中鼎工程股份有限公司 CTCI Corporation · 1 I. Letter from the Chairman & CEO Dear Shareholders, Friends and Colleagues, In 2016, with all the dedication and hard work of

中鼎工程股份有限公司CTCI Corporation

中鼎工程股份有限公司CTCI Corporation

Notice to readers

This English version annual report is a summary translation of the Chinese version and is not an

official document of the shareholders’ meeting. If there is any discrepancy between the English

version and Chinese version, the Chinese version shall prevail.

Spokesperson Name: Ming-Cheng Hsiao Title: Executive Vice President Tel: 886-2-2833-9999 ext. 10099 E-mail: MC.Hsiao @ctci.com Deputy Spokesperson Name: Patrick Lin Title: Chief Financial Officer Tel: 886-2-2833-9999 ext. 16011 E-mail: [email protected] Headquarters and Branches Headquarters Address: 89, Sec. 6, Zhongshan North Rd., Taipei, Taiwan Tel: 886-2- 2833-9999 Branch CTCI CORPORATION ABU DHABI BRANCH Address: Shaikh Sultan Bin Srour Al Dhaheri Building, Al Salam Street, Abu Dhabi Tel: 971-26711572 CTCI CORPORATION ITALY BRANCH Address: Via G. Carducci, 1221013 Gallarate(VA), Italy Tel: 39- 0331 771026 CTCI CORPORATION QATAR BRANCH Address: Office No.6 , 1st Floor, Al-Emadi Business Centre, C-Ring Road, Doha City,State of Qatar P.O Box: 30261 Tel: (+974) 4451-7383 Stock Transfer Agent KGI Securities Co. Ltd. Address: 5th Fl., 2, Sec. 1, Chung Ching South Rd., Taipei, Taiwan Website: http://www.kgieworld.com.tw/ Tel: 886-2-2389-2999 Auditors PriceWaterHouseCoopers Auditors: Shih-Jung Weng, Shu-Chiung Chang Address: 27th Fl., 333, Sec. 1, Keelung Rd., Taipei, Taiwan Website: http://www.pwc.tw Tel.: 886-2-2729-6666 Corporate Website http://www.ctci.com

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

II. Company Profile 2.1 Date of Incorporation .................................................................................................................. 4 2.2 Company History .......................................................................................................................... 4

III. Corporate Governance Report 3.1 Organization ................................................................................................................................. 5 3.2 Directors and Management Team ............................................................................................... 9 3.3 Remuneration of Directors and Management Team ................................................................. 20 3.4 Implementation of Corporate Governance ............................................................................... 25 3.5 Public Expenses of CPA .............................................................................................................. 74 3.6 Information for change of CPA .................................................................................................. 74 3.7 The Company's Chairman, President and Managers Responsible for Finance or

Accounting who have Held a Post in the CPA Office or its Affiliated within the Latest Year .... 74 3.8 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders ......... 75 3.9 Information Disclosing the Relationship between any of the Company’s Top Ten

Shareholders .............................................................................................................................. 78 3.10 Shareholdings of the Company Directors, Supervisors, Managements, and Direct and

Indirect Investments of the Company in Affiliated Companies ................................................. 79 IV. Capital Overview 4.1 Capital and Shares ...................................................................................................................... 80 4.2 Issuance of Corporate Bonds ..................................................................................................... 84 4.3 Preferred Shares ........................................................................................................................ 84 4.4 Issuance of Depository Receipt .................................................................................................. 84 4.5 Employee Stock Options ............................................................................................................ 85 4.6 New Restricted Employee Shares .............................................................................................. 87 4.7 Status of New Shares Issuance in Connection with Mergers and Acquisitions ......................... 87 4.8 Financing Plans and Implementation ......................................................................................... 87 V. Operational Highlights 5.1 Business Activities ...................................................................................................................... 88 5.2 Market and Sales Overview ....................................................................................................... 96 5.3 Human Resources .................................................................................................................... 101 5.4 Environmental Protection Expenditure ................................................................................... 104 5.5 Labor Relations......................................................................................................................... 104 5.6 Important Contracts ................................................................................................................. 111 VI. Financial Information 6.1 Five-Year Financial Summary ................................................................................................... 113 6.2 Five-Year Financial Analysis ..................................................................................................... 121 6.3 Audit Committee’s Review Report in the Most Recent Year ................................................... 127 6.4 Consolidated Financial Statements and Independent Auditors’ Report in the Most

Recent Year .............................................................................................................................. 128 6.5 Financial Statements and Independent Auditors’ Report in the Most Recent Year ............... 128 6.6 Impact of the Financial Distress Occurred to the Company and Affiliates in the Recent

Years until the Annual Report being published ....................................................................... 128

VII. Review of Financial Conditions, Financial Performance, and Risk Management 7.1 Analysis of Financial Status ...................................................................................................... 129 7.2 Analysis of Financial Performance ........................................................................................... 130 7.3 Analysis of Cash Flow ............................................................................................................... 130 7.4 Major Capital Expenditure Items ............................................................................................. 131 7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans

and the Investment Plans for the Coming Year ....................................................................... 131 7.6 Analysis of Risk Management .................................................................................................. 131 7.7 Other ........................................................................................................................................ 137 VIII. Special Disclosure 8.1 Summary of Affiliated Companies ........................................................................................... 138 8.2 Private Placement Securities in the Most Recent Years .......................................................... 159 8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years .. 159 8.4 Other Supplementary Information .......................................................................................... 163 Appendices 1 Consolidated Financial Statements and Independent Auditors’ Report in the Most

Recent Year .............................................................................................................................. 164 2 Financial Statements and Independent Auditors’ Report in the Most Recent Year ............... 284

1

I. Letter from the Chairman & CEO Dear Shareholders, Friends and Colleagues, In 2016, with all the dedication and hard work of our staff, we continue to grow and make business breakthroughs. I would hereby like to report the 2016 business review, the 2017 strategic plan and blueprint for CTCI as follows:

A. 2016 Business Review a) Operation Results

The consolidated sales revenue of 2016 amounted to NTD70.5 billion, increased by NTD3.45 billion, or 5.15% growth compared to that of 2015. The consolidated operating expenses were NTD2.02 billion, while the consolidated non-operating loss was NTD184.05 million. The consolidated net income was reported at NTD2.22 billion with earnings per share (EPS) of NTD2.92.

b) Business Achievement

We produce outstanding results in 2016 evidenced by record high new contracts, backlog and consolidate revenue of NTD85.6 billion, NTD203.2 billion and NTD 70.5 billion respectively. Major new contracts awarded in 2016 include Chungli Sewerage System (capacity: 156,800 CMD) BOT Project of Taoyuan City Government, Saudi Kayan Ethylene Cracking Furnace No.10 EPC Project (KSA), TPC Dah-Tarn Emergency GTG Project, Dahej LNG Receiving Terminal Phase IIIB-1 Expansion Project(India), Kaohsiung Fengshan Shi Wastewater Reclamation (capacity: 45,000 CMD BTO Project of Kaohsiung City Government, and FPC-Tx Offsite Pipe Rack Modularization & Erection Project (USA).

C) Innovation and R&D

In 2016, CTCI’s Innovation R&D Center embraces small-volume and large-variety production based on Industry 4.0 concept, to integrate into EPC innovative management, implement automatic, intelligent management of department operations, construct Tag Platform, improve schedule control and agile reaction. The goal is to ensure are fined project management and enhance competitiveness. We keep on iEPC intelligent development to concatenate engineering, procurement, construction and commissioning data system; therefore all information will be integrated through Tag Platform. All traditional procedures and the engineering information management are going to shift the manner from batch processing to agile reaction. The development of iEPC will not only enhance our competitiveness but to further differentiate ourselves from competitors. For design automation, we have developed auto-routing, S3D intelligent tube automation, power wiring automation, pump/instrument type selection, etc., to increase CTCI design capability and quality. Also, we strengthen procurement supply chain and establish CAP (CTCI Alliance Partner) to shorten the purchase schedule and the implementation of procurement. In terms of construction, site mobile management, mobile device applications at major project sites, site equipment management, HSE mobile system have been continuously installed to improve site operation efficiency and reduce incidents at job sites. We had implemented the Smart Scaffolding design system for site scaffolding design and management; applying QR Code/RFID to assist site equipment control and warehousing management that will enhance construction and management capabilities. For technology expertise, we have completed the research of Bow-Tie/ ALARP analysis, the dynamic calculation of Blowdown, the risk assessment and analysis of lightning protection, the analysis of No-load Tap Changer (NLTC) from Step-up Transformer in Power Plant, the analysis and application on the swelling vitreous pearly particle of pitchstone, the research of European

2

code tank design technology, etc. Through industry–university cooperation and self-developed applications, we update and integrate design specification, and modify the internal design guidelines and existing engineering software that improve and enhance quality, speed, and accuracy in EPC project implementation.

B. Summary of 2017 Business Plan

Major planned developments of 2017 consist of completing the design of smart engineering as soon as possible, forging end-to-end EPC lump sum service, as well as leveraging high-tech products such as robots to differentiate ourselves from the competitors, widen our lead and satisfy our customers with optimized engineering services, in order to become irreplaceable partners. Another important task is to precisely implement CTCI's internal corporate culture: Professionalism, Integrity, Teamwork and Innovation so that it takes root. Corporate culture is competitiveness that others cannot copy. If all the employees locally and overseas in the Group can relate to and materialize what the corporate culture represents through their behavior, we can then stimulate a vast strength internally. There are actions to be taken tactically and strategically: First of all, we tactically need to strengthen the soft power of the CTCI brand by tying up the corporate culture and our employees' personal behavior to demonstrate and deliver the image of "Most Reliable" all the time. Secondly, we have to reinforce CTCI's hard power by introducing robots and VR (virtual reality) to engineering applications to provide smart engineering service. Thirdly, we shall aggressively step into the US market. Lead only by one senior executive from headquarters, a senior local management team are fully dedicated to CTCI Americas operation, who are professional and capable to deal local clients efficiently and execute EPC project confidently and profitably in U.S. Being an international engineering company, we have to elevate the communication capability, and request employees be capable to communicate with others in English. Strategically, we continue to cultivate talents internally, including inter-BU (business unit) talent rotation and development. In the meantime, we need to review our manpower/resources of the Group and to get a synergy in reaching the goal of 2017.

C. Development Blueprint in the future Given the global competition, technical upgrading is not the only factor for success. We have to catch and response market trend timely and foresee any potentials in the future. CTCI has various track records in the Middle East, Southeast Asia and the U.S., including several projects with amount over USD 1 billion each. For the market of Commonwealth of Independent States (CIS), we will collaborate with Chinese enterprises along with the "One Belt, One Road" initiative. Besides, we will continue to trace the business opportunities in emerging markets such as power plants, transport infrastructure and the energy related. As a result of cheap cost of shale gas in the U.S., the landscape of global energy and petrochemical have changed dramatically. That is, the U.S. is going to replace the lead of OECD OPEC for investment in new capacity of petrochemical plant. We made a successful entrance into the U.S. market evidenced by awarded detailed design for LDPE and EO/EG plants last year. Furthermore, we will continue expand our exposure actively in the U.S. by adopting the strategy of "Taiwan plus U.S.". Since its establishment, CTCI has grown gloriously as contributed by the incessant efforts of competent management team for years. We have become the leader of engineering company in Taiwan. To sustain such remarkable growth in the future, we shall continue to be well-positioned, in line with market trend, to cope with any new challenge. In response to the fast change of market, we have completed several organization restructurings before, by which we can manage company efficiently. In 2016, we just completed the biggest organization restructuring, based on the corporate culture of "Professionalism, Integrity, Teamwork, and Innovation". It was motivated by

3

the brand positioning of "Most Reliable" for all employees to take duties proactively, pursuit opportunities and going forward in line with the Group's globalization. We will strive to provide comprehensive services that are faster, better and more competitive to meet our clients' requirements on a sustainable basis which ensures another summit of CTCI Group in the future.

Sincerely,

John T. Yu Chairman & CEO

4

II. Company Profile 2.1 Date of Incorporation: April 6, 1979 2.2 Company History

Year Milestones

2016.04 Chairman Yu honored by Harvard Business Review as one of the TOP 50 Best Performing CEOs in Taiwan.

2016.04 CTCI Corporation, Advanced Control & Systems Inc., and KD Holding Corporation Evaluated as Top 5% in the “2015 Corporate Governance Evaluation System”.

2016.05 In terms of the overall ranking in the Top 650 Service Enterprises by CommonWealth Magazine 2016, CTCI ranked as 22nd retained Top 1 spot in the contractor sector for years in a row. It also ranked as 32th in Top 50 Most Profitable Companies (net profit after tax).

2016.08 CTCI and KD Holding ranked the 28th and 3rd in the categories of “large enterprise” and “mid-size enterprise” respectively in Corporate Social Responsibility” by CommonWealth Magazine in 2016.

2016.08 CTCI group ranked the 92nd among “The International Design Firms”, the 100th among “The International Contractors”, the 147th among “The Global Design Firms”, and the 139th among “The Global Contractors” in the 2016 ENR Rankings.

2016.09 From the latest evaluation results of the Dow Jones Sustainability Index (DJSI), CTCI was selected for Emerging Markets Index Membership with excellent performance and, therefore, became a pioneer enterprise in the field of Engineering & Construction Industry in Taiwan.

2016.10 CTCI has been recognized by SABIC for its accumulated record of 22.3 million safe work hours (without a lost time accident) during the construction of Saudi Methacrylates Company (SAMAC) MMA/PMMA Project and Ibn Rushd Aromatics/U&O/PTA DBN Project. The award was held in October 2016. CTCI Group Chairman John T. Yu received the honor from Saudi Prince and Chairman of SABIC, Saud bin Abdullah bin Thunayan Al-Saud, for the excellent achievement in safety during the projects execution.

2016.10 CPC Talin #11 DHDS Project won the Excellence in Design and Construction Awards of “The 16th Public Construction Golden Quality Award”.

2016.11 CTCI Won the 16th Public Construction Golden Quality Award for CPC Talin #11 DHDS Project.

2016.11 CTCI was granted the honors of “Taiwan Most Admired Company” by CommonWealth Magazine in 2016.

2016.11 CTCI and KD Holding recognized by the Taiwan Institute for Sustainable Energy with “Golden Award” and “Bronze Award” of services industry respectively under the Taiwan Top 50 Corporate Sustainability Report Award, and was also granted the honors of “Transparency and Integrity Awards”. Moreover, CTCI was granted the honors of “Growth through Innovation Awards”.

5

Chairman

Management Strategy

Committee

President

Audit Dept.

Board of Directors

Secretariat of the Board

Infrastructure, Environment

& Power Business Operations

(IEPBO)

Business DevelopmentDivision

Infrastructure Division

Power & EnvironmentResources Division

Vice Chairman

Executive Management

Operations

(EMO)

Hydrocarbon Business

Operations (HBO)

EPC Operations

(EPCO)

Procurement Division

Construction Division

Construction Logistics Dept.

Construction Operation

Dept.

Project Engineering Manager Dept.

Logistics Dept.

Subcontracting

Dept.

Purchasing

Dept.

Project Procurement Management Dept.

Innovation R&D Center

QHSE Division

Overseas

Subsidiaries

Domestic

Subsidiaries

HSE ManagementDept.

Quality ManagementDept.

Plant Maintenance Business Operations (PMBO)

Marketing & SalesDepartment

Maintenance Department

ReliabilityDepartment

Engineering Management

Division

Engineering Division

Civil & Building

Engineering Dept.

Mechanical & Equipment

Engineering Dept

Instrumentation & Control

System EngineeringDept.

Piping EngineeringDept.

Electrical Engineering Dept.

Process EngineeringDept.

Plant CommissioningDept.

Marketing & SalesDivision

Marketing & Sales

Dept. II(SEA, India , Australia)

Marketing & Sales

Dept. III (ME, Africa)

Project Division Ⅰ(Taiwan, China)

Marketing & Sales

Dept. IV

Marketing & Sales

Dept. I (Taiwan)

Project Division Ⅱ(S.E. Asia, India)

Proposal & Estimating

Division

Technology

Development Division

Project Division Ⅲ(M.E. )

Project Service

Division

LNG Project Division

Managing Director

of the Board

Regional Heads

Administration & PR Division

Corporate Administration Dept.

Human ResourcesDept.

AGS & PR Office Dept.

Legal Dept.

InvestmentRelation Office

F/A & Strategic Planning Division

Finance Dept.

Accounting Dept.

Strategy and Business Development Dept.

Legal and Compliance Division

BrandManagement Dept.

Human ResourcesDivision

Contract Management

Dept.

Project SiteAdministration Dept.

Infrastructure Dept. I

Infrastructure Dept. II

Infrastructure Dept. Ⅲ

Power & EnvironmentResources Dept. Ⅰ

Power & EnvironmentResources Dept. Ⅱ

Power & EnvironmentResources Dept. Ⅲ

Project Control Dept.

Estimating Dept.

Power & EnvironmentResources

Marketing & Sales Dept.

Infrastructure

Marketing & Sales

Dept.

Technology

Development

Dept.

Audit

Committee

Corporate Governance Committee

Remuneration Committee

IT Division

IT Dept. II

IT Dept. I

Nomination

Committee

III. Corporate Governance Report 3.1 Organization 3.1.1 Organization Chart

6

3.1.2 Operations and functions of the various departments

Department Operations & Functions

Immediate Board of Directors

Secretariat of The Board

Responsible for conducting the operations related to the boards of directors, shareholders meetings, commissions and employee stock warrant, stock affairs and M.O.P.S matters of the various member companies

Auditing Office Responsible for inspecting and reviewing defects in the internal control systems for the Company and its subsidiaries’ business continuity, providing timely recommendations for improvements to reasonably ensure the sustained operating effectiveness of the systems

Immediate President

QHSE Division Responsible for establishing the Company’s quality management system, guiding various projects to establish the quality activity documents, leading the quality auditing operation of various permanent departments and projects, and researching various corrective actions against quality

IT Division Responsible for defining the company’s information policy, planning and promoting the information systems, supervising the information dept. affairs of various affiliates

Innovation R&D Center

Responsible for developing new products, innovating procedures and developing new operating technology

Executive Management Operations (EMO)

Legal Dept. Responsible for handling disputes, litigation, arbitration, non-litigation

Contract Management Dept.

Responsible for contract reviewing

Investment Relation Office

Responsible for liaising with shareholders, corporate investors and the media, and providing investors with timely and correct information about the company’s operation

Corporate Administration Dept.

Responsible for auditing the project cost, releasing commodity price information and helping the cost-related system development

Finance Dept. Responsible for supporting the project’s achievement of financial objectives, planning and executing important financial tasks and controlling the project risk to increase the company’s earnings

Accounting Dept. Responsible for verifying the company’s income, providing the actual accounting information in a timely manner, and well-founding various financial management systems

Strategy and Business Development Dept.

Responsible for corporate strategy and developing new business

Human Resources Dept.

Responsible for human resource’s strategies and management, providing the talents corporate needs to meet corporate’s mission

AGS & PR Office Dept.

Responsible for managing the general affairs, administration, and external public relations to ensure corporate administration running well and keep good relations with external customers and medias.

7


Project Site Administration Dept.

Responsible for the administrative general affairs of overseas and domestic construction project sites to ensure the operation of administrative management at the site

Brand Management Dept.

Responsible for Corporate brand strategy and external communication

Hydrocarbon Business Operations (HBO)

Marketing & Sales Division

Responsible for developing the market, collecting business information, establishing cooperative relations, striving for bidding and winning opportunities, analyzing competitors’ status, planning strategic alliances, preparing qualification proposals and reviewing & suggesting tender documentation, participating in tender opening, negotiating for contracts and maintaining after-sales service

Project Division I Responsible for executing various projects in Taiwan and Mainland China

Project Division II Responsible for executing various projects in South East Asia and India

Project Division III Responsible for executing various projects in the Middle East

LNG Project Division

Responsible for developing and integrating LNG projects related business

Project Service Division

Responsible for controlling the various information about refining and petro-chemical projects, and achieving the objectives together with the projects

Proposal & Estimating Division

Responsible for defining the quotation strategies and work plans, organizing the quotation taskforce, drafting the project execution strategies and development execution plan, executing the project risk assessment, preparing technical and business tender documentation, clarifying and negotiating after tender submission, and preparing case closure report of the quotation

Technology Development Division

Responsible for collecting refining and petro-chemical production process technical information, providing technical advice, assisting projects/business to seek jobs, assisting the project planning test run taskforce of the Business Dept., executing the test run to complete projects as scheduled

Infrastructure, Environment & Power Business Operations (IEPBO)

Business Development Division

Responsible for developing the market, collecting business information, establishing cooperative relations, striving for bidding and winning opportunities, analyzing competitors’ status, planning strategic alliances, preparing qualification proposals and reviewing & suggesting tender documentation, participating in tender opening, negotiating for contracts and maintaining after-sale service

Infrastructure Division

Responsible for executing the projects and developing the business about MRT, HSR, light rail, steel plant, air separation plant, desulfuration and De-NOx

Power & Environment Resources Division

Responsible for executing the projects and developing the business about gas power plants, cogeneration plants, coal-fired power plants, incinerators, sewage and pure water treatment plants, water recycling and seawater desalination plants

8


Technology Development Division

Responsible for collecting infrastructure and energy & environment production process technical information, providing technical advice, assisting projects/business to seek jobs, assisting the project planning test run taskforce of the Business Dept., executing the test run to complete projects as scheduled

EPC Operations

Engineering Management Division

Responsible for executing quality, HSE and cost control of project engineering management

Engineering Division

Responsible for coordinating and integrating the human resources, quotation, execution of projects, and multi-departmental technology of various design departments and Hydrocarbon projects’ commissioning, also planning and executing the training programs for various projects

Procurement Division

Responsible for the procurement, inspection and transportation business, and supervising and confirming the quality/SHE requirements about all of the procurement documents

Construction Division

Responsible for supporting interaction of various business divisions and subsidiaries, and supervising the compliance of various quotations and project site operations with the company’s requirement

Plant Maintenance Business Operations

Responsible for hydrocarbon plants maintenance business

9

3.2 Directors and Management Team 3.2.1 Directors

April 30th, 2017

Title Nationality Name Gender Date

Elected Term

(Years)

Date First Elected (Rep. of juridical person)

Shareholding when Elected

Current Shareholding

(Rep. of juridical person)

Spouse & Minor

Shareholding

Shareholding by Nominee

Arrangement Experience (Education)

Other Position

Executives, Directors or Supervisors who

are spouses or within two degrees of kinship

Shares % Shares % Shares % Shares % Title Name Relation

Chairman R.O.C.

John T. Yu (Rep. of CTCI Development Corporation)

Male Jun. 26,

2014 3

Feb. 8, 2002

(Feb. 9, 1999)

912,170 0.12 912,170

(1,103,471) 0.12

(0.14) 2,000,000 0.26 0 0

-PMD 61, Harvard Business School, USA -B.S., Electrical Engineering, National Taiwan University -Senior Vice President / Executive Vice President / President, CTCI Corporation

Note 1 - - -

Vice Chairman

R.O.C.

John H. Lin (Rep. of CTCI Investment

Corporation)

Male Jun. 26,

2014 3

Feb. 8, 2002

(Jun. 25, 2002)

344,436 0.05 344,436

(300,355) 0.05

(0.04) 450,000 0.06 0 0

-MBA, EMBA program in International Business Management, National Taiwan University -B.S., Mechanical Engineering, National Cheng Kung University - Senior Vice President / Executive Vice President / President, CTCI Corporation

Note 2 - - -

Managing Director

R.O.C.

Andy Sheu (Rep. of Sino

Environmental Services

Corporation)

Male Jun. 26,

2014 3

Jun. 23, 2006

(Jun. 26, 2014)

1,028 0.00 1,028

(1,031,281) 0.00

(0.14) 1,966 0.00 0 0

-MBA, EMBA Program in International Business Management, National Taiwan University -B.S., Power Mechanical Engineering, National Tsing-Hua University -Managing Director, CTCI (Thailand) Co., Ltd. - Senior Vice President / Executive Vice President / President, CTCI Corporation

Note 3 - - -

Independent Director

R.O.C. Johnny Shih Male Jun. 26,

2014 3

Feb. 8, 2002

(Note 4)

0 0 0 0 0 0 0 0

-Columbia University, USA. Master in Computer Science and Business Administration -Vice Chairman, Far eastern International Bank

Note 5 - - -


R.O.C. Jack Huang Male Jun. 26,

2014 3

Jun. 26, 2014

0 0 0 0 0 0 0 0 S.J.D., Harvard University Note 6 - - -

10


R.O.C. Frank Fan Male Jun. 26,

2014 3

Jun. 26, 2014

0 0 0 0 0 0 0 0

-M.S., Institute of traffic and Transportation, National Chiao Tung University -Minister without Portfolio & Chairperson of Public Construction Commission, Executive Yuan

- - - -

Director R.O.C. Quintin Wu Male Jun. 26,

2014 3

Jun. 23, 2006

0 0 0 0 0 0 0 0 -Chairman, USI Corporation Note 7 - - -

Director R.O.C. Yancey Hai Male Jun. 26,

2014 3

Feb. 8, 2002

0 0 0 0 0 0 0 0

-MA, the University of Texas at Dallas -Country Manager, G.E. Capital -Vice President, Citibank, Taipei Branch -CEO, Delta Electronics Foundation

-Chairman, Delta Electronics Inc.

- - -

Director R.O.C. Wenent Pan Male Jun. 26,

2014 3

Apr. 1, 2012

0 0 0 0 0 0 0 0

-M.S. & Ph.D., Chemical Engineering, University of Wyoming, USA -President & Chairman, CPC Corporation -Chairman & CEO, Kuo Kuang Power Co.

-Chairman, CTCI Foundation -Chairman, Gintech Energy Corporation

- - -

Director R.O.C. Bing Shen Male Jun. 26,

2014 3

Mar. 26, 1999

(Note 8)

0 0 0 0 0 0 0 0

-MBA, Harvard Business School -Executive Director, Morgan Stanley Group -Executive Vice President, China Development Industrial Bank -President, CDIB & Partners Investment Holding Corp.

-Independent Director, Far Eastern International Bank -Independent Director, Far Eastern New Century Corporation -Independent Director, ELITE MATERIAL CO., LTD.

- - -

Director R.O.C. Teng-Yaw Yu

(Rep. of CTCI Foundation)

Male Jun. 26,

2014 3

Apr. 6, 1979

(Jun. 26, 2014)

60,862,051 7.97 60,862,051

(36,650) 7.97

(0.00) 818 0.00 0 0

-MBA, University of Leicester, UK -CEO, Taiwan Green Productivity Foundation

- CEO,CTCI Foundation

- - -

Director R.O.C.

Michael Yang (Rep. of Crown

Asia 2 Investment

Limited)

Male Jun. 26,

2014 3

Jun. 22, 2011

(Mar. 7, 2016)

500 0.00 500 (0)

0.00 (0)

347,097 0.05 0 0

-EMBA, Business Administration, National Taiwan University of Science and Technology -M.S., Mechanical Engineering, National Taiwan University -B.S., Mechanical engineering, Tatung University - Senior Vice President/ Executive Vice President, CTCI Corporation

Note 9 - - -

11

Note 1: Chairman, CTCI Corporation / Chairman, CTCI Development Corporation /Director, CTCI Overseas Corp., Ltd. / Director, CTCI Education Foundation / Managing Director, CTCI Foundation / Director, Gintech Energy Corporation / Director, Utech Solar Co., Ltd. / Supervisor, China Steel Chemical Corporation / Director, Taiwan Cement Co., Ltd. / Director, TSRC Corporation Note 2: Vice Chairman, CTCI Corporation / Chairman, KD Holding Corporation / Vice Chairman, CTCI Overseas Corp., Ltd. / Chairman, CTCI Investment Corporation / Director, CTCI Education Foundation Note 3: Managing Director, CTCI Corporation / Chairman, CTCI Overseas (BVI) Corporation / Director, CTCI Overseas Corp., Ltd. / Chairman, CTCI Americas, Inc. Note4: Mr. Johnny Shih is not the director or supervisor of the Company during the period from Jun. 15, 2005 to Jun. 25, 2014.

Note5: Vice Chairman, Far Eastern New Century Corporation / Vice Chairman, Oriental Union Chemical Corporation / Chairman, Everest Textile Company Limited / Director, Asia Cement Corporation Note 6: Partner, Jones Day Taipei Office / Independent director, Taiwan Mobile Co., Ltd / Independent director, WPG Holdings Limited / Independent director, Systex Corporation Note 7:

Chairman, USI Corporation / Chairman, China General Plastics Corporation / Chairman, Asia Polymer Corporation / Chairman, Taita Chemical Company, Limited / Chairman, Acme Electronics Corporation

Note8: Mr. Bing Shen is not the director or supervisor of the Company during these periods: Nov. 28, 2001 ~ Jun. 13, 2005 / May 16, 2006 ~ Jun. 22, 2006 / May 11, 2011 ~ Jun. 21, 2011. Note9: Director & President, CTCI Corporation / Director, KD Holding Corporation / Chairman, CTCI Overseas Corp., Ltd. / Chairman, Crown Asia 2 Investment Limited / Director, CTCI Education Foundation / Director, CTCI Americas, Inc. / Director, MIE Industrial Sdn. Bhd.

12

Major shareholders of the institutional shareholders April 30th, 2017

Name of institutional shareholders Major shareholders of the institutional shareholders

CTCI Development Corporation CTCI Corporation (100%)

CTCI Investment Corporation CTCI Corporation (100%)

Sino Environmental Services Corporation KD Holding Corporation (93.15%), A-Lang, Chang (0.94%), Tsung-Chih, Tseng (0.29%), Wei-Hsiung, Chan (0.29%), Ching-Yao, Teng (0.23%), Ssu-Jung, Tsai (0.20%), Shu-Hui , Wu (0.20%), Yu-Ling, Teng (0.18%), Sen-Ming, Lu (0.17%), Hui-Ching, Lin (0.15%)

Crown Asia 2 Investment Limited CTCI Development Corporation (100%)

CTCI Foundation N/A

Major shareholders of the major shareholders that are juridical persons

April 30th, 2017

Name of juridical persons Major shareholders of the juridical persons

CTCI Corporation

CTBC BANK CO., LTD.(CTCI Corporation Employee Stock Ownership Trust)(9.23%), CTCI Foundation(7.97%), Fubon Life Insurance Co., Ltd.(6.96%), Blackrock Global Funds-Asian Growth Leaders(3.78%), American Funds Developing World Growth and Income Fund(2.18%), Eastspring Investments - Emerging Asia Equity Fund(2.16%), Chunghwa Post Co., Ltd.(2.00%), USI Corporation(1.99%), Shin Kong Life Insurance Co., Ltd(1.95%), Asia Polymer Corporation(1.90%)

KD Holding Corporation

CTCI Corporation(57.58%), Fubon Life Insurance Co., Ltd.(6.84%), Nan Shan Life Insurance Co., Ltd.(3.26%), Parkwell Investment Limited(1.59%), Julius Baer Multipartner(0.72%), Fubon Financial Holding Venture Capital Corp.(0.70%), Wang Ze Hang(0.62%), Taiwan Life Insurance Co, Ltd.(0.51%), CTCI Development Corporation (0.37%), Wang Sheng song(0.36%)

CTCI Development Corporation CTCI Corporation (100%)

13

Professional qualifications and independence analysis of directors and supervisors April 30th, 2017

Criteria Name

Meet 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

Have 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

John T. Yu - - V V V V V V 0 John H. Lin - - V V V V V V 0 Andy Sheu - - V V V V V V 0

Johnny Shih - - V V V V V V V V V V V 0

Jack Huang - V V V V V V V V V V V V 3

Frank Fan - - V V V V V V V V V V V 0

Quintin Wu - - V V V V V V V V V V V 0

Yancey Hai - - V V V V V V V V V V V 1

Wenent Pan - - V V V V V V V V V 2

Bing Shen - - V V V V V V V V V V V 3

Teng-Yaw Yu - - V V V V V V V V V 0

Michael Yang - - V V V V V V 0

1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company’s affiliates. The same does not apply, however, in cases where the person is an independent director of the Company, its parent company,

or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount

of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking

in the top five in holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business relationship with the Company. 7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal,

financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, provided that this restriction does not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies Whose Stock is Listed on the TWSE or Traded on the GTSM.

8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company. 9. Not been a person of any conditions defined in Article 30 of the Company Law. 10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

14

3.2.2 Management Team April 30th, 2017

Title Nationality Name Gender Date

Effective

Shareholding Spouse & Minor

Shareholding


Arrangement Experience(Education) Other Position

Managers who are Spouses or Within

Two Degrees of Kinship

Shares % Shares % Shares % Title Name Relation

President R.O.C. Michael

Yang Male

Jun. 26 , 2014

0 0 357,097 0.05 0 0

-EMBA, Business Administration, National Taiwan University of Science and Technology -M.S., Mechanical Engineering, National Taiwan University -B.S., Mechanical engineering, Tatung University -Vice President/ Senior Vice President/ Executive Vice President, CTCI Corporation

-Chairman, CTCI Overseas Corp., Ltd. -Director, KD Holding Corporation -Chairman, Crown Asia 2 Investment Limited -Director, CTCI Education Foundation -Director, CTCI Americas, Inc. -Director, MIE Industrial Sdn. Bhd.

- - -

Executive Vice

President R.O.C.

Mark W. H. Yang

Male Jan. 1 , 2010

208,732 0.03 281,205 0.04 0 0

-MBA, Global EMBA of National Chengchi University -Mechanical Engineering, National Taipei Institute of Technology -Vice President/ Senior Vice President, CTCI Corporation

-Director, CTCI Beijing Co., Ltd. -Director, CTCI Americas, Inc. -Chairman, CINDA Engineering & Construction Private Limited

- - -

Executive Vice

President R.O.C.

M. H. Wang

Male Jan. 1 , 2013

0 0 239,431 0.03 0 0

-MBA, Chulalongkorn University, Thailand -B.S., Civil Engineering, Feng-Chia University -Vice President/ Senior Vice President, CTCI Corporation -Deputy Managing Director/ Managing Director, CTCI (Thailand) Co., Ltd.

-Director, CTCI Chemicals Corporation -Director, CTCI Americas, Inc. -Chairman, CTCI Arabia Ltd. -Director, CTCI Machinery Corporation -Director, CCJV P1 Engineering & Construction Sdn. Bhd.

- - -

15

Executive Vice

President R.O.C.

Pao-Yao Pan

Male Jan. 1 , 2006

12,628 0.00 326,000 0.04 0 0

-M.S., Management, National Sun Yat-sen University -B.S., Mechanical Engineering, Tatung University - Vice President/ Senior Vice President, CTCI Corporation

-Chairman, CTCI (Thailand) Co., Ltd. -Vice Chairman, CIMAS Engineering Company Limited -Director, CTCI Americas, Inc. -Director, Superiority (Thailand) Co., Ltd. -Chairman, CTCI&HEC Water Business Corporation. -Director, Metro Consulting Service Corporation

- - -

Executive Vice

President R.O.C.

Ming-Cheng Hsiao

Male Jan. 1 , 2006

2,000 0.00 80,000 0.01 0 0

-Ph.D., Chemical Engineering, National Tsin Hua University -MBA, EMBA Program in Accounting, National Taiwan University -M.S., Chemical Engineering, National Tsin Hua University -B.S., Chemical Engineering Tamkang University - Senior Vice President, CTCI Corporation

-Chairman, CTCI E&C Sdn. Bhd. -Director, KD Holding Corporation -Director, CTCI Americas, Inc. -Chairman, Universal Engineering (BVI) Corp. -Chairman, CIPEC Construction Inc. -Director, Crown Asia 2 Investment Limited -Chairman, Accuracy International Inc. -Director, Powertec Energy Corporation -Director, Unisurpass Technology Co.,Ltd -Director, Unimighty Co., Ltd.

- - -

Senior Vice

President R.O.C.

Tien-Nan Pan

(Note 1) Male

Jan. 1 , 2005

127,000 0.02 437,863 0.06 0 0

-MBA, EMBA Program in Finance, National Taiwan University -B.S., Business Administration, National Taiwan University -Vice President, CTCI Corporation

None - - -

Senior Vice

President R.O.C.

Ching-Lin Hsu

(Note 2) Male

Jan. 1 , 2012

278,000 0.04 300,559 0.04 0 0

-B.S., Mechanical Engineering, Tam-Kang University -Vice President, CTCI Corporation -President, CTCI Beijing Co., Ltd.

None - - -

16

Senior Vice

President R.O.C.

Andrew Tsai

Male Jan. 1 , 2013

30,250 0.00 230,575 0.03 0 0

-Ph.D., Business Administration, Macau University of Science and Technology -M.S., Business Administration, Macau University of Science and Technology -Executives Program, Graduate School of Business Administration, NCCU -B.S., Feng Chia University -President, E&C Engineering Corporation -Chairman, CTCI Shanghai Co., Ltd.

-Supervisor, CTCI Smart Engineering Corporation -Supervisor, Level Biotechnology Inc.

- - -

Senior Vice

President R.O.C.

Jung-Yu Han

Male Jan. 1 , 2016

2,604 0.00 225,000 0.03 0 0

-B.S., National Taipei University of Technology -Senior General Manager/ Vice President, CTCI Corporation

-Director, HD Resource Management Corporation -Director, CTCI Machinery Corporation

- - -

Senior Vice

President R.O.C.

Chen-San Hu

(Note 3) Male

Jan. 1 , 2016

100,116 0.01 400,000 0.05 0 0

-B.S., Department of Naval Architecture, National Kaohsiung Marine University -Senior General Manager/Vice President, CTCI Corporation

-Chairman, CTCI Machinery Corporation -Director, Pan Asia Corporation

- - -

Senior Vice

President R.O.C. Todd Chen Male

Jan. 1 , 2016

0 0 93,099 0.01 0 0

-M.S., Mechanical Engineering, National Chiao Tung University -B.S., Mechanical Engineering, National Chiao Tung University -Senior General Manager/ Vice President, CTCI Corporation

-Director, Sino Environmental Services Corporation -Director, CTCI Chemicals Corporation

- - -

Senior Vice

President & CFO

R.O.C. Patrick Lin Male Jan. 1 , 2017

43,280 0.01 240,000 0.03 0 0

-MBA, EMBA Program in Finance, National Taiwan University -MBA, University of Massachusetts-Boston, USA -B.S., Business Administration, Tamkang University -Director, Financial Division, Coretronic Corporation -Manager, Financial Division, Powerchip Technology Corporation -Director, Societe Generale Corporate & Investment Banking

-Director, CTCI Investment Corporation -Director, SINOGAL - Waste Services Co., Ltd. -Supervisor, Yuan Ding Resources Corporation -Supervisor, Xiang Ding Environmental Consultant (shanghai) Co., Ltd. -President, CTCI Development Corporation -President, CTCI Investment Corporation

- - -

17

Senior Vice

President R.O.C. T. C. Huang Male

Mar. 17 , 2017

246,273 0.03 0 0 0 0

-Executive Master of Business Administration, National Sun Yat-Sen University -B.S., Mechanical engineering, Chinese Culture University -Chairman/President, CTCI Machinery Corporation

-Director, BORETECH Resource Recovery Engineering CO., LTD (Cayman)

- - -

Vice President

R.O.C. Teh-Ming

Tao Male

Jan. 1 , 2006

316,064 0.04 0 0 0 0

-Ph.D., Chemical Engineering, TAMU, USA -M.S., Chemical Engineering, TAMU, USA -B.S., Chemistry, National Tsing-Hua University, Taiwan -Senior Research Engineer, Dowell Schlumberger (USA) SR-RE -CEO, CTCI Foundation -Project Manager, CTCI Foundation -Director, Industrial Safety and Health, CPC Corporation

-Director, CTCI Investment Corporation

- - -

Vice President

R.O.C. Steve Jean Male Jan. 1 , 2011

1,668 0.00 169,000 0.02 0 0

-EMBA, Executive Master of Business Administration of National Cheng Chi University -M.S., Mechanical Engineering, National Central University -B.S., Civil Engineering , National Taipei Institute of Technology -General Director, CIMAS Engineering Co., Ltd.

None - - -

Vice President

R.O.C. M. G. Lee Male Jan. 1 , 2013

0 0 123,029 0.02 0 0

-M.S., Management, National Taiwan University of Science and Technology -B.S., Ming Chi University of Technology -Senior General Manager, CTCI Corporation

None - - -

Vice President

R.O.C. Po-Chien

Wang Male

Jan. 1 , 2013

135,144 0.02 0 0 0 0

-LL.M., Legal Studies, University of Illinois Springfield -LL.B., Department of Law, Soochow University -Senior General Manager, CTCI Corporation

-Director, CTCI Overseas (BVI) Corporation -Supervisor, CTCI&HEC Water Business Corporation. -Chairman, CTCI Singapore PTE. LTD.

- - -

18

Vice President

R.O.C. Ching-Hsiang

Tseng Male

Jan. 1 , 2014

244,904 0.03 30,000 0.00 0 0

-B.S., Civil Engineering, National Cheng Kung University -Senior General Manager, CTCI Corporation

None - - -

Vice President

R.O.C. Shen-Peng

Liao Male

Apr. 1 , 2014

10,000 0.00 166,289 0.02 0 0

-M.S., Mechanical Engineering, National Taiwan University of Science and Technology -Mechanical Engineering, St. John's University of Technology -Executive Vice President, JDEC Corporation

-Director, CTCI Beijing Co., Ltd. - - -

Vice President

R.O.C. Tsai-Ming

Wang Male

Apr. 1 , 2014

0 0 316,767 0.04 0 0

-B.S., Mechanical Engineering, Tamkang University -Chemical Engineering, National Taipei Institute of Technology -Senior General Manager, CTCI Corporation

-Director, CINDA Engineering & Construction Private Limited

- - -

Vice President

R.O.C. Min-Li Lee Male Apr. 1 , 2014

95,156 0.01 18,000 0.00 0 0

-M.S., Chemical Engineering, National Central University -B.S., Chemical Engineering, Chung-Yuan Christian University -Senior General Manager, CTCI Corporation

-Supervisor, Fortune Energy Corporation

- - -

Vice President

R.O.C. Jing-Shing

Wu Male

Apr. 1 , 2014

250,000 0.03 0 0 0 0

-Executive Master of Business Administration, National Sun Yat-Sen University -Chemical Engineering, National Taipei University of Technology -Senior General Manager, CTCI Corporation

None - - -

Vice President

R.O.C. J.H. Chen Male Jan. 5 , 2015

30,000 0.00 0 0 0 0

-EMBA, Executive Master of Business Administration of National Central University -B.A., Economics, Soochow University, Taiwan -VP, Human Resources Center, Integrated Business Services Center, Coretronic Corporation -CHO, WPG Holdings

None - - -

19

Vice President

R.O.C. Y. S. Liao Male Mar. 12,

2015 0 0 98,000 0.01 0 0

-B.S. in Nuclear Engineering, National Tsing-Hua University -President, E&C Engineering Corporation

-Director, CTCI Beijing Co., Ltd. -Director, CTCI&HEC Water Business Corporation. -Director, Blue Whale Water Technology Co., Ltd.

- - -

Vice President

R.O.C. SH Lin Male Jun. 1, 2017

5,000 0.00 166,649 0.02 0 0

-EMBA, National Chengchi University -B.S., Accounting, Soochow University -Senior General Manager, CTCI Corporation

-Supervisor, CDIB Partners Investment Holding Corp. -Supervisor, G.D. Development Corporation

- - -

Vice President

R.O.C. Ting-Kuo Li Male Jun. 1, 2017

92,751 0.01 0 0 0 0

-B.S., Mechanical engineering, Tatung University -Senior General Manager, CTCI Corporation

-Director, CTCI Machinery Corporation

- - -

Accounting Officer

R.O.C. Ai Cheng

Ho Male

Mar. 18, 2017

58,225 0.01 0 0 0 0

-MBA, EMBA Program in Finance, National Taiwan University -MBA in Finance, West Coast University, California, USA -B.S., Geography, Chinese Culture University -General Manager, CTCI Corporation

-Supervisor, CTCI Beijing Co., Ltd. -Supervisor, Century Ahead Ltd. -Supervisor, CTCI Trading Shanghai Co., Ltd.

- - -

Note1: SVP Tien-Nan Pan is dismissed on Jan. 4, 2016. Note2: SVP Ching-Lin Hsu is dismissed on Oct. 1, 2016. Note3: SVP Chen-San Hu is dismissed on Mar. 13, 2017.

20

3.3 Remuneration of Directors, President, and Vice President 3.3.1 Remuneration of Directors

December 31st, 2016; Unit: NT$ thousands; thousand shares

Title Name

Remuneration Ratio of total remuneration

(A+B+C+D) to net income (%)

Relevant remuneration received by directors who are also employees Ratio of total compensation

(A+B+C+D+E+F+G) to net income(%)

Compensation paid to directors from an invested company other than

the company’s subsidiary

Base Compensation (A) Pension Fund(B) Directors’

Compensation (C) Allowances(D) Salary, Bonuses, and Allowances (E)

Pension Fund(F) (Note3)

Employees’ Compensation (G)

CTCI All

Consolidated Entities

CTCI All


CTCI All


CTCI All


CTCI All


CTCI All


CTCI All


CTCI All

Consolidated Entities CTCI

All Consolidated

Entities Cash Stock Cash Stock

Chairman John T. Yu (Note1) 500 537 0 0 0 0 14,441 16,283 0.67 0.76 0 0 0 0 0 0 0 0 0.67 0.76 0

Vice Chairman

John H. Lin (Note1) 500 809 0 0 0 0 12,296 14,296 0.58 0.68 0 0 0 0 0 0 0 0 0.58 0.68 0

Managing Director

Andy Sheu (Note1)

11,307 11,830 0 0 15,000 15,000 2,240 3,280 1.28 1.35 18,124 21,004 1,632 1,632 262 0 262 0 2.18 2.38 0

Juristic- person

Director

CTCI Development Corporation

CTCI Investment Corporation

Sino Environmental

Services Corporation

CTCI Foundation

Crown Asia 2 Investment

Limited


Johnny Shih Jack Huang Frank Fan

Director

Quintin Wu Yancey Hai Leslie Koo

Wenent Pan Bing Shen

Teng-Yaw Yu (Note1)

Michael Yang (Note1,2)

Takao Kamiji (Note1,2)

Note 1: Mr. John T. Yu is representative of CTCI Development Corporation; Mr. John H. Lin is representative of CTCI Investment Corporation; Mr. Andy Sheu is representative of Sino Environmental Services Corporation; Mr. Teng-Yaw Yu is representative of CTCI Foundation; Mr. Michael Yang and Mr. Takao Kamiji is representative of Crown Asia 2 Investment Limited.

Note 2: Mr. Takao Kamiji, the representative of Crown Asia 2 Investment Limited, was replaced by Mr. Michael Yang on Mar. 7, 2016. Note 3: NT$ 1,632 thousands are allocated to the pension plan in 2016.

21

Bracket

Name of Directors

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

CTCI All Consolidated

Entities CTCI

All Consolidated Entities

Under NT$ 2,000,000

Takao Kamiji / CTCI Development Corporation /

CTCI Investment Corporation / Sino Environmental Services

Corporation / CTCI Foundation / Crown Asia 2

Investment Limited




Investment Limited




Investment Limited




Investment Limited

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

Andy Sheu / Michael Yang / Johnny Shih / Jack Huang / Frank Fan / Quintin Wu / Yancey Hai / Leslie Koo /

Wenent Pan / Bing Shen / Teng-Yaw Yu

Andy Sheu / Michael Yang / Johnny Shih / Jack Huang / Frank Fan / Quintin Wu / Yancey Hai / Leslie Koo /


Johnny Shih / Jack Huang / Frank Fan / Quintin Wu / Yancey Hai / Leslie Koo /


Johnny Shih / Jack Huang / Frank Fan / Quintin Wu / Yancey Hai / Leslie Koo /


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

NT$10,000,000 ~ NT$15,000,000 John T. Yu / John H. Lin John T. Yu / John H. Lin /

Andy Sheu / Michael Yang Andy Sheu / Michael Yang

NT$15,000,000 ~ NT$30,000,000 John T. Yu / John H. Lin John T. Yu / John H. Lin

NT$30,000,000 ~ NT$50,000,000

NT$50,000,000 ~ NT$100,000,000

Over NT$100,000,000

Total

22

3.3.2 Compensation of President and Executive Vice President December 31st, 2016; Unit: NT$ thousands; thousand shares

Title Name

Salary(A) Pension Fund (B) Bonuses and Allowances

(C) Employees’ Compensation (D)

Ratio of total compensation (A+B+C+D)

to net income (%)

Compensation paid to the

president and executive vice

president from an invested company

other than the company’s subsidiary


Entities CTCI

All Consolidated Entities


Entities


Entities CTCI All Consolidated

Entities Cash Stock Cash Stock

President Michael Yang

17,416 21,171 2,875 2,875 23,435 23,435 474 0 474 0 1.99 2.16 0 Executive Vice

President

Mark W. H. Yang

M. H. Wang

Pao-Yao Pan

Ming-Cheng Hsiao

Note: Pension contributed according to actuaries’ report and resolution of the board of directors’ meeting.

Bracket Name of President and Executive Vice President

CTCI All Consolidated Entities

Under NT$ 2,000,000

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

NT$5,000,000 ~ NT$10,000,000 Mark W. H. Yang / M. H. Wang / Pao-Yao Pan /

Ming-Cheng Hsiao Mark W. H. Yang / M. H. Wang / Pao-Yao Pan /

Ming-Cheng Hsiao

NT$10,000,000 ~ NT$15,000,000 Michael Yang Michael Yang

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

NT$30,000,000 ~ NT$50,000,000

NT$50,000,000 ~ NT$100,000,000

Over NT$100,000,000

Total

23

Employees’ Compensation Granted to Management Team Unit: NT$ thousands

Title Name

Employee Bonus - in Stock

(Fair Market Value)

Employee Bonus - in Cash

Total Ratio of Total

Amount to Net Income (%)

Executive Officers

Vice Chairman of Management Strategy Committee

Andy Sheu

0 1,700 1,700 0.08


Executive Vice President Mark W. H. Yang

Executive Vice President M. H. Wang

Executive Vice President Ming-Cheng Hsiao

Executive Vice President Pao-Yao Pan

Senior Vice President Andrew Tsai

Senior Vice President Jung-Yu Han

Senior Vice President Todd Chen

Vice President Teh-Ming Tao

Vice President M. G. Lee

Vice President Steve Jean

Vice President Po-Chien Wang

Vice President Ching-Hsiang Tseng

Vice President Shen-Peng Liao

Vice President Tsai-Ming Wang

Vice President Min-Li Lee

Vice President Jing-Shing Wu

Vice President J.H. Chen

Vice President Y. S. Liao

Vice President Ting-Kuo Li

Senior Vice President & CFO Patrick Lin

Vice President SH Lin

Accounting Officer Ai Cheng Ho Note: The distributed amount is based on the total amount approved by Board of Directors and calculated accordingly to each executive officers’ on-job days in the

previous year.

24

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

Unit: NT$ thousands

Year Title

2015 2016

CTCI All Consolidated Entities CTCI All Consolidated Entities

Total remuneration

Ratio to net income (%)

Total remuneration


Total remuneration


Total remuneration


Directors 89,838 4.40 99,724 4.89 109,567 4.93 119,587 5.38 Presidents and Executive

Vice President

A. The policies, standards and combinations of directors' remuneration, and the procedures for the payment of remuneration

Directors are paid traveling allowance, remuneration and compensation annually. The traveling allowance is stipulated with reference to other public listed companies and companies within the similar industry field. The remuneration is stipulated per the section of profit allocation in Articles of Incorporation. The compensation of chairman and vice chairman is stipulated with the Company’s performance (eg, EPS, ROE, etc.).The remuneration of Directors/Supervisors who hold concurrent positions in the affiliates is stipulated under the same standard.

B. The policies and standards about the remuneration of the President and Executive Vice Presidents as well as the procedures for determining the remuneration The structure of remuneration of the President and Executive Vice Presidents is divided into fixed and variable ones. The fixed remuneration is salary paid monthly, while the variable one includes employee remuneration and year-end bonus, with the standards based on individual’s annual key performance index (KPI) assessment. The aforementioned assessment includes qualitative indicators (eg, core competencies, potential development, etc.) and quantitative indicators (eg, the achievement of the individual's goals, the rate of achievement or the degree of achievement of the expected target value, etc.) Employee remuneration is paid based on the Company’s Articles of Incorporation. The year-end bonus is determined based on the annual operating performance of the Company, and it has to be agreed by the Company's personnel committee and remuneration committee firstly, then approved by the board of directors. Regular review has been conducted for the employee remuneration and year-end bonus to ensure the reasonableness.

C. The relation to business performance and future risks The standard, structure and system of the compensation of Directors, President and Executive Vice Presidents are subject to future risk factors and will not encourage Directors, President and Executive Vice Presidents to risk danger in desperation for pursuit of rewards in order to avoid the Company loss suffering even after the compensation payment.

25

3.4 Implementation of Corporate Governance 3.4.1 Board of Directors A total of 8 meetings of the board of directors were held in the previous period, Directors’ attendance was as follows: (As of April 30, 2017)

Title Name Attendance

in Person By Proxy

Attendance rate (%)

Remarks

Chairman John T. Yu

(Rep. of CTCI Development Corporation)

8 0 100

Vice Chairman

John H. Lin (Rep. of CTCI Investment

Corporation) 8 0 100

Managing Director

Andy Sheu (Rep. of Sino Environmental

Services Corporation) 8 0 100


Johnny Shih 3 5 38


Jack Huang 8 0 100


Frank Fan 8 0 100

Director Quintin Wu 7 1 88

Director Yancey Hai 5 3 63

Director Leslie Koo 2 5 29

Be dismissed on January 23, 2017 and shall

present 7 times.

Director Wenent Pan 6 2 75

Director Bing Shen 8 0 100

Director Takao Kamiji

(Rep. of Crown Asia 2 Investment Limited)

0 0 0

Be dismissed on March 6,

2016 and shall present 0

times.

Director Michael Yang

(Rep. of Crown Asia 2 Investment Limited)

7 1 88

Be newly appointed on March 7, 2016

and shall present 8

times.

Director Teng-Yaw Yu

(Rep. of CTCI Foundation) 7 1 88

26

Other mentionable items: 1. If there are the matter referred to as below in the directors’ meetings, the dates of meetings,

sessions, contents of motions, all independents’ opinion and the Company’s response to independent directors’ opinion should be specified. (1) the matters referred to in Article 14-3 of Securities and Exchange Act. (2) resolutions of the directors’ meetings objected to by Independent Directors or subject to

qualified opinion and recorded or declared in writing The Company has already established the Audit Committee, please refer to the section 3.4.2 “The State of operations of the Audit Committee” for the matters referred to in Article 14-5 of Securities and Exchange Act. Until the annual report being published, the resolutions of the directors’ meetings were unanimously approved as proposed by all present Board members.

2. If there is Directors’ avoidance of motions in conflict of interest, the Directors’ names, contents of motions, causes for avoidance and voting should be specified: (1) Directors’ Names: Michael Yang

Contents of motion: The 13th meeting of the 13th term Board of Directors (2016.05.06): Approval of removing the non-competition restrictions on new representative of juristic-person director. Causes for avoidance and voting should be specified: Director Michael Yang recused himself during discussion of and voting on this item because of the interested party relationship.

(2) Directors’ Names: Quintin Wu Contents of motion: The 15th meeting of the 13th term Board of Directors (2016.08.05): Approval of investing Ever Victory Global Limited. Causes for avoidance and voting should be specified: Director Quintin Wu recused himself during discussion of and voting on this item because of the interested party relationship.

(3) Directors’ Names: Johnny Shih, Jack Huang and Frank Fan Contents of motion: The 18th meeting of the 13th term Board of Directors (2016.12.13): Approval of establishing the Nomination Committee. Causes for avoidance and voting should be specified: Independent Director Johnny Shih, Jack Huang and Frank Fan recused himself during discussion of and voting on this item because of the interested party relationship.

(4) Directors’ Names: Andy Sheu and Michael Yang Contents of motion: The 18th meeting of the 13th term Board of Directors (2016.12.13): Approval of the average salary increase rate of 2017. Causes for avoidance and voting should be specified: Manager Director Andy Sheu and Michael Yang recused himself during discussion of and voting on this item because of the interested party relationship.

(5) Directors’ Names: Andy Sheu and Michael Yang Contents of motion: The 18th meeting of the 13th term Board of Directors (2016.12.13): Approval of the remuneration of the management officers of the Company. Causes for avoidance and voting should be specified: Manager Director Andy Sheu and Director Michael Yang recused himself during discussion of and voting on this item because of the interested party relationship.

(6) Directors’ Names: John T. Yu and John H. Lin Contents of motion: The 18th meeting of the 13th term Board of Directors (2016.12.13): Approval of the amendment to the remuneration of the Chairman and Vice Chairman of the Company. Causes for avoidance and voting should be specified: Chairman John T. Yu and Vice Chairman John H. Lin recused themselves during discussion of and voting on this item because of the interested party relationship.

(7) Directors’ Names: Andy Sheu and Michael Yang Contents of motion: The 19th meeting of the 13th term Board of Directors (2017.03.17): Approval of the subscribers and the exercisable units of the 2017 Employee Stock Options. Causes for avoidance and voting should be specified: Manager Director Andy Sheu and Director

27

Michael Yang recused themselves during discussion of and voting on this item because of the interested party relationship.

3. Measures taken to strengthen the functionality of the Board: (1) The Company has elected three independent directors and established the Audit Committee which

is composed of all independent directors on June 26, 2014. Please refer to the section 3.4.2 “The State of Operations of the Audit Committee”.

(2) The Company has established the Nomination Committee which is composed of all independent directors under the resolution of the directors’ meeting.

(3) From 2011, the Company has disclosed the major resolutions of the Board meeting voluntarily on the Company website.

(4) In accordance with the Articles of Association, the Company has purchased D&O insurance for directors and supervisors in order to reduce and diversify major damage risks of the Company and the shareholders.

28

3.4.2 The State of operations of the Audit Committee or the State of participation in board meetings by the supervisors (1) The Company has elected three independent directors and established the Audit Committee in

lieu of supervisors on June 26, 2014. (2) A total of 8 meetings of the Audit Committee were held in the previous period. Independent

Directors’ attendance was as follows: (As of April 30, 2017)

Title Name Attendance in

Person By Proxy

Attendance rate (%)

Remarks


Johnny Shih 6 2 75


Jack Huang 8 0 100


Frank Fan 8 0 100

Other mentionable items: 1. If there are the matter referred to as below in the Audit Committee, the dates of directors’

meetings, sessions, contents of motions, the Audit Committee’ resolutions and the Company’s response to the Audit Committee’s opinion should be specified. (1) the matters referred to in Article 14-5 of Securities and Exchange Act (2) resolution that was not approved by the Audit Committee but be undertaken upon the

consent of two-thirds or more of all directors

BOD Meetings Contents of Motions and the Response

In Article 14-5 of

Securities and

Exchange Act

Not approved by the Audit

Committee but be undertaken upon

the consent of two-thirds or more of all

directors

The 12th meeting of the 13th term Board of Directors (2016.03.18)

Approval of amendment to the “Articles of Incorporation” of the Company.

V

Approval of the distribution plan of the 2015 directors’ and employees’ remuneration.

V

Approval of the Fiscal 2015 business report, financial reports and consolidated reports.

V

Approval of the distribution plan of Fiscal 2015 earnings.

V

Approval of “Statement of Internal Control System for the Year 2015”.

V

Approval on loans to subsidiaries for working capital requirement granted by the Company.

V

Approval of the update of the Company’s paid-in capital registration.

V

Resolutions of the Audit Committee(2016.03.17): unanimously approved by all present Audit Committee members

The Company’s response to the Audit Committee’s opinion: unanimously approved by all present Board members


Approval of the amendment to the Company’s “Internal Control Systems” and the internal rules.

V

Approval of increase investment in Malaysia. V

Approval of the Company to close its branch (liaison) office in Seoul, Korea.

V


V



29


Approval of the incorporation of a joint venture in Malaysia.

V


V




Report on the consolidated financial reports as of June 30, 2016.

V


V

Approval of investing CTCI&HEC Water Business Corporation.

V

Approval of investing Blue Whale Water Technology Co., Ltd.

V

Approval of investing Ever Victory Global Limited.

V




Approval in the cash injection of subsidiaries. V




Approval of change of independent auditors of the Company

V


V

Approval of the amendment to the Company’s “The Procedures for halt and resumption applications”

V




Approval of the budget of 2017. V

Approval of the Year 2017 Audit Plan. V


V


V

Approval of Donating to CTCI Education Foundation. V

Approval of the issuance of 2017 Employee Stock Options.

V

Approval of the amendment to the remuneration of the Chairman and Vice Chairman of the Company

V




Approval of the distribution plan of the 2016 directors’ and employees’ remuneration.

V

Approval of the Fiscal 2016 business report, financial reports and consolidated reports.

V

Approval of the distribution plan of Fiscal 2016 earnings.

V

Approval of “Statement of Internal Control System for the Year 2016”

V


V


V

Approval of the incorporation of a joint venture in Malaysia.

V

30

Approval of the incorporation of a joint venture in Netherlands and establishing the branch in Oman.

V

Approval in the cash injection of subsidiaries. V

Approval of changing the accounting officer. V



2. If there is Independent Directors’ avoidance of motions in conflict of interest, the Independent Directors’ names, contents of motions, causes for avoidance and voting should be specified: None

3. Communications between Independent Directors and the Company's Internal Audit officer and CPA A. After having presented the audit and follow-up reports to the Chairman, the Internal

Audit officer submits the same reports via e-mail for review by the Independent Directors on a monthly basis. The Internal Audit officer communicates with the Independent Directors in person quarterly. There was no further issue after responding their comments in 2016.

B. The Internal Audit officer presents the findings of audit reports in the meetings of the Audit Committee and the Board of Directors. All the Independent Directors have adequate access to how audit performs. During 2016, the communication channel between Independent Directors and the Internal Audit officer functioned well.

C. The CPAs present audit reports and findings to the Independent Directors. CFO, Finance manager, Accounting manager and Internal Audit officer attend the Audit Committee meetings and reply to Independent Directors immediately if they have any questions. During 2016, the communication channel between Independent Directors and CPAs functioned well.

31

3.4.3 Corporate Governance and Operation, Differences from the Corporate Governance Best Practice Principles for the TWSE/ GTSM Listed Companies and Reasons

Evaluation Item

Operation Status Deviations from “Corporate Governance Best-Practice

Principles for TWSE/GTSM Listed Companies” and reasons

Yes No Summary Statement

1. Does the Company establish and disclose the Corporate Governance Practice Principals in accordance with the Corporate Governance Best Practice Principles for the TWSE/ GTSM Listed Companies?

V In the 10th meeting of the 10th term board of directors, the establishment of the Corporate Governance Practice Principals was decided on 24 July 2006, which had been modified in accordance with the regulations and real practice in these years. The latest revision was made in the 15th meeting of the 13th term board of directors on 5 August 2016 and was published in the Market Observatory Post System (MOPS) and the website of the Company.

None

2. Ownership structure and shareholder’s equity (1) Does the Company set up the internal

standard operation procedure to handle issues such as shareholder’s advices, questions, disputes and accusations for implementation accordingly?

(2) Does the Company have control over the major shareholders, who control the Company and have the name list of the major shareholders who have the ultimate control over the Company?

(3) Does the Company set up and implement the risk control and firewall mechanism with the subsidiaries and affiliates?

V

(1) The Company has set up spokesman and investor

relation office as the liaison channel to handle issues like the shareholders’ advices or disputes.

(2) The Company has been submitting monthly report to

the Market Observatory Post System, assigned by the Securities and Futures Bureau about the change of the shareholding of the insiders (directors, managers and shareholders who have more than 10% of the total shares) in accordance with the 25th article of the Securities and Exchange Act.

(3) In addition to establishing the “Supervision and

Management of Subsidiaries” based on the “Regulations Governing Establishment of Internal Control System by Public Companies” set by the Financial Supervisory

None

32

Evaluation Item




(4) Does the Company stipulate internal regulation, prohibiting the insiders of the company to make use of the unpublished information for the trading of securities?

Committee, the Company also stipulated the internal basic principles for cooperation between the parent company and the subsidiaries like the Basic Principles for Joint- Venture contract and Cooperation between the Parent Company and Subsidiaries of the CTCI Group, the Common Operation Procedure to maintain the rights and interest of the CTCI Group…etc, which are inspected by departments like the Auditing Department and QHSE Division to ensure the thorough implementation of the system and good mechanism of the risk- control for the subsidiaries and affiliates.

(4) The Company has set up the “Measures to Prevent

Insider Trading” and “CTCI Code of Ethics and Conduct”, prohibiting use of the unpublished information for the trading of securities.

3. Composition and Responsibilities of the Board of Directors (1) Is there establishment of the

diversification and thorough implementation about the composition of the board of directors?

V (1) The Company has established the diversification of the

board of directors in its “Corporate Governance Principles “. In consideration of diversity and fairness, the members of the board of directors include practicing lawyer, business professionals, and listed company operators from various industries such as electronics, plastics, optoelectronic, textile, cement, etc. The implementation about the composition of the board of directors is as below:

None

33

Evaluation Item




(2) In addition to the establishment of the Remuneration Committee and Audit Committee, does the Company have other functional committees?

Operation management

Law Financial accounting

Industry knowledge

John T. Yu v V

John H. Lin V V

Andy Sheu V V

Michael Yang V V

Johnny Shih V V V

Jack Huang V

Frank Fan V

Quintin Wu V

Yancey Hai V V

Bing Shen V

Wenent Pan V V

Teng-Yaw Yu v V

(2) In addition to the establishment of the Remuneration

Committee and Audit Committee regulated by the law, the Company also set up the Corporate Governance Committee whose major jobs include the assessment of the company risk control policy and risk evaluation criteria/ tracing of the major risk accidents and revision of the performance regarding the implementation of the company governance system…etc. The committee is composed of 9 directors and has held 34 meetings since its establishment. It works strictly and plays a decisive role in the major company policy decisions. Moreover, the Company set up the Nominating Committee on 13 December, 2016, composed of 3 independent directors, whose major jobs include the programming of the composition of the board of directors/ functional committees, the qualification assessment of the directors, the programming of the succession of the managing echelon…etc.

None

34

Evaluation Item




(3) Is there performance appraisal of the

board of directors, which is carried out annually?

(4) Is there regular assessment of the independence of the certified public accountant every year?

(3) The Company has set up the “Regulations Governing the

board Performance Evaluation“ with the resolution of the Boards on 13 December, 2016. The internal board performance evaluation for the current year shall be conducted at the end of each year according to the evaluation procedures and the evaluation indexes in this regulation.

(4) To fulfill Corporate Governance, the Company has

established “Evaluation of engaged Certified Public Accountant Regulation” in the 11th meeting of the 12th board of director on December 20, 2012. According to this regulation, the Company exams and evaluates CPA’s independence and capability annually, and submit a report to the Audit Committee and Board of Directors. The report was approved by the Audit Committee in the 16th meeting of the 1st on March 16, 2017 and by the Board of Directors in the 19th meeting of the 13th on March 17, 2017, the evaluation items please refer to the【Note 3】. After assessed, CPAs Shih-Jung Weng and

Shu-Chiung Chang from PricewaterhouseCoopers were qualified. Both CPAs do not have any direct interest relationship with either the Board of Directors or the Company, and believed to have more than sufficient capabilities on auditing, taxation and time cost efficiency.

None None

35

Evaluation Item




4. Does the company set up the corporate governance units or personnel responsible for matters related corporate governance?(including but not limited to providing the business-required information to the directors and supervisor, handling the matters related to the meetings of the Board and the shareholders' meeting, the registration of the company and the minutes of the Board and the shareholders' meeting)

V The Company has set up the Secretariat of the Board to be in charge of the corporate governance.

None

5. Does the Company establish communication channel for stakeholders which including but not limited to shareholders, employees, customers and suppliers, set up a dedicated section in its corporate website for stakeholders, and properly respond to CSR-related issues concerned by stakeholders?

V The Company establishes "CSR" and "Investor Relations" sections in its corporate website to explain to stakeholders the conducts for fulfilling CSR and may be contacted via its corporate website when needed. The Company will give proper feedback to any reasonable concerns raised by the stakeholders.

None

6. Does the Company entrust the professional stock affair agency for the shareholder affairs?

V The Company has entrusted the department of the stock affair agency of the KGI Securities Co. Ltd. to assist us in the stock affairs.

None

7. Information Disclosure (1) Does the Company set up a website to

disclose information regarding the Company’s finance, business and corporate governance status?

V (1)

a) The Company has set up a Chinese/English website (www.ctci.com) to disclose information regarding the Company’s finance and business status and update information regularly.

b) The Company has disclosed information regarding the organization and function of Internal Auditing Dept., “Rules Governing Procedure for Making of Endorsements or Guarantees”, “Rules Governing

None

36

Evaluation Item




(2) Is there any other information disclosure

channels (e.g., maintaining an English-language website, appointing responsible people to handle information collection and disclosure, appointing spokespersons, webcasting investors conference)?

Acquisition and Disposal of Assets” and “Rules Governing Procedure for Loaning of Funds” on the Company website.

(2) a) The Company has set up a Chinese/English website

and has appointed Brand Management Dept. to handle information collection and disclosure.

b) The Company has appointed the Head of Executive Management Office as the spokesperson, CFO as deputy spokesperson and they are responsible for speaking to the public. The Company will hold investors conference presentation according to practical needs.

c) The audio-visual record of investor conference has been posted on the Company website. The Company has disclosed finance and business information revealed in inventor conference on the Company website and the Market Observation Post System pursuant to regulations of Taiwan Stock Exchange.

8. Is there other important information, which helps to understand the governance and operation of the company, which includes but not limited to the rights and interest of the staff, cares for the employees, investor relations, relation with the suppliers, rights of the stakeholders, trainings received by the directors and supervisors, the implementation of the risk management policy and risk assessment criteria, the liability insurance policies taken out for the

V Please refer to the【Note 1】 None

37

Evaluation Item




directors and supervisors…etc?

9. According to the last Corporate Governance Evaluation by TWSE, please indicate the situation has been improved and the priority and measures for the non-improved ones.

V The 3rd Corporate Governance Evaluation was announced by TWSE in April, 2017. Please refer to the【Note 2】for

the specific improvements.

None

【Note 1】

1. The system about employee rights and interests and the care for the employees adopted by the Company is implemented in accordance with the related regulations and specified clearly in the working regulations of the employee manual, which include the gender equality at work, sexual harassment prevention and treatment, the compensation and pension for the disaster, injury and disease, subsidy principals the for weddings /funerals…etc. The labor management meeting is held as well to communicate with each other for issues concerned by the labor regularly each quarter. There are other measurements like the mail box for the employee opinion and special line against the sexual harassment to give trust to the employees thoroughly and to carry out the self- governance of the employee.

2. The first principle for the sound corporate administration is to protect the shareholder rights and interests and to treat all shareholders fairly. To encourage the investors to participate in the corporate governance and to implement the shareholder activism, the Company has uploaded the minute of the shareholder meeting on the website and released the major information in English and Chinese simultaneously to protect the rights and interests of the domestic and international investors. Moreover, the Company holds the corporate conference regularly and uploads the video of the conference to the website to increase the understanding of the corporation about the Company to maintain the shareholder rights and interests accordingly.

3. The Company offers the relevant laws and regulations requiring attention and seminar information for further study to directors and supervisors and make presentation about the business regularly in the meeting of the board of directors. (For detailed information, please refer to the important information concerning the corporate governance and operation.)

4. All directors should attend the meeting of the board of directors except for special situation and their presence of the meeting will be registered in the Market Observatory Post System.

5. To recuse themselves to avoid conflicts of interests is the basic consensus for directors of the Company. 6. The Company purchased D&O insurance for its directors and supervisors. 7. We strictly conduct supplier management. Only those qualified and registered in the CTCI Group PSSCM System have the chance for quote and to be

contracted for plant construction. Issues regarding the scope of the integration work, the work regulation, the project schedule, the quality inspection, QHSE Management are well- explained to the contractors during the inquiry and quote for them to understand completely the content of work, responsibilities and obligations in the contract. The total amount of the contract, the payment term, the responsibilities, obligations and penalties for the mutual parties are specified in the contract as base for the implementation of the contract of the corporative contractor. With the sound finance of the

38

company, all contractors get paid in due course and according to the payment term. Besides, the function to check the payment is established for the contractors to know the review procedure of the invoice. The company treats all contracted contractors fairly and honestly and negotiates with them for cooperation, mutual harmony and prosperity.

8. “Implementation of risk management policies and risk measuring criteria” Risk management policies: Declarations: All kinds of risks will affect the achievement of objective of the company. The understanding and management of risk can assist the company to prepare countermeasure and improve performance, so as to achieve stable growth and pursue the sustainable operation. Descriptions: Through constructing proper risk management procedure, the risk management of the company will integrate into the daily operating activities to manage the operating risks effectively. For this purpose, the company will: Establish enterprise risk management system consistent with company strategy; Define the roles and responsibilities of all employees in enterprise risk management, and communicate with all employees; Prepare systematized enterprise risk assessment method to ensure that risks significantly affecting the company can be identified effectively; Ensure that information related to enterprise risk can be passed through explicit and effective channel; Integrate enterprise risk management mechanism into daily operating activities. Enterprise risk management is a continuous activity; all employees of the company are responsible for understanding and carrying out risk management system of the company. All colleagues shall properly perform the duty of risk management; each management level shall also comply with relevant requirements of this risk management system. CTCI follows the “Risk Management Procedure” which defines the risk management process and risk measuring criteria to perform the risk management tasks. Each risk management unit regularly performs risk identification and risk evaluation and proposes the improvement plan. The report is submitted to the Risk Management Executive Committee to control and to reduce the risks.

9. “To Satisfy Our Customers with Optimized Engineering Services” is CTCI’s corporate mission, and we stress customers’ feedback highly. For years, we have been collecting customers’ feedback based on “Customer Service Enhancement Regulations” in a timely fashion and proactively conducting customer satisfaction survey twice a year. Besides, a cross-departmental “Customers Services Feedback Group” coordinated by the President was established. The Group would review the customer feedback raised in the questionnaire survey, proposed correction actions, and instructed the departments concerned to fulfill their tasks accordingly to make sure our customers’ trust and expectations are met.

【Note 2】

No. Evaluation Item Specific Improvements

2.6 Was the Annual General Meeting convened before the end of May? The Company would consider on adjusting the related process and intend to convene the Annual General Meeting before the end of May.

3.31 Is there performance appraisal of the board of directors, which is carried out annually and posted on the Company website or the annually report?

The Company has set up the “Regulations Governing the board Performance Evaluation“ on 13 December, 2016. The internal board performance evaluation for the current year shall be conducted at the end of each year.

39

【Note 3】

No. Evaluation Item Result Compliance

1 The engaged auditors should not accept the engagement when they may have involved in any direct or material indirect interests which may impair their impartiality and independence.

2

An audit or review of financial statements delivers high or medium (but not absolute) assurance to potential users of financial statements. In addition to the maintenance of independence in appearance, the maintenance of independence in mind is more important for an independent auditor. Therefore, the members of audit engagement team, the partners of the accounting firm, and accounting firm and its affiliates must be independent to us.

3

If the engaged auditor fulfills any of the below requirements:

(1) Integrity: an independent auditor shall be straightforward and honest during his/her provision of professional services.

(2) Objectivity: During his/her provision of professional services, an independent auditor shall be objective and avoid any conflict of interests to override his/her independence.

(3) Independence: an independent auditor shall have independence in mind and in appearance on an audit or review of financial statements.

4 Independence is related to the integrity and objectivity. During the engagement, if an independent auditor isn’t in the lack/impairment of independence and thus affects his/her integrity and objectivity.

5 If the independence of an auditor isn’t impaired by self-interest, self-review advocacy, familiarity, and intimidation.

6

Self-interest could impair an auditor’s independence. Self-interest means acquiring a financial interest in an audit client (i.e. CTCI Corporation) or having another conflict of interests created by other interests or relationships with us. If our engaged independent auditor isn’t in any of the below situations:

(1) Having a direct or material indirect financial interest from us.

(2) Having financing or guarantee relationship with us or our directors.

(3) Concerned about the possibility of losing CTCI Corporation as a client.

(4) Having a significant and close business relationship with us.

40


(5) Entering into a potential employment negotiations with us.

(6) Entering into a contingent fee arrangement relating to our audit engagement.

7

Independence influenced by self-review means an independent auditor uses a report or judgment resulting from a non-audit service as an important factor to conclude the result in an audit or review of financial information, or a member of the audit engagement team is our former director, or is in our key position with significant influence over the subject matter of the audit engagement. If the engaged auditor isn’t in any of the below situations:

(1) A member of the audit engagement team is/was our director, supervisor, manager, or employed by us in a position with significant influence over the subject matter of the audit engagement within last two years.

(2) The accounting firm of the audit engagement team provides us non-audit services which would directly affect a material item of the audit engagement.

8

Independence influenced by advocacy means that a member of the audit team acting as an advocate of our position so the objectivity of the independent auditor could be challenged. If the engaged auditor isn’t in any of the below situations:

(1) Promoting or brokering shares or other securities issued by us.

(2) Acting as an advocate on behalf of us in litigation or disputes with third parties.

9

The effects of familiarity to independence means a close relationship with our directors, supervisors, and/or managers will cause an independent auditor to excessively concern or sympathize about our interest. If the engaged auditor isn’t in any of the below situations:

(1) Having a family relationship with our directors, supervisors, managers, or employees in a position with significant influence over the subject matter of the audit engagement.

(2) A former partner, who was disassociated with the engaged accounting firm within a year, joins us as a director, supervisor, manager, or employee in a key position with significant influence over the subject matter of the audit engagement.

(3) Accepting gifts or preferential treatment from our directors, managers, or us.

10 Independence influenced by intimidation means an independent auditor is deterred from being objective due to actual or perceived pressures, including the attempts to exercise undue influences. if engaged auditor isn’t in any of the below situations:

41


(1) Requesting an independent auditor to agree with our inappropriate accounting treatments and disclosures.

(2) Compelling an independent auditor to reduce the extent of work performed in order to lower the audit fee.

42

3.4.4 The Remunerate committee’s composition, responsibilities and operation: A. Remuneration Committee members’ information

Identity (Note1)

Criteria Name

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

Independence Criteria(Note 2) Number of

Other Public Companies in

Which the Individual is

Concurrently Serving as a member of

Remuneration Committee

Remark

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

Have 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


Johnny Shih - - V V V V V V V V V 0 N/A


Jack Huang - V V V V V V V V V V 3 N/A


Frank Fan - - V V V V V V V V V 0 N/A

Note 1: Please fill out director, independent director, or other. Note 2: 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the Company, its parent

company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount

of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking in

the top five in holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business relationship with the Company. 7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal,

financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. 8. Not been a person of any conditions defined in Article 30 of the Company Law.

43

B. The state of operations of the Remuneration Committee a. This committee is comprised of 3 members. b. The term of current committee members is from June 26, 2014 to June 25, 2017:

A total of 4 meetings of the Remuneration Committee were held in the previous period: (As of April 30, 2017)

Title Name Attendance in

Person By Proxy

Attendance rate (%)

Remarks

Convener Johnny Shih 3 0 100

Member Jack Huang 3 0 100

Member Frank Fan 3 0 100

Other mentionable items: 1. If the board of directors declined to adopt, or modified, a recommendation of the remuneration

committee, the dates of meetings, sessions, contents of motions, resolutions of the Board Meeting and the Company’s response to remuneration committee’ opinion should be specified(If the remuneration passed by the board of directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified): None

2. If there are objections or reservations to any discussion matters or extraordinary motions expressed by any member of the Committee, recorded or provided in written forms, the dates of meetings, sessions, contents of motions, all members’ opinion and the Company’s response to members’ opinion should be specified: None

44

3.4.5 Corporate Social Responsibility (CSR)

Evaluation Item

Implementation Status Deviations from

“Corporate Governance Best-Practice

Principles for

TWSE/GTSM Listed

Companies” and reasons


1. Corporate Management Practices (1) Does the Company formulate

CSR policy or systems and review the implementation status?

(2) Does the Company arrange CSR

trainings regularly? (3) Does the Company establish

exclusively (or concurrently) dedicated units with senior management authorized by the Board to be in charge of CSR Promotion and report to the Board?

(4) Does the Company make a reasonable remuneration policy; combine performance assessment of employees with CSR policy; and regulate an

V (1) CTCI established the CSR Promotion and CSR Report Publication Procedure in November 2009

to define the organizational framework, responsibility and authority of the CSR Committee, and to specify the cautions and rules for promoting CSR within CTCI. When setting issues to be promoted within CTCI, these issues are considered in accordance with the Global Reporting Initiatives (GRI) G4 Guidelines in terms of corporate governance, environmental protection and social participation as well as AA1000 International Standards, including the concern for stakeholders and impacts on CTCI; and systematic procedures for determining such have been established.

(2) The Company holds environmental education courses irregularly, and promotes the concept of corporate social responsibilities through various approaches, such as trainings, public announcement and activities held.

(3) In the end of 2008, CTCI CSR Committee was established, under which three working groups were set up. The CSR Committee administers the planning, promotion, implementation, data consolidation, review and improvement of the CSR work of CTCI. The CSR Committee shall report to the Board on a regular basis.

(4) CTCI values employee welfare and care. Apart from offering a base salary higher than the

minimum local wage, CTCI also appeals in internal and external fairness as well as individual fairness. In terms of external fairness, we have external professionals surveying the salary and benefit survey with fully understanding of the market rate while analyzing the employment environment as the foundation of our salary design. For internal fairness, the salary structure

None

45

Evaluation Item



Principles for

TWSE/GTSM Listed



explicit and effective system of reward and punishment?

is designed based on the evaluation of skills and duties of employees so as to insure that the salary standard is appropriate and irrespective of gender difference. To encourage better performance of colleagues, CTCI also combines one's payment with his/her performance, especially for variable bonus, to realize individual fairness in salary with one's organizational performance, departmental performance, and personal performance. Additionally, salary review is performed according to the market salary survey and personal performance ever year. Aside from specifying in Topic 1, Performance, Rewards and Discipline of Chapter 6 Work Rule in the Employees Manual, we also speculated CTCI Employees Reward and Punishment Regulations accordingly, so as to boost morale and strengthen disciplines with fairness, justice, openness, and rationality.

2. Sustainable Environment Development (1) Does the company dedicate

itself to improve the efficiency of all kinds of resources and use the renewable materials that impact on the environment less?

(2) Does the company set up an environmental management system that suits the nature of industry?

V (1) As a member of the society, CTCI shall spare no pain to save energy and reduce carbon

emissions. In terms of engineering expertise, CTCI has been making continuous innovation of engineering technologies to reduce energy consumption and reduce pollution. For routine affairs, CTCI urges employees to save energy and resources and emphasize the importance of saving paper, electricity, water and petroleum consumption.

(2) CTCI has long been dedicating to the R&D of green engineering technologies. The aims are to

provide owners with economical, feasible environmental and energy-saving solutions, to reduce pollution, to lower impacts to human health and environment risk, and to bring innovation and enhance the industry’s green competitiveness based on the core technology of CTCI, with a full life cycle perspective starting from engineering design, procurement, construction, commissioning, operation and decommissioning. Hence, we can attain a multi-win scenario among CTCI, cooperative partners, stakeholders and social environment.

None

46

Evaluation Item



Principles for

TWSE/GTSM Listed



(3) Does the Company pay attention to the impact of climate change on its operations; carry out the investigation of greenhouse gas inventory; and make strategies of energy efficiency, carbon and greenhouse gas reduction for the company?

(3) To demonstrate the resolution to mitigate climate change with all countries in the world, CTCI has included greenhouse gases (GHG) and other climate change issues into the top priorities of the CSR environmental protection team. Annual greenhouse gas emission inventory, implementation of energy-saving and carbon reduction plans, climate change risk and opportunity assessment, and formulating response strategies are all main responsibilities of the environmental protection team. This team is one of the three components of CTCI's CSR task force, which is directly answerable to the CSR committee, whose chairperson is the President of the company. At the regular CSR committee meetings, the environmental protection team reports directly to the President on the effectiveness of greenhouse gas management and results of responses to climate change. Because the CSR committee is supervised by the corporate governance committee, which answers to the Board of Directors, it reports to the Board via the President on strategic suggestions regarding climate change, as reference for long-term strategies. CTCI's greenhouse gas emissions have been verified by a third party since 2012. GHG inventory will continue to be conducted annually to serve as basis for future carbon reduction and carbon management. Currently, the GHG inventory of scope1 and scope2 cover CTCI's headquarters building. In 2015, CO2e for the two scopes were 247.8 and 3,184.3 tons respectively. The data of GHG inventory for 2016 are being conducted now and will be completed by May of this year.

In addition to promoting energy saving concepts, CTCI also implemented various management measures in the HQ building, e.g. shutting down several elevators during off hours or holidays, installing Inductive lighting switch at public space, gradually replacing old refrigerators with those adopting frequency Inverters. Besides, we supported the Earth Hour activity and turned off all lights in CTCI from 20:30 to 21:30 on 19 March 2016. For one thing, it is an act to restate our support for energy saving and carbon reduction; for another, it is an example to

47

Evaluation Item



Principles for

TWSE/GTSM Listed



encourage employees to save energy and reduce carbon emissions from small things, in order to do our part to mitigate global warming.

3. Social Welfare Protection (1) Does the company formulate

management policies and procedures in accordance with relevant regulations as well as International Covenant on Human Rights?

(2) Does the company create a

mechanism and channel for employees’ complaint and settle it properly?

(3) Does the company provide

V (1) In compliance with the United Nations Global Compact regarding regulations over human

rights, labor standards, environment and anti-corruption, in addition to ensuring all daily operations conforming to corporate ethics, CTCI develops basic conduct standards of compliance for all board directors, managers, employees and procurement staff. This set of standards Corporate Governance Norms, Business Ethical Behavior Norms for Board Members and Managers, Code of Employee Ethics and Behavior, and Work Ethical Behavior Rules for Procurement Staff.

(2) The company has stipulated “Guidelines for Ethical Conduct“ and specifically defined the guidelines and penalties in “Prohibition of Bribes Offering and Acceptance, and Blackmailing”, “Preventing Conflicts of Interest”, and “Protection of Business Confidentiality and Intellectual Property Rights”. The company established an investigation team and complaint hotline for corruption and briberies, which accept reporting from persons inside and outside of the organization at all time. The reporting and consulting hotline is (02-2835-5936) or the email address: [email protected]. The department in charge of the complaints is the Human Resource Department. We encourage employees to notify any infringement of law, regulation or staff regulations through named reporting. The company should by any means hold confidentiality of the identity of the person submitting this report to avoid threats. In cases that one is suspicious of corrupt practices but could not be verified of the action violating the law, the consulting hotline is available for immediate report. Colleagues can even write e-mails to the feedback box, which will be directly responded by the manager of Human Resource Department or related departments for further handling.

(3) CTCI established a health center in 2013. We advocate health promotion through inviting

None

48

Evaluation Item



Principles for

TWSE/GTSM Listed



employees with a safe and healthy working environment as well as the regular tutorials regarding the knowledge of safety and health?

(4) Does the company create a

mechanism of regular communication for employees and notify them of any significant operational changes that might impact on them?

physicians or nutritionists as well as other experts to hold health promotion seminars and provide physician on-site services every month. The topics of health promotion seminars feature mental, physical and spiritual wellbeing. Related contents will be published on CTCI Monthly and posted on the corporate website as well. Moreover, to create a friendly workplace, we set up a breastfeeding room in 2012 for female colleagues who become new moms. In 2016, there were totally 826 people benefitted from physicians’ on-site service and healthcare provided by the registered nurses; accumulatively 4,798 people/times for breastfeeding room usage, and 1,034 people participated in the 13 health promotion seminars held.

(4) In appointment and promotion, we have no limit or restriction of any kind or in any form on gender, ethnic origin, political orientation, and religion (belief). Those who are qualified for the post are given equal opportunities to fill the post. The equal rights and obligations of employees are specified in the Employee Handbook and continuously published on the corporate Intranet. In employment age, we strictly follow the regulatory requirements prescribed in the Labor Standard Law. That is to say, no child labor incident has happened or has been reported at CTCI. At CTCI, eliminating sexual harassment and sexual discrimination is a commitment. In order to prevent workplace sexual harassment, apart from specifying the relevant rules in the Employee Handbook and educating employees, we have established a hotline and a dedicated e-mail for employees to report and make suggestions for eliminating sexual harassment. The “Sexual Harassment Complaint Handling Committee” was set up for the handling of sexual harassment cases or probable events, the committee should protect the confidentiality and privacy of the parties involved and set forth the findings within 3 months after the case is raised. The Sexual Harassment Complaint Handling Committee has 7 committee members in total with the chairman being the supervisor of the HR Division. Other committee members are selected from employees in different departments by the heads of

49

Evaluation Item



Principles for

TWSE/GTSM Listed



each business operation unit. The proportion of female committee members should not be less than 1/2. In 2016, we received no complaint related to sexual harassment. To enhance the industrial relation and guarantee rights of the labor, CTCI sets up an “Employment Coordination Meeting” on a quarterly basis (i.e., 4 meetings for a year). Issues concerned by employees of the quarter are reported or discussed in the meetings. Major issues raised are CTCI business development and the employees’ health, safety, welfare, salary, reward and punishments. The “Employment Coordination Meeting” is composed of 6 management representatives and 6 labor representatives. The head of the Group Shared Services serve as the chairman who would assign personnel familiar with business operations and labor situations as management representatives. The 6 labor representatives are elected by the constituency (units of business operations) and each term is 3 years. Wherein, supervisors above the rank of senior vice president are not allowed to serve as labor representatives, and female representatives must not be less than one-third of the total labor representatives. In internal communication, we hold “Forum with Executives” each quarter for employees to discuss with higher level supervisors face to face and raise opinions and questions about company operation or management. The forum attracts 50 to 60 employees to participate each time. During the discussion, employees raised questions enthusiastically and feedbacks are directly provided. At the forum, managers can hear the voice of employees, and employees can understand better about company policy and direction. Furthermore, higher-level supervisors will also discuss with recruits regularly to understand opinions and ideas of them through face to face communications. We also conducted anonymous personal surveys on employees who have resigned, in order to understand employee satisfaction rate, loyalty, and stability from various perspectives. The senior management routinely conducted seminars with new entrants, in order to understand their ideas and suggestions for the Company and their work through face-to-face communications.

50

Evaluation Item



Principles for

TWSE/GTSM Listed



(5) Does the company draw up workable plans of vocational skills development for employees?

(6) Does the company formulate

policies and a complaint procedure regarding consumer rights protection based on the workflow of R&D, procurement, production, operation and service?

(7) Does the Company abide by relevant regulations and international standards in the marketing and labeling of their products and services?

(8) Does the Company check if the suppliers had any record of affecting environment and

(5) To provoke the passion for work in every employee and in consideration of the need for the organization to satisfy employees with self-realization, CTCI started promoting Individual Development Plant (IDP) for all employees since 2014. Each employee may develop different learning development plans according to the corporate development, competency required for the function and individual development intent, which urges the employees to increase their own KSA (knowledge, skill and attitude) while employees can develop training, experience, disciplines, and refinement based on their own strength and weakness through communication with the coach. Consequently the overall competitiveness in employees is enhanced to reach win-win situation between the employees and the company, which forms an unconstrained work environment with infinite development opportunities.

(6) The company conducts customer satisfaction survey on the projects in progress and the projects during its closing to warrantee period semiannually. The Brand Management Department will send out the questionnaire to customers. Then, the “Customers Services Feedback Group” will make analysis on the survey results and seek effective solutions for further improvement by respective departments following acquiring approval by the President. This has ensured CTCI's quality standard can win customers' trust and meet their expectations.

(7) A commitment to quality is the key that enables CTCI to operate sustainably, it is also a promise that CTCI has kept to its clients. To do so, we established Quality Management System based on ISO 9001:2008 to make sure all vital stages of project management, engineering, procurement, construction, fabrication, commissioning and maintenance are in compliance with engineering and regulation requirements. We had been certified since 1996.

(8) All vendors have to sign "Contractor’s Commitments on Corporate Sustainable Management", promising to be in compliance with the sustainable operation practice. For new vendors requested by the management to undergo plant visiting survey, "Self-Assessment Sheet of

51

Evaluation Item



Principles for

TWSE/GTSM Listed



society in the past before doing business with them?

(9) Do the contracts signed

between the Company and suppliers contain the terms that the contract can be terminated or canceled at any time if the supplier violate against its policy of CSR and has significant impact on environment and society?

Contractor's Corporate Sustainable Management" will be distributed and filled in beforehand for evaluations of their social and environmental performances. As of 2016, vendors listed in Tier 1 will have to fill in "Self-Assessment Sheet of Contractor's Corporate Sustainable Management". We are scheduled to complete the survey within 3 years by surveying over 200 vendors each year to evaluate the possible environmental and social impacts of the Tier 1 suppliers.

(9) Since 2011, we began to incorporate "Corporate Social Responsibilities" with vendor evaluations; while beginning with 2014, we add more items including "Environmental Management", "Labor Conditions", "Human Rights" and "Social Impact" to the list to ensure the vendor is qualified with ISO14001/OHSAS 18001certification, and comply with requirements for quality, price, delivery period, safety, health, environmental management, labor conditions, health management, and employee welfare. Disqualified vendors will be suspended for cooperation following such stringent review process.

4. Information Disclosure Enhancement (1) Does the Company disclose any

relevant and reliable information regarding CSR on its official website and Market Observatory Post System?

V (1) (a) Being one of the leading transparent companies, we participated in the “Information

Disclosure and Transparency Ranking System” launched by TWSE and GreTai since 2004, and were ranked as a listed company with rather transparent information disclosure. After reformation of the evaluation system in 2006, we were ranked as a Grade A listed company in information disclosure. In 2010 and 2011, an A+ Grade for listed company in information disclosure was issued. Moreover, from 2012 to 2015, CTCI has been ranked as an A++ company, the top ranking a company can ever receive, for four years in a row. The fact proved

None

52

Evaluation Item



Principles for

TWSE/GTSM Listed



our rigor in corporate governance and effort to maintain information transparency. (b) CTCI has been providing correct, open and transparent important operational information for

investors to make the correct choice. We also assign a spokesperson, organize conference calls, publish periodic reports, and make important announcements over the CTCI website to make active communication with investors. In addition to the corporate website, we also disclose relevant information over the Market Information Post System of the Taiwan Stock Exchange. Since March 2010, the English version of important announcements has been made available. We also organize overseas investor conferences for foreign investors or participate in the investor conferences organized by securities companies, in order to improve and increase communication and exchange with overseas corporate investors.

(c) In order to communicate with stakeholders and allow them to better understand our way of operation, we began publishing on an annual basis the CTCI CSR Report in 2008 to disclose the information concerning our materiality issues according to the GRI Guideline. We also regularly submit the report to the British Standards Institution (BSI) for verification. In fact, we are the first private business in Taiwan to have our CSR report pass the BSI verification. For more details, Please refer to the item 7 “If the corporate social responsibility reports have received assurance from external institutions, they should state so below“ of this table.

5. If the Company has established corporate social responsibility principles based on “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies,” please describe any discrepancy between the principles and their implementation: verified by BSI, a third party, CTCI CSR Report is in compliance with the three major principles of AA1000 Assurance Standard, which are Inclusivity, Materiality and Responsiveness.

6. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices (1) CSR Policy Statement:

To fulfill corporate social responsibilities with due faith has been a target of operation for our company; aside from pursuing the largest profits for our shareholders, we aim to attend at the same time the rights of the stakeholders, conform to the ethical codes considered the social norms, and promote energy saving and carbon reduction to slow the pace of climate change. It is hoped that with such actions we can construct a society of justice and

53

Evaluation Item



Principles for

TWSE/GTSM Listed



fairness jointly with the stakeholders while creating a sustainable living environment. Thereby, the implementation directives of CSR promoted by CTCI Corporation include the three aspects, "Operation and Governance," "Environmental Protection," and "Social Participation," committing to developing a robust organizational structure, realizing the vision of green engineering with due diligence, and performing CSR with due faith. Developing a Robust Organizational Structure Steady growth and sustainable development are the basic requirements for performing CSR. Without them, no enterprise is capable of promoting social welfare and environmental protection. For this reason, besides legal compliance, we will continue to develop an effective internal control system, maintain information security, carry out risk management, ensure accessibility and transparency in disclosure, uphold business self-discipline, and optimize organizational structure, while at the same time provide employees with steady career development, shareholders with stable long-term profits, and clients with satisfactory project service quality. Performing CSR with Due Faith "Cultivating engineering talent for the enhancement of engineering service quality" has been the corporate mission of CTCI since its inception, and it is the most straightforward method to requite society. The Company has been in full compliance with the labor laws, dedicated to protecting and respecting the principles of globally recognized basic labor rights, ensured such rights applied for all without discrimination, and provide diversified communication channels as well as a healthy and safe workplace for employees. Also, we maintain good neighbor relationship with citizens in local communities and promote social welfare in the best way possible. Realizing the Vision of Green Engineering with Due Diligence CTCI has long been emphasizing the technological development for green engineering, and dedicating efforts to minimize pollution, and lower the impacts made to human health and the environment during the whole life cycle of project executions, including engineering (E), procurement (P), construction (C), commissioning (K), operation and maintenance after plant turnover to the owners. All the procedures are taken with approaches that are economical and viable with an aim to bring innovation and enhance the green competitiveness of the industry to create a multi-win scenario among CTCI, cooperative partners, stakeholders, and the social environments, and to contribute its share to the creation of a sustainable eco environment.

54

Evaluation Item



Principles for

TWSE/GTSM Listed



(2) Methods of communication, frequency, and key responses:

Stakeholders Methods of communication

Frequency of communication

Key responses

Employees Labor Relations Conference

Every quarter - We have improved recruitment issues by increasing the bonuses of clerks at project sites.

- We have remitted the bonuses after reconfirming and recalculating the amount of bonuses for not taking leaves overseas.

- Explained that decreases in bonuses were allocated into special funds toward year-end performance-based bonuses.

- Held Sexual Harassment Management Committee meetings to deal with actual incident.

- Allocated extra raise in compensations for employees with exceptional performances and those who were qualified for promotions in the year.

- Added space for nursing room and the room was completed in April 2015. - Increased meal-based financial aids for our employees and explained about

promotions in various work.

Senior Management Seminar

Every quarter

Worker Safety and Health Committee

Every quarter

Designated hotline and email

All the time

CTCI Monthly Publication Monthly All the time

Employee Welfare Committee

55

Evaluation Item



Principles for

TWSE/GTSM Listed





Key responses

Shareholders/ investors

Shareholders Annual Meeting

Every year - Company operational conditions and financial performance. - Inquired about Company operational performance, financial performance, or

media announcements. Investor Conference Every 6 months

Overseas Investor Conference

From time to time

Investor Zone All the time

Visits to the top 10 shareholders

Every year

Telephone, fax, email, website

All the time

Community Hold large-scale cultural/charity events

Every year - Proposed to increase the academic scholarship and will implement upon adjustments in procedures in 2016.

- We hope to offer consultation and information sharing with associations via CTCI's professional know-how. Telephone, fax, email,

website

All the time

Suppliers/ downstream contractors

Vendor Assessment Upon completion of contract

- Procurement of materials and equipment should consider environmental protection and energy conservation as a first priority

Factory visits From time to time

Telephone, fax, email, website

All the time

56

Evaluation Item



Principles for

TWSE/GTSM Listed





Key responses

Clients Client satisfaction survey Every 6 months - Propose plans to conserve energy and lower carbon emissions during quotations and project executions, persuade owners to adapt skill-sets to lower carbon emissions and to incorporate these techniques into strategic implementations.

- Strengthen engineering safety management, and enhance our operations according to the 10 safety health management factors proposed by the client.

Telephone, fax, email All the time

Personal visits

All the time

Government Compliance to relevant legal regulations and policies

All the time - Complete operations within the given timeframe. - Strengthen supervision over contracted engineering projects, implement self-

regulatory construction site safety and health management. - Won the highest honor in design and construction excellence awards under the

facilities category of "The 16th Public Construction Golden Quality Award" from the Public Construction Commission, Executive Yuan.

- Responded to investigations on conditions with unpaid leave.

(3) Education Foundation:

The purpose of establishing the CTCI Education Foundation is to enhance the standard of education, nurture exceptional talent, reward academic and technical research, construct a lifetime learning environment, and to promote national competitiveness. The primary objective of the Foundation is to propose scholarships to footer talent, and besides rewarding scientific research through promoting green educational seminars, we also host community and LOHAS educational events to construct a lifetime learning environment. Currently, the Board of Directors has 7 members, including 4 supervisors from CTCI and 3 external personnel. A Director from CTCI serves as the Chairman and has established a CEO role, and the position is served by the President from the Executive Management Office. CEO manages a Supervisor, and four units including Planning, Legal, Finance, and Volunteering. Besides recruiting external personnel for planning, all the other roles are filled by CTCI personnel.

57

Evaluation Item



Principles for

TWSE/GTSM Listed



Primary objective of the Foundation Method

Nurturing Talents - Granting Scholarship: to outstanding and financially disadvantaged students majoring in engineering related disciplines

- Participation in engineering-related associations: participating in or sponsoring activities held - Promotion of engineering education: assisting schools in organizing education courses, field visits,

camps, etc., and arranging internship or part-time job opportunities. Inviting retired colleagues to lecture and offer seminars.

Rewards for Academic and Technical Research - R&D Plan: promote engineering and academic research and to incorporate engineering schools or organizations to co-organize R&D Plan.

- Host forums and seminars: invite engineering experts, scholars, and competitors to collaborate and host forums and seminars.

- Organizational Sustainability Alliance: call on firms in CTCI's supply chain and competitors to promote eco-friendly and energy-conserving innovative techniques and green engineering.

- Moreover, to integrate engineering technology, finance, HR, and resources, and to collaborate on disaster-relief, and new or reconstruction engineering projects.

Forming a Lifetime Learning Environment - Community environmental education and cultural promotions: cohost routine regional and representational activities with local groups to be closer to the local community and facilitate in the promotions of environmental education and the local culture, as well as to enhance the Company's corporate image.

- Caring for the underprivileged groups: offer opportunities for charity sale and facilitate in setting up booths, donate computers to students in remote areas, and offer online engineering courses.

7. If the corporate social responsibility reports have received assurance from external institutions, they should state so below: In order to communicate with stakeholders and allow them to better understand our way of operation, we began publishing on an annual basis the CTCI Corporate Sustainability Report in 2008 to disclose the information concerning our materiality issues and according to the GRI Guidelines. We also regularly submit the report to the British Standards Institution (BSI) for verification. In fact, we are the first private business in Taiwan to have our CSR report pass the

58

Evaluation Item



Principles for

TWSE/GTSM Listed



BSI verification. In the G4.0 Guidelines proclaimed in 2014, the GRI advised organizations that they should disclose information more comprehensively and more transparently. Upholding the attitude of being responsible and the spirit of information accessibility and transparency, we disclosed corporate information using the G4.0 Guidelines. Also, we passed the AA1000:2008 High Level accreditation from BSI and the GRI G4.0 Guidelines. All these point to one thing: We were a pioneer reporter using the GRI G4.0 Guidelines. In addition, to ensure that stakeholders at home and abroad can better understand the actual CSR activities at CTCI and to connect with the world, contents of this report also correspond to the Ten Principles of the UN Global Compact, the Seven Core Subjects in ISO2600:2010, and the Determination Items of the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies. All these show that the CSR activities and information disclosed in this report are complete and transparent. With the concerted effort of Company’s managers and all employees, we won numerous awards and credits in 2016 to prove our achievements in promoting CSR. Honor Events : Corporate Social Responsibility

Awards Description

Emerging Markets Index Membership for Dow Jones Sustainability Indices (DJSI)

CTCI has been continuously selected for Emerging Markets Index Membership for DJSI with excellent performance and is a pioneer enterprise in the field of Engineering & Construction Industry in Taiwan.

Recognized by the Taiwan Institute for Sustainable Energy (TAISE) with the Honor of Taiwan Corporate Sustainability Awards

(TCSA)

CTCI is recognized by TAISE and honored with“Outstanding Corporate Sustainability Professional” to Group

Chairman John T. Yu, ”Sustainable Corporate Award”, gold medal under the Taiwan Top 50 Corporate Sustainability Report Award, “Growth through Innovation Awards,” as well as “Transparency and Integrity Awards” in 2016. CTCI will continue to improve the transparency of corporate governance, build reliable quality engineering, and take care of employees to form a harmonious partnership, while also focusing on environmental protection, reduction of resources waste, corporate image enhancement and achieving sound financial performance to fulfill CSR.

Ranked as Grade A++ in the Information Disclosure and Transparency Rankings for TWSE-listed and GTSM-listed Companies

CTCI has been performing rather well regarding information disclosure, and was awarded Grade A+ in 2010 and 2011, while the top ranking Grade A++ was issued from 2012 to 2015. Such an achievement demonstrates that CTCI’s efforts have been well recognized.

Evaluated as Top 5% in the “2015 Corporate Governance Evaluation System”

CTCI was evaluated as top 5% of the TWSE listed companies and the Taipei Exchange (TPEx) listed companies.

59

Evaluation Item



Principles for

TWSE/GTSM Listed



Top 50 for Excellence in Corporate Social Responsibilities by CommonWealth Magazine

CTCI’s accomplishment of CSR activities was recognized by the CommonWealth Magazine, listed 28th among Top 50 of the Excellence in Corporate Social Responsibilities Award this year for the group of large enterprises (with annual turnover exceeding NT$10 billion). With good performance in the aspects of corporate governance, corporate commitment, social participation, and environmental protection, CTCI was able to stand out from various large enterprises and well-recognized with its achievement in corporate sustainability.

Listed among the Top 2000 Enterprises by CommonWealth Magazine and retains Top 1 in the contractor sector

The ranking of 2016 Taiwan's Top 2000 Enterprises was based on the consolidated revenues and profits of the companies for 2015, a result of the survey conducted by CommonWealth Magazine. In terms of the overall ranking in the Top 650 Service Enterprises, CTCI Corporation ranked as the 22nd this year, retained Top 1 in the contractor sector for years in a row.

BSI Green Sustainability Practice Award With the determination and actions in carrying out sustainable development and fulfilling corporate social responsibilities, CTCI has been awarded Green Sustainability Practice Award by BSI.

3.4.6 The Ethical Corporate Management

Evaluation Item

Implementation Status Deviations from “Ethical

Corporate Management Best Practice Principles for TWSE/GTSM-

Listed Companies” and reasons


1. Establishment of ethical corporate management policies and programs

(1) Does the company declare its ethical corporate management policies and procedures in its

V The Company established “Corporate Governance Principles”, “Ethical Corporate Management Principles “, “Codes of Ethical Conduct”, and “Procurement Personnel Code of Conduct”. Directors, and managers should obey the “Codes of Ethical Conduct”, when

None

60

Evaluation Item





guidelines and external documents, as well as the commitment from its board to implement the policies?

(2) Does the company establish policies to prevent unethical conduct with clear statements regarding relevant procedures, guidelines of conduct, punishment for violation, rules of appeal, and the commitment to implement the policies?

(3) Does the company establish appropriate precautions against high-potential unethical conducts or listed activities stated in Article 2, Paragraph 7 of the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies?

they execute their function. Meanwhile, all employees are requested to follow the laws and ethics standard and behavior principles clearly defined in “Codes of Ethical Conduct”.

2. Fulfill operations integrity policy (1) Does the company evaluate business partners’

ethical records and include ethics-related clauses in business contracts?

(2) Does the company establish an exclusively (or concurrently) dedicated unit supervised by the Board to be in charge of corporate integrity?

(3) Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it?

(4) Has the company established effective systems for both accounting and internal control to

V The Company concluded the commerce contracts based on mutual trust and good faith management principles.

The Company assigned Human Resources Department to be in charge of corporate integrity related matter and report to the board meeting periodically.

It is forbidden to have preferential affairs between employee and party. All employees can’t pay or ask for present, entertainment, commission or bribe for the advantage of themselves or third party, when they conduct their work.

The Company set up effective and faultless accounting system and internal control program to manage out of ordinary affairs. The Company also set up a specialized independent audit unit to execute yearly auditing plans and

None

61

Evaluation Item





facilitate ethical corporate management, and are they audited by either internal auditors or CPAs on a regular basis?

(5) Does the company regularly hold internal and external educational trainings on operational integrity?

report the audit results to supervisors every month. The audit unit also has to attend the Audit Committee and Board of Directors to report the faults and extraordinary affairs in their internal control inspection, and push related units to take modified measures and trace the results quarterly until they are fully- modified.

The principles of the Company are professionalism, integrity, teamwork and innovation. We delivered the related training coursed to train our employees and posted the poster at office and site to remind our employees as well.

3. Operation of the integrity channel (1) Does the company establish both a

reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up?

(2) Does the company establish standard operating procedures for confidential reporting on investigating accusation cases?

(3) Does the company provide proper whistleblower protection?

V The Company has the Accusation management regulation with a special telephone line and an investigation team to deal with the graft and bribe events.

The Company has the regulation of Reward and Punishment to deal with the above cases.

None

4. Strengthening information disclosure (1) Does the company disclose its ethical corporate

management policies and the results of its implementation on the Company’s website and MOPS?

V The Company has disclosed the “Ethical Corporate Management Best Practice Principles” on its website and MOPS.

None

62

Evaluation Item





5. If the company has established its own ethical corporate principles based on “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies”, please describe the difference between operation practice and the ethical corporate principles: According to the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies”, the Company has obtained the approval of the “Ethical Corporate Management Best Practice Principles” (the “Principle”) in the 5th meeting of the 13th term Board of Directors in December 17th, 2014. The all employees, officers and board members should comply with the Principle. Furthermore, the Principle was amended and renamed to the “Ethical Corporate Management Principles” for the expansion of applicable scope to whole CTCI Group.

6. Other important information to facilitate understanding of the company’s good faith management implementation.(e.g. To announce the company’s determination to implement good faith management to business vendors, to invite vendors to participate in related education, and to review and revise the company’s ethical corporate management best practice principles) The Company strictly observed “Company Act”,” Securities and Exchange Act”, related rules for TWSE/GTSM-Listed Companies and other commerce ordinances to implement the good faith management. Review and revise the Company’s internal management principles including “Corporate Governance

Principles”, “Ethical Corporate Management Principles “, “Codes of Ethical Conduct”, and “Procurement Personnel Code of Conduct” based on the development of ethical corporate management principles.

3.4.7 Corporate Governance Guidelines and Regulations

Please refer to the Company’s website at www.ctci.com

http://www.ctci.com/

63

3.4.8 Other Important Information Regarding Corporate Governance A. Training program for directors

Title Name Study period

Sponsoring Organization Course Training

hours From To

Chairman John T. Yu 2016/05/06 2016/05/06

Taiwan Corporate Governance Association

The trends of corporate governance: the top 6 issues focused by the BOD in 2016

3.0

2016/08/05 2016/08/05 Taiwan Corporate Governance Association

How to deal with modern white - collar crime

3.0

Vice Chairman

John H. Lin



3.0

2016/06/16 2016/06/16 Securities & Futures Institute

The ceremony of the 2nd Corporate Governance Evaluation and the lecture

3.0



3.0

Managing Director

Andy Sheu 2016/05/06 2016/05/06



3.0



3.0


Johnny Shih 2016/07/06 2016/07/06


The trends of the tax changes 3.0

2015/12/23 22015/12/23 Taiwan Academy of Banking and Finance

The practical operation of the BOD and the corporate governance

3.0


Jack Huang 2016/05/06 2016/05/06



3.0


The structure of the corporate governance and the operation of the BOD

3.0


Frank Fan 2016/05/06 2016/05/06



3.0



3.0

Director Quintin Wu 2016/07/12 2016/07/12 Securities & Futures Institute

Strengthen corporate governance by the fraud prevention and the business secret protection

3.0

64


Prevent the insider trading 3.0

Director Yancey Hai 2016/07/28 2016/07/28


Strengthen corporate governance by the fraud prevention and the business secret protection

3.0


The threats of emerging internet and its trends

3.0

Director Wenent Pan 2016/01/26 2016/01/26

Securities & Futures Institute

「2016 Corporate Governance - Insider

trading and the Social Responsibility」

Seminar

3.0



3.0

Director Bing Shen 2016/05/06 2016/05/06



3.0



3.0

Director Teng-Yaw Yu 2016/05/06 2016/05/06



3.0

2016/08/10 2016/08/10 Business Council for Sustainable Development

The trend of low carbon development after Paris Agreement

3.0

Director Michael Yang



3.0


The ceremony of the 2nd Corporate Governance Evaluation and the lecture

3.0



3.0

B. Internal Material Information Disclosure Procedure

According to the letter of Financial Supervisory Commission dated March 16th, 2009 and consulting with “Internal Material Information Disclosure Procedure” which is announced by Taiwan Stock Exchange Corporation (TWSE), the Company has obtained the approval of the “Regulations Governing Prevention of Insider Trading” (the “Regulation”) in the 9th meeting of the 11th term Board of Directors in August 28th, 2009. The Regulation is the code of conduct for Directors, Supervisors, Managerial personnel, and the persons regulated under the Regulation and it includes the scope of Internal Material Information, and the laws, regulations, orders that people forenamed should comply with. The Company has provided the Regulation to all Directors and Supervisors, and also disseminates all employees.

65

C. Code of Business Conduct and Ethics for the Board of Directors and Managers

CTCI CORPORATION

Code of Business Conduct and Ethics for the Board of Directors and Managers Amended on December 19th, 2007

Amended on August 8th, 2014 Amended on June 22th, 2016

Article 1 (Purpose of and basis for adoption) Pursuant to Article 6 of CTCI’s Corporate Governance Principles, CTCI’s Codes of Ethical Conduct are established to pursue the greatest interest of CTCI and devote in continuous business development. And for stakeholders to understand the content of ethical standards and code of conduct that have been complied by directors, managers and all employees in the execution of their duties. CTCI’s Codes of Ethical Conduct shall be approved by a resolution of the Board of Directors.

Article 2 (Scope) The Codes of Ethical Conduct are applicable to CTCI’s subsidiaries, and other institutions or juridical persons which are substantially controlled by CTCI ("business group"). The term “CTCI employees” in this Codes of Ethical Conduct refers to directors, supervisors, and managerial officers (including deputy assistant general managers or their equivalents, chief financial and chief accounting officers), and employees.

Article 3 (Compliance of ethical conduct) CTCI directors and managers shall comply with all regulations and the Codes of Ethical Conduct. They shall set as examples to CTCI employees, promoting the practice of this Codes of Ethical Conduct, pursuing high-level compliance of this Codes. CTCI directors and managers shall fulfill the duty of care of a good custodian, and as their objective the pursuit of CTCI’s overall benefit. Moreover, CTCI employees may not damage CTCI’s rights and interests for the benefit of a specific individual or specific group, and shall treat all shareholders fairly. In the execution of their duties, CTCI employees shall focus on teamwork, abandon sectionalism, diligently comply with the principle of honesty and credibility, be proactive, responsible and prudent.

Article 4 (Fair hiring and anti-discrimination policy) No form of preferential treatment or discrimination should take place in any form based on race, sex, religious beliefs, political party affiliation, sexual orientation, position, nationality, or age.

Article 5 (Safe and healthy working environment) CTCI employees should work to maintain a safe and healthy environment, and there should be no instances of harassment, or violent and threatening behavior.

Article 6 (Prevention of conflicts of interest) When a proposal at a given board of directors meeting concerns the interest of CTCI, the concerned person shall not participate in discussion of or voting on the proposal and shall recuse himself or herself from the discussion or the voting, and may not exercise voting rights as proxy for another director. Where a director or manager, for himself/herself or on behalf of others, enters into a sale/purchase or loan transaction, or conducts any legal act with CTCI, he/she shall disclose detail information of the above situation to the audit committee.

Article 7 (Prevention of conflicts of interest) If a director engages in conduct involving competition with CTCI, pursuant to the Company Law, he or she shall report the matter in advance to a general meeting of shareholders and obtain approval. If a manager engages in conduct involving competition with CTCI, in accordance with the Company

66

Law, he or she shall report the matter in advance to board of directors and obtain approval.

Article 8 (Minimizing incentives to pursue personal gain) CTCI employees shall faithfully execute their duties in the interests of all shareholders. As regards procurement and supply arrangements related to CTCI’s operations, cooperation arrangements, strategic alliances or other commercial opportunities or opportunities from which profit may be gained with which CTCI employees become familiar as the result of executing their functional duties, CTCI employees shall give priority to providing such opportunities to CTCI or to preserving the interests of the Company, and must not take advantage of such opportunities to seek personal gains for themselves or third parties. CTCI employees shall prevent the following activities: 1.Seeking an opportunity to pursue personal gain by using company property or information or taking

advantage of their positions. 2.Competing with CTCI or damage CTCI’s interest through any methods.

Article 9 (Fair trade) CTCI employees shall treat all suppliers and customers, competitors, and employees fairly, and may not obtain improper benefits through manipulation, nondisclosure, or misuse of the information learned by virtue of their positions, or through misrepresentation of important matters, or through other unfair trading practices.

Article 10 (Insider trading) Work-related knowledge and any information that could affect the share price of CTCI stock, before it has been disclosed as public information, all information shall be kept confidential pursuant to The Securities and Exchange Act regulations, and shall not to be used to engage in insider trading.

Article 11 (Confidentiality) Company employees’ work-related knowledge, confidential information or customer data is to be carefully managed, and except for that required for company disclosure or publicized as required by law, data should not be leaked to other persons, or used for any non-work related matter. This Article also to employees who have left the Company. CTCI employees are obliged to keep the Company and its clients’ information confidential. Information shall not be disclosed prior to Company’s authorization or as required by law, and leaked to other persons or used for any non-work related matter. The confidential information includes, but is not limited to, any undisclosed information that may be utilized or divulged by competitors and consequently cause damage or loss to the Company or its clients, as well as information regarding the investments, inventions, business secrets, technical data, product design, professional manufacturing knowledge, finance, accounting and intellectual property rights of CTCI.

Article 12 (Safeguarding and proper use of company assets) CTCI employees have the responsibility to safeguard company assets and to ensure that they can be effectively and lawfully used for official business purposes; any theft, negligence in care, or waste of the assets will all directly impact CTCI's profitability.

Article 13(Legal compliance) CTCI employees shall comply all regulations and company’s policies and procedures.

Article 14 (Encouraging reporting on illegal or unethical activities) CTCI shall raise awareness of ethics internally and encourage employees to report with defined identity or anonymously upon suspicion or discovery of any activity in violation of a law or regulation or the Codes of Ethical Conduct. The company shall use its best efforts to ensure the safety of informants and protect them from reprisals.

Article 15 (Procedures for penalizing)

67

CTCI employees in violation of the Codes of Ethical Conduct shall be penalized according to the Company’s Rewards and Punishment related policy. Employees who are in significant violation of this Conduct shall be reported to Board of Directors.

Article 16 (Procedures for exemption) In the event that a director or supervisor wishes to be exempted from the applicability of the Codes of Ethical Conduct, he or she should explain said opportunity, information or the specific details of the competition with CTCI to the Board of Directors, and the reasons why there is no conflict with CTCI’s interests; this shall then be approved by a resolution of the Board of Directors. Upon approval by a resolution of the Board of Directors of an exemption of applicability as provided in the preceding paragraph, CTCI shall immediately disclose information including the titles and names of the personnel exempted, the date of board approval of the exemption, the period of the exemption, the reasons for exemption, and the standard(s) has been exempted on the Market Observation Post System (MOPS).

Article 17 (Enforcement and method of disclosure) CTCI's Codes of Ethical Conduct, and any amendments to it, shall enter into force after it has been adopted by the board of directors, and shall disclose in CTCI annual reports on its website.

68

D. Accusation Management Regulations

CTCI CORPORATION

Accusation Management Regulations

1.0 Purpose This regulation is specially formulated in order to effectively control the accusation case of the company and establish smooth accusation channel and fair investigation procedure, so as to prevent blackmail and correct possible undue behavior.

2.0 Scope

2.1 Accuser Including official, contracted and dispatched in-service employee of the company, however, if external personnel of the company finds any significant malpractice, such personnel can be included as accuser.

2.2 Scope of accusation Accusation may be proposed if the accused object violates laws and decrees, rules and regulations of the company, or has other undue behaviors affecting the rights and interests of the company.

3.0 Definition

3.1 Individual accusation A employee proposes real-name accusation independently in his/her own name.

3.2 Joint accusation Two (inclusive) or more employees propose real-name accusation jointly.

3.3 Blackmail The accusation letter proposed anonymously.

4.0 Responsibility

4.1 Human Resources Department Responsible for accepting accusation case and proposing suggestion on preliminary examination, sending the case for Rewards and Punishment Committee for hearing, and handing subsequent matters thereof according to hearing result.

4.2 Investigation group The trans-department group formed by the members as approved by Rewards and Punishment Committee, which will be responsible for investigating whether the accusation contents are true and proposing investigation report.

4.3 Rewards and Punishment Committee Responsible for hearing the accusation case preliminary examination proposal and accusation case investigation report, and proposing suggestions on punishment.

4.4 Each Department Relevant personnel of each department shall coordinate to assist investigation group to execute relevant investigation works.

5.0 Activity

5.1 Operation procedure Subject to Attachment 1 - Flow Chart of this Regulation.

5.2 Accusation The accuser shall fill in "Accusation Letter" (Attachment 2), the accusation matter must conform to the scope as prescribed in Article 2.2 hereof, besides, accuser shall provide specific descriptions and relevant evidences on the concerned person, matter, time, place and object etc., and submit the such letter to the special accusation e-mail box of Human Resources Department or send it in confidential paper copy. Employee may use accusation special line to report the

69

accusation case, provided such employee shall still provide relevant accusation documents and evidences as mentioned above. When accepting joint accusation, it will be handled as single case, and representative shall be elected upon accusation for the convenience of contact. When the accusation case comes from outside the company, the unit or employee that receiving the accusation materials shall submit the complete accusation materials to Human Resources Department at first time for subsequent handling, if the affiliated department of accused object has any concealment or delay that causing impact on the handling time and affecting the rights and interests of the company, it shall be punished according to relevant regulations of the company.

5.3 Case acceptance After Human Resources Department has accepted the accusation case, if necessary, it may ask the accuser to supplement relevant descriptions or evidences, conduct preliminary examination according to relevant contents of accusation materials, propose suggestions on whether or not to establish trans-department investigation group for investigation, fill in "Accusation Preliminary Examination Proposal" (Attachment 3) ans submit it to CTCI Rewards and Punishment Committee together with other case materials for review and approve whether or not to open a case for investigation. If it is not belong to the scope of accusation or the evidences proposed by accuser are not detailed and true, Human Resources Department shall ask the accuser for supplement. If the accusation case is blackmail, Human Resources Department may not handle it.

5.4 Investigation If the CTCI Rewards and Punishment Committee decides to open a case for investigation, it shall designate relevant unit representatives to form investigation group and assign group convenor to start investigation according to the situation of accusation case. In the course of investigation, Human Resources Department shall inform relevant units that shall cooperate to assist in investigation according to the investigation plan of the investigation group. When necessary, investigation group may interview relevant personnel or ask relevant personnel to provide relevant materials to assist in investigation. After the completion of investigation, investigation group shall submit investigation report to Human Resources Department.

5.5 Punishment After Human Resources Department has received the investigation report, it shall convene the meeting of Rewards and Punishment Committee pursuant to "CTCI Employees Reward and Punishment Regulations" to hear the accusation case, and propose punishment suggestions according to the preceding Regulation. Then Human Resources Department will submit the complete report contents to the Chairman for review and decision.

5.6 Response For any accusation case, Human Resources Department shall respond to the accuser in writing on the handling result thereof. For false accusation or fling abuses, the responding content shall include the reminder on relevant legal responsibility.

5.7 Confidentiality obligation Responsible employee of Human Resources Department and all members of Rewards and Punishment Committee and investigation group shall bear confidentiality obligation for the materials of accuser.

6.0 Reference document

CP-319-B CTCI Employees Reward and Punishment Regulations 7.0 Attachment

Attachment 1 Work Flow Chart Attachment 2 Accusation Letter Attachment 3 Accusation Preliminary Examination Proposal

70

3.4.9 Internal Control System A. Statement of Internal Control System

71

B. Where a CPA has been hired to carry out a special audit of the internal control system, furnish the CPA audit report: None

3.4.10 In Recent Years until the Annual Report being Published, Violation of Internal Control Policies

by Employees：None

3.4.11 Major Resolutions of Shareholders’ Meeting and Board Meetings A. Major resolutions of Shareholders’ Meeting of Year 2016

Date Resolutions of Shareholders’ Meeting Action Arisen

2016.06.22

1. Approval of amendment to the “Articles of Incorporation” of the Company

The resolution has been made and implemented.

2. Adoption of the Company’s 2015 Business Report, Financial Statements and Consolidated Financial Statements.


3. Adoption of the Company’s distribution plan of 2015 earnings.

The ex-dividend date was on August 1st, 2016, and cash dividend was paid on August 19th, 2016. In accordance with the total amount of common shares outstanding, the cash dividend per share had been adjusted to NT$ 2.39601453 actually.

4. Approval of removing the non-competition restrictions on new representative of juristic-person director.(Mr. Michael Yang)


B. Major resolutions of the Board Meeting in recent years until the annual report being published: 2016.03.18 Approval of amendment to the “Articles of Incorporation” of the Company.

Approval of the distribution plan of the 2015 directors’ and employees’ remuneration. Approval of the Fiscal 2015 business report, financial reports and consolidated reports. Approval of the distribution plan of Fiscal 2015 earnings. Approval of “Statement of Internal Control System for the Year 2015”. Approval of the convening of the 2016 Annual General Meeting. Approval of the place and the period of time for shareholders to submit proposals of the 2016 Annual General Meeting. Approval of the update of the Company’s paid-in capital registration. Approval on loans to subsidiaries for working capital requirement granted by the Company. Approval of the adjustment of member and assistants of the Functional Committee

2016.05.06 Report on Consolidated financial reports as of March 31, 2016.

Approval of the amendment to the Company’s “Internal Control Systems” and the internal rules. Approval of increase investment in Malaysia. Approval of the Company to close its branch (liaison) office in Seoul, Korea. Approval of the update of the Company’s paid-in capital registration. Approval of removing the non-competition restrictions on new representative of juristic-person director. Approval of the convening of the 2016 Annual General Meeting. (Supplemental)

2016.06.22 Approval of the ex-dividend record date of 2016. Approval of the incorporation of a joint venture in Malaysia. Approval of the update of the Company’s paid-in capital registration.

Approval of the amendment to the Company’s internal rules. 2016.08.05 Report on Consolidated financial reports as of June 30, 2016.

72


Approval of investing CTCI&HEC Water Business Corporation. Approval of investing Blue Whale Water Technology Co., Ltd. Approval of investing Ever Victory Global Limited. Approval of amendment to the “Corporate Governance Principles”.

2016.09.19 Approval in the cash injection of subsidiaries. 2016.11.04 Report on Consolidated financial reports as of September 30, 2016.

Approval of change of independent auditors of the Company. Approval on loans to subsidiaries for working capital requirement granted by the Company. Approval of the amendment to the “The Procedures for halt and resumption applications”.

2016.12.13 Approval of the budget of 2017.

Approval of the Year 2017 Audit Plan. Approval on loans to subsidiaries for working capital requirement granted by the Company. Approval of the prescription/amendment to the Company’s “Internal Control Systems” and the internal rules. Approval of donating to CTCI Education Foundation. Approval of the adjustment of managerial officers of the Company. Approval of the removing the non-competition restrictions on a new managerial officer. Approval of establishing the Nominating Committee. Approval of adoption of the “Regulations Governing the board Performance Evaluation”. Approval of the issuance of 2017 Employee Stock Options. Approval of the average salary increase rate of 2017.

Approval of the remuneration of the management officers of the Company. Approval of the amendment to the remuneration of the Chairman and Vice Chairman of the Company.

2017.03.17 Approval of the Fiscal 2016 business report, financial reports and consolidated reports. Approval of the distribution plan of Fiscal 2016 earnings. Approval of “Statement of Internal Control System for the Year 2016”. Approval of the amendment to the Company’s “Internal Control Systems”. Approval of electing the Company’s 14th term Directors by shareholders’ meeting. Approval of nominating the Company’s 14th term director candidates. Approval of the lifting of newly-elected directors of non-competition restrictions by shareholders’ meeting.

Approval of the convening of the 2017 Annual General Meeting. Approval of the place and the period of time for shareholders to submit proposals of the 2017 Annual General Meeting. Approval on loans to subsidiaries for working capital requirement granted by the Company. Approval of the incorporation of a joint venture in Malaysia. Approval of the incorporation of a joint venture in Netherlands and establishing the branch in Oman. Approval in the cash injection of subsidiaries. Approval of the adjustment of managerial officers of the Company. Approval of changing the accounting officer. Approval of the removing the non-competition restrictions on a new managerial officer.

Approval of the subscribers and the exercisable units of the 2017 Employee Stock Options. 3.4.12 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to

73

Important Resolutions Passed by the Board of Directors None

3.4.13 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, President,

and Heads of Accounting, Finance, Internal Audit and R&D April 30th, 2017

Title Name Date of Effective Date of Dismissal Reason for Dismissal

Accounting Officer

Shin-Hwei Lin June 13th, 2008 March 18th, 2017 Position Adjustment

74

3.5 Professional fee of CPA 3.5.1 Information of CPA

Accounting Firm Name of CPA Audit Period Note

PriceWaterHouseCoopers Shih-Jung Weng Shu-Chiung Chang 2016.01.01-2016.12.31 -

3.5.2 Scale of professional fee of CPA Unit: NT$ thousands

Item Amount (NTD)

Audit Fee Non-audit Fee Total

1 Less than 2,000

2 2,000 ~ 4,000 (inclusive of 2,000) 3,333 3,333

3 4,000 ~ 6,000 (inclusive of 4,000) 5,854

5,854 4 6,000 ~ 8,000 (inclusive of 6,000)

5 8,000 ~ 10,000 (inclusive of 8,000)

6 More than 10,000 (inclusive of 10,000)

Unit: NT$ thousands

Accounting Firm Name of CPA Audit Fee

Non-audit Fee

Audit Period Note System Design

Registration Human

Resource Other

(Note1) Total

PriceWaterHouseCoopers Shih-Jung Weng

5,854 998 300 0 2,035 3,333 2016.01.01~2016.12.31

Note 1 Shu-Chiung Chang 2016.01.01~2016.12.31

Note 1: The (other) professional fees except audit fee include: transfer-pricing report NT$683 thousand, employee stock options NT$60 thousand, the consultant fee of Consolidated Financial Report template NT$1,292 thousand.

Note 2: In the event that the CPA firm is changed and the audit fees paid by the company in the concurrent year are lower than the preceding year: None Note 3: In the event that the audit fees paid by the company are reduced by 15% compared to the preceding year: None 3.6 Information on replacement of CPA : None 3.7 The Company's Chairman, President and Managers Responsible for Finance or Accounting who have Held a Post in the CPA Office or its Affiliated

within the Latest Year : None

75

3.8 Changes in Shareholding of Directors, Managers and Major Shareholders Unit: Share

Title Name

2016 As of April 30, 2017

Holding Increase

(Decrease)

Pledged Holding Increase

(Decrease)

Holding Increase

(Decrease)

Pledged Holding Increase

(Decrease)

Chairman


0 0 0 0

Representative: John T. Yu

0 0 0 0

Vice Chairman


0 0 0 0

Representative: John H. Lin

(18,000) 0 (45,000) 0

Managing Director

Sino Environmental Services Corporation

0 0 0 0

Representative: Andy Sheu

230,000 0 0 0


Johnny Shih 0 0 0 0


Jack Huang 0 0 0 0


Frank Fan 0 0 0 0

Director Quintin Wu 0 0 0 0

Director Yancey Hai 0 0 0 0

Director Leslie Koo Note1 0 0 0 0

Director Wenent Pan 0 0 0 0

Director Bing Shen 0 0 0 0

Director

Crown Asia 2 Investment Limited

0 0 0 0

Representative: Takao Kamiji Note2

0 0 0 0

Representative: Michael Yang Note3

(61,750) 0 0 0

Director

CTCI Foundation 0 0 0 0

Representative: Teng-Yaw Yu

0 0 0 0

Managerial Officers John T. Yu 0 0 0 0

Managerial Officers John H. Lin (18,000) 0 (45,000) 0

Managerial Officers Andy Sheu 230,000 0 0 0

Managerial Officers Michael Yang (61,750) 0 0 0

Managerial Officers Mark W. H. Yang (80,000) 0 0 0

Managerial Officers M. H. Wang 0 0 0 0

Managerial Officers Pao-Yao Pan 0 0 0 0

Managerial Officers Ming-Cheng Hsiao 0 0 0 0

Managerial Officers Tien-Nan PanNote4 0 0 0 0

Managerial Officers Ching-Lin Hsu Note5 0 0 0 0

Managerial Officers Andrew Tsai 20,250 0 0 0

76

Managerial Officers Jung-Yu Han 0 0 2,000 0

Managerial Officers Chen-San Hu Note6 (248,000) 0 0 0

Managerial Officers Todd Chen 2,000 0 (69,099) 0

Managerial Officers T. C. Huang Note7 0 0 245,388 0

Managerial Officers Teh-Ming Tao 48,000 0 0 0

Managerial Officers Steve Jean 0 0 0 0

Managerial Officers M. G. Lee 0 0 0 0

Managerial Officers Po-Chien Wang 17,000 0 3,000 0

Managerial Officers Ching-Hsiang Tseng 0 0 0 0

Managerial Officers Shen-Peng Liao 0 0 0 0

Managerial Officers Tsai-Ming Wang (280,912) 0 0 0

Managerial Officers Min-Li Lee 0 0 0 0

Managerial Officers Jing-Shing Wu (8,307) 0 0 0

Managerial Officers J.H. Chen 12,000 0 6,000 0

Managerial Officers Y. S. Liao (98,000) 0 0 0

Managerial Officers Ting-Kuo Li Note8 0 0 92,142 0

Managerial Officers SH Lin 5,000 0 0 0

Managerial Officers & CFO

Patrick Lin 34,000 0 0 0

Accounting Officer Ai Cheng Ho Note9 0 0 58,219 0

Note1: Be Dismissed on January 23, 2017 Note2: Be Dismissed on March 7, 2016 Note3: On Board on March 7, 2016 Note4: Be Dismissed on January 4, 2016 Note5: Be Dismissed on October 1, 2016 Note6: Be Dismissed on March 13, 2017 Note7: On Board on March 17, 2017 Note8: On Board on January 1, 2017 Note9: On Board on March 18, 2017

77

3.8.1 Shares Trading with Related Parties Unit: Share

3.8.2 Shares Pledge with Related Parties

None

Name Reason

for Transfer

Date of Transaction

Transferee

Relationship between Transferee and

Directors, Supervisors,

Managers and Major Shareholders

Shares Transaction Price (NT$)

Michael Yang Donation 2016.01.22 Chih-Min Lo Spouse 61,750 NA

M. H. Wang Donation 2016.05.20 Su-Hua Wu Spouse 10,000 NA

Tsai-Ming Wang

Donation 2016.06.04 Jia-Li Lee Spouse 303,912 NA

Jing-Shing Wu Donation 2016.06.08 Hsiu-Li Cheng Spouse 248,000 NA

Mark W. H. Yang

Donation 2016.07.05 Ping-Ping Cheng Spouse 200,000 NA

Y. S. Liao Donation 2016.07.15 Li-Jyuan Chen Spouse 98,000 NA

Todd Chen Donation 2017.02.08 Ren-Min Jiang Spouse 69,099 NA

78

3.9 Information Disclosing the Relationship between any of the Company’s Top Ten Shareholders

Name Shareholding

Spouse & Minor


Arrangement

The relationship between any of the Company’s Top Ten Shareholders

Remarks

Shares % Shares % Shares % Name Relation

CTBC BANK CO., LTD.(CTCI Corporation Employee Stock Ownership Trust)

70,437,399 9.23 0 0 0 0 None None

CTCI Foundation 60,862,051 7.97 0 0 0 0 None None

Fubon Life Insurance Co., Ltd.

53,125,000 6.96 0 0 0 0 None None

Chairman: Richard M. Tsai

0 0 0 0 0 0 None None

Blackrock Global Funds-Asian Growth Leaders

28,831,000 3.78 0 0 0 0 None None

American Funds Developing World Growth and Income Fund

16,667,000 2.18 0 0 0 0 None None

Eastspring Investments - Emerging Asia Equity Fund

16,514,000 2.16 0 0 0 0 None None

Chunghwa Post Co., Ltd.

15,233,000 2.00 0 0 0 0 None None

Chairman: Wen-Chi Weng

0 0 0 0 0 0 None None

USI Corporation 15,180,656 1.99 0 0 0 0 Asia

Polymer Corporation

Subordinate company of

USI Corporation’s

subsidiary

Chairman: Quintin Wu

0 0 0 0 0 0 Asia

Polymer Corporation

Chairman of Asia Polymer Corporation

Shin Kong Life Insurance Co., Ltd

14,867,000 1.95 0 0 0 0 None None

Chairman: Tung Chin Wu

0 0 0 0 0 0 None None

Asia Polymer Corporation

14,496,107 1.90 0 0 0 0 USI

Corporation

Parent company of

Asia Polymer Corporation’s shareholder

Chairman: Quintin Wu

0 0 0 0 0 0 USI

Corporation

Chairman of USI

Corporation

79

3.10 Shareholdings of the Company Directors, Supervisors, Managements, and Direct and Indirect Investments of the Company in Affiliated Companies

As of April 30, 2017

Affiliated Company

Investment of the Company

Directors, Supervisors,

Managements Direct and Indirect

Investment of the Company

Total Investment

Share % Share % Share %

CTCI Smart Engineering Corporation

59,098,624 97.09 99,841 0.16 59,198,465 97.25

CTCI Resources Engineering Inc. 16,765,048 93.14 1,000 0.01 16,766,048 93.15

Advanced Control & Systems Inc. 11,444,842 48.72 338,833 1.44 11,783,675 50.16

CTCI Development Corporation 169,000,000 100.00 0 0.00 169,000,000 100.00

CTCI Investment Corporation 140,200,000 100.00 0 0.00 140,200,000 100.00

KD Holding Corporation 38,457,105 57.58 305,563 0.46 38,762,668 58.32

CTCI (Thailand) Co., Ltd. 1,249,500 49.00 1,300,500 51.00 2,550,000 100.00

CTCI Overseas (BVI) Corporation 6,740,000 100.00 0 0.00 6,740,000 100.00

CTCI Engineering & Construction Sdn. Bhd.

450,000 60.00 300,000 40.00 750,000 100.00

CTCI Arabia Ltd. 500 50.00 500 50.00 1,000 100.00

CTCI Machinery Corporation 20,000,000 100.00 0 0.00 20,000,000 100.00

SINOGAL - Waste Services Co., Ltd. *0 30.00 *0 30.00 0 60.00

CTCI Americas, Inc. 100,000 100.00 0 0.00 100,000 100.00

CTCI Singapore Pte., Ltd. 5,100,000 100.00 0 0.00 5,100,000 100.00

CTCI & Partners Co., Ltd. 2,000,000 40.00 3,000,000 60.00 5,000,000 100.00

CCJV P1 Engineering & Construction Sdn. Bhd.

247,500 99.00 0 0 247,500 99.00

CTCI&HEC Water Business Corporation

25,500,000 51.00 0 0 25,500,000 51.00

*SINOGAL - Waste Services Co., Ltd. doesn’t issue any stock related certificates.

80

IV. Capital Overview 4.1 Capital and Shares 4.1.1 Source of Capital A. Issued Shares


Year /Month

Par Value (NT$)

Authorized Capital Paid-in Capital Remark

Shares Amount

(NT$) Shares

Amount (NT$)

Sources of Capital

Capital Increased

by Assets Other

than Cash

Other

1997.07 10 300,000,000 3,000,000,000 288,417,000 2,884,170,000 Retained Earnings

None

1998.07~

2000.06 10 520,000,000 5,200,000,000 476,000,000 4,760,000,000

Retained Earnings

None

2001.06 10 720,000,000 7,200,000,000 547,600,000 5,476,000,000 Retained Earnings

None

2003.12~

2004.03 23.38 720,000,000 7,200,000,000 571,620,484 5,716,204,840 ECB None

2004.08~

2006.08 10 720,000,000 7,200,000,000 598,000,000 5,980,000,000

Retained Earnings

None

2007.09~

2008.08 10 900,000,000 9,000,000,000 631,438,000 6,314,380,000

Retained Earnings

None

2010.01~

2011.04 10 900,000,000 9,000,000,000 698,666,648 6,986,666,480 CB & ESOP None

2011.07~

2015.12 10 900,000,000 9,000,000,000 760,508,848 7,605,088,480 ESOP None

2016.04 10 900,000,000 9,000,000,000 761,107,598 7,611,075,980 ESOP None Note 1

2016.05 10 900,000,000 9,000,000,000 762,514,598 7,611,075,980 ESOP None Note 2

2016.07 10 900,000,000 9,000,000,000 763,273,848 7,632,738,480 ESOP None Note 3

Note 1: 2016.04.13 MOEA Ruling Ref.No. 10501068390 Note 2: 2016.05.24 MOEA Ruling Ref.No. 10501109180 Note 3: 2016.07.19 MOEA Ruling Ref.No. 10501164430

B. Type of Stock

Share Type Authorized Capital

Remarks Issued Shares Un-issued Shares Total Shares

Common Share 763,273,848 136,726,152 900,000,000 Listed stock

81

4.1.2 Status of Shareholders As of April 30, 2017

Item Government

Agencies Financial

Institutions

Other Juridical Person

Domestic Natural Persons

Foreign Institutions & Natural Persons

Total

Number of Shareholders

0 48 68 18,330 324 18,770

Shareholding (shares)

0 203,038,581 156,768,913 90,098,875 313,367,479 763,273,848

Percentage (%) 0.00 26.60 20.54 11.80 41.06 100

4.1.3 Shareholding Distribution Status

Common Shares (The par value for each share is NT$10) As of April 30, 2017

Class of Shareholding (Unit : Share)

Number of Shareholders

Shareholding (Shares) Percentage (%)

1 ~ 999 8,804 2,001,093 0.26

1,000 ~ 5,000 6,829 14,713,277 1.93

5,001 ~ 10,000 1,331 9,800,546 1.28

10,001 ~ 15,000 491 6,032,084 0.79

15,001 ~ 20,000 270 4,792,345 0.63

20,001 ~ 30,000 265 6,504,815 0.85

30,001 ~ 40,000 141 5,002,356 0.66

40,001 ~ 50,000 85 3,776,438 0.49

50,001 ~ 100,000 196 14,016,120 1.84

100,001 ~ 200,000 122 16,958,686 2.22

200,001 ~ 400,000 76 21,597,589 2.83

400,001 ~ 600,000 34 17,462,416 2.29

600,001 ~ 800,000 23 16,368,456 2.14

800,001 ~ 1,000,000 8 7,407,587 0.97

1,000,001 or over 95 616,840,040 80.82

Total 18,770 763,273,848 100.00

4.1.4 List of Major Shareholders


Shareholder's Name Shareholding

Shares Percentage (%)

CTBC BANK CO., LTD.(CTCI Corporation Employee Stock Ownership Trust)

70,437,399 9.23

CTCI Foundation 60,862,051 7.97

Fubon Life Insurance Co., Ltd. 53,125,000 6.96

Blackrock Global Funds-Asian Growth Leaders 28,831,000 3.78

American Funds Developing World Growth and Income Fund 16,667,000 2.18

Eastspring Investments - Emerging Asia Equity Fund 16,514,000 2.16

Chunghwa Post Co., Ltd. 15,233,000 2.00

USI Corporation 15,180,656 1.99

Shin Kong Life Insurance Co., Ltd 14,867,000 1.95

Asia Polymer Corporation 14,496,107 1.90

82

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

Item 2016 2015 As of March 31, 2017

Market Price per Share

Highest Market Price 51.80 55.50 54.50

Lowest Market Price 34.60 33.05 47.70

Average Market Price 44.56 46.57 50.08

Net Worth per Share

Before Distribution 22.40 22.36 22.73

After Distribution 19.80 19.96 NA

Earnings per Share

Weighted Average Shares 761,539 758,195 762,016

Diluted Earnings Per Share 2.92 2.69 0.58

Dividends per Share

Cash Dividends 2.60 2.40 NA

Stock Dividends

Dividends from Retained Earnings 0 0 0

Dividends from Capital Surplus 0 0 0

Accumulated Undistributed Dividends 0 0 0

Return on Investment

Price / Earnings Ratio 15.26 17.31 21.62

Price / Dividend Ratio 17.14 19.40 NA

Cash Dividend Yield Rate 0.06 0.05 NA Note 1: The Board of Directors has approved the 2016 earnings distribution and has not been

resolved by the Shareholder’s Resolution in 2017. Note 2: The 2017 Q1 consolidated financial statement has not been reviewed by CPA as of the date

of publication of the annual report. 4.1.6 Dividend Policy and Implementation Status A. Dividend Policies under Articles of Incorporation

When net profit occurs in the annual accounts, the Company shall first pay the profit-seeking enterprise income taxes and offset its losses in previous years and set aside a legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve has equaled the total capital of the Company; then set aside a special capital reserve in the amount equivalent to the balance of shareholders’ equity deficit of the current fiscal year. After having paid the corporate taxes and off-set past losses, 10% of the profit earned by the Company of each fiscal year shall be set aside as statutory reserve, except where such reserve has reached the total authorized capital of the Company. Furthermore, a special reserve shall be set aside. If there is recovery of the balance of shareholders’ equity deficit, the recovered amount shall be included in the distribution of the profit for the current year. The allocable profit for the current year, which is the balance after the profit distribution and covering losses aforementioned, together with the cumulative undistributed profit of the previous year shall be referred to as cumulative allocable profit, which shall be distributed according to shareholders’ resolutions. In order to meet the requirements in business expansion and industry growth, fulfilling future operating needs and stabilizing financial structure is the priority of the Company's dividend policy. Thus, the distribution of the cumulative allocable profit according to the shareholders’ resolutions Besides, the amount of shareholders’ bonus shall not be less than 50% of cumulative allocable profit

83

of the Company, in particular cash dividend shall not be less than 20%. B. Proposed Distribution of Dividend: Cash dividend: NT$2.60 per share C. The Company adopts a dividend policy of high earnings appropriation rate, and stipulates that at

least 80% of total attributable earnings should be appropriated as dividends. In recent years, the Company distributes all of its dividends in the form of cash. Historical information about dividends distribution is available on the Company’s website.

4.1.7 Impact of Stock Dividend Distribution on Business Performance, EPS and Return on

Investment: Not Applicable. 4.1.8 Employee and Directors' Remuneration A. Information Relating to Employee and Directors’ Remuneration in the Articles of Incorporation

When net profit occurs in the annual accounts, the Company may, after reserving a sufficient amount of the income before tax to cover the accumulated losses, with the resolution of the board of directors, distribute 1.5%~5% of the income before tax to pay to the employees as remuneration, and distribute no more than 1.5% of the income before tax to pay to the board of directors as remuneration. The remuneration could be stock or cash, and the employee remuneration could be distributed to the employees of subsidiaries of the Company under certain conditions. A report of the distribution of employee remuneration or the board of directors remuneration shall be submitted to the shareholders’ meeting.

B. The estimation basis on remuneration to Employees and Directors, the calculating basis on the

number of shares for share bonus and accounting treatment for the differences between the actual distributing amounts and estimations: Estimation of employee and Directors’ remuneration is based on prior experience and is recognized as current expenses. In case of a significant change (per Article 6 of Securities and Exchange Act Enforcement Rules, the amount is over NT$10,000 thousand while reaching 1% of audited net operating revenue or 5% of paid-in capital), the expense shall be adjusted accordingly in the year where the employee bonus was recorded. When the change is not significant, it shall be recorded in the following year as change in accounting estimation. If the amount remains variable at the date of Shareholders’ meeting in the following year, it shall be recorded in the following year as change in accounting estimation.

C. Profit Distribution of Year 2016 Approved in Board of Directors Meeting for Employee and Directors’

Remuneration a. Recommended Distribution of Directors’ Remuneration is NT$ 15 million, and Employee

Remuneration in cash is NT$66.484 million. b. Ratio of Recommended Employee Stock Bonus to Capitalization of Earnings: N/A c. Recounted EPS after Recommended Distribution of Employee and Directors’ and Supervisors’

Remuneration: NT$2.60 per share

84

D. Information of 2015 Earnings Set Aside to Employee Bonus and Directors’ and Supervisors’ Remuneration:

Unit: NT$

Actual Distribution A

Recognized Estimated Amount B

Variance C=A-B

Bonuses for Employees (Cash) 55,111,338 55,111,338 0

Remuneration for Directors (Cash)

15,000,000 15,000,000 0

The Estimation for 2015 Employee Bonus and Directors’ Remuneration is based on the percentage of earnings after tax and legal reserve consideration in the Articles of Incorporation. There is no difference between the actual 2015 Employee Bonus and Directors’ Remuneration distributed according to the resolution of the stockholders’ meeting and the Estimated Amount.

E. The Information of Top Ten Recipients of Employee Bonuses in 2015:

Name Title Amount(NT$)

Andy Sheu Vice Chairman of Management

Strategy Committee

789,605

Michael Yang President

Mark W. H. Yang Executive Vice President

M. H. Wang Executive Vice President

Pao-Yao Pan Executive Vice President

Ming-Cheng Hsiao Executive Vice President

Andrew Tsai Senior Vice President

Patrick Lin Senior Vice President

Ching-Lin Hsu Senior Vice President

Teh-Ming Tao Vice President

4.1.9 Buyback of Treasury Stock None 4.2 Issuance of Corporate Bonds None 4.3 Preferred Shares None 4.4 Issuance of Depository Receipt None

85

4.5 Employee Stock Options 4.5.1 Issuance of Employee Stock Options As of April 30, 2017

Type of Stock Option 4th Tranche

(Note) 5th Tranche

Effective Date by Regulatory Agency

2010/06/09 2017/04/05

Issue date 2010/06/18 2017/04/11

Units issued 22,000 units 20,000 units

Option shares to be issued as a percentage of

outstanding shares (%) 2.90 2.62

Duration

The duration for options is 6 years, during which employees may not transfer, pledge, or gift their options except to heirs. Upon the expiration of the grant period, unexercised options are deemed forfeited and the subscribers may no longer claim right to exercise the option and purchase those shares.

Conversion measures issue new share

Conditional conversion periods and percentages

Subscribers may exercise their options by the following schedule and proportion: The availability period The ceiling of option exercisable

(accumulate)

Regular Reward Less than 2 years 0% 0% In 2 years after the grant 50% 25% In 3 years after the grant 75% 50% In 4 years after the grant 100% 100%

Converted shares 20,296,750 Shares 0 Shares

Exercised amount NT$532,089,714 NT$0

Number of shares yet to be converted

0 Shares 20,000,000 Shares

Adjusted exercise price for those who have yet to

exercise their rights N/A NT$52.2

Unexercised shares as a percentage of total issued

shares (%) 0 2.62

Impact on possible dilution of shareholdings

Dilution to Shareholders’ Equity is limited.

Note: The expiration date of the 4th Tranche Employee Stock Options is Jun 17th 2016. The exercise date is rescheduled to April 22nd 2016 due to 2016 shareholders’ meeting.

86

4.5.2 List of Executives Receiving Employee Stock Options and the Top 10 Employees As of April 30, 2017

Title Name

No. of Option Shares

(thousand shares)

Option Shares as a Percentage of Shares issued (%)

Exercised Note7 Unexercised Note8 No. of Shares

Converted (thousand

shares)

Strike Price (NT$)

Amount (NT$

thousands)

Converted Shares as a

Percentage of Shares issued

(%)

No. of Shares

Converted (thousand

shares)

Strike Price (NT$)

Amount (NT$

thousands)

Converted Shares as a Percentage of Shares issued (%)

Vice Chairman of Management Strategy Committee Andy Sheu

6,032 0.79 1,982 4th:

NT$23.9-28.6

49,715 0.26 3,654 5th:

NT$52.2 190,738 0.48


Executive Vice President Mark W. H. Yang

Executive Vice President M. H. Wang

Executive Vice President Pao-Yao Pan

Executive Vice President Ming-Cheng Hsiao

Senior Vice President Tien-Nan PanNote1

Senior Vice President Ching-Lin Hsu Note2

Senior Vice President Andrew Tsai

Senior Vice President Jung-Yu Han

Senior Vice President Chen-San Hu Note3

Senior Vice President Todd Chen

Senior Vice President T. C. Huang Note4

Senior Vice President & CFO

Patrick Lin

Vice President Teh-Ming Tao

Vice President Steve Jean

Vice President M. G. Lee

Vice President Po-Chien Wang

Vice President Ching-Hsiang Tseng

Vice President Shen-Peng Liao

Vice President Tsai-Ming Wang

Vice President Min-Li Lee

Vice President Jing-Shing Wu

Vice President J.H. Chen

Vice President Y. S. Liao

Vice President Ting-Kuo Li Note5

Vice President SH Lin

Accounting Officer Ai Cheng Ho Note6

87

Note1: Be dismissed on January 4, 2016. Note2: Be dismissed on October 1, 2016. Note3: Be dismissed on March 13, 2017. Note4: On Board on March 17, 2017. Note5: On Board on January 1, 2017. Note6: On Board on March 18, 2017. Note7: The expiration date of the 4th Tranche Employee Stock Options is Jun 17th 2016. The exercise date is rescheduled to April 22nd 2016 due to 2016 shareholders’ meeting. Any unexercised

options shall be deemed forfeited. Note8: The Issue date of the 5th Tranche Employee Stock Options is Apr 11th 2016, and the subscribers may not request for exercising the stock option within 2 years after the date of issued.

Title Name

No. of Option Shares

(thousand shares)

Option Shares as a Percentage of Shares issued (%)

Exercised Unexercised No. of Shares

Converted (thousand

shares)

Strike Price (NT$)

Amount (NT$

thousands)

Converted Shares as a

Percentage of Shares issued

(%)

No. of Shares

Converted (thousand

shares)

Strike Price (NT$)

Amount (NT$

thousands)

Converted Shares as a Percentage of Shares issued (%)

Chief Engineer Hope Sun

775 0.10 206 4th:

NT$23.9-28.6

5,276 0.03 569 5th:

NT$52.2 29,722 0.07

Senior General Manager Cheng-Shen Wang

Chief Engineer W. P. Luo

Chief Information Officer Gino Tsai

Senior General Manager H.C. LEE

Senior General Manager Leon Chen

Senior General Manager Chun-Jung Hung

Senior General Manager Jin-Wen Chang

Senior General Manager E. C. Lin

Senior General Manager Chih-Ming Liu

4.6 Status of New Restricted Employee Shares

None 4.7 Status of New Shares Issuance in Connection with Mergers and Acquisitions

None 4.8 Financing Plans and Implementation

None

88

V. Operational Highlights 5.1 Business Activities 5.1.1 Business Scope A. Main areas of business operations

a. Markets: Hydrocarbon, Power, Environmental, Transportation and Industrial.

b. Services: Project Management, FS/FEED, Engineering, Procurement, Fabrication, Construction, Commissioning, Intelligent Solutions, Automation & Control, Clean Room & MEP, Structure Jacking & Movement, Ground Freezing and Operation & Maintenance.

c. Products: Stationary Equipment, Chemical Additives and Energy Management Software.

B. Revenue distribution

Unit；NT$ thousands

Major Divisions Total Sales in Year 2016 (%) of total sales

Engineering 65,524,588 92.93

Environment 4,553,643 6.46

General Trade 114,051 0.16

Others 317,393 0.45

Total 70,509,675 100.00

C. Main Services:

The main services of the Company include feasibility study & planning, project management, engineering, procurement, fabrication, construction, plant commissioning, QA & HSE, operation & maintenance, and information technology.

D. New products development: Not Applicable 5.1.2 Industry Overview A. Macro Business Outlook:

Based on the latest International Monetary Fund (IMF) report, the global economy growth became smooth in 2016 .The GDP growth rate for 2016 is projected at 3.1%. Looking into the future, the global economic growth will accelerate in 2017 and 2018 and the global GDP growth rate is estimated to achieve 3.4% in 2017 and 3.6% in 2018. IMF indicated that the outlook for advanced economies has improved for 2017–18, reflecting somewhat stronger activity in the second half of 2016 for some advanced countries (such as Spain, Germany, United Kingdom and Japan) as well as a projected fiscal stimulus by the new government in the United States. The picture for emerging market and developing economies (EMDEs) remains heterogeneous. The economies, most notably India, Brazil, and Mexico keep facing challenge and slow recovery; the growth rate in China will be a bit stronger due to the support by continued policy stimulus. IMF thinks the growth rate of global economy will be stronger given the improvement in emerging market and developing economies. According to data compiled by the International Monetary Fund (IMF), the global economic growth rate in 2016 was 3.1%, with 1.6% of advance countries, and 4.1% of emerging countries. The IMF predicts that the global economic growth rate will be 3.4% in 2017, with 1.9% of advance countries, and 4.5% of emerging countries. The Company is engaged in the engineering, procurement and construction (“EPC”) industry, which is closely tied to the overall economic conditions of our target markets. Many projects are initiated by government and consumption demands arising from the private sector. Therefore, the economic growth of the Company’s target markets is a good indicator of potential business opportunities amount in those areas. The following table is IMF’s predictions of the economic growth rates in our major markets, and we find the economy growth rate is improving. The forecast economic growth rates of 2017 in these countries are expected to outperform than 2016, such

89

as Taiwan, Singapore, Indonesia, Malaysia, Thailand, Vietnam, India ,USA, Mexico, Saudi Arabia, United Arab Emirates, Qatar, Kuwait and Oman. Most of the growth rates in the target markets also expect to outperform than average of the global, especially China, Indonesia, Vietnam and India are estimated to grow more than 5% in 2016. Overall, the Company will maintain the progressive and cautious mindset to participate in the bidding.

Forecast of Economic Growth Rate

Country 2016 2017

Global 3.1% 3.4%

Taiwan 1.0% 1.7%

China 6.5% 6.0%

Singapore 1.7% 2.2%

Indonesia 4.9% 5.3%

Malaysia 4.3% 4.6%

Thailand 3.2% 3.3%

Vietnam 6.1% 6.2%

India 7.2% 7.7%

United States 2.3% 2.5%

Mexico 1.7% 2.0%

Saudi Arabia 0.4% 2.3%

United Arab Emirates 2.3% 2.5%

Qatar 2.6% 3.4%

Kuwait 2.5% 2.6%

Oman 1.8% 2.6% Sources: International Monetary Fund (IMF) - Data and Statistics

B. Market Overview and Future Development: The Company is mainly engaged in the field of engineering design, procurement and construction. As a professional EPC lump sum turn-key provider, the Company is the only enterprise in Taiwan with a paid-in capital over NT$7.6 billion out of more than 510 companies registered with the Chinese Association of Engineering Consultants. The Company is the largest representative company of EPC industry in Taiwan. Besides, the majority of domestic engineering consultant companies focus on domestic market which is limited and competitive. When the large-scale projects are under the tendency of lump sum turn-key type and opening for international bidding, there is only a few companies can compete or alliance with international companies. The developments of small-scale companies will be constrained. The Company has entered the international markets and then built up the significant reputations in the industry for years, CTCI has become a designated partner for many internationally well-known companies to collaborate with in various domestic projects. Moreover, being the leader in Taiwan market with highly competitive advantages, the Company alone is capable of bidding projects with single contract amount over USD 1 billion.

C. The EPC Industry: Major clients of the Company cover in areas of refinery, petrochemical, general chemical, power, infrastructure, environmental protection, steel manufacturing, incinerator, storage, pharmaceutical and etc... The main service of the Company is to provide the EPC works in accordance to clients’ requirements. The EPC project is a professional-based integration, which requires an intensive engineers’ capability in completion timely and efficiently as required by the clients. For this reason, the entry barrier to enter this industry is high. More specifically, the Company’s services include feasibility study, engineering, procurement services, equipment supply, construction management, and commissioning services. The upstream of this industry is the clients with plant construction demands. The midstream is the EPC turnkey companies.

90

(The Company is at this section) The downstream is the third-party vendors, such as materials, equipment suppliers and construction firms.

D. Market Trend and Competition:

a. The Trend (1) Turn to EPC and Large Projects

Given a trend of incessant businesses expansion overtime, requirements from client are getting more complicated. In order to minimize the risks associated with large projects and reduce the transaction cost, clients turn to be reluctant to award specific sub-projects to different contractors and prefer EPC contractors instead.

(2) Turnkey Solution Clients’ requirements today request not only engineering design, procurement and construction, but advance planning, project financing, operation management, etc. To complete the project with low cost, high quality and timely are preferred by the clients. It’s undoubtedly a challenge to EPC contractors.

(3) Increasing BOT projects in Public Sector, and to internationalize and liberalize In the public sector, the governments tend to boost economic growth by investing infrastructure projects. In order to reduce the government fiscal burden and encourage private sector to get involve with government’s projects, it’s becoming popular to announce BOT (Build-Operate-Transfer) projects for public sector projects. The Company and the partner were jointly awarded Chung Li Sewerage System BOT Project, serving 200,000 households and improving the life quality in southern Taoyuan. In the future, we will also introduce BOT model to emerging markets’ clients. After Taiwan joined the World Trade Organization and signed government purchase agreements with other countries, the domestic market in Taiwan is now available to foreign construction companies on an equal basis. Taiwanese engineering companies aim business potentials in emerging markets overseas via collaboration with other engineering firms worldwide, and strengthening the capability in finance and legal resources to cope with the ever-changing environment.

(4) Technical Innovation Technical innovation becomes increasingly important to viability of EPC contractors. Generating value-added solutions to satisfy clients’ demands is a key challenge to engineering firms worldwide for maintaining competiveness on the market.

b. Competition There are around 16 EPC competitors globally, mainly in South Korea, Japan and Europe. In domestic market, there is not too much competitors with similar size. When the projects opened for international bidding, the competitors are mainly from Korea and Japan. However, the Company still has the geographically advantages in Taiwan. In oversea markets, the Company has no obvious differences on technologies. The keys to award the contracts are the experience of project construction and the ability to control the cost. The

Suppliers(Materials、

Equipments and

Construction)

Downstream

CTCI

Midstream

Client

(Owner)

Upstream

Engineering

diagrams,

Construction

procedures and

standards,

Construction

management

Requirement and

Specification

Completion of

construction or

installation

Completion

Certificate

91

Company has the advantage by developing China and South East Asia markets and setting local subsidies for years. For the largest petrochemical market in Middle East, the rigid competition from South Korea companies remains unchanged. Since the Company returned to middle East market in 2006, the Company already awarded projects in Qatar, Saudi Arabia and Oman. The Company will continuously strive for the overseas projects to enhance the market share in overseas market.

5.1.3 Research and Development Overview A. Research and Development Expenses in Past Three Years

Unit；NT$ thousands

Item/Year 2014 2015 2016

Operating Revenue 38,060,203 42,049,227 42,764,443

R&D Expense 81,630 81,217 101,816

R&D Expense as percentage of Operating Revenue (%)

0.21 0.19 0.24

Note: Independent Financial Statements were under IFRS B. Research and Development Projects Completed in Recent Years and Successful Technology or

Products Developed in Past Two Years

a. RD Projects Completed in Recent Years:

Item 2015 Projects 2016 Projects

1 The innovation of management The application and development of project information dashboard

2 The implementation, promotion and extending application of existing innovation product

The maintenance and implementation of existing innovation product

3 The research of distributed forestage and centralized backstage information management system

The application and research of the mobilization at site

4 The research of QR code application The research and development of intelligentized turn over system

5 The research of the integration and handover technology of EPC lump sum engineering design information

The research and application of intelligent labeling for lump sum engineering

6 The research of applying big data technology to engineering material information analysis

The application of the maintenance, promotion and extension application of material management system

7 The research of failure mode and effect analysis & criticality analysis (FMEA/CA)

The research of process risk and mechanical integrity assessment

8 The research of process design software application

The development and optimization of intelligentized process design data

9 The establishment of hydraulic calculation guide for high viscosity fluid and slurry

The simulation study of Blowdown dynamic calculation and program

10 The basic design of applying thin-film technology to zero-liquid discharge system

The programing for the discharge capacity calculation of safety release valve

11 The new technology and new method for civil and building engineering

The development of civil and building common information operation system

12 BIM 3D/4D technology research and application

The research and development of the improvement of civil and building design workflow

92

13 The design of stud bolts welded to the steel column embedded in RC piers

The application and research of fireproof, insulation of vitreous particle of fluorite

14 The development of equipment design operation and application system

The common operation platform of Equipment Department

15 The development of welding document review tools and high pressure equipment design

The integrated system of project equipment information

16 Truss supported conical roof tank structure design

European code storage tank design system

17 The automation design technology development for instrument control room layout

The research and development of instrumentation and control system common operation platform

18 The application and research of new instrument design operation system

The research of integrated intelligentized database of instrumentation and control design information

19 The integration and development of project drawing and material information for instrument design

The improvement of piping operation workflow

20 The application research of Bentley OpenPlant 3D

Agile piping design

21 The automatic modeling of the typical piping around unit equipment

The advanced application of power information integrated platform

22 pulsation and piping vibration analysis for reciprocating compressor

The application and development of the digitalization of electrical layouts

23 Power system CAD development The risk assessment and analysis of lighting protection

24 The research and development of power system design data integration system

The analysis of No-load Tap Changer(NLTC) from step-up transformer in power plan

25 Cathodic protection application for offshore structure and facility

The planning of enhancing procurement supplier chain

26 Seamless integration between startup and EPCK (STARTUP FLAWLESS)

Integrating P6, CMS and SPC to apply to 4D Construction Planning and Simulation

27 Construction HSE mobile system

28 The development of integrated Intelligent

construction Information Platform

29 The establishment of start-up expert system

30 The research and promotion of SPPID

application

b. Successful Technology or Products Developed in Past Two Years

Only the most important technology or products are listed below due to approximate 30 projects in a year.

Year RD Achievements

2015 1. The analysis and research of applying big data technology to engineering material information

2. SPE DI related technology development

3. BIM 3D/4D technology research and application

4. The integration and development of project drawing and material information for instrument design

5. Automatic 3D modeling of typical piping design around equipment

6. Integrate P6, CMS and SPC to apply to 4D construction planning and simulation

93

7. The research of failure mode and effect analysis & criticality analysis

8. The establishment of hydraulic calculation guide for high viscosity fluid and slurry

9. The basic design of applying thin-film technology to zero-liquid discharge system 10. The research of super high pressure plant design

11. The design of stud bolts welded to the steel column embedded in RC piers

12. Truss supported conical roof tank structure design

13. Pulsation and piping vibration analysis for reciprocating compressor

14. Cathodic protection application for offshore structure and facility 15. The establishment of startup flawless guide

2016 1. The application and development of project information dashboard

2. The application and research of the mobilization at site

3. The research of reliability, availability and maintainability

4. The research of Bow-Tie/ALARP analysis

5. The dynamic calculation of Blowdown

6. The programming of safety release valve emission calculation

7. The application and research of fireproof, insulation of vitreous particle of fluorite

8. European code tank design system

9. The research and development of generating Instr. Location Plan from SP3D

10. The development of EQAS (Engineering Quality Assurance System)

11. The automatic adjusting development of S3D “intelligent” pipe supporting

12. The automation of power wiring operation

13. The risk analysis of lighting protection

14. The analysis of No-load Tap Changer(NLTC) from step-up transformer in power plant

15. The research and promotion SPPID application C. 2017 RD Direction and Major Technology Development

a. 2017 RD Direction is to (1) Develop iEPC technology to increase intelligentized lump sum engineering operation (2) Develop the application of new science and technology and new expertise technology to

strengthen lump sum engineering operation capability b. Major Technology developments are as follows:

(1) Develop iEPC technology - Develop the technology of iEPC operation workflow - Improve the topics for project agile management according to division’s requirement - The operation automation of main workflow and MH statistic in top three of each engineering

discipline - Extend the information exchange between vendors to each expertise of rotary machine ,

piping, steel structure, instrumentation and control system and electrical - Optimize the construction management platform - Establish intelligentized warehouse and construction management - Implement above one automatic installation operation for each discipline - Small and medium modular prefabrication and installation - Virtual and physical plant handover

(2) Develop new science and technology and new expertise technology - Rule Base

- Develop intelligentized piping design - The intelligentized programing development of plant layout

- Water saving, energy saving - The P&ID template establishment of raw water, pure water treatment system - The basic design establishment of system recycled water treatment technology

94

- Robot - The application and development of robot installation at site

- Mobile device - Mobile system optimization at construction site

- IOT - The research of intelligent sensing technology applied to site management – electronic

fencing, confined space - Mobile scan application for site material

- Cloud computing platform - Vendor information exchange

- Digital plant - The research of virtual and physical plant handover

- Modularization - The research of the new science and technology and new expertise technology of civil and

building engineering - modular study - The research of scaffolding operation optimization and establishing modular skill

- Special expertise - The dynamic simulation research of flare / steam network - The research of building corrosion/deterioration mechanisms identification and

inspection planning system - The research of building HAZOP review comment control log system

- 3D model application - The technology development of VR applied to 3D model review

D. Current Project or New Product Being in process Refer to Section 7.6.3 for current RD project list

5.1.4 Short & Long Term Development Plans A. Short Term Goals:

a. Engage in overseas projects aggressively and range into tier one engineering firms in the world. Following the Middle East, Southeast Asia and the North America market will be the main markets in the global petrochemical industry, and there are also lots of petrochemical projects in Commonwealth of Independent States. The Company will maintain the progressive and cautious mindset to participate the bidding. The Company expects to establish a solid foundation in the global petrochemical industry and become the tier one international engineering company. The Company also evaluates to enter the new markets, such as Commonwealth of Independent States.

b. Become one of the major players in the utility market. In recent years, the Company awarded the Lin Kou, Talin and Tung-Hsiao power plant expansion projects from Taiwan Power Company and overseas small power producer project from Thai Oil. According to a planned schedule of Taiwan Power Company, several power plant renovation projects will be released in the coming years. As the economy growing south-east Asia, power demand also increases simultaneously; potential power plants projects is foreseen recently in Malaysia, India, Vietnam Indonesia and Thailand. The Company will be bidding power plant projects progressively.

B. Long Term Goals a. Emerging Markets

Looking forward, to expand market share in the international petrochemical market is still one of the Company’s primary goals, and extend to emerging markets in north Africa, east Europe, Commonwealth of Independent States, north America and south America from the regions of south-east Asia and middle-east. The Company also devoted to share successful experiences in non-hydrocarbon projects such as power plants, public transportation and incinerator to overseas markets, from China, south-east Asia and middle-east to rest of the world.

b. New Techniques and New Areas

95

The Company is planning to invest in new areas such as carbon-reducing techniques and alternative energy sources to complement our existing lines of services. These new businesses will contribute increasingly to the Company’s profitability and growth potential. In all, the Company aims: to become one of the top 30 engineering companies in the world, and to create an esteemed brand name for the Taiwanese engineering consulting service industry.

96

5.2 Market and Sales Overview 5.2.1 Market Analysis The Company signed contracts amounted NT$ 7.7 billion, while CTCI Group signed of NT$ 85.6 billion totally in 2016. The sales revenues of the Company amounted NT$ 42.8 billion, while the CTCI Group consolidated sales revenues amounted NT$ 70.5 billion totally in 2016. A. Sales Analysis by Major Services:

a. By Area

Area Group New Contracts Consolidated Sales Revenues

Taiwan 72.44% 50.04%

South East Asia 17.17% 17.78%

China 2.70% 3.38%

India 2.47% 0.31%

Middle East 4.13% 25.91%

Others 1.08% 2.58%

Total 100% 100%

b. By Industry

Industry Group New Contracts Consolidated Sales Revenues

Refinery/Petrochemical 10.00% 50.12%

Industrial 4.28% 10.68%

Transportation 1.80% 2.49%

Power 21.68% 26.71%

Environmental 60.37% 7.45%

Others 1.87% 2.55%

Total 100% 100%

B. Market Share The Company has ranked No.1 in the domestic EPC market in Taiwan for years. Common Wealth Magazine has placed the Company as No.1 in the top 650 service company survey within the engineering service provider category since 2005. Within all companies under engineering service provider category, the revenues of the Company account for 18.1% of the total amount. On the global scene, the Company is well recognized by the U.S. Magazine Engineering News-Record in its annual rankings. For the year 2016, the Company is ranked, No.147 in Top 150 Global Design Firms Rankings, No.92 in Top 225 International Design Firms Rankings, No.139 in Top 250 Global Contractors Rankings, and No.100 in Top 250 International Contractors Rankings.

C. Industry Trend Overview a. Short Term Market Trend

Based on the latest International Monetary Fund (IMF) report, the global economic will be growing in 2017 comparing to 2016. The advanced countries and emerging counties have the same path of recovery. The countries in South East Asia still release National projects, while the Middle East region also releases petrochemical projects. The Company predicts such project investments in advanced and emerging countries will continue in 2017. Our views on the global market are briefed as following: (1) Taiwan

We expect the government to maintain its policy on expanding domestic consumption, from which we target local projects as one of priorities in the coming years. Domestic power demand is increasing with economic growth. Moreover, all of the domestic nuclear power plants will be decommissioned by 2025 based on the government policy and some of the mega thermal power plants will be expired in recent years, so the Taiwan Power Company begins to execute

97

renewal and expansion plans for many fire power plants, which are our potential opportunities. For hydrocarbon projects, there are capacity upgrade project for refinery plant and the petrochemical plant which joint venture with foreign companies from CPC, and LNG receiving terminal projects to strive for. For infrastructure projects, the Company is seeking to bid track work and power supply projects of mass rapid transportation (MRT) system, flue gas denitration(De-NOx), sewerage projects and etc.

(2) South East Asia and India New investments appear to be trending upwards in Southeast Asia and India with the rebound of the oil price. The continued economic growth in India under the current government leadership led to increased governmental investment in refineries, petrochemical plants and LNG receiving terminals. The India government proposed “made in India” will bring more Taiwanese companies to invest in India. In Malaysia, the Company continues to focus on the RAPID project investments and other Euro 5 related refinery upgrading units. For Indonesia, with the steady growth of GDP, the government is now in a better financial position for new investments for refineries. The tender for the first new refinery is expected to take place this year. The investment in Thailand will be focused on LNG receiving terminals, upgrading existing refineries, specialty chemicals, mega power plants, small private-owned gas power plants, bio-fuel power plants, municipal waste incineration power plants, and etc. On the Philippines side, with the increase of domestic demand, there are already some refineries and petrochemical owners planning to increase the production capacity of existing facilities. In Vietnam, the major opportunities will be the municipal waste incineration power plants and coal-fired power plants. Except for the above projects, the Company will also seek the coal-fired power plants subcontracting opportunities from renowned international EPC companies. Many projects will be available in Singapore along with several large infrastructure projects, including power supply and track work projects of MRT System projects.

(3) China CTCI not only monitors the refinery and petrochemical complex activated by Taiwanese investors and Sinopec, but also PTA plants of other Chinese firms. The Company’s primary goal now is to strength the capabilities of its subsidiaries in both Shanghai and Beijing for obtaining upcoming projects of Taiwanese petrochemical companies. Besides the petrochemical industry, benefited by the thirteenth five-year economy plan of China, new opportunities are derived from the environmental protection, cogeneration, flue gas denitration(De-NOx) and the metropolis refuse incineration projects. The Company plans to collaborate with local partners for such booming sectors. Moreover, there are also waste incineration power plant revamping opportunities in Macau.

(4) Middle East and North Africa The oil price will remain volatile due to the competition of OPEC and Shales, which will create shorter price cycles. The oil price is expected to be rebound between 2018 ~ 2020. In order to improve the profits and stabilize the revenue, the GCC owners started to expand its business to high-value products in downstream. And GCC petrochemical industry needs to integrate small and medium companies to face the challenges from USA and China. Even though the oil price didn’t have a large rebound, clients keep investing to meet production targets. CTCI will keep our eyes on the national tactical plan (e.g. Oman) and the investments of private enterprises. Saudi Aramco plans to invest US$334 billion dollars across the oil and gas value chain by 2025, and to triple its chemical production to 34 million metric tons per year by 2030. Part of the private enterprises also initiates their investments while the construction cost is low. In Qatar, the government is re-evaluating the return of potential mega projects, and the petrochemical development outline will not be solid until the second half of year 2016. Bahrain is planning a new aromatic complex. Kuwait is expected to invest US$115billion on energy projects over the next five years to boost the crude production capacity to 4 million barrels a day by 2020. In Iraq, the situation in the north is relatively stable, however, it is learned that the financial strength of Iraqi governmental institutes are often weak, which becomes an important factor to decide

98

whether to attend the tender or not for the Company. In the North African region, the Algerian government is planning to build four to five refineries in the coming five years and to invest US$70 billion to shale oil/gas projects by 2030. In addition, CTCI is keen to step in Iran market, what’s worth mentioning is that, the economic and monetary sanction against Iran resulted in Iran’s nuclear plan has been lifted, and It is expected that abundant projects suspended before can be resumed. Except for the projects mentioned, the bidding opportunities are also available in the fields of power, desalination, waste water treatment, MRT Systems, steel/none-ferrous industrial, etc.

(5) USA Due to large scale shale gas production, the cost of petrochemical products has been considerably reduced. Many investors have been attracted to the U.S. market, which brings significant opportunities for contractors, such as Formosa Plastic Group’s investment in Texas and Louisiana. In 2016, CTCI successfully secured the first EPC project in the US, and have participated in bidding for FEED and EPC works. Taking this opportunity, we expect to turn CTCI Americas into an integrated EPC company.

(6) Commonwealth of Independent States With abundant oil and gas resources in Russia and Kazakhstan, there are many project opportunities foreseeable pertaining to petrochemical field. In 2016, CTCI successfully secured the first basic design project in Russia because of our reliable and abundant PTA experiences overseas. With strong partnership and experience all over the world, CTCI will be able to march toward the next milestone soon.

b. Long Term Market Trend

The Company expects that refinery business would be promising in the coming few years. Emerging markets such as China, Indonesia, Vietnam, India, and Malaysia also contribute to this upward trend as their economy grows and creates new demands. As the notion of conserving energy is gaining momentum around the world, industries related to alternative energy and environmental protection are set to become mainstream in the years to come. Accordingly, the Company is trying to be more involved into new techniques and new areas such as LNG, alternative energy and other energy conservation items.

D. Competitive Advantage

CTCI Corporation has been existed in the industry for more than 30 years and been recognized as tier one international engineering company. The company is capable of feasibility study, engineering, procurement services, construction management, and commissioning services, and one of the few EPC companies with track records worldwide. However, facing competition from engineering firms around the world, it is becoming increasingly crucial to utilize the resources on a global basis. That’s why the Company is setting up subsidiaries throughout Asia, in places like Beijing, Shanghai, Bangkok, Hanoi and Delhi, to develop more engineering talents at competitive costs. Looking ahead, the Company is on course to expand in more places to maintain its competitive advantages it has enjoyed to this date. In all, facing with stiffening competition, the Company is constantly trying to sustain efficient solutions by strengthening our global logistic network to lower down procurement costs, and strengthening capabilities in project management and risk control as well.

E. Advantages and Disadvantages for Long-Term Development & Corresponding Strategies a. Advantages

(1) Domestic market is recovering Taiwan government continues to push ahead for a new national development plan. CPC Corporation and Taiwan Power Company continue to execute their plans for renewal and expansion plans, which provide stable source of domestic opportunities. Taiwanese petrochemical companies still invest in new capacity expansion in China, India, South East Asia; it is another potential business of the Company too.

99

(2) Bidding for mega projects with professional capabilities. The Company is now the only engineering Company in Taiwan to be able to carry out projects with amount over US$ 1 billion without any partner. The Company has valuable experience in teamed up with foreign partners for project both for local and overseas for EPC project. Also by collaborating with these international firms, The Company has established itself in the global market place for future opportunities overseas.

(3) Entering into Overseas Markets with Strategic Partners. With our successful strategic alliances, the Company now has world-class patented processes and techniques at its disposal. These advantages will not only serve existing projects, but they can also be utilized globally such as China, Thailand, Vietnam, Malaysia, India, Singapore and the Middle East. The Company will integrate all the available resources to expand globally.

(4) Strengthening Competiveness through Global Resources Management The Company’s subsidiaries in China (Beijing & Shanghai), Thailand, and Vietnam, India, Malaysia and Singapore have contributed significantly to the projects carried out in domestic and overseas markets. The engineers in these subsidiaries have also gained invaluable experiences throughout the process. These subsidiaries will continue to serve the Company favorably in the years to come with low cost and work efficiency advantages.

b. Disadvantages & Corresponding Strategies

Item Corresponding Strategies

Severe competition from Korean competitors

The Company plans to do the following to increase its chances of winning projects: Strengthen cost control and project management capabilities Technical Improvement: Continuous process re-engineering and

innovation through the R&D center Human Resources Development: Global expansion by integrating

local talents

Fluctuations in commodity prices

The Company has adopted the following internal control mechanisms to deal with commodity price fluctuations: Shortening design timeframe, better control of procurement supply

quantities and shipment schedule. Multiple hedging mechanisms to reduce the associated risks to the

minimum. Purchasing commodity swaps to lock-in the prices of basic materials required such as copper and nickel.

Arranging long-term supply contracts with suppliers. Enhancing relationships with major equipment manufacturers.

To reduce the procurement costs of the projects, actively seeking for low cost regional suppliers with stable quality.

Difficulties in executing overseas projects

The Company has established a risk management committee to monitor and control all the relevant risks at both the project and the corporate levels.

Better integration of local resources and cost control for higher efficiency.

5.2.2 The Company’s Main Services Purposes and Service Sequences

The Company’s main services are EPC and consulting-oriented, including all sorts of professional services such as feasibility study, design, equipment supply, equipment fabrication, construction services, construction management, commissioning, and maintenance. A. Main Services and Purposes

a. Refinery/Petrochemical: For the manufacturing of oil-related and petrochemical products. b. Utilities: Nuclear power plant, natural-gas power plant, coal-fired power plant, and combined-

cycle power plant.

100

c. Infrastructure: MRT system, high speed railway…etc. d. Environmental: Incinerators operation and maintenance, waste management, water

treatment, air pollution processing…etc. e. General Industry: Steel manufacturing plant, storage and docking facilities f. High tech and bio-related: electronic plant, pharmaceutical plant…etc.

B. Service Sequences: Feasibility study and initial design → Engineering → Procurement → Construction →

Construction Management → Commissioning → Service and Maintenance

5.2.3 Major Materials Used and Supply Status:

A. Commodities: specially-formed steel, steel plates, steel rods, cement, various pipes and accessories, electricity cables, and special paints. These materials are sourced by qualified suppliers in the region close to the project job sites.

B. Equipments: reactor, storage tank, heat exchanger, heat boiler…etc. These major equipments are supplied by specialized companies throughout the world.

5.2.4 Major Suppliers and Clients A. Major Clients (each commanding 10%-plus share of annual order volume) Information for the Last Two

Calendar Years Unit：NT$ thousands

Item

2015 2016 As of March 31, 2017

Company Name

Amount % Relation

with Issuer

Company Name

Amount % Relation

with Issuer

Company Name

Amount % Relation

with Issuer

1 TPC 19,864,146 30 None TPC 16,811,608 24 None TPC 3,174,807 21 None

2 Others 47,193,494 70 None Others 53,698,067 76 None Others 12,003,963 79 None

Total 67,057,640 100 Total 70,509,675 100 Total 15,178,770 100

B. Major Suppliers Information for the Last Two Calendar Years N/A

5.2.5 Production over the Last Two Years

Unit: NT$ thousands

2015 2016

Engineering 58,301,255 60,881,194

Environment 3,018,765 3,155,153

General Trade 113,549 85,154

Others 187,993 202,344

Total 61,621,562 64,323,845

5.2.6 Shipments and Sales over the Last Two Years

Unit: NT$ thousands

2015 2016

Local Export Local Export

Engineering 53,017,613 9,919,036 51,041,836 14,482,752

Environment 3,017,909 659,530 3,221,230 1,332,413

General Trade 155,446 0 114,051 0

Others 288,106 0 317,393 0

Total 56,479,074 10,578,566 54,694,510 15,815,165

101

5.3 Human Resources 5.3.1 The information about employees employed for the most recent two fiscal years and up to the

date of printing of the annual report

Year 2015 2016 As of March 31, 2017

Number of Employees

Permanent employee 2,581 2,598 2,572

Temporary employee 204 176 151

Total 2,785 2,774 2,723

Average Age 41.5 41.9 42.1

Average service seniority 10.8 12.9 13.2

Number of employees at each level of

educational degree

Doctor 18 19 18

Master 1,236 1,269 1,249

Bachelor 1,383 1,362 1,351

Senior High School 104 87 76

Senior High School below

44 37 29

Certification details of employees whose Jobs are related to the Release of the Company’s Financial Information

Certification Number of Employees

Certified Internal Auditor(CIA) 4

Test of the Enterprise Internal Control Basic Ability 4

Test of the Bank Internal Control Basic Ability 1

Certified Securities Investment Analyst(CSIA) 2

The Accountant of R.O.C. 1

5.3.2 Work Environment and Occupational Safety and Health A. HSE Policy

CTCI’s HSE Policy Statements are set seventh below: ‧ Insist on Safety as the First Priority; ‧ Promote Personal Health and Wellbeing; ‧ Protect the Environment and Pursue Sustainability; ‧ Implement Effective Risk Management; ‧ Comply with Legal and Contractual Requirements; ‧ Encourage Training and Engagement; ‧ Continuously Improve Our HSE Management System. CTCI Corporation is always dedicated to creating and maintaining a sound working condition of health, safety, and environment protection (HSE). CTCI regards HSE as the priority among all of our activities. Also, we are enthusiastic to promote health management in workplace, to create a health working environment that free of harms to body and mind. We provide professional services with obligation to environment protection, aim for energy saving, carbon reduction, and prevent possible pollutions. We implement risk management mechanism, while prevention of occupational injuries and diseases as well as the environmental protection remains our highest concern among others. All of the projects related to planning, engineering design, procurement, construction and commissioning must be carried out in conformance with governments HSE legislations and the requirement specified in the contracts with customers is our commitment. To improve all personnel and collaborators’ knowledge on safety, health and environment protection, CTCI regularly held HSE training programs and often support HSE related activities and conferences, which personnel and collaborators are encouraged to participate actively. Moreover, CTCI spare no efforts on continuous improvement of each HSE activity to make sure the applicability and effectiveness of HSE management system.

102

B. HSE Organization To ensure a safe and healthy environment provided by CTCI Corporation to our employees, also to ensure the project execution do not harm the environment, the company established HSE Management Department. CTCI also set up QHSE division. Under the direction of the group president, and the QHSE division, the HSE Management Department is in charge of formulating, planning, promoting and monitoring the corporate-level HSE activities, and instructing every department, project, subsidiaries in implementation. HSE Management Department also conducts internal auditing, monitors HSE performance of the corporation, and ensures the performance of HSE management work of every project activities, in order to prevent occupational accidents, protect employees’ safety and health, and conserve the environment.

C. HSE Management System CTCI acquired ISO 14001 Environment Management System Certificate and OHSAS 18001 Occupational Health & Safety Management System Certificate in 2006, and has been continuously updating the latest version of international guidelines. For 3 years routine review in 2014, we successfully demonstrate our management systems’ compliance to OHSAS standards, thereby certification remain valid up to date. CTCI also acquired a TOSHMS (Taiwan Occupational Safety and Health Management System) Certificate in year 2009, and in 2012 it was approved with CNS 15506:2011. To achieve continuous improvement of HSE management system, CTCI regularly review HSE performances, propose practical corrective actions and put into action, and annually revise the HSE objectives, to lower potential risk on safety, health and environment. Moreover, CTCI emphasizes concerns on safety management, incident prevention, energy conservation, and occupational health promotion.

D. Operation of HSE Management System The operation of HSE management system followed the P-D-C-A process, scopes includes engineering design, procurement, construction, commissioning, emergency response, and headquarters etc.

E. Statistic of Occupational Incidents CTCI as an international engineering corporation, in response to international clients’ requirements, the occupational injury statistics is conducted by the formula of TRCR, Disabling Injury or DARTR proclaimed by United State of Labor Department Occupational Safety and Health Administration (OSHA). Furthermore, the Root Cause Analysis (RCA) is conducted by the company in order to develop corrective and preventive and effective actions. Meanwhile, issues that are inter-departmental or systematic are documented, monitored and controlled.

Note1: Traffic incident are not included in the statistic number Note2: The United State of Labor Department Occupational Safety and Health Administration (OSHA)

Note3: Total recordable case rate ,TRCR＝ Number of Total Recordable Case

Total Hours Worked× 200,000

Note4: Days away from work, days of restricted work activity or job transfer incidence rate,

DARTR= Number of Days Away ,Restricted or Job Transfer Incidence

Total Hours Worked× 200,000

103

F. Awards To recognize its achievements in HSE, CTCI Corporation in 2016 received several awards from government authorities and clients. These are listed as follows: a. CTCI headquarters acquired Certificate of Zero Accident Proof from Ministry of Labor (totally 37.72

million accident free man-hours from January of 2007 to December of 2016) b. CTCI awarded 22.3 Million safe work hours from the Petrochemical Giant SABIC. c. Talin No. 11 DHDS Project Contracted by CTCI Honored with CPC outstanding safety and

environmental protection performance. d. CTCI Receives a Certificate of Appreciation from the North Promotion Association of TOSHMS

under the Occupational Safety and Health Administration, Ministry of Labor. e. Talin power plant project is awarded by Kaohsiung Environmental Protection Bureau with

outstanding environmental protection performance award. f. RAPID refinery RFCC package 1 project got the highest score in Tier-3 HSE assurance by PETRONAS

GHSED.

104

5.4 Environmental Protection Expenditure CTCI Corporation is in the industry of engineering service, which that the workplace including the Headquarters building and job sites. Described respectively as following: 1. Headquarters building: Mostly office works, no polluting events happened ever. To dedicate to

energy saving for environment protection, we replaced lighting of public area and escape stair rooms with LED tubes, and replaced lighting in drinking area and parking lot with automatic sensor lighting system, variable frequency refrigerator etc.

2. Job sites: Located in industrial zone in most cases, no influence to nearby residents is always the top demand. During construction process, all sub-contractors are requested to execute the environmental protection measures like waste management or any other to eliminate impacts on air, water, and soil to comply with regulations. No improper records happened before.

5.5 Relations between labor and employer 5.5.1 Employee benefit plans, continuing education, training, retirement systems, and the status of

their implementation, and the status of labor-management agreements and measures for preserving employees' rights and interests

A. Employees’ benefits a. Labor insurance

(1) The Company’s employees are enrolled in the labor insurance program pursuant to laws. (2) The labor insurance premium includes the premium of the insurance against ordinary incident

and occupational disaster. 70% of the insurance premium for ordinary incident will be borne by the Company, 20% thereof borne by the insured, 10% thereof borne by the government. The insurance premium for occupational disaster will be borne by the Company in full.

b. National health insurance (1) The Company’s employees and their dependents are enrolled in the national health insurance

program pursuant to laws. (2) The payable national health insurance premium shall be subject to the government’s relevant

requirements. c. Group insurance

(1) The Company’s employees are entitled to the additional group insurance purchased by the Company from the life insurance company externally.

(2) The Company’s employees will be enrolled in the group insurance program immediately on the hiring date. The group insurance covers life insurance and accidental injury insurance, which will be borne by the Company in full.

(3) The Company’s employees and their dependents may select the medical care insurance programs at their sole discretion, and 60% of the insurance premium will be borne by the Company.

d. Annual bonus The Company will allocate the incentive bonus subject to the annual operation overview, and will grant the bonus with respect to individual performance, attendance record and seniority in accordance with the relevant operating procedure.

e. Workers’ Welfare Commission The Company establishes the Workers’ Welfare Commission pursuant to laws, and allocates the welfare fund periodically. The colleagues may elect the commission members openly, and organize tours and club activities and give birthday coupons and festival gifts, subsidies and consolation money periodically.

f. Incentive payment for shareholding trust To support the employees’ shareholding committee incorporated by employees and encourage employees to save funds and hold the Company’s shares permanently, the Company specially agrees that the colleagues who have served more than one year and been enrolled in the employees’

105

shareholding committee may be granted the incentive payment on a pro rata basis subject to the fund allocated on a monthly basis.

B. Top Management advanced studies:

a. EMBA:

Title Name Course Name Status

President Michael Yang EMBA, National Taiwan University of Science and Technology, Taiwan

Graduated in 2008

Executive Vice President

Mark W. H. Yang

EMBA, National Chengchi University, Taiwan Graduated

in 2011


M. H. Wang EMBA, Chulalongkorn University, Thailand Graduated

in 2009


Pao-Yao Pan EMBA, National Sun Yat-sen University Graduated

in 2010

Senior Vice President

Andrew Tsai

EMBA, Macau University of Science and Technology

Graduated in 2008

Doctor of Business Administration, Macau University of Science and Technology

Graduated in 2013


Jung-Yu Han EMBA, National Chengchi University, Taiwan Studied in

2009

Senior Vice President & CFO

Patrick Lin EMBA, National Taiwan University, Taiwan Graduated

in 2013


T. C. Huang EMBA,, National Sun Yat-Sen University Graduated

in 2008

Vice President Steve Jean EMBA, National Chengchi University, Taiwan Graduated

in 2013

Vice President M. G. Lee EMBA, National Taiwan University of Science and Technology

Graduated in 2008

Vice President SH Lin EMBA, National Chengchi University

Graduated in 2008

Accounting Officer

Ai- Chen Ho EMBA Program in Finance, National Taiwan University, Taiwan

Graduated in 2010

b. Top Management program:

Title Name Course Name Status

Executive Vice

President

Ming-Cheng Hsiao

Executive Management Training Program, National Taiwan University, Taiwan

During the period of Apr. to Jul. 2013

Executive Vice

President

Pao-Yao Pan

Top Management Training Course by National Taiwan University, Taiwan

During the period of Mar. to June 2013


Andrew Tsai

National ChengChi University Business Executive Program

During the period of Sep. 2005 to Apr. 2008

Executive Management Training Program, National Taiwan University, Taiwan

During the period of Mar. to June 2013


Jung-Yu Han

Participated in Advanced Executive Program for Senior Manager of National Taiwan University, Taiwan

During the period of Nov. 2005 to Jun. 2006



106


Chen-San Hu




& CFO Patrick Lin

Participated in Advanced Seminar on General Management of National Taiwan University, Taiwan

During the period of Feb. 2009 to Jul. 2009



Vice President

Steve Jean

Participated in Advanced Executive Program for Senior Manager of National Taiwan University, Taiwan

During the period of Dec. 2008 to Aug. 2009


During the period of Sep. 2009 to Mar. 2010

Vice President

Teh-Ming Tao





Vice President

M. G. Lee Top Management Training Course by National Taiwan University, Taiwan


Vice President

SH Lin





Accounting Officer

Ai- Chen Ho Top Management Training Course by National Taiwan University, Taiwan


c. Training program about Corporate Governance:

Name Date Sponsoring

Organization Course Hours

Michael Yang / Ming-Cheng Hsiao / Mark W. H. Yang / Pao-Yao Pan / Andrew Tsai / Todd Chen / Jung-Yu Han / SH Lin / J.H. Chen / Ai Cheng Ho / Ai-ling Hsu

2016/05/06



3

Michael Yang / Ming-Cheng Hsiao / Mark W. H. Yang / M. H. Wang / Pao-Yao Pan / Jung-Yu Han / Todd Chen / Chen-San Hu / Andrew Tsai / Teh-Ming Tao / Po-Chien Wang / Patrick Lin / Shen-Peng Liao / Tsai-Ming Wang / SH Lin / Ai Cheng Ho / Ai-ling Hsu

2016/08/05



3

C. Employees’ training:

The Company establishes the workers’ training system in accordance with the Company’s view, mission and long-term business objectives, and plans the training development blueprint for various professional areas and job ranks. In addition to enhancing the workers’ professional ability, the

107

Company also works hard to train their multi-departmental integration professional ability. The training programs include traditional lecturing courses, and also OJT, Lesson & Learnt, e-Learning and knowledge database in order to upgrade the employees’ knowledge about the know-how and skill, language, computer, management and leadership. As of June 2010, the Company started to perform the Mentor & Mentee (M&M) plan with respect to new employees in order to assist new employees to adapt to the enterprise culture and rapidly acquire the professional attitude and ability required by independent operation through structured (professional guidance) and non-structured (environmental adaption) one-on-one instruction. The training management applies the omnibus training management system, GTS (Global Training System), to enhance the e-Learning function and enable colleagues around the world to learn the expertise synchronously, and hopes to fulfill the workers’ training systems and development blueprint effectively through the strong control mechanism. The Company’s personnel committee will recommend excellent colleagues to take on-the-job advanced studies in domestic and foreign colleges/universities on a yearly basis, and will offer them the chance to co-work with staff of foreign engineering companies on a non-scheduled basis, so as to upgrade their expertise and solidify their international competitive ability. The employees’ training costs will be NT$14.17 millions approximately per year. The average training hours will be more than 73.1 hours per person/year (202,814hours/2,774 persons). The various training hours and costs are specified as following:

Type Number of class Total number of

attendees Total hours (hour) Total costs (NT$)

Orientation training 72 478 61,454 184,829

Competence training 1,305 26,445 122,743 9,332,173

Management training 45 578 16,945 2,898,692

General knowledge training 38 120 820 658,412

Self-development training 5 5 852 1,097,320

Total 1,465 27,626 202,814 14,171,426

a. Orientation training: Including the introduction to the overview, work rules and QHSE management

regulations of the Company, Orientation, and Mentor & Mentee (M&M) plan; b. Competence training: The various departments conduct the specialty training programs by

instructing the employees and offering the employees with the chance to practice subject to the nature of work, the Company’s business needs or requirements under contracts and laws, and have employees participate in the actual operation adequately to upgrade their competence;

c. Management training: HR Dept. arranges the management programs subject to the Company’s status and development needs, and makes the programs available to the various departments’ management.

d. General knowledge training: The employees’ specialty training committee plans general knowledge training programs together with relevant units in accordance with the employees’ training policy, objective and strategy, and make the programs available to the whole employees;

e. Self-development training: Including English comprehension training arranged in order to upgrade the colleagues’ international language ability, and on-the-job advanced studies in domestic and foreign colleges/universities to advance employees’ competence; The operations related to the employees’ training programs shall be conducted in accordance with the “CTCI Employee Training Management Procedure” and “CTCI Employee's Professional Competency Assessment and Management Procedure”.

D. Retirement system and implementation thereof:

The Company enforces the workers' retirement rules pursuant to the Labor Standard Law and allocates the pension reserve on a monthly basis. The rules are outlined as following: a. All of the Company’s employees shall comply with the rights and obligations defined in the workers’

108

retirement rules. b. The Company allocated the pension reserve equivalent to 5% of the total salary on a monthly basis

before the end of September 2002, and 6.5% thereof after October 2002. The pension reserve will be deposited to the exclusive account maintained at the Bank of Taiwan. As of July 2005, the Company has executed the new system according to the employees’ will and choice, and allocated the pension fund according to the Labor Pension Act.

c. Payment of pension fund: The Company paid the pension fund pursuant to the Labor Standard Act or Labor Pension Act pursuant to laws subject to the employees’ choice as of July 1, 2005.

E. Other important agreements:

a. The Company is engaged in the engineering service and possesses qualified personnel, a definite management philosophy, and a well-founded management system. In addition to the ordinary organization and system, the communication channels also include employees’ forums and labor and employer meetings held on a scheduled or non-scheduled basis, and installation of a suggestions box, so as to establish common consensus and a harmonious relationship between the employees and employer through the various channels.

b. The Company is engaged in the business where the Labor Standard Law may apply and, therefore, it shall operate in accordance with the Labor Standard Law.

c. Written undertaking for non-disclosure, non-competition and intellectual property right To secure the going concern, protect the group members’ interest and complete the corporate governance, the Company amends the “written undertaking for non-disclosure and copyright & patent right” to the “written undertaking for non-disclosure, non-competition and intellectual property right” and hopes that all employees may comply with the undertaking. All employees of CTCI and its domestic affiliates and overseas companies have already signed the undertaking.

5.5.2 Loss suffered by the Company due to dispute between labor and employer in the most recent

fiscal years The Company is used to valuing the employees’ benefits and calling a labor and employer meeting and welfare committee meeting on a quarterly basis, and also installs the suggestions box to make a two-way communication channel available to employees. Therefore, the relationship between labor and employer is harmonious and no dispute over labor has arisen in the past. No material loss or punishment has been suffered by the Company due to dispute between labor and employer in the past three years. In the future, the Company will continue to adhere to the same principle and solidify the relationship between labor and employer further.

5.5.3 Guidelines for ethical conduct

1.0 Purpose Guidelines for ethical conduct (“the Guidelines”) are adopted to assist CTCI to foster a corporate culture of ethical management, preventing employees taking advantage of their positions in exchange for improper benefits.

2.0 Scope These Guidelines are applicable to CTCI employees, subsidiaries, and other institutions or juridical persons which are substantially controlled by CTCI ("business group").

3.0 Definition 3.1 Vendor: Including suppliers, third parties and subcontractors. 3.2 Family: Employee and their spouse and relatives within three degrees of consanguinity. 3.3 Confidential information: Including all CTCI methods, techniques, processes, programs, or

other information that can be used for production, sale or business operation. 3.4 Intellectual property: Including all CTCI patents, trademarks, copyrights and trade secrets.

4.0 Responsibility 4.1 Human Resource Department: Establish guidelines of ethical conduct and accept accusations.

5.0 Operation Procedure 5.1 Gift receiving norm

5.1.1 If CTCI is the Party A in contract:

109

A. Shall not ask for, expect or receive any money and goods gifted by the downstream vendor (Party B in contract) having existing contractual relationship or might establish cooperation relationship with CTCI, including but not limited to: cash, coupon, present, entertainment ticket, fruit, food, liquor, tea, stationery, travel hospitality, commodity discount coupon, membership card, painting and other properties or preference in personal shopping.

B. But under general social etiquette and custom circumstances below, the gift may be received when not affecting the specific rights and obligations: a. The gift is the souvenir distributed extensively and with the Logo of gifting

company, such as calendar, notebook, pen drive, cardcase, tie, tie clip etc. or other management or inspirational books.

b. When being invited to dinner party or other communicative activities, CTCI employee has reported to the supervisor (*Notes) and been approved in advance.

* Notes: the supervisor of CTCI is the head of BU, the supervisor of subordinate unit is the President, so is the other companies under the Group.

5.1.2 If CTCI is the Party B in contract: For the present gifted to our company by Party A’s customer (landlord) and partner of our company, dinner party or other communicative activities, it may be accepted with prior report to the supervisor (*Notes).

5.2 Preventing conflicts of interest CTCI employees are allowed to conduct personal investments and other business activities under the limitation of following requirements, in order to avoid conflicts of interest between employee and CTCI, which may further affects the loyalty of such employee: 5.2.1 Avoid personal gain during business operations:

A. CTCI employees shall not participate in business operations if business relationship appears between CTCI and their family.

B. CTCI employees shall not directly or indirectly accept any improper benefits when conducting business operation.

5.2.2 Avoid part-time job and/or competing with CTCI: A. CTCI employees shall not accept other company’s employment during tenure. B. Direct or indirect relationship with competitors shall be avoid, including part-

time/full-time employment and contractor of companies in the same business, CTCI’s clients or vendors, CTCI’s competitors and its supplier.

C. Effects on CTCI clients and/or vendors lead to disadvantage of CTCI shall not occur. 5.2.3 The measures of relatives’ employment of related industries:

A. To avoid disadvantaging CTCI and conflicting with interests of CTCI, CTCI employees shall not sharing confidential information with their relatives who is employed by a company in the related industries, and their companies as well.

B. CTCI employees shall proactively submit to Human Resource Department in written form if his/her relatives hold a business relationship with CTCI.

5.2.4 CTCI employees shall submit to Executive Management Office in advance if he/she is a director of the board, supervisor or consultant of a company in the related industries, excluding those of CTCI affiliates.

5.3 Protection of business confidentiality and intellectual property rights 5.3.1 All types of documents and information shall not be altered or modified by CTCI

employees. 5.3.2 CTCI employees shall not discuss their work with non-CTCI employees and leak

confidential information which has not been revealed by CTCI to others. The article above is still valid after resigning or retiring.

5.3.3 Before CTCI patent or confidential information is revealed, CTCI employees shall not disclose it in any ways, including disclosing it in CTCI. The disclosure in CTCI should be authorized or assigned, and the disclosure out of CTCI should be done after subscribing the contract of confidentiality.

5.4 Fair trade with vendors 5.4.1 Vendor selection

A. Vendors shall be fairly selected based on the technical specification, quality, duration and business requirements with the most competitive price. CTCI employees shall not choose vendors with preference and ignore CTCI’s interests.

110

B. Employees participating in vendor selection shall avoid doing any activity that might be seen as the cause for vendor selection result.

C. Employees participating in vendor selection shall not provide any information relating to the contract or proposal to irrelevant third parties.

D. CTCI’s goals in procurement are “Best price, suitable quality, and prompt delivery”. CTCI employees should assist our vendors to accomplish the quality and quantity of their products or services.

5.4.2 Dealing with vendors A. CTCI employees should treat all vendors in positivity, fairness, and politeness. B. CTCI employees shall not disclose confidential information to vendors. C. CTCI employees should avoid contacting vendors due to non-business-related affairs

5.5 Steps to determine the ethicalness of behavior 5.5.1 Ethical Decision Making

When CTCI employees have concerns about their own acts, or find anyone has suspected unethical behavior within CTCI, employees should take the following steps： A. Assess that if there is any adverse effect to CTCI, other people, and yourself, due to

the behaviors, according to the section 5.2 in Guideline. B. Taking action after assessing the above statement, and should be noted the following

principles： a. The action plan shall comply with laws and regulations. b. The action plan shall meet CTCI’s policies. c. CTCI’s employees may consult ethic-responsible department before deciding to

take the action. 5.5.2 Questions to consider

When CTCI employees are faced with a situation not stated in this Guideline, the following questions may help them decide the right course of action: A. Am I personally uncomfortable about the course of action? B. Would I be unwilling or embarrassed to tell my family, friends, or coworkers? C. Could someone’s life, health, safety, or reputation be endangered by my action? D. Would such action damage CTCI’s reputation if it appears on the news? E. Would I be regret of such action?

5.6 Reporting and disciplinary procedures for violation 5.6.1 Disciplinary system

A. CTCI employees shall acknowledge the rules and their obligations. Employee violates the Codes of Ethical Conduct shall be reviewed by the Rewards and Punishment Committee, and penalized according to “CTCI Employees Reward and Punishment Regulations”. Employees who are in significant violation of this Conduct may be subject to disciplinary action up to and including termination of the labor contract.

B. Apart from being penalized according to the CTCI internal rewards and punishment related policies, CTCI may conduct civil or criminal lawsuit based on the severity of violation.

5.6.2 Reporting system A. CTCI employees who discover any violation of this Conduct or other unethical

activities shall report under their real name or anonymously according to “Accusation Management Regulations”.

B. Reporter shall provide specific descriptions and relevant evidences on the concerned person, matter, time, place and object for further investigation. Reporting channels including: Online reporting (https://www.reportnow.com.tw/ctci) and email ([email protected]).

C. The reporting channel stated above is run by an independent third-party service provider to ensure the unethical activities being reported is conveyed truthfully. CTCI promise to keep the confidentiality of reporters’ identity, protecting reporters from inappropriate disciplinary actions due to their whistle-blowing.

D. CTCI may not conduct investigation or further action if reporters could not provide descriptions and relevant evidences on the concerned person involved. Such reporters may be penalized for malicious complaints.

111

5.6 Important Contracts

Agreement Counterparty Period Major Contents Restrictions

EPC Formosa Plastics

Corporation, Texas 2017/01/09 2018/02/06

FPC-Tx Offsite Pipe Rack Modularization & Erection

Project, EPC

According to contract

content stipulation

EPC Taiwan Power Company 2016/12/07 2018/02/11

Dah-Tarn 600MW Emergency GTG Project,

EPCK


content stipulation

BOT Taoyuan City Government 2016/08/19 2054/08/18

TYCG 156,000CMD Chungli Sewerage System BOT

Project


content stipulation

BTO Kaohsiung City Government

2016/08/15 2019/08/14

KCG 45,000 CMD Fengshan WWRU BTO Project


content stipulation

EPC Petronet LNG Limited 2016/07/01 2019/06/30

Petronet Dahej LNG IIIB-1 Expansion Project


content stipulation

Engineering CHENG LOONG CORP.

HOU-LI MILL 2016/05/03 2017/06/30

Cheng Loong Houli District Cogeneration Boilers 65T/H & 230T/H SCR Project,EPC


content stipulation

EPC

CPC Corporation, Taiwan

Project

& Construction Division

2016/03/10 2017/07/31

CPC 8,000CMD Talin Plant WWRU Project


content stipulation

EPC Saudi Basic Industry

Corporation 2016/02/08 2017/08/08

KSA Saudi Kayan No. 10 Furnace Project


content stipulation

Engineering Saudi Basic Industry

Corporation 2016/01/13 2016/04/13

KSA Saudi Kayan EO/EG Revamping project


content stipulation

EPC Taiwan Power Co., Ltd.

Taichung Power Plant

2015/12/31

2020/12/31

TPC Taichung Power Plant 550MWX4 Existing Unit

1~4 AQCS Retrofit Project, EPC


content stipulation

EPC

Oman Oil Refineries and

Petroleum Industries

Company SAOC (ORPIC)

2015/12/17

2019/12/17

Oman ORPIC PKG-1 Steam Cracker and U&O, EPC


content stipulation

EPC Land Transport Authority 2015/04/08

2019/11/30

Singapore Gali Batu Depot Stabling Trackworks, EPC


content stipulation

112

Agreement Counterparty Period Major Contents Restrictions

EPC

Department of Rapid

Transit Systems,New

Taipei City Government

2014/12/01

2017/07/30

Danhai LRT AC Power EP and Trackworks EPC


content stipulation

Expansion Marubeni and Tokyo

Electric Power Corp.

2014/09/16

2017/12/31

Philippines Pagbilao IPP Unit 3 Expansion Project

Seawater FGD


content stipulation

EPC TOHO/AMIC Joint Venture 2014/09/15

2017/05/31

KSA Toho/ AMIC JV Ti-sponge Feasibility Study , Early Work and EPC Work


content stipulation

EP Land Transport Authority 2014/07/25

2020/12/30

Singapore Thomson Line Trackwork Project


content stipulation

EPC PRPC Refinery and Cracker

SDN. BHD.

2014/08/01

2019/05/31

Malaysia Petronas RAPID Package 1 RFCC, EPC


content stipulation

EPC Taiwan Power Company 2013/09/03

2020/12/31

Tunghsiao Combined Cycle Power Plant Project


content stipulation


TPC Talin Power Plant Renewal Project


content stipulation


800 MW x 3 Lin Kou Power Plant Renewal Project, EPC,

Taiwan


content stipulation

EPC Taichung City Government

2011/05/08 2019/04/23

DORTS, Taichung MCT Power Supply EPC, Taiwan


content stipulation

113

VI. Financial Information

6.1 Condensed Financial Statement for the Recent 5 Years

6.1.1 Condensed Consolidated Balance Sheet - International Financial Reporting Standards

Unit: NT$ thousands

Year Item

Five-Year Financial Summary As of March 31, 2017 (Note 3)

2012 2013 2014 2015 2016

Current Assets 39,644,718 35,132,199 42,090,608 45,298,807 51,394,621 47,699,138

Property, Plant and Equipment

7,288,315 7,150,831 7,026,878 7,001,676 6,876,224 6,737,537

Intangible Assets 106,859 114,766 118,638 121,469 127,686 109,288

Other Assets 6,750,308 6,551,449 7,647,224 7,808,634 7,826,358 7,839,334

Total Assets 53,790,200 48,949,245 56,883,348 60,230,586 66,224,889 62,385,297

Current Liabilities

Before distribution

28,679,088 23,657,670 31,033,931 34,389,605 40,297,705 36,403,633

After distribution

30,781,491 25,156,119 32,732,020 36,218,420 Note 2 Note 2

Non-current Liabilities 6,546,811 6,893,439 6,365,262 6,112,898 5,737,135 5,420,770

Total Liabilities

Before distribution

35,225,899 30,551,109 37,399,193 40,502,503 46,034,840 41,824,403

After distribution

37,328,302 32,049,558 39,097,282 42,331,318 Note 2 Note 2

Equity Attributable to Shareholders of The Parent

16,408,354 15,950,640 16,918,949 17,019,448 17,098,343 17,345,529

Capital Stock 7,349,960 7,474,343 7,575,303 7,611,076 7,632,738 7,632,738

Capital Surplus 2,757,865 3,070,085 3,230,033 3,297,703 3,322,098 3,330,907

Retained Earnings

Before distribution

6,170,655 5,188,509 5,874,885 6,097,988 6,343,847 6,789,186

After distribution

4,068,252 3,690,060 4,176,796 4,269,173 Note 2 Note 2

Other Equities 141,709 229,538 250,563 24,516 (188,505) (395,467)

Treasury Stocks (11,835) (11,835) (11,835) (11,835) (11,835) (11,835)

Non-controlling Interests

2,155,947 2,447,496 2,565,206 2,708,635 3,091,706 3,215,365

Total Equity

Before distribution

18,564,301 18,398,136 19,484,155 19,728,083 20,190,049 20,560,894

After distribution

16,461,898 16,899,687 17,786,066 17,899,268 Note 2 Note 2

Note1: The post-distribution numbers are based on the Shareholder’s Resolution in the following year. Note2: The 2016 earnings distribution has not been resolved by the Shareholder’s Meeting, hence not

applicable. Note3: The 2017 Q1 consolidated financial statement has not been reviewed by CPA as of the date of

publication of the annual report. Asset revaluation has not been made.

114

Condensed Balance Sheet - International Financial Reporting Standards

Unit: NT$ thousands

Year Item

Five-Year Financial Summary

2012 2013 2014 2015 2016

Current Assets 24,682,142 21,723,839 27,948,158 27,683,068 30,226,145

Property, Plant and Equipment

404,883 376,216 354,847 344,367 320,512

Intangible Assets 92,630 99,555 108,317 112,131 121,127

Other Assets 11,687,557 11,461,708 12,721,418 12,983,703 13,650,508

Total Assets 36,867,212 33,661,318 41,132,740 41,123,269 44,318,292

Current Liabilities

Before distribution

18,250,272 14,278,377 20,713,133 20,493,816 23,623,778

After distribution

20,352,675 15,776,826 22,411,222 22,322,631 Note 2

Non-current Liabilities 2,208,586 3,432,301 3,500,658 3,610,005 3,596,171

Total Liabilities

Before distribution

20,458,858 17,710,678 24,213,791 24,103,821 27,219,949

After distribution

22,561,261 19,209,127 25,911,880 25,932,636 Note 2

Equity Attributable to Shareholders of The Parent

16,408,354 15,950,640 16,918,949 17,019,448 17,098,343

Capital Stock 7,349,960 7,474,343 7,575,303 7,611,076 7,632,738

Capital Surplus 2,757,865 3,070,085 3,230,033 3,297,703 3,322,098

Retained Earnings

Before distribution

6,170,655 5,188,509 5,874,885 6,097,988 6,343,847

After distribution

4,068,252 3,690,060 4,176,796 4,269,173 Note 2

Other Equities 141,709 229,538 250,563 24,516 (188,505)

Treasury Stocks (11,835) (11,835) (11,835) (11,835) (11,835)

Non-controlling Interests

0 0 0 0 0

Total Equity

Before distribution

16,408,354 15,950,640 16,918,949 17,019,448 17,098,343

After distribution

14,305,951 14,452,191 15,220,860 15,193,633 Note 2

Note1: The post-distribution numbers are based on the Shareholder’s Resolution in the following year.

Note2: The 2016 earnings distribution has not been resolved by the Shareholder’s Meeting, hence not applicable.

115

Condensed Consolidated Income Statement - International Financial Reporting Standards

Unit: NT$ thousands

Year Item

Five-Year Financial Summary As of March 31, 2017 (Note 1)

2012 2013 2014 2015 2016

Operating Revenues 60,522,162 52,221,958 57,691,937 67,057,640 70,509,675 15,178,770

Gross Profit 5,159,479 4,217,053 4,374,365 5,436,078 6,185,829 1,286,978

Operating Income 3,237,648 2,365,775 2,702,331 3,001,912 4,162,523 827,283

Non-Operating Income & Expenses

215,739 144,135 462,501 318,740 (184,055) (105,278)

Income Before Income Tax

3,453,387 2,509,910 3,164,832 3,320,652 3,978,468 722,005

Net Income from continuing operations

2,850,215 2,035,776 2,536,396 2,570,143 3,013,715 566,955

Net Income(Loss) 2,850,215 2,035,776 2,536,396 2,570,143 3,013,715 566,955

Other Comprehensive Income (Income after tax)

(24,852) 86,584 114,414 (393,515) (379,303) (212,358)

Total Comprehensive Income

2,825,363 2,122,360 2,650,810 2,176,628 2,634,412 354,597

Net Income Attributable to Shareholders of The Parent

2,445,282 1,641,730 2,092,199 2,040,610 2,222,888 445,339

Net Income Attributable to Non-controlling Interests

404,933 394,046 444,197 529,533 790,827 121,616

Total Comprehensive Income (Loss) Attributable to Shareholders of the Parent

2,438,974 1,729,559 2,205,850 1,695,145 1,861,653 238,377

Total Comprehensive Income (Loss) Attributable to Non-controlling Interests

386,389 392,801 444,960 481,483 772,759 116,220

Earnings Per Share (NT$)

3.39 2.22 2.79 2.69 2.92 0.58

Note1: The 2017 Q1 consolidated financial statement has not been reviewed by CPA as of the date of publication of the annual report.

116

Condensed Income Statement - International Financial Reporting Standards

Unit: NT$ thousands

Year Item


2012 2013 2014 2015 2016

Operating Revenues 34,824,383 31,446,326 38,060,203 42,049,227 42,764,443

Gross Profit 2,356,663 2,169,180 2,068,143 2,827,102 2,594,191

Operating Income 1,303,017 1,129,995 1,282,847 1,193,000 1,419,547

Non-Operating Income & Expenses

1,406,827 657,006 1,084,562 1,271,157 1,175,111

Income Before Income Tax

2,709,844 1,787,001 2,367,409 2,464,157 2,594,658

Net Income from continuing operations

2,445,282 1,641,730 2,092,199 2,040,610 2,222,888

Net Income(Loss) 2,445,282 1,641,730 2,092,199 2,040,610 2,222,888

Other Comprehensive Income (Income after tax)

(6,308) 87,829 113,651 (345,465) (361,235)

Total Comprehensive Income

2,438,974 1,729,559 2,205,850 1,695,145 1,861,653

Net Income Attributable to Shareholders of The Parent

- - - - -

Net Income Attributable to Non-controlling Interests

- - - - -

Total Comprehensive Income (Loss) Attributable to Shareholders of the Parent

- - - - -

Total Comprehensive Income (Loss) Attributable to Non-controlling Interests

- - - - -


3.39 2.22 2.79 2.69 2.92

117

6.1.2 Condensed Consolidated Balance Sheet - ROC GAAP Unit: NT$ thousands

Year Item


2012 2013 2014 2015 2016

Current assets 39,698,734 N/A N/A N/A N/A

Funds and Investments 1,274,120 N/A N/A N/A N/A

Fixed assets 10,508,302 N/A N/A N/A N/A

Intangible Assets 194,496 N/A N/A N/A N/A

Other assets 466,861 N/A N/A N/A N/A

Total assets 52,142,513 N/A N/A N/A N/A

Current liabilities

Before distribution

28,433,813 N/A N/A N/A N/A

After distribution

30,536,216 N/A N/A N/A N/A

Long-term liabilities 4,255,113 N/A N/A N/A N/A

Other liabilities 2,277,652 N/A N/A N/A N/A

Total liabilities

Before distribution

34,966,578 N/A N/A N/A N/A

After distribution

37,068,981 N/A N/A N/A N/A

Capital stock 7,349,960 N/A N/A N/A N/A

Capital Reserves 2,955,935 N/A N/A N/A N/A

Retained Earnings

Before distribution

4,935,700 N/A N/A N/A N/A

After distribution

2,833,297 N/A N/A N/A N/A

Unrealized gain or loss on financial instruments

183,088 N/A N/A N/A N/A

Cumulative translation adjustments

92,246 N/A N/A N/A N/A

Unrecognized pension cost (212,565) N/A N/A N/A N/A

Treasury stock (11,835) N/A N/A N/A N/A

Total stockholders' equity of parent company

Before distribution

15,292,529 N/A N/A N/A N/A

After distribution

13,190,126 N/A N/A N/A N/A

Minority interest 1,883,406 N/A N/A N/A N/A

Total Shareholders’ Equity

Before distribution

17,175,935 N/A N/A N/A N/A

After distribution

15,073,532 N/A N/A N/A N/A

Note1: The post-distribution numbers are based on the Shareholder’s Resolution in the following year. Note2: Condensed Consolidated Balance Sheet was under IFRS during 2013 to 2016, hence not

applicable.

118

Condensed Balance Sheet - ROC GAAP

Unit: NT$ thousands

Year

Item


2012 2013 2014 2015 2016

Current assets 24,988,128 N/A N/A N/A N/A

Funds and Investments 8,720,265 N/A N/A N/A N/A

Fixed assets 404,883 N/A N/A N/A N/A

Intangible Assets 92,630 N/A N/A N/A N/A

Other assets 1,313,123 N/A N/A N/A N/A

Total assets 35,519,029 N/A N/A N/A N/A

Current liabilities

Before distribution

18,250,272 N/A N/A N/A N/A

After distribution

20,352,675 N/A N/A N/A N/A

Long-term liabilities - N/A N/A N/A N/A

Other liabilities 1,976,228 N/A N/A N/A N/A

Total liabilities

Before distribution

20,226,500 N/A N/A N/A N/A

After distribution

22,328,903 N/A N/A N/A N/A

Capital stock 7,349,960 N/A N/A N/A N/A

Capital Reserves 2,955,935 N/A N/A N/A N/A

Retained Earnings

Before distribution

4,935,700 N/A N/A N/A N/A

After distribution

2,833,297 N/A N/A N/A N/A

Unrealized gain or loss on financial instruments

183,088 N/A N/A N/A N/A

Cumulative translation adjustments

92,246 N/A N/A N/A N/A

Unrecognized pension cost (212,565) N/A N/A N/A N/A

Treasury stock (11,835) N/A N/A N/A N/A

Total Shareholders’ Equity

Before distribution

15,292,529 N/A N/A N/A N/A

After distribution

13,190,126 N/A N/A N/A N/A

Note1: The post-distribution numbers are based on the Shareholder’s Resolution in the following year. Note2: Condensed Balance Sheet was under IFRS during 2013 to 2016, hence not applicable.

119

Condensed Consolidated Income Statement - ROC GAAP

Unit: NT$ thousands

Year Item


2012 2013 2014 2015 2016

Operating revenues 60,738,850 N/A N/A N/A N/A

Gross profit 5,116,066 N/A N/A N/A N/A

Operating income 3,154,153 N/A N/A N/A N/A

Non-operating income 468,172 N/A N/A N/A N/A

Non-operating expenses

252,908 N/A N/A N/A N/A

Income from continuing operations before income tax

3,369,417 N/A N/A N/A N/A

Income from operations of continued segments - after tax

2,780,419 N/A N/A N/A N/A

Income from discontinued departments

- N/A N/A N/A N/A

Extraordinary gain or loss

- N/A N/A N/A N/A

Cumulative effect of accounting principle changes

- N/A N/A N/A N/A

Equity holders of the Company

2,392,436 N/A N/A N/A N/A

Minority interest 387,983 N/A N/A N/A N/A


3.32 N/A N/A N/A N/A

Note1: Condensed Consolidated Income Statement was under IFRS during 2013 to 2016, hence not applicable.

120

Condensed Income Statement - ROC GAAP

Unit: NT$ thousands

Year Item


2012 2013 2014 2015 2016

Operating revenues 34,824,383 N/A N/A N/A N/A

Gross profit 2,356,663 N/A N/A N/A N/A

Operating income 1,264,354 N/A N/A N/A N/A

Non-operating income 1,548,955 N/A N/A N/A N/A

Non-operating expenses

162,884 N/A N/A N/A N/A

Income from continuing operations before income tax

2,650,425 N/A N/A N/A N/A

Income from operations of continued segments - after tax

2,392,436 N/A N/A N/A N/A

Income from discontinued departments

- N/A N/A N/A N/A

Extraordinary gain or loss

- N/A N/A N/A N/A

Cumulative effect of accounting principle changes

- N/A N/A N/A N/A

Net income 2,392,436 N/A N/A N/A N/A



Note1: Condensed Income Statement was under IFRS during 2013 to 2016, hence not applicable.

6.1.3 Auditors’ Opinions in Past Five Years:

CPA Firm/Year 2012 2013 2014 2015 2016

PriceWaterhouseCoopers

Shih-Jung Weng

Shih-Jung Weng

Shih-Jung Weng

Shih-Jung Weng

Shih-Jung Weng

Huei-Shyang Wang

Huei-Shyang Wang

Huei-Shyang Wang

Huei-Shyang Wang

Shu-Chiung Chang

Auditing Opinion modified

unqualified opinion

modified unqualified

opinion


opinion


opinion

unqualified opinion

121

6.2 Financial Analysis for the Recent 5 Years

6.2.1 Consolidated Financial Ratio Analysis -International Financial Reporting Standards

Year Item

Five-Year Financial Summary As of March 31, 2017 2012 2013 2014 2015 2016

Financial Structure

(%)

Debt to Asset Ratio 65.49 62.41 65.75 67.25 69.51 67.04

Long-term Funds to Properties, Plants and Equipment Ratio

308.32 353.69 367.86 369.07 377.06 385.63

Liquidity (%)

Current ratio 138.24 148.50 135.63 131.72 127.54 131.03

Quick ratio 125.54 135.43 122.90 121.46 116.56 119.62

Interest Coverage Ratio

3,632.33 2,465.03 3,655.79 3,811.55 5,051.79 3,444.63

Operating Performance

Accounts Receivable Turnover (times)

13.05 8.83 8.24 9.85 11.75 10.56

Average Collection Period (days)

27.96 41.33 44.29 37.05 31.06 34.56

Inventory Turnover (times)

N/A N/A N/A N/A N/A N/A

Accounts Payable Turnover (times)

4.92 3.93 3.67 3.88 3.97 3.79

Average Inventory Turnover Period (Days)

N/A N/A N/A N/A N/A N/A

Properties, Plant and Equipment Turnover (times)

8.30 7.23 8.14 9.56 10.16 8.92

Total Assets Turnover (times)

1.13 1.02 1.09 1.15 1.12 0.94

Profitability

Return on Assets (%)

4.71 3.37 4.09 3.61 3.62 2.88

Return on Equity (%) 15.40 10.15 12.73 12.03 13.03 10.34

Income before tax to Capital Ratio (%)

46.99 33.58 41.78 43.63 52.12 37.84

Net Margin (%) 4.04 3.14 3.63 3.04 3.15 2.93

Earnings per share (NT$)

3.39 2.22 2.79 2.69 2.92 0.58

Cash flow

Cash flow Ratio (%) 6.43 (13.54) 16.27 (17.51) 37.57 (9.75)

Cash flow adequacy Ratio (%)

173.39 112.88 126.58 11.49 99.23 72.43

Cash reinvestment Ratio (%)

(1.92) (13.15) 12.15 (30.64) 47.21 (13.12)

Leverage Operating leverage 4.10 5.24 4.60 4.48 3.54 4.04

Financial leverage 1.03 1.05 1.03 1.03 1.02 0.97

122

Financial Ratio Analysis -International Financial Reporting Standards

Year Item


2012 2013 2014 2015 2016

Financial Structure (%)

Debt to Asset Ratio 55.49 52.61 58.87 58.61 61.42

Long-term Funds to Properties, Plants and Equipment Ratio

4,052.62 5,152.08 5,754.48 5,990.54 6,456.70

Liquidity (%)

Current ratio 135.24 152.15 134.93 135.08 127.95

Quick ratio 122.38 137.83 122.37 124.86 118.09

Interest Coverage Ratio

N/A N/A 1,797,032.20 49,225.94 57,707.86



13.82 9.39 9.40 11.67 16.48


26.42 38.88 38.82 31.27 22.15


N/A N/A N/A N/A N/A


4.23 3.28 3.27 3.54 4.02


N/A N/A N/A N/A N/A

Properties, Plant and Equipment Turnover (times)

86.01 80.52 104.12 120.28 128.64


0.94 0.89 1.02 1.02 1.00

Profitability

Return on Assets (%) 6.73 4.66 5.59 4.97 5.21

Return on Equity (%) 15.40 10.15 12.73 12.03 13.03

Income before tax to Capital Ratio (%)

36.87 23.91 31.25 32.38 33.99

Net Margin (%) 7.02 5.22 5.50 4.85 5.20

Earnings per share (NT$)

3.39 2.22 2.79 2.69 2.92

Cash flow

Cash flow Ratio (%) (5.68) (20.37) 6.66 (18.21) 32.45


188.63 98.99 75.28 (33.08) 14.15


(17.22) (26.80) (0.61) (27.28) 29.18

Leverage Operating leverage 4.74 5.27 4.50 5.15 4.78

Financial leverage 1.00 1.00 1.00 1.00 1.00

123

The formulas for the above table:

1. Financial Structure

(1) Debts to Assets Ratio = Total Liabilities / Total Assets

(2) Long-term Funds to Properties, Plants and Equipment Ratio = (Total Shareholders' Equity plus Noncurrent Liabilities) / Net of Properties, Plants and Equipment

2. Liquidity

(1) Current Ratio = Current Assets / Current Liabilities

(2) Quick Ratio = (Current Assets - inventory - Prepaid Expense) / Current Liabilities

(3) Interest Coverage Ratio = (Net Income before Income Tax and Interest Expenses) / Interest Expense

3. Operating Performance

(1) Account Receivable Turnover = Net Sales / Average Accounts Receivable

(2) Average Collection Period = 365/ Accounts Receivable Turnover

(3) Inventory Turnover = Costs of Goods Sold / Average Inventory

(4) Accounts Payable Turnover = Costs of Goods Sold / Average Accounts Payable

(5) Average Inventory Turnover Period = 365 / Inventory Turnover

(6) Properties, Plant and Equipment Turnover = Net Sales / Average of Net Properties, Plants and Equipment.

(7) Total Assets Turnover Ratio = Net Sales / Average of Total Assets

4. Profitability Analysis

(1) Return on Assets =[Net Income +Interest Expense×(1-Tax Rate)] / Average Total Assets

(2) Return on Equity =Net Income / Average Shareholders' Equity

(3) Net Margin = Net Income / Net Sales

(4) Earnings per Share = (Net Income Attribute to Controlling Interest - Preferred Stock Dividend) / Weighed-average Number of Outstanding Shares

5. Cash Flow

(1) Cash Flow Ratio = Cash Flows from Operating Activities / Current Liabilities

(2) Cash Flow adequacy Ratio = Net Cash Flow from Operating Activities for the past 5 years / (Capital Expenditure + Increase in Inventory + Cash Dividends) for the past 5 years

(3) Cash Reinvestment Ratio = (Net Cash Flow from Operating Activities - Cash Dividends) / (Gross Properties, Plants and Equipment + Long-term Investment + Other Noncurrent Assets + Working Capital)

6. Leverage Ratio

(1) Operating Leverage = (Net Sales - Variable Operating Costs and Expenses) / Operating Income

(2) Financial Leverage = Operating Income / (Operating Income-Interest Expenses)

124

6.2.2 Consolidated Financial Ratio Analysis - ROC GAAP

Year Item

Financial analysis in the past five years

2012 2013 2014 2015 2016

Financial structure

(%)

Debt to Asset Ratio 67.06 N/A N/A N/A N/A

Long-term Funds to Fixed Assets Ratio

203.94 N/A N/A N/A N/A

Liquidity (%)

Current ratio 139.62 N/A N/A N/A N/A

Quick ratio 125.82 N/A N/A N/A N/A

Interest Coverage Ratio 34.99 N/A N/A N/A N/A



13.73 N/A N/A N/A N/A


26.58 N/A N/A N/A N/A


N/A N/A N/A N/A N/A




N/A N/A N/A N/A N/A

Fixed Assets Turnover (times)




Profitability

Return on Assets (%) 4.76 N/A N/A N/A N/A

Return on Stockholders' Equity (%)

16.24 N/A N/A N/A N/A

Ratio to issued capital (%)

Operating Income

42.91 N/A N/A N/A N/A

Pre-tax Income 45.84 N/A N/A N/A N/A

Net Margin (%) 3.94 N/A N/A N/A N/A

Earnings per share (NT$) 3.32 N/A N/A N/A N/A

Cash flow

Cash flow Ratio (%) 3.18 N/A N/A N/A N/A


162.95 N/A N/A N/A N/A


(4.03) N/A N/A N/A N/A

Leverage Operating leverage 4.13 N/A N/A N/A N/A

Financial leverage 1.03 N/A N/A N/A N/A

Note1: Consolidated Financial Ratio Analysis was under IFRS during 2013 to 2016, hence not

applicable.

125

Financial Ratio Analysis - ROC GAAP

Year Item

Financial analysis in the past five years

2012 2013 2014 2015 2016

Financial structure

(%)

Debt to Asset Ratio 56.95 N/A N/A N/A N/A

Long-term Funds to Fixed Assets Ratio

3,777.02 N/A N/A N/A N/A

Liquidity (%)

Current ratio 136.92 N/A N/A N/A N/A

Quick ratio 122.71 N/A N/A N/A N/A

Interest Coverage Ratio N/A N/A N/A N/A N/A



13.82 N/A N/A N/A N/A


26.41 N/A N/A N/A N/A


N/A N/A N/A N/A N/A




N/A N/A N/A N/A N/A

Fixed Assets Turnover (times)

86.01 N/A N/A N/A N/A



Profitability

Return on Assets (%) 6.83 N/A N/A N/A N/A

Return on Stockholders' Equity (%)

16.24 N/A N/A N/A N/A

Ratio to issued capital (%)

Operating Income

17.20 N/A N/A N/A N/A

Pre-tax Income 36.06 N/A N/A N/A N/A

Net Margin (%) 6.87 N/A N/A N/A N/A

Earnings per share (NT$) 3.32 N/A N/A N/A N/A

Cash flow

Cash flow Ratio (%) (5.49) N/A N/A N/A N/A


187.69 N/A N/A N/A N/A


(17.02) N/A N/A N/A N/A

Leverage Operating leverage 4.88 N/A N/A N/A N/A

Financial leverage 1.00 N/A N/A N/A N/A

Note1: Financial Ratio Analysis was under IFRS during 2013 to 2016, hence not applicable.

126

The formulas for the above table:

1. Financial Structure

(1) Debts to Assets Ratio = Total Liabilities / Total Assets

(2) Long-term Funds to Fixed Assets Ratio = (Total Shareholders' Equity plus Long-term Liabilities) / Net Fixed Assets

2. Liquidity

(1) Current Ratio = Current Assets / Current Liabilities

(2) Quick Ratio = (Current Assets - inventory - Prepaid Expense) / Current Liabilities

(3) Interest Coverage Ratio = (Net Income before Income Tax and Interest Expenses) / Interest Expense

3. Operating Performance

(1) Account Receivable Turnover = Net Sales / Average Receivables (including accounts and notes receivable)

(2) Average Collection Period = 365/ Accounts Receivable Turnover

(3) Inventory Turnover = Costs of Goods Sold / Average Inventory

(4) Accounts Payable Turnover = Costs of Goods Sold / Average Payables (including accounts and notes payable)

(5) Average Inventory Turnover Period = 365 / Inventory Turnover

(6) Fixed Assets Turnover = Net Sales / Net Fixed Assets

(7) Total Assets Turnover = Net Sales / Total Assets

4. Profitability Analysis

(1) Return on Assets =[Net Income +Interest Expense×(1-Tax Rate)] / Average Total Assets

(2) Return on Shareholders' Equity =Net Income / Average Shareholders' Equity

(3) Net Margin = Net Income / Net Sales

(4) Earnings per Share = (Net Income - Preferred Stock Dividend) / Weighed-average Number of Outstanding Shares.

5. Cash Flow

(1) Cash Flow Ratio = Cash Flows from Operating Activities / Current Liabilities

(2) Cash Flow adequacy Ratio = Net Cash Flow from Operating Activities for the past 5 years / (Capital Expenditure + Increase in Inventory + Cash Dividends) for the past 5 years

(3) Cash reinvestment Ratio = (Net Cash Flow from Operating Activities - Cash Dividends) / (Gross Fixed Assets + Long-term Investment + Other Assets + Working Capital)

6. Leverage Ratio

(1) Operating Leverage = (Net Sales - Variable Operating Costs and Expenses) / Operating Income

(2) Financial Leverage = Operating Income / (Operating Income-Interest Expenses)

127

6.3 Audit Committee’s Review Report in the Most Recent Year

128

6.4 Consolidated Financial Statements and Independent Auditors’ Report in the Most Recent Year Please refer to the Appendix 1

6.5 Financial Statements and Independent Auditors’ Report in the Most Recent Year Please refer to the Appendix 2

6.6 Impact of the Financial Dist ress Occurred to the Company and Affiliates in the Recent Years until

the Annual Report being published: None

129

VII. Review of Financial Conditions, Operating Results, and Risk Management 7.1 Analysis of Financial Status 7.1.1 Analysis of Financial Status Unit: NT$ thousands

Year Item

2016 2015 Difference Remark

(Note 1) Amount %

Current Assets 51,394,621 45,298,807 6,095,814 13.46

Properties, Plants and Equipment 6,876,224 7,001,676 (125,452) (1.79)

Intangible Assets 127,686 121,469 6,217 5.12

Other Assets 7,826,358 7,808,634 17,724 0.23

Total Assets 66,224,889 60,230,586 5,994,303 9.95

Current Liabilities 40,297,705 34,389,605 5,908,100 17.18

Non-current Liabilities 5,737,135 6,112,898 (375,763) (6.15)

Total Liabilities 46,034,840 40,502,503 5,532,337 13.66

Equity attributable to owners of the parent

17,098,343 17,019,448 78,895 0.46

Capital stock 7,632,738 7,611,076 21,662 0.28

Capital surplus 3,322,098 3,297,703 24,395 0.74

Retained Earnings 6,343,847 6,097,988 245,859 4.03

Other equity interest (188,505) 24,516 (213,021) (868.91) Note 2

Treasury stocks (11,835) (11,835) 0 0.00

Non-controlling interest 3,091,706 2,708,635 383,071 14.14

Total Equity 20,190,049 19,728,083 461,966 2.34

Note 1: The analysis is not applicable when the difference percentage does not exceed 20% and is less NT10, 000 thousands.

Note 2: Other equity interest decreases, mainly due to accumulative translation transaction differences of foreign operations and fluctuation in the value of financial assets in held-to-maturity.

7.1.2 The evaluation basis of the balance sheet valuation items Item B/S valuation item Evaluation reference Evaluation basis 1 Monetary assets

denominated in foreign currency

Spot rate on balance sheet date

Compute exchange gain or loss based on the spot rate

2 Financial instruments carried at fair value, available for sales and derivatives

Fair market value on balance sheet date

Evaluate based on the fair market value

3 Allowances for doubtful accounts

Historical records and credit references

The recognition and valuation of allowance-for-bad-debts are based on the controlling credit risks of our clients which are categorized such as low risk, medium-high risk, foreign owners..etc. A certain percentage of allowances for bad debts are determined according to the valuation of aging of accounts receivable in each category. Note: The accounts receivables from related

parties are not subject for allowances-for-bad-debts. However if special credit risk prevails, the allowance for bad debts will be evaluated according to the risk.

4 Allowances for inventory valuation and obsolescence losses

Not applicable to the Company

Not applicable to the Company

130

7.2 Analysis of Financial Performance 1. Analysis of Financial Performance

Unit: NT$ thousands

Year Item

2016 2015 Difference Remark

(Note) Amount %

Operating Revenue 70,509,675 67,057,640 3,452,035 5.15

Operating Costs (64,323,846) (61,621,562) (2,702,284) 4.39

Gross Profit 6,185,829 5,436,078 749,751 13.79

Operating Expenses (2,023,306) (2,434,166) 410,860 (16.88)

Operating Income 4,162,523 3,001,912 1,160,611 38.66 Note 2

Non-operating Income and expenses (184,055) 318,740 (502,795) (157.74) Note 2

Profit before Income Tax 3,978,468 3,320,652 657,816 19.81

Income Tax Expense (964,753) (750,509) (214,244) 28.55

Non-controlling Interest (790,827) (529,533) (261,294) 49.34

Income attributable to owners of the parent

2,222,888 2,040,610 182,278 8.93

2. The analysis of the differences：

(1) The operating income for 2016 increased compared to 2015 is mainly due to domestic major projects are in the high-peak of construction revenue recognition.

(2) The non-operating Income and expenses for 2016 decreased compared to 2015 is mainly due to the exchange loss of financial assets and liabilities at fair value through profit or loss and bank deposits.

(3) The income tax for 2016 increased compared to 2015 is mainly due to the increased of profit before Income Tax

(4) Non-controlling Interest for 2016 increased compared to 2015 is mainly due to the increases in net-income of subsidiaries

3. Analysis of gross profit: The consolidated revenue for 2016 increase compared to the previous year. This is mainly because domestic major projects are in the high-peak of construction revenue recognition.

4. The explanation of occurred or expected operational, policy, market status, economic environment and other internal and external: None

5. The drivers of the following year that affect company expected operating revenue: The operating revenue of the following year is expected to be flat compared to 2016 accounting to the backlog.

7.3 Analysis of Cash Flow 7.3.1 Cash Flow Analysis for the Past 2 Year

Unit: NT$ thousands

Year Item

2016/12/31 2015/12/31 Difference ratio (%)

Cash Flow Ratio (%) 37.57 -17.51 314.56

Fund Flow Adequacy Ratio (%) 99.23 11.49 763.62

Cash Re-investment Ratio (%) 47.21 -30.64 254.08

Explanation to changes: 1. Cash flow ratio increased due to net cash used out operating activities. 2. Fund flow adequacy ratio increased due to net cash used out operating activities. 3. Cash re-investment ratio increased due to net cash used out operating activities.

7.3.2 Analysis of Cash Liquidity The cash inflow of Year 2016 is NT$9,177.808 millions. The cash balance in the end of the year is NT$13,832.291 millions. Cash liquidity is fine.

131

7.3.3 Analysis of Cash Liquidity for the Coming Year Unit: NT$ thousands

Cash Balance at Beginning for the Year

Expected Net Cash Flow from

Operating Activities

Expected Cash Inflow

(Outflow)

Expected Cash Surplus (Deficit)

Leverage of Expected Cash Deficit

Investment Plans Investment Plans

13,832,291 3,784,830 (5,013,074) 8,819,217 - -

1. Analysis of change in cash flow in Year 2017: (1) Operating activities: The sufficient backlog of CTCI Group and cost down policy will create net cash

inflow. (2) Investing activities: The expected cash outflow are mainly due to new business investment and

injection to JV Company. (3) Financing activities: The expected cash outflow is mainly due to cash dividends distribution.

2. Liquidity analysis and remedial measures against cash deficit: N/A

7.4 Major Capital Expenditure Items: None 7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the

Investment Plans for the Coming Year The Company has established subsidiaries in China, Thailand, Malaysia, Vietnam, India, the Middle East, the United States, Singapore and the Netherlands; branches in Italy and Qatar; CTCI Indonesia representative office. In accordance with strategy of development of U.S.A, the possibility of enlargement investment in US market is under evaluation recently. To strengthen global market position, CTCI would keep assessing overseas markets and future growth, and expand its global footprints timely to enhance the international competitiveness.

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. Interest rate

Unit：NT$ Thousands

Item 2016 2015

Interest Income 43,460 121,013

Interest Expense 80,344 89,468

Investment gain on money market fund

1,592 7,840

Sales 70,509,675 67,057,640

Net Income before Tax 3,978,468 3,320,652

Besides equity products and deposits, the Company invests inactive money mainly in money market funds, which highly correlate with market interest rates. However, the investment gain on money market fund is not credited to interest income but to gain on disposal of investment. Therefore, to analyze the effects of changes in interest rates should consolidate interest income/expense and gain on disposal of money market fund. The inactive money was reduced in this year, while interest income decreased by NT$ 77,553 thousands over 2016. As CBC cut the TWD interest rates twice in 2016, resulted in financing costs was reduced, while interest expense decreased by NT$ 9,124 thousands over 2016. For inactive money, the Company will continue to look for higher-yield financial products with safety and proper liquidity to achieve the purpose of earning stable investment profits.

132

B. Foreign exchange rates Unit：NT$ Thousands

Item 2016 2015

Net Foreign Exchange Gain/Loss(A) 15,045 109,098

Sales (B) 70,509,675 67,057,640

Net Income before Tax (C) 3,978,468 3,320,652

A/B(%) 0.02 0.16

A/C(%) 0.38 3.29

The business line of CTCI includes engineering design, procurement, fabrication, construction, supervision, project management, test & commissioning and environmental protection. All business work can be separated into two parts as domestic projects and overseas projects according to its location. For cash-in side, domestic projects are usually signed in Taiwan dollar, and sometimes in other foreign currencies; overseas projects are usually signed in US dollar and local currency. For cash-out side, the currencies of payment are usually decided by service location or procurement region. Therefore, the Company must keep appropriate foreign assets and liabilities to operate general activities. Thus the appreciation or depreciation of major currencies, like US dollar, Japanese Yen, and Euro, will influence foreign exchange profit/loss of the Company. To lower the influence on changes in foreign exchange rates, the Company adopts natural hedge strategy, including contracts in different currencies or asking multiple-currency contracts to cover major payment in different currencies. For other FX exposure, the Company also has concrete methods to hedge the risks. Thus, the changes in foreign exchange rates little affect the income of the Company. According to above table, the ratios of foreign exchange profit/loss to sales and net income before tax are slight. That means the changes in foreign exchange rates have limited influence on the sales and net income before tax. The concrete methods to hedge FX risks are as below, a. To know well update trends of major currencies, and adjust FX position timely. b. To create internal hedge effect by netting foreign receivables and payables. c. For payment in foreign currencies, to forecast the direction of payment currencies and analyze the

potential profit and loss of foreign exchange, and then choose leads or lags strategy to hedge FX risks and achieve the goal of saving costs.

d. In order to allocate optimal capital position, to open foreign currency deposit accounts to collect foreign income and convert it into new Taiwan dollar or other strong currencies based on actual cash flow demand or FX tendency.

e. To use forward contracts or other tools to hedge FX risks. C. Inflation

Item 2016 2015

CPI 105.10 103.65

Annual Change of CPI 1.4 -0.31

Construction Cost Indices 97.76 99.44

Annual Change of Construction Cost Indices -1.69 -2.82

profit margin 8.77 8.11 Source：Directorate General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.(Taiwan)/ Base year 2011

Due to the industry nature, the analysis of inflation should be referred to not only CPI but also Construction Cost Indices. The Consumer Price Index of 2016 was 105.10, and the annual change of it increased by 1.4%. It was mainly caused by the rebounding prices of crude oil and raw materials. DGBAS estimates the annual change of CPI of 2017 will be 1.08%. Taiwan Institute of Economic Research expects the CPI level of 2017 will have stable growth due to the rebounding prices of crude oil and raw materials and the lower base last year. The total Construction Cost Indices of 2016 declined by 1.69%, mainly due to the decrease of 2.67% of its material category index and the increase of 0.27% of its service category index. The causes include

http://eng.stat.gov.tw/public/Data/1151634271.xls




133

the reduction in domestic demand for sand, cement and wood, despite the rebounding prices of international crude oil and copper, and the increase of minimum wages. The Company would do the best to take potential inflation and raw material prices into account during whole project period in bidding stage. However the profits will still be eroded once the price increase is more than expected. The Company will continue to watch price changes closely and reflect them to project contract quotation simultaneously; furthermore the Company also executes derivatives to hedge operational risks from potential inflation.

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 The Company is devoted to develop EPC service business and does not engage in high-risk and high-leveraged investment. As for lending to others, guarantees and derivatives transactions all are executed according to the Company’s “Rules Governing Procedure for Loaning of Funds”, ”Rules Governing Procedure for Making of Endorsements or Guarantees” and “The Procedure for Acquisition and Disposition of Assets”.

7.6.3 Future Research & Development Projects and Corresponding Budget A. Current Project Progress (as of end of March, 2017), Budget and Estimated Time to Finish

Item Project Name Current Progress

(%) Budget

Estimated Time

to Finish

1 The front operation, system setting and report online of implementing existing Innovation RD product to new project

23.5 14,214,000 2017.12.31

2 The research and development of intelligent application platform (Tag Platform)

25 23,908,000 2017.12.31

3 The research of virtual and physical plant hand over 23 2,992,000 2017.12.31

4 The research of intelligent sensing technology applied to site management

26 6,200,000 2017.12.31

5 The integrated research of Intergraph SPE and Tag Platform 22 2,856,000 2017.12.31

6 AP Service 15 2,962,000 2017.12.31

7 Material management system’s maintenance, mobilization application and group affiliates implementation

25 6,600,000 2017.12.31

8 The development of SmartPlant design information integration and application

25 8,720,000 2017.12.31

9 The research of building corrosion/deterioration mechanisms identification and inspection planning system

25 2,060,000 2017.12.31

10 The research of building HAZOP review comment control log system

25 1,020,000 2017.12.31

11 The development and research of process design information automation

25 5,280,000 2017.12.31

12 The P&ID template establishment of raw water, pure water treatment system

25 660,000 2017.12.31

13 The basic design creation of system recycled water treatment technology

25.8 674,000 2017.12.31

14 The dynamic simulation research of flare / steam network 25 1,566,000 2017.12.31

15 The development of civil and building iEPC common information operation system

25 5,280,000 2017.12.31

16 The new science and technology and new expertise technology of civil and building engineering

25 6,800,000 2017.12.31

17 The research and development of track engineering technology

25 4,090,000 2017.12.31

18 The improvement of equipment operation workflow 25 1,980,000 2017.12.31

19 Project equipment database system 25 1,650,000 2017.12.31

134

Item Project Name Current Progress

(%) Budget

Estimated Time

to Finish

20 The development and maintenance of equipment application system

24 1,650,000 2017.12.31

21 CFD analysis for evaluating hot-air recirculation affection in air-cooled heat exchanger

25 1,344,000 2017.12.31

22 The automatic integrated research of instrumentation inter-discipline data

25 3,960,000 2017.12.31

23 The research and development of instrumentation 3D/2D design operation

25 4,624,000 2017.12.31

24 The intelligentized programing development of plant layout 25 6,170,000 2017.12.31

25 The technology development of VR applied to 3D model review

25 2,190,000 2017.12.31

26 The integrated development of piping digital information 25 14,985,000 2017.12.31

27 The extending application of power information integrated data

24 4,513,000 2017.12.31

28 Applying electrical information to 3D/2D with automatic generation

25 4,092,000 2017.12.31

29 Analysis of Fast-Bus Transfer (FBT) scheme for its impact on power system and protective relay co-ordination

22 2,520,000 2017.12.31

30 Vendor information exchange 15 2,158,200 2017.12.31

31 The establishment of Implementing SPC system to optimize construction management platform

25 990,000 2017.12.31

32 The research of scaffolding operation optimization and establishing modular skill

20 812,000 2017.12.31

33 The application and development of robot installation at site

25 3,462,000 2017.12.31

34 Mobile system optimization at construction site 20 1,982,000 2017.12.31

35 Developing system mark-up 3D model in S3D 20 990,000 2017.12.31

B. Major Factor to Influence Future RD Success

a. Right RD strategy and definition of key performance Index b. Good communication with users to make sure production meet market requirement c. Stable RD resource to accomplish development task effectively d. Accurate progress control to ensure the timeliness of RD results

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 in Industry Relating to Corporate Finance

and Sales None

7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s

Response Measures None

7.6.7 Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans

None

135

7.6.8 Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans Not Applicable

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% The fluctuated security price and the possibility of changing directors are the effect and risk, and strengthening company’s information transparency is the countermeasure. The Company has established functional committees beneath Board of Directors, such as Corporate Governance Committee, Audit Committee and Remuneration Committee, to strengthen Board of Directors functions, furthermore, to promote the corporate governance.

7.6.11 Effects of, Risks Relating to and Response to Changes in Control over the Company None

7.6.12 Litigation or Non-litigation Matters A. CTCI Corporation and Mitsubishi Heavy Industries, Ltd. were joint venture in the Kaohsiung Country

Ren-Wu Resource Recovery Plant Project. The project completed on February 19, 2000 and accepted by Environmental Protection Administration on May 16, 2000. CTCI claimed for release of the guarantee bond in the amount of NTD 141,690 thousands, Environmental Protection Administration, however, declined the request due to one unsolved dispute between Kaohsiung City Government and O&M Contractor. After CTCI remitted in NTD 73,253 thousands to bank for exempting from the execution of the guarantee bond and filed a lawsuit to Taiwan Taipei District Court, Environmental Protection Administration returned the amount of NTD 9,299 thousands to CTCI. As a result, CTCI reduced the claim amount to NTD 63,954 thousands, with the interest in the amount of NTD 117 thousands and the liquated damages in the amount of NTD 2,421 thousands. CTCI was then awarded a winning adjudication except for the damages in the amount of NTD 1,708 thousands has been rejected. Afterwards, the Environmental Protection Administration appealed to the Taiwan High Court but failed. Further, the Environmental Protection Administration continued to appeal to the Taiwan Supreme Court. This lawsuit is remanded by Taiwan Supreme Court twice and now is under the trial of Taiwan High Court. The judgment of Taiwan High Court was not in favor of the assertion of Environmental Protection Administration and Environmental Protection Administration appealed to Taiwan Supreme Court for the third time. The judgment of Taiwan Supreme Court remanded this case to Taiwan High Court. This lawsuit now is under the trial of Taiwan High Court. There is no material impact to CTCI’s finance as well as business development so far.

B. CTCI Corporation, Ishikawajima-Harima Heavy Industries Co., Ltd., Resource Engineering Services Inc. and East Construction Industry Co., Ltd were joint venture in the CPC Northern LNG Receiving Terminal Project and entered into a contract on July 23, 2004. CTCI claimed for additional costs, including direct and indirect costs, in the total amount of NTD 82,390 thousands for delay resulted from CPC Corporation’s contractor for another project and filed a lawsuit to Taipei District Court on March 5, 2010. After reviewing related document itself, CTCI reduced the claim amount to NTD 71,448,016 on March 1, 2011. The judgments of Taipei District Court and Taiwan High Court were not awarded to CTCI. CTCI appealed to Taiwan Supreme Court. The judgment of Taiwan Supreme Court sustained CTCI’s appeal and remanded for retrial under Taiwan High Court. However, Taiwan High Court did not award to CTCI. CTCI appealed to Taiwan Supreme Court again. Finally Taiwan Supreme Court rejected CTCI’s appeal. This case was closed on March, 2016. There is no material impact to CTCI’s finance as well as business development.

136

C. CTCI Corporation, Ishikawajima-Harima Heavy Industries Co., Ltd., Resource Engineering Services Inc.

and East Construction Industry Co., Ltd were joint venture in the CPC Northern LNG Receiving Terminal Project and entered into a contract on July 23, 2004. CPC Corporation alleged it has limited budget and cannot pay the compensation of price escalation, so CTCI claimed for compensation of price escalation in the amount of USD 7,983 thousands and NTD 384,159 thousands and filed a lawsuit to Taipei District Court on March 5, 2010. The judgment of Taipei District Court is not awarded to CTCI. CTCI appealed to Taiwan High Court but was overruled. CTCI appealed to Taiwan Supreme Court and Taiwan Supreme Court remanded this case to Taiwan High Court to re-decide. This lawsuit now is under the re-trial of Taiwan High Court. There is no material impact to CTCI’s finance as well as business development so far.

7.6.13 Risk management organization framework A. Organization chart

Note: The dashed line indicates the communication mechanism between Risk Management Executive Committee

and Audit department rather than the reporting relationship.

B. Responsibility: a. Risk Management Executive Committee

The Risk Management Executive Committee is the major monitoring mechanism for risk management of the company, its members mainly include President and Head of Executive Management Office, Business Operations and Supporting Operations, President is the Chairman of committee, and the convener is Head of Executive Management Office. Major responsibilities are as follows: -Approve risk management policy and rules of the company; -Examine risk management report and strategy of the company, and improvement plan; -Supervise execution of risk control measure and improvement plan, communicate and deliver risk

management affairs with and to all employees; -Examine and assess the effectiveness of risk management measure and ask relevant unit to propose

improvement plan.

b. Risk Management Secretary Service The convener of Risk Management Executive Committee will designate dedicated personnel (or unit) to be responsible for overall risk management secretary service to ensure continuous effectiveness of risk management mechanism. Major responsibilities are as follows: -Contact window of risk management mechanism of the company; -Summarize and submit the risk management report, real time report and other works related to

risk management; -Issue relevant procedures; -Convene risk management review meeting.

風險管理執行委員會

Risk Management Executive Committee 稽核室

Audit Department

Risk management representative of Risk Management Unit

全體員工 All Employees

秘書業務 Secretary Service

137

c. Audit Department

Audit Department can makes and executes annual audit plan in accordance with the result of risk evaluation.

d. Risk Management Representative

Company sets several risk management units in accordance with the functions and each unit designates risk management representative to undertake relevant affairs and contact windows. Roles and responsibilities of risk management representative are as follows: -Promote the supervision, identification and management of significant risks on behalf of risk

management units; -Summarize and prepare risk registers and improvement plan of the risk management unit; -Collect and monitor significant risk event and evaluate the impact; -Report significant risk and relevant improvement plan to Head of Business Operations and provide

a copy to the unit of risk management secretary service; -Deliver the notice of risk management to members of the unit;

e. All employees

Comply with company policy, perform duty in accordance with the R&R, implement relevant operations of risk management, and report to the supervisor immediately in case of a risk.

7.6.14 Other Major Risks Competiveness is enhanced with CTCI tracking international business and economic conditions and assessing the impact on corporate finance, sales and business implementation which is responded to through various means including the control of cash flows to facilitate capital turnover; development of new markets for added business; and strengthened core technology which including project management and quality control. 7.7 Other: None

138

100%


100%


100%

CTCI Machinery

Corporation

100%

HD Resources Management Corporation

23.34%

CTCI Chemicals Corporation

9.24%

9.24%

6.77%

26.90%

98%

Leading Energy

Corporation

2%

93.14%CTCI

Resources Engineering

Inc.

0.01%

57.58%


0.05%

0.37%

60%

Yuan Ding Resources

Corporation

40%

CTCI Group Companies Organization (Domestic) April 30, 2017

CTCI Corporation

93.15%Sino

Environmental Services

Corporation

0.01%

100%

Crown Asia 2 Investment

Limited

74.999%

Fortune Energy

Corporation

0.001%

97.09%


0.002%

48.72%

Advanced Control &

Systems Inc.

1.38%

51%

CTCI&HEC Water Business

Corporation.

VIII. Special Disclosure 8.1 Summary of Affiliated Companies 8.1.1 Consolidated Business Report of Affiliates

(1) Organizational chart of the affiliates

139

Advanced Control &

Systems Inc.



Sino Environmental


100%Cen

tury A

head

Ltd.

100%

CTC

I Ad

vanced

System

s Shan

ghai

Inc.

100%

CTC

I Tradin

g Sh

angh

ai Co

., Ltd.

19.24%

CTC

I Shan

ghai C

o.,

Ltd.

80.76%

30%

SINO

GA

L –W

aste Services C

o., Ltd

.

30%

CTC

I Co

rpo

ration

Q

atar Bran

ch

CTC

I Co

rpo

ration

AB

U D

HA

BI B

ranch

50%

CTC

I Arab

ia Ltd.

50%

100%CTC

I Overseas (B

VI)

Co

rpo

ration

60%CTC

I Engin

eering &

C

on

structio

n Sd

n.

Bh

d.

40%

49%CTC

I (Thailan

d) C

o.,

Ltd.

51%

100%CTC

I Am

ericas, Inc.

CTC

I Co

rpo

ration

Italian

Bran

ch

100%CTC

I Singap

ore P

te.Ltd

.

100%

CTC

I Overseas C

o.,

Ltd.

100%U

niversal

Engin

eering (B

VI)

Co

rpo

ration

50%CIM

AS En

gineerin

g C

o., Ltd

.

100%CIN

DA

Engin

eering

& C

on

structio

n P

vt. Ltd

.

100%

CTC

I Beijin

g Co

.,Ltd

.

49%

Sup

eriority

(Thailan

d)

100%

Xian

g Din

g En

viron

men

tal C

on

sultan

t (sh

angh

ai) Co

., Ltd.

40%CTC

I & P

artners C

o.,

Ltd.

60%

39.99%CIP

EC C

on

structio

n

Inc.

CTCI Group Companies Organization (Overseas)

CTCI Corporation

CTC

I Ind

on

esia R

epresen

tative Office

99%

CC

JV P

1

Engin

eering &

C

on

structio

n Sd

n.

Bh

d.

CTC

I Ove

rseas C

om

pan

ies

100%

CTC

I Neth

erland

s B

.V.

11.80%

Sum

ber

Mam

pu

Sdn

. Bh

d

20%CTC

I Malaysia Sd

n.

Bh

d.

80%

April 30, 2017

140

(2) General information of the affiliates: April 30th, 2017 ; Unit : $Thousands

Company Date of

Incorporation Address

Common Stock Issued

Major Business Activities


1980.05.27 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei

City, Taiwan NTD 608,720 Planning and design of construction projects

CTCI Resources Engineering Inc. 1984.05.29 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei City, Taiwan

NTD 180,000 Planning, design and supervision of mechanical and electrical engineering projects

Advanced Control & Systems Inc.

1987.08.03 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei City, Taiwan

NTD 234,915 Design and installation of software



NTD 151,000 Environmental engineering

CTCI Development Corporation 1999.02.24 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei City, Taiwan

NTD 1,690,000 Real estate and leasing business

CTCI Investment Corporation 1999.02.05 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei City, Taiwan

NTD 1,402,000 Investments

KD Holding Corporation 1999.12.13 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei City, Taiwan

NTD 667,836 Investments

CTCI Chemicals Corporation. 1999.08.04 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei City, Taiwan

NTD 71,000 Manufacturing of chemical products

Leading Energy Corporation 2000.05.19 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei City, Taiwan



2001.06.01 No.69, Ln. 373, Changchun St., Wuri Dist., Taichung City, Taiwan


Fortune Energy Corporation 2002.11.07 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei City, Taiwan


CTCI Machinery Corporation 2007.03.14 5, Xinggong Rd., Dashe Dist., Kaohsiung City, Taiwan

NTD 200,000 Planning and design of construction projects

CTCI (Thailand) Co., Ltd. 1987.08.15 19th Floor, Phairojkijja Tower 825, Bangna-Trad K.M.4, Bangna Bangkok 10260 Thailand

THB 255,000 Planning and design of construction projects

CTCI Overseas (BVI) Corporation

1997.04.30 P.O.Box 662, Road Town, Tortola British Virgin Islands

HKD 67,400 Investment, planning and design of construction

141

CTCI Beijing Co., Ltd. 1993.02.17 10F Royal City International Centre B, No. 138, Andingmenwai Street, Dongcheng District, Beijing, China

USD 10,600 Planning and design of construction projects

CTCI Shanghai Co., Ltd. 2003.09.24 Room.12, Floor.8, No.441, He Nang Bai Road, Zhabei District, Shanghai, China

CNY 123,413 Consulting services for construction projects

CTCI OVERSEAS CORPORATION LIMITED

1993.06.01 Suite 1801-5,18/F.,Tower 2,China Hong Kong City, 33 Canton Road,Tsim Sha Tsui, Kowloon Hong Kong

HKD 67,400 Planning and design of construction projects


1983.09.21 SUITE 22-03B, 22nd Fl., Menara Tan & Tan 207 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia

MYR 750 Planning and design of construction projects

CTCI Arabia Ltd. 2002.10.27 P.O.Box 1962 Al Khobar 31952 Kindom of Saudi Arabia

SAR 5,000 Design and construction of chemical factories

CIMAS Engineering Company Limited

2001.03.28 6th Floor, Charmvit Building 117Tran Duy HungCau Giay District Hanoi, Vietnam


Century Ahead Ltd. 2000.10.12 Offshore Chambers, P.O.Box 217, Apia, Samoa

USD 750 Investments, planning and design of construction projects

Superiority (Thailand) Co., Ltd 2006.01.01 19th Floor, Phairojkijja Tower 825, Bangna-Trad Road, K.M.4, Bangna, Bangkok 10260 Thailand

THB 350 Investments

CTCI Advanced Systems Shanghai Inc.

2001.09.21 Room 704, 7Fl, 26, Lane 168, Daduhe Road, Putuo District, Shanghai, China

USD 750 Computer skills services

CTCI Malaysia Sdn. Bhd. 2002.06.04 SUITE 22-03B, 22nd Fl., Menara Tan & Tan 207 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia

MYR 750 Planning and design of construction projects

SUMBER MAMPU SDN. BHD. 2003.06.04 SUITE 22-03B, 22nd Fl., Menara Tan & Tan 207 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia

MYR 102,040 Investments

CIPEC Construction Inc. 2003.07.03 Unit 402 SEDCCO 1 Building Roda St. Legaspi Village Makati City, Philippines.

PHP 2,500 Planning and design of construction projects

SINOGAL - Waste Services Co., Ltd.

2009.06.25 Rua Dr. Pedro Jose Lobo, ns 1-3, Edificio Banco Luso Internacional,15 andar, salas 1501 e 1510, em Macau

MOP 4,000 Environmental engineering

142

CINDA Engineering & Construction Pvt. Ltd.

2008.08.08 B-92, 9th Floor, Himalaya House, 23 Kasturba Gandhi Marg, New Delhi – 110001, India

INR 80,000 Planning and design of construction projects

CTCI Trading Shanghai Co., Ltd. 2009.07.17 Room 701, 7Fl, 26, Lane 168, Daduhe Road, Putuo District, Shanghai, China

CNY 5,000 General trade.

CTCI Americas, Inc. 2009.10.02 9555 West Sam Houston Pkwy South, Suite 420 Houston, Texas 77099, USA

USD 100 Business development and related engineering services and planning

CTCI and Partners Company Limited

2009.09.14 P.O.Box 1962 Al Khobar 31952 Kindom of Saudi Arabia

SAR 5,000 Planning and design of construction projects

Universal Engineering(BVI) Co., 2003.03.06 Akara Bldg.,24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands.

USD 50 Planning and design of construction projects

CTCI Singapore Pte. Ltd. 2011.01.10 80 Robinson Road #02-00 Singapore(068896)


Yuan Ding Resources Corporation



Xiang Ding Environmental Consultant (shanghai) Co., Ltd.

2013.08.02 Room 2206-G,NO.89,East Yunling Rd., Putuo District, Shanghai, China

USD 140 Environmental engineering


2014.05.20 SUITE D23, 2nd Floor, Plaza Pekeliling, No.2, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia

MYR 250 Planning of construction projects



NTD 250 Investments

CTCI Netherlands B.V. 2016.01.04 Jan Pietersz. Coenstraat 7, 2595WP's-Gravenhage, Netherlands

EUR 300 Engineers and other technical design and consultancy

CTCI&HEC Water Business Corporation.

2016.08.15 16Fl., No.65, Sec. 2, Daxing W. Rd., Taoyuan Dist., Taoyuan City, Taiwan

NTD 500,000 Environmental engineering with BOT

143

(3) Common Shareholders of the Company and Its Subsidiaries or Its Affiliates with Actual of Deemed Control: None

(4) Industries covered by the business operated by all affiliates:

The business of the Company and its subsidiaries and affiliates provide include engineering, environmental, chemical and investment.

(5) Directors, supervisors, and general managers of the Company and affiliates

April 30th, 2017

Company Title Name of Representative Shareholding

Shares %


Chairman CTCI Corporation Representative: S. C. Chun

59,098,624 97.09

Director CTCI Corporation Representative: Hwei-Nan Yih Benjamin C. N. Tsai Shuh-Gong Lou Yang-Ting Chen

59,098,624 97.09

Supervisor CTCI Investment Corporation Representative: Andrew Tsai

1,000 0.00

President Ben Sun

CTCI Resources Engineering Inc.

Chairman CTCI Corporation Representative: Kuo-Ann Wu

16,765,048 93.13

Director CTCI Corporation Representative: Michael Chung Ding-Go Ku Hwei-Nan Yih S. C. Chun

16,765,048 93.13

Supervisor CTCI Development Corporation Representative: Gino Tsai

1,000 0.01

President Ding-Go Ku

Advanced Control & Systems Inc.

Chairman CTCI Corporation Representative: Hwei-Nan Yih

11,444,842 48.72

Director

CTCI Corporation Representative: Yin-Fan Liu

11,444,842 48.72

Bao-Lang Chen

Hou-Sheng Chan

Hung-I Chen 401,000 1.71


Ray Chang

Hsi-Peng Lu

Amy Lee

President Yin-Fan Liu 72,022 0.31

144


Chairman KD Holding Corporation Representative: J.J. Liao

14,065,936 93.15

Director KD Holding Corporation Representative: Mike Chiou Todd Chen Eric Tiao Daniel Hsin-I Ting

14,065,936 93.15

Supervisor HD Resource Management Corporation Representative: Chien-Lung Yen

1,000 0.01

President Eric Tiao


Chairman CTCI Corporation Representative: John T. Yu

169,000,000 100.00

Director CTCI Corporation Representative: Eric Lin Jim Chen

169,000,000 100.00

Supervisor CTCI Corporation Representative: Chun-Jung Hung

169,000,000 100.00

President Patrick Lin


Chairman CTCI Corporation Representative: John H. Lin

140,200,000 100.00

Director CTCI Corporation Representative: Patrick Lin Teh-Ming Tao

140,200,000 100.00

Supervisor CTCI Corporation Representative: Hope Sun

140,200,000 100.00

President Patrick Lin


Chairman CTCI Corporation Representative: John H. Lin

38,457,105 57.58

Director CTCI Corporation Representative: Michael Yang Ming-Cheng Hsiao

38,457,105 57.58

Wen-Whe Pan

Yang-Min Liu

Parkwell Investment Limited Representative: Kuan-Shen Wang

1,060,000 1.59


Sidney Hsin-Huai Chow

Shean-Bii Chiu

Eugene Chien

President J.J. Liao

CTCI Chemicals Corporation.

Chairman CTCI Investment Corporation Representative: Kevin S.P. Jen

1,657,207 23.34

Director CTCI Investment Corporation Representative: M.H. Wang Todd Chen Yeu-Wen Chen

1,657,207 23.34

Shirley Chou 576,910 8.13

Supervisor CTCI Development Corporation Representative: Henderson Ko

480,661 6.77

President Sam Kuo 10,143 0.14

145

Leading Energy Corporation


47,040,000 98.00

Director KD Holding Corporation Representative: Jin-Yiu Hsueh Chang-Hong Lin

47,040,000 98.00

Supervisor Sino Environmental Services Corporation Representative: Nicole Ku

960,000 2.00

President Jin-Yiu Hsueh



2,000,000 100.00

Director KD Holding Corporation Representative: Yun-Peng Shih Jung-Yu Han

Hsiu-Yu Mike Kuo P. F. Chu

2,000,000 100.00

Supervisor KD Holding Corporation Representative: Jig-Wen Chang

2,000,000 100.00

President Yun-Peng Shih

Fortune Energy Corporation


56,249,000 75.00

Director KD Holding Corporation Representative: Alex Chen

56,249,000 75.00

Topco Scientific Co., Ltd. Representative: Fa-Siang Tan

18,700,000 24.93

Supervisor Sino Environmental Services Corporation Representative: M.L. Lee

1,000 0.00

Topco International Investment Co., Ltd. Representative: Su-Qing Lu

50,000 0.07


CTCI Machinery Corporation

Chairman CTCI Corporation Representative: Chen-San Hu

20,000,000 100.00

Director CTCI Corporation Representative: Rong-Ting Chen M.H. Wang Ting-Kuo Li Jung-Yu Han

20,000,000 100.00

Supervisor CTCI Corporation Representative: Yuan-Shuang Kuan

20,000,000 100.00

President Rong-Ting Chen

CTCI (Thailand) Co., Ltd.

Director CTCI Corporation Representative: Pao-Yao Pan Jeff Hsu Jung-Chen Chen Ho-Chuang Lee

1,249,500 49.00

Superiority (Thailand) Co.,Ltd Representative: Rungthip Chin Thira Jaturonrassamee

1,300,500 51.00

CTCI Overseas (BVI) Corporation

Director CTCI Corporation Representative: Andy Sheu Po-Chien Wang B.J.Liang

6,740,000 100.00

146

CTCI Beijing Co., Ltd.

Chairman CTCI Overseas Corporation Limited Representative: Tieh-Shih Chang

USD 10,600,000 100.00

Director CTCI Overseas Corporation Limited Representative: Mark W. H. Yang Fortune Chen Y. S. Liao Shen-Peng Liao

USD 10,600,000 100.00

Supervisor CTCI Overseas Corporation Limited Representative: Ai Cheng Ho

USD 10,600,000 100.00

President Fortune Chen

CTCI Shanghai Co., Ltd.

Chairman CTCI Overseas Corporation Limited Representative: S. C. Chun

USD 13,470,000 80.76

Director CTCI Smart Engineering Corporation Representative: Chen-Chin Chen Tsung-Kung Shu

USD 3,210,000 19.24

CTCI Overseas Corporation Limited Representative: Chang-Ning Tzou

USD 13,470,000 80.76

Supervisor CTCI Overseas Corporation Limited Representative: Sharon Chiang

USD 13,470,000 80.76

President Chang-Ning Tzou

CTCI Overseas Corporation Limited

Director CTCI Overseas (BVI) Corporation Representative: John T. Yu John H. Lin Andy Sheu Michael Yang

6,740,000 100.00


Chairman CTCI Corporation Representative: Ming-Cheng Hsiao

450,000 60.00

Director CTCI Corporation Representative: Jenq-Shyong Chung

T.C. Li Eric Chiu

450,000 60.00

CTCI Overseas Corporation Limited 300,000 40.00

President Eric Chiu

CTCI Arabia Ltd. Chairman CTCI Corporation Representative: M. H. Wang

SAR 2,500,000 50.00

Director CTCI Corporation Representative: Paul Yang

SAR 2,500,000 50.00

CTCI Overseas Corporation Limited Representative: Scott Chen Edward Yuan

SAR 2,500,000 50.00

President Scott Chen

147

CIMAS Engineering Company Limited

Chairman Vietnam Machinery Erection Corporation Representative: Hoang Minh Khoi

USD 1,254,000 33.00

Vice Chairman

CTCI Overseas Corporation Limited Representative: Pao-Yao Pan

USD 1,900,000 50.00

BOM Members

CTCI Overseas Corporation Limited Representative: James Y.H. Wang Perry Lin

USD 1,900,000 50.00

Vietnam Machinery Erection Corporation Representative: Nguyen Viet Hung

USD 1,254,000 33.00

Sincerity Engineering Co., Ltd. Representative: Yang Yi-Chung

USD 646,000 17.00

General Director Perry Lin

Century Ahead Ltd.

Director Advanced Control & Systems Inc. Representative: Hwei-Nan Yih Yin-Fan Liu Ai-Cheng Ho

USD 750,000 100.00

President Hwei-Nan Yih

Superiority (Thailand) Co., Ltd

Director Universal Engineering BVI Representative: Pao-Yao Pan Jeff Hsu

THB 171,500 49.00

3 independent shareholders Representative: Rungthip Chin

THB 178,500 51.00

CTCI Advanced Systems Shanghai Inc.

Chairman Century Ahead Ltd. Representative: Hwei-Nan Yih

USD 750,000 100.00

Director Century Ahead Ltd. Representative: Yin-Fan Liu Benjamin C. N. Tsai

USD 750,000 100.00

Supervisor Century Ahead Ltd. Representative: Chuan-Ju Shen

USD 750,000 100.00

President Tsung-Kung Shu

CTCI Malaysia Sdn. Bhd.

Chairman Sumber Mampu Sdn. Bhd. Representative: Mohamed Nor Bin Abu

Bakar

600,000 80.00

Director CTCI Engineering & Construction Sdn. Bhd. Representative: Jenq-Shyong Chung Eric Chiu

150,000 20.00

Sumber Mampu Sdn. Bhd. Representative: Kamaruddin Bin Anuer, Muhammad Anas Bin

Marjunit

600,000 80.00

SINOGAL - Waste Services Co., Ltd.

Chairman Helder Jose Moura Dos Santos MOP 800,000 20.00 Director Pereira Taveira Pinto, Carlos Manuel MOP 800,000 20.00 CTCI Corporation MOP 1,200,000 30.00 Sino Environmental Services Corporation MOP 1,200,000 30.00 Director J.J. Liao

Eric Tiao Patrick Lin

President Jeng-Long Su

148

CIPEC Construction Inc.

Chairman CTCI Overseas Corporation Limited Representative: Ming-Cheng Hsiao

9,998 40.00

Director CTCI Overseas Corporation Limited Representative: Wen-Pin Lo

9,998 40.00

Accuracy International Inc. Representative: Romuel Consunji Randolph Ang Grace Z. Fernandez

14,997 60.00

President Romuel Consunji

CINDA Engineering & Construction Pvt. Ltd.

Chairman Director

Mark W. H. Yang Ming-Shyan Lee Tim Lin T.M. Wang

INR 80,000,000 100.00

Managing Director

Tim Lin

CTCI Trading Shanghai Co., Ltd.

Chairman CTCI Shanghai Co., Ltd. Representative: S. C. Chun

CNY 5,000,000 100.00

Director CTCI Shanghai Co., Ltd. Representative: Chang-Ning Tzou Yu-Li Zhu

Supervisor CTCI Shanghai Co., Ltd. Representative: Ai-Cheng Ho

President Chang-Ning Tzou

CTCI Americas, Inc.

Chairman Director

Andy Sheu Michael Yang Mark W. H. Yang M. H. Wang Ming-Cheng Hsiao Pao-Yao Pan Ebrahim Fatemizadeh

100,000

100.00

President Hai Ankrum

CTCI and Partners Company Limited

Chairman CTCI Overseas Corporation Limited Representative: John H. Lin

3,000,000 60.00

CTCI Corporation 2,000,000 40.00 Universal Engineering (BVI) Co.,

Chairman Ming-Cheng Hsiao

50,000 100.00

CTCI Singapore Pte. Ltd.

Chairman Po-Chien Wang 5,100,000 100.00

Director Mike Chi-Min Chien Eric Chiu Lee Wei Hsiung

Managing Director

Eric Chiu

Yuan Ding Resources Corporation


2,700,000 60.00

Director KD Holding Corporation Representative: Yun-Peng Shih Feng-Hui Lee

2,700,000 60.00

Supervisor HD Resource Management Corporation Representative: Patrick Lin

1,800,000 40.00

President Yun-Peng Shih

149


Executive Director

Sino Environmental Services Corporation Representative: J.J. Liao

USD 140,000 100.00

Supervisor Sino Environmental Services Corporation Representative: Patrick Lin

USD 140,000 100.00



CTCI Corporation 247,500 99.00 Chiyoda Corporation 2,500 1.00

Director M. H. Wang Steven C.H. Wu Rick Wu

Takahashi Akemi

CTCI Netherlands B.V.

CTCI Singapore Pte. Ltd. EUR 300,000 100.00

Director David Wang


Chairman CTCI Development Corporation Representative: Michael Yang

TWD 250,000 100.00

Director CTCI Development Corporation Representative: Ming-Cheng Hsiao

CTCI&HEC Water Business Corporation.

Chairman CTCI Corporation Representative: Pao-Yao Pan

25,500,000 51.00

Director CTCI Corporation Representative: Y. S. Liao Tyrone C Tsai

25,500,000 51.00

HSIN DAR Environment Corporation Representative: Sheng-Le Chen Li-Ming Zhou

24,500,000 49.00

Supervisor Po-Chien Wang Wen-Jie Ding

President William Chung

SUMBER MAMPU SDN. BHD.

Director CTCI Overseas Corporation Limited Representative: Frank Wu

Eric Chiu

12,040 11.80

Director Mohamed nor bin abu bakar 30,000 29.40

Kamaruddin Bin Anuer 30,000 29.40

Muhammad Anas Bin Marjunit 30,000 29.40

150

8.1.2 Operation overview of the Company and affiliates

December 31st, 2016; Unit: NT$ Thousands

Company Common

Stock Issued Total Assets

Total Liabilities

Total Stockholders’

Equity

Total Operating Revenue

Operating Income (Loss)

Net Income (Loss)


CTCI Smart Engineering Corporation $ 608,720 $ 3,260,118 $ 2,434,804 $ 825,314 $ 3,920,437 $ 111,869 $ 101,595 $ 1.70

CTCI Resources Engineering Inc. 180,000 804,818 628,463 176,355 1,159,321 (110,120) (107,661) (5.98)

Advanced Control & Systems Inc. 234,915 1,151,958 628,196 523,762 1,118,554 85,802 72,408 3.08

Sino Environmental Services Corporation 151,000 2,139,791 1,123,403 1,016,388 2,871,714 341,163 489,858 32.44

CTCI Development Corporation 1,690,000 4,945,826 2,422,074 2,523,752 326,689 158,333 114,476 0.68

CTCI Investment Corporation 1,402,000 1,307,776 15,626 1,292,150 (11,569) (14,113) (17,745) (0.13)

KD Holding Corporation 664,6144 4,706,573 24,516 4,682,057 880,677 832,195 848,097 12.80

Leading Energy Corporation 480,000 1,596,506 201,484 1,395,022 657,942 338,393 282,563 5.89

Fortune Energy Corporation 750,000 1,820,303 485,559 1,334,744 360,797 192,606 155,841 2.08

CTCI Chemicals Corporation 71,000 315,629 95,128 220,501 462,869 73,410 54,727 7.71

HD Resources Management Corporation 20,000 385,648 296,851 88,797 991,313 40,890 37,634 18.82

CTCI (Thailand) Co., Ltd. 229,296 615,649 461,385 154,264 932,235 (91,533) (94,751) (37.16)

CTCI Overseas (BVI) Corporation 321,668 2,146,522 35 2,146,487 0 (631) 49,407 -

CTCI Overseas Corporation Limited 278,419 3,843,524 1,722,137 2,121,387 1,607,385 51,759 6,857 1.02

CTCI Beijing Co., Ltd. 338,586 1,467,404 278,313 1,189,091 610,556 (311,203) (283,662) (3.87)

CTCI Engineering & Construction Sdn. Bhd. 5,385 175,913 24,427 151,486 166,385 76,494 81,414 108.55

CIMAS Engineering Company Limited 95,150 134,094 31,499 102,595 158,470 5,296 4,909 -

Century Ahead Ltd. 23,678 26,712 0 26,712 0 (34) (769) -

Chung Ding Chemicals Corporation 315 173 30 143 0 (159) (179) -

CTCI Arabia Ltd. 42,919 1,363,622 2,096,593 (732,971) 6,311,566 737,578 599,278 -

CTCI Shanghai Co., Ltd. 570,363 1,158,279 742,982 415,297 997,245 11,346 10,495 -

151

Company Common

Stock Issued Total Assets

Total Liabilities

Total Stockholders’

Equity

Total Operating Revenue

Operating Income (Loss)

Net Income (Loss)


CTCI Advanced Systems Shanghai Inc. 24,607 26,690 1,303 25,387 22,333 (723) (713) -

CTCI Machinery Corporation 200,000 2,031,122 1,590,326 440,796 2,518,683 83,859 51,920 2.60

Superiority (Thailand) Co., Ltd 315 4,820 60,611 (55,791) 0 (235) (49,263) (11,206.36)

Universal Engineering(BVI) Corporation 1,610 118,133 55,774 62,359 0 (89) (48,308) -

CIPEC Construction Inc. 1,626 15,407 19,762 (4,355) 0 (1,091) (2,415) -

CINDA Engineering & Construction Pvt. Ltd. 37,963 302,157 142,206 156,951 218,662 (35,191) (38,521) (4.82)

SUMBER MAMPU SDN. BHD. 718 107,350 4,509 102,841 0 (118) 64,182 -

CTCI Malaysia Sdn. Bhd. 5,385 292,162 152,366 139,796 56,820 1,388 80,227 106.97

SINOGAL - Waste Services Co., Ltd. 16,129 438,103 181,679 256,424 1,274,864 744,338 728,696 -

CTCI Trading Shanghai Co., Ltd. 23,108 273,003 232,138 40,865 657,176 16,236 10,608 -

CTCI Americas, Inc. 3,220 35,314 27,735 7,579 124,149 240 142 -

CTCI and Partners Company Limited 42,919 28,498 386 28,112 0 (160) (160) (0.03)

CTCI Singapore Pte. Ltd. 144,183 508,686 997,669 (488,983) 721,345 (451,065) (424,349) -

Yuan Ding Resources Corporation 45,000 39,227 111 39,116 0 (134) 118 0.03


3,974 67,688 53,292 14,396 80,213 9,459 7,266 -

CCJV P1 ENGINEERING & CONSTRUCTION SDN. BHD.

1,795 6,337,334 5,766,199 571,135 6,058,374 634,426 415,367 1,661.47

CTCI Netherlands B.V. 10,176 108,500 81,802 26,698 83,281 21,992 17,385 -

Crown Asia 2 investment Limited 250 1,755 174 1,581 1,430 1,294 1,080 43.22

CTCI&HEC Water Business Corporation 500,000 499,681 2,808 496,873 0 (3,221) (3,127) (0.06)

152

8.1.3 The related information on the endorsements or guarantees for others, lending to others and derivative financial instruments of affiliates: A. Endorsements or guarantees for others: (as of March 31st, 2017) Unit: NT$ thousands

No. (Note 1)

Guarantor

Guarantee

The Ceiling on guarantee for single

enterprise

The highest balance

during the period

(Note 4)

Ending balance as of March 31st,2017

Assets pledged for guarantee

Ratio of the accumulated guarantee to the net asset value of the

Company as of March 31st,2017

Ceiling on total guarantee amount (Note 3)

Name

Relationship with the company (Note 2)

1 CTCI Advanced

Systems Inc. Century Ahead

Limited 2

100% of the net worth from the latest audited financial statements of CTCI Advanced Systems Inc.

18,904 18,222 - 3.37%

The ceiling for total guarantee is $1,080,330, 200% of the net worth from the latest audited financial statements of CTCI Advanced Systems Inc.

2 CTCI Smart Engineering Corporation

CTCI Trading Shanghai Co., Ltd.

5

300% of the net worth from the latest audited financial statements of CTCI Smart Engineering Corporation

156,607 149,920 - 18.17%

The ceiling for total guarantee is $4,951,886, 600% of the net worth from the latest audited financial statements of CTCI Smart Engineering Corporation


CTCI Shanghai Co., Ltd.

5


266,923 255,525 - 30.96%



CTCI Machinery Corporation

5


1,698,800 1,698,800 - 205.84%


3 CTCI

Machinery Corporation


5

300% of the net worth from the latest audited financial statements of CTCI Machinery Corporation

11,267 11,260 - 2.55%

The ceiling for total guarantee is $2,644,774, 600% of the net worth from the latest audited financial statements of CTCI Machinery Corporation

4 CTCI

Chemicals Corporation

CTCI Corporation 4

300% of the net worth from the latest audited financial statements of CTCI Chemicals Corporation

18,817 18,817 - 8.53%

The ceiling for total guarantee is $1,323,005, 600% of the net worth from the latest audited financial statements of CTCI Chemicals Corporation

153

4 CTCI

Chemicals Corporation

CTCI Resources Engineering Inc.

5

300% of the net worth from the latest audited financial statements of CTCI Chemicals Corporation

8,000 8,000 - 3.63%

The ceiling for total guarantee is $1,323,005, 600% of the net worth from the latest audited financial statements of CTCI Chemicals Corporation

5 CTCI Shanghai

Co., Ltd. CTCI Trading

Shanghai Co., Ltd. 2

300% of the net worth from the latest audited financial statements of CTCI Shanghai Co., Ltd.

103,970 100,221 - 24.97%

The ceiling for total guarantee is $2,407,940, 600% of the net worth from the latest audited financial statements of CTCI Shanghai Co., Ltd.

6

CTCI Resources

Engineering Inc.


5

300% of the net worth from the latest audited financial statements of CTCI Resources Engineering Inc.

234,675 234,675 - 133.07%

The ceiling for total guarantee is $1,058,129, 600% of the net worth from the latest audited financial statements of CTCI Resources Engineering Inc.

7 KD Holding Corporation

G.D. Development Corporation

6

200% of the net worth from the latest audited financial statements of KD Holding Corporation

660,778 649,418 - 13.41%

The ceiling for total guarantee is $14,533,140, 300% of the net worth from the latest audited financial statements of KD Holding Corporation

Note 1: 1. Company：0

2. Subsidiaries：Please fill in the number with a sequence from 1 to 10.

Note 2: Eligibility of endorsements or Guarantees：

1. A company with which it does business. 2. A company in which the company directly or indirectly holds more than 50%of the voting shares. 3. A company and subsidiaries totally holds more than 50% of the voting shares. 4. A company directly and indirectly holds more than 50% of the voting shares in the company. 5. Contract required. 6. The relationship of Joint venture.

Note 3: Fill in limit on endorsements/guarantees provided for a single party and ceiling on total amount of endorsements/guarantees provided as prescribed in the endorser/guarantor company’s “Procedures for Provision of Endorsements and Guarantees”, and state each individual party to which the endorsements/guarantees have been provided and the calculation for ceiling on total amount of endorsements/guarantees provided in the footnote.

Note 4: Fill in the maximum outstanding balance of endorsements/guarantees provided during the year ended March 31, 2017.

154

B. Lending to others: (as of March 31st, 2017)

No. (Note 1)

Lender Borrower Account item

(Note 2)

The highest balance during period

(Note 3)

Ending balance as of March 31st,2017 (Note 8)

Interest rate

Nature of

Lending (Note 4)

Amount for

operation (Note 5)

Reason of short-term financing (Note 6)

Allowance for bad debts

Collateral

Limit on lending for

single enterprise (Note 7)

Ceiling for total

amount (Note 7)

Name Value

1 CTCI Advanced

Systems Inc. CTCI

Corporation

Accounts receivable-related

parties 49,000 45,000 0.810% 2 0

For operational

needs 0 NA 0 54,017 216,066

2 CTCI Overseas

Corp. Ltd.

Superiority (Thailand) Company Limited


parties 59,533 58,806 1.336% 2 0

For operational

needs 0 NA 0 800,354 800,354

2 CTCI Overseas

Corp. Ltd. CTCI Americas,

Inc.


parties 37,807 36,444 - 2 0

For operational

needs 0 NA 0 800,354 800,354

2 CTCI Overseas

Corp. Ltd.

CIPEC Construction

Inc.


parties 20,217 20,217 1.656% 2 0

For operational

needs 0 NA 0 800,354 800,354

2 CTCI Overseas

Corp. Ltd.

CCJV P1 Engineeering

& Construction Sdn.Bhd.


parties 220,542 212,590 - 2 0

For operational

needs 0 NA 0 800,354 800,354

2 CTCI Overseas

Corp. Ltd.

CTCI Netherlands

B.V.


parties 27,095 26,118 1.292% 2 0

For operational

needs 0 NA 0 800,354 800,354

2 CTCI Overseas

Corp. Ltd. CTCI Arabia

Ltd.


parties 315,060 288,515

1.493% ~1.621%

2 0 For

operational needs

0 NA 0 800,354 800,354

3


G.D.Development

Corporation


parties 30,000 30,000 1.800% 2 0

For operational

needs 0 NA 0 484,438 1,937,752

3


CTCI Corporation


parties 430,000 430,000 0.810% 2 0

For operational

needs 0 NA 0 484,438 1,937,752

155

4 HD Resource Management Corporation

CTCI Corporation


parties 7,000 7,000 1.010% 2 0

For operational

needs 0 NA 0 10,065 40,262




parties 7,000 7,000 1.010% 2 0

For operational

needs 0 NA 0 10,065 40,262


CTCI Machinery

Corporation


parties 7,000 7,000 1.010% 2 0

For operational

needs 0 NA 0 10,065 40,262

5

Sino Environmental


CTCI Corporation


parties 78,000 78,000 - 2 0

For operational

needs 0 NA 0 107,266 429,065

5

Sino Environmental




parties 78,000 78,000 1.010% 2 0

For operational

needs 0 NA 0 107,266 429,065

5

Sino Environmental


CTCI Machinery

Corporation


parties 78,000 78,000 1.010% 2 0

For operational

needs 0 NA 0 107,266 429,065

5

Sino Environmental


CTCI Resources Engineering

Inc.


parties 78,000 78,000 1.010% 2 0

For operational

needs 0 NA 0 107,266 429,065

6 CTCI Shanghai

Co., Ltd.

CTCI Trading Shanghai Co.,

Ltd.


parties 59,879 35,275 4.480% 2 0

For operational

needs 0 NA 0 160,259 160,259

Note 1： Number for items explain as follows：

■ Company：0

■ Subsidiaries：Please fill in the number with a sequence from 1 to 10.

Note 2： This item is for account receivable-related parties, owner’s equity, prepayments, temporary payments etc. If any item belongs to Lending to others needs to be filled

in this column. Note 3： The highest balance during period

156

Note 4： Description for Lending to others as follows：

■1：Having business relationship

■2：Operational needs

Note 5： Belongs to item 1, please fill in the amount for operation.

Note 6： Belongs to item 2, please explain the reason and lending purpose of short-term financing. For example, repayment for loans, purchasing equipments, or needs for

operations and working capital, etc. Note 7： Please fill in the limit of amount on lending to single enterprise and total limit of amount on lending to others by the Company, according to the stipulation of the

Procedures of Lending to Others, and express the calculation of the aforesaid figures in the column of remarks. Note 8： The amounts of funds to be loaned to others which have been approved by the board of directors of a public company in accordance with Article 14, Item 1 of the

“Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies” should be included in its published balance of loans to others at the end of the reporting period to reveal the risk of loaning the public company bears, even though they have not yet been appropriated. However, this balance should exclude the loans repaid when repayments are done subsequently to reflect the risk adjustment. In addition, if the board of directors of a public company has authorized the chairman to loan funds in installments or in revolving within certain lines and within one year in accordance with Article 14, Item 2 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”, the published balance of loans to others at the end of the reporting period should also include these lines of loaning approved by the board of directors, and these lines of loaning should not be excluded from this balance even though the loans are repaid subsequently, for taking into consideration they could be loaned again thereafter.

157

C. Derivative Transactions Information: a. Derivatives transactions by Dec. 31, 2016

(1) Up to December 31, 2016, CTCI Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 8,561,790 thousand. As the counter-party has good credit, the financial risk is limited. The main exchange loss of aforesaid forward contracts is 51,675 thousand, listed in non-operating expense, and the other exchange loss of aforesaid forward contracts, which is executed for the CCJV P1 project, is 372 thousand, debited to operating cost.

(2) Up to December 31, 2016, CTCI Corporation engaged in FX SWAP transactions to hedge the risks from FX commitment. Total contract amount is 447,686 thousand. As the counter-party has good credit, the financial risk is limited. The exchange loss of aforesaid SWAP contracts is 17,371 thousand, listed in non-operating expense.

(3) Up to December 31, 2016, CTCI Overseas Corporation Limited engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 457,672 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange gain of aforesaid forward contracts is 1,655 thousand, listed in non-operating income.

(4) Up to December 31, 2016, CTCI Overseas Corporation Limited engaged in FX SWAP transactions to hedge the risks from FX commitment. Total contract amount is 117,795 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid SWAP contracts is 2,119 thousand, listed in non-operating expense.

(5) Up to December 31, 2016, CTCI Chemicals Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 87,215 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 1,283 thousand, listed in non-operating expense.

(6) Up to December 31, 2016, CTCI Smart Engineering Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 45,527 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 585 thousand, listed in non-operating expense.

(7) Up to December 31, 2016, CTCI Machinery Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 122,573 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 2,011 thousand, listed in non-operating expense.

(8) Up to December 31, 2016, CCJV P1 Engineering & Construction Sdn. Bhd. engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 6,368,174 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 163,875 thousand, listed in non-operating expense.

158

b. Derivatives transactions by Mar. 31, 2017 (1) Up to March 31, 2017, CTCI Corporation engaged in FX forward transactions to hedge

the risks from FX commitment. Total contract amount is 3,061,948 thousand. As the counter-party has good credit, the financial risk is limited. The main exchange loss of aforesaid forward contracts is 34,886 thousand, listed in non-operating expense, and the other exchange loss of aforesaid forward contracts, which is executed for the CCJV P1 project, is 278 thousand, debited to operating cost.

(2) Up to March 31, 2017, CTCI Overseas Corporation Limited engaged in FX SWAP transactions to hedge the risks from FX commitment. Total contract amount is 59,660 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid SWAP contracts is 2,351 thousand, listed in non-operating expense.

(3) Up to March 31, 2017, CTCI Chemicals Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 93,866 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 2,420 thousand, listed in non-operating expense.

(4) Up to March 31, 2017, CTCI Smart Engineering Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 9,295 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 194 thousand, listed in non-operating expense.

(5) Up to March 31, 2017, CTCI Machinery Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 63,762 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 1,387 thousand, listed in non-operating expense.

(6) Up to March 31, 2017, CCJV P1 Engineering & Construction Sdn. Bhd. engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 2,791,994 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange gain of aforesaid forward contracts is 33,867 thousand, listed in non-operating income.

8.1.4 Consolidated Financial Statements of Affiliated Enterprises of the Company: None

8.1.5 Affiliation Report: None

159

8.2 Private Placement Securities in the Most Recent Years: None 8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years:

Unit: NT$ thousands; Shares; %

Name of subsidiary

Stock capital

collected

Fund source

Shareholding ratio of the

company (%)

Date of acquisition

or disposition

Shares and

amount acquired

Shares and

amount disposed

of

Investment gain (loss)

Shareholdings & amount in the most recent

year

Mortgage

Endorsement amount made

for the subsidiary

Amount loaned to

the subsidiary


$ 151,000 own reserves

93.16 1997.08

50,000 $1,764

1,028

$61 None None None

1997.10 50,000 $2,021

$258

1997.10 50,000 $1,893

1997.12 50,000 $1,780

1997.12 100,000

$3,673 $185

1998.08 50,000 $3,092

1998.12

Stock dividend 11,500

1998.12 61,000 $3,112

$45

1999.12 971,160 $31,475

1999.12 831,560 $26,951

$721

2001.12 505,871 $13,256

2002.12 645,000

2004.08

Stock dividend 9

160

Name of subsidiary

Stock capital

collected

Fund source


company (%)

Date of acquisition

or disposition

Shares and

amount acquired

Shares and

amount disposed

of



year

Mortgage


for the subsidiary

Amount loaned to

the subsidiary

2005.10

Stock dividend 9

2006.10

Stock dividend 7

2007.10

Stock dividend 20

2008.09

Stock dividend 12


$1,690,000 own reserves

100 1999.03 550,000 $21,878

912,170 $53,818

None None None

1999.03 200,000

$8,104 $303

1999.04 450,000 $19,056

1999.04 450,000 $18,791

$586

1999.05 350,000 $14,677

1999.05 620,000 $27,053

$831

1999.06 776,000 $28,919

1999.07


1999.07 15,000

$584 $18

1999.08 100,000

$3,044

2000.02 427,000 $14,663

$1,274

161

Name of subsidiary

Stock capital

collected

Fund source


company (%)

Date of acquisition

or disposition

Shares and

amount acquired

Shares and

amount disposed

of



year

Mortgage


for the subsidiary

Amount loaned to

the subsidiary

2000.07


2001.07


2004.08


2005.10


2006.10


2007.10


2008.09



$1,402,000 own reserves

100 1999.04

328,000 $14,198

344,436 $20,322

None None None

1999.04 105,000

$4,582 $108

1999.05 350,000 $14,826

1999.05 400,000 $17,881

$769

1999.06 250,000

$9,659

1999.07


2000.02 308,840

$8,841 $420

2000.07


162

Name of subsidiary

Stock capital

collected

Fund source


company (%)

Date of acquisition

or disposition

Shares and

amount acquired

Shares and

amount disposed

of



year

Mortgage


for the subsidiary

Amount loaned to

the subsidiary

2001.07


2004.08


2005.10


2006.10


2007.10


2008.09


Crown Asia 2 Investment Limited Note

$ 250 Donation 100 2011.04 500 $18

500 $18

None None None

Note: Acquired in March 2016, the funding source is by donation.

163

8.4 Other Supplementary Information 8.4.1 KPI by industry:

A. CTCI Group budget for conclusion of contract, operating revenue and gross profit

Unit : NT$100 million

Item Budget in 2016 Performance

New Order 796.00 856.36

Operating Revenue 694.90 705.10

Gross Profit 59.77 61.86

B. Social responsibility

a. Concern about safety and health environment, carry out HSE management system. b. Aggressively build positive ties throughout the community and promote local activities of

culture and education. c. Foster engineering expertise with close attention employee training and education and the

exchange of knowledge which also enhances Industry-academic cooperation d. Provide employment opportunities, assist job related activities and build long term ties with

marginally listed workers. e. Offer a friendly workplace, health promotion activities in order to improve the physical and

mental health of the employee. f. KPI for energy saving and carbon reduction and health management:

Item KPI in 2016 Performance

Water consumption in the workplace

Less than 11.19M3/person (average water consumption over the past two years)

10.25 M3/person

Power consumption in workplace

Less than 3,060 degree/person (average amount consumed electricity over the past two years)

3,167 degree/person

Health management - Promotion

More than 12 seminars 13 seminars (including two first aid courses)

g. To enhance the urgent response ability, there are a total of 35 qualified first-aid personnel.

8.4.2 Material Event Impact on Shareholders' Equity or Share Price in Recent Years until the Annual

Report being published None

01100217

打字機

Appendix 1

Documents

中鼎工程股份有限公司 CTCI Corporation · 1 I. Letter from the Chairman & CEO Dear Shareholders, Friends and Colleagues, In 2016, with all the dedication and hard work of