600,000 100 Director Tong, Huai-Ming; Peng, Pao-Chu (Note 1) Supervisor Huang, Hui-Na (Note 1) President Lo, Chun-Ying (Nominated by China Airlines)

5. CAL Park Co., Ltd. Chairman Hsieh, Su-Chien; (Note 1) 150,000,000 100 Director Chen, Wei-Tau (Note 1) Supervisor Fang, Juo-Ling (Note 1) Director (President) Chang, Young (Note 1)

6. CAL Hotel Co., Ltd. Chairman Hsieh, Su-Chien; (Note 1) 46,500,000 100

Director Wang, Chen-Min; Kao, Shing-Hwang; Wang, Houng; Hong, Tsu-Kuang (Note 1)

Supervisor Fang, Juo-Ling; Chen, I-Chieh (Note 1)

President Eric Rimbeuf

7. Taiwan Aircraft Maintenance and Engineering Co., Ltd.

Chairman Wang, Houng (Note 1) 135,000,000 100

Director Chang, Young; Sun, Jia-Min; Lee, Jung-Hu; Wang, Chen-Min (Note 1)

Supervisor Fang, Juo-Ling; Yen, Yang (Note 1) President Tsai, Chih Hung (Nominated by China Airlines) 8. Mandarin Airlines, Ltd. Chairman Hsieh, Su-Chien (Note 1) 188,154,025 93.99

Director Chang, Young; Kao, Shing-Hwang; Wang, Houng; Wang, Chen-Min; Peng, Pao-Chu (Note 1)

Supervisor Chen, I-Chieh Director (President) Tsao, Jyh-Fen (Note 1)

9. Sabre Travel Network (Taiwan) Ltd.

Chairman Wu, Wen-Kuo (Note 1) 13,021,042

609,000

93.93

4.39

Director Chung, Ming-Jyh; Tong, Huai-Ming; Peng, Pao-Chu (Note 1) Director Alan Chen (Representing Sabre Travel Network Asia Pacific) Supervisor Ho, Hui-Fen President Ouyang, Yinchi (Nominated by China Airlines) 10. Tigerair Taiwan Co., Ltd. Chairman Chang, Horng-Jong (Note 1) 138,906,275

69.45

Director Chang, Young; Wang, Chen-Min; Chang, Cheng-Hao; Chen, I-Chieh; Chen, Han-Ming (Note 1)

Director Hsiao, Po Jen; Hsu, Yang Che; Jao, Shih-Chen; Yen, Sin-Hui Independent Director

Chen, I-Heng(Independent director undertaking public welfare); Fan, Hung-Shu; Yang, David

President Chang, Horng-Jong 11. China Pacific Laundry Services

Ltd. Chairman Hong, Tsu-Kuang (Acting) (Note 1) 13,750,000 55 Director Chu, Te-Hsiu; Chung, Wan-Chun (Note 1) Director Chan, Derrick (Representing Hendriz Holding) 3,750,000 15 Director Yeung, Maggie (Representing Heathlee Int’l) 3,750,000 15 Supervisor Xu, Martin (Representing Merton Lake) 3,750,000

15

Supervisor Chen, I-Chieh President Lo, Tao-Wei (Nominated by China Airlines)

12. Taiwan Air Cargo Terminal Ltd.

Chairman Chen, Chong-Yi (Note 1) 135,000,000 54

Deputy Chairman Chen, Charles C.Y. (Representing Eyon Industrial Co.) 6,000,000 2.40 Director Wang, Chen-Min; Chang, Cheng-Hao; Liu, Der-Chuan (Note 1) Director UPS 20,000,000 8


Company Title Name Shareholding

Shares % Director Michael Shea (Representing Hsin Feng Corp.) 7,000,000 2.80 Supervisor Ho, Hui-Fen Supervisor Chen, Jyi-Fu (Representing Express Container Terminal Corp.) 15,000,000 6 President Lin, Hsiao-Feng (Nominated by China Airlines)

13. Kaohsiung Airport Catering Services Ltd.

Chairman Chang, Young (Note 1) 21,494,637 53.67

Director Chung, Wan-Chun; Wang, Wei (Note 1)

Director Lin, Jyh-Jong; Tsai, Ta-Wei (Nominated by Uni Airways Corporation)

16,178,945 40.40

Supervisor Han, Lan-Ping (Nominated by Evergreen International Corporation)

10,000 0.02

Supervisor Yen, Yang President Lee, Ho-Yuan

13A. Delica International Co., Ltd

Chairman Lee, Ho-Yuan (Nominated by Kaohsiung Airport Catering Services)

1,020,000 51

Director Lin, Jyh-Jong (Nominated by Kaohsiung Airport Catering Services)

Director Tokuyama, Keiichi; Tokuyama, Keisuke (Nominated by F. TEC Co., Ltd)

980,000 49

Supervisor Lai, Li-Chao; Araki, Osamu President Eguchi, Kenichi

14. China Pacific Catering Services Ltd.

Chairman Yeh, Chu-Lan (Note 1) 43,911,000 51

Director Hong, Tsu-Kuang; Chung, Wan-Chun (Note 1) Director Wong, Andy; Yau Algernon (Representing Aldeburgh Limited) 21,045,500 24.50 Supervisor Fang, Juo-Ling Supervisor Xu, Martin (Representing Deli Holdings Limited) 21,045,500 24.50 President An, Long-Chi (Nominated by China Airlines)

15. NORDAM Asia Ltd. Chairman T. Hastings Siegfried (Nominated by The NORDAM Group) 3,952,500 51

Deputy Chairman Wang, Houng (Note 1) 3,797,500 49 Director Li, Chih-Wei (Note 1)

Director J.Terrell Siegfried, Jamie Lane (Nominated by the NORDAM Group)

Supervisor Ralph McDavid Supervisor Wang, Wei

16. Taoyuan International Airport Services Co., Ltd.

Chairman Kuo June-Tsung (Representing Motc) 31,500,000 45

Director (President) Lee, Chih-Chiang (Note 1) 34,300,000 49

Director Hsieh, Su-Chien; Chang, Young; Wang, Houng; Chu, Te-Hsiu (Note 1)

Director Chen, Yen-Po; Chang, Chang-Chi; Li, Hung-Sheng; Lee, Chun-Hsiung (Representing Motc)

Director Hung, Ngai (Representing UPS) 4,200,000 6 Supervisor Li, Mi; Li, Shen-Yi

17. Taiwan Airport Service Co., Ltd.

Chairman Chang, Young (Note 1) 20,626,644 47.35

Director (President) Peng, Long-Min (Note 1) Director Chang, Cheng-Hao (Note 1)

Director Chung, Ting-Chun (Representing juridical person shareholder Rih Hsin Asset Management Company)

9,405,300 21.59

Director Chang, Chieh-Tang (Representing Goldsun Building Materials) 7,405,200 17 Supervisor Fang, Juo-Ling Supervisor Chen, Yao-Ming

17A Taiwan Airport Service (Samoa) Co., Ltd.

Authorized Signatory Chang, Young (Representing Taiwan Airport Service Co.) 5,876,976

(USD1, share) 100

18. Global Sky Express Ltd. Chairman Li, Chung-Hui 50,000 5 Director Liu, Der-Chuan; Shann, Da-Sin; Chang, Cheng-Hao (Note 1) 250,000 25

Director Pao, Hsueh-Chao 40,000 4 Director Huang, Nan-Sheng 50,000 5 Director Wei, Ching-Li 20,000 2 Director Hsiao, Yu-Hsin 20,000 2 Director Chung, Mei-Chih (Representing Leader Mutual Freight System) 20,000 2 Supervisor Huang, Hui-Na Supervisor Yeh, Chien-Tien 10,000 1 Supervisor Chiang, Ming-Fang (Representing Morrison Express) 50,000 5 President Hwang, Chun-Chyuan (Nominated by China Airlines)

Note 1: Representative of juridical person shareholder China Airlines. Note 2: Representative of juridical person shareholder CAL-Dynasty International, Inc.


E. Affiliated Company Business Overview Dec 31, 2019

Unit: NT$ thousands; EPS=NT$

Company Capital Total

Assets Total

Liabilities Total

Equity Operating Revenue

Operating Income (Loss)

Profit(Loss) EPS (Dollars)

1. CAL-Dynasty International, Inc. 785,135 1,451,427 174,881 1,276,546 363,339 51,974 41,262 15.78 1A Dynasty Properties Co., Ltd. 15,015 745,297 238,802 506,496 101,661 28,191 19,468 3,893.54 1B Dynasty Hotel of Hawaii, Inc. 120,120 524,683 96,567 428,116 262,051 20,698 14,204 35.51

2. CAL-Asia Investment Inc. 215,386 559,562 0 559,562 0 (1,189) 30,820 4.30 3. Dynasty Aerotech International

Corp. 77,270 210,237 114,567 95,670 400,060 22,089 17,008 220.12

4. Yestrip Co., Ltd. 16,000 67,653 42,480 25,173 31,652 (684) (480) (0.30)

5. CAL Park Co., Ltd. 1,500,000 5,429,229 3,923,450 1,505,779 345,569 66,268 1,163 0.008

6. CAL Hotel Co., Ltd.. 465,000 769,916 291,890 478,026 617,826 22,166 16,787 0.36

7. Taiwan Aircraft Maintenance and Engineering Co., Ltd.

1,350,000 3,515,478 2,593,492 921,986 31,717 (178,019) (206,151) (1.53)

8. Mandarin Airlines, Ltd. 2,001,825 7,557,633 5,948,601 1,609,032 8,607,182 118,378 204,018 1.02

9. Sabre Travel Network (Taiwan)

Ltd. 138,618 612,793 122,840 489,953 388,315 236,096 195,347 14.09

10. Tigerair Taiwan Co., Ltd. 2,000,000 13,337,093 10,534,749 2,802,344 9,513,321 1,087,316 808,718 4.04

11. China Pacific Laundry Services

Ltd. 250,000 383,410 76,962 306,448 257,661 33,761 27,327 1.09

12. Taiwan Air Cargo Terminal Ltd. 2,500,000 4,980,713 2,169,708 2,811,005 2,030,229 361,916 271,552 1.09

13. Kaohsiung Airport Catering Services Ltd.

400,500 1,419,764 476,446 943,318 2,186,765 360,827 292,632 7.31

13A Delica International Co., Ltd. 20,000 15,646 219 15,427 0 (1) (4) 0.003

15. China Pacific Catering Services

Ltd. 861,000 2,995,989 1,425,262 1,570,727 3,072,795 632,111 511,121 5.94

16. NORDAM Asia Ltd. 77,500 77,314 145 77,169 0 (152) (144) (0.02)

17. Taoyuan International Airport

Services Co., Ltd. 700,000 2,890,698 1,386,116 1,504,582 3,430,485 342,970 291,522 4.16

18. Taiwan Airport Service Co., Ltd. 435,600 1,415,951 832,774 583,177 1,117,038 158,607 156,861 3.60

18A Taiwan Airport Service (Samoa) Co., Ltd.

176,486 347,551 0 347,551 0 (11) 23,107 3.93

19. Global Sky Express Ltd. 10,000 36,442 7,266 29,176 121,543 7,987 6,392 6.39

Note 1: Capital, total assets, total liabilities, total equity were calculating using the exchange rate at the end of 2019.

Note 2: Operating revenue, operating profit, and income for the period were calculated using the 2019 quarterly average exchange rates. Note 3: Exchange rates at the end of 2019 were 1TWD=0.0333 USD, 3.6156 JPY, 0.2323 CNY.

Note 4: Quarterly average exchange rates in 2019 were as following:

Q1: 1TWD=0.0325USD, 3.5784JPY, 0.2196CNY. Q2: 1TWD=0.0321USD, 3.5542JPY, 0.2183CNY.

Q3: 1TWD=0.0321USD, 3.4490JPY, 0.2235CNY.

Q4: 1TWD=0.0326USD, 3.5453JPY, 0.2304CNY.

(2) Affiliated Company Consolidated Financial Statements: Information required to be disclosed regarding affiliated company consolidated financial statements is included in Appendix 1 Consolidated Financial Statements. The Company will no longer prepare a separate consolidated financial statement for affiliated companies.

(3) Relationship Report: China Airlines is not the subsidiary of any company, so a relationship report is not required.


8.2 Private Placement Securities in the Most Recent Years: None.

8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years:

APR 25, 2020 Units: NT$; shares; %

Company Capital Source of Funds

Stake in Subsidiary(%)

Date of Acquisition or

Disposal

Number of Shares and

Value of Stocks

Acquired

Number of Shares and

Value of Stocks

Disposed of

Investment Gain/Loss

Number of Shares and Value of Stock

Held as of the Printing Date of this

Report

Amount of Company

Endorsement /Guarantee of

Subsidiary

Dynasty Aerotech International Corp.

77,270,000 Equity Fund 100%

02/20/2020 - 152 220

0 shares 0

- 02/21/2020 - 300,000 485,539

02/25/2020 - 300,000 398,925

02/26/2020 - 214,000 270,365

Mandarin Airlines, Ltd. 2,001,825,000 Equity

Fund 93.99% - - - - 2,074,628 shares 14,585,000 -

Note: No subsidiary has a Company stock pledge nor has the Company lent money to any subsidiary.

8.4 Special Notes: None.

8.5 Situations with Major Impact on Shareholder Equity or Share Prices:

8.5.1 Change in the chairman of the board, general manager, or one-third or more of the directors of the Company. On April 2, 2019, the Company dismissed Mr. Ho, Nuan-Hsuan as juridical person director representative of the China Aviation Development Foundation in the Company. The Board of Directors of the Company elected Mr. Hsieh, Su-Chien as the new Chairman and concurrently as the President.

8.5.2 Signing of major memoranda, strategic alliances or other plans for business cooperation or major contracts A.On January 21, 2019, the Company approved the listing plan of its subsidiary, Tigerair Taiwan,

by a resolution of the Board of Directors. Since its establishment in 2014, Tigerair Taiwan has developed into a Low Cost Carrier (LCC) with a stable business model and sound financial structure. Considering the benefits of convenient fund raising in the future, financial autonomy and equity value enhancement, the Board of Directors resolved to carry out the listing plan of Tigerair Taiwan. In order to meet the requirements of listing review standards, the Board of Directors deliberated and resolved on May 8, 2019 to sell equity shares of Tigerair Taiwan held by the Company, and submitted it to the Shareholders' Annual General Meeting for deliberation and resolution on June 25 of the same year.

B. On June 19, 2019, the Company began negotiations with Airbus (France) to purchase A321neo aircrafts. In order to lock-in the delivery time, the Company signed a memorandum of agreement and continued to discuss business conditions.

C. On December 31, 2019, the Company renewed its housing and land lease contract with Taiwan Air Cargo Terminal Ltd.


8.5.3 Lawsuits, non-contentious matters, administrative actions, administrative disputes, injunctive procedures, or compulsory enforcement matters A. The Taoyuan Union of Pilots announced that it would go on strike at 6:00 a.m. on February 8

and that the strike would last until February 14. Under the witness of the Executive Yuan, the Ministry of Labor, the Ministry of Transportation and Communications, and the Taoyuan City Government, the Company reached an agreement with the Taoyuan Union of Pilots through the labor-management conference and signed the collective agreement. The union immediately announced the termination of the strike. The compensation for customers’ losses and various derivative expenses was preliminarily estimated to be around NT$154 million. According to the fifth appeal of the Agreement between the two parties, it was promised that the full salary of the 13th month will be changed to a flight safety bonus. The amount of the bonus was agreed to at the negotiation meeting on February 21. It was estimated that the annual expenditure will increase by around NT$190 million.

B. The Department of Labor of the Taoyuan City Government performed a labor inspection. On February 25, 2019, June 21, 2019, and December 4, 2019, the Company was fined NT$1 million in each instance because female worker nighttime work had not been approved by the labor union, which was in violation of Article 49, Paragraph 1 of the Labor Standards Act.

C. On October 2, 2019, the Department of Finance of the Taoyuan City Government imposed a fine of NT$6 million on the Company for violating Article 46, Paragraph 1 of the Tobacco and Alcohol Administration Act. The Company will implement and follow relevant laws and regulations and strengthen the legal education of its employees

8.5.4 Lawsuits, non-contentious matters, administrative actions, administrative disputes, injunctive procedures, or compulsory enforcement matters A. On July 26, 2019, the Company cooperated with the inspection and investigation unit to

conduct investigation on the sale of duty-free cigarettes on chartered flights of the Company.

B. In response to the COVID-19 pandemic, the Company and its group members have improved their pandemic prevention measures and adjusted the service content of catering and supplies for mainland-Taiwan air routes and Hong Kong-Macau-Taiwan air routes starting from January 28, 2020; The main consideration is to reduce personnel contact and reduce the unnecessary use of re-used products and use disposable products instead. At the same time, we also encourage passengers to bring their own products, such as environmental protection cups, to reduce the risk of infection. And in addition to the normal disinfection procedures for all cross-strait, Hong Kong and Macao flights arrival to Taiwan, the disinfection of the dining trays, handrails and overhead luggage cabinets in the cabin are carried out to maintain the health of passengers and crew members.


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re

all

the

sam

e as

the

com

pani

es r

equi

red

to b

e in

clud

ed i

n th

e co

nsol

idat

ed f

inan

cial

sta

tem

ents

of

pare

nt

and

subs

idia

ry c

ompa

nies

as

prov

ided

in

Inte

rnat

iona

l F

inan

cial

Rep

orti

ng S

tand

ard

10 “

Con

soli

date

d

Fin

anci

al S

tate

men

ts.”

R

elev

ant

info

rmat

ion

that

sho

uld

be d

iscl

osed

in

the

cons

olid

ated

fin

anci

al

stat

emen

ts o

f af

fili

ates

has

all

bee

n di

sclo

sed

in t

he c

onso

lida

ted

fina

ncia

l st

atem

ents

of

pare

nt a

nd

subs

idia

ry c

ompa

nies

. Hen

ce, w

e ha

ve n

ot p

repa

red

a se

para

te s

et o

f co

nsol

idat

ed f

inan

cial

sta

tem

ents

of

affi

liat

es.

Ver

y tr

uly

your

s,

CH

INA

AIR

LIN

ES

, LT

D.

By

Mar

ch 1

8, 2

020

(App

endi

x 1)

- 2

-

IND

EP

EN

DE

NT

AU

DIT

OR

S’

RE

PO

RT

The

Boa

rd o

f D

irec

tors

and

Sha

reho

lder

s C

hina

Air

line

s, L

td.

Op

inio

n

We

have

aud

ited

the

acc

ompa

nyin

g co

nsol

idat

ed f

inan

cial

sta

tem

ents

of

Chi

na A

irli

nes,

Ltd

. an

d it

s su

bsid

iari

es (

coll

ecti

vely

ref

erre

d to

as

the

“Gro

up”)

, w

hich

com

pris

e th

e co

nsol

idat

ed b

alan

ce

shee

ts a

s of

Dec

embe

r 31

, 20

19 a

nd 2

018,

and

the

con

soli

date

d st

atem

ents

of

com

preh

ensi

ve

inco

me,

ch

ange

s in

eq

uity

an

d ca

sh

flow

s fo

r th

e ye

ars

then

en

ded,

an

d th

e no

tes

to

the

cons

olid

ated

fi

nanc

ial

stat

emen

ts,

incl

udin

g a

sum

mar

y of

si

gnif

ican

t ac

coun

ting

po

lici

es.

(col

lect

ivel

y re

ferr

ed to

as

the

“con

soli

date

d fi

nanc

ial s

tate

men

ts”)

In o

ur o

pini

on,

the

acco

mpa

nyin

g co

nsol

idat

ed f

inan

cial

sta

tem

ents

pre

sent

fai

rly,

in

all

mat

eria

l re

spec

ts,

the

cons

olid

ated

fin

anci

al p

ositi

on o

f th

e G

roup

as

of D

ecem

ber

31,

2019

and

201

8, a

nd

its

cons

olid

ated

fin

anci

al p

erfo

rman

ce a

nd i

ts c

onso

lida

ted

cash

flo

ws

for

the

year

s th

en e

nded

in

acco

rdan

ce w

ith

the

Reg

ulat

ions

Gov

erni

ng t

he P

repa

rati

on o

f F

inan

cial

Rep

orts

by

Sec

urit

ies

Issu

ers,

an

d In

tern

atio

nal

Fin

anci

al

Rep

orti

ng

Sta

ndar

ds

(IF

RS

),

Inte

rnat

iona

l A

ccou

ntin

g S

tand

ards

(IA

S),

IF

RIC

Int

erpr

etat

ions

(IF

RIC

), a

nd S

IC I

nter

pret

atio

ns (

SIC

) en

dors

ed a

nd is

sued

in

to e

ffec

t by

the

Fin

anci

al S

uper

viso

ry C

omm

issi

on o

f th

e R

epub

lic o

f C

hina

.

Bas

is f

or O

pin

ion

We

cond

ucte

d ou

r au

dits

in

acco

rdan

ce w

ith

the

Reg

ulat

ions

Gov

erni

ng A

uditi

ng a

nd A

ttes

tati

on

of F

inan

cial

Sta

tem

ents

by

Cer

tifi

ed P

ubli

c A

ccou

ntan

ts a

nd a

udit

ing

stan

dard

s ge

nera

lly

acce

pted

in

the

Rep

ubli

c of

Chi

na.

Our

res

pons

ibil

itie

s un

der

thos

e st

anda

rds

are

furt

her

desc

ribe

d in

the

A

udit

ors’

Res

pons

ibil

itie

s fo

r th

e A

udit

of t

he C

onso

lida

ted

Fin

anci

al S

tate

men

ts s

ecti

on o

f ou

r re

port

. W

e ar

e in

depe

nden

t of

the

Gro

up i

n ac

cord

ance

wit

h T

he N

orm

of

Pro

fess

iona

l E

thic

s fo

r C

erti

fied

Pub

lic

Acc

ount

ant

of t

he R

epub

lic

of C

hina

, an

d w

e ha

ve f

ulfi

lled

our

oth

er e

thic

al

resp

onsi

bili

ties

in a

ccor

danc

e w

ith

thes

e re

quir

emen

ts. W

e be

liev

e th

at t

he a

udit

evid

ence

we

have

ob

tain

ed is

suf

fici

ent a

nd a

ppro

pria

te to

pro

vide

a b

asis

for

our

opi

nion

.

Key

Au

dit

Mat

ters

Key

aud

it m

atte

rs a

re th

ose

mat

ters

that

, in

our

prof

essi

onal

judg

men

t, w

ere

of m

ost s

igni

fica

nce

in

our

audi

t of

the

con

soli

date

d fi

nanc

ial

stat

emen

ts f

or t

he y

ear

ende

d D

ecem

ber

31,

2019

. T

hese

m

atte

rs w

ere

addr

esse

d in

the

con

text

of

our

audi

t of

the

con

soli

date

d fi

nanc

ial

stat

emen

ts a

s a

who

le,

and

in f

orm

ing

our

opin

ion

ther

eon,

and

we

do n

ot p

rovi

de a

sep

arat

e op

inio

n on

the

se

mat

ters

.

Hsi

eh, S

u-C

hien

142

- 3

-

The

key

aud

it m

atte

rs i

n th

e au

dit

of t

he c

onso

lida

ted

fina

ncia

l st

atem

ents

of

the

Gro

up a

re s

tate

d be

low

: P

asse

nger

Rev

enue

Rec

ogni

tion

In

acc

orda

nce

wit

h IF

RS

15

“Rev

enue

fro

m C

ontr

acts

wit

h C

usto

mer

s”,

pass

enge

r sa

les

are

acco

unte

d fo

r as

con

trac

t li

abil

itie

s be

fore

rel

evan

t tr

ansp

orta

tion

ser

vice

s ar

e pr

ovid

ed.

Aft

er

prov

idin

g th

e re

late

d se

rvic

es, c

ontr

act l

iabi

liti

es a

re r

ecla

ssif

ied

to p

asse

nger

rev

enue

. For

the

year

en

ded

Dec

embe

r 31

, 201

9, p

asse

nger

rev

enue

was

NT

$111

,413

,435

thou

sand

. Ref

er to

Not

es 4

and

27

to th

e ac

com

pany

ing

cons

olid

ated

fin

anci

al s

tate

men

ts f

or r

elat

ed d

etai

led

info

rmat

ion.

S

ince

rel

evan

t sa

les

can

only

be

reco

gniz

ed a

s pa

ssen

ger

reve

nue

whe

n pa

ssen

gers

act

ually

bo

arde

d, c

onfi

rmat

ion

from

eac

h pa

ssen

ger

hold

ing

the

tick

et w

ho a

ctua

lly

boar

ded

invo

lves

a

com

plic

ated

pro

cess

; the

refo

re, w

e id

enti

fied

pas

seng

er r

even

ue r

ecog

niti

on a

s a

key

audi

t mat

ter.

T

he m

ain

audi

t pro

cedu

res

that

we

perf

orm

ed in

clud

ed th

e fo

llow

ing:

1.

W

e un

ders

tood

and

test

ed th

e in

tern

al c

ontr

ol r

elat

ed to

the

proc

ess

of r

even

ue f

rom

pas

seng

er,

incl

udin

g m

anua

l and

aut

omat

ic c

ontr

ol.

2.

We

unde

rsto

od a

nd t

este

d th

e ef

fect

iven

ess

of t

he i

nfor

mat

ion

syst

em r

elat

ed t

o th

e pr

oces

s of

pa

ssen

ger

reve

nue.

3.

W

e sa

mpl

ed s

ever

al f

ligh

t ti

cket

s, w

hich

wer

e fl

own

and

reco

gniz

ed a

s re

venu

e, t

o ve

rify

w

heth

er t

he b

oard

ing

date

mat

ched

the

dat

e re

cord

ed o

n th

e ti

cket

s, f

rom

adv

ance

d sa

les

tick

ets.

In

itia

l App

lica

tion

of

IFR

S 1

6 (L

ease

s) -

Air

craf

t In

acc

orda

nce

wit

h IF

RS

16

“Lea

ses”

, air

craf

t lea

ses

init

ially

cla

ssif

ied

as f

inan

ce le

ases

und

er I

AS

17

sho

uld

be r

ecog

nize

d as

Rig

ht-o

f-us

e as

sets

and

lea

se l

iabi

liti

es i

n th

e co

nsol

idat

ed b

alan

ces

shee

t. A

s of

Dec

embe

r 31

, 20

19,

the

carr

ying

am

ount

of

Rig

ht-o

f-us

e as

sets

and

lea

se l

iabi

liti

es

(inc

ludi

ng f

inan

cial

lia

bili

ties

for

hed

ging

) re

lati

ng t

o ai

rcra

ft l

ease

s ar

e N

T$6

2,05

2,70

1 th

ousa

nd

and

NT

$60,

114,

778

thou

sand

, re

spec

tive

ly.

Ref

er

to

Not

es

4 an

d 21

to

th

e ac

com

pany

ing

cons

olid

ated

fin

anci

al s

tate

men

ts f

or r

elat

ed d

etai

led

info

rmat

ion.

C

hina

Air

line

s, M

anda

rin

Air

line

s an

d T

iger

air

Tai

wan

lea

sed

ten

777-

300E

R p

lane

s, f

ifte

en

A33

0-30

0 pl

anes

, fi

ftee

n 73

7-80

0 pl

anes

, te

n A

320-

200

plan

es,

six

ER

J190

pla

nes

and

thre

e A

RT

72-6

00 p

lane

s fo

r op

erat

ion.

Bec

ause

the

lea

se t

erm

of

airc

raft

is

high

er a

nd t

he a

mou

nt o

f re

ntal

is

high

er,

the

perc

enta

ge o

f ri

ght-

of-u

se a

sset

s an

d le

ase

liab

ilit

ies

of t

he a

ircr

aft

in t

he

cons

olid

ated

bal

ance

she

ets

is h

igh.

The

par

amet

ers

and

leas

e te

rms

are

dete

rmin

ed b

y th

e m

anag

emen

t, an

d th

e ca

lcul

atio

n of

the

lea

se l

iabi

liti

es w

ill

affe

ct t

he c

arry

ing

amou

nt a

nd

depr

ecia

tion

exp

ense

of

the

righ

t-of

-use

ass

ets

and

leas

e li

abil

itie

s (i

nclu

ding

fin

anci

al li

abil

itie

s fo

r he

dgin

g) r

elat

ing

to a

ircr

afts

. The

refo

re, w

e id

enti

fied

init

ial a

ppli

cati

on o

f IF

RS

16 -

Air

craf

ts a

s a

key

audi

t mat

ter.

T

he m

ain

audi

t pro

cedu

res

that

we

perf

orm

ed in

clud

ed th

e fo

llow

ing:

1.

W

e un

ders

tood

and

test

ed th

e ef

fect

iven

ess

of th

e in

form

atio

n sy

stem

rel

ated

to th

e ca

lcul

atio

n of

leas

e li

abil

itie

s.

- 4

-

2.

We

sele

cted

one

of

the

rent

al p

aym

ents

sch

edul

e of

the

air

craf

t fr

om t

he l

ease

cal

cula

tion

sy

stem

, to

re

calc

ulat

e am

ount

of

th

e le

ase

liab

ilit

ies

bala

nce

and

fina

ncia

l co

st

and

amor

tiza

tion

of

righ

t-of

-use

, an

d re

late

d ca

rryi

ng a

mou

nt.

Als

o, w

e se

lect

ed s

ever

al a

ircr

aft

leas

e co

ntra

cts

from

the

car

ryin

g am

ount

s of

air

craf

t le

ase

liab

ilit

y, a

nd c

heck

ed i

f th

ere

was

an

y di

ffer

ence

bet

wee

n re

ntal

in

the

airc

raft

ren

tal

paym

ent

sche

dule

and

lea

se t

erm

in

the

cont

ract

ed r

enta

ls.

And

we

chec

ked

if t

he l

ease

ter

m u

sed

the

rent

al p

aym

ent

sche

dule

was

co

nsis

tent

wit

h th

e co

ntra

ct.

Oth

er M

atte

r A

ud

it b

y O

ther

In

dep

end

ent

Au

dit

ors

We

did

not

audi

t so

me

subs

idia

ries

whi

ch w

ere

incl

uded

in

the

cons

olid

ated

fin

anci

al s

tate

men

ts.

The

fin

anci

al s

tate

men

ts a

nd d

iscl

osed

info

rmat

ion

wer

e au

dite

d by

oth

er in

depe

nden

t aud

itors

, and

ou

r au

dit o

pini

on is

bas

ed s

olel

y on

the

audi

t rep

ort o

f ot

her

inde

pend

ent a

udit

ors.

A

s of

Dec

embe

r 31

, 20

19,

tota

l as

sets

of

thes

e su

bsid

iari

es a

mou

nted

to

NT

$13,

337,

093

thou

sand

do

llar

s, r

epre

sent

ing

4.55

% o

f th

e to

tal

asse

ts.

For

the

yea

r en

ded

Dec

embe

r 31

, 20

19,

reve

nue

from

the

se s

ubsi

diar

ies

amou

nted

to

NT

$9,5

13,3

21th

ousa

nd d

olla

rs,

repr

esen

ting

5.6

5% o

f th

e

tota

l rev

enue

. O

ther

Mat

ter

Par

ent

Com

pan

y O

nly

Fin

anci

al S

tate

men

ts

We

have

als

o au

dite

d th

e pa

rent

com

pany

onl

y fi

nanc

ial

stat

emen

ts o

f C

hina

Air

line

s, L

td.

as o

f an

d fo

r th

e ye

ars

ende

d D

ecem

ber

31,

2019

and

201

8 on

whi

ch w

e ha

ve i

ssue

d an

unm

odif

ied

opin

ion.

R

esp

onsi

bil

itie

s of

Man

agem

ent

and

Th

ose

Ch

arge

d w

ith

Gov

ern

ance

for

th

e C

onso

lid

ated

F

inan

cial

Sta

tem

ents

M

anag

emen

t is

res

pons

ible

for

the

pre

para

tion

and

fai

r pr

esen

tati

on o

f th

e co

nsol

idat

ed f

inan

cial

st

atem

ents

in

acco

rdan

ce w

ith

the

Reg

ulat

ions

Gov

erni

ng t

he P

repa

rati

on o

f F

inan

cial

Rep

orts

by

Sec

urit

ies

Issu

ers,

an

d In

tern

atio

nal

Fin

anci

al

Rep

orti

ng

Stan

dard

s (I

FR

S),

In

tern

atio

nal

Acc

ount

ing

Sta

ndar

ds

(IA

S),

IF

RIC

In

terp

reta

tions

(I

FR

IC),

an

d S

IC

Inte

rpre

tati

ons

(SIC

) en

dors

ed a

nd is

sued

into

eff

ect b

y th

e F

inan

cial

Sup

ervi

sory

Com

mis

sion

of

the

Rep

ubli

c of

Chi

na,

and

for

such

int

erna

l co

ntro

l as

man

agem

ent

dete

rmin

es i

s ne

cess

ary

to e

nabl

e th

e pr

epar

atio

n of

co

nsol

idat

ed f

inan

cial

sta

tem

ents

tha

t ar

e fr

ee f

rom

mat

eria

l m

isst

atem

ent,

whe

ther

due

to

frau

d or

er

ror.

In

pre

pari

ng t

he c

onso

lida

ted

fina

ncia

l st

atem

ents

, m

anag

emen

t is

res

pons

ible

for

ass

essi

ng t

he

Gro

up’s

abi

lity

to c

onti

nue

as a

goi

ng c

once

rn,

disc

losi

ng,

as a

ppli

cabl

e, m

atte

rs r

elat

ed t

o go

ing

conc

ern

and

usin

g th

e go

ing

conc

ern

basi

s of

acc

ount

ing

unle

ss m

anag

emen

t ei

ther

int

ends

to

liqu

idat

e th

e G

roup

or

to c

ease

ope

rati

ons,

or

has

no r

eali

stic

alt

erna

tive

but

to d

o so

. T

hose

cha

rged

wit

h go

vern

ance

, inc

ludi

ng th

e au

dit

com

mit

tee

and

supe

rvis

ors,

are

res

pons

ible

for

ov

erse

eing

the

Gro

up’s

fin

anci

al r

epor

ting

pro

cess

. A

ud

itor

s’ R

esp

onsi

bil

itie

s fo

r th

e A

ud

it o

f th

e C

onso

lid

ated

Fin

anci

al S

tate

men

ts

Our

ob

ject

ives

ar

e to

ob

tain

re

ason

able

as

sura

nce

abou

t w

heth

er

the

cons

olid

ated

fi

nanc

ial

stat

emen

ts a

s a

who

le a

re f

ree

from

mat

eria

l m

isst

atem

ent,

whe

ther

due

to

frau

d or

err

or,

and

to

issu

e an

aud

itor

s’ r

epor

t th

at i

nclu

des

our

opin

ion.

Rea

sona

ble

assu

ranc

e is

a h

igh

leve

l of

as

sura

nce,

but

is

not

a gu

aran

tee

that

an

audi

t co

nduc

ted

in a

ccor

danc

e w

ith

the

audi

ting

sta

ndar

ds

gene

rall

y ac

cept

ed i

n th

e R

epub

lic

of C

hina

wil

l al

way

s de

tect

a m

ater

ial

mis

stat

emen

t w

hen

it ex

ists

. Mis

stat

emen

ts c

an a

rise

fro

m f

raud

or

erro

r an

d ar

e co

nsid

ered

mat

eria

l if,

indi

vidu

ally

or

in

the

aggr

egat

e, t

hey

coul

d re

ason

ably

be

expe

cted

to

infl

uenc

e th

e ec

onom

ic d

ecis

ions

of

user

s ta

ken

on th

e ba

sis

of th

ese

cons

olid

ated

fin

anci

al s

tate

men

ts.

143

- 5

-

As

part

of

an a

udit

in

acco

rdan

ce w

ith

the

audi

ting

sta

ndar

ds g

ener

ally

acc

epte

d in

the

Rep

ublic

of

Chi

na,

we

exer

cise

pro

fess

iona

l ju

dgm

ent

and

mai

ntai

n pr

ofes

sion

al s

kept

icis

m t

hrou

ghou

t th

e au

dit.

We

also

: 1.

Id

enti

fy a

nd a

sses

s th

e ri

sks

of m

ater

ial

mis

stat

emen

t of

the

con

soli

date

d fi

nanc

ial

stat

emen

ts,

whe

ther

due

to

frau

d or

err

or,

desi

gn a

nd p

erfo

rm a

udit

pro

cedu

res

resp

onsi

ve t

o th

ose

risk

s,

and

obta

in a

udit

evi

denc

e th

at i

s su

ffic

ient

and

app

ropr

iate

to

prov

ide

a ba

sis

for

our

opin

ion.

T

he r

isk

of n

ot d

etec

ting

a m

ater

ial

mis

stat

emen

t re

sult

ing

from

fra

ud i

s hi

gher

tha

n fo

r on

e re

sult

ing

from

er

ror,

as

fr

aud

may

in

volv

e co

llus

ion,

fo

rger

y,

inte

ntio

nal

omis

sion

s,

mis

repr

esen

tati

ons,

or

the

over

ride

of

inte

rnal

con

trol

. 2.

O

btai

n an

und

erst

andi

ng o

f in

tern

al c

ontr

ol r

elev

ant

to t

he a

udit

in

orde

r to

des

ign

audi

t pr

oced

ures

tha

t ar

e ap

prop

riat

e in

the

cir

cum

stan

ces,

but

not

for

the

pur

pose

of

expr

essi

ng a

n op

inio

n on

the

effe

ctiv

enes

s of

the

Gro

up’s

inte

rnal

con

trol

. 3.

E

valu

ate

the

appr

opri

aten

ess

of a

ccou

ntin

g po

lici

es u

sed

and

the

reas

onab

lene

ss o

f ac

coun

ting

es

tim

ates

and

rel

ated

dis

clos

ures

mad

e by

man

agem

ent.

4.

Con

clud

e on

th

e ap

prop

riat

enes

s of

m

anag

emen

t’s

use

of

the

goin

g co

ncer

n ba

sis

of

acco

unti

ng a

nd,

base

d on

the

aud

it e

vide

nce

obta

ined

, w

heth

er a

mat

eria

l un

cert

aint

y ex

ists

re

late

d to

eve

nts

or c

ondi

tion

s th

at m

ay c

ast

sign

ific

ant

doub

t on

the

Gro

up’s

abi

lity

to

cont

inue

as

a go

ing

conc

ern.

If

we

conc

lude

tha

t a

mat

eria

l un

cert

aint

y ex

ists

, we

are

requ

ired

to

dra

w a

tten

tion

in

our

audi

tors

’ re

port

to

the

rela

ted

disc

losu

res

in t

he c

onso

lidat

ed f

inan

cial

st

atem

ents

or,

if

such

dis

clos

ures

are

ina

dequ

ate,

to

mod

ify

our

opin

ion.

Our

con

clus

ions

are

ba

sed

on t

he a

udit

evi

denc

e ob

tain

ed u

p to

the

dat

e of

our

aud

itor

s’ r

epor

t. H

owev

er,

futu

re

even

ts o

r co

ndit

ions

may

cau

se th

e G

roup

to c

ease

to c

onti

nue

as a

goi

ng c

once

rn.

5.

Eva

luat

e th

e ov

eral

l pre

sent

atio

n, s

truc

ture

and

con

tent

of

the

cons

olid

ated

fin

anci

al s

tate

men

ts,

incl

udin

g th

e di

sclo

sure

s, a

nd w

heth

er t

he c

onso

lida

ted

fina

ncia

l st

atem

ents

rep

rese

nt t

he

unde

rlyi

ng tr

ansa

ctio

ns a

nd e

vent

s in

a m

anne

r th

at a

chie

ves

fair

pre

sent

atio

n.

6.

Obt

ain

suff

icie

nt a

nd a

ppro

pria

te a

udit

evi

denc

e re

gard

ing

the

fina

ncia

l in

form

atio

n of

ent

itie

s or

bus

ines

s ac

tivi

ties

wit

hin

the

Gro

up t

o ex

pres

s an

opi

nion

on

the

cons

olid

ated

fin

anci

al

stat

emen

ts.

We

are

resp

onsi

ble

for

the

dire

ctio

n, s

uper

visi

on,

and

perf

orm

ance

of

the

grou

p au

dit.

We

rem

ain

sole

ly r

espo

nsib

le f

or o

ur a

udit

opin

ion.

W

e co

mm

unic

ate

wit

h th

ose

char

ged

wit

h go

vern

ance

reg

ardi

ng, a

mon

g ot

her

mat

ters

, the

pla

nned

sc

ope

and

timin

g of

the

aud

it a

nd s

igni

fica

nt a

udit

fin

ding

s, i

nclu

ding

any

sig

nifi

cant

def

icie

ncie

s in

inte

rnal

con

trol

that

we

iden

tify

dur

ing

our

audi

t. W

e al

so p

rovi

de t

hose

cha

rged

wit

h go

vern

ance

wit

h a

stat

emen

t th

at w

e ha

ve c

ompl

ied

wit

h re

leva

nt

ethi

cal

requ

irem

ents

re

gard

ing

inde

pend

ence

, an

d to

co

mm

unic

ate

wit

h th

em

all

rela

tion

ship

s an

d ot

her

mat

ters

tha

t m

ay r

easo

nabl

y be

tho

ught

to

bear

on

our

inde

pend

ence

, an

d w

here

app

lica

ble,

rel

ated

saf

egua

rds.

F

rom

the

mat

ters

com

mun

icat

ed w

ith

thos

e ch

arge

d w

ith

gove

rnan

ce,

we

dete

rmin

e th

ose

mat

ters

th

at w

ere

of m

ost

sign

ific

ance

in

the

audi

t of

the

con

soli

date

d fi

nanc

ial

stat

emen

ts f

or t

he y

ear

ende

d D

ecem

ber

31, 2

019

and

are

ther

efor

e th

e ke

y au

dit m

atte

rs. W

e de

scri

be th

ese

mat

ters

in o

ur

audi

tors

’ re

port

unl

ess

law

or

regu

lati

on p

recl

udes

pub

lic

disc

losu

re a

bout

the

mat

ter

or w

hen,

in

extr

emel

y ra

re c

ircu

mst

ance

s, w

e de

term

ine

that

a m

atte

r sh

ould

not

be

com

mun

icat

ed in

our

rep

ort

beca

use

the

adve

rse

cons

eque

nces

of

doin

g so

wou

ld r

easo

nabl

y be

exp

ecte

d to

out

wei

gh t

he

publ

ic in

tere

st b

enef

its

of s

uch

com

mun

icat

ion.

- 6

-

The

eng

agem

ent

part

ners

on

the

audi

t re

sult

ing

in t

his

inde

pend

ent

audi

tors

’ re

port

are

Jui

-Cha

n H

uang

and

Shi

uh-R

an, C

heng

. D

eloi

tte

& T

ouch

e T

aipe

i, T

aiw

an

Rep

ubli

c of

Chi

na

Mar

ch 1

8, 2

020

N

otic

e to

Rea

ders

T

he a

ccom

pany

ing

cons

olid

ated

fin

anci

al s

tate

men

ts a

re i

nten

ded

only

to

pres

ent

the

cons

olid

ated

fi

nanc

ial

posi

tion

, fin

anci

al p

erfo

rman

ce a

nd c

ash

flow

s in

acc

orda

nce

wit

h ac

coun

ting

pri

ncip

les

and

prac

tice

s ge

nera

lly

acce

pted

in

the

Rep

ubli

c of

Chi

na a

nd n

ot t

hose

of

any

othe

r ju

risd

icti

ons.

T

he s

tand

ards

, pro

cedu

res

and

prac

tice

s to

aud

it s

uch

cons

olid

ated

fin

anci

al s

tate

men

ts a

re t

hose

ge

nera

lly

appl

ied

in th

e R

epub

lic

of C

hina

. F

or

the

conv

enie

nce

of

read

ers,

th

e in

depe

nden

t au

dito

rs’

repo

rt

and

the

acco

mpa

nyin

g co

nsol

idat

ed f

inan

cial

sta

tem

ents

hav

e be

en t

rans

late

d in

to E

ngli

sh f

rom

the

ori

gina

l C

hine

se

vers

ion

prep

ared

and

use

d in

the

Rep

ubli

c of

Chi

na.

If t

here

is

any

conf

lict

bet

wee

n th

e E

ngli

sh

vers

ion

and

the

orig

inal

Chi

nese

ver

sion

or

any

diff

eren

ce in

the

inte

rpre

tati

on o

f the

two

vers

ions

, th

e C

hine

se-l

angu

age

inde

pend

ent

audi

tors

’ re

port

and

con

soli

date

d fi

nanc

ial

stat

emen

ts s

hall

pr

evai

l.

144

- 7

-

CH

INA

AIR

LIN

ES

, LT

D. A

ND

SU

BS

IDIA

RIE

S

CO

NS

OL

IDA

TE

D B

AL

AN

CE

SH

EE

TS

D

EC

EM

BE

R 3

1, 2

019

AN

D 2

018

(In

Th

ousa

nd

s of

New

Tai

wan

Dol

lars

)

2019

2018

A

SS

ET

S

Am

oun

t

%

A

mou

nt

%

CU

RR

EN

T A

SS

ET

S

Cas

h an

d ca

sh e

quiv

alen

ts (

Not

es 4

, 6, 1

9 an

d 33

)

$

28

,459

,528

10

$

24,9

37,5

37

11

F

inan

cial

ass

ets

at f

air

valu

e th

roug

h pr

ofit

or

loss

- c

urre

nt (

Not

es 4

, 7 a

nd 3

2)

51

2,19

2

-

206,

001

-

Fin

anci

al a

sset

s at

am

orti

zed

cost

(N

otes

9 a

nd 3

2)

2,

355,

095

1

3,

856,

660

2

Fin

anci

al a

sset

s fo

r he

dgin

g -

curr

ent (

Not

es 4

and

32)

9,62

6

-

32,9

06

-

Not

es a

nd a

ccou

nts

rece

ivab

le, n

et (

Not

es 4

, 10

and

32)

8,

520,

834

3

10

,038

,528

4 N

otes

and

acc

ount

s re

ceiv

able

- r

elat

ed p

arti

es (

Not

es 3

2 an

d 33

)

10,3

48

-

9,

043

-

Oth

er r

ecei

vabl

es (

Not

es 4

and

32)

774,

206

-

87

9,19

1

- C

urre

nt ta

x as

sets

(N

otes

4 a

nd 2

9)

54

,689

-

18,9

48

-

Inve

ntor

ies,

net

(N

otes

4 a

nd 1

1)

8,

470,

113

3

8,

654,

710

4

Non

-cur

rent

ass

ets

held

for

sal

e (N

otes

4, 5

and

12)

-

-

46,1

54

-

Oth

er a

sset

s -

curr

ent (

Not

es 6

and

18)

2,65

5,71

1

1

4,14

7,88

2

2

Tot

al c

urre

nt a

sset

s

51,8

22,3

42

18

52,8

27,5

60

23

NO

N-C

UR

RE

NT

AS

SE

TS

F

inan

cial

ass

ets

at f

air

valu

e th

roug

h ot

her

com

preh

ensi

ve in

com

e -

non-

curr

ent (

Not

es 8

and

32)

209,

221

-

13

2,19

1

- F

inan

cial

ass

ets

at a

mor

tize

d co

st (

Not

es 4

and

9)

10

5,58

6

-

-

- In

vest

men

ts a

ccou

nted

for

usi

ng th

e eq

uity

met

hod

(Not

es 4

and

14)

2,22

3,79

3

1

2,20

0,14

9

1 P

rope

rty,

pla

nt a

nd e

quip

men

t (N

otes

4, 5

, 15

and

35)

14

5,88

6,97

1

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16

3,10

7,71

8

71

Rig

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f-us

e as

sets

(N

otes

4, 2

1 an

d 35

)

71,0

33,6

17

24

-

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vest

men

t pro

pert

ies

(Not

es 4

and

16)

2,07

5,06

8

1

2,07

5,34

5

1 O

ther

inta

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le a

sset

s (N

otes

4 a

nd 1

7)

1,

182,

692

-

1,

210,

796

1

Def

erre

d in

com

e ta

x as

set (

Not

es 4

, 5 a

nd 2

9)

5,

337,

626

2

5,

152,

070

2

Oth

er a

sset

s -

non-

curr

ent (

Not

es 1

8, 2

1, 3

2 an

d 34

)

13,1

71,0

63

4

3,

430,

753

1

T

otal

non

-cur

rent

ass

ets

24

1,22

5,63

7

82

17

7,30

9,02

2

77

T

OT

AL

$

293

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L

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AN

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QU

ITY

C

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RE

NT

LIA

BIL

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S

Sho

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deb

ts (

Not

e 19

)

$

38

0,00

0

-

$

-

-

Fin

anci

al li

abil

itie

s at

fai

r va

lue

thro

ugh

prof

it or

loss

- c

urre

nt (

Not

es 4

, 5, 7

and

32)

11,7

49

-

221

- F

inan

cial

liab

ilit

ies

for

hedg

ing

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rren

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otes

4, 2

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d 32

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8,61

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56

0

-

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es a

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ccou

nts

paya

ble

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e 32

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1,49

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1,

594,

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nts

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late

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rtie

s (N

otes

32

and

33)

54

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-

53

2,81

5

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Oth

er p

ayab

les

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es 2

2 an

d 32

)

13,1

87,9

72

5

14,1

46,1

98

6 C

urre

nt ta

x lia

bili

ties

(Not

es 4

and

29)

374,

178

-

164,

181

- L

ease

liab

ilitie

s -

curr

ent (

Not

es 3

, 4 a

nd 2

1)

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340,

873

1

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Pro

visi

ons

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rren

t (N

otes

4 a

nd 2

4)

36

0,39

3

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32

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5

-

Con

trac

t lia

bili

ties

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urre

nt (

Not

e 23

)

21,0

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73

7

19,5

46,4

55

9 B

onds

pay

able

and

put

opt

ion

of c

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onds

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on (

Not

es 4

, 20,

27

and

32)

10

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cur

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19,

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and

35)

14

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7

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ital

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ligat

ions

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Not

es 4

, 21,

32

and

35)

-

-

633,

398

- O

ther

cur

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liab

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es (

Not

e 33

)

3,83

0,57

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3,

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115

2

Tot

al c

urre

nt li

abil

ities

76,3

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27

26

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eriv

ativ

e fi

nanc

ial l

iabi

litie

s fo

r he

dgin

g -

non-

curr

ent (

Not

es 3

, 4, 2

1 an

d 33

)

42,4

20,2

05

15

-

- B

onds

pay

able

- n

on-c

urre

nt (

Not

es 4

, 20,

27

and

32)

22

,052

,625

8

28

,473

,710

12

L

oans

and

deb

ts -

non

-cur

rent

(N

otes

19,

32

and

35)

53

,514

,891

18

60,6

86,1

48

26

Con

trac

t lia

bili

ties

- n

on-c

urre

nt (

Not

es 4

and

23)

2,23

6,31

1

1

1,

903,

665

1 P

rovi

sion

s -

non-

curr

ent (

Not

es 4

and

24)

10,0

11,4

64

3

8,47

3,46

4

4

Def

erre

d ta

x li

abil

ities

(N

otes

4 a

nd 2

9)

55

7,14

2

-

18

8,44

7

-

Lea

se li

abili

ties

- no

n-cu

rren

t (N

otes

3, 4

, 21

and

25)

15

,801

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5

-

- C

apit

al le

ase

obli

gati

ons

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n-cu

rren

t (N

otes

4, 2

1, 3

2 an

d 35

)

-

-

2,

945

- A

ccru

ed p

ensi

on c

osts

(N

otes

4, 5

and

25)

9,43

5,03

5

3

8,

803,

382

4 O

ther

non

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rent

liab

ilit

ies

(Not

e 32

)

534,

938

-

607,

845

-

Tot

al n

on-c

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nt li

abil

itie

s

156,

564,

335

53

10

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47

Tot

al li

abil

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s

232,

915,

862

79

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OF

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20

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19

54

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C

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al s

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2,

488,

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1

1,24

1,21

4

-

Ret

aine

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Leg

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ve

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6,41

6

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12,9

67

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118,

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1,

144,

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1,

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1 O

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equ

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1,

196,

233

-

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23

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-

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372)

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T

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ity

attr

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able

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wne

rs o

f th

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56

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20

57,0

81,5

72

25

N

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LL

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ST

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3,57

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17

21

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26

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$ 2

93,0

47,9

79

100

$ 2

30,1

36,5

82

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The

acc

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g no

tes

are

an in

tegr

al p

art o

f th

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inan

cial

sta

tem

ents

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- 8

-

CH

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LIN

ES

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31,

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are)

20

19

20

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%

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%

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es 4

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and

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$

168

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100

$ 1

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11,6

07

1

00

C

OS

TS

(N

otes

4, 9

, 11,

17,

24,

25,

27

and

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151,

757,

232

90

153,

504,

076

90

G

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PR

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16,6

86,9

28

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31

10

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14,0

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8

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O

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, 8 a

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988

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60

6,45

3

1

Oth

er g

ains

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loss

es (

Not

es 1

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2, 1

4, 1

5, 2

7

and

31)

(473

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)

-

(534

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-

Fin

ance

cos

ts (

Not

es 9

, 27

and

32)

(3,3

40,1

19)

(2)

(1,3

79,9

85)

(1)

Sha

re o

f th

e pr

ofit

of

asso

ciat

es a

nd jo

int v

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e 14

)

33

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5

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367,

246

-

Tot

al n

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)

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272,

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OT

HE

R C

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EH

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It

ems

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wil

l not

be

recl

assi

fied

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pr

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or

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(L

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n on

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men

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4, 2

7 an

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23,8

84

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nrea

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n in

vest

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equ

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des

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ted

as a

t fai

r va

lue

thro

ugh

othe

r co

mpr

ehen

sive

inco

me

(Not

e 8)

79

,392

-

930

- R

emea

sure

men

t of

defi

ned

bene

fit p

lans

(N

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4

and

26)

(781

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)

-

(851

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)

-

Sha

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f ot

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ve lo

ss o

f as

soci

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int v

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the

equi

ty m

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d (N

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4, 1

5 an

d 31

)

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2)

-

(33,

242)

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lati

ng to

item

s th

at w

ill n

ot b

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clas

sifi

ed s

ubse

quen

tly to

pro

fit o

r lo

ss

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e 28

)

14

5,16

6

-

187,

881

-

(607

,042

)

-

(672

,413

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-

(Con

tinu

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145

- 9

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CH

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, LT

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20

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Am

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Item

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$

26

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Gai

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4, 2

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1,

411,

623

-

85

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-

Inco

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T

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146

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59

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Issu

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1,

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565,

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Cas

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118,

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144,

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42,6

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25

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57,0

81,5

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2,

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11

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-

-

-

-

-

- C

ash

divi

dend

s -

$0.2

0960

737

per

shar

e

-

-

-

-

(1,1

36,2

78 )

-

-

-

-

-

-

(1

,136

,278

)

-

(1,1

36,2

78 )

C

hang

es in

cap

ital

sur

plus

fro

m d

ivid

ends

dis

trib

uted

to

subs

idia

ries

-

606

-

-

-

-

-

-

-

-

-

60

6

-

606

A

ctua

l dis

posa

l of

inte

rest

s in

sub

sidi

arie

s

-

1,24

7,08

7

-

-

-

-

-

-

-

-

-

1,24

7,08

7

7,54

6

1,25

4,63

3

Net

pro

fit (

loss

) fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 201

9

-

-

-

-

(1,1

99,7

98 )

-

-

-

-

-

-

(1

,199

,798

)

524,

796

(6

75,0

02 )

O

ther

com

preh

ensi

ve in

com

e (l

oss)

for

the

year

end

ed

Dec

embe

r 31

, 201

9 ne

t of

inco

me

tax

-

-

-

-

(5

77,4

27 )

(5

3,41

1 )

-

64

,538

-

1,11

9,01

3

-

552,

713

(8

9,95

5 )

46

2,75

8

Tot

al c

ompr

ehen

sive

inco

me

(los

s) f

or th

e ye

ar e

nded

D

ecem

ber

31, 2

019

-

-

-

-

(1

,777

,225

)

(53,

411

)

-

64,5

38

-

1,

119,

013

-

(6

47,0

85 )

43

4,84

1

(212

,244

)

Cas

h di

vide

nds

from

sub

sidi

arie

s pa

id to

non

-con

trol

ling

in

tere

sts

-

-

-

-

-

-

-

-

-

-

-

-

61

1,84

1

611,

841

N

on-c

ontr

olli

ng in

tere

sts

aris

ing

from

acq

uisi

tion

of

subs

idia

ries

-

-

-

-

-

-

-

-

-

-

-

-

(416

,438

)

(416

,438

)

Los

s of

con

trol

of

subs

idia

ries

-

-

-

-

-

8,36

8

-

105

-

-

-

8,

473

(2

4,95

7 )

(1

6,48

4 )

B

AL

AN

CE

AT

DE

CE

MB

ER

31,

201

9

$

54

,209

,846

$

2,

488,

907

$

466,

416

$

12,9

67

$

(1,7

77,2

25 )

$

(54,

707

)

$

-

$

107,

262

$

-

$

1,

143,

678

$

(43,

372

)

$

56

,553

,772

$

3,

578,

345

$

60,1

32,1

17

The

acc

ompa

nyin

g no

tes

are

an in

tegr

al p

art o

f th

e co

nsol

idat

ed f

inan

cial

sta

tem

ents

.

147

- 11

-

CH

INA

AIR

LIN

ES

, LT

D. A

ND

SU

BS

IDIA

RIE

S

CO

NS

OL

IDA

TE

D S

TA

TE

ME

NT

S O

F C

AS

H F

LO

WS

F

OR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1, 2

019

AN

D 2

018

(In

Th

ousa

nd

s of

New

Tai

wan

Dol

lars

)

20

19

20

18

C

AS

H F

LO

WS

FR

OM

OP

ER

AT

ING

AC

TIV

ITIE

S

(Los

s) I

ncom

e be

fore

inco

me

tax

$

(9

6,81

7)

$

3,

081,

249

Adj

ustm

ents

for

ope

rati

ng a

ctiv

itie

s:

Dep

reci

atio

n ex

pens

es

32,6

01,4

00

19,3

25,0

83

Am

orti

zati

on e

xpen

ses

198,

237

191,

979

Exp

ecte

d cr

edit

loss

rec

ogni

zed

on tr

ade

rece

ivab

les

24,0

96

49,8

24

Net

gai

n on

fai

r va

lue

chan

ges

of f

inan

cial

ass

ets

and

liab

ilit

ies

held

fo

r tr

adin

g

(2

7,58

0)

(11,

168)

In

tere

st in

com

e

(4

17,4

46)

(330

,710

) D

ivid

end

inco

me

(21,

422)

(9

,603

) S

hare

of

prof

it of

ass

ocia

tes

and

join

t ven

ture

s

(3

32,3

05)

(367

,246

) (G

ain)

loss

on

disp

osal

of

prop

erty

, pla

nt a

nd e

quip

men

t

(3

2,46

0)

270,

597

Gai

n on

dis

posa

l of

inve

stm

ents

acc

ount

ed f

or u

sing

the

equi

ty

met

hod

(7,6

56)

(450

,195

) L

oss

on d

ispo

sal o

f no

n-cu

rren

t ass

ets

held

for

sal

e

10

,462

36

8,99

2 Im

pair

men

t los

s on

non

-cur

rent

ass

ets

held

for

sal

e

-

75,4

37

Impa

irm

ent l

oss

reco

gniz

ed o

n pr

oper

ty, p

lant

, equ

ipm

ent

-

50

,000

L

oss

on in

vent

orie

s an

d pr

oper

ty, p

lant

and

equ

ipm

ent

572,

026

623,

022

Net

(ga

in)

loss

on

fore

ign

curr

ency

exc

hang

e

(5

9,98

7)

298,

787

Fin

ance

cos

ts

3,34

0,11

9

1,

379,

985

Rec

ogni

tion

of

prov

isio

ns

4,60

8,92

4

3,

386,

052

Am

orti

zati

on o

f un

real

ized

on

sale

- le

aseb

acks

10

3,77

5

-

Oth

ers

(1,4

84)

- A

mor

tiza

tion

of

unre

aliz

ed g

ain

on s

ale-

leas

ebac

ks

-

(1

3,88

8)

Cha

nges

in o

pera

ting

ass

ets

and

liab

ilit

ies

Fin

anci

al a

sset

s m

anda

tori

ly c

lass

ifie

d as

at f

air

valu

e th

roug

h pr

ofit

or

loss

(2

78,7

41)

269,

682

Fin

anci

al li

abil

itie

s m

anda

tori

ly c

lass

ifie

d as

at f

air

valu

e th

roug

h pr

ofit

or

loss

11

,528

(9

,359

) N

otes

and

acc

ount

s re

ceiv

able

1,

564,

298

(1,3

04,9

48)

Acc

ount

s re

ceiv

able

- r

elat

ed p

arti

es

66,5

38

253,

540

Oth

er r

ecei

vabl

es

(49,

138)

(1

00,4

00)

Inve

ntor

ies

(118

,317

)

(2

88,9

41)

Oth

er c

urre

nt a

sset

s

54

8,15

6

15

,763

N

otes

and

acc

ount

s pa

yabl

e

(1

4,32

6)

993,

434

Acc

ount

s pa

yabl

e -

rela

ted

part

ies

(224

,931

)

(9

7,75

3)

Oth

er p

ayab

les

(832

,288

)

53

5,21

1 C

ontr

act l

iabi

liti

es

1,84

7,28

6

3,

256,

101

Pro

visi

ons

(2,7

99,3

14)

(3,3

10,0

89)

Oth

er c

urre

nt li

abil

itie

s

20

2,81

5

73

,958

A

ccru

ed p

ensi

on li

abil

itie

s

(1

49,6

78)

(205

,340

) O

ther

liab

ilit

ies

(5,1

55)

2,69

8 C

ash

gene

rate

d fr

om o

pera

tion

s

40

,230

,615

28

,001

,754

In

tere

st r

ecei

ved

401,

190

301,

465

Div

iden

ds r

ecei

ved

355,

311

228,

636

(Con

tinu

ed)

- 12

-

CH

INA

AIR

LIN

ES

, LT

D. A

ND

SU

BS

IDIA

RIE

S

CO

NS

OL

IDA

TE

D S

TA

TE

ME

NT

S O

F C

AS

H F

LO

WS

F

OR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1, 2

019

AN

D 2

018

(In

Th

ousa

nd

s of

New

Tai

wan

Dol

lars

)

20

19

20

18

In

tere

st p

aid

$

(3

,124

,960

)

$

(1,3

19,6

90)

Inco

me

tax

paid

(3

35,5

44)

(185

,208

)

Net

cas

h ge

nera

ted

from

ope

rati

ng a

ctiv

itie

s

37

,526

,612

27

,026

,957

CA

SH

FL

OW

S F

RO

M I

NV

ES

TIN

G A

CT

IVIT

IES

A

cqui

siti

on o

f am

orti

zed

cost

fin

anci

al a

sset

s

(2

,089

,871

)

(3

,460

,496

) D

ispo

sal o

f am

orti

zed

cost

fin

anci

al a

sset

s

3,

447,

202

1,62

1,54

6 P

roce

eds

from

dis

posa

l of

non-

curr

ent a

sset

s he

ld f

or s

ale

35,6

92

688,

427

Pay

men

ts f

or p

rope

rty,

pla

nt a

nd e

quip

men

t

(3

,316

,078

)

(4

,608

,600

) P

roce

eds

from

dis

posa

l of

prop

erty

, pla

nt a

nd e

quip

men

t

71

,194

33

3,28

4 In

crea

se in

ref

unda

ble

depo

sits

(4

40,4

43)

(265

,335

) D

ecre

ase

in r

efun

dabl

e de

posi

ts

218,

547

391,

487

Incr

ease

in p

repa

ymen

ts f

or e

quip

men

t

(1

5,65

8,89

8)

(14,

991,

412)

In

crea

se in

long

-ter

m le

ase

rece

ivab

le

-

(7

85)

Incr

ease

in c

ompu

ter

soft

war

e co

sts

(172

,639

)

(1

84,2

23)

Dec

reas

e in

res

tric

ted

asse

ts

38,6

36

59,7

26

Pro

ceed

s fr

om d

ispo

sal o

f as

soci

ates

acc

ount

ed f

or u

sing

the

equi

ty

met

hod

1,86

6,47

4

-

Pro

ceed

s fr

om a

cqui

siti

on o

f jo

int v

entu

res

acco

unte

d fo

r us

ing

the

equi

ty m

etho

d

(3

5,52

5)

- N

et c

ash

outf

low

on

disp

osal

of

subs

idia

ries

(N

ote

31)

(17,

413)

-

Acq

uisi

tion

of

subs

idia

ries

(N

ote

30)

-

13

6,76

9

Net

cas

h us

ed in

inve

stin

g ac

tivi

ties

(1

6,05

3,12

2)

(20,

279,

612)

CA

SH

FL

OW

S F

RO

M F

INA

NC

ING

AC

TIV

ITIE

S

Pay

men

ts f

or b

uy-b

ack

of o

rdin

ary

shar

es

-

(4

69,3

93)

Dec

reas

e in

sho

rt-t

erm

deb

ts

380,

000

(120

,000

) P

roce

eds

from

issu

ance

of

bond

s pa

yabl

e

3,

500,

000

10,5

12,0

00

Rep

aym

ents

of

bond

s pa

yabl

e

(4

,445

,900

)

(2

,700

,000

) P

roce

eds

from

long

-ter

m b

orro

win

gs

9,07

8,69

0

18

,285

,457

R

epay

men

ts o

f lo

ng-t

erm

bor

row

ings

and

cap

ital

leas

e ob

liga

tion

s

(1

7,81

9,75

0)

(28,

587,

288)

R

epay

men

ts o

f th

e pr

inci

pal p

orti

on o

f le

ase

liab

ilit

ies

(11,

692,

310)

-

Pro

ceed

s fr

om g

uara

ntee

dep

osit

s re

ceiv

ed

180,

360

126,

578

Ref

unds

of

guar

ante

e de

posi

ts r

ecei

ved

(149

,198

)

(7

0,20

4)

Pro

ceed

s fr

om s

ale

- le

aseb

acks

4,

905,

660

- D

ivid

ends

pai

d to

ow

ners

of

the

Com

pany

(1

,135

,672

)

(1

,193

,040

) C

ash

divi

dend

s pa

id to

non

-con

trol

ling

inte

rest

s

(4

16,4

38)

(171

,019

)

Net

cas

h us

ed in

fin

anci

ng a

ctiv

itie

s

(1

7,61

4,55

8)

(4,3

86,9

09)

E

FF

EC

TS

OF

EX

CH

AN

GE

RA

TE

CH

AN

GE

S O

N T

HE

BA

LA

NC

E

OF

CA

SH

HE

LD

IN

FO

RE

IGN

CU

RR

EN

CIE

S

(336

,941

)

(8

,231

) (C

onti

nued

)

148

- 13

-

CH

INA

AIR

LIN

ES

, LT

D. A

ND

SU

BS

IDIA

RIE

S

CO

NS

OL

IDA

TE

D S

TA

TE

ME

NT

S O

F C

AS

H F

LO

WS

F

OR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1, 2

019

AN

D 2

018

(In

Th

ousa

nd

s of

New

Tai

wan

Dol

lars

)

20

19

20

18

N

ET

IN

CR

EA

SE

IN

CA

SH

AN

D C

AS

H E

QU

IVA

LE

NT

S

$

3,

521,

991

$

2,

352,

205

C

AS

H A

ND

CA

SH

EQ

UIV

AL

EN

TS

AT

TH

E B

EG

INN

ING

OF

TH

E

YE

AR

24

,937

,537

22

,585

,332

CA

SH

AN

D C

AS

H E

QU

IVA

LE

NT

S A

T T

HE

EN

D O

F T

HE

YE

AR

$

28,4

59,5

28

$

24

,937

,537

T

he a

ccom

pany

ing

note

s ar

e an

inte

gral

par

t of

the

cons

olid

ated

fin

anci

al s

tate

men

ts.

(Con

clud

ed)

- 14

-

CH

INA

AIR

LIN

ES

, LT

D. A

ND

SU

BS

IDIA

RIE

S

NO

TE

S T

O C

ON

SO

LID

AT

ED

FIN

AN

CIA

L S

TA

TE

ME

NT

S

FO

R T

HE

YE

AR

S E

ND

ED

DE

CE

MB

ER

31,

201

9 A

ND

201

8 (I

n T

hou

san

ds

of N

ew T

aiw

an D

olla

rs, U

nle

ss S

tate

d O

ther

wis

e)

1.

GE

NE

RA

L I

NF

OR

MA

TIO

N

Chi

na A

irli

nes,

Ltd

. (t

he “

Com

pany

”) w

as f

ound

ed i

n 19

59 a

nd i

ts s

hare

s ha

ve b

een

list

ed o

n th

e T

aiw

an

Sto

ck E

xcha

nge

sinc

e F

ebru

ary

26,

1993

. T

he C

ompa

ny p

rim

aril

y pr

ovid

es a

ir t

rans

port

ser

vice

s fo

r pa

ssen

gers

and

car

go. I

ts o

ther

ope

rati

ons

incl

ude

(a)

mai

l ser

vice

s; (

b) g

roun

d se

rvic

es a

nd r

outi

ne a

ircr

aft

mai

nten

ance

; (c

) m

ajor

mai

nten

ance

of

flig

ht e

quip

men

t; (

d) c

omm

unic

atio

ns a

nd d

ata

proc

essi

ng s

ervi

ces

to o

ther

air

line

s; (

e) th

e sa

le o

f ai

rcra

ft p

arts

, equ

ipm

ent a

nd th

e en

tire

air

craf

t; a

nd (

f) le

asin

g of

air

craf

t. T

he m

ajor

sha

reho

lder

s of

the

Com

pany

are

the

Chi

na A

viat

ion

Dev

elop

men

t F

ound

atio

n (C

AD

F)

and

the

Nat

iona

l Dev

elop

men

t Fun

d (N

DF

), E

xecu

tive

Yua

n. A

s of

Dec

embe

r 31

, 201

9 an

d 20

18, C

AD

F a

nd N

DF

bo

th h

eld

44.0

3% o

f th

e C

ompa

ny’s

sha

res.

2.

AP

PR

OV

AL

OF

FIN

AN

CIA

L S

TA

TE

ME

NT

S

The

con

soli

date

d fi

nanc

ial

stat

emen

ts o

f th

e C

ompa

ny a

nd i

ts s

ubsi

diar

ies

(col

lect

ivel

y re

ferr

ed t

o as

the

“G

roup

”) w

ere

appr

oved

by

the

Com

pany

’s b

oard

of

dire

ctor

s on

Mar

ch 1

8, 2

020.

3

. A

PP

LIC

AT

ION

OF

NE

W, A

ME

ND

ED

AN

D R

EV

ISE

D S

TA

ND

AR

DS

AN

D I

NT

ER

PR

ET

AT

ION

S

a.

In

itia

l app

lica

tion

of

the

amen

dmen

ts to

the

Reg

ulat

ions

Gov

erni

ng th

e P

repa

rati

on o

f F

inan

cial

Rep

orts

by

Sec

urit

ies

Issu

ers

(FS

C)

and

the

Inte

rnat

iona

l F

inan

cial

Rep

orti

ng S

tand

ards

(IF

RS

), I

nter

nati

onal

A

ccou

ntin

g S

tand

ards

(I

AS

),

Inte

rpre

tati

ons

of

IFR

S

(IF

RIC

),

and

Inte

rpre

tati

ons

of

IAS

(S

IC)

endo

rsed

and

issu

ed in

to e

ffec

t by

the

FSC

E

xcep

t fo

r th

e fo

llow

ing,

the

ini

tial

app

lica

tion

of

the

amen

dmen

ts t

o th

e R

egul

atio

ns G

over

ning

the

P

repa

rati

on o

f F

inan

cial

Rep

orts

by

Sec

urit

ies

Issu

ers

and

the

IFR

Ss

endo

rsed

and

iss

ued

into

eff

ect

by

the

FS

C d

id n

ot h

ave

mat

eria

l im

pact

on

the

Gro

up’s

acc

ount

ing

polic

ies:

IF

RS

16

“Lea

ses”

IF

RS

16

prov

ides

a c

ompr

ehen

sive

mod

el f

or t

he i

dent

ific

atio

n of

lea

se a

rran

gem

ents

and

the

ir

trea

tmen

t in

the

fin

anci

al s

tate

men

ts o

f bo

th l

esse

e an

d le

ssor

. It

supe

rsed

es I

AS

17

“Lea

ses”

, IF

RIC

4

“Det

erm

inin

g w

heth

er a

n A

rran

gem

ent c

onta

ins

a L

ease

”, a

nd a

num

ber

of r

elat

ed in

terp

reta

tion

s. R

efer

to

Not

e 4

for

info

rmat

ion

rela

ting

to th

e re

leva

nt a

ccou

ntin

g po

lici

es.

Def

init

ion

of a

leas

e T

he G

roup

ele

cted

to a

pply

the

guid

ance

of

IFR

S 1

6 in

det

erm

inin

g w

heth

er c

ontr

acts

are

, or

cont

ain,

a

leas

e on

ly t

o co

ntra

cts

ente

red

into

(or

cha

nged

) on

or

afte

r Ja

nuar

y 1,

201

9. C

ontr

acts

ide

ntif

ied

as

cont

aini

ng a

lea

se u

nder

IA

S 1

7 an

d IF

RIC

4 a

re n

ot b

e re

asse

ssed

and

acc

ount

ed f

or i

n ac

cord

ance

w

ith

the

tran

siti

onal

pro

visi

ons

unde

r IF

RS

16.

149

- 15

-

The

Gro

up a

s le

ssee

T

he G

roup

rec

ogni

zes

righ

t-of

-use

ass

ets,

or

inve

stm

ent

prop

ertie

s if

the

rig

ht-o

f-us

e as

sets

mee

t th

e de

fini

tion

of

inve

stm

ent

prop

erti

es, a

nd l

ease

lia

bili

ties

for

all

lea

ses

on t

he c

onso

lida

ted

bala

nce

shee

ts

exce

pt f

or t

hose

who

se p

aym

ents

und

er l

ow-v

alue

and

sho

rt-t

erm

lea

ses

are

reco

gniz

ed a

s ex

pens

es o

n a

stra

ight

-lin

e ba

sis.

On

the

cons

olid

ated

sta

tem

ents

of

com

preh

ensi

ve i

ncom

e, t

he G

roup

pre

sent

s th

e de

prec

iati

on e

xpen

se c

harg

ed o

n ri

ght-

of-u

se a

sset

s se

para

tely

fro

m t

he i

nter

est

expe

nse

accr

ued

on

leas

e li

abil

itie

s; in

tere

st is

com

pute

d us

ing

the

effe

ctiv

e in

tere

st m

etho

d. O

n th

e co

nsol

idat

ed s

tate

men

ts

of c

ash

flow

s, c

ash

paym

ents

for

the

pri

ncip

al p

orti

on o

f le

ase

liab

ilit

ies

are

clas

sifi

ed w

ithi

n fi

nanc

ing

acti

viti

es;

cash

pay

men

ts f

or t

he i

nter

est

port

ion

are

clas

sifi

ed w

ithi

n op

erat

ing

acti

viti

es.

Pri

or t

o th

e ap

plic

atio

n of

IF

RS

16,

pay

men

ts u

nder

ope

rati

ng l

ease

con

trac

ts,

incl

udin

g pr

oper

ty i

nter

est

qual

ifie

d as

inve

stm

ent p

rope

rtie

s, w

ere

reco

gniz

ed a

s ex

pens

es o

n a

stra

ight

-lin

e ba

sis.

Cas

h fl

ows

for

oper

atin

g le

ases

wer

e cl

assi

fied

wit

hin

oper

atin

g ac

tivi

ties

on

the

cons

olid

ated

sta

tem

ents

of

cash

flo

ws.

Lea

sed

asse

ts a

nd f

inan

ce l

ease

pay

able

s w

ere

reco

gniz

ed o

n th

e co

nsol

idat

ed b

alan

ce s

heet

s fo

r co

ntra

cts

clas

sifi

ed a

s fi

nanc

e le

ases

.

Lea

se l

iabi

liti

es w

ere

reco

gniz

ed o

n Ja

nuar

y 1,

201

9 fo

r le

ases

cla

ssif

ied

as o

pera

ting

lea

ses

unde

r IA

S

17.

Lea

se l

iabi

liti

es a

re m

easu

red

at t

he p

rese

nt v

alue

of

the

rem

aini

ng l

ease

pay

men

ts,

disc

ount

ed

usin

g th

e le

ssee

’s i

ncre

men

tal

borr

owin

g ra

te o

n Ja

nuar

y 1,

201

9. R

ight

-of-

use

asse

ts a

re m

easu

red

at

an a

mou

nt e

qual

to

the

leas

e li

abil

itie

s, a

djus

ted

by t

he a

mou

nt o

f an

y pr

epai

d or

acc

rued

lea

se

paym

ents

. The

Gro

up a

pplie

s IA

S 3

6 to

all

rig

ht-o

f-us

e as

sets

. F

or le

ases

cla

ssif

ied

as f

inan

ce le

ases

und

er I

AS

17,

the

carr

ying

am

ount

of

righ

t-of

-use

ass

ets

and

leas

e li

abil

itie

s on

Jan

uary

1,

2019

was

det

erm

ined

as

the

carr

ying

am

ount

of

the

leas

ed a

sset

s an

d fi

nanc

e le

ase

paya

bles

as

of D

ecem

ber

31, 2

018.

If

the

Gro

up d

eter

min

es t

hat

a sa

le a

nd l

ease

back

tra

nsac

tion

doe

s no

t sa

tisf

y th

e re

quir

emen

ts o

f IF

RS

15

to

be a

ccou

nted

for

as

a sa

le o

f an

ass

et,

it i

s ac

coun

ted

for

as a

fin

anci

ng t

rans

acti

on.

If i

t sa

tisf

ies

the

requ

irem

ents

to

be a

ccou

nted

for

as

a sa

le o

f an

ass

et, t

he G

roup

rec

ogni

zes

only

the

am

ount

of

any

gain

or

loss

whi

ch r

elat

es t

o th

e ri

ghts

tra

nsfe

rred

to

the

buye

r-le

ssor

. P

rior

to

the

appl

icat

ion

of I

FR

S

16,

the

leas

ebac

k po

rtio

n is

cla

ssif

ied

as e

ithe

r a

fina

nce

leas

e or

an

oper

atin

g le

ase

and

acco

unte

d fo

r di

ffer

entl

y.

The

Gro

up d

oes

not

reas

sess

sal

e an

d le

aseb

ack

tran

sact

ions

ent

ered

int

o be

fore

Jan

uary

1,

2019

to

dete

rmin

e w

heth

er t

he t

rans

fer

of a

n un

derl

ying

ass

et s

atis

fies

the

req

uire

men

ts i

n IF

RS

15

to b

e ac

coun

ted

for

as a

sal

e. U

pon

init

ial

appl

icat

ion

of I

FR

S 1

6, t

he a

fore

men

tion

ed t

rans

itio

nal

prov

isio

n fo

r a

less

ee i

s ap

plie

d to

the

lea

seba

ck p

ortio

n. I

n ad

diti

on,

for

asse

t ac

coun

ted

for

as a

sal

e an

d a

fina

nce

leas

e un

der

IAS

17,

the

Gro

up c

onti

nues

to a

mor

tize

any

gai

ns o

n sa

les

over

the

leas

e te

rm.

- 16

-

The

les

see’

s w

eigh

ted

aver

age

incr

emen

tal

borr

owin

g ra

te a

ppli

ed t

o le

ase

liab

ilit

ies

reco

gniz

ed o

n Ja

nuar

y 1,

201

9 w

as 2

.58%

. The

dif

fere

nce

betw

een

the

(i)

leas

e li

abil

itie

s re

cogn

ized

and

(ii)

ope

rati

ng

leas

e co

mm

itm

ents

on

Dec

embe

r 31

, 201

8 is

exp

lain

ed a

s fo

llow

s:

The

fut

ure

min

imum

leas

e pa

ymen

ts o

f no

n-ca

ncel

labl

e op

erat

ing

leas

e co

mm

itm

ents

on

Dec

embe

r 31

, 201

8

$

78,0

30,3

70

Und

isco

unte

d am

ount

on

Janu

ary

1, 2

019

$

78

,030

,370

D

isco

unte

d am

ount

usi

ng th

e in

crem

enta

l bor

row

ing

rate

on

Janu

ary

1, 2

019

$

67

,420

,164

A

dd: F

inan

ce le

ase

paya

ble

on D

ecem

ber

31, 2

018

633,

775

Add

: Adj

ustm

ents

as

a re

sult

of

a di

ffer

ent t

reat

men

t of

exte

nsio

n an

d te

rmin

atio

n op

tion

s

8,

191,

127

Add

: Oth

er

1,97

0,82

9 L

ess:

Der

ivat

ive

fina

ncia

l ins

trum

ents

for

hed

ging

(4

1,91

9,50

8 )

Lea

se li

abil

itie

s re

cogn

ized

on

Janu

ary

1, 2

019

$

36

,296

,387

T

he G

roup

as

less

or

The

Gro

up d

oes

not m

ake

any

adju

stm

ents

to le

ases

in w

hich

it is

a le

ssor

and

acc

ount

s fo

r th

ose

leas

es

unde

r IF

RS

16

star

ting

fro

m J

anua

ry 1

, 201

9.

The

impa

ct o

n as

sets

, lia

bili

ties

and

equ

ity

as o

f Ja

nuar

y 1,

201

9 fr

om th

e in

itia

l app

lica

tion

of

IFR

S 1

6 is

set

out

as

foll

ows:

As

Ori

gin

ally

S

tate

d o

n

Jan

uar

y 1,

201

9

Ad

just

men

ts

Ari

sin

g fr

om

Init

ial

Ap

pli

cati

on

R

esta

ted

on

Ja

nu

ary

1, 2

019

Pre

paym

ents

for

leas

es

$

86

1,04

5

$

(861

,045

)

$

- R

efun

dabl

e de

posi

ts

1,08

9,69

0

(2

5,61

7)

1,

064,

073

Rig

ht-o

f-us

e as

sets

-

78,4

99,3

74

78,4

99,3

74

Pro

pert

y, p

lant

and

equ

ipm

ent

163,

107,

718

(30,

682)

163,

077,

036

Tot

al e

ffec

t on

asse

ts

$

165

,058

,453

$

77,5

82,0

30

$

242

,640

,483

L

ease

liab

ilit

ies

- cu

rren

t

$

-

$

3,92

4,77

6

$

3,92

4,77

6 L

ease

liab

ilit

ies

- no

n-cu

rren

t

-

32,3

71,6

11

32,3

71,6

11

Fin

ance

leas

e pa

yabl

es

633,

775

(633

,775

)

-

Acc

rued

ren

t pay

able

90

(9

0)

-

Fin

anci

al li

abil

itie

s fo

r he

dgin

g -

curr

ent

560

5,94

7,44

9

5,

948,

009

Fin

anci

al li

abil

itie

s fo

r he

dgin

g -

non-

curr

ent

-

35

,972

,059

35

,972

,059

T

otal

eff

ect o

n li

abil

itie

s

$

634,

425

$

77

,582

,030

$

78,2

16,4

55

150

- 17

-

b.

New

IF

RS

s in

issu

e bu

t not

yet

end

orse

d an

d is

sued

into

eff

ect b

y th

e F

SC

New

IF

RS

s

Eff

ecti

ve D

ate

An

nou

nce

d b

y IA

SB

A

men

dmen

ts to

IF

RS

3 “

Def

init

ion

of B

usin

ess”

J

anua

ry 1

, 202

0 (N

ote

1)

Am

endm

ents

to I

FR

S 9

, IA

S 3

9 an

d IF

RS

7 “

Inte

rest

Rat

e B

ench

mar

k R

efor

m”

J

anua

ry 1

, 202

0 (N

ote

2)

Am

endm

ents

to I

AS

1 a

nd I

AS

8 “

Def

init

ion

of M

ater

iali

ty”

Jan

uary

1, 2

020

(Not

e 3)

N

ote

1:

Unl

ess

stat

ed o

ther

wis

e, t

he a

bove

New

IF

RS

s ar

e ef

fect

ive

for

annu

al p

erio

ds b

egin

ning

on

or a

fter

thei

r re

spec

tive

eff

ecti

ve d

ates

. N

ote

2:

Bus

ines

s co

mbi

nati

ons

that

beg

an a

fter

Jan

uary

1,

2020

and

acq

uisi

tion

of

asse

ts a

fter

the

af

ores

aid

date

are

sub

ject

ed to

the

amen

dmen

t. N

ote

3:

The

am

endm

ent i

s ap

plie

d fo

r th

e an

nual

per

iod

begi

nnin

g af

ter

Janu

ary

1, 2

020.

A

s of

th

e da

te

the

cons

olid

ated

fi

nanc

ial

stat

emen

ts

wer

e au

thor

ized

fo

r is

sue,

th

e G

roup

is

co

ntin

uous

ly a

sses

sing

the

pos

sibl

e im

pact

tha

t th

e ap

plic

atio

n of

oth

er s

tand

ards

and

int

erpr

etat

ions

w

ill

have

on

the

Gro

up’s

fin

anci

al p

osit

ion

and

fina

ncia

l pe

rfor

man

ce a

nd w

ill

disc

lose

the

rel

evan

t im

pact

whe

n th

e as

sess

men

t is

com

plet

ed.

c.

N

ew I

FR

Ss

in is

sue

but n

ot y

et e

ndor

sed

and

issu

ed in

to e

ffec

t by

the

FS

C

New

IF

RS

s

Eff

ecti

ve D

ate

An

nou

nce

d b

y IA

SB

(N

ote)

A

men

dmen

ts to

IF

RS

10

and

IAS

28

“Sal

e or

Con

trib

utio

n of

Ass

ets

betw

een

an I

nves

tor

and

its

Ass

ocia

te o

r Jo

int V

entu

re”

To

be d

eter

min

ed b

y IA

SB

IFR

S 1

7 “I

nsur

ance

Con

trac

ts”

Jan

uary

1, 2

021

Am

endm

ents

to I

AS

1 “

Cla

rify

the

Cla

ssif

icat

ion

of L

iabi

liti

es a

s C

urre

nt o

r N

on-c

urre

nt”

Jan

uary

1, 2

022

Not

e:

Unl

ess

stat

ed o

ther

wis

e, t

he a

bove

New

IF

RS

s ar

e ef

fect

ive

for

annu

al r

epor

ting

per

iods

be

ginn

ing

on o

r af

ter

thei

r re

spec

tive

eff

ecti

ve d

ates

. T

he a

ppli

cati

on o

f ne

w I

FRS

s in

issu

e bu

t not

yet

end

orse

d an

d is

sued

into

eff

ect b

y th

e F

SC

wou

ld n

ot

have

any

mat

eria

l im

pact

on

the

Gro

up’s

acc

ount

ing

poli

cies

. A

s of

the

dat

e th

e co

nsol

idat

ed f

inan

cial

st

atem

ents

wer

e au

thor

ized

for

iss

ue,

the

Gro

up i

s co

ntin

uous

ly a

sses

sing

the

pos

sibl

e im

pact

tha

t th

e ap

plic

atio

n of

oth

er s

tand

ards

and

int

erpr

etat

ions

wil

l ha

ve o

n th

e G

roup

’s f

inan

cial

pos

itio

n an

d fi

nanc

ial p

erfo

rman

ce a

nd w

ill d

iscl

ose

the

rele

vant

impa

ct w

hen

the

asse

ssm

ent i

s co

mpl

eted

. 4

. S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

S

tate

men

t of

Com

pli

ance

T

he c

onso

lida

ted

fina

ncia

l st

atem

ents

hav

e be

en p

repa

red

in a

ccor

danc

e w

ith

the

Reg

ulat

ions

Gov

erni

ng

the

Pre

para

tion

of

Fin

anci

al R

epor

ts b

y S

ecur

itie

s Is

suer

s an

d IF

RS

s as

end

orse

d an

d is

sued

int

o ef

fect

by

the

FS

C.

- 18

-

Bas

is o

f P

rep

arat

ion

T

he c

onso

lida

ted

fina

ncia

l st

atem

ents

hav

e be

en p

repa

red

on t

he h

isto

rica

l co

st b

asis

exc

ept

for

fina

ncia

l in

stru

men

ts w

hich

are

mea

sure

d at

fai

r va

lue.

T

he f

air

valu

e m

easu

rem

ents

, w

hich

are

gro

uped

int

o L

evel

s 1

to 3

bas

ed o

n th

e de

gree

to

whi

ch t

he f

air

valu

e m

easu

rem

ent

inpu

ts a

re o

bser

vabl

e an

d ba

sed

on t

he s

igni

fica

nce

of t

he i

nput

s to

the

fai

r va

lue

mea

sure

men

t in

its

enti

rety

, are

des

crib

ed a

s fo

llow

s:

1)

Lev

el 1

inpu

ts a

re q

uote

d pr

ices

(un

adju

sted

) in

act

ive

mar

kets

for

iden

tica

l ass

ets

or li

abil

itie

s;

2)

Lev

el 2

inp

uts

are

inpu

ts o

ther

tha

n qu

oted

pri

ces

incl

uded

wit

hin

Lev

el 1

tha

t ar

e ob

serv

able

for

an

asse

t or

liab

ilit

y, e

ithe

r di

rect

ly (

i.e. a

s pr

ices

) or

indi

rect

ly (

i.e. d

eriv

ed f

rom

pri

ces)

; and

3)

L

evel

3 in

puts

are

uno

bser

vabl

e in

puts

for

an

asse

t or

liab

ility

. C

urr

ent

and

Non

-cu

rren

t A

sset

s an

d L

iab

ilit

ies

Cur

rent

ass

ets

incl

ude:

1)

A

sset

s he

ld p

rim

aril

y fo

r th

e pu

rpos

e of

trad

ing;

2)

A

sset

s ex

pect

ed to

be

real

ized

wit

hin

12 m

onth

s af

ter

the

repo

rtin

g pe

riod

; and

3)

C

ash

and

cash

equ

ival

ents

unl

ess

the

asse

t is

rest

rict

ed f

rom

bei

ng e

xcha

nged

or

used

to s

ettl

e a

liab

ilit

y fo

r at

leas

t 12

mon

ths

afte

r th

e re

port

ing

peri

od.

Cur

rent

liab

ilit

ies

incl

ude:

1)

L

iabi

liti

es h

eld

prim

aril

y fo

r th

e pu

rpos

e of

trad

ing;

2)

L

iabi

liti

es d

ue t

o be

set

tled

wit

hin

12 m

onth

s af

ter

the

repo

rtin

g pe

riod

, ev

en i

f an

agr

eem

ent

to

refi

nanc

e, o

r to

res

ched

ule

paym

ents

, on

a l

ong-

term

bas

is i

s co

mpl

eted

aft

er t

he r

epor

ting

per

iod

and

befo

re th

e co

nsol

idat

ed f

inan

cial

sta

tem

ents

are

aut

hori

zed

for

issu

e; a

nd

3)

Lia

bili

ties

for

whi

ch t

he G

roup

doe

s no

t ha

ve a

n un

cond

itio

nal

righ

t to

def

er s

ettl

emen

t fo

r at

lea

st 1

2 m

onth

s af

ter

the

repo

rtin

g pe

riod

. Ter

ms

of a

liab

ilit

y th

at c

ould

, at t

he o

ptio

n of

the

coun

terp

arty

, res

ult

in it

s se

ttle

men

t by

the

issu

e of

equ

ity

inst

rum

ents

do

not a

ffec

t its

cla

ssif

icat

ion.

A

sset

s an

d li

abil

itie

s th

at a

re n

ot c

lass

ifie

d as

cur

rent

are

cla

ssif

ied

as n

on-c

urre

nt.

Bas

is o

f C

onso

lid

atio

n

The

con

soli

date

d fi

nanc

ial

stat

emen

ts i

ncor

pora

te t

he f

inan

cial

sta

tem

ents

of

the

Com

pany

and

the

ent

itie

s co

ntro

lled

by

the

Com

pany

. Inc

ome

and

expe

nses

of

subs

idia

ries

acq

uire

d or

dis

pose

d of

dur

ing

the

peri

od

are

incl

uded

in

the

cons

olid

ated

sta

tem

ents

of

prof

it o

r lo

ss a

nd o

ther

com

preh

ensi

ve i

ncom

e fr

om t

he

effe

ctiv

e da

tes

of a

cqui

siti

ons

up t

o th

e ef

fect

ive

date

s of

dis

posa

ls,

as a

ppro

pria

te.

Whe

n ne

cess

ary,

ad

just

men

ts a

re m

ade

to t

he f

inan

cial

sta

tem

ents

of

subs

idia

ries

to

brin

g th

eir

acco

unti

ng p

olic

ies

into

lin

e w

ith

thos

e us

ed

by

the

Com

pany

. A

ll

intr

a-gr

oup

tran

sact

ions

, ba

lanc

es,

inco

me

and

expe

nses

ar

e el

imin

ated

in

full

upo

n co

nsol

idat

ion.

Tot

al c

ompr

ehen

sive

inc

ome

of s

ubsi

diar

ies

is a

ttri

bute

d to

the

ow

ners

of

the

Com

pany

and

to

the

non-

cont

roll

ing

inte

rest

s ev

en i

f th

is r

esul

ts i

n th

e no

n-co

ntro

lling

in

tere

sts

havi

ng a

def

icit

bal

ance

.

151

- 19

-

Cha

nges

in

the

Gro

up’s

ow

ners

hip

inte

rest

s in

sub

sidi

arie

s th

at d

o no

t re

sult

in

the

Gro

up l

osin

g co

ntro

l ov

er t

he s

ubsi

diar

ies

are

acco

unte

d fo

r as

equ

ity

tran

sact

ions

. T

he c

arry

ing

amou

nts

of t

he i

nter

ests

of

the

Gro

up a

nd t

he n

on-c

ontr

olli

ng i

nter

ests

are

adj

uste

d to

ref

lect

the

cha

nges

in

thei

r re

lati

ve i

nter

ests

in

the

subs

idia

ries

. Any

dif

fere

nce

betw

een

the

amou

nt b

y w

hich

the

non-

cont

roll

ing

inte

rest

s ar

e ad

just

ed a

nd th

e fa

ir v

alue

of

the

cons

ider

atio

n pa

id o

r re

ceiv

ed i

s re

cogn

ized

dir

ectl

y in

equ

ity

and

attr

ibut

ed t

o th

e ow

ners

of

the

Com

pany

. W

hen

the

Gro

up l

oses

con

trol

of

a su

bsid

iary

, a g

ain

or l

oss

is r

ecog

nize

d in

pro

fit

or l

oss

and

is c

alcu

late

d as

the

dif

fere

nce

betw

een

(i)

the

aggr

egat

e of

the

fai

r va

lue

of t

he c

onsi

dera

tion

rec

eive

d an

d an

y in

vest

men

t re

tain

ed i

n th

e fo

rmer

sub

sidi

ary

at i

ts f

air

valu

e at

the

dat

e w

hen

cont

rol

is l

ost

and

(ii)

the

as

sets

(in

clud

ing

any

good

wil

l) a

nd l

iabi

litie

s an

d an

y no

n-co

ntro

llin

g in

tere

sts

of t

he f

orm

er s

ubsi

diar

y at

th

eir

carr

ying

am

ount

s at

the

dat

e w

hen

cont

rol

is l

ost.

The

Gro

up a

ccou

nts

for

all

amou

nts

reco

gniz

ed i

n ot

her

com

preh

ensi

ve i

ncom

e in

rel

atio

n to

tha

t su

bsid

iary

on

the

sam

e ba

sis

as w

ould

be

requ

ired

had

the

G

roup

dir

ectl

y di

spos

ed o

f th

e re

late

d as

sets

or

liab

ilit

ies.

F

orei

gn C

urr

enci

es

In p

repa

ring

the

con

soli

date

d fi

nanc

ial

stat

emen

ts o

f th

e G

roup

, tr

ansa

ctio

ns i

n cu

rren

cies

oth

er t

han

the

Com

pany

’s f

unct

iona

l cu

rren

cy (

i.e.

fore

ign

curr

enci

es)

are

reco

gniz

ed a

t th

e ra

tes

of e

xcha

nge

prev

aili

ng

at th

e da

tes

of th

e tr

ansa

ctio

ns. A

t the

end

of

each

rep

orti

ng p

erio

d, m

onet

ary

item

s de

nom

inat

ed in

for

eign

cu

rren

cies

are

ret

rans

late

d at

the

rat

es p

reva

ilin

g at

tha

t da

te.

Non

-mon

etar

y it

ems

that

are

mea

sure

d at

hi

stor

ical

cos

t in

a fo

reig

n cu

rren

cy a

re n

ot r

etra

nsla

ted.

Non

-mon

etar

y it

ems

mea

sure

d at

fai

r va

lue

that

are

de

nom

inat

ed in

for

eign

cur

renc

ies

are

retr

ansl

ated

at t

he r

ates

pre

vail

ing

at th

e da

te w

hen

the

fair

val

ue w

as

dete

rmin

ed.

Exc

hang

e di

ffer

ence

s on

mon

etar

y it

ems

aris

ing

from

set

tlem

ent

or t

rans

lati

on a

re r

ecog

nize

d in

pro

fit

or

loss

in th

e pe

riod

in w

hich

they

ari

se e

xcep

t for

: a.

E

xcha

nge

diff

eren

ces

on f

orei

gn c

urre

ncy

borr

owin

gs r

elat

ing

to a

sset

s un

der

cons

truc

tion

for

fut

ure

prod

ucti

ve u

se, w

hich

are

inc

lude

d in

the

cos

t of

tho

se a

sset

s w

hen

they

are

reg

arde

d as

an

adju

stm

ent

to in

tere

st c

osts

on

thos

e fo

reig

n cu

rren

cy b

orro

win

gs;

b.

Exc

hang

e di

ffer

ence

s on

tran

sact

ions

ent

ered

into

in o

rder

to h

edge

cer

tain

for

eign

cur

renc

y ri

sks.

E

xcha

nge

diff

eren

ces

aris

ing

on t

he r

etra

nsla

tion

of

non-

mon

etar

y it

ems

are

incl

uded

in

prof

it o

r lo

ss f

or

the

peri

od e

xcep

t fo

r ex

chan

ge d

iffe

renc

es a

risi

ng f

rom

the

ret

rans

lati

on o

f no

n-m

onet

ary

item

s in

res

pect

of

whi

ch g

ains

and

los

ses

are

reco

gniz

ed d

irec

tly

in o

ther

com

preh

ensi

ve i

ncom

e, i

n w

hich

cas

e, t

he

exch

ange

dif

fere

nces

are

als

o re

cogn

ized

dir

ectl

y in

oth

er c

ompr

ehen

sive

inco

me.

F

or t

he p

urpo

se o

f pr

esen

ting

con

soli

date

d fi

nanc

ial

stat

emen

ts,

the

asse

ts a

nd l

iabi

liti

es o

f th

e G

roup

’s

fore

ign

oper

atio

ns a

re tr

ansl

ated

into

New

Tai

wan

dol

lars

usi

ng e

xcha

nge

rate

s pr

evai

ling

at t

he e

nd o

f ea

ch

repo

rtin

g pe

riod

. In

com

e an

d ex

pens

e it

ems

are

tran

slat

ed a

t th

e av

erag

e ex

chan

ge r

ates

for

the

per

iod.

E

xcha

nge

diff

eren

ces

are

reco

gniz

ed i

n ot

her

com

preh

ensi

ve i

ncom

e (a

ttri

bute

d to

the

ow

ners

of

the

Com

pany

and

non

-con

trol

ling

inte

rest

s as

app

ropr

iate

).

On

the

disp

osal

of

a fo

reig

n op

erat

ion,

all

of

the

exch

ange

dif

fere

nces

acc

umul

ated

in

equi

ty i

n re

spec

t of

th

at o

pera

tion

att

ribu

tabl

e to

the

owne

rs o

f th

e C

ompa

ny a

re r

ecla

ssif

ied

to p

rofi

t or

loss

.

- 20

-

Bu

sin

ess

Com

bin

atio

ns

Whe

re t

he c

onsi

dera

tion

the

Gro

up t

rans

fers

in

a bu

sine

ss c

ombi

nati

on i

nclu

des

asse

ts o

r li

abil

itie

s re

sult

ing

from

a c

onti

ngen

t co

nsid

erat

ion

arra

ngem

ent,

the

cont

inge

nt c

onsi

dera

tion

is

mea

sure

d at

its

ac

quis

itio

n-da

te f

air

valu

e an

d co

nsid

ered

as

part

of

the

cons

ider

atio

n tr

ansf

erre

d in

a b

usin

ess

com

bina

tion

. C

hang

es i

n th

e fa

ir v

alue

of

the

cont

inge

nt c

onsi

dera

tion

tha

t qu

alif

y as

mea

sure

men

t pe

riod

adj

ustm

ents

ar

e ad

just

ed r

etro

spec

tive

ly,

wit

h th

e co

rres

pond

ing

adju

stm

ents

bei

ng m

ade

agai

nst

good

wil

l or

gai

ns o

n ba

rgai

n pu

rcha

ses.

Mea

sure

men

t pe

riod

adj

ustm

ents

are

adj

ustm

ents

tha

t ar

ise

from

add

itio

nal

info

rmat

ion

obta

ined

dur

ing

the

mea

sure

men

t pe

riod

abo

ut f

acts

and

cir

cum

stan

ces

that

exi

sted

as

of t

he a

cqui

siti

on

date

.

Whe

n a

busi

ness

com

bina

tion

is

achi

eved

in

stag

es,

the

Gro

up’s

pre

viou

sly

held

equ

ity i

nter

est

in a

n ac

quir

ee i

s re

mea

sure

d to

fai

r va

lue

at t

he a

cqui

siti

on d

ate,

and

the

res

ulti

ng i

s re

cogn

ized

in

prof

it or

los

s or

oth

er c

ompr

ehen

sive

inco

me.

Am

ount

s ar

isin

g fr

om in

tere

sts

in th

e ac

quir

ee p

rior

to th

e ac

quis

itio

n da

te

that

hav

e pr

evio

usly

bee

n re

cogn

ized

in

othe

r co

mpr

ehen

sive

inc

ome

are

reco

gniz

ed o

n th

e sa

me

basi

s as

w

ould

be

requ

ired

if th

ose

inte

rest

s w

ere

dire

ctly

dis

pose

d of

by

the

Gro

up

If t

he i

niti

al a

ccou

ntin

g fo

r a

busi

ness

com

bina

tion

is

inco

mpl

ete

by t

he e

nd o

f th

e re

port

ing

peri

od i

n w

hich

th

e co

mbi

nati

on

occu

rs,

the

Gro

up

repo

rts

prov

isio

nal

amou

nts

for

the

item

s fo

r w

hich

th

e ac

coun

ting

is

inco

mpl

ete.

Tho

se p

rovi

sion

al a

mou

nts

are

adju

sted

ret

rosp

ecti

vely

dur

ing

the

mea

sure

men

t pe

riod

, or

addi

tion

al a

sset

s or

lia

bili

ties

are

rec

ogni

zed,

to

refl

ect

new

inf

orm

atio

n ob

tain

ed a

bout

fac

ts a

nd

circ

umst

ance

s th

at e

xist

ed a

s of

the

acq

uisi

tion

dat

e th

at,

if k

now

n, w

ould

hav

e af

fect

ed t

he a

mou

nts

reco

gniz

ed a

s of

that

dat

e.

Inve

nto

ries

In

vent

orie

s ar

e pr

imar

ily

expe

ndab

le a

nd n

onex

pend

able

par

ts a

nd m

ater

ials

, su

ppli

es u

sed

in o

pera

tion

s an

d it

ems

for

in-f

ligh

t sa

les

and

are

stat

ed a

t th

e lo

wer

of

cost

or

net

real

izab

le v

alue

. T

he c

osts

of

inve

ntor

ies

sold

or

cons

umed

are

det

erm

ined

usi

ng th

e w

eigh

ted-

aver

age

met

hod.

N

on-c

urr

ent

Ass

ets

Hel

d f

or S

ale

Non

-cur

rent

ass

ets

are

clas

sifi

ed a

s he

ld-f

or-s

ale

if t

heir

car

ryin

g am

ount

wil

l be

rec

over

ed p

rinc

ipal

ly

thro

ugh

a sa

le t

rans

acti

on r

athe

r th

an t

hrou

gh c

onti

nuin

g us

e. T

his

cond

itio

n is

reg

arde

d as

met

onl

y w

hen

the

sale

is

high

ly p

roba

ble

and

the

non-

curr

ent

asse

t is

ava

ilab

le f

or i

mm

edia

te s

ale

in i

ts p

rese

nt c

ondi

tion.

T

o m

eet

the

crit

eria

for

the

sal

e be

ing

high

ly p

roba

ble,

the

app

ropr

iate

lev

el o

f m

anag

emen

t m

ust

be

com

mit

ted

to t

he s

ale,

whi

ch s

houl

d be

exp

ecte

d to

qua

lify

for

rec

ogni

tion

as a

com

plet

ed s

ale

wit

hin

one

year

fro

m th

e da

te o

f cl

assi

fica

tion

. N

on-c

urre

nt a

sset

s cl

assi

fied

as

held

-for

-sal

e ar

e m

easu

red

at t

he l

ower

of

thei

r pr

evio

us c

arry

ing

amou

nt

and

fair

val

ue le

ss c

osts

to s

ell.

Rec

ogni

tion

of

depr

ecia

tion

of

thos

e as

sets

wou

ld c

ease

. In

vest

men

ts in

Ass

ocia

tes

and

Joi

nt

Ven

ture

s A

n as

soci

ate

is a

n en

tity

ove

r w

hich

the

Gro

up h

as s

igni

fica

nt i

nflu

ence

and

tha

t is

nei

ther

a s

ubsi

diar

y no

r an

int

eres

t in

a j

oint

ven

ture

. A

joi

nt v

entu

re i

s a

join

t ar

rang

emen

t w

here

by t

he G

roup

and

oth

er p

arti

es

that

hav

e jo

int c

ontr

ol o

f th

e ar

rang

emen

t and

the

righ

ts to

the

net a

sset

s of

the

arra

ngem

ent.

The

Gro

up u

ses

the

equi

ty m

etho

d to

acc

ount

for

its

inve

stm

ents

in a

ssoc

iate

s an

d jo

int v

entu

res.

U

nder

the

equi

ty m

etho

d, in

vest

men

ts in

an

asso

ciat

e an

d a

join

t ven

ture

are

init

iall

y re

cogn

ized

at c

ost a

nd

adju

sted

the

reaf

ter

to r

ecog

nize

the

Gro

up’s

sha

re o

f pr

ofit

or

loss

and

oth

er c

ompr

ehen

sive

inc

ome

of t

he

asso

ciat

e an

d jo

int

vent

ure.

The

Gro

up a

lso

reco

gniz

es t

he c

hang

es i

n th

e G

roup

’s s

hare

of

equi

ty o

f as

soci

ates

and

join

t ven

ture

att

ribu

tabl

e to

the

Gro

up.

152

- 21

-

Any

exc

ess

of t

he c

ost

of a

cqui

siti

on o

ver

the

Gro

up’s

sha

re o

f ne

t fa

ir v

alue

of

the

iden

tifi

able

ass

ets

and

liab

ilit

ies

of a

n as

soci

ate

reco

gniz

ed a

t th

e da

te o

f ac

quis

itio

n is

rec

ogni

zed

as g

oodw

ill,

whi

ch i

s in

clud

ed

wit

hin

the

carr

ying

am

ount

of

the

inve

stm

ent

and

is n

ot a

mor

tize

d. A

ny e

xces

s of

the

Gro

up’s

sha

re o

f ne

t fa

ir v

alue

of

the

iden

tifi

able

ass

ets

and

liab

ilit

ies

over

the

cos

t of

acq

uisi

tion

, af

ter

reas

sess

men

t, is

re

cogn

ized

imm

edia

tely

in p

rofi

t or

loss

. W

hen

the

Gro

up s

ubsc

ribe

s fo

r ad

diti

onal

new

sha

res

of a

n as

soci

ate

and

join

t ve

ntur

e at

a p

erce

ntag

e di

ffer

ent

from

its

exi

stin

g ow

ners

hip

perc

enta

ge,

the

resu

ltin

g ca

rryi

ng a

mou

nt o

f th

e in

vest

men

t di

ffer

s fr

om th

e am

ount

of

the

Gro

up’s

pro

port

iona

te in

tere

st in

the

asso

ciat

e an

d jo

int v

entu

re. T

he G

roup

rec

ords

su

ch a

dif

fere

nce

as a

n ad

just

men

t to

inv

estm

ents

wit

h th

e co

rres

pond

ing

amou

nt c

harg

ed o

r cr

edit

ed t

o ca

pita

l su

rplu

s -

chan

ges

in t

he G

roup

’s s

hare

of

equi

ty o

f as

soci

ates

and

joi

nt v

entu

res.

If

the

Gro

up’s

ow

ners

hip

inte

rest

is

redu

ced

due

to t

he s

ubsc

ript

ion

of a

ddit

iona

l ne

w s

hare

s of

the

ass

ocia

te a

nd j

oint

ve

ntur

e, t

he p

ropo

rtio

nate

am

ount

of

the

gain

s or

los

ses

prev

ious

ly r

ecog

nize

d in

oth

er c

ompr

ehen

sive

in

com

e in

rel

atio

n to

tha

t as

soci

ate

and

join

t ve

ntur

e is

rec

lass

ifie

d to

pro

fit

or l

oss

on t

he s

ame

basi

s as

w

ould

be

requ

ired

had

the

inve

stee

dir

ectl

y di

spos

ed o

f th

e re

late

d as

sets

or

liab

ilit

ies.

Whe

n th

e ad

just

men

t sh

ould

be

debi

ted

to c

apita

l su

rplu

s, b

ut t

he c

apit

al s

urpl

us r

ecog

nize

d fr

om i

nves

tmen

ts a

ccou

nted

for

us

ing

the

equi

ty m

etho

d is

insu

ffic

ient

, the

sho

rtag

e is

deb

ited

to r

etai

ned

earn

ings

. W

hen

the

Gro

up’s

sha

re o

f lo

sses

of

an a

ssoc

iate

and

a j

oint

ven

ture

equ

als

or e

xcee

ds i

ts i

nter

est

in t

hat

asso

ciat

e an

d jo

int

vent

ure

(whi

ch i

nclu

des

any

carr

ying

am

ount

of

the

inve

stm

ent

acco

unte

d fo

r us

ing

the

equi

ty m

etho

d an

d lo

ng-t

erm

int

eres

ts t

hat,

in s

ubst

ance

, fo

rm p

art

of t

he G

roup

’s n

et i

nves

tmen

t in

the

as

soci

ate

and

join

t ve

ntur

e),

the

Gro

up d

isco

ntin

ues

reco

gniz

ing

its

shar

e of

fur

ther

los

ses.

Add

itio

nal

loss

es a

nd l

iabi

liti

es a

re r

ecog

nize

d on

ly t

o th

e ex

tent

tha

t th

e G

roup

has

inc

urre

d le

gal

obli

gati

ons,

or

cons

truc

tive

obl

igat

ions

, or

mad

e pa

ymen

ts o

n be

half

of

that

ass

ocia

te a

nd jo

int v

entu

re.

The

ent

ire

carr

ying

am

ount

of

the

inve

stm

ent (

incl

udin

g go

odw

ill)

is te

sted

for

impa

irm

ent a

s a

sing

le a

sset

by

com

pari

ng it

s re

cove

rabl

e am

ount

wit

h it

s ca

rryi

ng a

mou

nt. A

ny im

pair

men

t los

s re

cogn

ized

is d

educ

ted

from

the

car

ryin

g am

ount

of

the

inve

stm

ent.

Any

rev

ersa

l of

tha

t im

pair

men

t lo

ss i

s re

cogn

ized

to

the

exte

nt th

at th

e re

cove

rabl

e am

ount

of

the

inve

stm

ent s

ubse

quen

tly in

crea

ses.

T

he G

roup

dis

cont

inue

s th

e us

e of

the

equ

ity m

etho

d fr

om t

he d

ate

on w

hich

its

inv

estm

ent

ceas

es t

o be

an

asso

ciat

e an

d a

join

t ve

ntur

e. A

ny r

etai

ned

inve

stm

ent

is m

easu

red

at f

air

valu

e at

tha

t da

te a

nd t

he f

air

valu

e is

reg

arde

d as

its

fai

r va

lue

on i

niti

al r

ecog

niti

on a

s a

fina

ncia

l as

set.

The

dif

fere

nce

betw

een

the

prev

ious

car

ryin

g am

ount

of

the

asso

ciat

e an

d th

e jo

int

vent

ure

attr

ibut

able

to

the

reta

ined

int

eres

t an

d it

s fa

ir v

alue

is

incl

uded

in

the

dete

rmin

atio

n of

the

gai

n or

los

s on

dis

posa

l of

the

ass

ocia

te a

nd t

he j

oint

ve

ntur

e. T

he G

roup

acc

ount

s fo

r al

l am

ount

s pr

evio

usly

rec

ogni

zed

in o

ther

com

preh

ensi

ve i

ncom

e in

re

lati

on t

o th

at a

ssoc

iate

and

the

joi

nt v

entu

re o

n th

e sa

me

basi

s as

wou

ld b

e re

quir

ed h

ad t

hat

asso

ciat

e di

rect

ly d

ispo

sed

of t

he r

elat

ed a

sset

s or

lia

bili

ties

. If

an i

nves

tmen

t in

an

asso

ciat

e be

com

es a

n in

vest

men

t in

a j

oint

ven

ture

or

an i

nves

tmen

t in

a j

oint

ven

ture

bec

omes

an

inve

stm

ent

in a

n as

soci

ate,

the

Gro

up

cont

inue

s to

app

ly th

e eq

uity

met

hod

and

does

not

rem

easu

re th

e re

tain

ed in

tere

st.

Pro

per

ty, P

lan

t an

d E

qu

ipm

ent

Pro

pert

y, p

lant

and

equ

ipm

ent

are

tang

ible

ite

ms

that

are

hel

d fo

r us

e in

the

pro

duct

ion

or s

uppl

y of

goo

ds

or s

ervi

ces,

for

ren

tal

to o

ther

s, o

r fo

r ad

min

istr

ativ

e pu

rpos

es a

nd a

re e

xpec

ted

to b

e us

ed f

or m

ore

than

on

e pe

riod

. The

cos

t of

an it

em o

f pr

oper

ty, p

lant

and

equ

ipm

ent s

hall

be

reco

gniz

ed a

s an

ass

et if

, and

onl

y if

, it

is p

roba

ble

that

fut

ure

econ

omic

ben

efit

s as

soci

ated

wit

h th

e it

em w

ill

flow

to

the

Gro

up a

nd t

he c

ost

of t

he i

tem

can

be

mea

sure

d re

liab

ly.

Pro

pert

y, p

lant

and

equ

ipm

ent

are

stat

ed a

t co

st l

ess

reco

gniz

ed

accu

mul

ated

dep

reci

atio

n an

d re

cogn

ized

acc

umul

ated

impa

irm

ent l

oss.

F

reeh

old

land

is n

ot d

epre

ciat

ed.

Dep

reci

atio

n is

rec

ogni

zed

usin

g th

e st

raig

ht-l

ine

met

hod.

Eac

h si

gnif

ican

t pa

rt i

s de

prec

iate

d se

para

tely

. T

he e

stim

ated

use

ful

live

s, r

esid

ual

valu

es a

nd d

epre

ciat

ion

met

hods

are

rev

iew

ed a

t th

e en

d of

eac

h re

port

ing

peri

od, w

ith

the

effe

cts

of a

ny c

hang

es in

the

esti

mat

es a

ccou

nted

for

on

a pr

ospe

ctiv

e ba

sis.

- 22

-

Ass

ets

held

und

er f

inan

ce le

ases

are

dep

reci

ated

ove

r th

eir

expe

cted

use

ful l

ives

on

the

sam

e ba

sis

as o

wne

d as

sets

. Ass

ets

are

depr

ecia

ted

over

the

sho

rter

of

the

leas

e te

rm a

nd t

heir

use

ful

live

s us

ing

the

stra

ight

-lin

e m

etho

d.

Any

gai

n or

los

s ar

isin

g on

the

dis

posa

l or

ret

irem

ent

of a

n it

em o

f pr

oper

ty,

plan

t an

d eq

uipm

ent

is

dete

rmin

ed a

s th

e di

ffer

ence

bet

wee

n th

e sa

les

proc

eeds

and

the

car

ryin

g am

ount

of

the

asse

t an

d is

re

cogn

ized

in p

rofi

t or

loss

. In

vest

men

t P

rop

erti

es

Inve

stm

ent

prop

erti

es a

re p

rope

rtie

s he

ld t

o ea

rn r

enta

ls o

r fo

r ca

pita

l ap

prec

iati

on.

Inve

stm

ent

prop

erti

es

also

incl

ude

land

hel

d fo

r a

curr

entl

y un

dete

rmin

ed f

utur

e us

e.

Inve

stm

ent

prop

erti

es a

re m

easu

red

init

iall

y at

cos

t, in

clud

ing

tran

sact

ion

cost

s. S

ubse

quen

t to

ini

tial

re

cogn

itio

n, i

nves

tmen

t pr

oper

ties

are

mea

sure

d at

cos

t le

ss a

ccum

ulat

ed d

epre

ciat

ion

and

accu

mul

ated

im

pair

men

t los

s.

Dep

reci

atio

n is

rec

ogni

zed

usin

g th

e st

raig

ht-l

ine

met

hod.

The

est

imat

ed u

sefu

l liv

es a

nd r

esid

ual v

alue

s ar

e re

view

ed a

t the

end

of

each

rep

orti

ng p

erio

d.

Any

gai

n or

los

s ar

isin

g on

the

der

ecog

niti

on o

f in

vest

men

t pr

oper

ties

is

calc

ulat

ed a

s th

e di

ffer

ence

be

twee

n th

e ne

t di

spos

al p

roce

eds

and

the

carr

ying

am

ount

of

the

asse

t an

d is

inc

lude

d in

pro

fit

or l

oss

in

the

peri

od in

whi

ch th

e pr

oper

ty is

der

ecog

nize

d.

Inta

ngi

ble

Ass

ets

Inta

ngib

le a

sset

s w

ith

fini

te u

sefu

l li

ves

that

are

acq

uire

d se

para

tely

are

ini

tial

ly m

easu

red

at c

ost

and

subs

eque

ntly

m

easu

red

at

cost

le

ss

accu

mul

ated

am

orti

zati

on

and

accu

mul

ated

im

pair

men

t lo

ss.

Am

orti

zati

on i

s re

cogn

ized

on

a st

raig

ht-l

ine

basi

s. T

he e

stim

ated

use

ful

live

s, r

esid

ual

valu

es,

and

amor

tiza

tion

met

hods

are

rev

iew

ed a

t th

e en

d of

eac

h re

port

ing

peri

od,

wit

h th

e ef

fect

s of

any

cha

nges

in

the

esti

mat

es b

eing

acc

ount

ed f

or o

n a

pros

pect

ive

basi

s. T

he r

esid

ual

valu

e of

an

inta

ngib

le a

sset

wit

h a

fini

te u

sefu

l lif

e sh

all b

e as

sum

ed z

ero

unle

ss th

e G

roup

exp

ects

to d

ispo

se o

f th

e in

tang

ible

ass

et b

efor

e th

e en

d of

its

econ

omic

life

. Im

pai

rmen

t of

Tan

gib

le a

nd

In

tan

gibl

e A

sset

s O

ther

Th

an G

ood

wil

l A

t th

e en

d of

eac

h re

port

ing

peri

od,

the

Gro

up r

evie

ws

the

carr

ying

am

ount

s of

its

tan

gibl

e an

d in

tang

ible

as

sets

, ex

clud

ing

good

wil

l, to

det

erm

ine

whe

ther

the

re i

s an

y in

dica

tion

tha

t th

ose

asse

ts h

ave

suff

ered

an

impa

irm

ent

loss

. If

any

suc

h in

dica

tion

exi

sts,

the

rec

over

able

am

ount

of

the

asse

t is

est

imat

ed i

n or

der

to

dete

rmin

e th

e ex

tent

of

the

impa

irm

ent

loss

. W

hen

it i

s no

t po

ssib

le t

o es

tim

ate

the

reco

vera

ble

amou

nt o

f an

ind

ivid

ual

asse

t, th

e G

roup

est

imat

es t

he r

ecov

erab

le a

mou

nt o

f th

e ca

sh-g

ener

atin

g un

it t

o w

hich

the

as

set

belo

ngs.

Cor

pora

te a

sset

s ar

e al

loca

ted

to t

he i

ndiv

idua

l ca

sh-g

ener

atin

g un

its

on a

rea

sona

ble

and

cons

iste

nt b

asis

; oth

erw

ise,

cor

pora

te a

sset

s ar

e al

loca

ted

to th

e sm

alle

st g

roup

of

cash

-gen

erat

ing

unit

s on

a

reas

onab

le a

nd c

onsi

sten

t all

ocat

ion

basi

s.

Inta

ngib

le a

sset

s w

ith

inde

fini

te u

sefu

l li

ves

and

inta

ngib

le a

sset

s no

t ye

t av

aila

ble

for

use

are

test

ed f

or

impa

irm

ent a

t lea

st a

nnua

lly,

and

whe

neve

r th

ere

is a

n in

dica

tion

that

the

asse

t may

be

impa

ired

. T

he r

ecov

erab

le a

mou

nt i

s th

e hi

gher

of

fair

val

ue l

ess

cost

s to

sel

l an

d va

lue

in u

se.

In a

sses

sing

val

ue i

n us

e, t

he G

roup

use

s th

e es

tim

ated

cas

h fl

ows

disc

ount

ed b

y th

e fu

ture

pre

-tax

dis

coun

t ra

te,

and

the

disc

ount

rat

e re

flec

ts th

e cu

rren

t mar

ket t

ime

valu

e of

mon

ey a

nd th

e sp

ecif

ic r

isks

to th

e as

set f

or e

stim

ated

fu

ture

cas

h fl

ows

not y

et a

djus

ting

to th

e m

arke

t. If

the

rec

over

able

am

ount

of

an a

sset

or

cash

-gen

erat

ing

unit

is e

stim

ated

to

be l

ess

than

its

car

ryin

g am

ount

, the

car

ryin

g am

ount

of

the

asse

t or

cash

-gen

erat

ing

unit

is r

educ

ed to

its

reco

vera

ble

amou

nt.

153

- 23

-

Whe

n an

impa

irm

ent l

oss

is s

ubse

quen

tly

reve

rsed

, the

car

ryin

g am

ount

of

the

asse

t or

cash

-gen

erat

ing

unit

is i

ncre

ased

to

the

revi

sed

esti

mat

e of

its

rec

over

able

am

ount

, but

onl

y to

the

ext

ent

of t

he c

arry

ing

amou

nt

that

wou

ld h

ave

been

det

erm

ined

had

no

impa

irm

ent

loss

bee

n re

cogn

ized

for

the

ass

et o

r ca

sh-g

ener

atin

g un

it in

pri

or y

ears

. A r

ever

sal o

f an

impa

irm

ent l

oss

is r

ecog

nize

d in

pro

fit o

r lo

ss.

Fin

anci

al I

nst

rum

ents

F

inan

cial

ass

ets

and

fina

ncia

l li

abil

itie

s ar

e re

cogn

ized

whe

n th

e G

roup

bec

omes

a p

arty

to

the

cont

ract

ual

prov

isio

ns o

f th

e in

stru

men

ts.

F

inan

cial

ass

ets

and

fina

ncia

l li

abil

itie

s ar

e in

itia

lly

mea

sure

d at

fai

r va

lue.

Tra

nsac

tion

cos

ts t

hat

are

dire

ctly

att

ribu

tabl

e to

the

acq

uisi

tion

or

issu

ance

of

fina

ncia

l as

sets

and

fin

anci

al l

iabi

liti

es (

othe

r th

an

fina

ncia

l as

sets

and

fin

anci

al l

iabi

liti

es a

t F

VT

PL

) ar

e ad

ded

to o

r de

duct

ed f

rom

the

fai

r va

lue

of t

he

fina

ncia

l as

sets

or

fina

ncia

l li

abil

itie

s, a

s ap

prop

riat

e, o

n in

itia

l re

cogn

itio

n. T

rans

acti

on c

osts

dir

ectl

y at

trib

utab

le

to

the

acqu

isit

ion

of

fina

ncia

l as

sets

or

fi

nanc

ial

liab

ilit

ies

at

FV

TP

L

are

reco

gniz

ed

imm

edia

tely

in p

rofi

t or

loss

. a.

F

inan

cial

ass

ets

All

reg

ular

pur

chas

es o

r sa

les

of f

inan

cial

ass

ets

are

reco

gniz

ed a

nd d

erec

ogni

zed

on a

tra

de d

ate

basi

s.

All

reg

ular

pur

chas

es o

r sa

les

of f

inan

cial

ass

ets

are

buy

or s

ell

of f

inan

cial

ass

ets

in t

he p

erio

d se

t by

re

gula

tion

or

mar

ket c

onve

ntio

n.

1)

Mea

sure

men

t cat

egor

y

Fin

anci

al a

sset

s ar

e cl

assi

fied

int

o th

e fo

llow

ing

cate

gori

es:

Fin

anci

al a

sset

s at

FV

TP

L,

fina

ncia

l as

sets

at a

mor

tize

d co

st, a

nd in

vest

men

ts in

equ

ity

inst

rum

ents

at F

VT

OC

I.

a)

Fin

anci

al a

sset

s at

FV

TP

L

Fin

anci

al a

sset

s ar

e cl

assi

fied

as

at F

VT

PL

whe

n su

ch a

fin

anci

al a

sset

is m

anda

tori

ly c

lass

ifie

d or

des

igna

ted

as a

t F

VT

PL

. F

inan

cial

ass

ets

man

dato

rily

cla

ssif

ied

as a

t F

VT

PL

inc

lude

in

vest

men

ts i

n eq

uity

ins

trum

ents

whi

ch a

re n

ot d

esig

nate

d as

at

FV

TO

CI

and

debt

ins

trum

ents

th

at d

o no

t mee

t the

am

orti

zed

cost

cri

teri

a or

the

FV

TO

CI

crit

eria

. F

inan

cial

ass

ets

at F

VT

PL

are

sub

sequ

ently

mea

sure

d at

fai

r va

lue,

wit

h an

y ga

ins

or l

osse

s ar

isin

g on

rem

easu

rem

ent

reco

gniz

ed i

n pr

ofit

or l

oss.

Fai

r va

lue

is d

eter

min

ed i

n th

e m

anne

r de

scri

bed

in N

ote

33.

b)

F

inan

cial

ass

ets

at a

mor

tize

d co

st

Fin

anci

al a

sset

s th

at m

eet

the

foll

owin

g co

ndit

ions

are

sub

sequ

entl

y m

easu

red

at a

mor

tize

d co

st:

i. T

he f

inan

cial

ass

et i

s he

ld w

ithi

n a

busi

ness

mod

el w

hose

obj

ecti

ve i

s to

hol

d fi

nanc

ial

asse

ts in

ord

er to

col

lect

con

trac

tual

cas

h fl

ows;

and

ii

. T

he c

ontr

actu

al te

rms

of th

e fi

nanc

ial a

sset

giv

e ri

se o

n sp

ecif

ied

date

s to

cas

h fl

ows

that

are

so

lely

pay

men

ts o

f pr

inci

pal a

nd in

tere

st o

n th

e pr

inci

pal a

mou

nt o

utst

andi

ng.

Sub

sequ

ent

to i

niti

al r

ecog

niti

on,

fina

ncia

l as

sets

at

amor

tize

d co

st,

incl

udin

g ca

sh a

nd c

ash

equi

vale

nts,

tra

de r

ecei

vabl

es,

othe

r re

ceiv

able

s an

d ot

her

fina

ncia

l as

sets

, ar

e m

easu

red

at

amor

tize

d co

st,

whi

ch e

qual

s th

e gr

oss

carr

ying

am

ount

det

erm

ined

usi

ng t

he e

ffec

tive

int

eres

t m

etho

d le

ss a

ny im

pair

men

t los

s. E

xcha

nge

diff

eren

ces

are

reco

gniz

ed in

pro

fit o

r lo

ss.

- 24

-

Inte

rest

inc

ome

is c

alcu

late

d by

app

lyin

g th

e ef

fect

ive

inte

rest

rat

e to

the

gro

ss c

arry

ing

amou

nt

of a

fin

anci

al a

sset

. C

ash

equi

vale

nts

incl

ude

tim

e de

posi

ts w

ith

orig

inal

mat

urit

ies

wit

hin

3 m

onth

s fr

om th

e da

te o

f ac

quis

itio

n, w

hich

are

hig

hly

liqui

d, r

eadi

ly c

onve

rtib

le t

o a

know

n am

ount

of

cash

and

are

su

bjec

t to

an

insi

gnif

ican

t ri

sk o

f ch

ange

s in

val

ue.

The

se c

ash

equi

vale

nts

are

held

for

the

pu

rpos

e of

mee

ting

sho

rt-t

erm

cas

h co

mm

itm

ents

.

c)

Inve

stm

ents

in e

quit

y in

stru

men

ts a

t FV

TO

CI

On

init

ial

reco

gnit

ion,

the

Gro

up m

ay m

ake

an i

rrev

ocab

le e

lect

ion

to d

esig

nate

inv

estm

ents

in

equi

ty i

nstr

umen

ts a

s at

FV

TO

CI.

Des

igna

tion

as

at F

VT

OC

I is

not

per

mit

ted

if a

n eq

uity

in

vest

men

t is

hel

d fo

r tr

adin

g or

if

it i

s co

ntin

gent

con

side

rati

on r

ecog

nize

d by

an

acqu

irer

in

a bu

sine

ss c

ombi

nati

on.

Inve

stm

ents

in

equi

ty i

nstr

umen

ts a

t F

VT

OC

I ar

e su

bseq

uent

ly m

easu

red

at f

air

valu

e w

ith

gain

s an

d lo

sses

ari

sing

fro

m c

hang

es i

n fa

ir v

alue

rec

ogni

zed

in o

ther

com

preh

ensi

ve i

ncom

e an

d ac

cum

ulat

ed in

oth

er e

quit

y. T

he c

umul

ativ

e ga

in o

r lo

ss w

ill n

ot b

e re

clas

sifi

ed to

pro

fit o

r lo

ss o

n di

spos

al o

f th

e eq

uity

inve

stm

ents

; ins

tead

, the

y w

ill b

e tr

ansf

erre

d to

ret

aine

d ea

rnin

gs.

Div

iden

ds o

n th

ese

inve

stm

ents

in

equi

ty i

nstr

umen

ts a

re r

ecog

nize

d in

pro

fit

or l

oss

whe

n th

e G

roup

’s r

ight

to

rece

ive

the

divi

dend

s is

est

abli

shed

, un

less

the

div

iden

ds c

lear

ly r

epre

sent

a

reco

very

of

part

of

the

cost

of

an in

vest

men

t.

2)

Impa

irm

ent o

f fi

nanc

ial a

sset

s T

he G

roup

rec

ogni

zes

a lo

ss a

llow

ance

for

exp

ecte

d cr

edit

los

ses

on f

inan

cial

ass

ets

at a

mor

tize

d co

st (

incl

udin

g tr

ade

rece

ivab

les)

, as

wel

l as

cont

ract

ass

ets.

T

he G

roup

alw

ays

reco

gniz

es l

ifet

ime

expe

cted

cre

dit

loss

es (

EC

Ls)

for

tra

de r

ecei

vabl

es a

nd o

ther

re

ceiv

able

s. F

or a

ll o

ther

fin

anci

al i

nstr

umen

ts, t

he G

roup

rec

ogni

zes

life

tim

e E

CL

s w

hen

ther

e ha

s be

en a

sig

nifi

cant

inc

reas

e in

cre

dit

risk

sin

ce i

niti

al r

ecog

niti

on.

If,

on t

he o

ther

han

d, t

he c

redi

t ri

sk o

n a

fina

ncia

l in

stru

men

t ha

s no

t in

crea

sed

sign

ific

antly

sin

ce i

niti

al r

ecog

niti

on,

the

Gro

up

mea

sure

s th

e lo

ss a

llow

ance

for

that

fin

anci

al in

stru

men

t at a

n am

ount

equ

al to

12-

mon

th E

CL

s.

Exp

ecte

d cr

edit

los

ses

refl

ect

the

wei

ghte

d av

erag

e of

cre

dit

loss

es w

ith

the

resp

ecti

ve r

isks

of

a de

faul

t oc

curr

ing

as t

he w

eigh

ts. L

ifet

ime

EC

L r

epre

sent

s th

e ex

pect

ed c

redi

t lo

sses

tha

t w

ill

resu

lt

from

all

pos

sibl

e de

faul

t ev

ents

ove

r th

e ex

pect

ed l

ife

of a

fin

anci

al i

nstr

umen

t. In

con

tras

t, 12

-mon

th E

CL

rep

rese

nts

the

port

ion

of l

ifet

ime

EC

L t

hat

is e

xpec

ted

to r

esul

t fr

om d

efau

lt e

vent

s on

a f

inan

cial

inst

rum

ent t

hat a

re p

ossi

ble

wit

hin

12 m

onth

s af

ter

the

repo

rtin

g da

te.

The

im

pair

men

t lo

ss o

f al

l fi

nanc

ial

asse

ts i

s re

cogn

ized

in

prof

it o

r lo

ss b

y a

redu

ctio

n in

the

ir

carr

ying

am

ount

s th

roug

h a

loss

all

owan

ce a

ccou

nt, e

xcep

t fo

r in

vest

men

ts i

n de

bt i

nstr

umen

ts t

hat

are

mea

sure

d at

FV

TO

CI,

for

whi

ch t

he l

oss

allo

wan

ce i

s re

cogn

ized

in

othe

r co

mpr

ehen

sive

in

com

e an

d th

e ca

rryi

ng a

mou

nts

of s

uch

fina

ncia

l ass

ets

are

not r

educ

ed.

3)

D

erec

ogni

tion

of

fina

ncia

l ass

ets

The

Gro

up d

erec

ogni

zes

a fi

nanc

ial

asse

t on

ly w

hen

the

cont

ract

ual

righ

ts t

o th

e ca

sh f

low

s fr

om

the

asse

t ex

pire

or

whe

n it

tra

nsfe

rs t

he f

inan

cial

ass

et a

nd s

ubst

anti

ally

all

the

ris

ks a

nd r

ewar

ds o

f ow

ners

hip

of th

e as

set t

o an

othe

r pa

rty.

154

- 25

-

On

dere

cogn

itio

n of

a f

inan

cial

ass

et i

n it

s en

tire

ty,

the

diff

eren

ce b

etw

een

the

asse

t’s

carr

ying

am

ount

and

the

sum

of

the

cons

ider

atio

n re

ceiv

ed a

nd r

ecei

vabl

e an

d th

e cu

mul

ativ

e ga

in o

r lo

ss

that

had

bee

n re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e is

rec

ogni

zed

in p

rofi

t or

loss

.

b.

Equ

ity in

stru

men

ts

Deb

t an

d eq

uity

ins

trum

ents

iss

ued

by t

he G

roup

ent

ity

are

clas

sifi

ed a

s ei

ther

fin

anci

al l

iabi

liti

es o

r as

eq

uity

in

acco

rdan

ce w

ith

the

subs

tanc

e of

the

con

trac

tual

arr

ange

men

ts a

nd t

he d

efin

itio

ns o

f a

fina

ncia

l lia

bili

ty a

nd a

n eq

uity

inst

rum

ent.

Equ

ity i

nstr

umen

ts i

ssue

d by

the

Gro

up e

ntity

are

rec

ogni

zed

at t

he p

roce

eds

rece

ived

, ne

t of

dir

ect

issu

e co

sts.

R

epur

chas

e of

the

Gro

up’s

ow

n eq

uity

ins

trum

ents

is

reco

gniz

ed i

n an

d de

duct

ed d

irec

tly f

rom

equ

ity.

N

o ga

in o

r lo

ss i

s re

cogn

ized

in

prof

it o

r lo

ss o

n th

e pu

rcha

se,

sale

, is

sue

or c

ance

llat

ion

of t

he

Com

pany

’s o

wn

equi

ty in

stru

men

ts.

c.

F

inan

cial

liab

ilit

ies

1)

Sub

sequ

ent m

easu

rem

ent

E

xcep

t fo

r fi

nanc

ial

liab

ilit

ies

at F

VT

PL

, al

l fi

nanc

ial

liab

ilit

ies

are

mea

sure

d at

am

orti

zed

cost

us

ing

the

effe

ctiv

e in

tere

st m

etho

d.

2)

D

erec

ogni

tion

of

fina

ncia

l lia

bili

ties

T

he

diff

eren

ce

betw

een

the

carr

ying

am

ount

of

a

fina

ncia

l li

abil

ity

dere

cogn

ized

an

d th

e co

nsid

erat

ion

paid

, inc

ludi

ng a

ny n

on-c

ash

asse

ts tr

ansf

erre

d or

liab

ilit

ies

assu

med

, is

reco

gniz

ed in

pr

ofit

or

loss

.

d.

Con

vert

ible

bon

ds

The

com

pone

nt p

arts

of

com

poun

d in

stru

men

ts (

i.e.

conv

erti

ble

bond

s) i

ssue

d by

the

Com

pany

are

cl

assi

fied

se

para

tely

as

fi

nanc

ial

liab

ilit

ies

and

equi

ty

in

acco

rdan

ce

wit

h th

e su

bsta

nce

of

the

cont

ract

ual a

rran

gem

ents

and

the

defi

nitio

ns o

f a

fina

ncia

l lia

bili

ty a

nd a

n eq

uity

inst

rum

ent.

On

init

ial

reco

gnit

ion,

the

fai

r va

lue

of t

he l

iabi

lity

com

pone

nt i

s es

tim

ated

usi

ng t

he p

reva

ilin

g m

arke

t in

tere

st r

ate

for

sim

ilar

non

-con

vert

ible

ins

trum

ents

. T

his

amou

nt i

s re

cord

ed a

s a

liab

ility

on

an

amor

tize

d co

st b

asis

usi

ng t

he e

ffec

tive

int

eres

t m

etho

d un

til

exti

ngui

shed

upo

n co

nver

sion

or

the

inst

rum

ent’

s m

atur

ity

date

. Any

em

bedd

ed d

eriv

ativ

e li

abil

ity is

mea

sure

d at

fai

r va

lue.

T

he c

onve

rsio

n op

tion

clas

sifi

ed a

s eq

uity

is

dete

rmin

ed b

y de

duct

ing

the

amou

nt o

f th

e li

abil

ity

com

pone

nt f

rom

the

fair

val

ue o

f th

e co

mpo

und

inst

rum

ent a

s a

who

le. T

his

is r

ecog

nize

d an

d in

clud

ed

in e

quity

, ne

t of

inc

ome

tax

effe

cts,

and

is

not

subs

eque

ntly

rem

easu

red.

In

addi

tion

, th

e co

nver

sion

op

tion

cla

ssif

ied

as e

quity

wil

l re

mai

n in

equ

ity u

ntil

the

con

vers

ion

opti

on i

s ex

erci

sed,

in

whi

ch c

ase,

th

e ba

lanc

e re

cogn

ized

in

equi

ty w

ill

be t

rans

ferr

ed t

o ca

pita

l su

rplu

s -

shar

e pr

emiu

ms.

Whe

n th

e co

nver

sion

opt

ion

rem

ains

une

xerc

ised

at

mat

urit

y, t

he b

alan

ce r

ecog

nize

d in

equ

ity w

ill

be t

rans

ferr

ed

to c

apit

al s

urpl

us -

sha

re p

rem

ium

s.

Tra

nsac

tion

cos

ts t

hat

rela

te t

o th

e is

sue

of t

he c

onve

rtib

le n

otes

are

all

ocat

ed t

o th

e li

abili

ty a

nd e

quity

co

mpo

nent

s in

pro

port

ion

to t

he a

lloc

atio

n of

the

gro

ss p

roce

eds.

Tra

nsac

tion

cos

ts r

elat

ing

to t

he

equi

ty c

ompo

nent

are

rec

ogni

zed

dire

ctly

in e

quity

. Tra

nsac

tion

cos

ts r

elat

ing

to th

e li

abili

ty c

ompo

nent

ar

e in

clud

ed in

the

carr

ying

am

ount

of

the

liab

ility

com

pone

nt.

- 26

-

e.

Der

ivat

ive

fina

ncia

l ins

trum

ents

T

he G

roup

ent

ers

into

a v

arie

ty o

f de

riva

tive

fin

anci

al i

nstr

umen

ts t

o m

anag

e it

s ex

posu

re t

o in

tere

st

rate

, fo

reig

n ex

chan

ge r

ate

and

fuel

pri

ce r

isks

, in

clud

ing

fore

ign

exch

ange

for

war

d co

ntra

cts,

int

eres

t ra

te s

wap

s, c

urre

ncy

opti

ons

swap

s an

d fu

el s

wap

s.

Der

ivat

ives

are

ini

tial

ly r

ecog

nize

d at

fai

r va

lue

at t

he d

ate

the

deri

vati

ve c

ontr

acts

are

ent

ered

int

o an

d ar

e su

bseq

uent

ly r

emea

sure

d to

thei

r fa

ir v

alue

at t

he e

nd o

f ea

ch r

epor

ting

per

iod.

The

res

ulti

ng g

ain

or

loss

is

reco

gniz

ed i

n pr

ofit

or

loss

im

med

iate

ly u

nles

s th

e de

riva

tive

is

desi

gnat

ed a

nd e

ffec

tive

as

a he

dgin

g in

stru

men

t, in

whi

ch e

vent

, the

tim

ing

of th

e re

cogn

itio

n in

pro

fit o

r lo

ss d

epen

ds o

n th

e na

ture

of

the

hed

ging

rel

atio

nshi

p. W

hen

the

fair

val

ue o

f a

deri

vati

ve f

inan

cial

ins

trum

ent

is p

osit

ive,

the

de

riva

tive

is

reco

gniz

ed a

s a

fina

ncia

l as

set;

whe

n th

e fa

ir v

alue

of

a de

riva

tive

fin

anci

al i

nstr

umen

t is

ne

gati

ve, t

he d

eriv

ativ

e is

rec

ogni

zed

as a

fin

anci

al li

abil

ity.

H

edge

Acc

oun

tin

g T

he C

ompa

ny e

nter

s in

to s

ome

deri

vati

ve t

rans

acti

ons

that

aim

to

man

age

inte

rest

rat

es,

fore

ign

exch

ange

ra

tes,

fu

el

pric

es,

and

othe

r fa

ctor

s af

fect

ing

gain

s or

lo

sses

on

as

sets

an

d li

abil

itie

s.

The

he

dgin

g tr

ansa

ctio

ns a

re d

efin

ed a

s ca

sh f

low

hed

ges.

Whe

n en

teri

ng i

nto

hedg

ing

tran

sact

ions

, th

e C

ompa

ny h

as

prep

ared

off

icia

l do

cum

ents

tha

t de

scri

be t

he h

edgi

ng r

elat

ions

hip

betw

een

hedg

ing

inst

rum

ents

and

ite

ms

whi

ch h

ave

been

hed

ged,

the

obj

ecti

ve o

f ri

sk m

anag

emen

t, th

e he

dgin

g st

rate

gy,

and

the

way

to

eval

uate

th

e ef

fect

iven

ess

of th

e he

dgin

g in

stru

men

t.

The

eff

ecti

ve p

orti

on o

f ch

ange

s in

the

fair

val

ue o

f de

riva

tive

s th

at a

re d

esig

nate

d an

d qu

alif

y as

cas

h fl

ow

hedg

es i

s re

cogn

ized

in

othe

r co

mpr

ehen

sive

inc

ome.

The

gai

n or

los

s re

lati

ng t

o th

e in

effe

ctiv

e po

rtio

n is

re

cogn

ized

imm

edia

tely

in p

rofi

t or

loss

. T

he a

ssoc

iate

d ga

ins

or l

osse

s th

at w

ere

reco

gniz

ed i

n ot

her

com

preh

ensi

ve i

ncom

e ar

e re

clas

sifi

ed f

rom

eq

uity

to

prof

it o

r lo

ss a

s a

recl

assi

fica

tion

adj

ustm

ent

in t

he l

ine

item

rel

atin

g to

the

hed

ged

item

in

the

sam

e pe

riod

as

whe

n th

e he

dged

ite

m a

ffec

ts p

rofi

t or

los

s. I

f a

hedg

e of

a f

orec

aste

d tr

ansa

ctio

n su

bseq

uent

ly r

esul

ts i

n th

e re

cogn

itio

n of

a n

on-f

inan

cial

ass

et o

r a

non-

fina

ncia

l li

abil

ity,

the

ass

ocia

ted

gain

s an

d lo

sses

tha

t w

ere

reco

gniz

ed i

n ot

her

com

preh

ensi

ve i

ncom

e ar

e re

mov

ed f

rom

equ

ity a

nd a

re

incl

uded

in th

e in

itia

l cos

t of

the

non-

fina

ncia

l ass

et o

r no

n-fi

nanc

ial l

iabi

lity

. S

tart

ing

from

201

8, t

he G

roup

dis

cont

inue

s he

dge

acco

unti

ng o

nly

whe

n th

e he

dgin

g re

lati

onsh

ip c

ease

s to

m

eet

the

qual

ifyi

ng c

rite

ria;

for

ins

tanc

e, w

hen

the

hedg

ing

inst

rum

ent

expi

res

or i

s so

ld,

term

inat

ed o

r ex

erci

sed.

The

cum

ulat

ive

gain

or

loss

on

the

hedg

ing

inst

rum

ent

that

has

bee

n pr

evio

usly

rec

ogni

zed

in

othe

r co

mpr

ehen

sive

inc

ome

from

the

per

iod

in w

hich

the

hed

ge w

as e

ffec

tive

rem

ains

sep

arat

ely

in e

quit

y un

til

the

fore

cast

ed t

rans

acti

on o

ccur

s. W

hen

a fo

reca

sted

tra

nsac

tion

is

no l

onge

r ex

pect

ed t

o oc

cur,

the

ga

in o

r lo

ss a

ccum

ulat

ed in

equ

ity is

rec

ogni

zed

imm

edia

tely

in p

rofi

t or

loss

. P

rovi

sion

s T

he G

roup

rec

ogni

zes

prov

isio

ns w

hen

the

Gro

up h

as a

pre

sent

obl

igat

ion

(leg

al o

r co

nstr

ucti

ve)

aris

ing

from

pas

t ev

ents

(le

gal

or c

onst

ruct

ive

obli

gati

on),

pay

men

t fo

r th

e ob

liga

tion

is

prob

able

, an

d th

e ex

pend

itur

e fo

r se

ttli

ng th

e ob

liga

tion

can

be

esti

mat

ed r

elia

bly.

T

he a

mou

nt r

ecog

nize

d as

a p

rovi

sion

is

the

best

est

imat

e of

the

exp

endi

ture

req

uire

d to

set

tle t

he p

rese

nt

obli

gati

on, t

akin

g in

to a

ccou

nt th

e ri

sks

and

unce

rtai

ntie

s su

rrou

ndin

g th

e ob

ligat

ion

as o

f th

e ba

lanc

e sh

eet

date

. W

hen

a pr

ovis

ion

is m

easu

red

usin

g th

e ca

sh f

low

s es

tim

ated

to

sett

le t

he p

rese

nt o

blig

atio

n, i

ts

carr

ying

am

ount

is th

e pr

esen

t val

ue o

f th

ose

cash

flo

ws.

155

- 27

-

Air

craf

t lea

se c

ontr

acts

W

hen

an a

ircr

aft

leas

e co

ntra

cts

expi

res

and

the

leas

ed i

tem

wil

l be

ret

urne

d to

the

les

sor,

the

Gro

up w

ill

asse

ss i

f th

ere

are

exis

ting

obl

igat

ions

exi

st a

nd i

f it

is

requ

ired

to

reco

gniz

e a

prov

isio

n w

hen

sign

ing

the

leas

e co

ntra

ct.

Rev

enu

e R

ecog

nit

ion

W

hen

appl

ying

IF

RS

15

duri

ng 2

018,

the

Gro

up r

ecog

nize

s re

venu

e by

app

lyin

g th

e fo

llow

ing

step

s:

Iden

tify

ing

the

cont

ract

wit

h th

e cu

stom

er;

Iden

tify

ing

the

perf

orm

ance

obl

igat

ions

in th

e co

ntra

ct;

Det

erm

ine

the

tran

sact

ion

pric

e;

All

ocat

e th

e tr

ansa

ctio

n pr

ice

to th

e pe

rfor

man

ce o

blig

atio

ns in

the

cont

ract

; and

R

ecog

nize

rev

enue

whe

n th

e G

roup

sat

isfi

es a

per

form

ance

obl

igat

ion.

S

hipp

ing

serv

ice

reve

nue

Pas

seng

er a

nd c

argo

rev

enue

are

rec

ogni

zed

as r

even

ue w

hen

the

pass

enge

rs a

nd g

oods

are

act

uall

y ca

rrie

d.

Whe

n th

e ti

cket

s ar

e so

ld, d

ue to

the

fact

that

the

fulf

illm

ent o

blig

atio

ns o

f th

e sh

ipm

ent h

ave

not b

een

met

, th

e re

leva

nt a

mou

nt o

f re

venu

e is

fir

st r

ecor

ded

as c

ontr

act l

iabi

liti

es u

ntil

pas

seng

ers

actu

ally

boa

rd.

L

easi

ng

2019

A

t the

ince

ptio

n of

a c

ontr

act,

the

Gro

up a

sses

ses

whe

ther

the

cont

ract

is, o

r co

ntai

ns, a

leas

e.

The

Gro

up a

s le

ssee

T

he G

roup

rec

ogni

zes

righ

t-of

-use

ass

ets

and

leas

e li

abil

itie

s fo

r al

l le

ases

at

the

com

men

cem

ent

date

of

a le

ase,

ex

cept

fo

r sh

ort-

term

le

ases

an

d lo

w-v

alue

as

set

leas

es

acco

unte

d fo

r ap

plyi

ng a

re

cogn

itio

n ex

empt

ion

whe

re le

ase

paym

ents

are

rec

ogni

zed

as e

xpen

ses

on a

str

aigh

t-li

ne b

asis

ove

r th

e le

ase

term

s.

Rig

ht-o

f-us

e as

sets

are

ini

tial

ly m

easu

red

at c

ost,

whi

ch c

ompr

ises

the

ini

tial

mea

sure

men

t of

lea

se

liab

ilit

ies

adju

sted

for

lea

se p

aym

ents

mad

e at

or

befo

re t

he c

omm

ence

men

t da

te,

plus

any

ini

tial

dir

ect

cost

s in

curr

ed a

nd a

n es

tim

ate

of c

osts

nee

ded

to r

esto

re th

e un

derl

ying

ass

ets,

and

less

any

leas

e in

cent

ives

re

ceiv

ed.

Rig

ht-o

f-us

e as

sets

ar

e su

bseq

uent

ly

mea

sure

d at

co

st

less

ac

cum

ulat

ed

depr

ecia

tion

an

d im

pair

men

t lo

sses

and

adj

uste

d fo

r an

y re

mea

sure

men

t of

the

lea

se l

iabi

liti

es.

Rig

ht-o

f-us

e as

sets

are

pr

esen

ted

on a

sep

arat

e li

ne in

the

cons

olid

ated

bal

ance

she

ets.

R

ight

-of-

use

asse

ts a

re d

epre

ciat

ed u

sing

the

str

aigh

t-li

ne m

etho

d fr

om t

he c

omm

ence

men

t da

tes

to t

he

earl

ier

of t

he e

nd o

f th

e us

eful

liv

es o

f th

e ri

ght-

of-u

se a

sset

s or

the

end

of

the

leas

e te

rms.

How

ever

, if

le

ases

tra

nsfe

r ow

ners

hip

of t

he u

nder

lyin

g as

sets

to

the

Gro

up b

y th

e en

d of

the

lea

se t

erm

s or

if

the

cost

s of

rig

ht-o

f-us

e as

sets

ref

lect

tha

t th

e G

roup

wil

l ex

erci

se a

pur

chas

e op

tion

, th

e G

roup

dep

reci

ates

the

ri

ght-

of-u

se a

sset

s fr

om th

e co

mm

ence

men

t dat

es to

the

end

of th

e us

eful

live

s of

the

unde

rlyi

ng a

sset

s.

Lea

se l

iabi

liti

es a

re i

niti

ally

mea

sure

d at

the

pre

sent

val

ue o

f th

e le

ase

paym

ents

, w

hich

com

pris

e fi

xed

paym

ents

, in

-sub

stan

ce f

ixed

pay

men

ts,

vari

able

lea

se p

aym

ents

whi

ch d

epen

d on

an

inde

x or

a r

ate,

re

sidu

al v

alue

gua

rant

ees,

the

exe

rcis

e pr

ice

of a

pur

chas

e op

tion

if

the

less

ee i

s re

ason

ably

cer

tain

to

exer

cise

tha

t op

tion

, an

d pa

ymen

ts o

f pe

nalt

ies

for

term

inat

ing

a le

ase

if t

he l

ease

ter

m r

efle

cts

such

te

rmin

atio

n, l

ess

any

leas

e in

cent

ives

pay

able

. T

he l

ease

pay

men

ts a

re d

isco

unte

d us

ing

the

inte

rest

rat

e im

plic

it i

n a

leas

e, i

f th

at r

ate

can

be r

eadi

ly d

eter

min

ed.

If t

hat

rate

can

not

be r

eadi

ly d

eter

min

ed,

the

Gro

up u

ses

the

less

ee’s

incr

emen

tal b

orro

win

g ra

te.

- 28

-

Sub

sequ

ently

, le

ase

liab

ilit

ies

are

mea

sure

d at

am

orti

zed

cost

usi

ng t

he e

ffec

tive

int

eres

t m

etho

d, w

ith

inte

rest

exp

ense

rec

ogni

zed

over

the

lea

se t

erm

s. W

hen

ther

e is

a c

hang

e in

a l

ease

ter

m,

a ch

ange

in

the

amou

nts

expe

cted

to b

e pa

yabl

e un

der

a re

sidu

al v

alue

gua

rant

ee, a

cha

nge

in th

e as

sess

men

t of

an o

ptio

n to

pu

rcha

se a

n un

derl

ying

ass

et, o

r a

chan

ge i

n fu

ture

lea

se p

aym

ents

res

ulti

ng f

rom

a c

hang

e in

an

inde

x or

a

rate

use

d to

det

erm

ine

thos

e pa

ymen

ts,

the

Gro

up r

emea

sure

s th

e le

ase

liab

ilit

ies

wit

h a

corr

espo

ndin

g ad

just

men

t to

the

rig

ht-o

f-us

e-as

sets

. L

ease

lia

bili

ties

are

pre

sent

ed o

n a

sepa

rate

lin

e in

the

con

soli

date

d ba

lanc

e sh

eets

. V

aria

ble

leas

e pa

ymen

ts t

hat

do n

ot d

epen

d on

an

inde

x or

a r

ate

are

reco

gniz

ed a

s ex

pens

es i

n th

e pe

riod

s in

whi

ch th

ey a

re in

curr

ed.

For

sal

e an

d le

aseb

ack

tran

sact

ions

, if

the

tra

nsfe

r of

an

asse

t sa

tisf

ies

the

requ

irem

ents

of

IFR

S 1

5 to

be

acco

unte

d fo

r as

a s

ale,

the

Gro

up r

ecog

nize

s on

ly th

e am

ount

of

any

gain

or

loss

whi

ch r

elat

es to

the

righ

ts

tran

sfer

red

to t

he b

uyer

-les

sor,

and

adj

usts

the

off

-mar

ket

term

s to

mea

sure

the

sal

e pr

ocee

ds a

t fa

ir v

alue

. If

the

tra

nsfe

r do

es n

ot s

atis

fy th

e re

quir

emen

ts o

f IF

RS

15

to b

e ac

coun

ted

for

as a

sal

e, i

t is

acc

ount

ed f

or

as a

fin

anci

ng tr

ansa

ctio

n.

2018

L

ease

s ar

e cl

assi

fied

as

fina

nce

leas

es w

hene

ver

the

term

s of

the

leas

e tr

ansf

er s

ubst

anti

ally

all

the

risk

s an

d re

war

ds o

f ow

ners

hip

to th

e le

ssee

. All

oth

er le

ases

are

cla

ssif

ied

as o

pera

ting

leas

es.

a.

Fin

anci

al le

ases

T

he G

roup

as

less

ee

Ass

ets

held

und

er f

inan

ce l

ease

s ar

e in

itia

lly

reco

gniz

ed a

s as

sets

of

the

Com

pany

at

the

low

er o

f th

eir

fair

val

ue a

t th

e in

cept

ion

of t

he l

ease

or

the

pres

ent

valu

e of

the

min

imum

lea

se p

aym

ents

. T

he

corr

espo

ndin

g li

abil

ity to

the

less

ee is

incl

uded

in th

e ba

lanc

e sh

eets

as

a fi

nanc

e le

ase

obli

gati

on.

Min

imum

lea

se p

aym

ents

are

app

ortio

ned

betw

een

fina

nce

expe

nses

and

red

ucti

ons

of t

he l

ease

ob

liga

tion

so

as t

o ac

hiev

e a

cons

tant

rat

e of

int

eres

t on

the

rem

aini

ng b

alan

ce o

f th

e li

abil

ity.

Fin

ance

ex

pens

es a

re r

ecog

nize

d im

med

iate

ly i

n pr

ofit

or

loss

, unl

ess

they

are

dir

ectl

y at

trib

utab

le t

o qu

alif

ying

as

sets

, in

whi

ch c

ase,

the

y ar

e ca

pita

lize

d in

acc

orda

nce

wit

h th

e C

ompa

ny’s

gen

eral

pol

icy

on

borr

owin

g co

sts.

Con

ting

ent

rent

als

are

reco

gniz

ed a

s ex

pens

es i

n th

e pe

riod

s in

whi

ch t

hey

are

incu

rred

.

b.

Sal

es a

nd le

aseb

acks

F

or a

sal

e an

d le

aseb

ack

tran

sact

ion,

if

it m

eets

the

con

ditio

n w

here

by a

ll t

he r

isks

and

rew

ards

of

owne

rshi

p of

the

lea

sed

asse

t ar

e es

sent

iall

y tr

ansf

erre

d to

the

les

see,

the

sal

e an

d le

aseb

ack

tran

sact

ion

is c

lass

ifie

d as

a f

inan

ce l

ease

. If

par

t of

the

sig

nifi

cant

ris

ks a

nd r

ewar

ds o

f ow

ners

hip

of t

he l

ease

d as

set

rem

ain

wit

h th

e le

ssor

(i.e

. th

e bu

yer)

, th

e sa

le a

nd l

ease

back

tra

nsac

tion

is

clas

sifi

ed a

s an

op

erat

ing

leas

e.

1)

Fin

anci

al le

ases

T

his

tran

sact

ion

does

not

act

uall

y di

spos

e of

the

asse

ts. T

he a

ccou

ntin

g tr

eatm

ent u

sed

is to

trea

t the

tr

ansa

ctio

n as

if it

did

not

occ

ur, a

nd th

e as

sets

are

con

tinu

ousl

y re

cogn

ized

at t

he b

ook

valu

e of

the

asse

t bef

ore

sale

.

156

- 29

-

2)

Ope

rati

ng le

ases

If

the

sel

ling

pri

ce i

s eq

ual

to t

he f

air

valu

e, t

he t

rans

acti

on g

ain

or l

oss

shou

ld b

e re

cogn

ized

im

med

iate

ly.

If t

he s

elli

ng p

rice

is

abov

e fa

ir v

alue

, th

e di

ffer

ence

bet

wee

n th

e fa

ir v

alue

and

the

bo

ok v

alue

of

the

gain

or

loss

sho

uld

be r

ecog

nize

d im

med

iate

ly;

only

the

par

t of

the

sel

ling

pri

ce

whi

ch is

abo

ve f

air

valu

e sh

all b

e de

ferr

ed a

nd a

mor

tize

d ov

er th

e pe

riod

of

the

leas

e.

c.

O

pera

ting

leas

es

1)

The

Gro

up a

s le

ssor

R

enta

l in

com

e fr

om o

pera

ting

lea

ses

is r

ecog

nize

d on

a s

trai

ght-

line

bas

is o

ver

the

term

of

the

rele

vant

lea

se u

nles

s an

othe

r sy

stem

atic

bas

is i

s re

pres

enta

tive

of

the

tim

e pa

tter

n of

the

les

see’

s be

nefi

t fro

m th

e us

e of

the

leas

ed a

sset

.

2)

The

Gro

up a

s le

ssee

O

pera

ting

lea

se p

aym

ents

are

rec

ogni

zed

as e

xpen

ses

on a

str

aigh

t-li

ne b

asis

ove

r th

e le

ase

term

, ex

cept

whe

re a

noth

er s

yste

mat

ic b

asis

is

mor

e re

pres

enta

tive

of

the

tim

e pa

tter

n in

whi

ch e

cono

mic

be

nefi

ts f

rom

the

lea

sed

asse

t ar

e co

nsum

ed.

Con

ting

ent

rent

als

aris

ing

unde

r op

erat

ing

leas

es a

re

reco

gniz

ed a

s ex

pens

es in

the

peri

od in

whi

ch th

ey a

re in

curr

ed.

In t

he e

vent

tha

t le

ase

ince

ntiv

es a

re r

ecei

ved

whe

n en

teri

ng i

nto

oper

atin

g le

ases

, su

ch i

ncen

tive

s ar

e re

cogn

ized

as

a li

abil

ity.

The

agg

rega

te b

enef

it o

f in

cent

ives

is

reco

gniz

ed a

s a

redu

ctio

n of

re

ntal

exp

ense

on

a st

raig

ht-l

ine

basi

s, e

xcep

t w

here

ano

ther

sys

tem

atic

bas

is i

s m

ore

repr

esen

tati

ve

of th

e ti

me

patt

ern

in w

hich

eco

nom

ic b

enef

its

from

the

leas

ed a

sset

are

con

sum

ed.

E

mp

loye

e B

enef

its

a.

Sho

rt-t

erm

em

ploy

ee b

enef

its

Lia

bili

ties

rec

ogni

zed

in r

espe

ct o

f sh

ort-

term

em

ploy

ee b

enef

its

are

mea

sure

d at

the

und

isco

unte

d am

ount

of

the

bene

fits

exp

ecte

d to

be

paid

in e

xcha

nge

for

the

rela

ted

serv

ices

. b.

R

etir

emen

t ben

efit

s P

aym

ents

to

th

e de

fine

d co

ntri

buti

on

reti

rem

ent

bene

fit

plan

ar

e re

cogn

ized

as

ex

pens

es

whe

n em

ploy

ees

have

ren

dere

d se

rvic

es e

ntit

ling

them

to th

e co

ntri

buti

ons.

D

efin

ed b

enef

it c

osts

(in

clud

ing

serv

ice

cost

, ne

t in

tere

st a

nd r

emea

sure

men

t) u

nder

the

def

ined

co

ntri

butio

n re

tire

men

t be

nefi

t pl

an a

re d

eter

min

ed u

sing

the

pro

ject

ed u

nit

cred

it m

etho

d. S

ervi

ce c

ost

(inc

ludi

ng c

urre

nt s

ervi

ce c

ost

and

past

ser

vice

cos

t) a

nd n

et i

nter

est

on t

he n

et d

efin

ed b

enef

it li

abil

itie

s (a

sset

s) a

re r

ecog

nize

d as

em

ploy

ee b

enef

its

expe

nse

in t

he p

erio

d in

whi

ch t

hey

occu

r.

Rem

easu

rem

ent,

com

pris

ing

actu

aria

l gai

ns a

nd lo

sses

and

the

retu

rn o

n pl

an a

sset

s (e

xclu

ding

inte

rest

),

is

reco

gniz

ed

in

othe

r co

mpr

ehen

sive

in

com

e in

th

e pe

riod

in

whi

ch

it

occu

rs.

Rem

easu

rem

ent

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

is r

efle

cted

imm

edia

tely

in r

etai

ned

earn

ings

and

wil

l not

be

recl

assi

fied

to p

rofi

t or

loss

.

Net

def

ined

ben

efit

liab

ilit

ies

(ass

ets)

rep

rese

nt th

e ac

tual

def

icit

in th

e G

roup

’s d

efin

ed b

enef

it p

lans

.

- 30

-

Bor

row

ing

Cos

ts

Bor

row

ing

cost

s di

rect

ly a

ttri

buta

ble

to t

he a

cqui

siti

on,

cons

truc

tion

or

prod

ucti

on o

f qu

alif

ying

ass

ets

(ass

ets

whi

ch a

re s

ubst

anti

ally

rea

dy f

or th

eir

inte

nded

use

or

sale

thro

ugh

a fa

irly

long

per

iod)

are

add

ed to

th

e co

st o

f th

ose

asse

ts, u

ntil

suc

h ti

me

as th

e as

sets

are

sub

stan

tial

ly r

eady

for

thei

r in

tend

ed u

se o

r sa

le.

Inve

stm

ent i

ncom

e ea

rned

on

the

tem

pora

ry in

vest

men

t of

spec

ific

bor

row

ings

pen

ding

thei

r ex

pend

itur

e on

qu

alif

ying

ass

ets

is d

educ

ted

from

the

borr

owin

g co

sts

elig

ible

for

cap

ital

izat

ion.

O

ther

than

that

whi

ch is

sta

ted

abov

e, a

ll o

ther

bor

row

ing

cost

s ar

e re

cogn

ized

in p

rofi

t or

loss

in th

e pe

riod

in

whi

ch th

ey a

re in

curr

ed.

Fre

qu

ent

Fly

er P

rogr

ams

The

Com

pany

has

a “

Dyn

asty

Fly

er P

rogr

am”

thro

ugh

whi

ch p

rogr

am m

embe

rs c

an c

onve

rt a

ccum

ulat

ed

mil

eage

to

a ca

bin

upgr

ade,

fre

e ti

cket

s an

d ot

her

mem

ber

rew

ards

and

ope

rate

s a

“Tig

ercl

ub M

embe

r P

rivi

lege

Pro

gram

” to

pro

vide

mem

bers

wit

h ac

cum

ulat

ed t

icke

t re

war

d bo

nuse

s, w

hich

can

be

used

to

offs

et t

he p

aym

ents

for

air

fare

, lu

ggag

e fe

es,

prio

rity

che

ck-i

ns,

and

orde

ring

of

mea

ls i

n fl

ight

cab

ins.

A

port

ion

of p

asse

nger

rev

enue

att

ribu

tabl

e to

the

rew

ards

for

the

fre

quen

t fl

yer

prog

ram

is

defe

rred

. T

he

Com

pany

sho

uld

reco

gniz

es t

his

defe

rred

rev

enue

as

reve

nue

only

whe

n th

e C

ompa

ny h

as f

ulfi

lled

its

ob

liga

tion

s on

the

gra

ntin

g of

rew

ards

or

whe

n th

e pe

riod

for

con

vert

ing

the

mil

eage

to

rew

ards

has

ex

pire

d.

Sh

are-

bas

ed P

aym

ent

Arr

ange

men

ts

Equ

ity-

sett

led

shar

e-ba

sed

paym

ents

to

empl

oyee

s ar

e m

easu

red

at t

he f

air

valu

e of

the

equ

ity

inst

rum

ents

at

the

gran

t dat

e.

The

fai

r va

lue

dete

rmin

ed a

t th

e gr

ant

date

of

the

equi

ty-s

ettl

ed s

hare

-bas

ed p

aym

ents

is

expe

nsed

on

a st

raig

ht-l

ine

basi

s ov

er t

he v

esti

ng p

erio

d, b

ased

on

the

Gro

up’s

est

imat

e of

equ

ity

inst

rum

ent

that

wil

l ev

entu

ally

ves

t, w

ith

a co

rres

pond

ing

incr

ease

in

capi

tal

surp

lus

- em

ploy

ee s

hare

opt

ions

. T

he f

air

valu

e de

term

ined

at

the

gran

t da

te o

f th

e eq

uity

-set

tled

sha

re-b

ased

pay

men

ts i

s re

cogn

ized

as

an e

xpen

se i

n fu

ll at

the

gran

t dat

e w

hen

the

gran

ted

shar

e op

tion

s ar

e ve

sted

imm

edia

tely

. T

axat

ion

In

com

e ta

x ex

pens

e re

pres

ents

the

sum

of

the

curr

ent t

ax a

nd d

efer

red

tax.

a.

C

urre

nt ta

x

The

cur

rent

tax

lia

bili

ties

are

bas

ed o

n cu

rren

t ta

xabl

e pr

ofit

. Sin

ce p

art

of t

he i

ncom

e an

d ex

pens

es a

re

taxa

ble

or d

educ

tibl

e in

oth

er p

erio

ds,

or i

n ac

cord

ance

wit

h th

e re

leva

nt t

ax l

aws

are

taxa

ble

or

dedu

ctib

le,

curr

ent

taxa

ble

prof

it d

iffe

rs f

rom

net

pro

fit

repo

rted

in

the

cons

olid

ated

sta

tem

ents

of

com

preh

ensi

ve in

com

e.

The

Gro

up’s

cur

rent

tax

liab

ilit

ies

are

calc

ulat

ed b

y th

e ta

x ra

te w

as le

gisl

ated

or

subs

tant

iall

y le

gisl

ated

at

the

bala

nce

shee

t dat

e.

Acc

ordi

ng t

o th

e In

com

e T

ax L

aw, a

n ad

diti

onal

tax

at

10%

of

unap

prop

riat

ed e

arni

ngs

is p

rovi

ded

for

as in

com

e ta

x in

the

year

the

shar

ehol

ders

app

rove

the

rete

ntio

n of

thes

e ea

rnin

gs.

Adj

ustm

ents

of

prio

r ye

ars’

tax

liab

iliti

es a

re a

dded

to o

r de

duct

ed f

rom

the

curr

ent y

ear’

s ta

x pr

ovis

ion.

157

- 31

-

b.

Def

erre

d ta

x D

efer

red

tax

is r

ecog

nize

d on

tem

pora

ry d

iffe

renc

es b

etw

een

the

carr

ying

am

ount

s of

ass

ets

and

liab

ilit

ies

in

the

cons

olid

ated

fi

nanc

ial

stat

emen

ts

and

the

corr

espo

ndin

g ta

x ba

ses

used

in

th

e co

mpu

tati

on o

f ta

xabl

e pr

ofit

. Def

erre

d ta

x li

abili

ties

are

gene

rall

y re

cogn

ized

for

all

tax

able

tem

pora

ry

diff

eren

ces.

Def

erre

d ta

x as

sets

are

gen

eral

ly r

ecog

nize

d fo

r al

l de

duct

ible

tem

pora

ry d

iffe

renc

es,

unus

ed

loss

ca

rryf

orw

ards

an

d un

used

ta

x cr

edit

s fo

r pu

rcha

ses

of

mac

hine

ry,

equi

pmen

t an

d te

chno

logy

, re

sear

ch a

nd d

evel

opm

ent

expe

ndit

ures

, an

d pe

rson

nel

trai

ning

exp

endi

ture

s to

the

ext

ent

that

it

is p

roba

ble

that

tax

able

pro

fit

wil

l be

ava

ilab

le a

gain

st w

hich

tho

se d

educ

tibl

e te

mpo

rary

di

ffer

ence

s ca

n be

uti

lize

d.

Def

erre

d ta

x li

abil

itie

s ar

e re

cogn

ized

for

tax

able

tem

pora

ry d

iffe

renc

es a

ssoc

iate

d w

ith

inve

stm

ents

in

subs

idia

ries

and

ass

ocia

tes

and

inte

rest

s in

joi

nt v

entu

res,

exc

ept

whe

re t

he G

roup

is

able

to

cont

rol

the

reve

rsal

of

the

tem

pora

ry d

iffe

renc

e an

d it

is

prob

able

tha

t th

e te

mpo

rary

dif

fere

nce

wil

l no

t re

vers

e in

th

e fo

rese

eabl

e fu

ture

. D

efer

red

tax

asse

ts a

risi

ng f

rom

ded

ucti

ble

tem

pora

ry d

iffe

renc

es a

ssoc

iate

d w

ith

such

inve

stm

ents

and

inte

rest

s ar

e on

ly r

ecog

nize

d to

the

exte

nt th

at it

is p

roba

ble

that

ther

e w

ill b

e su

ffic

ient

tax

able

pro

fit

agai

nst

whi

ch t

o ut

iliz

e th

e be

nefi

ts o

f th

e te

mpo

rary

dif

fere

nces

and

the

y ar

e ex

pect

ed to

rev

erse

in th

e fo

rese

eabl

e fu

ture

. T

he c

arry

ing

amou

nt o

f de

ferr

ed t

ax a

sset

s is

rev

iew

ed a

t th

e en

d of

eac

h re

port

ing

peri

od a

nd r

educ

ed

to t

he e

xten

t th

at i

t is

no

long

er p

roba

ble

that

suf

fici

ent

taxa

ble

prof

it w

ill

be a

vail

able

to

allo

w a

ll o

r pa

rt o

f th

e as

sets

to

be r

ecov

ered

. A

pre

viou

sly

unre

cogn

ized

def

erre

d ta

x as

set

is a

lso

revi

ewed

at

the

end

of e

ach

repo

rtin

g pe

riod

and

rec

ogni

zed

to th

e ex

tent

that

it h

as b

ecom

e pr

obab

le th

at f

utur

e ta

xabl

e pr

ofit

wil

l all

ow th

e de

ferr

ed ta

x as

set t

o be

rec

over

ed.

Def

erre

d ta

x li

abil

itie

s an

d as

sets

are

mea

sure

d at

the

tax

rate

s th

at a

re e

xpec

ted

to a

pply

in th

e pe

riod

in

whi

ch t

he l

iabi

liti

es a

re s

ettl

ed o

r th

e as

sets

are

rea

lize

d, b

ased

on

tax

rate

s (a

nd t

ax l

aws)

tha

t ha

ve

been

ena

cted

or

subs

tant

ivel

y en

acte

d by

the

end

of

the

repo

rtin

g pe

riod

. The

mea

sure

men

t of

def

erre

d ta

x li

abil

itie

s an

d as

sets

ref

lect

s th

e ta

x co

nseq

uenc

es t

hat

wou

ld f

ollo

w f

rom

the

man

ner

in w

hich

the

G

roup

exp

ects

, at

the

end

of

the

repo

rtin

g pe

riod

, to

rec

over

or

sett

le t

he c

arry

ing

amou

nt o

f it

s as

sets

an

d li

abil

itie

s.

c.

Cur

rent

and

def

erre

d ta

xes

for

the

year

Cur

rent

and

def

erre

d ta

xes

are

reco

gniz

ed i

n pr

ofit

or

loss

, ex

cept

whe

n th

ey r

elat

e to

ite

ms

that

are

re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e or

dir

ectl

y in

equ

ity, i

n w

hich

cas

e, th

e cu

rren

t and

def

erre

d ta

xes

are

also

rec

ogni

zed

in o

ther

com

preh

ensi

ve in

com

e or

dir

ectl

y in

equ

ity, r

espe

ctiv

ely.

M

ain

ten

ance

an

d O

verh

aul C

osts

R

outi

ne m

aint

enan

ce c

osts

are

rec

ogni

zed

in p

rofi

t or

loss

in th

e pe

riod

in w

hich

they

are

incu

rred

. T

he o

verh

aul

cost

s of

an

owne

d or

lea

sed

airc

raft

tha

t m

eet

the

crit

eria

for

fix

ed a

sset

cap

ital

izat

ion

are

capi

tali

zed

as r

epla

cem

ents

for

air

craf

t an

d en

gine

s an

d ar

e de

prec

iate

d on

a s

trai

ght-

line

bas

is o

ver

the

expe

cted

ann

ual o

verh

aul c

ycle

.

5.

CR

ITIC

AL

AC

CO

UN

TIN

G J

UD

GE

ME

NT

S A

ND

KE

Y S

OU

RC

ES

OF

ES

TIM

AT

ION

U

NC

ER

TA

INT

Y

In t

he a

ppli

cati

on o

f th

e G

roup

’s a

ccou

ntin

g po

lici

es a

s di

sclo

sed

in N

ote

4, m

anag

emen

t is

req

uire

d to

m

ake

judg

men

ts,

esti

mat

ions

and

ass

umpt

ions

abo

ut t

he c

arry

ing

amou

nts

of a

sset

s an

d li

abil

itie

s th

at a

re

not

read

ily

appa

rent

fro

m o

ther

sou

rces

. T

he e

stim

ates

and

ass

ocia

ted

assu

mpt

ions

are

bas

ed o

n hi

stor

ical

ex

peri

ence

and

oth

er f

acto

rs th

at a

re c

onsi

dere

d re

leva

nt. A

ctua

l res

ults

may

dif

fer

from

thes

e es

tim

ates

.

- 32

-

The

est

imat

es a

nd u

nder

lyin

g as

sum

ptio

ns a

re r

evie

wed

on

an o

ngoi

ng b

asis

. R

evis

ions

to

acco

unti

ng

esti

mat

es a

re r

ecog

nize

d in

the

per

iod

in w

hich

the

est

imat

es a

re r

evis

ed i

f th

e re

visi

ons

affe

ct o

nly

that

pe

riod

or

in t

he p

erio

d of

the

rev

isio

ns a

nd f

utur

e pe

riod

s if

the

rev

isio

ns a

ffec

t bo

th c

urre

nt a

nd f

utur

e pe

riod

s.

Key

Sou

rces

of

Est

imat

ion

Un

cert

ain

ty

The

key

ass

umpt

ions

con

cern

ing

the

futu

re a

nd o

ther

key

sou

rces

of

esti

mat

ion

unce

rtai

nty

at th

e en

d of

the

repo

rtin

g pe

riod

tha

t ha

ve a

sig

nifi

cant

ris

k ca

usin

g a

mat

eria

l ad

just

men

t to

the

car

ryin

g am

ount

s of

ass

ets

and

liab

ilit

ies

wit

hin

the

next

fin

anci

al y

ear

are

disc

usse

d be

low

. D

epre

ciat

ion

of

Pro

per

ty, P

lan

t an

d E

qu

ipm

ent

- F

ligh

t E

qu

ipm

ent

Fli

ght

equi

pmen

t is

dep

reci

ated

on

a st

raig

ht-l

ine

basi

s at

rat

es t

hat

can

be u

sed

to w

rite

dow

n th

eir

cost

to

thei

r es

tim

ated

res

idua

l va

lues

at

the

end

of t

heir

use

ful

live

s. T

he e

stim

ates

of

the

usef

ul l

ives

and

res

idua

l va

lues

of

the

flig

ht e

quip

men

t ar

e m

ade

by t

he G

roup

on

the

basi

s of

pas

t ex

peri

ence

and

fle

et o

pera

tion

perf

orm

ance

in

the

indu

stry

. D

ue t

o ch

ange

s in

the

fle

et p

lan,

the

boa

rd o

f di

rect

ors

of t

he C

ompa

ny h

as

deci

ded

to c

hang

e th

e ex

pect

ed u

sefu

l li

ves

of f

our

747-

400

(GE

) fr

om 2

0 to

16-

17 y

ears

sin

ce J

anua

ry 1

, 20

18 i

n or

der

to m

eet

the

econ

omic

ben

efit

s an

d nu

mbe

r of

yea

rs o

f co

nsum

ptio

n. I

t is

est

imat

ed t

hat

the

depr

ecia

tion

exp

ense

wil

l inc

reas

e by

app

roxi

mat

ely

NT

$770

mil

lion

ann

ually

. D

efin

ed B

enef

it O

bli

gati

ons

The

pre

sent

val

ue o

f de

fine

d be

nefi

t ob

liga

tion

s at

the

end

of

the

repo

rtin

g pe

riod

are

cal

cula

ted

usin

g ac

tuar

ial

assu

mpt

ions

. T

hose

ass

umpt

ions

, w

hich

are

bas

ed o

n m

anag

emen

t’s

judg

men

t an

d es

tim

ates

, co

mpr

ise

the

disc

ount

rat

e an

d ex

pect

ed r

etur

n on

pla

n as

sets

. Cha

nges

in a

ctua

rial

ass

umpt

ions

may

hav

e a

mat

eria

l im

pact

on

the

amou

nt o

f de

fine

d be

nefi

t obl

igat

ions

.

6.

CA

SH

AN

D C

AS

H E

QU

IVA

LE

NT

S

Dec

emb

er 3

1

20

19

20

18

C

ash

on h

and

and

revo

lvin

g fu

nds

$

48

3,95

1

$

413,

139

Che

ckin

g ac

coun

ts a

nd d

eman

d de

posi

ts

7,20

6,93

8

7,

770,

200

Cas

h eq

uiva

lent

s

T

ime

depo

sits

wit

h or

igin

al m

atur

itie

s of

less

than

thre

e m

onth

s

16

,565

,821

15

,784

,323

R

epur

chas

e ag

reem

ents

col

late

rali

zed

by b

onds

4,

202,

818

969,

875

$

28

,459

,528

$

24,9

37,5

37

The

mar

ket

rate

int

erva

ls o

f ca

sh i

n ba

nks

and

cash

equ

ival

ents

at

the

end

of t

he r

epor

ting

per

iod

wer

e as

fo

llow

s:

Dec

emb

er 3

1

20

19

20

18

B

ank

bala

nce

0%

-1.9

%

0%

-1.9

%

Tim

e de

posi

ts w

ith

orig

inal

mat

urit

ies

of le

ss th

an th

ree

mon

ths

0.

59%

-3.5

5%

0.

59%

-3.5

5%

Rep

urch

ase

agre

emen

ts c

olla

tera

lize

d by

bon

ds

0.

47%

-0.7

%

0.

63%

-3.3

0%

158

- 33

-

7.

FIN

AN

CIA

L I

NS

TR

UM

EN

TS

AT

FA

IR V

AL

UE

TH

RO

UG

H P

RO

FIT

OR

LO

SS

(F

VT

PL

)

D

ecem

ber

31

2019

2018

Fin

anci

al a

sset

s -

curr

ent

F

inan

cial

ass

ets

man

dato

rily

cla

ssif

ied

at F

VT

PL

D

eriv

ativ

e fi

nanc

ial i

nstr

umen

ts (

not u

nder

hed

ge a

ccou

ntin

g)

For

eign

exc

hang

e fo

rwar

d co

ntra

cts

$

43

4

$

- N

on-d

eriv

ativ

e fi

nanc

ial a

sset

s

B

enef

icia

l cer

tifi

cate

s

51

1,75

8

20

6,00

1

$

512,

192

$

20

6,00

1

Fin

anci

al li

abil

itie

s he

ld f

or tr

adin

g

Der

ivat

ive

fina

ncia

l ins

trum

ents

(no

t und

er h

edge

acc

ount

ing)

-

fore

ign

exch

ange

for

war

d co

ntra

cts

$

11

,749

$

221

At

the

end

of t

he r

epor

ting

peri

od,

outs

tand

ing

fore

ign

exch

ange

for

war

d co

ntra

cts

not

unde

r he

dge

acco

unti

ng w

ere

as f

ollo

ws:

C

urr

ency

Mat

uri

ty D

ate

N

otio

nal

Am

oun

t (I

n T

hou

san

ds)

D

ecem

ber

31, 2

019

B

uy f

orw

ard

cont

ract

s N

TD

/US

D

20

20.0

1.15

-202

0.07

.31

NT

D57

0,57

1/U

SD

19,0

00

D

ecem

ber

31, 2

018

B

uy f

orw

ard

cont

ract

s N

TD

/US

D

20

19.0

1.02

-201

9.01

.31

NT

D30

,923

/US

D1,

000

8.

FIN

AN

CIA

L A

SS

ET

S A

T F

VT

OC

I In

vest

men

ts in

Eq

uit

y In

stru

men

ts

Dec

emb

er 3

1

20

19

20

18

N

on-c

urre

nt

F

orei

gn in

vest

men

ts

Unl

iste

d sh

ares

$

182,

356

$

11

0,44

5 D

omes

tic

inve

stm

ents

U

nlis

ted

shar

es

26,8

65

21,7

46

$

20

9,22

1

$

132,

191

The

se i

nves

tmen

ts i

n eq

uity

ins

trum

ents

are

not

hel

d fo

r tr

adin

g. I

nste

ad,

they

are

hel

d fo

r m

ediu

m-

to

long

-ter

m s

trat

egic

pur

pose

s. A

ccor

ding

ly, t

he m

anag

emen

t ele

cted

to d

esig

nate

thes

e in

vest

men

ts in

equ

ity

inst

rum

ents

as

at F

VT

OC

I as

it

beli

eves

tha

t re

cogn

izin

g sh

ort-

term

flu

ctua

tion

s in

the

se i

nves

tmen

ts’

fair

va

lues

in

prof

it o

r lo

ss w

ould

not

be

cons

iste

nt w

ith

the

Gro

up’s

str

ateg

y of

hol

ding

the

se i

nves

tmen

ts f

or

long

-ter

m p

urpo

ses.

- 34

-

9

. F

INA

NC

IAL

AS

SE

TS

AT

AM

OR

TIZ

ED

CO

ST

Dec

emb

er 3

1

20

19

20

18

C

urre

nt

T

ime

depo

sits

wit

h or

igin

al m

atur

itie

s of

mor

e th

an 3

mon

ths

$

2,

355,

095

$

3,

856,

660

N

on-c

urre

nt

T

ime

depo

sits

wit

h or

igin

al m

atur

itie

s of

mor

e th

an 1

yea

r

$

105,

586

$

-

The

int

eres

t ra

tes

for

tim

e de

posi

ts w

ith

orig

inal

mat

urit

ies

of m

ore

than

3 m

onth

s ra

nged

fro

m 0

.60%

to

1.30

% a

nd 0

.40%

to 1

.36%

as

of 2

019

and

2018

.

10.

NO

TE

S R

EC

EIV

AB

LE

AN

D A

CC

OU

NT

S R

EC

EIV

AB

LE

D

ecem

ber

31

2019

2018

Not

es r

ecei

vabl

e

$

299,

245

$

59

8,82

4

Acc

ount

s re

ceiv

able

Acc

ount

s re

ceiv

able

8,

440,

254

9,66

7,01

0 L

ess:

All

owan

ce f

or im

pair

men

t los

s

(2

18,6

65)

(227

,306

)

8,22

1,58

9

9,

439,

704

$

8,

520,

834

$

10

,038

,528

T

he a

vera

ge c

redi

t pe

riod

was

7 t

o 55

day

s. I

n de

term

inin

g th

e re

cove

rabi

lity

of

a tr

ade

rece

ivab

le,

the

Gro

up c

onsi

dere

d an

y ch

ange

in

the

cred

it q

uali

ty o

f th

e re

ceiv

able

sin

ce t

he d

ate

cred

it w

as i

niti

ally

gr

ante

d to

the

end

of

the

repo

rtin

g pe

riod

, an

d an

y al

low

ance

for

im

pair

men

t lo

ss w

as b

ased

on

the

esti

mat

ed i

rrec

over

able

am

ount

s de

term

ined

by

refe

renc

e to

the

Gro

up’s

pas

t de

faul

t ex

peri

ence

wit

h th

e co

unte

rpar

ty a

nd a

n an

alys

is o

f th

e co

unte

rpar

ty’s

cur

rent

fin

anci

al p

osit

ion.

The

Gro

up a

dopt

ed a

pol

icy

of

only

dea

ling

wit

h en

titi

es t

hat

are

rate

d th

e eq

uiva

lent

of

inve

stm

ent

grad

e or

hig

her

and

obta

inin

g su

ffic

ient

col

late

ral,

whe

re a

ppro

pria

te,

as a

mea

ns o

f m

itig

atin

g th

e ri

sk o

f fi

nanc

ial

loss

fro

m d

efau

lts.

C

redi

t ra

ting

inf

orm

atio

n is

obt

aine

d fr

om i

ndep

ende

nt r

atin

g ag

enci

es w

here

ava

ilab

le o

r, i

f no

t av

aila

ble,

th

e G

roup

use

s ot

her

publ

icly

ava

ilab

le f

inan

cial

inf

orm

atio

n or

its

ow

n tr

adin

g re

cord

s to

rat

e it

s m

ajor

cu

stom

ers.

The

Gro

up’s

exp

osur

e an

d th

e cr

edit

rat

ings

of

its

coun

terp

arti

es a

re c

onti

nuou

sly

mon

itor

ed a

nd

the

aggr

egat

e va

lue

of t

rans

acti

ons

conc

lude

d is

spr

ead

amon

gst

appr

oved

cou

nter

part

ies.

Cre

dit

expo

sure

is

con

trol

led

by c

ount

erpa

rty

lim

its

that

are

rev

iew

ed a

nd a

ppro

ved

by t

he r

isk

man

agem

ent

com

mit

tee

annu

ally

. T

he G

roup

app

lies

the

sim

plif

ied

appr

oach

to

allo

win

g fo

r ex

pect

ed c

redi

t lo

sses

pre

scri

bed

by I

FR

S 9

, w

hich

per

mit

s th

e us

e of

lif

etim

e ex

pect

ed l

oss

allo

wan

ce f

or a

ll t

rade

rec

eiva

bles

. T

he e

xpec

ted

cred

it

loss

es o

n tr

ade

rece

ivab

les

are

esti

mat

ed u

sing

a p

rovi

sion

mat

rix

by r

efer

ence

to

past

def

ault

exp

erie

nce

wit

h th

e de

btor

s an

d an

ana

lysi

s of

the

deb

tors

’ cu

rren

t fi

nanc

ial

posi

tion

, ad

just

ed f

or g

ener

al e

cono

mic

co

ndit

ions

of

the

indu

stry

in

whi

ch t

he d

ebto

rs o

pera

te a

nd a

n as

sess

men

t of

bot

h th

e cu

rren

t as

wel

l as

the

fo

reca

sted

dir

ecti

on o

f ec

onom

ic c

ondi

tion

s at

the

rep

orti

ng d

ate.

As

the

Gro

up’s

his

tori

cal

cred

it l

oss

expe

rien

ce d

oes

not

show

sig

nifi

cant

ly d

iffe

rent

los

s pa

tter

ns f

or d

iffe

rent

cus

tom

er s

egm

ents

, th

e lo

ss

allo

wan

ce b

ased

on

the

past

due

sta

tus

is n

ot f

urth

er d

isti

ngui

shed

acc

ordi

ng to

the

diff

eren

t seg

men

ts o

f th

e G

roup

’s c

usto

mer

bas

e.

159

- 35

-

The

Gro

up w

rite

s of

f a

trad

e re

ceiv

able

whe

n th

ere

is in

form

atio

n in

dica

ting

that

the

debt

or is

exp

erie

ncin

g se

vere

fin

anci

al d

iffi

culty

and

the

re i

s no

rea

list

ic p

rosp

ect

of r

ecov

ery.

For

acc

ount

s re

ceiv

able

tha

t ha

ve

been

w

ritt

en

off,

th

e G

roup

co

ntin

ues

to

enga

ge

in

enfo

rcem

ent

acti

vity

to

at

tem

pt

to

reco

ver

the

rece

ivab

les

whi

ch a

re d

ue. W

here

rec

over

ies

are

mad

e, th

ese

are

reco

gniz

ed in

pro

fit o

r lo

ss.

The

fol

low

ing

tabl

e de

tail

s th

e lo

ss a

llow

ance

of

trad

e re

ceiv

able

s ba

sed

on th

e G

roup

’s p

rovi

sion

mat

rix.

D

ecem

ber

31, 2

019

N

ot P

ast

Du

e U

p t

o 30

Day

s

31 t

o 60

Day

s

61 t

o 90

Day

s

Ove

r 90

Day

s

Tot

al

E

xpec

ted

cred

it lo

ss r

ate

0.

12%

0.15

%

6.

16%

15.2

5%

97

.18%

Gro

ss c

arry

ing

amou

nt

$

6,7

05,6

62

$

1,3

32,6

40

$

97

,700

$

113,

716

$

19

0,53

6

$ 8

,440

,254

L

oss

allo

wan

ce (

life

time

EC

Ls)

(8

,123

)

(2

,019

)

(6

,021

)

(1

7,34

0)

(1

85,1

62)

(218

,665

)

Am

orti

zed

cost

$ 6

,697

,539

$ 1

,330

,621

$

91,6

79

$

96

,376

$

5,37

4

$ 8

,221

,589

D

ecem

ber

31, 2

018

N

ot P

ast

Du

e U

p t

o 30

Day

s

31 t

o 60

Day

s

61 t

o 90

Day

s

Ove

r 90

Day

s

Tot

al

E

xpec

ted

cred

it lo

ss r

ate

0.

06%

0.06

%

3.

67%

21.7

8%

97

.5%

Gro

ss c

arry

ing

amou

nt

$

7,8

56,0

48

$

1,4

24,4

21

$

10

3,49

8

$

76,4

15

$

20

6,62

8

$ 9

,667

,010

L

oss

allo

wan

ce (

life

time

EC

Ls)

(4

,546

)

(8

56)

(3,7

96)

(16,

642)

(2

01,4

66)

(227

,306

)

A

mor

tize

d co

st

$

7,8

51,5

02

$

1,4

23,5

65

$

99

,702

$

59,7

73

$

5,

162

$

9,4

39,7

04

The

mov

emen

ts o

f th

e lo

ss a

llow

ance

of

trad

e re

ceiv

able

s w

ere

as f

ollo

ws:

F

or t

he

Yea

r E

nd

ed D

ecem

ber

31

2019

2018

Bal

ance

at J

anua

ry 1

$

227,

306

$

18

1,86

8 A

dd: N

et r

emea

sure

men

t of

loss

all

owan

ce

24,0

96

49,8

24

Les

s: A

mou

nts

wri

tten

off

(3

2,71

7)

(2,9

75)

For

eign

exc

hang

e ga

ins

and

loss

es

(3)

(1,4

11)

Los

s of

con

trol

of

subs

idia

ries

(1

7 )

-

Bal

ance

at D

ecem

ber

31, 2

018

$

21

8,66

5

$

227,

306

11

. IN

VE

NT

OR

IES

Dec

emb

er 3

1

20

19

20

18

A

ircr

aft s

pare

par

ts

$

7,

578,

125

$

7,

847,

082

Item

s fo

r in

-fli

ght s

ale

571,

601

556,

365

Wor

k in

pro

cess

- m

aint

enan

ce s

ervi

ces

283,

933

227,

975

Oth

ers

36

,454

23

,288

$

8,47

0,11

3

$

8,65

4,71

0 T

he o

pera

ting

cos

ts r

ecog

nize

d fo

r th

e ye

ars

ende

d D

ecem

ber

31,

2019

and

201

8 in

clud

ed l

osse

s fr

om

- 36

-

inve

ntor

y w

rite

-dow

ns o

f $3

27,9

19 th

ousa

nd a

nd $

371,

275

thou

sand

, res

pect

ivel

y.

12

. N

ON

-CU

RR

EN

T A

SS

ET

S H

EL

D F

OR

SA

LE

Dec

emb

er 3

1

20

19

20

18

L

ong-

term

equ

ity in

vest

men

ts h

eld

for

sale

- A

sian

Com

pres

sor

Tec

hnol

ogy

Ser

vice

s

$

-

$

46,1

54

To

enha

nce

its

com

peti

tive

ness

, th

e C

ompa

ny p

lans

to

intr

oduc

e ne

w a

ircr

aft

and

reti

re o

ld a

ircr

aft

acco

rdin

g to

a p

lann

ed s

ched

ule.

Suc

h ai

rcra

ft, c

lass

ifie

d as

non

-cur

rent

ass

ets

held

for

sal

e, h

ad a

n or

igin

al

book

val

ue w

hich

was

hig

her

than

the

expe

cted

sal

e pr

ice

and

whi

ch w

as r

ecog

nize

d as

an

impa

irm

ent l

oss.

H

owev

er, t

he a

ctua

l los

s sh

all b

e id

enti

fied

by

the

actu

al s

ale

pric

e.

In 2

019

and

2018

, th

e C

ompa

ny r

ecog

nize

d im

pair

men

t lo

sses

of

$0 t

hous

and

and

$75,

436

thou

sand

, re

spec

tive

ly. I

n 20

19 a

nd 2

018,

the

Com

pany

rec

ogni

zed

disp

osal

loss

es o

f $1

0,46

2 th

ousa

nd a

nd $

368,

992

thou

sand

, re

spec

tive

ly.

The

fai

r va

lue

was

det

erm

ined

by

tran

sact

ions

of

the

rela

ted

mar

ket,

and

the

prop

osed

sal

e pr

ice

was

bas

ed o

n th

e cu

rren

t sta

tus

of th

e ai

rcra

ft. T

he f

air

valu

e is

cla

ssif

ied

as le

vel 3

.

13.

SU

BS

IDIA

RIE

S

Sub

sidi

ary

incl

uded

in th

e co

nsol

idat

ed f

inan

cial

sta

tem

ents

:

Pro

por

tion

of

Ow

ner

ship

(%

)

Dec

embe

r 31

In

vest

or C

omp

any

In

vest

ee C

omp

any

M

ain

Bu

sin

esse

s an

d P

rod

uct

s

2019

2018

C

hina

Air

line

s, L

td.

T

iger

air

Tai

wan

Co.

, Ltd

. (N

ote)

A

ir tr

ansp

orta

tion

77

100

Tai

wan

Air

craf

t Mai

nten

ance

A

nd E

ngin

eeri

ng C

o., L

td.

Air

craf

t mai

nten

ance

100

100

CA

L-D

ynas

ty I

nter

nati

onal

A h

oldi

ng c

ompa

ny, r

eal e

stat

e an

d ho

tel

serv

ices

100

100

CA

L-A

sia

Inve

stm

ent

Gen

eral

inve

stm

ent

10

0 10

0

D

ynas

ty A

erot

ech

Inte

rnat

iona

l C

orp.

Cle

anin

g of

air

craf

t and

mai

nten

ance

of

mac

hine

and

equ

ipm

ent

10

0 10

0

Yes

trip

Tra

vel b

usin

ess

10

0 10

0

C

al P

ark

Rea

l est

ate

leas

e an

d in

tern

atio

nal t

rade

100

100

Cal

Hot

el C

o., L

td.

H

otel

bus

ines

s

100

100

Sab

re T

rave

l Net

wor

k (T

aiw

an)

S

ale

and

mai

nten

ance

of

hard

war

e an

d so

ftw

are

94

94

Man

dari

n A

irli

nes

A

ir tr

ansp

orta

tion

and

mai

nten

ance

of

airc

raft

94

94

Tai

wan

Air

Car

go T

erm

inal

(N

ote)

Air

car

go a

nd s

tora

ge

59

59

Kao

hsiu

ng C

ater

ing

Ser

vice

s,

Ltd

.

In-f

ligh

t cat

erin

g

54

54

Dyn

asty

Hol

iday

s

T

rave

l bus

ines

s

20

51

Tao

yuan

Int

erna

tion

al A

irpo

rt

Serv

ices

Air

port

ser

vice

s

49

49

Tai

wan

Air

port

Ser

vice

s (N

ote)

Air

port

ser

vice

s

48

48

Glo

bal S

ky E

xpre

ss

F

orw

ardi

ng a

nd s

tora

ge o

f ai

r ca

rgo

25

25

Cal

-Dyn

asty

Dyn

asty

Pro

pert

ies

Co.

, Ltd

.

Rea

l est

ate

man

agem

ent

10

0 10

0

Inte

rnat

iona

l

Dyn

asty

Hot

el o

f H

awai

i, In

c.

H

otel

bus

ines

s

100

100

Tai

wan

Air

port

Ser

vice

s

Tai

wan

Air

port

Ser

vice

(S

amoa

)

Air

port

sup

port

ing

serv

ice

and

inve

stm

ent

10

0 10

0 N

ote:

P

ropo

rtio

n of

ow

ners

hip

is c

onsi

dere

d fr

om th

e pe

rspe

ctiv

e of

the

Gro

up.

Exc

ept

that

the

Com

pany

has

con

trol

ove

r T

aoyu

an I

nter

nati

onal

Air

port

Ser

vice

, T

aiw

an A

irpo

rt S

ervi

ce

160

- 37

-

and

Glo

bal

Sky

Exp

ress

, th

e ot

hers

are

inv

este

es t

hat

the

Com

pany

had

mor

e th

an 5

0% o

f th

eir

voti

ng

shar

es.

The

abo

ve f

inan

cial

inf

orm

atio

n of

the

sub

sidi

arie

s fo

r th

e ye

ars

ende

d D

ecem

ber

31,

2019

and

20

18 o

f th

ese

subs

idia

ries

was

rep

orte

d ac

cord

ing

to r

epor

ts t

hat

wer

e no

t re

view

ed b

y in

depe

nden

t au

dito

rs.

The

Gro

up p

aid

$243

,743

tho

usan

d on

Mar

ch 7

, 20

18 t

o ac

quir

e an

add

itio

nal

18%

of

the

issu

ed s

hare

ca

pita

l of

Kao

hsiu

ng C

ater

ing,

Ltd

. (K

aohs

iung

Cat

erin

g). T

he G

roup

’s h

oldi

ng o

f th

e is

sued

sha

re c

apit

al

of K

aohs

iung

Cat

erin

g ex

ceed

s 50

%;

ther

efor

e, K

aohs

iung

Cat

erin

g is

lis

ted

as a

sub

sidi

ary

beca

use

the

Gro

up h

as c

ontr

ol o

ver

the

inve

stee

. F

or t

he d

iscl

osur

e of

the

Gro

up’s

acq

uisi

tion

of

Kao

hsiu

ng C

ater

ing,

pl

ease

ref

er to

Not

e 30

. T

he b

oard

of

dire

ctor

s of

the

Com

pany

dec

ided

to

sell

par

t of

the

equ

ity

of D

ynas

ty H

olid

ays

to H

.I.S

. T

aiw

an C

o., L

td. o

n Ja

nuar

y 21

, 201

9, a

nd c

ompl

eted

the

tran

sact

ion

on J

anua

ry 3

1, 2

109.

Aft

er th

e sa

le o

f th

e eq

uity

, th

e G

roup

’s h

oldi

ng o

f th

e is

sued

sha

re c

apit

al d

ecre

ased

fro

m 5

1% t

o 20

%.

Dyn

asty

Hol

iday

s w

as c

lass

ifie

d as

an

asso

ciat

e si

nce

the

Gro

up l

ost

cont

rol

of t

he s

ubsi

diar

y. T

here

fore

, th

e re

leva

nt a

sset

s an

d li

abil

itie

s w

ere

not c

onso

lida

ted

in th

e cu

rren

t per

iod,

and

onl

y th

e pr

ofit

and

loss

fro

m J

anua

ry 1

, 201

9 to

Jan

uary

31,

201

9 w

as c

onso

lida

ted.

For

the

inf

orm

atio

n ab

out

the

disp

osal

of

the

subs

idia

ry, p

leas

e re

fer

to N

ote

31.

In o

rder

to

prep

are

the

list

ing

of T

iger

air

Tai

wan

Co.

, L

td.

and

com

ply

wit

h th

e ru

les

rela

ting

to

the

exam

inat

ion

for

publ

ic l

istin

g, t

he r

elea

se o

f th

e sh

ares

of

Tig

erai

r T

aiw

an C

o.,

Ltd

. he

ld b

y th

e C

ompa

ny

and

Man

dari

n A

irli

nes

was

res

olve

d in

the

shar

ehol

ders

’ m

eeti

ng o

f th

e C

ompa

ny o

n Ju

ne 2

5, 2

019,

and

in

the

shar

ehol

ders

’ m

eeti

ng o

f M

anda

rin

Air

line

s on

Jun

e 27

, 20

19.

The

sha

res

shal

l be

sub

scri

bed

by a

ll

shar

ehol

ders

of

the

Com

pany

and

Man

dari

n A

irli

nes

on t

he b

asis

of

the

perc

enta

ge o

f sh

areh

oldi

ngs.

For

th

e su

bscr

ibed

sha

res

that

the

orig

inal

sha

reho

lder

s w

aive

d or

for

the

unde

rsub

scri

bed

port

ion,

the

chai

rman

w

as a

utho

rize

d to

con

tact

spe

cifi

c pe

rson

s to

sub

scri

be. T

he s

ubsc

ript

ion

pric

e w

as s

et a

t $4

1 pe

r sh

are.

In

Oct

ober

201

9, t

he s

tock

pri

ce w

as f

ully

pai

d an

d th

e sh

ares

wer

e co

mpl

etel

y de

liver

ed a

nd t

rans

ferr

ed. T

he

proc

eeds

fro

m d

ispo

sal

wer

e $1

,866

,474

tho

usan

d, a

nd t

he r

elat

ed g

ain

on d

ispo

sal

was

$1,

254,

633

thou

sand

and

rec

ogni

zed

in th

e ca

pita

l sur

plus

acc

ount

. 14

. IN

VE

ST

ME

NT

S A

CC

OU

NT

ED

FO

R U

SIN

G T

HE

EQ

UIT

Y M

ET

HO

D

D

ecem

ber

31

2019

2018

Inve

stm

ents

in a

ssoc

iate

s

$

1,20

8,49

5

$

1,21

7,86

3 In

vest

men

ts in

join

tly c

ontr

olle

d en

titi

es

1,01

5,29

8

98

2,28

6

$

2,22

3,79

3

$

2,20

0,14

9 a.

T

he a

mou

nt o

f in

vest

men

t in

asso

ciat

es w

ere

as f

ollo

ws:

Dec

emb

er 3

1

20

19

20

18

Unl

iste

d co

mpa

nies

Chi

na A

ircr

aft S

ervi

ces

$

46

1,26

3

$

497,

362

Kao

hsiu

ng C

ater

ing

Ser

vice

s

10

,004

-

Air

port

Air

Car

go T

erm

inal

(X

iam

en)

446,

161

442,

891

Air

port

Air

Car

go S

ervi

ce (

Xia

men

)

24

8,35

0

23

3,41

7 E

aste

rn U

nite

d In

tern

atio

nal L

ogis

tics

(H

oldi

ngs)

Ltd

.

42

,717

44

,193

$

1,20

8,49

5

$

1,21

7,86

3 A

t th

e en

d of

the

rep

ortin

g pe

riod

, th

e pr

opor

tion

of

owne

rshi

p an

d vo

ting

righ

ts i

n as

soci

ates

hel

d by

- 38

-

the

Gro

up w

ere

as f

ollo

ws:

P

rop

orti

on o

f O

wn

ersh

ip a

nd

V

otin

g R

igh

ts

Dec

emb

er 3

1 N

ame

of A

ssoc

iate

2019

2018

Chi

na A

ircr

aft S

ervi

ces

20

%

20%

D

ynas

ty H

olid

ays

(Not

e)

20

%

51%

A

irpo

rt a

ir C

argo

Ter

min

al (

Xia

men

)

28%

28

%

Air

port

air

Car

go S

ervi

ce (

Xia

men

)

28%

28

%

Eas

tern

Uni

ted

Inte

rnat

iona

l Log

isti

cs (

Hol

ding

s) L

td.

35

%

35%

N

ote:

Dyn

asty

Hol

iday

s w

as li

st a

s an

ass

ocia

te o

n Ja

nuar

y 1,

201

9.

The

inve

stm

ent i

ncom

e of

ass

ocia

tes

acco

unte

d fo

r us

ing

the

equi

ty m

etho

d w

ere

as f

ollo

ws:

20

19

20

18

C

hina

Air

craf

t Ser

vice

s

$

10,3

65

$

6,

402

Kao

hsiu

ng C

ater

ing

Ser

vice

s

-

15,1

13

Dyn

asty

Hol

iday

s

15

-

Air

port

air

Car

go T

erm

inal

(X

iam

en)

21,5

35

22,5

71

Air

port

air

Car

go S

ervi

ce (

Xia

men

)

25

,146

32

,196

E

aste

rn U

nite

d In

tern

atio

nal L

ogis

tics

(H

oldi

ngs)

Ltd

.

3,

387

6,89

5

$

60,4

48

$

83

,177

O

ther

com

preh

ensi

ve in

com

e of

ass

ocia

tes

acco

unte

d fo

r us

ing

the

equi

ty m

etho

d in

201

9 an

d 20

18 a

re

both

loss

es in

the

amou

nts

of $

0 th

ousa

nd.

The

fin

anci

al s

tate

men

ts u

sed

as a

bas

is o

f th

e am

ount

s of

and

rel

ated

inf

orm

atio

n on

the

inv

estm

ents

ac

coun

ted

for

usin

g th

e eq

uity

met

hod

and

the

shar

e of

pro

fit

or l

oss

and

othe

r co

mpr

ehen

sive

inc

ome

of t

hose

inv

estm

ents

for

the

yea

rs e

nded

Dec

embe

r 31

, 201

9 an

d 20

18 w

ere

all

inde

pend

ently

aud

ited

, ex

cept

tho

se o

f C

hina

Air

craf

t S

ervi

ces

and

Eas

tern

Uni

ted

Inte

rnat

iona

l L

ogis

tics

(H

oldi

ng)

Ltd

. H

owev

er,

the

man

agem

ent

dete

rmin

ed t

hat

ther

e w

ould

hav

e be

en n

o si

gnif

ican

t ad

just

men

ts h

ad t

his

inve

stee

’s f

inan

cial

sta

tem

ents

bee

n in

depe

nden

tly

audi

ted.

b.

Inve

stm

ents

in jo

intly

con

trol

led

enti

ties

T

he in

vest

men

ts in

join

tly c

ontr

olle

d en

titie

s w

ere

as f

ollo

ws:

D

ecem

ber

31

2019

2018

Chi

na P

acif

ic C

ater

ing

Ser

vice

s

$

801,

071

$

80

5,15

7 C

hina

Pac

ific

Lau

ndry

Ser

vice

s

16

8,54

7

16

6,90

1 N

OR

DA

M A

sia

Ltd

.

37

,813

2,

358

Del

ica

Inte

rnat

iona

l Co.

, Ltd

.

7,

867

7,87

0

$

1,01

5,29

8

$

982,

286

161

- 39

-

At

the

end

of t

he r

epor

ting

per

iod,

the

pro

port

ion

of o

wne

rshi

p an

d vo

ting

righ

ts i

n jo

intly

con

trol

led

enti

ties

hel

d by

the

Gro

up w

ere

as f

ollo

ws:

Pro

por

tion

of

Ow

ner

ship

an

d

Vot

ing

Rig

hts

D

ecem

ber

31

2019

2018

Chi

na P

acif

ic C

ater

ing

Ser

vice

s

51%

51%

C

hina

Pac

ific

Lau

ndry

Ser

vice

s

55%

55%

N

OR

DA

M A

sia

Ltd

.

49%

49%

D

elic

a In

tern

atio

nal C

o., L

td.

51

%

51

%

The

Gro

up e

nter

ed i

nto

a jo

int

vent

ure

agre

emen

t w

ith

the

Tai

koo

Gro

up t

o in

vest

in

Chi

na P

acif

ic

Cat

erin

g S

ervi

ces

and

Chi

na P

acif

ic L

aund

ry S

ervi

ces.

Acc

ordi

ng t

o th

e ag

reem

ent,

both

par

ties

hav

e th

e m

ajor

ity

pow

er in

the

boar

d of

dir

ecto

rs to

pos

e a

mot

ion

for

veto

, and

ther

efor

e th

e G

roup

doe

s no

t ha

ve c

ontr

ol.

To

enha

nce

the

Gro

up’s

mai

nten

ance

cap

abil

itie

s, t

he C

ompa

ny e

stab

lish

ed a

joi

nt v

entu

re w

ith

the

US

NO

RD

AM

Aer

ospa

ce G

roup

in

Dec

embe

r 20

17,

plan

ning

to

prov

ide

thru

st r

ever

sers

and

com

posi

te

repa

ir s

ervi

ces

in A

sia

unde

r th

e N

OR

DA

M b

rand

. N

OR

DA

M h

as f

iled

for

Cha

pter

11

bank

rupt

cy

reor

gani

zati

on i

n th

e U

SA

on

July

22,

201

8 to

sol

ve t

he b

usin

ess

disp

utat

ion

wit

h th

eir

coop

erat

ive

part

ner,

so

thei

r co

mpa

ny o

pera

tion

was

not

im

pact

ed.

As

a re

sult

, N

OR

DA

M A

sia

susp

ende

d it

s op

erat

ion

from

Oct

ober

5,

2018

to

Oct

ober

4,

2019

and

res

umed

bus

ines

s on

Oct

ober

4,

2019

. T

he

Com

pany

incr

ease

d th

e ca

pita

l of

NO

RD

AM

Asi

a by

$35

,525

thou

sand

in N

ovem

ber

2019

. T

o ex

pand

the

Gro

up’s

cat

erin

g bu

sine

ss,

Kao

hsiu

ng C

ater

ing

ente

red

into

a j

oint

ven

ture

agr

eem

ent

wit

h a

Japa

nese

bra

nd c

ompa

ny t

o in

vest

in

Del

ica

Inte

rnat

iona

l C

o, L

td.,

wit

h th

e Ja

pane

se b

rand

co

mpa

ny h

avin

g th

e ri

ght

to m

ake

deci

sion

s on

ope

rati

ons,

and

the

refo

re,

the

Gro

up d

oes

not

have

co

ntro

l. D

etai

ls o

f in

vest

men

t inc

ome

attr

ibut

able

to in

vest

men

t in

join

tly c

ontr

olle

d en

titie

s w

ere

as f

ollo

ws:

F

or t

he

Yea

r E

nd

ed D

ecem

ber

31

2019

2018

Chi

na P

acif

ic C

ater

ing

Ser

vice

s

$

256,

899

$

26

7,41

3 C

hina

Pac

ific

Lau

ndry

Ser

vice

s

15

,030

16

,695

N

OR

DA

M A

sia

Ltd

.

(7

0)

(41)

D

elic

a In

tern

atio

nal C

o., L

td.

(2)

2

$

271,

857

$

284,

069

Oth

er c

ompr

ehen

sive

inco

me

of a

ssoc

iate

s ac

coun

ted

for

usin

g th

e eq

uity

met

hod

in 2

019

and

2018

are

lo

sses

in th

e am

ount

s of

$(3

2,10

1) th

ousa

nd a

nd $

(33,

242)

thou

sand

, res

pect

ivel

y.

The

fin

anci

al s

tate

men

ts u

sed

as a

bas

is o

f th

e am

ount

s of

and

rel

ated

inf

orm

atio

n on

the

inv

estm

ents

ac

coun

ted

for

usin

g th

e eq

uity

met

hod

and

the

shar

e of

pro

fit

or l

oss

and

othe

r co

mpr

ehen

sive

inc

ome

of t

hose

inv

estm

ents

for

the

yea

rs e

nded

Dec

embe

r 31

, 201

9 an

d 20

18 w

ere

all

inde

pend

ently

aud

ited

, ex

cept

of

NO

RD

AM

Asi

a L

imit

ed.

How

ever

, th

e m

anag

emen

t de

term

ined

tha

t th

ere

wou

ld h

ave

been

no

sig

nifi

cant

adj

ustm

ents

had

this

inve

stee

’s f

inan

cial

sta

tem

ents

bee

n in

depe

nden

tly

audi

ted.

F

or d

etai

ls o

n se

rvic

es,

maj

or b

usin

ess

offi

ces

and

the

coun

try

whe

re t

he a

bove

ass

ocia

tes

and

join

tly

cont

roll

ed e

ntit

ies

are

regi

ster

ed,

refe

r to

Tab

le 6

, “N

ames

, L

ocat

ions

, A

nd O

ther

Inf

orm

atio

n of

In

vest

ees

Ove

r W

hich

the

Com

pany

Exe

rcis

es S

igni

fica

nt I

nflu

ence

”, a

nd T

able

7,

“Inv

estm

ents

In

Mai

nlan

d C

hina

”, f

ollo

win

g th

ese

note

s to

con

soli

date

d fi

nanc

ial s

tate

men

ts.

- 40

-

15.

PR

OP

ER

TY

, PL

AN

T A

ND

EQ

UIP

ME

NT

Fre

ehol

d L

and

Bu

ild

ings

Fli

ght

Eq

uip

men

t

Eq

uip

men

t u

nd

er F

inan

ce

Lea

ses

O

ther

s

Tot

al

C

ost

B

alan

ce a

t Jan

uary

1,

2018

$

922,

626

$

13

,698

,308

$ 2

63,4

27,1

44

$

26

,187

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$

16,2

30,0

11

$

320

,465

,645

A

ddit

ions

-

57,9

98

2,68

4,33

7

-

1,86

8,21

2

4,

610,

547

Dis

posa

ls

-

(1

1,80

3 )

(2

0,30

7,37

5 )

(1

,811

,222

)

(3

13,7

27 )

(22,

444,

127 )

R

ecla

ssif

icat

ion

-

(2

27 )

13,6

61,6

40

1,42

8,46

3

10

3,29

6

15

,193

,172

N

et e

xcha

nge

diff

eren

ce

16,2

34

28,9

91

-

21

1

3,

003

48,4

39

Gai

n of

acq

uisi

tion

s th

roug

h bu

sine

ss

com

bina

tion

s

76,7

04

220,

318

229,

384

-

26

,985

55

3,39

1

Bal

ance

at D

ecem

ber

31,

2018

$

1,01

5,56

4

$

13,9

93,5

85

$

259

,695

,130

$

25,8

05,0

08

$

17

,917

,780

$ 3

18,4

27,0

67

A

ccum

ulat

ed d

epre

ciat

ion

an

d im

pair

men

t

Bal

ance

at J

anua

ry 1

, 20

18

$

-

$

(6

,137

,495

)

$ (1

36,5

94,7

65 )

$

(1

4,14

2,87

2 )

$

(9,9

72,9

82 )

$

(166

,848

,114

) D

epre

ciat

ion

expe

nse

-

(4

33,4

50 )

(15,

960,

477 )

(2,0

23,9

24 )

(906

,953

)

(1

9,32

4,80

4 )

Dis

posa

ls

-

10

,049

19

,814

,544

1,

532,

046

292,

136

21,6

48,7

75

Impa

irm

ent l

oss

-

-

(50,

000 )

-

-

(50,

000 )

R

ecla

ssif

icat

ion

-

-

9,28

3,04

1

-

(11,

655 )

9,27

1,38

6 N

et e

xcha

nge

diff

eren

ce

-

(1

3,97

7 )

-

(72 )

(2,5

43 )

(16,

592 )

Bal

ance

at D

ecem

ber

31,

2018

$

-

$

(6,5

74,8

73 )

$

(123

,507

,657

)

$

(14,

634,

822 )

$

(1

0,60

1,99

7 )

$ (1

55,3

19,3

49 )

Bal

ance

at D

ecem

ber

31,

2018

, net

val

ue

$

1,

015,

564

$

7,

418,

712

$

136

,187

,473

$

11,1

70,1

86

$

7,

315,

783

$

163

,107

,718

Cos

t

Bal

ance

at J

anua

ry 1

, 20

19

$

1,

015,

564

$

13

,993

,585

$ 2

59,6

95,1

30

$

25

,805

,008

$

17,9

17,7

80

$

318

,427

,067

A

ddit

ions

-

209,

413

2,24

8,85

6

-

864,

223

3,32

2,49

2 D

ispo

sals

-

(1,1

30 )

(20,

698,

042 )

(668

,721

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(3

93,0

58 )

(21,

760,

951 )

R

ecla

ssif

icat

ion

-

1,

906,

078

30,8

31,7

48

(25,

131,

813 )

(1,5

37,4

94 )

6,06

8,51

9 N

et e

xcha

nge

diff

eren

ce

(13,

065 )

(23,

883 )

-

-

(2,4

58 )

(39,

406 )

L

oss

of c

ontr

ol o

f su

bsid

iari

es

-

-

-

(4

,474

)

(2

,158

)

(6

,632

)

Bal

ance

at D

ecem

ber

31,

2019

$

1,00

2,49

9

$

16,0

84,0

63

$

272

,077

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$

-

$

16,8

46,8

35

$

306

,011

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Acc

umul

ated

dep

reci

atio

n

and

impa

irm

ent

B

alan

ce a

t Jan

uary

1,

2019

$

-

$

(6,5

74,8

73 )

$

(123

,507

,657

)

$

(14,

634,

822 )

$

(1

0,60

1,99

7 )

$ (1

55,3

19,3

49 )

Dep

reci

atio

n ex

pens

e

-

(466

,943

)

(1

8,57

1,99

2 )

(7

41,8

52 )

(921

,246

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(2

0,70

2,03

3 )

Dis

posa

ls

-

1,

014

14,8

99,5

62

79,8

66

355,

222

15,3

35,6

64

Rec

lass

ific

atio

n

-

-

(1

4,70

6,08

3 )

15

,294

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(4

5,10

3 )

54

3,51

0 N

et e

xcha

nge

diff

eren

ce

-

12

,262

-

-

1,

989

14,2

51

Los

s of

con

trol

of

subs

idia

ries

-

-

-

2,11

2

1,

727

3,83

9 B

alan

ce a

t Dec

embe

r 31

, 20

19

$

-

$

(7

,028

,540

)

$ (1

41,8

86,1

70 )

$

-

$

(1

1,20

9,40

8 )

$ (1

60,1

24,1

18 )

Bal

ance

at D

ecem

ber

31,

2019

, net

val

ue

$

1,

002,

499

$

9,

055,

523

$

130

,191

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$

-

$

5,63

7,42

7

$ 1

45,8

86,9

71

162

- 41

-

Pro

pert

y, p

lant

and

equ

ipm

ent

are

depr

ecia

ted

on a

str

aigh

t-li

ne b

asis

ove

r th

e es

tim

ated

use

ful

life

of

the

asse

t:

Bui

ldin

g

M

ain

buil

ding

s

45-5

5 ye

ars

Oth

ers

10

-25

year

s M

achi

nery

and

equ

ipm

ent

Ele

ctro

-mec

hani

cal e

quip

men

t

25 y

ears

O

ther

s

3-13

yea

rs

Off

ice

equi

pmen

t

3-15

yea

rs

Lea

seho

ld im

prov

emen

ts

Bui

ldin

g im

prov

emen

ts

5

year

s O

ther

s

3-5

year

s A

sset

s le

ased

to o

ther

s

3-5

year

s F

ligh

t equ

ipm

ent a

nd e

quip

men

t und

er f

inan

ce le

ases

A

irfr

ames

15-2

5 ye

ars

Air

craf

t cab

ins

7-

20 y

ears

E

ngin

es

10

-20

year

s H

eavy

mai

nten

ance

on

airc

raft

6-8

year

s E

ngin

e ov

erha

uls

3-

10 y

ears

L

andi

ng g

ear

over

haul

s

7-

12 y

ears

R

epai

rabl

e sp

are

part

s

3-15

yea

rs

Lea

sed

airc

raft

impr

ovem

ents

5-12

yea

rs

Reg

ardi

ng c

hang

es i

n fl

eet

com

posi

tion

, cu

rren

t an

d fo

reca

sted

mar

ket

valu

e, a

nd o

ther

tec

hnic

al f

acto

rs,

the

Gro

up r

ecog

nize

d im

pair

men

t lo

sses

on

airc

raft

equ

ipm

ent

in 2

018

of $

50,0

00 t

hous

and.

The

fai

r va

lue

was

det

erm

ined

bas

ed o

n ai

rcra

ft c

ondi

tion

s an

d m

arke

t est

imat

es.

Ref

er to

Not

e 35

for

the

carr

ying

am

ount

s of

pro

pert

y, p

lant

and

equ

ipm

ent p

ledg

ed b

y th

e G

roup

. B

ased

on

the

part

icul

arit

y of

ris

k in

the

avi

atio

n in

dust

ry,

all

of t

he G

roup

’s a

sset

s su

ch a

s ai

rcra

ft,

real

es

tate

, and

mov

able

pro

pert

y ar

e ad

equa

tely

insu

red

to d

iver

sify

the

pote

ntia

l ris

k re

late

d to

ope

rati

ons.

T

he G

roup

gen

erat

ed th

e fo

llow

ing

non-

cash

inve

stm

ent a

ctiv

itie

s re

late

d to

the

purc

hase

of

prop

erty

, pla

nt

and

equi

pmen

t in

2019

and

201

8:

Dec

emb

er 3

1

20

19

20

18

In

crea

se in

pro

pert

y, p

lant

and

equ

ipm

ent

$

3,

322,

492

$

4,

610,

547

Cap

ital

ized

inte

rest

pai

d

(6

,414

)

(1

,947

)

Pur

chas

e of

pro

pert

y, p

lant

and

equ

ipm

ent p

aid

$

3,

316,

078

$

4,

608,

600

16

. IN

VE

ST

ME

NT

PR

OP

ER

TIE

S

D

ecem

ber

31

2019

2018

Car

ryin

g am

ount

In

vest

men

t pro

pert

ies

$

2,

075,

068

$

2,

075,

345

The

inv

estm

ent

prop

erti

es h

eld

by t

he G

roup

wer

e la

nd l

ocat

ed i

n N

anka

n an

d bu

ildin

gs i

n T

aipe

i, w

hich

w

ere

all l

ease

d to

oth

ers.

The

bui

ldin

gs a

re d

epre

ciat

ed o

n a

stra

ight

-lin

e ba

sis

over

55

year

s.

- 42

-

The

fai

r va

lue

of t

he i

nves

tmen

t pr

oper

ties

hel

d by

the

Gro

up w

as $

2,50

6,23

0 th

ousa

nd a

s of

bot

h D

ecem

ber

31,

2019

and

201

8, r

espe

ctiv

ely.

In

addi

tion,

man

agem

ent

asse

ssed

tha

t th

ere

is n

o si

gnif

ican

t di

ffer

ence

in th

e fa

ir v

alue

of

Dec

embe

r 31

, 201

9 an

d 20

18.

The

abo

ve f

air

valu

e va

luat

ion

was

per

form

ed b

y in

depe

nden

t qua

lifie

d pr

ofes

sion

al v

alue

rs, a

nd th

e fu

ture

in

com

e ev

alua

ted

by m

anag

emen

t was

bas

ed o

n m

arke

t tra

nsac

tion

s.

All

of

the

Gro

up’s

inve

stm

ent p

rope

rtie

s w

ere

held

und

er f

reeh

old

inte

rest

.

C

ost

A

ccu

mu

late

d

N

et V

alu

e

B

alan

ce a

t Jan

uary

1, 2

018

$

2,

082,

390

$

(6

,766

)

$

2,07

5,62

4 D

epre

ciat

ion

expe

nse

-

(2

79)

(279

)

B

alan

ce a

t Dec

embe

r 31

, 201

8

$

2,08

2,39

0

$

(7,0

45)

$

2,

075,

345

Bal

ance

at J

anua

ry 1

, 201

9

$

2,08

2,39

0

$

(7,0

45)

$

2,

075,

345

Dep

reci

atio

n ex

pens

e

-

(277

)

(2

77)

Bal

ance

at D

ecem

ber

31, 2

019

$

2,

082,

390

$

(7

,322

)

$

2,07

5,06

8 17

. O

TH

ER

IN

TA

NG

IBL

E A

SS

ET

S

Com

pu

ter

Sof

twar

e C

ost

Rel

atio

nsh

ip

Bet

wee

n

Cli

ents

Acc

um

ula

ted

A

mor

tiza

tion

Net

Val

ue

B

alan

ce a

t Jan

uary

1, 2

018

$

2,

039,

602

$

-

$

(1,

020,

257)

$

1,01

9,34

5 A

ddit

ions

18

4,22

3

-

-

18

4,22

3 A

mor

tiza

tion

exp

ense

s

-

-

(1

81,9

43)

(181

,943

) A

cqui

siti

ons

thro

ugh

busi

ness

co

mbi

nati

ons

686

186,

197

(10,

036)

17

6,84

7 R

ecla

ssif

icat

ion

12,8

71

-

(5

40)

12,3

31

Eff

ects

of

exch

ange

rat

e ch

ange

s

-

-

(7)

(7)

B

alan

ce a

t Dec

embe

r 31

, 201

8

$

2,23

7,38

2

$

186,

197

$

(1,

212,

783)

$

1,21

0,79

6

Bal

ance

at J

anua

ry 1

, 201

9

$

2,23

7,38

2

$

186,

197

$

(1,

212,

783)

$

1,21

0,79

6 A

ddit

ions

17

2,63

9

-

-

17

2,63

9 A

mor

tiza

tion

exp

ense

s

-

-

(1

98,2

37)

(198

,237

) D

ispo

sal o

f su

bsid

iari

es

(3,8

58)

-

1,

357

(2,5

01)

Eff

ects

of

exch

ange

rat

e ch

ange

s

-

-

(5)

(5)

B

alan

ce a

t Dec

embe

r 31

, 201

9

$

2,40

6,16

3

$

186,

197

$

(1,

409,

668)

$

1,18

2,69

2 T

he a

bove

oth

er in

tang

ible

ass

ets

are

amor

tize

d on

a s

trai

ght-

line

bas

is o

ver

2-16

yea

rs.

163

- 43

-

18.

OT

HE

R A

SS

ET

S

D

ecem

ber

31

2019

2018

C

urre

nt

T

empo

rary

pay

men

ts

$

29

6,75

9

$

556,

860

Pre

paym

ents

1,

690,

368

3,02

8,80

8 R

estr

icte

d as

sets

14

,618

18

,623

O

ther

s

65

3,96

6

54

3,59

1

$

2,65

5,71

1

$

4,14

7,88

2

Non

-cur

rent

Pre

paym

ents

for

air

craf

t

$

8,86

3,86

1

$

529,

963

Pre

paym

ents

- lo

ng-t

erm

2,

819,

575

1,60

3,40

0 R

efun

dabl

e de

posi

ts

1,26

1,61

1

1,

089,

690

Res

tric

ted

asse

ts

64,2

13

100,

141

Oth

er f

inan

cial

ass

ets

19,1

03

19,3

35

Oth

ers

14

2,70

0

88

,224

$

13,1

71,0

63

$

3,

430,

753

The

pre

paym

ents

for

air

craf

t co

mpr

ised

the

pre

paid

dep

osit

s an

d ca

pita

lize

d in

tere

st f

rom

the

pur

chas

e of

A

350-

900,

AT

R72

-600

, A

321n

eo,

A32

0neo

and

B77

7F a

ircr

afts

. F

or d

etai

ls o

n th

e ai

rcra

ft p

urch

ase

cont

ract

s, r

efer

to N

ote

36.

19

. B

OR

RO

WIN

GS

a.

Sho

rt-t

erm

deb

ts

D

ecem

ber

31

2019

2018

Ban

k lo

ans

- un

secu

red

$

38

0,00

0

$

-

Inte

rest

rat

es

0.

95%

-1.0

7%

-

b.

L

ong-

term

bor

row

ings

D

ecem

ber

31

2019

2018

Uns

ecur

ed b

ank

loan

s

$

1,92

9,82

7

$

9,35

4,45

7 S

ecur

ed b

ank

loan

s

34

,064

,099

36

,330

,211

C

omm

erci

al p

aper

P

roce

eds

from

issu

e

31

,730

,000

30

,770

,000

L

ess:

Una

mor

tize

d di

scou

nt

60,1

43

59,0

33

67

,663

,783

76

,395

,635

L

ess:

Cur

rent

por

tion

14

,148

,892

15

,709

,487

$

53,5

14,8

91

$

60

,686

,148

Inte

rest

rat

es

0

.55%

-1.7

3%

0

.92%

-1.4

6%

- 44

-

For

inf

orm

atio

n on

sec

ured

ban

k lo

ans

whi

ch w

ere

secu

red

by b

uild

ings

, m

achi

nery

equ

ipm

ent

and

flig

ht e

quip

men

t, re

fer

to N

ote

35.

Ban

k lo

ans

(New

Tai

wan

dol

lars

) ar

e re

paya

ble

quar

terl

y, s

emia

nnua

lly o

r in

lum

p su

m u

pon

mat

urit

y.

Rel

ated

info

rmat

ion

is s

umm

ariz

ed a

s fo

llow

s:

Dec

emb

er 3

1

20

19

20

18

Per

iods

2008

.2.2

6-

2030

.4.2

5

2007

.5.2

4-

2030

.4.2

5 T

he G

roup

has

not

e is

suan

ce f

acil

itie

s (N

IFs)

obt

aine

d fr

om c

erta

in f

inan

cial

ins

titu

tion

s. T

he N

IFs,

w

ith

vari

ous

mat

urit

ies

unti

l D

ecem

ber

2021

, w

ere

used

by

the

Gro

up t

o gu

aran

tee

com

mer

cial

pap

ers

issu

ed.

As

of D

ecem

ber

31,

2019

and

201

8, t

he c

omm

erci

al p

aper

s w

ere

issu

ed a

t di

scou

nt r

ates

of

1.13

00%

-1.3

380%

and

1.0

693%

-1.2

960%

, res

pect

ivel

y.

20.

BO

ND

S P

AY

AB

LE

Dec

emb

er 3

1

20

19

20

18

U

nsec

ured

cor

pora

te b

onds

fir

st-t

ime

issu

ed in

201

3

$

2,

750,

000

$

5,

500,

000

Uns

ecur

ed c

orpo

rate

bon

ds f

irst

-tim

e is

sued

in 2

016

4,70

0,00

0

4,

700,

000

Uns

ecur

ed c

orpo

rate

bon

ds s

econ

d-ti

me

issu

ed in

201

6

5,

000,

000

5,00

0,00

0 U

nsec

ured

cor

pora

te b

onds

fir

st-t

ime

issu

ed in

201

7

2,

350,

000

2,35

0,00

0 U

nsec

ured

cor

pora

te b

onds

sec

ond-

tim

e is

sued

in 2

017

3,50

0,00

0

3,

500,

000

Uns

ecur

ed c

orpo

rate

bon

ds f

irst

-tim

e is

sued

in 2

018

4,50

0,00

0

4,

500,

000

Uns

ecur

ed c

orpo

rate

bon

ds f

irst

-tim

e is

sued

in 2

019

3,50

0,00

0

-

Con

vert

ible

bon

ds -

fif

th-t

ime

issu

es

-

1,

695,

900

Con

vert

ible

bon

ds -

six

th-t

ime

issu

es

5,75

2,62

5

5,

673,

710

32

,052

,625

32

,919

,610

L

ess:

Cur

rent

por

tion

and

put

opt

ion

of c

onve

rtib

le b

onds

10

,000

,000

4,

445,

900

$

22

,052

,625

$

28,4

73,7

10

Rel

ated

issu

ance

con

diti

ons

wer

e as

fol

low

s:

Cat

egor

y

Per

iod

Con

dit

ion

s

Rat

e (%

)

F

ive-

year

pri

vate

uns

ecur

ed b

onds

- is

sued

at p

ar

in J

anua

ry 2

013;

rep

ayab

le in

Jan

uary

201

7 an

d 20

18; 1

.6%

inte

rest

p.a

., pa

yabl

e an

nual

ly.

20

13.0

1.17

- 20

18.0

1.17

P

rinc

ipal

rep

ayab

le in

Ja

nuar

y of

201

7 an

d 20

18; i

ndic

ator

rat

e;

paya

ble

annu

ally

.

1.

60

Sev

en-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in J

anua

ry 2

013;

rep

ayab

le in

Ja

nuar

y 20

19 a

nd 2

020;

1.8

5% in

tere

st p

.a.,

paya

ble

annu

ally

.

20

13.0

1.17

- 20

20.0

1.17

P

rinc

ipal

rep

ayab

le in

Ja

nuar

y of

201

9 an

d 20

20; i

ndic

ator

rat

e;

paya

ble

annu

ally

.

1.

85

Fiv

e-ye

ar u

nsec

ured

bon

ds -

issu

ed a

t par

in

May

201

6; r

epay

able

in M

ay 2

020

and

2021

; 1.

19%

inte

rest

p.a

., pa

yabl

e an

nual

ly.

20

16.0

5.26

- 20

21.0

5.26

P

rinc

ipal

rep

ayab

le in

May

of

202

0 an

d 20

21; i

nter

est

p.a.

pay

able

ann

ually

.

1.

19

(Con

tinu

ed)

164

- 45

-

Cat

egor

y

Per

iod

Con

dit

ion

s

Rat

e (%

)

F

ive-

year

uns

ecur

ed b

onds

- is

sued

at p

ar in

S

epte

mbe

r 20

16; r

epay

able

in S

epte

mbe

r 20

20

and

2021

; 1.0

8% in

tere

st p

.a.,

paya

ble

annu

ally

.

20

16.0

9.27

- 20

21.0

9.27

P

rinc

ipal

rep

ayab

le in

S

epte

mbe

r of

202

0 an

d 20

21; i

nter

est p

.a. p

ayab

le

annu

ally

.

1.

08

Thr

ee-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in M

ay 2

017;

rep

ayab

le o

n du

e da

te;

inte

rest

of

1.2%

p.a

., pa

yabl

e an

nual

ly.

20

17.0

5.19

- 20

20.0

5.19

P

rinc

ipal

rep

ayab

le o

n du

e da

te; i

ndic

ator

rat

e;

paya

ble

annu

ally

.

1.

20

Sev

en-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in M

ay 2

017;

rep

ayab

le o

n du

e da

te;

inte

rest

of

1.75

% p

.a.,

paya

ble

annu

ally

.

20

17.0

5.19

- 20

24.0

5.19

P

rinc

ipal

rep

ayab

le o

n du

e da

te; i

ndic

ator

rat

e;

paya

ble

annu

ally

.

1.

75

Thr

ee-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in O

ctob

er 2

017;

rep

ayab

le o

n du

e da

te;

inte

rest

of

1.14

% p

.a.,

paya

ble

annu

ally

.

20

17.1

0.12

- 20

20.1

0.12

P

rinc

ipal

rep

ayab

le o

n du

e da

te; i

ndic

ator

rat

e;

paya

ble

annu

ally

.

1.

14

Fiv

e-ye

ar p

riva

te u

nsec

ured

bon

ds -

issu

ed a

t par

in

Oct

ober

201

7; r

epay

able

in O

ctob

er 2

021

and

2022

; 1.4

5% in

tere

st p

.a.,

paya

ble

annu

ally

.

20

17.1

0.12

- 20

22.1

0.12

P

rinc

ipal

rep

ayab

le in

O

ctob

er o

f 20

21 a

nd

2022

; ind

icat

or r

ate;

pa

yabl

e an

nual

ly.

1.

45

Fiv

e-ye

ar p

riva

te u

nsec

ured

bon

ds -

issu

ed a

t par

in

Nov

embe

r 20

18; r

epay

able

in

Nov

embe

r 20

22 a

nd 2

023;

1.3

2% in

tere

st p

.a.,

paya

ble

annu

ally

20

18.1

1.30

- 20

23.1

1.30

P

rinc

ipal

rep

ayab

le in

N

ovem

ber

of 2

022

and

2023

; ind

icat

or r

ate;

pa

yabl

e an

nual

ly

1.

32

Fiv

e-ye

ar p

riva

te u

nsec

ured

bon

ds -

issu

ed a

t par

in

Nov

embe

r 20

18; r

epay

able

in

Nov

embe

r 20

22 a

nd 2

023;

1.4

5% in

tere

st p

.a.,

paya

ble

annu

ally

20

18.1

1.30

- 20

25.1

1.30

P

rinc

ipal

rep

ayab

le in

N

ovem

ber

of 2

022

and

2023

; ind

icat

or r

ate;

pa

yabl

e an

nual

ly

1.

45

Fiv

e-ye

ar p

riva

te u

nsec

ured

bon

ds -

issu

ed a

t par

in

Jun

e 20

19; r

epay

able

in J

une

2023

and

20

24; 1

.10%

inte

rest

p.a

., pa

yabl

e an

nual

ly

20

19.0

6.21

- 20

24.0

6.21

P

rinc

ipal

rep

ayab

le in

Jun

e of

202

3 an

d 20

24;

indi

cato

r ra

te; p

ayab

le

annu

ally

1.

10

Sev

en-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in J

une

2019

; rep

ayab

le in

Jun

e 20

25 a

nd

2026

; 1.3

2% in

tere

st p

.a.,

paya

ble

annu

ally

20

19.0

6.21

- 20

26.0

6.21

P

rinc

ipal

rep

ayab

le in

Jun

e of

202

5 an

d 20

26;

indi

cato

r ra

te; p

ayab

le

annu

ally

1.

32

Fiv

e-ye

ar c

onve

rtib

le b

onds

- is

sued

at d

isco

unt

in D

ecem

ber

2013

; rep

ayab

le in

lum

p su

m

upon

mat

urit

y; 1

.824

5% d

isco

unt r

ate

p.a.

20

13.1

2.26

- 20

18.1

2.26

E

xcep

t for

con

vert

ing

to

shar

e ca

pita

l or

buyi

ng

back

, pri

ncip

al r

epay

able

in

Dec

embe

r of

201

8

-

Fiv

e-ye

ar c

onve

rtib

le b

onds

- is

sued

at d

isco

unt

in D

ecem

ber

2013

; rep

ayab

le in

lum

p su

m

upon

mat

urit

y; 1

.382

1% d

isco

unt r

ate

p.a.

20

18.0

1.30

- 20

23.0

1.30

E

xcep

t for

con

vert

ing

to

shar

e ca

pita

l or

buyi

ng

back

, pri

ncip

al r

epay

able

in

Dec

embe

r of

202

3

-

(Con

clud

ed)

The

Com

pany

iss

ued

its

2016

fir

st u

nsec

ured

cor

pora

te b

onds

wit

h a

face

val

ue o

f $5

,000

,000

tho

usan

d,

and

the

purc

hase

rs o

f th

e bo

nds

incl

uded

Man

dari

n A

irli

nes

Co.

, L

td.

and

Sab

re T

rave

l N

etw

ork

(Tai

wan

) C

o., L

td.,

whi

ch h

eld

a fa

ce v

alue

of

$300

,000

thou

sand

, and

the

amou

nt w

as e

lim

inat

ed in

the

cons

olid

ated

fi

nanc

ial s

tate

men

ts.

- 46

-

The

Com

pany

iss

ued

the

fift

h is

sue

of u

nsec

ured

con

vert

ible

bon

ds,

and

the

issu

ance

con

diti

ons

wer

e as

fo

llow

s:

a.

The

hol

ders

may

dem

and

a lu

mp-

sum

pay

men

t for

the

bond

s up

on m

atur

ity.

b.

T

he h

olde

rs c

an r

eque

st t

hat

the

Com

pany

rep

urch

ase

thei

r bo

nds

at 1

00.7

5% f

ace

valu

e on

the

thi

rd

anni

vers

ary

of t

he o

ffer

ing

date

. Bec

ause

the

hol

ders

can

exe

rcis

e se

llin

g ri

ghts

on

Dec

embe

r 26

, 201

6,

the

Com

pany

rec

lass

ifie

d th

e bo

nds

paya

ble

to “

curr

ent

port

ion

of b

onds

pay

able

” in

Dec

embe

r 20

15.

The

Com

pany

pai

d $9

94,7

05 t

hous

and

to t

he h

olde

rs o

f th

e bo

nds

paya

ble

who

exe

rcis

ed t

he p

ut

opti

ons,

and

the

diff

eren

ce b

etw

een

the

paym

ent

amou

nt a

nd c

arry

ing

amou

nt r

ecog

nize

d w

as a

los

s on

th

e bo

nds

paya

ble

buy

back

of

$41,

943

thou

sand

, fo

r w

hich

the

Com

pany

rec

lass

ifie

d th

e re

mai

ning

fa

ce v

alue

to n

on-c

urre

nt a

sset

s.

c.

The

Com

pany

may

red

eem

the

bon

ds a

t fa

ce v

alue

bet

wee

n M

arch

26,

201

4 an

d N

ovem

ber

16,

2018

un

der

cert

ain

cond

itio

ns.

d.

Bet

wee

n Ja

nuar

y 26

, 201

4 an

d D

ecem

ber

16, 2

018

(exc

ept

for

the

peri

od b

etw

een

the

form

er d

ivid

end

date

and

the

dat

e of

the

div

iden

d de

clar

atio

n on

rec

ord)

, ho

lder

s m

ay c

onve

rt t

he b

onds

to

the

Com

pany

’s o

rdin

ary

shar

es.

The

ini

tial

con

vers

ion

pric

e w

as s

et a

t N

T$1

2.24

, w

hich

is

subj

ect

to

adju

stm

ent

if t

here

is

a ca

pita

l in

ject

ion

by c

ash,

sha

re d

ivid

end

dist

ribu

tion

, and

the

pro

port

ion

of c

ash

divi

dend

s pe

r sh

are

in m

arke

t pr

ice

exce

edin

g 1.

5%.

Bec

ause

the

Com

pany

dis

trib

uted

cas

h di

vide

nds

as o

f A

ugus

t 14

, 201

8, t

here

was

adj

ustm

ent

the

conv

ersi

on p

rice

to

NT

$11.

38, c

orpo

rate

bon

ds w

ith

a fa

ce v

alue

of

$3,3

16,8

00 th

ousa

nd h

ad b

een

conv

erte

d to

270

,985

thou

sand

uni

ts o

f or

dina

ry s

hare

s.

e.

The

con

vert

ible

bon

ds h

as e

xpir

ed o

n D

ecem

ber

26, 2

018,

the

Com

pany

has

ful

ly r

epay

able

in

Janu

ary

8, 2

019,

the

rela

ted

capi

tal s

urpl

us -

sha

re o

ptio

n ha

s re

clas

sifi

ed a

s ca

pita

l sur

plus

- o

ther

. T

he c

onve

rtib

le b

onds

con

tain

bot

h li

abil

ity a

nd e

quity

com

pone

nts.

The

equ

ity c

ompo

nent

was

pre

sent

ed

in e

quity

und

er th

e he

adin

g of

cap

ital

sur

plus

- o

ptio

ns. T

he e

ffec

tive

inte

rest

rat

e of

the

liab

ility

com

pone

nt

was

1.8

245%

per

ann

um o

n in

itia

l rec

ogni

tion

. P

roce

eds

from

issu

ance

$

6,00

0,00

0 E

quity

com

pone

nt

(518

,621

)

L

iabi

lity

com

pone

nt a

t the

dat

e of

issu

ance

$

5,48

1,37

9 T

he C

ompa

ny is

sued

the

sixt

h is

sue

of it

s un

secu

red

conv

erti

ble

bond

s, a

nd th

e is

suan

ce c

ondi

tion

s w

ere

as

foll

ows:

a.

T

he h

olde

rs m

ay d

eman

d a

lum

p-su

m p

aym

ent f

or th

e bo

nds

upon

mat

urit

y.

b.

The

hol

ders

can

req

uest

tha

t th

e C

ompa

ny r

epur

chas

e th

eir

bond

s at

fac

e va

lue

on t

he t

hird

ann

iver

sary

of

the

offe

ring

dat

e. T

he h

olde

rs c

an e

xerc

ise

the

righ

t to

sell

on

Janu

ary

30, 2

021.

c.

T

he C

ompa

ny m

ay r

edee

m t

he b

onds

at

face

val

ue b

etw

een

Apr

il 3

0, 2

018

and

Dec

embe

r 20

, 20

22

unde

r ce

rtai

n co

ndit

ions

. d.

B

etw

een

Janu

ary

26, 2

014

and

Dec

embe

r 16

, 201

8 (e

xcep

t fo

r th

e pe

riod

bet

wee

n th

e fo

rmer

div

iden

d da

te a

nd t

he d

ate

of t

he d

ivid

end

decl

arat

ion

on r

ecor

d),

hold

ers

may

con

vert

the

bon

ds t

o th

e C

ompa

ny’s

ord

inar

y sh

ares

. T

he i

niti

al c

onve

rsio

n pr

ice

was

set

at

NT

$13.

2, w

hich

is

subj

ect

to

adju

stm

ent

if t

here

is

a ca

pita

l in

ject

ion

by c

ash,

sha

re d

ivid

end

dist

ribu

tion

, and

the

pro

port

ion

of c

ash

divi

dend

s pe

r sh

are

in m

arke

t pr

ice

exce

edin

g 1.

5%.

Bec

ause

the

Com

pany

dis

trib

uted

cas

h di

vide

nds

as o

f Ju

ly 2

9, 2

019,

the

conv

ersi

on p

rice

was

adj

uste

d to

NT

$12.

6.

165

- 47

-

The

con

vert

ible

bon

ds c

onta

in b

oth

liab

ility

and

equ

ity c

ompo

nent

s. T

he e

quity

com

pone

nt w

as p

rese

nted

in

equ

ity u

nder

the

head

ing

of c

apit

al s

urpl

us -

opt

ions

. The

eff

ecti

ve in

tere

st r

ate

of th

e li

abili

ty c

ompo

nent

w

as 1

.382

1% p

er a

nnum

on

init

ial r

ecog

niti

on.

P

roce

eds

from

issu

ance

$

6,01

2,00

0 E

quity

com

pone

nt

(409

,978

)

L

iabi

lity

com

pone

nt a

t the

dat

e of

issu

ance

$

5,60

2,02

2 T

he s

even

th i

ssue

of

the

Com

pany

’s u

nsec

ured

con

vert

ible

bon

ds w

as r

esol

ved

by t

he b

oard

of

dire

ctor

s of

th

e C

ompa

ny o

n A

ugus

t 7,

201

9. T

he c

umul

ativ

e fa

ce v

alue

of

the

bond

s sh

all

not

exce

ed $

3,00

0,00

0 th

ousa

nd. T

he b

onds

are

issu

ed a

t 100

%-1

00.5

% o

f th

e fa

ce v

alue

, and

the

issu

ance

per

iod

is 5

yea

rs.

21

. L

EA

SIN

G

2019

a.

R

ight

-of-

use

asse

ts -

201

9

Dec

emb

er 3

1,

2019

C

arry

ing

amou

nts

Lan

d

$

8,

153,

382

Bui

ldin

gs

82

4,95

5 F

ligh

t equ

ipm

ent

62

,052

,701

O

ther

equ

ipm

ent

2,

579

$

71,0

33,6

17

F

or Y

ear

En

ded

D

ecem

ber

31,

20

19

A

ddit

ions

to r

ight

-of-

use

asse

ts

$

5,86

3,62

5

Dep

reci

atio

n fo

r ri

ght-

of-u

se a

sset

s

L

and

$

376,

425

Bui

ldin

gs

79

8,93

3 F

ligh

t equ

ipm

ent

10

,721

,575

O

ther

equ

ipm

ent

2,15

7

$

11

,899

,090

b.

L

ease

liab

ilit

ies

- 20

19

D

ecem

ber

31,

20

19

C

arry

ing

amou

nts

C

urre

nt

$

2,34

0,87

3 N

on-c

urre

nt

$

15,8

01,7

24

- 48

-

Ran

ge o

f di

scou

nt r

ate

for

leas

e li

abil

itie

s (i

nclu

de U

S le

ase

hedg

ing

inst

rum

ents

):

Dec

emb

er 3

1,

2019

Lan

d

1.09

%-1

.65%

B

uild

ings

0%-3

.56%

F

ligh

t equ

ipm

ent

2.

49%

-3.3

4%

Oth

er e

quip

men

t

1.06

%-1

.50%

c.

Fin

anci

al li

abil

itie

s un

der

hedg

e ac

coun

ting

T

he G

roup

spe

cifi

cs a

par

t of

US

leas

e co

ntra

ct a

s a

hedg

ing

inst

rum

ents

to a

void

exc

hang

e fl

uctu

atio

ns

is U

S d

olla

r pa

ssen

ger

reve

nue,

and

app

lies

the

acc

ount

ing

trea

tmen

t of

cas

h fl

ow h

edgi

ng.

The

lea

se

info

rmat

ion

is a

s fo

llow

s:

Mat

uri

ty D

ate

S

ub

ject

C

arry

ing

Val

ue

Dec

embe

r 31

, 201

9 2

021.

4.15

-202

8.5.

15

Fin

anci

al li

abil

itie

s fo

r he

dgin

g -

curr

ent

$

8,

577,

482

Fin

anci

al li

abil

itie

s fo

r he

dgin

g -

non-

curr

ent

42,4

20,2

05

Infl

uenc

e of

com

preh

ensi

ve in

com

e

Rec

ogn

ized

in

Oth

er

Com

pre

hen

sive

In

com

e

Rec

lass

ifie

d t

o In

com

e

For

the

year

end

ed D

ecem

ber

31, 2

019

$

1,45

7,05

8

$

(24,

029)

d.

As

less

ees,

Chi

na A

irli

nes,

Man

dari

n A

irli

nes

and

Tig

erai

r T

aiw

an l

ease

d te

n 77

7-30

0ER

pla

nes,

fi

ftee

n A

330-

300

plan

es,

fift

een

737-

800

plan

es,

ten

A32

0-20

0 pl

anes

, si

x E

RJ1

90 p

lane

s an

d th

ree

AR

T72

-600

pla

nes

for

oper

atio

n, l

ease

per

iod

are

6 to

12

year

s fr

om F

ebru

ary

2006

to

May

202

8. T

he

rent

al p

rici

ng m

etho

d is

par

tly

a fi

xed

amou

nt o

f fu

nds,

and

som

e of

the

m a

re f

loat

ing

rent

s, f

loat

ing

rent

s ar

e ac

cord

ing

to b

ench

mar

k ra

tio,

the

ren

t is

rev

ised

eve

ry h

alf

year

. W

hen

the

leas

e ex

pire

s, t

he

leas

e ag

reem

ents

hav

e no

pur

chas

e ri

ghts

. T

he in

form

atio

n of

ref

unda

ble

depo

sits

and

ope

ning

of

cred

it le

tter

due

to r

enta

l of

plan

es:

Dec

emb

er 3

1,

2019

Ref

unda

ble

depo

sits

$

73

7,89

5 C

redi

t gua

rant

ees

1,71

7,95

3 C

AL

Par

k, a

nd T

aoyu

an I

nter

nati

onal

Air

port

Ser

vice

sig

ned

a B

OT

con

trac

t w

ith

a la

nd l

ease

ag

reem

ent,

for

the

deta

ils

for

the

leas

e ag

reem

ent,

plea

se r

efer

to

Not

e 35

. The

lea

se i

nclu

des

an o

ptio

n to

ext

end

the

leas

e, a

s it

is n

ot p

ossi

ble

to e

xten

d th

e le

ase,

the

amou

nt o

f th

e le

ase

rela

ted

to t

he p

erio

d co

vere

d by

the

opti

on i

s no

t in

clud

ed i

n th

e le

ase

liab

ility

. If

the

amou

nt o

f th

e ex

tend

ed l

ease

per

iod

is

incl

uded

in

the

leas

e li

abil

ity,

the

leas

e li

abil

ity w

ill

incr

ease

by

$873

,293

tho

usan

d on

Dec

embe

r 31

, 20

19.

Tai

wan

Air

Car

go T

erm

inal

Co.

and

CA

A s

igne

d a

BO

T c

ontr

act

wit

h a

land

lea

se a

gree

men

t. F

or

deta

ils,

ple

ase

refe

r to

Not

e 36

.

166

- 49

-

e.

T

he C

ompa

ny s

igne

d a

rent

al c

ontr

act

for

six

A32

1neo

wit

h A

ir L

ease

Cor

pora

tion

, w

hich

is

expe

cted

to

be

intr

oduc

ed b

etw

een

2021

and

202

2.

The

Com

pany

sig

ned

a re

ntal

lett

er o

f in

tent

for

eig

ht A

321n

eo w

ith C

AL

C L

ease

Cor

pora

tion

, whi

ch is

ex

pect

ed to

be

intr

oduc

ed in

202

2.

Tig

erai

r T

aiw

an

Co.

, L

td.

sign

ed

a re

ntal

le

tter

of

in

tent

fo

r ei

ght

A32

1neo

w

ith

ICB

C

Lea

se

Cor

pora

tion

, whi

ch is

exp

ecte

d to

be

intr

oduc

ed in

202

1.

f.

In

ord

er t

o re

vita

lize

ass

ets

and

stre

ngth

en t

he f

inan

cial

str

uctu

re,

the

Com

pany

sol

d fi

ve o

f it

s ow

n A

330-

300

airc

raft

to

Alt

avai

r L

.P.

in S

epte

mbe

r 20

19 b

y sa

le-a

nd-l

ease

back

for

$4,

905,

660

thou

sand

. T

he le

ase

term

was

5 to

6 y

ears

and

a lo

ss o

f $1

03,7

75 th

ousa

nd w

as in

curr

ed. T

he le

ase

agre

emen

t had

no

ter

ms

for

leas

e re

new

al o

r of

ftak

e ri

ghts

. The

ann

ual

leas

e pa

ymen

ts f

or e

ach

airc

raft

are

US

$5,3

89

thou

sand

to U

S$5

,437

thou

sand

.

g.

Oth

er le

ase

info

rmat

ion

The

Gro

up u

ses

oper

atin

g le

ase

agre

emen

t for

inve

stm

ent p

rope

rtie

s, r

efer

to N

ote

16.

For

th

e Y

ear

En

ded

D

ecem

ber

31,

20

19

S

hort

-ter

m a

nd lo

w p

rice

leas

e pa

ymen

t

$

52

,675

T

otal

of

leas

e ca

sh o

utfl

ow

$ (

13,8

84,3

67)

The

Gro

up c

hoos

es to

wai

ve th

e re

cogn

ition

of

the

cont

ract

pro

visi

ons

for

the

shor

t-te

rm le

ases

and

low

pr

ice

leas

e, a

nd d

oes

not r

ecog

nize

the

rela

ted

righ

t-of

-use

ass

ets

and

leas

e li

abil

itie

s fo

r su

ch le

ase.

20

18

1)

Sal

e-le

aseb

ack

fina

nce

leas

es

Dec

emb

er 3

1,

2018

Min

imum

leas

e pa

ymen

ts -

fli

ght e

quip

men

t

Wit

hin

one

year

$

59

6,00

0 B

eyon

d on

e ye

ar a

nd w

ithi

n fi

ve y

ears

-

Pre

sent

val

ue o

f m

inim

um le

ase

paym

ents

$

59

6,00

0

Inte

rest

rat

es

1.

0680

%

The

Gro

up h

ad l

ease

d on

e A

330-

300

airc

raft

und

er s

ale-

leas

ebac

k fi

nanc

e le

ases

as

of D

ecem

ber

31, 2

018.

The

lea

se t

erm

s st

arte

d fr

om J

une

2006

to

Apr

il 2

019.

Dur

ing

the

leas

e te

rms,

the

Gro

up

reta

ined

all

ris

ks a

nd r

ewar

ds a

ttac

hed

to t

he a

ircr

aft

and

engi

nes

and

enjo

yed

the

sam

e su

bsta

ntiv

e ri

ghts

as

thos

e pr

ior

to t

he t

rans

acti

ons.

The

int

eres

t ra

tes

unde

rlyi

ng a

ll o

blig

atio

ns u

nder

the

se

fina

nce

leas

es w

ere

floa

ting

. T

here

fore

, th

e m

inim

um l

ease

pay

men

ts u

nder

the

sal

e-le

aseb

ack

airc

raft

con

trac

ts d

o no

t inc

lude

inte

rest

exp

ense

s.

- 50

-

2)

Fin

ance

leas

es

Tai

wan

Air

Car

go T

erm

inal

Co.

(“T

AC

T”)

ent

ered

int

o a

term

inal

con

stru

ctio

n co

ntra

ct.

Ref

er t

o N

ote

36 f

or th

e te

rms

of th

e co

ntra

ct. D

ynas

ty H

olid

ay C

o., L

td. s

igne

d a

long

-ter

m e

quip

men

t lea

se

cont

ract

, and

the

leas

e co

ntra

ct is

a f

inan

ce le

ase

cont

ract

.

D

ecem

ber

31,

20

18

M

inim

um le

ase

paym

ents

- c

argo

term

inal

and

oth

er

W

ithi

n on

e ye

ar

$

37,9

98

Bey

ond

one

year

and

wit

hin

five

yea

rs

2,

974

40,9

72

Les

s: F

inan

ce c

osts

(629

)

Pre

sent

val

ue o

f m

inim

um le

ase

paym

ents

$

40

,343

Pre

sent

val

ue o

f m

inim

um le

ase

paym

ents

-

ca

rgo

term

inal

and

oth

er

Wit

hin

one

year

$

37

,398

B

eyon

d on

e ye

ar a

nd w

ithi

n fi

ve y

ears

2,94

5

$

40

,343

Dis

coun

t rat

e

4.

756%

Tot

al a

mou

nt o

f pr

esen

t val

ue o

f m

inim

um le

ase

paym

ents

C

urre

nt

$

633,

398

Non

curr

ent

2,

945

$

636,

343

3)

O

pera

ting

leas

e ar

rang

emen

ts (

incl

ude

sale

-lea

seba

ck o

pera

ting

leas

es)

For

the

ope

rati

ng l

ease

arr

ange

men

ts,

plea

se r

efer

to

the

cons

olid

ated

fin

anci

al s

tate

men

ts f

or t

he

year

end

ed D

ecem

ber

31, 2

018.

A

s of

Dec

embe

r 31

, 20

18,

the

refu

ndab

le d

epos

its

paid

by

the

Gro

up u

nder

ope

rati

ng l

ease

co

ntra

cts

wer

e $6

93,4

66 t

hous

and.

Som

e of

the

gua

rant

ees

wer

e se

cure

d by

cre

dit

guar

ante

es,

and

outs

tand

ing

cred

it g

uara

ntee

s as

of

Dec

embe

r 31

, 201

8 w

ere

$1,6

82,7

74 th

ousa

nd.

The

fut

ure

min

imum

lea

se p

aym

ents

for

the

non

-can

cela

ble

oper

atin

g le

ase

com

mit

men

ts w

ere

as

foll

ows:

D

ecem

ber

31,

20

18

U

p to

1 y

ear

$

11,7

85,4

42

Ove

r 1

year

to 5

yea

rs

44

,559

,429

O

ver

5 ye

ars

21

,685

,499

$

78

,030

,370

167

- 51

-

The

leas

e pa

ymen

ts r

ecog

nize

d in

exp

ense

for

the

curr

ent p

erio

d w

ere

as f

ollo

ws:

For

th

e Y

ear

En

ded

D

ecem

ber

31,

20

18

M

inim

um le

ase

paym

ents

$

11

,735

,495

22.

OT

HE

R P

AY

AB

LE

S

D

ecem

ber

31

2019

2018

Fue

l cos

ts

$

3,

723,

213

$

3,

822,

018

Gro

und

serv

ice

expe

nses

1,

262,

878

1,16

7,21

4 R

epai

r ex

pens

es

1,20

8,87

5

1,

031,

700

Inte

rest

exp

ense

21

9,66

0

26

6,26

8 S

hort

-ter

m e

mpl

oyee

ben

efit

s

2,

040,

718

2,23

7,40

9 T

erm

inal

sur

char

ges

1,12

2,53

2

1,

151,

578

Com

mis

sion

exp

ense

s

50

9,52

0

48

4,34

1 O

ther

s

3,

100,

576

3,98

5,67

0

$

13,1

87,9

72

$

14

,146

,198

23

. C

ON

TR

AC

T L

IAB

ILIT

IES

/DE

FE

RR

ED

RE

VE

NU

E

D

ecem

ber

31

2019

2018

Con

trac

t L

iab

ilit

ies

C

ontr

act

Lia

bil

itie

s

Fre

quen

t fly

er p

rogr

ams

$

2,

895,

535

$

2,

493,

551

Adv

ance

tick

et s

ales

20

,401

,549

18

,956

,569

$

23,2

97,0

84

$

21

,450

,120

Cur

rent

$

21,0

60,7

73

$

19

,546

,455

N

on-c

urre

nt

2,23

6,31

1

1,

903,

665

$

23

,297

,084

$

21,4

50,1

20

24.

PR

OV

ISIO

NS

Dec

emb

er 3

1

20

19

20

18

O

pera

ting

leas

es -

air

craf

t

$

10,3

71,8

57

$

8,

794,

539

C

urre

nt

$

36

0,39

3

$

321,

075

Non

-cur

rent

10

,011

,464

8,

473,

464

$

10

,371

,857

$

8,79

4,53

9

- 52

-

Air

craf

t L

ease

C

ontr

act

B

alan

ce a

t Jan

uary

1, 2

018

$

8,48

9,30

8 A

ddit

iona

l pro

visi

ons

reco

gniz

ed

3,

386,

052

Usa

ge

(3

,310

,089

) E

ffec

t of

exch

ange

rat

e ch

ange

s

229,

268

B

alan

ce a

t Dec

embe

r 31

, 201

8

$

8,

794,

539

B

alan

ce a

t Jan

uary

1, 2

019

$

8,79

4,53

9 A

ddit

iona

l pro

visi

ons

reco

gniz

ed

4,

608,

924

Usa

ge

(2

,799

,314

) E

ffec

t of

exch

ange

rat

e ch

ange

s

(232

,292

)

Bal

ance

at D

ecem

ber

31, 2

019

$

10,3

71,8

57

The

Gro

up l

ease

d fl

ight

equ

ipm

ent

unde

r op

erat

ing

leas

e ag

reem

ents

. Und

er t

he c

ontr

acts

, whe

n th

e le

ases

ex

pire

and

the

equ

ipm

ent

is r

etur

ned

to t

he l

esso

r, t

he f

ligh

t eq

uipm

ent

has

to b

e re

pair

ed a

ccor

ding

to

the

expe

cted

yea

rs o

f us

e, n

umbe

r of

fli

ght

hour

s, f

light

cyc

les

and

the

num

ber

of e

ngin

e re

volu

tions

. T

he

Gro

up h

ad e

xist

ing

oblig

atio

ns t

o re

cogn

ize

prov

isio

ns w

hen

sign

ing

a le

ase

or d

urin

g th

e le

ase

term

. T

iger

air

Tai

wan

Co.

, L

td.

also

lea

sed

flig

ht e

quip

men

t un

der

oper

atin

g le

ase

agre

emen

ts.

In a

ccor

danc

e to

th

e co

ntra

ct,

Tig

erai

r m

ust

pay

mai

nten

ance

res

erve

s m

onth

ly a

ccor

ding

to

the

actu

al n

umbe

r of

fli

ght

hour

s.

25.

RE

TIR

EM

EN

T B

EN

EF

IT P

LA

NS

a.

D

efin

ed c

ontr

ibut

ion

plan

s T

he G

roup

ado

pted

a p

ensi

on p

lan

unde

r th

e L

abor

Pen

sion

Act

(th

e “L

PA

”), w

hich

is

a st

ate-

man

aged

de

fine

d co

ntri

buti

on p

lan.

Und

er t

he L

PA

, an

ent

ity

mak

es m

onth

ly c

ontr

ibut

ions

to

empl

oyee

s’

indi

vidu

al p

ensi

on a

ccou

nts

at 6

% o

f m

onth

ly s

alar

ies

and

wag

es.

Em

ploy

ees

base

d in

the

Uni

ted

stat

es a

nd J

apan

of

Chi

na A

irli

nes

Co.

, L

td.

and

subs

idia

ries

are

m

embe

rs o

f th

e U

nite

d st

ates

and

Jap

an g

over

nmen

t re

tire

men

t be

nefi

t pl

ans.

Sub

sidi

arie

s sh

ould

ap

prop

riat

e a

spec

ific

por

tion

to

reti

rem

ent

bene

fit

plan

s. T

he o

blig

atio

n to

the

gov

ernm

ent

reti

rem

ent

bene

fit p

lans

of

Chi

na A

irli

nes

Co.

, Ltd

. and

sub

sidi

arie

s is

to a

ppro

pria

te a

spe

cifi

c po

rtio

n am

ount

.

b.

Def

ined

ben

efit

pla

ns

The

def

ined

ben

efit

pla

n ad

opte

d by

the

Com

pany

and

in

acco

rdan

ce w

ith

the

Lab

or S

tand

ards

Law

is

oper

ated

by

the

gove

rnm

ent.

Pen

sion

ben

efit

s ar

e ca

lcul

ated

on

the

basi

s of

the

len

gth

of s

ervi

ce a

nd

aver

age

mon

thly

sal

arie

s of

the

six

mon

ths

befo

re r

etir

emen

t. T

he C

ompa

ny a

nd s

ubsi

diar

y co

ntri

bute

am

ount

s eq

ual

to 2

%-1

5% o

f to

tal

mon

thly

sal

arie

s an

d w

ages

to

a pe

nsio

n fu

nd a

dmin

iste

red

by t

he

pens

ion

fund

mon

itor

ing

com

mit

tee.

Pen

sion

con

trib

utio

ns a

re d

epos

ited

in

the

Ban

k of

Tai

wan

in

the

com

mit

tee’

s na

me.

Bef

ore

the

end

of e

ach

year

, th

e G

roup

ass

esse

s th

e ba

lanc

e in

the

pen

sion

fun

d. I

f th

e am

ount

of

the

bala

nce

in t

he p

ensi

on f

und

is i

nade

quat

e to

pay

ret

irem

ent

bene

fits

for

em

ploy

ees

who

con

form

to r

etir

emen

t req

uire

men

ts in

the

next

yea

r, th

e G

roup

is r

equi

red

to f

und

the

diff

eren

ce in

on

e ap

prop

riat

ion

that

sho

uld

be m

ade

befo

re t

he e

nd o

f M

arch

of

the

next

yea

r. T

he p

ensi

on f

und

is

man

aged

by

the

Bur

eau

of L

abor

Fun

ds,

Min

istr

y of

Lab

or (

the

“Bur

eau”

); t

he G

roup

has

no

righ

t to

in

flue

nce

the

inve

stm

ent p

olic

y an

d st

rate

gy.

168

- 53

-

The

am

ount

s in

clud

ed in

the

cons

olid

ated

bal

ance

she

ets

in r

espe

ct o

f th

e G

roup

’s d

efin

ed b

enef

it p

lans

w

ere

as f

ollo

ws:

D

ecem

ber

31

2019

2018

Pre

sent

val

ue o

f fu

nded

def

ined

ben

efit

obl

igat

ion

$

18

,457

,304

$

17,4

64,8

56

Fai

r va

lue

of p

lan

asse

ts

(9,0

22,2

69)

(8,6

61,4

74)

D

efic

it (

net d

efin

ed b

enef

it li

abil

itie

s)

$

9,

435,

035

$

8,

803,

382

Mov

emen

ts in

net

def

ined

ben

efit

liab

ilit

ies

(ass

ets)

wer

e as

fol

low

s:

Pre

sen

t V

alu

e of

th

e D

efin

ed

Ben

efit

O

bli

gati

on

F

air

Val

ue

of

the

Pla

n A

sset

s

Net

Def

ined

B

enef

it

Lia

bil

itie

s (A

sset

s)

Bal

ance

at J

anua

ry 1

, 201

8

$

16,1

49,3

82

$

(8

,047

,817

)

$

8,10

1,56

5 S

ervi

ce c

ost

Cur

rent

ser

vice

cos

t

1,

384,

213

-

1,

384,

213

Net

inte

rest

exp

ense

(in

com

e)

163,

283

(82,

595)

80

,688

R

ecog

nize

d in

pro

fit o

r lo

ss

1,54

7,49

6

(8

2,59

5)

1,46

4,90

1 R

emea

sure

men

t

Ret

urn

on p

lan

asse

ts (

excl

udin

g am

ount

s in

clud

ed in

net

inte

rest

)

-

(236

,287

)

(2

36,2

87)

Act

uari

al (

gain

) lo

ss -

cha

nges

in

dem

ogra

phic

ass

umpt

ions

15

,538

-

15,5

38

Act

uari

al (

gain

) lo

ss -

cha

nges

in f

inan

cial

as

sum

ptio

ns

344,

716

-

344,

716

A

ctua

rial

(ga

in)

loss

- e

xper

ienc

e ad

just

men

ts

727,

899

-

72

7,89

9 R

ecog

nize

d in

oth

er c

ompr

ehen

sive

inco

me

1,08

8,15

3

(2

36,2

87)

851,

866

Con

trib

utio

ns f

rom

the

empl

oyer

-

(1,4

86,5

50)

(1,4

86,5

50)

Ben

efit

s pa

id

(1,2

10,8

39)

1,21

0,83

9

-

Oth

ers

(109

,336

)

(1

9,06

4)

(128

,400

) B

alan

ce a

t Dec

embe

r 31

, 201

8

17

,464

,856

(8

,661

,474

)

8,

803,

382

Cur

rent

ser

vice

cos

t

1,

321,

600

-

1,

321,

600

Net

inte

rest

exp

ense

(in

com

e)

161,

808

(86,

234)

75

,574

R

ecog

nize

d in

pro

fit o

r lo

ss

1,48

3,40

8

(8

6,23

4)

1,39

7,17

4 R

emea

sure

men

t

Ret

urn

on p

lan

asse

ts (

excl

udin

g am

ount

s in

clud

ed in

net

inte

rest

)

-

(308

,223

)

(3

08,2

23)

Act

uari

al (

gain

) lo

ss -

cha

nges

in

dem

ogra

phic

ass

umpt

ions

15

,959

-

15,9

59

Act

uari

al (

gain

) lo

ss -

cha

nges

in f

inan

cial

as

sum

ptio

ns

440,

374

-

44

0,37

4 A

ctua

rial

(ga

in)

loss

- e

xper

ienc

e ad

just

men

ts

633,

683

-

63

3,68

3 R

ecog

nize

d in

oth

er c

ompr

ehen

sive

inco

me

1,09

0,01

6

(3

08,2

23)

781,

793

Con

trib

utio

ns f

rom

the

empl

oyer

-

(1,4

18,9

70)

(1,4

18,9

70)

Ben

efit

s pa

id

(1,4

52,6

32)

1,45

2,63

2

-

Oth

ers

(128

,344

)

-

(128

,344

)

B

alan

ce a

t Dec

embe

r 31

, 201

9

$

18,4

57,3

04

$

(9

,022

,269

)

$

9,43

5,03

5

- 54

-

Thr

ough

the

def

ined

ben

efit

pla

ns u

nder

the

Lab

or S

tand

ards

Law

, th

e G

roup

is

expo

sed

to t

he

foll

owin

g ri

sks:

1)

In

vest

men

t ri

sk:

The

pla

n as

sets

are

inv

este

d in

dom

esti

c an

d fo

reig

n eq

uity

and

deb

t se

curi

ties

, ba

nk d

epos

its,

etc.

The

inv

estm

ent

is c

ondu

cted

at

the

disc

reti

on o

f th

e B

urea

u or

und

er t

he

man

date

d m

anag

emen

t. H

owev

er,

in a

ccor

danc

e w

ith

rele

vant

reg

ulat

ions

, th

e re

turn

gen

erat

ed b

y pl

an a

sset

s sh

ould

not

be

belo

w th

e in

tere

st r

ate

for

a 2-

year

tim

e de

posi

t wit

h lo

cal b

anks

. 2)

In

tere

st r

isk:

A d

ecre

ase

in t

he g

over

nmen

t bo

nd i

nter

est

rate

wil

l in

crea

se t

he p

rese

nt v

alue

of

the

defi

ned

bene

fit

obli

gati

on;

how

ever

, th

is w

ill

be p

arti

ally

off

set

by a

n in

crea

se i

n th

e re

turn

on

the

plan

’s d

ebt i

nves

tmen

ts.

3)

Sal

ary

risk

: T

he p

rese

nt v

alue

of

the

defi

ned

bene

fit

obli

gati

on i

s ca

lcul

ated

by

refe

renc

e to

the

fu

ture

sal

arie

s of

pla

n pa

rtic

ipan

ts.

As

such

, an

inc

reas

e in

the

sal

ary

of t

he p

lan

part

icip

ants

wil

l in

crea

se th

e pr

esen

t val

ue o

f th

e de

fine

d be

nefi

t obl

igat

ion.

T

he a

ctua

rial

val

uati

ons

of t

he p

rese

nt v

alue

of

the

defi

ned

bene

fit

obli

gati

on w

ere

carr

ied

out

by

qual

ifie

d ac

tuar

ies.

The

sig

nifi

cant

ass

umpt

ions

use

d fo

r th

e pu

rpos

es o

f th

e ac

tuar

ial v

alua

tion

s w

ere

as

foll

ows:

D

ecem

ber

31

2019

2018

Dis

coun

t rat

e(s)

0.63

%-1

.10%

0.86

%-1

.35%

E

xpec

ted

rate

(s)

of s

alar

y in

crea

se

1.

00%

-2.5

0%

1.

00%

-2.5

0%

If p

ossi

ble

reas

onab

le c

hang

e in

eac

h of

the

sig

nifi

cant

act

uari

al a

ssum

ptio

ns w

ill

occu

r an

d al

l ot

her

assu

mpt

ions

wil

l re

mai

n co

nsta

nt,

the

pres

ent

valu

e of

the

def

ined

ben

efit

obl

igat

ion

wou

ld i

ncre

ase

(dec

reas

e) a

s fo

llow

s:

Dec

emb

er 3

1

20

19

20

18

D

isco

unt r

ate(

s)

0.5%

incr

ease

$

(939

,308

)

$

(777

,193

) 0.

5% d

ecre

ase

1,00

0,77

1

84

1,48

8 E

xpec

ted

rate

(s)

of s

alar

y in

crea

se

0.5%

incr

ease

96

9,32

4

81

1,48

5 0.

5% d

ecre

ase

(927

,180

)

(7

60,7

93)

The

sen

siti

vity

ana

lysi

s pr

esen

ted

abov

e m

ay n

ot b

e re

pres

enta

tive

of

the

actu

al c

hang

e in

the

pre

sent

va

lue

of t

he d

efin

ed b

enef

it o

blig

atio

n as

it

is u

nlik

ely

that

the

cha

nge

in a

ssum

ptio

ns w

ould

occ

ur i

n is

olat

ion

of o

ne a

noth

er a

s so

me

of th

e as

sum

ptio

ns m

ay b

e co

rrel

ated

.

D

ecem

ber

31

2019

2018

The

exp

ecte

d co

ntri

butio

ns to

the

plan

for

the

next

yea

r

$

930,

963

$

91

6,92

7

The

ave

rage

dur

atio

n of

the

defi

ned

bene

fit o

blig

atio

n

8-11

yea

rs

8-

12 y

ears

169

- 55

-

26.

EQ

UIT

Y

a.

Sha

re c

apit

al

Ord

inar

y sh

ares

D

ecem

ber

31

2019

2018

Num

bers

of

auth

oriz

ed s

hare

s (i

n th

ousa

nds)

7,

000,

000

6,00

0,00

0 A

mou

nt o

f au

thor

ized

sha

res

$

70

,000

,000

$

60,0

00,0

00

Am

ount

of

issu

ed s

hare

s

$

54,2

09,8

46

$

54

,209

,846

b.

Cap

ital

sur

plus

Dec

emb

er 3

1

20

19

20

18

Is

suan

ce o

f co

nver

tibl

e bo

nds

in e

xces

s of

par

val

ue a

nd

conv

ersi

on p

rem

ium

$

315,

114

$

31

5,11

4 D

ivid

end

dist

ribu

ted

to s

ubsi

diar

ies

3,

909

3,30

3 R

etir

emen

t of

trea

sury

sha

res

33

,513

33

,513

E

xpir

ed e

mpl

oyee

sha

re o

ptio

ns

11,7

47

11,7

47

Lon

g-te

rm in

vest

men

ts

118,

962

955

Bon

ds p

ayab

le e

quity

com

pone

nt

409,

978

409,

978

Dif

fere

nce

in s

ale

pric

e of

sha

res

of s

ubsi

diar

ies

and

book

val

ue

1,12

9,08

0

-

Oth

ers

466,

604

466,

604

$

2,

488,

907

$

1,

241,

214

The

cap

ital

sur

plus

fro

m s

hare

s is

sued

in

exce

ss o

f pa

r (i

nclu

ding

add

itio

nal

paid

-in

capi

tal

from

is

suan

ce o

f or

dina

ry s

hare

s an

d tr

easu

ry s

hare

tra

nsac

tion

s) a

nd t

he d

iffe

renc

e in

sal

e pr

ice

of s

hare

s of

su

bsid

iari

es a

nd b

ook

valu

e m

ay b

e us

ed t

o of

fset

def

icit

s; i

n ad

diti

on,

whe

n th

e C

ompa

ny h

as n

o de

fici

t, su

ch c

apit

al s

urpl

us m

ay b

e di

stri

bute

d as

cas

h di

vide

nds

or tr

ansf

erre

d to

cap

ital

(bu

t lim

ited

to

a ce

rtai

n pe

rcen

tage

of

the

Com

pany

’s p

aid-

in c

apit

al o

n ye

arly

bas

is).

T

he c

apit

al s

urpl

us f

rom

lon

g-te

rm i

nves

tmen

ts,

empl

oyee

sha

re o

ptio

ns e

xpir

ed,

divi

dend

s di

stri

bute

d to

sub

sidi

arie

s an

d re

tire

men

t of

tre

asur

y sh

ares

may

not

be

used

for

any

pur

pose

. B

esid

es,

capi

tal

surp

lus

from

con

vers

ion

of e

mpl

oyee

sha

res

and

conv

erti

ble

bond

s pa

yabl

e m

ay n

ot b

e us

ed f

or a

ny

purp

ose.

c.

App

ropr

iati

on o

f ea

rnin

gs a

nd d

ivid

end

poli

cy

Acc

ordi

ng t

o am

ende

d C

ompa

ny A

ct,

whe

re t

he C

ompa

ny m

ade

prof

it i

n a

fisc

al y

ear,

the

pro

fit

shal

l be

fir

st u

tili

zed

for

payi

ng t

axes

, of

fset

ting

los

ses

of p

revi

ous

year

s, s

etti

ng a

side

as

lega

l re

serv

e 10

%

of t

he r

emai

ning

pro

fit,

sett

ing

asid

e or

rev

ersi

ng a

spe

cial

res

erve

in

acco

rdan

ce w

ith

the

law

s an

d re

gula

tion

s, a

nd t

hen

any

rem

aini

ng p

rofi

t to

geth

er w

ith

any

undi

stri

bute

d re

tain

ed e

arni

ngs

shal

l be

us

ed b

y th

e C

ompa

ny’s

boa

rd o

f di

rect

ors

as t

he b

asis

for

pro

posi

ng a

dis

trib

utio

n pl

an w

ith

due

cons

ider

atio

n of

any

fut

ure

airc

raft

acq

uisi

tion

pla

ns a

nd f

und

dem

and,

whi

ch s

houl

d be

res

olve

d in

the

sh

areh

olde

rs’

mee

ting

for

the

dis

trib

utio

n of

div

iden

ds a

nd b

onus

es t

o sh

areh

olde

rs b

y ca

sh o

r sh

ares

(c

ash

divi

dend

s ca

nnot

be

less

tha

n 30

% o

f to

tal

divi

dend

s di

stri

bute

d).

How

ever

, if

the

Com

pany

’s

prof

it b

efor

e ta

x in

a f

isca

l ye

ar a

fter

ded

ucti

ons

for

the

abov

emen

tion

ed i

tem

s is

not

suf

fici

ent

for

earn

ings

dis

trib

utio

n, r

etai

ned

earn

ings

can

be

used

as

a su

pple

men

t for

the

defi

cien

cy.

- 56

-

The

Com

pany

sha

ll s

et a

side

pro

fits

as

a le

gal

rese

rve

unti

ll th

e le

gal

rese

rve

amou

nts

to t

he a

utho

rize

d ca

pita

l. T

he l

egal

res

erve

cou

ld b

e us

ed f

or m

akin

g go

od t

he d

efic

it o

f th

e C

ompa

ny.

If t

he C

ompa

ny

has

no d

efic

it i

n a

fisc

al y

ear,

the

Com

pany

can

dis

trib

ute

all

or p

art

of t

he c

apit

al s

urpl

us b

y ca

sh o

r sh

ares

wit

h du

e co

nsid

erat

ion

of f

inan

ce,

mar

ketin

g an

d m

anag

emen

t re

quir

emen

ts i

n ac

cord

ance

wit

h th

e la

ws

and

regu

lati

ons.

T

he d

istr

ibut

ion

of d

ivid

ends

sho

uld

be r

esol

ved

and

reco

gniz

ed i

n th

e sh

areh

olde

rs’

mee

ting

in

the

foll

owin

g ye

ar.

1)

App

ropr

iati

on o

f ea

rnin

gs in

201

7 T

he a

ppro

pria

tion

of

earn

ings

for

201

7 w

as r

esol

ved

in th

e sh

areh

olde

rs’

mee

ting

on

June

27,

201

8.

The

app

ropr

iati

ons

and

divi

dend

s pe

r sh

are

wer

e as

fol

low

s:

Ap

pro

pri

atio

n

of E

arn

ings

Div

iden

ds

Per

S

har

e (N

T$)

Leg

al r

eser

ve

$

14

5,83

1

Spe

cial

res

erve

11

8,81

0

C

ash

divi

dend

s

1,

193,

670

$0

.218

1820

086

2)

A

ppro

pria

tion

of

earn

ings

in 2

018

The

app

ropr

iati

on o

f ea

rnin

gs f

or 2

018

was

res

olve

d in

the

shar

ehol

ders

’ m

eeti

ng o

n Ju

ne 2

5, 2

019.

T

he a

ppro

pria

tion

and

div

iden

ds p

er s

hare

wer

e as

fol

low

s:

Ap

pro

pri

atio

n

of E

arn

ings

Div

iden

ds

Per

S

har

e (N

T$)

Leg

al r

eser

ve

$

11

4,49

3

Cas

h di

vide

nds

1,13

6,27

8

$0.2

0960

737

Com

pany

rev

erse

d sp

ecia

l res

erve

of

$105

,843

thou

sand

.

3)

Off

sett

ing

defi

cits

in 2

019

O

n M

arch

18,

202

0, t

he b

oard

pro

pose

d to

off

set

the

accu

mul

ated

def

icit

in

2019

. T

he d

efic

it

incl

uded

a n

et l

oss

of $

1,19

9,79

8 th

ousa

nd,

nega

tive

adju

stm

ent

of o

ther

ret

aine

d ea

rnin

gs o

f $5

77,4

27 th

ousa

nd, t

he r

emai

ning

am

ount

of

accu

mul

ated

def

icit

was

$1,

777,

225

thou

sand

.

The

of

fset

ting

of

de

fici

ts

for

2019

is

su

bjec

t to

th

e re

solu

tion

of

th

e sh

areh

olde

rs

in

the

shar

ehol

der’

s m

eeti

ng to

be

held

on

June

23,

202

0.

170

- 57

-

d.

Oth

er e

quity

item

s T

he m

ovem

ent o

f ot

her

equi

ty it

ems

is a

s fo

llow

s:

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han

ge

Dif

fere

nce

s on

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ran

slat

ing

For

eign

O

per

atio

ns

Un

real

ized

G

ain

(L

oss)

on

A

vail

able

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- sa

le F

inan

cial

A

sset

s

Un

real

ized

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ain

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oss)

on

F

inan

cial

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sset

s at

F

VT

OC

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Cas

h F

low

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edge

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n (

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s) o

n

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gin

g In

stru

men

ts

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otal

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ance

at J

anua

ry 1

, 20

18

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9 )

$ -

$ (1

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Adj

ustm

ents

on

init

ial

appl

icat

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of I

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alan

ce a

t Jan

uary

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er I

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xcha

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77

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rofi

t or

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31

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nrea

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O

ther

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ed in

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od

25

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268

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87

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113,

169

T

rans

fers

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ount

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12

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t Dec

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r 31

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42,6

19

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$ 25

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58,2

23

B

alan

ce a

t Jan

uary

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-

$

25,2

68

$ 58

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E

xcha

nge

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-

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6 )

Cum

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ive

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ges

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e of

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1,

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1,

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Cum

ulat

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619,

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565,

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2,

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of D

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201

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31

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The

ab

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acqu

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ions

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the

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shar

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prev

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ars

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du

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vest

men

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nnin

g.

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sha

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of th

e C

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eld

by it

s su

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ere

trea

ted

as tr

easu

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he s

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exer

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sh

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Com

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tere

sts,

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ted

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s fr

om A

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19

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185,

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191,

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28,7

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egio

n

1,68

0

7,

391

Eff

ect o

n ad

just

men

t to

inco

me

tax

N

on-d

educ

tibl

e ex

pens

es in

det

erm

inin

g ta

xabl

e in

com

e

16,9

36

20,6

62

Tax

-exe

mpt

inco

me

(45,

861)

(2

5,73

0)

Inco

me

tax

on u

napp

ropr

iate

d ea

rnin

gs (

5%)

378

35

Inco

me

basi

c ta

x

8,

468

- O

vers

ea in

com

e ta

x ex

pens

e

11

,157

22

,786

U

nrec

ogni

zed

loss

car

ryfo

rwar

ds, i

nves

tmen

t tax

cre

dits

and

te

mpo

rary

dif

fere

nce

586,

135

1,08

8,65

0 A

djus

tmen

ts f

or p

rior

yea

rs’

tax

(5,5

46)

10,5

92

Adj

ustm

ents

to d

efer

red

tax

attr

ibut

able

to c

hang

es in

tax

rate

s an

d la

ws

24,5

34

1,86

1 A

djus

tmen

ts to

cha

nges

in ta

x ra

tes

and

law

s

-

(933

,932

) O

ther

(3

34)

-

Inco

me

tax

expe

nse

reco

gniz

ed in

pro

fit o

r lo

ss

$

57

8,18

5

$

808,

565

The

Inc

ome

Tax

Law

of

the

RO

C w

as a

men

ded

and,

sta

rtin

g fr

om 2

018,

the

cor

pora

te i

ncom

e ta

x ra

te

was

ad

just

ed

from

17

%

to

20%

. In

ad

diti

on,

the

rate

of

th

e co

rpor

ate

surt

ax

appl

icab

le

to

unap

prop

riat

ed e

arni

ngs

was

red

uced

fro

m 1

0% to

5%

.

173

- 63

-

b.

Inco

me

tax

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

20

19

20

18

D

efer

red

tax

R

ecog

nize

d in

oth

er c

ompr

ehen

sive

inco

me

T

rans

lati

on o

f fo

reig

n op

erat

ions

$

13,4

54

$

(4

,657

) F

air

valu

e ch

ange

s of

fin

anci

al a

sset

s at

FV

TO

CI

(14,

854)

54

7 H

edgi

ng in

stru

men

ts f

air

valu

e re

valu

atio

n fo

r ca

sh f

low

he

dgin

g

(2

78,6

64)

(24,

128)

A

ctua

rial

gai

n or

loss

on

defi

ned

bene

fit p

lan

156,

359

187,

368

Eff

ect o

f in

com

e ta

x

-

10,8

93

T

otal

inco

me

tax

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

$ (

123,

705)

$

170,

023

c.

D

efer

red

tax

asse

ts a

nd li

abil

itie

s F

or th

e ye

ar e

nded

Dec

embe

r 31

, 201

9

B

egin

nin

g B

alan

ce

R

ecog

niz

ed in

P

rofi

t or

Los

s

Rec

ogn

ized

in

Oth

er

Com

pre

hen

sive

In

com

e

Exc

han

ge

Dif

fere

nce

En

din

g B

alan

ce

D

efer

red

tax

asse

ts

T

empo

rary

dif

fere

nces

D

efin

ed b

enef

it p

lans

$

1,76

5,05

2

$

(29,

560 )

$

156,

359

$ -

$ 1,

891,

851

Fre

quen

t fly

er p

rogr

ams

51

0,06

0

82,9

17

-

-

59

2,97

7 M

aint

enan

ce r

eser

ves

1,

811,

848

42

8,15

5

-

-

2,24

0,00

3 A

llow

ance

for

red

ucti

on o

f in

vent

ory

33

5,71

1

(38,

854 )

-

-

296,

857

Oth

ers

72

9,39

9

(429

,580

)

15,1

13

1,

006

31

5,93

8

$

5,15

2,07

0

$

13,0

78

$ 17

1,47

2

$

1,00

6

$

5,33

7,62

6

Def

erre

d ta

x li

abil

itie

s

T

empo

rary

dif

fere

nces

U

nrea

lize

d fo

reig

n ex

chan

ge g

ains

$

17

$ 81

,760

$

-

$

-

$

81,7

77

Oth

ers

(Not

e)

18

8,43

0

(8,9

99 )

29

5,17

7

757

47

5,36

5

$

188,

447

$ 72

,761

$

295,

177

$ 75

7

$

557,

142

- 64

-

For

the

year

end

ed D

ecem

ber

31, 2

018

Beg

inn

ing

Bal

ance

Rec

ogn

ized

in

Pro

fit

or L

oss

Rec

ogn

ized

in

Oth

er

Com

pre

hen

sive

In

com

e

Exc

han

ge

Dif

fere

nce

Acq

uis

itio

n

Con

soli

dat

ed

E

nd

ing

Bal

ance

Def

erre

d ta

x as

sets

Tem

pora

ry d

iffe

renc

es

Def

ined

ben

efit

pla

ns

$ 1,

381,

538

$ 18

0,56

0

$

195,

742

$ -

$ 7,

212

$ 1,

765,

052

Fre

quen

t fly

er

prog

ram

s

426,

106

83

,954

-

-

-

510,

060

Mai

nten

ance

res

erve

s

1,50

7,28

5

304,

563

-

-

-

1,

811,

848

All

owan

ce f

or

redu

ctio

n of

in

vent

ory

23

9,11

5

96,5

96

-

-

33

5,71

1 O

ther

s

1,14

3,87

1

(397

,832

)

(18,

546 )

479

1,42

7

72

9,39

9 L

oss

carr

yfor

war

ds

82

1,41

7

(821

,417

)

-

-

-

-

$ 5,

519,

332

$ (5

53,5

76 )

$ 17

7,19

6

$ 47

9

$ 8,

639

$

5,15

2,07

0

Def

erre

d ta

x li

abil

itie

s

T

empo

rary

dif

fere

nces

U

nrea

lize

d fo

reig

n ex

chan

ge g

ains

$

915

$

(898

)

$

-

$

-

$

-

$

17

Dep

reci

atio

n di

ffer

ence

fr

om f

ixed

ass

ets

31

,010

(31,

010 )

-

-

-

- O

ther

s (N

ote)

165,

630

11

,743

7,17

3

3,

884

-

18

8,43

0

$

197,

555

$ (2

0,16

5 )

$ 7,

173

$

3,88

4

$ -

$

188,

447

Not

e:

Incl

uded

adj

ustm

ents

on

init

ial

appl

icat

ion

due

to t

ax r

ate

chan

ges

$6,8

73 t

hous

and

from

IF

RS

9.

Ded

ucti

ble

tem

pora

ry d

iffe

renc

es, a

nd u

nuse

d lo

ss c

arry

forw

ards

for

whi

ch n

o de

ferr

ed t

ax a

sset

s ha

ve

been

rec

ogni

zed

in th

e co

nsol

idat

ed b

alan

ce s

heet

s.

D

ecem

ber

31

2019

2018

Los

s ca

rryf

orw

ards

20

19

$

-

$

11

,790

,770

20

21

2,89

9,49

6

2,

899,

496

2022

61

9,79

9

62

0,76

9 20

25

18,1

24

18,1

24

2026

54

6,89

9

81

8,19

8 20

27

68,4

15

68,4

15

2028

1,

706,

913

1,51

3,00

1 20

29

955,

250

-

$

6,81

4,89

6

$

17,7

28,7

73

D

iffe

renc

e in

dep

reci

atio

n

$

1,34

8,09

6

$

90,3

50

174

- 65

-

d.

Unu

sed

tax

loss

car

ryfo

rwar

ds a

s of

Dec

embe

r 31

, 201

9 w

ere

as f

ollo

ws:

Exp

iry

Yea

r

Un

use

d

Am

oun

t

Chi

na A

irli

nes,

Ltd

.

2021

$

2,

899,

496

2022

619,

799

2026

202,

699

2028

1,51

9,94

1 20

29

76

0,15

7

$

6,

002,

092

M

anda

rin

Air

line

Co.

, Ltd

.

2026

$

31

2,72

4 20

28

83

,821

$

39

6,54

5

Tai

wan

Air

craf

t Mai

nten

ance

And

Eng

inee

ring

Co.

, Ltd

.

2025

$

18

,124

20

26

31

,476

20

27

68

,415

20

28

10

3,15

1 20

29

19

5,09

3

$

41

6,25

9

e.

Inco

me

tax

asse

ssm

ent

The

inc

ome

tax

retu

rns

for

2017

of

the

Com

pany

and

its

sub

sidi

arie

s ha

ve b

een

exam

ined

by

the

tax

auth

orit

ies.

29

. E

AR

NIN

G P

ER

SH

AR

E

The

num

erat

ors

and

deno

min

ator

s us

ed in

cal

cula

ting

ear

ning

s pe

r sh

are

wer

e as

fol

low

s:

F

or t

he

Yea

r E

nd

ed D

ecem

ber

31

2019

2018

Bas

ic e

arni

ngs

per

shar

e

$

(0.2

2)

$

0.

33

Dil

uted

ear

ning

s pe

r sh

are

$

(0

.22 )

$

0.32

Ear

ning

s us

ed in

the

com

puta

tion

of

basi

c ea

rnin

gs p

er s

hare

$ (

1,19

9,79

8)

$

1,

790,

361

Eff

ect o

f po

tent

iall

y di

luti

ve o

rdin

ary

shar

es:

Inte

rest

on

conv

erti

ble

bond

s (a

fter

tax)

-

81,4

63

E

arni

ngs

used

in th

e co

mpu

tati

on o

f di

lute

d ea

rnin

gs p

er s

hare

$ (

1,19

9,79

8 )

$

1,

871,

824

- 66

-

For

th

e Y

ear

En

ded

Dec

emb

er 3

1

20

19

20

18

T

hous

and

unit

W

eigh

ted

aver

age

num

ber

of o

rdin

ary

shar

es in

com

puta

tion

of

basi

c ea

rnin

gs p

er s

hare

5,

418,

096

5,45

3,57

9 E

ffec

t of

pote

ntia

lly

dilu

tive

ord

inar

y sh

ares

:

C

onve

rtib

le b

onds

-

457,

481

Em

ploy

ees’

com

pens

atio

n or

bon

uses

issu

ed to

em

ploy

ees

-

8,82

1

Wei

ghte

d av

erag

e nu

mbe

r of

ord

inar

y sh

ares

use

d in

the

com

puta

tion

of

dilu

ted

earn

ings

per

sha

re

5,41

8,09

6

5,

919,

881

If t

he G

roup

off

ered

to

sett

le c

ompe

nsat

ion

or b

onus

es p

aid

to e

mpl

oyee

s in

cas

h or

sha

res,

the

Gro

up

assu

med

the

ent

ire

amou

nt o

f th

e co

mpe

nsat

ion

or b

onus

es w

ould

be

sett

led

in s

hare

s an

d th

e re

sult

ing

pote

ntia

l sh

ares

w

ere

incl

uded

in

th

e w

eigh

ted

aver

age

num

ber

of

shar

es

outs

tand

ing

used

in

th

e co

mpu

tati

on o

f di

lute

d ea

rnin

gs p

er s

hare

, if

the

eff

ect

is d

ilut

ive.

Suc

h di

luti

ve e

ffec

t of

the

pot

entia

l sh

ares

was

inc

lude

d in

the

com

puta

tion

of

dilu

ted

earn

ings

per

sha

re u

ntil

the

num

ber

of s

hare

s to

be

dist

ribu

ted

to e

mpl

oyee

s is

res

olve

d in

the

foll

owin

g ye

ar.

30

. B

US

INE

SS

CO

MB

INA

TIO

NS

A

s st

ated

in

Not

e 14

, th

e ot

her

disc

losu

res

of t

he G

roup

’s a

cqui

siti

on o

f K

aohs

iung

Cat

erin

g on

Mar

ch 7

, 20

18 a

re a

s fo

llow

s:

a.

Acq

uisi

tion

-rel

ated

cas

h am

ount

ing

to $

243,

743

thou

sand

. b.

A

sset

s ac

quir

ed a

nd li

abil

itie

s as

sum

ed a

t the

dat

e of

acq

uisi

tion

.

Ass

ets

C

urre

nt a

sset

s (i

nclu

ded

cash

and

cas

h eq

uiva

lent

s of

$38

0,51

2)

$

91

8,03

3 P

rope

rty,

pla

nt a

nd e

quip

men

t

55

3,39

0 In

tang

ible

ass

ets

186,

883

Oth

er a

sset

s

49

,479

T

otal

ass

ets

1,70

7,78

5 L

iabi

liti

es

(486

,356

)

Id

enti

fiab

le n

et a

sset

s

$

1,22

1,42

9 c.

T

he C

ompa

ny a

cqui

red

the

cont

rol

of K

aohs

iung

Cat

erin

g (t

he d

ate

of a

cqui

siti

on),

and

the

35.

78%

eq

uity

hel

d by

the

equ

ity m

etho

d w

as r

emea

sure

d at

the

fai

r va

lue

of t

he a

cqui

siti

on d

ate

and

the

diff

eren

ce r

ecog

nize

d in

gai

n on

dis

posa

l of

inve

stm

ent i

s $6

9,67

1 th

ousa

nd.

d.

The

non

-con

trol

ling

int

eres

t of

Kao

hsiu

ng C

ater

ing

(46.

33%

of

equi

ty)

was

val

ued

$565

,888

tho

usan

d;

at t

he f

air

valu

e of

the

ide

ntif

iabl

e ne

t as

sets

att

ribu

ted

to t

he n

on-c

ontr

olli

ng i

nter

est

on t

he d

ate

of

acqu

isit

ion.

e.

T

he b

arga

in p

urch

ase

bene

fit

of $

26,6

15 t

hous

and

of K

aohs

iung

Cat

erin

g (t

he d

ate

of a

cqui

siti

on)

was

m

easu

red

as t

he e

xces

s of

the

sum

of

the

cons

ider

atio

n tr

ansf

erre

d an

d th

e fa

ir v

alue

of

the

acqu

irer

’s

prev

ious

ly h

eld

equi

ty i

nter

ests

in

the

acqu

iree

ove

r th

e ne

t of

the

acq

uisi

tion

-dat

e am

ount

s of

the

id

enti

fiab

le a

sset

s ac

quir

ed a

nd th

e li

abil

itie

s as

sum

ed.

175

- 67

-

f.

Impa

ct o

f ac

quis

itio

ns o

f th

e G

roup

F

rom

the

acq

uisi

tion

dat

e, t

he o

pera

ting

res

ults

fro

m t

he a

cqui

red

Com

pany

, w

hich

are

inc

lude

d in

the

co

nsol

idat

ed s

tate

men

ts o

f co

mpr

ehen

sive

inco

me,

are

as

foll

ows:

K

aoh

siu

ng

Cat

erin

g

R

even

ue

$

1,

823,

950

Pro

fit

$

22

9,66

5 H

ad t

hese

bus

ines

s co

mbi

nati

ons

been

in

effe

ct a

t th

e be

ginn

ing

of t

he a

nnua

l re

port

ing

peri

od,

the

Gro

up’s

rev

enue

fro

m c

onti

nuin

g op

erat

ions

wou

ld h

ave

been

$17

1,03

9,10

2 th

ousa

nd a

nd t

he p

rofi

t fr

om c

onti

nuin

g op

erat

ions

wou

ld h

ave

been

$2,

310,

159

thou

sand

. T

his

pro-

form

a in

form

atio

n is

for

il

lust

rati

ve p

urpo

ses

only

and

is n

ot n

eces

sari

ly a

n in

dica

tion

of

the

reve

nue

and

resu

lts

of o

pera

tion

s of

th

e G

roup

tha

t ac

tual

ly w

ould

hav

e be

en a

chie

ved

had

the

acqu

isit

ion

been

com

plet

ed o

n Ja

nuar

y 1,

20

18, n

or is

it in

tend

ed to

be

a pr

ojec

tion

of

futu

re r

esul

ts.

31

. D

ISP

OS

AL

OF

SU

BS

IDIA

RIE

S

On

Janu

ary

21,

2019

, th

e bo

ard

of d

irec

tors

of

the

Com

pany

dec

ided

to

sell

par

t of

Dyn

asty

Hol

iday

s to

H

.I.S

. Tai

wan

Co.

, Ltd

. for

dis

posa

l pr

ice

of $

34,0

36 t

hous

and

and

a di

spos

itio

n of

$7,

656

thou

sand

. Aft

er

the

disp

osal

, the

pro

port

ion

of o

wne

rshi

p de

crea

se f

rom

51%

to 2

0%, l

oss

cont

rol t

o th

e su

bsid

iary

. a.

C

onsi

dera

tion

rec

eive

d fr

om d

ispo

sals

C

onsi

dera

tion

rec

eive

d in

cas

h an

d ca

sh e

quiv

alen

ts

$

34,0

36

b.

A

naly

sis

of a

sset

s an

d li

abil

itie

s on

the

date

con

trol

was

lost

C

urre

nt a

sset

s

C

ash

and

cash

equ

ival

ents

$

51

,449

O

ther

cur

rent

ass

ets

47

,510

N

on-c

urre

nt a

sset

s

17,0

35

Cur

rent

liab

ilit

ies

(4

9,74

2)

Non

-cur

rent

liab

ilit

ies

(1

5,31

8 )

N

et a

sset

s di

spos

ed o

f

$

50

,934

c.

Gai

n on

dis

posa

ls o

f su

bsid

iari

es

Con

side

rati

on r

ecei

ved

$

34

,036

N

et a

sset

s di

spos

ed o

f

(5

0,93

4)

Fai

r va

lue

of e

quity

10

,187

N

on-c

ontr

ollin

g in

tere

sts

24,9

57

Rec

lass

ific

atio

n of

oth

er c

ompr

ehen

sive

inco

me

in r

espe

ct o

f su

bsid

iari

es

(10,

590 )

G

ain

on d

ispo

sal

$

7,

656

d.

N

et c

ash

infl

ow o

n di

spos

al o

f su

bsid

iari

es

Con

side

rati

on r

ecei

ved

in c

ash

and

cash

equ

ival

ents

$

34,0

36

Les

s: C

ash

and

cash

equ

ival

ent b

alan

ces

disp

osed

of

(51,

449 )

$

(17

,413

)

- 68

-

32

. C

AP

ITA

L M

AN

AG

EM

EN

T

The

Gro

up m

anag

es i

ts c

apit

al t

o en

sure

tha

t en

titi

es i

n th

e G

roup

wil

l be

abl

e to

con

tinu

e as

goi

ng

conc

erns

whi

le m

axim

izin

g th

e re

turn

to

stak

ehol

ders

thr

ough

the

opt

imiz

atio

n of

the

deb

t an

d eq

uity

ba

lanc

e. T

he c

apit

al s

truc

ture

of

the

Gro

up c

onsi

sts

of n

et d

ebt

(bor

row

ings

off

set

by c

ash

and

cash

eq

uiva

lent

s) a

nd e

quity

of

the

Gro

up c

ompr

isin

g is

sued

cap

ital

, res

erve

s, r

etai

ned

earn

ings

, oth

er e

quity

and

no

n-co

ntro

llin

g in

tere

sts.

T

o su

ppor

t it

s op

erat

ing

acti

viti

es a

nd p

urch

ase

of a

ircr

aft,

the

Gro

up n

eeds

to

mai

ntai

n su

ffic

ient

cap

ital

. T

here

fore

, th

e go

al o

f ca

pita

l m

anag

emen

t is

to

ensu

re f

inan

cial

res

ourc

es a

nd o

pera

ting

pla

n is

abl

e to

su

ppor

t th

e fu

ture

wor

king

cap

ital

, ca

pita

l ex

pend

itur

es,

debt

rep

aym

ent

and

divi

dend

exp

ense

s an

d ot

her

need

s.

33

. F

INA

NC

IAL

IN

ST

RU

ME

NT

S

a.

F

air

valu

es o

f fi

nanc

ial i

nstr

umen

ts

1)

F

inan

cial

inst

rum

ents

not

eva

luat

ed a

t fai

r va

lue

Exc

ept

as d

etai

led

in t

he f

ollo

win

g ta

ble,

the

man

agem

ent

cons

ider

s th

e ca

rryi

ng a

mou

nts

of

fina

ncia

l ass

ets

and

fina

ncia

l lia

bili

ties

rec

ogni

zed

in th

e fi

nanc

ial s

tate

men

ts a

s ap

prox

imat

ing

thei

r fa

ir v

alue

s.

Dec

emb

er 3

1

20

19

20

18

Car

ryin

g A

mou

nt

F

air

Val

ue

C

arry

ing

Am

oun

t

Fai

r V

alu

e F

inan

cial

liab

ilit

ies

B

onds

pay

able

$

32,0

52,6

25

$

32

,062

,874

$

33,9

19,6

10

$

31

,651

,865

L

oans

and

deb

t

67

,663

,783

67

,663

,783

76

,395

,635

74

,404

,225

S

ome

long

-ter

m b

orro

win

gs a

nd c

apit

al l

ease

obl

igat

ions

are

flo

atin

g-ra

te f

inan

cial

lia

bili

ties,

so

thei

r ca

rryi

ng a

mou

nts

are

thei

r fa

ir v

alue

s. A

s of

Dec

embe

r 31

, 20

19 a

nd 2

018,

the

fai

r va

lues

of

long

-ter

m b

orro

win

gs a

nd p

riva

te b

onds

wit

h fi

xed

inte

rest

rat

es a

re e

stim

ated

at

the

pres

ent

valu

e of

exp

ecte

d ca

sh f

low

s di

scou

nted

at

rate

s of

0.6

7% a

nd 0

.68%

, re

spec

tive

ly,

prev

aili

ng i

n th

e m

arke

t fo

r lo

ng-t

erm

bor

row

ings

(L

evel

2).

Fai

r va

lues

of

bond

pay

able

tra

ding

in

OT

C a

nd b

ased

on

quo

ted

mar

ket p

rice

s (L

evel

1).

2)

Fai

r va

lue

mea

sure

men

ts r

ecog

nize

d in

the

bala

nce

shee

ts

The

fol

low

ing

tabl

e pr

ovid

es a

n an

alys

is o

f fi

nanc

ial

inst

rum

ents

tha

t ar

e m

easu

red

subs

eque

nt t

o in

itia

l re

cogn

itio

n at

fai

r va

lue,

gro

uped

int

o L

evel

s 1

to 3

bas

ed o

n th

e de

gree

to

whi

ch t

he f

air

valu

e is

obs

erva

ble:

a)

L

evel

1 f

air

valu

e m

easu

rem

ents

are

tho

se d

eriv

ed f

rom

quo

ted

pric

es (

unad

just

ed)

in a

ctiv

e m

arke

ts f

or id

enti

cal a

sset

s or

liab

ilit

ies;

b)

L

evel

2 f

air

valu

e m

easu

rem

ents

are

thos

e de

rive

d fr

om in

puts

oth

er th

an q

uote

d pr

ices

incl

uded

w

ithi

n L

evel

1 t

hat

are

obse

rvab

le f

or t

he a

sset

or

liab

ilit

y, e

ithe

r di

rect

ly (

i.e.

as p

rice

s) o

r in

dire

ctly

(i.e

. der

ived

fro

m p

rice

s); a

nd

176

- 69

-

c)

Lev

el 3

fai

r va

lue

mea

sure

men

ts a

re th

ose

deri

ved

from

val

uati

on te

chni

ques

that

incl

ude

inpu

ts

for

the

asse

t or

liab

ility

that

are

not

bas

ed o

n ob

serv

able

mar

ket d

ata

(uno

bser

vabl

e in

puts

).

Dec

embe

r 31

, 201

9

L

evel

1

L

evel

2

L

evel

3

T

otal

Fin

anci

al a

sset

s at

F

VT

PL

D

omes

tic

mon

ey

mar

ket f

unds

$

511,

758

$

-

$

-

$

51

1,75

8 F

orei

gn e

xcha

nge

agre

emen

t

-

434

-

43

4

$

511,

758

$

43

4

$

-

$

512,

192

F

inan

cial

ass

ets

at

FV

TO

CI

Inve

stm

ents

in e

quity

in

stru

men

ts

Uni

ted

shar

es -

do

mes

tic

$

-

$

-

$

26

,865

$

26,8

65

Unl

iste

d sh

ares

-

fore

ign

-

-

182,

356

182,

356

$

-

$

-

$

20

9,22

1

$

209,

221

F

inan

cial

liab

ilit

ies

at

FV

TP

L

Der

ivat

ive

inst

rum

ents

$

-

$

11,7

49

$

-

$

11

,749

Fin

anci

al a

sset

s fo

r he

dgin

g

$

-

$

147

$

9,

479

$

9,

626

F

inan

cial

liab

ilit

ies

for

hedg

ing

$

50

,997

,687

$

37,0

69

$

3,

955

$

51

,038

,711

D

ecem

ber

31, 2

018

Lev

el 1

Lev

el 2

Lev

el 3

Tot

al

F

inan

cial

ass

ets

at

FV

TP

L

Dom

esti

c m

oney

m

arke

t fun

ds

$

20

6,00

1

$

-

$

-

$

206,

001

(Con

tinu

ed)

- 70

-

Lev

el 1

Lev

el 2

Lev

el 3

Tot

al

F

inan

cial

ass

ets

at

FV

TO

CI

Inve

stm

ents

in e

quity

in

stru

men

ts

Uni

ted

shar

es -

do

mes

tic

$

-

$

-

$

21

,746

$

21,7

46

Unl

iste

d sh

ares

-

fore

ign

-

-

110,

445

110,

445

$

-

$

-

$

13

2,19

1

$

132,

191

F

inan

cial

liab

ilit

ies

at

FV

TP

L

Der

ivat

ive

inst

rum

ents

$

-

$

221

$

-

$

22

1

Fin

anci

al a

sset

s fo

r he

dgin

g

$

-

$

28,0

05

$

4,

901

$

32

,906

Fin

anci

al li

abil

itie

s fo

r he

dgin

g

$

-

$

560

$

-

$

56

0 (C

oncl

uded

) T

here

wer

e no

tran

sfer

s be

twee

n L

evel

s 1

and

2 in

the

curr

ent p

erio

ds.

d)

V

alua

tion

tech

niqu

es a

nd in

puts

app

lied

for

Lev

el 2

fai

r va

lue

mea

sure

men

t

Fin

anci

al I

nst

rum

ents

Val

uat

ion

Tec

hn

iqu

es a

nd

In

pu

ts

D

eriv

ativ

es -

for

eign

exc

hang

e fo

rwar

d co

ntra

cts

and

inte

rest

rat

e sw

aps

D

isco

unte

d ca

sh f

low

s.

Fut

ure

cash

flo

ws

are

esti

mat

ed b

ased

on

obse

rvab

le f

orw

ard

exch

ange

rat

es a

t the

end

of

the

repo

rtin

g pe

riod

and

co

ntra

ct f

orw

ard

rate

s, d

isco

unte

d at

a r

ate

that

ref

lect

s th

e cr

edit

ris

k of

var

ious

cou

nter

part

ies.

e)

V

alua

tion

tech

niqu

es a

nd in

puts

app

lied

for

Lev

el 3

fai

r va

lue

mea

sure

men

t T

he f

air

valu

es o

f fo

reig

n ex

chan

ges

and

fuel

opt

ions

are

det

erm

ined

usi

ng o

ptio

n pr

icin

g m

odel

s w

here

the

sig

nifi

cant

uno

bser

vabl

e in

puts

are

im

plie

d fl

uctu

atio

n. C

hang

es i

n th

e im

plie

d fl

uctu

atio

ns u

sed

in i

sola

tion

wou

ld r

esul

t in

an

incr

ease

or

decr

ease

in

the

fair

val

ue o

f th

e fo

reig

n ex

chan

ge f

orw

ard

cont

ract

s an

d fu

el o

ptio

ns.

The

dom

esti

c un

list

ed e

quit

y in

vest

men

t is

bas

ed o

n th

e co

mpa

rati

ve c

ompa

ny v

alua

tion

to

esti

mat

e th

e fa

ir v

alue

. The

mai

n as

sum

ptio

ns a

re b

ased

on

the

mul

tipl

ier

of t

he m

arke

t pr

ice

of

the

com

para

ble

list

ed c

ompa

ny a

nd t

he n

et v

alue

per

sha

re, w

hich

hav

e co

nsid

ered

the

liq

uidi

ty

disc

ount

. T

he h

ighe

r th

e m

ulti

plie

r or

the

low

er t

he l

iqui

dity

dis

coun

t, th

e hi

gher

the

fai

r va

lue

of th

e re

leva

nt f

inan

cial

inst

rum

ents

.

177

- 71

-

The

mov

emen

ts o

f L

evel

3 f

inan

cial

inst

rum

ents

are

as

foll

ows:

Mu

ltip

lica

tor

L

iqu

idit

y D

isco

un

t

Dec

embe

r 31

, 201

9

0.75

-13.

23

80

%

Dec

embe

r 31

, 201

8

0.74

-15.

29

80

%

Der

ivat

ive

Inst

rum

ents

Eq

uit

y In

stru

men

ts

B

alan

ce a

t Jan

uary

1, 2

019

$

4,

901

$

13

2,19

1 R

ecog

nize

d in

oth

er c

ompr

ehen

sive

inco

me

623

77,0

30

B

alan

ce a

t Dec

embe

r 31

, 201

9

$

5,52

4

$

209,

221

B

alan

ce a

t Jan

uary

1, 2

018

$

-

$

84

,075

A

djus

tmen

ts o

n in

itia

l app

licat

ion

of I

FRS

9

-

47

,510

O

ther

com

preh

ensi

ve in

com

e re

cogn

ized

dur

ing

the

peri

od

4,90

1

60

6

Bal

ance

at D

ecem

ber

31, 2

018

$

4,

901

$

13

2,19

1 B

ecau

se s

ome

fina

ncia

l ins

trum

ents

and

non

fina

ncia

l ins

trum

ents

may

not

hav

e th

eir

fair

val

ues

disc

lose

d, t

he t

otal

fai

r va

lue

disc

lose

d he

rein

is

not

the

tota

l va

lue

of t

he G

roup

’s c

olle

ctiv

e in

stru

men

ts.

b.

C

ateg

orie

s of

fin

anci

al in

stru

men

ts

D

ecem

ber

31

2019

2018

Fin

anci

al a

sset

s

Fin

anci

al a

sset

s at

FV

TP

L

$

51

2,19

2

$

206,

001

Fin

anci

al a

sset

s fo

r he

dgin

g

9,

626

32,9

06

Fin

anci

al a

sset

s at

am

orti

zed

cost

(N

ote

1)

41,4

79,5

56

40,4

96,6

18

Fin

anci

al a

sset

s at

FV

TP

CI

- eq

uity

inst

rum

ent i

nves

tmen

t

20

9,22

1

13

2,19

1

Fin

anci

al li

abil

itie

s

Fin

anci

al li

abil

itie

s at

FV

TP

L

11,7

49

221

Fin

anci

al li

abil

itie

s fo

r he

dgin

g

51

,038

,711

56

0 F

inan

cial

liab

ilit

ies

at a

mor

tize

d co

st (

Not

e 2)

13

4,24

0,99

3

12

7,27

1,89

2 N

ote

1:

The

bal

ance

s in

clud

e lo

ans

and

rece

ivab

les

mea

sure

d at

am

orti

zed

cost

, whi

ch c

ompr

ise

cash

an

d ca

sh e

quiv

alen

ts,

note

s an

d ac

coun

ts r

ecei

vabl

e, a

ccou

nts

rece

ivab

le -

rel

ated

par

ties

, ot

her

rece

ivab

les,

ref

unda

ble

depo

sits

, ot

her

fina

ncia

l as

sets

and

oth

er r

estr

icte

d fi

nanc

ial

asse

ts.

Not

e 2:

T

he

bala

nces

in

clud

e fi

nanc

ial

liab

ilit

ies

mea

sure

d at

am

orti

zed

cost

, w

hich

co

mpr

ise

shor

t-te

rm d

ebts

, sh

ort-

term

not

es p

ayab

le,

note

s an

d ac

coun

ts p

ayab

le,

acco

unts

pay

able

-

rela

ted

part

ies,

oth

er p

ayab

les,

bon

ds p

ayab

le, l

ong-

term

loa

ns, l

ease

lia

bili

ties

pay

able

, lea

se

liab

ilit

ies,

pro

visi

ons,

par

t of

oth

er c

urre

nt l

iabi

liti

es,

part

of

othe

r no

n-cu

rren

t li

abil

itie

s an

d gu

aran

tee

depo

sits

.

- 72

-

c.

Fin

anci

al r

isk

man

agem

ent o

bjec

tive

s an

d po

lici

es

The

Gro

up h

as r

isk

man

agem

ent

and

hedg

ing

stra

tegi

es t

o re

spon

d to

cha

nges

in

the

econ

omic

and

fi

nanc

ial

envi

ronm

ent

and

in t

he f

uel

mar

ket.

To

redu

ce t

he f

inan

cial

ris

ks f

rom

cha

nges

in

inte

rest

ra

tes,

in

exch

ange

rat

es a

nd i

n fu

el p

rice

s, t

he G

roup

has

its

ope

rati

ng c

osts

sta

y w

ithi

n a

spec

ifie

d ra

nge

by u

sing

app

ropr

iate

fin

anci

al h

edgi

ng i

nstr

umen

ts a

nd h

edgi

ng p

erce

ntag

es i

n ac

cord

ance

wit

h th

e “P

roce

ssin

g P

rogr

am o

f D

eriv

ativ

e F

inan

cial

Ins

trum

ent

Tra

nsac

tion

s” a

ppro

ved

by t

he G

roup

sh

areh

olde

rs t

o re

duce

the

im

pact

of

mar

ket

pric

e ch

ange

s on

ear

ning

s. T

hese

ris

ks i

nclu

de m

arke

t ri

sk

(inc

ludi

ng f

orei

gn c

urre

ncy

risk

, int

eres

t rat

e ri

sk a

nd o

ther

pri

ce r

isk)

, cre

dit r

isk

and

liqu

idit

y ri

sk.

In a

ddit

ion,

the

Gro

up h

as a

ris

k m

anag

emen

t co

mm

itte

e, w

hich

mee

ts p

erio

dica

lly

to e

valu

ate

the

perf

orm

ance

of

de

riva

tive

inst

rum

ents

an

d de

term

ine

the

appr

opri

ate

hedg

ing

perc

enta

ge.

Thi

s co

mm

itte

e in

form

s th

e G

roup

of

glob

al e

cono

mic

and

fin

anci

al c

ondi

tion

s, c

ontr

ols

the

enti

re f

inan

cial

ri

sk r

esul

ting

fro

m c

hang

es i

n th

e fi

nanc

ial

envi

ronm

ent

and

fuel

pri

ces,

and

dev

elop

s th

e st

rate

gy a

nd

resp

onse

to a

void

fin

anci

al r

isk

wit

h th

e as

sist

ance

of

fina

ncia

l ris

k ex

pert

s to

eff

ect r

isk

man

agem

ent.

1)

Mar

ket r

isk

The

Gro

up i

s pr

imar

ily

expo

sed

to t

he f

inan

cial

ris

ks o

f ch

ange

s in

for

eign

cur

renc

y ex

chan

ge r

ates

an

d in

tere

st r

ates

. The

Gro

up e

nter

ed in

to d

eriv

ativ

e fi

nanc

ial i

nstr

umen

ts to

man

age

its

expo

sure

to

fore

ign

curr

ency

ris

k an

d in

tere

st r

ate

risk

. T

he G

roup

ent

ers

into

for

eign

exc

hang

e fo

rwar

d co

ntra

cts,

for

eign

cur

renc

y op

tion

con

trac

ts,

and

inte

rest

sw

ap c

ontr

acts

wit

h fa

ir v

alue

s th

at a

re

high

ly

nega

tivel

y co

rrel

ated

to

th

e fa

ir

valu

es

of

hedg

ed

item

s an

d ev

alua

tes

the

hedg

ing

effe

ctiv

enes

s of

thes

e in

stru

men

ts p

erio

dica

lly.

a)

F

orei

gn c

urre

ncy

risk

T

he G

roup

ent

ers

into

for

eign

cur

renc

y op

tion

con

trac

ts t

o he

dge

agai

nst

the

risk

s on

cha

nge

in

rela

ted

exch

ange

rat

es,

ente

rs i

nto

forw

ard

cont

ract

s to

hed

ge a

gain

st t

he r

isks

on

chan

ges

in

fore

ign-

curr

ency

ass

ets,

liab

ilit

ies

and

com

mit

men

ts in

the

rela

ted

exch

ange

rat

es.

Sen

siti

vity

ana

lysi

s T

he G

roup

was

mai

nly

expo

sed

to th

e U

S d

olla

r.

The

fol

low

ing

deta

ils

the

Gro

up’s

sen

siti

vity

to

a on

e do

llar

inc

reas

e or

dec

reas

e in

the

New

T

aiw

an d

olla

r (t

he f

unct

iona

l cu

rren

cy)

agai

nst

the

rele

vant

for

eign

cur

renc

ies

(i.e

. th

e U

S

doll

ar).

Thi

s is

the

sen

siti

vity

rat

e us

ed w

hen

repo

rtin

g fo

reig

n cu

rren

cy r

isk

inte

rnal

ly t

o ke

y m

anag

emen

t pe

rson

nel

and

repr

esen

ts m

anag

emen

t’s

asse

ssm

ent

of t

he r

easo

nabl

y po

ssib

le

chan

ge i

n fo

reig

n ex

chan

ge r

ates

. T

he s

ensi

tivi

ty a

naly

sis

incl

uded

onl

y ou

tsta

ndin

g fo

reig

n cu

rren

cy d

enom

inat

ed m

onet

ary

item

s an

d fo

reig

n cu

rren

cy f

orw

ard

cont

ract

s de

sign

ated

as

cash

flo

w h

edge

s an

d ad

just

s th

eir

tran

slat

ion

at t

he e

nd o

f th

e re

port

ing

peri

od f

or a

one

US

do

llar

s in

crea

se/d

ecre

ase

agai

nst t

he N

ew T

aiw

an d

olla

r.

Whe

n N

ew T

aiw

an d

olla

rs i

ncre

ase

one

doll

ar a

gain

st U

.S. d

olla

rs a

nd a

ll o

ther

var

iabl

es w

ere

held

co

nsta

nt,

ther

e w

ould

be

a

incr

ease

in

pr

e-ta

x pr

ofit

an

d in

crea

se

in

pre-

tax

othe

r co

mpr

ehen

sive

inc

ome

gain

and

los

ses

for

the

year

end

ed D

ecem

ber

31,

2019

of

$105

,266

th

ousa

nd a

nd $

1,61

2,25

6 th

ousa

nd a

nd a

dec

reas

e in

pre

-tax

pro

fit a

nd d

ecre

ase

in p

re-t

ax o

ther

co

mpr

ehen

sive

inc

ome

gain

and

los

s fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 20

18 o

f $9

1,39

7 th

ousa

nd a

nd $

13,6

20 th

ousa

nd, r

espe

ctiv

ely.

T

he G

roup

’s h

edgi

ng s

trat

egy

is t

o en

ter

into

for

eign

exc

hang

e fo

rwar

d co

ntra

cts

to a

void

ex

chan

ge r

ate

expo

sure

of

its

fore

ign

curr

ency

den

omin

ated

rec

eipt

s an

d pa

ymen

ts a

nd t

o m

anag

e ex

chan

ge r

ate

expo

sure

of

its

airc

raft

pre

paym

ents

in

the

next

yea

r. T

hose

tra

nsac

tion

s ar

e de

sign

ated

as

cash

flo

w h

edge

s. W

hen

fore

cast

ed p

urch

ases

act

uall

y ta

ke p

lace

, ba

sis

adju

stm

ents

are

mad

e to

the

init

ial c

arry

ing

amou

nts

of h

edge

d it

ems.

178

- 73

-

For

the

hed

ges

of h

ighl

y pr

obab

le a

ircr

aft

prep

aym

ents

, as

the

cri

tica

l te

rms

(i.e

. th

e no

tion

al

amou

nt,

usef

ul l

ife

and

unde

rlyi

ng a

sset

) of

the

for

eign

exc

hang

e fo

rwar

d co

ntra

cts

and

thei

r co

rres

pond

ing

hedg

ed i

tem

s ar

e th

e sa

me,

the

Gro

up p

erfo

rms

a qu

alit

ativ

e as

sess

men

t of

the

ef

fect

iven

ess,

and

it is

exp

ecte

d th

at th

e va

lue

of th

e fo

reig

n ex

chan

ge f

orw

ard

cont

ract

s an

d th

e va

lue

of t

he c

orre

spon

ding

hed

ged

item

s w

ill

syst

emat

ical

ly c

hang

e in

the

opp

osit

e di

rect

ion

in

resp

onse

to m

ovem

ents

in th

e un

derl

ying

exc

hang

e ra

tes.

T

he f

ollo

win

g ta

ble

sum

mar

izes

the

info

rmat

ion

rela

ting

to th

e he

dges

of

fore

ign

curr

ency

ris

k.

Dec

embe

r 31

, 201

9

Not

ion

al

L

ine

Item

in

C

arry

ing

Am

oun

t H

edgi

ng

Inst

rum

ents

Cu

rren

cy

A

mou

nt

M

atu

rity

For

war

d R

ate

B

alan

ce S

hee

t

Ass

et

L

iab

ility

Cas

h fl

ow h

edge

A

ircr

aft r

enta

ls -

fo

rwar

d ex

chan

ge

cont

ract

s

N

TD

/US

D

N

TD

509,

507/

U

SD

16,9

67

20

20.1

.21-

20

20.1

2.24

29.5

-30.

8

Fina

ncia

l ass

ets

for

hedg

ing

- cu

rren

t/

liab

ilit

ies

for

hedg

ing

- cu

rren

t

$

38

$

8,49

1

Avi

atio

n fu

el -

for

war

d ex

chan

ge c

ontr

acts

NT

D/U

SD

NT

D66

0,66

1/

US

D22

,000

2020

.2.2

7-

2020

.11.

30

29

.7-3

0.7

Fi

nanc

ial a

sset

s fo

r he

dgin

g -

curr

ent/

li

abil

itie

s fo

r he

dgin

g -

curr

ent

32

10,1

93

Air

craf

t pre

paym

ents

- fo

rwar

d ex

chan

ge

cont

ract

s

N

TD

/US

D

N

TD

1,41

1,41

1/

US

D47

,000

2020

.11.

4

29.6

-30.

5

Fina

ncia

l ass

ets

for

hedg

ing

- cu

rren

t/

liab

ilit

ies

for

hedg

ing

- cu

rren

t

77

18,3

85

The

abo

vem

enti

oned

hed

ging

ins

trum

ents

con

tinu

e to

be

appl

ied

to h

edgi

ng a

ccou

ntin

g. T

he

book

val

ue o

f ot

her

equi

ty w

hich

bel

ongs

to

each

hed

ging

ite

m (

airc

raft

ren

tals

in

U.S

. dol

lars

, av

iati

on

fuel

an

d ai

rcra

ft

prep

aym

ents

) ar

e $(

8,45

3)

thou

sand

, $(

10,1

61)

thou

sand

an

d $(

18,3

08)

thou

sand

, res

pect

ivel

y.

Dec

embe

r 31

, 201

8

Not

ion

al

L

ine

Item

in

C

arry

ing

Am

oun

t H

edgi

ng

Inst

rum

ents

Cu

rren

cy

A

mou

nt

M

atu

rity

For

war

d R

ate

B

alan

ce S

hee

t

Ass

et

L

iab

ility

Cas

h fl

ow h

edge

A

ircr

aft r

enta

ls -

fo

rwar

d ex

chan

ge

cont

ract

s

N

TD

/US

D

N

TD

2,26

5,23

1/

US

D13

,620

2019

.1.7

- 20

19.1

2.26

28.3

-30.

9

Fina

ncia

l ass

ets

for

hedg

ing/

liab

ilit

ies

for

hedg

ing

$ 2

8,00

5

$

56

0

The

abo

ve m

enti

oned

hed

ging

ins

trum

ents

con

tinu

e to

be

appl

ied

to h

edgi

ng a

ccou

ntin

g. T

he

book

val

ue o

f ot

her

equi

ty w

hich

bel

ongs

to

each

hed

ging

ite

m (

airc

raft

ren

tals

in

U.S

. do

llar

s an

d A

ircr

aft p

repa

ymen

t) a

re $

27,4

45 th

ousa

nd.

For

the

year

end

ed D

ecem

ber

31, 2

019

Com

pre

hen

sive

In

com

e

Hed

gin

g G

ain

(L

oss)

R

ecog

niz

ed in

O

ther

C

omp

reh

ensi

ve

Inco

me

Am

oun

t R

ecla

ssif

ied

to

Pro

fit

and

Los

s an

d t

he

Ad

just

ed L

ine

Item

Cas

h fl

ow h

edge

Air

craf

t ren

tals

$ (

35,8

97)

$

9,

137

(Not

e)

Avi

atio

n fu

el

(10,

161)

(5

3)

A

ircr

aft p

repa

ymen

ts

(17,

705 )

-

$

(63

,763

)

$

9,08

4

Not

e:

Incr

ease

in o

pera

ting

cos

ts o

r ex

chan

ge lo

ss.

- 74

-

And

the

am

ount

of

gain

s an

d lo

sses

on

hedg

ing

inst

rum

ents

for

the

yea

r en

ded

Dec

embe

r 31

, 20

19 r

ecla

ssif

ied

from

pro

fit o

r lo

ss to

pre

paym

ents

for

equ

ipm

ent w

as $

(603

) th

ousa

nd.

For

the

year

end

ed D

ecem

ber

31, 2

018

Com

pre

hen

sive

In

com

e

Hed

gin

g G

ain

(L

oss)

R

ecog

niz

ed in

O

ther

C

omp

reh

ensi

ve

Inco

me

Am

oun

t R

ecla

ssif

ied

to

Pro

fit

and

Los

s an

d t

he

Ad

just

ed L

ine

Item

Cas

h fl

ow h

edge

Air

craf

t ren

tals

$

80,4

40

$

(2

2,41

5)

(Not

e)

Air

craf

t pre

paym

ents

23

,884

-

$

10

4,32

4

$

(22,

415)

Not

e:

Incr

ease

in o

pera

ting

cos

ts.

And

the

am

ount

of

gain

s an

d lo

sses

on

hedg

ing

inst

rum

ents

for

the

yea

r en

ded

Dec

embe

r 31

, 20

18 r

ecla

ssif

ied

from

pro

fit o

r lo

ss to

pre

paym

ents

for

equ

ipm

ent w

as $

12,1

18 th

ousa

nd.

b)

In

tere

st r

ate

risk

T

he G

roup

ent

ers

into

int

eres

t sw

ap c

ontr

acts

to

hedg

e ag

ains

t th

e ri

sks

on c

hang

e in

net

li

abil

itie

s in

tere

st r

ates

. The

ris

k is

man

aged

by

the

Gro

up b

y m

aint

aini

ng a

n ap

prop

riat

e m

ix o

f fi

xed

and

floa

ting

rat

e bo

rrow

ings

, an

d us

ing

inte

rest

rat

e sw

ap c

ontr

acts

and

for

war

d in

tere

st

rate

con

trac

ts.

T

he c

arry

ing

amou

nt o

f th

e G

roup

’s f

inan

cial

ass

ets

and

fina

ncia

l li

abil

itie

s w

ith

expo

sure

to

inte

rest

rat

es a

t the

end

of

the

repo

rtin

g pe

riod

wer

e as

fol

low

s.

Dec

emb

er 3

1

20

19

20

18

F

air

valu

e in

tere

st r

ate

risk

$

91,4

14,8

06

$

34

,919

,610

C

ash

flow

inte

rest

rat

e ri

sk

77,8

21,8

87

75,0

31,9

78

Sen

siti

vity

ana

lysi

s T

he s

ensi

tivi

ty a

naly

ses

belo

w w

ere

dete

rmin

ed b

ased

on

the

Gro

up’s

exp

osur

e to

int

eres

t ra

tes

for

both

der

ivat

ives

and

non

-der

ivat

ive

inst

rum

ents

at

the

end

of t

he r

epor

ting

peri

od.

For

floa

ting

ra

te

liab

ilit

ies,

th

e an

alys

is

was

pr

epar

ed

assu

min

g th

e am

ount

of

th

e li

abil

ity

outs

tand

ing

at t

he e

nd o

f th

e re

port

ing

peri

od w

as o

utst

andi

ng f

or t

he w

hole

yea

r. A

one

yar

d (2

5 ba

sis)

poi

nt i

ncre

ase

or d

ecre

ase

was

use

d w

hen

repo

rtin

g in

tere

st r

ate

risk

int

erna

lly

to k

ey

man

agem

ent

pers

onne

l an

d re

pres

ents

man

agem

ent’

s as

sess

men

t of

the

rea

sona

bly

poss

ible

ch

ange

in in

tere

st r

ates

.

Had

int

eres

t ra

tes

incr

ease

d on

e ya

rd (

25 b

asis

) po

ints

hig

her

and

had

all

othe

r va

riab

les

been

he

ld c

onst

ant,

the

Gro

up’s

pre

-tax

pro

fit

for

the

year

end

ed D

ecem

ber

31,

2019

wou

ld h

ave

decr

ease

d by

$19

4,55

5 th

ousa

nd.

Had

int

eres

t ra

tes

incr

ease

d on

e ya

rd (

25 b

asis

) po

ints

hig

her

and

had

all

othe

r va

riab

les

been

he

ld c

onst

ant,

the

Gro

up’s

pre

-tax

pro

fit

for

the

year

end

ed D

ecem

ber

31,

2018

wou

ld h

ave

decr

ease

d by

$18

7,58

0 th

ousa

nd.

179

- 75

-

c)

O

ther

pri

ce r

isk

The

Gro

up w

as e

xpos

ed to

fue

l pri

ce r

isk

on it

s pu

rcha

se o

f av

iati

on f

uel.

The

Gro

up e

nter

s in

to

fuel

sw

ap c

ontr

acts

to h

edge

aga

inst

adv

erse

ris

ks o

n fu

el p

rice

cha

nges

.

Dec

embe

r 31

, 201

9

Not

ion

al

L

ine

Item

in

C

arry

ing

Am

oun

t H

edgi

ng

Inst

rum

ent

C

urr

ency

Am

oun

t

Mat

uri

ty

F

orw

ard

Rat

e

Bal

ance

Sh

eet

A

sset

Lia

bili

ty

C

ash

flow

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US

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S$4

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S$8

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ge a

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tinue

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inue

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ting

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nt o

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ty w

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m (

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men

ts)

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5,52

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nd.

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embe

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ion

al

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in

C

arry

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Am

oun

t H

edgi

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Inst

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urr

ency

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Mat

uri

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F

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Rat

e

Bal

ance

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eet

A

sset

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ty

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ash

flow

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ions

US

D

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T$4

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ting

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fit

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h fl

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rati

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osts

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Dec

embe

r 31

, 201

8 C

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me

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Incr

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- 76

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Sen

siti

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lysi

s T

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ensi

tivi

ty a

naly

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belo

w w

as d

eter

min

ed b

ased

on

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expo

sure

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fuel

pri

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isks

at

the

end

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e re

port

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peri

od.

For

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En

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Dec

emb

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1

20

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20

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pre

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Cre

dit r

isk

C

redi

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efer

s to

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ris

k th

at a

cou

nter

part

y w

ill

defa

ult

on i

ts c

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actu

al o

blig

atio

ns r

esul

ting

in

fin

anci

al l

oss

to t

he G

roup

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he G

roup

’s c

redi

t ri

sk,

prim

aril

y co

mes

fro

m a

ccou

nts

rece

ivab

le

gene

rate

d fr

om o

pera

ting

act

ivit

ies

and

bank

dep

osit

s ge

nera

ted

from

inv

esti

ng a

ctiv

itie

s, f

ixed

in

vest

men

t in

com

e an

d ot

her

fina

ncia

l in

stru

men

ts, o

pera

tion

rel

ated

cre

dit

risk

and

fin

anci

al c

redi

t ri

sk a

re m

anag

ed s

epar

atel

y.

Ope

rati

on -

rel

ated

cre

dit r

isk

The

Gro

up h

as e

stab

lish

ed p

roce

dure

s to

man

agem

ent

oper

atio

ns r

elat

ed c

redi

t ri

sk t

o m

aint

ain

the

qual

ity o

f ac

coun

ts r

ecei

vabl

e.

To

asse

ss i

ndiv

idua

l cu

stom

ers,

the

Gro

up c

onsi

der

into

the

fin

anci

al c

ondi

tion

of t

he c

usto

mer

s,

the

cred

it r

atin

g ag

ency

rat

ing,

the

Gro

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int

erna

l cr

edit

rat

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nsac

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his

tory

and

cur

rent

ec

onom

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ondi

tion

s an

d m

any

othe

r fa

ctor

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at m

ay a

ffec

t th

e re

paym

ent.

Som

etim

es,

the

Gro

up

uses

cer

tain

cre

dit

enha

ncem

ent

tool

s to

red

uce

the

cred

it r

isk

of s

peci

fic

cust

omer

s. S

ince

the

cu

stom

ers

of t

he i

ndus

try

is d

ispe

rsed

and

non

-rel

ated

, th

e cr

edit

ris

k co

ncen

trat

ion

is n

ot c

riti

cal

avia

tion

. F

inan

cial

cre

dit r

isk

Cre

dit

risk

on

bank

dep

osit

s, i

nves

tmen

ts i

ncom

e an

d ot

her

fina

ncia

l in

stru

men

ts a

re m

easu

red

and

mon

itor

by

the

Gro

up’s

fin

ance

dep

artm

ent.

The

Gro

up’s

tra

ding

par

tner

s an

d ot

her

part

ies

wer

e w

ell-

perf

orm

ing

bank

s an

d fi

nanc

ial i

nstit

utio

ns, c

orpo

rati

ons,

and

gov

ernm

ent a

genc

ies,

and

so

the

risk

of

coun

terp

arti

es f

aili

ng t

o di

scha

rge

an o

blig

atio

n is

low

; th

eref

ore,

the

re i

s no

sig

nifi

cant

cr

edit

ris

k.

3)

Liq

uidi

ty r

isk

T

he o

bjec

tive

of

the

Gro

up’s

man

agem

ent

of l

iqui

dity

is

to m

aint

ain

cash

and

cas

h eq

uiva

lent

s su

ffic

ient

for

ope

rati

ng p

urpo

ses,

mar

keta

ble

secu

riti

es w

ith

high

liq

uidi

ty a

nd l

oan

com

mit

men

ts

that

are

suf

fici

ent t

o en

sure

that

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Gro

up h

as a

dequ

ate

fina

ncia

l fle

xibi

lity

.

180

- 77

-

Liq

uidi

ty a

nd in

tere

st r

isk

rate

tabl

e T

he f

ollo

win

g ta

ble

show

s th

e re

mai

ning

con

trac

tual

mat

urit

y an

alys

is o

f th

e G

roup

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inan

cial

li

abil

itie

s w

ith

agre

ed-u

pon

repa

ymen

t pe

riod

s, w

hich

wer

e ba

sed

on t

he d

ate

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Gro

up m

ay b

e re

quir

ed t

o pa

y th

e fi

rst

repa

ymen

t an

d fi

nanc

ial

liab

ilit

ies

is e

valu

ated

bas

ed o

n un

disc

ount

ed c

ash

flow

s, in

clud

ing

cash

flo

ws

of in

tere

st a

nd p

rinc

ipal

. B

ank

loan

s w

ith

a re

paym

ent

on d

eman

d cl

ause

wer

e in

clud

ed i

n th

e se

cond

col

umn

of t

he t

able

be

low

reg

ardl

ess

of w

heth

er o

r no

t th

e ba

nks

wou

ld c

hoos

e to

exe

rcis

e ea

rly

thei

r ri

ghts

to

repa

ymen

t. T

he m

atur

ity

date

s fo

r ot

her

non-

deri

vati

ve f

inan

cial

lia

bili

ties

wer

e ba

sed

on t

he

agre

ed-u

pon

repa

ymen

t dat

es. T

he G

roup

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quid

ity a

naly

sis

for

its d

eriv

ativ

e fi

nanc

ial i

nstr

umen

ts

is a

lso

show

n in

the

fol

low

ing

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e. T

he t

able

was

bas

ed o

n th

e un

disc

ount

ed c

ontr

actu

al n

et c

ash

infl

ows

and

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low

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ivat

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rum

ents

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set

tle

on a

net

bas

is, a

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e un

disc

ount

ed g

ross

ca

sh i

nflo

ws

and

outf

low

s on

tho

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eriv

ativ

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requ

ire

gros

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ttle

men

t. W

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amou

nt

paya

ble

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nt d

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term

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renc

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lust

rate

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yie

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port

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od.

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late

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Com

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aid

the

rent

al o

n us

age

hour

s. I

n 20

19 a

nd 2

018,

the

Com

pany

had

pai

d re

ntal

s of

abo

ut $

56,4

74 t

hous

and

and

$64,

188

thou

sand

, res

pect

ivel

y.

g.

End

orse

men

ts a

nd g

uara

ntee

s

Dec

emb

er 3

1

20

19

20

18

Au

thor

ized

A

mou

nt

A

ctu

al

Am

oun

t U

sed

Au

thor

ized

A

mou

nt

A

ctu

al

Am

oun

t U

sed

The

Com

pany

CA

L P

ark

$

3,

850,

000

$

2,

129,

400

$

3,

850,

000

$

2,

339,

700

Tai

wan

Air

Car

go T

erm

inal

1,

080,

000

-

1,

080,

000

- T

iger

air

Tai

wan

3,

012,

668

685,

444

1,08

1,79

2

41

8,49

1 T

aiw

an A

ir C

raft

Mai

nten

ance

2,

000,

000

1,27

9,82

7

2,

000,

000

605,

457

- 80

-

h.

Com

pens

atio

n of

key

man

agem

ent p

erso

nnel

For

th

e Y

ear

En

ded

Dec

emb

er 3

1

20

19

20

18

S

hort

-ter

m e

mpl

oyee

ben

efit

s

$

39,6

93

$

44

,551

P

ost-

empl

oym

ent b

enef

its

2,36

2

3,

295

$

42

,055

$

47,8

46

The

rem

uner

atio

n of

dir

ecto

rs a

nd k

ey e

xecu

tive

s w

as d

eter

min

ed b

y th

e re

mun

erat

ion

com

mit

tee

havi

ng r

egar

d to

the

perf

orm

ance

of

indi

vidu

als

and

mar

ket t

rend

s.

35

. P

LE

DG

ED

AS

SE

TS

T

he f

ollo

win

g as

sets

wer

e pl

edge

d or

mor

tgag

ed a

s co

llat

eral

for

lon

g-te

rm b

ank

loan

s, l

ease

obl

igat

ions

an

d bu

sine

ss tr

ansa

ctio

ns:

Dec

emb

er 3

1

20

19

20

18

P

rope

rty,

pla

nt a

nd e

quip

men

t

$

31,2

60,8

01

$

42

,066

,242

R

ight

-of-

use

asse

ts

71,0

33,6

17

- R

estr

icte

d as

sets

- n

on-c

urre

nt

Ple

dged

cer

tifi

cate

dep

osit

s

13

0,05

2

16

9,92

5

$ 1

02,4

24,4

70

$

42

,236

,167

36

. C

OM

MIT

ME

NT

S A

ND

CO

NT

ING

EN

T L

IAB

ILIT

IES

A

s of

Dec

embe

r 31

, 201

9, e

xcep

t fo

r th

e di

sclo

sure

s st

ated

in

othe

r no

tes,

the

Gro

up h

ad c

omm

itm

ents

and

co

ntin

gent

liab

ilit

ies

(exc

ept f

or th

ose

men

tion

ed in

oth

er n

otes

) as

fol

low

s:

a.

For

ope

rati

on n

eeds

, the

boa

rd o

f di

rect

ors

of M

anda

rin

Air

line

s re

solv

ed to

ent

er in

to a

con

trac

t to

buy

six

AT

R72

-600

air

craf

t, an

d th

e to

tal

list

pric

e of

the

six

air

craf

t w

as $

120,

000

thou

sand

. The

exp

ecte

d de

live

ry p

erio

d ra

nges

fro

m J

une

2018

to

June

202

0, a

s of

Dec

embe

r 31

, 201

9, f

our

of t

he a

ircr

aft

has

been

han

ded

over

to th

e co

mpa

ny, a

nd th

e to

tal l

ist p

rice

of

the

left

s tw

o ai

rcra

ft w

as $

40,0

00 th

ousa

nd,

whi

ch h

as b

een

paid

in th

e am

ount

of

US

$8,3

14 th

ousa

nd (

reco

gniz

ed a

s pr

epay

men

ts f

or a

ircr

aft)

.

b.

Tai

wan

Air

Car

go T

erm

inal

Co.

(T

AC

T)

sign

ed a

ter

min

al c

onst

ruct

ion

cont

ract

wit

h th

e C

ivil

Aer

onau

tics

Adm

inis

trat

ions

(C

AA

) on

Jan

uary

14,

200

0. T

he c

hart

ered

ope

rati

on p

erio

d (C

OP

) is

20

year

s fr

om t

he d

ate

of t

rans

fer

of t

he c

hart

ered

ope

rati

on r

ight

s fr

om C

AA

to

TA

CT

. T

he t

erm

inal

ex

pans

ion

and

impr

ovem

ents

and

the

equ

ipm

ent

inst

alla

tion

and

upg

rade

in

the

Tai

wan

Tao

yuan

In

tern

atio

nal

Air

port

car

go t

erm

inal

and

Kao

hsiu

ng c

argo

ter

min

al w

ere

expe

cted

to

be c

ompl

eted

in

the

firs

t 10

yea

rs o

f th

e C

OP

. Thi

s co

nstr

ucti

on p

roje

ct w

as a

ppro

ved

by T

AC

T’s

boa

rd o

f di

rect

ors

in

2003

. T

AC

T f

iled

an

appl

icat

ion

for

a 10

-yea

r ex

tens

ion

of t

he C

OP

for

the

car

go t

erm

inal

s in

the

T

aiw

an T

aoyu

an I

nter

natio

nal

Air

port

and

Kao

hsiu

ng I

nter

nati

onal

Air

port

and

rec

eive

d th

e ap

prov

al

from

the

Tao

yuan

Air

port

Cor

pora

tion

and

CA

A in

Jul

y 20

13 a

nd J

uly

2015

, res

pect

ivel

y.

The

ori

gina

l to

tal

expe

nditu

re o

f th

e pr

evio

us m

ain

cons

truc

tion

pro

ject

was

$8,

490,

000

thou

sand

. H

owev

er,

TA

CT

fil

ed a

n ar

bitr

atio

n fo

r th

e to

tal

amou

nt o

f ex

pend

itur

e in

201

2 to

rev

ise

the

tota

l am

ount

to $

6,84

0,00

0 th

ousa

nd.

182

- 81

-

As

of D

ecem

ber

31,

2019

, T

AC

T h

ad s

igne

d th

e fo

llow

ing

cons

truc

tion

con

trac

ts w

ith

unre

late

d pa

rtie

s:

Cli

ent

Nam

e

Con

trac

t T

itle

Con

trac

t A

mou

nt

(VA

T

Incl

ud

ed)

C

EC

I E

ngin

eeri

ng

Con

sult

ant,

Inc.

, Tai

wan

C

argo

Ter

min

al E

xpan

sion

Con

stru

ctio

n C

onsu

ltan

t C

ontr

act

$

55

2,28

5

As

of D

ecem

ber

31,

2019

, th

e cu

mul

ated

con

sult

ant

serv

ice

expe

nse

and

cons

truc

tion

equ

ipm

ent

had

amou

nted

to

$4

81,7

76

thou

sand

(V

AT

in

clud

ed)

and

$5,2

12,6

22

thou

sand

(V

AT

in

clud

ed),

re

spec

tive

ly.

Upo

n co

mpl

etio

n of

the

pro

ject

s, t

he a

mou

nt o

f $4

68,7

55 t

hous

and

(VA

T i

nclu

ded)

and

$5

,200

,780

th

ousa

nd

(VA

T

incl

uded

) w

ere

recl

assi

fied

to

pr

oper

ty,

plan

t, an

d eq

uipm

ent.

The

re

mai

ning

cum

ulat

ive

paym

ents

wer

e re

cogn

ized

und

er c

onst

ruct

ion

in p

rogr

ess.

A

sset

s ac

quir

ed f

rom

car

go t

erm

inal

im

prov

emen

ts,

equi

pmen

t ac

quis

itio

n an

d su

bseq

uent

equ

ipm

ent

acqu

isit

ion

and

repl

acem

ent

wil

l be

tra

nsfe

rred

to

the

gove

rnm

ent

wit

hout

any

com

pens

atio

n w

hen

the

char

tere

d op

erat

ing

lice

nse

expi

res.

T

AC

T

shou

ld

pay

roya

lties

to

T

aoyu

an

Air

port

Cor

pora

tion

and

th

e C

AA

du

ring

th

e ch

arte

red

oper

atio

n pe

riod

. T

he c

alcu

lati

on i

s ba

sed

on a

nnua

l sa

les

(inc

ludi

ng o

pera

ting

and

non

-ope

rati

ng

reve

nue

but

excl

udin

g th

e re

ntal

rev

enue

fro

m s

peci

fic

dist

rict

s), a

nd T

aoyu

an A

irpo

rt C

orpo

rati

on a

nd

the

CA

A h

ave

the

opti

on to

adj

ust t

he r

oyal

ty r

ates

eve

ry 3

yea

rs s

tart

ing

from

the

date

of

tran

sfer

of

the

char

tere

d op

erat

ion

righ

ts o

n th

e ba

sis

of a

ctua

l re

venu

e an

d ex

pend

itur

es.

The

cur

rent

roy

alty

rat

e is

6%

.

c.

CA

L P

ark

Co.

, L

td.

(“C

AL

Par

k”)

sign

ed “

Tai

wan

Tao

yuan

Int

erna

tion

al A

irpo

rt A

viat

ion

Ope

rati

on

Cen

ter

(inc

ludi

ng A

irpo

rt H

otel

) C

onst

ruct

ion

Ope

rati

ng C

ontr

act”

wit

h th

e C

AA

on

Sep

tem

ber

20,

2006

. How

ever

, on

Nov

embe

r 1,

201

0, th

e T

aoyu

an A

irpo

rt C

orpo

rati

on to

ok o

ver

the

CA

A’s

rig

hts

on

this

con

trac

t fr

om t

he C

AA

. The

con

trac

t is

eff

ecti

ve f

or 5

0 ye

ars

(con

sist

ing

of t

he d

evel

opm

ent

stag

e an

d op

erat

ing

peri

od)

from

the

cont

ract

dat

e. T

hree

yea

rs b

efor

e co

ntra

ct e

xpir

y da

te, C

AL

Par

k ha

s th

e fi

rst o

ptio

n to

ren

ew th

e co

ntra

ct o

nce

wit

h a

20-y

ear

exte

nsio

n.

CA

L P

ark’

s bu

sine

ss s

cope

inc

lude

s pr

ovid

ing

busi

ness

and

oth

er o

pera

ting

spa

ce r

elat

ed t

o ci

vil

air

tran

spor

t, ho

tels

, av

iati

on s

ervi

ce a

nd r

elat

ed i

ndus

trie

s ad

here

d to

the

bas

e an

d es

sent

ial

serv

ices

law

an

d ap

prov

ed b

y th

e T

aoyu

an A

irpo

rt C

orpo

rati

on.

CA

L P

ark

shou

ld p

ay l

and

rent

als

on t

he d

ate

of t

he r

egis

trat

ion

of s

urfa

ce r

ight

s. T

he r

enta

l ra

tes

for

the

deve

lopm

ent

stag

e di

ffer

fro

m t

hose

for

the

ope

rati

on p

erio

d. T

he r

enta

l ra

tes

shou

ld f

ollo

w A

rtic

le

No.

2 o

f th

e “R

egul

atio

ns f

or F

avor

able

Ren

tals

Reg

ardi

ng P

ubli

c L

and

Lea

se a

nd S

uper

fici

es i

n In

fras

truc

ture

Pro

ject

s,”

whi

ch s

tate

s th

at r

enta

l cal

cula

tion

in th

e de

velo

pmen

t sta

ge s

houl

d in

clud

e th

e la

nd v

alue

add

ed ta

x pl

us th

e ne

cess

ary

mai

nten

ance

fee

; in

the

oper

atio

n pe

riod

, ren

tals

are

60%

of

the

amou

nt b

ased

on

the

Nat

iona

l B

uild

ing

Lan

d R

enta

l S

tand

ard

plus

lan

d va

lue

tax,

val

ue-a

dded

tax

and

th

e ne

cess

ary

mai

nten

ance

fee

. D

urin

g th

e 50

yea

rs b

egin

ning

fro

m th

e in

itia

l ope

rati

on d

ate

of C

AL

Par

k to

the

end

of th

e co

nstr

ucti

on

peri

od, C

AL

Par

k sh

ould

pay

roy

alti

es b

ased

on

the

oper

atin

g re

venu

e es

tim

ated

in th

e fi

nanc

ial p

lan

of

its

inve

stm

ent

exec

utio

n pr

opos

al.

If t

he s

ales

and

bus

ines

s ta

x de

clar

ed a

nd f

iled

by

a bu

sine

ss e

ntit

y fo

r a

sing

le y

ear

exce

eds

10%

of

the

oper

atin

g re

venu

e as

est

imat

ed i

n th

e fi

nanc

ial

plan

in

its

inve

stm

ent e

xecu

tion

pro

posa

l, C

AL

Par

k sh

ould

pay

add

itio

nal r

oyal

ties

at 1

0% o

f th

is e

xces

s.

- 82

-

CA

L P

ark

shou

ld s

ubm

it th

e as

set t

rans

fer

plan

wit

hin

five

yea

rs b

efor

e th

e ex

piry

dat

e of

the

char

tere

d op

erat

ion

peri

od,

begi

n th

e ne

goti

atio

n of

the

ass

et t

rans

fer

cont

ract

, an

d co

mpl

ete

the

assi

gnat

ion

no

late

r th

an t

hree

yea

rs b

efor

e th

e ex

piry

dat

e of

the

cha

rter

ed p

erio

d. I

f C

AA

dec

ides

not

to

keep

the

bu

ildi

ng a

nd e

quip

men

t on

the

bas

e ar

ea,

CA

L P

ark

shou

ld r

emov

e al

l re

late

d bu

ildi

ng a

nd e

quip

men

t w

ithi

n th

ree

mon

ths

afte

r th

e ex

piry

dat

e.

d.

T

he C

ompa

ny f

aile

d to

med

iate

lab

or d

ispu

tes

wit

h th

e la

bor

unio

n. A

fter

obt

aini

ng t

he r

ight

to

stri

ke,

the

labo

r un

ion

wen

t on

str

ike

on F

ebru

ary

8, 2

019,

and

the

fli

ghts

res

umed

nor

mal

ope

rati

on o

n F

ebru

ary

14,

2019

. A

tot

al o

f 21

4 fl

ight

s w

as c

ance

lled

and

the

acc

umul

ated

rev

enue

los

s w

as a

bout

$5

00 m

illi

on. T

he in

itia

l est

imat

ed c

ompe

nsat

ion

for

cust

omer

loss

es a

nd o

ther

exp

endi

ture

s w

ere

abou

t $5

4 m

illi

on (

reco

gniz

ed a

s op

erat

ing

cost

).

e.

In O

ctob

er 2

019,

the

Com

pany

sig

ned

a co

ntra

ct w

ith

Air

bus

S.A

.S.

to p

urch

ase

elev

en A

321n

eo

airc

raft

and

an

optio

n to

pur

chas

e fi

ve A

321n

eo a

ircr

aft.

The

tot

al l

ist

pric

e of

the

ele

ven

airc

raft

is

US

$1,6

76,4

13 t

hous

and,

and

the

lis

t pr

ice

of t

he o

ptio

n to

pur

chas

e fi

ve a

ircr

aft

is U

S$7

69,9

22

thou

sand

. T

he e

xpec

ted

deli

very

per

iod

of t

he e

leve

n ai

rcra

ft r

ange

s fr

om 2

024

to 2

026.

As

of

Dec

embe

r 31

, 20

19,

the

list

pric

e ha

s be

en p

aid

in t

he a

mou

nt o

f U

S$1

7,01

4 th

ousa

nd (

reco

gniz

ed a

s pr

epay

men

ts f

or a

ircr

aft)

. In

Oct

ober

201

9, t

he C

ompa

ny s

igne

d a

cont

ract

wit

h In

tern

atio

nal

Aer

o E

ngin

es C

ompa

ny t

o pu

rcha

se f

our

back

up e

ngin

es o

f A

321n

eo. T

he t

otal

lis

t pr

ice

of t

he f

our

engi

nes

is U

S$6

0,28

9 th

ousa

nd.

f.

In J

uly

and

Aug

ust

2019

, th

e C

ompa

ny s

igne

d a

cont

ract

wit

h th

e B

oein

g C

ompa

ny t

o pu

rcha

se t

hree

B

777F

air

craf

t an

d ex

erci

sed

the

opti

on t

o pu

rcha

se t

hree

B77

7F a

ircr

aft.

The

tot

al l

ist

pric

e of

the

six

ai

rcra

ft i

s U

S$2

,320

,315

tho

usan

d, a

nd t

he e

xpec

ted

deli

very

per

iod

is f

rom

202

0 to

202

3. A

s of

D

ecem

ber

30, 2

019,

the

lis

t pr

ice

has

been

pai

d in

the

am

ount

of

US

$241

,650

tho

usan

d (r

ecog

nize

d as

pr

epay

men

ts f

or a

ircr

aft)

. g.

In

Sep

tem

ber

2019

, T

iger

air

Tai

wan

Co.

, L

td.

sign

ed a

con

trac

t w

ith

Air

bus

S.A

.S.

to p

urch

ase

seve

n A

320n

eo a

ircr

aft

and

an o

ptio

n to

pur

chas

e tw

o A

320n

eo a

ircr

aft.

The

tot

al l

ist

pric

e of

the

sev

en

airc

raft

is

US

$729

,746

thou

sand

, and

the

lis

t pr

ice

of t

he o

ptio

n to

pur

chas

e tw

o ai

rcra

ft i

s U

S$2

08,4

99

thou

sand

. The

exp

ecte

d de

live

ry p

erio

d of

the

seve

n ai

rcra

ft r

ange

s fr

om 2

025

to 2

028.

As

of D

ecem

ber

30, 2

019,

the

lis

t pr

ice

has

been

pai

d in

the

am

ount

of

US

$9,3

24 t

hous

and

(rec

ogni

zed

as p

repa

ymen

ts

for

airc

raft

).

In

addi

tion

, in

D

ecem

ber

2019

, T

iger

air

Tai

wan

C

o.,

Ltd

. si

gned

a

cont

ract

w

ith

Inte

rnat

iona

l Aer

o E

ngin

es C

ompa

ny to

pur

chas

e tw

o ba

ckup

eng

ines

of

A32

0neo

air

craf

t. T

he to

tal l

ist

pric

e of

the

two

engi

nes

is U

S$2

7,34

5 th

ousa

nd.

37

. S

IGN

IFIC

AN

T E

VE

NT

S A

FT

ER

TH

E B

AL

AN

CE

SH

EE

T D

AT

E

By

the

end

of J

anua

ry 2

020,

the

Cor

onav

irus

that

ori

gina

ted

from

Wuh

an, t

he c

apit

al c

ity

of H

ubei

pro

vinc

e in

Chi

na,

beca

me

a pa

ndem

ic.

The

Com

pany

has

com

plie

d an

d co

ntin

ues

to c

ompl

y w

ith

the

trav

el a

lert

s is

sued

by

the

Tai

wan

Cen

ters

for

Dis

ease

Con

trol

and

has

can

cell

ed f

ligh

ts b

etw

een

seve

ral

coun

trie

s li

ke

Chi

na,

Hon

g K

ong,

Jap

an a

nd K

orea

. O

ther

fli

ghts

hav

e fl

exib

le c

apac

ity

depe

ndin

g on

the

red

ucti

on o

f de

man

d. S

o fa

r, t

he a

ir t

rans

port

ser

vice

s fo

r pa

ssen

gers

hav

e be

en s

ever

ely

affe

cted

. In

add

itio

n to

ad

just

ing

the

oper

atio

n, t

he C

ompa

ny a

lso

take

s m

easu

res

abou

t fu

ndin

g as

sist

ance

, hu

man

res

ourc

es,

redu

cing

exp

endi

ture

, an

d as

ks t

he g

over

nmen

t fo

r he

lp i

n th

ree

mai

n ar

eas

incl

udin

g gu

aran

tee

for

its

oper

atio

n, r

elie

f fr

om th

e bu

rden

, and

a r

ecov

ery

plan

.

183

- 83

-

38.

SIG

NIF

ICA

NT

AS

SE

TS

AN

D L

IAB

ILIT

IES

DE

NO

MIN

AT

ED

IN

FO

RE

IGN

CU

RR

EN

CIE

S

The

fol

low

ing

info

rmat

ion

was

agg

rega

ted

by t

he f

orei

gn c

urre

ncie

s ot

her

than

fun

ctio

nal

curr

enci

es o

f th

e gr

oup

enti

ties

and

the

exc

hang

e ra

tes

betw

een

fore

ign

curr

enci

es a

nd r

espe

ctiv

e fu

ncti

onal

cur

renc

ies

wer

e di

sclo

sed.

The

sig

nifi

cant

ass

ets

and

liab

ilit

ies

deno

min

ated

in f

orei

gn c

urre

ncie

s w

ere

as f

ollo

ws:

D

ecem

ber

31, 2

019

For

eign

C

urr

enci

es (

In

Th

ousa

nd

s)

E

xch

ange

Rat

e

Car

ryin

g A

mou

nt

F

inan

cial

ass

ets

M

onet

ary

item

s

U

SD

$

658,

407

30

.030

0

$

19,7

71,9

57

EU

R

18,4

01

33

.670

0

61

9,57

1 H

KD

22

8,23

4

3.85

95

880,

868

JPY

6,

262,

272

0.

2766

1,

732,

130

CN

Y

425,

343

4.

3048

1,

831,

012

F

inan

cial

liab

ilit

ies

M

onet

ary

item

s

U

SD

2,

480,

896

30

.030

0

74

,501

,305

E

UR

7,

638

33

.670

0

25

7,15

5 H

KD

74

,651

3.85

95

288,

117

JPY

6,

584,

434

0.

2766

1,

821,

237

CN

Y

153,

196

4.

3048

65

9,47

8 D

ecem

ber

31, 2

018

For

eign

C

urr

enci

es (

In

Th

ousa

nd

s)

E

xch

ange

Rat

e

Car

ryin

g A

mou

nt

F

inan

cial

ass

ets

M

onet

ary

item

s

U

SD

$

532,

196

30

.769

2

$

16,3

75,2

37

EU

R

20,5

19

35

.211

3

72

2,51

4 H

KD

30

2,93

0

3.92

31

1,18

8,42

5 JP

Y

6,47

9,94

2

0.27

78

1,80

0,96

7 C

NY

39

4,50

3

4.48

03

1,76

7,49

1

Fin

anci

al li

abil

itie

s

Mon

etar

y it

ems

US

D

441,

798

30

.769

2

13

,593

,777

E

UR

7,

806

35

.211

3

27

4,87

3 H

KD

79

,716

3.92

31

310,

978

JPY

5,

586,

337

0.

2778

1,

552,

067

CN

Y

150,

536

4.

4803

67

4,44

6

- 84

-

For

the

yea

rs e

nded

Dec

embe

r 31

, 20

19 a

nd 2

018,

the

Gro

up’s

net

for

eign

exc

hang

e ga

in (

loss

es)

wer

e $(

141,

611)

tho

usan

d an

d $4

1,84

3 th

ousa

nd,

resp

ecti

vely

. It

is

impr

acti

cal

to d

iscl

ose

net

fore

ign

exch

ange

ga

ins

(los

ses)

by

each

sig

nifi

cant

for

eign

cur

renc

y du

e to

the

var

iety

of

the

fore

ign

curr

ency

tra

nsac

tion

s an

d fu

ncti

onal

cur

renc

ies

of th

e gr

oup

enti

ties

.

39.

AD

DIT

ION

AL

DIS

CL

OS

UR

ES

a.

F

ollo

win

g ar

e th

e ad

diti

onal

dis

clos

ures

req

uire

d by

the

Sec

urit

ies

and

Fut

ures

Bur

eau

for

the

Com

pany

an

d it

s in

vest

ees:

1

) Fin

anci

ng p

rovi

ded:

Non

e 2

) End

orse

men

ts/g

uara

ntee

s pr

ovid

ed: T

able

1 (

atta

ched

) 3

) Mar

keta

ble

secu

riti

es h

eld:

Tab

le 2

(at

tach

ed)

4) M

arke

tabl

e se

curi

ties

acq

uire

d an

d di

spos

ed o

f at

cos

ts o

r pr

ices

of

at l

east

NT

$300

mil

lion

or

20%

of

the

paid

-in

capi

tal:

Tab

le 3

(at

tach

ed)

5) A

cqui

siti

ons

of i

ndiv

idua

l re

al e

stat

es a

t co

sts

or p

rice

of

at l

east

NT

$300

mil

lion

or

20%

of

the

paid

-in

capi

tal:

Non

e 6

) D

ispo

sals

of

indi

vidu

al r

eal

esta

tes

at c

osts

or

pric

es o

f at

lea

st N

T$3

00 m

illi

on o

r 20

% o

f th

e pa

id-i

n ca

pita

l: N

one

7) T

otal

pur

chas

es f

rom

or

sale

s to

rel

ated

par

ties

am

ount

ing

to a

t le

ast

NT

$100

mil

lion

or

20%

of

the

paid

-in

capi

tal:

Tab

le 4

(at

tach

ed)

8) R

ecei

vabl

es f

rom

rel

ated

par

ties

am

ount

ing

to a

t le

ast

NT

$100

mil

lion

or

20%

of

the

paid

-in

capi

tal:

Tab

le 5

(at

tach

ed)

9

) Nam

es,

loca

tion

s,

and

rela

ted

info

rmat

ion

of

inve

stee

s ov

er

whi

ch

the

Com

pany

ex

erci

ses

sign

ific

ant i

nflu

ence

: Tab

le 6

(at

tach

ed)

10) D

eriv

ativ

e fi

nanc

ial t

rans

acti

ons

(Not

es 7

and

8)

b.

In

vest

men

t in

mai

nlan

d C

hina

: Tab

le 7

(at

tach

ed)

c.

Bus

ines

s re

lati

onsh

ips

and

impo

rtan

t tr

ansa

ctio

ns b

etw

een

Chi

na A

irli

nes,

Ltd

. an

d it

s su

bsid

iari

es:

Tab

le 8

(at

tach

ed)

184

- 85

-

40.

SE

GM

EN

T I

NF

OR

MA

TIO

N

a.

Seg

men

t inf

orm

atio

n

The

Gro

up m

ainl

y en

gage

s in

air

tra

nspo

rtat

ion

serv

ices

for

pas

seng

ers

and

carg

o; t

he s

ervi

ces

incl

ude

airp

ort

serv

ice,

sto

rage

ser

vice

, an

d ot

her

air

tran

spor

tati

on s

ervi

ces

whi

ch a

re b

elow

the

fin

anci

al

thre

shol

d fo

r an

ope

rati

ng s

egm

ent

of t

he G

roup

. The

refo

re, t

he G

roup

’s m

ain

repo

rtab

le s

egm

ent

is a

ir

tran

spor

tati

on.

The

acc

ount

ing

poli

cies

of

the

repo

rtab

le s

egm

ent

are

cons

iste

nt w

ith

the

acco

unti

ng

poli

cies

des

crib

ed in

Not

e 4.

For

th

e Y

ear

En

ded

Dec

emb

er 3

1, 2

019

Air

T

ran

spor

tati

on

O

ther

s

Ad

just

men

ts

and

Wri

te-o

ffs

T

otal

Ope

ratin

g re

venu

e

$

164,

492,

453

$ 11

,067

,323

$

(7,1

15,6

16)

$ 16

8,44

4,16

0

Ope

ratio

n pr

ofit

and

loss

es

$ 1,

302,

647

$ 1,

449,

620

$ (8

6,44

6)

$

2,66

5,82

1 In

tere

st r

even

ue

41

7,44

6 In

vest

men

ts in

com

e ac

coun

ted

for

usin

g th

e eq

uity

met

hod

33

2,30

5 R

even

ue

49

5,24

9 Fi

nanc

ial c

osts

(3,3

40,1

19)

Exp

ense

s

(667

,519

)

Pro

fit b

efor

e in

com

e ta

x

$

(96,

817)

Iden

tifia

ble

asse

ts

$ 20

9,39

7,85

0

$

15,9

15,0

60

(6

,317

,254

)

$

218,

995,

656

Inve

stm

ents

acc

ount

ed f

or u

sing

th

e eq

uity

met

hod

2,

223,

793

Ass

ets

71

,828

,530

Tot

al a

sset

s

$

293,

047,

979

F

or t

he

Yea

r E

nd

ed D

ecem

ber

31,

201

8

Air

T

ran

spor

tati

on

O

ther

s

Ad

just

men

ts

and

Wri

te-o

ffs

T

otal

Ope

ratin

g re

venu

e

$

167,

370,

925

$ 10

,430

,156

$

(7,0

89,4

74)

$ 17

0,71

1,60

7

Ope

ratio

n pr

ofit

and

loss

es

$ 2,

617,

116

$ 1,

429,

884

$ (2

4,61

7)

$

4,02

2,38

3 In

tere

st r

even

ue

33

0,71

0 In

vest

men

ts in

com

e ac

coun

ted

for

usin

g th

e eq

uity

met

hod

36

7,24

6 R

even

ue

15

7,30

1 Fi

nanc

ial c

osts

(1,3

79,9

85)

Exp

ense

s

(416

,406

)

Pro

fit b

efor

e in

com

e ta

x

$

3,08

1,24

9

Id

entif

iabl

e as

sets

$

154,

007,

329

$ 11

,036

,945

138,

787

$ 16

5,18

3,06

2 In

vest

men

ts a

ccou

nted

for

usi

ng

the

equi

ty m

etho

d

2,20

0,14

9 A

sset

s

62,7

53,3

70

T

otal

ass

ets

$ 23

0,13

6,58

2

- 86

-

b.

Geo

grap

hica

l seg

men

t T

he g

eogr

aphi

cal

segm

ent

info

rmat

ion

of t

he C

ompa

ny a

nd i

ts s

ubsi

diar

ies

in 2

019

and

2018

are

lis

ted

belo

w:

For

th

e Y

ear

En

ded

Dec

emb

er 3

1, 2

019

Am

eric

a

Nor

thea

st A

sia

S

outh

east

Asi

a

Eu

rop

e

Au

stra

lia

C

hin

a

Dom

esti

c

Ad

just

men

t an

d

Eli

min

atio

ns

C

onso

lid

atio

n

O

pera

ting

rev

enue

$

40,3

24,1

60

$ 39

,232

,038

$

33,3

54,4

05

$ 15

,638

,657

$

7,07

3,17

0

$

21,7

90,9

43

$ 18

,146

,403

$

(7,1

15,6

16 )

$

168,

444,

160

O

pera

tion

pro

fit

and

loss

es

$ (5

07,2

37 )

$

2,53

7,00

3

$

(3,4

97,5

92 )

($

86

8,09

1 )

$ (1

39,5

73 )

$

1,91

3,14

0

$

3,31

4,61

7

($

86

,446

)

$ 2,

665,

821

Inte

rest

rev

enue

417,

446

Inve

stm

ents

in

com

e ac

coun

ted

for

usin

g th

e eq

uity

m

etho

d

332,

305

Rev

enue

495,

249

Inte

rest

exp

ense

(3,3

40,1

19 )

E

xpen

ses

(6

67,5

19 )

Pro

fit b

efor

e in

com

e ta

x

$

(96,

817

)

Iden

tifi

able

ass

ets

$ 1,

399,

591

$ 22

2,58

4

$

154,

074

$ 26

,707

$

8,98

5

$

50,9

48

$ 22

3,45

0,02

1

$

(6,3

17,2

54 )

$

218,

995,

656

Inve

stm

ents

ac

coun

ted

for

usin

g th

e eq

uity

m

etho

d

2,22

3,79

3 A

sset

s

71,8

28,5

30

T

otal

ass

ets

$ 29

3,04

7,97

9

For

th

e Y

ear

En

ded

Dec

emb

er 3

1, 2

018

Am

eric

a

Nor

thea

st A

sia

S

outh

east

Asi

a

Eu

rop

e

Au

stra

lia

C

hin

a

Dom

esti

c

Ad

just

men

t an

d

Eli

min

atio

ns

C

onso

lid

atio

n

O

pera

ting

rev

enue

$

43,2

78,8

90

$ 38

,464

,450

$

34,1

32,3

01

$ 16

,092

,452

$

6,76

0,14

6

$

22,1

14,2

27

$ 16

,958

,615

$

(7,0

89,4

74 )

$

170,

711,

607

O

pera

tion

pro

fit

and

loss

es

$ 58

2,72

1

$

2,71

7,25

5

$

(2,4

12,8

23 )

($

75

6,26

3 )

$ (9

04,4

16 )

$

2,45

4,93

5

$

2,36

5,59

1

($

24

,617

)

$ 4,

022,

383

In

tere

st r

even

ue

33

0,71

0 In

vest

men

ts

inco

me

acco

unte

d fo

r us

ing

the

equi

ty

met

hod

36

7,24

6 R

even

ue

14

6,66

7 In

tere

st e

xpen

se

(1

,369

,351

)

Exp

ense

s

(416

,406

)

P

rofi

t bef

ore

inco

me

tax

$ 3,

081,

249

Id

enti

fiab

le a

sset

s

$

1,32

8,00

4

$

15,5

20

$ 94

,631

$

2,79

6

$

2,61

9

$

10,1

74

$ 16

3,59

0,53

0

$

138,

787

$

165,

183,

061

Inve

stm

ents

ac

coun

ted

for

usin

g th

e eq

uity

m

etho

d

2,20

0,14

9 A

sset

s

62,7

53,3

72

T

otal

ass

ets

$ 23

0,13

6,58

2

185

- 87

-

TA

BL

E 1

C

HIN

A A

IRL

INE

S, L

TD

. AN

D I

NV

ES

TE

ES

E

ND

OR

SE

ME

NT

/GU

AR

AN

TE

E P

RO

VID

ED

F

OR

TH

E Y

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ND

ED

DE

CE

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31,

201

9 (I

n T

hous

ands

of

New

Tai

wan

Dol

lars

, Un

less

Sta

ted

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erw

ise)

C

oun

terp

arty

No.

E

nd

orse

men

t/

Gu

aran

tee

Pro

vid

er

Nam

e N

atu

re o

f R

elat

ion

ship

Lim

it o

n E

ach

C

oun

terp

arty

’s

En

dor

sem

ent/

G

uar

ante

e A

mou

nt

(Not

e 1)

Max

imu

m

Bal

ance

for

th

e P

erio

d

En

din

g B

alan

ce

Act

ual

Bor

row

ing

Am

ount

Val

ue

of

Col

late

rals

P

rop

erty

, Pla

nt

or E

qu

ipm

ent

Rat

io o

f A

ccu

mu

late

d

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ount

of

Col

late

ral t

o N

et E

quit

y of

th

e L

ates

t F

inan

cial

S

tate

men

t (%

)

Max

imu

m

Col

late

ral/

Gu

aran

tee

Am

ount

s A

llow

able

(N

ote

2)

En

dor

sem

ent/

G

uar

ante

e G

iven

by

Par

ent

on B

ehal

f of

S

ub

sid

iari

es

En

dor

sem

ent/

G

uar

ante

e G

iven

by

Su

bsi

dia

ries

on

B

ehal

f of

Par

ent

En

dor

sem

ent/

G

uar

ante

e G

iven

on

Beh

alf

of C

ompa

nie

s in

M

ain

lan

d C

hin

a

0 C

hina

Air

lines

C

AL

Par

k

100%

sub

sidi

ary

$

11,

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$

3,

850,

000

$

3,

850,

000

$

2,

129,

400

$

-

6.81

$ 2

8,27

6,88

6 Y

N

N

(t

he “

Com

pany

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Tai

wan

Air

Car

go T

erm

inal

54

% s

ubsi

diar

y

11

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000

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0

-

- 1.

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28,2

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86

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N

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Tig

erai

r T

aiw

an C

o., L

td.

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ubsi

diar

y by

di

rect

and

indi

rect

ho

ldin

gs

11,3

10,7

54

3,05

5,47

5

3,

012,

668

685,

444

- 5.

33

28,2

76,8

86

Y

N

N

Tai

wan

Air

craf

t Mai

nten

ance

an

d E

ngin

eeri

ng C

o., L

td.

100%

sub

sidi

ary

11,3

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54

2,00

0,00

0

2,

000,

000

1,27

9,82

7

-

3.54

28

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Y

N

N

Not

e 1:

B

ased

on

the

Com

pany

’s g

uide

lines

, the

max

imum

am

ount

of

guar

ante

e to

an

indi

vidu

al c

ount

erpa

rty

is u

p to

20%

of

the

Com

pany

’s s

hare

hold

ers’

equ

ity.

Not

e 2:

B

ased

on

the

Com

pany

’s g

uide

lines

, the

allo

wab

le a

ggre

gate

am

ount

of

colla

tera

l gua

rant

ee is

up

to 5

0% o

f th

e C

ompa

ny’s

sha

reho

lder

s’ e

quity

. 186

- 88

-

TA

BL

E 2

C

HIN

A A

IRL

INE

S, L

TD

. AN

D I

NV

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KE

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CE

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31,

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n T

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ds

of N

ew T

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d O

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wis

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ecem

ber

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Hol

din

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any

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e M

ark

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d I

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nsh

ip

wit

h t

he

Hol

din

g C

omp

any

Fin

anci

al S

tate

men

t A

ccou

nt

Nu

mb

er o

f S

har

es/U

nit

s C

arry

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Am

oun

t

Per

cen

tage

of

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ner

ship

(%

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ket

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ue

or N

et A

sset

V

alu

e

Not

e

C

hina

Air

line

s (“

Par

ent c

ompa

ny”)

S

hare

s

E

vere

st I

nves

tmen

t Hol

ding

s L

td. -

ord

inar

y sh

ares

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al a

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CI

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73

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$

80

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N

ote

1

Eve

rest

Inv

estm

ent H

oldi

ngs

Ltd

. - p

refe

renc

e sh

ares

-

Fin

anci

al a

sset

s at

FV

TO

CI

- no

n-cu

rren

t 13

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7,

363

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-

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ng H

ua E

xpre

ss C

o.

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inan

cial

ass

ets

at F

VT

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non-

curr

ent

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0,00

0

26

,865

11

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26,8

65

Jard

ine

Air

Ter

min

al S

ervi

ces

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inan

cial

ass

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at F

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urre

nt

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00

- 15

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he G

rand

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ai H

otel

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cur

rent

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anda

rin

Air

line

s S

hare

s

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hina

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line

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aren

t com

pany

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inan

cial

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at F

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non-

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inan

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e 2

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AE

CO

Com

posi

te S

truc

ture

s (J

inji

ang)

-

Fin

anci

al a

sset

s at

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TO

CI

- no

n-cu

rren

t -

101,

365

5.45

10

1,36

5 N

ote

2

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re T

rave

l Net

wor

k (T

aiw

an)

Ben

efic

iary

cer

tifi

cate

s

F

rank

lin

Tem

plet

on S

inoA

m M

oney

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ket F

und

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inan

cial

ass

ets

at F

VT

PL

- c

urre

nt

7,81

6,04

8

81

,124

-

81,1

24

-

FS

ITC

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ey M

arke

t Fun

d -

Fin

anci

al a

sset

s at

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cur

rent

49

7,74

0

89

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89,1

45

All

ianz

Glo

bal I

nves

tors

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wan

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ey M

arke

t Fun

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anci

al a

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apit

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oney

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ket F

und

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inan

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at F

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2,84

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46

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35

Tai

wan

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port

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vice

s S

hare

s

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rans

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a A

irw

ays

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inan

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ass

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at F

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6

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0.4

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efic

ial c

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tes

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und

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inan

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at F

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und

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inan

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asty

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otec

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tern

atio

nal C

orp.

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hare

s

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hina

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line

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pany

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inan

cial

ass

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at F

VT

OC

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non-

curr

ent

814,

152

7,37

6 -

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efic

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tifi

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ey M

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al a

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cur

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34

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tinu

ed)

187

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D

ecem

ber

31,

201

9

Hol

din

g C

omp

any

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e M

ark

etab

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ecu

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d I

ssu

er/N

ame

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nsh

ip

wit

h t

he

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din

g C

omp

any

Fin

anci

al S

tate

men

t A

ccou

nt

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mb

er o

f S

har

es/U

nit

s C

arry

ing

Am

oun

t

Per

cen

tage

of

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ner

ship

(%

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ket

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ue

or N

et A

sset

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alu

e

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e

K

aohs

iung

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erin

g S

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efic

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cate

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rude

ntia

l Fin

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oney

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ket F

und

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inan

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$

85,8

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dent

ial F

inan

cial

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cur

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4,

493,

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23

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70

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aish

in 1

699

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al a

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cur

rent

1,

106,

807

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35

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15

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T

iger

air

Tai

wan

Co.

, Ltd

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over

nmen

t bon

d

P

hili

ppin

es g

over

nmen

t bon

d -

Am

orti

zed

cost

fin

anci

al a

sset

s -

299

Not

app

lica

ble

299

Not

e 1:

T

he s

ubsi

diar

y’s

net a

sset

val

ue w

as $

80,9

91 th

ousa

nd, w

hich

incl

uded

ord

inar

y sh

ares

and

pre

fere

nce

shar

es a

s of

and

for

the

year

end

ed D

ecem

ber

31, 2

019.

N

ote

2:

The

Com

pany

doe

s no

t iss

ue s

hare

s be

caus

e it

is a

lim

ited

com

pany

. N

ote

3:

The

tabl

e on

ly li

sts

fina

ncia

l ass

ets

that

are

IF

RS

9 r

egul

ated

.

(Con

clud

ed)

188

- 90

-

TA

BL

E 3

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

M

AR

KE

TA

BL

E S

EC

UR

ITIE

S A

CQ

UIR

ED

AN

D D

ISP

OS

ED

OF

AT

CO

ST

S O

R P

RIC

ES

OF

AT

LE

AST

NT

$300

MIL

LIO

N O

R 2

0% O

F T

HE

PA

ID-I

N C

AP

ITA

L

FO

R T

HE

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

019

(In

Th

ousa

nd

s of

New

Tai

wan

Dol

lars

, Un

less

Sta

ted

Oth

erw

ise)

B

egin

nin

g B

alan

ce

Acq

uis

itio

n (

Not

e 3)

D

isp

osal

(N

ote

3)

En

din

g B

alan

ce

Com

pan

y N

ame

Typ

e an

d N

ame

of

Mar

keta

ble

Secu

riti

es

(Not

e 1)

Fin

anci

al S

tate

men

t A

ccou

nt

Cou

nte

rpar

ty

(Not

e 2)

R

elat

ion

ship

(N

ote

2)

Num

ber

of

Sh

ares

A

mou

nt

Num

ber

of

Sh

ares

A

mou

nt

Num

ber

of

Sh

ares

A

mou

nt

Car

ryin

g A

mou

nt

Gai

n (

Los

s) o

n

Dis

pos

al

Num

ber

of

Sh

ares

A

mou

nt

C

hina

Air

line

s, L

td.

Sh

ares

T

iger

air

Tai

wan

Co.

, Ltd

. In

vest

men

ts a

ccou

nted

for

us

ing

the

equi

ty m

etho

d (N

ote

5)

Non

-rel

ated

par

ty

-

$

-

-

$

-

-

$

-

$

-

$

-

-

$

-

N

ote

1:

The

mar

keta

ble

secu

riti

es in

this

tabl

e re

fer

to s

hare

s, b

onds

, ben

efic

ial c

erti

fica

tes

and

the

secu

riti

es d

eriv

ed f

rom

the

abov

e it

ems.

N

ote

2:

Mar

keta

ble

secu

riti

es w

hich

are

rec

ogni

zed

as in

vest

men

ts a

ccou

nts

for

usin

g th

e eq

uity

met

hod

are

requ

ired

to b

e fi

lled

in th

e se

cond

col

umn.

N

ote

3 T

he c

umul

ativ

e am

ount

of

acqu

ired

and

dis

pose

d of

mar

keta

ble

secu

riti

es a

re r

equi

red

to b

e ca

lcul

ated

sep

arat

ely

to d

eter

min

e w

heth

er th

ey a

re a

t lea

st N

T$3

00 m

illi

on o

r 20

% o

f th

e pa

id-i

n ca

pita

l. N

ote

4 Pa

id-i

n ca

pita

l re

fers

to

paid

-in

capi

tal

of t

he i

ndic

ated

par

ent

com

pany

. If

the

shar

es i

ssue

d by

an

issu

er h

ave

no p

ar v

alue

or

a pa

r va

lue

othe

r th

an N

T$1

0 pe

r sh

are,

the

thr

esho

ld o

f 20

% o

f pa

id-i

n ca

pita

l, as

set

out

in

the

prec

edin

g it

em, s

hall

be

repl

aced

by

10%

of

equi

ty a

ttri

buta

ble

to

owne

rs o

f th

e in

dica

ted

pare

nt c

ompa

ny, a

s st

ated

in th

e re

spec

tive

bala

nce

shee

t. N

ote

5:

Sub

sidi

arie

s pl

anni

ng in

itia

l pub

lic

offe

ring

rel

ease

sto

cks.

189

- 91

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TA

BL

E 4

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HIN

A A

IRL

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S, L

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D I

NV

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S F

RO

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AL

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TO

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LA

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D P

AR

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MO

UN

TIN

G T

O A

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NT

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MIL

LIO

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1, 2

019

(In

Th

ousa

nd

s of

New

Tai

wan

Dol

lars

, Un

less

Sta

ted

Oth

erw

ise)

Tra

nsa

ctio

n D

etai

ls

Ab

nor

mal

Tra

nsa

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Not

e/A

ccou

nt

Pay

able

or

Rec

eiva

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C

omp

any

Nam

e R

elat

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arty

N

atu

re o

f R

elat

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ship

P

urc

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e/

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e A

mou

nt

% o

f T

otal

P

aym

ent

Ter

ms

Un

it P

rice

P

aym

ent

Ter

ms

En

din

g B

alan

ce

% o

f T

otal

Not

e

Chi

na A

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nes,

Ltd

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ir C

argo

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min

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524,

457

0.39

30

day

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$

-

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(41,

017)

(1

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-

(“C

hina

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line

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Tai

wan

Air

port

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vice

s S

ubsi

diar

y P

urch

ase

445,

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40

day

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7,97

0)

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dari

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(1

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) 1.

35

2 m

onth

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15

8,12

3 1.

83

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Man

dari

n A

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chas

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24

2,11

4 0.

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2 m

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(2

47,9

97)

(9.2

1)

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Tig

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(3

73,8

11)

0.26

1

mon

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42,6

42

0.49

T

iger

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wan

S

ubsi

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urch

ase

152,

914

0.11

1

mon

ths

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(31,

210)

(1

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-

T

aoyu

an I

nter

nati

onal

Air

port

Ser

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S

ubsi

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urch

ase

1,22

0,42

2 0.

90

40 d

ays

- -

(347

,127

) (1

2.90

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K

aohs

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Cat

erin

g S

ervi

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sidi

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56

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rec

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inve

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ncom

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loss

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ote

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Rep

rese

nts

the

cons

olid

ated

fin

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form

atio

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the

fore

ign

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l reg

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ions

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ote

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Com

pany

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t iss

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hare

s be

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lim

ited

com

pany

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ote

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etw

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cons

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ities

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ote

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Dif

fere

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caus

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acq

uisi

tion

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- 94

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BL

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C

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A A

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ces

2,

495,

195

(U

S$

83,0

90)

Indi

rect

(N

ote

1)

64

,601

(

US

$ 2,

151)

-

-

64

,601

(

US

$ 2,

151)

-

2.58

9

-

-

-

H

AE

CO

Com

posi

te

Str

uctu

res

(Jin

jian

g)

Com

posi

te m

ater

ial

35

0,24

0 (

US

$ 11

,663

) In

dire

ct

(Not

e 1)

19,0

99

(U

S$

636)

-

-

19

,099

(

US

$ 63

6)

- 5.

45

-

42

,718

(

RM

B

9,92

3)

-

Acc

um

ula

ted

In

vest

men

t in

M

ain

lan

d C

hin

a as

of

Dec

emb

er 3

1, 2

019

Inve

stm

ent

Am

oun

t

Au

thor

ized

by

Inve

stm

ent

Com

mis

sion

, MO

EA

L

imit

on

In

vest

men

t

$2

67,8

86 (

US

$8,9

20)

$650

,192

(N

ote

3)

$36,

079,

270

(Not

e 4)

(Con

tinu

ed)

193

- 95

-

Tai

wan

Air

port

Ser

vice

s

Rem

itta

nce

of

Fu

nd

s

Inve

stee

Com

pan

y M

ain

Bu

sin

ess

and

P

rod

uct

P

aid

-in

Cap

ital

M

eth

od o

f In

vest

men

t

Acc

um

ula

ted

O

utw

ard

R

emit

tan

ce f

or

Inve

stm

ent

from

Tai

wan

as

of J

anua

ry 1

, 20

19

Ou

twar

d

Inw

ard

Acc

um

ula

ted

O

utw

ard

R

emit

tan

ce f

or

Inve

stm

ent

from

Tai

wan

as

of D

ecem

ber

31,

20

19

Net

In

com

e (L

oss)

of

the

Inve

stee

% O

wn

ersh

ip

of D

irec

t or

In

dir

ect

Inve

stm

ent

Inve

stm

ent

Inco

me

(Los

s)

Car

ryin

g A

mou

nt

as o

f D

ecem

ber

31,

20

19

Acc

um

ula

ted

R

epat

riat

ion

of

Inve

stm

ent

Inco

me

as o

f D

ecem

ber

31,

20

19

A

irpo

rt A

ir C

argo

Ter

min

al

(Xia

men

) C

o., L

td.

For

war

ding

and

sto

rage

of

air

car

go

$

1,09

5,48

0 (

RM

B 2

54,4

80)

Indi

rect

(N

ote

5)

$

120,

671

(U

S$

4,01

8) $

-

$

- $

12

0,67

1 (

US

$ 4,

018)

$

76,7

11

(R

MB

17

,107

) 14

.00

$

10,7

40

(R

MB

2,

395)

$

222,

478

(R

MB

51

,682

) $

11

4,30

4 (

US

$ 3,

806)

Air

port

Air

Car

go S

ervi

ce

(Xia

men

) C

o., L

td.

For

war

ding

and

sto

rage

of

air

car

go

60

,267

(

RM

B

14,0

00)

Indi

rect

(N

ote

5)

57

,860

(

US

$ 1,

927)

-

-

57

,860

(

US

$ 1,

927)

89

,573

(

RM

B

19,9

75)

14.0

0

12,5

40

(R

MB

2,

796)

12

4,27

9 (

RM

B

28,8

70)

42

,240

(

US

$ 1,

407)

A

ccu

mu

late

d O

utw

ard

R

emit

tan

ce f

or I

nve

stm

ent

in

Mai

nla

nd

Ch

ina

as o

f D

ecem

ber

31,

201

9

Inve

stm

ent

Am

oun

ts A

uth

oriz

ed b

y In

vest

men

t C

omm

issi

on, M

OE

A

Up

per

Lim

it o

n t

he

Am

oun

t of

In

vest

men

t S

tip

ula

ted

by

In

vest

men

t C

omm

issi

on, M

OE

A

$1

78,5

32 (

US

$5,9

45)

$178

,532

(U

S$5

,945

) $3

49,9

06 (

Not

e 4)

Not

e 1:

C

hina

Air

line

s, L

td. t

he “

Com

pany

” in

vest

ed in

CA

L-A

sia

Inve

stm

ent,

whi

ch, i

n tu

rn, i

nves

ted

in a

com

pany

loca

ted

in m

ainl

and

Chi

na.

Not

e 2:

T

he in

war

d re

mit

tanc

e of

ear

ning

s in

201

9 am

ount

ed to

US

$2,8

01,7

49 a

nd U

S$87

5,33

0.

Not

e 3:

T

he a

mou

nt c

ompr

ised

US

$19,

828,

324,

RM

B4,

200,

000

and

NT

$36,

666,

667.

N

ote

4:

The

lim

it s

tate

d in

the

Inve

stm

ent C

omm

issi

on’s

reg

ulat

ion,

“In

vest

men

t or

Tec

hnic

al C

oope

rati

on in

Mai

nlan

d C

hina

Adj

ustm

ent R

ule,

” is

the

larg

er o

f th

e C

ompa

ny’s

net

ass

et v

alue

or

60%

of

the

cons

olid

ated

net

ass

et v

alue

. N

ote

5:

Tai

wan

Air

port

Ser

vice

s in

vest

ed in

Tai

wan

Air

port

Ser

vice

s (S

amoa

), w

hich

in r

etur

n, in

vest

ed in

a c

ompa

ny lo

cate

d in

mai

nlan

d C

hina

. N

ote

6:

The

RM

B a

nd U

.S. d

olla

r am

ount

s of

ass

ets

are

tran

slat

ed a

t yea

r-en

d ra

tes

and

thos

e of

gai

ns (

loss

es),

at t

he a

vera

ge o

f th

e ye

ar-e

nd r

ates

of

refe

r fo

r th

e re

port

ing

peri

od.

(C

oncl

uded

)

194

- 96

-

TA

BL

E 8

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

B

US

INE

SS

RE

LA

TIO

NS

HIP

S A

ND

IM

PO

RT

AN

T T

RA

NS

AC

TIO

NS

BE

TW

EE

N C

HIN

A A

IRL

INE

S, L

TD

. AN

D I

TS

SU

BS

IDIA

RIE

S

FO

R T

HE

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

019

(In

Th

ousa

nd

s of

New

Tai

wan

Dol

lars

)

Inte

rcom

pan

y T

ran

sact

ion

s

No.

C

omp

any

Nam

e R

elat

ed P

arty

N

atu

ral o

f R

elat

ion

ship

(N

ote

1)

Fin

anci

al S

tate

men

t A

ccou

nt

Am

oun

t T

ran

sact

ion

Cri

teri

a

% o

f T

otal

C

onso

lid

ated

T

otal

Rev

enu

e or

Ass

ets

0 C

hina

Air

line

s, L

td.

Man

dari

n A

irli

nes

a P

asse

nger

rev

enue

$

1,72

8,15

8 T

he s

ame

as o

rdin

ary

tran

sact

ions

1.

03

Man

dari

n A

irli

nes

a O

ther

ope

rati

ng r

even

ue

243,

304

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.14

T

iger

air

Tai

wan

Co.

, Ltd

. a

Oth

er o

pera

ting

rev

enue

37

3,81

1 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

22

Man

dari

n A

irli

nes

a P

asse

nger

cos

ts

242,

114

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.14

T

aoyu

an I

nter

nati

onal

Air

port

Ser

vice

s a

Air

port

ser

vice

cos

ts

1,22

0,42

2 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

72

Tai

wan

Air

port

Ser

vice

a

Air

port

ser

vice

cos

ts

445,

472

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.26

D

ynas

ty A

erot

ech

Inte

rnat

iona

l Cor

p.

a A

irpo

rt s

ervi

ce c

osts

34

9,60

2 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

21

Tai

wan

Air

Car

go T

erm

inal

a

Oth

er o

pera

ting

cos

ts

524,

457

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.31

C

AL

Par

k a

Oth

er o

pera

ting

cos

ts

231,

288

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.14

C

al H

otel

Co.

, Ltd

. a

Oth

er o

pera

ting

cos

ts

135,

687

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.08

K

aohs

iung

Cat

erin

g S

ervi

ces

a O

ther

ope

rati

ng c

osts

56

1,44

3 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

33

Man

dari

n A

irli

nes

a A

ccou

nts

rece

ivab

le -

rel

ated

par

ties

15

8,12

3 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

05

Man

dari

n A

irli

nes

a A

ccou

nts

paya

ble

- re

late

d pa

rtie

s

24

7,99

7 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

08

Tao

yuan

Int

erna

tion

al A

irpo

rt S

ervi

ces

a A

ccou

nts

paya

ble

- re

late

d pa

rtie

s

34

7,12

7 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

11

Man

dari

n A

irli

nes

a B

onds

pay

able

- n

on-c

urre

nt

250,

000

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.08

1

Tai

wan

Air

Car

go T

erm

inal

C

hina

Air

line

s, L

td.

b S

ales

rev

enue

52

4,45

7 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

31

2 M

anda

rin

Air

line

s C

hina

Air

line

s, L

td.

b P

asse

nger

cos

ts

1,72

8,15

8 T

he s

ame

as o

rdin

ary

tran

sact

ions

1.

03

Tai

wan

Air

port

Ser

vice

c

Air

port

ser

vice

cos

ts

189,

853

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.11

C

hina

Air

line

s, L

td.

b P

asse

nger

rev

enue

24

2,11

4 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

14

Chi

na A

irli

nes,

Ltd

. b

Ope

rati

ng e

xpen

ses

243,

304

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.14

C

hina

Air

line

s, L

td.

b A

ccou

nts

rece

ivab

le -

rel

ated

par

ties

24

7,99

7 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

08

Chi

na A

irli

nes,

Ltd

. b

Fin

anci

al a

sset

s at

am

orti

zed

cost

s

25

0,00

0 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

08

Chi

na A

irli

nes,

Ltd

. b

Not

es p

ayab

le a

nd a

ccou

nts

paya

ble

- re

late

d pa

rtie

s

15

8,12

3 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

05

3 T

aoyu

an I

nter

nati

onal

Air

port

Ser

vice

s T

iger

air

Tai

wan

Co.

, Ltd

. c

Air

port

ser

vice

rev

enue

19

7,17

9 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

12

Chi

na A

irli

nes,

Ltd

. b

Air

port

ser

vice

rev

enue

1,

220,

422

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.72

C

hina

Air

line

s, L

td.

b A

ccou

nts

rece

ivab

le -

rel

ated

par

ties

34

7,12

7 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

11

4 T

aiw

an A

irpo

rt S

ervi

ce

Chi

na A

irli

nes,

Ltd

. b

Ope

rati

ng r

even

ue

445,

472

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.26

M

anda

rin

Air

line

s c

Ope

rati

ng r

even

ue

189,

853

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.11

5

Dyn

asty

Aer

otec

h In

tern

atio

nal C

orp.

C

hina

Air

line

s, L

td.

b O

pera

ting

rev

enue

34

9,60

2 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

21

(Con

tinu

ed)

195

- 97

-

In

terc

omp

any

Tra

nsa

ctio

ns

No.

C

omp

any

Nam

e R

elat

ed P

arty

N

atu

ral o

f R

elat

ion

ship

(N

ote

1)

Fin

anci

al S

tate

men

t A

ccou

nt

Am

oun

t T

ran

sact

ion

Cri

teri

a

% o

f T

otal

C

onso

lid

ated

T

otal

Rev

enu

e or

Ass

ets

6 C

AL

Par

k C

hina

Air

line

s, L

td.

b O

pera

ting

rev

enue

$

231,

288

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.14

C

al H

otel

Co.

, Ltd

. c

Ope

rati

ng r

even

ue

114,

281

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.07

7

Cal

Hot

el C

o., L

td.

Chi

na A

irli

nes,

Ltd

. b

Ope

rati

ng r

even

ue

135,

687

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.08

C

AL

Par

k c

Ope

rati

ng c

osts

11

4,28

1 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

07

8 T

iger

air

Tai

wan

Co.

, Ltd

. C

hina

Air

line

s, L

td.

b O

pera

ting

expe

nses

37

3,81

1 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

22

Tao

yuan

Int

erna

tion

al A

irpo

rt S

ervi

ces

c A

irpo

rt s

ervi

ce c

osts

19

7,17

9 T

he s

ame

as o

rdin

ary

tran

sact

ions

0.

12

9 K

aohs

iung

Cat

erin

g S

ervi

ces

Chi

na A

irli

nes,

Ltd

. b

Ope

rati

ng r

even

ue

561,

443

The

sam

e as

ord

inar

y tr

ansa

ctio

ns

0.18

N

ote

1:

The

thre

e di

rect

iona

l typ

es f

or tr

ansa

ctio

ns b

y bu

sine

ss r

elat

ions

hip

betw

een

Chi

na A

irli

nes,

Ltd

. and

its

subs

idia

ries

are

as

foll

ows:

a.

P

aren

t to

subs

idia

ries

. b.

S

ubsi

diar

ies

to p

aren

t. c.

S

ubsi

diar

ies

to s

ubsi

diar

ies.

N

ote

2:

Inte

rcom

pany

tran

sact

ions

wer

e w

ritt

en o

ff in

the

cons

olid

ated

fin

anci

al s

tate

men

ts.

Not

e 3:

T

he C

ompa

ny o

nly

disc

lose

s tr

ansa

ctio

n am

ount

s or

bal

ance

s of

mor

e th

an $

100,

000

thou

sand

.

(Con

clud

ed)

196

- 1

-

IND

EP

EN

DE

NT

AU

DIT

OR

S’

RE

PO

RT

The

Boa

rd o

f D

irec

tors

and

the

Sha

reho

lder

s C

hina

Air

line

s, L

td.

Op

inio

n

We

have

aud

ited

the

acc

ompa

nyin

g fi

nanc

ial

stat

emen

ts o

f C

hina

Air

line

s, L

td.

(the

“C

ompa

ny”)

, w

hich

co

mpr

ise

the

bala

nce

shee

ts a

s of

Dec

embe

r 31

, 20

19 a

nd 2

018,

and

the

sta

tem

ents

of

com

preh

ensi

ve i

ncom

e,

chan

ges

in e

quit

y an

d ca

sh f

low

s fo

r th

e ye

ars

then

end

ed, a

nd t

he n

otes

to

the

fina

ncia

l st

atem

ents

, inc

ludi

ng a

su

mm

ary

of s

igni

fica

nt a

ccou

ntin

g po

lici

es (

coll

ecti

vely

ref

erre

d to

as

the

“fin

anci

al s

tate

men

ts”)

.

In o

ur o

pini

on,

the

acco

mpa

nyin

g fi

nanc

ial

stat

emen

ts p

rese

nt f

airl

y, i

n al

l m

ater

ial

resp

ects

, th

e fi

nanc

ial

posi

tion

of

the

Com

pany

as

of D

ecem

ber

31,

2019

and

201

8, a

nd i

ts f

inan

cial

per

form

ance

and

its

cas

h fl

ows

for

the

year

s th

en e

nded

in

acco

rdan

ce w

ith

the

Reg

ulat

ions

Gov

erni

ng t

he P

repa

rati

on o

f F

inan

cial

Rep

orts

by

Sec

urit

ies

Issu

ers

and

othe

r re

gula

tion

s.

Bas

is f

or O

pin

ion

We

cond

ucte

d ou

r au

dits

in

acco

rdan

ce w

ith

the

Reg

ulat

ions

Gov

erni

ng A

uditi

ng a

nd A

ttes

tati

on o

f F

inan

cial

S

tate

men

ts b

y C

erti

fied

Pub

lic

Acc

ount

ants

and

aud

itin

g st

anda

rds

gene

rall

y ac

cept

ed in

the

Rep

ubli

c of

Chi

na.

Our

res

pons

ibil

itie

s un

der

thos

e st

anda

rds

are

furt

her

desc

ribe

d in

the

Aud

itor

s’ R

espo

nsib

ilit

ies

for

the

Aud

it o

f th

e F

inan

cial

Sta

tem

ents

sec

tion

of

our

repo

rt.

We

are

inde

pend

ent

of t

he C

ompa

ny i

n ac

cord

ance

wit

h T

he

Nor

m o

f P

rofe

ssio

nal E

thic

s fo

r C

erti

fied

Pub

lic A

ccou

ntan

t of

the

Rep

ubli

c of

Chi

na, a

nd w

e ha

ve f

ulfi

lled

our

ot

her

ethi

cal

resp

onsi

bili

ties

in a

ccor

danc

e w

ith

thes

e re

quir

emen

ts. W

e be

liev

e th

at t

he a

udit

evid

ence

we

have

ob

tain

ed is

suf

fici

ent a

nd a

ppro

pria

te to

pro

vide

a b

asis

for

our

opi

nion

.

Key

Au

dit

Mat

ters

Key

aud

it m

atte

rs a

re t

hose

mat

ters

tha

t, in

our

pro

fess

iona

l ju

dgm

ent,

wer

e of

mos

t si

gnif

ican

ce i

n ou

r au

dit o

f th

e fi

nanc

ial

stat

emen

ts f

or t

he y

ear

ende

d D

ecem

ber

31, 2

019.

The

se m

atte

rs w

ere

addr

esse

d in

the

con

text

of

our

audi

t of

the

fin

anci

al s

tate

men

ts a

s a

who

le,

and

in f

orm

ing

our

opin

ion

ther

eon,

and

we

do n

ot p

rovi

de a

se

para

te o

pini

on o

n th

ese

mat

ters

.

The

key

aud

it m

atte

rs in

the

audi

t of

the

fina

ncia

l sta

tem

ents

of

the

Com

pany

are

sta

ted

belo

w:

Pas

seng

er R

even

ue R

ecog

niti

on

In a

ccor

danc

e w

ith

IFR

S 1

5 “R

even

ue f

rom

Con

trac

ts w

ith

Cus

tom

ers”

, pa

ssen

ger

sale

s ar

e ac

coun

ted

for

as

cont

ract

lia

bili

ties

bef

ore

rele

vant

tra

nspo

rtat

ion

serv

ices

are

pro

vide

d. A

fter

pro

vidi

ng t

he r

elat

ed s

ervi

ces,

co

ntra

ct l

iabi

liti

es a

re r

ecla

ssif

ied

to p

asse

nger

rev

enue

. F

or t

he y

ear

ende

d D

ecem

ber

31,

2019

, pa

ssen

ger

reve

nue

was

NT

$96,

176,

865

thou

sand

. R

efer

to

Not

es 4

and

26

to t

he a

ccom

pany

ing

fina

ncia

l st

atem

ents

for

re

late

d de

tail

ed in

form

atio

n.

(App

endi

x 2)

- 2

-

Sin

ce

rele

vant

sa

les

can

only

be

re

cogn

ized

as

pa

ssen

ger

reve

nue

whe

n pa

ssen

gers

ac

tual

ly

boar

ded,

co

nfir

mat

ion

from

eac

h pa

ssen

ger

hold

ing

the

tick

et w

ho a

ctua

lly

boar

ded

invo

lves

a c

ompl

icat

ed p

roce

ss;

ther

efor

e, w

e id

enti

fied

pas

seng

er r

even

ue r

ecog

niti

on a

s a

key

audi

t mat

ter.

T

he m

ain

audi

t pro

cedu

res

that

we

perf

orm

ed in

clud

ed th

e fo

llow

ing:

1.

W

e un

ders

tood

and

tes

ted

the

inte

rnal

con

trol

rel

ated

to

the

proc

ess

of r

even

ue f

rom

pas

seng

er,

incl

udin

g m

anua

l and

aut

omat

ic c

ontr

ol.

2.

We

unde

rsto

od a

nd t

este

d th

e ef

fect

iven

ess

of t

he i

nfor

mat

ion

syst

em r

elat

ed t

o th

e pr

oces

s of

pas

seng

er

reve

nue.

3.

W

e sa

mpl

ed s

ever

al f

ligh

t ti

cket

s, w

hich

wer

e fl

own

and

reco

gniz

ed a

s re

venu

e, t

o ve

rify

whe

ther

the

bo

ardi

ng d

ate

mat

ched

the

date

rec

orde

d on

the

tick

ets,

fro

m a

dvan

ced

sale

s ti

cket

s.

Init

ial A

ppli

cati

on o

f IF

RS

16

(Lea

ses)

- A

ircr

aft

In a

ccor

danc

e w

ith

IFR

S 1

6 “L

ease

s”,

airc

raft

s le

ases

ini

tial

ly c

lass

ifie

d as

fin

ance

lea

ses

unde

r IA

S 1

7 sh

ould

be

rec

ogni

zed

as R

ight

-of-

use

asse

ts a

nd l

ease

lia

bili

ties

in

the

bala

nce

shee

t. A

s of

Dec

embe

r 31

, 20

19,

the

carr

ying

am

ount

of

righ

t-of

-use

ass

ets

and

leas

e li

abil

itie

s (i

nclu

ding

fin

anci

al li

abil

itie

s fo

r he

dgin

g) r

elat

ing

to

airc

raft

s le

ases

are

NT

$53,

870,

134

thou

sand

and

NT

$52,

153,

682

thou

sand

, re

spec

tive

ly.

Ref

er t

o N

otes

4 a

nd

20 to

the

acco

mpa

nyin

g fi

nanc

ial s

tate

men

ts f

or r

elat

ed d

etai

led

info

rmat

ion.

C

hina

Air

line

s le

ased

ten

777-

300E

R p

lane

s, f

ifte

en A

330-

300

plan

es a

nd f

ifte

en 7

37-8

00 p

lane

s, f

or o

pera

tion

. B

ecau

se t

he l

ease

ter

m o

f ai

rcra

fts

is h

ighe

r an

d th

e am

ount

of

rent

al i

s hi

gher

, th

e pe

rcen

tage

of

righ

t-of

-use

as

sets

and

lea

se l

iabi

liti

es o

f th

e ai

rcra

fts

in t

he b

alan

ce s

heet

is

high

. T

he p

aram

eter

s an

d le

ase

term

s ar

e de

term

ined

by

the

man

agem

ent,

and

the

calc

ulat

ion

of t

he l

ease

lia

bili

ties

wil

l af

fect

the

car

ryin

g am

ount

and

de

prec

iati

on e

xpen

se o

f th

e ri

ght-

of-u

se a

sset

s an

d le

ase

liab

ilit

ies

(inc

ludi

ng f

inan

cial

lia

bili

ties

for

hed

ging

) re

lati

ng to

air

craf

ts. T

here

fore

, we

iden

tifi

ed in

itia

l app

lica

tion

of

IFR

S 1

6-A

ircr

afts

as

a ke

y au

dit m

atte

r.

The

mai

n au

dit p

roce

dure

s th

at w

e pe

rfor

med

incl

uded

the

foll

owin

g:

1.

We

unde

rsto

od a

nd t

este

d th

e ef

fect

iven

ess

of t

he i

nfor

mat

ion

syst

em r

elat

ed t

o th

e ca

lcul

atio

n of

lea

se

liab

ilit

ies.

2.

W

e se

lect

ed o

ne o

f th

e re

ntal

pay

men

ts s

ched

ule

of t

he a

ircr

afts

fro

m t

he l

ease

cal

cula

tion

sys

tem

, to

re

calc

ulat

e am

ount

of

the

leas

e li

abil

itie

s ba

lanc

e an

d fi

nanc

ial

cost

and

am

orti

zati

on o

f ri

ght-

of-u

se,

and

rela

ted

carr

ying

am

ount

. A

lso,

we

sele

cted

sev

eral

air

craf

t le

ase

cont

ract

s fr

om t

he c

arry

ing

amou

nts

of

airc

raft

lea

se l

iabi

lity

, and

che

cked

if

ther

e w

as a

ny d

iffe

renc

e be

twee

n co

ntra

cted

ren

tal

and

rent

als

in t

he

airc

raft

ren

tal

paym

ent

sche

dule

. A

nd w

e ch

ecke

d if

the

lea

se t

erm

use

d th

e re

ntal

pay

men

t sc

hedu

le w

as

cons

iste

nt w

ith

the

cont

ract

. O

ther

Mat

ter

- A

ud

it b

y O

ther

In

dep

end

ent

Au

dit

ors

Som

e in

vest

men

ts a

ccou

nted

for

usi

ng th

e eq

uity

met

hod

and

disc

losu

re in

form

atio

n in

Not

e 13

wer

e au

dite

d by

ot

her

inde

pend

ent

audi

tors

, an

d ou

r au

dit

opin

ion

is b

ased

sol

ely

on t

he a

udit

rep

ort

of o

ther

ind

epen

dent

au

dito

rs.

As

of D

ecem

ber

31, 2

019,

the

afo

rem

enti

oned

inv

estm

ent

acco

unte

d fo

r us

ing

the

equi

ty m

etho

d w

as

NT

$1,9

46,3

28

thou

sand

, re

pres

enti

ng

0.72

%

of

tota

l as

sets

. F

or

the

year

en

ded

Dec

embe

r 31

, 20

19,

com

preh

ensi

ve i

ncom

e (i

nclu

ding

sha

re o

f pr

ofit

or

loss

of

subs

idia

ries

, ass

ocia

tes

and

join

t ve

ntur

es a

nd s

hare

of

oth

er c

ompr

ehen

sive

inc

ome

(los

s) o

f su

bsid

iari

es,

asso

ciat

es a

nd j

oint

ven

ture

s ac

coun

ted

for

usin

g th

e eq

uity

met

hod)

was

NT

$691

,115

thou

sand

.

197

- 3

-

Res

pon

sib

ilit

ies

of M

anag

emen

t an

d T

hos

e C

har

ged

wit

h G

over

nan

ce f

or t

he

Fin

anci

al S

tate

men

ts

Man

agem

ent

is r

espo

nsib

le f

or t

he p

repa

rati

on a

nd f

air

pres

enta

tion

of

the

fina

ncia

l st

atem

ents

in

acco

rdan

ce

wit

h th

e R

egul

atio

ns G

over

ning

the

Pre

para

tion

of

Fin

anci

al R

epor

ts b

y S

ecur

itie

s Is

suer

s, a

nd f

or s

uch

inte

rnal

co

ntro

l as

man

agem

ent

dete

rmin

es i

s ne

cess

ary

to e

nabl

e th

e pr

epar

atio

n of

fin

anci

al s

tate

men

ts t

hat

are

free

fr

om m

ater

ial m

isst

atem

ent,

whe

ther

due

to f

raud

or

erro

r.

In p

repa

ring

the

fin

anci

al s

tate

men

ts,

man

agem

ent

is r

espo

nsib

le f

or a

sses

sing

the

Com

pany

’s a

bilit

y to

co

ntin

ue a

s a

goin

g co

ncer

n, d

iscl

osin

g, a

s ap

plic

able

, m

atte

rs r

elat

ed t

o go

ing

conc

ern

and

usin

g th

e go

ing

conc

ern

basi

s of

acc

ount

ing

unle

ss m

anag

emen

t ei

ther

int

ends

to

liqu

idat

e th

e C

ompa

ny o

r to

cea

se o

pera

tion

s,

or h

as n

o re

alis

tic

alte

rnat

ive

but t

o do

so.

T

hose

cha

rged

wit

h go

vern

ance

, in

clud

ing

the

audi

t co

mm

itte

e an

d su

perv

isor

s, a

re r

espo

nsib

le f

or o

vers

eein

g th

e C

ompa

ny’s

fin

anci

al r

epor

ting

pro

cess

. A

ud

itor

s’ R

esp

onsi

bil

itie

s fo

r th

e A

ud

it o

f th

e F

inan

cial

Sta

tem

ents

O

ur o

bjec

tive

s ar

e to

obt

ain

reas

onab

le a

ssur

ance

abo

ut w

heth

er t

he f

inan

cial

sta

tem

ents

as

a w

hole

are

fre

e fr

om m

ater

ial

mis

stat

emen

t, w

heth

er d

ue t

o fr

aud

or e

rror

, an

d to

iss

ue a

n au

dito

rs’

repo

rt t

hat

incl

udes

our

op

inio

n. R

easo

nabl

e as

sura

nce

is a

hig

h le

vel

of a

ssur

ance

, bu

t is

not

a g

uara

ntee

tha

t an

aud

it c

ondu

cted

in

acco

rdan

ce w

ith

the

audi

ting

sta

ndar

ds g

ener

ally

acc

epte

d in

the

Rep

ubli

c of

Chi

na w

ill a

lway

s de

tect

a m

ater

ial

mis

stat

emen

t w

hen

it e

xist

s. M

isst

atem

ents

can

ari

se f

rom

fra

ud o

r er

ror

and

are

cons

ider

ed m

ater

ial

if,

indi

vidu

ally

or

in th

e ag

greg

ate,

they

cou

ld r

easo

nabl

y be

exp

ecte

d to

infl

uenc

e th

e ec

onom

ic d

ecis

ions

of

user

s ta

ken

on th

e ba

sis

of th

ese

fina

ncia

l sta

tem

ents

. A

s pa

rt o

f an

aud

it i

n ac

cord

ance

wit

h th

e au

diti

ng s

tand

ards

gen

eral

ly a

ccep

ted

in t

he R

epub

lic

of C

hina

, w

e ex

erci

se p

rofe

ssio

nal j

udgm

ent a

nd m

aint

ain

prof

essi

onal

ske

ptic

ism

thro

ugho

ut th

e au

dit.

We

also

: 1.

Id

enti

fy a

nd a

sses

s th

e ri

sks

of m

ater

ial

mis

stat

emen

t of

the

fin

anci

al s

tate

men

ts,

whe

ther

due

to

frau

d or

er

ror,

des

ign

and

perf

orm

aud

it p

roce

dure

s re

spon

sive

to

thos

e ri

sks,

and

obt

ain

audi

t ev

iden

ce t

hat

is

suff

icie

nt

and

appr

opri

ate

to

prov

ide

a ba

sis

for

our

opin

ion.

T

he

risk

of

no

t de

tect

ing

a m

ater

ial

mis

stat

emen

t re

sult

ing

from

fra

ud i

s hi

gher

tha

n fo

r on

e re

sult

ing

from

err

or,

as f

raud

may

inv

olve

co

llus

ion,

for

gery

, int

enti

onal

om

issi

ons,

mis

repr

esen

tati

ons,

or

the

over

ride

of

inte

rnal

con

trol

. 2.

O

btai

n an

und

erst

andi

ng o

f in

tern

al c

ontr

ol r

elev

ant t

o th

e au

dit i

n or

der

to d

esig

n au

dit p

roce

dure

s th

at a

re

appr

opri

ate

in t

he c

ircu

mst

ance

s, b

ut n

ot f

or t

he p

urpo

se o

f ex

pres

sing

an

opin

ion

on t

he e

ffec

tive

ness

of

the

Com

pany

’s in

tern

al c

ontr

ol.

3.

Eva

luat

e th

e ap

prop

riat

enes

s of

acc

ount

ing

poli

cies

use

d an

d th

e re

ason

able

ness

of

acco

unti

ng e

stim

ates

an

d re

late

d di

sclo

sure

s m

ade

by m

anag

emen

t. 4.

C

oncl

ude

on t

he a

ppro

pria

tene

ss o

f m

anag

emen

t’s

use

of t

he g

oing

con

cern

bas

is o

f ac

coun

ting

and

, bas

ed

on t

he a

udit

evi

denc

e ob

tain

ed,

whe

ther

a m

ater

ial

unce

rtai

nty

exis

ts r

elat

ed t

o ev

ents

or

cond

itio

ns t

hat

may

cas

t si

gnif

ican

t do

ubt

on t

he C

ompa

ny’s

abi

lity

to c

ontin

ue a

s a

goin

g co

ncer

n. I

f w

e co

nclu

de t

hat

a m

ater

ial

unce

rtai

nty

exis

ts,

we

are

requ

ired

to

draw

att

enti

on i

n ou

r au

dito

rs’

repo

rt t

o th

e re

late

d di

sclo

sure

s in

the

fin

anci

al s

tate

men

ts o

r, i

f su

ch d

iscl

osur

es a

re i

nade

quat

e, t

o m

odif

y ou

r op

inio

n. O

ur

conc

lusi

ons

are

base

d on

the

audi

t evi

denc

e ob

tain

ed u

p to

the

date

of

our

audi

tors

’ re

port

. How

ever

, fut

ure

even

ts o

r co

ndit

ions

may

cau

se th

e C

ompa

ny to

cea

se to

con

tinu

e as

a g

oing

con

cern

. 5.

E

valu

ate

the

over

all p

rese

ntat

ion,

str

uctu

re a

nd c

onte

nt o

f th

e fi

nanc

ial s

tate

men

ts, i

nclu

ding

the

disc

losu

res,

an

d w

heth

er t

he f

inan

cial

sta

tem

ents

rep

rese

nt t

he u

nder

lyin

g tr

ansa

ctio

ns a

nd e

vent

s in

a m

anne

r th

at

achi

eves

fai

r pr

esen

tati

on.

- 4

-

6.

Obt

ain

suff

icie

nt a

ppro

pria

te a

udit

evi

denc

e re

gard

ing

the

fina

ncia

l in

form

atio

n of

the

ent

itie

s or

bus

ines

s ac

tivi

ties

wit

hin

the

Com

pany

to

expr

ess

an o

pini

on o

n th

e fi

nanc

ial

stat

emen

ts. W

e ar

e re

spon

sibl

e fo

r th

e di

rect

ion,

sup

ervi

sion

and

per

form

ance

of

the

audi

t. W

e re

mai

n so

lely

res

pons

ible

for

our

aud

it o

pini

on.

We

com

mun

icat

e w

ith

thos

e ch

arge

d w

ith

gove

rnan

ce r

egar

ding

, am

ong

othe

r m

atte

rs,

the

plan

ned

scop

e an

d ti

min

g of

the

aud

it an

d si

gnif

ican

t au

dit

find

ings

, in

clud

ing

any

sign

ific

ant

defi

cien

cies

in

inte

rnal

con

trol

tha

t w

e id

enti

fy d

urin

g ou

r au

dit.

We

also

pro

vide

tho

se c

harg

ed w

ith

gove

rnan

ce w

ith

a st

atem

ent

that

we

have

com

plie

d w

ith

rele

vant

eth

ical

re

quir

emen

ts r

egar

ding

ind

epen

denc

e, a

nd t

o co

mm

unic

ate

wit

h th

em a

ll r

elat

ions

hips

and

oth

er m

atte

rs t

hat

may

rea

sona

bly

be th

ough

t to

bear

on

our

inde

pend

ence

, and

whe

re a

ppli

cabl

e, r

elat

ed s

afeg

uard

s.

Fro

m t

he m

atte

rs c

omm

unic

ated

wit

h th

ose

char

ged

wit

h go

vern

ance

, w

e de

term

ine

thos

e m

atte

rs t

hat

wer

e of

m

ost

sign

ific

ance

in

the

audi

t of

the

fin

anci

al s

tate

men

ts f

or t

he y

ear

ende

d D

ecem

ber

31,

2019

and

are

th

eref

ore

the

key

audi

t m

atte

rs.

We

desc

ribe

the

se m

atte

rs i

n ou

r au

dito

rs’

repo

rt u

nles

s la

w o

r re

gula

tion

pr

eclu

des

publ

ic d

iscl

osur

e ab

out

the

mat

ter

or w

hen,

in

extr

emel

y ra

re c

ircu

mst

ance

s, w

e de

term

ine

that

a

mat

ter

shou

ld n

ot b

e co

mm

unic

ated

in

our

repo

rt b

ecau

se t

he a

dver

se c

onse

quen

ces

of d

oing

so

wou

ld

reas

onab

ly b

e ex

pect

ed to

out

wei

gh th

e pu

blic

inte

rest

ben

efit

s of

suc

h co

mm

unic

atio

n.

The

eng

agem

ent

part

ners

on

the

audi

t re

sult

ing

in t

his

inde

pend

ent

audi

tors

’ re

port

are

Jui

-Cha

n H

uang

and

S

hiuh

-Ran

, Che

ng.

Del

oitt

e &

Tou

che

Tai

pei,

Tai

wan

R

epub

lic

of C

hina

M

arch

18,

202

0

Not

ice

to R

eade

rs

The

ac

com

pany

ing

finan

cial

st

atem

ents

ar

e in

tend

ed

only

to

pr

esen

t th

e fin

anci

al

posi

tion

, fi

nanc

ial

perf

orm

ance

and

cas

h fl

ows

in a

ccor

danc

e w

ith

acco

unti

ng p

rinc

iple

s an

d pr

acti

ces

gene

rall

y ac

cept

ed i

n th

e R

epub

lic

of C

hina

and

not

tho

se o

f an

y ot

her

juri

sdic

tion

s. T

he s

tand

ards

, pr

oced

ures

and

pra

ctic

es t

o au

dit

such

fina

ncia

l sta

tem

ents

are

thos

e ge

nera

lly

appl

ied

in th

e R

epub

lic o

f Chi

na.

F

or t

he c

onve

nien

ce o

f re

ader

s, t

he i

ndep

ende

nt a

udit

ors’

rep

ort

and

the

acco

mpa

nyin

g fin

anci

al s

tate

men

ts

have

bee

n tr

ansl

ated

into

Eng

lish

from

the

orig

inal

Chi

nese

ver

sion

pre

pare

d an

d us

ed in

the

Rep

ubli

c of

Chi

na.

If t

here

is

any

conf

lict

bet

wee

n th

e E

ngli

sh v

ersi

on a

nd t

he o

rigi

nal

Chi

nese

ver

sion

or

any

diff

eren

ce i

n th

e in

terp

reta

tion

of

the

two

vers

ions

, th

e C

hine

se-l

angu

age

inde

pend

ent

audi

tors

’ re

port

and

fin

anci

al s

tate

men

ts

shal

l pre

vail

.

198

- 5

-

CH

INA

AIR

LIN

ES

, LT

D.

BA

LA

NC

E S

HE

ET

S

DE

CE

MB

ER

31,

201

9 A

ND

201

8 (I

n T

hou

san

ds

of N

ew T

aiw

an D

olla

rs)

2019

2018

A

SS

ET

S

A

mou

nt

%

Am

ount

%

C

UR

RE

NT

AS

SE

TS

C

ash

and

cash

equ

ival

ents

(N

otes

4, 6

and

30)

$

20

,626

,014

8

$

18

,688

,022

9 F

inan

cial

ass

ets

at f

air

valu

e th

roug

h pr

ofit

or lo

ss -

cur

rent

(N

otes

4, 7

and

30)

434

-

-

-

Fin

anci

al a

sset

s at

am

ortiz

ed c

ost (

Not

es 9

and

30)

1,46

0,45

0

-

2,31

0,00

0

1 F

inan

cial

ass

ets

for

hedg

ing

- cu

rren

t (N

otes

4 a

nd 3

0)

9,

588

-

27

,354

- N

otes

and

acc

ount

s re

ceiv

able

s, n

et (

Not

es 4

, 10

and

30)

7,

694,

431

3

9,

280,

662

4

Acc

ount

s re

ceiv

able

s -

rela

ted

part

ies

(Not

e 31

)

232,

386

-

29

8,31

1

- O

ther

rec

eiva

bles

560,

819

-

65

6,79

0

- C

urre

nt ta

x as

sets

(N

otes

4 a

nd 2

7)

52

,776

-

15,8

10

-

Inve

ntor

ies,

net

(N

otes

4 a

nd 1

1)

8,

246,

515

3

8,

451,

892

4

Non

-cur

rent

ass

ets

held

for

sal

e (N

otes

4 a

nd 1

2)

-

-

46

,154

- O

ther

cur

rent

ass

ets

(Not

e 17

)

2,10

6,19

9

1

3,15

7,86

4

2

Tot

al c

urre

nt a

sset

s

40,9

89,6

12

15

42,9

32,8

59

20

NO

N-C

UR

RE

NT

AS

SET

S

Fin

anci

al a

sset

s at

fai

r va

lue

thro

ugh

othe

r co

mpr

ehen

sive

inco

me

- no

n-cu

rren

t (N

otes

4, 8

and

30)

107,

856

-

83

,366

- In

vest

men

ts a

ccou

nted

for

usi

ng th

e eq

uity

met

hod

(Not

es 4

and

13)

13,4

82,8

77

5

13

,158

,355

6 P

rope

rty,

pla

nt a

nd e

quip

men

t (N

otes

4, 1

4 an

d 32

)

131,

029,

886

49

149,

029,

054

69

R

ight

-of-

use

asse

ts (

Not

es 4

, 20

and

32)

64

,262

,830

24

-

-

Inve

stm

ent p

rope

rtie

s (N

otes

4 a

nd 1

5)

2,

047,

448

1

2,

047,

448

1

Oth

er in

tang

ible

ass

ets

(Not

es 4

and

16)

971,

298

-

97

9,70

8

1 D

efer

red

tax

asse

ts (

Not

es 4

and

27)

4,75

7,14

2

2

4,56

1,34

6

2 O

ther

non

-cur

rent

ass

ets

(Not

es 1

7, 2

0 an

d 30

)

11,2

27,5

56

4

2,

122,

085

1

T

otal

non

-cur

rent

ass

ets

22

7,88

6,89

3

85

17

1,98

1,36

2

80

T

OT

AL

$

268

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,505

1

00

$ 2

14,9

14,2

21

100

L

IAB

ILIT

IES

AN

D E

QU

ITY

C

UR

RE

NT

LIA

BIL

ITIE

S

Fin

anci

al li

abili

ties

at f

air

valu

e th

roug

h pr

ofit

or lo

ss -

cur

rent

(N

otes

4, 7

and

30)

$

11

,749

-

$

221

- F

inan

cial

liab

ilitie

s fo

r he

dgin

g -

curr

ent (

Not

es 4

, 20

and

30)

8,

610,

015

3

239

- N

otes

and

acc

ount

s pa

yabl

e (N

ote

30)

1,

222,

410

-

1,19

8,64

7

1

Con

trac

t lia

bilit

ies

curr

ent (

Not

es 4

and

22)

18,5

84,2

87

7

17,0

65,4

81

8 A

ccou

nts

paya

ble

- re

late

d pa

rtie

s (N

ote

31)

1,

469,

434

1

1,58

3,68

4

1

Oth

er p

ayab

les

(Not

es 2

1 an

d 26

)

10,8

92,2

03

4

11,7

39,3

01

5 P

rovi

sion

s -

curr

ent (

Not

es 4

and

23)

-

-

26

8,90

1

-

Lea

se li

abil

itie

s -

curr

ent (

Not

es 4

and

20)

695,

215

-

-

-

Bon

ds p

ayab

le a

nd p

ut o

ptio

n of

con

vert

ible

bon

ds -

cur

rent

por

tion

(Not

es 4

, 19,

30

and

31)

10

,000

,000

4

4,

445,

900

2 L

oans

and

deb

ts -

cur

rent

por

tion

(Not

es 1

8, 3

0 an

d 32

)

13,7

08,3

20

5

15,3

35,0

05

7 C

apita

l lea

se o

blig

atio

ns -

cur

rent

por

tion

(Not

es 4

, 20,

30,

31

and

33)

-

-

596,

000

- O

ther

cur

rent

liab

ilitie

s

2,80

6,54

0

1

2,

946,

455

1

Tot

al c

urre

nt li

abili

ties

68

,000

,173

25

55,1

79,8

34

25

N

ON

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RR

EN

T L

IAB

ILIT

IES

F

inan

cial

liab

ilitie

s fo

r he

dgin

g -

non-

curr

ent (

Not

es 4

, 20

and

30)

42

,420

,205

16

-

-

Bon

ds p

ayab

le (

Not

es 4

, 19,

30

and

31)

22

,352

,625

8

28

,773

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13

L

oans

and

deb

ts (

Not

es 1

8, 3

0 an

d 32

)

48,6

18,1

68

18

56

,827

,738

27

L

ease

liab

ilitie

s -

non-

curr

ent (

Not

es 4

and

20)

10,9

09,2

62

4

-

-

Con

trac

t lia

bilit

ies

(Not

es 4

and

22)

2,23

6,31

1

1

1,

903,

665

1 P

rovi

sion

s (N

otes

4 a

nd 2

3)

9,

431,

736

4

7,73

0,11

4

4

Def

erre

d ta

x lia

bilit

ies

(Not

es 4

and

27)

399,

253

-

21,1

95

- A

ccru

ed p

ensi

on c

osts

(N

otes

5 a

nd 2

4)

7,

588,

745

3

6,93

2,78

3

3

Oth

er n

on-c

urre

nt li

abili

ties

36

6,25

5

-

46

3,61

0

-

T

otal

non

-cur

rent

liab

ilitie

s

144,

322,

560

54

10

2,65

2,81

5

48

Tot

al li

abili

ties

21

2,32

2,73

3

79

157,

832,

649

73

E

QU

ITY

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otes

19

and

25)

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re c

apita

l

54,2

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46

20

54

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C

apita

l sur

plus

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8,90

7

1

1,

241,

214

1 R

etai

ned

earn

ings

L

egal

res

erve

466,

416

-

351,

923

- S

peci

al r

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ve

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11

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pria

ted

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ined

ear

ning

s (a

ccum

ulat

ed d

efic

its)

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-

1,

144,

928

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otal

ret

aine

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rnin

gs

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-

1,

615,

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1 O

ther

equ

ity

1,

196,

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-

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23

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ury

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3,37

2)

-

(43,

372)

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ity

56

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21

57,0

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27

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OT

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$

268

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$

214

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10

0 T

he a

ccom

pany

ing

note

s ar

e an

inte

gral

par

t of

the

fina

ncia

l sta

tem

ents

.

- 6

-

CH

INA

AIR

LIN

ES

, LT

D.

ST

AT

EM

EN

TS

OF

CO

MP

RE

HE

NS

IVE

IN

CO

ME

F

OR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1, 2

019

AN

D 2

018

(In

Th

ousa

nd

s of

New

Tai

wan

Dol

lars

, Exc

ept

Ear

nin

gs P

er S

har

e)

2019

2018

A

mou

nt

%

Am

oun

t

%

R

EV

EN

UE

(N

otes

4, 2

6 an

d 32

)

$ 1

46,3

72,4

01

1

00

$

150

,264

,792

100

CO

ST

S (

Not

es 4

, 11,

26

and

32)

135,

008,

166

92

137,

614,

956

92

G

RO

SS

PR

OF

IT

11,3

64,2

35

8

12

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8

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PE

RA

TIN

G E

XP

EN

SE

S (

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es 4

, 26

and

32)

11,2

84,0

00

8

10

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,269

7

O

PE

RA

TIN

G P

RO

FIT

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-

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7,56

7

1

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ON

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ER

AT

ING

IN

CO

ME

AN

D E

XP

EN

SE

S

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er in

com

e (N

ote

26)

524,

233

-

42

0,41

6

-

Oth

er g

ains

and

loss

es (

Not

es 1

2, 1

3, 1

4 an

d 26

)

(5

69,5

82)

-

(5

59,2

30)

- F

inan

ce c

osts

(N

otes

26

and

32)

(3,0

34,1

72)

(2)

(1,3

12,0

44)

(1)

Sha

re o

f th

e pr

ofit

of

asso

ciat

es a

nd jo

int v

entu

res

(Not

e 13

)

1,

811,

960

1

1,

918,

922

1

Tot

al n

on-o

pera

ting

inco

me

and

expe

nses

(1

,267

,561

)

(1

)

46

8,06

4

-

P

RO

FIT

(L

OS

S)

BE

FO

RE

IN

CO

ME

TA

X

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87,3

26)

(1)

2,31

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1

1

IN

CO

ME

TA

X E

XP

EN

SE

(N

otes

4 a

nd 2

7)

12,4

72

-

52

5,27

0

-

N

ET

IN

CO

ME

(L

OS

S)

(1,1

99,7

98)

(1)

1,79

0,36

1

1

O

TH

ER

CO

MP

RE

HE

NS

IVE

IN

CO

ME

(L

OS

S)

Item

s th

at w

ill n

ot b

e re

clas

sifi

ed s

ubse

quen

tly

to

prof

it o

r lo

ss:

Los

s on

hed

ging

inst

rum

ents

sub

ject

to b

asis

ad

just

men

ts (

Not

es 4

, 25

and

31)

(17,

705)

-

23

,884

-

Unr

eali

zed

(los

s) g

ain

on in

vest

men

ts in

equ

ity

inst

rum

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eds

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dis

posa

l of

non-

curr

ent a

sset

s he

ld f

or s

ale

35,6

92

688,

427

Pro

ceed

s fr

om d

ispo

sal o

f in

vest

men

ts a

ccou

nted

for

usi

ng th

e eq

uity

m

etho

d

1,

713,

825

- In

crea

se in

ref

unda

ble

depo

sits

(3

87,2

44)

(51,

378)

D

ecre

ase

in r

efun

dabl

e de

posi

ts

104,

825

103,

593

Incr

ease

in p

repa

ymen

ts f

or e

quip

men

t

(1

3,69

9,04

3)

(13,

798,

867)

In

crea

se in

com

pute

r so

ftw

are

cost

s

(1

57,5

71)

(155

,431

)

Net

cas

h us

ed in

inve

stin

g ac

tivi

ties

(1

3,94

1,50

4 )

(17,

999,

250)

CA

SH

FL

OW

S F

RO

M F

INA

NC

ING

AC

TIV

ITIE

S

Rep

aym

ents

of

the

prin

cipa

l por

tion

of

leas

e li

abil

itie

s

(9

,666

,313

)

-

Pay

men

ts f

or b

uy-b

ack

of tr

easu

ry s

hare

s

-

(469

,393

) P

roce

eds

from

issu

ance

of

bond

s pa

yabl

e

3,

500,

000

10,5

12,0

00

Rep

aym

ents

of

bond

s pa

yabl

e

(4

,445

,900

)

(2

,700

,000

) P

roce

eds

from

sal

e-le

aseb

acks

4,

905,

660

- P

roce

eds

from

long

-ter

m b

orro

win

gs

5,50

0,00

0

17

,200

,000

R

epay

men

ts o

f lo

ng-t

erm

bor

row

ings

and

cap

ital

leas

e ob

liga

tion

s

(1

5,33

6,25

5)

(27,

339,

868)

P

roce

eds

from

gua

rant

ee d

epos

its

rece

ived

16

7,03

4

11

8,36

7 R

efun

ds o

f gu

aran

tee

depo

sits

rec

eive

d

(1

33,9

38)

(67,

905)

D

ivid

ends

pai

d to

ow

ners

of

the

Com

pany

(1

,136

,278

)

(1

,193

,670

)

Net

cas

h us

ed in

fin

anci

ng a

ctiv

itie

s

(1

6,64

5,99

0 )

(3,9

40,4

69)

E

FF

EC

TS

OF

EX

CH

AN

GE

RA

TE

CH

AN

GE

S O

N T

HE

BA

LA

NC

E

OF

CA

SH

HE

LD

IN

FO

RE

IGN

CU

RR

EN

CIE

S

(220

,402

)

2,

690

N

ET

IN

CR

EA

SE

IN

CA

SH

AN

D C

AS

H E

QU

IVA

LE

NT

S

1,93

7,99

2

2,

124,

463

C

AS

H A

ND

CA

SH

EQ

UIV

AL

EN

TS

AT

TH

E B

EG

INN

ING

OF

TH

E

YE

AR

18

,688

,022

16

,563

,559

CA

SH

AN

D C

AS

H E

QU

IVA

LE

NT

S A

T T

HE

EN

D O

F T

HE

YE

AR

$

20,6

26,0

14

$

18

,688

,022

T

he a

ccom

pany

ing

note

s ar

e an

inte

gral

par

t of

the

fina

ncia

l sta

tem

ents

. (C

oncl

uded

)

202

- 11

-

CH

INA

AIR

LIN

ES

, LT

D.

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

F

OR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1, 2

019

AN

D 2

018

(In

Th

ousa

nd

s of

New

Tai

wan

Dol

lars

, Un

less

Sta

ted

Oth

erw

ise)

1

. G

EN

ER

AL

IN

FO

RM

AT

ION

C

hina

Air

line

s, L

td.

(the

“C

ompa

ny”)

was

fou

nded

in

1959

and

its

sha

res

have

bee

n li

sted

on

the

Tai

wan

S

tock

Exc

hang

e si

nce

Feb

ruar

y 26

, 19

93.

The

Com

pany

pri

mar

ily

prov

ides

air

tra

nspo

rt s

ervi

ces

for

pass

enge

rs a

nd c

argo

. Its

oth

er o

pera

tion

s in

clud

e (a

) m

ail s

ervi

ces;

(b)

gro

und

serv

ices

and

rou

tine

air

craf

t m

aint

enan

ce;

(c)

maj

or m

aint

enan

ce o

f fl

ight

equ

ipm

ent;

(d)

com

mun

icat

ions

and

dat

a pr

oces

sing

ser

vice

s to

oth

er a

irli

nes;

(e)

the

sale

of

airc

raft

par

ts, e

quip

men

t and

the

enti

re a

ircr

aft;

and

(f)

leas

ing

of a

ircr

aft.

The

maj

or s

hare

hold

ers

of t

he C

ompa

ny a

re t

he C

hina

Avi

atio

n D

evel

opm

ent

Fou

ndat

ion

(CA

DF

) an

d th

e N

atio

nal D

evel

opm

ent F

und

(ND

F),

Exe

cuti

ve Y

uan.

As

of D

ecem

ber

31, 2

019

and

2018

, CA

DF

and

ND

F

held

44.

03%

of

the

Com

pany

’s s

hare

s. A

s of

Dec

embe

r 31

, 20

19 a

nd 2

018,

the

Com

pany

had

12,

175

and

12,4

98 e

mpl

oyee

s, r

espe

ctiv

ely.

2

. A

PP

RO

VA

L O

F F

INA

NC

IAL

ST

AT

EM

EN

TS

T

he f

inan

cial

sta

tem

ents

wer

e ap

prov

ed b

y th

e C

ompa

ny’s

boa

rd o

f di

rect

ors

on M

arch

18,

202

0.

3.

AP

PL

ICA

TIO

N O

F N

EW

, AM

EN

DE

D A

ND

RE

VIS

ED

ST

AN

DA

RD

S A

ND

IN

TE

RP

RE

TA

TIO

NS

a.

Init

ial a

ppli

cati

on o

f th

e am

endm

ents

to th

e R

egul

atio

ns G

over

ning

the

Pre

para

tion

of

Fin

anci

al R

epor

ts

by S

ecur

itie

s Is

suer

s (F

SC

) an

d th

e In

tern

atio

nal

Fin

anci

al R

epor

ting

Sta

ndar

ds (

IFR

S),

Int

erna

tion

al

Acc

ount

ing

Sta

ndar

ds

(IA

S),

In

terp

reta

tion

s of

IF

RS

(I

FR

IC),

an

d In

terp

reta

tion

s of

IA

S

(SIC

) en

dors

ed a

nd is

sued

into

eff

ect b

y th

e F

SC

E

xcep

t fo

r th

e fo

llow

ing,

the

ini

tial

app

lica

tion

of

the

amen

dmen

ts t

o th

e R

egul

atio

ns G

over

ning

the

P

repa

rati

on o

f F

inan

cial

Rep

orts

by

Sec

urit

ies

Issu

ers

and

the

IFR

Ss

endo

rsed

and

iss

ued

into

eff

ect

by

the

FS

C d

id n

ot h

ave

mat

eria

l im

pact

on

the

Com

pany

’s a

ccou

ntin

g po

lici

es:

IFR

S 1

6 “L

ease

s”

IFR

S 1

6 pr

ovid

es a

com

preh

ensi

ve m

odel

for

the

ide

ntif

icat

ion

of l

ease

arr

ange

men

ts a

nd t

heir

tr

eatm

ent

in t

he f

inan

cial

sta

tem

ents

of

both

les

see

and

less

or. I

t su

pers

edes

IA

S 1

7 “L

ease

s”, I

FR

IC 4

“D

eter

min

ing

whe

ther

an

Arr

ange

men

t con

tain

s a

Lea

se”,

and

a n

umbe

r of

rel

ated

inte

rpre

tati

ons.

Ref

er

to N

ote

4 fo

r in

form

atio

n re

lati

ng to

the

rele

vant

acc

ount

ing

poli

cies

. D

efin

itio

n of

a le

ase

The

Com

pany

ele

cted

to a

pply

the

guid

ance

of

IFR

S 1

6 in

det

erm

inin

g w

heth

er c

ontr

acts

are

, or

cont

ain,

a

leas

e on

ly t

o co

ntra

cts

ente

red

into

(or

cha

nged

) on

or

afte

r Ja

nuar

y 1,

201

9. C

ontr

acts

ide

ntif

ied

as

cont

aini

ng a

lea

se u

nder

IA

S 1

7 an

d IF

RIC

4 a

re n

ot b

e re

asse

ssed

and

acc

ount

ed f

or i

n ac

cord

ance

w

ith

the

tran

siti

onal

pro

visi

ons

unde

r IF

RS

16.

- 12

-

The

Com

pany

as

less

ee

The

Com

pany

rec

ogni

zes

righ

t-of

-use

ass

ets,

or

inve

stm

ent p

rope

rtie

s if

the

righ

t-of

-use

ass

ets

mee

t the

de

fini

tion

of

inve

stm

ent

prop

erti

es,

and

leas

e li

abil

itie

s fo

r al

l le

ases

on

the

bala

nce

shee

ts e

xcep

t fo

r th

ose

who

se

paym

ents

un

der

low

-val

ue

and

shor

t-te

rm

leas

es

are

reco

gniz

ed

as

expe

nses

on

a

stra

ight

-lin

e ba

sis.

On

the

stat

emen

ts o

f co

mpr

ehen

sive

inc

ome,

the

Com

pany

pre

sent

s th

e de

prec

iati

on

expe

nse

char

ged

on r

ight

-of-

use

asse

ts s

epar

atel

y fr

om t

he i

nter

est

expe

nse

accr

ued

on l

ease

lia

bili

ties

; in

tere

st is

com

pute

d us

ing

the

effe

ctiv

e in

tere

st m

etho

d. O

n th

e st

atem

ents

of

cash

flo

ws,

cas

h pa

ymen

ts

for

the

prin

cipa

l po

rtio

n of

lea

se l

iabi

liti

es a

re c

lass

ifie

d w

ithi

n fi

nanc

ing

acti

viti

es;

cash

pay

men

ts f

or

the

inte

rest

por

tion

are

cla

ssif

ied

wit

hin

oper

atin

g ac

tivi

ties

. P

rior

to

the

appl

icat

ion

of I

FR

S 1

6,

paym

ents

und

er o

pera

ting

leas

e co

ntra

cts,

incl

udin

g pr

oper

ty in

tere

st q

uali

fied

as

inve

stm

ent p

rope

rtie

s,

wer

e re

cogn

ized

as

expe

nses

on

a st

raig

ht-l

ine

basi

s. C

ash

flow

s fo

r op

erat

ing

leas

es w

ere

clas

sifi

ed

wit

hin

oper

atin

g ac

tivi

ties

on

the

stat

emen

ts o

f ca

sh f

low

s. L

ease

d as

sets

and

fin

ance

lea

se p

ayab

les

wer

e re

cogn

ized

on

the

bala

nce

shee

ts f

or c

ontr

acts

cla

ssif

ied

as f

inan

ce le

ases

. L

ease

lia

bili

ties

wer

e re

cogn

ized

on

Janu

ary

1, 2

019

for

leas

es c

lass

ifie

d as

ope

rati

ng l

ease

s un

der

IAS

17

. L

ease

lia

bili

ties

are

mea

sure

d at

the

pre

sent

val

ue o

f th

e re

mai

ning

lea

se p

aym

ents

, di

scou

nted

us

ing

the

less

ee’s

inc

rem

enta

l bo

rrow

ing

rate

on

Janu

ary

1, 2

019.

Rig

ht-o

f-us

e as

sets

are

mea

sure

d at

an

am

ount

equ

al t

o th

e le

ase

liab

ilit

ies,

adj

uste

d by

the

am

ount

of

any

prep

aid

or a

ccru

ed l

ease

pa

ymen

ts. T

he C

ompa

ny a

ppli

es I

AS

36

to a

ll r

ight

-of-

use

asse

ts.

For

leas

es c

lass

ifie

d as

fin

ance

leas

es u

nder

IA

S 1

7, th

e ca

rryi

ng a

mou

nt o

f ri

ght-

of-u

se a

sset

s an

d le

ase

liab

ilit

ies

on J

anua

ry 1

, 20

19 w

as d

eter

min

ed a

s th

e ca

rryi

ng a

mou

nt o

f th

e le

ased

ass

ets

and

fina

nce

leas

e pa

yabl

es a

s of

Dec

embe

r 31

, 201

8.

If t

he C

ompa

ny d

eter

min

es t

hat

a sa

le a

nd l

ease

back

tra

nsac

tion

doe

s no

t sa

tisf

y th

e re

quir

emen

ts o

f IF

RS

15

to b

e ac

coun

ted

for

as a

sal

e of

an

asse

t, it

is

acco

unte

d fo

r as

a f

inan

cing

tra

nsac

tion

. If

it

sati

sfie

s th

e re

quir

emen

ts t

o be

acc

ount

ed f

or a

s a

sale

of

an a

sset

, th

e C

ompa

ny r

ecog

nize

s on

ly t

he

amou

nt o

f an

y ga

in o

r lo

ss w

hich

rel

ates

to

the

righ

ts t

rans

ferr

ed t

o th

e bu

yer-

less

or.

Pri

or t

o th

e ap

plic

atio

n of

IF

RS

16,

the

leas

ebac

k po

rtio

n is

cla

ssif

ied

as e

ithe

r a

fina

nce

leas

e or

an

oper

atin

g le

ase

and

acco

unte

d fo

r di

ffer

entl

y.

The

Com

pany

doe

s no

t re

asse

ss s

ale

and

leas

ebac

k tr

ansa

ctio

ns e

nter

ed i

nto

befo

re J

anua

ry 1

, 20

19 t

o de

term

ine

whe

ther

the

tra

nsfe

r of

an

unde

rlyi

ng a

sset

sat

isfi

es t

he r

equi

rem

ents

in

IFR

S 1

5 to

be

acco

unte

d fo

r as

a s

ale.

Upo

n in

itia

l ap

plic

atio

n of

IF

RS

16,

the

afo

rem

enti

oned

tra

nsit

iona

l pr

ovis

ion

for

a le

ssee

is

appl

ied

to t

he l

ease

back

por

tion

. In

add

itio

n, f

or a

sset

s ac

coun

ted

for

as a

sal

e an

d a

fina

nce

leas

e un

der

IAS

17,

the

Com

pany

con

tinu

es to

am

orti

ze a

ny g

ains

on

sale

s ov

er th

e le

ase

term

.

203

- 13

-

The

les

see’

s w

eigh

ted

aver

age

incr

emen

tal

borr

owin

g ra

te a

ppli

ed t

o le

ase

liab

ilit

ies

reco

gniz

ed o

n Ja

nuar

y 1,

201

9 w

as 2

.47%

. The

dif

fere

nce

betw

een

the

(i)

leas

e li

abil

itie

s re

cogn

ized

and

(ii)

ope

rati

ng

leas

e co

mm

itm

ents

on

Dec

embe

r 31

, 201

8 is

exp

lain

ed a

s fo

llow

s:

The

fut

ure

min

imum

leas

e pa

ymen

ts o

f no

n-ca

ncel

labl

e op

erat

ing

leas

e co

mm

itm

ents

on

Dec

embe

r 31

, 201

8

$

68,1

74,2

92

Und

isco

unte

d am

ount

on

Janu

ary

1, 2

019

$

68

,174

,292

D

isco

unte

d am

ount

usi

ng th

e in

crem

enta

l bor

row

ing

rate

on

Janu

ary

1, 2

019

$

58

,286

,964

A

dd: F

inan

ce le

ase

paya

ble

on D

ecem

ber

31, 2

018

596,

000

Add

: Adj

ustm

ents

as

a re

sult

of

a di

ffer

ent t

reat

men

t of

exte

nsio

n an

d te

rmin

atio

n op

tion

s

6,

419,

285

Add

: Oth

er

4,55

7,77

0 L

ess:

Der

ivat

ive

fina

ncia

l ins

trum

ents

for

hed

ging

(4

1,91

9,50

8 )

Lea

se li

abil

itie

s re

cogn

ized

on

Janu

ary

1, 2

019

$

27

,940

,511

T

he C

ompa

ny a

s le

ssor

T

he C

ompa

ny d

oes

not

mak

e an

y ad

just

men

ts t

o le

ases

in

whi

ch i

t is

a l

esso

r an

d ac

coun

ts f

or t

hose

le

ases

und

er I

FR

S 1

6 st

arti

ng f

rom

Jan

uary

1, 2

019.

T

he im

pact

on

asse

ts, l

iabi

liti

es a

nd e

quit

y as

of

Janu

ary

1, 2

019

from

the

init

ial a

ppli

cati

on o

f IF

RS

16

is s

et o

ut a

s fo

llow

s:

Car

ryin

g A

mou

nt

as o

f D

ecem

ber

31,

20

19

Ad

just

men

ts

Ari

sin

g fr

om

Init

ial

Ap

pli

cati

on

Ad

just

ed

Car

ryin

g A

mou

nt

as o

f Ja

nu

ary

1, 2

019

Pre

paid

ren

t

$

699,

098

$

(6

99,0

98)

$

-

Ref

unda

ble

depo

sits

37

7,57

7

(2

15,4

26)

162,

151

Rig

ht-o

f-us

e as

sets

-

69,9

88,7

35

69,9

88,7

35

Oth

er f

inan

cial

ass

ets

-

18

9,80

8

18

9,80

8

T

otal

eff

ect o

n as

sets

$ 1,

076,

675

$

69

,264

,019

$ 70

,340

,694

L

ease

liab

ilit

ies

- cu

rren

t

$

-

$

3,

394,

630

$

3,

394,

630

Lea

se li

abil

itie

s -

non-

curr

ent

-

24

,545

,881

24

,545

,881

C

apit

al le

ase

obli

gati

ons

596,

000

(596

,000

)

-

Fin

anci

al li

abil

itie

s fo

r he

dgin

g -

curr

ent

-

5,

947,

449

5,94

7,44

9 F

inan

cial

liab

ilit

ies

for

hedg

ing

- no

n-cu

rren

t

-

35,9

72,0

59

35,9

72,0

59

Tot

al e

ffec

t on

liab

ilit

ies

$

59

6,00

0

$

69,2

64,0

19

$

69

,860

,019

- 14

-

b.

New

IF

RS

s in

issu

e bu

t not

yet

end

orse

d an

d is

sued

into

eff

ect b

y th

e F

SC

New

IF

RS

s

Eff

ecti

ve D

ate

An

nou

nce

d b

y IA

SB

A

men

dmen

ts to

IF

RS

3 “

Def

init

ion

of B

usin

ess”

J

anua

ry 1

, 202

0 (N

ote

1)

Am

endm

ents

to I

FR

S 9

, IA

S 3

9 an

d IF

RS

7 “

Inte

rest

Rat

e B

ench

mar

k R

efor

m”

J

anua

ry 1

, 202

0 (N

ote

2)

Am

endm

ents

to I

AS

1 a

nd I

AS

8 “

Def

init

ion

of M

ater

iali

ty”

Jan

uary

1, 2

020

(Not

e 3)

N

ote

1:

Unl

ess

stat

ed o

ther

wis

e, t

he a

bove

New

IF

RS

s ar

e ef

fect

ive

for

annu

al p

erio

ds b

egin

ning

on

or a

fter

thei

r re

spec

tive

eff

ecti

ve d

ates

. N

ote

2:

Bus

ines

s co

mbi

nati

ons

that

beg

an a

fter

Jan

uary

1,

2020

and

acq

uisi

tion

of

asse

ts a

fter

the

af

ores

aid

date

are

sub

ject

ed to

the

amen

dmen

t. N

ote

3:

The

am

endm

ent i

s ap

plie

d fo

r th

e an

nual

per

iod

begi

nnin

g af

ter

Janu

ary

1, 2

020.

A

s of

the

dat

e th

e fi

nanc

ial

stat

emen

ts w

ere

auth

oriz

ed f

or i

ssue

, th

e C

ompa

ny i

s co

ntin

uous

ly

asse

ssin

g th

e po

ssib

le im

pact

that

the

appl

icat

ion

of o

ther

sta

ndar

ds a

nd in

terp

reta

tion

s w

ill h

ave

on th

e C

ompa

ny’s

fin

anci

al p

osit

ion

and

fina

ncia

l pe

rfor

man

ce a

nd w

ill

disc

lose

the

rel

evan

t im

pact

whe

n th

e as

sess

men

t is

com

plet

ed.

c.

N

ew I

FR

Ss

in is

sue

but n

ot y

et e

ndor

sed

and

issu

ed in

to e

ffec

t by

the

FS

C

New

IF

RS

s

Eff

ecti

ve D

ate

An

nou

nce

d b

y IA

SB

(N

ote)

A

men

dmen

ts to

IF

RS

10

and

IAS

28

“Sal

e or

Con

trib

utio

n of

Ass

ets

betw

een

an I

nves

tor

and

its

Ass

ocia

te o

r Jo

int V

entu

re”

To

be d

eter

min

ed b

y IA

SB

IFR

S 1

7 “I

nsur

ance

Con

trac

ts”

Jan

uary

1, 2

021

Am

endm

ents

to I

AS

1 “c

lari

fy th

e cl

assi

fica

tion

of

liab

ilit

ies

as c

urre

nt

or n

on-c

urre

nt”

Jan

uary

1, 2

022

Not

e:

Unl

ess

stat

ed o

ther

wis

e, t

he a

bove

New

IF

RS

s ar

e ef

fect

ive

for

annu

al r

epor

ting

per

iods

be

ginn

ing

on o

r af

ter

thei

r re

spec

tive

eff

ecti

ve d

ates

. T

he a

ppli

cati

on o

f ne

w I

FRS

s in

issu

e bu

t not

yet

end

orse

d an

d is

sued

into

eff

ect b

y th

e F

SC

wou

ld n

ot

have

any

mat

eria

l im

pact

on

the

Com

pany

’s a

ccou

ntin

g po

lici

es. A

s of

the

date

the

fina

ncia

l sta

tem

ents

w

ere

auth

oriz

ed

for

issu

e,

the

Com

pany

is

co

ntin

uous

ly

asse

ssin

g th

e po

ssib

le

impa

ct

that

th

e ap

plic

atio

n of

oth

er s

tand

ards

and

int

erpr

etat

ions

wil

l ha

ve o

n th

e C

ompa

ny’s

fin

anci

al p

osit

ion

and

fina

ncia

l per

form

ance

and

wil

l dis

clos

e th

e re

leva

nt im

pact

whe

n th

e as

sess

men

t is

com

plet

ed.

4

. S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

S

tate

men

t of

Com

pli

ance

T

he f

inan

cial

sta

tem

ents

hav

e be

en p

repa

red

in a

ccor

danc

e w

ith

the

Reg

ulat

ions

Gov

erni

ng t

he P

repa

rati

on

of F

inan

cial

Rep

orts

by

Secu

riti

es I

ssue

rs a

nd o

ther

reg

ulat

ions

.

Bas

is o

f P

rep

arat

ion

T

he f

inan

cial

sta

tem

ents

hav

e be

en p

repa

red

on t

he h

isto

rica

l co

st b

asis

exc

ept

for

fina

ncia

l in

stru

men

ts

whi

ch a

re m

easu

red

at f

air

valu

e.

204

- 15

-

The

fai

r va

lue

mea

sure

men

ts,

whi

ch a

re g

roup

ed i

nto

Lev

els

1 to

3 b

ased

on

the

degr

ee t

o w

hich

the

fai

r va

lue

mea

sure

men

t in

puts

are

obs

erva

ble

and

base

d on

the

sig

nifi

canc

e of

the

inp

uts

to t

he f

air

valu

e m

easu

rem

ent i

n it

s en

tire

ty, a

re d

escr

ibed

as

foll

ows:

a.

L

evel

1 in

puts

are

quo

ted

pric

es (

unad

just

ed)

in a

ctiv

e m

arke

ts f

or id

enti

cal a

sset

s or

liab

ilit

ies;

b.

L

evel

2 i

nput

s ar

e in

puts

oth

er t

han

quot

ed p

rice

s in

clud

ed w

ithi

n L

evel

1 t

hat

are

obse

rvab

le f

or a

n as

set o

r li

abil

ity,

eit

her

dire

ctly

(i.e

. as

pric

es)

or in

dire

ctly

(i.e

. der

ived

fro

m p

rice

s); a

nd

c.

Lev

el 3

inpu

ts a

re u

nobs

erva

ble

inpu

ts f

or a

n as

set o

r li

abil

ity.

Whe

n pr

epar

ing

thes

e pa

rent

com

pany

onl

y fi

nanc

ial

stat

emen

ts,

the

Com

pany

use

d th

e eq

uity

met

hod

to

acco

unt f

or it

s in

vest

men

ts in

sub

sidi

arie

s, a

ssoc

iate

s an

d jo

int v

entu

res.

In

orde

r fo

r th

e am

ount

s of

the

net

prof

it f

or t

he y

ear,

oth

er c

ompr

ehen

sive

inc

ome

for

the

year

and

tot

al e

quit

y in

the

par

ent

com

pany

onl

y fi

nanc

ial

stat

emen

ts t

o be

the

sam

e w

ith

the

amou

nts

attr

ibut

able

to

the

owne

rs o

f th

e C

ompa

ny i

n its

st

anda

lone

fin

anci

al s

tate

men

ts, a

djus

tmen

ts a

risi

ng f

rom

the

dif

fere

nces

in

acco

unti

ng t

reat

men

ts b

etw

een

the

pare

nt c

ompa

ny o

nly

basi

s an

d th

e st

anda

lone

bas

is w

ere

mad

e to

inv

estm

ents

acc

ount

ed f

or u

sing

the

eq

uity

met

hod,

the

sha

re o

f pr

ofit

or

loss

of

subs

idia

ries

, as

soci

ates

and

joi

nt v

entu

res,

the

sha

re o

f ot

her

com

preh

ensi

ve i

ncom

e of

sub

sidi

arie

s, a

ssoc

iate

s an

d jo

int

vent

ures

and

the

rel

ated

equ

ity

item

s, a

s ap

prop

riat

e, in

thes

e pa

rent

com

pany

onl

y fi

nanc

ial s

tate

men

ts.

Cu

rren

t an

d N

on-c

urr

ent

Ass

ets

and

Lia

bil

itie

s C

urre

nt a

sset

s in

clud

e:

a.

Ass

ets

held

pri

mar

ily

for

the

purp

ose

of tr

adin

g;

b.

Ass

ets

expe

cted

to b

e re

aliz

ed w

ithi

n 12

mon

ths

afte

r th

e re

port

ing

peri

od; a

nd

c.

Cas

h an

d ca

sh e

quiv

alen

ts u

nles

s th

e as

set i

s re

stri

cted

fro

m b

eing

exc

hang

ed o

r us

ed to

set

tle

a li

abil

ity

for

at le

ast 1

2 m

onth

s af

ter

the

repo

rtin

g pe

riod

. C

urre

nt li

abil

itie

s in

clud

e:

a.

Lia

bili

ties

hel

d pr

imar

ily

for

the

purp

ose

of tr

adin

g;

b.

Lia

bili

ties

due

to b

e se

ttle

d w

ithi

n 12

mon

ths

afte

r th

e re

port

ing

peri

od; a

nd

c.

Lia

bili

ties

for

whi

ch t

he C

ompa

ny d

oes

not

have

an

unco

nditi

onal

rig

ht t

o de

fer

sett

lem

ent

for

at l

east

12

mon

ths

afte

r th

e re

port

ing

peri

od.

Ass

ets

and

liab

ilit

ies

that

are

not

cla

ssif

ied

as c

urre

nt a

re c

lass

ifie

d as

non

-cur

rent

. F

orei

gn C

urr

enci

es

In p

repa

ring

the

fin

anci

al s

tate

men

ts o

f th

e C

ompa

ny, t

rans

acti

ons

in c

urre

ncie

s ot

her

than

the

Com

pany

’s

func

tion

al c

urre

ncy

(i.e

. fo

reig

n cu

rren

cies

) ar

e re

cogn

ized

at

the

rate

s of

exc

hang

e pr

evai

ling

at

the

date

s of

the

tra

nsac

tion

s. A

t th

e en

d of

eac

h re

port

ing

peri

od,

mon

etar

y it

ems

deno

min

ated

in

fore

ign

curr

enci

es

are

retr

ansl

ated

at

the

rate

s pr

evai

ling

at

that

dat

e. N

on-m

onet

ary

item

s th

at a

re m

easu

red

at h

isto

rica

l co

st

in a

for

eign

cur

renc

y ar

e no

t re

tran

slat

ed. N

on-m

onet

ary

item

s m

easu

red

at f

air

valu

e th

at a

re d

enom

inat

ed

in f

orei

gn c

urre

ncie

s ar

e re

tran

slat

ed a

t the

rat

es p

reva

ilin

g at

the

date

whe

n th

e fa

ir v

alue

was

det

erm

ined

.

- 16

-

Exc

hang

e di

ffer

ence

s on

mon

etar

y it

ems

aris

ing

from

set

tlem

ent

or t

rans

lati

on a

re r

ecog

nize

d in

pro

fit

or

loss

in th

e pe

riod

in w

hich

they

ari

se e

xcep

t for

: a.

E

xcha

nge

diff

eren

ces

on f

orei

gn c

urre

ncy

borr

owin

gs r

elat

ing

to a

sset

s un

der

cons

truc

tion

for

fut

ure

prod

ucti

ve u

se, w

hich

are

inc

lude

d in

the

cos

t of

tho

se a

sset

s w

hen

they

are

reg

arde

d as

an

adju

stm

ent

to in

tere

st c

osts

on

thos

e fo

reig

n cu

rren

cy b

orro

win

gs;

b.

Exc

hang

e di

ffer

ence

s on

tran

sact

ions

ent

ered

into

in o

rder

to h

edge

cer

tain

for

eign

cur

renc

y ri

sks.

E

xcha

nge

diff

eren

ces

aris

ing

on t

he r

etra

nsla

tion

of

non-

mon

etar

y it

ems

are

incl

uded

in

prof

it o

r lo

ss f

or

the

peri

od e

xcep

t fo

r ex

chan

ge d

iffe

renc

es a

risi

ng f

rom

the

ret

rans

lati

on o

f no

n-m

onet

ary

item

s in

res

pect

of

whi

ch g

ains

and

los

ses

are

reco

gniz

ed d

irec

tly

in o

ther

com

preh

ensi

ve i

ncom

e, i

n w

hich

cas

e, t

he

exch

ange

dif

fere

nces

are

als

o re

cogn

ized

dir

ectl

y in

oth

er c

ompr

ehen

sive

inco

me.

F

or t

he p

urpo

ses

of p

rese

ntin

g fi

nanc

ial

stat

emen

ts,

the

asse

ts a

nd l

iabi

liti

es o

f th

e C

ompa

ny’s

for

eign

op

erat

ions

are

tra

nsla

ted

into

New

Tai

wan

dol

lars

usi

ng e

xcha

nge

rate

s pr

evai

ling

at

the

end

of e

ach

repo

rtin

g pe

riod

. In

com

e an

d ex

pens

e it

ems

are

tran

slat

ed a

t th

e av

erag

e ex

chan

ge r

ates

for

the

per

iod.

E

xcha

nge

diff

eren

ces

aris

ing

are

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

(att

ribu

ted

to th

e ow

ners

of

the

Com

pany

and

non

-con

trol

ling

inte

rest

s as

app

ropr

iate

).

On

the

disp

osal

of

a fo

reig

n op

erat

ion,

all

of

the

exch

ange

dif

fere

nces

acc

umul

ated

in

equi

ty i

n re

spec

t of

th

at o

pera

tion

att

ribu

tabl

e to

the

owne

rs o

f th

e C

ompa

ny a

re r

ecla

ssif

ied

to p

rofi

t or

loss

. In

ven

tori

es

Inve

ntor

ies

are

prim

aril

y ex

pend

able

and

non

expe

ndab

le p

arts

and

mat

eria

ls,

supp

lies

use

d in

ope

rati

ons

and

item

s fo

r in

-fli

ght

sale

and

are

sta

ted

at t

he l

ower

of

cost

or

net

real

izab

le v

alue

. T

he c

osts

of

inve

ntor

ies

sold

or

cons

umed

are

det

erm

ined

usi

ng th

e w

eigh

ted-

aver

age

met

hod.

N

on-c

urr

ent

Ass

ets

Hel

d f

or S

ale

Non

-cur

rent

ass

ets

are

clas

sifi

ed a

s he

ld-f

or-s

ale

if t

heir

car

ryin

g am

ount

wil

l be

rec

over

ed p

rinc

ipal

ly

thro

ugh

a sa

le t

rans

acti

on r

athe

r th

an t

hrou

gh c

onti

nuin

g us

e. T

his

cond

itio

n is

reg

arde

d as

met

onl

y w

hen

the

sale

is h

ighl

y pr

obab

le a

nd th

e N

on-c

urre

nt a

sset

is a

vail

able

for

imm

edia

te s

ale

in it

s pr

esen

t con

diti

on.

To

mee

t th

e cr

iter

ia f

or t

he s

ale

bein

g hi

ghly

pro

babl

e, t

he a

ppro

pria

te l

evel

of

man

agem

ent

mus

t be

co

mm

itte

d to

the

sal

e, w

hich

sho

uld

be e

xpec

ted

to q

uali

fy f

or r

ecog

nitio

n as

a c

ompl

eted

sal

e w

ithi

n on

e ye

ar f

rom

the

date

of

clas

sifi

cati

on.

Non

-cur

rent

ass

ets

clas

sifi

ed a

s he

ld-f

or-s

ale

are

mea

sure

d at

the

low

er o

f th

eir

prev

ious

car

ryin

g am

ount

an

d fa

ir v

alue

less

cos

ts to

sel

l. R

ecog

niti

on o

f de

prec

iati

on o

f th

ose

asse

ts w

ould

cea

se.

Inve

stm

ents

Acc

oun

ted

for

by

the

Eq

uit

y M

eth

od

Inve

stm

ents

in

subs

idia

ries

, as

soci

ates

and

joi

ntly

con

trol

led

enti

ties

are

acc

ount

ed f

or b

y th

e eq

uity

m

etho

d.

a.

Inve

stm

ent i

n su

bsid

iari

es

S

ubsi

diar

ies

(inc

ludi

ng s

peci

al p

urpo

se e

ntit

ies)

are

the

enti

ties

con

trol

led

by th

e C

ompa

ny.

Und

er t

he e

quity

met

hod,

the

inv

estm

ent

is i

niti

ally

rec

ogni

zed

at c

ost

and

the

carr

ying

am

ount

is

incr

ease

d or

dec

reas

ed t

o re

cogn

ize

the

Com

pany

’s s

hare

of

the

prof

it o

r lo

ss a

nd o

ther

com

preh

ensi

ve

inco

me

of t

he s

ubsi

diar

y af

ter

the

date

of

acqu

isit

ion.

Bes

ides

, th

e C

ompa

ny a

lso

reco

gniz

es t

he

Com

pany

’s s

hare

of

the

chan

ges

in o

ther

equ

ity

of th

e su

bsid

iary

.

205

- 17

-

Cha

nges

in

the

Com

pany

’s o

wne

rshi

p in

tere

sts

in s

ubsi

diar

ies

that

do

not

resu

lt i

n th

e C

ompa

ny’s

los

s of

con

trol

ove

r th

e su

bsid

iari

es a

re a

ccou

nted

for

as

equi

ty t

rans

acti

ons.

Any

dif

fere

nce

betw

een

the

carr

ying

am

ount

s of

th

e in

vest

men

t an

d th

e fa

ir

valu

e of

th

e co

nsid

erat

ion

paid

or

re

ceiv

ed

is

reco

gniz

ed d

irec

tly

in e

quity

. W

hen

the

Com

pany

’s s

hare

of

loss

es o

f a

subs

idia

ry e

qual

s or

exc

eeds

its

int

eres

t in

tha

t su

bsid

iary

(w

hich

inc

lude

s an

y ca

rryi

ng a

mou

nt o

f th

e in

vest

men

t in

sub

sidi

ary

acco

unte

d fo

r by

the

equ

ity

met

hod

and

long

-ter

m i

nter

ests

tha

t, in

sub

stan

ce,

form

par

t of

the

Com

pany

’s n

et i

nves

tmen

t in

the

su

bsid

iary

), th

e C

ompa

ny c

onti

nues

rec

ogni

zing

its

shar

e of

fur

ther

loss

es.

The

acq

uisi

tion

cos

t in

exc

ess

of t

he a

cqui

siti

on-d

ate

fair

val

ue o

f th

e id

enti

fiab

le n

et a

sset

s ac

quir

ed i

s re

cogn

ized

as

go

odw

ill.

Goo

dwil

l is

no

t am

orti

zed.

T

he

acqu

isit

ion-

date

fa

ir

valu

e of

th

e ne

t id

enti

fiab

le a

sset

s ac

quir

ed in

exc

ess

of th

e ac

quis

itio

n co

st is

rec

ogni

zed

imm

edia

tely

in p

rofi

t or

loss

. W

hen

the

Com

pany

cea

ses

to h

ave

cont

rol

over

a s

ubsi

diar

y, a

ny r

etai

ned

inve

stm

ent

is m

easu

red

at

fair

val

ue a

t th

at d

ate

and

the

diff

eren

ce b

etw

een

the

prev

ious

car

ryin

g am

ount

of

the

subs

idia

ry

attr

ibut

able

to

the

reta

ined

int

eres

t an

d it

s fa

ir v

alue

is

incl

uded

in

the

dete

rmin

atio

n of

the

gai

n or

los

s.

Fur

ther

mor

e, t

he C

ompa

ny a

ccou

nts

for

all

amou

nts

prev

ious

ly r

ecog

nize

d in

oth

er c

ompr

ehen

sive

in

com

e in

rel

atio

n to

tha

t su

bsid

iary

on

the

sam

e ba

sis

as w

ould

be

requ

ired

if

the

Com

pany

had

di

rect

ly d

ispo

sed

of th

e re

late

d as

sets

or

liab

ilit

ies.

P

rofi

ts a

nd l

osse

s fr

om d

owns

trea

m t

rans

acti

ons

wit

h a

subs

idia

ry a

re e

lim

inat

ed i

n fu

ll.

Pro

fits

and

lo

sses

fro

m u

pstr

eam

wit

h a

subs

idia

ry a

nd s

ide

stre

am tr

ansa

ctio

ns b

etw

een

subs

idia

ries

are

rec

ogni

zed

in t

he C

ompa

ny’s

fin

anci

al s

tate

men

ts o

nly

to t

he e

xten

t of

int

eres

ts i

n th

e su

bsid

iary

tha

t ar

e no

t re

late

d to

the

Com

pany

.

b.

Inve

stm

ents

in a

ssoc

iate

s an

d jo

int v

entu

res

A

n as

soci

ate

is a

n en

tity

ove

r w

hich

the

Com

pany

has

sig

nifi

cant

inf

luen

ce a

nd t

hat

is n

eith

er a

su

bsid

iary

nor

an

inte

rest

in

a jo

int

vent

ure.

A j

oint

ven

ture

is

a jo

int

arra

ngem

ent

whe

reby

the

C

ompa

ny a

nd o

ther

par

ties

tha

t ha

ve j

oint

con

trol

of

the

arra

ngem

ent

and

the

righ

ts t

o th

e ne

t as

sets

of

the

arra

ngem

ent.

The

Com

pany

use

s th

e eq

uity

met

hod

to a

ccou

nt f

or it

s in

vest

men

ts in

ass

ocia

tes

and

join

t ven

ture

s.

Und

er t

he e

quit

y m

etho

d, a

n in

vest

men

t in

an

asso

ciat

e an

d jo

intl

y co

ntro

lled

ent

ity

is i

niti

ally

re

cogn

ized

at

cost

and

adj

uste

d th

erea

fter

to

reco

gniz

e th

e C

ompa

ny’s

sha

re o

f th

e pr

ofit

or

loss

and

ot

her

com

preh

ensi

ve i

ncom

e of

the

ass

ocia

te a

nd j

oint

ly v

entu

res.

The

Com

pany

als

o re

cogn

izes

the

ch

ange

s in

the

Com

pany

’s s

hare

of

equi

ty o

f as

soci

ates

and

joi

ntly

ven

ture

s at

trib

utab

le t

o th

e C

ompa

ny.

Whe

n th

e C

ompa

ny s

ubsc

ribe

s fo

r ad

diti

onal

new

sha

res

of a

n as

soci

ate

and

join

t ve

ntur

es a

t a

perc

enta

ge d

iffe

rent

fro

m i

ts e

xist

ing

owne

rshi

p pe

rcen

tage

, th

e re

sult

ing

carr

ying

am

ount

of

the

inve

stm

ent

diff

ers

from

the

am

ount

of

the

Com

pany

’s p

ropo

rtio

nate

int

eres

t in

the

ass

ocia

te a

nd j

oint

ve

ntur

es.

The

C

ompa

ny

reco

rds

such

a

diff

eren

ce

as

an

adju

stm

ent

to

inve

stm

ents

w

ith

the

corr

espo

ndin

g am

ount

cha

rged

or

cred

ited

to

capi

tal

surp

lus.

If

the

Com

pany

’s o

wne

rshi

p in

tere

st i

s re

duce

d du

e to

the

sub

scri

ptio

n of

add

itio

nal

new

sha

res

of t

he a

ssoc

iate

and

joi

ntly

con

trol

led

enti

ty,

the

prop

orti

onat

e am

ount

of

the

gain

s or

loss

es p

revi

ousl

y re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e in

re

lati

on to

that

ass

ocia

te a

nd jo

int v

entu

res

is r

ecla

ssif

ied

to p

rofi

t or

loss

on

the

sam

e ba

sis

as w

ould

be

requ

ired

had

the

inv

este

e di

rect

ly d

ispo

sed

of t

he r

elat

ed a

sset

s or

lia

bili

ties

. W

hen

the

adju

stm

ent

shou

ld b

e de

bite

d to

cap

ital

surp

lus,

but

the

cap

ital

sur

plus

rec

ogni

zed

from

inv

estm

ents

acc

ount

ed f

or

usin

g th

e eq

uity

met

hod

is in

suff

icie

nt, t

he s

hort

age

is d

ebit

ed to

ret

aine

d ea

rnin

gs.

- 18

-

Whe

n th

e C

ompa

ny’s

sha

re o

f lo

sses

of

an a

ssoc

iate

and

joi

nt v

entu

res

equa

ls o

r ex

ceed

s it

s in

tere

st i

n th

at a

ssoc

iate

and

joi

nt v

entu

res

whi

ch i

nclu

des

any

carr

ying

am

ount

of

the

inve

stm

ent

acco

unte

d fo

r us

ing

the

equi

ty m

etho

d an

d lo

ng-t

erm

int

eres

ts t

hat,

in s

ubst

ance

, fo

rm p

art

of t

he C

ompa

ny’s

net

in

vest

men

t in

the

asso

ciat

e an

d jo

int v

entu

res

enti

ty, t

he C

ompa

ny d

isco

ntin

ues

reco

gniz

ing

its

shar

e of

fu

rthe

r lo

sses

. A

ddit

iona

l lo

sses

and

lia

bili

ties

are

rec

ogni

zed

only

to

the

exte

nt t

hat

the

Com

pany

has

in

curr

ed le

gal o

blig

atio

ns, o

r co

nstr

ucti

ve o

blig

atio

ns, o

r m

ade

paym

ents

on

beha

lf o

f th

at a

ssoc

iate

and

jo

int v

entu

res.

A

ny e

xces

s of

the

cos

t of

acq

uisi

tion

ove

r th

e C

ompa

ny’s

sha

re o

f th

e ne

t fa

ir v

alue

of

the

iden

tifi

able

as

sets

an

d li

abil

itie

s of

an

as

soci

ate

and

join

t ve

ntur

es

reco

gniz

ed

at

the

date

of

ac

quis

itio

n is

re

cogn

ized

as

good

wil

l, w

hich

is

incl

uded

wit

hin

the

carr

ying

am

ount

of

the

inve

stm

ent

and

is n

ot

amor

tize

d. A

ny e

xces

s of

the

Com

pany

’s s

hare

of

the

net

fair

val

ue o

f th

e id

enti

fiab

le a

sset

s an

d li

abil

itie

s ov

er th

e co

st o

f ac

quis

itio

n, a

fter

rea

sses

smen

t, is

rec

ogni

zed

imm

edia

tely

in p

rofi

t or

loss

. T

he e

ntir

e ca

rryi

ng a

mou

nt o

f th

e in

vest

men

t (i

nclu

ding

goo

dwil

l) i

s te

sted

for

im

pair

men

t as

a s

ingl

e as

set b

y co

mpa

ring

its

reco

vera

ble

amou

nt w

ith

its

carr

ying

am

ount

. Any

impa

irm

ent l

oss

reco

gniz

ed is

no

t al

loca

ted

to a

ny a

sset

, inc

ludi

ng g

oodw

ill,

that

for

ms

part

of

the

carr

ying

am

ount

of

the

inve

stm

ent.

Any

rev

ersa

l of

tha

t im

pair

men

t lo

ss i

s re

cogn

ized

to

the

exte

nt t

hat

the

reco

vera

ble

amou

nt o

f th

e in

vest

men

t sub

sequ

entl

y in

crea

ses.

T

he C

ompa

ny d

isco

ntin

ues

the

use

of t

he e

quity

met

hod

from

the

dat

e on

whi

ch i

t ce

ases

to

have

si

gnif

ican

t inf

luen

ce a

nd jo

int c

ontr

ol. A

ny r

etai

ned

inve

stm

ent i

s m

easu

red

at f

air

valu

e at

that

dat

e an

d th

e fa

ir v

alue

is

rega

rded

as

its

fair

val

ue o

n in

itia

l re

cogn

itio

n as

a f

inan

cial

ass

et.

The

dif

fere

nce

betw

een

the

prev

ious

car

ryin

g am

ount

of

the

asso

ciat

e an

d th

e jo

intly

con

trol

led

enti

ty a

ttri

buta

ble

to

the

reta

ined

int

eres

t an

d it

s fa

ir v

alue

is

incl

uded

in

the

dete

rmin

atio

n of

the

gai

n or

los

s on

dis

posa

l of

th

e as

soci

ate

and

the

join

tly c

ontr

olle

d en

tity

. T

he C

ompa

ny a

ccou

nts

for

all

amou

nts

prev

ious

ly

reco

gniz

ed i

n ot

her

com

preh

ensi

ve i

ncom

e in

rel

atio

n to

tha

t as

soci

ate

and

the

join

tly c

ontr

olle

d en

tity

on

the

sam

e ba

sis

as w

ould

be

requ

ired

if

that

ass

ocia

te h

ad d

irec

tly

disp

osed

of

the

rela

ted

asse

ts o

r li

abil

itie

s.

Whe

n th

e C

ompa

ny t

rans

acts

wit

h it

s as

soci

ate

and

join

t ve

ntur

es, p

rofi

ts a

nd l

osse

s re

sult

ing

from

the

tr

ansa

ctio

ns w

ith

the

asso

ciat

e ar

e re

cogn

ized

in th

e C

ompa

ny’

fina

ncia

l sta

tem

ents

onl

y to

the

exte

nt o

f in

tere

sts

in th

e as

soci

ate

and

the

join

tly

cont

roll

ed e

ntit

y th

at a

re n

ot r

elat

ed to

the

Com

pany

. P

rop

erty

, Pla

nt

and

Eq

uip

men

t P

rope

rty,

pla

nt a

nd e

quip

men

t ar

e ta

ngib

le i

tem

s th

at a

re h

eld

for

use

in t

he p

rodu

ctio

n or

sup

ply

of g

oods

or

ser

vice

s, f

or r

enta

l to

oth

ers,

or

for

adm

inis

trat

ive

purp

oses

and

are

exp

ecte

d to

be

used

for

mor

e th

an

one

peri

od. T

he c

ost o

f an

item

of

prop

erty

, pla

nt a

nd e

quip

men

t sha

ll b

e re

cogn

ized

as

an a

sset

if, a

nd o

nly

if,

it i

s pr

obab

le t

hat

futu

re e

cono

mic

ben

efit

s as

soci

ated

wit

h th

e it

em w

ill

flow

to

the

Com

pany

; an

d th

e co

st o

f th

e ite

m c

an b

e m

easu

red

reli

ably

. P

rope

rty,

pla

nt a

nd e

quip

men

t ar

e st

ated

at

cost

les

s re

cogn

ized

ac

cum

ulat

ed d

epre

ciat

ion

and

reco

gniz

ed a

ccum

ulat

ed im

pair

men

t los

s.

Fre

ehol

d la

nd is

not

dep

reci

ated

. D

epre

ciat

ion

is r

ecog

nize

d us

ing

the

stra

ight

-lin

e m

etho

d. E

ach

sign

ific

ant

part

is

depr

ecia

ted

sepa

rate

ly.

The

est

imat

ed u

sefu

l li

ves,

res

idua

l va

lues

and

dep

reci

atio

n m

etho

ds a

re r

evie

wed

at

the

end

of e

ach

repo

rtin

g pe

riod

, wit

h th

e ef

fect

s of

any

cha

nges

in th

e es

tim

ates

acc

ount

ed f

or o

n a

pros

pect

ive

basi

s.

Ass

ets

held

und

er f

inan

ce le

ases

are

dep

reci

ated

ove

r th

eir

expe

cted

use

ful l

ives

on

the

sam

e ba

sis

as o

wne

d as

sets

. Ass

ets

are

depr

ecia

ted

over

the

sho

rter

of

the

leas

e te

rm a

nd t

heir

use

ful

live

s us

ing

the

stra

ight

-lin

e m

etho

d.

Any

gai

n or

los

s ar

isin

g on

the

dis

posa

l or

ret

irem

ent

of a

n it

em o

f pr

oper

ty,

plan

t an

d eq

uipm

ent

is

dete

rmin

ed a

s th

e di

ffer

ence

bet

wee

n th

e sa

les

proc

eeds

and

the

car

ryin

g am

ount

of

the

asse

t an

d is

re

cogn

ized

in p

rofi

t or

loss

.

206

- 19

-

Inve

stm

ent

Pro

per

ties

In

vest

men

t pr

oper

ties

are

pro

pert

ies

held

to

earn

ren

tals

or

for

capi

tal

appr

ecia

tion

. In

vest

men

t pr

oper

ties

al

so in

clud

e la

nd h

eld

for

a cu

rren

tly

unde

term

ined

fut

ure

use.

In

vest

men

t pr

oper

ties

are

mea

sure

d in

itia

lly

at c

ost,

incl

udin

g tr

ansa

ctio

n co

sts.

Sub

sequ

ent

to i

niti

al

reco

gnit

ion,

inv

estm

ent

prop

erti

es a

re m

easu

red

at c

ost

less

acc

umul

ated

dep

reci

atio

n an

d ac

cum

ulat

ed

impa

irm

ent l

oss.

A

ny g

ain

or l

oss

aris

ing

on t

he d

erec

ogni

tion

of

inve

stm

ent

prop

erti

es i

s ca

lcul

ated

as

the

diff

eren

ce

betw

een

the

net

disp

osal

pro

ceed

s an

d th

e ca

rryi

ng a

mou

nt o

f th

e as

set

and

is i

nclu

ded

in p

rofi

t or

los

s in

th

e pe

riod

in w

hich

the

prop

erty

is d

erec

ogni

zed.

In

tan

gib

le A

sset

s In

tang

ible

ass

ets

wit

h fi

nite

use

ful

live

s th

at a

re a

cqui

red

sepa

rate

ly a

re i

niti

ally

mea

sure

d at

cos

t an

d su

bseq

uent

ly

mea

sure

d at

co

st

less

ac

cum

ulat

ed

amor

tiza

tion

an

d ac

cum

ulat

ed

impa

irm

ent

loss

. A

mor

tiza

tion

is

reco

gniz

ed o

n a

stra

ight

-lin

e ba

sis.

The

est

imat

ed u

sefu

l li

ves,

res

idua

l va

lues

, an

d am

orti

zati

on m

etho

ds a

re r

evie

wed

at

the

end

of e

ach

repo

rtin

g pe

riod

, w

ith

the

effe

cts

of a

ny c

hang

es i

n th

e es

tim

ates

bei

ng a

ccou

nted

for

on

a pr

ospe

ctiv

e ba

sis.

The

res

idua

l va

lue

of a

n in

tang

ible

ass

et w

ith

a fi

nite

use

ful

life

sha

ll b

e as

sum

ed t

o be

zer

o un

less

the

Com

pany

exp

ects

to

disp

ose

of t

he i

ntan

gibl

e as

set

befo

re th

e en

d of

its

econ

omic

life

. Im

pai

rmen

t of

Tan

gib

le a

nd

In

tan

gibl

e A

sset

s O

ther

Th

an G

ood

wil

l A

t th

e en

d of

eac

h re

port

ing

peri

od,

the

Com

pany

rev

iew

s th

e ca

rryi

ng a

mou

nts

of i

ts t

angi

ble

and

inta

ngib

le a

sset

s, e

xclu

ding

goo

dwil

l, to

det

erm

ine

whe

ther

the

re i

s an

y in

dica

tion

tha

t th

ose

asse

ts h

ave

suff

ered

an

impa

irm

ent

loss

. If

any

such

ind

icat

ion

exis

ts, t

he r

ecov

erab

le a

mou

nt o

f th

e as

set

is e

stim

ated

in

ord

er t

o de

term

ine

the

exte

nt o

f th

e im

pair

men

t lo

ss. W

hen

it i

s no

t po

ssib

le t

o es

tim

ate

the

reco

vera

ble

amou

nt o

f an

indi

vidu

al a

sset

, the

Com

pany

est

imat

es th

e re

cove

rabl

e am

ount

of

the

cash

-gen

erat

ing

unit

to

whi

ch t

he a

sset

bel

ongs

. C

orpo

rate

ass

ets

are

allo

cate

d to

the

ind

ivid

ual

cash

-gen

erat

ing

unit

s on

a

reas

onab

le

and

cons

iste

nt

basi

s;

othe

rwis

e,

corp

orat

e as

sets

ar

e al

loca

ted

to

the

smal

lest

gr

oup

of

cash

-gen

erat

ing

unit

s on

a r

easo

nabl

e an

d co

nsis

tent

all

ocat

ion

basi

s.

Inta

ngib

le a

sset

s w

ith

inde

fini

te u

sefu

l li

ves

and

inta

ngib

le a

sset

s no

t ye

t av

aila

ble

for

use

are

test

ed f

or

impa

irm

ent a

t lea

st a

nnua

lly,

and

whe

neve

r th

ere

is a

n in

dica

tion

that

the

asse

t may

be

impa

ired

. T

he r

ecov

erab

le a

mou

nt i

s th

e hi

gher

of

fair

val

ue l

ess

cost

s to

sel

l an

d va

lue

in u

se.

In a

sses

sing

val

ue i

n us

e, t

he C

ompa

ny u

ses

the

esti

mat

ed c

ash

flow

s di

scou

nted

by

the

futu

re p

re-t

ax d

isco

unt

rate

, an

d th

e di

scou

nt r

ate

refl

ects

the

curr

ent m

arke

t tim

e va

lue

of m

oney

and

the

spec

ific

ris

ks to

the

asse

t for

est

imat

ed

futu

re c

ash

flow

s no

t yet

adj

usti

ng to

the

mar

ket.

If t

he r

ecov

erab

le a

mou

nt o

f an

ass

et o

r ca

sh-g

ener

atin

g un

it is

est

imat

ed t

o be

les

s th

an i

ts c

arry

ing

amou

nt, t

he c

arry

ing

amou

nt o

f th

e as

set o

r ca

sh-g

ener

atin

g un

it is

red

uced

to it

s re

cove

rabl

e am

ount

. W

hen

an i

mpa

irm

ent

loss

is

subs

eque

ntly

is

reve

rsed

, th

e ca

rryi

ng a

mou

nt o

f th

e as

set

or c

ash-

gene

rati

ng

unit

is

incr

ease

d to

the

rev

ised

est

imat

e of

its

rec

over

able

am

ount

, bu

t on

ly t

o th

e ex

tent

of

the

carr

ying

am

ount

tha

t w

ould

hav

e be

en d

eter

min

ed h

ad n

o im

pair

men

t lo

ss b

een

reco

gniz

ed f

or t

he a

sset

or

cash

-gen

erat

ing

unit

in p

rior

yea

rs. A

rev

ersa

l of

an im

pair

men

t los

s is

rec

ogni

zed

in p

rofi

t or

loss

. F

inan

cial

In

stru

men

ts

Fin

anci

al a

sset

s an

d fi

nanc

ial

liab

ilit

ies

are

reco

gniz

ed w

hen

the

Com

pany

bec

omes

a p

arty

to

the

cont

ract

ual p

rovi

sion

s of

the

inst

rum

ents

.

- 20

-

Fin

anci

al a

sset

s an

d fi

nanc

ial

liab

ilit

ies

are

init

iall

y m

easu

red

at f

air

valu

e. T

rans

acti

on c

osts

tha

t ar

e di

rect

ly a

ttri

buta

ble

to t

he a

cqui

siti

on o

r is

suan

ce o

f fi

nanc

ial

asse

ts a

nd f

inan

cial

lia

bili

ties

(ot

her

than

fi

nanc

ial

asse

ts a

nd f

inan

cial

lia

bili

ties

at

FV

TP

L)

are

adde

d to

or

dedu

cted

fro

m t

he f

air

valu

e of

the

fi

nanc

ial

asse

ts o

r fi

nanc

ial

liab

ilit

ies,

as

appr

opri

ate,

on

init

ial

reco

gnit

ion.

Tra

nsac

tion

cos

ts d

irec

tly

attr

ibut

able

to

th

e ac

quis

itio

n of

fi

nanc

ial

asse

ts

or

fina

ncia

l li

abil

itie

s at

F

VT

PL

ar

e re

cogn

ized

im

med

iate

ly in

pro

fit o

r lo

ss.

a.

Fin

anci

al a

sset

s A

ll r

egul

ar p

urch

ases

or

sale

s of

fin

anci

al a

sset

s ar

e re

cogn

ized

and

der

ecog

nize

d on

a t

rade

dat

e ba

sis.

A

ll r

egul

ar p

urch

ases

or

sale

s of

fin

anci

al a

sset

s ar

e bu

y or

sel

l of

fin

anci

al a

sset

s in

the

per

iod

set

by

regu

lati

on o

r m

arke

t con

vent

ion.

1)

M

easu

rem

ent c

ateg

ory

Fin

anci

al a

sset

s ar

e cl

assi

fied

int

o th

e fo

llow

ing

cate

gori

es:

fina

ncia

l as

sets

at

FV

TP

L,

fina

ncia

l as

sets

at a

mor

tize

d co

st, a

nd in

vest

men

ts in

equ

ity

inst

rum

ents

at F

VT

OC

I.

a)

Fin

anci

al a

sset

s at

FV

TP

L

F

inan

cial

ass

ets

are

clas

sifi

ed a

s at

FV

TP

L w

hen

such

a f

inan

cial

ass

et is

man

dato

rily

cla

ssif

ied

or d

esig

nate

d as

at

FV

TP

L.

Fin

anci

al a

sset

s m

anda

tori

ly c

lass

ifie

d as

at

FV

TP

L i

nclu

de

inve

stm

ents

in

equi

ty i

nstr

umen

ts w

hich

are

not

des

igna

ted

as a

t F

VT

OC

I an

d de

bt i

nstr

umen

ts

that

do

not m

eet t

he a

mor

tize

d co

st c

rite

ria

or th

e F

VT

OC

I cr

iter

ia.

Fin

anci

al a

sset

s at

FV

TP

L a

re s

ubse

quen

tly m

easu

red

at f

air

valu

e, w

ith

any

gain

s or

los

ses

aris

ing

on r

emea

sure

men

t re

cogn

ized

in

prof

it or

los

s. F

air

valu

e is

det

erm

ined

in

the

man

ner

desc

ribe

d in

Not

e 31

. b)

F

inan

cial

ass

ets

at a

mor

tize

d co

st

Fin

anci

al a

sset

s th

at m

eet

the

foll

owin

g co

ndit

ions

are

sub

sequ

entl

y m

easu

red

at a

mor

tize

d co

st:

i. T

he f

inan

cial

ass

et i

s he

ld w

ithi

n a

busi

ness

mod

el w

hose

obj

ecti

ve i

s to

hol

d fi

nanc

ial

asse

ts in

ord

er to

col

lect

con

trac

tual

cas

h fl

ows;

and

ii

. T

he c

ontr

actu

al te

rms

of th

e fi

nanc

ial a

sset

giv

e ri

se o

n sp

ecif

ied

date

s to

cas

h fl

ows

that

are

so

lely

pay

men

ts o

f pr

inci

pal a

nd in

tere

st o

n th

e pr

inci

pal a

mou

nt o

utst

andi

ng.

S

ubse

quen

t to

ini

tial

rec

ogni

tion

, fi

nanc

ial

asse

ts a

t am

orti

zed

cost

, in

clud

ing

cash

and

cas

h eq

uiva

lent

s, t

rade

rec

eiva

bles

, ot

her

rece

ivab

les

and

othe

r fi

nanc

ial

asse

ts,

are

mea

sure

d at

am

orti

zed

cost

, w

hich

equ

als

the

gros

s ca

rryi

ng a

mou

nt d

eter

min

ed u

sing

the

eff

ecti

ve i

nter

est

met

hod

less

any

impa

irm

ent l

oss.

Exc

hang

e di

ffer

ence

s ar

e re

cogn

ized

in p

rofi

t or

loss

. In

tere

st i

ncom

e is

cal

cula

ted

by a

pply

ing

the

effe

ctiv

e in

tere

st r

ate

to t

he g

ross

car

ryin

g am

ount

of

a f

inan

cial

ass

et.

Cas

h eq

uiva

lent

s in

clud

e ti

me

depo

sits

wit

h or

igin

al m

atur

itie

s w

ithi

n 3

mon

ths

from

the

date

of

acqu

isit

ion,

whi

ch a

re h

ighl

y liq

uid,

rea

dily

con

vert

ible

to

a kn

own

amou

nt o

f ca

sh a

nd a

re

subj

ect

to a

n in

sign

ific

ant

risk

of

chan

ges

in v

alue

. T

hese

cas

h eq

uiva

lent

s ar

e he

ld f

or t

he

purp

ose

of m

eeti

ng s

hort

-ter

m c

ash

com

mit

men

ts.

207

- 21

-

c)

Inve

stm

ents

in e

quit

y in

stru

men

ts a

t FV

TO

CI

O

n in

itia

l re

cogn

itio

n, t

he C

ompa

ny m

ay m

ake

an i

rrev

ocab

le e

lect

ion

to d

esig

nate

inv

estm

ents

in

equ

ity

inst

rum

ents

as

at F

VT

OC

I. D

esig

nati

on a

t F

VT

OC

I is

not

per

mit

ted

if a

n eq

uity

in

vest

men

t is

hel

d fo

r tr

adin

g or

if

it i

s co

ntin

gent

con

side

rati

on r

ecog

nize

d by

an

acqu

irer

in

a bu

sine

ss c

ombi

nati

on.

Inve

stm

ents

in

equi

ty i

nstr

umen

ts a

t F

VT

OC

I ar

e su

bseq

uent

ly m

easu

red

at f

air

valu

e w

ith

gain

s an

d lo

sses

ari

sing

fro

m c

hang

es i

n fa

ir v

alue

rec

ogni

zed

in o

ther

com

preh

ensi

ve i

ncom

e an

d ac

cum

ulat

ed in

oth

er e

quit

y. T

he c

umul

ativ

e ga

in o

r lo

ss w

ill n

ot b

e re

clas

sifi

ed to

pro

fit o

r lo

ss o

n di

spos

al o

f th

e eq

uity

inve

stm

ents

; ins

tead

, the

y w

ill b

e tr

ansf

erre

d to

ret

aine

d ea

rnin

gs.

Div

iden

ds o

n th

ese

inve

stm

ents

in

equi

ty i

nstr

umen

ts a

re r

ecog

nize

d in

pro

fit

or l

oss

whe

n th

e C

ompa

ny’s

rig

ht t

o re

ceiv

e th

e di

vide

nds

is e

stab

lish

ed, u

nles

s th

e di

vide

nds

clea

rly

repr

esen

t a

reco

very

of

part

of

the

cost

of

an in

vest

men

t.

2)

Impa

irm

ent o

f fi

nanc

ial a

sset

s

The

C

ompa

ny

reco

gniz

es

a lo

ss

allo

wan

ce

for

expe

cted

cr

edit

lo

sses

on

fi

nanc

ial

asse

ts

at

amor

tize

d co

st (

incl

udin

g tr

ade

rece

ivab

les)

, as

wel

l as

cont

ract

ass

ets.

T

he C

ompa

ny a

lway

s re

cogn

izes

lif

etim

e ex

pect

ed c

redi

t lo

sses

(E

CL

s) f

or t

rade

rec

eiva

bles

and

ot

her

rece

ivab

les.

For

all

oth

er f

inan

cial

ins

trum

ents

, the

Com

pany

rec

ogni

zes

life

tim

e E

CL

s w

hen

ther

e ha

s be

en a

sig

nifi

cant

inc

reas

e in

cre

dit

risk

sin

ce i

niti

al r

ecog

niti

on. I

f, o

n th

e ot

her

hand

, the

cr

edit

ris

k on

a f

inan

cial

ins

trum

ent

has

not

incr

ease

d si

gnif

ican

tly

sinc

e in

itia

l re

cogn

itio

n, t

he

Com

pany

mea

sure

s th

e lo

ss a

llow

ance

for

that

fin

anci

al in

stru

men

t at a

n am

ount

equ

al to

12-

mon

th

EC

Ls.

E

xpec

ted

cred

it l

osse

s re

flec

t th

e w

eigh

ted

aver

age

of c

redi

t lo

sses

wit

h th

e re

spec

tive

ris

ks o

f a

defa

ult

occu

rrin

g as

the

wei

ghts

. Lif

etim

e E

CL

rep

rese

nts

the

expe

cted

cre

dit

loss

es t

hat

wil

l re

sult

fr

om a

ll p

ossi

ble

defa

ult

even

ts o

ver

the

expe

cted

lif

e of

a f

inan

cial

ins

trum

ent.

In c

ontr

ast,

12-m

onth

EC

L r

epre

sent

s th

e po

rtio

n of

lif

etim

e E

CL

tha

t is

exp

ecte

d to

res

ult

from

def

ault

eve

nts

on a

fin

anci

al in

stru

men

t tha

t are

pos

sibl

e w

ithi

n 12

mon

ths

afte

r th

e re

port

ing

date

. T

he i

mpa

irm

ent

loss

of

all

fina

ncia

l as

sets

is

reco

gniz

ed i

n pr

ofit

or

loss

by

a re

duct

ion

in t

heir

ca

rryi

ng a

mou

nts

thro

ugh

a lo

ss a

llow

ance

acc

ount

, exc

ept

for

inve

stm

ents

in

debt

ins

trum

ents

tha

t ar

e m

easu

red

at F

VT

OC

I, f

or w

hich

the

los

s al

low

ance

is

reco

gniz

ed i

n ot

her

com

preh

ensi

ve

inco

me

and

the

carr

ying

am

ount

s of

suc

h fi

nanc

ial a

sset

s ar

e no

t red

uced

.

3)

Der

ecog

niti

on o

f fi

nanc

ial a

sset

s T

he C

ompa

ny d

erec

ogni

zes

a fi

nanc

ial a

sset

onl

y w

hen

the

cont

ract

ual r

ight

s to

the

cash

flo

ws

from

th

e as

set

expi

re o

r w

hen

it t

rans

fers

the

fin

anci

al a

sset

and

sub

stan

tial

ly a

ll t

he r

isks

and

rew

ards

of

owne

rshi

p of

the

asse

t to

anot

her

part

y.

On

dere

cogn

itio

n of

a f

inan

cial

ass

et a

t am

orti

zed

cost

in

its

enti

rety

, th

e di

ffer

ence

bet

wee

n th

e as

set’

s ca

rryi

ng a

mou

nt a

nd t

he s

um o

f th

e co

nsid

erat

ion

rece

ived

and

rec

eiva

ble

is r

ecog

nize

d in

pr

ofit

or

loss

. O

n de

reco

gnit

ion

of a

n in

vest

men

t in

a d

ebt

inst

rum

ent

at F

VT

OC

I, t

he d

iffe

renc

e be

twee

n th

e as

set’

s ca

rryi

ng a

mou

nt a

nd t

he s

um o

f th

e co

nsid

erat

ion

rece

ived

and

rec

eiva

ble

and

the

cum

ulat

ive

gain

or

lo

ss

whi

ch

had

been

re

cogn

ized

in

ot

her

com

preh

ensi

ve

inco

me

is

reco

gniz

ed i

n pr

ofit

or l

oss.

How

ever

, on

dere

cogn

itio

n of

an

inve

stm

ent

in a

n eq

uity

ins

trum

ent

at

FV

TO

CI,

the

dif

fere

nce

betw

een

the

asse

t’s

carr

ying

am

ount

and

the

sum

of

the

cons

ider

atio

n re

ceiv

ed a

nd r

ecei

vabl

e is

rec

ogni

zed

in p

rofi

t or

los

s, a

nd t

he c

umul

ativ

e ga

in o

r lo

ss w

hich

had

be

en r

ecog

nize

d in

oth

er c

ompr

ehen

sive

inc

ome

is t

rans

ferr

ed d

irec

tly

to r

etai

ned

earn

ings

, wit

hout

re

cycl

ing

thro

ugh

prof

it o

r lo

ss.

- 22

-

b.

Equ

ity in

stru

men

ts

D

ebt

and

equi

ty i

nstr

umen

ts i

ssue

d by

the

Com

pany

ent

ity

are

clas

sifi

ed a

s ei

ther

fin

anci

al l

iabi

liti

es o

r as

equ

ity

in a

ccor

danc

e w

ith

the

subs

tanc

e of

the

con

trac

tual

arr

ange

men

ts a

nd t

he d

efin

itio

ns o

f a

fina

ncia

l lia

bili

ty a

nd a

n eq

uity

inst

rum

ent.

Equ

ity i

nstr

umen

ts i

ssue

d by

the

Com

pany

ent

ity a

re r

ecog

nize

d at

the

pro

ceed

s re

ceiv

ed, n

et o

f di

rect

is

sue

cost

s.

Rep

urch

ase

of t

he C

ompa

ny’s

ow

n eq

uity

ins

trum

ents

is

reco

gniz

ed i

n an

d de

duct

ed d

irec

tly

from

eq

uity

. No

gain

or

loss

is

reco

gniz

ed i

n pr

ofit

or

loss

on

the

purc

hase

, sal

e, i

ssue

or

canc

ella

tion

of

the

Com

pany

’s o

wn

equi

ty in

stru

men

ts.

c.

F

inan

cial

liab

ilit

ies

1)

Sub

sequ

ent m

easu

rem

ent

E

xcep

t fo

r fi

nanc

ial

liab

ilit

ies

at F

VT

PL

, al

l fi

nanc

ial

liab

ilit

ies

are

mea

sure

d at

am

orti

zed

cost

us

ing

the

effe

ctiv

e in

tere

st m

etho

d.

2)

D

erec

ogni

tion

of

fina

ncia

l lia

bili

ties

T

he

diff

eren

ce

betw

een

the

carr

ying

am

ount

of

a

fina

ncia

l li

abil

ity

dere

cogn

ized

an

d th

e co

nsid

erat

ion

paid

, inc

ludi

ng a

ny n

on-c

ash

asse

ts tr

ansf

erre

d or

liab

ilit

ies

assu

med

, is

reco

gniz

ed in

pr

ofit

or

loss

.

d.

Con

vert

ible

bon

ds

The

com

pone

nt p

arts

of

com

poun

d in

stru

men

ts (

i.e.

conv

erti

ble

bond

s) i

ssue

d by

the

Com

pany

are

cl

assi

fied

se

para

tely

as

fi

nanc

ial

liab

ilit

ies

and

equi

ty

in

acco

rdan

ce

wit

h th

e su

bsta

nce

of

the

cont

ract

ual a

rran

gem

ents

and

the

defi

nitio

ns o

f a

fina

ncia

l lia

bili

ty a

nd a

n eq

uity

inst

rum

ent.

On

init

ial

reco

gnit

ion,

the

fai

r va

lue

of t

he l

iabi

lity

com

pone

nt i

s es

tim

ated

usi

ng t

he p

reva

ilin

g m

arke

t in

tere

st r

ate

for

sim

ilar

non

-con

vert

ible

ins

trum

ents

. T

his

amou

nt i

s re

cord

ed a

s a

liab

ility

on

an

amor

tize

d co

st b

asis

usi

ng t

he e

ffec

tive

int

eres

t m

etho

d un

til

exti

ngui

shed

upo

n co

nver

sion

or

the

inst

rum

ent’

s m

atur

ity

date

. Any

em

bedd

ed d

eriv

ativ

e li

abil

ity is

mea

sure

d at

fai

r va

lue.

T

he c

onve

rsio

n op

tion

clas

sifi

ed a

s eq

uity

is

dete

rmin

ed b

y de

duct

ing

the

amou

nt o

f th

e li

abil

ity

com

pone

nt f

rom

the

fair

val

ue o

f th

e co

mpo

und

inst

rum

ent a

s a

who

le. T

his

is r

ecog

nize

d an

d in

clud

ed

in e

quity

, ne

t of

inc

ome

tax

effe

cts,

and

is

not

subs

eque

ntly

rem

easu

red.

In

addi

tion

, th

e co

nver

sion

op

tion

cla

ssif

ied

as e

quity

wil

l re

mai

n in

equ

ity u

ntil

the

con

vers

ion

opti

on i

s ex

erci

sed,

in

whi

ch c

ase,

th

e ba

lanc

e re

cogn

ized

in

equi

ty w

ill

be t

rans

ferr

ed t

o ca

pita

l su

rplu

s -

shar

e pr

emiu

ms.

Whe

n th

e co

nver

sion

opt

ion

rem

ains

une

xerc

ised

at

mat

urit

y, t

he b

alan

ce r

ecog

nize

d in

equ

ity w

ill

be t

rans

ferr

ed

to c

apit

al s

urpl

us -

sha

re p

rem

ium

s.

Tra

nsac

tion

cos

ts t

hat

rela

te t

o th

e is

suan

ce o

f th

e co

nver

tibl

e no

tes

are

allo

cate

d to

the

lia

bili

ty a

nd

equi

ty c

ompo

nent

s in

pro

port

ion

to t

he a

lloc

atio

n of

the

gro

ss p

roce

eds.

Tra

nsac

tion

cos

ts r

elat

ing

to

the

equi

ty c

ompo

nent

are

rec

ogni

zed

dire

ctly

in

equi

ty.

Tra

nsac

tion

cos

ts r

elat

ing

to t

he l

iabi

lity

co

mpo

nent

are

incl

uded

in th

e ca

rryi

ng a

mou

nt o

f th

e li

abil

ity c

ompo

nent

.

e.

Der

ivat

ive

fina

ncia

l ins

trum

ents

T

he C

ompa

ny e

nter

s in

to a

var

iety

of

deri

vati

ve f

inan

cial

inst

rum

ents

to m

anag

e it

s ex

posu

re to

inte

rest

ra

te,

fore

ign

exch

ange

rat

e an

d fu

el p

rice

ris

ks,

incl

udin

g fo

reig

n ex

chan

ge f

orw

ard

cont

ract

s, i

nter

est

rate

sw

aps,

cur

renc

y op

tion

s sw

aps

and

fuel

sw

aps.

208

- 23

-

Der

ivat

ives

are

ini

tial

ly r

ecog

nize

d at

fai

r va

lue

at t

he d

ate

the

deri

vati

ve c

ontr

acts

are

ent

ered

int

o an

d ar

e su

bseq

uent

ly r

emea

sure

d to

thei

r fa

ir v

alue

at t

he e

nd o

f ea

ch r

epor

ting

per

iod.

The

res

ulti

ng g

ain

or

loss

is

reco

gniz

ed i

n pr

ofit

or

loss

im

med

iate

ly u

nles

s th

e de

riva

tive

is

desi

gnat

ed a

nd e

ffec

tive

as

a he

dgin

g in

stru

men

t, in

whi

ch e

vent

, the

tim

ing

of th

e re

cogn

itio

n in

pro

fit o

r lo

ss d

epen

ds o

n th

e na

ture

of

the

hed

ging

rel

atio

nshi

p. W

hen

the

fair

val

ue o

f a

deri

vati

ve f

inan

cial

ins

trum

ent

is p

osit

ive,

the

de

riva

tive

is

reco

gniz

ed a

s a

fina

ncia

l as

set;

whe

n th

e fa

ir v

alue

of

a de

riva

tive

fin

anci

al i

nstr

umen

t is

ne

gati

ve, t

he d

eriv

ativ

e is

rec

ogni

zed

as a

fin

anci

al li

abil

ity.

H

edge

Acc

oun

tin

g T

he C

ompa

ny e

nter

s in

to s

ome

deri

vati

ve t

rans

acti

ons

that

aim

to

man

age

inte

rest

rat

es,

fore

ign

exch

ange

ra

tes,

fu

el

pric

es,

and

othe

r fa

ctor

s af

fect

ing

gain

s or

lo

sses

on

as

sets

an

d li

abil

itie

s.

The

he

dgin

g tr

ansa

ctio

ns a

re d

efin

ed a

s ca

sh f

low

hed

ges.

Whe

n en

teri

ng i

nto

hedg

ing

tran

sact

ions

, th

e C

ompa

ny h

as

prep

ared

off

icia

l do

cum

ents

tha

t de

scri

be t

he h

edgi

ng r

elat

ions

hip

betw

een

hedg

ing

inst

rum

ents

and

ite

ms

whi

ch h

ave

been

hed

ged,

the

obj

ecti

ve o

f ri

sk m

anag

emen

t, th

e he

dgin

g st

rate

gy,

and

the

way

to

eval

uate

th

e ef

fect

iven

ess

of th

e he

dgin

g in

stru

men

t.

The

eff

ecti

ve p

orti

on o

f ch

ange

s in

the

fair

val

ue o

f de

riva

tive

s th

at a

re d

esig

nate

d an

d qu

alif

y as

cas

h fl

ow

hedg

es i

s re

cogn

ized

in

othe

r co

mpr

ehen

sive

inc

ome.

The

gai

n or

los

s re

lati

ng t

o th

e in

effe

ctiv

e po

rtio

n is

re

cogn

ized

imm

edia

tely

in p

rofi

t or

loss

. T

he a

ssoc

iate

d ga

ins

or l

osse

s th

at w

ere

reco

gniz

ed i

n ot

her

com

preh

ensi

ve i

ncom

e ar

e re

clas

sifi

ed f

rom

eq

uity

to

prof

it o

r lo

ss a

s a

recl

assi

fica

tion

adj

ustm

ent

in t

he l

ine

item

rel

atin

g to

the

hed

ged

item

in

the

sam

e pe

riod

as

whe

n th

e he

dged

ite

m a

ffec

ts p

rofi

t or

los

s. I

f a

hedg

e of

a f

orec

aste

d tr

ansa

ctio

n su

bseq

uent

ly r

esul

ts i

n th

e re

cogn

itio

n of

a n

on-f

inan

cial

ass

et o

r a

non-

fina

ncia

l li

abil

ity,

the

ass

ocia

ted

gain

s an

d lo

sses

tha

t w

ere

reco

gniz

ed i

n ot

her

com

preh

ensi

ve i

ncom

e ar

e re

mov

ed f

rom

equ

ity a

nd a

re

incl

uded

in th

e in

itia

l cos

t of

the

non-

fina

ncia

l ass

et o

r no

n-fi

nanc

ial l

iabi

lity

. S

tart

ing

from

201

8, th

e C

ompa

ny d

isco

ntin

ues

hedg

e ac

coun

ting

onl

y w

hen

the

hedg

ing

rela

tion

ship

cea

ses

to m

eet

the

qual

ifyi

ng c

rite

ria;

for

ins

tanc

e, w

hen

the

hedg

ing

inst

rum

ent

expi

res

or i

s so

ld,

term

inat

ed o

r ex

erci

sed.

The

cum

ulat

ive

gain

or

loss

on

the

hedg

ing

inst

rum

ent

that

has

bee

n pr

evio

usly

rec

ogni

zed

in

othe

r co

mpr

ehen

sive

inc

ome

from

the

per

iod

in w

hich

the

hed

ge w

as e

ffec

tive

rem

ains

sep

arat

ely

in e

quit

y un

til

the

fore

cast

ed t

rans

acti

on o

ccur

s. W

hen

a fo

reca

sted

tra

nsac

tion

is

no l

onge

r ex

pect

ed t

o oc

cur,

the

ga

in o

r lo

ss a

ccum

ulat

ed in

equ

ity is

rec

ogni

zed

imm

edia

tely

in p

rofi

t or

loss

. P

rovi

sion

s T

he C

ompa

ny r

ecog

nize

s pr

ovis

ions

whe

n th

e C

ompa

ny h

as a

pre

sent

obl

igat

ion

(leg

al o

r co

nstr

ucti

ve)

aris

ing

from

pas

t ev

ents

(le

gal

or c

onst

ruct

ive

obli

gati

on),

pay

men

t fo

r th

e ob

ligat

ion

is p

roba

ble,

and

the

ex

pend

itur

e fo

r se

ttli

ng th

e ob

liga

tion

can

be

esti

mat

ed r

elia

bly.

T

he a

mou

nt r

ecog

nize

d as

a p

rovi

sion

is

the

best

est

imat

e of

the

exp

endi

ture

req

uire

d to

set

tle t

he p

rese

nt

obli

gati

on, t

akin

g in

to a

ccou

nt th

e ri

sks

and

unce

rtai

ntie

s su

rrou

ndin

g th

e ob

ligat

ion

as o

f th

e ba

lanc

e sh

eet

date

. W

hen

a pr

ovis

ion

is m

easu

red

usin

g th

e ca

sh f

low

s es

tim

ated

to

sett

le t

he p

rese

nt o

blig

atio

n, i

ts

carr

ying

am

ount

is

the

pres

ent

valu

e of

tho

se c

ash

flow

s. W

hen

the

airc

raft

lea

se c

ontr

acts

exp

ire

and

wil

l be

ret

urne

d to

less

or, t

he C

ompa

ny w

ill a

sses

s if

ther

e ar

e ex

isti

ng o

blig

atio

ns a

nd if

a p

rovi

sion

is r

equi

red

whe

n si

gnin

g th

e le

ase

cont

ract

. R

even

ue

Rec

ogn

itio

n

Whe

n ap

plyi

ng I

FR

S 1

5 du

ring

201

8, th

e C

ompa

ny r

ecog

nize

s re

venu

e by

app

lyin

g th

e fo

llow

ing

step

s:

Iden

tify

ing

the

cont

ract

wit

h th

e cu

stom

er;

Iden

tify

ing

the

perf

orm

ance

obl

igat

ions

in th

e co

ntra

ct;

Det

erm

ine

the

tran

sact

ion

pric

e;

All

ocat

e th

e tr

ansa

ctio

n pr

ice

to th

e pe

rfor

man

ce o

blig

atio

ns in

the

cont

ract

; and

- 24

-

Rec

ogni

ze r

even

ue w

hen

the

Com

pany

sat

isfi

es a

per

form

ance

obl

igat

ion.

S

hipp

ing

serv

ice

reve

nue

Pas

seng

er a

nd c

argo

rev

enue

are

rec

ogni

zed

as r

even

ue w

hen

the

pass

enge

rs a

nd g

oods

are

act

uall

y ca

rrie

d.

Whe

n th

e ti

cket

s ar

e so

ld, d

ue to

the

fact

that

the

fulf

illm

ent o

blig

atio

ns o

f th

e sh

ipm

ent h

ave

not b

een

met

, th

e re

leva

nt a

mou

nt o

f re

venu

e is

fir

st r

ecor

ded

as c

ontr

act

liab

ilit

ies

unti

l pa

ssen

gers

act

uall

y bo

ard.

B

efor

e 20

17, t

he r

elev

ant a

mou

nts

wer

e re

cord

ed a

s de

ferr

ed r

even

ue.

Lea

sin

g 20

19

At t

he in

cept

ion

of a

con

trac

t, th

e C

ompa

ny a

sses

ses

whe

ther

the

cont

ract

is, o

r co

ntai

ns, a

leas

e.

The

Com

pany

as

less

ee

The

Com

pany

rec

ogni

zes

righ

t-of

-use

ass

ets

and

leas

e li

abil

itie

s fo

r al

l lea

ses

at th

e co

mm

ence

men

t dat

e of

a

leas

e, e

xcep

t fo

r sh

ort-

term

lea

ses

and

low

-val

ue a

sset

lea

ses

acco

unte

d fo

r ap

plyi

ng a

rec

ogni

tion

ex

empt

ion

whe

re le

ase

paym

ents

are

rec

ogni

zed

as e

xpen

ses

on a

str

aigh

t-li

ne b

asis

ove

r th

e le

ase

term

s.

Rig

ht-o

f-us

e as

sets

are

ini

tial

ly m

easu

red

at c

ost,

whi

ch c

ompr

ises

the

ini

tial

mea

sure

men

t of

lea

se

liab

ilit

ies

adju

sted

for

lea

se p

aym

ents

mad

e at

or

befo

re t

he c

omm

ence

men

t da

te,

plus

any

ini

tial

dir

ect

cost

s in

curr

ed a

nd a

n es

tim

ate

of c

osts

nee

ded

to r

esto

re th

e un

derl

ying

ass

ets,

and

less

any

leas

e in

cent

ives

re

ceiv

ed.

Rig

ht-o

f-us

e as

sets

ar

e su

bseq

uent

ly

mea

sure

d at

co

st

less

ac

cum

ulat

ed

depr

ecia

tion

an

d im

pair

men

t lo

sses

and

adj

uste

d fo

r an

y re

mea

sure

men

t of

the

lea

se l

iabi

liti

es.

Rig

ht-o

f-us

e as

sets

are

pr

esen

ted

on a

sep

arat

e li

ne in

the

bala

nce

shee

ts.

Rig

ht-o

f-us

e as

sets

are

dep

reci

ated

usi

ng t

he s

trai

ght-

line

met

hod

from

the

com

men

cem

ent

date

s to

the

ea

rlie

r of

the

end

of

the

usef

ul l

ives

of

the

righ

t-of

-use

ass

ets

or t

he e

nd o

f th

e le

ase

term

s. H

owev

er,

if

leas

es t

rans

fer

owne

rshi

p of

the

und

erly

ing

asse

ts t

o th

e C

ompa

ny b

y th

e en

d of

the

lea

se t

erm

s or

if

the

cost

s of

rig

ht-o

f-us

e as

sets

ref

lect

tha

t th

e C

ompa

ny w

ill

exer

cise

a p

urch

ase

opti

on,

the

Com

pany

de

prec

iate

s th

e ri

ght-

of-u

se a

sset

s fr

om t

he c

omm

ence

men

t da

tes

to t

he e

nd o

f th

e us

eful

liv

es o

f th

e un

derl

ying

ass

ets.

L

ease

lia

bili

ties

are

ini

tial

ly m

easu

red

at t

he p

rese

nt v

alue

of

the

leas

e pa

ymen

ts,

whi

ch c

ompr

ise

fixe

d pa

ymen

ts,

in-s

ubst

ance

fix

ed p

aym

ents

, va

riab

le l

ease

pay

men

ts w

hich

dep

end

on a

n in

dex

or a

rat

e,

resi

dual

val

ue g

uara

ntee

s, t

he e

xerc

ise

pric

e of

a p

urch

ase

opti

on i

f th

e le

ssee

is

reas

onab

ly c

erta

in t

o ex

erci

se t

hat

opti

on,

and

paym

ents

of

pena

ltie

s fo

r te

rmin

atin

g a

leas

e if

the

lea

se t

erm

ref

lect

s su

ch

term

inat

ion,

les

s an

y le

ase

ince

ntiv

es p

ayab

le.

The

lea

se p

aym

ents

are

dis

coun

ted

usin

g th

e in

tere

st r

ate

impl

icit

in

a le

ase,

if

that

rat

e ca

n be

rea

dily

det

erm

ined

. If

tha

t ra

te c

anno

t be

rea

dily

det

erm

ined

, th

e C

ompa

ny u

ses

the

less

ee’s

incr

emen

tal b

orro

win

g ra

te.

S

ubse

quen

tly,

leas

e li

abil

itie

s ar

e m

easu

red

at a

mor

tize

d co

st u

sing

the

eff

ecti

ve i

nter

est

met

hod,

wit

h in

tere

st e

xpen

se r

ecog

nize

d ov

er t

he l

ease

ter

ms.

Whe

n th

ere

is a

cha

nge

in a

lea

se t

erm

, a

chan

ge i

n th

e am

ount

s ex

pect

ed to

be

paya

ble

unde

r a

resi

dual

val

ue g

uara

ntee

, a c

hang

e in

the

asse

ssm

ent o

f an

opt

ion

to

purc

hase

an

unde

rlyi

ng a

sset

, or

a ch

ange

in

futu

re l

ease

pay

men

ts r

esul

ting

fro

m a

cha

nge

in a

n in

dex

or a

ra

te u

sed

to d

eter

min

e th

ose

paym

ents

, th

e C

ompa

ny r

emea

sure

s th

e le

ase

liab

ilit

ies

wit

h a

corr

espo

ndin

g ad

just

men

t to

the

righ

t-of

-use

-ass

ets.

Lea

se li

abil

itie

s ar

e pr

esen

ted

on a

sep

arat

e li

ne in

the

bala

nce

shee

ts.

Var

iabl

e le

ase

paym

ents

tha

t do

not

dep

end

on a

n in

dex

or a

rat

e ar

e re

cogn

ized

as

expe

nses

in

the

peri

ods

in w

hich

they

are

incu

rred

.

209

- 25

-

For

sal

e an

d le

aseb

ack

tran

sact

ions

, if

the

tra

nsfe

r of

an

asse

t sa

tisf

ies

the

requ

irem

ents

of

IFR

S 1

5 to

be

acco

unte

d fo

r as

a s

ale,

the

Com

pany

rec

ogni

zes

only

the

am

ount

of

any

gain

or

loss

whi

ch r

elat

es t

o th

e ri

ghts

tra

nsfe

rred

to

the

buye

r-le

ssor

, an

d ad

just

s th

e of

f-m

arke

t te

rms

to m

easu

re t

he s

ale

proc

eeds

at

fair

va

lue.

If

the

tran

sfer

doe

s no

t sa

tisf

y th

e re

quir

emen

ts o

f IF

RS

15

to b

e ac

coun

ted

for

as a

sal

e, i

t is

ac

coun

ted

for

as a

fin

anci

ng tr

ansa

ctio

n.

2018

L

ease

s ar

e cl

assi

fied

as

fina

nce

leas

es w

hene

ver

the

term

s of

the

leas

e tr

ansf

er s

ubst

anti

ally

all

the

risk

s an

d re

war

ds o

f ow

ners

hip

to th

e le

ssee

. All

oth

er le

ases

are

cla

ssif

ied

as o

pera

ting

leas

es.

The

Com

pany

as

less

ee

Ass

ets

held

und

er f

inan

ce l

ease

s ar

e in

itia

lly

reco

gniz

ed a

s as

sets

of

the

Com

pany

at

the

low

er o

f th

eir

fair

va

lue

at t

he i

ncep

tion

of

the

leas

e or

the

pre

sent

val

ue o

f th

e m

inim

um l

ease

pay

men

ts. T

he c

orre

spon

ding

li

abil

ity

to th

e le

ssee

is in

clud

ed in

the

bala

nce

shee

ts a

s a

fina

nce

leas

e ob

liga

tion

. F

inan

ce e

xpen

ses

are

reco

gniz

ed i

mm

edia

tely

in

prof

it o

r lo

ss,

unle

ss t

hey

are

dire

ctly

att

ribu

tabl

e to

qu

alif

ying

ass

ets,

in

whi

ch c

ase,

the

y ar

e ca

pita

lize

d in

acc

orda

nce

wit

h th

e C

ompa

ny’s

gen

eral

pol

icy

on

borr

owin

g co

sts.

O

pera

ting

leas

e pa

ymen

ts a

re r

ecog

nize

d as

exp

ense

s on

a s

trai

ght-

line

bas

is o

ver

the

leas

e te

rm

Em

plo

yee

Ben

efit

s a.

S

hort

-ter

m e

mpl

oyee

ben

efit

s L

iabi

liti

es r

ecog

nize

d in

res

pect

of

shor

t-te

rm e

mpl

oyee

ben

efit

s ar

e m

easu

red

at t

he u

ndis

coun

ted

amou

nt o

f th

e be

nefi

ts e

xpec

ted

to b

e pa

id in

exc

hang

e fo

r th

e re

late

d se

rvic

es.

b.

Ret

irem

ent b

enef

its

Pay

men

ts

to

the

defi

ned

cont

ribu

tion

re

tire

men

t be

nefi

t pl

an

are

reco

gniz

ed

as

expe

nses

w

hen

empl

oyee

s ha

ve r

ende

red

serv

ices

ent

itli

ng th

em to

the

cont

ribu

tion

s.

Def

ined

ben

efit

cos

ts (

incl

udin

g se

rvic

e co

st,

net

inte

rest

and

rem

easu

rem

ent)

und

er t

he d

efin

ed

cont

ribu

tion

reti

rem

ent

bene

fit

plan

are

det

erm

ined

usi

ng t

he p

roje

cted

uni

t cr

edit

met

hod.

Ser

vice

cos

t (i

nclu

ding

cur

rent

ser

vice

cos

t an

d pa

st s

ervi

ce c

ost)

and

net

int

eres

t on

the

net

def

ined

ben

efit

liab

ilit

ies

(ass

ets)

are

rec

ogni

zed

as e

mpl

oyee

ben

efit

s ex

pens

e in

the

per

iod

in w

hich

the

y oc

cur.

R

emea

sure

men

t, co

mpr

isin

g ac

tuar

ial g

ains

and

loss

es a

nd th

e re

turn

on

plan

ass

ets

(exc

ludi

ng in

tere

st),

is

re

cogn

ized

in

ot

her

com

preh

ensi

ve

inco

me

in

the

peri

od i

n w

hich

it

oc

curs

. R

emea

sure

men

t re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e is

ref

lect

ed im

med

iate

ly in

ret

aine

d ea

rnin

gs a

nd w

ill n

ot b

e re

clas

sifi

ed to

pro

fit o

r lo

ss.

N

et d

efin

ed b

enef

it l

iabi

liti

es (

asse

ts)

repr

esen

t th

e ac

tual

def

icit

in

the

Com

pany

’s d

efin

ed b

enef

it

plan

s.

Bor

row

ing

Cos

ts

Bor

row

ing

cost

s di

rect

ly a

ttri

buta

ble

to t

he a

cqui

siti

on,

cons

truc

tion

or

prod

ucti

on o

f qu

alif

ying

ass

ets

(ass

ets

whi

ch a

re s

ubst

anti

ally

rea

dy f

or th

eir

inte

nded

use

or

sale

thro

ugh

a fa

irly

long

per

iod)

are

add

ed to

th

e co

st o

f th

ose

asse

ts, u

ntil

suc

h ti

me

as th

e as

sets

are

sub

stan

tial

ly r

eady

for

thei

r in

tend

ed u

se o

r sa

le.

Inve

stm

ent i

ncom

e ea

rned

on

the

tem

pora

ry in

vest

men

t of

spec

ific

bor

row

ings

pen

ding

thei

r ex

pend

itur

e on

qu

alif

ying

ass

ets

is d

educ

ted

from

the

borr

owin

g co

sts

elig

ible

for

cap

ital

izat

ion.

- 26

-

Oth

er th

an th

at w

hich

is s

tate

d ab

ove,

all

oth

er b

orro

win

g co

sts

are

reco

gniz

ed in

pro

fit o

r lo

ss in

the

peri

od

in w

hich

they

are

incu

rred

. F

req

uen

t F

lyer

Pro

gram

s T

he C

ompa

ny h

as a

“D

ynas

ty F

lyer

Pro

gram

” th

roug

h w

hich

pro

gram

mem

bers

can

con

vert

acc

umul

ated

m

ilea

ge to

a c

abin

upg

rade

, fre

e ti

cket

s an

d ot

her

mem

ber

rew

ards

. A

por

tion

of

pass

enge

r re

venu

e at

trib

utab

le t

o th

e re

war

ds f

or t

he f

requ

ent

flye

r pr

ogra

m i

s de

ferr

ed.

The

C

ompa

ny r

ecog

nize

s th

is d

efer

red

reve

nue

as r

even

ue o

nly

whe

n th

e C

ompa

ny h

as f

ulfi

lled

its

obl

igat

ions

on

the

gran

ting

of r

ewar

ds o

r w

hen

the

peri

od f

or c

onve

rtin

g th

e m

ilea

ge to

rew

ards

has

exp

ired

. S

har

e-b

ased

Pay

men

t A

rran

gem

ents

E

quit

y-se

ttle

d sh

are-

base

d pa

ymen

ts t

o em

ploy

ees

are

mea

sure

d at

the

fai

r va

lue

of t

he e

quit

y in

stru

men

ts

at th

e gr

ant d

ate.

T

he f

air

valu

e de

term

ined

at

the

gran

t da

te o

f th

e eq

uity

-set

tled

sha

re-b

ased

pay

men

ts i

s ex

pens

ed o

n a

stra

ight

-lin

e ba

sis

over

the

ves

ting

per

iod,

bas

ed o

n th

e C

ompa

ny’s

est

imat

e of

equ

ity

inst

rum

ent

that

wil

l ev

entu

ally

ves

t, w

ith

a co

rres

pond

ing

incr

ease

in

capi

tal

surp

lus

- em

ploy

ee s

hare

opt

ions

. T

he f

air

valu

e de

term

ined

at

the

gran

t da

te o

f th

e eq

uity

-set

tled

sha

re-b

ased

pay

men

ts i

s re

cogn

ized

as

an e

xpen

se i

n fu

ll at

the

gran

t dat

e w

hen

the

gran

ted

shar

e op

tion

s ar

e ve

sted

imm

edia

tely

. T

axat

ion

In

com

e ta

x ex

pens

e re

pres

ents

the

sum

of

the

curr

ent t

ax a

nd d

efer

red

tax.

a.

C

urre

nt ta

x

The

cur

rent

tax

lia

bili

ties

are

bas

ed o

n cu

rren

t ta

xabl

e pr

ofit

. Sin

ce p

art

of t

he i

ncom

e an

d ex

pens

es a

re

taxa

ble

or d

educ

tibl

e in

oth

er p

erio

ds,

or i

n ac

cord

ance

wit

h th

e re

leva

nt t

ax l

aws

are

taxa

ble

or

dedu

ctib

le,

curr

ent

taxa

ble

prof

it d

iffe

rs f

rom

net

pro

fit

repo

rted

in

the

stat

emen

ts o

f co

mpr

ehen

sive

in

com

e.

The

Com

pany

’s c

urre

nt t

ax l

iabi

liti

es a

re c

alcu

late

d by

the

tax

rat

e w

as l

egis

late

d or

sub

stan

tial

ly

legi

slat

ed a

t the

bal

ance

she

et d

ate.

A

ccor

ding

to

the

Inco

me

Tax

Law

, an

addi

tion

al t

ax a

t 10

% o

f un

appr

opri

ated

ear

ning

s is

pro

vide

d fo

r as

inco

me

tax

in th

e ye

ar th

e sh

areh

olde

rs a

ppro

ve th

e re

tent

ion

of th

ese

earn

ings

. A

djus

tmen

ts o

f pr

ior

year

s’ ta

x li

abili

ties

are

add

ed to

or

dedu

cted

fro

m th

e cu

rren

t yea

r’s

tax

prov

isio

n.

b.

D

efer

red

tax

Def

erre

d ta

x is

rec

ogni

zed

on t

empo

rary

dif

fere

nces

bet

wee

n th

e ca

rryi

ng a

mou

nts

of a

sset

s an

d li

abil

itie

s in

the

fina

ncia

l sta

tem

ents

and

the

corr

espo

ndin

g ta

x ba

ses

used

in th

e co

mpu

tati

on o

f ta

xabl

e pr

ofit

. D

efer

red

tax

liab

ilit

ies

are

gene

rall

y re

cogn

ized

for

all

tax

able

tem

pora

ry d

iffe

renc

es.

Def

erre

d ta

x as

sets

are

gen

eral

ly r

ecog

nize

d fo

r al

l de

duct

ible

tem

pora

ry d

iffe

renc

es,

unus

ed l

oss

carr

yfor

war

ds

and

unus

ed

tax

cred

its

for

purc

hase

s of

m

achi

nery

, eq

uipm

ent

and

tech

nolo

gy,

rese

arch

an

d de

velo

pmen

t ex

pend

itur

es,

and

pers

onne

l tr

aini

ng e

xpen

ditu

res

to t

he e

xten

t th

at i

t is

pro

babl

e th

at

taxa

ble

prof

it w

ill b

e av

aila

ble

agai

nst w

hich

thos

e de

duct

ible

tem

pora

ry d

iffe

renc

es c

an b

e ut

iliz

ed.

210

- 27

-

Def

erre

d ta

x li

abil

itie

s ar

e re

cogn

ized

for

tax

able

tem

pora

ry d

iffe

renc

es a

ssoc

iate

d w

ith

inve

stm

ents

in

subs

idia

ries

and

ass

ocia

tes

and

inte

rest

s in

joi

nt v

entu

res,

exc

ept

whe

re t

he C

ompa

ny i

s ab

le t

o co

ntro

l th

e re

vers

al o

f th

e te

mpo

rary

dif

fere

nce

and

it is

pro

babl

e th

at th

e te

mpo

rary

dif

fere

nce

wil

l not

rev

erse

in

the

for

esee

able

fut

ure.

Def

erre

d ta

x as

sets

ari

sing

fro

m d

educ

tibl

e te

mpo

rary

dif

fere

nces

ass

ocia

ted

wit

h su

ch in

vest

men

ts a

nd in

tere

sts

are

only

rec

ogni

zed

to th

e ex

tent

that

it is

pro

babl

e th

at th

ere

wil

l be

suff

icie

nt t

axab

le p

rofi

t ag

ains

t w

hich

to

util

ize

the

bene

fits

of

the

tem

pora

ry d

iffe

renc

es a

nd t

hey

are

expe

cted

to r

ever

se in

the

fore

seea

ble

futu

re.

The

car

ryin

g am

ount

of

defe

rred

tax

ass

ets

is r

evie

wed

at

the

end

of e

ach

repo

rtin

g pe

riod

and

red

uced

to

the

ext

ent

that

it

is n

o lo

nger

pro

babl

e th

at s

uffi

cien

t ta

xabl

e pr

ofit

wil

l be

ava

ilab

le t

o al

low

all

or

part

of

the

asse

ts t

o be

rec

over

ed.

A p

revi

ousl

y un

reco

gniz

ed d

efer

red

tax

asse

t is

als

o re

view

ed a

t th

e en

d of

eac

h re

port

ing

peri

od a

nd r

ecog

nize

d to

the

exte

nt th

at it

has

bec

ome

prob

able

that

fut

ure

taxa

ble

prof

it w

ill a

llow

the

defe

rred

tax

asse

t to

be r

ecov

ered

. D

efer

red

tax

liab

ilit

ies

and

asse

ts a

re m

easu

red

at th

e ta

x ra

tes

that

are

exp

ecte

d to

app

ly in

the

peri

od in

w

hich

the

lia

bili

ties

are

set

tled

or

the

asse

ts a

re r

eali

zed,

bas

ed o

n ta

x ra

tes

(and

tax

law

s) t

hat

have

be

en e

nact

ed o

r su

bsta

ntiv

ely

enac

ted

by t

he e

nd o

f th

e re

port

ing

peri

od. T

he m

easu

rem

ent

of d

efer

red

tax

liab

ilit

ies

and

asse

ts r

efle

cts

the

tax

cons

eque

nces

tha

t w

ould

fol

low

fro

m t

he m

anne

r in

whi

ch t

he

Com

pany

exp

ects

, at

the

end

of

the

repo

rtin

g pe

riod

, to

rec

over

or

sett

le t

he c

arry

ing

amou

nt o

f it

s as

sets

and

liab

ilit

ies.

c.

Cur

rent

and

def

erre

d ta

xes

for

the

year

C

urre

nt a

nd d

efer

red

taxe

s ar

e re

cogn

ized

in

prof

it o

r lo

ss,

exce

pt w

hen

they

rel

ate

to i

tem

s th

at a

re

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

or d

irec

tly

in e

quity

, in

whi

ch c

ase,

the

curr

ent a

nd d

efer

red

taxe

s ar

e al

so r

ecog

nize

d in

oth

er c

ompr

ehen

sive

inco

me

or d

irec

tly

in e

quity

, res

pect

ivel

y.

Mai

nte

nan

ce a

nd

Ove

rhau

l Cos

ts

Rou

tine

mai

nten

ance

cos

ts a

re r

ecog

nize

d in

pro

fit o

r lo

ss in

the

peri

od in

whi

ch th

ey a

re in

curr

ed.

The

ove

rhau

l co

sts

of a

n ow

ned

or l

ease

d ai

rcra

ft t

hat

mee

t th

e cr

iter

ia f

or f

ixed

ass

et c

apit

aliz

atio

n ar

e ca

pita

lize

d as

rep

lace

men

ts f

or a

ircr

aft

and

engi

nes

and

are

depr

ecia

ted

on a

str

aigh

t li

ne b

asis

ove

r th

e ex

pect

ed a

nnua

l ove

rhau

l cyc

le.

5

. C

RIT

ICA

L A

CC

OU

NT

ING

JU

DG

ME

NT

S A

ND

KE

Y S

OU

RC

ES

OF

ES

TIM

AT

ION

U

NC

ER

TA

INT

Y

In t

he a

ppli

cati

on o

f th

e C

ompa

ny’s

acc

ount

ing

poli

cies

as

disc

lose

d in

Not

e 4,

man

agem

ent

is r

equi

red

to

mak

e ju

dgm

ents

, es

tim

atio

ns a

nd a

ssum

ptio

ns a

bout

the

car

ryin

g am

ount

s of

ass

ets

and

liab

ilit

ies

that

are

no

t re

adil

y ap

pare

nt f

rom

oth

er s

ourc

es.

The

est

imat

es a

nd a

ssoc

iate

d as

sum

ptio

ns a

re b

ased

on

hist

oric

al

expe

rien

ce a

nd o

ther

fac

tors

that

are

con

side

red

rele

vant

. Act

ual r

esul

ts m

ay d

iffe

r fr

om th

ese

esti

mat

es.

The

est

imat

es a

nd u

nder

lyin

g as

sum

ptio

ns a

re r

evie

wed

on

an o

ngoi

ng b

asis

. R

evis

ions

to

acco

unti

ng

esti

mat

es a

re r

ecog

nize

d in

the

per

iod

in w

hich

the

est

imat

es a

re r

evis

ed i

f th

e re

visi

ons

affe

ct o

nly

that

pe

riod

or

in t

he p

erio

d of

the

rev

isio

ns a

nd f

utur

e pe

riod

s if

the

rev

isio

ns a

ffec

t bo

th c

urre

nt a

nd f

utur

e pe

riod

s.

Key

Sou

rces

of

Est

imat

ion

Un

cert

ain

ty

The

key

ass

umpt

ions

con

cern

ing

the

futu

re a

nd o

ther

key

sou

rces

of

esti

mat

ion

unce

rtai

nty

at th

e en

d of

the

repo

rtin

g pe

riod

tha

t ha

ve a

sig

nifi

cant

ris

k of

cau

sing

a m

ater

ial

adju

stm

ent

to t

he c

arry

ing

amou

nts

of

asse

ts a

nd li

abil

itie

s w

ithi

n th

e ne

xt f

inan

cial

yea

r ar

e di

scus

sed

belo

w.

- 28

-

Dep

reci

atio

n o

f P

rop

erty

, Pla

nt

and

Eq

uip

men

t -

Fli

ght

Eq

uip

men

t F

ligh

t eq

uipm

ent

is d

epre

ciat

ed o

n a

stra

ight

-lin

e ba

sis

at r

ates

tha

t ca

n be

use

d to

wri

te d

own

thei

r co

st t

o th

eir

esti

mat

ed r

esid

ual

valu

es a

t th

e en

d of

the

ir u

sefu

l li

ves.

The

est

imat

es o

f th

e us

eful

liv

es a

nd r

esid

ual

valu

es o

f th

e fl

ight

equ

ipm

ent a

re m

ade

by th

e C

ompa

ny o

n th

e ba

sis

of p

ast e

xper

ienc

e an

d fl

eet o

pera

tion

pe

rfor

man

ce i

n th

e in

dust

ry.

Due

to

chan

ges

in t

he f

leet

pla

n, t

he b

oard

of

dire

ctor

s of

the

Com

pany

has

de

cide

d to

cha

nge

the

expe

cted

use

ful

live

s of

fou

r 74

7-40

0 (G

E)

from

20

to 1

6-17

yea

rs s

ince

Jan

uary

1,

2018

in

orde

r to

mee

t th

e ec

onom

ic b

enef

its

and

num

ber

of y

ears

of

cons

umpt

ion.

It

is e

stim

ated

tha

t th

e de

prec

iati

on e

xpen

se w

ill i

ncre

ase

by a

ppro

xim

atel

y N

T$7

70 m

illi

on a

nnua

lly.

Def

ined

Ben

efit

Ob

liga

tion

s T

he p

rese

nt v

alue

of

defi

ned

bene

fit

obli

gati

ons

at t

he e

nd o

f th

e re

port

ing

peri

od a

re c

alcu

late

d us

ing

actu

aria

l as

sum

ptio

ns.

Tho

se a

ssum

ptio

ns,

whi

ch a

re b

ased

on

man

agem

ent’

s ju

dgm

ent

and

esti

mat

es,

com

pris

e th

e di

scou

nt r

ate

and

expe

cted

ret

urn

on p

lan

asse

ts. C

hang

es in

act

uari

al a

ssum

ptio

ns m

ay h

ave

a m

ater

ial i

mpa

ct o

n th

e am

ount

of

defi

ned

bene

fit o

blig

atio

ns.

6

. C

AS

H A

ND

CA

SH

EQ

UIV

AL

EN

TS

Dec

emb

er 3

1

20

19

20

18

C

ash

on h

and

and

revo

lvin

g fu

nds

$

58

,661

$

51,2

64

Che

ckin

g ac

coun

ts a

nd d

eman

d de

posi

ts

4,86

7,01

5

6,

367,

527

Cas

h eq

uiva

lent

s

T

ime

depo

sits

wit

h or

igin

al m

atur

itie

s of

less

than

thre

e m

onth

s

12

,662

,162

12

,269

,231

R

epur

chas

e ag

reem

ents

col

late

rali

zed

by b

onds

3,

038,

176

-

$

20,6

26,0

14

$

18

,688

,022

T

he m

arke

t ra

te i

nter

vals

of

cash

in

bank

s an

d ca

sh e

quiv

alen

ts a

t th

e en

d of

the

rep

orti

ng p

erio

d w

ere

as

foll

ows:

D

ecem

ber

31

2019

2018

Ban

k ba

lanc

e

0.01

%-1

.90%

0%-1

.90%

T

ime

depo

sits

wit

h or

igin

al m

atur

itie

s of

less

than

thre

e m

onth

s

0.60

%-2

.55%

0.60

%-3

.55%

R

epur

chas

e ag

reem

ents

col

late

rali

zed

by b

onds

0.55

%-0

.70%

-

7.

FIN

AN

CIA

L I

NS

TR

UM

EN

TS

AT

FA

IR V

AL

UE

TH

RO

UG

H P

RO

FIT

OR

LO

SS

(F

VT

PL

)

D

ecem

ber

31

2019

2018

F

inan

cial

ass

ets

- cu

rren

t

Fin

anci

al a

sset

s m

anda

tori

ly c

lass

ifie

d at

FV

TP

L

Der

ivat

ive

fina

ncia

l ins

trum

ents

(no

t und

er h

edge

acc

ount

ing)

F

orei

gn e

xcha

nge

forw

ard

cont

ract

s

$

434

$

-

F

inan

cial

liab

ilit

ies

held

for

trad

ing

D

eriv

ativ

e fi

nanc

ial i

nstr

umen

ts (

not u

nder

hed

ge a

ccou

ntin

g)

fore

ign

exch

ange

for

war

d co

ntra

cts

$

11

,749

$

221

211

- 29

-

At

the

end

of t

he r

epor

ting

peri

od,

outs

tand

ing

fore

ign

exch

ange

for

war

d co

ntra

cts

not

unde

r he

dge

acco

unti

ng w

ere

as f

ollo

ws:

Cu

rren

cy

M

atu

rity

Dat

e

Not

ion

al A

mou

nt

(In

Th

ousa

nd

s)

D

ecem

ber

31, 2

019

B

uy f

orw

ard

cont

ract

s N

TD

/US

D

20

20.0

1.15

-202

0.07

.31

NT

D57

0,57

1/U

SD

19,0

00

D

ecem

ber

31, 2

018

B

uy f

orw

ard

cont

ract

s N

TD

/US

D

20

19.0

1.02

-201

9.01

.31

NT

D30

,923

/US

D1,

000

8.

FIN

AN

CIA

L A

SS

ET

S A

T F

AIR

VA

LU

E T

HR

OU

GH

OT

HE

R C

OM

PR

EH

EN

SIV

E I

NC

OM

E

Inve

stm

ents

in E

qu

ity

Inst

rum

ents

D

ecem

ber

31

2019

2018

Non

-cur

rent

For

eign

inve

stm

ents

U

nlis

ted

shar

es

$

80

,991

$

61,6

20

Dom

esti

c in

vest

men

ts

Unl

iste

d sh

ares

26

,865

21

,746

$

107,

856

$

83

,366

T

hese

inv

estm

ents

in

equi

ty i

nstr

umen

ts a

re n

ot h

eld

for

trad

ing.

Ins

tead

, th

ey a

re h

eld

for

med

ium

- to

lo

ng-t

erm

str

ateg

ic p

urpo

ses.

Acc

ordi

ngly

, the

man

agem

ent e

lect

ed to

des

igna

te th

ese

inve

stm

ents

in e

quit

y in

stru

men

ts a

s at

FV

TO

CI

as i

t be

liev

es t

hat

reco

gniz

ing

shor

t-te

rm f

luct

uati

ons

in t

hese

inv

estm

ents

’ fa

ir

valu

es i

n pr

ofit

or

loss

wou

ld n

ot b

e co

nsis

tent

wit

h th

e C

ompa

ny’s

str

ateg

y of

hol

ding

the

se i

nves

tmen

ts

for

long

-ter

m p

urpo

ses.

9.

FIN

AN

CIA

L A

SS

ET

S A

T A

MO

RT

IZE

D C

OS

T

Dec

emb

er 3

1

20

19

20

18

C

urre

nt

T

ime

depo

sits

wit

h or

igin

al m

atur

itie

s of

mor

e th

an 3

mon

ths

(e)

$

1,

460,

450

$

2,

310,

000

T

he r

ange

of

inte

rest

rat

es f

or t

ime

depo

sits

wit

h or

igin

al m

atur

itie

s of

mor

e th

an 3

mon

ths

wer

e ap

prox

imat

ely

0.60

%-2

.44%

and

0.4

0%-0

.68%

per

ann

um a

s of

Dec

embe

r 31

, 201

9 an

d 20

18, r

espe

ctiv

ely.

- 30

-

10.

NO

TE

S R

EC

EIV

AB

LE

AN

D A

CC

OU

NT

S R

EC

EIV

AB

LE

Dec

emb

er 3

1

20

19

20

18

N

otes

rec

eiva

ble

$

29

7,07

5

$

596,

739

A

ccou

nts

rece

ivab

le

A

t am

orti

zed

cost

G

ross

car

ryin

g am

ount

7,

577,

460

8,87

5,00

2 L

ess:

All

owan

ce f

or im

pair

men

t los

s

(1

80,1

04)

(191

,079

)

7,39

7,35

6

8,

683,

923

$

7,

694,

431

$

9,

280,

662

The

ave

rage

cre

dit

peri

od w

as 7

to

55 d

ays.

In

dete

rmin

ing

the

reco

vera

bili

ty o

f a

trad

e re

ceiv

able

, th

e C

ompa

ny c

onsi

dere

d an

y ch

ange

in

the

cred

it q

uali

ty o

f th

e re

ceiv

able

sin

ce t

he d

ate

cred

it w

as i

niti

ally

gr

ante

d to

the

end

of

the

repo

rtin

g pe

riod

, an

d an

y al

low

ance

for

im

pair

men

t lo

ss w

as b

ased

on

the

esti

mat

ed ir

reco

vera

ble

amou

nts

dete

rmin

ed b

y re

fere

nce

to th

e C

ompa

ny’s

pas

t def

ault

exp

erie

nce

wit

h th

e co

unte

rpar

ty a

nd a

n an

alys

is o

f th

e co

unte

rpar

ty’s

cur

rent

fin

anci

al p

osit

ion.

The

Com

pany

ado

pted

a

poli

cy o

f on

ly d

eali

ng w

ith e

ntit

ies

that

are

rat

ed th

e eq

uiva

lent

of

inve

stm

ent g

rade

or

high

er a

nd o

btai

ning

su

ffic

ient

col

late

ral,

whe

re a

ppro

pria

te,

as a

mea

ns o

f m

itig

atin

g th

e ri

sk o

f fi

nanc

ial

loss

fro

m d

efau

lts.

C

redi

t ra

ting

inf

orm

atio

n is

obt

aine

d fr

om i

ndep

ende

nt r

atin

g ag

enci

es w

here

ava

ilab

le o

r, i

f no

t av

aila

ble,

th

e C

ompa

ny u

ses

othe

r pu

blic

ly a

vail

able

fin

anci

al i

nfor

mat

ion

or i

ts o

wn

trad

ing

reco

rds

to r

ate

its

maj

or

cust

omer

s. T

he C

ompa

ny’s

exp

osur

e an

d th

e cr

edit

rat

ings

of

its

coun

terp

arti

es a

re c

onti

nuou

sly

mon

itor

ed

and

the

aggr

egat

e va

lue

of t

rans

acti

ons

conc

lude

d is

spr

ead

amon

gst

appr

oved

cou

nter

part

ies.

Cre

dit

expo

sure

is

cont

roll

ed b

y co

unte

rpar

ty l

imit

s th

at a

re r

evie

wed

and

app

rove

d by

the

ris

k m

anag

emen

t co

mm

itte

e an

nual

ly.

The

Com

pany

app

lies

the

sim

plif

ied

appr

oach

to

allo

win

g fo

r ex

pect

ed c

redi

t lo

sses

pre

scri

bed

by I

FR

S 9

, w

hich

per

mit

s th

e us

e of

lif

etim

e ex

pect

ed l

oss

allo

wan

ce f

or a

ll t

rade

rec

eiva

bles

. T

he e

xpec

ted

cred

it

loss

es o

n tr

ade

rece

ivab

les

are

esti

mat

ed u

sing

a p

rovi

sion

mat

rix

by r

efer

ence

to

past

def

ault

exp

erie

nce

wit

h th

e de

btor

s an

d an

ana

lysi

s of

the

deb

tors

’ cu

rren

t fi

nanc

ial

posi

tion

, ad

just

ed f

or g

ener

al e

cono

mic

co

ndit

ions

of

the

indu

stry

in

whi

ch t

he d

ebto

rs o

pera

te a

nd a

n as

sess

men

t of

bot

h th

e cu

rren

t as

wel

l as

the

fo

reca

sted

dir

ecti

on o

f ec

onom

ic c

ondi

tion

s at

the

rep

orti

ng d

ate.

As

the

Com

pany

’s h

isto

rica

l cr

edit

los

s ex

peri

ence

doe

s no

t sh

ow s

igni

fica

ntly

dif

fere

nt l

oss

patt

erns

for

dif

fere

nt c

usto

mer

seg

men

ts,

the

loss

al

low

ance

bas

ed o

n th

e pa

st d

ue s

tatu

s is

not

fur

ther

dis

ting

uish

ed a

ccor

ding

to th

e di

ffer

ent s

egm

ents

of

the

Com

pany

’s c

usto

mer

bas

e.

The

Com

pany

wri

tes

off

a tr

ade

rece

ivab

le w

hen

ther

e is

inf

orm

atio

n in

dica

ting

tha

t th

e de

btor

is

expe

rien

cing

se

vere

fi

nanc

ial

diff

icul

ty

and

ther

e is

no

re

alis

tic

pros

pect

of

re

cove

ry.

For

ac

coun

ts

rece

ivab

le t

hat

have

bee

n w

ritt

en o

ff,

the

Com

pany

con

tinu

es t

o en

gage

in

enfo

rcem

ent

acti

vity

to

atte

mpt

to

rec

over

the

rece

ivab

les

whi

ch a

re d

ue. W

here

rec

over

ies

are

mad

e, th

ese

are

reco

gniz

ed in

pro

fit o

r lo

ss.

212

- 31

-

The

fol

low

ing

tabl

e de

tail

s th

e lo

ss a

llow

ance

of

trad

e re

ceiv

able

s ba

sed

on t

he C

ompa

ny’s

pro

visi

on

mat

rix.

D

ecem

ber

31, 2

019

N

ot P

ast

Du

e U

p t

o 30

Day

s

31 t

o 60

Day

s

61 t

o 90

Day

s

Ove

r 90

Day

s

Tot

al

E

xpec

ted

cred

it lo

ss r

ate

0.

03%

0.15

%

15

.89%

22.1

4%

10

0%

-

Gro

ss c

arry

ing

amou

nt

$

6,0

70,7

53

$

1,2

41,7

66

$

37

,891

$

73,0

58

$

15

3,99

2

$ 7

,577

,460

L

oss

allo

wan

ce (

life

time

EC

Ls)

(2

,052

)

(1

,862

)

(6

,020

)

(1

6,17

8)

(153

,992

)

(1

80,1

04)

Am

orti

zed

cost

$ 6

,068

,701

$ 1

,239

,904

$

31,8

71

$

56

,880

$

-

$ 7

,397

,356

D

ecem

ber

31, 2

018

N

ot P

ast

Du

e U

p t

o 30

Day

s

31 t

o 60

Day

s

61 t

o 90

Day

s

Ove

r 90

Day

s

Tot

al

E

xpec

ted

cred

it lo

ss r

ate

0.

06%

0.06

%

3.

67%

21.7

8%

97

.5%

Gro

ss c

arry

ing

amou

nt

$

7,2

91,9

10

$

1,3

31,5

29

$

36

,819

$

41,9

20

$

17

2,82

4

$ 8

,875

,002

L

oss

allo

wan

ce (

life

time

EC

Ls)

(1

,149

)

(6

99)

(3,7

96)

(12,

611)

(1

72,8

24)

(191

,079

)

A

mor

tize

d co

st

$

7,2

90,7

61

$

1,3

30,8

30

$

33

,023

$

29,3

09

$

-

$

8,6

83,9

23

The

mov

emen

ts o

f th

e lo

ss a

llow

ance

of

acco

unts

rec

eiva

bles

wer

e as

fol

low

s:

F

or t

he

Yea

r E

nd

ed D

ecem

ber

31

2019

2018

Bal

ance

at J

anua

ry 1

$

191,

079

$

14

2,63

7 A

dd: N

et r

emea

sure

men

t of

loss

all

owan

ce

24,0

00

50,0

00

Les

s: A

mou

nts

wri

tten

off

(3

4,97

5)

(2,5

55)

For

eign

exc

hang

e ga

ins

and

loss

es

-

99

7

Bal

ance

at D

ecem

ber

31

$

18

0,10

4

$

191,

079

11

. IN

VE

NT

OR

IES

Dec

emb

er 3

1

20

19

20

18

A

ircr

aft s

pare

par

ts

$

7,

390,

981

$

7,

669,

834

Item

s fo

r in

-fli

ght s

ale

571,

601

554,

084

Wor

k in

pro

cess

- m

aint

enan

ce s

ervi

ces

283,

933

227,

974

$

8,

246,

515

$

8,

451,

892

The

ope

rati

ng c

osts

for

the

yea

rs e

nded

Dec

embe

r 31

, 20

19 a

nd 2

018

incl

uded

los

ses

from

inv

ento

ry

wri

te-d

owns

of

$317

,629

thou

sand

and

$37

1,27

5 th

ousa

nd, r

espe

ctiv

ely.

- 32

-

12.

NO

N-C

UR

RE

NT

AS

SE

TS

HE

LD

FO

R S

AL

E

D

ecem

ber

31

2019

2018

Air

craf

t hel

d fo

r sa

le

$

-

$

46

,154

T

o en

hanc

e it

s co

mpe

titi

vene

ss,

the

Com

pany

pla

ns t

o in

trod

uce

new

air

craf

t an

d re

tire

old

air

craf

t ac

cord

ing

to a

pla

nned

sch

edul

e. S

uch

airc

raft

, cla

ssif

ied

as n

on-c

urre

nt a

sset

s he

ld f

or s

ale,

had

an

orig

inal

bo

ok v

alue

whi

ch w

as h

ighe

r th

an th

e ex

pect

ed s

ale

pric

e an

d w

hich

was

rec

ogni

zed

as a

n im

pair

men

t los

s.

How

ever

, the

act

ual l

oss

shal

l be

iden

tifi

ed b

y th

e ac

tual

sal

e pr

ice.

In

201

9 an

d 20

18,

the

Com

pany

rec

ogni

zed

impa

irm

ent

loss

es o

f $0

tho

usan

d an

d $7

5,43

7 th

ousa

nd,

resp

ecti

vely

. In

2019

and

201

8, th

e C

ompa

ny r

ecog

nize

d di

spos

al lo

sses

of

$10,

462

thou

sand

and

$36

8,99

2 th

ousa

nd, r

espe

ctiv

ely.

T

he f

air

valu

e w

as d

eter

min

ed b

y tr

ansa

ctio

ns o

f th

e re

late

d m

arke

t, an

d th

e pr

opos

ed s

ale

pric

e w

as b

ased

on

the

curr

ent s

tatu

s of

the

airc

raft

. The

fai

r va

lue

is c

lass

ifie

d as

Lev

el 3

.

13.

INV

ES

TM

EN

TS

AC

CO

UN

TE

D F

OR

US

ING

TH

E E

QU

ITY

ME

TH

OD

Dec

emb

er 3

1

20

19

20

18

In

vest

men

ts in

sub

sidi

arie

s

$

12,0

04,1

80

$

11

,686

,577

In

vest

men

ts in

ass

ocia

tes

471,

267

497,

362

Inve

stm

ents

in jo

intly

con

trol

led

enti

ties

1,

007,

430

974,

416

$

13

,482

,877

$

13,1

58,3

55

a.

In

vest

men

t in

subs

idia

ries

Dec

emb

er 3

1

20

19

20

18

U

nlis

ted

com

pani

es

T

iger

air

Tai

wan

Co.

, Ltd

.

$

1,94

6,32

8

$

1,80

5,92

1 C

AL

Par

k

1,

552,

310

1,50

7,44

5 M

anda

rin

Air

line

s

1,

494,

603

1,20

1,10

9 C

AL

-Dyn

asty

Int

erna

tion

al

1,27

6,54

6

1,

266,

921

Tai

wan

Air

Car

go T

erm

inal

1,

517,

946

1,53

3,24

4 T

aoyu

an I

nter

nati

onal

Air

port

Ser

vice

s

73

7,24

5

75

5,61

9 C

AL

-Asi

a In

vest

men

t

55

9,56

2

49

4,09

8 S

abre

Tra

vel N

etw

ork

(Tai

wan

)

46

0,21

3

45

4,14

9 C

AL

Hot

el

479,

259

461,

239

Tai

wan

Air

port

Ser

vice

s

27

6,13

4

26

6,77

5 H

wa

Hsi

a

88

,313

89

,101

T

aiw

an A

ircr

aft M

aint

enan

ce A

nd E

ngin

eeri

ng C

o., L

td.

921,

989

1,12

8,13

8 Y

estr

ip

25,2

68

26,9

46

Dyn

asty

Hol

iday

s

-

26,0

59

Glo

bal S

ky E

xpre

ss

7,29

4

6,

996

Kao

hsiu

ng C

ater

ing

Ser

vice

s

66

1,17

0

66

2,81

7

$

12,0

04,1

80

$

11

,686

,577

213

- 33

-

At t

he e

nd o

f th

e re

port

ing

peri

od, t

he p

ropo

rtio

n of

ow

ners

hip

and

votin

g ri

ghts

in s

ubsi

diar

ies

held

by

the

Com

pany

wer

e as

fol

low

s:

D

ecem

ber

31

2019

2018

T

iger

air

Tai

wan

Co.

, Ltd

.

69%

90

%

Tai

wan

Air

Car

go T

erm

inal

54%

54

%

CA

L P

ark

10

0%

100%

M

anda

rin

Air

line

s

94%

94

%

CA

L-D

ynas

ty I

nter

nati

onal

100%

10

0%

Tao

yuan

Int

erna

tion

al A

irpo

rt S

ervi

ces

49

%

49%

C

AL

-Asi

a In

vest

men

t

100%

10

0%

Sab

re T

rave

l Net

wor

k (T

aiw

an)

94

%

94%

T

aiw

an A

irpo

rt S

ervi

ces

47

%

47%

C

AL

Hot

el

10

0%

100%

H

wa

Hsi

a

100%

10

0%

Tai

wan

Air

craf

t Mai

nten

ance

And

Eng

inee

ring

Co.

, Ltd

.

100%

10

0%

Dyn

asty

Hol

iday

s

20%

51

%

Yes

trip

100%

10

0%

Glo

bal S

ky E

xpre

ss

25

%

25%

K

aohs

iung

Cat

erin

g S

ervi

ces

54

%

54%

E

ach

of t

he C

ompa

ny’s

hol

ding

s of

the

iss

ued

shar

e ca

pita

l of

Tao

yuan

Int

erna

tion

al A

irpo

rt S

ervi

ce,

Tai

wan

Air

port

Ser

vice

and

Glo

bal

Sky

Exp

ress

did

not

exc

eed

50%

, bu

t si

nce

the

Com

pany

had

co

ntro

l ove

r th

ese

inve

stee

s, th

ey w

ere

list

ed a

s su

bsid

iari

es.

The

Com

pany

pai

d $2

43,7

43 t

hous

and

on M

arch

7,

2018

to

acqu

ire

an a

ddit

iona

l 18

% o

f K

aohs

iung

C

ater

ing,

Ltd

. (K

aohs

iung

Cat

erin

g) o

f w

hich

the

Com

pany

’s h

oldi

ng o

f th

e is

sued

sha

re c

apit

al

exce

eded

50%

. Kao

hsiu

ng C

ater

ing

is l

iste

d as

a s

ubsi

diar

y be

caus

e th

e C

ompa

ny h

as c

ontr

ol o

ver

the

inve

stee

. For

the

disc

losu

re o

f th

e C

ompa

ny’s

acq

uisi

tion

of K

aohs

iung

Cat

erin

g, r

efer

to N

ote

30.

The

boa

rd o

f di

rect

ors

of t

he C

ompa

ny d

ecid

ed t

o se

ll p

art

of t

he e

quity

of

Dyn

asty

Hol

iday

s to

H.I

.S.

Tai

wan

Co.

, L

td.

on J

anua

ry 2

1, 2

019,

and

com

plet

ed t

he t

rans

acti

on o

n Ja

nuar

y 31

, 21

09.

Aft

er t

he

sale

of

the

equi

ty,

the

Com

pany

’s h

oldi

ng o

f th

e is

sued

sha

re c

apit

al d

ecre

ased

fro

m 5

1% t

o 20

%.

Dyn

asty

Hol

iday

s w

as c

lass

ifie

d as

an

asso

ciat

e si

nce

the

Gro

up l

ost

cont

rol

of t

he s

ubsi

diar

y. F

or t

he

info

rmat

ion

abou

t the

dis

posa

l of

the

Dyn

asty

Hol

iday

s, p

leas

e re

fer

to N

ote

31.

In o

rder

to

prep

are

the

list

ing

of T

iger

air

Tai

wan

Co.

, L

td.

and

com

ply

wit

h th

e ru

les

rela

ting

to

the

exam

inat

ion

for

publ

ic l

isti

ng,

the

rele

ase

of t

he s

hare

s of

Tig

erai

r T

aiw

an C

o.,

Ltd

. he

ld b

y th

e C

ompa

ny w

as r

esol

ved

in th

e sh

areh

olde

rs’

mee

ting

of

the

Com

pany

on

June

25,

201

9. T

he s

hare

s sh

all

be s

ubsc

ribe

d by

all

sha

reho

lder

s of

the

Com

pany

on

the

basi

s of

the

per

cent

age

of s

hare

hold

ings

. F

or

the

subs

crib

ed s

hare

s th

at t

he o

rigi

nal

shar

ehol

ders

wai

ved

or f

or t

he u

nder

subs

crib

ed p

orti

on,

the

chai

rman

was

aut

hori

zed

to c

onta

ct s

peci

fic

pers

ons

to s

ubsc

ribe

. The

sub

scri

ptio

n pr

ice

was

set

at

$41

per

shar

e. I

n O

ctob

er a

nd D

ecem

ber

2019

, th

e st

ock

pric

e w

as f

ully

pai

d an

d th

e sh

ares

wer

e co

mpl

etel

y de

live

red

and

tran

sfer

red.

The

pro

ceed

s fr

om d

ispo

sal

wer

e $1

,679

,789

tho

usan

d, a

nd t

he

rela

ted

gain

on

disp

osal

was

$1,

129,

080

thou

sand

and

rec

ogni

zed

in th

e ca

pita

l sur

plus

acc

ount

. T

he s

hare

of

prof

it o

r lo

ss o

f su

bsid

iari

es r

ecog

nize

d un

der

the

equi

ty m

etho

d w

as a

s fo

llow

s:

20

19

20

18

T

he s

hare

of

prof

it o

r lo

ss

$

1,

529,

721

$

1,

628,

453

- 34

-

b.

Inve

stm

ents

in a

ssoc

iate

s

Dec

emb

er 3

1

20

19

20

18

U

nlis

ted

com

pani

es

C

hina

Air

craf

t Ser

vice

s

$

461,

263

$

49

7,36

2 D

ynas

ty H

olid

ays

10,0

04

-

$

471,

267

$

49

7,36

2 A

t th

e en

d of

the

rep

ortin

g pe

riod

, th

e pr

opor

tion

of

owne

rshi

p an

d vo

ting

righ

ts i

n as

soci

ates

hel

d by

th

e C

ompa

ny w

ere

as f

ollo

ws:

D

ecem

ber

31

2019

2018

Chi

na A

ircr

aft S

ervi

ces

20

%

20%

D

ynas

ty H

olid

ays

(Not

e)

20

%

51%

N

ote:

Dyn

asty

Hol

iday

s w

as li

st a

s a

asso

ciat

e on

Jan

uary

31,

201

9.

The

rec

ogni

zed

inve

stm

ent

inco

me

of a

ssoc

iate

s ac

coun

ted

for

usin

g th

e eq

uity

met

hod

wer

e as

fo

llow

s:

20

19

20

18

C

hina

Air

craf

t Ser

vice

s

$

10,3

65

$

6,

402

Dyn

asty

Hol

iday

s

15

-

$

10

,380

$

6,40

2

c.

Inve

stm

ents

in jo

intly

con

trol

led

enti

ties

T

he in

vest

men

ts in

join

tly c

ontr

olle

d en

titie

s w

ere

as f

ollo

ws:

Dec

emb

er 3

1

20

19

20

18

C

hina

Pac

ific

Cat

erin

g S

ervi

ces

$

80

1,07

0

$

805,

157

Chi

na P

acif

ic L

aund

ry S

ervi

ces

168,

547

166,

901

NO

RD

AM

Asi

a

37

,813

2,

358

$

1,

007,

430

$

97

4,41

6

214

- 35

-

At

the

end

of t

he r

epor

ting

per

iod,

the

per

cent

ages

of

owne

rshi

p an

d vo

ting

righ

ts i

n jo

intly

con

trol

led

enti

ties

hel

d by

the

Com

pany

wer

e as

fol

low

s:

D

ecem

ber

31

2019

2018

Chi

na P

acif

ic C

ater

ing

Ser

vice

s

51%

51

%

Chi

na P

acif

ic L

aund

ry S

ervi

ces

55

%

55%

N

OR

DA

M A

sia

49

%

49%

T

he C

ompa

ny s

igne

d a

join

t ve

ntur

e ag

reem

ent

wit

h th

e T

aiko

o C

ompa

ny t

o in

vest

in

Chi

na P

acif

ic

Cat

erin

g S

ervi

ces

and

Chi

na P

acif

ic L

aund

ry S

ervi

ces.

Acc

ordi

ng t

o th

e ag

reem

ent,

both

par

ties

hav

e th

e m

ajor

ity

pow

er i

n th

e bo

ard

of d

irec

tors

to

pose

a m

otio

n fo

r ve

to, a

nd t

here

fore

the

Com

pany

doe

s no

t hav

e co

ntro

l. T

o en

hanc

e th

e C

ompa

ny’s

mai

nten

ance

cap

abil

itie

s, t

he C

ompa

ny e

stab

lish

ed a

joi

nt v

entu

re w

ith

the

US

NO

RD

AM

Aer

ospa

ce G

roup

in D

ecem

ber

2017

, pla

nnin

g to

pro

vide

thru

st r

ever

sers

and

com

posi

te

repa

ir s

ervi

ces

in A

sia

unde

r th

e N

OR

DA

M b

rand

. N

OR

DA

M h

as f

iled

for

Cha

pter

11

bank

rupt

cy

reor

gani

zati

on i

n th

e U

SA

on

July

22,

201

8 to

sol

ve t

he b

usin

ess

disp

utat

ion

wit

h th

eir

coop

erat

ive

part

ner,

whi

le t

heir

com

pany

ope

rati

on w

as n

ot i

mpa

ct.

NO

RD

AM

Asi

a su

spen

ded

its

oper

atio

n fr

om

Oct

ober

5, 2

018

to O

ctob

er 4

, 201

9 an

d re

sum

ed b

usin

ess

on O

ctob

er 4

, 201

9. T

he c

ompa

ny i

ncre

ased

ca

pita

l of

$35,

525

thou

sand

to N

OR

DA

M A

sia

on N

ovem

ber

2019

. D

etai

ls o

f th

e in

vest

men

t in

com

e at

trib

utab

le t

o in

vest

men

ts i

n jo

intly

con

trol

led

enti

ties

wer

e as

fo

llow

s:

D

ecem

ber

31

2019

2018

Chi

na P

acif

ic C

ater

ing

Ser

vice

s

$

256,

899

$

26

7,41

3 C

hina

Pac

ific

Lau

ndry

Ser

vice

s

15

,030

16

,695

N

OR

DA

M A

sia

(70)

(4

1)

$

27

1,85

9

$

284,

067

The

Com

pany

’s s

hare

s of

oth

er c

ompr

ehen

sive

inco

me

of s

ubsi

diar

ies,

ass

ocia

tes

and

join

tly

cont

roll

ed

enti

ties

wer

e lo

sses

of

$(85

,977

) th

ousa

nd a

nd $

(75,

996)

thou

sand

in 2

019

and

2018

, res

pect

ivel

y.

The

fin

anci

al s

tate

men

ts u

sed

as a

bas

is o

f th

e am

ount

s of

and

rel

ated

inf

orm

atio

n on

the

inv

estm

ents

ac

coun

ted

for

usin

g th

e eq

uity

met

hod

and

the

shar

e of

pro

fit

or l

oss

and

othe

r co

mpr

ehen

sive

inc

ome

of t

hose

inv

estm

ents

for

the

yea

rs e

nded

Dec

embe

r 31

, 201

9 an

d 20

18 w

ere

all

inde

pend

ently

aud

ited

, ex

cept

of

Chi

na A

ircr

aft S

ervi

ces.

How

ever

, the

man

agem

ent d

eter

min

ed th

at th

ere

wou

ld h

ave

been

no

sign

ific

ant a

djus

tmen

ts h

ad th

is in

vest

ee’s

fin

anci

al s

tate

men

ts b

een

inde

pend

ently

aud

ited

. F

or d

etai

ls o

n se

rvic

es,

maj

or b

usin

ess

offi

ces

and

the

coun

try

whe

re t

he a

bove

ass

ocia

tes

and

join

tly

cont

roll

ed e

ntit

ies

are

regi

ster

ed,

refe

r to

Tab

le 6

, “N

ames

, L

ocat

ions

, A

nd O

ther

Inf

orm

atio

n of

In

vest

ees

Ove

r W

hich

the

Com

pany

Exe

rcis

es S

igni

fica

nt I

nflu

ence

” an

d, T

able

7,

“Inv

estm

ents

In

Mai

nlan

d C

hina

”, f

ollo

win

g th

e no

tes

to f

inan

cial

sta

tem

ents

.

- 36

-

14.

PR

OP

ER

TY

, PL

AN

T A

ND

EQ

UIP

ME

NT

Fre

ehol

d L

and

Bu

ild

ings

Fli

ght

Eq

uip

men

t

Eq

uip

men

t u

nd

er F

inan

ce

Lea

ses

O

ther

s

Tot

al

C

ost

B

alan

ce a

t Jan

uary

1,

2018

$

193,

013

$

7,

304,

328

$

261

,114

,631

$

25,5

94,4

36

$

6,

163,

436

$

300

,369

,844

A

ddit

ions

-

41,0

16

2,30

8,68

3

-

212,

288

2,56

1,98

7 D

ispo

sals

-

(10,

349 )

(20,

305,

928 )

(1,8

11,2

22 )

(108

,752

)

(2

2,23

6,25

1 )

Rec

lass

ific

atio

n

-

542

12,4

62,2

41

1,42

8,46

3

73

,574

13

,964

,820

Bal

ance

at D

ecem

ber

31,

2018

$

193,

013

$

7,

335,

537

$

255

,579

,627

$

25,2

11,6

77

$

6,

340,

546

$

294

,660

,400

Acc

umul

ated

dep

reci

atio

n

and

impa

irm

ent

B

alan

ce a

t Jan

uary

1,

2018

$

-

$

(3,7

17,0

55 )

$

(135

,671

,634

)

$

(13,

613,

023 )

$

(5

,102

,584

)

$ (1

58,1

04,2

96 )

Dep

reci

atio

n ex

pens

e

-

(172

,873

)

(1

5,73

2,01

8 )

(1

,993

,631

)

(2

93,7

69 )

(18,

192,

291 )

D

ispo

sals

-

9,32

6

19

,813

,183

1,

532,

046

89,8

41

21,4

44,3

96

Impa

irm

ent l

osse

s

-

-

(50,

000 )

-

-

(50,

000 )

R

ecla

ssif

icat

ion

-

-

9,28

3,04

1

-

(12,

196 )

9,27

0,84

5

Bal

ance

at D

ecem

ber

31,

2018

$

-

$

(3,8

80,6

02 )

$

(122

,357

,428

)

$

(14,

074,

608 )

$

(5

,318

,708

)

$ (1

45,6

31,3

46 )

C

arry

ing

amou

nts

at

Dec

embe

r 31

, 201

8

$

193,

013

$

3,

454,

935

$

133

,222

,199

$

11,1

37,0

69

$

1,

021,

838

$

149

,029

,054

Cos

t

Bal

ance

at J

anua

ry 1

, 20

19

$

19

3,01

3

$

7,33

5,53

7

$ 2

55,5

79,6

27

$

25

,211

,677

$

6,34

0,54

6

$ 2

94,6

60,4

00

Add

itio

ns

-

37

,725

2,

211,

321

-

14

8,69

6

2,

397,

742

Dis

posa

ls

-

(1

62 )

(20,

698,

042 )

(79,

866 )

(85,

852 )

(20,

863,

922 )

R

ecla

ssif

icat

ion

-

10

,658

29

,815

,008

(2

5,13

1,81

1 )

10

6,25

7

4,

800,

112

B

alan

ce a

t Dec

embe

r 31

, 20

19

$

19

3,01

3

$

7,38

3,75

8

$ 2

66,9

07,9

14

$

-

$

6,

509,

647

$

280

,994

,332

Acc

umul

ated

dep

reci

atio

n

and

impa

irm

ent

B

alan

ce a

t Jan

uary

1,

2019

$

-

$

(3,8

80,6

02 )

$

(122

,357

,428

)

$

(14,

074,

608 )

$

(5

,318

,708

)

$ (1

45,6

31,3

46 )

Dep

reci

atio

n ex

pens

e

-

(175

,943

)

(1

8,18

6,43

4 )

(7

41,7

80 )

(284

,537

)

(1

9,38

8,69

4 )

Dis

posa

ls

-

16

2

14

,899

,562

79

,866

76

,586

15

,056

,176

R

ecla

ssif

icat

ion

-

-

(14,

692,

000 )

14,7

36,5

22

(45,

104 )

(582

)

Bal

ance

at D

ecem

ber

31,

2019

$

-

$

(4,0

56,3

83 )

$

(140

,336

,300

)

$

-

$

(5,5

71,7

63 )

$

(149

,964

,446

)

Car

ryin

g am

ount

s at

D

ecem

ber

31, 2

019

$

19

3,01

3

$

3,32

7,37

5

$ 1

26,5

71,6

14

$

-

$

93

7,88

4

$ 1

31,0

29,8

86

Rec

lass

ific

atio

n is

mai

nly

from

pre

paid

equ

ipm

ent.

215

- 37

-

The

abo

ve it

ems

of p

rope

rty,

pla

nt a

nd e

quip

men

t are

dep

reci

ated

on

a st

raig

ht-l

ine

basi

s ov

er th

e es

tim

ated

us

eful

life

of

the

asse

t:

Bui

ldin

g

M

ain

buil

ding

s

45-5

5 ye

ars

Oth

ers

10

-25

year

s M

achi

nery

and

equ

ipm

ent

Ele

ctro

-mec

hani

cal e

quip

men

t

25 y

ears

O

ther

s

3-13

yea

rs

Off

ice

equi

pmen

t

3-15

yea

rs

Lea

seho

ld im

prov

emen

ts

Bui

ldin

g im

prov

emen

ts

5

year

s O

ther

s

3-5

year

s F

ligh

t equ

ipm

ent a

nd e

quip

men

t und

er f

inan

ce le

ases

A

irfr

ames

18-2

5 ye

ars

Air

craf

t cab

ins

10

-20

year

s E

ngin

es

12

-20

year

s H

eavy

mai

nten

ance

on

airc

raft

6-8

year

s E

ngin

e ov

erha

uls

3-

10 y

ears

L

andi

ng g

ear

over

haul

s

8-12

yea

rs

Rep

aira

ble

spar

e pa

rts

3-

15 y

ears

L

ease

d ai

rcra

ft im

prov

emen

ts

5-

12 y

ears

R

egar

ding

cha

nges

in

flee

t co

mpo

siti

on,

curr

ent

and

fore

cast

ed m

arke

t va

lues

, an

d ot

her

tech

nica

l fa

ctor

s,

the

Com

pany

rec

ogni

zed

impa

irm

ent l

osse

s on

a p

art o

f ai

rcra

ft e

quip

men

t of

$50,

000

thou

sand

in 2

018.

R

efer

to

Not

e 32

for

the

car

ryin

g am

ount

s of

air

craf

t eq

uipm

ent

and

righ

t-of

-use

ass

ets

pled

ged

by t

he

Com

pany

. B

ased

on

the

part

icul

arit

y of

ris

k in

the

avi

atio

n in

dust

ry, a

ll o

f th

e C

ompa

ny’s

ass

ets

such

as

airc

raft

, rea

l es

tate

, and

mov

able

pro

pert

y ar

e ad

equa

tely

insu

red

to d

iver

sify

the

pote

ntia

l ris

k re

late

d to

ope

rati

ons.

15

. IN

VE

ST

ME

NT

PR

OP

ER

TIE

S

D

ecem

ber

31

2019

2018

Car

ryin

g am

ount

In

vest

men

t pro

pert

ies

$

2,

047,

448

$

2,

047,

448

T

he in

vest

men

t pro

pert

ies

(lan

d) h

eld

Com

pany

, loc

ated

in N

anka

n, w

ere

leas

ed to

oth

ers.

T

he f

air

valu

e of

the

inv

estm

ent

prop

erti

es h

eld

by t

he C

ompa

ny w

ere

both

$2,

473,

771

thou

sand

as

of

Dec

embe

r 31

, 20

19

and

2018

. T

he

fair

va

lue

valu

atio

n w

as

perf

orm

ed

by

inde

pend

ent

qual

ifie

d pr

ofes

sion

al v

alue

rs,

and

the

futu

re i

ncom

e ev

alua

ted

by m

anag

emen

t w

as b

ased

on

mar

ket

tran

sact

ions

. A

ll o

f th

e C

ompa

ny’s

inve

stm

ent p

rope

rtie

s w

ere

held

und

er f

reeh

old

inte

rest

.

- 38

-

16.

OT

HE

R I

NT

AN

GIB

LE

AS

SE

TS

C

omp

ute

r S

oftw

are

Cos

ts

A

ccu

mu

late

d

Am

orti

zati

on

N

et V

alu

e

B

alan

ce a

t Jan

uary

1, 2

018

$

1,

905,

354

$

(9

16,0

27)

$

98

9,32

7 A

ddit

ions

15

5,43

1

-

155,

431

Am

orti

zati

on e

xpen

se

-

(1

65,0

50)

(165

,050

)

B

alan

ce a

t Dec

embe

r 31

, 201

8

$

2,06

0,78

5

$ (

1,08

1,07

7)

$

97

9,70

8

B

alan

ce a

t Jan

uary

1, 2

019

$

2,

060,

785

$

(1,

081,

077)

$

979,

708

Add

itio

ns

157,

571

-

15

7,57

1 A

mor

tiza

tion

exp

ense

-

(165

,981

)

(1

65,9

81)

Bal

ance

at D

ecem

ber

31, 2

019

$

2,

218,

356

$

(1,

247,

058)

$

971,

298

The

abo

ve it

ems

of o

ther

inta

ngib

le a

sset

s ar

e am

orti

zed

on a

str

aigh

t-li

ne b

asis

ove

r 2-

10 y

ears

.

17.

OT

HE

R A

SS

ET

S

D

ecem

ber

31

2019

2018

Cur

rent

Tem

pora

ry p

aym

ents

$

94,6

82

$

29

0,66

2 P

repa

ymen

ts

1,55

1,11

3

2,

549,

376

Oth

ers

460,

404

317,

826

$

2,

106,

199

$

3,

157,

864

N

on-c

urre

nt

P

repa

ymen

ts f

or a

ircr

aft

$

8,

322,

518

$

22

3,74

5 P

repa

ymen

ts -

long

-ter

m

2,26

4,22

0

1,

501,

429

Ref

unda

ble

depo

sits

62

1,71

5

37

7,57

7 O

ther

fin

anci

al a

sset

s

19

,103

19

,334

$

11,2

27,5

56

$

2,

122,

085

The

pre

paym

ents

for

air

craf

t co

mpr

ised

the

pre

paid

dep

osit

s an

d ca

pita

lize

d in

tere

st f

rom

the

pur

chas

e of

A

321n

eo a

nd B

777F

air

craf

t. F

or d

etai

ls o

n th

e A

321n

eo a

nd B

777F

air

craf

t pu

rcha

se c

ontr

acts

, re

fer

to

Not

e 33

.

216

- 39

-

18.

BO

RR

OW

ING

S

Lon

g-te

rm B

orro

win

gs

D

ecem

ber

31

2019

2018

Uns

ecur

ed b

ank

loan

s

$

650,

000

$

7,

749,

000

Sec

ured

ban

k lo

ans

30,4

35,8

70

34,1

71,8

75

Com

mer

cial

pap

er

Pro

ceed

s fr

om is

sue

31,3

00,0

00

30,3

00,0

00

Les

s: U

nam

orti

zed

disc

ount

59

,382

58

,132

62,3

26,4

88

72,1

62,7

43

Les

s: C

urre

nt p

orti

on

13,7

08,3

20

15,3

35,0

05

$

48

,618

,168

$

56,8

27,7

38

Inte

rest

rat

es

1.

08%

-1.4

6%

0.

92%

-1.4

6%

For

info

rmat

ion

on s

ecur

ed b

ank

loan

s w

hich

wer

e se

cure

d by

fli

ght e

quip

men

t, re

fer

to N

ote

32.

Ban

k lo

ans

(New

Tai

wan

dol

lars

and

U.S

. do

llar

s) a

re r

epay

able

qua

rter

ly,

sem

iann

uall

y or

in

lum

p su

m

upon

mat

urit

y. R

elat

ed in

form

atio

n is

sum

mar

ized

as

foll

ows:

Dec

emb

er 3

1

20

19

20

18

P

erio

ds

20

08/2

/26-

20

30/4

/25

20

07/5

/24-

20

30/4

/25

The

Com

pany

has

not

e is

suan

ce f

acil

itie

s (N

IFs)

obt

aine

d fr

om c

erta

in f

inan

cial

ins

titu

tion

s. T

he N

IFs,

w

ith

vari

ous

mat

urit

ies

unti

l A

ugus

t 20

24,

wer

e us

ed b

y th

e C

ompa

ny t

o gu

aran

tee

com

mer

cial

pap

er

whi

ch i

t is

sued

. T

he c

omm

erci

al p

aper

was

iss

ued

at d

isco

unt

rate

s of

1.1

300%

-1.1

680%

in

2019

and

1.

0693

%-1

.296

0% in

201

8.

19

. B

ON

DS

PA

YA

BL

E

D

ecem

ber

31

2019

2018

Uns

ecur

ed c

orpo

rate

bon

ds f

irst

-tim

e is

sued

in 2

013

$

2,75

0,00

0

$

5,50

0,00

0 U

nsec

ured

cor

pora

te b

onds

fir

st-t

ime

issu

ed in

201

6

5,

000,

000

5,00

0,00

0 U

nsec

ured

cor

pora

te b

onds

sec

ond-

tim

e is

sued

in 2

016

5,00

0,00

0

5,

000,

000

Uns

ecur

ed c

orpo

rate

bon

ds f

irst

-tim

e is

sued

in 2

017

2,35

0,00

0

2,

350,

000

Uns

ecur

ed c

orpo

rate

bon

ds s

econ

d-ti

me

issu

ed in

201

7

3,

500,

000

3,50

0,00

0 U

nsec

ured

cor

pora

te b

onds

fir

st-t

ime

issu

ed in

201

8

4,

500,

000

4,50

0,00

0 U

nsec

ured

cor

pora

te b

onds

fir

st-t

ime

issu

ed in

201

9

3,

500,

000

- C

onve

rtib

le b

onds

- f

ifth

-tim

e is

sue

-

1,

695,

900

Con

vert

ible

bon

ds -

six

th-t

ime

issu

e

5,

752,

625

5,67

3,71

0

32,3

52,6

25

33,2

19,6

10

Les

s: C

urre

nt p

orti

on a

nd p

ut o

ptio

n of

con

vert

ible

bon

ds

10,0

00,0

00

4,44

5,90

0

$

22,3

52,6

25

$

28

,773

,710

- 40

-

Rel

ated

issu

ance

con

diti

ons

wer

e as

fol

low

s:

Cat

egor

y

Per

iod

Con

dit

ion

s

Rat

e (%

)

F

ive-

year

pri

vate

uns

ecur

ed b

onds

- is

sued

at

par

in J

anua

ry 2

013;

rep

ayab

le in

Jan

uary

20

17 a

nd 2

018;

1.6

% in

tere

st p

.a.,

paya

ble

annu

ally

20

13.0

1.17

- 20

18.0

1.17

P

rinc

ipal

rep

ayab

le in

Ja

nuar

y of

201

7 an

d 20

18;

indi

cato

r ra

te; p

ayab

le

annu

ally

1.

6

Sev

en-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in J

anua

ry 2

013;

rep

ayab

le in

Jan

uary

20

19 a

nd 2

020;

1.8

5% in

tere

st p

.a.,

paya

ble

annu

ally

20

13.0

1.17

- 20

20.0

1.17

P

rinc

ipal

rep

ayab

le in

Ja

nuar

y of

201

9 an

d 20

20;

indi

cato

r ra

te; p

ayab

le

annu

ally

1.

85

Fiv

e-ye

ar u

nsec

ured

bon

ds -

issu

ed a

t par

in

May

201

6; r

epay

able

in M

ay 2

020

and

2021

; 1.1

9% in

tere

st p

.a.,

paya

ble

annu

ally

20

16.0

5.26

- 20

21.0

5.26

P

rinc

ipal

rep

ayab

le in

May

of

2020

and

202

1; in

tere

st p

.a.

paya

ble

annu

ally

1.

19

Fiv

e-ye

ar u

nsec

ured

bon

ds -

issu

ed a

t par

in

Sep

tem

ber

2016

; rep

ayab

le in

S

epte

mbe

r 20

20 a

nd 2

021;

1.0

8% in

tere

st

p.a.

, pay

able

ann

ually

20

16.0

9.27

- 20

21.0

9.27

P

rinc

ipal

rep

ayab

le in

S

epte

mbe

r of

202

0 an

d 20

21; i

nter

est p

.a. p

ayab

le

annu

ally

1.

08

Thr

ee-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in M

ay 2

017;

rep

ayab

le o

n du

e da

te;

inte

rest

of

1.2%

p.a

., pa

yabl

e an

nual

ly

20

17.0

5.19

- 20

20.0

5.19

P

rinc

ipal

rep

ayab

le o

n du

e da

te; i

ndic

ator

rat

e;

paya

ble

annu

ally

1.

20

Sev

en-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in M

ay 2

017;

rep

ayab

le o

n du

e da

te;

inte

rest

of

1.75

% p

.a.,

paya

ble

annu

ally

20

17.0

5.19

- 20

24.0

5.19

P

rinc

ipal

rep

ayab

le o

n du

e da

te; i

ndic

ator

rat

e;

paya

ble

annu

ally

1.

75

Thr

ee-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in O

ctob

er 2

017;

rep

ayab

le o

n du

e da

te;

inte

rest

of

1.14

% p

.a.,

paya

ble

annu

ally

20

17.1

0.12

- 20

20.1

0.12

P

rinc

ipal

rep

ayab

le o

n du

e da

te; i

ndic

ator

rat

e;

paya

ble

annu

ally

1.

14

Fiv

e-ye

ar p

riva

te u

nsec

ured

bon

ds -

issu

ed a

t pa

r in

Oct

ober

201

7; r

epay

able

in O

ctob

er

2021

and

202

2; 1

.45%

inte

rest

p.a

., pa

yabl

e an

nual

ly

20

17.1

0.12

- 20

22.1

0.12

P

rinc

ipal

rep

ayab

le in

O

ctob

er o

f 20

21 a

nd 2

022;

in

dica

tor

rate

; pay

able

an

nual

ly

1.

45

Fiv

e-ye

ar p

riva

te u

nsec

ured

bon

ds -

issu

ed a

t pa

r in

Nov

embe

r 20

18; r

epay

able

in

Nov

embe

r 20

22 a

nd 2

023;

1.3

2% in

tere

st

p.a.

, pay

able

ann

ually

20

18.1

1.30

- 20

23.1

1.30

P

rinc

ipal

rep

ayab

le in

N

ovem

ber

of 2

022

and

2023

; ind

icat

or r

ate;

pa

yabl

e an

nual

ly

1.

32

Sev

en-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in N

ovem

ber

2018

; rep

ayab

le in

N

ovem

ber

2022

and

202

3; 1

.45%

inte

rest

p.

a., p

ayab

le a

nnua

lly

20

18.1

1.30

- 20

25.1

1.30

P

rinc

ipal

rep

ayab

le in

N

ovem

ber

of 2

022

and

2023

; ind

icat

or r

ate;

pa

yabl

e an

nual

ly

1.

45

Fiv

e-ye

ar p

riva

te u

nsec

ured

bon

ds -

issu

ed a

t pa

r in

Jun

e 20

19; r

epay

able

in J

une

2023

an

d 20

24; 1

.10%

inte

rest

p.a

., pa

yabl

e an

nual

ly

20

19.0

6.21

- 20

24.0

6.21

P

rinc

ipal

rep

ayab

le in

Jun

e of

20

23 a

nd 2

024;

indi

cato

r ra

te; p

ayab

le a

nnua

lly

1.

10

Sev

en-y

ear

priv

ate

unse

cure

d bo

nds

- is

sued

at

par

in J

une

2019

; rep

ayab

le in

Jun

e 20

25

and

2026

; 1.3

2% in

tere

st p

.a.,

paya

ble

annu

ally

20

19.0

6.21

- 20

26.0

6.21

P

rinc

ipal

rep

ayab

le in

Jun

e of

20

25 a

nd 2

026;

indi

cato

r ra

te; p

ayab

le a

nnua

lly

1.

32

(Con

tinu

ed)

217

- 41

-

Cat

egor

y

Per

iod

Con

dit

ion

s

Rat

e (%

)

F

ive-

year

con

vert

ible

bon

ds -

issu

ed a

t di

scou

nt in

Dec

embe

r 20

13; r

epay

able

in

lum

p su

m u

pon

mat

urit

y; 1

.824

5% d

isco

unt

rate

p.a

.

20

13.1

2.26

- 20

18.1

2.26

E

xcep

t for

con

vert

ing

to s

hare

ca

pita

l or

buyi

ng b

ack,

pr

inci

pal r

epay

able

in

Dec

embe

r of

201

8

-

Fiv

e-ye

ar c

onve

rtib

le b

onds

- is

sued

at

disc

ount

in J

anua

ry 2

018;

rep

ayab

le in

lum

p su

m u

pon

mat

urity

; 1.3

821%

dis

coun

t rat

e p.

a.

20

18.0

1.30

- 20

23.0

1.30

E

xcep

t for

con

vert

ing

to s

hare

ca

pita

l or

buyi

ng b

ack,

pr

inci

pal r

epay

able

in

Dec

embe

r of

202

3

-

(Con

clud

ed)

The

Com

pany

iss

ued

its

2016

fir

st u

nsec

ured

cor

pora

te b

onds

wit

h a

face

val

ue o

f $5

,000

,000

tho

usan

d,

and

the

purc

hase

rs o

f th

e bo

nds

incl

uded

Man

dari

n A

irli

nes

Co.

, L

td.

and

Sab

re T

rave

l N

etw

ork

(Tai

wan

) C

o., L

td.,

whi

ch h

eld

a fa

ce v

alue

of

$300

,000

tho

usan

d, a

nd t

he a

mou

nt w

as e

lim

inat

ed i

n th

e C

ompa

ny’s

co

nsol

idat

ed f

inan

cial

sta

tem

ents

. T

he C

ompa

ny i

ssue

d th

e fi

fth

issu

e of

uns

ecur

ed c

onve

rtib

le b

onds

, an

d th

e is

suan

ce c

ondi

tion

s w

ere

as

foll

ows:

a.

T

he h

olde

rs m

ay d

eman

d a

lum

p-su

m p

aym

ent f

or th

e bo

nds

upon

mat

urit

y.

b.

The

hol

ders

can

req

uest

tha

t th

e C

ompa

ny r

epur

chas

e th

eir

bond

s at

100

.75%

fac

e va

lue

on t

he t

hird

an

nive

rsar

y of

the

off

erin

g da

te. B

ecau

se t

he h

olde

rs c

an e

xerc

ise

sell

ing

righ

ts o

n D

ecem

ber

26, 2

016,

th

e C

ompa

ny r

ecla

ssif

ied

the

bond

s pa

yabl

e to

“cu

rren

t po

rtio

n of

bon

ds p

ayab

le”

in D

ecem

ber

2015

. T

he C

ompa

ny p

aid

$994

,705

tho

usan

d to

the

hol

ders

of

the

bond

s pa

yabl

e w

ho e

xerc

ised

the

put

op

tion

s, a

nd th

e di

ffer

ence

bet

wee

n th

e pa

ymen

t am

ount

and

car

ryin

g am

ount

rec

ogni

zed

was

a l

oss

on

the

bond

s pa

yabl

e bu

y ba

ck o

f $4

1,94

3 th

ousa

nd,

for

whi

ch t

he C

ompa

ny r

ecla

ssif

ied

the

rem

aini

ng

face

val

ue to

Non

-cur

rent

ass

ets.

c.

T

he C

ompa

ny m

ay r

edee

m t

he b

onds

at

face

val

ue b

etw

een

Mar

ch 2

6, 2

014

and

Nov

embe

r 16

, 20

18

unde

r ce

rtai

n co

ndit

ions

. d.

B

etw

een

Janu

ary

26, 2

014

and

Dec

embe

r 16

, 201

8 (e

xcep

t fo

r th

e pe

riod

bet

wee

n th

e fo

rmer

div

iden

d da

te a

nd t

he d

ate

of t

he d

ivid

end

decl

arat

ion

on r

ecor

d),

hold

ers

may

con

vert

the

bon

ds t

o th

e C

ompa

ny’s

ord

inar

y sh

ares

. T

he i

niti

al c

onve

rsio

n pr

ice

was

set

at

NT

$12.

24,

whi

ch i

s su

bjec

t to

ad

just

men

t if

the

re i

s a

capi

tal

inje

ctio

n by

cas

h, s

hare

div

iden

d di

stri

buti

on, a

nd t

he p

ropo

rtio

n of

cas

h di

vide

nds

per

shar

e in

mar

ket

pric

e ex

ceed

ing

1.5%

. B

ecau

se t

he C

ompa

ny d

istr

ibut

ed c

ash

divi

dend

s as

of

Aug

ust

14, 2

018,

the

re w

as a

djus

tmen

t th

e co

nver

sion

pri

ce t

o N

T$1

1.38

, cor

pora

te b

onds

wit

h a

face

val

ue o

f $3

,316

,800

thou

sand

had

bee

n co

nver

ted

to 2

70,9

85 th

ousa

nd u

nits

of

ordi

nary

sha

res.

e.

T

he c

onve

rtib

le b

onds

has

exp

ired

on

Dec

embe

r 26

, 201

8, t

he C

ompa

ny h

as f

ully

rep

ayab

le i

n Ja

nuar

y 8,

201

9, th

e re

late

d ca

pita

l sur

plus

- s

hare

opt

ion

has

recl

assi

fied

as

capi

tal s

urpl

us -

oth

er.

The

con

vert

ible

bon

ds c

onta

in b

oth

liab

ility

and

equ

ity c

ompo

nent

s. T

he e

quity

com

pone

nt w

as p

rese

nted

in

equ

ity u

nder

the

head

ing

of c

apit

al s

urpl

us -

opt

ions

. The

eff

ecti

ve in

tere

st r

ate

of th

e li

abili

ty c

ompo

nent

w

as 1

.824

5% p

er a

nnum

on

init

ial r

ecog

niti

on.

Pro

ceed

s fr

om is

suan

ce

$

6,

000,

000

Equ

ity c

ompo

nent

(5

18,6

21)

Lia

bili

ty c

ompo

nent

at t

he d

ate

of is

suan

ce

$

5,

481,

379

- 42

-

The

Com

pany

issu

ed th

e si

xth

issu

e of

its

unse

cure

d co

nver

tibl

e bo

nds,

and

the

issu

ance

con

diti

ons

wer

e as

fo

llow

s:

a.

The

hol

ders

may

dem

and

a lu

mp-

sum

pay

men

t for

the

bond

s up

on m

atur

ity.

b.

T

he h

olde

rs c

an r

eque

st t

hat

the

Com

pany

rep

urch

ase

thei

r bo

nds

at f

ace

valu

e on

the

thi

rd a

nniv

ersa

ry

of th

e of

feri

ng d

ate.

The

hol

ders

can

exe

rcis

e th

e ri

ght t

o se

ll o

n Ja

nuar

y 30

, 202

1.

c.

The

Com

pany

may

red

eem

the

bon

ds a

t fa

ce v

alue

bet

wee

n A

pril

30,

201

8 an

d D

ecem

ber

20,

2022

un

der

cert

ain

cond

itio

ns.

d.

Bet

wee

n Ja

nuar

y 26

, 201

4 an

d D

ecem

ber

16, 2

018

(exc

ept

for

the

peri

od b

etw

een

the

form

er d

ivid

end

date

and

the

dat

e of

the

div

iden

d de

clar

atio

n on

rec

ord)

, ho

lder

s m

ay c

onve

rt t

he b

onds

to

the

Com

pany

’s o

rdin

ary

shar

es.

The

ini

tial

con

vers

ion

pric

e w

as s

et a

t N

T$1

3.2,

whi

ch i

s su

bjec

t to

ad

just

men

t if

the

re i

s a

capi

tal

inje

ctio

n by

cas

h, s

hare

div

iden

d di

stri

buti

on, a

nd t

he p

ropo

rtio

n of

cas

h di

vide

nds

per

shar

e in

mar

ket

pric

e ex

ceed

ing

1.5%

. B

ecau

se t

he C

ompa

ny d

istr

ibut

ed c

ash

divi

dend

s as

of

July

29,

201

9, th

e co

nver

sion

pri

ce w

as a

djus

ted

to N

T$1

2.6.

T

he c

onve

rtib

le b

onds

con

tain

bot

h li

abil

ity a

nd e

quity

com

pone

nts.

The

equ

ity c

ompo

nent

was

pre

sent

ed

in e

quity

und

er th

e he

adin

g of

cap

ital

sur

plus

- o

ptio

ns. T

he e

ffec

tive

inte

rest

rat

e of

the

liab

ility

com

pone

nt

was

1.3

821%

per

ann

um o

n in

itia

l rec

ogni

tion

.

Pro

ceed

s fr

om is

suan

ce

$

6,

012,

000

Equ

ity c

ompo

nent

(4

09,9

78)

Lia

bili

ty c

ompo

nent

at t

he d

ate

of is

suan

ce

$

5,

602,

022

The

sev

enth

iss

ue o

f th

e C

ompa

ny’s

uns

ecur

ed c

onve

rtib

le b

onds

was

res

olve

d by

the

boa

rd o

f di

rect

ors

of

the

Com

pany

on

Aug

ust

7, 2

019.

The

cum

ulat

ive

face

val

ue o

f th

e bo

nds

shal

l no

t ex

ceed

$3,

000,

000

thou

sand

. The

bon

ds a

re is

sued

at 1

00%

-100

.5%

of

the

face

val

ue, a

nd th

e is

suan

ce p

erio

d is

5 y

ears

.

20.

LE

AS

E A

GR

EE

ME

NT

S

Yea

r 20

19

a.

Rig

ht-o

f-us

e as

sets

- 2

019

Dec

emb

er 3

1,

2019

C

arry

ing

amou

nts

Lan

d

$

3,

442,

366

Bui

ldin

gs

6,

950,

330

Fli

ght e

quip

men

t

53,8

70,1

34

$

64,2

62,8

30

218

- 43

-

For

th

e Y

ear

En

ded

D

ecem

ber

31,

20

19

A

ddit

ions

to r

ight

-of-

use

asse

ts

$

5,04

3,40

9

Dep

reci

atio

n fo

r ri

ght-

of-u

se a

sset

s

L

and

$

171,

147

Bui

ldin

gs

76

7,93

9 F

ligh

t equ

ipm

ent

9,

070,

855

$

10,0

09,9

41

b.

Lea

se li

abil

itie

s -

2019

Dec

emb

er 3

1,

2019

C

arry

ing

amou

nts

C

urre

nt

$

695,

215

Non

-cur

rent

$

10

,909

,262

R

ange

of

disc

ount

rat

e fo

r le

ase

liab

ilit

ies

(inc

lude

US

leas

e he

dgin

g in

stru

men

ts):

D

ecem

ber

31,

20

19

L

and

1.

09%

-1.6

5%

Bui

ldin

gs

0%

-3.5

6%

Fli

ght e

quip

men

t

2.49

%-3

.16%

c.

Fin

anci

al li

abil

itie

s un

der

hedg

e ac

coun

ting

T

he C

ompa

ny s

peci

fics

a p

art

of U

S l

ease

con

trac

t as

a h

edgi

ng i

nstr

umen

ts t

o av

oid

exch

ange

fl

uctu

atio

ns is

US

dol

lar

pass

enge

r re

venu

e, a

nd a

pplie

s th

e ac

coun

ting

trea

tmen

t of

cash

flo

w h

edgi

ng.

The

leas

e in

form

atio

n is

as

foll

ows:

M

atu

rity

Dat

e

Su

bje

ct

Car

ryin

g V

alu

e

Dec

embe

r 31

, 201

9

2021

.4.1

5-20

28.5

.15

Fin

anci

al li

abil

itie

s fo

r he

dgin

g -

curr

ent

$

8,

577,

482

F

inan

cial

liab

ilit

ies

for

hedg

ing

- no

n-cu

rren

t

42

,420

,205

Infl

uenc

e of

com

preh

ensi

ve in

com

e

Rec

ogn

ized

in

Oth

er

Com

pre

hen

sive

In

com

e

Rec

lass

ifie

d t

o In

com

e

For

the

year

end

ed D

ecem

ber

31, 2

019

$

1,

457,

058

$

(2

4,02

9)

- 44

-

d.

Mat

eria

l lea

sing

act

ivit

ies

and

term

s

As

less

ee,

Chi

na A

irli

nes

leas

ed t

en 7

77-3

00E

R p

lane

s, f

ifte

en A

330-

300

plan

es a

nd f

ifte

en 7

37-8

00

plan

es f

or o

pera

tion

, lea

se p

erio

d ar

e 8

to 1

2 ye

ars

from

Feb

ruar

y 20

06 to

May

202

8. T

he r

enta

l pri

cing

m

etho

d is

par

tly

a fi

xed

amou

nt o

f fu

nds,

and

som

e of

the

m a

re f

loat

ing

rent

s, f

loat

ing

rent

s ar

e ac

cord

ing

to b

ench

mar

k ra

tio,

the

ren

t is

rev

ised

eve

ry h

alf

year

. W

hen

the

leas

e ex

pire

s, t

he l

ease

ag

reem

ents

hav

e no

pur

chas

e ri

ghts

. T

he in

form

atio

n of

ref

unda

ble

depo

sits

and

ope

ning

of

cred

it le

tter

due

to r

enta

l of

plan

es:

Dec

emb

er 3

1,

2019

Ref

unda

ble

depo

sits

$

46

3,11

5 C

redi

t gua

rant

ees

1,40

6,70

2

e.

Lea

se a

gree

men

t T

he C

ompa

ny s

igne

d a

rent

al c

ontr

act f

or s

ix A

321n

eo w

ith

Air

Lea

se C

orpo

rati

on o

n S

epte

mbe

r 20

19,

whi

ch is

exp

ecte

d to

be

intr

oduc

ed b

etw

een

2021

and

202

2.

The

Com

pany

sig

ned

a re

ntal

let

ter

of i

nten

t fo

r ei

ght

A32

1neo

with

CA

LC

Lea

se C

orpo

rati

on o

n M

ay

2019

, whi

ch is

exp

ecte

d to

be

intr

oduc

ed in

202

2.

f.

S

ale-

and-

leas

ebac

k

In o

rder

to

revi

tali

ze a

sset

s an

d st

reng

then

the

fin

anci

al s

truc

ture

, th

e C

ompa

ny s

old

five

of

its

own

A33

0-30

0 ai

rcra

ft t

o A

ltav

air

L.P

. in

Sep

tem

ber

2019

by

sale

-and

-lea

seba

ck f

or $

4,90

5,66

0 th

ousa

nd.

The

leas

e te

rm w

as 5

to 6

yea

rs a

nd a

loss

of

$103

,775

thou

sand

was

incu

rred

. The

leas

e ag

reem

ent h

ad

no t

erm

s fo

r le

ase

rene

wal

or

offt

ake

righ

ts. T

he a

nnua

l le

ase

paym

ents

for

eac

h ai

rcra

ft a

re U

S$5

,389

th

ousa

nd to

US

$5,4

37 th

ousa

nd.

As

less

ee, t

he C

ompa

ny le

ased

off

ice

buil

ding

s an

d eq

uipm

ent f

rom

CA

L P

ark.

Lea

se p

erio

d is

2 y

ears

, an

d th

e fi

xed

paym

ent (

tax

incl

uded

) is

$20

,238

thou

sand

per

mon

th.

g.

O

ther

leas

e in

form

atio

n T

he C

ompa

ny u

ses

oper

atin

g le

ase

agre

emen

t for

inve

stm

ent p

rope

rtie

s, r

efer

to N

ote

15.

For

th

e Y

ear

En

ded

D

ecem

ber

31,

20

19

S

hort

-ter

m a

nd lo

w p

rice

leas

e pa

ymen

t

$

18

,144

T

otal

of

leas

e ca

sh o

utfl

ow

$ (

11,5

83,3

49)

The

Com

pany

cho

oses

to

wai

ve t

he r

ecog

nitio

n of

the

con

trac

t pr

ovis

ions

for

the

sho

rt-t

erm

lea

ses

and

low

pri

ce le

ase,

and

doe

s no

t rec

ogni

ze th

e re

late

d ri

ght-

of-u

se a

sset

s an

d le

ase

liab

ilit

ies

for

such

leas

e.

219

- 45

-

2018

a.

S

ale-

and-

leas

ebac

k fi

nanc

e le

ases

Dec

emb

er 3

1,

2018

Min

imum

leas

e pa

ymen

ts -

fli

ght e

quip

men

t

Wit

hin

one

year

$

59

6,00

0 B

eyon

d on

e ye

ar a

nd w

ithi

n fi

ve y

ears

-

Pre

sent

val

ue o

f m

inim

um le

ase

paym

ents

$

59

6,00

0

Inte

rest

rat

es

1.

0680

%

The

Com

pany

had

leas

ed o

ne A

330-

300

airc

raft

und

er s

ale-

leas

ebac

k fi

nanc

e le

ases

as

of D

ecem

ber

31,

2018

. T

he l

ease

ter

ms

star

ted

from

Jun

e 20

06 t

o A

pril

201

9. D

urin

g th

e le

ase

term

s, t

he C

ompa

ny

reta

ined

all

ris

ks a

nd r

ewar

ds a

ttac

hed

to t

he a

ircr

aft

and

engi

nes

and

enjo

yed

the

sam

e su

bsta

ntiv

e ri

ghts

as

thos

e pr

ior

to t

he tr

ansa

ctio

ns. T

he i

nter

est

rate

s un

derl

ying

all

oblig

atio

ns u

nder

thes

e fi

nanc

e le

ases

wer

e fl

oati

ng. T

here

fore

, the

min

imum

leas

e pa

ymen

ts u

nder

the

sale

-lea

seba

ck a

ircr

aft c

ontr

acts

do

not

incl

ude

inte

rest

exp

ense

s.

b.

O

pera

ting

leas

e ar

rang

emen

ts (

incl

ude

sale

-lea

seba

ck o

pera

ting

leas

es)

F

or t

he o

pera

ting

lea

se a

rran

gem

ents

, pl

ease

ref

er t

o th

e fi

nanc

ial

stat

emen

ts f

or t

he y

ear

ende

d D

ecem

ber

31, 2

018.

A

s of

Dec

embe

r 31

, 201

8, th

e re

fund

able

dep

osit

s pa

id b

y th

e C

ompa

ny u

nder

ope

rati

ng le

ase

cont

ract

s w

ere

$215

,425

tho

usan

d. S

ome

of t

he g

uara

ntee

s w

ere

secu

red

by c

redi

t gu

aran

tees

, an

d ou

tsta

ndin

g cr

edit

gua

rant

ees

as o

f D

ecem

ber

31, 2

018

wer

e $1

,437

,707

thou

sand

. T

he f

utur

e m

inim

um l

ease

pay

men

ts f

or t

he n

on-c

ance

labl

e op

erat

ing

leas

e co

mm

itm

ents

wer

e as

fo

llow

s:

Dec

emb

er 3

1,

2018

U

p to

1 y

ear

$

9,

943,

373

Ove

r 1

year

to 5

yea

rs

38,7

89,0

47

Ove

r 5

year

s

19

,441

,872

$

68

,174

,292

T

he le

ase

paym

ents

rec

ogni

zed

in e

xpen

se f

or th

e cu

rren

t per

iod

wer

e as

fol

low

s:

For

th

e Y

ear

En

ded

D

ecem

ber

31,

20

18

M

inim

um le

ase

paym

ents

$

10

,024

,963

- 46

-

21.

OT

HE

R P

AY

AB

LE

S

D

ecem

ber

31

2019

2018

Fue

l cos

ts

$

3,

419,

803

$

3,

571,

314

Gro

und

serv

ice

expe

nses

1,

178,

184

1,08

9,12

5 R

epai

r ex

pens

es

1,13

6,58

8

96

0,13

8 In

tere

st e

xpen

ses

214,

089

260,

179

Sho

rt-t

erm

em

ploy

ee b

enef

its

1,57

7,32

2

2,

053,

442

Ter

min

al s

urch

arge

s

91

4,42

8

91

4,17

1 C

omm

issi

on e

xpen

ses

509,

520

484,

341

Oth

ers

1,94

2,26

9

2,

406,

591

$

10

,892

,203

$

11,7

39,3

01

22.

CO

NT

RA

CT

LIA

BIL

ITIE

S/D

EF

ER

RE

D R

EV

EN

UE

Dec

emb

er 3

1

20

19

20

18

Con

trac

t L

iab

ilit

ies

C

ontr

act

Lia

bil

itie

s

Fre

quen

t fly

er p

rogr

ams

$

2,

884,

122

$

2,

489,

950

Adv

ance

tick

et s

ales

17

,936

,476

16

,479

,196

$

20,8

20,5

98

$

18

,969

,146

Cur

rent

$

18,5

84,2

87

$

17

,065

,481

N

on-c

urre

nt

2,23

6,31

1

1,

903,

665

$

20

,820

,598

$

18,9

69,1

46

23.

PR

OV

ISIO

NS

Dec

emb

er 3

1

20

19

20

18

O

pera

ting

leas

es -

air

craf

t

$

9,43

1,73

6

$

7,99

9,01

5

Cur

rent

$

-

$

268,

901

Non

-cur

rent

9,

431,

736

7,73

0,11

4

$

9,43

1,73

6

$

7,99

9,01

5

220

- 47

-

The

Com

pany

ren

ted

flig

ht e

quip

men

t un

der

oper

atin

g le

ase

agre

emen

ts.

Und

er t

he c

ontr

acts

(so

me

of t

he

leas

ed f

ligh

t equ

ipm

ent’

s le

ase

paym

ents

are

cal

cula

ted

mon

thly

), w

hen

the

leas

e ex

pire

s an

d th

e eq

uipm

ent

is r

etur

ned

to t

he l

esso

r, t

he f

ligh

t eq

uipm

ent

has

to b

e re

pair

ed a

ccor

ding

to

the

expe

cted

yea

rs o

f us

e,

num

ber

of f

ligh

t ho

urs,

fli

ght

cycl

e an

d th

e nu

mbe

r of

eng

ine

revo

luti

ons.

The

Com

pany

had

exi

stin

g ob

liga

tion

s to

rec

ogni

ze p

rovi

sion

s w

hen

sign

ing

a le

ase

or d

urin

g th

e le

ase

term

.

Air

craf

t L

ease

C

ontr

act

B

alan

ce a

t Jan

uary

1, 2

018

$

7,75

8,65

1 A

ddit

iona

l pro

visi

ons

reco

gniz

ed

2,

566,

045

Usa

ge

(2

,539

,210

) E

ffec

t of

exch

ange

rat

e ch

ange

s

213,

529

B

alan

ce a

t Dec

embe

r 31

, 201

8

$

7,

999,

015

B

alan

ce a

t Jan

uary

1, 2

019

$

7,99

9,01

5 A

ddit

iona

l pro

visi

ons

reco

gniz

ed

3,

616,

519

Usa

ge

(1

,970

,226

) E

ffec

t of

exch

ange

rat

e ch

ange

s

(213

,572

)

Bal

ance

at D

ecem

ber

31, 2

019

$

9,43

1,73

6 24

. R

ET

IRE

ME

NT

BE

NE

FIT

PL

AN

S

a.

Def

ined

con

trib

utio

n pl

ans

The

C

ompa

ny

adop

ted

a pe

nsio

n pl

an

unde

r th

e L

abor

P

ensi

on

Act

(t

he

“LP

A”)

, w

hich

is

a

stat

e-m

anag

ed d

efin

ed c

ontr

ibut

ion

plan

. U

nder

the

LP

A,

an e

ntity

mak

es m

onth

ly c

ontr

ibut

ions

to

empl

oyee

s’ in

divi

dual

pen

sion

acc

ount

s at

6%

of

mon

thly

sal

arie

s an

d w

ages

.

b.

Def

ined

ben

efit

pla

ns

The

Com

pany

ado

pted

the

def

ined

ben

efit

pla

n un

der

the

Lab

or S

tand

ards

Law

, un

der

whi

ch p

ensi

on

bene

fits

are

cal

cula

ted

on t

he b

asis

of

the

leng

th o

f se

rvic

e an

d av

erag

e m

onth

ly s

alar

ies

of t

he s

ix

mon

ths

befo

re r

etir

emen

t. T

he C

ompa

ny c

ontr

ibut

e am

ount

s eq

ual

to 1

5% o

f to

tal

mon

thly

sal

arie

s an

d w

ages

to a

pen

sion

fun

d ad

min

iste

red

by th

e pe

nsio

n fu

nd m

onit

orin

g co

mm

itte

e. P

ensi

on c

ontr

ibut

ions

ar

e de

posi

ted

in th

e B

ank

of T

aiw

an in

the

com

mit

tee’

s na

me.

B

efor

e th

e en

d of

eac

h ye

ar, t

he C

ompa

ny a

sses

ses

the

bala

nce

in th

e pe

nsio

n fu

nd. I

f th

e am

ount

of

the

bala

nce

in t

he p

ensi

on f

und

is i

nade

quat

e to

pay

ret

irem

ent

bene

fits

for

em

ploy

ees

who

con

form

to

reti

rem

ent

requ

irem

ents

in

the

next

yea

r, t

he C

ompa

ny i

s re

quir

ed t

o fu

nd t

he d

iffe

renc

e in

one

ap

prop

riat

ion

that

sho

uld

be m

ade

befo

re t

he e

nd o

f M

arch

of

the

next

yea

r. T

he p

ensi

on f

und

is

man

aged

by

the

Bur

eau

of L

abor

Fun

ds, M

inis

try

of L

abor

(th

e “B

urea

u”);

the

Com

pany

has

no

righ

t to

infl

uenc

e th

e in

vest

men

t pol

icy

and

stra

tegy

.

- 48

-

The

am

ount

s in

clud

ed i

n th

e ba

lanc

e sh

eets

in

resp

ect

of t

he C

ompa

ny’s

def

ined

ben

efit

pla

ns w

ere

as

foll

ows:

D

ecem

ber

31

2019

2018

Pre

sent

val

ue o

f de

fine

d be

nefi

t obl

igat

ion

$

13

,932

,511

$

13,1

17,2

55

Fai

r va

lue

of p

lan

asse

ts

(6,3

43,7

66)

(6,1

84,4

72)

N

et d

efin

ed b

enef

it li

abil

itie

s

$

7,

588,

745

$

6,

932,

783

Mov

emen

ts in

net

def

ined

ben

efit

liab

ilit

ies

(ass

ets)

wer

e as

fol

low

s:

Pre

sen

t V

alu

e of

th

e D

efin

ed

Ben

efit

O

bli

gati

on

F

air

Val

ue

of

the

Pla

n A

sset

s

Net

Def

ined

B

enef

it

Lia

bil

itie

s (A

sset

s)

Bal

ance

at J

anua

ry 1

, 201

8

$

11,9

56,2

23

$

(5

,797

,479

)

$

6,15

8,74

4 S

ervi

ce c

ost

Cur

rent

ser

vice

cos

t

1,

263,

193

-

1,

263,

193

Net

inte

rest

exp

ense

(in

com

e)

116,

231

(56,

995)

59

,236

R

ecog

nize

d in

pro

fit o

r lo

ss

1,37

9,42

4

(5

6,99

5)

1,32

2,42

9 R

emea

sure

men

t

Ret

urn

on p

lan

asse

ts (

excl

udin

g am

ount

s in

clud

ed in

net

inte

rest

)

-

(168

,987

)

(1

68,9

87)

Act

uari

al lo

ss -

cha

nges

in f

inan

cial

as

sum

ptio

ns

283,

774

-

28

3,77

4 A

ctua

rial

loss

- e

xper

ienc

e ad

just

men

ts

560,

118

-

56

0,11

8 R

ecog

nize

d in

oth

er c

ompr

ehen

sive

inco

me

843,

892

(168

,987

)

67

4,90

5 C

ontr

ibut

ions

fro

m th

e em

ploy

er

-

(1

,058

,494

)

(1

,058

,494

) B

enef

its

paid

(8

97,4

83)

897,

483

- P

aym

ent t

o em

ploy

ees

dire

ct f

rom

the

empl

oyer

(1

74,3

90)

-

(1

74,3

90)

Eff

ect o

f ex

chan

ge r

ate

chan

ges

9,58

9

-

9,58

9 B

alan

ce a

t Dec

embe

r 31

, 201

8

13

,117

,255

(6

,184

,472

)

6,

932,

783

Ser

vice

cos

t

C

urre

nt s

ervi

ce c

ost

1,18

7,28

1

-

1,18

7,28

1 N

et in

tere

st e

xpen

se (

inco

me)

11

8,51

7

(5

6,04

9)

62,4

68

Rec

ogni

zed

in p

rofi

t or

loss

1,

305,

798

(56,

049)

1,

249,

749

Rem

easu

rem

ent

R

etur

n on

pla

n as

sets

(ex

clud

ing

amou

nts

incl

uded

in n

et in

tere

st)

-

(2

19,3

45)

(219

,345

) A

ctua

rial

loss

- c

hang

es in

fin

anci

al

assu

mpt

ions

29

0,04

4

-

290,

044

Act

uari

al lo

ss -

exp

erie

nce

adju

stm

ents

49

1,56

0

-

491,

560

Rec

ogni

zed

in o

ther

com

preh

ensi

ve in

com

e

78

1,60

4

(2

19,3

45)

562,

259

Con

trib

utio

ns f

rom

the

empl

oyer

-

(1,0

38,6

24)

(1,0

38,6

24)

Ben

efit

s pa

id

(1,1

54,7

24)

1,15

4,72

4

-

Pay

men

t to

empl

oyee

s di

rect

fro

m th

e em

ploy

er

(117

,492

)

-

(117

,492

) E

ffec

t of

exch

ange

rat

e ch

ange

s

70

-

70

Bal

ance

at D

ecem

ber

31, 2

019

$

13

,932

,511

$

(6,3

43,7

66)

$

7,

588,

745

221

- 49

-

Thr

ough

the

def

ined

ben

efit

pla

ns u

nder

the

Lab

or S

tand

ards

Law

, th

e C

ompa

ny i

s ex

pose

d to

the

fo

llow

ing

risk

s:

1)

Inve

stm

ent

risk

: T

he p

lan

asse

ts a

re i

nves

ted

in d

omes

tic

and

fore

ign

equi

ty a

nd d

ebt

secu

riti

es,

bank

dep

osits

, et

c. T

he i

nves

tmen

t is

con

duct

ed a

t th

e di

scre

tion

of

the

Bur

eau

or u

nder

the

m

anda

ted

man

agem

ent.

Bas

ed o

n re

leva

nt r

egul

atio

ns,

the

retu

rn g

ener

ated

by

plan

ass

ets

shou

ld

not b

e be

low

the

inte

rest

rat

e fo

r a

two-

year

tim

e de

posi

t wit

h lo

cal b

anks

. 2)

In

tere

st r

isk:

A d

ecre

ase

in t

he g

over

nmen

t bo

nd i

nter

est

rate

wil

l in

crea

se t

he p

rese

nt v

alue

of

the

defi

ned

bene

fit

obli

gati

on;

how

ever

, th

is w

ill

be p

arti

ally

off

set

by a

n in

crea

se i

n th

e re

turn

on

the

plan

’s d

ebt i

nves

tmen

ts.

3)

Sal

ary

risk

: T

he p

rese

nt v

alue

of

the

defi

ned

bene

fit

obli

gati

on i

s ca

lcul

ated

by

refe

renc

e to

the

fu

ture

sal

arie

s of

pla

n pa

rtic

ipan

ts.

Thu

s, a

n in

crea

se i

n th

e sa

lari

es o

f th

e pl

an p

arti

cipa

nts

wil

l in

crea

se th

e pr

esen

t val

ue o

f th

e de

fine

d be

nefi

t obl

igat

ions

. T

he a

ctua

rial

val

uati

ons

of t

he p

rese

nt v

alue

of

the

defi

ned

bene

fit

obli

gati

on w

ere

carr

ied

out

by

qual

ifie

d ac

tuar

ies.

The

sig

nifi

cant

ass

umpt

ions

use

d fo

r th

e pu

rpos

es o

f th

e ac

tuar

ial v

alua

tion

s w

ere

as

foll

ows:

D

ecem

ber

31

2019

2018

Dis

coun

t rat

e

0.71

%

0.93

%

Exp

ecte

d ra

te o

f sa

lary

incr

ease

1.00

%

1.00

%

If p

ossi

ble

reas

onab

le c

hang

e in

eac

h of

the

sig

nifi

cant

act

uari

al a

ssum

ptio

ns w

ill

occu

r an

d al

l ot

her

assu

mpt

ions

wil

l re

mai

n co

nsta

nt,

the

pres

ent

valu

e of

the

def

ined

ben

efit

obl

igat

ion

wou

ld i

ncre

ase

(dec

reas

e) a

s fo

llow

s:

Dec

emb

er 3

1

20

19

20

18

D

isco

unt r

ate

0.5%

incr

ease

$ (

613,

408 )

$ (

576,

271)

0.

5% d

ecre

ase

$

65

3,41

3

$

626,

381

Exp

ecte

d ra

te o

f sa

lary

incr

ease

0.

5% in

crea

se

$

62

6,74

3

$

601,

326

0.5%

dec

reas

e

$ (

600,

073 )

$ (

563,

743)

T

he s

ensi

tivi

ty a

naly

sis

pres

ente

d ab

ove

may

not

be

repr

esen

tati

ve o

f th

e ac

tual

cha

nge

in t

he p

rese

nt

valu

e of

the

def

ined

ben

efit

obl

igat

ion

as i

t is

unl

ikel

y th

at t

he c

hang

e in

ass

umpt

ions

wou

ld o

ccur

in

isol

atio

n of

one

ano

ther

as

som

e of

the

assu

mpt

ions

may

be

corr

elat

ed.

Dec

emb

er 3

1

20

19

20

18

T

he e

xpec

ted

cont

ribu

tions

to th

e pl

an f

or th

e ne

xt y

ear

$

73

6,05

6

$

722,

820

T

he a

vera

ge d

urat

ion

of th

e de

fine

d be

nefi

t obl

igat

ion

9.

6 ye

ars

9.

8 ye

ars

- 50

-

25.

EQ

UIT

Y

a.

Sha

re c

apit

al

Ord

inar

y sh

ares

D

ecem

ber

31

2019

2018

Num

ber

of a

utho

rize

d sh

ares

(in

thou

sand

s)

7,00

0,00

0

6,

000,

000

Am

ount

of

auth

oriz

ed s

hare

s

$

70,0

00,0

00

$

60

,000

,000

A

mou

nt o

f is

sued

sha

res

$

54

,209

,846

$

54,2

09,8

46

b.

C

apit

al s

urpl

us

D

ecem

ber

31

2019

2018

Inco

me

of c

onve

rtib

le b

onds

in e

xces

s of

par

val

ue a

nd

conv

ersi

on p

rem

ium

$

315,

114

$

31

5,11

4 D

ivid

ends

dis

trib

uted

to s

ubsi

diar

ies

3,90

9

3,

303

Ret

irem

ent o

f tr

easu

ry s

hare

s

33

,513

33

,513

D

iffe

renc

e in

sal

e pr

ice

of s

hare

of

subs

idia

ries

and

boo

k va

lue

1,12

9,08

0

-

Exp

ired

em

ploy

ee s

hare

opt

ions

11

,747

11

,747

L

ong-

term

inve

stm

ents

11

8,96

2

95

5 B

onds

pay

able

equ

ity c

ompo

nent

40

9,97

8

40

9,97

8 O

ther

s

46

6,60

4

46

6,60

4

$

2,48

8,90

7

$

1,24

1,21

4

The

cap

ital

sur

plus

fro

m s

hare

s is

sued

in

exce

ss o

f pa

r (a

ddit

iona

l pa

id-i

n ca

pita

l fr

om i

ssua

nce

of

ordi

nary

sha

res)

may

be

used

to

offs

et a

def

icit

; in

add

itio

n, w

hen

the

Com

pany

has

no

defi

cit,

such

ca

pita

l su

rplu

s m

ay b

e di

stri

bute

d as

cas

h di

vide

nds

or t

rans

ferr

ed t

o ca

pita

l (l

imit

ed t

o a

cert

ain

perc

enta

ge o

f th

e C

ompa

ny’s

pai

d-in

cap

ital

).

The

cap

ital

sur

plus

fro

m lo

ng-t

erm

inve

stm

ents

, em

ploy

ee s

hare

s op

tion

s ex

pire

d, d

ivid

ends

dis

trib

uted

to

sub

sidi

arie

s an

d re

tire

men

t of

trea

sury

sha

res

may

not

be

used

for

any

pur

pose

, exp

ect f

or o

ffse

ttin

g a

defi

cit.

As

for

capi

tal

surp

lus

from

con

vers

ion

of c

onve

rtib

le b

onds

pay

able

may

not

be

used

for

any

pu

rpos

e.

222

- 51

-

c.

App

ropr

iati

on o

f ea

rnin

gs a

nd d

ivid

end

poli

cy

Acc

ordi

ng t

o am

ende

d C

ompa

ny A

ct,

whe

re t

he C

ompa

ny m

ade

prof

it i

n a

fisc

al y

ear,

the

pro

fit

shal

l be

fir

st u

tili

zed

for

payi

ng t

axes

, of

fset

ting

los

ses

of p

revi

ous

year

s, s

etti

ng a

side

as

lega

l re

serv

e 10

%

of t

he r

emai

ning

pro

fit,

sett

ing

asid

e or

rev

ersi

ng a

spe

cial

res

erve

in

acco

rdan

ce w

ith

the

law

s an

d re

gula

tion

s, a

nd t

hen

any

rem

aini

ng p

rofi

t to

geth

er w

ith

any

undi

stri

bute

d re

tain

ed e

arni

ngs

shal

l be

us

ed b

y th

e C

ompa

ny’s

boa

rd o

f di

rect

ors

as t

he b

asis

for

pro

posi

ng a

dis

trib

utio

n pl

an w

ith

due

cons

ider

atio

n of

any

fut

ure

airc

raft

acq

uisi

tion

pla

ns a

nd f

und

dem

and,

whi

ch s

houl

d be

res

olve

d in

the

sh

areh

olde

rs’

mee

ting

for

the

dis

trib

utio

n of

div

iden

ds a

nd b

onus

es t

o sh

areh

olde

rs b

y ca

sh o

r sh

ares

(c

ash

divi

dend

s ca

nnot

be

less

tha

n 30

% o

f to

tal

divi

dend

s di

stri

bute

d).

How

ever

, if

the

Com

pany

’s

prof

it b

efor

e ta

x in

a f

isca

l ye

ar a

fter

ded

ucti

ons

for

the

abov

emen

tion

ed i

tem

s is

not

suf

fici

ent

for

earn

ings

dis

trib

utio

n, r

etai

ned

earn

ings

can

be

used

as

a su

pple

men

t for

the

defi

cien

cy.

The

Com

pany

sha

ll s

et a

side

pro

fits

as

a le

gal

rese

rve

unti

ll th

e le

gal

rese

rve

amou

nts

to t

he a

utho

rize

d ca

pita

l. T

he l

egal

res

erve

cou

ld b

e us

ed f

or m

akin

g go

od t

he d

efic

it o

f th

e C

ompa

ny.

If t

he C

ompa

ny

has

no d

efic

it i

n a

fisc

al y

ear,

the

Com

pany

can

dis

trib

ute

all

or p

art

of t

he c

apit

al s

urpl

us b

y ca

sh o

r sh

ares

wit

h du

e co

nsid

erat

ion

of f

inan

ce,

mar

ketin

g an

d m

anag

emen

t re

quir

emen

ts i

n ac

cord

ance

wit

h th

e la

ws

and

regu

lati

ons.

T

he d

istr

ibut

ion

of p

rofi

t su

rplu

s sh

all

be a

ppro

ved

in t

he a

nnua

l sh

areh

olde

rs’

mee

ting

hel

d in

the

fo

llow

ing

year

and

sha

ll b

e ac

coun

ted

for

in th

at y

ear.

1)

A

ppro

pria

tion

of

earn

ings

and

div

iden

ds p

er s

hare

in 2

017

T

he a

ppro

pria

tion

of

earn

ings

for

201

7 w

as r

esol

ved

in th

e sh

areh

olde

rs’

mee

ting

on

June

27,

201

8.

The

app

ropr

iati

ons

and

divi

dend

s pe

r sh

are

wer

e as

fol

low

s:

Ap

pro

pri

atio

n

of E

arn

ings

Div

iden

ds

Per

S

har

e (N

T$)

L

egal

res

erve

$

145,

831

Spe

cial

res

erve

11

8,81

0

C

ash

divi

dend

s

1,

193,

670

$0

.218

1820

086

2)

App

ropr

iati

on o

f ea

rnin

gs in

201

8 T

he a

ppro

pria

tion

of

earn

ings

for

201

8 w

as r

esol

ved

in th

e sh

areh

olde

rs’

mee

ting

on

June

25,

201

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app

ropr

iati

on a

nd d

ivid

ends

per

sha

re w

ere

as f

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ws:

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pp

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riat

ion

of

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erve

$

114,

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ash

divi

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1,

136,

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ve o

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nd.

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ing

of d

efic

its

in 2

019

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n M

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pro

pose

d to

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set

the

accu

mul

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def

icit

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he d

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it

incl

uded

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et l

oss

of $

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ousa

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tive

adju

stm

ent

of o

ther

ret

aine

d ea

rnin

gs o

f $5

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ousa

nd, t

he r

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ning

am

ount

of

accu

mul

ated

def

icit

was

$1,

777,

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thou

sand

.

The

of

fset

ting

of

de

fici

ts

for

2019

is

su

bjec

t to

th

e re

solu

tion

of

th

e sh

areh

olde

rs

in

the

shar

ehol

ders

’ m

eeti

ng to

be

held

on

June

23,

202

0.

d.

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er e

quity

item

s T

he m

ovem

ent o

f ot

her

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ty it

ems

is a

s fo

llow

s:

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ge

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fere

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f in

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ther

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me

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gniz

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od

25

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268

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87

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rans

fers

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ount

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12

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alan

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t Dec

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r 31

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19

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58,2

23

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tinu

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223

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h F

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ance

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107,

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clud

ed)

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Tre

asur

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ares

T

reas

ury

shar

es a

re t

he C

ompa

ny’s

sha

res

held

by

its

subs

idia

ries

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of

Dec

embe

r 31

, 20

19 a

nd 2

018

wer

e as

fol

low

s:

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har

es in

Th

ousa

nd

s)

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rpos

e of

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asu

ry S

har

es

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uy

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k t

o W

rite

off

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pan

y’s

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ares

Hel

d b

y It

s S

ub

sid

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umbe

r of

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ng th

e ye

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ber

of s

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n T

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mou

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ark

et V

alu

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18,7

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$

18

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26

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26,1

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dari

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22

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$

22,8

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81

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6

$

31,7

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$

31

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he

abov

e ac

quis

itio

ns

by

subs

idia

ries

of

th

e C

ompa

ny’s

sh

ares

in

pr

evio

us

year

s w

as

due

to

inve

stm

ent p

lann

ing.

T

he s

hare

s of

the

Com

pany

hel

d by

its

subs

idia

ries

wer

e tr

eate

d as

trea

sury

sha

res.

The

sub

sidi

arie

s ca

n ex

erci

se

shar

ehol

ders

’ ri

ght

on

thes

e tr

easu

ry

shar

es,

exce

pt

for

the

righ

t to

su

bscr

ibe

for

the

Com

pany

’s n

ew s

hare

s an

d vo

ting

righ

ts.

To

mai

ntai

n th

e C

ompa

ny’s

cre

dit s

tand

ing

and

shar

ehol

ders

’ ri

ghts

and

inte

rest

s, th

e bo

ard

of d

irec

tors

de

cide

d to

buy

bac

k sh

ares

of

the

Com

pany

fro

m T

aiw

an S

tock

Exc

hang

e at

a p

rice

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m $

9 to

$14

per

sh

are.

The

exp

ecte

d pe

riod

of

purc

hase

is

from

Aug

ust

10,

2018

to

Oct

ober

9,

2018

. A

s of

50,

000

thou

sand

sha

res

had

been

rep

urch

ased

. T

he t

reas

ury

shar

es h

eld

by t

he C

ompa

ny h

as r

etir

ed o

n D

ecem

ber

18,

2018

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are

capi

tal

decr

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s $5

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hous

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ry s

hare

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reas

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2,90

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id-i

n ca

pita

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trea

sury

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re i

ncre

ases

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nder

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Sec

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ct, t

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reas

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es h

eld

by th

e C

ompa

ny c

anno

t be

ple

dged

and

are

not

ent

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to d

ivid

ends

dis

trib

utio

n an

d vo

ting

rig

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etc

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224

- 55

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T I

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or t

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31

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420,

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t

$

26,3

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(27

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nanc

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hel

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irm

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d.

Fin

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ts

F

or t

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Yea

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nd

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onds

pay

able

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431,

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41

4,56

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1,

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Info

rmat

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foll

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th

e Y

ear

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emb

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1

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19

20

18

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88,6

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18

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242,

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4,

106,

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69,8

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A

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ding

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the

Com

pany

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pany

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pens

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n at

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es o

f no

le

ss t

han

3% o

f th

e ne

t pr

ofit

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ore

inco

me

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ompe

nsat

ion,

and

acc

rued

pro

fit

bonu

s at

a c

erta

in r

ate

of p

rofi

t bef

ore

tax

on th

e ba

sis

of th

e co

llec

tive

agr

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igne

d w

ith

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Chi

na

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line

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mpl

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nion

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he

empl

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pens

atio

n an

d pr

ofit

bo

nus

for

the

year

en

ded

Dec

embe

r 31

, 20

18 w

as $

51,6

56 t

hous

and

and

$594

,810

tho

usan

d. F

or t

he y

ear

ende

d D

ecem

ber

31,

225

- 57

-

2019

, the

em

ploy

ees’

com

pens

atio

n ha

ve n

ot e

stim

ated

sin

ce it

was

loss

bef

ore

inco

me

tax.

M

ater

ial

diff

eren

ces

betw

een

such

est

imat

ed a

mou

nts

and

the

amou

nts

prop

osed

by

the

boar

d of

di

rect

ors

on o

r be

fore

the

dat

e th

e an

nual

fin

anci

al s

tate

men

ts a

re a

utho

rize

d fo

r is

sue

are

adju

sted

in

the

year

tha

t th

e bo

nus

and

rem

uner

atio

n w

ere

reco

gniz

ed. I

f th

ere

is a

cha

nge

in t

he p

ropo

sed

amou

nts

afte

r th

e an

nual

fin

anci

al s

tate

men

ts w

ere

auth

oriz

ed f

or i

ssue

, the

dif

fere

nces

are

rec

orde

d as

a c

hang

e in

the

acco

unti

ng e

stim

ate.

In

form

atio

n on

the

empl

oyee

s’ c

ompe

nsat

ion

and

rem

uner

atio

n of

dir

ecto

rs a

nd s

uper

viso

rs r

esol

ved

by

the

Com

pany

’s b

oard

of

dire

ctor

s in

201

9 an

d 20

18 is

ava

ilab

le o

n th

e M

arke

t Obs

erva

tion

Pos

t Sys

tem

w

ebsi

te o

f th

e T

aiw

an S

tock

Exc

hang

e.

27

. IN

CO

ME

TA

X

a.

In

com

e ta

x re

cogn

ized

in p

rofi

t or

loss

T

he m

ajor

com

pone

nts

of ta

x ex

pens

e w

ere

as f

ollo

ws:

F

or t

he

Yea

r E

nd

ed D

ecem

ber

31

2019

2018

Cur

rent

tax

Cur

rent

yea

r

$

8,83

6

$

22,5

06

Pri

or y

ear

adju

stm

ent

(6,6

58)

4,86

6 D

efer

red

tax

Cur

rent

yea

r

(1

6,21

8)

1,36

6,74

0 A

djus

tmen

ts to

def

erre

d ta

x at

trib

utab

le to

cha

nges

in ta

x ra

tes

and

law

s

26

,512

-

Eff

ect o

f in

com

e ta

x

-

(8

68,8

42)

In

com

e ta

x ex

pens

e re

cogn

ized

in p

rofi

t or

loss

$

12,4

72

$

52

5,27

0 A

rec

onci

liat

ion

of a

ccou

ntin

g pr

ofit

and

inco

me

tax

expe

nse

is a

s fo

llow

s:

For

th

e Y

ear

En

ded

Dec

emb

er 3

1

20

19

20

18

P

rofi

t bef

ore

tax

$

(1,

187,

326 )

$

2,31

5,63

1

Inco

me

tax

expe

nse

calc

ulat

ed a

t the

sta

tuto

ry r

ate

$

(2

37,4

65)

$

46

3,12

6 A

dd (

dedu

ct)

tax

effe

cts

of:

Non

dedu

ctib

le e

xpen

ses

in d

eter

min

ing

taxa

ble

inco

me

17,9

00

20,0

98

Tax

-exe

mpt

inco

me

(347

,338

)

(3

43,1

07)

Ove

rsea

s in

com

e ta

x ex

pens

e

8,

836

22,5

06

Add

itio

nal i

ncom

e ta

x un

der

the

Alt

erna

tive

Min

imum

Tax

Act

-

- U

nrec

ogni

zed

loss

car

ryfo

rwar

ds a

nd in

vest

men

t tax

cre

dits

55

0,68

5

1,22

7,00

0 E

ffec

t of

inco

me

tax

-

(868

,842

) A

djus

tmen

ts f

or p

rior

yea

rs’

tax

(6,6

58)

4,86

6 A

djus

tmen

ts to

def

erre

d ta

x at

trib

utab

le to

cha

nges

in ta

x ra

tes

and

law

s

26

,512

-

Oth

er

-

(377

)

Inco

me

tax

expe

nse

reco

gniz

ed in

pro

fit o

r lo

ss

$

12

,472

$

525,

270

- 58

-

It w

as a

nnou

nced

tha

t th

e In

com

e T

ax L

aw i

n th

e R

OC

. w

as a

men

ded

and,

sta

rtin

g fr

om 2

018,

the

co

rpor

ate

inco

me

tax

rate

wil

l be

adj

uste

d fr

om 1

7% t

o 20

%.

In a

ddit

ion,

the

rat

e of

the

cor

pora

te

surt

ax a

ppli

cabl

e to

una

ppro

pria

ted

earn

ings

wil

l be

redu

ced

from

10%

to 5

%.

b.

In

com

e ta

x re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e

F

or t

he

Yea

r E

nd

ed D

ecem

ber

31

2019

2018

Def

erre

d ta

x

Rec

ogni

zed

in o

ther

com

preh

ensi

ve in

com

e

T

rans

lati

on o

f fo

reig

n op

erat

ions

$

11,8

35

$

(6

,828

) F

air

valu

e re

valu

atio

n of

hed

ging

inst

rum

ents

for

cas

h fl

ow

hedg

es

(281

,401

)

(2

2,29

0)

Act

uari

al g

ain

or lo

ss o

n de

fine

d be

nefi

t pla

n

112,

452

134,

979

Fai

r va

lue

chan

ges

of f

inan

cial

ass

ets

at F

VT

OC

I

(1

4,85

4)

547

Eff

ect o

f in

com

e ta

x

-

2,51

9

Tot

al in

com

e ta

x re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e

$ (

171,

968 )

$

108,

927

c.

D

efer

red

tax

asse

ts a

nd li

abil

itie

s F

or th

e ye

ar e

nded

Dec

embe

r 31

, 201

9

B

egin

nin

g B

alan

ce

R

ecog

niz

ed in

P

rofi

t or

Los

s

Rec

ogn

ized

in

Oth

er

Com

pre

- h

ensi

ve

Inco

me

E

nd

ing

Bal

ance

Def

erre

d ta

x as

sets

Tem

pora

ry d

iffe

renc

es

Def

ined

ben

efit

pla

ns

$

1,

396,

033

$

18

,726

$

112,

452

$

1,

527,

211

Fre

quen

t fly

er p

rogr

ams

510,

060

80,6

34

-

59

0,69

4 M

aint

enan

ce r

eser

ve

1,67

4,97

3

38

8,51

2

-

2,06

3,48

5 A

llow

ance

for

red

ucti

on o

f in

vent

ory

333,

653

(38,

854)

-

294,

799

Oth

ers

646,

627

(377

,534

)

11

,860

28

0,95

3

$

4,56

1,34

6

$

71,4

84

$

12

4,31

2

$

4,75

7,14

2

Def

erre

d ta

x li

abil

itie

s

Tem

pora

ry d

iffe

renc

es

Unr

eali

zed

fore

ign

exch

ange

ga

ins

$

-

$

81,7

78

$

-

$

81

,778

O

ther

s (N

ote)

21

,195

-

29

6,28

0

317,

475

$

21

,195

$

81,7

78

$

29

6,28

0

$

39

9,25

3

226

- 59

-

For

the

year

end

ed D

ecem

ber

31, 2

018

Beg

inn

ing

Bal

ance

Rec

ogn

ized

in

Pro

fit

or L

oss

Rec

ogn

ized

in

Oth

er

Com

pre

- h

ensi

ve

Inco

me

E

nd

ing

Bal

ance

Def

erre

d ta

x as

sets

Tem

pora

ry d

iffe

renc

es

Def

ined

ben

efit

pla

ns

$

1,

055,

972

$

20

5,08

1

$

13

4,98

0

$

1,39

6,03

3 F

requ

ent f

lyer

pro

gram

s

42

6,10

6

83

,954

-

510,

060

Mai

nten

ance

res

erve

1,

395,

805

279,

168

-

1,

674,

973

All

owan

ce f

or r

educ

tion

of

inve

ntor

y

23

7,36

6

96

,287

-

333,

653

Oth

ers

1,07

9,92

3

(4

20,1

79)

(13,

117)

64

6,62

7 L

oss

carr

yfor

war

ds

779,

769

(779

,769

)

-

-

$

4,97

4,94

1

$

(535

,458

)

$

121,

863

$

4,

561,

346

D

efer

red

tax

liab

ilit

ies

T

empo

rary

dif

fere

nces

D

epre

ciat

ion

diff

eren

ce f

rom

fi

xed

asse

ts

$

31

,010

$

(31,

010)

$

-

$

- U

nrea

lize

d fo

reig

n ex

chan

ge

gain

s

91

5

(9

15)

-

-

Oth

ers

(Not

e)

13,8

94

(5,6

35)

12,9

36

21,1

95

$

45

,819

$

(37,

560)

$

12,9

36

$

21

,195

N

ote:

In

clud

ed a

djus

tmen

ts o

n in

itia

l ap

plic

atio

n du

e to

tax

rat

e ch

ange

s $6

,873

tho

usan

d fr

om

IFR

S 9

. D

educ

tibl

e te

mpo

rary

dif

fere

nces

, un

used

los

s ca

rryf

orw

ards

and

unu

sed

inve

stm

ent

cred

its

for

whi

ch

no d

efer

red

tax

asse

ts h

ave

been

rec

ogni

zed

in th

e ba

lanc

e sh

eets

are

as

foll

ows:

D

ecem

ber

31

2019

2018

Los

s ca

rryf

orw

ards

20

19

$

11,7

90,7

70

2021

$

2,89

9,49

6

2,

899,

496

2022

61

9,79

9

61

9,79

9 20

26

202,

699

202,

699

2028

1,

519,

941

1,32

6,52

8 20

29

760,

157

-

$

6,00

2,09

2

$

16,8

39,2

92

O

ther

$

1,09

7,90

8

$

39,1

42

- 60

-

d.

Unu

sed

tax

loss

car

ryfo

rwar

ds a

s of

Dec

embe

r 31

, 201

8 w

ere

as f

ollo

ws:

Exp

iry

Yea

r

Un

use

d

Am

oun

t

2021

$

2,

899,

496

2022

619,

799

2026

202,

699

2028

1,51

9,94

1 20

29

76

0,15

7

$

6,

002,

092

e.

In

com

e ta

x re

turn

s

The

inco

me

tax

retu

rns

of th

e C

ompa

ny th

roug

h 20

17 h

ave

been

exa

min

ed b

y th

e ta

x au

thor

itie

s.

28.

EA

RN

ING

S P

ER

SH

AR

E

F

or t

he

Yea

r E

nd

ed D

ecem

ber

31

2019

2018

Bas

ic e

arni

ngs

per

shar

e

$

(0.2

2 )

$

0.

33

Dil

uted

ear

ning

s pe

r sh

are

$

(0

.22)

$

0.32

F

or t

he

Yea

r E

nd

ed D

ecem

ber

31

2019

2018

Ear

ning

s us

ed in

the

com

puta

tion

of

basi

c ea

rnin

gs p

er s

hare

$ (

1,19

9,79

8)

$

1,

790,

361

Eff

ect o

f po

tent

iall

y di

luti

ve o

rdin

ary

shar

es:

Inte

rest

on

conv

erti

ble

bond

s (a

fter

tax)

-

81,4

63

E

arni

ngs

used

in th

e co

mpu

tati

on o

f di

lute

d ea

rnin

gs p

er s

hare

$ (

1,19

9,79

8 )

$

1,

871,

824

W

eigh

ted

aver

age

num

ber

of o

rdin

ary

shar

es in

com

puta

tion

of

basi

c ea

rnin

gs p

er s

hare

(in

thou

sand

s)

5,41

8,09

6

5,

453,

579

Eff

ect o

f po

tent

iall

y di

luti

ve o

rdin

ary

shar

es:

Con

vert

ible

bon

ds (

in th

ousa

nds)

-

457,

481

Em

ploy

ees’

com

pens

atio

n or

bon

uses

issu

ed to

em

ploy

ees

(in

thou

sand

s)

-

8,

821

W

eigh

ted

aver

age

num

ber

of o

rdin

ary

shar

es u

sed

in th

e co

mpu

tati

on o

f di

lute

d ea

rnin

gs p

er s

hare

(in

thou

sand

s)

5,41

8,09

6

5,

919,

881

If th

e C

ompa

ny o

ffer

s to

set

tle

com

pens

atio

n or

bon

uses

pai

d to

em

ploy

ees

in c

ash

or s

hare

s, th

e C

ompa

ny

assu

mes

the

ent

ire

amou

nt o

f th

e co

mpe

nsat

ion

or b

onus

es w

ould

be

sett

led

in s

hare

s, a

nd t

he r

esul

ting

po

tent

ial

shar

es

wer

e in

clud

ed

in

the

wei

ghte

d av

erag

e nu

mbe

r of

sh

ares

ou

tsta

ndin

g us

ed

in

the

com

puta

tion

of

dilu

ted

earn

ings

per

sha

re,

if t

he e

ffec

t is

dil

utiv

e. S

uch

dilu

tive

eff

ect

of t

he p

oten

tial

shar

es w

as i

nclu

ded

in t

he c

ompu

tati

on o

f di

lute

d ea

rnin

gs p

er s

hare

unt

il t

he n

umbe

r of

sha

res

to b

e di

stri

bute

d to

em

ploy

ees

is r

esol

ved

in th

e fo

llow

ing

year

.

227

- 61

-

29.

CA

PIT

AL

MA

NA

GE

ME

NT

T

he C

ompa

ny m

anag

es i

ts c

apit

al t

o en

sure

tha

t en

titi

es i

n th

e C

ompa

ny w

ill

be a

ble

to c

onti

nue

as g

oing

co

ncer

ns w

hile

max

imiz

ing

the

retu

rn t

o st

akeh

olde

rs t

hrou

gh t

he o

ptim

izat

ion

of t

he d

ebt

and

equi

ty

bala

nce.

The

cap

ital

str

uctu

re o

f th

e C

ompa

ny c

onsi

sts

of n

et d

ebt

(bor

row

ings

off

set

by c

ash

and

cash

eq

uiva

lent

s) a

nd e

quit

y of

the

Com

pany

com

pris

ing

issu

ed c

apit

al, r

eser

ves,

ret

aine

d ea

rnin

gs, o

ther

equ

ity

and

non-

cont

roll

ing

inte

rest

s.

To

supp

ort

its

oper

atin

g ac

tivi

ties

and

pur

chas

e of

air

craf

t, th

e C

ompa

ny n

eeds

to

mai

ntai

n su

ffic

ient

ca

pita

l. T

here

fore

, the

goa

l of

capi

tal m

anag

emen

t is

to e

nsur

e fi

nanc

ial r

esou

rces

and

ope

rati

ng p

lan

is a

ble

to s

uppo

rt th

e fu

ture

wor

king

cap

ital

, cap

ital

exp

endi

ture

s, d

ebt r

epay

men

t and

div

iden

d ex

pens

es a

nd o

ther

ne

eds.

30.

FIN

AN

CIA

L I

NS

TR

UM

EN

TS

a.

Fai

r va

lues

of

fina

ncia

l ins

trum

ents

Dec

emb

er 3

1

20

19

20

18

Car

ryin

g A

mou

nt

F

air

Val

ue

C

arry

ing

Am

oun

t

Fai

r V

alu

e

Fin

anci

al li

abil

itie

s

Bon

ds p

ayab

le

$

32

,352

,625

$

32,3

63,3

01

$

33

,219

,610

$

31,6

51,8

65

Ban

k lo

ans

62

,326

,488

62

,326

,488

72

,162

,743

70

,171

,333

Som

e lo

ng-t

erm

bor

row

ings

are

flo

atin

g-ra

te f

inan

cial

liab

ilit

ies,

so

thei

r ca

rryi

ng a

mou

nts

are

thei

r fa

ir

valu

es. T

he f

air

valu

es o

f lo

ng-t

erm

bor

row

ings

and

pri

vate

bon

ds w

ith

fixe

d in

tere

st r

ates

are

est

imat

ed

at t

he p

rese

nt v

alue

of

expe

cted

cas

h fl

ows

disc

ount

ed a

t ra

tes

of 0

.67%

in

2019

and

0.6

8% i

n 20

18

prev

aili

ng in

the

mar

ket f

or lo

ng-t

erm

bor

row

ings

(L

evel

2).

The

fai

r va

lues

of

bond

s pa

yabl

e ar

e ba

sed

on th

ose

whi

ch a

re tr

aded

in th

e st

ock

exch

ange

and

bas

ed o

n qu

oted

mar

ket p

rice

s (L

evel

1).

b.

F

air

valu

e m

easu

rem

ents

rec

ogni

zed

in th

e ba

lanc

e sh

eets

T

he f

ollo

win

g ta

ble

prov

ides

an

anal

ysis

of

fina

ncia

l ins

trum

ents

that

are

mea

sure

d su

bseq

uent

to in

itia

l re

cogn

itio

n at

fai

r va

lue,

gro

uped

int

o L

evel

s 1

to 3

bas

ed o

n th

e de

gree

to

whi

ch t

he f

air

valu

e is

ob

serv

able

: 1)

L

evel

1 f

air

valu

e m

easu

rem

ents

are

tho

se d

eriv

ed f

rom

quo

ted

pric

es (

unad

just

ed)

in a

ctiv

e m

arke

ts f

or id

enti

cal a

sset

s or

liab

ilit

ies;

2)

L

evel

2 f

air

valu

e m

easu

rem

ents

are

tho

se d

eriv

ed f

rom

inp

uts

othe

r th

an q

uote

d pr

ices

inc

lude

d w

ithi

n L

evel

1 t

hat

are

obse

rvab

le f

or t

he a

sset

or

liab

ilit

y, e

ithe

r di

rect

ly (

i.e.

as p

rice

s) o

r in

dire

ctly

(i.e

. der

ived

fro

m p

rice

s); a

nd

- 62

-

3)

Lev

el 3

fai

r va

lue

mea

sure

men

ts a

re th

ose

deri

ved

from

val

uati

on te

chni

ques

that

incl

ude

inpu

ts f

or

the

asse

t or

liab

ility

that

are

not

bas

ed o

n ob

serv

able

mar

ket d

ata

(uno

bser

vabl

e in

puts

).

Dec

embe

r 31

, 201

9

L

evel

1

L

evel

2

L

evel

3

T

otal

Fin

anci

al a

sset

s at

FV

TP

L

Der

ivat

ive

inst

rum

ents

$

-

$

434

$ -

$ 43

4

Fin

anci

al a

sset

s at

FV

TO

CI

Inve

stm

ents

in e

quity

inst

rum

ents

Unl

iste

d sh

ares

- d

omes

tic

$ -

$ -

$ 26

,865

$

26,8

65

Unl

iste

d sh

ares

- f

orei

gn

-

-

80

,991

80,9

91

$ -

$ -

$ 10

7,85

6

$

107,

856

F

inan

cial

liab

ilitie

s at

FV

TP

L

Der

ivat

ive

inst

rum

ents

$

-

$

11,7

49

$ -

$ 11

,749

Fin

anci

al a

sset

s fo

r he

dgin

g

$

-

$

109

$ 9,

479

$ 9,

588

F

inan

cial

liab

ilitie

s fo

r he

dgin

g

$

50,9

97,6

87

$ 28

,578

$

3,95

5

$

51,0

30,2

20

Dec

embe

r 31

, 201

8

L

evel

1

L

evel

2

L

evel

3

T

otal

Fin

anci

al a

sset

s at

FV

TO

CI

Inve

stm

ents

in e

quity

inst

rum

ents

Uni

ted

shar

es -

dom

estic

$

-

$

-

$

21,7

46

$ 21

,746

U

nlis

ted

shar

es -

for

eign

-

-

61,6

20

61

,620

$

-

$

-

$

83,3

66

$ 83

,366

Fin

anci

al li

abili

ties

at F

VT

PL

D

eriv

ativ

e in

stru

men

ts

$ -

$ 22

1

$

-

$

221

F

inan

cial

ass

ets

for

hedg

ing

$ -

$ 22

,453

$

4,90

1

$

27,3

54

F

inan

cial

liab

ilitie

s fo

r he

dgin

g

$

-

$

239

$ -

$ 23

9 T

here

wer

e no

tran

sfer

s be

twee

n L

evel

2 a

nd 3

in th

e cu

rren

t and

pri

or p

erio

ds.

4)

V

alua

tion

tech

niqu

es a

nd in

puts

app

lied

for

Lev

el 2

fai

r va

lue

mea

sure

men

t F

inan

cial

In

stru

men

ts

V

alu

atio

n T

ech

niq

ues

an

d I

np

uts

Der

ivat

ives

- f

orei

gn e

xcha

nge

forw

ard

cont

ract

s an

d in

tere

st r

ate

swap

s

T

he f

air

valu

es o

f de

riva

tive

s (e

xcep

t opt

ions

) ha

ve b

een

dete

rmin

ed b

ased

on

disc

ount

ed c

ash

flow

ana

lyse

s us

ing

inte

rest

yie

ld c

urve

s ap

plic

able

for

the

dura

tion

of

the

deri

vati

ves.

The

est

imat

es a

nd a

ssum

ptio

ns th

at th

e C

ompa

ny

used

to d

eter

min

e th

e fa

ir v

alue

s ar

e id

enti

cal t

o th

ose

used

in

the

pric

ing

of f

inan

cial

inst

rum

ents

for

mar

ket p

arti

cipa

nts.

228

- 63

-

5)

Val

uati

on te

chni

ques

and

inpu

ts a

ppli

ed f

or L

evel

3 f

air

valu

e m

easu

rem

ent

T

he f

air

valu

es o

f cu

rren

cy o

ptio

ns a

nd f

uel

opti

ons

are

dete

rmin

ed u

sing

opt

ion

pric

ing

mod

els

whe

re t

he s

igni

fica

nt u

nobs

erva

ble

inpu

ts a

re i

mpl

ied

fluc

tuat

ion.

An

incr

ease

in

the

impl

ied

fluc

tuat

ion

used

in is

olat

ion

wou

ld r

esul

t in

a de

crea

se in

the

fair

val

ue o

f cu

rren

cy o

ptio

ns a

nd f

uel

opti

ons.

T

he d

omes

tic

unli

sted

equ

ity

inve

stm

ent i

s ba

sed

on th

e co

mpa

rati

ve c

ompa

ny v

alua

tion

to e

stim

ate

the

fair

val

ue.

The

mai

n as

sum

ptio

ns a

re b

ased

on

the

mul

tipl

ier

of t

he m

arke

t pr

ice

of t

he

com

para

ble

list

ed c

ompa

ny a

nd t

he n

et v

alue

per

sha

re,

whi

ch h

ave

cons

ider

ed t

he l

iqui

dity

di

scou

nt.

The

hig

her

the

mul

tipl

ier

or t

he l

ower

the

liq

uidi

ty d

isco

unt,

the

high

er t

he f

air

valu

e of

th

e re

leva

nt f

inan

cial

inst

rum

ents

. T

he m

ovem

ents

of

Lev

el 3

fin

anci

al in

stru

men

ts a

re a

s fo

llow

s:

Mu

ltip

lica

tor

L

iqu

idit

y D

isco

un

t

Dec

embe

r 31

, 201

9

0.75

-13.

23

80

%

Dec

embe

r 31

, 201

8

0.74

-15.

29

80

%

Der

ivat

ive

Inst

rum

ents

Eq

uit

y In

stru

men

ts

B

alan

ce a

t Jan

uary

1, 2

019

$

4,

901

$

83

,366

R

ecog

nize

d in

oth

er c

ompr

ehen

sive

inco

me

623

24,4

90

B

alan

ce a

t Dec

embe

r 31

, 201

9

$

5,52

4

$

107,

856

Der

ivat

ive

Inst

rum

ents

Eq

uit

y In

stru

men

ts

B

alan

ce a

t Jan

uary

1, 2

018

$

-

$

64

,177

A

djus

tmen

ts o

n in

itia

l app

licat

ion

of I

FRS

9

-

43

,019

O

ther

com

preh

ensi

ve in

com

e re

cogn

ized

dur

ing

the

peri

od

4,90

1

(2

3,83

0)

B

alan

ce a

t Dec

embe

r 31

, 201

8

$

4,90

1

$

83,3

66

Bec

ause

som

e fi

nanc

ial

inst

rum

ents

and

non

fina

ncia

l in

stru

men

ts m

ay n

ot h

ave

thei

r fa

ir v

alue

s di

sclo

sed,

the

tot

al f

air

valu

e di

sclo

sed

here

in i

s no

t th

e to

tal

valu

e of

the

Gro

up’s

col

lect

ive

inst

rum

ents

.

- 64

-

c.

Cat

egor

ies

of f

inan

cial

inst

rum

ents

Dec

emb

er 3

1

20

19

20

18

F

inan

cial

ass

ets

F

inan

cial

ass

ets

at F

VT

PL

$

434

$

-

Fin

anci

al a

sset

s fo

r he

dgin

g

9,

588

27,3

54

Fin

anci

al a

sset

s at

am

orti

zed

cost

(N

ote

1)

31,3

56,5

62

31,6

30,6

97

Fin

anci

al a

sset

s at

FV

TO

CI

- eq

uity

inst

rum

ent i

nves

tmen

t

10

7,85

6

83

,366

Fin

anci

al li

abil

itie

s

Fin

anci

al li

abil

itie

s at

FV

TP

L

11,7

49

221

Fin

anci

al li

abil

itie

s fo

r he

dgin

g

51

,030

,220

23

9 F

inan

cial

liab

ilit

ies

at a

mor

tize

d co

st (

Not

e 2)

11

9,88

8,72

0

12

0,51

9,57

5 N

ote

1:

The

bal

ance

s in

clud

e fi

nanc

ial

asse

ts m

easu

red

at a

mor

tize

d co

st,

whi

ch c

ompr

ise

cash

and

ca

sh e

quiv

alen

ts,

note

s an

d ac

coun

ts r

ecei

vabl

e, a

ccou

nts

rece

ivab

le -

rel

ated

par

ties

, ot

her

rece

ivab

les,

ref

unda

ble

depo

sits

and

oth

er r

estr

icte

d fi

nanc

ial a

sset

s.

Not

e 2:

T

he b

alan

ce o

f fi

nanc

ial

liab

ilit

ies

mea

sure

d at

am

orti

zed

cost

com

pris

ed s

hort

-ter

m n

otes

pa

yabl

e, n

otes

and

acc

ount

s pa

yabl

e, a

ccou

nts

paya

ble

- re

late

d pa

rtie

s, o

ther

pay

able

s, b

onds

pa

yabl

e an

d lo

ng-t

erm

loan

s, le

ase

liab

ilit

ies,

pro

visi

ons,

par

ts o

f ot

her

curr

ent l

iabi

liti

es, p

arts

of

oth

er n

oncu

rren

t lia

bili

ties

and

guar

ante

e de

posi

ts.

d.

F

inan

cial

ris

k m

anag

emen

t obj

ecti

ves

and

poli

cies

T

he C

ompa

ny h

as r

isk

man

agem

ent

and

hedg

ing

stra

tegi

es t

o re

spon

d to

cha

nges

in

the

econ

omic

, fi

nanc

ial e

nvir

onm

ent a

nd in

the

fuel

mar

ket.

To

redu

ce th

e fi

nanc

ial r

isks

fro

m c

hang

es in

inte

rest

rat

es,

in e

xcha

nge

rate

s an

d fu

el p

rice

s, t

he C

ompa

ny h

as i

ts o

pera

ting

cos

ts s

tay

wit

hin

a sp

ecif

ied

rang

e by

us

ing

appr

opri

ate

fina

ncia

l he

dgin

g in

stru

men

ts a

nd h

edgi

ng p

erce

ntag

es i

n ac

cord

ance

wit

h th

e “P

roce

ssin

g P

rogr

am

of

Der

ivat

ive

Fin

anci

al

Inst

rum

ent

Tra

nsac

tion

s”

appr

oved

by

C

ompa

ny

shar

ehol

ders

to

redu

ce t

he i

mpa

ct o

f m

arke

t pr

ice

on e

arni

ngs.

The

se r

isks

inc

lude

mar

ket

risk

(i

nclu

ding

for

eign

cur

renc

y ri

sk, i

nter

est r

ate

risk

and

oth

er p

rice

ris

k), c

redi

t ris

k an

d li

quid

ity

risk

. In

add

itio

n, t

he C

ompa

ny h

as a

ris

k m

anag

emen

t co

mm

itte

e, w

hich

mee

ts p

erio

dica

lly

to e

valu

ate

the

perf

orm

ance

of

deri

vati

ve i

nstr

umen

ts a

nd d

eter

min

e th

e ap

prop

riat

e he

dgin

g po

rtio

n. T

his

com

mit

tee

info

rms

the

Com

pany

of

glob

al e

cono

mic

and

fin

anci

al c

ondi

tion

s, c

ontr

ols

the

Com

pany

’s e

ntir

e fi

nanc

ial

risk

res

ulti

ng f

rom

cha

nges

in

the

fina

ncia

l en

viro

nmen

t an

d fu

el p

rice

s, a

nd d

evel

ops

the

stra

tegy

and

res

pons

e to

avo

id f

inan

cial

ris

k w

ith

the

assi

stan

ce o

f fi

nanc

ial

risk

exp

erts

to

effe

ct r

isk

man

agem

ent.

1)

Mar

ket r

isk

The

Com

pany

is

prim

aril

y ex

pose

d to

the

fin

anci

al r

isks

of

chan

ges

in f

orei

gn c

urre

ncy

exch

ange

ra

tes

and

inte

rest

rat

es.

The

Com

pany

ent

ered

int

o de

riva

tive

fin

anci

al i

nstr

umen

ts t

o m

anag

e its

ex

posu

re to

for

eign

cur

renc

y ri

sk a

nd in

tere

st r

ate

risk

. T

he C

ompa

ny e

nter

s in

to f

orw

ard

cont

ract

s, f

orei

gn c

urre

ncy

optio

n co

ntra

cts,

and

int

eres

t sw

ap

cont

ract

s w

ith

fair

val

ues

that

are

hig

hly

nega

tive

ly c

orre

late

d to

the

fair

val

ues

of h

edge

d it

ems

and

eval

uate

s th

e he

dgin

g ef

fect

iven

ess

of th

ese

inst

rum

ents

per

iodi

call

y.

229

- 65

-

a)

For

eign

cur

renc

y ri

sk

The

Com

pany

ent

ers

into

cur

renc

y op

tion

to

hedg

e ag

ains

t th

e ri

sks

of c

hang

es i

n re

late

d ex

chan

ge r

ates

, and

ent

ers

into

for

eign

exc

hang

e fo

rwar

d co

ntra

cts

to h

edge

aga

inst

the

ris

ks o

f ch

ange

s in

the

rela

ted

exch

ange

rat

es o

f fo

reig

n-cu

rren

cy a

sset

s, li

abil

itie

s an

d co

mm

itm

ents

. S

ensi

tivi

ty a

naly

sis

The

Com

pany

is m

ainl

y ex

pose

d to

the

U.S

. dol

lar.

T

he f

ollo

win

g de

tail

s th

e G

roup

’s s

ensi

tivi

ty t

o a

one

doll

ar i

ncre

ase

and

decr

ease

in

the

New

T

aiw

an d

olla

r (i

.e. t

he f

unct

iona

l cu

rren

cy)

agai

nst

the

U.S

. dol

lar.

The

sen

siti

vity

am

ount

use

d w

hen

repo

rtin

g fo

reig

n cu

rren

cy r

isk

inte

rnal

ly t

o ke

y m

anag

emen

t pe

rson

nel

and

whi

ch

repr

esen

ts m

anag

emen

t’s

asse

ssm

ent

of t

he r

easo

nabl

y po

ssib

le c

hang

e in

for

eign

exc

hang

e ra

tes

is

one

doll

ar.

The

se

nsit

ivit

y an

alys

is

incl

uded

on

ly

outs

tand

ing

fore

ign

curr

ency

de

nom

inat

ed m

onet

ary

item

s an

d fo

reig

n ex

chan

ge f

orw

ard

cont

ract

s de

sign

ated

as

cash

flo

w

hedg

es a

nd a

djus

ts th

eir

tran

slat

ion

at th

e en

d of

the

repo

rtin

g pe

riod

for

the

New

Tai

wan

dol

lar

stre

ngth

enin

g or

wea

keni

ng o

ne d

olla

r ag

ains

t the

U.S

. dol

lar.

W

hen

New

Tai

wan

dol

lars

inc

reas

e on

e do

llar

aga

inst

U.S

. dol

lars

and

all

oth

er v

aria

bles

wer

e he

ld c

onst

ant,

ther

e w

ould

be

a de

crea

se i

n pr

e-ta

x pr

ofit

of

$40,

775

thou

sand

and

inc

reas

e in

pr

e-ta

x ot

her

com

preh

ensi

ve i

ncom

e ga

in a

nd l

osse

s of

$1,

629,

223

thou

sand

in

year

end

ed

Dec

embe

r 31

, 20

19.

A d

ecre

ase

in p

re-t

ax p

rofi

t of

$35

,184

tho

usan

d an

d de

crea

se i

n pr

e-ta

x ot

her

com

preh

ensi

ve i

ncom

e ga

in a

nd l

osse

s of

$54

,250

tho

usan

d in

yea

r en

ded

Dec

embe

r 31

, 20

18.

For

the

year

end

ed D

ecem

ber

31, 2

019

The

Com

pany

’s h

edgi

ng s

trat

egy

is t

o en

ter

into

for

eign

exc

hang

e fo

rwar

d co

ntra

cts

to a

void

ex

chan

ge r

ate

expo

sure

of

its

fore

ign

curr

ency

den

omin

ated

rec

eipt

s an

d pa

ymen

ts a

nd t

o m

anag

e ex

chan

ge r

ate

expo

sure

of

its

airc

raft

pre

paym

ents

in

the

next

yea

r. T

hose

tra

nsac

tion

s ar

e de

sign

ated

as

cash

flo

w h

edge

s. W

hen

fore

cast

ed p

urch

ases

act

uall

y ta

ke p

lace

, ba

sis

adju

stm

ents

are

mad

e to

the

init

ial c

arry

ing

amou

nts

of h

edge

d it

ems.

F

or t

he h

edge

s of

hig

hly

prob

able

air

craf

t pr

epay

men

ts,

as t

he c

riti

cal

term

s (i

.e.

the

noti

onal

am

ount

, us

eful

lif

e an

d un

derl

ying

ass

et)

of t

he f

orei

gn e

xcha

nge

forw

ard

cont

ract

s an

d th

eir

corr

espo

ndin

g he

dged

ite

ms

are

the

sam

e, t

he C

ompa

ny p

erfo

rms

a qu

alit

ativ

e as

sess

men

t of

th

e ef

fect

iven

ess,

and

it is

exp

ecte

d th

at th

e va

lue

of th

e fo

reig

n ex

chan

ge f

orw

ard

cont

ract

s an

d th

e va

lue

of th

e co

rres

pond

ing

hedg

ed it

ems

wil

l sys

tem

atic

ally

cha

nge

in th

e op

posi

te d

irec

tion

in

res

pons

e to

mov

emen

ts in

the

unde

rlyi

ng e

xcha

nge

rate

s.

The

fol

low

ing

tabl

e su

mm

ariz

es t

he i

nfor

mat

ion

rela

ting

to

the

hedg

es o

f fo

reig

n cu

rren

cy r

isk.

F

or th

e in

form

atio

n re

late

d to

leas

e co

ntra

ct a

s a

hedg

ing

inst

rum

ents

, ple

ase

refe

r to

not

e 20

.

Dec

embe

r 31

, 201

9

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ion

al

L

ine

Item

in

C

arry

ing

Am

oun

t H

edgi

ng

Inst

rum

ents

Cu

rren

cy

A

mou

nt

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atu

rity

For

war

d R

ate

B

alan

ce S

hee

t

Ass

et

L

iab

ility

Cas

h fl

ow h

edge

A

viat

ion

fuel

- f

orw

ard

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ange

con

trac

ts

N

TD

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D

N

TD

660,

661/

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SD

22,0

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7

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ncia

l ass

ets

for

hedg

ing

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rren

t/

liab

ilit

ies

for

hedg

ing

- cu

rren

t

$

32

$ 1

0,19

3

Air

craf

t ren

tals

-

forw

ard

exch

ange

co

ntra

cts

N

TD

/US

D

N

TD

1,41

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US

D47

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4

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5

Fina

ncia

l ass

ets

for

hedg

ing

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rren

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liab

ilit

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for

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ing

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rren

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77

18,3

85

The

abo

ve m

enti

oned

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ging

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trum

ents

con

tinu

e to

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ied

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edgi

ng a

ccou

ntin

g. T

he

book

val

ue o

f ot

her

equi

ty w

hich

bel

ongs

to

each

hed

ging

ite

m (

airc

raft

ren

tals

in

U.S

. do

llar

s

- 66

-

and

avia

tion

fue

l) a

re $

(18,

308)

thou

sand

and

$(1

0,16

1) th

ousa

nd, r

espe

ctiv

ely.

For

the

year

end

ed D

ecem

ber

31, 2

019

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pre

hen

sive

In

com

e

Hed

gin

g G

ain

R

ecog

niz

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ther

C

omp

reh

ensi

ve

Inco

me

Am

oun

t R

ecla

ssif

ied

to

Pro

fit

and

Los

s an

d t

he

Ad

just

ed L

ine

Item

Cas

h fl

ow h

edge

Air

craf

t ren

tals

$ (

22,2

14)

$

28

,374

(N

ote)

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viat

ion

fuel

(1

0,16

1)

(53)

Air

craf

t pre

paym

ents

(1

7,70

5 )

-

$ (

50,0

80)

$

28

,321

Not

e:

Dec

reas

e in

ope

rati

ng c

osts

or

fore

ign

exch

ange

loss

. F

or t

he y

ear

ende

d D

ecem

ber

31,

2019

, th

e he

dgin

g in

stru

men

ts s

ettl

emen

t re

clas

sifi

ed t

o pr

epai

d eq

uipm

ent w

as $

(603

) th

ousa

nd.

Dec

embe

r 31

, 201

8

Not

ion

al

F

orw

ard

Lin

e It

em in

Car

ryin

g A

mou

nt

Hed

gin

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stru

men

ts

C

urr

ency

Am

oun

t

Mat

uri

ty

R

ate

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alan

ce S

hee

t

Ass

et

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iab

ility

C

ash

flow

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ge

Air

craf

t ren

tals

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ard

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ange

co

ntra

cts

N

TD

/US

D

N

TD

1,66

9,23

1/

US

D54

,250

2019

.1.1

7-

2019

.12.

23

28

.3-3

0.7

Fi

nanc

ial a

sset

s fo

r he

dgin

g -

curr

ent/

li

abil

itie

s fo

r he

dgin

g -

curr

ent

$ 2

2,45

3

$

23

9

The

abo

ve h

edgi

ng in

stru

men

ts a

re c

onti

nuou

sly

appl

ied

to h

edgi

ng a

ccou

ntin

g. T

he b

ook

valu

e of

oth

er e

quity

whi

ch b

elon

gs t

o ea

ch h

edgi

ng it

ems

(air

craf

t re

ntal

s in

U.S

. dol

lar)

are

$22

,214

th

ousa

nd.

For

the

year

end

ed D

ecem

ber

31, 2

018

Com

pre

hen

sive

In

com

e

Hed

gin

g G

ain

(L

oss)

R

ecog

niz

ed in

O

ther

C

omp

reh

ensi

ve

Inco

me

Am

oun

t R

ecla

ssif

ied

to

Pro

fit

and

Los

s an

d t

he

Ad

just

ed L

ine

Item

Cas

h fl

ow h

edge

Air

craf

t ren

tals

$

70,5

53

$

(4

,933

) (N

ote)

A

ircr

aft p

repa

ymen

ts

23,8

84

-

$

94,4

37

$

(4

,933

)

Not

e:

Incr

ease

in o

pera

ting

cos

ts o

r fo

reig

n ex

chan

ge lo

ss.

For

the

yea

r en

ded

Dec

embe

r 31

, 20

18,

the

hedg

ing

inst

rum

ents

set

tlem

ent

recl

assi

fied

to

prep

aid

equi

pmen

t was

$12

,118

thou

sand

.

230

- 67

-

b)

Inte

rest

rat

e ri

sk

The

Com

pany

ent

ers

into

int

eres

t sw

ap c

ontr

acts

to

hedg

e ag

ains

t th

e ri

sks

on c

hang

e in

net

li

abil

itie

s in

tere

st r

ates

.

The

ris

k is

man

aged

by

the

Com

pany

thr

ough

mai

ntai

ning

an

appr

opri

ate

mix

of

fixe

d an

d fl

oati

ng r

ate

borr

owin

gs,

and

usin

g in

tere

st r

ate

swap

con

trac

ts a

nd f

orw

ard

inte

rest

rat

e co

ntra

cts.

T

he c

arry

ing

amou

nt o

f th

e C

ompa

ny’s

fin

anci

al l

iabi

liti

es w

ith

expo

sure

to

inte

rest

rat

es a

t th

e en

d of

the

repo

rtin

g pe

riod

wer

e as

fol

low

s.

Dec

emb

er 3

1

20

19

20

18

F

air

valu

e in

tere

st r

ate

risk

$

83,3

50,3

12

$

33

,523

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ash

flow

inte

rest

rat

e ri

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73,9

30,9

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43

Sen

siti

vity

ana

lysi

s T

he s

ensi

tivi

ty a

naly

ses

belo

w w

ere

dete

rmin

ed b

ased

on

the

Com

pany

’s e

xpos

ure

to i

nter

est

rate

s fo

r bo

th d

eriv

ativ

es a

nd n

on-d

eriv

ativ

e in

stru

men

ts a

t th

e en

d of

the

rep

orti

ng p

erio

d. F

or

floa

ting

ra

te

liab

ilit

ies,

th

e an

alys

is

was

pr

epar

ed

assu

min

g th

e am

ount

of

th

e li

abil

ity

outs

tand

ing

at t

he e

nd o

f th

e re

port

ing

peri

od w

as o

utst

andi

ng f

or t

he w

hole

yea

r. O

ne y

ard

(25

basi

s)

incr

ease

or

de

crea

se

was

us

ed

whe

n re

port

ing

inte

rest

ra

te

risk

in

tern

ally

to

ke

y m

anag

emen

t pe

rson

nel

and

repr

esen

ts m

anag

emen

t’s

asse

ssm

ent

of t

he r

easo

nabl

y po

ssib

le

chan

ge in

inte

rest

rat

es.

H

ad i

nter

est

rate

s in

crea

sed

one

yard

(25

bas

is)

and

had

all

othe

r va

riab

les

been

hel

d co

nsta

nt,

the

Com

pany

’s p

re-t

ax p

rofi

t fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 20

19 w

ould

hav

e de

crea

sed

by

$184

,827

thou

sand

. H

ad i

nter

est

rate

s in

crea

sed

one

yard

(25

bas

is)

and

had

all

othe

r va

riab

les

been

hel

d co

nsta

nt,

the

Com

pany

’s p

re-t

ax p

rofi

t fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 20

18 w

ould

hav

e de

crea

sed

by

$176

,897

thou

sand

.

c)

Oth

er p

rice

ris

k

The

Com

pany

was

exp

osed

to

fuel

pri

ce r

isk

on i

ts p

urch

ase

of a

viat

ion

fuel

. T

he C

ompa

ny

ente

rs in

to f

uel s

wap

con

trac

ts to

hed

ge a

gain

st a

dver

se r

isks

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fuel

pri

ce c

hang

es.

D

ecem

ber

31, 2

019

N

otio

nal

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e It

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mou

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stru

men

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mou

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atu

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war

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alan

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et

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ility

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ow h

edge

s -

fuel

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tion

s

US

D

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2020

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nanc

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r he

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ent/

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abil

itie

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r he

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ent

$

9,47

9

$

3,

955

- 68

-

The

abo

ve m

enti

oned

hed

ging

ins

trum

ents

con

tinu

e to

be

appl

ied

to h

edgi

ng a

ccou

ntin

g. T

he

book

val

ue o

f ot

her

equi

ty w

hich

bel

ongs

to

each

hed

ging

ite

m (

fuel

pay

men

ts)

is $

5,52

4 th

ousa

nd.

For

the

year

end

ed D

ecem

ber

31, 2

019

Com

pre

hen

sive

In

com

e

Hed

gin

g G

ain

(L

oss)

R

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niz

ed in

O

ther

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omp

reh

ensi

ve

Inco

me

Am

oun

t R

ecla

ssif

ied

to

Pro

fit

and

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s an

d t

he

Ad

just

ed L

ine

Item

Cas

h fl

ow h

edge

s -

fuel

opt

ions

$

623

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(13

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) (N

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N

ote:

In

crea

se in

ope

rati

ng c

osts

. D

ecem

ber

31, 2

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nal

Lin

e It

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nt

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mou

nt

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rity

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war

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ate

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h fl

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fu

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2.31

US

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D88

Fina

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ets

for

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ing

$

4,90

1

$

-

The

abo

ve m

enti

oned

hed

ging

ins

trum

ents

con

tinu

e to

be

appl

ied

to h

edgi

ng a

ccou

ntin

g. T

he

book

val

ue o

f ot

her

equi

ty w

hich

bel

ongs

to

each

hed

ging

ite

m (

fuel

pay

men

ts)

is $

4,90

1 th

ousa

nd.

For

the

year

end

ed D

ecem

ber

31, 2

018

Com

pre

hen

sive

In

com

e

Hed

gin

g G

ain

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ed in

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ther

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omp

reh

ensi

ve

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me

Am

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t R

ecla

ssif

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Pro

fit

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just

ed L

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Item

Cas

h fl

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edge

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fuel

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ions

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4,90

1

$

(9,4

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(Not

e)

Not

e:

Incr

ease

in o

pera

ting

cos

ts.

231

- 69

-

Sen

siti

vity

ana

lysi

s T

he s

ensi

tivi

ty a

naly

sis

belo

w w

as d

eter

min

ed b

ased

on

the

expo

sure

to

fuel

pri

ce r

isks

at

the

end

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e re

port

ing

peri

od.

For

th

e Y

ear

En

ded

Dec

emb

er 3

1

20

19

20

18

Pre

-tax

Pro

fit

Incr

ease

(D

ecre

ase)

Oth

er

Com

pre

- h

ensi

ve

Inco

me

Incr

ease

(D

ecre

ase)

Pre

-tax

Pro

fit

Incr

ease

(D

ecre

ase)

Oth

er

Com

pre

- h

ensi

ve

Inco

me

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ease

(D

ecre

ase)

Fue

l pri

ce in

crea

se o

f 5%

$

-

$

7,97

3

$

-

$

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uel p

rice

dec

reas

e of

5%

-

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-

-

2)

Cre

dit r

isk

C

redi

t ri

sk r

efer

s to

the

ris

k th

at a

cou

nter

part

y w

ill

defa

ult

on i

ts c

ontr

actu

al o

blig

atio

ns r

esul

ting

in

fin

anci

al l

oss

to t

he C

ompa

ny.

The

Com

pany

’s c

redi

t ri

sk,

prim

aril

y co

mes

fro

m a

ccou

nts

rece

ivab

le g

ener

ated

fro

m o

pera

ting

act

ivit

ies,

ban

k de

posi

ts g

ener

ated

fro

m i

nves

ting

act

ivit

ies,

fi

xed

inve

stm

ent

inco

me

and

othe

r fi

nanc

ial

inst

rum

ents

. Ope

rati

on r

elat

ed c

redi

t ri

sk a

nd f

inan

cial

cr

edit

ris

k ar

e m

anag

ed s

epar

atel

y.

Ope

rati

on -

rel

ated

cre

dit r

isk

The

Com

pany

has

est

abli

shed

pro

cedu

res

to m

anag

emen

t op

erat

ions

rel

ated

cre

dit

risk

to

mai

ntai

n th

e qu

ality

of

acco

unts

rec

eiva

ble.

T

o as

sess

indi

vidu

al c

usto

mer

s, th

e C

ompa

ny c

onsi

der

into

the

fina

ncia

l con

diti

on o

f th

e cu

stom

ers,

th

e cr

edit

rat

ing

agen

cy r

atin

g, t

he C

ompa

ny’s

int

erna

l cr

edit

rat

ing,

tra

nsac

tion

his

tory

and

cur

rent

ec

onom

ic c

ondi

tion

s an

d m

any

othe

r fa

ctor

s th

at

may

aff

ect

the

repa

ymen

t. S

omet

imes

, th

e C

ompa

ny u

ses

cert

ain

cred

it e

nhan

cem

ent t

ools

to r

educ

e th

e cr

edit

ris

k of

spe

cifi

c cu

stom

ers.

S

ince

the

cus

tom

ers

of t

he i

ndus

try

is d

ispe

rsed

and

non

-rel

ated

, the

cre

dit

risk

con

cent

rati

on i

s no

t cr

itic

al a

viat

ion.

F

inan

cial

cre

dit r

isk

Cre

dit

risk

on

bank

dep

osit

s, i

nves

tmen

ts i

ncom

e an

d ot

her

fina

ncia

l in

stru

men

ts a

re m

easu

red

and

mon

itor

by

the

Com

pany

’s f

inan

ce d

epar

tmen

t. T

he C

ompa

ny’s

tra

ding

par

tner

s an

d ot

her

part

ies

wer

e w

ell-

perf

orm

ing

bank

s an

d fi

nanc

ial

inst

itut

ions

, co

rpor

atio

ns,

and

gove

rnm

ent

agen

cies

, an

d so

the

ris

k of

cou

nter

part

ies

fail

ing

to d

isch

arge

an

oblig

atio

n is

low

; th

eref

ore,

the

re i

s no

si

gnif

ican

t cre

dit r

isk.

E

ndor

sem

ents

giv

en b

y th

e C

ompa

ny o

n be

half

of

its

subs

idia

ries

can

be

foun

d in

Not

es 3

1(g)

.

3)

Liq

uidi

ty r

isk

The

obj

ecti

ve o

f th

e C

ompa

ny’s

man

agem

ent

of l

iqui

dity

is

to m

aint

ain

cash

and

cas

h eq

uiva

lent

s su

ffic

ient

for

ope

rati

ng p

urpo

ses,

mar

keta

ble

secu

riti

es w

ith

high

liq

uidi

ty a

nd l

oan

com

mit

men

ts

that

are

suf

fici

ent t

o en

sure

that

the

Com

pany

has

ade

quat

e fi

nanc

ial f

lexi

bili

ty.

- 70

-

Liq

uidi

ty a

nd in

tere

st r

isk

rate

tabl

e T

he f

ollo

win

g ta

ble

show

s th

e re

mai

ning

con

trac

tual

mat

urit

y an

alys

is o

f th

e C

ompa

ny’s

fin

anci

al

liab

ilit

ies

wit

h ag

reed

-upo

n re

paym

ent

peri

ods,

whi

ch w

ere

base

d on

the

dat

e th

e C

ompa

ny m

ay b

e re

quir

ed t

o pa

y th

e fi

rst

repa

ymen

t an

d fi

nanc

ial

liab

ilit

ies

is e

valu

ated

bas

ed o

n un

disc

ount

ed c

ash

flow

s, in

clud

ing

cash

flo

ws

of in

tere

st a

nd p

rinc

ipal

.

Ban

k lo

ans

wit

h a

repa

ymen

t on

dem

and

clau

se w

ere

incl

uded

in

the

seco

nd c

olum

n of

the

tab

le

belo

w r

egar

dles

s of

whe

ther

or

not

the

bank

s w

ould

cho

ose

to e

xerc

ise

earl

y th

eir

righ

ts t

o re

paym

ent.

The

mat

urit

y da

tes

for

othe

r no

n-de

riva

tive

fin

anci

al l

iabi

liti

es w

ere

base

d on

the

ag

reed

-upo

n re

paym

ent

date

s.

The

C

ompa

ny’s

li

quid

ity

anal

ysis

fo

r it

s de

riva

tive

fi

nanc

ial

inst

rum

ents

is

also

sho

wn

in t

he f

ollo

win

g ta

ble.

The

tab

le w

as b

ased

on

the

undi

scou

nted

co

ntra

ctua

l ne

t ca

sh i

nflo

ws

and

outf

low

s on

der

ivat

ive

inst

rum

ents

tha

t se

ttle

on

a ne

t ba

sis,

and

th

e un

disc

ount

ed g

ross

cas

h in

flow

s an

d ou

tflo

ws

on t

hose

der

ivat

ives

that

req

uire

gro

ss s

ettl

emen

t. W

hen

the

amou

nt p

ayab

le o

r re

ceiv

able

is

not

fixe

d, t

he a

mou

nt d

iscl

osed

has

bee

n de

term

ined

by

refe

renc

e to

the

pro

ject

ed i

nter

est

rate

s as

ill

ustr

ated

by

yiel

d cu

rves

at

the

end

of t

he r

epor

ting

pe

riod

. D

ecem

ber

31, 2

019

Th

e W

eigh

ted

A

vera

ge

Eff

ecti

ve

Inte

rest

Rat

e (%

)

Les

s th

an 1

Y

ear

1

to 5

Yea

rs

O

ver

5 Y

ears

F

inan

ce le

ase

liab

ilit

ies

0.

1448

$

914,

419

$

3,

362,

181

$

10

,451

,021

F

loat

ing

inte

rest

rat

e li

abil

itie

s

0.95

76

14,2

84,0

90

34,4

57,4

00

14,7

87,8

69

Hed

ging

inst

rum

ents

3.11

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60,8

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39,7

29,0

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3,33

3 B

onds

pay

able

2.52

73

10,8

23,9

05

19,8

71,1

74

3,38

3,40

1

$

36

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$

97,4

19,8

17

$

34

,995

,624

D

ecem

ber

31, 2

018

Th

e W

eigh

ted

A

vera

ge

Eff

ecti

ve

Inte

rest

Rat

e (%

)

Les

s th

an 1

Y

ear

1

to 5

Yea

rs

O

ver

5 Y

ears

F

inan

ce le

ase

liab

ilit

ies

1.

0627

$

601,

743

$

-

$

-

Flo

atin

g in

tere

st r

ate

liab

ilit

ies

1.

1084

14

,050

,574

39

,852

,965

18

,293

,128

F

ixed

inte

rest

rat

e li

abil

itie

s

1.18

00

2,00

5,90

0

-

- H

edgi

ng in

stru

men

ts

-

239

-

-

Bon

ds p

ayab

le

1.

3905

5,

999,

321

30,8

35,4

49

1,05

1,41

8

$

22

,657

,777

$

70,6

88,4

14

$

19

,344

,546

232

- 71

-

Loa

n co

mm

itm

ents

D

ecem

ber

31

2019

2018

Unu

sed

bank

loan

lim

it (

unse

cure

d)

$

18

,422

,000

$

17,3

37,0

00

31.

RE

LA

TE

D-P

AR

TY

TR

AN

SA

CT

ION

S

Exc

ept

for

the

disc

losu

res

stat

ed i

n ot

her

note

s, t

rans

acti

ons

betw

een

the

Com

pany

and

its

rel

ated

par

ties

ar

e di

sclo

sed

belo

w:

a.

Rel

ated

par

ties

’ na

mes

and

rel

atio

nshi

ps

N

ame

R

elat

ion

ship

wit

h t

he

Com

pan

y

T

aiw

an A

irca

rgo

Ter

min

al C

ompa

ny

Sub

sidi

ary

Tao

yuan

Int

erna

tion

al A

irpo

rt S

ervi

ce C

o., L

td.

Sub

sidi

ary

Sab

re T

rave

l Net

wor

k (T

aiw

an),

Ltd

. S

ubsi

diar

y T

aiw

an A

irpo

rt S

ervi

ce C

o., L

td.

Sub

sidi

ary

Tai

wan

Air

port

Ser

vice

(S

amoa

) S

ubsi

diar

y H

wa

Hsi

a S

ubsi

diar

y Y

estr

ip

Sub

sidi

ary

Glo

bal S

ky E

xpre

ss

Sub

sidi

ary

Man

dari

n A

irli

nes

Sub

sidi

ary

CA

L P

ark

Sub

sidi

ary

CA

L H

otel

Co.

, Ltd

. S

ubsi

diar

y C

AL

-Asi

a In

vest

men

t S

ubsi

diar

y D

ynas

ty H

olid

ays,

Inc

. A

ssoc

iate

(be

com

e as

soci

ate

in J

anua

ry

2019

) C

AL

-Dyn

asty

Int

erna

tion

al I

nc.

Sub

sidi

ary

Tig

erai

r T

aiw

an C

o., L

td.

Sub

sidi

ary

Tai

wan

Air

craf

t Mai

nten

ance

and

Eng

inee

ring

Co.

, Ltd

. S

ubsi

diar

y K

aohs

iung

Cat

erin

g S

ervi

ces

Sub

sidi

ary

(bec

ome

subs

idia

ry in

Mar

ch

2018

) A

sian

Com

pres

sor

Tec

hnol

ogy

Ser

vice

s A

ssoc

iate

(di

spos

al in

Jan

uary

201

8)

Chi

na A

ircr

aft S

ervi

ce

Ass

ocia

te

Air

port

Air

Car

go T

erm

inal

(X

iam

en)

Co.

, Ltd

. A

ssoc

iate

A

irpo

rt A

ir C

argo

Ser

vice

(X

iam

en)

Co.

, Ltd

. A

ssoc

iate

E

aste

rn U

nite

d In

tern

atio

nal L

ogis

tics

(H

ong

Kon

g)

Ass

ocia

te

Chi

na P

acif

ic C

ater

ing

Ser

vice

s J

oint

ven

ture

inve

stm

ent

Chi

na P

acif

ic L

aund

ry S

ervi

ces

Joi

nt v

entu

re in

vest

men

t N

OR

DA

M A

sia

Ltd

. J

oint

ven

ture

inve

stm

ent

Del

ica

Inte

rnat

iona

l Co.

, Ltd

. J

oint

ven

ture

inve

stm

ent

Chi

na A

viat

ion

Dev

elop

men

t Fou

ndat

ion

Dir

ecto

r of

the

Com

pany

and

maj

or

shar

ehol

der

Oth

ers

Dir

ecto

r, k

ey m

anag

emen

t per

sonn

el,

chai

rman

, gen

eral

man

ager

of

the

Com

pany

, spo

use

and

seco

nd-d

egre

e re

lati

ve

- 72

-

b.

Ope

rati

ng in

com

e

For

th

e Y

ear

En

ded

Dec

emb

er 3

1 A

ccou

nt

Item

s

Rel

ated

Par

ty T

ype

20

19

20

18

O

ther

inco

me

Sub

sidi

ary

$

2,

577,

039

$

2,

651,

423

M

ajor

sha

reho

lder

of

the

Com

pany

$

25,4

57

$

28

,670

A

ssoc

iate

$

1,23

9

$

523

J

oint

ven

ture

inve

stm

ent

$

42

,457

$

41,4

10

c.

Pur

chas

es

For

th

e Y

ear

En

ded

Dec

emb

er 3

1 R

elat

ed P

arty

Typ

e

2019

2018

Sub

sidi

ary

$

3,

915,

258

$

3,

843,

308

Maj

or s

hare

hold

er o

f th

e C

ompa

ny

$

56

,474

$

64,1

88

Ass

ocia

te

$

41

4,10

6

$

501,

609

Join

t ven

ture

inve

stm

ent

$

1,

911,

091

$

1,

912,

995

d.

A

ccou

nts

rece

ivab

le -

rel

ated

par

ties

(ge

nera

ted

by o

pera

tion

s)

D

ecem

ber

31

Rel

ated

Par

ty T

ype

20

19

20

18

S

ubsi

diar

y

$

222,

038

$

28

9,26

8 Jo

int v

entu

re in

vest

men

t

7,

760

7,58

9 M

ajor

sha

reho

lder

of

the

Com

pany

2,

588

1,45

4

$

232,

386

$

29

8,31

1 T

he r

ecei

vabl

es a

re n

ot g

uara

ntee

d, a

nd t

here

is

no a

llow

ance

for

dou

btfu

l ac

coun

ts r

elat

ed t

o ac

coun

ts

rece

ivab

le -

rel

ated

par

ties

. The

pay

men

t pe

riod

s of

suc

h ac

coun

ts w

ere

wit

hin

30 t

o 90

day

s, a

nd t

here

ar

e no

ove

rdue

pay

men

ts.

e.

A

ccou

nts

paya

ble

- re

late

d pa

rtie

s (g

ener

ated

by

oper

atio

ns)

D

ecem

ber

31

Rel

ated

Par

ty T

ype

20

19

20

18

S

ubsi

diar

y

$

927,

419

$

1,

050,

869

Ass

ocia

te

51,3

33

54,9

48

Join

t ven

ture

inve

stm

ent

484,

700

474,

499

Maj

or s

hare

hold

er o

f th

e C

ompa

ny

5,98

2

3,

368

$

1,

469,

434

$

1,

583,

684

The

rem

aini

ng b

alan

ce o

f no

tes

and

acco

unts

pay

able

- r

elat

ed p

arti

es w

ill b

e pa

id in

cas

h if

they

are

not

se

cure

d.

f.

L

ease

s of

pro

pert

ies

(ope

rati

ng le

ases

) T

he C

ompa

ny r

ente

d ou

t pl

anes

to

Man

dari

n A

irli

nes

unde

r an

ope

rati

ng l

ease

con

trac

t. T

he m

onth

ly

rent

rec

eive

d is

bas

ed o

n fl

ight

hou

rs.

In 2

019

and

2018

, th

e re

ntal

s re

ceiv

ed a

mou

nted

to

$1,6

24,5

68

thou

sand

and

$1,

685,

494

thou

sand

, res

pect

ivel

y.

233

- 73

-

Und

er a

n op

erat

ing

leas

e ag

reem

ent,

the

Com

pany

ren

ted

flig

ht t

rain

ing

mac

hine

s an

d fl

ight

sim

ulat

ors

from

Chi

na A

viat

ion

Dev

elop

men

t F

ound

atio

n to

tra

in p

ilot

s. T

he C

ompa

ny p

aid

the

rent

al b

ased

on

usag

e ho

urs.

In

2019

and

201

8, t

he C

ompa

ny p

aid

rent

als

of a

bout

$56

,474

tho

usan

d an

d $6

4,18

8 th

ousa

nd, r

espe

ctiv

ely.

In

Mar

ch 2

010,

the

Com

pany

sig

ned

wit

h C

AL

Par

k a

year

ly r

enew

able

ope

rati

ng l

ease

agr

eem

ent

to

use

the

Ope

rati

ng a

nd A

viat

ion

Hea

dqua

rter

s bu

ildi

ng o

f th

e T

aiw

an T

aoyu

an I

nter

nati

onal

Air

port

. In

2019

and

201

8, th

e C

ompa

ny p

aid

rent

als

of b

oth

wer

e $2

31,2

88 th

ousa

nd p

er y

ear.

g.

E

ndor

sem

ents

and

gua

rant

ees

D

ecem

ber

31

2019

2018

Au

thor

ized

A

mou

nt

A

ctu

al

Am

oun

t U

sed

Au

thor

ized

A

mou

nt

A

ctu

al

Am

oun

t U

sed

T

he C

ompa

ny

C

AL

Par

k

$

3,85

0,00

0

$

2,12

9,40

0

$

3,85

0,00

0

$

2,33

9,70

0 T

aiw

an A

ir C

argo

Ter

min

al

1,08

0,00

0

-

1,08

0,00

0

-

Tig

erai

r T

aiw

an

3,01

2,66

8

68

5,44

4

1,

081,

792

418,

491

Tai

wan

Air

Cra

ft M

aint

enan

ce

2,00

0,00

0

1,

279,

827

2,00

0,00

0

60

5,45

7 h.

B

onds

pay

able

- r

elat

ed p

arti

es

R

elat

ed p

arti

es t

hat

inve

sted

in

the

firs

t is

sue

of u

nsec

ured

bon

ds i

n 20

16 (

Not

e 19

) ar

e su

mm

ariz

ed a

s fo

llow

s:

Dec

emb

er 3

1, 2

019

Rel

ated

Par

ty

U

nit

s

Agg

rega

te

Par

/Dol

lars

T

he f

irst

issu

e of

uns

ecur

ed b

onds

in 2

016

M

anda

rin

Air

line

s

250

$

25

0,00

0 S

abre

Tra

vel N

etw

ork

(Tai

wan

)

50

50,0

00

In 2

019,

inte

rest

exp

ense

s w

as $

3,57

0 th

ousa

nd. T

his

bond

s pa

yabl

e w

ill b

e pa

id o

ff in

May

202

1. A

s of

D

ecem

ber

31, 2

019

the

inte

rest

pay

able

was

$2,

142

thou

sand

.

i. C

ompe

nsat

ion

of k

ey m

anag

emen

t per

sonn

el

F

or t

he

Yea

r E

nd

ed D

ecem

ber

31

2019

2018

Sho

rt-t

erm

em

ploy

ee b

enef

its

$

39

,693

$

44,5

51

Pos

t-em

ploy

men

t ben

efit

s

2,

362

3,29

5

$

42,0

55

$

47

,846

T

he r

emun

erat

ion

of d

irec

tors

and

key

exe

cuti

ves

was

det

erm

ined

by

the

rem

uner

atio

n co

mm

itte

e ha

ving

reg

ard

to th

e pe

rfor

man

ce o

f in

divi

dual

s an

d m

arke

t tre

nds.

- 74

-

32.

PL

ED

GE

D A

SS

ET

S

The

fol

low

ing

asse

ts w

ere

pled

ged

or m

ortg

aged

as

coll

ater

al f

or l

ong-

term

ban

k lo

ans,

lea

se o

blig

atio

ns

and

busi

ness

tran

sact

ions

:

D

ecem

ber

31

2019

2018

Pro

pert

y, p

lant

and

equ

ipm

ent

$

26,9

56,6

31

$

37

,468

,142

R

ight

-of-

use

asse

t

64

,262

,830

-

$

91

,219

,461

$

37,4

68,1

42

33

. C

OM

MIT

ME

NT

S A

ND

CO

NT

ING

EN

T L

IAB

ILIT

IES

A

s of

Dec

embe

r 31

, 201

9, e

xcep

t fo

r th

e di

sclo

sure

s st

ated

in

othe

r no

tes,

the

Com

pany

had

com

mit

men

ts

and

cont

inge

nt li

abil

itie

s w

hich

wer

e as

fol

low

s:

a.

The

Com

pany

fai

led

to m

edia

te l

abor

dis

pute

s w

ith

the

labo

r un

ion.

Aft

er o

btai

ning

the

rig

ht t

o st

rike

, th

e la

bor

unio

n w

ent

on s

trik

e on

Feb

ruar

y 8,

201

9, a

nd t

he f

ligh

ts r

esum

ed n

orm

al o

pera

tion

on

Feb

ruar

y 14

, 20

19.

A t

otal

of

214

flig

hts

was

can

cell

ed a

nd t

he a

ccum

ulat

ed r

even

ue l

oss

was

abo

ut

$500

mil

lion

. The

init

ial e

stim

ated

com

pens

atio

n fo

r cu

stom

er lo

sses

and

oth

er e

xpen

ditu

res

wer

e ab

out

$54

mil

lion

(re

cogn

ized

as

oper

atin

g co

st).

b.

In

Oct

ober

201

9, t

he C

ompa

ny s

igne

d a

cont

ract

wit

h A

irbu

s S

.A.S

. to

pur

chas

e el

even

A32

1neo

ai

rcra

ft a

nd a

n op

tion

to p

urch

ase

five

A32

1neo

air

craf

t. T

he t

otal

lis

t pr

ice

of t

he e

leve

n ai

rcra

ft i

s U

S$1

,676

,413

tho

usan

d, a

nd t

he l

ist

pric

e of

the

opt

ion

to p

urch

ase

five

air

craf

t is

US

$769

,922

th

ousa

nd. T

he e

xpec

ted

deli

very

per

iod

of t

he e

leve

n ai

rcra

ft r

ange

s fr

om 2

024

to 2

026.

As

of O

ctob

er

31,

2019

, th

e li

st p

rice

of

the

four

teen

air

craf

t ha

s be

en p

aid

in t

he a

mou

nt o

f U

S$1

7,01

4 th

ousa

nd

(rec

ogni

zed

as p

repa

ymen

ts f

or a

ircr

aft)

. In

Oct

ober

201

9, t

he C

ompa

ny s

igne

d a

cont

ract

wit

h In

tern

atio

nal

Aer

o E

ngin

es C

ompa

ny t

o pu

rcha

se f

our

back

up e

ngin

es o

f A

321n

eo.

The

tot

al l

ist

pric

e of

the

four

eng

ines

is U

S$6

0,28

9 th

ousa

nd.

c.

In J

uly

and

Aug

ust

2019

, th

e C

ompa

ny s

igne

d a

cont

ract

wit

h th

e B

oein

g C

ompa

ny t

o pu

rcha

se t

hree

B

777F

air

craf

t an

d ex

erci

sed

the

opti

on t

o pu

rcha

se t

hree

B77

7F a

ircr

aft.

The

tot

al l

ist

pric

e of

the

six

ai

rcra

ft i

s U

S$2

,320

,315

tho

usan

d, a

nd t

he e

xpec

ted

deli

very

per

iod

is f

rom

202

0 to

202

3. A

s of

S

epte

mbe

r 30

, 201

9, t

he l

ist

pric

e ha

s be

en p

aid

in t

he a

mou

nt o

f U

S$2

41,6

50 t

hous

and

(rec

ogni

zed

as

prep

aym

ents

for

air

craf

t).

34

. S

IGN

IFIC

AN

T E

VE

NT

S A

FT

ER

TH

E B

AL

AN

CE

SH

EE

T D

AT

E

By

the

end

of J

anua

ry,

2020

, th

e C

oron

avir

us t

hat

orig

inat

ed f

rom

Wuh

an,

the

capi

tal

city

of

Hub

ei

prov

ince

in

Chi

na,

beca

me

a pa

ndem

ic.

The

Com

pany

has

com

plie

d an

d co

ntin

ues

to c

ompl

y w

ith

the

trav

el a

lert

s is

sued

by

the

Tai

wan

Cen

ters

for

Dis

ease

Con

trol

and

has

can

cell

ed f

ligh

ts b

etw

een

seve

ral

coun

trie

s li

ke C

hina

, H

ong

Kon

g, J

apan

and

Kor

ea.

Oth

er f

ligh

ts h

ave

flex

ible

cap

acit

y de

pend

ing

on t

he

dem

and.

So

far,

the

air

tra

nspo

rt s

ervi

ces

for

pass

enge

rs h

ave

been

sev

erel

y af

fect

ed.

In a

ddit

ion

to

adju

stin

g th

e op

erat

ion,

the

Com

pany

als

o ta

kes

mea

sure

s ab

out

fund

ing

assi

stan

ce,

hum

an r

esou

rces

, re

duci

ng e

xpen

ditu

re,

and

asks

the

gov

ernm

ent

for

help

in

thre

e m

ain

area

s in

clud

ing

guar

ante

e fo

r it

s op

erat

ion,

rel

ief

from

the

burd

en, a

nd a

rec

over

y pl

an.

234

- 75

-

35.

SIG

NIF

ICA

NT

AS

SE

TS

AN

D L

IAB

ILIT

IES

DE

NO

MIN

AT

ED

IN

FO

RE

IGN

CU

RR

EN

CIE

S

The

fol

low

ing

info

rmat

ion

was

agg

rega

ted

by t

he f

orei

gn c

urre

ncie

s ot

her

than

fun

ctio

nal

curr

enci

es o

f th

e C

ompa

ny e

ntit

ies

and

the

exch

ange

rat

es b

etw

een

fore

ign

curr

enci

es a

nd r

espe

ctiv

e fu

ncti

onal

cur

renc

ies

wer

e di

sclo

sed.

The

sig

nifi

cant

ass

ets

and

liab

ilit

ies

deno

min

ated

in f

orei

gn c

urre

ncie

s w

ere

as f

ollo

ws:

D

ecem

ber

31, 2

019

For

eign

C

urr

enci

es

(In

Th

ousa

nd

s)

E

xch

ange

Rat

e

Car

ryin

g A

mou

nt

Fin

anci

al a

sset

s

Mon

etar

y it

ems

US

D

$

50

2,60

8

30.0

300

$

15

,093

,328

E

UR

18

,401

33.6

700

619,

571

HK

D

225,

078

3.

8595

86

8,68

9 JP

Y

5,53

1,84

9

0.27

66

1,53

0,10

9 R

MB

37

1,64

2

4.30

48

1,59

9,84

6

Fin

anci

al li

abil

itie

s

Mon

etar

y it

ems

US

D

2,17

9,05

6

30.0

300

65,4

37,0

49

EU

R

7,63

9

33.6

700

257,

211

HK

D

67,5

29

3.

8595

26

0,63

0 JP

Y

5,70

6,14

1

0.27

66

1,57

8,31

9 R

MB

13

2,62

2

4.30

48

570,

913

Dec

embe

r 31

, 201

8

For

eign

C

urr

enci

es

(In

Th

ousa

nd

s)

E

xch

ange

Rat

e

Car

ryin

g A

mou

nt

Fin

anci

al a

sset

s

Mon

etar

y it

ems

US

D

$

43

9,65

2

30.7

692

$

13

,527

,732

E

UR

20

,511

35.2

113

722,

232

HK

D

297,

496

3.

9231

1,

167,

107

JPY

5,

521,

288

0.

2778

1,

533,

814

RM

B

345,

777

4.

4803

1,

549,

187

F

inan

cial

liab

ilit

ies

M

onet

ary

item

s

U

SD

40

5,46

8

30.7

692

12,4

75,9

19

EU

R

7,80

1

35.2

113

274,

697

HK

D

70,9

00

3.

9231

27

8,14

9 JP

Y

4,86

6,89

4

0.27

78

1,35

2,02

3 R

MB

12

6,54

6

4.48

03

566,

964

For

the

year

s en

ded

Dec

embe

r 31

, 201

9 an

d 20

18, t

he C

ompa

ny’s

net

for

eign

exc

hang

e (l

osse

s) g

ains

wer

e $(

262,

610)

tho

usan

d an

d $1

0,81

2 th

ousa

nd,

resp

ecti

vely

. It

is

impr

acti

cal

to d

iscl

ose

net

fore

ign

exch

ange

ga

ins

(los

ses)

by

each

sig

nifi

cant

for

eign

cur

renc

y du

e to

the

vari

ety

of th

e fo

reig

n cu

rren

cy tr

ansa

ctio

ns.

- 76

-

36.

AD

DIT

ION

AL

DIS

CL

OS

UR

ES

a.

Fol

low

ing

are

the

addi

tion

al d

iscl

osur

es r

equi

red

by th

e S

ecur

itie

s an

d F

utur

es B

urea

u fo

r th

e C

ompa

ny

and

its

inve

stee

s:

1) F

inan

cing

pro

vide

d: N

one.

2

) End

orse

men

ts/g

uara

ntee

s pr

ovid

ed: T

able

1 (

atta

ched

).

3) M

arke

tabl

e se

curi

ties

hel

d: T

able

2 (

atta

ched

).

4) M

arke

tabl

e se

curi

ties

acq

uire

d an

d di

spos

ed o

f at

cos

ts o

r pr

ices

of

at l

east

NT

$300

mil

lion

or

20%

of

the

paid

-in

capi

tal:

Tab

le 3

(at

tach

ed).

5

) Acq

uisi

tion

s of

ind

ivid

ual

real

est

ates

at

cost

s or

pri

ce o

f at

lea

st N

T$1

00 m

illi

on o

r 20

% o

f th

e pa

id-i

n ca

pita

l: N

one.

6

) Dis

posa

ls o

f in

divi

dual

rea

l es

tate

s at

cos

ts o

r pr

ices

of

at l

east

NT

$100

mil

lion

or

20%

of

the

paid

-in

capi

tal:

Non

e.

7) T

otal

pur

chas

es f

rom

or

sale

s to

rel

ated

par

ties

am

ount

ing

to a

t le

ast

NT

$100

mil

lion

or

20%

of

the

paid

-in

capi

tal:

Tab

le 4

(at

tach

ed).

8

) Rec

eiva

bles

fro

m r

elat

ed p

arti

es a

mou

ntin

g to

at

leas

t N

T$1

00 m

illi

on o

r 20

% o

f th

e pa

id-i

n ca

pita

l: T

able

5 (

atta

ched

).

9) N

ames

, lo

cati

ons,

an

d re

late

d in

form

atio

n of

in

vest

ees

over

w

hich

th

e C

ompa

ny

exer

cise

s si

gnif

ican

t inf

luen

ce: T

able

6 (

atta

ched

).

10) D

eriv

ativ

e fi

nanc

ial t

rans

acti

ons:

Not

es 7

and

30.

b.

Inve

stm

ent i

n m

ainl

and

Chi

na: T

able

7 (

atta

ched

).

37.

SE

GM

EN

T I

NF

OR

MA

TIO

N

The

Com

pany

mai

nly

enga

ges

in a

ir t

rans

port

atio

n se

rvic

es f

or p

asse

nger

s, c

argo

and

oth

ers.

The

maj

or

reve

nue-

gene

rati

ng a

sset

is

the

flee

t, w

hich

is

join

tly

used

for

pas

seng

er a

nd c

argo

ser

vice

s. T

hus,

the

C

ompa

ny’s

sol

e re

port

able

seg

men

t is

the

fli

ght

segm

ent.

For

ope

rati

ng s

egm

ent

repo

rtin

g in

the

fin

anci

al

stat

emen

ts,

the

Com

pany

’s

repo

rtab

le

segm

ent

com

pris

es

the

flig

ht

and

the

non-

flig

ht

busi

ness

de

part

men

ts.

235

- 77

-

TA

BL

E 1

C

HIN

A A

IRL

INE

S, L

TD

. AN

D I

NV

ES

TE

ES

E

ND

OR

SE

ME

NT

/GU

AR

AN

TE

E P

RO

VID

ED

F

OR

TH

E Y

EA

R E

ND

ED

DE

CE

MB

ER

31,

201

9 (I

n T

hous

ands

of

New

Tai

wan

Dol

lars

, Un

less

Sta

ted

Oth

erw

ise)

C

oun

terp

arty

No.

E

nd

orse

men

t/

Gu

aran

tee

Pro

vid

er

Nam

e N

atu

re o

f R

elat

ion

ship

Lim

it o

n E

ach

C

oun

terp

arty

’s

En

dor

sem

ent/

G

uar

ante

e A

mou

nt

(Not

e 1)

Max

imu

m

Bal

ance

for

th

e P

erio

d

En

din

g B

alan

ce

Act

ual

Bor

row

ing

Am

ount

Val

ue

of

Col

late

rals

P

rop

erty

, Pla

nt

or E

qu

ipm

ent

Rat

io o

f A

ccu

mu

late

d

Am

ount

of

Col

late

ral t

o N

et E

quit

y of

th

e L

ates

t F

inan

cial

S

tate

men

t (%

)

Max

imu

m

Col

late

ral/

Gu

aran

tee

Am

ount

s A

llow

able

(N

ote

2)

En

dor

sem

ent/

G

uar

ante

e G

iven

by

Par

ent

on B

ehal

f of

S

ub

sid

iari

es

En

dor

sem

ent/

G

uar

ante

e G

iven

by

Su

bsi

dia

ries

on

B

ehal

f of

Par

ent

En

dor

sem

ent/

G

uar

ante

e G

iven

on

Beh

alf

of C

ompa

nie

s in

M

ain

lan

d C

hin

a

0 C

hina

Air

lines

C

AL

Par

k

100%

sub

sidi

ary

$

11,

310,

754

$

3,

850,

000

$

3,

850,

000

$

2,

129,

400

$

-

6.81

$ 2

8,27

6,88

6 Y

N

N

(t

he “

Com

pany

”)

Tai

wan

Air

Car

go T

erm

inal

54

% s

ubsi

diar

y

11

,310

,754

1,

080,

000

1,08

0,00

0

-

- 1.

91

28,2

76,8

86

Y

N

N

Tig

erai

r T

aiw

an C

o., L

td.

77.1

7% s

ubsi

diar

y by

di

rect

and

indi

rect

ho

ldin

gs

11,3

10,7

54

3,05

5,47

5

3,

012,

668

685,

444

- 5.

33

28,2

76,8

86

Y

N

N

Tai

wan

Air

craf

t Mai

nten

ance

an

d E

ngin

eeri

ng C

o., L

td.

100%

sub

sidi

ary

11,3

10,7

54

2,00

0,00

0

2,

000,

000

1,27

9,82

7

-

3.54

28

,276

,886

Y

N

N

Not

e 1:

B

ased

on

the

Com

pany

’s g

uide

lines

, the

max

imum

am

ount

of

guar

ante

e to

an

indi

vidu

al c

ount

erpa

rty

is u

p to

20%

of

the

Com

pany

’s s

hare

hold

ers’

equ

ity.

Not

e 2:

B

ased

on

the

Com

pany

’s g

uide

lines

, the

allo

wab

le a

ggre

gate

am

ount

of

colla

tera

l gua

rant

ee is

up

to 5

0% o

f th

e C

ompa

ny’s

sha

reho

lder

s’ e

quity

. 236

- 78

-

TA

BL

E 2

C

HIN

A A

IRL

INE

S, L

TD

. AN

D I

NV

ES

TE

ES

M

AR

KE

TA

BL

E S

EC

UR

ITIE

S H

EL

D

DE

CE

MB

ER

31,

201

9 (I

n T

hou

san

ds

of N

ew T

aiw

an D

olla

rs, U

nle

ss S

tate

d O

ther

wis

e)

D

ecem

ber

31,

201

9

Hol

din

g C

omp

any

Nam

e M

ark

etab

le S

ecu

rity

Typ

e an

d I

ssu

er/N

ame

Rel

atio

nsh

ip

wit

h t

he

Hol

din

g C

omp

any

Fin

anci

al S

tate

men

t A

ccou

nt

Nu

mb

er o

f S

har

es/U

nit

s C

arry

ing

Am

oun

t

Per

cen

tage

of

Ow

ner

ship

(%

)

Mar

ket

Val

ue

or N

et A

sset

V

alu

e

Not

e

C

hina

Air

line

s (“

Par

ent c

ompa

ny”)

S

hare

s

E

vere

st I

nves

tmen

t Hol

ding

s L

td. -

ord

inar

y sh

ares

-

Fin

anci

al a

sset

s at

FV

TO

CI

- no

n-cu

rren

t 1,

359,

368

$

73

,628

13

.59

$

80

,991

N

ote

1

Eve

rest

Inv

estm

ent H

oldi

ngs

Ltd

. - p

refe

renc

e sh

ares

-

Fin

anci

al a

sset

s at

FV

TO

CI

- no

n-cu

rren

t 13

5,93

7

7,

363

-

-

Chu

ng H

ua E

xpre

ss C

o.

- F

inan

cial

ass

ets

at F

VT

OC

I -

non-

curr

ent

1,10

0,00

0

26

,865

11

.00

26,8

65

Jard

ine

Air

Ter

min

al S

ervi

ces

- F

inan

cial

ass

ets

at F

VT

PL

- c

urre

nt

12,0

00,0

00

- 15

.00

-

T

he G

rand

Hi L

ai H

otel

-

Fin

anci

al a

sset

s at

FV

TP

L -

cur

rent

4,

021

- 0.

02

-

M

anda

rin

Air

line

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hare

s

C

hina

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line

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aren

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pany

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inan

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at F

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non-

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ent

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Lan

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inan

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Com

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365

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10

1,36

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efic

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cer

tifi

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F

rank

lin

Tem

plet

on S

inoA

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oney

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ket F

und

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inan

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at F

VT

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8

81

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-

81,1

24

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FS

ITC

Mon

ey M

arke

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Fin

anci

al a

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rent

49

7,74

0

89

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89,1

45

All

ianz

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bal I

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wan

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ey M

arke

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al a

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rent

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81

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C

apit

al M

oney

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ket F

und

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inan

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at F

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2,84

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46

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46,0

35

Tai

wan

Air

port

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vice

s S

hare

s

T

rans

Asi

a A

irw

ays

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inan

cial

ass

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at F

VT

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urre

nt

2,27

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6

-

0.4

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Ben

efic

ial c

erti

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mer

ging

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ket S

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ncom

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und

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inan

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20

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20,2

53

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a G

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l Bon

d F

und

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inan

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1,23

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na A

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ent c

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anci

al a

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7,

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376

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und

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din

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omp

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d I

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wit

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omp

any

Fin

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ccou

nt

Nu

mb

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f S

har

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nit

s C

arry

ing

Am

oun

t

Per

cen

tage

of

Ow

ner

ship

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ket

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ue

or N

et A

sset

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alu

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Not

e

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Cat

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Ben

efic

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P

rude

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l Fin

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5,40

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85,8

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85,8

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4,

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23

-

70

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in 1

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rent

1,

106,

807

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35

-

15

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T

iger

air

Tai

wan

Co.

, Ltd

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over

nmen

t bon

d

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hili

ppin

es g

over

nmen

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d -

Am

orti

zed

cost

fin

anci

al a

sset

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299

Not

app

lica

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T

he s

ubsi

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y’s

net a

sset

val

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as $

80,9

91 th

ousa

nd, w

hich

incl

uded

ord

inar

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ares

and

pre

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shar

es a

s of

and

for

the

year

end

ed D

ecem

ber

31, 2

019.

N

ote

2:

The

Com

pany

doe

s no

t iss

ue s

hare

s be

caus

e it

is a

lim

ited

com

pany

. N

ote

3:

The

tabl

e on

ly li

sts

fina

ncia

l ass

ets

that

are

IF

RS

9 r

egul

ated

.

(Con

clud

ed)

238

- 80

-

TA

BL

E 3

C

HIN

A A

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S, L

TD

. AN

D S

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AR

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D D

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OF

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NT

$300

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FO

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EN

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1, 2

019

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s of

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less

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ted

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ise)

B

egin

nin

g B

alan

ce

Acq

uis

itio

n (

Not

e 3)

D

isp

osal

(N

ote

3)

En

din

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alan

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Com

pan

y N

ame

Typ

e an

d N

ame

of

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keta

ble

Secu

riti

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(Not

e 1)

Fin

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tate

men

t A

ccou

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Cou

nte

rpar

ty

(Not

e 2)

R

elat

ion

ship

(N

ote

2)

Num

ber

of

Sh

ares

A

mou

nt

Num

ber

of

Sh

ares

A

mou

nt

Num

ber

of

Sh

ares

A

mou

nt

Car

ryin

g A

mou

nt

Gai

n (

Los

s) o

n

Dis

pos

al

Num

ber

of

Sh

ares

A

mou

nt

C

hina

Air

line

s, L

td.

Sh

ares

T

iger

air

Tai

wan

Co.

, Ltd

. In

vest

men

ts a

ccou

nted

for

us

ing

the

equi

ty m

etho

d (N

ote

5)

Non

-rel

ated

par

ty

-

$

-

-

$

-

-

$

-

$

-

$

-

-

$

-

N

ote

1:

The

mar

keta

ble

secu

riti

es in

this

tabl

e re

fer

to s

hare

s, b

onds

, ben

efic

ial c

erti

fica

tes

and

the

secu

riti

es d

eriv

ed f

rom

the

abov

e it

ems.

N

ote

2:

Mar

keta

ble

secu

riti

es w

hich

are

rec

ogni

zed

as in

vest

men

ts a

ccou

nts

for

usin

g th

e eq

uity

met

hod

are

requ

ired

to b

e fi

lled

in th

e se

cond

col

umn.

N

ote

3 T

he c

umul

ativ

e am

ount

of

acqu

ired

and

dis

pose

d of

mar

keta

ble

secu

riti

es a

re r

equi

red

to b

e ca

lcul

ated

sep

arat

ely

to d

eter

min

e w

heth

er th

ey a

re a

t lea

st N

T$3

00 m

illi

on o

r 20

% o

f th

e pa

id-i

n ca

pita

l. N

ote

4 Pa

id-i

n ca

pita

l re

fers

to

paid

-in

capi

tal

of t

he i

ndic

ated

par

ent

com

pany

. If

the

shar

es i

ssue

d by

an

issu

er h

ave

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ar v

alue

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a pa

r va

lue

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r th

an N

T$1

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r sh

are,

the

thr

esho

ld o

f 20

% o

f pa

id-i

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l, as

set

out

in

the

prec

edin

g it

em, s

hall

be

repl

aced

by

10%

of

equi

ty a

ttri

buta

ble

to

owne

rs o

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dica

ted

pare

nt c

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s st

ated

in th

e re

spec

tive

bala

nce

shee

t. N

ote

5:

Sub

sidi

arie

s pl

anni

ng in

itia

l pub

lic

offe

ring

rel

ease

sto

cks.

239

- 81

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TA

BL

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C

HIN

A A

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TD

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D I

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Th

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less

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Tra

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nor

mal

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ms

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aym

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En

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f T

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Not

e

Chi

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017)

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-

(“C

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line

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Tai

wan

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port

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vice

s S

ubsi

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urch

ase

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day

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7,97

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Man

dari

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35

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3 1.

83

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Man

dari

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24

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4 0.

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97)

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11)

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42,6

42

0.49

T

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ubsi

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urch

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152,

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(31,

210)

(1

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-

T

aoyu

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nati

onal

Air

port

Ser

vice

S

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2 0.

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(347

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) (1

2.90

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56

1,44

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60 d

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(3

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ua H

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34

9,60

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7,86

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ark

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(1

27)

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C

al H

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135,

687

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(40,

293)

(1

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-

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loba

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ress

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ubsi

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ale

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8

0.05

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E

aste

rn U

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tern

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nal L

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E

quity

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216,

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2

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(23,

430)

(0

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hina

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s E

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urch

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120,

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2

mon

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- -

(20,

118)

(0

.75)

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C

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1.33

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26)

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Chi

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day

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-

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(2

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3)

-

M

anda

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Air

line

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189,

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2.56

1

mon

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760)

(3

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pany

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114,

281

26.0

7 1

mon

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(382

) (0

.53)

-

Tig

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Tao

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Int

erna

tion

al A

irpo

rt S

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ce

Sam

e pa

rent

com

pany

P

urch

ase

197,

179

2.53

1

mon

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(24.

389)

(3

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-

240

- 82

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TA

BL

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IRL

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TD

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wan

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atu

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f R

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urn

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mou

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Act

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Per

iod

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or

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Deb

ts

C

hina

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td. (

“Chi

na A

irli

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anda

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line

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158,

123

Not

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$

- -

$

15

8,12

3

$

-

Man

dari

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247,

997

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e

-

-

24

5,36

4

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hina

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464,

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-

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31

1,35

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nati

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port

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34

7,12

7 3.

43

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340,

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use

of th

e pa

rtic

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cha

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ther

efor

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ate

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not

app

lica

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BL

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s of

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s, U

nles

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vest

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mou

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as

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ber

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Com

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ecem

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2019

D

ecem

ber

31,

2018

N

umbe

r of

S

har

es/U

nit

s

Per

cen

tage

of

O

wne

rshi

p (%

)

Car

ryin

g A

mou

nt

Net

In

com

e (L

oss)

of

the

Inve

stee

Inve

stm

ent

Inco

me

(Los

s)

Not

e

Chi

na A

irli

nes,

Ltd

. C

AL

Par

k

Tao

yuan

, Tai

wan

R

eal e

stat

e le

ase

and

inte

rnat

iona

l tra

de

$

1,50

0,00

0 $

1,

500,

000

15

0,00

0,00

0 10

0.00

$

1,

552,

310

$

1,16

3 $

47

,694

N

ote

4

Man

dari

n A

irli

nes

Tai

pei,

Tai

wan

A

ir tr

ansp

orta

tion

and

mai

nten

ance

of

airc

raft

2,04

2,36

8

2,04

2,36

8

188,

154,

025

93.9

9

1,49

4,60

3

204,

018

19

1,32

2 N

otes

1 a

nd 4

Tai

wan

Air

Car

go T

erm

inal

T

aoyu

an, T

aiw

an

Air

car

go a

nd s

tora

ge

1,

350,

000

1,

350,

000

13

5,00

0,00

0 54

.00

1,

517,

946

27

1,55

2

146,

642

Not

e 4

C

al-D

ynas

ty I

nter

nati

onal

L

os A

ngel

es, U

SA

A

hol

ding

com

pany

, rea

l est

ate

and

hote

l ser

vice

s

US

$ 26

,145

U

S$

26,1

45

2,

614,

500

100.

00

1,

276,

546

41

,262

41,2

62

Not

e 2

Chi

na P

acif

ic C

ater

ing

Ser

vice

s T

aoyu

an, T

aiw

an

In-f

ligh

t cat

erin

g

439,

110

43

9,11

0

43,9

11,0

00

51.0

0

801,

071

51

1,12

1

256,

899

-

Tao

yuan

Int

erna

tion

al A

irpo

rt S

ervi

ces

Tao

yuan

, Tai

wan

A

irpo

rt s

ervi

ces

14

7,00

0

147,

000

34

,300

,000

49

.00

73

7,24

5

291,

522

14

2,84

6 -

C

AL

-Asi

a In

vest

men

t T

erri

tory

of

the

Bri

tish

Vir

gin

Isla

nds

Gen

eral

inve

stm

ent

US

$ 7,

172

US

$ 7,

172

7,

172,

346

100.

00

55

9,56

2

30,8

20

30

,819

-

S

abre

Tra

vel N

etw

ork

(Tai

wan

) T

aipe

i, T

aiw

an

Sal

e an

d m

aint

enan

ce o

f ha

rdw

are

and

soft

war

e

52,2

00

52

,200

13,0

21,0

42

93.9

3

460,

213

19

5,34

7

183,

490

-

Chi

na A

ircr

aft S

ervi

ce

Hon

g K

ong

Inte

rnat

iona

l Air

port

A

irpo

rt s

ervi

ces

HK

$ 58

,000

H

K$

58,0

00

28

,400

,000

20

.00

46

1,26

3

51,8

28

10

,365

-

T

aiw

an A

irpo

rt S

ervi

ces

Tai

pei,

Tai

wan

A

irpo

rt s

ervi

ces

12

,289

12,2

89

20

,626

,644

47

.35

27

6,13

4

156,

861

74

,274

-

K

aohs

iung

Cat

erin

g S

ervi

ces

Kao

hsiu

ng, T

aiw

an

In-f

ligh

t cat

erin

g

383,

846

38

3,84

6

21,4

94,6

37

53.6

7

661,

170

29

2,63

2

142,

886

Not

e 5

C

al H

otel

Co.

, Ltd

. T

aoyu

an, T

aiw

an

Hot

el b

usin

ess

46

5,00

0

465,

000

46

,500

,000

10

0.00

479,

259

16

,787

18,0

20

Not

e 4

C

hina

Pac

ific

Lau

ndry

Ser

vice

s T

aoyu

an, T

aiw

an

Cle

anin

g an

d le

asin

g of

the

tow

el o

f ai

rlin

es, h

otel

s,

rest

aura

nts

and

heal

th c

lubs

137,

500

13

7,50

0

13,7

50,0

00

55.0

0

168,

547

27

,327

15,0

30

-

H

wa

Hsi

a T

aoyu

an, T

aiw

an

Cle

anin

g of

air

craf

t and

mai

nten

ance

of

mac

hine

and

eq

uipm

ent

77,2

70

77

,270

77,2

70

100.

00

88

,313

17,0

08

16

,857

N

otes

1 a

nd 4

Y

estr

ip

Tai

pei,

Tai

wan

T

rave

l bus

ines

s

26,2

65

26

,265

1,60

0,00

0 10

0.00

25,2

68

(4

80)

(3

84)

Not

e 4

D

ynas

ty H

olid

ays

Tok

yo, J

apan

T

rave

l bus

ines

s J

PY

8,

000

JP

Y

20,4

00

16

0 20

.00

10

,004

(894

)

(480

) -

G

loba

l Sky

Exp

ress

T

aipe

i, T

aiw

an

For

war

ding

and

sto

rage

of

air

carg

o

2,

500

2,

500

25

0,00

0 25

.00

7,

294

6,

392

1,

598

-

Tig

erai

r T

aiw

an C

o., L

td.

Tai

pei,

Tai

wan

A

ir tr

ansp

orta

tion

and

mai

nten

ance

of

airc

raft

1,27

2,06

3

1,64

8,38

7

138,

906,

275

69.4

5

1,94

6,32

8

808,

718

69

9,03

9 N

ote

4

Tai

wan

Air

craf

t Mai

nten

ance

and

E

ngin

eeri

ng C

o., L

td.

Tao

yuan

, Tai

wan

A

ircr

aft m

aint

enan

ce

1,

350,

000

1,

350,

000

13

5,00

0,00

0 10

0.00

921,

989

(2

06,1

51)

(2

06,1

49)

Not

e 4

N

OR

DA

M A

sia

Ltd

. T

aoyu

an, T

aiw

an

Air

craf

t mai

nten

ance

37,9

75

2,

450

3,

797,

500

49.0

0

37,8

13

(1

44)

(7

0)

-

M

anda

rin

Air

line

s T

iger

air

Tai

wan

Co.

, Ltd

. T

aipe

i, T

aiw

an

Air

tran

spor

tati

on a

nd m

aint

enan

ce o

f ai

rcra

ft

15

4,33

0

200,

000

15

,433

,000

7.

72

21

6,24

3

808,

718

77

,587

-

T

aiw

an A

irpo

rt S

ervi

ces

Tai

pei,

Tai

wan

A

irpo

rt s

ervi

ces

11

,658

11,6

58

46

9,75

5 1.

08

6,

281

15

6,86

1

1,68

9 -

CA

L-A

sia

Inve

stm

ent

Eas

tern

Uni

ted

Inte

rnat

iona

l Log

isti

cs

Hon

g K

ong

F

orw

ardi

ng a

nd s

tora

ge o

f ai

r ca

rgo

HK

$ 3,

329

HK

$ 3,

329

1,

050,

000

35.0

0

42,7

17

9,

678

3,

387

-

T

aiw

an A

irpo

rt S

ervi

ces

Tai

wan

Air

port

Ser

vice

(S

amoa

)

Sam

oa

Air

port

ser

vice

s an

d in

vest

men

t

US

$ 5,

877

US

$ 5,

877

-

100.

00

34

7,55

1

23,1

07

23

,107

N

ote

3

K

aohs

iung

Cat

erin

g Se

rvic

es

Del

ica

Inte

rnat

iona

l Co.

, Ltd

. K

aohs

iung

, Tai

wan

C

ater

ing

busi

ness

10,2

00

10

,200

1,02

0,00

0 51

.00

7,

867

(4

)

(2)

-

Not

e 1:

A

dopt

ed th

e tr

easu

ry s

hare

s m

etho

d in

rec

ogni

zing

inve

stm

ent i

ncom

e or

loss

. N

ote

2:

Rep

rese

nts

the

cons

olid

ated

fin

anci

al in

form

atio

n of

the

fore

ign

hold

ing

com

pany

dis

clos

ed in

acc

orda

nce

with

loca

l reg

ulat

ions

. N

ote

3:

The

Com

pany

doe

s no

t iss

ue s

hare

s be

caus

e it

is a

lim

ited

com

pany

. N

ote

4:

Dif

fere

nce

caus

ed b

y le

ase

arra

ngem

ent b

etw

een

cons

olid

ated

ent

ities

. N

ote

5:

Dif

fere

nce

caus

e by

acq

uisi

tion

. 242

- 84

-

TA

BL

E 7

C

HIN

A A

IRL

INE

S, L

TD

. AN

D I

NV

ES

TE

ES

IN

VE

ST

ME

NT

S I

N M

AIN

LA

ND

CH

INA

F

OR

TH

E Y

EA

R E

ND

ED

DE

CE

MB

ER

31,

201

9 (I

n T

hou

san

ds

of N

ew T

aiw

an D

olla

rs/R

enm

inib

i/U

.S. D

olla

rs in

Th

ousa

nd

s, U

nle

ss S

tate

d O

ther

wis

e)

Chi

na A

irli

nes

In

vest

men

t F

low

Inve

stee

Com

pan

y N

ame

Mai

n B

usi

nes

s an

d

Pro

du

ct

Tot

al A

mou

nt

of P

aid

-in

C

apit

al

Inve

stm

ent

Typ

e

Acc

um

ula

ted

O

utf

low

of

Inve

stm

ent

from

Tai

wan

as

of J

anua

ry 1

, 20

19

Ou

tflo

w

Infl

ow

Acc

um

ula

ted

O

utf

low

of

Inve

stm

ent

from

Tai

wan

as

of D

ecem

ber

31,

20

19

Net

In

com

e (L

oss)

of

the

Inve

stee

% O

wn

ersh

ip

of D

irec

t or

In

dir

ect

Inve

stm

ent

Inve

stm

ent

Gai

n (

Los

s)

Car

ryin

g A

mou

nt

as

of

D

ecem

ber

31,

20

19

Acc

um

ula

ted

In

war

d

Rem

itta

nce

of

Ear

nin

gs a

s of

D

ecem

ber

31,

20

19

A

irpo

rt A

ir C

argo

Ter

min

al

(Xia

men

) C

o., L

td.

For

war

ding

and

sto

rage

of

air

car

go

$

10,9

5,48

0 (

RM

B 2

54,4

80)

Indi

rect

(N

ote

1)

$

125,

705

(U

S$

4,18

6) $

-

$

- $

12

5,70

5 (

US

$ 4,

186)

$

76,7

11

(R

MB

17

,107

) 14

.00

$

10,7

95

(R

MB

2,

395)

$

223,

683

(R

MB

51

,962

) $

84

,137

(

US

$ 2,

802)

(Not

e 2)

Air

port

Air

Car

go S

ervi

ce

(Xia

men

) C

o., L

td.

For

war

ding

and

sto

rage

of

air

car

go

60

,267

(

RM

B

14,0

00)

Indi

rect

(N

ote

1)

58

,482

(

US

$ 1,

947)

-

-

58

,482

(

US

$ 1,

947)

89

,573

(

RM

B

19,9

75)

14.0

0

12,6

06

(R

MB

2,

796)

12

4,07

1 (

RM

B

28,8

22)

26

,286

(

US

$ 87

5)

(N

ote

2)

T

aiko

o (X

iam

en)

Lan

ding

G

ear

Ser

vice

s

Lan

ding

gea

r m

aint

enan

ce s

ervi

ces

2,

495,

195

(U

S$

83,0

90)

Indi

rect

(N

ote

1)

64

,601

(

US

$ 2,

151)

-

-

64

,601

(

US

$ 2,

151)

-

2.58

9

-

-

-

H

AE

CO

Com

posi

te

Str

uctu

res

(Jin

jian

g)

Com

posi

te m

ater

ial

35

0,24

0 (

US

$ 11

,663

) In

dire

ct

(Not

e 1)

19,0

99

(U

S$

636)

-

-

19

,099

(

US

$ 63

6)

- 5.

45

-

42

,718

(

RM

B

9,92

3)

-

Acc

um

ula

ted

In

vest

men

t in

M

ain

lan

d C

hin

a as

of

Dec

emb

er 3

1, 2

019

Inve

stm

ent

Am

oun

t

Au

thor

ized

by

Inve

stm

ent

Com

mis

sion

, MO

EA

L

imit

on

In

vest

men

t

$2

67,8

86 (

US

$8,9

20)

$650

,192

(N

ote

3)

$36,

079,

270

(Not

e 4)

(Con

tinu

ed)

243

- 85

-

Tai

wan

Air

port

Ser

vice

s

Rem

itta

nce

of

Fu

nd

s

Inve

stee

Com

pan

y M

ain

Bu

sin

ess

and

P

rod

uct

P

aid

-in

Cap

ital

M

eth

od o

f In

vest

men

t

Acc

um

ula

ted

O

utw

ard

R

emit

tan

ce f

or

Inve

stm

ent

from

Tai

wan

as

of J

anua

ry 1

, 20

19

Ou

twar

d

Inw

ard

Acc

um

ula

ted

O

utw

ard

R

emit

tan

ce f

or

Inve

stm

ent

from

Tai

wan

as

of D

ecem

ber

31,

20

19

Net

In

com

e (L

oss)

of

the

Inve

stee

% O

wn

ersh

ip

of D

irec

t or

In

dir

ect

Inve

stm

ent

Inve

stm

ent

Inco

me

(Los

s)

Car

ryin

g A

mou

nt

as o

f D

ecem

ber

31,

20

19

Acc

um

ula

ted

R

epat

riat

ion

of

Inve

stm

ent

Inco

me

as o

f D

ecem

ber

31,

20

19

A

irpo

rt A

ir C

argo

Ter

min

al

(Xia

men

) C

o., L

td.

For

war

ding

and

sto

rage

of

air

car

go

$

1,09

5,48

0 (

RM

B 2

54,4

80)

Indi

rect

(N

ote

5)

$

120,

671

(U

S$

4,01

8) $

-

$

- $

12

0,67

1 (

US

$ 4,

018)

$

76,7

11

(R

MB

17

,107

) 14

.00

$

10,7

40

(R

MB

2,

395)

$

222,

478

(R

MB

51

,682

) $

11

4,30

4 (

US

$ 3,

806)

Air

port

Air

Car

go S

ervi

ce

(Xia

men

) C

o., L

td.

For

war

ding

and

sto

rage

of

air

car

go

60

,267

(

RM

B

14,0

00)

Indi

rect

(N

ote

5)

57

,860

(

US

$ 1,

927)

-

-

57

,860

(

US

$ 1,

927)

89

,573

(

RM

B

19,9

75)

14.0

0

12,5

40

(R

MB

2,

796)

12

4,27

9 (

RM

B

28,8

70)

42

,240

(

US

$ 1,

407)

A

ccu

mu

late

d O

utw

ard

R

emit

tan

ce f

or I

nve

stm

ent

in

Mai

nla

nd

Ch

ina

as o

f D

ecem

ber

31,

201

9

Inve

stm

ent

Am

oun

ts A

uth

oriz

ed b

y In

vest

men

t C

omm

issi

on, M

OE

A

Up

per

Lim

it o

n t

he

Am

oun

t of

In

vest

men

t S

tip

ula

ted

by

In

vest

men

t C

omm

issi

on, M

OE

A

$1

78,5

32 (

US

$5,9

45)

$178

,532

(U

S$5

,945

) $3

49,9

06 (

Not

e 4)

Not

e 1:

C

hina

Air

line

s, L

td. t

he “

Com

pany

” in

vest

ed in

CA

L-A

sia

Inve

stm

ent,

whi

ch, i

n tu

rn, i

nves

ted

in a

com

pany

loca

ted

in m

ainl

and

Chi

na.

Not

e 2:

T

he in

war

d re

mit

tanc

e of

ear

ning

s in

201

9 am

ount

ed to

US

$2,8

01,7

49 a

nd U

S$87

5,33

0.

Not

e 3:

T

he a

mou

nt c

ompr

ised

US

$19,

828,

324,

RM

B4,

200,

000

and

NT

$36,

666,

667.

N

ote

4:

The

lim

it s

tate

d in

the

Inve

stm

ent C

omm

issi

on’s

reg

ulat

ion,

“In

vest

men

t or

Tec

hnic

al C

oope

rati

on in

Mai

nlan

d C

hina

Adj

ustm

ent R

ule,

” is

the

larg

er o

f th

e C

ompa

ny’s

net

ass

et v

alue

or

60%

of

the

cons

olid

ated

net

ass

et v

alue

. N

ote

5:

Tai

wan

Air

port

Ser

vice

s in

vest

ed in

Tai

wan

Air

port

Ser

vice

s (S

amoa

), w

hich

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China Airlines Co., Ltd.

Chairman Hsieh, Su-Chien

Spokesperson & Deputy Spokesman

Name Spokesman Deputy Spokesman Liu, Tsao-Yang Chen, I-Chieh

Title Vice President, CORPORATE COMMUNICATIONS OFFICE Vice President, FINANCE DIV. Tel 886-3-399-8888 886-3-399-8888 Fax 886-3-399-8640 886-3-399-8313 Email [email protected] je [email protected] Headquarter, Branches and Plant

Organiza on Unit Address Tel Headquarter No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan 886-3-399-8888 Taipei Branch No.131, Sec on 3, Nanjing East Road, Taipei City 104, Taiwan 886-2-2715-2233 Cargo Sales & Service, Taiwan No.3, Aly. 123, Ln. 405, Dunhua N. Rd., Songshan Dist., Taipei City 105, Taiwan 886-2-2715-5151 Kaohsiung Branch 6 Floor, Asia-Paci c Financial Plaza, No.38 Of Xin Guang Road, Lingya District, Kaohsiung City 802, Taiwan 886-7-213-1200 Tainan O ce Room A, 6 Floor, No.358, Sec on 1, Tungmen Road, Tainan, Taiwan 886-6-235-8099 Taichung Branch Room 2, 15th Floor, No.218, Sec on 2, Taiwan Boulevard, West District, Taichung City 403, Taiwan 886-4-2325-9592 Maintenance Div. No.15, Hangqin S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan 886-3-383-4251 Cargo Sales & Services Mainland China Suite 22i, No.726 Of West Yanan Road, Changning District, Shanghai, China 86-21-2220-3292

Beijing O ce Bright China Chang An Building, Tower 2, Unit 1025, No.7 Jianguomen Nei Avenue, Beijing, China 86-10-6510-2671 Shanghai O ce Suite 22a, No.726 Of West Yanan Road, Changning District, Shanghai, China 86-21-2220-3333 Guangzhou O ce Room 1210, 12th Floor, Teem Tower, No.208 Of Tianhe Road, Tianhe District, Guangzhou, Guangdong, China 86-20-8527-2950

Shenzhen O ce Room 4805, O ce Tower, Shun Hing Di Wang Commercial Center, No.5002 Of Shen Nan East Road, Luohu District, Shenzhen, Guangdong, China 86-755-8246-3560

Xian O ce Room 810, 8th Floor, Gaoxin Building 9, Gaoxin 4th Road, High-Tech Zone, Xi'an, Shaanxi, China 86-29-895-81909 Chengdu O ce Room 1608, South Tower, Baoli Center Building, No.7, Consulate Rd. Chengdu, China 86-28-8602-7508 Zhengzhou O ce Rooms 1101-1102, Tower B, Yuhong Interna onal Building, No.59 Of Zijingshan Road, Zhengzhou, Henan, China 86-371-5562-9880 Changsha O ce Room 3404, Building 2, Block C, Kaifu Wanda Plaza, No.589 Of Zhongshan Road, Changsha , Hunan, China 86-731-8224-0871 Shenyang O ce Room 2009, Tower E, Fortune Center, No.59 Of North Sta on Road, Shen He District, Shenyang, Liaoning, China 86-24-3128-7021 Xiamen O ce Unit 3310, 33rd Floor, Bank Center, No.189 Of Xiahe Road , Xiamen, Fujian, China 86-592-2388-388 Nanjing O ce Room B1-B2, Building 38, Nanjing Center Building, No.1 South Zhongshan Road, Qinhuai District, Nanjing, China 86-25-8467-1050 Ningbo O ce Room 1702, China Ci c Building, No.36 Of Zhenming Road, Haishu District, Ningbo, Zhejiang, China 86-574-8775-4090 Hangzhou O ce Room 2307, Building 2, China Qian Tang Avia on Building, No.66, Shimin St., Jianggan District, Hangzhou, China 86-571-8668-4214 Fuzhou Sta on Room 2508, Zhonggeng Youth Plaza, No.83 Of East Road, Gulou District, Fuzhou, Fujian, China 86-591-8755-9705 Chongqing Sta on Room 2202, No.3 Building, Zhongyu Plaza, No.86 Of Hongjin Avenue, Yubei District, Chongqing, China 86-023-8828-0118 Haikou O ce 18e, Huanhai Business Building, No.15, Jinmao W. Rd., Haukuo Hainan, China 86-898-6853-9677 Nanchang Sta on Rm 701, Unit A, Building 16, No.205 Guangchang S. Rd., Nanchang, Jiangxi Province, China 86-0791-8378-0580 Sanya Sta on Room No.110, 5F, Block B, Sanya Avia on City, Sanya Phoenix Int'l Airport, Hainan 86-0898-8802-4956 Wenzhou Sta on Room 2310, Huameng Business Palace, No.2 Of Chezhan Road, Lucheng District, Wenzhou, Zhejiang, China 86-0577-8605-2181 Wuxi Sta on Room A207, No.18 Airport Second Road, New District, Wuxi City, Jiangsu Province, China 86-0510-8522-8710 Qingdao O ce Unit 2801, O ce Tower, Shangri-La Centre, No.9 Xiang Gang Zhong Lu, Qingdao, China 86-532-6887-7106 Weihai Sta on Unit 2801, O ce Tower, Shangri-La Centre, No.9 Xiang Gang Zhong Lu, Qingdao, China 86-532-6887-7106 Wuhan O ce Room 1315, 13F, New World Interna onal Trade Building, 568 Jianshe Avenue , Wuhan, China 86-27-8555-8172 Xuzhou Sta on Room 537, CUMT University Science Park, Jiefang S. Road, Xuzhou City, Jiangsu, China 86-516-8379-0550 Cargo Sales & Services, Japan Ni ochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan 81-3-6378-8860 Tokyo Branch Ni ochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan 81-3-6378-8855 Osaka Branch Nakanoshima Mitsui Bldg. 9F 3-3, 3-Chome Nakanoshima Kita-Ku Osaka-Shi, Osaka 530-0005, Japan 81-6-6459-5783 Sapporo Branch Kita 1 Jo Mitsui Bldg. 3F, Kita 1, Jo Nishi 5, Chuo-ku, Sapporo-Shi, Hokkaido, 060-0001, Japan 81-11-218-6766 Shizuoka Sta on Shizuoka Airport Terminal Bldg. 1F, 3336-4, Sakaguchi, Makinohara-Shi, Shizuoka, 421-0411, Japan 81-548-29-2668 Toyama Sta on Toyama Airport Interna onal Terminal Building 3F, 191 Akigashima, Toyama-Shi, 939-8252, Japan 81-76-461-7200 Kagoshima Sta on Kagoshima Airport Interna anl Terminal Bldg. 1355-4 Fumoto, Kirishima, Kagoshima 899-6404, Japan 81-995-57-6151 Miyazaki Sta on Miyazaki Airport, Akae Miyazaki 880-0912, Japan 81-985-64-9288 Nagoya Branch NMF Nagoya-Fushimi Bldg. 3F, Nishiki 2-9-27, Naka-ku, Nagoya-Shi, Aichi, 460-0003, Japan 81-52-202-7253 Fukuoka Branch Daihakata Bldg. 8F, 2-20-1 Hakata Ekimae, Hakata-Ku, Fukuoka 812-0011, Japan 81-92-471-7788 Hiroshima Branch Hiroshima-Mitsui Bldg. 7F 2-7-10, Ote-Machi, Naka-Ku, Hiroshima-Shi, Hiroshima, 730-0051, Japan 81-82-542-0883 Takamatsu Sta on Takamatsu Airport Bldg. 1312-7, Oka, Konan-cho, Takamatsu-shi, Kagawa, 761-1401, Japan 81-87-815-8702

Kumamoto Sta on Kumamoto Airport Int'l Terminal Bldg., 1802-2 Oyatsu, Mashiki-machi, Kamimashiki-gun, Kumamoto 861-2204, Japan 81-96-285-1814

Okinawa Branch Gojinsha Naha Matsuyama Bldg. 3F, 2-1-12 Matsuyama, Naha-Shi, Okinawa 900-0032, Japan 81-98-863-1013 Korea Branch 12F, Donghwa Bldg. Seosomun-Ro 106, Jung-Gu, Seoul, Korea 04513 82-2-317-8888 Busan Branch 3F, Kyo-Won B/D, Jungang Daero 216, Dong-Gu, Busan, Korea, 48733 82-51-462-8885 Hong Kong Branch Suites 2701-2705, 27F Devon House, Taikoo Place, 979 King's Road, Hong Kong 852-2843-9800 Thailand Branch 4Fl., The Peninsula Plaza Bangkok, 153 Rajadamri Rd., Bangkok 10330, Thailand 66-2-250-9898 Chiang Mai Branch 4Fl., The Peninsula Plaza Bangkok, 153 Rajadamri Rd., Bangkok 10330, Thailand 66-2-250-9898 Bali Branch Departure Int'l Terminal 2nd FL., No.A0-12B Ngurah Rai Airport, Tuban-Bali, Indonesia 62-361-9357-298 Malaysia Branch Unit 15.01-15.02, Level 15, AMODA Building, 22, Jalan Imbi, 55100 Kuala Lumpur, Malaysia 60-3-2148-9417 Penang Branch Unit 9.04, Level 9, Menara Boustead Penang, 39 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia 60-4-228-9227 Singapore Branch 302 Orchard Road, #14-01 Tong Building Singapore 238862 65-6-737-2144 Cambodia Branch #10, St.596 Toul Kork, Sangkat Beoung Kok II, Khan Toul Kork, Phnom Penh, Cambodia 855-23-222-058 Myanmar Branch No.353/355, Bo Aung Kyaw Street, Kyauktada Township, Yangon, Myanmar 95-1-8392-663 Philippines Branch G/F Unit-1 Golden Empire Tower 1322 Roxas Boulevard Cor. Padre Faura St., Ermita Manila, Philippines 63-2-354-6700 to 09 Cebu Branch G/F Unit-1 Golden Empire Tower 1322 Roxas Boulevard Cor. Padre Faura St., Ermita Manila, Philippines 63-2-354-6700 to 09 Indonesia Branch In land Tower, M1 Floor, Jl. Jend. Sudirman Kav.32, Jakarta 10220, Indonesia 62-21-251-0788 Vietnam Branch 1B, 7F Crescent Plaza 105 Ton Dat Tien St., Dist.7, Ho Chi Minh City, Vietnam 84-28-5414-1008 Hanoi Branch 4th Floor, Opera Business Center, 60 Ly Thai To Street, Hoan Kiem District, Hanoi, Vietnam 84-24-3936-6364 Palau Branch P.O. BOX 10027 Koror, Republic of Palau 96940 680-488-8888 Australia Branch Suite 1, level 1, Nigel love Building, 10 Arrivals Crt. Sydney Interna onal Airport Mascot NSW 2020, Australia 61-2-8339-9188 Brisbane Branch 1G 35, Brisbane Interna onal Terminal, Airport Drive, Brisbane Airport QLD 4008, Australia 61-7-3860-5611 Melbourne Branch Level 2, North End, Terminal 2, Melbourne Airport, Tullamarine 3045 61-3-9907-0910 New Zealand Branch GM60, Level 1, Auckland Interna onal Airport, Auckland 2150, New Zealand 64-9-256-8088 India Branch Unit 023/025, 3rd Floor, MGF Metropolis, M.G. Road, Gurgaon 122001, Haryana, India 91-124-711-5000 Los Angeles Branch 200 N. Con nental Blvd., Suite 100, El Segundo, CA 90245, U.S.A. 1-310-322-2888 New York Branch 633 3rd Ave., 8th Fl., Suite 800, New York, NY 10017, U.S.A. 1-917-368-2000 San Francisco Branch 433 Airport Blvd., Suite 501 Burlingame, CA 94010, U.S.A. 1-650-931-8000 Honolulu Branch 300 Rodgers Blvd., #14, Honolulu, HI 96819, U.S.A. 1-808-955-0088 Anchorage Branch 4600 Postmark Drive, Ste. NA 142, Anchorage, AK99502, U.S.A. 1-907-249-2300 Canada Branch Suite 240-10451 Shellbridge Way, Richmond, Bri sh Columbia, V6X 2W8, Canada 1-604-242-1168 Cargo Sales & Services The Americas 5651 West 96th Street, Los Angeles, CA 90045, U.S.A. 1-310-646-1260 Guam Branch 518 Pale San Vitores Road, Suite 202-203, Concorde Center, Tumon, Guam 96913, U.S.A. 1-671-649-0861 Netherlands Branch O cia Gebouw I, De Boelelaan 7, 6th Floor, 1083 HJ Amsterdam, The Netherlands 31-20-646-1001 Germany Branch Gutleutstrasse 80, 60329 Frankfurt, Germany 49-69-297-0580 Italy Branch Viale Marco Polo, 71, 3F, 00154 Roma, Italy 39-06-474-5045 Cargo Sales & Services, Europe Room G2045-G2050, 2nd Floor, Cargo Center Luxair, L-1360 Luxembourg, Luxembourg 352-348-363-9500 Austria Branch Mariahilfer Strasse 123/8 O.G. 1060 Vienna, Austria 43-1-8130-156 The United Kingdom Branch Minstrel House, 1F, 2 Chapel Place, Rivington Street, London, EC2A 3DQ 44-208-587-3688

Stock Transfer Agent:

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

Auditors: Name: Deloi e & Touche Auditors: Huang, Jui-Chan ; Cheng, Shiuh-Ran Address: 20F., No. 100, Songren Rd., Xinyi Dist., Taipei City 110, Taiwan Website: h p://www.deloi e.com.tw Tel: 886-2-2725-9988

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

China Airlines Co., Ltd. ChairmanCargo Sales & Services, Europe Room G2045-G2050, 2nd Floor, Cargo...

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Transcript of China Airlines Co., Ltd. ChairmanCargo Sales & Services, Europe Room G2045-G2050, 2nd Floor, Cargo...