china airlines co., ltd. chairman

China Airlines Co., Ltd.

Chairman Hsieh, Su-Chien

Spokesperson & Deputy Spokesman

Name Spokesman Deputy Spokesman Lu, Shwu-Huoy Wang, Wei

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

Organiza on Unit Address Tel Headquarter No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan 886-3-399-8888 Taipei Branch No.131, Sec on 3, Nanjing East Road, Taipei City 104, Taiwan 886-2-2715-2233 Cargo Sales & Service, Taiwan No.3, Aly. 123, Ln. 405, Dunhua N. Rd., Songshan Dist., Taipei City 105, Taiwan 886-2-2715-5151 Kaohsiung Branch 6 Floor, Asia-Paci c Financial Plaza, No.38 Of Xin Guang Road, Lingya District, Kaohsiung City 802, Taiwan 886-7-213-1200 Tainan Branch Room A, 6 Floor, No.358, Sec on 1, Tungmen Road, Tainan, Taiwan 886-6-235-8099 Taichung Branch Room 2, 15th Floor, No.218, Sec on 2, Taiwan Boulevard, West District, Taichung City 403, Taiwan 886-4-2325-9592 Maintenance Div. No.15, Hangqin S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan 886-3-383-4251 Cargo Sales & Services Mainland China Suite 22i, No.726 Of West Yanan Road, Changning District, Shanghai, China 86-21-2220-3292 Beijing O ce Bright China Chang An Building, Tower2, Unit 1025, No.7 Jianguomen Nei Avenue, Beijing, China 86-10-6510-2671 Shanghai O ce Suite 22a, No.726 Of West Yanan Road, Changning District, Shanghai, China 86-21-2220-3333 Guangzhou O ce Room 1210, 12th Floor, Teem Tower, No.208 Of Tianhe Road, Tianhe District, Guangzhou, Guangdong, China 86-20-8527-2950 Shenzhen O ce Room 4805, O ce Tower, Shun Hing Di Wang Commercial Center, No.5002 Of Shen Nan East Road, Luohu District, Shenzhen,

Guangdong, China 86-755-8246-3560 Xian O ce Room 810, 8th Floor, Gaoxin Building 9, Gaoxin 4th Road, High-Tech Zone, Xi'an, Shaanxi, China 86-29-8985-1902 Chengdu O ce Room 1608, South Tower, Baoli Center Building, No.7, Consulate Rd. Chengdu, China 86-28-8602-7508 Zhengzhou O ce Rooms 1101-1102, Tower B, Yuhong Interna onal Building, No.59 Of Zijingshan Road, Zhengzhou, Henan, China 86-371-5562-9880 Changsha O ce Room 1207 Pinghetang business building, No.88, Huangxing Middle Road, Furong district, Changsha City, Hunan province, China 86-731-8224-0871 Shenyang O ce Room 1110, Tower E, Fortune Center, No. 59 of North Sta on Road, Shen He District, Shenyang, Liaoning, China 86-24-3128-7021 Xiamen O ce Unit 3310, 33rd Floor, Bank Center, No.189 Of Xiahe Road, Xiamen, Fujian, China 86-592-2388-388 Nanjing O ce Room B1-B2, Building 38, Nanjing Center Building, No.1 South Zhongshan Road, Qinhuai District, Nanjing, China 86-25-8467-1050 Ningbo O ce Room 1515, Zhongshan Building, No93 East Zhongshan Road, Haishu District, Ningbo, China 86-574-8775-4090 Hangzhou O ce Room 2307, Building 2, China Qian Tang Avia on Building, No.66, Shimin St., Jianggan District, Hangzhou, China 86-571-8668-4214 Fuzhou Sta om Room 2508, Zhonggeng Youth Plaza, No.83 Of East Road, Gulou District, Fuzhou, Fujian, China 86-591-8755-9705 Chongqing Sta on Room 2202, No.3 Building, Zhongyu Plaza, No.86 Of Hongjin Avenue, Yubei District, Chongqing, China 86-023-8828-0118 Haikou O ce 18E, Huanhai Business Building, No.15, Jinmao W. Rd., Haukuo Hainan, China 86-898-6853-9677 Nanchang Sta on Rm 511, o ce building 7, hengmaodreamwrold Square, 438 Beijing E. Rd, Nanchang, Jiangxi Province, China 86-0791-8378-0580 Sanya Sta on Room 306, Floor 3rd, Exit and entry administra on of Sanya comprehensive service center, Sanya Phoenix Int'l Airport, Hainan,

China 86-0898-8802-4956 Wenzhou Sta on Room 2310, Huameng Business Palace, No.2 Of Chezhan Road, Lucheng District, Wenzhou, Zhejiang, China 86-0577-8605-2181 Wuxi Sta on Room 1611-1612, 16th Floor, Columbus building, No 282, ChangJiang North Road, New District Wuxi, Jiangsu China 86-0510-8522-8710 Yancheng Sta on Room B1207, East Building High-End Business O ce (Hbo), Ren Min South Road No.1, Yancheng, Jiangsu, China 86-515-8996-6950 Qingdao O ce Unit 2801, O ce Tower, Shangri-La Centre, No.9 Xiang Gang Zhong Lu, Qingdao, China 86-532-6887-7106 Wuhan O ce Room 1315, 13F, New World Interna onal Trade Building,568 Jianshe Avenue, Wuhan, China 86-27-8555-8172 Changchun O ce Rooms 6006, 6th Floor, Bai-Nau Technology Building, No.1313 Of Gong Nong Road, Chaoyang District, Changchun, Jilin, China 86-431-8920-7672 Xuzhou Sta on Room 537, CUMT University Science Park, Jiefang S. Road, Xuzhou City, Jiangsu, China 86-516-8379-0550 Cargo Sales & Services, Japan Ni ochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan 81-3-6378-8860 Tokyo Branch Ni ochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan 81-3-6378-8855 Osaka Branch Nakanoshima Mitsui Bldg. 9F 3-3, 3-Chome Nakanoshima Kita-Ku Osaka-Shi, Osaka 530-0005, Japan 81-6-6459-5783 Sapporo Branch Kita 1 Jo Mitsui Building 3F, Kita 1, Jo Nishi 5, Chuo-ku, Sapporo-Shi Hokkaido, 060-0001, Japan 81-11-218-6766 Shizuoka Sta on Shizuoka Ariport Terminal Bldg. 1F, 3336-4, Sakaguchi, Makinohara-Shi, Shizuoka, 421-0411, Japan 81-548-29-2668 Toyama Sta on Toyama Airport Interna onal Terminal Building 3F, 191 Akigashima, Toyama-Shi, 939-8252, Japan 81-76-461-7200 Kagoshima Sta on Kagoshima Airport Interna anl Terminal Bldg. 1355-4 Fumoto, Kirishima, Kagoshima 899-6404, Japan 81-995-57-9898 Miyazaki Sta on Miyazaki Airport, Akae Miyazaki 880-0912, Japan 81-985-64-9811 Nagoya Branch 3F, NMF Nagoya-Fushimi Building, Nishiki 2-9-27, Naka-ku, Nagoya, Aichi, 460-0003, Japan 81-52-202-7253 Fukuoka Branch Daihakata Bldg. 8F, 2-20-1 Hakata Ekimae, Hakata-Ku, Fukuoka 812-0011, Japan 81-92-471-7788 Hiroshima Branch Hiroshima-Mitsui Bldg. 7F 2-7-10, Ote-Machi, Naka-Ku, Hiroshima-Shi, Hiroshima, 730-0051, Japan 81-82-542-0883 Takamatsu Sta on Takamatsu Airport Building, Oka, Konan-cho, Takamatsu, Kagawa, 761-1401, Japan 81-87-815-8702 Kumamoto Sta on Kumamoto Airport Int'l Terminal Bldg. 1802-2 Oyatsu, Mashiki-machi, Kamimashiki-gun, Kumamoto 861-2204, Japan 81-96-285-1814 Okinawa Branch Gojinsha Naha Matsuyama Bldg. 3F, 2-1-12 Matsuyama, Naha-Shi, Okinawa 900-0032, Japan 81-98-863-1013 Korea Branch 3F, eplaza Bldg., 25, Sejong-daero 4-gil, Jung-gu, Seoul, Republic of Korea 04527 82-2-317-8888 Busan Branch 3F, Kyo-Won B/D, Jungang Daero 216, Dong-Gu, Busan, Korea, 48733 82-51-462-8885 Hong Kong Branch Suites 2701-2705, 27F Devon House, Taikoo Place, 979 King's Road, Hong Kong 852-2843-9800 Thailand Branch 4Fl., The Peninsula Plaza Bangkok, 153 Rajadamri Rd., Bangkok 10330, Thailand 66-2-250-9898 Bali Branch Departure Int'l Terminal 2nd FL., No. A0-12B Ngurah Rai Airport. Tuban-Bali, Indonesia 62-361-935-7298 Malaysia Branch Unit 15.01, Level 15, AMODA Building, 22, Jalan Imbi, 55100 Kuala Lumpur, Malaysia 60-3-2142-7344 Penang Branch Unit 9.04, Level 9, Menara Boustead Penang, 39 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia 60-4-228-9227 Singapore Branch 302 Orchard Road, #14-01 Tong Building Singapore 238862 65-6-737-2144 Cambodia Branch #10, St.596 Toul Kork, Sangkat Beoung Kok II, Khan Toul Kork, Phnom Penh, Cambodia 855-23-883-696/686 Myanmar Branch No.353/355, Bo Aung Kyaw Street, Kyauktada Township, Yangon, Myanmar 95-1-839-2663 Philippines Branch G/F Unit-1 Golden Empire Tower 1322 Roxas Boulevard Cor. Padre Faura St., Ermita Manila, Philippines 63-2-8354-6700 to 09 Indonesia Branch In land Tower, M1 Floor, Jl. Jend. Sudirman Kav.32, Jakarta 10220, Indonesia 62-21-251-0788 Vietnam Branch 1B, 7F Crescent Plaza 105 Ton Dat Tien St., Dist.7, Ho Chi Minh City, Vietnam 84-28-5414-1008 Hanoi Branch 4th Floor, Opera Business Center, 60 Ly Thai To Street, Hoan Kiem District, Hanoi, Vietnam 84-24-3936-6364 Palau Branch P.O. BOX 10027 Koror, Republic of Palau 96940 680-488-8888 Australia Branch Suite 1, Level 1, Nigel Love Building, 10 Arrivals Crt. Sydney Interna onal Airport Mascot NSW 2020, Australia 61-2-8339-9188 Brisbane Branch 1G35, Brisbane International Terminal, Airport Drive, Brisbane Airport QLD 4008, Australia 61-7-3860-5611 Melbourne Branch Level 2, North End, Terminal 2, Melbourne Airport, Tullamarine 3045 61-3-9907-0910 New Zealand Branch GM60, Level 1, Auckland Interna onal Airport, Auckland 2150, New Zealand 64-9-256-8088 India Branch O ce No.323, 3rd Floor, MGF Metropolis, M.G. Road, Gurgaon 122001, Haryana, India 91-124-711-5000 Los Angeles Branch 200 N. Con nental Blvd., Suite 100, El Segundo, CA 90245, U.S.A. 1-310-322-2888 New York Branch 633 3rd Ave., 8th Fl., Suite 800, New York, NY 10017, U.S.A. 1-917-368-2000 San Francisco Branch 433 Airport Blvd., Suite 501 Burlingame, CA 94010, U.S.A. 1-650-931-8000 Honolulu Branch 1830 Ala Moana Blvd Room 212, Honolulu, Hawaii 96815, U.S.A. 1-808-955-0088 Canada Branch Suite 240-10451 Shellbridge Way, Richmond, Bri sh Columbia, V6X 2W8, Canada 1-604-242-1168 Cargo Sales & Services The Americas 5651 West 96th Street, Los Angeles, CA 90045, U.S.A. 1-310-646-1260 Guam Branch 518 Pale San Vitores Road, Suite 202-203, Concorde Center, Tumon, Guam 96913, U.S.A. 1-671-649-0861 Netherlands Branch O cia Gebouw I, De Boelelaan 7, 6th Floor, 1083 HJ Amsterdam, The Netherlands 31-20-646-1001 Germany Branch Kaiserstr. 53, 60329 Frankfurt, Germany 49-69-297-0580 Italy Branch Via Lucullo 3, 00187, Rome, Italy 39-06-474-5045 Cargo Sales & Services, Europe Cargo Center Luxair, L-1360, Luxembourg 352-348-363-9500 Austria Branch Mariahilfer Strasse 123/8 O.G. 1060 Vienna, Austria 43-1-8130-156 The United Kingdom Branch Minstrel House, 1F, 2 Chapel Place, Rivington Street, London, EC2A 3DQ 44-208-587-3688

Stock Transfer Agent: Name: Address: Website: Tel:

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

Auditors: Name: Auditors: Address: Website: Tel:

Deloi e & Touche Huang, Jui-Chan ; Cheng, Shiuh-Ran 20F., No. 100, Songren Rd., Xinyi Dist., Taipei City 110, Taiwan

h p://www.deloi e.com.tw 886-2-2725-9988

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

Contents I. Letter to Shareholders ............................................................................................................................................. 1 II. Company Profile....................................................................................................................................................... 7

2.1 Date of Incorporation .............................................................................................................................................. 8 2.2 Company History ..................................................................................................................................................... 8

III. Corporate Governance Report ......................................................................................................................... 12 3.1 Organization .......................................................................................................................................................... 13 3.2 Directors, and Management Team ........................................................................................................................ 17 3.3 Implementation of Corporate Governance ............................................................................................................37 3.4 Information Regarding the Company’s Audit Fee and Independence ...................................................................76 3.5 Replacement of CPA .............................................................................................................................................. 77 3.6 Audit Independence .............................................................................................................................................. 78 3.7 Changes in Shareholding of Directors, Managers and Major Shareholders .......................................................... 78 3.8 Relationships among the Top Ten Shareholders ................................................................................................... 80 3.9 Ownership of Shares in Affiliated Enterprises ....................................................................................................... 81

IV. Capital Overview ................................................................................................................................................... 82 4.1 Capital and Shares ................................................................................................................................................. 83 4.2 Bonds .................................................................................................................................................................... 86 4.3 Other Securities-Related Issues ............................................................................................................................ 88 4.4 Financing Plans and Implementation.................................................................................................................... 88

V. Operational Highlights ......................................................................................................................................... 89 5.1 Business Activities ................................................................................................................................................. 90 5.2 Market and Sales Overview .................................................................................................................................. 98 5.3 Human Resources ............................................................................................................................................... 104 5.4 Environmental Protection Expenditure ............................................................................................................... 104 5.5 Labor Relations ................................................................................................................................................... 109 5.6 Major Contracts .................................................................................................................................................. 112

VI. Financial Information ........................................................................................................................................ 115 6.1 Five-Year Financial Summary .............................................................................................................................. 116 6.2 Five-Year Financial Analysis................................................................................................................................. 120 6.3 Consolidated Financial Statements for the Years Ended December 31, 2020 and 2019, and Independent

Auditors’ Report .................................................................................................................................................. 122 6.4 Parent Company Only Financial Statements for the Years Ended December 31, 2020 and 2019 and

Independent Auditors’ Report ............................................................................................................................ 122 6.5 Audit Committee’s Report .................................................................................................................................. 123

VII. Review of Financial Conditions, Financial Performance, and Risk Management ........................ 124 7.1 Analysis of Financial Status ................................................................................................................................. 124 7.2 Analysis of Financial Performance ...................................................................................................................... 126 7.3 Analysis of Cash Flow .......................................................................................................................................... 126 7.4 Major Capital Expenditure Items ........................................................................................................................ 126 7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and

Investment Plans for the Coming Year ................................................................................................................ 126 7.6 Analysis of Risk Management ............................................................................................................................. 126 7.7 Other important Matters .................................................................................................................................... 132

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

(Appendix 1) Consolidated Financial Statements for the Years Ended December 31, 2020 and 2019 and Independent Auditors’ Report ........................................................................ 141

(Appendix 2) Parent Company Only Financial Statements for the Years Ended December 31, 2020 and 2019 and Independent Auditors’ Report ............................................................. 193

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

Letter to Shareholders 1

Letter to Shareholders 1.1 Operating Performance in 2020

1.2 Business Plan for 2021

1.3 Development Strategies

2 Letter to Shareholders

I. Letter to Shareholders 2020 was a devastating year for both China Airlines and the aviation industry around the globe. Travel restriction and disease prevention measures implemented in most of the countries greatly struck the aviation market, forcing many airline companies to step out of the market or undertake reform. Facing unprecedented upheaval, China Airlines captures the market trend and creates revenue by leveraging 18 freighters, mitigating the impacts with air cargo shipment. China Airlines has overcome the drawbacks together with our employees and the professional operation of our cargo fleet has received universal recognition. In the epidemic prevention, China Airlines adopted the health care measures implemented by the health competent authority to provide passengers a safe and sound travel experience. This has gained passengers’ higher trust for China Airlines in resuming flights in the upcoming future. To maintain normal operation, China Airlines made several financial strategies to ensure stable finance, including internal cost control, cutting flights, financial assistance from the government, and aging freights retirement, etc. For passenger flights, China Airlines cut and adjusted the flights, timely rearranging the capacity to reduce losses. For cargo flights, China Airlines utilized the belly hold of the passenger flights to carry cargo. It also provided high-value goods shipment and charter service to expand its profit. 2021 is still a challenging year. Yet as the overall economy gradually recovers, the demands for IT equipment delivery and vaccine delivery appear. Thus, air cargo is still the main operation for China Airlines. China Airlines is the only carrier in Taiwan to be certified by the IATA Center of Excellence for Independent Validators in Pharmaceutical Logistics (CEIV Pharma) for temperature-controlled cold chain logistics so far. Recently introducing 18 new 747-400F aircraft and 3 new-gen 777F freighters, China Airlines will continue to leverage Taiwan's position as a transport hub to provide air cargo shipment. Passengers' safety and health are our top priority. China Airlines will closely follow the pandemic condition and properly evaluate the flight resumption. During the spread of COVID-19, China Airlines never stopped training employees and optimizing the operation procedure. Digital transformation has been what China Airlines doing, and we will make full preparation when the aviation industry gets back to normal.

In line with the six main strategies, safety, governance, fleet network, product service, group collaboration, and brand recognition, China Airlines has put the effort into the economy, environment, and society relentlessly. Since early 2020 of the COVID-19 outbreaks, China Airlines has served as the National Sky Team by giving international humanitarian assistance and delivering medical resources to countries with severe infection. China Airlines also offered special flights to carry Taiwanese stranded overseas back to the country. In the future, China Airlines will continue to bear the responsibility as a national carrier and create sustainable value for the public. As the aviation industry has suffered from a serious downturn, China Airlines will take a discreet attitude and flexible strategies to fight together with our employees. We will timely adjust and consolidate the resources in the Group to cope with the ever-changing market. We expect the full recovery of the economy will bring China Airlines thriving performance.

1.1 Operating Performance in 2020

Operating revenue in NT dollars (same hereafter) was NT$106.327 billion, a 27.36% decrease over the past year, and the after-tax net profit was NT$0.14 billion (which is an increase of 1.34 billion over the last year), for a basic after-tax net profit of NT$0.03 per share.

1.1.1 Results of the business strategy

A. Fleet:

Two 777F aircraft were introduced in the last quarter of 2020 to optimize the fleet structure. As of the end of December 2020, our fleet size was 93 vessels, including 70 passenger aircraft (including leased aircraft) and 23 cargo aircraft.

B. Passenger flights:

Revenue from passenger business was NT$20.508 billion, a 78.68% decrease over the past year and accounting for 19.29% of total operating revenue. As of the end of 2020, the China Airlines Group flew to 23 countries and 72 passenger destinations, spanning Asia, Europe, the Americas, and Oceania.


On average, there are 352 round-trip flights per week.

C. Cargo flights:

Revenue from cargo business was NT$81.693 billion, an 88.21% increase over the past year, accounting for 76.83% of total operating revenue. As of the end of 2020, the China Airlines Group flew 20 cargo planes in cargo operations to 17 countries and 39 destinations. On average, there were an average of 115 cargo flights per week.

D. Other operating income:

Other operating revenue included in-flight duty-free sales revenue, totaling NT$4.126 billion, a 39.23% decrease over the past year, accounting for 3.88% of the total operating revenue.

E. Investments and earnings:

As of the end of 2020, the Company had investment in a total of 31 companies, in areas of business such as air business, ground services, logistics, aircraft maintenance, air cargo station business, etc., which contributed NT$1.85 billion in loss over the year.

1.1.2 Business cash-flow budget and profitability analysis

A. Cash flow:

Operating revenue was NT$106.327 billion, a reduction of 40.045 billion over last year.

Operating costs and expenses were NT$101.442 billion, a reduction of NT$44.85 billion over last year.

Pre-tax net profit was NT$0.171 billion, an increase of NT$1.358 billion over the past year. After-tax net profit was NT$0.14 billion, an increase of NT$1.34 billion over last year.

B. Budget execution:

Projected operating revenue was NT$153.045 billion, and the actual operating revenue was NT$106.327 billion, for a 69.47% attainment; projected operating costs and fees were NT$151.084 billion, and actual operating costs were NT$101.442 billion, at a spending rate of 67.14%. Projected losses from non-operating activities totalled NT$0.76 billion, with actual losses from non-operating activities at NT$4.714 billion. Projected annual pre-tax net profit was NT$1.201 billion, and actual pre-tax net profit was NT$0.171 billion.

C. Profitability:

Return on assets 0.89% Return on equity 0.25% After-tax profit margin 0.13% After-tax earnings per share NT$0.03

1.1.3 Research and development A. "Solid root first, innovation as a supplement" was

the main strategy for IT development in 2020. China Airlines solidified the core business systems and reinforced the infrastructure to strengthen the risk management control of information safety. China Airlines also adopted innovative services such as robot customer service, process automation, big data analysis, mobile application, cloud computing, and VR/AR usage, etc. These applications have enhanced CAL's competency, increased revenue, cut down costs, and increased work efficiency.

B. Revenue Management System (RMS) is the core system to manage the sales of flight seats, which enhanced aviation network and competency. The new O&D (Original & Destination) RMS was implemented after evaluation and was officially operated on July 30, 2020. O&D RMS calculates the value of each seat by considering the booking information in the history and price information. Through dynamic deployment, routes and areas with high value will be highlighted, maximizing the passenger flight revenue.

C. In 2020, China Airlines continued to optimize the flight booking system and interface. The time for online booking has been extended to 80 minutes before the flight departure. For the ticket purchase on the CAL website, the 3-D secure protocol was implemented to safeguard the safety of credit card transactions for passengers around the globe; WeChat Pay was allowed for passengers in mainland China, leveling up the convenience for online ticket purchase. China Airlines established the pandemic section in response to the spread of COVID-19. Entry restrictions in Taiwan and other countries have been regularly updated, as well as schedule changes, ticket changes, ticket refunds, and other epidemic prevention measures. This was to facilitate passengers to keep up to date with the travel information and offer a friendlier experience in ticket purchases online.

D. Customer Relationship Management (CRM) project put passengers' travel experience in mind to fulfill a digitized service. By reviewing each phase in travel, from ticket purchase, preparation, check-in at the airport, and arrival, China Airlines built comprehensive, digitized, and


passenger-oriented services. The services include accessing travel information on the mobile app, enjoying more friendly airport and in-flight services, and receiving swift support for the flight change.

E. China Airlines leveraged the marketing funnel strategy and analyzed the browsing behaviors of CAL website visitors. By maximizing digital advertisement, approaching more consumers, and selecting potential target audiences using data analysis, China Airlines placed brand marketing advertisements on target consumers. Along with the promotion via eDM, app, and text messages, China Airlines displayed discount offers to potential customers, boosting customer consumption. In addition to newsletter marketing, content marketing, and social media, China Airlines continuously held physical campaigns and realized the corporate brand visions.

1.2 Business Plan for 2021 To prevent the spread of COVID-19, border lockdown and travel restrictions have been implemented in most of the countries, causing international flights to plummet and hitting hard on the aviation industry. China Airlines followed the pandemic prevention regulations in different countries and remained the normal operations of important routes to satisfy the market demand. For air cargo, as the delivery of the pandemic prevention resources and e-commerce goods remained strong, China Airlines agilely adjusted the capacity of passenger flights and cargo flights to enhance the overall capacity and increase revenue.

In 2021, it is expected that the global aviation market will recover as more people receive vaccines. China Airlines will continue to focus on the pandemic development in each area and agilely adjust its business pattern. China Airlines will push forward with its edge in air cargo and steadily recover its business.

1.2.1 Passenger Service

Other than the normal operations of important routes and flights, China Airlines will keep following the border policies around the world and the development of travel bubbles in Asia-Pacific countries to resume more passenger flights and grasp more opportunities.

After the market recovers, China Airlines will enter deep into the major markets, reinforce the role of Taoyuan International Airport as a major hub in the Asia-Pacific region, and strengthen the transfer capacity in the aviation network. China Airlines will

continue to work with other airline companies to boost overall performance. Meanwhile, China Airlines will keep track of the market trend and follow the diplomatic policies of the government to adjust aviation structure. By evaluating the market potential and adding more flights, China Airlines will remain steadfast as a leading carrier.

A. Northeast Asian Routes:

In response to the strong demand for air cargo shipment during the COVID-19 pandemic, China Airlines remains normal operations for flights between Taiwan and Japan (Taoyuan-Narita/ Osaka/Fukuoka/Nagoya) The flight to Nagoya is exclusively provided by China Airlines. For flights between Taiwan and South Korea, the Taoyuan-Seoul route remains a normal operation. As border control in different countries is constantly changing, China Airlines closely oversees the changes and adjusts accordingly. China Airlines will also control the ticket prices in the appropriate range to ensure company revenue.

B. Southeast Asian Routes:

Other than major routes and flights, China Airlines offers commercial/medical chartered flight services to destinations like Hanoi, Ho Chi Minh City, Yangon, Bali, and Palau, etc. Taoyuan-Cebu route and Taoyuan-Chiang Mai route may be opened depending on the tourist demand and post-pandemic market condition.

C. Cross-Strait Routes:

Due to the epidemic prevention policies and cancellation of business travels, the demand for cross-strait flights dropped dramatically. China Airlines currently only provide services in Beijing, Shanghai, Xiamen, and Chengdu. For Hong Kong station, passengers who arrive in Hong Kong by boat can directly depart by flight without the requirement of quarantine. This offers another option for Taiwanese businesspersons to head home.

D. Long-Haul Routes:

China Airlines maintains the normal operation in North America to connect to the southeast Asia network and facilitate the transit of passengers. China Airlines takes advantage of belly hold of passenger flights to carry cargo, and creates revenue by utilizing passenger flights to deliver cargo.

E. European Routes:

The coronavirus severely attacked Europe. Yet China Airlines remains operations in key destinations like London, Amsterdam, and Frankfurt to support the traveling needs of students and family members.


F. Australia and New Zealand Routes:

China Airlines remains normal operations in Australia and New Zealand but departure/arrival time is adjusted. China Airlines also strengthens the transit service from Australia/New Zealand to Europe, North America, and Northeast Asia in the hope of improving the flight service. In winter, cargo flights to New Zealand and Auckland are added, which provide passenger seats. Cargo flight to Christchurch is also open for expanding the aviation network of Australia and New Zealand.

1.2.2 Cargo Service China Airlines provides differentiation services by utilizing Boeing 747-400F cargo-only freighters to load large cargoes. Meanwhile, Fuel-saving Boeing 777F freighters are deployed to improve revenue management; China Airlines won many delivery opportunities by holding the CEIV Pharma certification. It will continue to provide mid-and long-term chartered flight service and provide customized regular/irregular charter service.

A. Long-Haul Routes

China Airlines arranges 40 long-haul routes every week, and adds more flights according to market change to meet the demands of high-price charter service. Through inter-airline cooperation, expanding the import and export sources of goods in Central and South America, extending aviation network services, and increasing loading capacity. After the introduction of the new 777F cargo aircraft at the end of 2020, China Airlines has prioritized flights to US West Coast destinations to improve flight payload and optimize economic efficiency.

B. European Routes:

China Airlines maintains the operation of 6 flights per week in cooperation with the pandemic prevention laws and continues to promote the potential markets of Delhi and Mumbai in India in response to the Indian market development plan, so as to achieve two-stage revenue benefits.

C. Regional routes:

China Airlines organizes 70 flights on regional routes and flexibly adds flights as demands rise; Cross-strait flights to Zhengzhou, Guangzhou, and Chongqing remain normal; The Second Freedom Rights to Ningbo was granted to expand China Airlines' aviation network.

Hong Kong route has been added to 19 flights per week. For Northeast Asia, other than the five flights per week as scheduled quarterly, cargo flights are added depending on the demand to cover charter service.

1.3 Development Strategies 1.3.1 Optimize the fleet scale and improve aircraft assets

China Airlines has been optimizing the fleet team. The next-gen passenger aircraft, Airbus A321neo, will be introduced in 2021 to replace Boeing 738 passenger aircraft. For cargo aircraft, six Boeing 777F are planned to be delivered before 2023. New aircraft feature low fuel consumption. They are more environmentally friendly as less CO2 is emitted. Their higher quality lowers the unit cost, improves airline performance, and strengthens overall competency.

China Airlines will further decide on the treatment of aging aircraft, sell aging Boeing 738 aircraft and replace 744 passenger aircraft, to optimize airline assets and reduce operational cost.

1.3.2 Cold chain logistics certification

China Airlines has been actively discovered the pharmaceutical cold chain logistic market. In April 2019, China Airlines became the first, and so far, the only, carrier in Taiwan that passed the strict review and received certification from the IATA Center of Excellence for Independent Validations. China Airlines has gained many experiences in cold chain logistics. It can carry out vaccine delivery with internationally acknowledged service. Deliveries for cargo chilled to as low as -80°C can now be undertaken once dry ice is added. This has effectively enhanced the competency, value, and performance of China Airlines in high-price cargo delivery. The inter-airline collaboration will be carried out to help other countries deliver vaccines. This further strengthens China Airlines' leading role in air cargo service in the Asia-Pacific region.

1.3.3 Inter-airline collaboration for substantial benefits

China Airlines is the first airline in Taiwan to join the global aviation alliance. We are also the first Taiwanese airline to conduct code-sharing cooperation. Currently, we have cooperated with 23 airlines in code-sharing, ranking first among all Taiwanese airlines. In addition to self-owned routes, China Airlines actively penetrates the market through aviation alliances, providing more convenient and complete services. China Airlines will seek more airlines to work with in the future and cover more services to enhance its competency.

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


1.3.4 Flexible sales strategy to increase revenue

For passenger flights, China Airlines will closely follow the pandemic condition, border policy in each country, and travel agreement development. China Airlines will adjust the delivery capacity, taking on the opportunity by offering more routes. China Airlines will also utilize the belly hold of passenger aircraft to deliver cargoes, supporting cargo delivery while increasing revenue.

For cargo flights, China Airlines will increase its delivery volume, improve revenue management, and agilely adjust the capacity and pricing strategy.

1.3.5 Consolidate Group resources to enhance performance

By rearranging the fleet capacity, China Airlines provides aviation services with differentiation to target customers. China Airlines offers multiple products to customers, reinforcing its leading position in the market.

1.3.6 Digitalization for enhanced efficiency and competency

China Airlines leverages technology to do online sales in hope of enhancing the efficiency of mobile applications. Online services have been provided for greater convenience in cargo and passenger flight services. The booking system and user interface have been optimized. The website has been localized. The 3-D secure protocol has been implemented for credit card transactions, providing an easier and friendlier experience in ticket purchases.

For cargo delivery, e-AWB was adopted and became the benchmark in the industry. Through EDI (Electronic Data Interchange) system, China Airlines can exchange information with business partners, greatly enhancing operational efficiency.

1.4 Effect of external competition, the legal environment, and the overall business environment 1.4.1 External competition

As the China-US trade war continues, high uncertainty remains as the regional economy is unstable, the supply chain is reconstructing, and high liquidity financial assets are rising. Moreover, if the COVID-19 outbreak is not under control, stricter border control may be adopted.

1.4.2 Legal environment

The health and quarantine-related control in different countries may restrict cabin crew's work, which further impairs the operational efficiency and revenue.

1.4.3 Overall business environment

A. As the vaccines are feasible, IATA estimated that the aviation industry can expect a lower loss in 2021. The passenger flight demand will increase by 50.4% compared with 2020. However, if the pandemic worsens, causing tightened travel restrictions, the aviation industry may only expect a 13% rise in passenger flight demand compared with 2020.

Cargo flights will remain strong and stable in delivering vaccines. As the capacity of belly hold of passenger aircraft is limited, and as the portion of special goods (e.g., vaccines) increases, the revenue is expected to grow 5%.

The fuel price in January was benefited from the economic stimulus plan in the US. However, the impact of border control on the demand for aviation fuel remains uncertain.

B. According to IHS Markit, the growth rate of the global economy is 5.1%. Taiwan Institute of Economic Research anticipated a 4.3% rise in the domestic economy in 2021. Benefiting from the remote business opportunity, 5G network, great demand in innovative technology, and the government's encouragement in green construction that attracts foreign investment, the domestic economy may outshine others.

Facing with the pandemic that directly impacts the aviation market and changing political and economic status, China Airlines will flexibly adjust its resources to cope with the external uncertainties. China Airlines will adjust its flight capacity and utilize the new fleet team to reach higher fuel efficiency. Risk control measures and countermeasures have been made so that China Airlines can leverage its edge in air cargo service to further penetrate the market. China Airlines will keep consolidating the Group resources, enhance its competency, and become a leading carrier with sustainable operation.

Chairman: Hsieh, Su-Chien

President: Kao, Shing-Hwang

Finance Manager: Chen, I-Chieh

Company Profile 7

Company Profile 2.1 Date of Incorporation

2.2 Company History

8 Company Profile

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

2.2 Company History

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

1961: Provided military supply transport to Laos.

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

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

1967: Inaugurated Northeast Asia routes.

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

1976: Inaugurated Middle East and Saudi Arabia routes.

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

1980: Invested in Dynasty Holidays, Inc.

1983: Expanded European routes.

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

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

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

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

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

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

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

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

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

1996: Inaugurated the Taoyuan-Penang cargo route.

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

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

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

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

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

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

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

Company Profile 9

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

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

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

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

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

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

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

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

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

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

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

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

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

10 Company Profile

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

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

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

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

Others: Centers for Disease Control Epidemic Prevention Award 2015.

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

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

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

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

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

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

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

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

Brand Service: Selected as Cheers magazine's “2018 Top 20 Employers of the New Generation.” China Airlines’ in-flight magazine Dynasty received the 2018 APEX Awards for Publication Excellence in the US.

Company Profile 11

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

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

Product Design: OBH Magazine awarded it the “Best Premium Economy Class Amenities Kit” for Onboard Hospitality.

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

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

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

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

2020: Non-stop, 24-hour automated customer service. Implemented an online check-in service for all tourists since June 22 in response to pandemic prevention. Met with a delegation headed by the President of the Senate of the Czech Republic to foster greater economic and trade between Taiwan and the Czech Republic. Carried out beach clean-up activity in Guanyin shore in response to the beach cleaning promotion by the Taoyuan Government. Aircraft livery was showcased on the new 2021 calendar to demonstrate the beauty of Taiwan. The

first 777F cargo aircraft entered service. The various awards we received:

"The Best Entry Outside of the U.S." award at the 131st Rose Parade in 2020 for the second consecutive year.

Ranked world’s No.3 Carrier for sustainability by DJSI

Won the award for the seventh consecutive year at the “Oscars” of Taiwan corporate sustainability

"#What Travel Brings You" China Airlines commercial won CLIO Awards and the recognition of New Yor Festival.

Won the special prize and the first procurement prize in 2020 Buying Power Social Innovation Products and Services held by MOEA

Won the 2020 Air Cargo Executive of the Year Award

12 Corporate Governance Report

Corporate Governance Report 3.1 Organization

3.2 Directors and Management Team

3.3 Implementation of Corporate Governance

3.4 Information Pertaining to the Company’s Audit Fee

and Independence

3.5 Replacement of CPA

3.6 Audit Independence

3.7 Changes in Shareholding of Directors, Managers, and

Major Shareholders

3.8 Relationships among the Top Ten Shareholders

3.9 Ownership of Shares in Affiliated Enterprises

Corporate Governance Report 13

III. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart (MAR 27, 2021)

SHAREHOLDERS MEETING

BOARD OF DIRECTORS

CORPORATE COMMUNICATIONS OFFICE

GENERAL AUDIT OFFICE

CHAIRMAN OF THE BOARD

PRESIDENT

CORPORATE DEVELOPMENT OFFICE

SECRETARIAL OFFICE, BOARD OF DIRECTORS

(VW)SENIOR VP

CABIN CREW DIV.

GROUND SERVICES DIV.

INFLIGHT SUPPLY CHAIN& MARKETING DIV.

HUMAN RESOURCES DIV.

EDUCATION TRAINING CENTER

SENIOR VICE PRESIDENT,EUROPE

(VF)SENIOR VP

(VE)SENIOR VP

FINANCE DIV.

LEGAL & INSURANCE DIV.

INFORMATIONMANAGEMENT DIV.

PASSENGER SALES & MARKETING DIV.

CARGO SALES MARKETING& SERVICES DIV.

MAINTENANCEDIV.

ENGINEERINGDIV.

QUALITYASSURANCE DIV.

LOS ANGELESBRANCH

VICE PRESIDENT,TAIWAN

VICE PRESIDENT,THE AMERICAS

SAN FRANCISCOBRANCH

NEW YORKBRANCH

HONOLULUBRANCH

ANCHORAGEBRANCH

CARGO SALES &SERVICES

THE AMERICAS

CANADA BRANCH

FUKUOKA BRANCH

KAGOSHIMASTATION

HIROSHIMABRANCH

SAPPORO BRANCH

OKINAWA BRANCH

TAIPEI BRANCH

KAOHSIUNGBRANCH

CARGO SALES &SERVICE, TAIWAN

VIETNAM BRANCH

PHILIPPINESBRANCH

MALAYSIA BRANCH

MYANMARBRANCH

PENANGBRANCH

PALAU BRANCH

SINGAPOREBRANCH

GUAM BRANCH

INDIA BRANCH

NEW ZEALANDBRANCH

INDONESIABRANCH

AUSTRALIABRANCH

BALI BRANCH

BRISBANEBRANCH

KOREA BRANCH

(VO)SENIOR VP

FLIGHTOPERATIONS DIV.

SYSTEM OPERATIONCONTROL DIV.

NETHERLANDSBRANCH

U.K. Branch

GERMANYBRANCH

ITALY BRANCH

AUSTRIA BRANCH

CARGO SALES &SERVICES, EUROPE

CORPORATESAFETY OFFICE

HANOI BRANCH

CAMBODIABRANCH

OCCUPATIONAL SAFETY & HEALTH DEPT.

ADMINISTRATION DIV.

VICE PRESIDENT,JAPAN

HONG KONGBRANCH

THAILANDBRANCH

OSAKA BRANCHTOKYO BRANCH

SHIZUOKASTATION

NAGOYA BRANCH

TOYAMASTATION

MIYAZAKISTATION

TAKAMATSUSTATION

CARGO SALES & SERVICES, JAPAN

ORGANIZATION CHART OF CHINA AIRLINES2021 / 03 / 18

TAICHUNG BRANCH

BUSAN BRANCH

TECHNICALTRAINING CENTER

MELBOURNEBRANCH

KUMAMOTOSTATION

VICE PRESIDENT,OCEANIA

(VV)SENIOR VP

GUANGZHOUOFFICE

SHENZHENOFFICE

CHENGDU OFFICE

ZHENGZHOUOFFICE

SHENYANG OFFICE

CHANGSHAOFFICE

CARGO SALES & SERVICES

MAINLAND CHINA

XIAN OFFICE

WUHAN OFFICE

NANCHANG STATION

HAIKOU OFFICE

SANYA STATION

ASSISTANT VP, SOUTH CHINA

CHONGQING STATION

SHANGHAI OFFICE

XIAMEN OFFICE

NANJING OFFICE

HANGZHOU OFFICE

NINGBO OFFICE

QINGDAO OFFICE

XUZHOU STATIONWUXI STATION

ASSISTANT VP, EAST CHINA

WENZHOU STATION

FUZHOUSTATION

BEIJING OFFICE

SENIOR VICE PRESIDENT, MAINLAND CHINA

ASSISTANT VP, NORTH CHINA

DATA PROTECTION &QUALITY MANAGEMENT OFFICE

AUDIT COMMITTEE

REMUNERATION COMMITTEE

RISK COMMITTEE

TAINAN SALES OFFICE

CEBU BRANCH

CHIANG MAI BRANCH


3.1.2 Major Corporate Functions

Department Functions

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

implementation of the annual business plan.

Secretarial Office,

Board of Directors

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

proceedings and overseeing matters relating to resolutions, coordination channels

with public stockholders, matters relating to juridical person shareholder

representatives, director communications and services, and budgeting and controls

for the Board and all functional committees.

Corporate

Development Office

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

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

relationships between the Company and civil aviation authorities in various

countries; establishing brand position and development strategies; planning

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

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

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

response policies and systems; establishes related management systems and

conducts educational training; implements related investigations, analysis, and

examinations; coordinates with government agencies and civil aviation authorities,

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

environmental, and emergency response-related issues.

Corporate

Communications Office

Responsible for external Company communications, communication links with the

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

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

publishing CAL Park Magazine, supervising and coordinating publication of Dynasty

magazine, and formulating the Company’s brand image and advertising strategy.

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

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

aeronautical parts, personnel, and passenger and cargo transportation.

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

budget, auditing accounts receivable and payable items, preparing financial

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

and cost-analysis information. Supervising of the operational performance and

management of invested enterprises.

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

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

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

receipt of prospectuses and official documents, and document management.

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

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

of cabin crew personnel.



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

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

ground services training, supervising ground services operations at all stations,

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

management of ground service provider contracts.

In-Flight Service Supply

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

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

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

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

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

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

Data Protection &

Quality Management

Office

Manages the personal information and quality management system, and reports

implementation results and improvement measures to the top management;

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

information in various countries to ensure compliance with laws and regulation

enforcement process in every country; sets up and implements the Company’s ISO

9001 quality management system, and imparts service quality education, internal

quality auditor training and encourages further understanding of measures

pertaining to quality-related issues.

Passenger Sales &

Marketing Div. Responsible for supervising the passenger transport network planning and route management of the entire network, seat control, business promotion, digital marketing, customer relationship maintenance, membership marketing and inter-airline cooperation, cross-industry collaboration, determination of passenger transport rates and various quotas, performance evaluation, and developing and maintaining revenue management systems and passenger transport business training at all levels.

Information

Management Div. Combines information technology with business knowledge to promote

computerization within the Company to upgrade operational competitiveness.

Human Resources Div. Responsible for planning the Company organization and human resources, the establishment of a personnel management system, and setting up pay standards. Provides recruitment services, supervises personnel management, established the employee training system and oversees future updates, provides employee health management, and manages personnel assignments to associated enterprises.

Occupational Safety &

Health Dept. Prepares the Company’s Occupational Health and Safety Manual and regulations; drafts, plans, supervises, and promotes health and safety matters and guides in their implementation in relevant departments to prevent occupational hazards and ensure employee health and safety. Received ISO45001:2018 and CNS45001:2018 occupational health and safety certification following SGS audit to effectively control occupational incident risk and improve occupational health and safety performance.



Cargo Sales, Marketing

& Services Div.

Formulates the cargo development strategy, supervises cargo operations on all

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

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

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

cargo plane loading control operations, cargo equipment controls and

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

Marketing & Services Division and Taiwan Cargo Center.

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

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

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

development of airplane flight manuals and maintenance of flight simulators.

System Operation

Control Div.

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

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

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

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

comprehensive aircraft and statistical analysis data; operates and guides crew

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

liability related to business.

Maintenance Div. Responsible for ensuring the maintenance of airplanes, client aircraft maintenance

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

maintenance capabilities.

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

management, controlling of maintenance costs, and planning of the information

system development strategy.

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

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

and aircraft airworthiness certificates; authorization and management of

maintenance personnel training and task assignments; formulation and

implementation of quality audit system. Established and implements the aircraft

quality management and on-site inspection systems, ensures introduction of new

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

aircraft incident investigations.

Technical Training

Center

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

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

(Engineering & Maintenance Organization) demands and customer requests.

Branch offices Responsible for the development of individual branches and promotion of passenger

and freight-related operations.


3.2 Directors and Management Team 3.2.1 Directors

MAR 27, 2021

Title

Nam

e

Nationality/ Country of

Origin

Gender

Date First Elected

Date Elected

Date Ended

Shareholding when Elected

Current Shareholding

Spouse & Minor Shareholding

Shareholding by Nominee

Arrangement Experience (Education) Other Position

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

Shares % Shares % Shares % Shares % Title Name Relation

Chairman

China Aviation Developm

ent Foundation

R.O.C.

-

07/07/1988

06/27/2018

05/25/2021

1,867,341,935 34.13% 1,867,341,935 34.45% - - - - - - - - - -

Representative: Hsieh, Su-Chien

R.O.C.

Male

07/06/2016

06/27/2018

05/25/2021

48,517 0.00% 48,517 0.00% 0 0.00% 0 0.00%

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

Chairman, CAL Park Co., Ltd. Chairman, CAL Hotel Co., Ltd. Chairman, CAL-Asia Investment Inc. Chairman, CAL-Dynasty International, Inc.

None None None None

Director

China Aviation Developm

ent Foundation

R.O.C.

-

07/07/1988

06/27/2018

05/25/2021

1,867,341,935 34.13% 1,867,341,935 34.45% - - - - - - - - - -

Representative: Kao, Shing-Hw

ang

R.O.C.

Male

03/11/2021

03/11/2021

05/25/2021

62,809 0.00% 62,809 0.00% 0 0.00% 0 0.00%

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

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

None None None Note1


Title

Nam

e


Origin

Gender

Date First Elected

Date Elected

Date Ended








Representative: Chen, Charles C.Y.

R.O.C.

Male

07/01/2000

06/27/2018

05/25/2021

190,166 0.00% 190,166 0.00% 155,849 0.00% 0 0.00%

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

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

None None None None

Representative: Ting, Kw

ang-Hung

R.O.C.

Male

01/28/2008

06/27/2018

05/25/2021

0 0.00% 0 0.00% 0 0.00% 0 0.00%

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

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

None None None None

Representative: Chen, Han-M

ing

R.O.C.

Male

07/26/2016

06/27/2018

05/25/2021

0 0.00% 0 0.00% 0 0.00% 0 0.00%

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

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

None None None None

Representative: Ko, Sun-Ta

R.O.C.

Male

06/27/2018

06/27/2018

05/25/2021

0 0.00% 0 0.00% 0 0.00% 0 0.00%

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

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

None None None None

Representative: W

ei, Yung-Yeh

R.O.C.

Male

06/27/2018

06/27/2018

05/25/2021

3,737 0.00% 3,737 0.00% 0 0.00% 0 0.00%

Jet Airplane Maintenance Group, Air Force Technical School

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

None None None Note1

Director

National

Development

Fund, Executive Yuan

R.O.C.

-

06/15/2012

06/27/2018

05/25/2021

519,750,519 9.50% 519,750,519 9.59% - - - - - - - - - -


Title

Nam

e


Origin

Gender

Date First Elected

Date Elected

Date Ended








Representative: Lin, Su-M

ing

R.O.C.

Male

06/15/2012

06/27/2018

05/25/2021

0 0.00% 0 0.00% 0 0.00% 0 0.00%

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

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

None None None None

Representative: W

ang, Shih-Szu

R.O.C

Female

06/27/2018

06/27/2018

05/25/2021

0 0.00% 0 0.00% 0 0.00% 0 0.00%

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

None None None None None

Independent Director

Chung, Lo-Min

R.O.C.

Male

06/15/2012

06/27/2018

05/25/2021

0 0.00% 0 0.00% 0 0.00% 0 0.00%

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

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

None None None None


Chang, Hsieh Gen-Sen

R.O.C.

Female

06/27/2018

06/27/2018

05/25/2021

0 0.00% 0 0.00% 0 0.00% 0 0.00%

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

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

None None None None


Title

Nam

e


Origin

Gender

Date First Elected

Date Elected

Date Ended









Shen, Hui-Ya

R.O.C.

Female

06/27/2018

06/27/2018

05/25/2021

0 0.00% 0 0.00% 0 0.00% 0 0.00%

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

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

None None None None

Note 1: In order to avoid the concurrent appointment from influencing the objectivity and supervision of the Board of Directors, except for President Kao, Shing-Hwang and Director Wei, Yung-Yeh, who are concurrently Directors and employees, none of the other members of the 21st Board of Directors is concurrently an employee of the Company.

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


Major shareholders from among institutional shareholders Name of Institutional Shareholders Major Shareholders

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

National Development Fund, Executive Yuan Government

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

Donor Donation Amount

Wu, Yueh 10,977,697 common shares of China Airlines and the profits NT$2,530,666,534

Tsu, Jung-Chun 5,872,874 common shares of China Airlines and the profits NT$1,353,861,897

Tien, Hsi 515,938 common shares of China Airlines and the profits NT$118,938,155

Chang, Lin-Te 239,214 common shares of China Airlines and the profits NT$55,145,599

Chang, Chih-Chen 515,938 common shares of China Airlines and the profits NT$118,938,155

Lan, Ping-Chuan 515,938 common shares of China Airlines and the profits NT$118,938,155

Fu, Jui-Yuan 515,938 common shares of China Airlines and the profits NT$118,938,155

Hsu, Kang-Liang 2,026 common shares of China Airlines and the profits NT$467,049

Shih, Kuang-Lin 2,026 common shares of China Airlines and the profits NT$467,049

Liu, Chiung-Kuang 239,214 common shares of China Airlines and the profits NT$55,145,599

Han, Te-Hui 239,214 common shares of China Airlines and the profits NT$55,145,599

Yeh, Chih-Fang 239,214 common shares of China Airlines and the profits NT$55,145,599

Hung, Yang-Fu 239,214 common shares of China Airlines and the profits NT$55,145,599

Liu, Ping-Kuan 239,214 common shares of China Airlines and the profits NT$55,145,599

Chang, Tang-Tien 239,214 common shares of China Airlines and the profits NT$55,145,599

Li, Hsueh-Yen 239,214 common shares of China Airlines and the profits NT$55,145,599

Li, Chi-Tang 239,214 common shares of China Airlines and the profits NT$55,145,599

Wang, Yu-Ken 239,214 common shares of China Airlines and the profits NT$55,145,599

Yuan, Chin-Han 239,214 common shares of China Airlines and the profits NT$55,145,599

Fan, Kuang-Hua 239,214 common shares of China Airlines and the profits NT$55,145,599

Liu, Hui-Chun 239,214 common shares of China Airlines and the profits NT$55,145,599

Yeh, I-Fan 239,214 common shares of China Airlines and the profits NT$55,145,599

Chen, Chung-Yu 239,214 common shares of China Airlines and the profits NT$55,145,599

Yang, Hung-Ting 239,214 common shares of China Airlines and the profits NT$55,145,599

Tsai, Ming-Yung 222,205 common shares of China Airlines and the profits NT$51,224,474

Wang, Wei-Ming 515,938 common shares of China Airlines and the profits NT$118,938,155

Huang, Jen-Sheng 515,938 common shares of China Airlines and the profits NT$118,938,155

Total 23,999,880 common shares and the profits NT$5,532,645,517


Professional qualifications and independence analysis of directors

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

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

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

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

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

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

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

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

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

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

Criteria

Name

Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years of 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 Departments Related to the Business Needs of the Company in a Public or Private Junior College, College or University

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

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

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

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


3.2.2 Management Team MAR 27, 2021

Title Name Nationality/ Country of

Origin Gender

Date Effective

Shareholding Spouse &

Minor Shareholding


Arrangement Experience (Education) Other Positions

Managers Who Are Spouses or Within Two

Degrees of Kinship Remark

Shares ％ Shares ％ Shares ％ Title Name Relation

President Kao,

Shing-Hwang R.O.C. Male 03/18/2021 62,809 0.00% 0 0.00% 0 0.00%

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

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

None None None Note 1

Auditor General, General Audit Office

Fang, Juo-Ling

R.O.C. Female 05/11/2018 8,000 0.00% 0 0.00% 0 0.00%

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

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

Assistant Vice

President, Cabin

Crew Div.

Fang,

Yuan-Hua Siblings None

Deputy Auditor General, General Audit Office

Ho, Hui-Fen

R.O.C. Female 02/01/2018 0 0.00% 0 0.00% 0 0.00%

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

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

None None None None

Senior Vice President (VE)

Wang, Houng

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

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

Chairman, Taiwan Aircraft Maintenance and Engineering Co., Ltd. Director, Mandarin Airlines, Ltd. Director, Taoyuan International Airport Services Co., Ltd. Vice Chairman, NORDAM Asia Ltd. Director, Cal Hotel Co. Ltd. Chairman & President, Kaohsiung Airport Catering Services Ltd.

None None None None

Senior Vice President (VV)

Wang, Chen-Min

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

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

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

None None None None



Origin Gender

Date Effective


Minor Shareholding






Senior Vice President (VF)

Chen, I-Chieh

R.O.C. Male 03/18/2021 6,161 0.00% 0 0.00% 0 0.00%

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

Director, Mandarin Airlines, Ltd. Director, Tigerair Taiwan Co., Ltd. Chairman, Taiwan Airport Services Co. Ltd. Director, Taoyuan International Airport Services Co., Ltd. Director, Kaohsiung Airport Catering Services Ltd. Director, Taiwan Aircraft Maintenance And Engineering Co., Ltd.

None None None None

Senior Vice President (VO)

Lai, Ming-Hui

R.O.C. Male 03/18/2021 19,127 0.00% 0 0.00% 0 0.00%

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

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

None None None None

Data Protection Officer, Data Protection & Quality Management Office

Huang, Ta-Fang R.O.C. Female 07/31/2020 0 0.00% 0 0.00% 0 0.00%

General Manager, Honolulu Branch. Vice President, Legal & Insurance Div. MBA, Baruch College, City University Of New York.


Vice President, Human Resources Div.

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

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

Director, Taoyuan International Airport Services Co., Ltd. Director, Taiwan Airport Services Co. Ltd.

None None None None

Assistant Vice President, Human Resources Div.

Lee, Pei-Chen

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

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


Vice President, Flight Operations Div.

Chen, I-Ko

R.O.C. Male 03/20/2021 23,541 0.00% 0 0.00% 0 0.00%

Vice President, Corporate Safety Office. Assistant Vice President, Corporate Safety Office. Associate’s Degree, United College Of Engineering


Assistant Vice President, Flight Operations Div.

Chen, Chwen-Der

R.O.C. Male 08/01/2018 6,299 0.00% 0 0.00% 0 0.00%

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



Kang, Yi-Chuan

R.O.C. Male 11/01/2020 241,000 0.00% 16,766 0.00% 0 0.00%

Assistant Vice President, Flight Operations Dep. Mandarin Airlines. General Manager, Crew Scheduling Dept., Flight Operations Div. Master’s Degree, National Chiao Tung University.




Origin Gender

Date Effective


Minor Shareholding







Tung, Hsing-Hua

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

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


Vice President, System Operation Control Div.

Chou, Jyh-Shyan

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

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


Assistant Vice President, System Operation Control Div.

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

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


Assistant Vice President, System Operation Control Div.

Huang, Hsiang-Piao

R.O.C. Male 08/01/2017 1,000 0.00% 0 0.00% 0 0.00%

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


Vice President, Passenger Sales & Passenger Marketing Div.

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

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

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

None None None None

Assistant Vice President, Passenger Sales & Passenger Marketing Div.

Chen, Pei-Ti

R.O.C. Female 11/01/2018 926 0.00% 0 0.00% 0 0.00%

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


Assistant Vice President, Passenger Sales & Marketing Div.

Pan, Yun-Hau

R.O.C. Male 05/09/2020 0 0.00% 4,999 0.00% 0 0.00%

Marketing Director, Europe. General Manager, Schedule Planning Dept., Passenger Marketing Div. Master’s Degree, Concordia University Aviation Management, Canada




Origin Gender

Date Effective


Minor Shareholding






Vice President, Finance Div.

Wang, Wei

R.O.C. Female 03/18/2021 33,297 0.00% 0 0.00% 0 0.00%

Assistant Vice President, Corporate Development Office. General Manager, Austria Branch. MBA, George Washington University, U.S.A.

Supervisor, NORDAM Asia Ltd. Supervisor, Cal Hotel Co. Ltd. Supervisor, Dynasty Aerotech International Corp. Director, Tigerair Taiwan Co., Ltd.

None None None None

Assistant Vice President, Finance Div.

Yen, Yang

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

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

Supervisor, Taiwan Aircraft Maintenance And Engineering Co., Ltd. Supervisor, Kaohsiung Airport Catering Services Ltd. Director, Dynasty Properties Co., Ltd. Director, Dynasty Hotel of Hawaii, Inc.

None None None None

Assistant Vice President, Finance Div.

Huang, Hui-Na

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

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

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

None None None None

Vice President, Corporate Safety Office

Li, Chih-Wei

R.O.C. Male 03/20/2021 10,295 0.00% 0 0.00% 0 0.00%

Vice President, Quality Assurance Div. Assistant Vice President, Maintenance Div. Master’s Degree, Kai-nan University.

Director, NORDAM Asia Ltd.

None None None None

Assistant Vice President, Corporate Safety Office

Yu, Yueh-Han

R.O.C. Male 12/06/2018 0 0.00% 0 0.00% 0 0.00%

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


Vice President, Legal & Insurance Div.

Chien, Feng-Nien

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

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


Vice President, Corporate Communications Office

Lu, Shwu-Huoy

R.O.C. Female 10/11/2020 22,605 0.00% 0 0.00% 0 0.00%

General Manager, Malaysia Branch. Assistant Vice President, Corporate Development Office. EMBA, National Central University


Assistant Vice President, Corporate Communications Office

Lin, Herng-Shan

R.O.C. Male 04/16/2019 0 0.00% 0 0.00% 0 0.00%

General Manager, Corporate Affairs Department, Corporate Communications Office General Manager, Employee Relations Department, Human Resources Div.




Origin Gender

Date Effective


Minor Shareholding






Master’s Degree, RMIT University, AU

Vice President, Administration Div.

Chen, Wei-Tau

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

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

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

None None None None

Vice President, Information Management Div.

Chung, Ming-Jyh

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

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

Director, Sabre Travel Network (Taiwan) Ltd.

None None None None

Assistant Vice President, Information Management Div.

Liu, Duan-Shiuh

R.O.C. Male 04/20/2017 92,608 0.00% 0 0.00% 0 0.00%

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


Vice President, Cabin Crew Div.

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

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

Director, China Pacific Laundry Services Ltd. Director, China Pacific Catering Services Ltd

None None None None

Assistant Vice President, Cabin Crew Div.

Fang, Yuan-Hua

R.O.C. Male 08/04/2018 30,348 0.00% 0 0.00% 0 0.00%

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

None

Auditor General, General

Audit Office

Fang, Juo-Ling

Siblings None

Vice President, Corporate Development Office

Chang, Cheng-Hao

R.O.C. Male 01/21/2019 131,905 0.00% 0 0.00% 0 0.00%

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

Director, Tigerair Taiwan Co., Ltd. Director, Global Sky Express Ltd. Director, China Aircraft Services Limited. Director, Taiwan Air Cargo Terminal Ltd.

None None None None

Assistant Vice President, Corporate Development Office

Yeh, Jin-Fu

R.O.C. Male 03/18/2021 25,773 0.00% 0 0.00% 0 0.00%

Assistant Vice President, Administration Div. General Manager, Fukuoka Branch. Master’s Degree, National Cheng Kung University


Assistant Vice

President,

Corporate

Development

Office

Liu,

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

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

National Taiwan

University


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

Chung,

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

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

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

None None None None

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

Chang, Hsu-Yu

R.O.C. Male 11/30/2020 6,211 0.00% 0 0.00% 0 0.00%

General Manager, Supply

Dept., Engineering Div.

General Manager, Dynasty

Aerotech International

Corp. Master's Degree, Cranfield University.


Vice President, Ground Services Div.

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

Chief Representative, East China, and Concurrently General Manager, Shanghai Office Assistant Vice President,

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

None None None None

Microsoft Office User

Highlighted part is unclear.



Origin Gender

Date Effective


Minor Shareholding






Flight Operations Div. Bachelor’s Degree, Chinese Culture University

Assistant Vice President, Ground Services Div.

Huang, Chin-Feng

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

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


Assistant Vice President, Ground Services Div.

Hsu, Hsueh-Wen

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

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


Vice President, Cargo Sales, Marketing & Services Div.

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

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

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

None None None None

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

Sheu, Yuh-Shy

R.O.C. Male 01/22/2019 24,648 0.00% 0 0.00% 0 0.00%

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



Mao, Li-Chung

R.O.C. Male 12/20/2019 0 0.00% 0 0.00% 0 0.00%

Chief Representative, South China Concurrently, General Manager, Guangzhou Office. General Manager, Nanking Office. MBA, Chung Yuan Christian University



Hsueh, Po-Wen R.O.C. Male 09/18/2020 328 0.00% 0 0.00% 0 0.00%

Chief Representative, East China Concurrently, General Manager, Shanghai Office. General Manager, Cargo Sales & Services, Taiwan. Bachelor’s Degree from Chinese Culture University


Vice President, Maintenance Div.

Sun, Jia-Min

R.O.C. Male 09/16/2017 62,602 0.00% 0 0.00% 0 0.00%

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

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

None None None None

Assistant Vice President, Maintenance Div.

Hsiao, Jui-Fu

R.O.C. Male 09/16/2017 0 0.00% 0 0.00% 0 0.00%

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


Vice President, Engineering Div.

Lee, Jung-Hui

R.O.C. Male 09/16/2017 10,298 0.00% 0 0.00% 0 0.00%

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

Director, Taiwan Aircraft Maintenance And Engineering Co., Ltd. Director, Taikoo (Xiamen) Landing Gear Services Co., Ltd. Director, HAECO Composite Structures (Jinjiang) CO. LTD. Director, Dynasty Aerotech International Corp.

None None None None



Origin Gender

Date Effective


Minor Shareholding






Vice President, Taiwan

Chiu, Wei-Tuan

R.O.C. Male 03/19/2020 4,901 0.00% 0 0.00% 0 0.00%

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

Director, Sabre Travel Network (Taiwan) Ltd.

None None None None

Vice President, Europe

Han, Liang-Chung

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

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


Vice President, Mainland China

Chang, Chih-Chieh R.O.C. Male 10/08/2018 96,553 0.00% 0 0.00% 0 0.00%

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


Vice President, Oceania

Chen, Chung-Ming

R.O.C. Male 05/10/2017 32,779 0.00% 0 0.00% 0 0.00%

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


Vice President, Japan

Chang, Horng-Jong

R.O.C. Male 05/27/2020 11,820 0.00% 0 0.00% 0 0.00%

Chairman, Tigerair Taiwan Co., Ltd. General Manager, Haikou Office. Washington University In St. Louis, Doctor of Science

Director, Dynasty Holidays, Inc. Director, Infini Travel Information, Inc.

None None None None

Note1: In order to prevent the concurrent appointment from influencing the objectivity and supervision of the Board of Directors, except for President Kao, Shing-Hwang and Director Wei, Yung-Yeh, who are concurrently Directors and employees, none of the other members of the 21st Board of Directors is concurrently an employee of the Company.

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


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

Title Name

(Note 1)

Remuneration Ratio of Total Remuneration

(A+B+C+D) to Net Loss (%) (Note 8)

Base Compensation (A) (Note 2)

Severance Pay (B) Bonus to Directors (C)

(Note 3) Allowances (D)

(Note 4)

CAL

Consolidated Subsidiaries of

CAL (Note 7)

CAL


CAL (Note 7)

CAL


CAL (Note 7)

CAL


CAL (Note 7)

CAL


CAL (Note 7)

Chairman Hsieh, Su-Chien 5,729 5,729 0 0 0 0 513 2,041 4.46% 5.55%

Director Chen, Charles C.Y. 40 40 0 0 0 0 480 720 0.37% 0.54%

Director Ting, Kwang-Hung 40 40 0 0 0 0 495 495 0.38% 0.38%

Director Chen, Han-Ming 40 2,182 0 0 0 0 480 902 0.37% 2.20%

Director Ko, Sun-Ta 40 40 0 0 0 0 480 480 0.37% 0.37%

Director Wei, Yung-Yeh 40 40 0 0 0 0 480 480 0.37% 0.37%

Director Lin, Su-Ming 40 40 0 0 0 0 500 500 0.39% 0.39%

Director Wang, Shih-Szu 40 40 0 0 0 0 276 276 0.23% 0.23%

Independent

Director Chung, Lo-Min 60 60 0 0 0 0 760 760 0.59% 0.59%

Independent

Director

Chang, Hsieh

Gen-Sen 60 60 0 0 0 0 770 770 0.59% 0.59%

Independent

Director Shen, Hui-Ya 60 60 0 0 0 0 760 760 0.59% 0.59%

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

Note 1: Aside from independent directors, all other directors are representatives of the Company’s juridical person shareholders China Aviation Development Foundation, National Development Fund (Executive Yuan).

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

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

Note 4: Refers to relevant business expenses incurred by directors (including travel expenses, various allowances, company car). If provided with a car or other transportation, or exclusive personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be disclosed. The above figures do not include remuneration paid to drivers, which totaled NT$912,000.

Note 5: Refers to salary, bonuses, and allowances received by directors who are also employed by the Company (including as president, vice president, other management, or regular employee) over the past year and includes salary, additional compensation, various bonuses, incentive pay, travel expenses, various allowances, and company car. If provided with a car or other transportation, or exclusive personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be disclosed. The Company didn't carry out employee stock options, employee restricted stock awards and participation in a cash capital increase.

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


Unit: NT$ thousands Dec 31, 2020 Remuneration Received by Directors Who are Also Employees Ratio of Total Compensation

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

Loss (%) (Note 8)

Compensation Paid to

Directors from an

Invested Company or

Parent Company Other

than the Company’s

Subsidiary

(Note 9)

Salary, Bonuses, and

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

Employees’ Compensation (G)

(Note 6)

CAL

Consolidated

Subsidiaries of

CAL

(Note 7)

CAL

Consolidated

Subsidiaries of

CAL

(Note 7)

CAL

Consolidated

Subsidiaries of CAL

(Note 7) CAL

Consolidated

Subsidiaries of

CAL

(Note 7) Cash Stock Cash Stock

0 0 0 0 0 0 0 0 4.46% 5.55% None

0 0 0 0 0 0 0 0 0.37% 0.54% None

0 0 0 0 0 0 0 0 0.38% 0.38% None

0 0 0 0 0 0 0 0 0.37% 2.20% None

0 0 0 0 0 0 0 0 0.37% 0.37% None

1,457 1,457 0 0 0 0 0 0 1.41% 1.41% None

0 0 0 0 0 0 0 0 0.39% 0.39% None

0 0 0 0 0 0 0 0 0.23% 0.23% None

0 0 0 0 0 0 0 0 0.59% 0.59% None

0 0 0 0 0 0 0 0 0.59% 0.59% None

0 0 0 0 0 0 0 0 0.59% 0.59% None

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

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

Note 6: Refers to employee compensation (including stock or cash) received by directors who are also employed by the Company (including as president, vice president, other management, or regular employee) over the past year, and the amount of employee compensation approved for distribution by the Board for the most recent year must be disclosed. The Company has no distributable earnings in 2020, so it does not plan to distribute employee compensation.

Note 7: The total remuneration provided by the Company and subsidiaries to directors is disclosed per the consolidated financial statement. Note 8: Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax) reported on

the individual financial statement for the most recent year. The Company’s 2020 individual financial statement net profit (after tax) totaled NT$140,000,000.

Note 9: (1) The directors of the Company do not receive any remuneration related to the reinvestment of enterprises other than subsidiaries. (2) Compensation refers to pay, bonuses (including bonuses to employees, directors, or supervisors), or expenses paid in the execution of business to

Company directors who serve as director, supervisor, or manager of an invested company other than a Company subsidiary. Note 10: (1) Aside from Chairman Hsieh, Su-Chien, all other directors received a travel allowance.

(2) Transportation subsidies for Director Ting, Kwang-Hung, and Director Wei, Yung-Yeh were partially donated to the China Airlines Employee Union. (3) Director who also serves as an employee of the Company is Director Wei, Yung-Yeh.


President and Senior Vice President Remuneration

Title Name

Salary (A) (Note 2)

Severance Pay (B) Bonuses and Allowances (C)

(Note 3)

CAL


CAL (Note 5)

CAL


CAL (Note 5)

CAL


CAL (Note 5)

President Hsieh, Su-Chien (Note 1) 0 0 0 0 0 0

Senior Vice President Kao, Shing-Hwang 2,914 2,914 0 0 5,009 5,369

Senior Vice President Wang, Chen-Min 2,975 2,975 0 0 623 1,867

Senior Vice President Wang, Houng 3,122 3,122 0 0 666 1,266

Senior Vice President Chang, Young 3,169 3,169 0 0 655 2,117

Note 1: Director Hsieh, Su-Chien also served as president and did not accept president remuneration. Note 2: Refers to president and senior vice president salaries, additional compensation, and severance pay over the past year. Note 3: Refers to various bonuses, incentive pay, travel expenses, various allowances, and company car distributed to presidents and senior vice

presidents over the past year. If provided with a car or other transportation, or exclusive personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be disclosed. The above figures do not include remuneration paid to drivers, which totaled NT$3,943,000. As stipulated in IFRS 2, Share Based Payments including obtaining employee stock options and employee restricted stock awards and participation in a cash capital increase shall be calculated as remuneration.

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


Unit: NT$ thousands December 31, 2020

Employees’ Compensation (D) (Note 4)

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

(Note 6) Compensation paid to the Presidents and Senior Vice

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

(Note 7) CAL

Consolidated Subsidiaries of CAL

(Note 5) CAL

Consolidated Subsidiaries of CAL (Note 5)

Cash Stock Cash Stock

0 0 0 0 0% 0% None

0 0 0 0 5.66% 5.92% None

0 0 0 0 2.57% 3.46% None

0 0 0 0 2.71% 3.13% None

0 0 0 0 2.73% 3.78% None

Note 4: Refers to employee compensation (including stock or cash) approved for distribution by president and senior vice presidents over the past year. Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax) reported on the individual financial statement for the most recent year. The Company has no distributable earnings in 2020, so it does not plan to distribute employee compensation.

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

Note 6: Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax) reported on the individual financial statement for the most recent year. The Company’s 2020 individual financial statement net profit (after tax) totaled NT$140,000,000.

Note 7: The President and Senior Vice President of the Company do not receive any remuneration related to the reinvestment of enterprises other than subsidiaries.


Top five managers with the highest remuneration

Title Name

(Note 1)

Salary (A) (Note 2)

Severance Pay (B) Bonuses and Allowances (C)

(Note 3)

CAL


CAL (Note 5)

CAL


CAL (Note 5)

CAL


CAL (Note 5)

Senior Vice President Kao, Shing-Hwang 2,914 2,914 0 0 5,009 5,369

Senior Vice President Wang, Chen-Min (Note 11) 2,975 2,975 0 0 623 1,867

Senior Vice President Wang, Houng 3,122 3,122 0 0 666 1,266

Senior Vice President Chang, Young 3,169 3,169 0 0 655 2,117

Vice President, Flight Operations Div. Chen, I-Ko 2,553 2,553 0 0 5,130 5,130

Note 1: The "top five managers with the highest remuneration" refer to the Company's presidents, the definition of which is based on the Ministry of Finance Official Letter No. Zheng-San 0920001301 regarding the scope of managerial officers issued by the former Securities and Futures Commission, Ministry of Finance on March 27, 2003.

Note 2: Refers to the salaries, additional compensation, and severance pay to the top five managers with the highest remuneration over the past year.

Note 3: Refers to various bonuses, incentive pay, travel expenses, various allowances, and company car distributed to the top five managers with the highest remuneration over the past year. If provided with a car or other transportation, or exclusive personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be disclosed. The above figures do not include remuneration paid to drivers, which totaled NT$3,943,000. As stipulated in IFRS 2, Share Based Payments including obtaining employee stock options and employee restricted stock awards and participation in a cash capital increase shall be treated as remuneration.

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


Unit: NT$ thousands December 31, 2020

Employees’ Compensation (D) (Note 4)

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

(Note 6) Compensation paid to the Presidents and Senior Vice Presidents from an Invested Company or Parent Company Other Than the Company’s Subsidiary

(Note 7) CAL

Consolidated Subsidiaries of CAL

(Note 5) CAL

Consolidated Subsidiaries of CAL (Note 5)

Cash Stock Cash Stock

0 0 0 0 5.66% 5.92% None

0 0 0 0 2.57% 3.46% None

0 0 0 0 2.71% 3.13% None

0 0 0 0 2.73% 3.78% None

0 0 0 0 5.49% 5.49% None

Note 4: Refers to employee compensation (including stock or cash) approved for distribution by the top five managers with the highest remuneration over the past year. Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax) reported on the individual financial statement for the most recent year. The Company has no distributable earnings in 2020, so it does not plan to distribute employee compensation.

Note 5: The total remuneration provided by the Company and subsidiaries to the top five managers with the highest remuneration is disclosed per the consolidated financial statement.

Note 6: Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax) reported on the individual financial statement for the most recent year. The Company’s 2020 individual financial statement net profit (after tax) totaled NT$140,000,000.

Note 7: The top five managers with the highest remuneration do not receive any remuneration related to the reinvestment of enterprises other than subsidiaries.


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

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

Title 2019 2020

CAL Consolidated Subsidiaries of CAL CAL Consolidated Subsidiaries of

CAL

Directors -1.62% -1.79% 9.74% 12.84%

Presidents and Senior Vice Presidents -2.06% -2.37% 13.67% 16.29%

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

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

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

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

D. Linkage to business outcomes

(1) The remuneration of the president has already been determined based on his professional capability and the Company's operations and financial situation; the Senior Vice Presidents are evaluated based on the work performance evaluation regulation of the Company, which include 40% of personal performance management and 60% of two times of annual work evaluation. The criteria include financial aspect, customer aspect, internal process aspect, safety aspect, growth and learning aspect, etc.

(2) Pursuant to Chapter 5, Article 25 of the Articles of Incorporation, if the Company makes profits in the year, no less than 3% of the profit shall be distributed as employee remuneration in either stock or cash. According to the internal regulations, work performance bonus is distributed based on the company's management goals in different stage. 60% accounts for personal performance and 40% account for the job title.

E. Linkage to future risk Major decision making at operational levels of the company always takes into consideration and

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


3.3 Implementation of Corporate Governance 3.3.1 Board of Directors

A. From January 1, 2020, through March 27, 2021, a total of seven meetings of the Board of Directors were held. The average attendance rate was 98%. Director attendance is detailed below:

Title Name

(Note 1) Attendance

in Person By Proxy

Attendance Rate (%) (Note 2)

Juridical Person Shareholder Represented

Remarks

Chairman Hsieh, Su-Chien 7 0 100% China Aviation Development Foundation

None

Director Kao, Shing-Hwang 1 0 100% China Aviation Development Foundation

None

Director Chen, Charles C.Y. 7 0 100% China Aviation Development Foundation

None

Director Ting, Kwang-Hung 7 0 100% China Aviation Development Foundation

None

Director Chen, Han-Ming 7 0 100% China Aviation Development Foundation

None

Director Ko, Sun-Ta 7 0 100% China Aviation Development Foundation

None

Director Wei, Yung-Yeh 7 0 100% China Aviation Development Foundation

None

Director Lin, Su-Ming 7 0 100% National Development Fund (Executive Yuan)

None

Director Wang, Shih-Szu 7 0 100% National Development Fund (Executive Yuan)

None

Independent Director Chung, Lo-Min 6 1 86% - On March 18, 2020, Chang, Hsieh Gen-Sen attended as a proxy.

Independent Director Chang, Hsieh Gen-Sen 7 0 100% - None Independent Director Shen, Hui-Ya 7 0 100% - None Other items deserving mention: 1. In the operation of the company by the Board of Directors, should any one of the following situations arise, the Board Meeting date, session, content of the resolution,

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

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

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

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

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

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

this matter

Chairman Hsieh, Su-Chien, who recused according to law due to interests involved, did not participate in the discussion or voting. The rest of the 10 attending Directors approved the resolution.

May 7th, 2020: 10th meeting of the 21st Board of Directors

Release Director Chen, Han-Ming from non-competition restrictions Director Chen, Han-Ming Personal interest in

this matter

Director Chen, Han-Ming, who recused according to law due to interests involved, did not participate in the discussion or voting. The rest of the 10 attending Directors approved the resolution.

August 6th, 2020: 12th meeting of the 21st Board of Directors

Capital increase for Tigerair Taiwan Co., Ltd. Director Chen, Han-Ming Personal interest in

this matter

Director Chen, Han-Ming, who recused according to law due to interests involved, did not participate in the discussion or voting. The rest of the 10 attending Directors approved the matter.

Distribute flight safety bonus to Chairman and Managers Chairman Hsieh, Su-Chien Personal interest in

this matter

Chairman Hsieh, Su-Chien voluntarily gave up the bonus. The recusal was not necessary since no personal interest was involved. All attending Directors approved the matter.

January 18th, 2021: 14th meeting of the 21st Board of Directors

2021 Lunar New Year incentive for Chairman and Managers Chairman Hsieh, Su-Chien Personal interest in

this matter

Chairman Hsieh, Su-Chien voluntarily gave up the bonus. The recusal was not necessary since no personal interest was involved. All attending Directors approved the matter.

March 18th, 2021: 15th meeting of the 21st Board of Directors

The appointment of President Director Kao, Shing-Hwang Personal interest in this matter

Director Kao, Shing-Hwang, who recused according to law due to interests involved, did not participate in the discussion or voting. The rest of the 11 attending Directors approved the resolution.

Distribute flight safety bonus to managers Director Kao, Shing-Hwang Personal interest in

this matter

Director Kao, Shing-Hwang, who recused according to law due to interests involved, did not participate in the discussion or voting. The rest of the 11 attending Directors approved the resolution.

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

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


(2) In order to implement corporate governance and improve the functioning of the Board of Directors of the Company and establish performance objectives to enhance the efficiency of the Board of Directors, the Company has formulated the "Regulations Governing the Board Performance Evaluation," which is implemented once at the end of each year. The evaluation method is divided into performance evaluation of the entire Board of Directors, individual Board members, and the functional committees. The evaluation shall be conducted every three years by an external professional independent organization or a team of experts and scholars. The Company has conducted a performance evaluation in 2020. The self-evaluation results by the entire Board of Directors, individual Board members, and the functional committees are all excellent. Hang Seng S.D. Co., Ltd. conducted the 2020 external evaluation of the Board of Directors, and the result was excellent.

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

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

4. Independent director attendance record for 2020 through March 27, 2021: Dates

Name 01/13/2020 03/18/2020 05/07/2020 08/06/2020 11/05/2020 01/18/2021 03/18/2021

Chung, Lo-Min ○ Chang, Hsieh Gen-Sen

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

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

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

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

B. Evaluation of the Board of Directors Evaluation cycle Evaluation

period Scope of

evaluation Evaluation method Evaluation content

(1) Engage in one internal evaluation per year.

January 1 to December 31, 2020

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

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

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

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

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

(2)An external

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

January 1 to December 31, 2020

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

External evaluation form of the Functional Committees and the observation of the Board meeting

The evaluation aspects cover the engagement of company operation, decision-making improvement by the Board of Directors, the composition and structure of the Board of Directors, the selection and appointment of the Board of Directors, continuous learning, internal control, corporate governance and operating performance evaluation.


3.3.2 Audit Committee The Audit Committee convened six meetings from January 1, 2020, through March 27, 2021. The attendance of Committee members is as follows:

Title Name Attendance in

Person By Proxy Attendance Rate (%) Remarks

Independent Director (Chairman)

Chang, Hsieh Gen-Sen 6 0 100% None

Independent Director Chung, Lo-Min 6 0 100% None

Independent Director Shen, Hui-Ya 5 1 83% None

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

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

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

Meeting Dates Agenda content

Outcome of the vote by the Board of

Auditors and company's handling of the Board's views

Outcome of the Board of Directors decision

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

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

Passed to the Board of Directors on unanimous approval by all members attending.

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

May 7, 2020 8th Meeting of the Audit Committee of the 21st Board of Directors

Disposal of 5 A330-300 aircraft through sale and leaseback transaction

Approved by all attending Directors in the 11th meeting of the 21st Board of Directors on May 7, 2020.

August 6, 2020 9th Meeting of the Audit Committee of the 21st Board of Directors

Second amendment to 2020 Audit Plan Capital increase for Tigerair Taiwan Co., Ltd. Issuing NT$6 billion in total face value of domestic unsecured convertible corporate bonds

Approved by all attending Directors in the 12th Extraordinary meeting of the 21st Board of Directors on August 6, 2020.

November 5, 2020 10th Meeting of the Audit Committee of the 21st Board of Directors

2021 Audit Plan

Approved by all attending Directors in the 13th meeting of the 21st Board of Directors on November 5th, 2020.

March 18, 2020 12th Meeting of the Audit Committee of the 21st Board of Directors

2020 Financial Report and Consolidated Financial Report

2020 Deficit Compensation 2021 CPA Appointment and Remuneration 2020 Internal Control System Effectiveness Audit and Statement

Approved by all attending Directors in the 15th meeting of the 21st Board of Directors on March 18th, 2021.

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

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

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

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

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

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

Means of communication

Communication matters Communication results

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

March 18, 2020 Audit Committee

Before the meeting, the accountant separately reported and explained

The impact of the COVID-19 pandemic on the Company's

Approved by all attending Independent

1. The managerial department provided the explanation and response forthwith


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

passenger revenue was addressed, and the adjustment to items of loss allocation was discussed.

Directors. during the meeting. 1. 2. Continued to submit for the Board of

Directors’ approval, and completed the 2019 financial report announcement and declaration on March 31, 2020.

May 7, 2020 Audit Committee

Before the meeting, the accountant shall separately report and explain the review situation to the independent director. At the meeting, the financial director of the Company shall explain the review results of the financial report in the first quarter of 2020 and the amendment of laws and regulations, and discuss and communicate the issues raised by the participants.

The details and execution of the government financial assistance (NT$20 billion), including the contracting, distribution, and repayment schedule, etc. The disclosed matters impacted by the COVID-19.

Noted by all attending Independent Directors.

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

2. Continued to report to the Board of Directors, and completed the Q1 2020 financial report was completed on May 15, 2020.

August 6, 2020 Audit Committee

Before the meeting, the accountant shall separately report and explain the review situation and the auditing/key audit matters of the 2020 financial statements to the independent director. At the meeting, the financial director of the Company shall explain the review results of the financial statements in the second quarter of 2020 and the impacts of new IFRS on the financial statements, and discuss and communicate the issues raised by the participants.

An inquiry into the impacts of COVID-19 disclosing on the financial statements. Ask the Company to increase revenue and save costs, assisting affiliates to improve operation.



2. Continued to report to the Board of Directors, and completed the Q2 2020 financial report announcement and declaration on August 14, 2020.

November 5, 2020 Audit Committee

Before the meeting, the accountant shall separately report and explain the review situation to the independent directors. At the meeting, the financial director of the Company shall explain the review results of the financial statements in the third quarter of 2020, and discuss and communicate the issues raised by the participants.

Profit difference in the second and third quarter. The impact of Mandarin Airlines and Tigerair Taiwan on the consolidated financial statements; the countermeasures against US dollar deflation and off-season of cargo shipment; the follow-up to aircraft replacement, the reasons of hedge financial assets increase and increase of contract liability; the impact of decreased cash and cash equivalents; the meaning of decreased cash and cash equivalents caused by fluctuated currency rate.



2. Continued to report to the Board of Directors, and completed the Q3 2020 financial report announcement and declaration on November 16, 2020.


Before the meeting, the accountant separately reported and explained the audit situation to the

Asked about the content of the financial statements regarding leased

Approved by all attending Independent

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


independent director. At the meeting, the financial director of the company explained the audit results of the financial report in 2020, and discussed and communicated the issues raised by the participants.

aircraft and purchased aircraft; the discussion on the dropping revenue due to COVID-19; suggested to lower the CPA commissioned fee.

Directors. to lower the fee. 2. Continued to submit for the Board of

Directors’ approval, and completed the 2020 financial report announcement and declaration on March 31, 2021.

Communication between independent directors and internal audit supervisor:

Means of communication

Communication matters Communication results

Primary matter Proposal by independent

director Results Company’s processing status


Internal audit business report for Q4 2019

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

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

2019 Internal Control System Effectiveness Audit and Statement


Resolved by the Board of Directors on March 18, 2020, and the 2019 Internal Control System was shared on March 23, and mentioned in the 2019 annual report.

Amendment to 2020 Audit Plan None

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

Resolved by the Board of Directors on March 18, 2020, and the 2020 internal audit plan was unveiled on March 24.




Reported to the Board of Directors on May 7, 2020.




Reported to the Board of Directors on August 6, 2020.

Second amendment of 2020 audit plan




Internal audit business report for March 2019


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





November 5, 2020 Audit Committee



Reported to the Board of Directors on November 5, 2020.

2021 Audit plan

Member Shen: The liquidation of YesTrip Co., Ltd. has not yet been completed. It is recommended to include the management team in the audit plan. Convener Chang: CAL shall reinforce the audit of the air cargo business. It is recommended to audit the cargo business and adjust the audit in each unit.

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

Reported to the Board of Directors on November 5, 2020.

January 18, 2021 Audit Committee



Reported to the Board of Directors on January 18, 2021.


Internal audit business report for January 2021

None

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

Reported to the Board of Directors on March 18, 2021.

2020 internal control effectiveness audit and statement


Resolved by the Board of Directors on March 18, 2021, and the 2020 Statement of Internal Control System was shared on March 22 and disclosed in the 2020 annual report.


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




Chung, Lo-Min 5 0 100% None


Chang, Hsieh Gen-Sen 5 0 100% None


Shen, Hui-Ya 4 0 80% Absence on May 8, 2020

Director Lin, Su-Ming 4 1 80% On March 18, 2021, Chung, Lo-Min attended as a proxy.

Director Ting, Kwang-Hung 4 1 80% On August 5, 2020, Lin, Su-Ming attended as a proxy;

Following are the other mentionable items: 1. Key functions of the Risk Committee:

The Committee reviews the establishment, implementation, and response measures of the Company's management strategies for overall finance, economy, flight safety, and other risks, and submits its views and recommendations to the Board of Directors for implementation.

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

2. The operation of the Risk Committee:

Meeting Dates Agenda content Risk Committee resolution results and company action on Risk Committee’s views

Results of the Board of Directors decision

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

Safety management report 2020Q1 Operations risk management analysis Financial status report Operations outlook and financing, crude oil market analysis Financial risk hedging strategy Oil risk hedging strategy

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

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

May 8, 2020 8th Meeting of the Risk Management Committee of the 21st Board of Directors


August 5, 2020 9th Meeting of the Risk Management Committee of the 21st Board of Directors


November 5, 2020 10th Meeting of the Risk Management Committee of the 21st Board of Directors

Safety management report

Climate control report

2020Q4 Operations risk-management analysis

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

March 18, 2021 11th Meeting of the Risk Management Committee of the 21st Board of Directors

Safety management report 2021Q1 Operations risk-management analysis Financial status report Operations outlook and financing, crude oil market analysis Financial risk hedging strategy Oil risk hedging strategy


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

Evaluation Item

Status of Implementation Deviations from the

Corporate Governance Best-Practice Principles for TWSE/TPEx-

Listed Companies

and Reasons

Yes No Brief Explanation

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

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

No Difference

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

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

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

No Difference

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

(2) The China Aviation Development Foundation is China Airlines’ largest shareholder and the company is in communication and contact with it.

No Difference

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

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

No Difference

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

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

No Difference

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

Company established policies calling for diversity among

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

No Difference


Evaluation Item



Listed Companies

and Reasons


members of the Board of Directors and put said policies into practice?

B. The ability to perform accounting and financial analysis. C. The ability to conduct management administration. D. The ability to manage crisis situations. E. Industrial knowledge. F. Perspective of the international market. G. The ability to lead. H. The ability to make decisions. The diversification policies of the current executives of the Company and their progress are as follows: MAR 27, 2021

Diversified Core Nam

e

Basic composition Industrial experience Professional competence

Nationality

Gender

Has employee status

Age

Length of office of

independent director Airlines

Transport

Professional services and m

arketing

Financial and Finance

Construction and engineering

Banking, insurance and real estate

Business and supply

Information and technology

Metal and m

achinery

Law

Accounting

Risk managem

ent

40-50

51-60

61-70

Less than 3 years

Six to nine years

Hsieh, Su-Chien

R.O.C.

Male - - - - - ○ - - ○ - - ○

Kao, Shing-Hw

ang

R.O.C.

Male - - - - ○ - - ○ ○ - ○

Chen, Charles C.Y.

R.O.C.

Male - - - - - - ○ - ○ - - -

Ting, Kw

ang-Hung

R.O.C.

Male - - - - - - - - - - ○

Chen, Han-M

ing

R.O.C.

Male - - - - - - ○ - - -

Ko, Sun-Ta

R.O.C.

Male - - - - - - - ○ - - - - - -

Wei,

Yung-Yeh

R.O.C.

Male - - - - - - - - - - - - - ○

Lin, Su-Ming

R.O.C.

Male - - - - - - - - - ○ - - - ○ ○

Wang,

Shih-Szu

R.O.C.

Female

- - - - - - - - - - - - - ○ -

Chung, Lo-M

in

R.O.C.

Male - - - - - - ○ - - ○ ○ ○ -


Evaluation Item



Listed Companies

and Reasons


Chang, Hsieh

Gen-Sen

R.O.C.

Female

- - - - - - - - - - - - - ○

Shen, Hui-Ya

R.O.C.

Female

- - - - - - - - - - - - - - ○

Note: Indicates the director has the capability; ○ indicates the director has some capability. a. The 11 directors (including 3 independent directors) of the 21st Board of Directors of the Company have business judgment,

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

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

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

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

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

No Difference

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

(3) The Company approved the “Regulations Governing the Board Performance Evaluation” in the 8th meeting of the 21st Board of Directors on November 7, 2019. An internal evaluation of the Board’s performance is made at the end of each year. The evaluation is divided into the performance evaluation of the entire Board of Directors, individual Board members, and functional committees. The evaluation shall be completed by the end of January of the following year, the outcomes of which shall be submitted by the Human Resources Department to be reported at the Board meeting held by the end of March. The evaluation shall be conducted every three years by an external professional independent organization or a team of experts and scholars. The results will be referred to in deciding directors' remuneration and nomination while renewing their performance. The Company completed the 2020 Board Performance Evaluation in accordance with the above regulations, which has been reported at the 15th meeting of the 21st Board of Directors on March 18, 2021, and disclosed on the Company’s official website. The self-evaluation results are as follows: A. Entire Board of Directors

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

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

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

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

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

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

External evaluation result:

1. Evaluation period: January 1 to December 31, 2020

2. Criteria: The engagement of company operation, decision-making improvement by the Board of Directors, the

No Difference


Evaluation Item



Listed Companies

and Reasons


composition and structure of the Board of Directors,

the selection and appointment of the Board of Directors, continuous learning, internal control, corporate governance

and operating performance evaluation. 3. Result and suggestions: The evaluation result of the China Airlines 2020 Board of Directors and Functional Committee was excellent; It is suggested to add one extra independent director to enhance the diversity of the Board.

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

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

Item Assessed Assessment Results Conforms to independence Yes No

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

complete independence Yes After assessment by the Company, accountants Huang, Jui-Chan and Cheng, Shiuh-Ran of Deloitte & Touche both conform to the above assessment standards for independence, and are suitable to act as CPAs for this company. After the 12th meeting of the 21st Audit Committee on March 18, 2021, a report will be made to the 15th meeting of the 21st Board of Directors on the appointment of accountants.

No Difference

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

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

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

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

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

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

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

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

B. In relation to the Company’s registration and change of registration, the Administration Division is responsible for completing the relevant registration with the competent authority in time limit for matters requiring registration or changes to registration matters of the Company.

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

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

Taiwan Corporate Governance Association

Technology and Information Safety Risk in the 5G and IoT Era 2020/05/07 3hr

Taiwan Corporate Governance Association

Trends of Digital Technology and Artificial Intelligence and Risk Management 2020/08/06 3hr

No Difference

5. Has the Company established communication channels with stakeholders (including but not limited to shareholders, employees, customers, and suppliers) and set up an area dedicated to stakeholders on the

The Company identifies stakeholders in accordance with the five principles of the AA1000 Stakeholder Engagement Standard (SES). To fully and effectively communicate with stakeholders, a spokesperson and “Stakeholders Section” have been created on the Company’s official website to provide contact information of the units associated with various issues, so as to facilitate stakeholders’ interaction with respective personnel working on relevant issues (including contact personnel, e-mails, and telephone numbers); also, a webpage for communication with stakeholders has been created on the corporate social responsibility website, explaining stakeholders’ issues of concern, communication channels, response frequency and communication results. The communication situation with various stakeholders is also reported to the Board of Directors every year. The outcomes from its implementation since 2020 have been reported at the 14th meeting of the 21st Board of Directors on January 18, 2021. Relevant content and frequency of the actual implementation show proper responses to various issues that include corporate social responsibility. See the following for details: (1) Company website -- stakeholders section: https://www.china-airlines.com/tw/en/about-us/stakeholder (2) Company Corporate Social Responsibility (CSR) website -- stakeholder engagement:

http://calec.china-airlines.com/csr/en/management_interested.html

No Difference

http://calec.china-airlines.com/csr/en/management_interested.html


Evaluation Item



Listed Companies

and Reasons


Company website? Does the Company respond appropriately to corporate social responsibility issues that stakeholders consider important?

(3) Explanatory table:Item

Category Focus of

Communication Contact Person Channel of Communication Frequency Result of Communication

Employees

Public health and safety

Flight safety management

Risk and hazards management

Labor/management relations and engagement

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

Labor-Management Conference

Four to six times per year

Employee satisfaction surveys are conducted once every two years; the score in 2019 was 6.4 (Note: the highest score is 10) Due to COVID-19, the survey was postponed to 2021 to avoided the survey result is distorted.

Union Real time

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

Real time

Website for retired employees and those who have left employment

Real time

Customers



Passenger service management

• Privacy and Information Security

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

Customer satisfaction surveys Real time

2020: 1. Passenger

satisfaction rate was 88.60%

2. Cargo satisfaction rate was 88.5%

3. Maintenance factory satisfaction score was 8.57

(Note: highest score is 10)

Global business meetings Annually Taiwan district business meetings

Twice per year

Discussions with travel agencies Occasional

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

Real time

Customer-service hotline Real time

Corporate customer visits Occasional

Investors



Operating and financial performance

Risk and hazards management

Vice President, Corporate Communications Office and speakwoman: Lu, Shwu-Huoy email: [email protected] Vice President, Finance Div.: Wang, Wei email: [email protected] Finance Div. Mr. Yang Tel: +886(0)-3-3998331 Finance Div. Mr. Lin Tel: +886(0)-3-3998361

Shareholders’ meeting Annually

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

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

Corporate information meeting Occasional

Partners (Suppliers)



Operating and financial performance

Governance and business integrity

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

Telephone, e-mail Occasional

A general supplier meeting was held at the end of 2020

Consultative conferences Occasional Business visits Occasional

Site inspections At least once every 6 months


Evaluation Item



Listed Companies

and Reasons


Miss Tseng Tel: +886(0)-3-3993913

Society


Corporate governance and business integrity


• Brand management

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

Hold activities for the public good, participate in societal activities

Occasional

A total of 355,459 individuals benefited in 2020

Press releases and messages Monthly Occasional

Network mailbox Occasional Daily

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

The Company’s professional services organization is CTBC Bank, which has been assigned the task of handling shareholder meeting matters.

No Difference

7. Information disclosure (1) Has the

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

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

No Difference

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

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

No Difference

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

(3) The Company publicly does not announce and register the annual financial report within two months of the end of the fiscal year, nor publicly announce and register the first, second, and third quarter financial reports and the monthly operating status earlier than the prescribed time limit.

Even though the Company didn't publicly announce/reg

ister the annual

financial report and

the monthly operating

status earlier than the

prescribed time limit, yet all the work

has been done within

the time regulated.


Evaluation Item



Listed Companies

and Reasons


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

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

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

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

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

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

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

(3) Investor relations: The Company has established Rules for Handling Investor Relations by which it handles all investor concerns or opinions. A total of 1 were handled in 2020, and the company will continue to announce and respond with operation-related results according to laws, regulations, and investors’ demand.

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

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

(6) Continuing education for directors and supervisors: see P.67-69 for details. (7) Status of implementation for risk management policy and risk balance standards:

The Company's operations are enormously impacted by both the domestic and international environment. So as to further improve the risk management system mechanism and reduce the effect created by interplay among risks, the Company has established a Risk Committee answering directly to the Board of Directors. The committee meets once per quarter and issues periodic reports to the Board of Directors, assisting the Board in oversight of the setting, and results and adaptive measures related to company risk management strategies. See P.42 for operation details. Moreover, to establish a solid internal governance system, the Company has additionally set up the China Airlines Procedures for Handling Important Internal Information, Ethical Code of Conduct for Directors, Ethical Code of Conduct for Senior Supervisors and Rules for Employee Conduct in the Course of Work.

(8) Implementation of customer policies: The Company takes the initiative to send service satisfaction questionnaires to members’ mailboxes (non-members can also fill out the questionnaire on the official website) to obtain passenger experience satisfaction with the Company’s passenger flights and their suggestions; A total of 53,801 effective customer satisfaction questionnaires were completed in 2020, with a satisfaction rate of 88.60%. After compiling and analyzing statistics, the above data have been reviewed and the products and services will be improved, where necessary, to comprehensively enhance customer satisfaction.

(9) Company purchases of liability insurance for directors and supervisors: The Company purchased liability insurance for all Directors in 2021 to reduce and diversify the Directors' legal liability risks. Important contents, such as Directors' liability insurance insured amount, coverage and premium rate, have been reported in the 15th meeting of the 21st Board of Directors on March 18, 2021.

No Difference

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

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

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

(3)The Company has, by the resolution of the Board of Directors in January 2019, approved the “Regulations Governing the Board Performance Evaluation,” and completed the 2018 to 2020 performance self-evaluation of the Board of Directors and external evaluation of 2020 Board of Director and Functional Committee. The evaluation results have been published in the annual report and on the website of the Company; in addition, on the Company’s website and the corporate social responsibility website, the communication situation between the Independent Directors and the chief audit executive and accountants; the operation status of functional committees other than those required by laws; the implementation status of ethical corporate management; and the information relevant to stakeholder communication, etc., have also been disclosed.


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

Members

Title (Note 1)

Criteria

Name

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

Independence Criteria (Note 1)

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

Remarks

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

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

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

1 2 3 4 5 6 7 8 9 10


Shen, Hui-Ya 1 -


Chang, Hsieh Gen-Sen 1 -

Other He, Jyun-Huei - 0 -

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

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

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

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

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

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

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

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

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

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

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


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




Shen, Hui-Ya 4 0 100% None

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

Other He, Jyun-Huei 4 0 100% None

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

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

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

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

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

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

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

Chairman and Managers' 2020 Lunar New Year Incentive

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

No further business

July 21, 2020 8th Meeting of the Remuneration Committee of the 21st Board of Directors

1. Amendment to the Charter of Remuneration Committee 2. Flight safety bonus to Chairman and managers


No further business

January 18, 2020 9th Meeting of the Remuneration Committee of the 21st Board of Directors

Chairman and Managers' 2021 Lunar New Year Incentive


No further business

March 18, 2021 10th Meeting of the Remuneration Committee of the 21st Board of Directors

1. Resignation pay for the former Senior Vice President Chang, Young

2. Flight safety bonus to managers


No further business


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

Evaluation Item

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


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

Our risk management framework is based on the materiality principle to identify both traditional risks and medium-term/long-term strategic risks. All impacts and countermeasures are analyzed and proposed through Risk Identification, Risk Analysis, Risk Assessment, and Risk Control, then followed up on and reviewed by the Risk Management Committee under the Board of Directors. The Committee assists the Board of Directors to inspect the strategies, execution results and countermeasures of each risk management strategy. A responsible unit will be required to control the risks. Among which, safety and operation risks are cross-unit operational risks and shall be handled by the Company's management level. The "Corporate Safety Committee" and the "Corporate Sustainability Committee" have been established under the President of the Company to be responsible for such risks and report the environmental and energy management performance to the top management on a quarterly basis. In addition, through the routine "Sustainability Committee" and "Board of Directors and Risk Management Committee" meetings, reports have been made to the Directors on environmental and climate risks, opportunity issues, and various responding control operations and development plans.

No Difference

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

The Company has set up a Corporate Sustainability Committee in 2014, which is solely responsible for the promotion of sustainability and is the highest governance organization for sustainability governance promotion, with the President sitting as its Chairman. There are six major task forces in the Committee, based on different aspects of sustainability, which are “Trust Value Team, Manpower Value Team, Joint Creation Value Team, Environmental Value Team, Social Value Team, and Sustainable Development Foundation Team.” Their main responsibilities are strategy formulation, business planning, and promotion of different aspects of sustainability; the teams report the implementation status to the Board of Directors on a regular basis every year in accordance with the Corporate Social Responsibility and Sustainable Development Best-Practice Principles. The results of the 2020 CSR operation and the 2021 CSR operation plan were reported in the 14th meeting of the 21st Board of Directors on January 18, 2021.

No Difference

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

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

(1)Environmental management organization and system A. In 2012, the Company was the first in Taiwan’s industry to establish a “Corporate

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

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

Standard

ISO 14064-1 Greenhouse gas inventory and management

system

ISO 14001 Environmental management

system

ISO 50001 Energy

management system

Time of introduction 2009 2012

(Note1) 2013

(Note2)

No Difference


Evaluation Item



Standard

ISO 14064-1 Greenhouse gas inventory and management

system

ISO 14001 Environmental management

system

ISO 50001 Energy

management system

Scope

(1)Global aviation fuel

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

(1)Aircraft/engine maintenance operation

(2)Flight operation and management

(3)Cargo transport service

(4)Passenger transport service

(1)Aircraft/engine maintenance operation

(2)Flight operation and management

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

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

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

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

Concepts Policies Promotion strategies Plans of action

Complying with environmental laws and regulations

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

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

˙ Actively participating in international cooperation and understanding mainstream issues.

˙ Perfecting management/supervision and evaluation mechanism

˙ Regular regulatory requirements checks and self-commitment reviews

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

˙Implementation of checking mechanism for management system compliance obligation

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

Conserving the Earth's resources

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

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

˙ Developing and implementing environmental performance and carbon reduction targets

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

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

No Difference


Evaluation Item



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

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

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

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

Improving eco-efficiency

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

˙ Creating diversified guidance and communication channels

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

˙ Implementing environmental and energy-saving education for all employees

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

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

˙Establishing a reward system for proposals

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

˙ Establishing a supply chain risk assessment and management system

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

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

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

˙Performing supply chain risk assessment operation


Evaluation Item



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

Fulfilling social responsibility

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

˙ Optimizing devices performance

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

˙ Introducing low-carbon and renewable energy facilities

˙ Checking and optimizing energy equipment and management measures

˙Establishing and implementing energy conservation management and educational programs

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

Supporting green design and procurement to promote environmental sustainability.

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

˙Promoting green procurement and green consumer culture

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

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

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

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

˙Diversifying the promotion of green consumer awareness

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

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

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

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

No Difference

Microsoft Office User

Are chosen


Evaluation Item



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

Potential risks Potential opportunities Response measures ˙ Poor weather

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

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

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

˙ The demand for passenger and cargo transport is reduced, and revenue is reduced.

˙ Enhance emergency responsibility, properly handle customer needs, improve service quality and reputation.

˙ Properly handle and meet customer needs, and improve the corporate tenacity and reputation.

˙ Continue to strengthen operational procedures and emergency response mechanisms, strengthen personnel training, and improve the inter-unit coordination and business operational efficiency within the organization.

˙ Bring in a professional meteorological team, improve the accuracy of meteorological forecasts, and activate the aircraft dispatching operation as early as possible.

˙ Enhance the coordination of supply chain management and partnership, ensure the safe and easy transportation of goods and personnel at all stages.

˙ Higher oil prices increase business operation costs.

˙ The use of aviation sustainable fuel increased, the ratio of fuel added increased, and the operational cost increased.

˙ Effectively adjust the risk of rising fossil fuel prices

˙ Improve the consumption and efficiency of low-carbon energy and reduce energy expenditure.

˙ Use aviation sustainable fuel to improve brand benefits and revenue.

˙ Diversified financing channels

˙ Continuous evaluation and introduction of new technology (new energy-saving aircraft, fuel-saving technology, etc.)

˙ Continue to promote the measures of aviation fuel saving

˙ Energy consumption inventory and improved efficiency in flight and ground operations

˙ Promote the development of alternative fuels in Taiwan

˙ With the growth of business, carbon emissions continue to grow, increasing carbon exchange and regulatory costs.

˙ Install/purchase renewable energy facilities or adjust work details, increasing business operation cost.

˙ Continue to reduce greenhouse gas (GHG) emissions and reduce our sensitivity to changes in carbon transaction prices.

˙ Derivative income from carbon rights sales

˙ Improve the energy efficiency of flight and ground operations and reduce energy expenditure.

˙ Proactively participate in negotiation and communication between public departments and international organizations

˙ Establish a carbon discharge monitoring and management system

˙ Understand fluctuations in the carbon market and manage carbon rights appropriately.

˙ Planning and implementation of each item in carbon reduction measures

˙ Unstable supply of raw materials

˙ Increase in procurement costs

˙ Open up new markets and increase revenue.

˙ Use raw materials of the current season to adjust meals and reduce costs.

˙ Carry out supply chain management guidance and strengthen supply chain fitness.

˙ Coordinate with the season to flexibly


Evaluation Item



˙ Sign long-term contracts with relevant supply partners to maintain stable services.

adjust raw materials used in meals to adapt to climate change trends, understand the compliance of goods carried, and strive for new market opportunities.

˙ Investors reduce their willingness to invest

˙ Capital investment is required to promote the consideration of highly efficient aircraft/sustainable fuel investment.

˙ Work with stakeholders to adapt to the climate and capture business opportunities by using innovative solutions.

˙ Discuss across departments, develop new routes and services.

˙ Develop a travel mode to save fuel and time

˙ Continue to research and analyze new technologies, facilities, and services, and introduce feasibility evaluation.

˙ The risk of infectious diseases has increased, reducing the demand for tourism and changing the demand for cargo transport.

˙ The consumer market attaches great importance to low-carbon and environmental protection of corporations, both of which affect brand trust and reduce revenue.

˙ Improvements in the awareness of carbon reduction changed the demand for air transport (such as changing to cruise lines, high-speed rail, etc.).

˙ Plan to promote low-carbon services and thereby enhance consumer support for our brand.

˙ Master the market model of low-carbon economy/transportation issues and create business opportunities and increase competitiveness.

˙ Cooperate with the governments of all countries to manage the disease properly, strengthen self-protection and response, and reduce the degree of impact.

˙ Develop all kinds of new products/services, improve service efficiency, and meet market demand.

˙ Launch environmentally friendly travel service ECO TRAVEL, invite passengers to participate in carbon reduction and enhance green/low-carbon business opportunities.

˙ Continuous research and development of new market channels or customer groups

˙ Develop diversified green and low-carbon activities and strengthen customer communication.

˙ Does not meet the expectations of stakeholders, affects brand reputation.

˙ Failure to properly manage supply chain issues, affecting operations.

˙ Strengthen the prediction system mechanism, maintain the rights and interests of customers, and stabilize revenue.

˙ We deal with emergency situations properly, increasing the public's confidence in us.

˙ Promote supply chain cooperation and enhance corporate sustainable competitiveness.

˙ Cooperate with and support the government's environmental protection policies, enhance industrial cooperation opportunities, and promote industrial competitiveness.

˙ We continue to strengthen communication between external stakeholders, support scientific research, participate in international environmental sustainability comparison assessments, and enhance the corporate sustainable image.

˙ Strengthen employee education and training, hold environmental protection and energy conservation activities, and improve employee awareness.

˙ Strengthen cooperation with domestic and overseas suppliers of low-carbon products to enhance the sustainable value of the supply chain.


Evaluation Item



(4) Has the Company compiled statistics on the past two years of GHG emissions, water usage, and waste amounts, and has it devised policies for energy conservation and carbon emissions reduction, GHG emissions reduction, water conservation, and other waste management?

(4)The Company's environmental/carbon/energy performance management is as follows:

A. Greenhouse gas inventory and verification Since 2009, the Company has actively implemented ISO14064-1 greenhouse gas management, conducted and organized inventory of greenhouse gas emissions generated by operations, and carried out third-party verification.

Greenhouse gas emissions GHG

Emissions Category

Type 2019 2020

Category 1 Aviation operations 7,059,083 5,787,751 Ground operations 4,981 3,051

Category 2 Ground operations 18,169 17,572 Total (Tons of CO2e) 7,082,233 5,808,374

B. Greenhouse gas management and reduction strategy The Company’s greenhouse gas management and reduction strategy consider the international industrial carbon reduction targets, strategy implementation and benchmarking technology of the same and different industries. It combines its corporate financial operation plan and technical feasibility to formulate air and ground carbon-reduction targets. In the future, it will continue to incorporate the Science-Based Target (SBT) concept to carry out rolling inspection of corporate carbon reduction objectives and management paths through the corporate risk management mechanism and platform.

Carbon reduction goals Target description 2020 Achievement rate

Aviation

2020 To increase aviation fuel efficiency by 1.5% every year on average

Failed to achieve due to the impact of COVID-19 on the global market

2025 Improving annual aviation fuel efficiency by 1.5% and achieving carbon-neutral growth (CORSIA CNG2020) (the carbon emission in 2050 will be reduced to 50% of those in 2005)

2030

Ground

2020 38% reduction in carbon emissions

Achieved the target

2025 40.43% reduction in carbon emissions

2030 42.34% reduction in carbon emissions

Aviation operations were the first phase carbon reduction target to be achieved for the airlines industry: "By 2020, fuel consumption efficiency will be increased by 1.5% every year." The Company will continue to strengthen fuel consumption efficiency countermeasures, and has formulated four major fuel saving strategies, including "promoting green energy flights," "improving ground service controls," "continuous regular maintenance" and "fuselage weight reduction,” as well as several specific implementation measures. However, due to the COVID-19, the total fuel consumption decreased by 2.4% compared to the last year. The total flight reduced by 38%, and RTK reduced by 22%. Thus the total fuel consumption efficiency was 0.2583 ton/thousand RTK, unable to reach the 2020 goal (0.2349 ton/thousand RTK). For ground operations, 61 environmental management KPIs and 13 fuel saving measures were promoted in 2020, which resulted in a total annual carbon reduction of 115 tons of CO2e; among which, carbon reduction in ground operations amounted to 466.48 metric tons of CO2e. Various data are as follows:

Item Savings Unit Carbon reduction (Tons of

CO2e)

Aircraft fuel savings 19,131 Kiloliter 48,421

Ground fuel conservation

119 Kiloliter 307

Energy conservation 2,691 1,000 kilowatt

hours 143

Water conservation 3 1,000 kilowatt

hours 0.48

Paper conservation 3.78 Tons 16

No Difference


Evaluation Item



2020 total carbon reduction 48,887.48 Considering the trend of energy saving around the world and rolling wave management, the Company made the amendment to the short-, mid-, and long-term carbon reduction goal for 2021:

Goals Description

Aviation

2023 Improving annual aviation fuel efficiency by 1.5% and achieving carbon-neutral growth (CORSIA CNG2020) (the carbon emission in 2050 will be reduced to 50% of those in 2005)

2025

2030

Ground

2023 41% reduction in carbon emissions 2025 44% reduction in carbon emissions 2030 50% reduction in carbon emissions

C.Targets and achievements in energy resource reduction The Company sets various environmental protection and energy conservation objectives in accordance with sustainable development goals (SDGs):

Item 2020 targets Achievements

2021 expected targets

Aviation fuel efficiency

Improvement of 1.5% over 2019

Did not meet target (Note)

Improvement of 1.5% over 2020

Ground carbon emissions

Reduction of 38% over 2009

100% Reduction of 39% over 2009

Water resources Reduction of 1.5% over 2018

100% Reduction of 2.2% over 2018

Domestic waste Reduction of 2% over 2018


Hazardous industrial waste

Recycling ratio reached 40%

100% Recycling ratio reached 41%

Photocopy paper

Reduction of 5% over 2018


Note: Failed to achieve due to the impact of COVID-19 on the global market.

D.Increased energy efficiency After obtaining "Diamond Green Building Label" certification in 2017, the headquarters for China Airlines continued to promote equipment renewal, optimize operational processes, and improve the overall energy efficiency of buildings; in 2019, the Company further responded to Taiwan's green energy policy. It completed the installation of 99kW solar photovoltaic facilities on the roof of the simulator training building for parallel power generation to support Taiwan's renewable energy through practical actions. In 2019, the Company received National Renewable Energy Certificate (T-REC) and was awarded the Bureau of Energy's (MOEA) Conservation Benchmark - Silver Award, Taipei Energy Conservation Leadership Award, supporting renewable energy with real actions. As of December 31, 2020, the Company received 117 certificates, and the total power generated was 215 thousand kW. 115 tonnes of CO2e were reduced.

E.Water resource utilization increase The total water consumption of the Company in 2020 was 126,774 kWh, which is about 13.46% less than that in 2019. Among which, the China Airlines headquarters park is in a specific area of the airport. The airport management unit collectively applies for and obtains tap water from the water supply unit and pays the sewage treatment fee. The domestic sewage is collected and sent to the domestic sewage treatment plant for treatment. The maintenance facility, Songshan Park, and Taipei branch apply directly for water supply from the water company. In order to reduce the risk associated with water resources, the Company has successively set up water meters at important water line nodes, and it tracks and analyzes the direction of water resource flow and water consumption hot spots, and promotes water reduction and recycling measures, including: Purchasing water conservation label products, promoting water conservation advocacy, setting up a rainwater recovery system, recycling cooling water and introducing Eco-shine, etc.

Item Unit 2019 2020

Tap water use volume Kilotons 146.49 126.77

Recycled water use volume Kilotons 17.41 8.64


Evaluation Item



Recycling percentage % (recycled volume/water use total volume)

% 11.88% 6.8% 11.88%

F.Waste Management The Company processes waste management in accordance with the five following principles: Refuse, Reduce, Reuse, Recycle, Repair. We have set a goal for 100% resource reclamation of waste and have annually increased the waste reuse rate.

Waste Management

Principles Strategies and goals Actions

Refuse Through green design and procurement, reduce resource consumption and waste disposal demand at the source.

Support suppliers to develop and purchase non-disposable plastic products (such as: wooden cocktail stir rods); Increase green procurement.

Reduce

Accurately plan business and service supplies to reduce consumption; improve maintenance processes and reduce end waste; Implement electronic teaching materials and operations, conserve paper arising from training and communication.

Reuse Through improvement of operation processes, improve the reuse rate of waste and reduce the opportunities where waste would be generated.

Improve the reuse ratio (e.g., plastic waste bucket) of hazardous industrial waste.

Recycle

Working with the environmental protection agency's plastic film recycling platform, improving the recycling ratio of packaging plastics.

Repair Continue to use passenger and freight equipment (such as pallets or containers/netting) after repair.

In 2020, the production of ground operation and domestic waste was 454,279 kg, which is about 35.4% less than that of 702,966 kg in 2019. In 2020, the amount of business waste also decreased by 21.7% compared with that in 2019.

Item Handling method 2019 2020

Ground Operational

Domestic waste

Non-recyclable Incineration

381,626 327,728

Recyclable: Resources recycled

321,340 126,552

Hazardous industrial waste

Non-toxic: Entrust qualified organization to remove/dispose

233,018 184,420

Toxic: solidification and burial/chemical treatment

18,815 12,657

In the air Service

General industrial/domestic waste

Non-recyclable Incineration

3,052,461 943,952

Recyclable: Resources recycled

1,116,396 341,366

Total waste (kg) 5,123,656 1,936,675

4. Social issues (1) Has the Company established

management policies and procedures in accordance with relevant laws and regulations and international human rights conventions?

(1)In the area of comprehensive management systems and organizational capacity, the Company not only abides by the Employee Code of Conduct and Employee Work Standards set forth in various labor laws, but also refers to the Universal Declaration of Human Rights, the United Nations Global Compact, the International Labor Organization's basic compact on core labor standards, the UN Guiding Principles on Business and Human Rights, and local laws and regulations. The company has established a Human Rights Policy based on the aforementioned norms as guiding principles for the Company's management.

No Difference


Evaluation Item



(2) Does the company establish and implement reasonable employee welfare measures (including compensation, vacation, and other benefits) that appropriately reflect the operating performance or results through employee compensation?

(2) Employees are the most important assets of a company. In addition to improved planning and setting standards for the implementation of salary, work bonuses, flight-safety bonuses, vacation, preferential air tickets, and several welfare measures, the Company offers performance bonuses, annual bonuses, year-end bonuses, promotions, and employee compensation with reference to the performance of employees at the end of each fiscal year and based on the Company's annual profit status. The Company takes this opportunity to care for its employees and treat them as the core of its sustainable operations. The average salary for all employees of the Company increased by about 1.67% in 2020.

No Difference

(3) Does the Company provide employees with a safe and healthy work environment and regularly implement health and safety education programs for employees?

(3)In order to protect the rights of employees, provide a healthy and safe working environment, and create a friendly workplace, the Company has established internal rules and regulations related to "employee complaint measures" and "employee safety report reward operation measures," and provides multiple communications channels, such as a speaking area, regularly scheduled labor-management consultation meetings, and special e-mails for complaints in various cases (including WeCare, workplace sexual harassment, professional ethics). Such channels are made accessible to all employees, and complaints are accepted in accordance with the operational procedures.

A. Keep pace with international double certification in this new era of workplace safety To adapt to trends of global international labor development, improve the efficiency of safety and health management, and promote systematic management measures, the Company established an independent safety and health management system and obtained ISO45001:2018 and TOSHMS certification on April 20, 2019, which serve as the management basis of occupational safety and health management system certification. Self-management and preventive measures based on the PDCA cycle mode are used to effectively control occupational disaster risk, improve occupational disease preventive management, improve occupational safety and health management performance, and actively implement occupational safety policies; Provide a safe, healthy, and comfortable working environment for employees, and promote industry competitiveness.

B. Occupational safety and health committee for two-way effective communication The Company has established an Occupational Safety and Health Committee in accordance with law. The committee is tasked with the objective of preventing occupational hazards and protecting the safety and health of all employees by reviewing, coordinating, and making recommendations pertaining to safety and health related matters. The position of chairman is served by the president. There is one vice chairman and one executive secretary under the chairman. The committee consists of the first-level management of designated units, occupational safety and health personnel, engineering and technical personnel, medical personnel, and labor representatives appointed by the labor union as members. A meeting is held once every three months to gather statistics and analyze the Company’s occupational accidents and report and follow up on subsequent safety and health management plans. A total of 14 safety and health proposals were reviewed, coordinated, and provided with suggestions in the meetings in 2019, and all proposals have been concluded; relevant meeting minutes have been announced on the Company’s internal website.

C. Full AQD for comprehensive risk assessment

Using China Airlines' Aviation Quality Database (AQD) of all personnel to reflect hidden hazards of the operating environment and implement risk assessment to reduce occupational accidents; the improvement rate of the safety and health related cases was 100%, indicating a safe, healthy, and comfortable working environment for China Airlines employees.

D. Strengthen occupational safety and pandemic prevention

To cope with the pandemic, China Airlines actively equips itself with the ability to deal with infectious diseases. Cross-unit control mechanisms and procedures were built to consolidate the efforts from each unit. The Company constantly reminds employees to keep full alert and quickly makes responses based on the condition of the epidemic. For employees who are exposed to high risks

No Difference


Evaluation Item



(cabin crews), a health report system was built to track any abnormality. Ground service staff were asked to work remotely and business travels were restricted. Relevant health management policies have been strictly adopted. Cross-function collaboration system was built to provide various communication channels. The Company also strengthened employees' knowledge on the prevention of biological pathogen hazards through health promotion lectures and education training. The Company also makes good management, utilization and storage of the pandemic prevention resources to provide a safe, healthy and comfortable working environment for employees.

E. The Company values employees' health, and has been dedicated to creating a healthy workplace. Regular health checkup has been conducted with more inspecting items as prescribed by law and with higher frequency. Employees who are listed in the high-risk group are followed up and guided by doctors to realize the early inspection and precaution. Meanwhile, every year the Company makes clear direction for health promotion and approves a sufficient budget. The occupational health promotion plan is made by combining the resources from the health authority and community. Health promotion courses are held to create a positive and healthy workplace. Topics cover cancer screening, prevention of infectious disease, and vaccination, etc. In 2020, cardiovascular disease and coronavirus prevention were included in the training content. The Company also provides employees in Taiwan with a free vaccination. 2,108 people were vaccinated in 2020. To allow female employees to be able to do breastfeeding, breastfeeding rooms are established in compliance with the breastfeeding policy of the Health Promotion Administration, Ministry of Health and Welfare as well as the Act of Gender Equality in Employment.

(4) Has the Company established an effective career skill development training program for employees?

(4) In order to nurture the Company's human resources, it has a Training Advisory Committee, which is responsible for the planning of annual education and training for all colleagues, including strategic occupational training, management occupational training, and job training. Simultaneously, in accordance with the Company's operational development strategy, and to deepen the Company's various levels of management professionals and broaden the horizon of potential talents, strategic and management occupational training was held on a regular basis to sharpen employees’ necessary knowledge and skills. In addition, since 2009, the Company has established a Management Talent Training and Development System to nurture talents with international vision and management capabilities, and to strengthen the management knowledge of management professionals through job experience, management course training, and rigorous assessment systems. As of today, more than 100 outstanding management professionals have been trained and are now serving in key units in Taiwan and foreign branches. In 2019, a total of NT$253 million was invested in the training and development. The total number of training hours exceeded 52,865 hours.

No Difference

(5) Regarding customer health and safety, customer privacy, marketing and labeling of the products and services, does the Company follow relevant regulations and international standards, and formulate relevant policies and complaint procedures for consumer rights protection?

(5) In addition to stipulating service commitments, transportation terms and conditions, and disclaimer clauses in accordance with the law, regarding the consumer rights policies, the Company has also posted and shared on the Company’s website the information security policy with its “privacy protection policy” and “privacy protection statement.” It is committed to protecting the privacy of all customers’ personal information. Also, to protect the rights and interests of the passengers, reservation and ticket-related rules for flight changes have been clearly mentioned in the FAQs on the official website. Furthermore, the Company has in place consumer complaint procedures to provide consumers with complaint channels for products and services, including company website (including stakeholders section, customer feedback, and service satisfaction survey), Facebook fan page, customer service e-mail, and global branches’ addresses and phone numbers; consumers may also send letters to the Company directly. All complaints will be replied to after processing.

No Difference

(6) Has the Company formulated supplier management policies that require suppliers to follow relevant regulations on issues such as environmental protection, occupational safety and health or labor human rights, and their implementation status?

(6)The Company has formulated the “Supplier Code of Conduct” which specifies that suppliers shall provide a healthy and safe working environment and shall ensure that workers respect each other, enjoy dignity and fairness, and abide by professional ethical standards; in any case, when providing products and services, suppliers shall strictly comply with the legal, ethical requirements and their commitment to be responsible to the society and environment; if the Code is violated, the Company may terminate the business relationship between the two

No Difference


Evaluation Item



parties. Moreover, the Company evaluates the supplier’s past credit history, and reviews the supplier’s quality, delivery date, and whether there are any negative reports before dealing with the supplier. In 2020, a total of 48 suppliers were reviewed. In accordance with the "Sustainable Supply Chain Management Policy Statement" of the Company, we have requested that every supplier sign the "Supplier Code of Conduct" when making a tender, jointly undertaking to create a sustainable industrial environment since 2016. We have also continued to promote the procurement of Green Mark certified products. By the end of 2020, we have completed green procurement of approximately NT$1.47 million in total. Therefore, the Company has been promoting sustainable supply chain management since the beginning of 2014. Subsequently, we established a Joint Value Creation Team for important procurement categories, including "aviation materials, aviation fuel, in-flight meals, service procurement, and general business affairs," and formulated long-term sustainability goals based on the United Nations' Sustainable Development Goals (SDGs), establishing China Airlines' Sustainable Supply Chain Management Policy Statement and Supplier Code of Conduct with reference to the Global Reporting Initiative (GRI), ISO 26000, United Nations Global Compact (UNGC), International Labour Organization (ILO), and other international standards. In addition, the Company has also established a risk investigation mechanism, performed audit operations, organized supplier meetings to enhance the effectiveness of engagement, and set up other management measures, and has regularly reported the management results to the Corporate Sustainability Committee for follow-up inspection on a quarterly basis.

5. Does the Company refer to internationally accepted report preparation standards or guidelines to prepare its Corporate Social Responsibility (CSR) Report and other reports that disclose the Company’s non-financial information? Has the aforementioned report been assured, verified, or certified by a third-party verification unit?

The Company follows the GRI Standards - Core option issued by the Global Sustainability Standards Board and refers to the UN Global Compact when preparing its CSR Report. In May 2021, the Company’s limited level report verification will be completed by KPMG based on the GRI Standards and ISAE3000 Assurance Standard, and a third-party verification statement was issued, which has been disclosed on the Company’s “Corporate Social Responsibility” section on its website.

No Difference

6. If the Company has drawn up a code for CSR based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any differences between said code and the Best-Practice Principles: In order to fully implement the scope of corporate social responsibility, comply with the government's direction of CSR promotion, and accord with international practice, the Company has added to and amended the Company's Corporate Social Responsibility and Sustainable Development Best-Practice Principles on November 5th, 2020 based on the revised Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies; through this CSR's highest guiding principle, we have comprehensively reviewed the Company's operational constitution, reflected the management and execution aspects, and striven to fulfill corporate social responsibility in three major aspects: environmental, social, and governance (economic) (ESG); there was no operational difference this year. For related information, please refer to the Company's corporate social responsibility website. No deviations were found this year.

7. Other important information for facilitating the understanding of CSR and its implementation: As the global aviation industry was fundamentally impacted by the coronavirus, China Airlines continued to fulfill its commitment to corporate sustainable development. Based on "promoting the local education internationalization," "enhancing international visibility of local brands in Taiwan" and "helping disadvantaged groups to obtain equal opportunities in society, "China Airlines looks forward to enhancing the education quality in Taiwan, strengthening Taiwan's visibility on the world stage, helping the vulnerable group to overcome difficulties, and giving back to society for sustainable development. (1) Promoting the internationalization of local education: Strengthening education: 46,017 persons benefited in 2020 Corporate visit: Every year, China Airlines invites colleges and universities to visit the company, and provides designated personnel to introduce corporate culture and training facilities for cabin crew, emergency training, and aviation training. Through real practices, it is hoped to cultivate students' knowledge of the aviation industry. In 2020, nine sessions of visits were paid by colleges and universities, benefiting 320 students. Lecture by volunteers: China Airlines Volunteering Club was established in 2001. Every year, the volunteers offer lectures to nearby schools. Through demonstration, the volunteers teach students relevant knowledge in the aviation industry, and enhance students' global perspective and growth. In 2020, 8 lectures in schools such as Xihai Elementary School, Zhuwei Elementary School, Shanfeng Elementary School, and Kuolin Elementary School in Dayuan District were held. In total, there were 50 participating volunteers and 24 hours of service, benefiting 604 students. Upholding the spirit of mutual support and spreading love, the China Airlines Volunteers Club gives back to the society and community with actions. Knowledge platform for elementary school students: Since 2014, China Airlines has been working with the Global Views Educational Foundation to collaborate on the "Common Knowledge Platform Public Welfare Project" sponsorship plan and to donate subscriptions to the "Global Kids Junior Monthly" to students in various elementary schools in Taoyuan City, Taitung County, Nantou County, and Hualien County to help students develop reading habits and to contribute to the cultural education of children. In 2020, 102 schools and about 44,472 students benefited. Little cabin crew dream project: China Airlines organizes the "Little Cabin Crew Dream Project" by utilizing the aviation resources to let people have another kind of travel experience. The activity attracted more than one hundred participants. With the professional guidance by a professional cabin crew mentor, participants got to learn basic knowledge of aviation; Flying simulation activity was provided to let participants to observe the in-flight operation. In 2020, 2


Evaluation Item



sessions were held with 239 participants. Co-exist with the environment: 350 people participated. Beach cleanup activity: The activity is one of the key projects for China Airlines. This year, in response to the Taoyuan Government's promotion of beach cleanup, 350 employees including their family members and friends cleaned up Guanyin beach to eliminate the hazards in the ocean. 2,082 kg of garbage were collected, among which 318 kg were discarded fishnets. Fishnets being recycled can be further reused to realize a circular economy. Enhancing international visibility of local brands in Taiwan: International rescue: 2,278 items were sent in 2020, with 1,224 people benefited. 2020 was heavily impacted by COVID-19. China Airlines integrated the resources to carry out the international rescue. In response to the policy of the central government, medical resources were delivered by charter flights to countries around the world including Europe, Northeast Asia, and Southeast Asia. 10 flights were operated that sent 2,278 items, equivalent to 73,343 kg. Moreover, China Airlines took on the great mission to send Taiwanese travelers abroad home from areas with serious infections via charter flights. 9 flights were made, including Wuhan charter flight, the Japanese Diamond Princess cruise ship charter flight, and Shanghai charter flight. 1,223 people benefited. China Airlines stood in the front line and fought against the disease, improving Taiwan's visibility on the international stage. Sports sponsor: In 2020, 29,589 people benefited China Airlines has been supporting local sports teams to cultivate more athletes to win pride for Taiwan. In 2020, a charity basketball camp and baseball camp were held that invited players from Formosa Dreamers, Chen, Wei-Yin and Wang, Wei-Chung, both well-known professional baseball pitchers to teach young players. The campaigns have prepared these young dreamers to realize their dreams. Sports event sponsored in 2020: 2020 Standard Chartered Taipei Charity Marathon Sports teams and athletes sponsored in 2020: Formosa Dreamers, professional baseball players Chen, Wei-Yin and Wang, Wei-Chung, Rising Star Gymnastic Association Equal opportunity for the disadvantaged: In 2020 241,679 people benefited. Disadvantaged Students and Communities: CAL's Love All Around team consists of CAL employees who volunteer to provide care for schoolchildren in remote areas, and teach children aviation knowledge during employees' days off. Since 2014, it has covered 15 counties and cities in Taiwan, including 27 townships, 53 junior high and elementary schools and social welfare groups, and cared for 3,207 students. Another volunteering group headed to schools in remote area in Taitung. In 2020, the group was invited to join the event called "Foresee the Future" held by Shan-Shuei Primary and Junior School, the first school incorporating alternative education based in Taichung. Aviation knowledge was designed into fun games to let students learn and explore. 382 students participated. In 2020, the cabin crews organized four donation events, offering spare items on flights to the disadvantaged group. A total of 240,158 people benefited. Disadvantaged Seniors: China Airlines has long cooperated with Huashan Social Welfare Foundation, visiting the local seniors in Taoyuan regularly on three main festivals. In 2020, three charity events were held: Dragon Boat Event, Mid-Autumn Event, and Have Fun with Grandchild. By gathering the social effort, China Airlines helped the elderly who are disabled, demented and live alone. China Airlines also cooperated with Taoyuan Fishermen's Association to hold the 2020 Lunar New Year Gathering. Mushiang Orphanage, White Orphanage and senior fishermen were invited to join the gathering. 550 seniors were benefited.Happiness Bus 2.0 in Pingtung: Due to COVID-19, the Ministry of Transportation and Communications initiated relief program for the aviation industry. In compliance with the regulations of trust fund relief operation, China Airlines sponsored the Happiness Bus 2.0 in Pingtung to improve the traffic quality in Manzhou township, Pingtung and enhance the local residents' living quality. A total of 7,500 people benefited from this project.


3.3.7 Ethical Corporate Management and Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/GTSM Listed Companies”

Evaluation Item

Implementation Status Deviations from the Ethical Corporate

Management Best-Practice Principles for

TWSE/TPEx Listed Companies and

Reason


1. Establishment of ethical operation policies and programs (1) Has the Company formulated an

ethical management policy approved by the Board of Directors, and expressly stated in the regulations and external documents the policies and practices of ethical management, as well as the Board of Directors and senior management’s commitment to actively implement the management policy?

(1) CAL has established Ethical Corporate Management Best-Practice Principles and Procedures for Ethical Management and Guidelines for Conduct, which were passed in 2016 at the 5th meeting of the 20th Board session. These guidelines and principles clearly spell out the Company’s ethical operating policies, methods, and commitments. They are published on the CAL website and the Taiwan Stock Exchange Market Observation Post System.

No Difference

(2) Has the Company established an assessment mechanism for the risk of unethical behaviors, regularly analyzed and evaluated business activities with a higher risk of being unethical within the business scope, and formulated a plan accordingly to prevent unethical behaviors, which covers at least the preventive measures provided in Article 7, Paragraph 2 of the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies?

(2) The Company’s Ethical Corporate Management Best Practice Principles sets out various business activities with a higher risk of being unethical to be prevented within the business scope to strengthens relevant preventive measures, which include behaviors provided in the subparagraphs under Article 7, Paragraph 2 of the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies.

No Difference

(3) Has the Company specified the operating procedures, behavioral guidelines, disciplinary penalties, and grievance system in its plan for unethical conduct prevention, and has it implemented the said program while also periodically reviewing and revising it?

(3) The Company's Procedures and Guidelines of Conduct for Ethical Management clearly set out all unethical and prohibited conduct, the whistleblowing system, and the disciplinary system. These procedures and guidelines are implemented in the operations of all units.

No Difference

2. Implementing ethical corporate management (1)Does the Company evaluate the ethical

records of the businesses with which it has dealings and include clear ethical corporate behavior provisions in contracts with such counterparties?

(1) In the process of business dealings with other companies, CAL employees explain our ethical management policy and related regulations to counterparties and expressly refuse to provide directly or indirectly, promise, demand, or accept any form of gratification. When signing contracts with others, CAL fully reviews the counterparty’s ethical corporate behavior and includes complying with our ethical corporate management policies as a provision in contracts.

No Difference

(2) Has the Company set up a special unit affiliated to the Board of Directors to promote corporate ethical management that periodically (at least once per year) reports to the Board of Directors on the status of the implementation of ethical management policies, the plan for unethical conduct prevention, and its supervision?

(2)A. The Company’s Human Resources Management Division, which is the dedicated unit for ethical management, is responsible for consolidating the ethical management implementation status in relevant units of the Company and reporting periodically to the Board of Directors once per year. The 2020 implementation status has been reported at the 13th meeting of the 21st Board of Directors on November 5, 2020. In addition, the Company encourages the reporting of unethical conduct and misconduct. An independent reporting mailbox has been set up and announced. The General Audit Office reports the received cases, handling methods, and follow-up review and rectification to the Board of Directors.

B. Relevant status of the Company’s implementation of ethical management policies in 2020: a. An E-learning training course was held to raise awareness of service principles

and code of conduct. b. Whistleblowing channels such as the following have been notified: chairman’s

mailbox, General Audit Office’s confidential mailbox, the Speak Out area, and the WeCare listens mailbox. These facilitate employees’ immediate reporting to management and the Human Resources Management Division.

c. "Employee Workplace Code of Conduct", "Employee Job Specifications", and relevant reward and disciplinary procedures have been established; clear standards and an effective disciplinary system have been set out.

d. Ethical management principles are followed through scheduled and unscheduled annual inspection mechanisms to prevent fraud and corruption.

No Difference


Evaluation Item

Implementation Status Deviations from the Ethical Corporate

Management Best-Practice Principles for

TWSE/TPEx Listed Companies and

Reason


(3) Has the Company formulated and implemented policies to prevent conflicts of interest and provide appropriate ways to record any potential conflicts found?

(3)CAL Procedures for Ethical Management and Guidelines for Conduct expressly state that should a conflict of interest arise in the execution of Company duties, employees shall report the situation to their direct supervisor, who should provide appropriate guidance.

No Difference

(4) Has the Company established an effective accounting system and an internal control system in efforts to implement ethical management? Has the Company’s internal audit unit used the results of ethical management risk assessments to draw up relevant audit plans and examined compliance with the plan for unethical conduct prevention or entrusted an accountant to perform such an audit?

(4)The Company has established effective systems, including an accounting system and internal control system. Annual audit plans are formulated every year based on risk assessments to examine the Company’s accounting and internal control systems. The systems are continuously inspected to implement ethical management.

No Difference

(5) Does the Company periodically hold internal and external ethical corporate behavior training?

(5)The Company promotes ethical behavior and corporate ethics when new employees assume office, and conducts E-Learning online courses for supervisors posted in Taiwan and abroad. The Ethical Corporate Management Best-Practice Principles, the Procedures and Guidelines of Conduct for Ethical Management, and other documents have been disclosed on the Company's internal and official website for the reference of internal and external personnel. In order to strengthen employees' understanding of the Company's corporate culture of ethical management, employees have been receiving training since 2017 through the E-learning system. The training situation for the last two years is as follows: A. 2019:

Trainee(s): Taiwanese and foreign cabin crew members (excluding personnel on leave of absence during training).

Number of trainees: 1,293 persons. Number of completions: 1,293 persons. Completion rate: 100%

B. 2020: Trainee(s): [Retraining] Domestic and overseas personnel who didn't complete the training in 2017/2018. Number of trainees: 212 persons. Number of completions: 212 persons. Completion rate: 100%

No Difference

3. Operation of the Company's Violation Reporting System (1) Has the Company established a

concrete violation reporting and rewards system, set up convenient reporting channels, and appointed suitable personnel to handle these cases?

(1) Article 20 of the Company's Procedures and Guidelines of Conduct for Ethical Management expressly provides and discloses the rules of reporting, the reporting channel, and the processing procedures; the reporting mailbox [email protected] is notified on the Company's website and internal website for the use of Company’s internal and external personnel. The reported cases will be handled by the General Audit Office of the Company and the circumstances of the report, its handling methods, follow-up review, and improvements made will be reported to the Board of Directors.

No Difference

(2) Has the Company established the standard operating procedures for the investigation of received reports, the follow-up measures to be taken after the investigation is completed, and the relevant confidentiality mechanism?

(2) According to CAL Procedures for Ethical Management and Guidelines for Conduct, all reports of violations and related follow-up investigations are kept strictly confidential and CAL has clear and effective awards and punishments, an appeals system, violation reporting confidentiality mechanism, and investigation SOP. In addition, the Company also incorporates ethical management into employee performance evaluation and human resources policies. A clear and effective reward and disciplinary system, grievance system, and the standard operating procedures for the investigation of reports have also been established.

No Difference

(3) Does the Company have any measures in place to protect individuals from possible mistreatment arising from reporting violations?

(3) Employees who process violation reports must sign a written statement pledging to maintain confidentiality of the reporters and details of the case. CAL also promises to protect the whistleblower from improper punishment due to reporting.

No Difference

4. Strengthening information disclosure Does the Company disclose the content of our Ethical Corporate Management Best-Practice Principles and their effectiveness on our website and the TWSE Market Observation Post System?

CAL’s Ethical Corporate Management Best-Practice Principles and Procedures for Ethical Management and Guidelines for Conduct are shown on the China Airlines website and the Taiwan Stock Exchange Market Observation Post System, along with the effectiveness of ethical operations and fair trade principles.

No Difference

5. If the Company has established a code of ethical corporate management based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any differences between said code and the Best-Practice Principles: No Differences.

6. Other information that will assist in the understanding of Company ethical corporate management practices: None.


3.3.8 Corporate Governance Guidelines and Regulations The Company has established a Corporate Charter, Rules for Discussions of Official Business at Shareholder Meetings, Rules for Discussions of Official Business by the Board of Directors, Ethical Code of Conduct for Directors, Election of Directors, Rules for Corporate Governance, Guiding Principles for Operational Integrity, Guide to Integrity in Management and Business Procedures and Conduct, Practical Guidelines for Corporate Social Responsibility and Sustainable Development, Ethical Code of Conduct for Directors, Ethical Code of Conduct for Senior Supervisors, Employee Workplace Rules of Conduct, China Airlines Group Rules of Conduct, Supplier Code of Conduct, and Human Rights Policy; it has formed three committees under the Board of Directors for audit, remuneration, and risk, and has formulated various organizational rules. The relevant rules listed above are all made public on the Company's website (http://www.china-airlines.com) and the Company's social responsibility network (https://calec.china-airlines.com/csr/en/index.html).

3.3.9 Summary table of the resignation and dismissal of relevant persons of the Company：None

3.3.10 Other Important Information Regarding Corporate Governance A. The organization and operations of the Company’s internal auditing

The Company’s internal audit operations are handled by the General Audit Office. In compliance with Article 11 of the "Regulations Governing Establishment of Internal Control Systems by Public Companies," the General Audit Office is under the jurisdiction of the Board of Directors. The main internal audit operation methods are announced via the quality document management system in the Company's corporate internal information network. Information announced includes the manual of "Detailed Rules for Internal Audit Implementation" and relevant operational methods. A summary is provided as follows: (1)Day-to-day audit (pre-incident audit and post-incident audit). (2)Annual audit (on-site inspection of the head office, branch units, and subsidiaries). (3)Project audit. (4)Supervision of construction, maintenance, and procurement. (5)Financial inventory. (6)Self-assessment of the internal control system. (7)Periodical audit required by the Financial Supervisory Commission. (8)Other units that need unscheduled audits.

B. Certifications of the personnel related to the Company's internal audits R.O.C. Certified Public Accountant License: 1 person, R.O.C. Futures Specialist: 1 person.

C. Company financial staff certifications and licenses: Institute of Internal Auditors-Chinese Taiwan Internal Auditor Certificate Institute of Internal Auditors-Chinese Taiwan Internal Auditor Certificate: 4 people, International Internal Auditor Certificate: 3 people, R.O.C. Certified Public Accountant License: 2 people, R.O.C. Securities (Senior) Specialist: 5 people, R.O.C. Securities Investment Trust and Consulting Professional: 4 people, R.O.C. Futures Specialist: 4 people, R.O.C. Financial Planning Personnel Proficiency Test Passing Certificate: 4 people, R.O.C. Stock Affairs Specialist Proficiency Test Passing Certificate: 8 people, USA Certified Public Accountant License: 1 person, R.O.C. Basic Enterprise Internal Audit Proficiency Test Passing Certificate: 5 people.

D. Company Director Continuing Education From January 1, 2020, through March 27, 2021

Title Name Training hours Date(s) Sponsoring Organization Course


3hr 05/07/2020 Training by: Taiwan Corporate Governance Association

Technology and Information Safety Risk in the 5G and IoT Era


Trends of Digital Technology and Artificial Intelligence and Risk Management



Director Ting, Kwang-Hung





Director Ko, Sun-Ta





Director Wei, Yung-Yeh





Director Lin, Su-Ming





Director Wang, Shih-Szu






Chang, Hsieh Gen-Sen





Independent Director Chung, Lo-Min





Independent Director Shen, Hui-Ya




The Role of Institutional Investors in Improving Corporate Governance

3hr 11/27/2020 Training by: Securities and Futures Institute

2021 Global Economic Prospect and Industry Trends

Director Chen, Charles C.Y.



3hr 09/18/2020 Training by: Taiwan Institute of Directors

2020 Board of Directors Annual Conference: Strategic Alteration for Growth and Momentum

Director Chen, Han-Ming


Compliance with Company Regulations and Directors' Monitoring Obligations


Practical Problems of Irregular Transaction that Directors and Supervisors Shall Pay Attention




E. Corporate Governance Related Training Attended by Company Managers From January 1, 2020 through March 27, 2021


Vice President,

Finance Div. Chen, I-Chieh 12hr

09/10/2020- 09/11/2020

Accounting Research and Development Foundation

Continued Education for Principal Accounting Officers of Issuers, Securities Firms, and Securities Exchanges

Assistant Vice President,

Finance Div. Yen, Yang

12hr 01/09/2020- 01/10/2020



12hr 10/29/2020- 10/30/2020



Deputy Auditor General,

General Audit Office

Fang, Juo-Ling

6hr 05/15/2020 Institute of Internal Auditors-Chinese Taiwan

Internal Audit Professional Courses- Audit Practices and Discussion of Ethics


Internal Audit Professional Courses- Labor Incident Act Case Analysis

Deputy Auditor General,

General Audit Office

Ho, Hui-Fen


Internal Audit Professional Courses- Fraud Prevention and Case Study


Internal Audit Professional Courses- Common Contract Terms and Implementations - Case Study of Delegation of Authority

Note: Mr. Chen, I-Chieh was promoted as Senior Vice President on March 18, 2021.

F. Succession plan for the Board of Directors and key management of the Company

The selection and nomination of China Airlines’ directors are carried out in accordance with the Company Act, Securities and Exchange Act, China Airlines’ Rules Governing the Election of Directors, and Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies. All elections of directors are conducted in accordance with the candidate nomination system. Shareholders may nominate director candidates; through shareholders' voting in the annual general meeting, directors (including independent directors) are elected from the list of candidates nominated by shareholders. The term of office of a director is 3 years.

As for the selection of directors’ successors, the director representative successors should generally have the required abilities stated in the chapter in China Airlines’ "Corporate Governance Principles" describing competencies required by the Board of Directors. As required by law, independent directors must have certain professional qualifications and work experience. Professionals who are experienced in the industry, including government and academic fields, are the main direction of selection that forms the basis of succession planning (please refer to P.44-45 for diversification). In addition, the independence of all Board members is ensured in accordance with law, and the results of its annual evaluation are an important reference for whether continued nomination is needed.

To improve the directors' ability to exercise powers empowered in them by virtue of their posts and ensure that the Board's effectiveness is up to date, scheduled advanced courses are arranged every year to help elevate their professional competencies. The courses cover corporate governance-related topics, including finance, accounting, business, commerce, legal affairs, information, risk


management, internal control systems, and corporate social responsibility. To ensure that the succession plan is comprehensive, the contents are aligned with the latest regulations and conditions of internal and external environments, as well as topics applicable to future development needs. Furthermore, in relation to succession planning for important management personnel, in addition to having excellent professional management ability, one’s behavior, ethics, and instructions will be based on the resolutions of the Board of Directors, and handled in accordance with the “China Airlines Executives Code of Ethical Conduct” and related laws and regulations in the best interests of the Company, employees, and shareholders.

In the training plan for the Company's senior management, regular senior management lectures are held every year, where experts from the fields of industry, public sector, and academia are invited to deliver special lectures on the state of the global market and the development of the aviation industry to enable the Company's supervisors better understand the state of the market and their breadth of professional competence development may be improved. Periodic inter-agency transfers are made according to the Company's rules to create diversified management capabilities among important management personnel. In addition, to deepen the knowledge of the Company's management professionals at various levels and broaden the horizon of potential talent, strategic and management occupational training sessions are held on a regular basis and talent training programs conducted to refine knowledge and skills of mid-level supervisors, cultivate talent with international vision and management capabilities, and strengthen the management knowledge of management professionals through job experience, management course training, and rigorous assessment systems. As of today, more than 100 outstanding management professionals have thus been nurtured and are now serving in key units in Taiwan and foreign branches.

G. On December 6, 2012, after approval by the Board of Directors, the Company has formulated the China Airlines Ltd. Procedures for Handling Material Insider Information. In addition to notifying the new procedures to the Board, management, and employees, they were also published under Important Company Regulations on the Investor Relations section of the CAL website for reference at any time to avoid violations and prevent the occurrence of insider trading.


3.3.11 Internal Control Systems A. Internal Control Statement


B. If the Company has commissioned external auditors to review the Company’s internal control system, the external auditor’s report should be disclosed: None.


3.3.12 Any disciplinary measures taken against the Company or its internal staff due to violations of legal requirements or taken by the Company against its own staff due to violations of the internal control system. The details of the disciplinary measures, major faults, and improvement measures should be noted

Date of penalty

Penalty official letter number Penalty Deficiency Improvement

February 25, 2020

2020 Labor Inspection No. 1090032769

A fine of NT$20,000.

The Company was under inspection by the Ministry of Labor on January 9, 2020. Due to business need, the Company rejected the annual leave application by the cabin crew, which violated Article 38, Paragraph 2 of the Labor Standards Act.

(1) The communication with the cabin crew on the date of the annual leave was insufficient. The internal communication process shall be improved.

(2) The job of cabin crews contains the work specialty. The Company rejected the leave application due to the company operation. According to law, the Company negotiated with the employee and the leave was granted, so the labor's rights were not harmed.

(3) The Company has proposed an administrative relief.

February 22, 2021.

2021 Labor Inspection No. 1100036610

A fine of NT$1,000,000.

On August 28, 31, 2018, the Company was inspected by the Ministry of Labor and was fined NT$1,000,000 due to cabin crew overworking. The case was originally annulled, yet identical events were found in other flights. Thus NT$1,000,000 was fined.

(1) The investigation authority improperly identified the reasons for flight delay stated in the verdict. The fine was directed given without further investigation. The main reason for the flight delay was waiting for the aviation personnel to give the apron instruction, which was a force majeure. Thus, the administrative appeal has been submitted.

(2) If the administrative appeal was dismissed, administrative relief will be taken.

In addition, from 2020 to the printing of the annual report, the Company was fined NT$30,000 by the Ministry of Labor by the ruling in the case of an unfair labor practice dispute with the Taoyuan Flight Attendants Union, and we continue to seek administrative remedies. The relevant data of cases and content of the disputes are as follows:

Date of penalty Penalty official letter number Main dispute Total amount of fines

February 1, 2021 2021 Labor Imposition No. 41 court verdict for inappropriate labor

(1) Dispute regarding granting of leave for union related business of the union's cadre. (2) Dispute regarding assigning representative on labor/management meeting (3) Dispute regarding employee performance evaluation

NT$30,000


3.3.13 Major Resolutions of Shareholders’ Meeting and Board Meetings A. Major Resolutions of Shareholders’ Meeting in 2020

Item Major resolutions Execution 1. Business Report and Financial Statements

for the year 2019 This resolution was passed as proposed upon voting.

Announcement was made after resolution of Shareholders’ Meeting on June 23, 2020.

2. 2019 Deficit Compensation This resolution was passed as proposed upon voting.

Announcement was made after resolution of Shareholders’ Meeting on June 23, 2020.

3. Amendment to the Articles of Incorporation

This resolution was passed as proposed upon voting.

Announcement was made after resolution of Shareholders’ Meeting on June 23, 2020, and has been complied with since that day.

4. Amendment to Rules of Procedure for Shareholders' Meetings


Announcement was made after resolution of Shareholders’ Meeting on June 23, 2020, and has been complied with since that day.

5. Proposal to release the non-competition restriction of holding concurrent positions on Director Chen, Han-Ming


The non-competition restriction on Director Chen, Han-Ming was lifted based on the resolution of Shareholders’ Meeting on June 23, 2020, which was subsequently announced.

B. Major Resolutions of Board Meetings (January 1, 2020 to March 27, 2021)

Date Item Opinions of independent directors

Handling of Independent

Directors’ opinions by the Company

January 13, 2020 21st Board of Directors 9th Meeting

1.Provision of General Financing Limit and Financial Commodity Trading Risk Limit by Four Financial Institutions, Including DBS Bank (Taiwan)

2. 2019 Year-end Bonus and 2020 Lunar New Year Incentive 3. Matters Regarding the Signing of Agreement with the CAL

Employees Union on Issues of "13th Month Full Salary (Flight Safety Bonus)" and "Working Hours Rearrangement and Female Employees' Nighttime Work" on December 31, 2019

4. 2020 Employee Salary Adjustment 5. Chairman and Managers' 2020 Lunar New Year Incentive 6. Lifting of Non-competition Restriction on Holding

Concurrent Posts for Senior Vice President 7. Report on the Company's Lease on Real Estate with a

Subsidiary

Approved by all attending Independent Directors

None

March 18, 2020 21st Board of Directors 10th Meeting

1. Amendment to 2020 Audit Plan 2. 2019 Internal Control System Effectiveness Audit and

Statement 3. New Branch Unit in Response to Route Launch 4. Change in Personnel and Position 5. 2020 Annual Shareholders’ Meeting 6. 2019 Financial Report and Consolidated Financial Report 7. 2019 Business Report 8. 2019 Deficit Compensation 9. 2020 CPA Appointment and Remuneration 10. Offering of Unsecured Ordinary Bonds 11. Provision of General Financing Limit and Financial

Commodity Trading Risk Limit by Three Financial Institutions, Including First Commercial Bank

12. Amendments to the Company's Article of Incorporation 13. Rules and Procedures of the Shareholders' Meeting 14. Amendment to the Rules of Procedures for Board of

Directors' Meetings 15. Amendments to the Charter of Audit Committee


None

May 7, 2020 21st Board of Directors 11th Meeting

1. Disposal of 5 A330-300 aircraft through sale and leaseback transaction

2. Venue alteration for 2020 Annual Shareholders' Meeting 3. Lifting of Non-competition Restriction on Holding

Concurrent Posts for Director Chen, Han-Ming 4. Pursuant to Measures for the Relief of Industries and

Businesses Affected by the Coronavirus Disease Issued by the Ministry of Transportation and Communication, the Bank of Taiwan offered NT$20 billion syndicated loan to


None


Date Item Opinions of independent directors

Handling of Independent

Directors’ opinions by the Company

China Airlines. 5. A350 passenger aircraft mortgage loan by First Commercial

Bank, Hua Nan Commercial Bank, Ltd., and Land Bank of Taiwan

6. Provision of General Financing Limit and Financial Commodity Trading Risk Limit by Five Financial Institutions, Including First Commercial Bank

August 6, 2020 21st Board of Directors 12th Meeting

1. Second amendment to 2020 Audit Plan 2. Amendment to the Charter of Remuneration Committee 3. Distribute flight safety bonus to Chairman and Managers 4. Capital increase for Tigerair Taiwan Co., Ltd. 5. Issuing NT$6 billion in total face value of domestic

unsecured convertible corporate bonds 6. Provision of General Financing Limit and Financial

Commodity Trading Risk Limit by Five Financial Institutions, Including CTBC Bank

7. Liquidation of Yestrip Co., Ltd.


None

November 5, 2020 21st Board of Directors 13th Meeting

1. 2021 Audit Plan 2. 2021 Business Plan and Budget Plan 3. Assign a custodian for the Company's seal for signing

warranty/endorsement. 4. Provision of General Financing Limit and Financial

Commodity Trading Risk Limit by Five Financial Institutions, Including Taishin International Bank.

5. Amendment to the Corporate Social Responsibility and Sustainable Development Best Practice Principles


None

January 18, 2021 21st Board of Directors 14th Meeting

1. Provision of General Financing Limit and Financial Commodity Trading Risk Limit by Three Financial Institutions, Including Crédit Agricole CIB

2. 2021 Employee Lunar New Year Incentive 3. 2021 Employee salary adjustment 4. Chairman and Managers' 2020 Lunar New Year Incentive 5. 2021 Annual Shareholders' Meeting 6. Election of 22nd term of Board of Directors 7. Report on the Company's Lease on Real Estate with a

Subsidiary


None

March 18, 2021 21st Board of Directors 15th Meeting

1. Appointment of President 2. Appointment of Senior Vice President (VF) and position

adjustment for Financial Vice President 3. Appointment of Senior Vice President (VO) 4. Distribute managers' flight safety bonus 5. Resignation fee for the former Senior Vice President (VF)

Chang, Young 6. Manager adjustment in Taichung Branch 7. 2020 Internal Control System Effectiveness Audit and

Statement 8. 2020 Financial Report and Consolidated Financial Report 9. 2020 Business Report 10. 2020 Deficit Compensation 11. 2021 CPA appointment and remuneration 12. Provision of General Financing Limit and Financial

Commodity Trading Risk Limit by First Commercial Bank and Mega Bills


None

3.3.14 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting with Important Resolutions Passed by the Board of Directors: None.


3.4 Information Regarding the Company’s Audit Fee and Independence

3.4.1 Audit Fee Accounting Firm Name of CPA Period Covered by CPA’s Audit Remarks

Deloitte & Touche Huang, Jui-Chan Cheng, Shiuh-Ran 01/01/2020-12/31/2020 None

Unit: NT$ thousands

Fee Items Fee Range

Audit Fee Non-audit Fee Total

1 Under 2,000 2 2,000 - 3,999 3 4,000 - 5,999 4 6,000 - 7,999 5 8,000 - 9,999 6 Over 10,000

3.4.2 Audit and Non-Audit Fees Paid to CPAs, the Certified Accounting Firm to Which Said CPAs Belong and Any Affiliated Enterprises and Details Regarding Non-Audit Fees. See Below:

Unit: NT$ thousands

Accounting Firm

Name of CPA

Audit Fee

Non-audit Fee Period Covered by CPA’s Audit

Remarks System

of Design

Company Registration

Human Resource

Others Subtotal

Deloitte & Touch

Huang, Jui-Chan Cheng, Shiuh-Ran

7,350 - - - 4,044 4,044 01/01/2020- 12/31/2020

Others include the business tax audit fee of dual-status business entities adopting direct deduction, the transfer pricing report service fee, the related accountant certification fee for issuance of corporate bond, the US airport Passenger Facility Charge (PFC) tax collection and audit fee, and the consulting fee of General Data Protection Regulation (GDPR).

3.4.3 Changed audit firms and the audit fee paid was less than the audit fees paid in the previous year prior to the change: Not Applicable.

3.4.4 Those with audit fees amounting to a reduction of 15% or more compared to the previous year: None.


3.5 Replacement of CPA: 3.5.1 On the previous accountant

Date of change March 20, 2019

Reason and explanation for change

Due to internal reorganization at the CPA firm, the resolution was passed at the 5th meeting of the 21st Board of Directors on March 20, 2019 that from the financial report for Q1 of 2019, the CPAs would be switched to Huang, Jui-Chan and Cheng, Shiuh-Ran.

Explanation was termination of the person or accountant appointed or refusal of appointment

Involved party Situation

Accountant Appointee

Proactive termination of appointment

None. Did not accept further (continuing) appointment

Newest check report within two years other than one signed and issued without disclaimer and reason

None.

Objection from issuer Yes

Accounting principles or customary practice Financial report disclosure Scope of check or steps Other

None

Explanation Other items disclosed (for which disclosure is required under Article 10, Clause 6, items 1d through 1g)

None.

3.5.2 On successor accountants

Name of firm Deloitte & Touche

Accountant Name Huang, Jui-Chan; Cheng, Shiuh-Ran

Date of appointment March 20, 2019

Pre-appointment consultations for opinions on the method of accounting or accounting principles for specific transactions and consultation on the possibility of signing and results of the same

None.

Written opinions of successor accountants at odds with those of previous accountants

None.

3.5.3 Former Accountant’s Reply to Disclosures under Items 1 and 2-3,

Subparagraph 6, Article 10 of the Guidelines:

None.


3.6 The Company's Chairman, Presidents, or Accounting Officers hold any positions in the Company's independent auditing firm or its affiliates during 2019: None.

3.7 Changes in Shareholding of Directors, Managers, and Major Shareholders

Unit: Shares

Title Name

2020 The current year through March 27, 2021

Holding Increase

(Decrease)

Pledged Holding Increase

(Decrease)

Holding Increase

(Decrease)


(Decrease) Major Shareholder China Aviation Development Foundation (Note)

0 0 0 0 Chairman China Aviation Development Foundation

Representative: Hsieh, Su-Chien

Director

China Aviation Development Foundation Representative: Chen, Charles C.Y.; Ting, Kwang-Hung; Chen, Han-Ming; Ko, Sun-Ta; Wei, Yung-Yeh, Kao, Shing-Hwang

Director National Development Fund, Executive Yuan Representative: Lin, Su-Ming; Wang, Shih-Szu 0 0 0 0

Independent Director Chung, Lo-Min 0 0 0 0

Independent Director Chang, Hsieh Gen-Sen 0 0 0 0

Independent Director Shen, Hui-Ya 0 0 0 0

President Kao, Shing-Hwang 0 0 0 0 Senior Vice President Wang, Chen-Min 0 0 0 0

Senior Vice President Wang, Houng 0 0 0 0

Senior Vice President Chen, I-Chieh 0 0 0 0

Senior Vice President Lai, Ming-Hui 0 0 0 0

Auditor General Fang, Juo-Ling 0 0 0 0 Data Protection Officer Huang, Ta-Fang (Assumed post on 07/31/2020) 0 0 0 0

Vice President Chien, Feng-Nien 0 0 0 0 Vice President Li, Chih-Wei Vice President Chen, I-Ko 0 0 0 0 Vice President Peng, Pao-Chu 0 0 0 0 Vice President Liu, Der-Chuan 0 0 0 0 Vice President Lu, Shwu-Huoy (Assumed post on 10/11/2020) Vice President Yeah, Shao-Ting 0 0 0 0 Vice President Chen, Wei-Tau 0 0 0 0

Vice President Wang, Wei 4,000 0 0 0

(15,000) 0 (10,000) 0 Vice President Hong, Tsu-Kuang 0 0 0 0 Vice President Chung, Wan-Chun 0 0 0 0 Vice President Chou, Jyh-Shyan 0 0 0 0 Vice President Chu, Te-Hsiu 0 0 0 0 Vice President Chang, Cheng-Hao 120,102 0 0 0


Title Name


Holding Increase

(Decrease)


(Decrease)

Holding Increase

(Decrease)


(Decrease) Vice President Chung, Ming-Jyh 0 0 0 0 Vice President Sun, Jia-Min 0 0 0 0 Vice President Lee, Jung-Hui 0 0 0 0 Deputy Auditor General

Ho, Hui-Fen 0 0 0 0

Assistant Vice President Yu, Yueh-Han 0 0 0 0

Assistant Vice President Chen, Chwen-Der 0 0 (13,000) 0

Assistant Vice President Tung, Hsing-Hua 0 0 0 0

Assistant Vice President Kang, Yi-Chuan (Assumed post on 11/01/2020) 0 0 0 0

Assistant Vice President Huang, Hsiang-Piao 0 0 0 0

Assistant Vice President He, Cheng 0 0 0 0

Assistant Vice President Chen, Pei-Ti 0 0 0 0

Assistant Vice President Pan, Yun-Hau (Assumed post on 05/09/2020) 0 0 0 0

Assistant Vice President Mao, Li-Chung 0 0 0 0

Assistant Vice President Sheu, Yuh-Shy 0 0 0 0

Assistant Vice President Hsueh, Po-Wen (Assumed post on 09/18/2020) 0 0 0 0

Assistant Vice President Lin, Herng-Shan 0 0 0 0

Assistant Vice President Lee, Pei-Chen 0 0 0 0

Assistant Vice President Yen, Yang 0 0 0 0

Assistant Vice President Huang, Hui-Na 0 0 0 0

Assistant Vice President Fang, Yuan-Hua 0 0 0 0

Assistant Vice President Chang, Hsu-Yu (Assumed post on 11/30/2020) 0 0 0 0

Assistant Vice President Huang, Chin-Feng 0 0 0 0

Assistant Vice President Hsu, Hsueh-Wen (Assumed post on 02/01/2020) 0 0 0 0

Assistant Vice President Liu, Shou-Shu 0 0 0 0

Assistant Vice President Yeh, Jin-Fu (Assumed post on 11/12/2020) 0 0 0 0

Assistant Vice President Liu, Duan-Shiuh 0 0 0 0

Assistant Vice President Hsiao, Jui-Fu 0 0 0 0

Senior Vice President Chang, Young (Dismissed on 01/31/2020) 0 0 0 0

Data Protection Officer Wu, Hsiao-Sui (Dismissed on 07/31/2020) 0 0 0 0


Title Name


Holding Increase

(Decrease)


(Decrease)

Holding Increase

(Decrease)


(Decrease) Vice President Liu, Tsao-Yang (Dismissed on 08/17/2020) 0 0 0 0 Assistant Vice President Chen, Jo-Ching (Dismissed on 04/01/2020) 0 0 0 0

Assistant Vice President Kao, Shu-Chuan (Dismissed on 04/01/2020) 0 0 0 0

Assistant Vice President Shann, Da-Sin (Dismissed on 09/18/2020) 0 0 0 0

Assistant Vice President Chiu, Wei-Tuan (Dismissed on 03/19/2020) 0 0 0 0

Assistant Vice President

An, Long-Chi (Assumed post on 04/01/2020) (Dismissed on 11/30/2020) 0 0 0 0

Note: Refers to major shareholders holding more than 10% of company shares.

3.7.1 Shares Trading with Related Parties: None.

3.7.2 Shares Pledge with Related Parties: None.

3.8 Relationships among the Top Ten Shareholders March 27, 2021

Name Current Shareholding

Spouse’s/minor’s Shareholding


Arrangement

Name and Relationship Between the Company’s Top Ten Shareholders, or

Spouses or Relatives Within Two Degrees

Remarks

Shares % Shares % Shares % Name Relationship China Aviation Development Foundation (Representative: Wang, Kwo-Tsai)

1,867,341,935 34.45% 0 0% 0 0% None None None

National Development Fund of The Executive Yuan (Representative: Dr. Kung, Ming-Hsin)

519,750,519 9.59% 0 0% 0 0% None None None

New Labor Pension Fund 76,934,000 1.42% NA NA 0 0% None None None

China Airlines Ltd. Employee Stock Ownership Trust Plan

63,331,761 1.17% NA NA 0 0% None None None

Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard International Equity Index Funds


Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds


JPMorgan Chase Bank N.A. Taipei Branch in custody for Norges Bank


Arrowstreet Capital Global All Country Alpha Extension Fund (Cayman) Limited


Reasonable Deal Co., Ltd. (Representative: Li, Chuan-Zhe)

24,325,000 0.45% 0 0% 0 0% None None None

Wan Hai Lines Ltd. (Representative: Jiu Fu Garden Co., Ltd.)



3.9 Ownership of Shares in Affiliated Enterprises Dec 31, 2020

Unit: shares; %

Affiliated Enterprises Ownership by the Company Direct or Indirect Ownership by

Directors, Managers Total Ownership

Shares % Shares % Shares % 1. CAL-Dynasty International, Inc. 2,614,500 100.00 - - 2,614,500 100.00 1A Dynasty Properties Co., Ltd. - - 5,000 100.00 5,000 100.00 1B Dynasty Hotel of Hawaii, Inc. - - 400,000 100.00 400,000 100.00 2. CAL-Asia Investment Inc. 7,172,346 100.00 - - 7,172,346 100.00 2A Eastern United International

Logistics (Holdings) Ltd. - - 1,050,000 35.00 1,050,000 35.00

2B Airport Air Terminal (Xiamen) Co., Ltd. - - (Note 1)

28.00 (Note 2)

(Note 1) 28.00

(Note 2) 2C Airport Air Cargo Service

(Xiamen) Co., Ltd. - - (Note 1) 28.00

(Note 2) (Note 1)

28.00 (Note 2)

2D Taikoo (Xiamen) Landing Gear Services Co., Ltd. - - (Note 1) 2.59 (Note 1) 2.59

2E Haeco Composite Structures (Jinjiang) Co., Ltd. - - (Note 1) 5.45 (Note 1) 5.45

3. Dynasty Aerotech International Corp. 77,270 100.00 - - 77,270 100.00

4. Yestrip Co., Ltd. 1,600,000 100.00 - - 1,600,000 100.00 5. CAL Park Co., Ltd. 150,000,000 100.00 - - 150,000,000 100.00 6. CAL Hotel Co., Ltd.. 46,500,000 100.00 - - 46,500,000 100.00 7. Taiwan Aircraft Maintenance And

Engineering Co., Ltd. 135,000,000 100.00 - - 135,000,000 100.00

8. Mandarin Airlines, Ltd. 188,154,025 93.99 - - 188,154,025 93.99 9. Sabre Travel Network (Taiwan)

Ltd. 13,021,042 93.93 - - 13,021,042 93.93

10. Tigerair Taiwan Co., Ltd. 212,420,046 75.86 15,433,000 5.51 227,853,046 81.37 11. China Pacific Laundry Services

Ltd. 13,750,000 55.00 - - 13,750,000 55.00

12. Taiwan Air Cargo Terminal Ltd. 135,000,000 54.00 12,500,000 5.00 147,500,000 59.00 13. Kaohsiung Airport Catering

Services 21,494,637 53.67 - - 21,494,637 53.67

13A Delica International Co., Ltd. - - 1,020,000 51 1,020,000 51 14. Dynasty Holidays, Inc. 160 20.00 - - 160 20.00 15. China Pacific Catering Services

Ltd. 43,911,000 51.00 - - 43,911,000 51.00

16. Taoyuan International Airport Services Co., Ltd. 34,300,000 49.00 - - 34,300,000 49.00

17. Taiwan Airport Service Co., Ltd. 20,626,644 47.35 469,755 1.08 21,096,399 48.43 17A Taiwan Airport Service

(Samoa) Co., Ltd. - - (Note 1) 100.00 (Note 1) 100.00

18. NORDAM Asia Ltd. 3,797,500 49.00 - - 3,797,500 49.00 19. Global Sky Express Ltd. 250,000 25.00 - - 250,000 25.00 20. China Aircraft Services Ltd. 28,400,000 20.00 - - 28,400,000 20.00 21. Jardine Air Terminal Services

Ltd. 12,000,000 15.00 - - 12,000,000 15.00

22. Everest Investment Holdings Ltd. (Note 4) 13.59 - - (Note 4) 13.59

23. Chung-Hwa Express Co., Ltd. 1,100,000 11.00 - - 1,100,000 11.00 Note 1: This company has not issued shares. Note 2: CAL-Asia Investments Inc. directly holds 14% stake, Taiwan Airport Service (Samoa) Co., Ltd. directly holds 14% stake.

Note 3: Yestrip Co. Ltd. was dissolved on October 26, 2020 by Taipei City Government, and it is in the procedures for Liquidation. Note 4: Includes 1,359,368 shares of common stock and 135,937 shares of preferred stock.

82 Capital Overview

Capital Overview 4.1 Capital and Shares

4.2 Corporate Bonds

4.3 Other Depository Receipts

4.4 Financing Plans and Implementation

Capital Overview 83

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

A. Issued Shares MAR 27, 2021 Unit: shares; NT$ Month/

Year Par

Value (NT$)

Authorized Capital Paid-in Capital Remark

Shares Amount Shares Amount Sources of Capital Approval Date and

Document No. by Ministry of Economic Affairs

02/2012 10 5.2 billion 52 billion 5.2 billion 52 billion Cash increase NT$5,683,776,490

Jing Shou Shang No. 10101028630, February 20,

2012

05/2015 10 6 billion 60 billion 5.24 billion 52.4 billion Corporate debt for

equity swap NT$491,665,650

Jing Shou Shang No. 10401079310, May 7, 2015


equity swap NT$1,208,413,350



equity swap NT$1,000,652,560

Jing Shou Shang No. 10401186200, September

17, 2015


equity swap NT$8,169,930

Jing Shou Shang No. 10401250360, December 8,

2015


equity swap, NT$945,010


2017

12/2018 10 6 billion 60 billion 5.42 billion 54.2 billion Treasury Stock Retired NT$500,000,000


2018

05/2019 10 7 billion 70 billion 5.42 billion 54.2 billion

Adjustment of authorized capital in accordance with the

Articles of Incorporation


Note 1: The Company didn't use properties other than cash to return share prices, nor issued special shares. Note 2: In March 2021, six shareholders applied to transfer shares with a total of 7,936 shares. The number of outstanding

shares became 5,420,992,586 shares (including common shares 5,420,984,650, and 7,936 shares which haven't received the approval of MOE).

B. Type of Stock: MAR 27, 2021 Unit: Thousand shares Share Type Authorized Capital Remarks Issued Shares Un-issued Shares Total Shares

Common Stock Inscribed 5,420,993 1,579,007 7,000,000 Listed Stocks

4.1.2 Status of Shareholders MAR 27, 2021 Unit: shares

Item Government Agencies

Financial Institutions

Other Juridical Persons

Foreign Institutions & Natural Persons

Domestic Natural Persons

Treasury Stock Total

Number of Shareholders 2 27 289 645 244,336 0 245,299 Shareholding 519,750,520 73,454,329 2,267,579,709 479,258,277 2,080,949,751 0 5,420,992,586

% 9.59% 1.35% 41.83% 8.84% 38.39% 0.00% 100.00%

4.1.3 Shareholding Distribution Status MAR 27, 2021 Unit: shares Class of Shareholding Number of Shareholders Shareholding Percentage

1-999 37,340 11,235,728 0.21% 1,000-5,000 144,869 329,812,301 6.08% 5,001-10,000 30,913 259,243,177 4.78%

10,001-15,000 8,665 111,957,123 2.07% 15,001-20,000 7,359 139,757,464 2.58% 20,001-30,000 5,641 148,602,474 2.74% 30,001-40,000 2,645 96,169,114 1.77% 40,001-50,000 2,144 102,238,728 1.89%

50,001-100,000 3,324 248,517,333 4.58% 100,001-200,000 1,328 194,566,873 3.59% 200,001-400,000 565 159,259,857 2.94% 400,001-600,000 163 81,546,904 1.50% 600,001-800,000 85 59,726,844 1.10%

800,001-1,000,000 64 58,918,295 1.09% 1,000,001 or over 194 3,419,440,371 63.08%

Total 245,299 5,420,992,586 100.00%

84 Capital Overview

4.1.4 List of Major Shareholders MAR 27, 2021 Unit: shares

Shareholding Shareholder's Name

Shares Percentage

China Aviation Development Foundation 1,867,341,935 34.45% National Development Fund of The Executive Yuan 519,750,519 9.59% New Labor Pension Fund 76,934,000 1.42% China Airlines Ltd. Employee Stock Ownership Trust Plan 63,331,761 1.17% Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard International

35,905,146 0.66%

Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds 35,231,442 0.65%

JPMorgan Chase Bank N.A. Taipei Branch in custody for Norges Bank 28,888,821 0.53% Arrowstreet Capital Global All Country Alpha Extension Fund (Cayman) Limited 26,889,000 0.50% Reasonable Deal Co., Ltd. 24,325,000 0.45% Wan Hai Lines Ltd. 23,753,862 0.44%

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share Unit: Thousand shares; NT$

Year

Items

2019 (Distributed in 2020)

(Note 10)

2020 (Distributed in 2021)

(Note 11)

2021 (As of MAR 27)

(Note 9) Market

Price per Share

(Note 1)

Highest Market Price 11.25 13.15 15.75

Lowest Market Price 9.00 5.50 10.10

Average Market Price 9.69 9.46 13.34 Net Worth per Share (Note 2)

Before Distribution 10.44 10.62 -

After Distribution 10.44 10.62 -

Earnings per Share

Weighted Average Shares 5,418,096 5,418,776 - Diluted Earnings Per Share (Note 3) (0.22) 0.03 -

Dividends per Share (Note 8)

Cash Dividends - - - Stock Dividends

Dividends from Related Earnings - - - Dividends from Capital Surplus - - -

Accumulated Undistributed Dividends (Note 4) - - -

Return on Investment

Price / Earnings Ratio (Note 5) NA 284.33 - Price / Dividend Ratio (Note 6) NA NA - Cash Dividend Yield Rate (Note 7) NA NA -

*If shares are distributed in connection with a capital increase out of earnings or capital reserve, further disclose information on market prices and cash dividends retroactively adjusted based on the number of shares after distribution. Note 1: Annual Average Market Price=Annual Turnover Value/Trading Volume. Note 2: Based both on the number of issued shares at the end of the year, and on the distribution decided on at the Shareholders’

Meeting the following year. Note 3: For those requiring retroactive adjustment due to stock grants, both the pre-and post-adjustment EPS should be listed. Note 4: In issuing equity securities, provisions may be made to accumulate undistributed dividends for the year and postpone

distribution until a year when profit is made. The dividends accumulated over the period ending in the year of distribution should be disclosed.

Note 5: P/E Ratio=Average market price of a share in the current year/EPS. Note 6: P/D Ratio=Average market price of a share in the current year/cash dividend per share. Note 7: Cash dividend yield=cash dividend per share/average market price of a share in the current year. Note 8: In accordance with Taiwan Stock Exchange regulations, treasury share effects have already been considered. Note 9: Net worth per share and EPS are calculated based on the financial statement for the most recent quarter that has been

verified by an accountant. All other fields are based on the current year data through the publication date of the annual report.

Note 10: The Company’s EPS for 2019 was negative and thus it will not distribute earnings; it has been decided by the 10th meeting of the 21st Board of Directors on March 18, 2020, that the Company will not pay dividends for 2019, thus this does not apply.

Note 11: The Company does not have distributable earnings for 2020. It has been decided by the 15th meeting of the 21st Board of Directors on March 18, 2020, that the Company will not pay dividends for 2020.

Note 12: The Company's 2020 final daily closing price was NT$12.05 .

Capital Overview 85

4.1.6 Dividend Policy and Implementation Status A. Dividend Policy

The CAL Articles of Incorporation outlines the following dividend policy: If the Company makes a profit over the year, an amount of no less than 3% of the profit must be distributed as employee compensation. If the Company has accumulated losses, funds must be retained to offset the deficit. The aforementioned employee compensation is primarily disbursed as stock or cash and the resolution must be approved at a meeting of the Board of Directors with two-thirds of directors in attendance and must receive support from half of participating members. Should the Company make a profit over the year, said profit must first be used to pay all taxes and offset accumulated losses, then 10% of the remaining amount is to be set aside as a legal reserve. After setting aside or reversing a special reserve, any remaining amount along with accumulated undistributed earnings shall be distributed as shareholder dividends and bonuses according to a resolution drawn up by the Board: (1)Not less than 50% of the amount shall be distributed as shareholder dividends and bonuses. After

pretax profits are deducted as outlined above, should the amount left not be sufficient for distribution, the difference will be made up by accumulated undistributed profit.

(2)In the event of a yearly loss, depending on the financial, operation, and management considerations, all or part of the legal reserve may be distributed as new stock or cash as prescribed by law and competent authority regulations.

(3)Dividends and bonuses are distributed as stock or cash, with cash dividends making up no less than 30% of the total distributable dividends.

B. Proposed Distribution of Dividend The Company does not have distributable earnings for 2020. It has been decided by the 15th meeting of the 21st Board of Directors on March 18, 2020, that the Company will not pay dividends for 2020.

C. No significant change in expected future dividend policy.

4.1.7 Impact of Stock Dividends Issuance on Company’s Business Performance and Earnings per Share: Not Applicable.

4.1.8 Employees’ Compensation and Directors' Remuneration A. Articles of Incorporation regulations: See 4.1.6 Dividend Policy and Implementation

Status. B. The basis for estimating the amount of employee compensation and director

bonuses, for calculating the number of shares to be distributed as stock bonuses, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period The Company has not allocated employee compensation for this period. In addition, in accordance with the Articles of Incorporation, it will not pay remuneration to the directors.

C. Board approved employee compensation and director bonus proposal (1) Amount of employee bonuses (including stock and cash) and director bonuses distributed. If the

actual amount distributed differs from the original estimated amount, the difference, reason, and how this was handled is to be disclosed: It has been decided by the 15th meeting of the 21st Board of Directors on March 18, 2021, that the Company will not pay dividends for 2020.

(2) The amount of any proposed distribution of employee stock bonuses and the size of such an amount as a percentage of the sum of the net income for the current period and total employee bonuses: Not Applicable.

D. The actual employee compensation and director bonuses distributed for the previous year (2018) (including the number of shares distributed, value, and stock price). Should there be a discrepancy with the proposed amount of employee compensation and director bonuses, the difference, reason, and how this was handled should be stated (1) Employee compensation: None. (2) Director bonuses: Not Applicable.

4.1.9 Buyback of Treasury Stock: None.

86 Capital Overview

4.2 Bonds 4.2.1 Corporate Bonds

MAR 27, 2021

Corporate Bond Type Domestic Unsecured Straight Bond (2016-1)

Domestic Unsecured Straight Bond (2016-2)



Issue date 05/26/2016 09/27/2016 05/19/2017 10/12/2017

Denomination NT$1,000,000 NT$1,000,000 NT$1,000,000 NT$1,000,000

Issuing and transaction location Republic of China Republic of China Republic of China Republic of China

Issue price Par Par Par Par

Total price NT$5,000,000,000 NT$5,000,000,000 NT$2,350,000,000 NT$3,500,000,000

Coupon rate 1.19% per annum. 1.08% per annum

Tranche A: 1.20% per annum Tranche B: 1.75% per annum


Tenor 5 year (May 26, 2016 to May 26, 2021)

5 year (September 27, 2016 to September 27, 2021)

Tranche A: 3 years (May 19, 2017 to May 19, 2020); Tranche B: 7 years (May 19, 2017 to May 19, 2024)

Tranche A: 3 years (October 12, 2017 to October 12, 2020); Tranche B: 5 years (October 12, 2017 to October 12, 2022)

Guarantee agency Not applicable Not applicable Not applicable Not applicable

Consignee Huanan Commercial Bank

Huanan Commercial Bank



Underwriting institution YuanTa Securities Ltd. Masterlink Securities Ltd.

Masterlink Securities Ltd.

Fubon Integrated Securities Ltd.

Certified lawyer

Ture Honesty International Law Office Kuo, Hui-Chi, Attorney At Law




CPA Huang, Jui-chan (Deloitte & Touche)

Yang, Chen-Hsiu (Deloitte & Touche)



Repayment method

Repayment of 50% of the principal in the fourth year and the remaining 50% in the fifth year

Repayment of 50% of the principal in the fourth year and the remaining 50% in the fifth year

One-time repayment of capital upon maturity.

Tranche A: one-time payment upon maturity; Tranche B: return of 50% of capital 4 and 5 years from the start date, respectively.

Outstanding principal NT$2,500,000,000 NT$2,500,000,000 NT$1,000,000,000 NT$2,600,000,000

Terms of redemption or advance repayment None None None None

Restrictive clause None None None None Name of the credit rating agency, rating date, rating of corporate bonds

None None None None

Other rights attached

As of the printing date of this annual report, converted amount of (exchanged or subscribed) ordinary shares, GDRs, or other securities

Not applicable Not applicable Not applicable Not applicable

Issuance and conversion (exchange or subscription) method

Issuance and conversion, exchange or subscription method, issuing condition dilution, and impact on existing shareholders’ equity

Not applicable Not applicable Not applicable Not applicable

Transfer agent None None None None

Capital Overview 87

MAR 27, 2021

Corporate Bond Type Domestic Unsecured 6th Convertible Bond

Domestic Unsecured Ordinary Corporate Bonds (2018-1)

Domestic Unsecured Ordinary Corporate Bonds (2019-1)

Issue date 01/30/2018 10/30/2018 06/21/2019

Denomination NT$100,000 per unit NT$1,000,000 per unit NT$1,000,000 per unit

Issuing and transaction location Republic of China Republic of China Republic of China

Issue price Issued at 100.2% of par value Par Par

Total price NT$6,012,000,000 NT$4,500,000,000 NT$3,500,000,000

Coupon rate 0.00% per annum Tranche A: 1.32% per annum Tranche B: 1.45% per annum


Tenor 5 years (January 30, 2018, to January 30, 2023)

Tranche A: 5 years (November 30, 2018, to November 30, 2023) Tranche B: 7 years (November 30, 2018, to November 30, 2025)

Tranche A: 5 years (June 21, 2019, to June 21, 2024) Tranche B: 7 years (June 21, 2019, to June 21, 2026)

Guarantee agency Not applicable Not applicable Not applicable

Consignee Chinatrust Commercial Bank Trust Department Huanan Commercial Bank Taishin International Bank

Underwriting institution Taishin Integrated Securities Ltd. Fubon Integrated Securities Ltd. Fubon Integrated Securities Ltd.

Certified lawyer Handsome Attorney-at-Law Chiu, Ya-Wen, Attorney At Law



CPA Not applicable Yang, Cheng-Hsiu (Deloitte & Touche)

Huang, Jui-chan (Deloitte & Touche)

Repayment method According to the offering of Domestic Unsecured 6th convertible bond section 6

Tranche A: Repayment of 50% of the principal at the end of the fourth year and the remaining 50% at the end of the fifth year; Tranche B: Repayment of 50% of the principal at the end of the sixth year and the remaining 50% at the end of the seventh year

Tranche A: Repayment of 50% of the principal at the end of the fourth year and the remaining 50% at the end of the fifth year; Tranche B: Repayment of 50% of the principal at the end of the sixth year and the remaining 50% at the end of the seventh year

Outstanding principal NT$5,999,900,000 NT$4,500,000,000 NT$3,500,000,000

Terms of redemption or advance repayment

According to the offering of Domestic Unsecured 6th convertible bond section 18 and 19

None None

Restrictive clause None None None Name of the credit rating agency, rating date, rating of corporate bonds

None None None

Other rights attached

As of the printing date of this annual report, converted amount of (exchanged or subscribed) ordinary shares, GDRs, or other securities

NT$100 thousand converted

Not applicable Other rights attached Issuance and conversion (exchange or subscription) method as per the 5th issue of domestic unsecured convertible bonds

According to the offering of Domestic Unsecured 6th convertible bond section 8 and 9

Issuance and conversion, exchange or subscription method, issuing condition dilution, and impact on existing shareholders’ equity

(Note) Not applicable Not applicable

Transfer agent None None None Note: As of March 27, 2021, according to the conversion price NT$12.60 of the sixth unsecured convertible bonds, and assuming the

convertible bonds have been fully converted, the shareholdings percentage of the three major shareholders, namely China Aviation Development Foundation, National Development Fund, and Chunghwa Telecom, will be reduced from 48.90% to 44.95%, but there will be no significant change in the shareholding structure, thus it has little effect on shareholder equity.

88 Capital Overview

4.2.2 Corporate Bonds Undergoing Private Placement A. At the 12th meeting of the 21st Board of Directors on August 6, 2020, the

Company’s seventh issuance of 60,000 domestic unsecured convertible corporate bonds was approved, each with a face value of NT$100,000, to be issued at 100% - 100.5% of the face value. The total issuance amount was capped at NT$6,030,000 thousand. It has been reported and put into effect by the approval of the Financial Supervisory Commission letter Jin-Guan-Zheng-Fa-Zi No. 1090379546 dated January 13, 2021.

B. Due to the recent changes in the domestic capital market conditions and the COVID-19 pandemic’s continuing impact on the air transport industry, and considering that rash pricing and non-ideal issuance conditions might damage shareholders’ rights, we applied for a three-month extension of the offering period for the seventh issuance of domestic unsecured convertible corporate bonds. It was approved and filed for future reference in letter Jin-Guan-Zheng-Fa-Zi No. 1100336476 dated March 24, 2021, and the offering period was extended to July 13, 2021. Once the market stabilizes, we will find the correct timing for pricing in order to protect the Company’s interests and shareholders’ rights.

4.2.3 Convertible Bonds Unit: NT$ Types of Corporate Bonds Domestic Unsecured 6th convertible bond

Year Item 2020 The current year through March 27, 2021

Convertible Bond Market Price

Highest 108.80 127.45 Lowest 92.10 102.00 Average 102.39 111.63

Conversion Price 12.60 12.60

Issuance date and conversion price at the time of issue

The convertible bonds were listed on the Taipei Exchange on January 30, 2018; the conversion price upon issuance was NT$13.20. Due to the distribution of 2018 and 2019 cash dividends, according to the provisions of the sixth unsecured convertible bonds’ issuance and conversion regulations, the conversion price shall be adjusted. The conversion price was thus reduced to NT$12.60.

Conversion method Issue new shares.

4.2.4 Exchangeable Bond, Shelf Registration, Shelf Registration: None.

4.3 Other Securities-Related Issues 4.3.1 Preferred shares: None.

4.3.2 Global Depository Receipts: None.

4.3.3 Employee Stock Options: None.

4.3.4 Employee Restricted Stock: None.

4.3.5 Status of New Shares Issuance in Connection with Mergers and Acquisitions: None.

4.4 Financing Plans and Implementation As of March 27, 2021, the use of funds earned through previously issued securities is progressing as planned and is in accordance with expected results.

Operational Highlights 89

Operational Highlights 5.1 Business Activities

5.2 Market and Sales Overview

5.3 Human Resources

5.4 Environmental Protection Expenditure

5.5 Labor Relations

5.6 Important Contracts

90 Operational Highlights

V. Operational Highlights 5.1 Business Activities 5.1.1 Business Scope

A. Main areas of business operations (1) Civil air transport business: Air passenger transport, regular and irregular contracting of

international charter flights business, and training of civil aviation personnel.

(2) General aviation business: In-flight commodity sales.

(3) Airport ground service business: Ground services for civil international airports and transit

aircraft.

(4) Air cargo terminal entrepot operation: Air cargo transport services.

(5) Aircraft and parts maintenance and manufacturing business: Aircraft body maintenance.

(6) Inflight catering service: Provision of in-flight catering or other related supplies.

(7) Laundry, dyeing, printing and finishing, and wholesale and retail of dyeing mills and dyestuff

cleaning supplies: Washing of cloth and clothing inside the aircraft and general washing business

in the hospitality industry.

(8) Warehouse and storage: Warehousing services for import, export, and entrepot air cargo.

(9) Other: All business items that are not prohibited or restricted by law, except for those that are

subject to special approval.

B. Revenue distribution Unit: NT$ thousands Proportion of Overall Business

Item 2020

Net Revenue Proportion of Revenue Passenger Revenue 25,704,367 22% Cargo Revenue 81,917,976 71% Other 7,628,207 7% Total 115,250,550 100%

C. Main products (1) Passenger service: Air passenger transport and regularly scheduled and non-scheduled contract

international charter flight services.

(2) Cargo service: Transport services for cargo, courier, mail, and packages.

(3) Ground services: Handling of luggage and cargo, aircraft cleaning, and ground support

equipment.

(4) In-flight sales: Providing in-flight duty free sales services.

(5) Airline catering: Providing meal services to airlines.

(6) Warehousing and logistics services: Provide airfreight forwarding and logistics services.

(7) Aircraft maintenance services: Airframe, engine, and aircraft component maintenance.

(8) Tourism and leisure services: General hotel industry and travel services.

(9) Investment holding and leasing services: Engaged in real estate investment, building

management, and leasing.

(10) Civil aviation personnel training: Organize maintenance training courses, develop professional

maintenance personnel.


D. Product Development (1) Revenue Management System (RMS)

Revenue Management System (RMS) is the core system to manage the sales of flight seats, which enhanced aviation network and competency. The new O&D (Original & Destination) RMS was implemented after evaluation and was officially operated on July 30, 2020. O&D RMS calculates the value of each seat by considering the booking information in the history and price information. Through dynamic deployment, routes and areas that create high value are highlighted to maximize the passenger flight revenue.

(2) Optimize booking system and user interface In 2020, China Airlines has been improving various services, including ticket booking 80 minutes prior to departure, 3-D secure protocol for credit card transactions, and WeChat Pay for the mainland China region. China Airlines established the pandemic section in response to the spread of COVID-19. Entry restrictions in Taiwan and other countries have been regularly updated, as well as schedule changes, ticket changes, ticket refunds, and other epidemic prevention measures. This was to facilitate passengers to keep up to date with the travel information and offer a friendlier experience in ticket purchases online.

(3) Customer Relationship Management (CRM) Improve digital service and consumer experience from the perspective of passengers by reviewing each phase in travel, from ticket purchase, preparation, check-in at the airport, and arrival, China Airlines built comprehensive, digitized, and passenger-oriented services. The services include accessing travel information on the mobile app, enjoying more friendly airport and in-flight services, and receiving swift support in the event of a flight change.

(4) Approach potential customers using digital marketing China Airlines leveraged the marketing funnel strategy and analyzed the browsing behaviors of CAL website visitors. By maximizing digital advertisement, approaching more consumers, and selecting potential target audiences using data analysis, China Airlines placed brand marketing advertisements on target consumers. Along with the promotion via eDM, app, and text messages, China Airlines displayed discount offers to potential customers, boosting customer consumption. In addition to newsletter marketing, content marketing, and social media exposure, China Airlines continuously held physical campaigns and realized the corporate brand visions.

(5) Developing potential destinations and optimizing the aviation network extension China Airlines has stayed close to the market condition, and deployed new destinations by evaluating the potential market, in order to strengthen the connectivity of the aviation network and enhance competency.

5.1.2 Industry Overview A. State of the industry and future development

(1) Economic growth According to the report made by IHS Markit in February 2021, the 2020 global economic growth rate was -3.7%, the first negative growth in ten years. In 2021, the business will get back to normal as the vaccines are available that eases the pandemic. IHS Markit estimated that the global economic growth rate will reach 5.1% in March 2021, while most major markets will grow, such as the US (5.7%), Europe (3.9%), Japan (2.6%), and China (7.8%). Taiwan has done exceptionally well in pandemic prevention. As the home economy and remote technology boosted during the outbreak that shifted the global supply chains. This created numerous opportunities for Taiwan in export business and manufacturing. According to the statistics made by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, Taiwan's annual growth rate in the economy was 3.11%, becoming one of the few countries with economic growth in 2020. In 2021, as export, investment, and consumption are on the rise, Taiwan's economy has grown stably. Domestic and foreign institutes estimated that the economic growth rate will reach 4.0%.

(2) Oil prices 2020 was severely impacted by the coronavirus pandemic. Lockdown and travel restrictions have been implemented in most countries. This caused the oil demand to drop. In April 2020, the WTI crude oil price dropped below zero, breaking the historical record. In the Short-Term Energy Outlook proposed by EIA (Energy Information Administration) in February 2021, as the demand for crude oil increases and the oil storage decreases, the WTI price is expected to be US$50.21/barrel, and the Brent price is expected to be US$53.2/barrel. As the pandemic poses uncertainty to the future economy, most financial institutes and energy institutes forecast that it's difficult for aviation fuel demand in 2021 to get back to the level in 2019.

(3) Air passenger market COVID-19 forced countries to adopt strict border control and disease inspection measures, leading to an almost standstill in demand for passenger flights. According to the forecast of IATA, the global passenger flight demand will return to the level in 2019 by the time of 2024. According to the statistics of IATA, 2020 RPKs dropped by 65.9%. The revenue from passenger flights dropped by NT$421 billion. The prospects in 2021 remain pessimistic as the new variant coronavirus appears, which prompted restricted travel by most countries in the first half of 2021. From the positive point of view, people in most developed countries are getting vaccinated, thus the travel restriction may be loosened. Therefore, the travel peak season in the summer can be expected. The passenger flight demand may be 38% of that of 2019. From the pessimistic point of view, border control in most countries may remain in the summer. In that case, the demand may only be 31% of that of 2019. No matter what, aviation companies will spend more than US$75 billion cash in 2021.

(4) Air cargo market According to IATA, global cargo flights were reduced drastically due to the pandemic in 2020. The loadability of the belly hold dropped by 53.1% in 2020. Even though the cargo flight capacity increased by 20.6%, the overall capacity still saw a fall of 24.1%. For global air cargo volume in 2020, a slide of 11.8% was seen, which was the most severe slump in 20 years. Thankfully, the drop in delivery supply was greater than the delivery capacity. In 2020, the delivery rate rose by 8.4%,


keeping the air cargo price at a high point. Despite the decline in delivery capacity, 2020 revenue was 15% higher than 2019. For most aviation companies, air cargo became the important income in 2020. IATA expected that 2021 air cargo demand will return to 2019. But since the new variant coronavirus still threatens the world in 2021, travel restriction remains. Thus, using belly hold of passenger flights to carry cargoes is still hard to achieve. This may create a challenge to satisfy the air cargo demand.

B. Relationship between upstream, midstream, and downstream firms The air transport service industry primarily provides transportation for passengers and cargo. These operations rely on the support and assistance of upstream, midstream, and downstream industries that enable us to provide comprehensive services and meet our customers’ needs. (1)Upstream industries

Primarily aircraft, aircraft engine, and ground service equipment (such as towing vehicles, loading vehicles, and equipment needed on the apron) manufacturers. Currently, in addition to purchasing aircraft, Taiwanese airlines also utilize leasing to add to their fleets, so the aircraft leasing industry is also an upstream industry for air transport providers.

(2)Midstream industries Primarily airlines themselves and related support industries such as the oil industry that provides aviation fuel, the aircraft maintenance industry that repairs and maintains airlines’ aircraft and components, and the airline catering industry that provides in-flight meals. In response to the changing needs of downstream industries, the air transport industry’s strategic adjustments in their operating scale, fleets, or flight networks will also affect the development of upstream industries.

(3)Downstream industries In passenger transport, the air transport industry primarily serves the public and travel agencies, while cargo transport services are provided to the courier and freight forwarding industries. As a member of the air transport industry, the needs of downstream customers are at the core of the CAL’s product and services planning. Our mission is to provide safe, convenient, and comprehensive services.

C. Product development trends (1)Aviation alliance cooperation

With the liberalization of the air-transport market, airports have become increasingly congested. Resources being limited, airlines provide passenger transportation services as part of alliance teams, with such mechanisms as code-sharing, extended route-agency systems, and combined mileage cumulation frequent flyer programs. Aviation alliance collaboration also includes operating in the same terminal at major airports, sharing maintenance facilities and operating equipment, mutual support of personnel, and cooperation in ground handling and inflight catering to reduce costs. This also helps passengers purchase flight tickets at a lower price. As long as they take alliance airlines, they can earn flight miles. Flight schedules provided by the alliance are more flexible with fewer transfers, making it easier for passengers to reach their destination early. At present, there are three major alliances in the aviation industry, namely, SkyTeam, Star Alliance, and One World. The Company is currently one of the 19-member airlines of the SkyTeam. Through extensive global network collaboration, we provide transportation services in 175 countries and to 1,150 destinations.

(2)Joint Venture (JV) For a closer strategic alliance relationship, airlines further share their route network with business partners and share joint marketing and bear risks together to earn more revenue and route profit. Joint ventures share revenue on cooperative routes, sometimes including cost sharing. The economies of scale, aviation network revenue, cost reduction and management efficiency improvements generated through cooperation can effectively improve operational efficiency, surpassing the benefits of alliance association. For example, United Airlines (UA) and All Nippon Airways (ANA / NH) have launched joint ventures since 2012. Passengers can take ANA from Taipei via Tokyo Narita or from Songshan via Tokyo Haneda to gateway cities in the United States, or choose United Airlines’ daily Taipei - San Francisco direct flight and transfer to major cities in the United States. Under the JV fare structure, due to the unified fare for the same cabin class and greater flight interoperability, the sales process is simpler.

(3)Grasping logistics trends and expanding business territory In response to the different transportation needs of special cargoes, such as semiconductor precision machinery, aircraft engine materials and the demand for equipment driven by the emerging 5G technology products, the Company provides professional large cargo loading services with its Boeing 747-400 cargo-only aircraft. For the vaccine delivery during the COVID-19 outbreak, China Airlines is well-versed in cold chain logistics and special goods delivery such as biotech medicines. Meanwhile, the Company is also the only Taiwanese carrier that received IATA CEIV pharma certification, meeting the needs of delivering vaccines. At the same time, the Company also cooperates with other airline alliances to assist other countries in delivering vaccines. Additionally, the home economy and the swift development of e-commerce have a higher demand for e-commerce goods delivery, pushing the Company to work with other airline


alliances and logistic vendors. The Company will stay close to the development of the logistic market and other potential opportunities to expand its air cargo business.

(4) Taoyuan International Airport expansion to become the transit hub in East Asia The government has been transforming the Taoyuan Airport as the transit hub in East Asia. The effort has been made not only in software upgrade and air right expansion, but also in hardware. In 2010 and 2011, Taiwan Taoyuan International Airport Park Overview Plan and Taiwan Taoyuan International Airport Park Implementation Plan were made to implement the reconstruction of Terminal 1, airside service roads, Terminal 3 satellite pier, and the third airway, etc. The Company also responded to the government policy by expanding its fleet capacity and building a transit hub in East Asia.

(5) Digital transformation in the aviation industry to rebuild traveler confidence COVID-19 escalated the digital transformation in the aviation industry, changing the airport and traveler's experience in 2020. Self-services in the airport, biometric technology, and Wi-Fi connectivity service not only shorten the check-in process but also maintain good social distances. China Airlines actively encourages passengers to utilize the internet to check in. In Hong Kong, New York, and San Francisco, the biometric-enabled check-in process was launched. At the end of 2020, IATA designed an application called "Travel Pass." The application provides passengers with disease control measures and travel restriction information. Users can upload their COVID-19 testing results and proof of COVID-19 vaccination, allowing the competent authority and aviation companies to identify passengers' health conditions before boarding. So far, multiple major aviation companies have undertaken the trial. The app will be officially launched in the first quarter of 2021. The aviation industry regards the Travel Pass developed by IATA as a milestone to resume the air travel.

D. Product competition China Airlines mainly provides regular/irregular flights that carry cargoes and passengers, as well as charter flight service. The Company will continue to optimize the aviation network and fleet scale to enhance the overall service quality, maintaining its solid role as a leading carrier in Taiwan. According to the IATA’s 2019 international passenger and cargo transport volume rankings published in 2020, the Company ranked 34th in the world, with a passenger transport volume of 42,142 million Revenue Passenger Kilometers (RPK）；In cargo transport, the Company ranked 12th in the world, with a cargo transport volume of 5,334 million Freight Revenue Ton Kilometers (FRTK).

Taiwan National Airlines International and Cross-Strait Market Share for Passengers and Cargo in 2020 Airline Passenger Cargo

China Airlines 25.01% 42.86% EVA Air 26.31% 26.56%

Mandarin Airlines 1.44% 0.26% UNI Air 1.10% 0.21%

Tigerair Taiwan 3.94% 0.01% STARLUX Airlines 0.40% 0.07%

Other-Foreign Carriers 41.80% 30.03% Source: Civil Aeronautics Administration Monthly Statistics from January to December 2020-Taiwan National Airlines

International and Cross-Strait Market Share for Passengers and Cargo

IATA Global International Route Passenger and Cargo Rankings 2019 Passenger (Passenger-Kilometers) Ranking

Unit: million Cargo (Ton-Kilometer) Ranking

Unit: million 1 Emirates 299,496 1 Qatar Airways 13,024 2 Ryanair 185,405 2 Emirates 12,052 3 Qatar Airways 172,591 3 Cathay Pacific Airways 10,930 4 United Airlines 162,962 4 Federal Express 8,851 5 Lufthansa 160,731 5 Korean Air 7,390 6 British Airways 151,935 6 Lufthansa 7,223 7 Air France 143,347 7 Cargolux 7,180 8 Delta Air Lines 141,353 8 Turkish Airlines 7,000 9 Turkish Airlines 131,106 9 United Parcel Service 6,228

10 American Airlines 126,533 10 Singapore Airlines 6,146 11 Cathay Pacific Airways 119,328 11 Air China 5,651 12 KLM 109,476 12 China Southern Airlines 5,482 13 Singapore Airlines 109,462 13 China Airlines 5,334 14 easyJet 99,854 14 AirBridgeCargo Airlines 5,168 15 Air Canada 87,701 15 United Airlines 4,231 16 Etihad Airways 81,856 16 British Airways 4,200 17 Norwegian 81,234 17 All Nippon Airways 3,922 18 Korean Air 80,298 18 Air France 3,774 19 Air China 79,293 19 Polar Air Cargo 3,765 20 China Southern Airlines 71,788 20 KLM 3,609 21 China Eastern Airlines 69,426 21 Atlas Air 3,598 22 Aeroflot Russian Airlines 68,911 22 KLM(4) 3,604 23 LATAM 67,108 23 EVA Air 3,580


Passenger (Passenger-Kilometers) Ranking Unit: million

Cargo (Ton-Kilometer) Ranking Unit: million

24 Thai Airways International 65,380 24 American Airlines 3,550 25 Qantas Airways 59,721 25 Etihad Airways 3,471 26 Saudi Arabian Airlines 55,778 26 Kalitta Air(2)(3) 3,121 27 Wizzair 55,090 27 LATAM Group(3) 3,044 28 Iberia 54,243 28 AeroLogic(1) 2,803 29 All Nippon Airways 52,981 29 China Cargo Airlines 2,702 30 EVA Air 48,627 30 Saudi Arabian Airlines 2,487 31 Japan Airlines 44,650 31 Thai Airways International 2,438 32 Asiana Airlines 44,449 32 Delta Air Lines 2,417 33 Ethiopian Airlines 44,436 33 Japan Airlines 2,410 34 China Airlines 42,142 34 Silk Way West Airlines 2,354

Source: IATA WATS 2020

E. Intellectual Property The Company has internal regulations governing corporate identity system management and has a brand- management platform for control and management. The scope includes the Company’s office buildings and airport terminals (indoor and external signboards, marks and signs, etc.), transportation, advertisements, printed matter, inflight and ground service supplies, logos, products, and other installations, publishing, or broadcasting with the application of corporate identity covered by the Corporate Identity System Guideline (hereinafter referred to as the “CIS Guideline”). By managing the Company’s corporate identity, application, and authorization of corporate logos (i.e., trademarks), and through reviewing the plan, we maintain the consistency of corporate identity exposure, unify the Company’s visual identity, and strengthen the Company’s corporate image. According to application situation of corporate identity in units in Taiwan and abroad, the Company will discuss and report the implementation method every two years, and notify the units to be audited by e-mail or memo. The units to be audited have to upload the audit samples on the brand- management platform to the concerned unit for review (or for an on-site audit) to protect the Company’s trademark rights under the protection of law.

5.1.3 Research and Development A. Costs of R&D investment and successfully developed technologies or products

From January 1, 2020, as on the publication date of this report, the Company has invested approximately NT$61 million in research and development. The following table summarizes the technologies and products developed:

Project R&D Project Description

Chatbot

Provide an innovative channel that reaches passengers and provides flight status in real time. During peak seasons or when significant changes are made to flights due to force majeure, provide passengers with an online instant chatbot conversational service to minimize the time passengers spend waiting on the customer service hotline. AI technology and AI semantic module have been utilized to enhance the service quality. Chatbot was officially completed and launched in March 2020.

Online Customer Service System

The China Airlines Customer Service Center was established in October 2003. The customer service system was introduced in 2004 and has been in use for more than 16 years. The system equipment must keep up with the times to cope with today's multifaceted business environment. In response to the customer service center's heavy workload, changing times, and technological advancements, China Airlines plans to establish a next-generation multimedia customer service system. It involves several functions, including telephone services, fax, automated voice answering systems, voice outbound dialing, e-mail, Facebook, and online customer service on the official website. The system will not only increase passenger access channels, but also help managers obtain workload information and staff status in real time, promptly allocate human resources, and improve service effectiveness and quality. The OnlineCC was officially launched in April 2020.

Health self-management system

In response to COVID-19 and the rules of the Taiwan Center for Disease Control and Civil Aeronautics Administration, a body temp reporting system was built for staff to self-report their health condition. This allowed the Company to monitor the disease condition in real-time, and save the labor cost for follow-up. The system was completed and officially launched in April 2020.

Aircraft inspection training system using VR/AR

The Company used VR/AR technology in aircraft inspection and new employee training. New employees can have real-time practices in the training to familiarize the inspection procedure and operations. This can improve employees' ability in identifying abnormalities and enhance the maintenance training result. The system was completed and officially launched in July 2020.

Fuel-saving effectiveness management system

Through the information process, consistent and complete oil-saving analysis data are generated. Various fuel-saving analysis data and monthly oil-saving results are presented in graphs. By doing so, the Company can formulate a precise fuel-saving policy and cut down on operating costs. The system was completed and officially launched in December 2020.

Robotic Process Automation, RPA

Promoting the relevant application of robotic process automation to all business units in China Airlines, reducing the manpower requirements for indirect manual operations, so to avoid the oversights caused by repetitive data input and manual input errors, improve work efficiency, and


improve operating performance. The RPA is implemented in audit tools optimization: the automatic measurement function, the IATA automatic settlement and payment system, and the automatic download of the ticket price. The application was completed and officially launched in December 2020.

Establish the relevant mechanism of Cyber Security Management Act

In 2020, China Airlines put Cyber Security Management Act as its core in the cyber security operation by implementing international standards such as ISO 27001:2013 and ISO 27701:2019. At the end of the year, PCI DSS was completed that ensures the safety of credit card transactions. China Airlines enhanced the cyber security in all aspects according to the standards of the Cyber Security Management Act, which includes the introduction of audit and accountability tools and protection platforms from malware. This is to enhance the Company's security level and reduce the cyber risks. The system was completed and officially launched in December 2020.

CI Mobile APP

In order to enhance user experience on mobile devices, the Company continues to optimize CI Mobile App functionality. The planned improvement projects cover car rental, accommodation booking/ticket refund application/chatbot customer services, pre-stored travel documents, passport scanning (OCR), China Airlines eMall home delivery, push notification of system records, Google Pay-supported electronic boarding pass service, seat preselection, collaboration with credit card companies, proof of purchase application, function upgrade for the membership app/the establishment of an app for co-branded cards.

B. Future R&D Projects To meet the future development needs, China Airlines will continue to invest in R&D. In, we plan to invest a total of NT$114.38 million into R&D. The following table summarizes the future projects:

Project Future R&D Project Description Estimated Completion Date

e-Shopping- Phase I

The "e-Shopping Duty-free Website" has been in use since the first project revision in 2013. After observing the functions and web designs of other airlines' websites and online shopping platforms, improvements will continue to be made to the website. In order to uphold the Company's service spirit through continuous innovation and optimization while keeping up with today's trend of smart technology, plans to revise and optimize the website will be implemented. This will provide a more novel shopping experience that will in turn increase sales.

March 2021 (Implementation progress was 100% as of the annual report printing date)

iCabin Service 2.0, iCS 2.0

The cabin team leader, manager, the head attendant can obtain information about passengers, flights, team members right away through mobile devices. They can write up cabin reports with flexibility. In addition, the digitized cabin manual provides the latest version for team members to read at any time to improve passenger service quality.

April 2021 (Implementation progress was 100% as of the annual report printing date)

CRM- Phase I

To establish the Company's consistent customer relationship service system and to expand business opportunities through data analysis in integrated systems. The

primary goal is to serve passengers. We plan to consolidate data platforms such as membership, ticket files, reservations, in-flight duty-free products, and customer

feedback. Through one single platform, data visualization and other operations, we can effectively accelerate customer service processing and improving service quality.

June 2021 (Implementation progress was 92% as of the annual report printing

date)

Customer service system improvement

To optimize the customer service process, existing interface, and data security mechanism, China Airlines strengthens the automatic and digital process. Financial and human resource systems are interlinked to get a full picture of customers' consumption patterns, enhancing service efficiency.

November 2021

(Implementation progress was 2% as of the annual report printing date)

Mail system integration

In order to keep the Company’s email system up to date, China Airlines strengthens the system information security mechanism, enhances the compatibility of mobile devices, integrates the existing e-mail system, upgrades the platform by taking into account subsequent maintenance costs and technical support, so as to provide a safer and more stable email service and a high quality office environment.

December 2021


Major broadband construction for enhanced online service

According to the infrastructure plan for communication, China Airlines replaced 10Gb internet routers in park control room, floor control rooms, terminals, and cargo stations (60 routers in total. Speeds came to 10/40/100Gb) to enhance the online service.

June 2022



Replacement of core optical fiber storage network switches

Through analysis, China Airlines adopted high-speed (32GB) Storage Area Network (SAN) and All Flash Storage devices to build a high-performance, high-reliability storage network. This reduced the downtime risks and improved the information efficiency of SAN.

December, 2022


Human Resource Management (HRM) system

In order to solve the problems of system expansion, difficulties in development and risks of information security, China Airlines made a new plan for business process, technical and regulatory aspects. By leveraging new technology and structure, adjusting SOP, and redefining the personal information processing principle, a new generation of human resources management system has been developed to achieve overall system synergy.

June 2023


New cargo operation and management system

The system aims to improve the management of cargo revenue. By introducing an external cargo operation and management system, China Airlines replaced current systems, CCNet and CIRAS. It is expected that the implementation can support the cargo business in the next ten to twenty years to achieve an efficient revenue forecast and price management.

December 2023


5.1.4 Long-term and Short-term Development

To promote sustainable operations and strengthen international competitiveness, CAL has planned the following short- and long-term passenger and cargo transport developments: A. Short-term Development

(1) Passenger Make short-term adjustments to ASK in response to the impact of the COVID-19 pandemic

Since the outbreak of the COVID-19 in late January 2020, border control in each country has become increasingly stringent and the overall aviation and tourism industries have been disrupted. The Company not only flexibly adjusts its delivery capacity in each route, but stays up to date on the border policy changes and travel bubbles development, as the vaccines are gradually available in each country. China Airlines hopes to minimize the loss and resume passenger flights as soon as possible.

Strive for providing Charter flight services to increase revenue Charter flight service is one of the main incomes for China Airlines during the pandemic. In 2020, China Airlines sent Taiwanese passengers back to Taiwan with charter flights, which include charter flights for the Japanese Diamond Princess cruise ship and charter flights departing from Wuhan, Shanghai, India, and Bali. Charter flights to Vietnam and Palau are also arranged to provide transportation for Taiwanese businessperson and foreign patients. In the post-COVID-19 era, China Airlines will provide different kinds of charter flights for students, corporates, and Taiwanese businessperson to enhance its revenue.

Open up new routes and explore market potential In 2020, China Airlines started successively opening up the Taoyuan-Cebu route and resuming the Taoyuan-Chiang Mai route to seize business opportunities in the market. At the same time, the schedules of these flights are arranged alongside the existing North America aviation network, so they can be connected to flights going to Los Angeles, Ontario, San Francisco, Vancouver, New York, and vice versa. This way, more convenient and comfortable services are provided to passengers traveling between Southeast Asia and North America.

(2) Cargo Improve revenue management and promote customized services

We will continue to improve revenue management. Regarding the different transportation needs of special cargo, such as time limit, volume, and special loading procedures, we will continue to enhance price differentiation and increase the added value of transportation services by utilizing the advantages of large cargo loading and professional services of our Boeing 747-400 all-cargo aircraft. The Company also highlights its charter flight service. By providing customized charter flight service, revenue can enhance profoundly. After the introduction of 777F new aircraft in 2021, the fleet scale increased. In response to the global aviation market changes caused by COVID-19, China Airlines will deploy the aviation network and adjust the flight schedule more flexibly. The Company will also explore the North America and Southeast Asia markets, stabilize the overall aviation network and promote charter flight service, realizing the freighters' performance.

B. Long-term Development (1) Passenger Roll out fleet plans.

In order to improve operational efficiency, in 2019, the Company finished its plans to replace the old cargo fleet and the old narrow-body fleet. Between 2021 and 2023, we will introduce 25 A321neo aircraft,


which will gradually replace the narrow-body aircraft currently in operation. The new cabin design will enhance passenger service quality and strengthen product competitiveness. Efficiently establish aviation networks and deepen inter-airline cooperation to increase

revenue. Utilize the new-generation, long-haul aircrafts 777 and A350 to proactively maximize the benefits of China Airlines' aviation network in California (North America) and expand the customer base for long-haul flights; provide a more interconnected, and convenient aviation network in Europe to secure China Airlines' leading position in the market of flights flying from Taiwan to Europe; continue to expand the aviation network covering bi-directional transfers in routes between New Zealand/Australia, Europe, and Northeast Asia to strengthen China Airlines' travel services. Furthermore, increase flight destinations and expand into major cities and tourist destinations around the world through inter-airline cooperation; increase the overall earnings generated by the aviation network by increasing flight frequencies and interconnectivity. Optimize cabin products and strengthen brand marketing to enhance passenger experience and

increase loyalty. Continue to improve personnel service and cabin hardware; provide passengers with the best flight quality and pleasant in-flight services. Establish brand positioning and a marketing direction that is in line with the brand improvement plan and based on the corporate philosophy; enhance the brand recognition of China Airlines; further ensure the consistency of passenger experience and strengthen the brand loyalty passengers have for China Airlines' products.

(2) Cargo Enhance project-based revenue and e-commerce goods delivery

Under the development of the Southbound policy and the economic growth in Southeast Asia, there has been tremendous growth in electrical devices, textile items, e-commerce goods. In addition to the delivery of north-south goods in regions like Japan, Singapore, Malaysia, Indonesia, Vietnam, the Philippines, and Thailand, the Company also emphasized the Southeast Asia routes. According to the demand, the chain flight is changed to a direct flight to increase the transportation capacity, in order to fully cooperate with the development of Southeast Asia, and improve the overall revenue and economic efficiency. Other than that, China Airlines will keep navigating the potential markets in special goods delivery, such as semiconductor machines, aviation materials, temperature-control cold chain, and biotech items. Airline alliance for cargo information exchange

Since its launch in Shenzhen in 2015, the Company has been working closely with UPS, DHL, Fedex, and SF Express on the fixed seats of American chartered flights. In addition, the cooperation with NCA and NH continued. China Airlines currently works with 165 cargo service companies by creating a win-win situation in airline alliance and aviation network. In addition, China Airlines also promoted the digitalization of freight forwarding and the upgrade of the information system of freight operation/services, which are also the key points of the Company’s strategic development. Through the integration of various systems and the provision of real-time information of mobile devices, the Company not only improved the efficiency of internal operations, but also enhanced the quality and satisfaction of customer services. Leverage the advantages of our cargo fleet to capture potential business opportunities Starting from the end of 2020, new models of 777 F have been introduced. In addition to effectively

improving fuel efficiency and enhancing the capacity of long-haul routes, the existing aircraft fleet of 747F has been flexibly deployed to meet customers’ needs by carrying semiconductor machines, e-commerce goods, consumer electronic products and equipment. The Company also provides medium and short-term chartered flights, flexible adjustment on the capacity of the aircraft fleet, adding flights to create good revenue.


5.2 Market and Sales Overview 5.2.1 Market Analysis

A. Main Sales (Service) Region Overview of Company passengers/cargo (RPK/FRTK, REV) by region and passenger and cargo transport market share over the past two years: (1)Passenger routes:

Item Area

2019 2020 No. of

Passengers No. of

Passengers No. of

Passengers No. of

Passengers RPK

(Million) Revenue

(NT$ Million) Trans-Pacific 1,017,031 1,017,031 1,017,031 235,264 2,499 4,601 Europe 623,389 623,389 623,389 122,553 1,157 2,615 South-East Asia 3,890,748 3,890,748 3,890,748 725,449 1,836 4,713 Domestic 1,467,638 1,467,638 1,467,638 1,729,624 397 2,688 Hong Kong/ Macau 2,532,308 2,532,308 2,532,308 243,329 194 944

North-East Asia 7,023,173 7,023,173 7,023,173 1,039,218 1,900 6,303 Oceania 651,793 651,793 651,793 149,571 906 1,948 Mainland China 2,624,929 2,624,929 2,624,929 247,045 208 1,892 Total 19,831,009 19,831,009 19,831,009 4,492,053 9,097 25,704

Note 1: Revenue passenger kilometers (RPK) equal the total number of revenue passengers multiplied by the flight distance travelled (kilometers).

Note 2: The above data includes scheduled flights, charter flights, and extra flights. Note 3: The above data includes Mandarin Airlines and Tigerair Taiwan.

(2) Cargo routes: Item

Area 2019 2020

FRTK (Million) FRTK (Million) FRTK (Million) Revenue (NT$ Million) Trans-Pacific 3,358 3,358 4,182 47,940 Europe 717 717 603 7,085 South-East Asia 756 756 952 15,380 North-East Asia 229 229 221 4,121 Oceania 161 161 234 2,420 Mainland China 149 149 176 4,972 Total 5,370 5,370 6,368 81,918

Note 1: Freight revenue ton-kilometer (FRTK) equals the revenue cargo load (tons) multiplied by the flight distance travelled (kilometers).

Note 2: The above data includes scheduled flights, charter flights, and extra flights. Note 3: The above data includes Mandarin Airlines and Tigerair Taiwan.

B. Market Share (%) of Major Product Categories in the Last Two Years Year

Airline Passengers Cargo

2019 2019 2019 2019 China Airlines 23.45% 25.01% 37.37% 42.86% EVA Air 21.70% 26.31% 24.12% 26.56% Mandarin Airlines 2.17% 1.44% 0.64% 0.26% UNI Air 1.43% 1.10% 0.56% 0.21% Far Eastern Air Transport 0.46% - - - Tigerair Taiwan 4.70% 3.94% 0.04% 0.01% Other-Foreign Carriers 46.09% 0.4% 37.27% 0.07%

Source: Civil Aeronautics Administration Monthly Statistics from January to December 2019 and 2020-Taiwan National Airlines International and Cross-Strait Market Share for Passengers and Cargo

C. Market Analysis of Major Product Categories (1) Passenger

According to IATA, travel restrictions remained tight in 2021 due to the new variant coronavirus. Although it is optimistic that developed countries will gradually ease tourism restrictions after the completion of vaccination for the disadvantaged group, the full year’s passenger demand remains at only 38% of 2019. Airlines may not be able to realize positive cash flow, and the loss can be turned into profit in 2022.

(2) Cargo In 2021, the COVID-19 pandemic continued to be severe, and the passenger flight market is expected to recover slowly, limiting the growth of belly hold capacity. However, as the economic recovery brought up the shipment market, many shipping ports in Europe and North America are experiencing traffic congestion and a lack of containers. Many businesses turned to air transport. Coupled with the heavy demand from aviation cargo-driven semiconductors, 5G, electric vehicles and epidemic prevention supplies, the air cargo market is expected to remain buoyant in 2021. In early 2021, the governments of major automotive manufacturers seek helps from Taiwan due to a global shortage of automotive chips. The dry freight rate after the mass production of vaccines is expected to increase in visibility for air cargo demand.


D. Competitive Niche (1) The new-generation fleet can help to enhance service quality.

In line with the development of the aviation network, the Company continues to optimize the fleet team. 744 passenger aircraft was replaced to lower operating costs and improve the fleet team. The next-gen Airbus A321neo is about to be introduced in 2021 to replace Boeing 738 aircraft. It will be used in flights for regional routes to enhance competency. China Airlines will introduce new narrow-body aircraft by elevating the passenger services with comfortable seat design, in-flight entertainment, and meal design. By integrating software and hardware, the passengers can have more diverse, consistent, and high-quality in-flight services. Customer loyalty will also be enhanced.

(2) Highly-efficient cargo aircraft to be introduced. Three Boeing 777F were about to be introduced from December 2020 to January 2021. The remaining three aircraft will be delivered before 2023. 777F new cargo freights come with two engines and fuel-saving feature, which are the main aircraft model in the fleet. With the existing 18 747-400 cargo-only aircraft, the fleet team will come to 21 aircraft in 2021. This will create more cargo revenue for China Airlines as the demands for vaccine delivery and air cargo delivery are on the rise. The 777F features twin engines that translate into 20% lower fuel consumption and a range longer than the 747F. It can therefore be flown on trans-Pacific routes with fewer payload restrictions and better hold utilization. The aircraft are equipped with fully temperature-controlled cargo holds and the main cargo hold can be fitted with cargo pallet restraint systems used for carrying semiconductor machinery and engines. High-value cargo such as precision instruments and temperature-controlled goods can all be carried in the future.

(3) CEIV Pharma Certification In April 2019, China Airlines officially obtained IATA's CEIV Pharma Certification, becoming the first aviation company in Taiwan to earn such honor. The certification shows that China Airlines has reached international standards in the field of medicinal air transport, which is sensitive to time and temperature. This enhances the Company's competitiveness and benefits generated in the highly valued freight market. As one of the leading cargo carriers in the world, China Airlines has made all the necessary preparations and has received a number of inquiries on transportation plans for different types of vaccines. China Airlines’ CEIV Pharma certification, many years of experience in professional transportation, and an extensive network covering major European and American cities such as Frankfurt, London, New York and Chicago, mean that it stands ready to meet the demand for vaccine transportation. Talks are underway with partner airlines on opportunities offered by the transshipment of vaccines by other countries.

(4) The Group’s integrated resources increase the overall efficacy. China Airlines Group's overall combined fleet ASK provides differentiated aviation services and products to target markets with differentiated market positioning. Tigerair Taiwan operates with a low-cost airline business model and mainly flies regional routes. In the civil aviation market, Tigerair Taiwan, China Airlines, and Mandarin Airlines have each established their own positioning in different segments, providing consumers with a diversity of product options.

(5) Taken a leading position in the inter-airline collaboration market In addition to self-owned routes, China Airlines is the first airline in Taiwan to join the global aviation alliance. We are also the first Taiwanese airlines to conduct code-sharing cooperation. Currently, we have cooperated with 23 airlines in code-sharing, ranking first among all Taiwanese airlines. We actively penetrate the market through the aviation alliance, allowing passengers to travel between Taiwan and major cities around the world with a network of airlines and providing them with more convenient and complete services.

E. Corporate Policies (1) Corporate Human Rights Policy

To enforce the concept of human rights, CAL has established our human rights policies and management mechanisms in accordance with the UN Guiding Principles on Business and Human Rights, international trends, and local human rights-related laws & regulations. The scope of application covers the members of the China Airlines Group and their suppliers, and the Talent Value Task Force under the Company's Corporate Sustainability Committee is responsible for human rights management. China Airlines sees its employees as its family and aspires to communicate and reach a mutual understanding with the union through equal and respectful negotiation procedures, to create a more harmonious and friendly working environment, based on a mutually beneficial situation for both labor and management. The Company and the union shall maintain an equal, cooperative, and respectful relationship. It is our core attitude to promote rational communication through open and transparent negotiations, so that labor and management can reach consensus and achieve the common good, and can conduct two-way friendly communication on collective agreement issues. China Airlines believes that employees are the Company's most important assets. The Company gradually strengthens and optimizes the working conditions and environments of colleagues to ensure they have employment safety and room for growth. The Company will treat each union with empathy and communicate and negotiate with them on their individual needs, and will give priority to fair protection of the labor rights of every employee with the obligation to stay neutral according to the law, showing the unions consistent respect and providing them with equal resources.


(2) Sustainable Supply Chain Management Based on the corporate vision of “becoming the top airline in Taiwan,” the Company, based in Taiwan and flying around the world, is committed to pursuing the business goal of corporate sustainable development. We strongly feel that only by cooperating with business partners can we truly implement corporate sustainable development and create sustainable value. Therefore, the Company has been promoting sustainable supply-chain management since the beginning of 2014. Subsequently, we established a Joint Creation Value Team for important procurement categories, including “aviation materials, aviation fuel, in-flight meals, service procurement, and general business affairs”; formulated long-term sustainability goals based on the United Nations’ Sustainable Development Goals (SDGs); and formulated China Airlines’ Sustainable Supply Chain Management Policy Statement and Supplier Code of Conduct with reference to the Global Reporting Initiative (GRI), ISO 26000, United Nations Global Compact (UNGC), International Labour Organization (ILO), and other international standards. In addition, the Company has also created a risk investigation mechanism, performed audit operations, organized supplier meetings to enhance the effectiveness of engagement, and set up other management measures, and has regularly reported the management outcomes to the Corporate Sustainability Committee for follow-up inspection on a quarterly basis.

(3) Environmental Sustainability Management The Company believes in environmental sustainable management and regards “environment” as one of the key elements in the implementation of sustainable management. Since 2007, we have established the concept of environmental and energy management. In 2011, a dedicated environmental department and Environmental Committee were set up; every quarter, the president reviews the Company’s environmental and energy-management performance and has also set incentive measures. In 2013, an environmental and energy policy statement was issued; the Company became the first domestic airline to establish a dedicated environmental organization and formulate policies. While pursuing business development, China Airlines recognizes the value and irreversibility of the global environment, and understands the corporation’s responsibility and obligation for protecting natural resources and environment. Based on this understanding, the Company established the four environmental and energy-management concepts and six environmental and energy policies according to the codes of practice for “Sustainable Environment Development” in the China Airlines Corporate Social Responsibility and Sustainable Development Best Practice Principles of the Board of Directors. The Company also referred to the UN’s SDGs while devising instructional strategies to ensure that the business operation direction is toward sustainable development, namely, environmental friendliness, low-carbon emissions, and energy conservation.

(4) Corporate Social Responsibility CAL's success today stands based on social support. Upholding our core philosophy of "giving back to society what we take from society," we at CAL continue to make social contributions aimed at creating love, while fulfilling our corporate responsibility in Taiwan. As a leader in Taiwan's aviation industry and a corporate citizen of Taiwan, the Company takes "continuous social value creation" as an important commitment for sustainable development. In 2020, the global aviation industry was severely impacted by COVID-19. China Airlines followed the pandemic prevention measures set out by the central government by reducing corporate interaction, educational sharing, and charity events. As the leading carrier in Taiwan, China Airlines is committed to social sustainable development and utilizes available resources. China Airlines sticks to the three main social strategies: Internationalize the local education, enhance Taiwan visibility on the global stage, and promote equal opportunity for the disadvantaged, and implements SDG3, SDG4, and SDG8 of the United Nations. China Airlines hopes to enhance the education quality in Taiwan, strengthen Taiwan's visibility in the world, assist the disadvantaged group in overcoming the difficulties, and create a sustainable society.

(5) Enterprise Risk Management Architecture and Process

China Airlines realizes the importance of risk management, and puts emphasis on the impacts it may bring. CAL's risk management framework complies with the Enterprise Risk Management (ERM) model, where a multi-level organizational approach is adopted to manage and control overall risks to CAL. The model emphasizes possible correlations between different risks, to reduce their overall impacts and achieve corporate sustainability. China Airlines' risk management is based on the materiality principle, which identifies traditional risks and mid-to-long-term strategic risks. By following the four main steps: identification, analysis, assessment, and control, China Airlines analyzes and assesses the impact of risk events on the Company. The Risk Committee and the Corporate Sustainability Committee were established to conduct regular follow-up and review. For risk identification, the aviation industry has its industrial specialty. Considering the operating environment and daily operation, the impacts, severity, and areas of the risk events are different. If a single mechanism is used for monitoring, the risk control result may be impacted. Therefore, China Airlines categorizes the risks into two levels: mid-to-long-term strategic risks and traditional short-term risks, which are monitored under two different systems: operating strategy management and annual sales plan/operational risk management. China Airlines also built up the new risk identification process. New risks have been identified through risk metrics. Regular risk review is conducted to formulate countermeasures in order to lower the impacts of new risks on the aviation industry.


F. Favorable and Unfavorable Factors in the Long Term (1) Favorable Factors The international air cargo industry continued to boom: Almost 90% of the world’s passenger flights were

grounded by the pandemic, while almost half of the air cargo delivery relied on belly hold of passenger aircraft, resulting in a crowded air cargo space and soaring freight rates due to the growing delivery demand of medical supplies, components, e-commerce goods, information and communications, and home economy. In 2020, revenue from cargo operations increased due to the launch of new electronic products and the surge in Q4 shopping. In 2021, the Company will continue to rely on air cargo deliveries to generate stable income as vaccine delivery and air cargo delivery are boosting. Global economy rebound: Many countries have received the vaccination, and the pandemic started to

ease in some of the countries. According to a poll conducted by Kekst CNC, an international consulting firm, people from six countries, including the United Kingdom, the United States, France, Sweden and Germany, are on a growing trend towards vaccination compared to December 2020. Along with the financial incentive policy in many countries, it is expected that the global market will rebound in 2021, which may benefit the aviation industry. Rapid development in Southeast Asia: since 2016, the Taiwanese government has promoted the New

Southbound Policy to strengthen its strategic partnership with 18 countries, including 10 ASEAN countries, 6 countries in South Asia and New Zealand and Australia, so as to increase the attractiveness of Taiwan for economic trade and tourism in the southern countries. This triggered higher growth of tourists coming from Southeast Asia before the pandemic. In addition, because of the global supply chain shift driven by the US-China trade and the COVID-19 that pushed the demands for passenger and cargo delivery in Southeast Asia, the Company planned to open a new Taoyuan-Philippines Cebu flight and Taoyuan-Thailand Chiang Mai flight in 2020, mainly focusing on the markets in Southeast Asia and the transit opportunity between North America and Southeast Asia. The flights will resume after the pandemic.

(2) Unfavorable Factors COVID-19 endless impact: The spread of the pandemic worsened in autumn and winter 2020. Border

control and epidemic prevention measures were more stringent in some countries. Even though the vaccines are available, their security and protection ability still need scientific proof and time. With the new variant coronavirus appearing, the travel restriction remains strict in most countries. IATA said that the number of passengers decreased by 5.4% in January compared to December, implying that the aviation industry did not secede from the COVID-19. Before the COVID-19 can be controlled, the aviation industry still needs to bear the financial burden. Unequal distribution of COVID-19 vaccines: While vaccines have been developed successfully, mass

vaccination on a global scale is an uphill task. In many wealthy developed countries, including the UK and the United States, large quantities of vaccines have been purchased, some exceeding the needs of the domestic population. The number of vaccines sourced in Canada is even more than 5 times sufficient for the population nationwide. However, several health experts have warned that this will cause a shortage of the vaccine in the COVAX mechanism, unable to assist front-line healthcare personnel and vulnerable groups in low- and middle-income countries to receive the protection required, leading to a global health emergency. The prolonged pandemic situation and predicted delay before herd immunity occurs are likely to have a significant impact on the timing of the recovery of the tourism and aviation industries. Unstable global economy: The global economy is affected by the outbreak of COVID-19, and the increase

in the unemployment rate, widening poverty and wealth due to different economies and industries. This causes social instability and drags down the recovery momentum of economic activities. Apart from the outbreak, geopolitical tensions, the continuance of protectionism, and the ongoing trade disruption between the United States and China have added to the uncertainties on the aviation industry's recovery.

(3) Response Measures Flexible adjustment of passenger and cargo routes: Ad hoc adjustments of passenger aircraft to carry cargo to support cargo demand for greater revenue. China Airlines continues to stay focus on the development of COVID-19 and border policy in each country. It adds flights according to the rising demand and strengthens the aviation network to remain good competency. At the same time, the Company will keep abreast of the operating trend of the airline alliance and consolidate its leading position in the market with its strengths. China Airlines also adjusts its business strategies in different seasons (Christmas, Easter, New Year, etc.) to create revenue. Increase air cargo flight revenue: As the border control loosened and the economy recovered, the long-haul cargo route has gradually gone back to normal. China Airlines has not only utilized the belly hold of passenger flights to carry cargo to achieve higher revenue in cargo delivery, but flights are also expected to resume and increase for the European routes. The transit point will be adjusted to increase revenue. 777F aircraft is planned to enter service in LAX route to improve and enlarge the cargo capacity for the US routes; As for routes in Asia, China Airlines will capture the opportunities in high-price charter service and new route demand. Capacity will be maximized for freighters to increase the cargoes carried


to enhance cargo delivery revenue. Optimize the fleet scale: China Airlines has optimized its fleet by replacing aging 744 passenger aircraft to reduce operating cost; Airbus A321neo narrow-body passenger aircraft is introduced in 2021 to replace Boeing 738 aircraft. The replacements have reduced carbon emission, saved more fuels, and become more environmentally friendly. The decline in unit cost will enhance the Company’s operating performance and competency. Three Boeing 777F are expected to be introduced from December 2020 to January 2021. The remaining three aircraft will be delivered before 2023. The fleet team will come to 21 aircraft by 2021, expecting to generate more freight revenue as the air cargo delivery demand and vaccine delivery remain strong. Safety measures for air traveling: To regain trust from passengers, China Airlines strictly follows the public health regulations promulgated by ICAO, IATA, ACI, and EASA. Various travel sanitation and safety tasks have been done on passenger service, aircraft, employee management and facilities. Other than the basic disease prevention measures such as temperature testing and wearing face masks, China Airlines actively elevated its disease prevention control by providing individual lunchbox, frequently sanitizing the luggage, reinforcing the aircraft cleaning, and improving the sanitization of the air-con system. China Airlines wants to guarantee tourists’ safety, improve the travel experience, and rebuild trust from the passengers.

Maintain robustness in finance: At the beginning of the COIVID-19 outbreak, China Airlines immediately adjusted its annual budget plan and canceled unnecessary spending. The capital was strictly controlled, and flexible labor deployment and personal leave projects were implemented to cut down on labor costs. In response to the large number of cancellations caused by COVID-19, credit facilities have been progressively raised since February 2020 to ensure a healthy capital turnover. To continuously utilize aircraft assets to generate working capital, in addition to the rental of an originally decommissioned Boeing 744F in 2019 to generate cash flow, China Airlines also continued to process the sale of the aging Boeing 738 aircraft and brought forward the decommission of the Boeing 744 passenger aircraft. In respect of the various relief measures provided by the government in the aviation industry, such as expenses reduction, subsidies, loan credit guarantees and interest subsidies, the Company continues to apply for these relief measures to alleviate operational pressures.

5.2.2 Procedures followed in the Production of Main Products A. Major Products and Their Main Uses

Major Products Main Uses Passenger services International passenger air transport and scheduled, non-scheduled, and charter flights. Cargo services International cargo, courier, mail, and package transport. In-flight sales Providing passengers with in-flight duty free sales services.

B. Major Products and Their Production Processes The Company is a member of the airline industry and not a manufacturer, so there is no production process in its operations.

5.2.3 Supply Status of Main Materials CAL is a member of the airline industry, not a manufacturer. Therefore, there is no need to produce raw materials. Aviation fuel makes up the largest proportion of operating costs. In addition to aviation fuel supplied at Taiwan Taoyuan Airport by CPC Corporation and Formosa Petrochemical Corporation, the Company also purchases fuel from large oil companies around the world at the various destinations served, so fuel supplies are very fragmented.

5.2.4 Major Suppliers and Clients A. Major Clients in the Last Two Calendar Years

CAL is a member of the airline industry and clients are members of the public.


B. Major Suppliers in the Last Two Calendar Years CPC Corporation, Chevron Corporation, and Formosa Petrochemical Corporation, etc.

Unit: NT$ thousands

Item

2019 2020

Company Name Amount %

Relation with

Issuer

Company Name Amount %

Relation with

Issuer

1 CPC Corporation 17,197,546 11.33 None CPC Corporation 7,927,738 7.55% None

2 Chevron Corporation 5,126,545 3.38 None Chevron Corporation 3,315,153 3.16% None

3 Formosa

Petrochemical Corporation

4,939,381 3.25 None Formosa

Petrochemical Corporation

2,466,270 2.35% None

Other 124,493,760 82.04 Other 91,322,188 86.94% Net Total 151,757,232 100.00 Net Total 105,031,349 100.00%

Reasons for changes:

Fuel is the Company’s primary operating expense. Overall, purchases have remained stable.

5.2.5 Production in the Last Two Years Unit: thousand kilometers Year

Capacity and Traffic 2019 2020 Rate of Increase

(Decrease) Available Seat Kilometers (ASK) 58,590,098 16,116,497 -72.49% Revenue Passenger Kilometers (RPK) 47,462,113 9,097,129 -80.83% Load Factor (%) 81.01% 56.45% -24.56 ppt Freight Available Ton Kilometers (FATK) 8,012,739 8,830,722 10.21% Freight Revenue Ton Kilometers (FRTK) 5,370,078 6,367,751 18.58% Load Factor (%) 67.02% 72.11% 5.09 ppt Available Ton Kilometers (ATK) 13,269,365 10,278,085 -22.54% Revenue Ton Kilometers (RTK) 9,627,913 7,184,503 -25.38% Load Factor (%) 72.56% 69.90% -2.66 ppt Note 1: The above data includes scheduled flights, charter flights, and extra flights. Note 2: The above data includes Mandarin Airlines and Tigerair Taiwan.

Reasons for Changes: In 2020, to prevent the spread of COVID-19, countries adopted border control, which decreased the commercial and travel demand. Available Seat Kilometer (thousand km) and Revenue Passenger Kilometer (thousand km) in 2019 dropped sharply. Due to the cancellation of passenger flights in each airline, the supply of cargo delivery plummeted. China Airlines utilized the belly hold of passenger flights to support the cargo delivery instead. Thus, the Freight Tonne-Kilometer (thousand km) and Freight Revenue Tonne Kilometer (thousand km) increased compared to 2019.

5.2.6 Shipments and Sales in the Last Two Years Unit: thousand kilometers; NT$ thousands

Item 2019 2020

RPK/FRTK Amount RPK/FRTK Amount Passenger Revenue 47,462,113 111,413,435 9,097,129 25,704,367 Cargo Revenue 5,370,078 43,793,256 6,367,751 81,917,976 Other Operating Revenue - 13,237,469 - 7,628,207 Total - 168,444,160 - 115,250,550 Note 1: The above data includes scheduled flights, charter flights, and extra flights. Note 2: The above data includes Mandarin Airlines and Tigerair Taiwan.

Reasons for Changes: Due to the impact of COVID-19 in 2020, the passenger flights were supported by inelastic demand, leading to a fundamental decline in passenger flight revenue; cargo delivery supply dropped as well due to the limited supply from the belly hold of passenger aircraft, causing the imbalance of supply and demand in the freight market. The fare rose accordingly. China Airlines has been pursuing the best combination of profit, utilizing cargo-only aircraft and belly hold of passenger aircraft to support the cargo delivery. Therefore, the revenue in air cargo rose by 87% in 2020 compared to 2019.


5.3 Human Resources Year 2019 2020 MAR 27, 2021

Number of Employees

Male 6,302 5,885 5,834 Female 5,937 5,505 5,425 Total 12,239 11,390 11,259

Average Age 41.40 42.72 42.97 Average Years of Service 14.00 15.35 15.58

Education

PhDs 0.09% 0.11% 0.11% Master’s Degrees 11.10% 12.02% 12.13%

Bachelor’s Degrees 82.63% 82.81% 82.75% Senior High School 5.89% 4.83% 4.78%

Below Senior High School 0.29% 0.24% 0.23%

5.4 Environmental Protection Expenditure

5.4.1 Total Losses and Penalties: None.

5.4.2 Company Countermeasures to Future Environmental Protection Issues A. ISO 14001 Environmental Management System and ISO 50001 Energy Management

System In order to integrate environmental protection operations into the daily operational risk management operations of the enterprise, China Airlines has introduced several international standard management systems (ISO 14064-1, ISO 14001, ISO 50001) since 2009, and has established and improved the environmental management operation mechanism of the enterprise, covering risk issues such as greenhouse gases, environmental management and energy management. The Company has formulated management strategies and action measures for relevant risks and opportunities identified in various aspects of the environment. (1)Management system operations

In 2017, we completed the revision of the ISO 14001: 2015 standard, incorporating the “life cycle thinking,” “stakeholder engagement,” “risk and opportunity management” and other aspects into the operation of the Corporate Environmental Management System (EMS). Following that, in 2019, we further developed ISO 50001:2018 version transferring operation, strengthening the identification and operation control of energy use, comprehensively reviewing and optimizing energy performance indicators, to fit into the international enterprise benchmark mode of thinking on sustainable development and governance.

(2)Value chain and outstation environment management In order to fully understand the global operational risks, the Company has initiated outstation risk/opportunity investigation and evaluation operation since 2018, strengthening the appreciation of international environmental-protection control trends, and ensuring the identification and handling of environmental energy-related risks and opportunities in operation. In 2019, we further focused on the current operational status of various issues of concern, and used best-case sharing to assist each station in seeking room for continuous improvement and implementing related operations. In addition to strengthening its own environmental sustainability management capacity, the Company also actively strengthens the sustainability value of the overall industrial chain. In 2018, it started the value chain environmental management operation and asked Group partners to set up environmental protection seeds, and by holding environmental/energy/carbon management workshop to promote Group partners’ understanding of the meaning and benefits of environmental/energy/carbon management. In 2019, it further improved the Group’s corporate environmental energy risk management capacity through environmental risk/opportunity investigation and communication meetings. In 2020, China Airlines further asked its value chain partners to promulgate appropriate policy on environment and energy. Management measures and monitoring tasks have been undertaken on key environmental impacts. More operating information was added (e.g., power/oil consumption) to reinforce the control and survey of the emissions. The Environmental Risk Analysis Result Briefing was held that invited the representative of partner companies and managers to demonstrate the result of the analysis and survey and share good practices.


(3) Green maintenance operation and pollution prevention In order to reduce the environmental impact of the Company’s maintenance operations, in addition to implementing and continuously improving the aforementioned risk management operations, the EMO (park maintenance) Environmental Management Committee under the Company’s Corporate Environmental Committee also tracks and inspects on a quarterly basis the results of the environmental management of the maintenance plant area, in order to comply with environmental regulations, international trends, headquarters policies, and corporate environmental sustainability obligations. For example, for heating boilers and spray-painting operations at maintenance facilities, air pollutant emission tests are carried out annually in accordance with relevant regulations, while air pollution prevention fees are reported quarterly. Meanwhile, its operating unit performs declaration and arranges fee payment in accordance with the regulations every year, and operates in accordance with the water pollution prevention measures plan, waste disposal plan and related permit documents, and actively follows the principles of source reduction, poison reduction, and end-of-pipe recycling, continuously improving and enhancing environmental performance and ecological benefits.

The Company performs a third-party audit of ISO 14001 and ISO 50001 annually. The audit for 2020 was completed on December 25, 2020. The Company is the second airline in the world and the first Taiwanese airline to obtain certification for ISO14001 and ISO50001 at the same time. The scope of certification is also the most complete in the domestic service industry.

B. Environmental KPI Controls The Company has followed the United Nations’ SDGs and set several short-, medium-, and long-term environmental protection and energy conservation objectives, including those for aviation fuel efficiency, ground carbon emissions, water consumption, domestic waste, business waste, and photocopy paper consumption. The five major environmental management committees and the carbon management task force develop and implement annual environmental protection KPI, and the Corporate Environmental Committee chaired by the President conducts the annual audit and review. The Company completed a total of 73 KPIs in 2020 and reduced carbon emissions by 48,888 tons CO2e. 69 KPIs are further planned in 2021, and it is expected to reduce the emissions by 48,756 tons of CO2e. Please refer to the Corporate Social Responsibility Report for more information: https://calec.china-airlines.com/csr/report.html

C. Strengthening adaptability to climate risks and opportunities In order to strengthen our understanding of climate-related risks and opportunities, in 2018, the Company signed an initiative to supporting the international Task Force on Climate-Related Financial Disclosures, TCFD, and launched project operations, through interviews, questionnaires, workshops, high-level forums, and other engagement processes, exploring the current or future climate risks and opportunities faced by business operations in different climate scenarios, and their potential impacts and corresponding costs, to gradually establish the Company’s climate risk and opportunity management mechanism. In 2020, the Climate-Related Financial Disclosure Report, the first-ever in the aviation industry, was made and reported to the Board of Directors. For other relevant activities, please refer to China Airline's CSR website/focus on climate change: https://ppt.cc/fTsUJx

D. Solidifying environmental management supervision mechanism The Company promotes environmental management supervision mechanisms. Each unit independently implements the first-level audit of environmental management; second-level audit of environmental management is implemented by the headquarters. The double-audit mechanism ensures that environmental management is implemented at basic level operations at all units. The Company has completed the second-level audit in 2020 Q2 and Q4. In addition to the checklist items, the audit components also included improvement over the previous audit findings, the extent of redressal of external stakeholders’ concerns and annual KPI implementation review.

E. Environmental education and training for all employees To implement the corporate environmental and energy philosophy of “implementing environmental and energy conservation education to foster employees’ environmental awareness,” as well as to achieve the goal of “environmental protection by all employees,” the Company has set


up an annual “environmental protection education campaign” for online or in-class environmental management education and training in Taiwan. The performance is as follows: (1)New employee and outstation supervisor environmental education and training implementation

rate is 100%. (2)The implementation rate of professional knowledge training on environmental/energy/carbon

management systems is 100%. (3)A total of 165 participants in the environmental protection forum for all employees on the

theme of climate change. (4)A total of 2,250 participants in interactive employee activities. (5)Published 24 promotional articles on the internal communication platform; set up “green

footprint” stickers on the ground and posters in the headquarters and maintenance park to convey information on 21 environmental protection measures, and set up plant identification placards.

F. Carbon Inventory and Reduction Project (1)Annual organization level greenhouse gas emission inventory operations

According to the ISO/CNS 14064-1 standard, the Company has conducted a greenhouse gas inventory each year since 2009, covering aviation, ground service and office administration operations, and also third-party verification operations in accordance with the requirements of “Reasonable Assurance”. The greenhouse gas emissions (Scope 1-2) in 2019 were 7,082,233 tons CO2e. In 2020, according to ISO14064-1:2018 standard, the Category 1-2 GHG emissions (ORIG Scope 1-2) were 5,808,374 tons CO2e, decreased by about 17.9%. In addition, according to the aforementioned standards, Category 3-6 were expanded and the emissions were 3,109,822 tons CO2e.

(2)EU ETS (European Emission Trading Scheme) operations According to the EU regulations, China Airlines' intra-EU flights emitted 62 tonnes of CO2 in 2020. After considering the operating condition and compliance, the financial unit sold its EU Emission Aviation Allowances (EUAA) in the account in 2019 and 2020 respectively. There are still 928 tonnes of CER (Certified Emission Reductions) available to partially offset the EUAA emission right. Further trading will be based on market demand and carbon pricing trends.

(3) CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) operation The Company follows the regulations of the Civil Aeronautics Administration and ICAO CORSIA SARPs, and has carried out monitoring, reporting, and verification (MRV) of carbon emission on international flights since 2019. The Company had completed the reporting and verification by the third party. On November 18, 2020, the Company received the verification approval notice from the Civil Aeronautics Administration. 77,293 international flights were verified in 2020, and the total emission was 6,339,661 tonnes.

G. Improving business eco-efficiency After obtaining the “Diamond Green Buildings Label” certification in 2017 for the headquarters of China Airlines, CAL Park, we continued to promote equipment renewal, optimize the operation process, and improve the overall energy efficiency of the buildings. In 2019, responding to the government’s green-energy policy, installed 99kW of solar photovoltaic facilities with grid-connected power generation on the rooftop of the simulator training building. As of December 31, 2020, these facilities had generated 215,000 kWh of electricity and reduced CO2e emissions by approximately 115 tons, and received National Renewable Energy Certificate(T-REC). These acts have fetched it the Energy Conservation Benchmark -- Silver Award of the Ministry of Economic Affairs, Bureau of Energy; Energy Conservation Leadership Award of Taipei City; No. 1 in Carbon Reduction and Electricity Conservation Reward Competition of Taoyuan Airport. Moreover, to reduce the risk of shortage of water resources, the Company has successively set up water meters at important water route nodes to track and analyze the flow direction of water


resources and water-consumption hot spots, and has promoted water-reduction and recycling measures, including: purchasing water-conservation label products, water-conservation advocacy, setting up a rainwater-recovery system, promoting cooling-water recycling and introducing Eco-Shine environment-friendly cleaning solution. The quantum of tap water used dropped from 146.49 kilotons in 2019 to 126.77 kilotons in 2020, a decrease of about 13.46%. Data relevant to this has been disclosed in the Company’s 2020 CSR report and authenticated by third parties. In waste management, the Company manages waste based on five main principles: refuse, reduce, reuse, recycle, and repair. And with the goal of 100% waste-resource recovery, the Company is increasing its waste reuse rate year by year. In addition, considering that waste management in aviation services involves a wide range of businesses, the Company has constituted a waste- management team in 2019. Service and supply, planning and quality assurance units, as well as aviation catering, cabin cleaning, and other suppliers and partners are invited to form a periodical communication platform, where all parties come together to analyze the trends in international aviation service waste management to discuss response strategies. Domestic waste output from employees in 2019 and 2020 were 702,966 kg and 462,897 kg, respectively, showing a decrease of approximately 34.1%. Data relevant to this has been presented in the Company’s 2020 CSR report and authenticated by a third party.

H. Promote Green Consumption The Company actively shares its environmentalism philosophy and implementation performance irregularly through different platforms, such as social networks and inflight magazines, to establish and promote the awareness of green consumption. In 2017, in a further effort to follow international trends, the Company started promoting voluntary carbon-offsetting program for passengers: the "ECO TRAVEL - Carbon Offsetting" service. Diversified electronic-friendly service platforms, including the official website, ticket-purchasing system, and travel reminders, are used to invite passengers to practice "zero-carbon" flying. In 2020, a total of 180 people took part in the carbon-offsetting program, in which a total of 293.93 metric tons of carbon was offset. Such performance exceeded all other Taiwanese companies in the same industry during the same period. Other actions to elevate and promote green consumption include: (1) Selecting six environmental films to play on airplanes. (2) Presenting three posts about environmental topics and reports on social media. (3) Interactive educational work, such as promoting closing of windows in summer. (4) Adding environmental products in the catalogue of home-delivery duty-free goods, and include

China Airlines' sustainability logo. (5) Collaborated with Zenzhou Social Enterprise Co., Ltd., to develop China Airlines Foldable Silicone

Cups, clinching the Special Award in the Environmental Sustainability category in the Buying Power competition organized by the Ministry of Economic Affairs.

I. Continue to Support International Environmental Protection Research Projects The Company is working with several environmental-protection organizations, including Environmental Protection Administration, National Central University, and the European Union’s IAGOS-ERI in the implementation of the Pacific Greenhouse Gases Measurement (PGGM) project. In June 2012, July 2016, and July 2017, IAGOS instruments were installed on the Company’s B-18806, B-18317 and B-18316 aircraft, respectively. Since then, atmospheric gas data has been automatically collected during flights. The data is observed by important Taiwanese and foreign research organizations to gain an understanding of the changes in high-altitude gasses. This facilitates the understanding of environmental quality changes and provides reference material for important decision-making platforms, such as the UNFCCC. During July 1, 2012 to December 31, 2020, atmospheric data collected from a total of 12,810 flights was collected, contributing to the ecosystems on Earth and enhancing Taiwan's image in the environmentalism field.


J. Transparent Disclosure of Environmental Protection Response and Performance Since 2012, the Company has been publishing its Corporate Social Responsibility (CSR) Report every year (former titles include Environmental Sustainability Report and Corporate Sustainability Report). The Company has also been establishing and updating the CSR network. It publicly and transparently discloses its sustainability governance strategies, as well as the results and performances in environmental, social, and financial aspects of its operations. The reports are an important tool and channel that facilitate discussion with stakeholders.

5.4.3 Countermeasures Unit: NT$ thousands Item

Year 2020 2021 2022 2023

Environmental protection equipment and maintenance costs (does not include depreciation) 13,968 14,000 14,000 14,000

Fees for wastewater equipment regular sampling inspections by inspection agencies and permitting 155 100 100 100

Waste disposal costs 3,854 4,000 4,000 4,000 Air pollution management costs 819 1,200 1,200 1,200 Aviation noise control fees (paid to the terminal based on airplane model and number of flights) 133,605 193,318 193,318 193,318

Fees for establishment of an environmental control system and strategic research project 1,616 4,000 4,000 4,000

Green procurement 10,199 20,000 20,000 20,000

5.4.4 Effect of Environmental Expenditure on Earnings Energy-saving equipment and improved management expenditure reduce both Company energy use and its operating costs.

5.4.5 Effect of Environmental Expenditure on Competitiveness Environmental performance has already become an important benchmark in achieving corporate social responsibility. With the rise in green consumers, actively investing in environmental improvements can positively improve our competitive position and improve brand image.


5.5 Labor Relations 5.5.1 Employee benefits, training, retirement program, and status of

implementation, and labor-management agreements and protection of employee rights and interests A. Good Labor-Management Relations

On May 4, 1988, the China Airlines Union was established. On July 29, 2011, in accordance with revisions to the Labor Union Act, it was renamed the “China Airlines Employee Union.” In 2002, a collective agreement was signed between labor and management, which is regularly negotiated and renewed.

B. Retirement Program and Pension Preparations (1) Labor Standards Act Old-Age Pension System

The Labor Pension Reserve Supervisory Committee of the Company was established in June 1987 in compliance with letter Bei-Shi-She-II-Zi No. 43791 from the Taipei City Government. In the past years, the appropriation and payment of pensions in the old system of Labor Standards Act were handled according to Labor Standards Act. In 2020, employees who may claim from the old system pension account constitute approximately 42.3% of the employees of the Company (42.9% of Company employees are subject to both new and old systems). The monthly appropriation rate of old system of pensions has been increasing year by year since 2014 and has risen to 15% since January 2016, reaching the statutory limit. For employees who meet the retirement qualifications of the Labor Standards Act and whose retirement has taken effect, the concerned unit will take the initiative to get the pension, and apply to the local government for expenditure approval and reference or submit to the Taiwan Bank for payment application according to relevant regulations of the government; it will notify the employees to receive the payment once the check is prepared. The deposit of pension reserve funds is supervised by the Labor Pension Reserve Supervisory Committee of the Company. The business unit regularly holds a pension supervision committee meeting once every three months to report on the use of the pension reserve funds to the members, including the estimated result of the next year’s appropriation, number of retirements each quarter, and designated pension reserve funds account balance, and exchange of retirement-related issues.

(2) Labor Pension Act New Pension System According to the Labor Pension Statutes promulgated by the government on June 30, 2004, in the order Zong-Tong-Hua-Zong-(I)-Yi-Zi No. 09300121821, for employees who are subject to statutes, new system pensions shall be appropriated monthly to the Bureau of Labor Insurance according to statutes starting from July 2005. In 2020, employees who can claim from the new system pension account constitute approximately 57.7% of the employees of the Company (31.6% of Company employees can avail benefits from both new and old systems). The new system pension appropriation rate is 6% per month, and is deposited into the employee's designated personal pension account at the Bureau of Labor Insurance. After the retirement conditions are met, the employee has to apply to the Bureau of Labor Insurance for payment.

C. Labor-Management Communications (1) Units in the Company with a relatively large number of employees, such as the maintenance

facility, Ground Services Division, Cabin Crew Division, Flight Operations Division, and Taipei and Kaohsiung branches hold regular communication meetings. In addition, elected union representatives attend regular company-wide labor-management conferences to improve understanding and communication.


(2) Establish an employee complaint mechanism and channels to ensure proper response: When employee rights have been violated or a situation is improperly handled, as mentioned in

the Regulations Governing Employee Complaints, a complaint can be lodged with the responsible operating unit or the Human Resources Division. If the employee is not satisfied with the response, he or she can appeal to the Human Resources Division. Eight written complaints from employees were handled in 2020.

D. Benefits (1) Employee care

Pension appropriation, labor and health insurance, employer liability insurance, group insurance, employee physical examination, and providing a nursing room.

(2) Employee stock ownership trust In August 1998, the Company set up an employee stock ownership trust, in which employees are free to participate. The amount, depending on the employee position, is deducted directly from their monthly salary. Through the end of 2020, a total of 2,112 employees participated.

(3) Profit sharing As per the Company charter, if the Company records a profit in a given year, it must set aside no less than three percent as employee bonuses. However, if the Company still has accumulated losses, it shall first retain a sum of money to make up for the shortage.

(4) Welfare system The Company’s Employee Welfare Committee was set up in December 1967. As stipulated by law, the Committee distributes benefits; handles the disbursement of wedding allowances, funeral allowances, disaster allowances, employee children excellence scholarships, birthday bonuses, and birth allowances; arranges visits to nursing homes, holds recreational sports activities, distributes meals and holiday gift certificates, and offers distress or purchase loans.

(5) Employee leisure Employee group activity subsidies, employee group travel subsidies, discounted tickets for current and former employees.

(6) Working environment Workplace compliance with occupational safety standards, gender equality.

E. Signing of Collective Agreement In 2019, the Company and the Pilots Union Taoyuan signed a collective agreement for the first time, effective for 3½ years. Since signing of the agreement with the China Airlines Corporate Union in 2002, it has been extended every 3 years. The two parties are currently negotiating the extension of the agreement, and the relevant negotiation records have been published on the Company’s internal enterprise information network.

F. Counseling To take care of our colleagues’ needs and participate in employees’ personal growth, the Company has employed professional counselors and psychiatrists to provide counseling services to employees. In 2020, there were a total of 75 counseling visits totaling 75 hours.

G. In addition to promoting employee education and training to enhance staff knowledge and skills, we also continue to accumulate knowledge and encourage exchange within the Company to build an organization for learning. Through the management personnel training program and the “China Airlines Lecture Hall” training system, the Company holds courses to improve employees’ strategic, management, professional, and general workplace skills.


(1) To encourage employees participate in various classes and self-study opportunities provided by the ROC Workforce Development Agency under the Ministry of Labor, the self-pay portions of the costs for such courses will be subsidized by the Company if work-related courses are completed by an employee.

(2)The Company participated in the “Enterprise Human Resource Enhancement Program” of the Workforce Development Agency, Ministry of Labor and received training subsidy of NT$312.375 million.

(3) Popularize and hold strategic work, management, professional and general skills courses. Marketing training:

including marketing strategies, customer operations, freight business and related OJT training, with a total of 216 in-person classes and 76 e-classes; a total of 9,477 people were trained. Professional technical classes:

including enterprise safety/inspection work, flight services, joint management and EMO, with a total of 2,202 in-person classes and 624 e-classes; a total of 104,887 people were trained. Service:

including service quality assurance, introduction to public relations, service business, ground- service operations, and inflight products, with a total of 307 in-person classes and 163 e-classes; a total of 21,737 people were trained. Other:

including investment management unit business, law and insurance, financial, information technology, and human-resources management, with a total of 87 in-person classes and 41 e-classes; a total of 32,803 people were trained.

5.5.2 CAL has formulated an employee code of conduct or ethical code and arranges pre-employment Employee Rights and Responsibilities classes for new hires. The main content of the Company’s Employee Code of Conduct is as follows: The Company’s Employee Code of Conduct primarily consists of workplace ethics, privacy, occupational safety, discrimination and harassment, moral integrity, media and public image, conflict of interest avoidance, anti-trust and fair competition, exchanging gifts and anti-corruption, CAL asset and intellectual property protections, reporting responsibilities, respect for human rights, and commitment to environmental protection. The Company includes an assessment and consideration of these items of workplace behavior in its annual evaluation; employees unable to respect or who violate these regulations governing workplace behavior are penalized as per the Company's regulations governing rewards and penalties, based on the severity of the offense.

5.5.3 Implementation of work environment and employee personal safety protection measures The Company has formed an Occupational Safety and Health Committee in accordance with law. The committee’s roles are preventing occupational hazards and protecting the safety and health of all employees by reviewing, coordinating, and making recommendations pertaining to safety and health-related matters. The Chairman is served by the President. There is one vice chairman and one executive secretary under the Chairman. The Committee consists of the head of designated units, occupational safety and health personnel, engineering and technical personnel, medical personnel, and labor representatives appointed by the labor union as members. Meetings are held once every three months to collate and analyze occupational hazards of the Company and to report and track the follow-up safety and health management plans. The relevant minutes are published on the Company’s internal corporate information website. Formulate and follow the Occupational Safety and Health Management Manual; to adapt to trends of global international labor development, improve the


efficiency of safety and health management, and promote systematic management measures, the Company established an independent safety and health management system and obtained ISO45001:2018 and TOSHMS certification on April 20, 2019, which serve as the management basis of occupational safety and health management system certification. Self-management and preventive measures based on the PDCA cycle mode are used to effectively control occupational disaster risk, improve occupational disease preventive management, improve occupational safety and health management performance, and actively implement occupational safety policies. The Company's Aviation Quality Database (AQD) is used to reflect potential hazards in the operating environment and implement risk assessment to reduce the occurrence of occupational disasters. The improvement rate of safety and health cases reached 100%, thereby providing employees with a safe, healthy and comfortable working environment and enhancing the Company's industry competitiveness. In response to the emerging epidemic, the Company actively strengthened the response to emerging infectious diseases, established cross-unit tiered mobilization mechanism, command system and operating procedures, integrated the related units’ common response, reminded employees to be alert, and activated the Company’s response mechanism according to the scale of the outbreak at the time. The Company has established a health management reporting system for employees with higher exposure risk levels (cabin crew), and handling mechanisms for abnormal reporting, remote working or adjusted schedules for ground service staff, strengthened various disease prevention advocacy, established cooperation mechanisms with relevant departments, established a cross-department communication platform, initiated multiple channels to provide real-time information, enhanced biohazard prevention awareness, conducted employee health education and training, preparation/management/use of epidemic prevention material, implemented risk management and control objectives to provide employees with a safe, healthy and comfortable working environment.

5.5.4 Over the most recent year through the date of the publication of this report, the estimated value of any losses or potential future losses due to labor disputes From 2020 to March 27, 2021, the Company was fined a total of NT$1.02 million by the government labor authorities for labor disputes or imperfections after labor inspections (please refer to P.73 for diversification). The Company will continue to maintain a genial interaction mechanism through diversified communication channels to achieve the goal of caring for employees’ welfare and to improving the quality of the work environment. Through comprehensive improvement to the satisfaction of employees of all categories, avoid issues that may arise from unnecessary labor disputes.

5.6 Major Contracts

Lease SASOFIV Aviation Ireland DAC 02/2006-02/2022 Aircraft Type:A330-300/No.:B-18351 - Lease SASOFIV Aviation Ireland DAC 02/2007-02/2023 Aircraft Type:A330-300/No.:B-18352 - Lease AerCap Ireland Ltd. 05/2008-05/2024 Aircraft Type:A330-300/No.:B-18353 - Lease Bluesky Magical 1001 Leasing Co. 11/2010-11/2022 Aircraft Type:A330-300/No.:B-18355 -

Lease MSN 1272&1278 Aircraft Leasing (Cayman) Ltd.

12/2011-12/2023 Aircraft Type:A330-300/No.:B-18356 -

Lease MSN 1272&1278 Aircraft Leasing (Cayman) Ltd.

01/2012-01/2024 Aircraft Type:A330-300/No.:B-18357 -

Lease AS Air Lease 83 Ireland Ltd. 10/2012-10/2024 Aircraft Type:A330-300/No.:B-18358 - Lease AS Air Lease 83 Ireland Ltd. 12/2012-12/2024 Aircraft Type:A330-300/No.:B-18359 - Lease Dianbao Aviation Leasing Ltd. 12/2013-12/2025 Aircraft Type:A330-300/No.:B-18360 -

Lease Wilmington Trust SP Services (Dublin) Ltd.

04/2013-04/2021 Aircraft Type:737-800/No.:B-18651 -





Lease Avolon Aerospace AOE 73 Ltd. 03/2014-03/2022 Aircraft Type:737-800/No.:B-18655 -


Lease Avolon Aerospace AOE 78 Ltd. 05/2014-05/2022 Aircraft Type:737-800/No.:B-18656 - Lease SMBC Aviation Capital (UK) Ltd. 06/2014-06/2022 Aircraft Type:737-800/No.:B-18657 - Lease Jade Aviation (Ireland) AOE 5 Ltd. 06/2014-06/2026 Aircraft Type:A330-300/No.:B-18361 - Lease FPG Amentum 10/2014-09/2026 Aircraft Type:777-300ER/No.:B-18051 - Lease Oriental Leasing 4 Company Ltd. 10/2014-10/2026 Aircraft Type:777-300ER/No.:B-18052 - Lease Zeus Aircraft Owner 1 Ltd. 11/2014-11/2026 Aircraft Type:777-300ER/No.:B-18053 - Lease Korea Investment & Securities (KIS) 01/2015-01/2027 Aircraft Type:777-300ER/No.:B-18055 - Lease Sky High XXXVII Leasing Company Ltd. 05/2015-05/2027 Aircraft Type:777-300ER/No.:B-18001 - Lease Sky High XXXVII Leasing Company Ltd. 06/2015-06/2027 Aircraft Type:777-300ER/No.:B-18002 - Lease Sky High XXXVII Leasing Company Ltd. 08/2015-08/2027 Aircraft Type:777-300ER/No.:B-18003 -



Lease ALC Blarney Aircraft Ltd. 10/2015-10/2023 Aircraft Type:737-800/No.:B-18659 - Lease Sky High XXXVII Leasing Company Ltd. 10/2015-10/2027 Aircraft Type:777-300ER/No.:B-18005 - Lease Zeus Aircraft Owner 2 Ltd. 01/2016-01/2028 Aircraft Type:777-300ER/No.:B-18006 - Lease UMB Bank N.A. 03/2016-03/2024 Aircraft Type:737-800/No.:B-18660 - Lease Zeus Aircraft Owner 3 Ltd. 05/2016-05/2028 Aircraft Type:777-300ER/No.:B-18007 - Lease Chilli Leasing LLC 09/2016-09/2024 Aircraft Type:737-800/No.:B-18661 - Lease Pacific Triangle Leasing Ltd. 09/2016-09/2024 Aircraft Type:737-800/No.:B-18662 - Lease BOC Aviation Ltd. 10/2016-10/2024 Aircraft Type:737-800/No.:B-18663 - Lease BOC Aviation Ltd. 11/2016-11/2024 Aircraft Type:737-800/No.:B-18665 - Lease BOC Aviation Ltd. 01/2017-01/2025 Aircraft Type:737-800/No.:B-18666 - Lease BOC Aviation Ltd. 02/2017-12/2025 Aircraft Type:737-800/No.:B-18667 - Lease Altitude Aircraft CAL I Ltd. 09/2019-113/09 Aircraft Type:A330-300/No.:B-18301 - Lease Altitude Aircraft CAL I Ltd. 09/2019-113/09 Aircraft Type:A330-300/No.:B-18302 - Lease Altitude Aircraft CAL I Ltd. 09/2019-113/09 Aircraft Type:A330-300/No.:B-18303 - Lease Altitude Aircraft CAL I Ltd. 09/2019-113/09 Aircraft Type:A330-300/No.:B-18305 - Lease Altitude Aircraft CAL I Ltd. 09/2019-113/09 Aircraft Type:A330-300/No.:B-18306 - Loan Taiwan Cooperative Bank 02/2008-02/2020 Aircraft Type:A330-300/No.:B-18317 - Loan Taipei Fubon Commercial Bank 10/2012-10/2019 Aircraft Type:737-800/No.:B-18610&B18617 - Loan Bank of Taiwan 12/2014-12/2019 Aircraft Type:747-400F/No.:B-18701 - Loan Hua Nan Commercial Bank 03/2015-03/2020 Unsecured Loan - Loan Mega International Commercial Bank 07/2015-07/2020 Aircraft Type:747-400F/No.:B-18711 - Loan Hua Nan Commercial Bank 06/2016-06/2021 Unsecured Loan - Loan E.SUN Commercial Bank 02/2020-02/2022 Unsecured Loan - Loan KGI Bank 02/2020-02/2022 Unsecured Loan - Loan Taishin International Bank 02/2020-02/2021 Unsecured Loan - Loan Bank SinoPac 02/2020-02/2023 Unsecured Loan - Loan Bank of Taiwan 07/2020-06/2022 Unsecured Loan - Loan Bank of Taiwan 10/2016-10/2028 Aircraft Type:A350-900/No.:B-18901 - Loan Bank of Communications 11/2016-11/2019 Unsecured Loan - Loan Bank of Communications 01/2017-01/2029 Aircraft Type:A350-900/No.:B-18902 - Loan Agricultural Bank of Taiwan 04/2017-04/2029 Aircraft Type:A350-900/No.:B-18905 - Loan Taiwan Business Bank 04/2017-04/2029 Aircraft Type:A350-900/No.:B-18905 - Loan Hua Nan Commercial Bank 06/2017-06/2029 Aircraft Type:A350-900/No.:B-18906 - Loan China Construction Bank Corporation 11/2017-11/2029 Aircraft Type:A350-900/No.:B-18903 - Loan Bank of Taiwan 04/2018-04/2030 Aircraft Type:A350-900/No.:B-18907 - Loan Hua Nan Commercial Bank 06/2020-06/2032 Aircraft Type:A350-900/No.:B-18917 - Loan Land Bank of Taiwan 06/2020-06/2032 Aircraft Type:A350-900/No.:B-18918 - Bills China Bills Finance Corporation 04/2016-04/2020 FRCP - Bills Mega Bills 07/2016-07/2020 FRCP - Bills International Bills Finance Corp. 09/2016-09/2020 FRCP - Bills China Bills Finance Corporation 04/2020-04/2023 FRCP - Bills International Bills Finance Corp. 03/2020-03/2025 FRCP - Bills China Bills Finance Corporation 05/2020-05/2023 FRCP -

Bills China Bills Finance Corporation and syndicate

12/2016-12/2020 FRCP Joint Underwriting, -

Bills China Bills Finance Corporation and syndicate



Bills Mega Bills and syndicate 11/2017-05/2021 FRCP Joint Underwriting, -

Bills International Bills Finance Corp. and syndicate


Surface Rights Registration Contract of Taipei CAL Building

Northern Region Branch of National Property Administration of the Ministry of Finance

12/31/2016-12/30/2026

Renew lease period for 10 years according to the original contract. Rental price adjustments are based on the assessment of the Announced Land Current Value and publicly announced land value.

-

Taipei CAL Building Lease Contract

FX Hotels Taiwan 09/01/99-12/30/2026

Rental subject: Located at No.131, Sec. 3, Nanjing E. Rd., Songshan Dist., Taipei City, CAL Building. Part of B1F 560.7 ㎡,1F 365.3㎡,10-13F 7,091 ㎡.Total 8,016.9 ㎡. 9 parking space at B1F

-

Taipei CAL Building Lease Contract

OEC Freight Worldwide Co., Ltd. of the OEC Group

03/01/2016-12/31/2026

Rental subject: Located at No.131, Sec. 3, Nanjing E. Rd., Songshan Dist., Taipei City, CAL Building. 7F 1,796.8㎡, part of B1F 50.4㎡ 1 parking space at B1F, 12 parking spaces at B2F.

-

Nankan CAL Park Land Lease Contract

Costco President Taiwan Inc.

Inception of the lease: 08/30/2012

Period of leasing: 20 years from the start of

lease

Rental subject: Land located at No.705 and No.705-1 Jinzhong part, Lujhu Dist., Taoyuan City. Total 27,709.21 ㎡

In accordance

with notarized

text

Kaohsiung CAL Building Lease Contract

FX Hotels Taiwan 12/31/2012-12/30/2032

Rental subject: Located at No.81, Zhonghua 3rd Rd., Qianjin Dist., Kaohsiung City. B1F 383.2 ㎡, 1F 336.8 ㎡, mezzanine 79.4 ㎡, 2F-12F 3,583.3㎡, Roof protrusion 117.2 ㎡. Total 4,499.9 ㎡

-

CAL Park Building Lease Contract

CAL Park Co., Ltd.

01/01/2019-12/31/2021 The contract will be

automatically renewed for one year on the expiration of

this period and contract renewed every two years.

Rental subject: Administration Center Building, Crew Center Building, Flight Training Center Building, Basement Parking Lot. Total 83107.4 ㎡.

-

Engineering consulting company commissioned technical service category

T.Y.Lin Taiwan Consulting Engineers. inc. 03/01/2019-11/30/2020

Renew lease period for 10 years according to the original contract. Rental price adjustments are based on the assessment of the Announced Land Current Value and publicly announced land value.

-

Technical Cooperation Contract

Pratt & Whitney Effective from 12/18/2020,

with no expiry date.

Became a member of GTF Engine Repair Alliance and undertook the GTF-1100G engine maintenance business.

-

Financial Information 115

Financial Information 6.1 Five-Year Financial Summary

6.2 Five-Year Financial Analysis

6.3 Consolidated Financial Statements for the Years

Ending December 31, 2020 and 2019, and

Independent Auditors’ Report

6.4 Parent Company Only Financial Statements for the

Years Ending December 31, 2020 and 2019 and

Independent Auditors’ Report

6.5 Audit Committee’s Review Report

116 Financial Information

VI. Financial Information 6.1 Five-Year Financial Summary 6.1.1 Consolidated Condensed Balance Sheet – Based on IFRS

Unit: NT$ thousands Year

Item Financial Summary for the Last Five Years (Note 1)

2016 (Note 2) 2017 (Note 3) 2018 (Note 4) 2019 (Note 5) 2020 (Note 6) Current assets 47,338,201 47,411,834 52,827,560 51,822,342 61,872,468 Property, plant and equipment 140,136,737 153,617,531 163,107,718 145,886,971 141,481,694 Intangible assets 1,137,115 1,019,345 1,210,796 1,182,692 1,076,351 Other assets 35,888,706 23,850,922 12,990,508 94,155,974 79,763,571 Total assets 224,500,759 225,899,632 230,136,582 293,047,979 284,194,084 Current liabilities

Before distribution 68,605,724 60,289,113 60,949,892 76,351,527 62,649,715 After distribution 68,605,724 61,482,783 62,086,170 76,351,527 -

Non-current liabilities 98,027,837 106,453,000 109,139,606 156,564,335 160,832,796 Total liabilities


Equity attributable to shareholders of the parent

55,783,817 57,023,237 57,081,572 56,553,772 57,559,483

Capital stock 54,708,901 54,709,846 54,209,846 54,209,846 54,209,846 Capital surplus

Before distribution 799,932 799,999 1,241,214 2,488,907 1,187,327 After distribution 799,932 799,999 1,241,214 1,191,065 -

Retained earnings

Before distribution 206,092 1,664,405 1,615,661 (1,297,842) (350,581) After distribution 206,092 470,735 479,383 - -

Other equity interest 112,264 (107,641) 58,223 1,196,233 2,543,766 Treasury shares (43,372) (43,372) (43,372) (43,372) (30,875) Non-controlling interest 2,083,381 2,134,282 2,965,512 3,578,345 3,152,090 Total equity


Note 1: 2016-2020 annual financial information was verified by Deloitte & Touche. Note 2: The 2016 Deficit Compensation Proposal was passed at the shareholder meeting held on June 22, 2017, with legal reserve bonds of NT$81,132,000 and

reversal of special reserve of 76,486,000 making up the shortfall. Note 3: In relation to 2017 surplus earnings distribution, after approval by the general meeting on June 27, 2018, the legal reserve appropriated was

NT$145,831,000, the special reserve appropriated was NT$118,810,000 and the cash dividend distributed was NT$1,193,670,000. Note 4: In relation to 2018 surplus earnings distribution, after approval by the general meeting on June 25, 2019, the legal reserve appropriated was NT$

114,493,000, the cash dividend distributed was NT$1,136,278,000, and reversal of special reserve of NT$105,843,000. Note 5: The 2019 Deficit Compensation Proposal was passed at the shareholder meeting held on June 23, 2020, with legal reserve bonds of NT$466,416,000,

special reserve of NT$12,967,000 and capital reserve of NT$1,297,843,000 to make up the losses. Note 6: The 2020 deficit make-up plan was approved by the 15th meeting of the 21st Board of Directors on March 18, 2021, but has yet to be approved at the

shareholders’ general meeting.


6.1.2 Consolidated Condensed Statement of Comprehensive Income – Based on IFRS

Unit: NT$ thousands; EPS (net) = NT$ Year


2016 2017 2018 2019 2020 Revenue 141,079,107 156,121,785 170,711,607 168,444,160 115,250,550 Gross profit 18,005,906 21,972,411 17,207,531 16,686,928 10,219,201 Operating profit 4,564,687 8,826,160 4,022,383 2,665,821 2,184,416 Non-operating income and expenses (2,684,836) (5,302,197) (941,134) (2,762,638) (2,838,213) Pretax profit (loss) 1,879,851 3,523,963 3,081,249 (96,817) (653,797) Income from operations of continued segments - after tax

710,940 2,490,792 2,272,684 (675,002) (279,814)

Income from discontinued operations - - - - - Net income (loss) 710,940 2,490,792 2,272,684 (675,002) (279,814) Other comprehensive income (income/loss after taxes)

(681,669) (1,113,176) (578,363) 462,758 864,072

Total comprehensive gain (loss) for the year 29,271 1,377,616 1,694,321 (212,244) 584,258 Net income attributable to shareholders of the parent 571,540 2,208,066 1,790,361 (1,199,798) 140,000 Net income attributable to non-controlling interest 139,400 282,726 482,323 524,796 (419,814) Comprehensive income attributable to Shareholders of the parent

26,103 1,240,677 1,258,035 (647,085) 966,968

Comprehensive income attributable to non-controlling interest

3,168 136,939 436,286 434,841 (382,710)

Earnings (Loss) per share 0.10 0.40 0.33 (0.22) 0.03 Note 1: 2016-2020 annual financial information was verified by Deloitte & Touche.


6.1.3 Condensed Balance Sheet – Based on IFRS (Parent Company Only) Unit: NT$ thousands

Year Item

Financial Summary for the Last Five Years (Note 1) 2016 (Note 2) 2017 (Note 3) 2018 (Note 4) 2019 (Note 5) 2020 (Note 6)

Current assets 39,908,492 37,933,696 42,932,859 40,989,612 51,858,785 Property, plant and equipment 129,121,632 142,265,548 149,029,054 131,029,886 126,414,462 Intangible assets 1,115,101 989,327 979,708 971,298 867,453 Other assets 41,394,218 30,729,421 21,972,600 95,885,709 81,769,065 Total assets 211,539,443 211,917,992 214,914,221 268,876,505 260,909,765

Current liabilities

Before distribution

64,339,805 54,925,364 55,179,834 68,000,173 56,740,010

After distribution

64,339,805 56,119,034 56,316,112 68,000,173 -

Non-current liabilities 91,415,821 99,969,391 102,652,815 144,322,560 146,610,272

Total liabilities

Before distribution

155,755,626 154,894,755 157,832,649 212,322,733 203,350,282

After distribution

155,755,626 156,088,425 158,968,927 212,322,733 -

Equity attributable to shareholders of the parent

55,783,817 57,023,237 57,081,572 56,553,772 57,559,483

Capital stock 54,708,901 54,709,846 54,209,846 54,209,846 54,209,846

Capital surplus

Before distribution

799,932 799,999 1,241,214 2,488,907 1,187,327

After distribution

799,932 799,999 1,241,214 1,191,065 -

Retained earnings

Before distribution

206,092 1,664,405 1,615,661 (1,297,842) (350,581)

After distribution

206,092 470,735 479,383 - -

Other equity interest 112,264 (107,641) 58,223 1,196,233 2,543,766 Treasury shares (43,372) (43,372) (43,372) (43,372) (30,875) Non-controlling interest - - - - -

Total equity

Before distribution

55,783,817 57,023,237 57,081,572 56,553,772 57,559,483

After distribution

55,783,817 55,829,567 55,945,294 56,553,772 -

Note 1: 2016-2020 annual financial information was verified by Deloitte & Touche. Note 2: The 2016 Deficit Compensation Proposal was passed at the shareholder meeting held on June 22, 2017, with legal reserve bonds of NT$81,132,000 and

reversal of special reserve of 76,486,000 making up the shortfall. Note 3: In relation to 2017 surplus earnings distribution, after approval by the general meeting on June 27, 2018, the legal reserve appropriated was

NT$145,831,000, the special reserve appropriated was NT$118,810,000 and the cash dividend distributed was NT$1,193,670,000. Note 4: In relation to 2018 surplus earnings distribution, after approval by the resolution of the general meeting on June 25, 2019, the legal reserve

appropriated was NT$ 114,493,000, the cash dividend distributed was NT$1,136,278,000, and reversal of special reserve of NT$105,843,000. Note 5: The 2019 Deficit Compensation Proposal was passed at the shareholder meeting held on June 23, 2020, with legal reserve bonds of NT$466,416,000,

special reserve of NT$12,967,000 and capital reserve of NT$1,297,843,000 to make up the losses. Note 6: The 2020 deficit make-up plan was approved by the resolution of the 15th meeting of the 21st Board of Directors on March 18, 2021, but has yet to be

approved at the shareholders’ general meeting.


6.1.4 Condensed Statement of Comprehensive Income – Based on IFRS (Parent Company Only)

Unit: NT$ thousands; EPS (net) = NT$ Year


2016 2017 2018 2019 2020 Revenue 127,524,864 139,815,211 150,264,792 146,372,401 106,327,123

Gross profit 15,275,980 17,966,397 12,649,836 11,364,235 11,136,944

Operating profit 4,475,707 7,358,114 1,847,567 80,235 4,884,855

Non-operating income and expenses

(2,938,456) (4,269,911) 468,064 (1,267,561) (4,713,760)

Pretax profit (loss) 1,537,251 3,088,203 2,315,631 (1,187,326) 171,095

Income from operations of continued segments - after tax

571,540 2,208,066 1,790,361 (1,199,798) 140,000

Income from discontinued operations

- - - - －

Net income (loss) 571,540 2,208,066 1,790,361 (1,199,798) 140,000

Other comprehensive income (income/loss after tax)

(545,437) (967,389) (532,326) 552,713 826,968

Total comprehensive gain (loss) for the tear

26,103 1,240,677 1,258,035 (647,085) 966,968

Net income attributable to shareholders of the parent

0.10 0.40 0.33 (0.22) 0.03

Note 1: 2016-2020 annual financial information was verified by Deloitte & Touche.

6.1.5 Condensed Balance Sheet – Based on ROC GAAP (Parent Company Only): Not Applicable.

6.1.6 Condensed Statement of Comprehensive Income – Based on ROC GAAP (Parent Company Only): Not Applicable.

6.1.7 Auditors’ Opinions from 2015 to 2020 Year Accounting Firm Name of CPA Audit Opinion

2016 Deloitte & Touche Yang, Chen-Hsiu; Chen, Li-Chi Unqualified Opinion 2017 Deloitte & Touche Yang, Chen-Hsiu; Chen, Li-Chi Unqualified Opinion 2018 Deloitte & Touche Yang, Chen-Hsiu; Huang, Jui-chan Unqualified opinions and other matters (Note 1) 2019 Deloitte & Touche Huang, Jui-chan; Cheng, Shiuh-Ran Unqualified opinions and other matters (Note 1) 2020 Deloitte & Touche Huang, Jui-chan; Cheng, Shiuh-Ran Unqualified opinions and other matters (Note 1)

Note 1: The financial statements and related information of some subsidiaries have not been audited by Deloitte & Touche since 2018; they have been audited by other accountants. The information on how the Company’s equity-accounted investments and overall gains are affected is explained in the paragraphs on "other matters".


6.2 Five-Year Financial Analysis 6.2.1 Consolidated Financial Analysis – Based on IFRS

Year

Item (Note 2)

Financial Summary for the Last Five Years (Note 1)

2016 2017 2018 2019 2020

Financial structure (%)

Debt ratio 74.22 73.81 73.91 79.48 78.64

Ratio of long-term capital to property, plant, and equipment

111.24 107.81 103.73 148.54 156.59

Solvency (%) Current ratio 69.00 78.64 86.67 67.87 98.76

Quick ratio 53.16 59.46 67.50 54.57 84.18

Interest earned ratio (times) 265.40 369.02 338.05 103.79 74.92

Operating performance

Accounts receivable turnover (times) 17.67 18.40 18.30 18.13 12.64

Average collection period 20.66 19.84 19.95 20.13 28.87

Inventory turnover (times) - - - - -

Accounts payable turnover (times) - - - - -

Average days in sales - - - - -

Property, plant, and equipment turnover (times)

1.05 1.06 1.08 1.09 0.80

Total assets turnover (times) 0.63 0.69 0.75 0.64 0.40

Profitability

Return on total assets (%) 0.80 1.60 1.48 0.76 0.75

Return on stockholders' equity (%) 1.20 4.26 3.81 (1.12) (0.46)

Pre-tax income to paid-in capital (%) 3.44 6.44 5.68 (0.18) (1.21)

Profit ratio (%) 0.50 1.60 1.33 (0.40) (0.24)

Earnings per share (NT$) 0.10 0.40 0.33 (0.22) 0.03

Cash flow Cash flow ratio (%) 25.71 47.35 44.34 49.15 15.52

Cash flow adequacy ratio (%) 303.17 351.58 366.94 518.35 579.32

Cash reinvestment ratio (%) 4.83 8.82 8.17 12.24 2.98

Leverage Operating leverage 4.99 3.16 6.00 14.20 16.28

Financial leverage 1.40 1.18 1.52 (3.95) (2.50)

Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%)

1. Solvency ratios: Mainly due to the decrease in receipts in advance as compared to the previous period due to the impact of COVID-19 in 2020, resulting in a

decrease in current liabilities.

2. Operating and profitability ratios: Mainly due to the significant decrease in passenger revenue as compared to the previous period due to the impact of

COVID-19 in 2020, resulting in a decrease in sales revenue and operating profit.

3. Cash flow ratios: Cash flow from operating activities decreased as compared to the previous period due to the impact of COVID-19 on passenger

transportation in 2020. 4. Financial leverage: Mainly due to the impact of COVID-19 in 2020, operating profit decreased as compared to the previous period.


6.2.2 Financial Analysis – Based on IFRS (Parent Company Only) Year

Item (Note 2)

Financial Summary for the Last Five Years (Note 1)

2016 2017 2018 2019 2020

Financial structure (%)

Debt ratio 73.63 73.09 73.44 78.97 77.94 Ratio of long-term capital to fixed assets

114.00 110.35 107.18 153.31 161.51

Solvency (%) Current ratio 62.03 69.06 77.81 60.28 91.40 Quick ratio 45.82 49.03 57.87 45.87 76.90 Interest earned ratio (times) 246.03 350.56 292.02 60.78 99.48

Operating performance

Accounts receivable turnover (times)

15.92 16.62 16.57 16.72 12.34

Average collection period 22.92 21.96 22.46 21.83 29.57 Inventory turnover (times) - - - - - Accounts payable turnover (times) - - - - - Average days in sales - - - - - Fixed assets turnover (times) 1.03 1.03 1.03 1.05 0.83 Total assets turnover (times) 0.61 0.66 0.70 0.61 0.40

Profitability

Return on total assets (%) 0.75 1.54 1.33 0.51 0.89 Return on stockholders' equity (%) 1.00 3.91 3.14 (2.11) 0.25 Pre-tax income to paid-in capital (%) 2.81 5.64 4.27 (2.19) 0.32 Profit ratio (%) 0.45 1.58 1.19 (0.82) 0.13 Earnings per share (NT$) 0.10 0.40 0.33 (0.22) 0.03

Cash flow Cash flow ratio (%) 26.71 47.41 43.61 48.16 24.19 Cash flow adequacy ratio (%) 309.01 357.86 381.09 557.30 610.31 Cash reinvestment ratio (%) 4.94 8.48 7.68 11.34 4.50

Leverage Operating leverage 4.85 3.46 11.25 372.72 7.15 Financial leverage 1.38 1.21 3.45 (0.03) 2.32

Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%) 1. Solvency ratios: Mainly due to the decrease in receipts in advance as compared to the previous period due to the impact of COVID-19 in 2020, resulting in a

decrease in current liabilities. 2. Operating ratios: Mainly due to a significant decrease in passenger revenue as compared to the previous period due to the impact of COVID-19 in 2020,

resulting in a decrease in sales revenue. 3. Profitability ratios: Mainly due to the increase in global demand for cargo transportation in 2020, resulting in an increase in operating profit as compared to

the previous period. 4. Cash flow ratios: Cash flow from operating activities decreased as compared to the previous period due to the impact of COVID-19 on passenger

transportation in 2020. 5. Leverage ratios: Mainly due to the impact of COVID-19 in 2020, the passenger income decreased as compared to the previous period and the operating profit

increased as compared to the previous period. Note 1: 2016-2020 annual financial information was verified by Deloitte & Touche. Note 2: The calculations of the above financial ratios are based on the following formulas:

1. Financial structure (1) Debt ratio = total liabilities / total assets (2) Ratio of long-term capital to property, plant, and equipment = (total shareholders' equity + non-current liabilities) / net property, plant, and

equipment 2. Solvency

(1) Current ratio = current assets / current liabilities (2) Quick ratio = (current assets – inventory – prepaid expenses) / current liabilities (3) Interest earned ratio (times) = earnings before interest and taxes / interest expenses

3. Operating performance (1) Accounts receivable turnover (including accounts receivable and notes receivable arising from business activities) = net sales / average accounts

receivable (including accounts receivable and notes receivable arising from business activities) (2) Average collection period = 365 / average accounts receivable turnover (3) Inventory turnover = cost of goods sold / average inventory (4) Accounts payable turnover (including accounts payable and notes payable arising from business activities) = cost of goods sold / average

accounts payable (including accounts payable and notes payable arising from business activities) (5) Average inventory turnover days = 365 / inventory turnover ratio (6) Property, plant, and equipment turnover = net sales / net property, plant, and equipment (7) Total asset turnover = net sales / average total assets

4. Profitability (1) Return on total assets = [net income + interest expense x (1 - effective tax rate)] / average total assets (2) Return on stockholders’ equity = net income / average stockholders’ equity (3) Net margin = net income / net sales (4) Earnings per share = (net income attributable to owners of the parent – preferred stock dividends) / weighted average number of shares

outstanding 5. Cash flow

(1) Cash flow ratio = net cash flows from operating activities / current liabilities (2) Cash flow adequacy ratio = five-year sum of net cash flows from operating activities / five-year sum of (capital expenditures + increase in

inventory + cash dividends) (3) Cash flow cash reinvestment ratio = (net cash flows from operating activities – cash dividends) / (gross property, plant, and equipment +

long-term investments + other non-current assets + working capital) 6. Leverage

(1) Operating leverage = (net sales – variable operating costs and expenses) / operating profit (2) Financial leverage = operating profit / (operating profit – interest expenses)


6.2.3 Consolidated Financial Analysis – Based on ROC GAAP: Not Applicable.

6.2.4 Financial Analysis – Based on ROC GAAP (Parent Company Only): Not Applicable.

6.3 Consolidated Financial Statements for the Years Ended December 31, 2020 and 2019, and Independent Auditors’ Report: Please refer to Appendix 1.

6.4 Parent Company Only Financial Statements for the Years Ended December 31, 2020 and 2019, and Independent Auditors’ Report: Please refer to Appendix 2.


6.5 Audit Committee’s Report Audit Committee’s Report

The Board of Directors shall prepare and send (1) the 2020 consolidated financial statement and

individual financial statement that have been jointly audited by Deloitte CPAs Huang, Jui-Chan and

Cheng, Shiuh-Ran, who released an official unqualified opinion by March 18, 2021, and (2) the 2020

business report and Earnings Distribution Statement after having found to have no discrepancies by

this audit committee and, thereupon, issue a report in accordance with the items stipulated in Article

14-4 of the Securities and Exchange Act and Article 219 of the Company Act.

China Airlines

Convener of the audit committee: Chang, Hsieh Gen-Sen

March 18, 2021

124 Review of Financial Conditions, Financial Performance, and Risk Management

Review of Financial Conditions, Financial Performance, and Risk Management 7.1 Analysis of Financial Status

7.2 Analysis of Operation Results

7.3 Analysis of Cash Flow

7.4 Major Capital Expenditure Items

7.5 Investment Policy Last Year, Main reasons for Profits/ Losses, Improvement Plans and Investment Plans for the Coming Year

7.6 Analysis of Risk Management

Review of Financial Conditions, Financial Performance, and Risk Management 125

VII. Review of Financial Conditions, Financial Performance, and Risk Management

7.1 Analysis of Financial Status (Consolidated) Analysis of changes in assets, liabilities, and equity over the past two years: Unit: NT$ thousands

Year Item 2020 2019

Difference

Amount %

Current assets 61,872,468 51,822,342 10,050,126 19.39

Property, plant and equipment 141,481,694 145,886,971 (4,405,277) (3.02)

Intangible assets 1,076,351 1,182,692 (106,341) (8.99)

Other assets 79,763,571 94,155,974 (14,392,403) (15.29)

Total assets 284,194,084 293,047,979 (8,853,895) (3.02)

Current liabilities 62,649,715 76,351,527 (13,701,812) (17.95)

Non-current liabilities 160,832,796 156,564,335 4,268,461 2.73

Total liabilities 223,482,511 232,915,862 (9,433,351) (4.05)

Capital stock 54,209,846 54,209,846 - -

Capital surplus 1,187,327 2,488,907 (1,301,580) (52.30)

Retained earnings (350,581) (1,297,842) 947,261 72.99

Other equity 2,543,766 1,196,233 1,347,533 112.65

Treasury shares (30,875) (43,372) 12,497 28.81

Non-controlling interests 3,152,090 3,578,345 (426,255) (11.91)

Total equity 60,711,573 60,132,117 579,456 0.96 Analysis of changes in financial ratios: 1. Assets: Mainly due to the impact of COVID-19 in 2020, to ensure the availability of funds, credit facilities and issuance of commercial

papers were gradually increased, resulting in an increase in current assets. Also, the annual amortization of the right-of-use assets reduces other assets once IFRS 16 is applied.

2. Liabilities: Mainly due to a significant decrease in receipts in advance due to the impact of COVID-19 in 2020, resulting in a decrease in contract liabilities of NT$15,841 million as compared to the previous period.

3. Capital surplus: Mainly to make up the accumulated losses of NT$1,298 million in 2019. 4. Other equity: Mainly due to the changes in the fair value of financial assets and hedging instruments measured by fair value through

other comprehensive income. Future response actions: The above changes do not significantly affect the Company.

7.2 Analysis of Financial Performance (Consolidated) Financial Performance Analysis Table Unit: NT$ thousands

Year Item 2020 2019

Difference Amount %

Revenue 115,250,550.00 168,444,160.00 (53,193,610.00) (31.58)

Cost 105,031,349.00 151,757,232.00 (46,725,883.00) (30.79)

Gross profit 10,219,201.00 16,686,928.00 (6,467,727.00) (38.76)

Operating expenses 8,034,785.00 14,021,107.00 (5,986,322.00) (42.70)

Operating income (loss) 2,184,416.00 2,665,821.00 (481,405.00) (18.06)

Non-operating income and expenses (2,838,213.00) (2,762,638.00) (75,575.00) (2.74)

Pretax profit (loss) (653,797.00) (96,817.00) (556,980.00) (575.29)

Income tax expense (373,983.00) 578,185.00 (952,168.00) (164.68)

Net income (loss) (279,814.00) (675,002.00) 395,188.00 58.55

Other comprehensive income 864,072.00 462,758.00 401,314.00 86.72

Total comprehensive gain (loss) for the year 584,258.00 (212,244.00) 796,502.00 375.28 Analysis of changes in financial ratios: 1. Operating revenue, gross profit, costs, expenses and profit or loss before tax: Due to the impact of COVID-19 in 2020, passenger revenue

and related costs decreased significantly as compared to the previous period. 2. Income tax and post-tax profit or loss: The impact of COVID-19 in 2020 resulted in a loss for most of the subsidiaries and income tax

benefit recognized. 3. Other comprehensive income (net): Mainly due to changes in the fair value of financial assets and hedging instruments assessed by fair

value of other comprehensive profit and loss cases. 4. Total comprehensive income for the period: The combined effects of the descriptions of 1, 2, and 3.


7.3 Analysis of Cash Flow (Consolidated) 7.3.1 Cash Flow Analysis for the Current Year

Unit: NT$ thousands Year

Item 2020 2019 Difference

Amount % Cash and Cash Equivalents, Beginning of Year 28,459,528.00 24,937,537 3,521,991.00 14.12 Net Cash Flow from Operating Activities 9,723,475.00 37,526,612 (27,803,137.00) (74.09) Net Cash Flow from Investing Activities (25,048,173.00) (16,053,122) (8,995,051.00) (56.03) Net Cash Flow from Financing Activities 13,869,177.00 (17,614,558) 31,483,735.00 178.74 Exchange Rate Adjustment 121,930.00 (336,941) 458,871.00 136.19 Cash and Cash Equivalents, End of Year 27,125,937.00 28,459,528 (1,333,591.00) (4.69)

Analysis of change in cash flow in the current year: 1. The difference in cash flow from operating activities was mainly due to the impact of the COVID in 2020, resulting in a significant decrease

in receipts in advance as compared to the previous period. 2. The difference in cash flow from investment activities was mainly due to the settlement of 777F aircraft and designated USD deposits as

hedging instruments to reduce the USD exchange rate risk. 3. The difference in cash flow from financing activities was mainly due to financing to borrow funds for disease-related projects from the

government to ensure the availability of funds. 7.3.2 Remedy for Cash Deficit and Liquidity Analysis: None. 7.3.3 Cash Flow Analysis for the Coming Year

The cash balance at the beginning of the period was approximately NT$20.0 billion, the expected net cash inflow from operating activities for the year was approximately NT$18.7 billion. Cash outflow from investing activities was NT$18.0 billion, and cash outflow from financing activities was NT$20.6 billion. The cash shortage is expected to be financed by the issuance of domestic unsecured convertible corporate bonds, medium-term commercial paper and medium-term credit loans of approximately NT$21.0 billion, with a balance of NT$21.1 billion at the end of the period.

7.4 Major Capital Expenditure Items (Parent Company Only) Major capital expenditures primarily include purchases of new airplanes as part of the operational expansion, which does not have a significant impact on the Company’s financial operations.

7.5 Investment Policy during the Last Year, Main reasons for Profits/ Losses, Improvement Plans and Investment Plans for the Coming Year To support our primary airline operations and enhance competitiveness of the CAL Group, investments are made primarily in airline industry-related companies. Currently, these include air transport, ground services, logistics and warehousing, air cargo terminals, airline catering, laundry, information networks, aeronautics, tourism services, and investing and leasing industries to create a comprehensive air service network and wide-ranging services. Due to the year-long impact of the COVID-19 epidemic in 2020, the Company’s loss on investments accounted for using the equity method amounted to approximately NT$1.85 billion. In the coming year, the Company will continue to evaluate potential investments in passenger, cargo, aircraft maintenance and aviation training.

7.6 Analysis of Risk Management 7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation

on Corporate Finance, and Future Response Measures A. Impact of changes in interest rates, foreign exchange rates, and inflation on Company income

Although changes in interest and foreign exchange rates have an impact on Company income, effective control on the impact is limited.


B. Response measures to changes in interest rates, foreign exchange rates, and inflation To prevent changes in interest rates, foreign exchange rates, and inflation from creating risks to the Company’s overall finances, we hold regular meetings of the Board of Directors Risk Committee, and remain alert to economic and financial developments both in Taiwan and overseas to develop a hedging strategy, evaluate performance of derivatives, and set an appropriate hedge ratio. These controls help prevent changes by utilizing financial hedging instruments in the financial environment and oil prices from creating systemic financial risks and enable CAL to properly manage risk.

7.6.2 Policies, Main reasons for Gain/Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions A. The Company does not involve in high-risk, highly-leveraged investments.

B. The Company has developed the Operational Procedures for Lending Funds to Others and Operational Procedures for Endorsements/Guarantees, and risks of such operations are controlled through strict assessment. Therefore, loans and endorsements/guarantees do not bring profits or cause losses to the Company.

C. Company’s derivative products include forward foreign exchange and foreign exchange options contracts and oil options contracts, which are primarily to hedge against the risk of fluctuations in oil prices, interest rates, and foreign exchange rates. Transactions are performed in accordance with the Company’s Operational Procedures for Derivatives Trading and are regularly evaluated to ensure effective risk controls.

7.6.3 Future Research & Development Projects and Corresponding Budget: Please refer to page 95-96.

7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales: None.


7.6.5 Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales: 1. Information Security Management Structure

China Airlines' information operations are in compliance with international information security standards and domestic information security regulations and are implemented in its daily general business; to this end, the “Information and Communication Security Promotion Team” of China Airlines was set up, in which the Vice President of the Information Management Division acts as the convener and reports the information and communication security business to the Board annually. Chairman Hsieh, Su-Chien is well qualified and has wide experience in management and cybersecurity. He has earlier served as the chairman of Sabre (Taiwan) Ltd., and is quite conversant with cybersecurity governance and monitors information operations in a timely manner.

2. Information Security Management Practices

In response to external attack methods, China Airlines has deployed relevant defense mechanisms and commissioned external information security experts to conduct penetration tests and information security health checks (including network structure inspection, network malicious activity inspection, etc.) on an annual basis. China Airlines also conducted internal information and communication security incident notification and response drills to review the effectiveness of the defense mechanisms. In each stage of system development and maintenance, weakness identification and repair are performed with various testing technologies to ensure the safety of our service.

3. Information Security Maintenance (1)Regular Evaluations and Exercises

In accordance with the Cyber Security Management Act, CAL conducts risk assessment of information and information and communication systems every year, and evaluates the cybersecurity responsibility levels of the core information and communication systems in aspects of confidentiality, integrity, availability, and compliance. CAL also develops a business continuity plan for the core information and communication systems and conducts a business continuity drill at least once every six months. This ensures timely and effective recovery of operational conditions to minimize possible losses in the event of disruptions. In addition, operational continuity plans are re-examined and evaluated periodically to ensure availability and integrity.


(2)Transportation Safety Training Every year, at least 4 cybersecurity and information personnel receive at least 12 hours of professional training or functional training on cybersecurity; other employees receive at least 3 hours of general cybersecurity education and training. Additionally, social engineering exercises are carried out at least once every six months to enhance information security awareness. Through the promotion of information security in multiple pays, the Company also incorporates ethical corporate management into staff performance appraisal and human resources policies, establishes a clear and effective reward and punishment system, and abides the practices of workplace conduct. The Information Management Division conducts self-inspection and legal compliance evaluations on a semi-annual basis and independent audits are carried out by the audit department to ensure the overall operation of the system is running smoothly.

(3)Notification of Cyber Security Incidents The cybersecurity incident notification and response mechanism are initiated based on the level of cybersecurity incidents, and emergency preparedness; notification and response procedures are in place to control their impact and post-incident recovery. CAL develops the security incident notification & contingency drill plan at the beginning of each year and completes internal cybersecurity exercise by the end of each year.

4. Information Security Verification and Audit In order to maintain the effectiveness of the certification and establish a more complete management system, the Company implemented the ISO/IEC 27001: 2013 validation of the core information communication system, the Information Security Management System in 2020. Also, the Company attempted, for the first time, to introduce the ISO/IEC 27701: 2019 standard of the privacy information management system introduced by the International Standard Organization in August 2019. Based on the existing Information Security Management System (ISMS), we expanded the requirements and implementation of the privacy information management system and obtained the certificate of approval in November 2020. Per examination by the Information Management Division in 2020, neither the monitoring nor warning information from the defense system, which detects threats to information security, was confirmed to be a security incident caused by hacker intrusion or virus infection.


5. Responses to the COVID-19 epidemic In response to the COVID-19 epidemic, the Information Management Division of the Company formulated the “Response Measures and Information for Social Distancing in Office and Remote Working For Employees” and the “Information Management Division's Response Measures for Response to Major Epidemics” and the “Operation Procedures for Maintenance and Operation of Applications System during Major Epidemics” in February 2020, enabling domestic and foreign employees to work at home. If there are network outages caused by cybersecurity threats or other disasters, notification and response can be implemented immediately. According to the Company’s regulations, firewall records are reviewed regularly to monitor the network usage via VPN. Accounts with no usage records or have expired, as well as accounts of transferred or terminated employees are deleted to reduce the cybersecurity risks.

6. Personal Information Protection Management System The Company places great importance on customer privacy and regards it as a basic service principle. In addition to complying with international and foreign laws related to personal information, the Company established the Personal Information Management Committee in 2014. Through the establishment of the Personal Information Protection Management System, the Company implements personal data protection and complies with the relevant regulations to protect our customers' rights and minimize the impact of personal data breach risks. In 2018, in order to comply with the General Data Protection Regulation (GDPR) put into effect by the European Union, the role of Data Protection Officer (DPO) has been established in the Company to oversee the management of personal data. The Company has publicly disclosed the relevant privacy policies and statements on privacy protection on the official website of China Airlines. Internally, it implemented the personal information management system, set up channels for the exercise of personal information rights, held annual personal information incident drills, confirmed the implementation of personal information inventory and risk assessment, comprehensively strengthened the concept of privacy protection and code of conduct of employees through education and training, and completed the personal information audit system. In response to various technological changes in the post-epidemic era, the Company continues to monitor the correlation between emerging technologies and privacy protection, and assess its risks through the implementation of the Data Protection Impact Assessment (DPIA) as a reference for future response measures. China Airlines is dedicated to protecting customers' personal information. In the future, CAL will continuously protect customers' personal information to increase its competitive advantage and customer trust.

7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures The Company has established a long-term safety management system, complied with standard operating procedures, continued to improve aviation and aircraft maintenance, and implemented the highest standard of flight safety. In the spirit of SOP+, various services were implemented, which were recognized by major domestic and overseas awards. The Company also actively invested in social welfare, fulfilled corporate responsibilities and incorporated environmental management into its operational focus. If there is any untrue or negative news, message, or incident that affects the Company's image, we will respond immediately, explaining and clarifying to the public, and post explanations on our website or social media platform if necessary, to reduce the negative effects.

At the time of the spread of COVID-19, the global aviation industry was hit and epidemic safety became another focus of operation management. The Company constantly pays attention to market trends, adjusts passenger and cargo flights in response to demand and focuses on cargo transportation, and actively plans to capture opportunities for passenger and cargo passengers such as seasonal travel, themed flights or business charter flights to increase revenue through multi-sales strategies. In addition, correct information on epidemic prevention management is disseminated in a timely manner to ensure the safety of passengers and crew.

7.6.7 Expected Benefits from, Risks Relating to, and Response to Merger and Acquisition Plans: None.


7.6.8 Expected Benefits from, Risks Relating to, and Response to Factory Expansion Plans: None.

7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration: None.

7.6.10 Effects of, Risks Relating to, and Response to Large Share Transfers or Changes in Shareholdings by Directors or Shareholders with Shareholdings of over 10%: None.

7.6.11 Effects of, Risks Relating to, and Response to the Changes in Management Rights: None.

7.6.12 Litigation or Non-litigation Matters Any major litigation, non-litigation, or administrative disputes involving the Company that are already finalized or still pending.

No. Case Name Summary Disputed Amount

(NT$) Litigants Current Status

1 Litigation for refunding overpayment on aircraft rental

1. In 2002, the Civil Aeronautics Administration (CAA) unilaterally terminated an aircraft rental contract with the Company for six aircraft, resulting in early termination of the contract, which changed the nature of the lease and the rent calculation basis and resulted in rent overpayment by the Company.

2. In 2010, the CAA resolved that the Civil Aeronautics Administration should pay the Company more than NT$1.5 billion and in 2015 the Supreme Court revoked the arbitration judgment, which resulted in the Company filing a civil lawsuit against the CAA to recoup the aforementioned rent overpayment.

3. This case has gone through the First and Second Instance trials. The court agreed that there was an overpayment of rent. However, due to incorrect logic used in the calculation, it mistakenly recognized that the Company had offset the final rent payment, so it was judged that the Company had no reason to request the CAAC to return the overpayment of rent.

More than 1.2 billion

Plaintiff: China Airlines Defendant: Civil Aeronautics Administration

The Third Instance trial of the case has commenced on November 27, 2019, and is under hearing by the Supreme Court.

7.6.13 Other Major Risks: 1. CAL fully understands the importance of risk management and the potential for interaction among

different types of risk. We formed a Risk Committee directly under the supervision of the Board of Directors to improve risk management and require subordinate units to control for each major risk category.


The CAL risk management organization and units responsible for implementation:

Type of Risk Responsible Department Risk Management Measures

Operating Risk Corporate Development Office

The operating environment for the aviation industry is ever changing. Major political and economic events as well as unexpected internal or external events can have a huge impact on the company’s operations. The Corporate Development Office analyzes potential political, economic, aviation industry, and internal Company situations that could affect the Company and proposes concrete response plans to reduce their impact on China Airlines’ strategic direction and annual business plan.

Safety Risk Corporate Safety Office

Safety is the most basic principle and core value of China Airlines' business operation, as well as our responsibility and commitment to each customer. According to the Safety Management System (SMS), the Company constructs safety risk management. In relation to internal and external operation risks, such as navigation, maintenance, air service, and ground operation, the Company maintains operational risk within an acceptable range through continuous hazard identification and risk management, and proposes improvement measures to effectively enhance the overall safety performance of the Company.

Financial Risk Finance Div.

Both domestic and global economy affect the operating results of the Company. Primary operating costs for airlines include interest rate, exchange rate, and fuel, and outside factors that can result in significant volatility. Therefore, the Finance Division utilizes financial hedging instruments to fix the above factors within a certain range, regularly monitors financial risk, and develops relevant strategies and measures to effectively manage financial risk.

2. Business strategy improvement measures in response to the impact of COVID-19 in 2020 are as follows:

(1) A rolling schedule review and increase/decrease program of passenger flights will be carried out in accordance with national quarantine regulations and changes in market supply and demand, while a flexible deployment of passenger aircraft to support loading mails will reduce the impact of the epidemic on passenger transportation business.

(2) Strive to capture all kinds of business opportunities (students, enterprises, Taiwanese businesses, themed and chartered flights) during the epidemic period to increase revenue.

(3) Comprehensive review and timely revision of various fares, keeping abreast of developments in the airline alliance, strengthening membership and e-commerce relationships, and visiting and developing potential enterprise customers.

(4) For flights with rigid demand, China Airlines no longer follows the previous forward control method with reference to the sales price and location arrangement to increase the revenue of passenger operations.

(5) Strengthen passenger reservation and ticketing refresher courses to enhance the professional education of transport-related personnel globally.

7.7 Other Important Matters: None.

Special Disclosure 133

Special Disclosure 8.1 Summary of Affiliated Companies

8.2 Private Placement Securities in the Most Recent

Years

8.3 Shares in the Company Held or Disposed of by

Subsidiaries in the Most Recent Years

8.4 Special Notes

8.5 Situations with Major Impacts on Shareholder

Equity or Share Prices

134 Special Disclosure

VIII. Special Disclosure 8.1 Summary of Affiliated Companies 8.1.1 Basic information of Affiliated Companies

A. Affiliated Companies Chart

Dec 31, 2020 Note 1: The affiliates listed above are companies in which the company has invested and has a 50% or higher voting share, or the means to

control, either directly or through a subsidiary company. China Pacific Laundry Services, China Pacific Catering Services, and Nordam Asia are joint ventures.

Note 2: Yestrip Co., Ltd. was liquidated on October 26, 2020 after the approval of the Taipei City Government. The liquidation procedure is underway.


B. Basic information of Affiliated Company Dec 31, 2020/Unit: NT$ thousands

Company Date

Founded Address

Capital (Note)

Principal Activities

1. CAL-Dynasty International, Inc. 07/01/1991 200 Continental Blvd. Suite #101 El Segundo, CA90245, U.S.A.

775,241 Holding & investing

1A Dynasty Properties Co., Ltd. 08/15/1973 200 Continental Blvd. Suite #101 El Segundo, CA90245, U.S.A.

14,826 Real estate investing, property leasing

1B Dynasty Hotel of Hawaii, Inc. 12/10/1973 1830 Ala Moana Blvd. Honolulu, Hawaii 96815, U.S.A.

118,606 Hotel service

2. CAL-Asia Investment Inc. 06/29/1995 Mandar House, 3rd Floor, P.O. Box 2196, Johnson’s Ghut, Tortola, VG1110, Virgin Islands, British


3. Dynasty Aerotech International Corp.

05/11/1989 No.6, Hangqin S. Rd., Dayuan District, Taoyuan City 77,270 Aviation ground handling service, cleaning service

4. Yestrip Co., Ltd. 01/18/2001 1,2F, No.131, Section 3, Nanjing E Rd., Zhongshan District, Taipei City

16,000 Travel service

5. CAL Park Co., Ltd. 09/06/2006 No.1, Hangzhan S. Rd., Dayuan District, Taoyuan City

1,500,000 Real estate leasing, parking lot management

6. CAL Hotel Co., Ltd. 01/03/2007 No.1-1, Hangzhan S. Rd., Dayuan District, Taoyuan City

465,000 Hotel business

7. Taiwan Aircraft Maintenance and

Engineering Co., Ltd. 01/16/2015

No.15, Hangqin S. Rd., Dayuan District, Taoyuan City

1,350,000 Aircraft maintenance and repair

8. Mandarin Airlines, Ltd. 04/29/1991 No.3, Alley 123, Lane 405, Dunhua N. Rd., Songshan District, Taipei City

2,001,825 Civil air transport

9. Sabre Travel Network (Taiwan) Ltd. 10/09/1990 15F, No.57, Fuxing N. Rd., Songshan District, Taipei City

138,618 IT service & GDS

10. Tigerair Taiwan Co., Ltd. 04/21/2014 No.3, Alley 123, Lane 405, Dunhua N. Rd., Songshan District, Taipei City

2,800,000 Civil air transport

11. China Pacific Laundry Services Ltd. 09/08/1997 No.7, Lane 54, Sande Street, Luzhu District, Taoyuan City

250,000 Laundry service

12. Taiwan Air Cargo Terminal Ltd. 12/22/1999 No.10-1, Hangqin N. Rd., Dayuan District, Taoyuan City

2,500,000 Air cargo and storage service

13. Kaohsiung Airport Catering

Services Ltd. 09/27/1999

No.2-10, Zhongshan 4th Rd., Xiaogang District, Kaohsiung City

400,500 Catering service

13A Delica International Co., Ltd. 05/24/2016 No.2-10, Zhongshan 4th Rd., Xiaogang District, Kaohsiung City


14. China Pacific Catering Services

Ltd. 08/19/1994

No.22, Lane 156, Section 2, Haishan Rd., Luzhu District, Taoyuan City


15. NORDAM Asia Ltd. 12/07/2017 No.15, Hangqin S. Rd., Dayuan Dist., Taoyuan City 77,500 Aircraft maintenance and repair

16. Taoyuan International Airport

Services Co., Ltd. 11/08/1978

No.15, Hangqin N. Rd., Dayuan District, Taoyuan City

700,000 Aviation ground handling service

17. Taiwan Airport Service Co., Ltd. 07/19/1966 3F, No.340, Dunhua N. Rd., Songshan District, Taipei City

435,600 Aviation ground handling service

17A Taiwan Airport Service (Samoa)

Co., Ltd. 03/22/2004

TrustNet Chambers, Lotemau Centre, P. O. Box 1225, Apia, Samoa


18. Global Sky Express Ltd. 09/29/1994 8F-3, No.186, Section 4, Nanjing East Rd., Songshan District, Taipei City

10,000 Air freight forwarder

Note 1: Capital was calculated using the exchange rate at the end of 2020: 1TWD=0.0337 USD. Note 2: Yestrip Co., Ltd. was liquidated on October 26, 2020 after the approval of the Taipei City Government. The liquidation procedure is

underway.


C. Overall Description of the Industries in which Affiliated Companies (Including Subsidiaries and Other Invested Companies) Operate

China Airlines’ affiliated companies can be divided into seven categories, each of which is highly dependent on the Company’s operations, and include airlines, ground services, air transport support, aerospace technology, logistics and warehousing, tourism and leisure, and investment holdings and leasing. The categories are described below:

Classification Description

Airlines Mandarin Airlines provides domestic and international passenger and cargo air transport services to further capitalize on our competitive advantage in the cross-strait market. Tigerair Taiwan is tasked with operating in the Asian low-cost carrier market to develop new business opportunities.

Ground Handling Services

Ground services at Taiwan Taoyuan and Taitung Airports are provided by Taoyuan International Airport Services Co., Ltd., while those for Kaohsiung Airport and all other domestic airports are serviced by Taiwan Airport Service Co., Ltd. Overseas, the Company has invested in Jardine Aviation Services in Hong Kong, which serves as China Airlines’ ground handling agent in Hong Kong. Cleaning and repair ground services are provided by Dynasty Aerotech International Corp.

Air Transport Support The Company has invested in domestic airline reservation system operations and maintenance provider Sabre Travel Network (Taiwan) Ltd. Overseas, the Company has invested in Singapore’s Everest Company.

In-flight catering services are provided for northern Taiwan by China Pacific Catering Services Ltd. and by Kaohsiung Airport Catering Services in the South. Delica International Co., Ltd. is the subsidiary of Kaohsiung Airport Catering Services.

China Pacific Laundry Services Ltd. provides laundry services for textiles and clothing used aboard aircraft and general laundry services for the hospitality industry.

Logistics and Warehousing

Domestically, Taiwan Air Cargo Terminal Ltd. is responsible for providing warehousing services at Taiwan Taoyuan Airport and Kaohsiung International Airport. In Mainland China, the Company made indirect investments in Airport Air Cargo Terminal (Xiamen) Co., Ltd. and Airport Air Cargo Service (Xiamen) Co., Ltd.

Logistics services are provided domestically by invested companies Global Sky Express Ltd. and Chung Hwa Express Corp. Overseas, the Company has indirectly invested in Hong Kong’s Eastern United International Logistics.

Aerospace Technology

In the aerospace technology industry in Taiwan, the Company has invested in Taiwan Aircraft Maintenance and Engineering Ltd., which is responsible for all aspects of maintenance and repair services for Boeing 777 and 737 and Airbus A320 and A350 models; NORDAM Asia provides thrust reverser and composite material maintenance services in the Asian region; overseas, the Company invests in Xiamen Taiko Landing Gear Co. in Mainland China, which provides and maintains landing gear, and HAECO Composite Structures (Jinjiang) Co. Ltd., which provides composite material maintenance. In Hong Kong, the Company invests in China Aircraft Services Ltd., which provides aircraft maintenance capacity.

Tourism and Leisure Domestic investments include Yestrip and CAL Hotel Co., Ltd. Overseas investments include an indirect investment in Dynasty Hotel of Hawaii, Inc. in the USA and investment in Japan’s Dynasty Holidays.

Investment Holdings and Leasing Business Group

Established CAL-Dynasty International, Inc., which makes indirect investments in Chinese and American companies engaged in real estate investments and leasing management. CAL-Asia Investment Inc. and Taiwan Airport Service (Samoa) Co., Ltd. are engaged in general investment holdings.


D. Directors, Supervisors, and Presidents of Affiliated Companies Dec 31, 2019

Units: Shares; %

Company Title Name Shareholding

Shares % 1. CAL-Dynasty International, Inc. Chairman Hsieh, Su-Chien (Note 1) 2,614,500 100 Director Wang, Chen-Min (Note 1) (USD10, share)

Director (President) Hsu, Pao-Chieh (Note 1) 1A Dynasty Properties Co., Ltd. Chairman (President) Hsu, Pao-Chieh (Note 2) 5,000 100 Director Hsieh, Su-Chien; Yen,Yang (Note 2) (USD100, share) 1B Dynasty Hotel of Hawaii,

Inc. Chairman Hsu, Pao-Chieh (Note 2) 400,000 100

Director Yen, Yang (Note 2) (USD10, share) Director (President) Pan, Wen-Tsung (Note 1) 2. CAL-Asia Investment Inc. Chairman Hsieh, Su-Chien (Note 1) 7,172,346 100

Director Chang, Young (Note 1) (USD1, share) Director (President) Wang, Chen-Min (Note 1)

3. Dynasty Aerotech International Corp. (Note 3) Chairman Sun, Jia-Min (Note 1) 77,270 100

Director Liu, Der-Chuan; Lee, Jung-Hui; Chen, Wei-Tau (Note 1) Supervisor Chen, I-Chieh (Note 1) President Shih, Hui Huang (Note 1) (Nominated by China Airlines)

4. Yestrip Co., Ltd. (Note 3) Supervisor Huang, Hui-Na (Note 1) 1,600,000 100 5. CAL Park Co., Ltd. Chairman Hsieh, Su-Chien; (Note 1) 150,000,000 100

Director Chen, Wei-Tau (Note 1) Supervisor Fang, Juo-Ling (Note 1) Director (President) Chang, Young (Note 1)

6. CAL Hotel Co., Ltd. Chairman Hsieh, Su-Chien; (Note 1) 46,500,000 100

Director Wang, Chen-Min; Kao, Shing-Hwang; Wang, Houng; Hong, Tsu-Kuang (Note 1)

Supervisor Fang, Juo-Ling; Chen, I-Chieh (Note 1)

President Eric Rimbeuf

7. Taiwan Aircraft Maintenance and Engineering Co., Ltd. Chairman Wang, Houng (Note 1)

135,000,000 100

Director Chang, Young; Sun, Jia-Min; Lee, Jung-Hu; Wang, Chen-Min (Note 1)

Supervisor Fang, Juo-Ling; Yen, Yang (Note 1) President Tsai, Chih Hung (Nominated by China Airlines) 8. Mandarin Airlines, Ltd. Chairman Hsieh, Su-Chien (Note 1) 188,154,025 93.99

Director Chang, Young; Kao, Shing-Hwang; Wang, Houng; Wang, Chen-Min; Peng, Pao-Chu (Note 1)


Hsieh, Yung-Ming (Independent Directors Undertaking Public Welfare)

Supervisor Chen, I-Chieh Director (President) Tsao, Jyh-Fen (Note 1)

9. Sabre Travel Network (Taiwan) Ltd. Chairman Wu, Wen-Kuo (Note 1)

13,021,042

609,000

93.93

4.39

Director Chung, Ming-Jyh; Chiu,Wei-Tuan; Peng, Pao-Chu (Note 1) Director Alan Chen (Represent Sabre Travel Network Asia Pacific) Supervisor Ho, Hui-Fen President Lee, Hsien-Kuang (Nominated by China Airlines) 10. Tigerair Taiwan Co., Ltd. Chairman Chen, Han-Ming (Note 1)

212,420,046

75.86

Director Chang, Young; Wang, Chen-Min; Chang, Cheng-Hao; Chen, I-Chieh; Tsao, Jyh-Fen (Note 1)

Director Hsiao, Po Jen; Hsu, Yang Che; Jao, Shihchen; Yen, Sin-Hui Independent Director

Chen, I-Heng (Independent director undertaking public welfare); Fan, Hung-Shu; Yang, David

President Chang, Ming-Wei 11. China Pacific Laundry Services

Ltd. Chairman Chung, Wan-Chun (Note 1) 13,750,000 55 Director Hong, Tsu-Kuang; Chu, Te-Hsiu; (Note 1) Director Chan, Derrick (Represent Hendriz Holding) 3,750,000 15 Director Yeung, Maggie (Represent Heathlee Int’l) 3,750,000 15 Supervisor Caho, Wen-Kan (Represent Merton Lake) 3,750,000

15

Supervisor Chen, I-Chieh President Lin, Chun-Nan (Nominated by China Airlines)

12. Taiwan Air Cargo Terminal Ltd.

Chairman Wang, Chen-Min (Note 1) 135,000,000 54

Deputy Chairman Charles C. Y. Chen (Represent Eyon Industrial Co.) 6,000,000 2.4 Director Chang, Cheng-Hao; Liu, Der-Chuan (Note 1) Director UPS 20,000,000 8 Director Michael Shea (Represent Hsin Feng Corp.) 7,000,000 2.8 Supervisor Ho, Hui-Fen Supervisor Chen, Jyi-Fu (Represent Express Container Terminal Corp.) 15,000,000 6


Company Title Name Shareholding

Shares % 13. Kaohsiung Airport Catering

Services Ltd. Chairman Chang, Young (Note 1) 21,494,637 53.67

Director Chung, Wan-Chun; Wang, Wei (Note 1)

Director Lin, Jyh-Jong; Tsai, Ta-Wei (Nominated by Uni Airways Corporation)

16,178,945 40.4

Supervisor Han, Lan-Ping (Nominated by Evergreen International Corporation)

10,000 0.02

Supervisor Yen, Yang President Lee, Ho-Yuan

13A. Delica International Co., Ltd

Chairman Lee, Ho-Yuan (Nominated by Kaohsiung Airport Catering Services)

1,020,000 51

Director Lin, Jyh-Jong (Nominated by Kaohsiung Airport Catering Services)

Director Tokuyama, Keiichi; Tokuyama, Keisuke (Nominated by F. TEC Co., Ltd) 980,000 49

Supervisor Lai, Li Chao; Araki, Osamu President Eguchi, Kenichi

14. China Pacific Catering Services Ltd.

Chairman Yeh, Chu-Lan (Note 1) 43,911,000 51

Director Hong, Tsu-Kuang; Chung, Wan-Chun (Note 1) Director Wu, Hsiu-Lan; Mao, Chi-Chiung (Represent Aldeburgh Limited) 21,045,500 24.5 Supervisor Fang, Juo-Ling Supervisor Caho, Wen-Kan (Represent Deli Holdings Limited) 21,045,500 24.5 President Chen, Jo-Ching (Nominated By China Airlines)

15. NORDAM Asia Ltd. Chairman T. Hastings Siegfried (Nominated by The NORDAM Group) 3,952,500 51 Deputy Chairman Wang, Houng (Note 1) 3,797,500 49 Director Li, Chih-Wei (Note 1)

Director J.Terrell Siegfried、Jamie Lane (Nominated By The NORDAM Group)

Supervisor Ralph McDavid Supervisor Wang, Wei

16. Taoyuan International Airport Services Co., Ltd.

Chairman (President)

Lee, Chih-Chiang (Represent Motc) 31,500,000 45

Director Hsu, Cheng-Chang; Chang, Chang-Chi; Li, Hung-Sheng; Lee, Chun-Hsiung (Represent Motc)

Director Hsieh, Su-Chien; Chang, Young; Wang, Houng; Chu, Te-Hsiu; Yeah, Shao-Ting (Note 1) 34,300,000 49

Director Hung, Ngai (Represent UPS) 4,200,000 6 Supervisor Li, Mi; Li, Shen-Yi

17. Taiwan Airport Service Co., Ltd. Chairman Chang, Young (Note 1) 20,626,644 47.35

Director (President) Peng, Long-Min (Note 1) Director Chang, Cheng-Hao (Note 1)

Director Li, Li-Yu (Representing juridical person shareholder Rih Hsin Asset Management Company)

7,085,300 16.27

Director Chang, Chieh-Tang (Represent Goldsun Building Materials) 7,405,200 17 Supervisor Fang, Juo-Ling Supervisor Chen, Yao-Ming

17A Taiwan Airport Service (Samoa) Co., Ltd. Authorized Signatory Chang, Young (Represent Taiwan Airport Service Co.)

5,876,976 (1 USD, per share) 100

18. Global Sky Express Ltd. Chairman Li, Chung-Hui 50,000 5 Director Liu, Der-Chuan; Shann, Da-Sin; Chang, Cheng-Hao (Note 1) 250,000 25

Director Pao, Hsueh-Chao 40,000 4 Director Huang, Nan-Sheng 50,000 5 Director Wei, Ching-Li 20,000 2 Director Hsiao, Yu-Hsin 20,000 2 Director Chung, Mei-Chih (Represent Leader Mutual Freight System) 20,000 2 Supervisor Huang, Hui-Na Supervisor Yeh, Chien-Tien 10,000 1 Supervisor Chiang, Ming-Fang (Represent Morrison Express) 50,000 5 President Hwang, Chun-Chyuan (Nominated by China Airlines)

Note 1: Representative of juridical person shareholder China Airlines. Note 2: Representative of juridical person shareholder CAL-Dynasty International, Inc. Note 3: Yestrip Co., Ltd. was liquidated on October 26, 2020 after the approval of the Taipei City Government. Its Board of Directors no longer

exists.


E. Affiliated Company Business Overview Dec 31, 2019

Unit: NT$ thousands; EPS=NT$

Company Capital Total

Assets Total

Liabilities Total

Equity Operating Revenue

Operating Income (Loss)

Profit (Loss)

EPS (Dollars)

1. CAL-Dynasty International, Inc. 775,241 1,349,213 110,620 1,238,593 154,223 (32,649) (21,960) (8.40) 1A Dynasty Properties Co., Ltd. 14826 696181 176822 519359 93269 26052 19263 3852.62 1B Dynasty Hotel of Hawaii, Inc. 118,606 413,702 37,437 376,265 61,316 (61,265) (46,577) (116.44)

2. CAL-Asia Investment Inc. 212,671 462,453 6,567 462,446 0 (1,157) 45,068 6.28 3. Dynasty Aerotech International

Corp. 77,270 344,123 207,492 136,630 382,834 43,279 33,986 439.84

4. Yestrip Co., Ltd. 16,000 10,392 286 10,106 4,326 (16,567) (15,067) (9.42)

5. CAL Park Co., Ltd. 1,500,000 5,180,342 3,666,260 1,514,082 309,284 55,456 9,350 0.06

6. CAL Hotel Co., Ltd.. 465,000 533,457 129,017 404,440 339,310 (101,805) (73,586) (1.58)

7. Taiwan Aircraft Maintenance and

Engineering Co., Ltd. 1,350,000 3,360,075 2,660,312 699,763 46,559 (222,643) (222,223) (1.65)

8. Mandarin Airlines, Ltd. 2,001,825 8,256,878 6,930,337 1,326,541 3,823,365 (297,996) (376,255) (1.88)

9. Sabre Travel Network (Taiwan) Ltd.

138,618 319,008 71,076 247,932 18,546 (74,188) (49,995) (3.61)

10. Tigerair Taiwan Co., Ltd. 2,800,000 11,694,612 8,657,483 3,037,129 1,880,636 (1,808,558) (1,371,056) (4.90)

11. China Pacific Laundry Services

Ltd. 250,000 361,629 90,077 271,552 125,081 (48,609) (28,137) (1.13)

12. Taiwan Air Cargo Terminal Ltd. 2,500,000 5,216,303 2,334,637 2,881,666 2,121,992 422,645 318,494 1.27

13. Kaohsiung Airport Catering

Services Ltd. 400,500 1,059,589 367,878 691,712 1,317,060 1,246 9,129 0.23

13A Delica International Co., Ltd. 20,000 15,653 220 15,434 0 0 7 0.00

15. China Pacific Catering Services Ltd.

861,000 3,631,885 2,244,852 1,387,032 701,120 (598,856) (306,623) (3.56)

16. NORDAM Asia Ltd. 77,500 77,156 80 77,076 0 (121) (93) (0.01)

17. Taoyuan International Airport

Services Co., Ltd. 700,000 2,345,219 1,115,243 1,229,975 2,060,716 (393,726) (258,894) (3.70)

18. Taiwan Airport Service Co., Ltd. 435,600 1,367,067 943,003 424,064 343,106 (224,397) (156,739) (3.60)

18A Taiwan Airport Service

(Samoa) Co., Ltd. 174,262 367,456 0 367,456 0 0 22,328 3.80

19. Global Sky Express Ltd. 10,000 45,664 15,092 30,572 166,040 9,732 7,796 7.80

Note 1: Capital, total assets, total liabilities, total equity were calculated using the exchange rate at the end of 2020. Note 2: Operating revenue, operating profit, and income for the period were calculated using the 2020 quarterly average exchange rates.

Note 3: Exchange rates at the end of 2020 were 1TWD=0.0337 USD, 0.2340 CNY.

Note 4: Quarterly average exchange rates in 2020 were as follows:

Q1：1TWD=0.0331USD0.2310CNY. Q2：1TWD=0.0333 USD0.2365CNY. Q3：1TWD=0.0338 USD0.2359CNY. Q4：1TWD=0.0347USD0.2324CNY.

(2) Affiliated Company Consolidated Financial Statements: Information required to be disclosed regarding affiliated company’s consolidated financial statements is included in Appendix 1 Consolidated Financial Statements. The Company will no longer prepare a separate consolidated financial statement for affiliated companies.

(3) Relationship Report: China Airlines is not the subsidiary of any company, so a relationship report is not required.


8.2 Private Placement Securities in the Most Recent Years: None.

8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years:

MAR 27, 2021 Units: NT$; shares; %

Company Capital Source of Funds

Stake in Subsidiary

(%)

Date of Acquisition or

Disposal

Number of Shares and

Value of Stocks

Acquired

Number of Shares and

Value of Stocks

Disposed

Investment Gain/Loss

Number of Shares and Value of Stock

Held as of the Printing Date of this

Report

Amount of Company

Endorsement /Guarantee of

Subsidiary Dynasty Aerotech International Corp.

77,270,000 Equity Fund 100%

109/02/20 - 152 220 0 shares

NT$0 -

109/02/21 - 300,000 485,539 109/02/25 - 300,000 398,925 109/02/26 - 214,000 270,365

Mandarin Airlines, Ltd. 2,001,825,000 Equity

Fund 93.99% - - - - 2,074,628 shares NT$31,223,000 -

Note: No subsidiary has a Company stock pledge nor has the Company lent money to any subsidiary.

8.4 Special Notes: None.

8.5 Situations with Major Impact on Shareholder Equity or Share Prices:

8.5.1 Change in the chairman of the board, general manager, or one-third or more of the directors of the Company. The Board has resolved to remove Mr. Hsieh, Su-Chien from the position of President on 18 March 2021 and to appoint Mr. Kao, Shing-Hwang to succeed as President.

8.5.2 Signing of major memoranda, strategic alliances or other plans for business cooperation or major contracts A. In order to strengthen the capital structure of the Company’s subsidiary, Tigerair Taiwan Co.,

Ltd., the Board of Directors resolved to participate in its cash capital increase on 6 August 2020.

B. On December 31, 2020, the Company renewed its land lease contract with Taiwan Air Cargo Terminal Ltd.

8.5.3 Others A. In response to the COVID-19 pandemic, the Company and its group members have improved

their pandemic prevention measures and adjusted the service content of catering and supplies for mainland-Taiwan air routes and Hong Kong-Macau-Taiwan air routes starting from January 28, 2020; the main consideration is to reduce personnel contact and reduce the unnecessary use of re-used products and use disposable products instead. At the same time, we also encourage passengers to bring their own products, such as environmental protection cups, to reduce the risk of infection. In addition to the normal disinfection procedures for all cross-strait, Hong Kong and Macao flights arrival to Taiwan, the disinfection of the dining trays, handrails and overhead luggage cabinets in the cabin are carried out to maintain the health of passengers and crew members.

B. The Company received an Italian aviation notice informing that, at the request of the country’s health bureau, the CI75 Taipei-Rome flight on February 2 and the CI76 Rome-Taipei flight on February 3 were canceled; In order to assist with the evacuation of the passengers, China Airlines obtained an agreement from the Italian Civil Aviation Authority to allow CI75 Taipei-Rome flight on February 2 and to reinstate CI76 Rome-Taipei flight on February 3.

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terp

reta

tions

(IFR

IC),

and

SIC

Inte

rpre

tatio

ns (S

IC) e

ndor

sed

and

issu

ed

into

eff

ect b

y th

e Fi

nanc

ial S

uper

viso

ry C

omm

issi

on o

f the

Rep

ublic

of C

hina

.

Bas

is fo

r O

pini

on

We

cond

ucte

d ou

r au

dits

in a

ccor

danc

e w

ith th

e Re

gula

tions

Gov

erni

ng A

uditi

ng a

nd A

ttest

atio

n of

Fin

anci

al S

tate

men

ts b

y C

ertif

ied

Publ

ic A

ccou

ntan

ts a

nd a

uditi

ng s

tand

ards

gen

eral

ly a

ccep

ted

in th

e R

epub

lic o

f C

hina

. Our

res

pons

ibili

ties

unde

r th

ose

stan

dard

s ar

e fu

rther

des

crib

ed in

the

Aud

itors

’ R

espo

nsib

ilitie

s fo

r th

e A

udit

of th

e C

onso

lidat

ed F

inan

cial

Sta

tem

ents

sec

tion

of o

ur

repo

rt. W

e ar

e in

depe

nden

t of t

he G

roup

in a

ccor

danc

e w

ith T

he N

orm

of

Prof

essi

onal

Eth

ics

for

Cer

tifie

d Pu

blic

Acc

ount

ant

of t

he R

epub

lic o

f C

hina

, an

d w

e ha

ve f

ulfil

led

our

othe

r et

hica

l re

spon

sibi

litie

s in

acc

orda

nce

with

thes

e re

quire

men

ts. W

e be

lieve

that

the

audi

t evi

denc

e w

e ha

ve

obta

ined

is su

ffic

ient

and

app

ropr

iate

to p

rovi

de a

bas

is fo

r our

opi

nion

.

Key

Aud

it M

atte

rs

Key

aud

it m

atte

rs a

re th

ose

mat

ters

that

, in

our p

rofe

ssio

nal j

udgm

ent,

wer

e of

mos

t sig

nific

ance

in

our

audi

t of

the

cons

olid

ated

fin

anci

al s

tate

men

ts f

or t

he y

ear

ende

d D

ecem

ber

31, 2

020.

The

se

mat

ters

wer

e ad

dres

sed

in t

he c

onte

xt o

f ou

r au

dit

of t

he c

onso

lidat

ed f

inan

cial

sta

tem

ents

as

a w

hole

, and

in

form

ing

our

opin

ion

ther

eon,

and

we

do n

ot p

rovi

de a

sep

arat

e op

inio

n on

the

se

mat

ters

.

- 2 -

Hsi

eh, S

u-C

hien

141

Key

aud

it m

atte

r in

the

audi

t of t

he G

roup

’s c

onso

lidat

ed fi

nanc

ial s

tate

men

ts is

stat

ed b

elow

: R

ecog

nitio

n of

Car

go R

even

ue

In a

ccor

danc

e w

ith IF

RS

15 “

Rev

enue

from

Con

tract

s w

ith C

usto

mer

s”, c

argo

sal

es a

re a

ccou

nted

fo

r as

carg

o re

venu

e af

ter r

elev

ant t

rans

porta

tion

serv

ices

hav

e be

en p

rovi

ded.

For

the

year

end

ed

Dec

embe

r 31,

202

0, c

argo

reve

nue

amou

nted

to N

T$81

,692

,574

thou

sand

. Ref

er to

Not

es 4

and

27

to th

e ac

com

pany

ing

cons

olid

ated

fina

ncia

l sta

tem

ents

for d

etai

led

info

rmat

ion.

C

argo

rat

es a

re h

ighl

y af

fect

ed b

y th

e su

pply

and

dem

and

of t

he m

arke

t an

d sa

les

can

only

be

reco

gniz

ed

afte

r re

leva

nt

trans

porta

tion

serv

ices

ar

e pr

ovid

ed.

The

inpu

t, pr

oces

sing

an

d m

aint

enan

ce o

f fr

eigh

t inf

orm

atio

n on

the

air

way

bills

invo

lve

man

ual o

pera

tions

. The

refo

re, w

e id

entif

ied

the

reco

gniti

on o

f car

go re

venu

e as

a k

ey a

udit

mat

ter.

Our

mai

n au

dit p

roce

dure

s per

form

ed in

clud

ed th

e fo

llow

ing:

1.

W

e un

ders

tood

the

int

erna

l co

ntro

ls r

elat

ed t

o th

e re

cogn

ition

of

carg

o re

venu

e, i

nclu

ding

m

anua

l and

aut

omat

ic c

ontro

l. 2.

W

e un

ders

tood

and

test

ed th

e ef

fect

iven

ess

of in

form

atio

n sy

stem

rela

ted

to th

e re

cogn

ition

of

carg

o re

venu

e.

3.

We

sam

pled

the

air w

aybi

lls, c

onfir

med

that

car

go ra

tes w

ere

cons

iste

nt w

ith th

ose

stat

ed in

air

way

bills

, and

ver

ified

the

accu

racy

of c

argo

reve

nue.

O

ther

Mat

ter

We

did

not

audi

t th

e fin

anci

al s

tate

men

ts o

f so

me

subs

idia

ries

whi

ch w

ere

incl

uded

in

the

cons

olid

ated

fin

anci

al s

tate

men

ts.

Such

fin

anci

al s

tate

men

ts w

ere

audi

ted

by o

ther

ind

epen

dent

au

dito

rs, a

nd o

ur a

udit

opin

ion

is b

ased

sole

ly o

n th

e re

ports

of o

ther

aud

itors

. A

s of

Dec

embe

r 31,

202

0, to

tal a

sset

s of

thes

e su

bsid

iarie

s am

ount

ed to

NT$

11,6

94,6

12 th

ousa

nd,

repr

esen

ting

4.12

% o

f th

e co

nsol

idat

ed t

otal

ass

ets.

For

the

year

end

ed D

ecem

ber

31,

2020

, re

venu

e fr

om th

ese

subs

idia

ries

amou

nted

to N

T$1,

880,

636

thou

sand

, rep

rese

ntin

g 1.

63%

of

the

cons

olid

ated

tota

l rev

enue

. W

e ha

ve a

lso

audi

ted

the

pare

nt c

ompa

ny o

nly

finan

cial

sta

tem

ents

of

Chi

na A

irlin

es, L

td. a

s of

an

d fo

r th

e ye

ars

ende

d D

ecem

ber

31, 2

020

and

2019

on

whi

ch w

e ha

ve i

ssue

d an

unm

odifi

ed

opin

ion.

R

espo

nsib

ilitie

s of M

anag

emen

t and

Tho

se C

harg

ed w

ith G

over

nanc

e fo

r th

e C

onso

lidat

ed

Fina

ncia

l Sta

tem

ents

M

anag

emen

t is

resp

onsi

ble

for

the

prep

arat

ion

and

fair

pres

enta

tion

of th

e co

nsol

idat

ed f

inan

cial

st

atem

ents

in a

ccor

danc

e w

ith th

e Re

gula

tions

Gov

erni

ng th

e Pr

epar

atio

n of

Fin

anci

al R

epor

ts b

y Se

curit

ies

Issu

ers,

and

Inte

rnat

iona

l Fi

nanc

ial

Repo

rting

St

anda

rds

(IFR

S),

Inte

rnat

iona

l A

ccou

ntin

g St

anda

rds

(IAS)

, IF

RIC

In

terp

reta

tions

(IF

RIC

), an

d SI

C

Inte

rpre

tatio

ns (

SIC

) en

dors

ed a

nd is

sued

into

eff

ect b

y th

e Fi

nanc

ial S

uper

viso

ry C

omm

issi

on o

f the

Rep

ublic

of C

hina

, an

d fo

r su

ch in

tern

al c

ontro

l as

man

agem

ent d

eter

min

es is

nec

essa

ry to

ena

ble

the

prep

arat

ion

of

cons

olid

ated

fina

ncia

l sta

tem

ents

that

are

free

from

mat

eria

l mis

stat

emen

t, w

heth

er d

ue to

frau

d or

er

ror.

- 3 -

In p

repa

ring

the

cons

olid

ated

fin

anci

al s

tate

men

ts, m

anag

emen

t is

res

pons

ible

for

ass

essi

ng t

he

Gro

up’s

abi

lity

to c

ontin

ue a

s a

goin

g co

ncer

n, d

iscl

osin

g, a

s ap

plic

able

, mat

ters

rel

ated

to g

oing

co

ncer

n an

d us

ing

the

goin

g co

ncer

n ba

sis

of a

ccou

ntin

g un

less

man

agem

ent

eith

er i

nten

ds t

o liq

uida

te th

e G

roup

or t

o ce

ase

oper

atio

ns, o

r has

no

real

istic

alte

rnat

ive

but t

o do

so.

Thos

e ch

arge

d w

ith g

over

nanc

e, in

clud

ing

the

audi

t com

mitt

ee a

nd s

uper

viso

rs, a

re re

spon

sibl

e fo

r ov

erse

eing

the

Gro

up’s

fina

ncia

l rep

ortin

g pr

oces

s. A

udito

rs’ R

espo

nsib

ilitie

s for

the

Aud

it of

the

Con

solid

ated

Fin

anci

al S

tate

men

ts

Our

obj

ectiv

es a

re t

o ob

tain

rea

sona

ble

assu

ranc

e ab

out

whe

ther

the

con

solid

ated

fin

anci

al

stat

emen

ts a

s a

who

le a

re f

ree

from

mat

eria

l mis

stat

emen

t, w

heth

er d

ue to

fra

ud o

r er

ror,

and

to

issu

e an

aud

itors

’ re

port

that

inc

lude

s ou

r op

inio

n. R

easo

nabl

e as

sura

nce

is a

hig

h le

vel

of

assu

ranc

e, b

ut is

not

a g

uara

ntee

that

an

audi

t con

duct

ed in

acc

orda

nce

with

the

audi

ting

stan

dard

s ge

nera

lly a

ccep

ted

in t

he R

epub

lic o

f C

hina

will

alw

ays

dete

ct a

mat

eria

l m

isst

atem

ent

whe

n it

exis

ts. M

isst

atem

ents

can

aris

e fr

om fr

aud

or e

rror

and

are

con

side

red

mat

eria

l if,

indi

vidu

ally

or i

n th

e ag

greg

ate,

the

y co

uld

reas

onab

ly b

e ex

pect

ed t

o in

fluen

ce t

he e

cono

mic

dec

isio

ns o

f us

ers

take

n on

the

basi

s of t

hese

con

solid

ated

fina

ncia

l sta

tem

ents

. A

s pa

rt of

an

audi

t in

acco

rdan

ce w

ith th

e au

ditin

g st

anda

rds

gene

rally

acc

epte

d in

the

Repu

blic

of

Chi

na,

we

exer

cise

pro

fess

iona

l ju

dgm

ent

and

mai

ntai

n pr

ofes

sion

al s

kept

icis

m t

hrou

ghou

t th

e au

dit.

We

also

: 1.

Id

entif

y an

d as

sess

the

risks

of m

ater

ial m

isst

atem

ent o

f the

con

solid

ated

fina

ncia

l sta

tem

ents

, w

heth

er d

ue to

frau

d or

err

or, d

esig

n an

d pe

rfor

m a

udit

proc

edur

es r

espo

nsiv

e to

thos

e ris

ks,

and

obta

in a

udit

evid

ence

that

is s

uffic

ient

and

app

ropr

iate

to p

rovi

de a

bas

is fo

r our

opi

nion

. Th

e ris

k of

not

det

ectin

g a

mat

eria

l mis

stat

emen

t res

ultin

g fr

om f

raud

is h

ighe

r th

an f

or o

ne

resu

lting

fr

om

erro

r, as

fr

aud

may

in

volv

e co

llusi

on,

forg

ery,

in

tent

iona

l om

issi

ons,

mis

repr

esen

tatio

ns, o

r the

ove

rrid

e of

inte

rnal

con

trol.

2.

Obt

ain

an u

nder

stan

ding

of

inte

rnal

con

trol

rele

vant

to

the

audi

t in

ord

er t

o de

sign

aud

it pr

oced

ures

that

are

app

ropr

iate

in th

e ci

rcum

stan

ces,

but n

ot fo

r the

pur

pose

of e

xpre

ssin

g an

op

inio

n on

the

effe

ctiv

enes

s of t

he G

roup

’s in

tern

al c

ontro

l. 3.

Ev

alua

te th

e ap

prop

riate

ness

of a

ccou

ntin

g po

licie

s us

ed a

nd th

e re

ason

able

ness

of a

ccou

ntin

g es

timat

es a

nd re

late

d di

sclo

sure

s mad

e by

man

agem

ent.

4.

Con

clud

e on

the

app

ropr

iate

ness

of

man

agem

ent’s

use

of

the

goin

g co

ncer

n ba

sis

of

acco

untin

g an

d, b

ased

on

the

audi

t ev

iden

ce o

btai

ned,

whe

ther

a m

ater

ial

unce

rtain

ty e

xist

s re

late

d to

eve

nts

or c

ondi

tions

tha

t m

ay c

ast

sign

ifica

nt d

oubt

on

the

Gro

up’s

abi

lity

to

cont

inue

as

a go

ing

conc

ern.

If w

e co

nclu

de th

at a

mat

eria

l unc

erta

inty

exi

sts,

we

are

requ

ired

to d

raw

atte

ntio

n in

our

aud

itors

’ rep

ort t

o th

e re

late

d di

sclo

sure

s in

the

cons

olid

ated

fina

ncia

l st

atem

ents

or,

if su

ch d

iscl

osur

es a

re in

adeq

uate

, to

mod

ify o

ur o

pini

on. O

ur c

oncl

usio

ns a

re

base

d on

the

audi

t evi

denc

e ob

tain

ed u

p to

the

date

of

our

audi

tors

’ re

port.

How

ever

, fut

ure

even

ts o

r con

ditio

ns m

ay c

ause

the

Gro

up to

cea

se to

con

tinue

as a

goi

ng c

once

rn.

5.

Eval

uate

the

over

all p

rese

ntat

ion,

stru

ctur

e an

d co

nten

t of t

he c

onso

lidat

ed fi

nanc

ial s

tate

men

ts,

incl

udin

g th

e di

sclo

sure

s, an

d w

heth

er t

he c

onso

lidat

ed f

inan

cial

sta

tem

ents

rep

rese

nt t

he

unde

rlyin

g tra

nsac

tions

and

eve

nts i

n a

man

ner t

hat a

chie

ves f

air p

rese

ntat

ion.

6.

O

btai

n su

ffic

ient

and

app

ropr

iate

aud

it ev

iden

ce re

gard

ing

the

finan

cial

info

rmat

ion

of e

ntiti

es

or b

usin

ess

activ

ities

with

in t

he G

roup

to

expr

ess

an o

pini

on o

n th

e co

nsol

idat

ed f

inan

cial

st

atem

ents

. We

are

resp

onsi

ble

for

the

dire

ctio

n, s

uper

visi

on, a

nd p

erfo

rman

ce o

f th

e gr

oup

audi

t. W

e re

mai

n so

lely

resp

onsi

ble

for o

ur a

udit

opin

ion.

- 4 -

142

We

com

mun

icat

e w

ith th

ose

char

ged

with

gov

erna

nce

rega

rdin

g, a

mon

g ot

her m

atte

rs, t

he p

lann

ed

scop

e an

d tim

ing

of th

e au

dit a

nd s

igni

fican

t aud

it fin

ding

s, in

clud

ing

any

sign

ifica

nt d

efic

ienc

ies

in in

tern

al c

ontro

l tha

t we

iden

tify

durin

g ou

r aud

it.

We

also

pro

vide

tho

se c

harg

ed w

ith g

over

nanc

e w

ith a

sta

tem

ent

that

we

have

com

plie

d w

ith

rele

vant

et

hica

l re

quire

men

ts

rega

rdin

g in

depe

nden

ce,

and

to

com

mun

icat

e w

ith

them

al

l re

latio

nshi

ps a

nd o

ther

mat

ters

that

may

rea

sona

bly

be th

ough

t to

bear

on

our

inde

pend

ence

, and

w

here

app

licab

le, r

elat

ed sa

fegu

ards

. Fr

om th

e m

atte

rs c

omm

unic

ated

with

thos

e ch

arge

d w

ith g

over

nanc

e, w

e de

term

ine

thos

e m

atte

rs

that

wer

e of

mos

t si

gnifi

canc

e in

the

aud

it of

the

con

solid

ated

fin

anci

al s

tate

men

ts f

or t

he y

ear

ende

d D

ecem

ber 3

1, 2

020

and

are

ther

efor

e th

e ke

y au

dit m

atte

rs. W

e de

scrib

e th

ese

mat

ters

in o

ur

audi

tors

’ re

port

unle

ss la

w o

r re

gula

tion

prec

lude

s pu

blic

dis

clos

ure

abou

t the

mat

ter

or w

hen,

in

extre

mel

y ra

re c

ircum

stan

ces,

we

dete

rmin

e th

at a

mat

ter s

houl

d no

t be

com

mun

icat

ed in

our

repo

rt be

caus

e th

e ad

vers

e co

nseq

uenc

es o

f do

ing

so w

ould

rea

sona

bly

be e

xpec

ted

to o

utw

eigh

the

pu

blic

inte

rest

ben

efits

of s

uch

com

mun

icat

ion.

Th

e en

gage

men

t par

tner

s on

the

audi

ts r

esul

ting

in th

is in

depe

nden

t aud

itors

’ re

port

are

Jui-C

han

Hua

ng a

nd S

hiuh

-Ran

Che

ng.

Del

oitte

& T

ouch

e Ta

ipei

, Tai

wan

R

epub

lic o

f Chi

na

Mar

ch 1

8, 2

021

N

otic

e to

Rea

ders

Th

e ac

com

pany

ing

cons

olid

ated

fina

ncia

l sta

tem

ents

are

inte

nded

onl

y to

pre

sent

the

cons

olid

ated

fin

anci

al p

ositi

on, f

inan

cial

per

form

ance

and

cas

h flo

ws

in a

ccor

danc

e wi

th a

ccou

ntin

g pr

inci

ples

an

d pr

actic

es g

ener

ally

acc

epte

d in

the

Repu

blic

of C

hina

and

not

thos

e of

any

oth

er ju

risd

ictio

ns.

The

stan

dard

s, pr

oced

ures

and

pra

ctic

es to

aud

it su

ch c

onso

lidat

ed fi

nanc

ial s

tate

men

ts a

re th

ose

gene

rally

app

lied

in th

e Re

publ

ic o

f Chi

na.

For

the

conv

enie

nce

of

read

ers,

the

inde

pend

ent

audi

tors

’ re

port

an

d th

e ac

com

pany

ing

cons

olid

ated

fin

anci

al s

tate

men

ts h

ave

been

tra

nsla

ted

into

Eng

lish

from

the

ori

gina

l C

hine

se

vers

ion

prep

ared

and

use

d in

the

Repu

blic

of C

hina

. If t

here

is a

ny c

onfli

ct b

etw

een

the

Engl

ish

vers

ion

and

the

orig

inal

Chi

nese

ver

sion

or a

ny d

iffer

ence

in th

e in

terp

reta

tion

of th

e tw

o ve

rsio

ns,

the

Chi

nese

-lang

uage

ind

epen

dent

aud

itors

’ re

port

and

con

solid

ated

fin

anci

al s

tate

men

ts s

hall

prev

ail.

- 5 -

CH

INA

AIR

LIN

ES,

LT

D. A

ND

SU

BSI

DIA

RIE

S C

ON

SOL

IDA

TE

D B

AL

AN

CE

SH

EE

TS

DE

CE

MB

ER

31,

202

0 A

ND

201

9 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs)

2020

2019

A

SSE

TS

A

mou

nt

%

Am

ount

%

C

UR

REN

T A

SSET

S

C

ash

and

cash

equ

ival

ents

(Not

es 4

, 6 a

nd 3

2)

$

27

,125

,937

10

$

28,4

59,5

28

10

Fina

ncia

l ass

ets a

t fai

r val

ue th

roug

h pr

ofit

or lo

ss -

curr

ent (

Not

es 4

, 7 a

nd 3

2)

274,

761

-

51

2,19

2

-

Fina

ncia

l ass

ets a

t am

ortiz

ed c

ost (

Not

es 9

and

32)

6,

551,

693

2

2,

355,

095

1 Fi

nanc

ial a

sset

s for

hed

ging

- cu

rrent

(Not

es 4

and

32)

7,

613,

636

3

9,

626

- N

otes

and

acc

ount

s rec

eiva

ble,

net

(Not

es 4

, 10

and

32)

9,69

7,51

1

4

8,52

0,83

4

3

Not

es a

nd a

ccou

nts r

ecei

vabl

e - r

elat

ed p

artie

s (N

otes

32

and

33)

1,66

7

-

10,3

48

- O

ther

rece

ivab

les (

Not

es 4

and

32)

80

1,13

4

-

774,

206

- C

urre

nt ta

x as

sets

(Not

es 4

and

28)

67

,549

-

54,6

89

- In

vent

orie

s, ne

t (N

otes

4 a

nd 1

1)

8,78

8,10

5

3

8,47

0,11

3

3

Non

-cur

rent

ass

ets h

eld

for s

ale

(Not

es 4

, 5 a

nd 1

2)

89,2

96

-

-

- O

ther

ass

ets -

cur

rent

(Not

e 18

)

86

1,17

9

-

2,65

5,71

1

1

To

tal c

urre

nt a

sset

s

61

,872

,468

22

51

,822

,342

18

NO

N-C

UR

REN

T A

SSET

S

Fi

nanc

ial a

sset

s at f

air v

alue

thro

ugh

othe

r com

preh

ensi

ve in

com

e - n

on-c

urre

nt (N

otes

8 a

nd 3

2)

163,

746

-

20

9,22

1

-

Fina

ncia

l ass

ets a

t am

ortiz

ed c

ost (

Not

es 4

and

9)

311,

596

-

10

5,58

6

-

Inve

stm

ents

acc

ount

ed fo

r usin

g th

e eq

uity

met

hod

(Not

es 4

and

14)

1,

970,

802

1

2,

223,

793

1 Pr

oper

ty, p

lant

and

equ

ipm

ent (

Not

es 4

, 5, 1

5 an

d 34

)

14

1,48

1,69

4

50

14

5,88

6,97

1

50

R

ight

-of-u

se a

sset

s (N

otes

4, 2

1 an

d 34

)

59

,861

,537

21

71

,033

,617

24

In

vest

men

t pro

perti

es (N

otes

4 a

nd 1

6)

2,07

4,79

8

1

2,07

5,06

8

1

Oth

er in

tang

ible

ass

ets (

Not

es 4

and

17)

1,

076,

351

-

1,

182,

692

- D

efer

red

inco

me

tax

asse

t (N

otes

4, 5

and

28)

6,

028,

200

2

5,

337,

626

2 O

ther

ass

ets -

non

-cur

rent

(Not

es 1

8, 2

1, 3

2 an

d 34

)

9,

352,

892

3

13

,171

,063

4

To

tal n

on-c

urre

nt a

sset

s

22

2,32

1,61

6

78

24

1,22

5,63

7

82

TOTA

L

$ 2

84,1

94,0

84

100

$

293

,047

,979

10

0

L

IAB

ILIT

IES

AN

D E

QU

ITY

CU

RR

ENT

LIA

BIL

ITIE

S

Sh

ort-t

erm

deb

ts (N

ote

19)

$

1,

932,

000

1

$

380,

000

- Sh

ort-t

erm

bill

s pay

able

(Not

e 19

)

8,

088,

882

3

-

- Fi

nanc

ial l

iabi

litie

s at f

air v

alue

thro

ugh

prof

it or

loss

- cu

rren

t (N

otes

4, 5

, 7 a

nd 3

2)

-

-

11,7

49

- Fi

nanc

ial l

iabi

litie

s for

hed

ging

- cu

rren

t (N

otes

4, 2

1 an

d 32

)

8,

129,

752

3

8,

618,

506

3 N

otes

and

acc

ount

s pay

able

(Not

e 32

)

1,

354,

237

1

1,

495,

606

1 A

ccou

nts p

ayab

le -

rela

ted

parti

es (N

otes

32

and

33)

128,

567

-

54

2,01

5

-

Oth

er p

ayab

les (

Not

es 2

2 an

d 32

)

8,

306,

257

3

13

,187

,972

5

Cur

rent

tax

liabi

litie

s (N

otes

4 a

nd 2

8)

216,

602

-

37

4,17

8

-

Leas

e lia

bilit

ies -

cur

rent

(Not

es 3

, 4 a

nd 2

1)

2,52

5,95

7

1

2,34

0,87

3

1

Con

tract

liab

ilitie

s - c

urre

nt (N

ote

23)

3,56

9,36

0

1

21,0

60,7

73

7 Pr

ovis

ions

- cu

rren

t (N

otes

4 a

nd 2

4)

164,

800

-

36

0,39

3

-

Bon

ds p

ayab

le a

nd p

ut o

ptio

n of

con

verti

ble

bond

s - c

urre

nt p

ortio

n (N

otes

4, 2

0, 2

7 an

d 32

)

11

,982

,859

4

10,0

00,0

00

3 Lo

ans a

nd d

ebts

- cu

rren

t por

tion

(Not

es 1

9, 3

2 an

d 34

)

15

,234

,374

5

14,1

48,8

92

5 O

ther

cur

rent

liab

ilitie

s (N

ote

32)

1,01

6,06

8

-

3,83

0,57

0

1

To

tal c

urre

nt li

abili

ties

62,6

49,7

15

22

76,3

51,5

27

26

N

ON

-CU

RR

ENT

LIA

BIL

ITIE

S

D

eriv

ativ

e fin

anci

al li

abili

ties f

or h

edgi

ng -

non-

curr

ent (

Not

es 3

, 4, 2

1 an

d 32

)

32

,455

,333

11

42

,420

,205

15

B

onds

pay

able

- no

n-cu

rren

t (N

otes

4, 2

0, 2

7 an

d 32

)

10

,300

,000

4

22,0

52,6

25

8 Lo

ans a

nd d

ebts

- no

n-cu

rren

t (N

otes

19,

32

and

35)

77,2

88,3

30

27

53,5

14,8

91

18

Con

tract

liab

ilitie

s - n

on-c

urre

nt (N

otes

4 a

nd 2

3)

1,76

1,10

4

1

2,23

6,31

1

1

Prov

isio

ns -

non-

curr

ent (

Not

es 4

and

24)

14

,369

,486

5

10,0

11,4

64

3 C

urre

nt ta

x lia

bilit

ies -

non

-cur

rent

(Not

es 4

and

28)

87

,181

-

-

-

Def

erre

d ta

x lia

bilit

ies (

Not

es 4

and

28)

1,

023,

084

-

55

7,14

2

-

Leas

e lia

bilit

ies -

non

-cur

rent

(Not

es 3

, 4, a

nd 2

1)

13,2

79,7

92

5

15

,801

,724

5

Acc

rued

pen

sion

cos

ts (N

otes

4, 5

and

25)

9,

737,

741

4

9,

435,

035

3 O

ther

non

-cur

rent

liab

ilitie

s (N

ote

32)

530,

745

-

53

4,93

8

-

To

tal n

on-c

urre

nt li

abili

ties

160,

832,

796

57

156,

564,

335

53

To

tal l

iabi

litie

s

22

3,48

2,51

1

79

23

2,91

5,86

2

79

EQU

ITY

ATT

RIB

UTA

BLE

TO

OW

NER

S O

F TH

E C

OM

PAN

Y (N

otes

20

and

26)

Shar

e ca

pita

l

54

,209

,846

19

54

,209

,846

19

C

apita

l sur

plus

1,

187,

327

-

2,

488,

907

1 R

etai

ned

earn

ings

(acc

umul

ated

def

icit)

Le

gal r

eser

ve

-

-

466,

416

- Sp

ecia

l res

erve

-

-

12

,967

-

Una

ppro

pria

ted

reta

ined

ear

ning

s (ac

cum

ulat

ed d

efic

it)

(350

,581

)

-

(1,7

77,2

25)

- To

tal r

etai

ned

earn

ings

(acc

umul

ated

def

icit)

(3

50,5

81)

-

(1

,297

,842

)

-

Oth

er e

quity

2,

543,

766

1

1,

196,

233

- Tr

easu

ry sh

ares

(3

0,87

5)

-

(4

3,37

2)

-

Tota

l equ

ity a

ttrib

utab

le to

ow

ners

of t

he C

ompa

ny

57,5

59,4

83

20

56,5

53,7

72

20

N

ON

-CO

NTR

OLL

ING

INTE

RES

TS (N

ote

26)

3,15

2,09

0

1

3,57

8,34

5

1

To

tal e

quity

60

,711

,573

21

60

,132

,117

21

TOTA

L

$ 2

84,1

94,0

84

100

$

293

,047

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10

0 Th

e ac

com

pany

ing

note

s are

an

inte

gral

par

t of t

he c

onso

lidat

ed fi

nanc

ial s

tate

men

ts.

- 6 -

143

CH

INA

AIR

LIN

ES,

LT

D. A

ND

SU

BSI

DIA

RIE

S C

ON

SOL

IDA

TE

D S

TA

TE

ME

NT

S O

F C

OM

PRE

HE

NSI

VE

INC

OM

E FO

R T

HE

YE

AR

S E

ND

ED

DE

CE

MB

ER

31,

202

0 A

ND

201

9 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs, E

xcep

t Ear

ning

s Per

Sha

re)

2020

2019

A

mou

nt

%

Am

ount

%

R

EVEN

UE

(Not

es 4

, 27

and

34)

$

115

,250

,550

100

$ 1

68,4

44,1

60

1

00

C

OST

S (N

otes

4, 9

, 11,

17,

24,

25,

27

and

34)

105,

031,

349

91

151,

757,

232

90

G

RO

SS P

RO

FIT

10,2

19,2

01

9

16

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10

OPE

RA

TIN

G E

XPE

NSE

S (N

otes

4, 2

5 an

d 27

)

8,

034,

785

7

14

,021

,107

8

O

PER

ATI

NG

PR

OFI

T

2,

184,

416

2

2,

665,

821

2

NO

N-O

PER

ATI

NG

INC

OM

E A

ND

LO

SS

Oth

er in

com

e (N

otes

4, 8

and

27)

68

6,57

4

1

718,

988

- O

ther

gai

ns a

nd lo

sses

(Not

es 1

2, 1

4, 1

5, 2

7 an

d 31

)

(2

65,9

90)

-

(4

73,8

12)

- Fi

nanc

e co

sts (

Not

es 2

7 an

d 32

)

(3

,057

,963

)

(3

)

(3

,340

,119

)

(2

) Sh

are

of th

e pr

ofit

of a

ssoc

iate

s and

join

t ven

ture

s (N

ote

14)

(200

,834

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-

332,

305

-

Tota

l non

-ope

ratin

g in

com

e an

d lo

ss

(2,8

38,2

13)

(2)

(2,7

62,6

38)

(2)

PR

ETA

X L

OSS

(6

53,7

97)

-

(9

6,81

7)

-

IN

CO

ME

TAX

(BEN

EFIT

) EX

PEN

SE (N

otes

4, 5

an

d 28

)

37

3,98

3

-

(578

,185

)

-

N

ET (L

OSS

) IN

CO

ME

(279

,814

)

-

(675

,002

)

-

O

ther

com

preh

ensi

ve g

ain

for t

he y

ear,

net o

f inc

ome

tax

Item

s tha

t will

not

be

recl

assi

fied

subs

eque

ntly

to

prof

it or

loss

:

(L

oss)

gai

n on

hed

ging

instr

umen

ts su

bjec

t to

basi

s adj

ustm

ent (

Not

es 4

, 26

and

32)

(474

,202

)

(1

)

(1

7,70

5)

-

Unr

ealiz

ed g

ain

on in

vest

men

ts in

equ

ity

inst

rum

ents

des

igna

ted

as a

t fai

r val

ue th

roug

h ot

her c

ompr

ehen

sive

inco

me

(Not

e 8)

(4

5,58

8)

-

79,3

92

- R

emea

sure

men

t of d

efin

ed b

enef

it pl

ans (

Not

es 4

an

d 25

)

(3

99,1

50)

-

(7

81,7

93)

- Sh

are

of o

ther

com

preh

ensi

ve lo

ss o

f ass

ocia

tes

and

join

t ven

ture

s acc

ount

ed fo

r usi

ng th

e eq

uity

met

hod

(Not

es 4

and

14)

34

,271

-

(32,

102)

- In

com

e ta

x re

latin

g to

item

s tha

t will

not

be

recl

assi

fied

subs

eque

ntly

to p

rofit

or l

oss

(N

ote

28)

144,

158

-

14

5,16

6

-

(7

40,5

11)

(1)

(607

,042

)

-

(Con

tinue

d)

- 7 -

CH

INA

AIR

LIN

ES,

LT

D. A

ND

SU

BSI

DIA

RIE

S C

ON

SOL

IDA

TE

D S

TA

TE

ME

NT

S O

F C

OM

PRE

HE

NSI

VE

INC

OM

E FO

R T

HE

YE

AR

S E

ND

ED

DE

CE

MB

ER

31,

202

0 A

ND

201

9 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs, E

xcep

t Ear

ning

s Per

Sha

re)

2020

2019

A

mou

nt

%

Am

ount

%

Ite

ms t

hat m

ay b

e re

clas

sifie

d su

bseq

uent

ly to

pro

fit

or lo

ss:

Exch

ange

diff

eren

ces o

n tra

nsla

tion

of th

e fin

anci

al st

atem

ents

of f

orei

gn o

pera

tions

(N

otes

4 a

nd 2

6)

$

(9

7,94

8)

-

$

(7

2,95

2)

-

Gai

n on

hed

ging

inst

rum

ents

not

subj

ect t

o ba

sis

adju

stm

ent (

Not

es 4

, 26

and

32)

2,10

3,33

2

2

1,41

1,62

3

-

Inco

me

tax

rela

ting

to it

ems t

hat m

ay b

e re

clas

sifie

d su

bseq

uent

ly to

pro

fit o

r los

s

(Not

e 28

)

(4

00,8

01)

-

(2

68,8

71)

-

1,60

4,58

3

2

1,06

9,80

0

-

O

ther

com

preh

ensi

ve g

ain

(loss

) for

the

year

, ne

t of i

ncom

e ta

x

86

4,07

2

1

462,

758

-

TOTA

L C

OM

PREH

ENSI

VE

INC

OM

E (L

OSS

) FO

R

THE

YEA

R

$

58

4,25

8

1

$

(2

12,2

44)

-

NET

INC

OM

E (L

OSS

) ATT

RIB

UTA

BLE

TO

:

O

wne

r of t

he C

ompa

ny

$

14

0,00

0

-

$

(1

,199

,798

)

(1

) N

on-c

ontro

lling

inte

rest

s

(4

19,8

14)

-

52

4,79

6

1

$

(2

79,8

14)

-

$

(675

,002

)

-

TO

TAL

CO

MPR

EHEN

SIV

E IN

CO

ME

ATT

RIB

UTA

BLE

TO

:

O

wne

r of t

he C

ompa

ny

$

96

6,96

8

1

$

(6

47,0

85)

- N

on-c

ontro

lling

inte

rest

s

(3

82,7

10)

-

43

4,84

1

-

$

58

4,25

8

1

$

(2

12,2

44)

- EA

RN

ING

S PE

R S

HA

RE

(NEW

TA

IWA

N

DO

LLA

RS;

Not

e 29

)

B

asic

$

0.03

$

(0

.22)

Dilu

ted

$

0.

03

$

(0.2

2)

Th

e ac

com

pany

ing

note

s are

an

inte

gral

par

t of t

he c

onso

lidat

ed fi

nanc

ial s

tate

men

ts.

(Con

clud

ed)

- 8 -

144

CH

INA

AIR

LIN

ES,

LT

D. A

ND

SU

BSI

DIA

RIE

S C

ON

SOL

IDA

TE

D S

TA

TEM

EN

TS

OF

CH

AN

GE

S IN

EQ

UIT

Y

FOR

TH

E Y

EA

RS

EN

DE

D D

EC

EMB

ER

31,

202

0 A

ND

201

9 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs)

Equ

ity A

ttrib

utab

le to

Ow

ners

of t

he C

ompa

ny

Oth

er E

quity

Ret

aine

d Ea

rnin

gs

E

xcha

nge

Diff

eren

ces o

n

Unr

ealiz

ed G

ain

on F

inan

cial

A

sset

at F

air

Shar

e C

apita

l

Cap

ital S

urpl

us

L

egal

Res

erve

Spec

ial R

eser

ve

Una

ppro

pria

ted

Ear

ning

s (A

ccum

ulat

ed

Def

icit)

T

rans

latio

n of

the

Fina

ncia

l St

atem

ents

of

Fore

ign

Val

ue T

hrou

gh

Oth

er

Com

preh

ensi

ve

Inco

me

Gai

n (L

oss)

on

Hed

ging

In

stru

men

ts

Tre

asur

y Sh

ares

H

eld

by

Subs

idia

ries

Tot

al

N

on-C

ontr

ollin

g In

tere

sts

T

otal

Equ

ity

B

ALA

NC

E A

T JA

NU

AR

Y 1

, 201

9

$

54

,209

,846

$

1,

241,

214

$

351,

923

$

118,

810

$

1,14

4,92

8

$

(9

,664

)

$

42

,619

$

25

,268

$

(4

3,37

2 )

$

57,0

81,5

72

$

2,96

5,51

2

$

60

,047

,084

Bas

is ad

justm

ent t

o lo

ss o

n he

dgin

g in

stru

men

ts

-

-

-

-

-

-

-

(603

)

-

(603

)

-

(603

)

App

ropr

iatio

n of

201

8 ea

rnin

gs

Lega

l res

erve

-

-

114,

493

-

(1

14,4

93 )

-

-

-

-

-

-

-

Spec

ial r

eser

ve

-

-

-

(1

05,8

43 )

10

5,84

3

-

-

-

-

-

-

- C

ash

divi

dend

s - $

0.20

9607

37 p

er sh

are

-

-

-

-

(1

,136

,278

)

-

-

-

-

(1,1

36,2

78 )

-

(1

,136

,278

)

Cha

nges

in c

apita

l sur

plus

from

div

iden

ds d

istrib

uted

to su

bsid

iarie

s

-

606

-

-

-

-

-

-

-

60

6

-

606

A

ctua

l dis

posa

l of i

nter

ests

in su

bsid

iarie

s

-

1,24

7,08

7

-

-

-

-

-

-

-

1,24

7,08

7

7,54

6

1,25

4,63

3

Net

pro

fit (l

oss)

for t

he y

ear e

nded

Dec

embe

r 31,

201

9

-

-

-

-

(1,1

99,7

98 )

-

-

-

-

(1

,199

,798

)

524,

796

(6

75,0

02 )

O

ther

com

preh

ensiv

e in

com

e (lo

ss) f

or th

e ye

ar e

nded

Dec

embe

r 31,

201

9 ne

t of i

ncom

e ta

x

-

-

-

-

(577

,427

)

(53,

411 )

64,5

38

1,

119,

013

-

55

2,71

3

(89,

955 )

462,

758

To

tal c

ompr

ehen

sive

inco

me

(loss

) for

the

year

end

ed D

ecem

ber 3

1, 2

019

-

-

-

-

(1

,777

,225

)

(53,

411 )

64,5

38

1,

119,

013

-

(6

47,0

85 )

43

4,84

1

(212

,244

)

Cas

h di

vide

nds f

rom

subs

idia

ries p

aid

to n

on-c

ontro

lling

inte

rest

s

-

-

-

-

-

-

-

-

-

-

611,

841

61

1,84

1

Non

-con

trolli

ng in

tere

sts a

risin

g fro

m a

cqui

sitio

n of

subs

idia

ries

-

-

-

-

-

-

-

-

-

-

(4

16,4

38 )

(4

16,4

38 )

Lo

ss o

f con

trol o

f sub

sidia

ries

-

-

-

-

-

8,

368

10

5

-

-

8,47

3

(24,

957 )

(16,

484 )

BA

LAN

CE

AT

DEC

EMB

ER 3

1, 2

019

54

,209

,846

2,48

8,90

7

466,

416

12

,967

(1,7

77,2

25 )

(5

4,70

7 )

10

7,26

2

1,14

3,67

8

(43,

372 )

56,5

53,7

72

3,

578,

345

60

,132

,117

Issu

ance

of e

mpl

oyee

shar

e op

tions

by

subs

idia

ries

-

17

2

-

-

-

-

-

-

-

172

52

224

C

hang

es in

per

cent

age

of o

wne

rshi

p in

tere

sts i

n su

bsid

iarie

s

-

-

-

-

(169

,272

)

-

-

-

-

(169

,272

)

331,

427

16

2,15

5

Bas

is ad

justm

ents

to g

ain

on h

edgi

ng in

strum

ents

-

-

-

-

-

-

-

20

0,98

9

-

200,

989

-

20

0,98

9

App

ropr

iatio

n of

201

9 ea

rnin

gs

Lega

l res

erve

-

-

(466

,416

)

-

466,

416

-

-

-

-

-

-

-

Spec

ial r

eser

ve

-

-

-

(1

2,96

7 )

12

,967

-

-

-

-

-

-

- C

apita

l sur

plus

use

d to

cov

er a

ccum

ulat

ed d

efic

it

-

(1,2

97,8

43 )

-

-

1,

297,

843

-

-

-

-

-

-

-

N

et p

rofit

(los

s) fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

020

-

-

-

-

14

0,00

0

-

-

-

-

140,

000

(4

19,8

14 )

(2

79,8

14 )

O

ther

com

preh

ensiv

e in

com

e (lo

ss) f

or th

e ye

ar e

nded

Dec

embe

r 31,

202

0,

net o

f inc

ome

tax

-

-

-

-

(3

19,5

76 )

(7

9,54

5 )

(3

5,90

3 )

1,

261,

992

-

82

6,96

8

37,1

04

86

4,07

2

Tota

l com

preh

ensi

ve in

com

e (lo

ss) f

or th

e ye

ar e

nded

Dec

embe

r 31,

202

0

-

-

-

-

(179

,576

)

(79,

545 )

(35,

903 )

1,26

1,99

2

-

966,

968

(3

82,7

10 )

58

4,25

8

Dis

posa

l of t

reas

ury

shar

es

-

(3

,909

)

-

-

(1,7

34 )

-

-

-

12

,497

6,85

4

-

6,85

4

Cas

h di

vide

nds f

rom

subs

idia

ries p

aid

to n

on-c

ontro

lling

inte

rest

s

-

-

-

-

-

-

-

-

-

-

(375

,024

)

(375

,024

)

BA

LAN

CE

AT

DEC

EMB

ER 3

1, 2

020

$

54,2

09,8

46

$

1,18

7,32

7

$

-

$

-

$

(3

50,5

81 )

$

(134

,252

)

$

71

,359

$

2,

606,

659

$

(30,

875 )

$

57

,559

,483

$

3,

152,

090

$

60,7

11,5

73

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

con

solid

ated

fina

ncia

l sta

tem

ents

. 145

CH

INA

AIR

LIN

ES,

LT

D. A

ND

SU

BSI

DIA

RIE

S C

ON

SOL

IDA

TE

D S

TA

TE

ME

NT

S O

F C

ASH

FLO

WS

FOR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1, 2

020

AN

D 2

019

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

)

20

20

20

19

C

ASH

FLO

WS

FRO

M O

PER

ATI

NG

AC

TIV

ITIE

S

Lo

ss b

efor

e in

com

e ta

x

$

(653

,797

)

$

(96,

817)

A

djus

tmen

ts fo

r ope

ratin

g ac

tiviti

es:

Dep

reci

atio

n ex

pens

e

31

,167

,247

32

,601

,400

A

mor

tizat

ion

expe

nse

206,

936

198,

237

Expe

cted

cre

dit l

oss r

ecog

nize

d on

trad

e re

ceiv

able

s

4,

895

24,0

96

Net

gai

n on

fair

valu

e ch

ange

s of f

inan

cial

ass

ets a

nd li

abili

ties h

eld

for t

radi

ng

(2,2

87)

(27,

580)

In

tere

st in

com

e

(2

82,5

06)

(417

,446

) D

ivid

end

inco

me

(23,

043)

(21,

422)

Sh

are

of lo

ss (p

rofit

) of a

ssoc

iate

s and

join

t ven

ture

s

20

0,83

4

(3

32,3

05)

Gai

n on

dis

posa

l of p

rope

rty, p

lant

and

equ

ipm

ent

(13,

347)

(32,

460)

G

ain

on d

ispo

sal o

f inv

estm

ents

acc

ount

ed fo

r usi

ng th

e eq

uity

m

etho

d

-

(7,6

56)

Loss

on

disp

osal

of n

on-c

urre

nt a

sset

s hel

d fo

r sal

e

-

10,4

62

Impa

irmen

t los

s rec

ogni

zed

on p

rope

rty, p

lant

, equ

ipm

ent

424,

573

- Lo

ss o

n in

vent

orie

s and

pro

perty

, pla

nt a

nd e

quip

men

t

47

1,50

7

57

2,02

6 N

et g

ain

on fo

reig

n cu

rren

cy e

xcha

nge

(1,3

38,7

16)

(59,

987)

C

ompe

nsat

ion

cost

s of e

mpl

oyee

shar

e op

tions

22

4

-

Fina

nce

cost

s

3,

057,

963

3,34

0,11

9 Im

pairm

ent l

oss o

f inv

estm

ents

acc

ount

ed fo

r usi

ng th

e eq

uity

m

etho

d

46

,757

-

Rec

ogni

tion

of p

rovi

sion

s

6,

075,

077

4,60

8,92

4 A

mor

tizat

ion

of u

nrea

lized

sale

-leas

ebac

ks

-

10

3,77

5 O

ther

s

(2

,435

)

(1

,484

) C

hang

es in

ope

ratin

g as

sets

and

liab

ilitie

s

Fi

nanc

ial a

sset

s man

dato

rily

clas

sifie

d as

at f

air v

alue

thro

ugh

prof

it or

loss

24

1,59

2

(2

78,7

41)

Fina

ncia

l lia

bilit

ies m

anda

toril

y cl

assi

fied

as a

t fai

r val

ue th

roug

h pr

ofit

or lo

ss

(11,

749)

11,5

28

Not

es a

nd a

ccou

nts r

ecei

vabl

e

(1

,073

,959

)

1,

564,

298

Acc

ount

s rec

eiva

ble

- rel

ated

par

ties

593,

365

66,5

38

Oth

er re

ceiv

able

s

(8

5,26

3)

(4

9,13

8)

Inve

ntor

ies

(83,

341)

(118

,317

) O

ther

cur

rent

ass

ets

1,83

0,88

7

54

8,15

6 N

otes

and

acc

ount

s pay

able

(6

28,7

80)

(14,

326)

A

ccou

nts p

ayab

le -

rela

ted

parti

es

(1,0

43,5

01)

(224

,931

) O

ther

pay

able

s

(4

,295

,509

)

(8

32,2

88)

Con

tract

liab

ilitie

s

(1

7,96

6,62

1)

1,

847,

286

Prov

isio

ns

(1,3

08,1

70)

(2,7

99,3

14)

Oth

er c

urre

nt li

abili

ties

(2,6

20,0

22)

202,

815

Acc

rued

pen

sion

liab

ilitie

s

(9

7,57

0)

(1

49,6

78)

Oth

er li

abili

ties

(17,

082)

(5,1

55)

Cas

h ge

nera

ted

from

ope

ratio

ns

12,7

74,1

59

40,2

30,6

15

Inte

rest

rece

ived

30

4,64

2

40

1,19

0 (C

ontin

ued)

- 10

-

CH

INA

AIR

LIN

ES,

LT

D. A

ND

SU

BSI

DIA

RIE

S C

ON

SOL

IDA

TE

D S

TA

TE

ME

NT

S O

F C

ASH

FLO

WS

FOR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1, 2

020

AN

D 2

019

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

)

20

20

20

19

D

ivid

ends

rece

ived

$

32,4

33

$

35

5,31

1 In

tere

st p

aid

(3,2

09,0

74)

(3,1

24,9

60)

Inco

me

tax

paid

(1

78,6

85)

(335

,544

)

Net

cas

h ge

nera

ted

from

ope

ratin

g ac

tiviti

es

9,72

3,47

5

37

,526

,612

CA

SH F

LOW

S FR

OM

INV

ESTI

NG

AC

TIV

ITIE

S

A

cqui

sitio

n of

fina

ncia

l ass

ets a

t am

ortiz

ed c

ost

(6,2

35,7

73)

(2,0

89,8

71)

Dis

posa

l of f

inan

cial

ass

ets a

t am

ortiz

ed c

ost

1,93

4,51

6

3,

447,

202

Paym

ents

to a

cqui

re fi

nanc

ial a

sset

s for

hed

ging

(1

0,26

9,05

5)

-

Dis

posa

l of f

inan

cial

ass

ets f

or h

edgi

ng

2,36

3,89

7

-

Proc

eeds

from

dis

posa

l of n

on-c

urre

nt a

sset

s hel

d fo

r sal

e

-

35,6

92

Paym

ents

for p

rope

rty, p

lant

and

equ

ipm

ent

(1,2

37,5

15)

(3,3

16,0

78)

Proc

eeds

from

dis

posa

l of p

rope

rty, p

lant

and

equ

ipm

ent

45,6

20

71,1

94

Incr

ease

in re

fund

able

dep

osits

(6

3,00

5)

(4

40,4

43)

Dec

reas

e in

refu

ndab

le d

epos

its

122,

324

218,

547

Incr

ease

in p

repa

ymen

ts fo

r equ

ipm

ent

(11,

407,

502)

(15,

658,

898)

(In

crea

se) d

ecre

ase

in c

ompu

ter s

oftw

are

cost

s

(1

30,4

61)

(172

,639

) D

ecre

ase

in re

stric

ted

asse

ts

(1

71,2

19)

38,6

36

Proc

eeds

from

dis

posa

l of a

ssoc

iate

s acc

ount

ed fo

r usin

g th

e eq

uity

m

etho

d

-

1,86

6,47

4 Pr

ocee

ds fr

om a

cqui

sitio

n of

join

t ven

ture

s acc

ount

ed fo

r usi

ng th

e eq

uity

met

hod

-

(3

5,52

5)

Net

cas

h ou

tflow

on

disp

osal

of s

ubsi

diar

ies (

Not

e 31

)

-

(17,

413)

Net

cas

h us

ed in

inve

stin

g ac

tiviti

es

(25,

048,

173)

(16,

053,

122)

CA

SH F

LOW

S FR

OM

FIN

AN

CIN

G A

CTI

VIT

IES

Dec

reas

e in

shor

t-ter

m d

ebts

1,

552,

000

380,

000

Incr

ease

in sh

ort-t

erm

bill

pay

able

8,

088,

882

- Pr

ocee

ds fr

om is

suan

ce o

f bon

ds p

ayab

le

-

3,

500,

000

Rep

aym

ents

of b

onds

pay

able

(9

,850

,000

)

(4

,445

,900

) Pr

ocee

ds fr

om lo

ng-te

rm d

ebts

45

,605

,919

9,

078,

690

Rep

aym

ents

of l

ong-

term

deb

ts

(20,

746,

998)

(17,

819,

750)

R

epay

men

ts o

f the

prin

cipa

l por

tion

of le

ase

liabi

litie

s

(1

0,58

3,87

2)

(1

1,69

2,31

0)

Proc

eeds

from

gua

rant

ee d

epos

its re

ceiv

ed

165,

404

180,

360

Ref

unds

of g

uara

ntee

dep

osits

rece

ived

(1

56,1

43)

(149

,198

) Pr

ocee

ds fr

om sa

le -

leas

ebac

ks

-

4,

905,

660

Div

iden

ds p

aid

to o

wne

rs o

f the

Com

pany

-

(1,1

35,6

72)

Issu

ance

of o

rdin

ary

shar

es o

f sub

sidi

arie

s

16

2,15

5

-

Cas

h di

vide

nds p

aid

to n

on-c

ontro

lling

inte

rest

s

(3

75,0

24)

(416

,438

) Pr

ocee

ds fr

om d

ispo

sal o

f tre

asur

y sh

ares

6,

854

-

Net

cas

h ge

nera

ted

from

(use

d in

) fin

anci

ng a

ctiv

ities

13

,869

,177

(1

7,61

4,55

8)

(Con

tinue

d)

- 11

-

146

CH

INA

AIR

LIN

ES,

LT

D. A

ND

SU

BSI

DIA

RIE

S C

ON

SOL

IDA

TE

D S

TA

TE

ME

NT

S O

F C

ASH

FLO

WS

FOR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1, 2

020

AN

D 2

019

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

)

20

20

20

19

EF

FEC

TS O

F EX

CH

AN

GE

RA

TE C

HA

NG

ES O

N T

HE

BA

LAN

CE

OF

CA

SH H

ELD

IN F

OR

EIG

N C

UR

REN

CIE

S

$

121,

930

$

(3

36,9

41)

N

ET (D

ECR

EASE

) IN

CR

EASE

IN C

ASH

AN

D C

ASH

EQ

UIV

ALE

NTS

(1

,333

,591

)

3,

521,

991

C

ASH

AN

D C

ASH

EQ

UIV

ALE

NTS

AT

THE

BEG

INN

ING

OF

THE

YEA

R

28,4

59,5

28

24,9

37,5

37

C

ASH

AN

D C

ASH

EQ

UIV

ALE

NTS

AT

THE

END

OF

THE

YEA

R

$

27

,125

,937

$

28,4

59,5

28

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

con

solid

ated

fina

ncia

l sta

tem

ents

. (C

oncl

uded

)

- 12

-

CH

INA

AIR

LIN

ES,

LT

D. A

ND

SU

BSI

DIA

RIE

S N

OT

ES

TO

CO

NSO

LID

AT

ED

FIN

AN

CIA

L S

TA

TE

ME

NT

S FO

R T

HE

YE

AR

S E

ND

ED

DE

CE

MB

ER

31,

202

0 A

ND

201

9 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs, U

nles

s Sta

ted

Oth

erw

ise)

1

. G

EN

ER

AL

INFO

RM

AT

ION

C

hina

Airl

ines

, Ltd

. (th

e “C

ompa

ny”)

was

fou

nded

in 1

959

and

its s

hare

s ha

ve b

een

liste

d on

the

Taiw

an

Stoc

k Ex

chan

ge s

ince

Feb

ruar

y 26

, 19

93.

The

Com

pany

prim

arily

pro

vide

s ai

r tra

nspo

rt se

rvic

es f

or

pass

enge

rs a

nd c

argo

. Its

oth

er o

pera

tions

incl

ude

(a) m

ail s

ervi

ces;

(b) g

roun

d se

rvic

es a

nd ro

utin

e ai

rcra

ft m

aint

enan

ce; (

c) m

ajor

mai

nten

ance

of f

light

equ

ipm

ent;

(d) c

omm

unic

atio

ns a

nd d

ata

proc

essi

ng s

ervi

ces

to o

ther

airl

ines

; (e)

the

sale

of a

ircra

ft pa

rts, e

quip

men

t and

the

entir

e ai

rcra

ft; a

nd (f

) lea

sing

of a

ircra

ft.

The

maj

or s

hare

hold

ers

of t

he C

ompa

ny a

re C

hina

Avi

atio

n D

evel

opm

ent

Foun

datio

n (C

AD

F) a

nd

Nat

iona

l Dev

elop

men

t Fun

d (N

DF)

, Exe

cutiv

e Y

uan.

As o

f Dec

embe

r 31,

202

0 an

d 20

19, C

AD

F an

d N

DF

join

tly h

eld

44.0

3% o

f the

Com

pany

’s sh

ares

.

2.

APP

RO

VA

L O

F FI

NA

NC

IAL

ST

AT

EM

EN

TS

The

cons

olid

ated

fin

anci

al s

tate

men

ts o

f th

e C

ompa

ny a

nd it

s su

bsid

iarie

s (c

olle

ctiv

ely

refe

rred

to a

s th

e “G

roup

”) w

ere

appr

oved

by

the

Com

pany

’s b

oard

of d

irect

ors o

n M

arch

18,

202

1.

3.

APP

LIC

AT

ION

OF

NEW

, AM

EN

DE

D A

ND

RE

VIS

ED

ST

AN

DA

RD

S A

ND

INT

ER

PRE

TA

TIO

NS

a.

Initi

al a

pplic

atio

n of

the

am

endm

ents

to

the

Inte

rnat

iona

l Fi

nanc

ial

Rep

ortin

g St

anda

rds

(IFR

S),

Inte

rnat

iona

l Acc

ount

ing

Stan

dard

s (IA

S), I

FRIC

Inte

rpre

tatio

ns (I

FRIC

), an

d SI

C In

terp

reta

tions

(SIC

) (c

olle

ctiv

ely,

the

“IFR

Ss”)

end

orse

d an

d is

sued

into

eff

ect b

y th

e Fi

nanc

ial S

uper

viso

ry C

omm

issi

on

(FSC

)

Exce

pt fo

r the

follo

win

g, th

e in

itial

app

licat

ion

of th

e IF

RSs

end

orse

d an

d is

sued

into

eff

ect b

y th

e FS

C

did

not h

ave

mat

eria

l im

pact

on

the

Gro

up’s

acc

ount

ing

polic

ies:

A

men

dmen

t to

IFR

S 16

“C

ovid

-19-

Rel

ated

Ren

t Con

cess

ions

” Th

e C

ompa

ny e

lect

ed t

o ap

ply

the

prac

tical

exp

edie

nt p

rovi

ded

in t

he a

men

dmen

t to

IFR

S 16

with

re

spec

t to

rent

con

cess

ions

neg

otia

ted

with

the

less

or a

s a

dire

ct c

onse

quen

ce o

f th

e C

OV

ID-1

9. T

he

rela

ted

acco

untin

g po

licie

s ar

e st

ated

in

Not

e 4.

Prio

r to

the

app

licat

ion

of t

he a

men

dmen

t, th

e C

ompa

ny sh

all d

eter

min

e w

heth

er o

r not

the

abov

emen

tione

d re

nt c

once

ssio

ns n

eed

to b

e ac

coun

ted

for

as le

ase

mod

ifica

tions

. Th

e C

ompa

ny a

pplie

d th

e am

endm

ent

from

Jan

uary

1,

2020

. B

ecau

se t

he a

bove

men

tione

d re

nt

conc

essi

ons

affe

ct o

nly

in 2

020,

ret

rosp

ectiv

e ap

plic

atio

n of

the

am

endm

ent

has

no i

mpa

ct o

n th

e re

tain

ed e

arni

ngs a

s of J

anua

ry 1

, 202

0.

- 13

-

147

b.

The

IFR

Ss e

ndor

sed

by th

e FS

C fo

r app

licat

ion

star

ting

from

202

1

New

IFR

Ss

E

ffec

tive

Dat

e A

nnou

nced

by

IASB

A

men

dmen

ts to

IFR

S 4 “

Exte

nsio

n of

the

Tem

pora

ry E

xem

ptio

n fr

om

App

lyin

g IF

RS

9”

Eff

ectiv

e im

med

iate

ly u

pon

prom

ulga

tion

by th

e IA

SB

Am

endm

ents

to IF

RS

9, IA

S 39

, IFR

S 7,

IFR

S 4

and

IFR

S 16

“I

nter

est R

ate

Ben

chm

ark

Ref

orm

- Ph

ase

2”

Jan

uary

1, 2

021

As

of t

he d

ate

the

cons

olid

ated

fin

anci

al s

tate

men

ts w

ere

auth

oriz

ed f

or i

ssue

, th

e G

roup

is

cont

inuo

usly

ass

essi

ng t

he p

ossi

ble

impa

ct t

hat t

he a

pplic

atio

n of

oth

er s

tand

ards

and

inte

rpre

tatio

ns

will

hav

e on

the

Gro

up’s

fin

anci

al p

ositi

on a

nd f

inan

cial

per

form

ance

and

will

dis

clos

e th

e re

leva

nt

impa

ct w

hen

the

asse

ssm

ent i

s com

plet

ed.

c.

N

ew IF

RSs

in is

sue

but n

ot y

et e

ndor

sed

and

issu

ed in

to e

ffec

t by

the

FSC

New

IFR

Ss

E

ffec

tive

Dat

e A

nnou

nced

by

IASB

(Not

e 1)

“A

nnua

l Im

prov

emen

ts to

IFR

S St

anda

rds 2

018-

2020

” J

anua

ry 1

, 202

2 (N

ote

2)

Am

endm

ents

to IF

RS

3 “R

efer

ence

to th

e C

once

ptua

l Fra

mew

ork”

J

anua

ry 1

, 202

2 (N

ote

3)

Am

endm

ents

to IF

RS

10 a

nd IA

S 28

“Sa

le o

r Con

tribu

tion

of A

sset

s be

twee

n an

Inve

stor

and

its A

ssoc

iate

or J

oint

Ven

ture

” T

o be

det

erm

ined

by

IASB

IFR

S 17

“In

sura

nce

Con

tract

s”

Jan

uary

1, 2

023

Am

endm

ents

to IF

RS

17

Jan

uary

1, 2

023

Am

endm

ents

to IA

S 1

“Cla

ssifi

catio

n of

Lia

bilit

ies a

s Cur

rent

or

Non

-cur

rent

” J

anua

ry 1

, 202

3

Am

endm

ents

to IA

S 1

“Dis

clos

ure

of A

ccou

ntin

g Po

licie

s”

Jan

uary

1, 2

023

(Not

e 6)

A

men

dmen

ts to

IAS

8 “D

efin

ition

of A

ccou

ntin

g Es

timat

es”

Jan

uary

1, 2

023

(Not

e 7)

A

men

dmen

ts to

IAS

16 “

Prop

erty

, Pla

nt a

nd E

quip

men

t - P

roce

eds

befo

re In

tend

ed U

se”

Jan

uary

1, 2

022

(Not

e 4)

Am

endm

ents

to IA

S 37

“O

nero

us C

ontra

cts -

Cos

t of F

ulfil

ling

a C

ontra

ct”

Jan

uary

1, 2

022

(Not

e 5)

Not

e 1:

U

nles

s st

ated

oth

erw

ise,

the

abo

ve N

ew I

FRSs

are

eff

ectiv

e fo

r an

nual

rep

ortin

g pe

riods

be

ginn

ing

on o

r afte

r the

ir re

spec

tive

effe

ctiv

e da

tes.

Not

e 2:

Th

e am

endm

ents

to IF

RS

9 w

ill b

e ap

plie

d pr

ospe

ctiv

ely

to m

odifi

catio

ns a

nd e

xcha

nges

of

finan

cial

liab

ilitie

s th

at o

ccur

on

or a

fter

the

annu

al r

epor

ting

perio

ds b

egin

ning

on

or a

fter

Janu

ary

1, 2

022.

The

am

endm

ents

to I

AS

41 “

Agr

icul

ture

” w

ill b

e ap

plie

d pr

ospe

ctiv

ely

to

the

fair

valu

e m

easu

rem

ents

on

or a

fter

the

annu

al r

epor

ting

perio

ds b

egin

ning

on

or a

fter

Janu

ary

1, 2

022.

The

am

endm

ents

to IF

RS

1 “F

irst-t

ime

Ado

ptio

ns o

f IFR

Ss”

will

be

appl

ied

retro

spec

tivel

y fo

r ann

ual r

epor

ting

perio

ds b

egin

ning

on

or a

fter J

anua

ry 1

, 202

2.

Not

e 3:

Th

e am

endm

ents

are

app

licab

le to

bus

ines

s co

mbi

natio

ns fo

r whi

ch th

e ac

quis

ition

dat

e is

on

or a

fter t

he b

egin

ning

of t

he a

nnua

l rep

ortin

g pe

riod

begi

nnin

g on

or a

fter J

anua

ry 1

, 202

2.

Not

e 4:

Th

e am

endm

ents

are

app

licab

le t

o pr

oper

ty,

plan

t an

d eq

uipm

ent

that

are

bro

ught

to

the

loca

tion

and

cond

ition

nec

essa

ry f

or th

em to

be

capa

ble

of o

pera

ting

in th

e m

anne

r int

ende

d by

man

agem

ent o

n or

afte

r Jan

uary

1, 2

021.

N

ote

5:

The

amen

dmen

ts a

re a

pplic

able

to c

ontra

cts

for

whi

ch th

e en

tity

has

not y

et f

ulfil

led

all i

ts ob

ligat

ions

on

Janu

ary

1, 2

022.

- 14

-

Not

e 6:

Th

e am

endm

ents

will

be

appl

ied

pros

pect

ivel

y fo

r an

nual

rep

ortin

g pe

riods

beg

inni

ng o

n or

af

ter J

anua

ry 1

, 202

3.

Not

e 7:

Th

e am

endm

ents

are

app

licab

le to

cha

nges

in a

ccou

ntin

g es

timat

es a

nd c

hang

es in

acc

ount

ing

polic

ies

that

occ

ur o

n or

afte

r th

e be

ginn

ing

of th

e an

nual

rep

ortin

g pe

riod

begi

nnin

g on

or

afte

r Jan

uary

1, 2

023.

Th

e ap

plic

atio

n of

new

IFR

Ss in

issu

e bu

t not

yet

end

orse

d an

d is

sued

into

eff

ect b

y th

e FS

C w

ould

not

ha

ve a

ny m

ater

ial i

mpa

ct o

n th

e G

roup

’s a

ccou

ntin

g po

licie

s. A

s of

the

date

the

cons

olid

ated

fina

ncia

l st

atem

ents

wer

e au

thor

ized

for

issu

e, th

e G

roup

is c

ontin

uous

ly a

sses

sing

the

poss

ible

impa

ct th

at th

e ap

plic

atio

n of

oth

er s

tand

ards

and

int

erpr

etat

ions

will

hav

e on

the

Gro

up’s

fin

anci

al p

ositi

on a

nd

finan

cial

per

form

ance

and

will

dis

clos

e th

e re

leva

nt im

pact

whe

n th

e as

sess

men

t is c

ompl

eted

. 4

. SI

GN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

Stat

emen

t of C

ompl

ianc

e Th

e co

nsol

idat

ed f

inan

cial

sta

tem

ents

hav

e be

en p

repa

red

in a

ccor

danc

e w

ith th

e R

egul

atio

ns G

over

ning

th

e Pr

epar

atio

n of

Fin

anci

al R

epor

ts b

y Se

curit

ies

Issu

ers

and

IFR

Ss a

s en

dors

ed a

nd is

sued

into

eff

ect b

y th

e FS

C.

Bas

is o

f Pre

para

tion

The

cons

olid

ated

fin

anci

al s

tate

men

ts h

ave

been

pre

pare

d on

the

hist

oric

al c

ost b

asis

exc

ept f

or f

inan

cial

in

stru

men

ts w

hich

are

mea

sure

d at

fair

valu

e.

The

fair

valu

e m

easu

rem

ents

, whi

ch a

re g

roup

ed in

to L

evel

s 1

to 3

bas

ed o

n th

e de

gree

to w

hich

the

fair

valu

e m

easu

rem

ent

inpu

ts ar

e ob

serv

able

and

bas

ed o

n th

e si

gnifi

canc

e of

the

inp

uts

to t

he f

air

valu

e m

easu

rem

ent i

n its

ent

irety

, are

des

crib

ed a

s fol

low

s:

a.

Leve

l 1 in

puts

are

quo

ted

pric

es (u

nadj

uste

d) in

act

ive

mar

kets

for i

dent

ical

ass

ets o

r lia

bilit

ies;

b.

Leve

l 2 in

puts

are

inpu

ts o

ther

than

quo

ted

pric

es in

clud

ed w

ithin

Lev

el 1

that

are

obs

erva

ble

for

an

asse

t or l

iabi

lity,

eith

er d

irect

ly (i

.e. a

s pric

es) o

r ind

irect

ly (i

.e. d

eriv

ed fr

om p

rices

); an

d c.

Le

vel 3

inpu

ts a

re u

nobs

erva

ble

inpu

ts fo

r an

asse

t or l

iabi

lity.

C

urre

nt a

nd N

on-c

urre

nt A

sset

s and

Lia

bilit

ies

Cur

rent

ass

ets i

nclu

de:

a.

A

sset

s hel

d pr

imar

ily fo

r the

pur

pose

of t

radi

ng;

b.

A

sset

s exp

ecte

d to

be

real

ized

with

in 1

2 m

onth

s afte

r the

repo

rting

per

iod;

and

c.

C

ash

and

cash

equ

ival

ents

unl

ess t

he a

sset

is re

stric

ted

from

bei

ng e

xcha

nged

or u

sed

to se

ttle

a lia

bilit

y fo

r at l

east

12

mon

ths a

fter t

he re

porti

ng p

erio

d.

Cur

rent

liab

ilitie

s inc

lude

: a.

Li

abili

ties h

eld

prim

arily

for t

he p

urpo

se o

f tra

ding

; b.

Li

abili

ties

due

to b

e se

ttled

with

in 1

2 m

onth

s af

ter

the

repo

rting

per

iod,

eve

n if

an a

gree

men

t to

re

finan

ce, o

r to

resc

hedu

le p

aym

ents

, on

a lo

ng-te

rm b

asis

is c

ompl

eted

afte

r the

rep

ortin

g pe

riod

and

befo

re th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts a

re a

utho

rized

for i

ssue

; and

- 15

-

148

c.

Liab

ilitie

s fo

r whi

ch th

e G

roup

doe

s no

t hav

e an

unc

ondi

tiona

l rig

ht to

def

er s

ettle

men

t for

at l

east

12

mon

ths a

fter t

he re

porti

ng p

erio

d. T

erm

s of a

liab

ility

that

cou

ld, a

t the

opt

ion

of th

e co

unte

rpar

ty, r

esul

t in

its s

ettle

men

t by

the

issu

e of

equ

ity in

stru

men

ts d

o no

t aff

ect i

ts c

lass

ifica

tion.

A

sset

s and

liab

ilitie

s tha

t are

not

cla

ssifi

ed a

s cur

rent

are

cla

ssifi

ed a

s non

-cur

rent

. B

asis

of C

onso

lidat

ion

The

cons

olid

ated

fina

ncia

l sta

tem

ents

inco

rpor

ate

the

finan

cial

sta

tem

ents

of t

he C

ompa

ny a

nd th

e en

titie

s co

ntro

lled

by th

e C

ompa

ny. I

ncom

e an

d ex

pens

es o

f sub

sidi

arie

s ac

quire

d or

dis

pose

d of

dur

ing

the

perio

d ar

e in

clud

ed i

n th

e co

nsol

idat

ed s

tate

men

ts o

f pr

ofit

or l

oss

and

othe

r co

mpr

ehen

sive

inc

ome

from

the

ef

fect

ive

date

s of

acq

uisi

tions

up

to t

he e

ffec

tive

date

s of

dis

posa

ls,

as a

ppro

pria

te.

Whe

n ne

cess

ary,

ad

just

men

ts a

re m

ade

to th

e fin

anci

al s

tate

men

ts o

f sub

sidi

arie

s to

brin

g th

eir a

ccou

ntin

g po

licie

s in

to li

ne

with

tho

se u

sed

by t

he C

ompa

ny.

All

intra

-gro

up t

rans

actio

ns,

bala

nces

, in

com

e an

d ex

pens

es a

re

elim

inat

ed i

n fu

ll up

on c

onso

lidat

ion.

Tot

al c

ompr

ehen

sive

inc

ome

of s

ubsi

diar

ies

is a

ttrib

uted

to

the

owne

rs o

f th

e C

ompa

ny a

nd t

o th

e no

n-co

ntro

lling

int

eres

ts e

ven

if th

is r

esul

ts i

n th

e no

n-co

ntro

lling

in

tere

sts h

avin

g a

defic

it ba

lanc

e.

Cha

nges

in th

e G

roup

’s o

wne

rshi

p in

tere

sts

in s

ubsid

iarie

s th

at d

o no

t res

ult i

n th

e G

roup

losi

ng c

ontro

l ov

er th

e su

bsid

iarie

s ar

e ac

coun

ted

for a

s eq

uity

tran

sact

ions

. The

car

ryin

g am

ount

s of

the

inte

rest

s of

the

Gro

up a

nd th

e no

n-co

ntro

lling

inte

rest

s ar

e ad

just

ed to

ref

lect

the

chan

ges

in th

eir

rela

tive

inte

rest

s in

the

subs

idia

ries.

Any

diff

eren

ce b

etw

een

the

amou

nt b

y w

hich

the

non-

cont

rolli

ng in

tere

sts a

re a

djus

ted

and

the

fair

valu

e of

the

cons

ider

atio

n pa

id o

r rec

eive

d is

reco

gniz

ed d

irect

ly in

equ

ity a

nd a

ttrib

uted

to th

e ow

ners

of

the

Com

pany

. W

hen

the

Gro

up lo

ses

cont

rol o

f a s

ubsi

diar

y, a

gai

n or

loss

is re

cogn

ized

in p

rofit

or l

oss

and

is c

alcu

late

d as

the

diff

eren

ce b

etw

een

(i) t

he a

ggre

gate

of

the

fair

valu

e of

the

con

side

ratio

n re

ceiv

ed a

nd a

ny

inve

stm

ent r

etai

ned

in th

e fo

rmer

sub

sidi

ary

at it

s fa

ir va

lue

at th

e da

te w

hen

cont

rol i

s lo

st a

nd (

ii) th

e as

sets

(inc

ludi

ng a

ny g

oodw

ill) a

nd li

abili

ties

and

any

non-

cont

rolli

ng in

tere

sts

of th

e fo

rmer

sub

sidi

ary

at

thei

r car

ryin

g am

ount

s at

the

date

whe

n co

ntro

l is

lost

. The

Gro

up a

ccou

nts

for a

ll am

ount

s re

cogn

ized

in

othe

r co

mpr

ehen

sive

inco

me

in r

elat

ion

to th

at s

ubsid

iary

on

the

sam

e ba

sis

as w

ould

be

requ

ired

had

the

Gro

up d

irect

ly d

ispo

sed

of th

e re

late

d as

sets

or l

iabi

litie

s. Fo

reig

n C

urre

ncie

s In

pre

parin

g th

e co

nsol

idat

ed f

inan

cial

sta

tem

ents

of

the

Gro

up, t

rans

actio

ns in

cur

renc

ies

othe

r th

an th

e C

ompa

ny’s

fun

ctio

nal c

urre

ncy

(for

eign

cur

renc

ies)

are

rec

ogni

zed

at th

e ra

tes

of e

xcha

nge

prev

ailin

g at

th

e da

tes

of th

e tra

nsac

tions

. At t

he e

nd o

f ea

ch r

epor

ting

perio

d, m

onet

ary

item

s de

nom

inat

ed in

for

eign

cu

rren

cies

are

ret

rans

late

d at

the

rat

es p

reva

iling

at

that

dat

e. N

on-m

onet

ary

item

s th

at a

re m

easu

red

at

hist

oric

al c

ost i

n a

fore

ign

curr

ency

are

not

retra

nsla

ted.

Non

-mon

etar

y ite

ms m

easu

red

at fa

ir va

lue

that

are

de

nom

inat

ed in

fore

ign

curr

enci

es a

re re

trans

late

d at

the

rate

s pre

vaili

ng a

t the

dat

e w

hen

the

fair

valu

e w

as

dete

rmin

ed.

Exch

ange

diff

eren

ces

on m

onet

ary

item

s ar

isin

g fr

om s

ettle

men

t or

trans

latio

n ar

e re

cogn

ized

in p

rofit

or

loss

in th

e pe

riod

in w

hich

they

aris

e ex

cept

for:

a.

Exch

ange

diff

eren

ces

on f

orei

gn c

urre

ncy

borr

owin

gs r

elat

ing

to a

sset

s un

der

cons

truct

ion

for

futu

re

prod

uctiv

e us

e, w

hich

are

incl

uded

in th

e co

st o

f tho

se a

sset

s w

hen

they

are

rega

rded

as

an a

djus

tmen

t to

inte

rest

cos

ts o

n th

ose

fore

ign

curr

ency

bor

row

ings

; b.

Ex

chan

ge d

iffer

ence

s on

trans

actio

ns e

nter

ed in

to in

ord

er to

hed

ge c

erta

in fo

reig

n cu

rren

cy ri

sks.

- 16

-

Exch

ange

diff

eren

ces

aris

ing

on th

e re

trans

latio

n of

non

-mon

etar

y ite

ms

are

incl

uded

in p

rofit

or

loss

for

th

e pe

riod

exce

pt fo

r exc

hang

e di

ffer

ence

s ar

isin

g fr

om th

e re

trans

latio

n of

non

-mon

etar

y ite

ms

in re

spec

t of

whi

ch g

ains

and

los

ses

are

reco

gniz

ed d

irect

ly i

n ot

her

com

preh

ensi

ve i

ncom

e, i

n w

hich

cas

e, t

he

exch

ange

diff

eren

ces a

re a

lso

reco

gniz

ed d

irect

ly in

oth

er c

ompr

ehen

sive

inco

me.

Fo

r th

e pu

rpos

e of

pre

sent

ing

cons

olid

ated

fin

anci

al s

tate

men

ts, t

he a

sset

s an

d lia

bilit

ies

of t

he G

roup

’s

fore

ign

oper

atio

ns a

re tr

ansl

ated

into

New

Tai

wan

dol

lars

usi

ng e

xcha

nge

rate

s pre

vaili

ng a

t the

end

of e

ach

repo

rting

per

iod.

Inc

ome

and

expe

nse

item

s ar

e tra

nsla

ted

at t

he a

vera

ge e

xcha

nge

rate

s fo

r th

e pe

riod.

Ex

chan

ge d

iffer

ence

s ar

e re

cogn

ized

in

othe

r co

mpr

ehen

sive

inc

ome

(attr

ibut

ed t

o th

e ow

ners

of

the

Com

pany

and

non

-con

trolli

ng in

tere

sts a

s app

ropr

iate

). O

n th

e di

spos

al o

f a fo

reig

n op

erat

ion,

all

of th

e ex

chan

ge d

iffer

ence

s ac

cum

ulat

ed in

equ

ity in

resp

ect o

f th

at o

pera

tion

attri

buta

ble

to th

e ow

ners

of t

he C

ompa

ny a

re re

clas

sifie

d to

pro

fit o

r los

s. B

usin

ess C

ombi

natio

ns

Whe

re t

he c

onsi

dera

tion

the

Gro

up t

rans

fers

in

a bu

sine

ss c

ombi

natio

n in

clud

es a

sset

s or

lia

bilit

ies

resu

lting

fro

m a

con

tinge

nt c

onsi

dera

tion

arra

ngem

ent,

the

cont

inge

nt c

onsi

dera

tion

is m

easu

red

at i

ts ac

quis

ition

-dat

e fa

ir va

lue

and

cons

ider

ed a

s par

t of t

he c

onsi

dera

tion

trans

ferr

ed in

a b

usin

ess c

ombi

natio

n.

Cha

nges

in th

e fa

ir va

lue

of th

e co

ntin

gent

con

side

ratio

n th

at q

ualif

y as

mea

sure

men

t per

iod

adju

stm

ents

ar

e ad

just

ed r

etro

spec

tivel

y, w

ith th

e co

rres

pond

ing

adju

stm

ents

bei

ng m

ade

agai

nst g

oodw

ill o

r ga

ins

on

barg

ain

purc

hase

s. M

easu

rem

ent p

erio

d ad

just

men

ts a

re a

djus

tmen

ts th

at a

rise

from

add

ition

al in

form

atio

n ob

tain

ed d

urin

g th

e m

easu

rem

ent

perio

d ab

out f

acts

and

circ

umst

ance

s th

at e

xist

ed a

s of

the

acqu

isiti

on

date

.

Whe

n a

busi

ness

com

bina

tion

is a

chie

ved

in s

tage

s, th

e G

roup

’s p

revi

ousl

y he

ld e

quity

int

eres

t in

an

acqu

iree

is re

mea

sure

d to

fair

valu

e at

the

acqu

isiti

on d

ate,

and

the

resu

lting

is re

cogn

ized

in p

rofit

or l

oss

or o

ther

com

preh

ensi

ve in

com

e. A

mou

nts

aris

ing

from

inte

rest

s in

the

acqu

iree

prio

r to

the

acqu

isiti

on d

ate

that

hav

e pr

evio

usly

bee

n re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e ar

e re

cogn

ized

on

the

sam

e ba

sis

as

wou

ld b

e re

quire

d if

thos

e in

tere

sts w

ere

dire

ctly

dis

pose

d of

by

the

Gro

up

If th

e in

itial

acc

ount

ing

for

a bu

sine

ss c

ombi

natio

n is

inc

ompl

ete

by t

he e

nd o

f th

e re

porti

ng p

erio

d in

w

hich

the

com

bina

tion

occu

rs,

the

Gro

up r

epor

ts pr

ovis

iona

l am

ount

s fo

r th

e ite

ms

for

whi

ch t

he

acco

untin

g is

inco

mpl

ete.

Tho

se p

rovi

sion

al a

mou

nts

are

adju

sted

ret

rosp

ectiv

ely

durin

g th

e m

easu

rem

ent

perio

d, o

r add

ition

al a

sset

s or

liab

ilitie

s ar

e re

cogn

ized

, to

refle

ct n

ew in

form

atio

n ob

tain

ed a

bout

fact

s an

d ci

rcum

stan

ces

that

exi

sted

as

of t

he a

cqui

sitio

n da

te t

hat,

if kn

own,

wou

ld h

ave

affe

cted

the

am

ount

s re

cogn

ized

as o

f tha

t dat

e.

Inve

ntor

ies

Inve

ntor

ies

are

prim

arily

exp

enda

ble

and

none

xpen

dabl

e pa

rts a

nd m

ater

ials

, sup

plie

s us

ed in

ope

ratio

ns

and

item

s fo

r in

-flig

ht s

ales

and

are

sta

ted

at t

he l

ower

of

cost

or

net

real

izab

le v

alue

. Th

e co

sts

of

inve

ntor

ies s

old

or c

onsu

med

are

det

erm

ined

usi

ng th

e w

eigh

ted-

aver

age

met

hod.

N

on-c

urre

nt A

sset

s Hel

d fo

r Sa

le

Non

-cur

rent

ass

ets

are

clas

sifie

d as

hel

d-fo

r-sal

e if

thei

r ca

rryi

ng a

mou

nt w

ill b

e re

cove

red

prin

cipa

lly

thro

ugh

a sa

le tr

ansa

ctio

n ra

ther

than

thro

ugh

cont

inui

ng u

se. T

his

cond

ition

is re

gard

ed a

s m

et o

nly

whe

n th

e sa

le is

hig

hly

prob

able

and

the

non-

curr

ent a

sset

is a

vaila

ble

for i

mm

edia

te s

ale

in it

s pr

esen

t con

ditio

n.

To m

eet

the

crite

ria f

or t

he s

ale

bein

g hi

ghly

pro

babl

e, t

he a

ppro

pria

te l

evel

of

man

agem

ent

mus

t be

co

mm

itted

to th

e sa

le, w

hich

sho

uld

be e

xpec

ted

to q

ualif

y fo

r rec

ogni

tion

as a

com

plet

ed s

ale

with

in o

ne

year

from

the

date

of c

lass

ifica

tion.

N

on-c

urre

nt a

sset

s cl

assi

fied

as h

eld-

for-s

ale

are

mea

sure

d at

the

low

er o

f th

eir

prev

ious

car

ryin

g am

ount

an

d fa

ir va

lue

less

cos

ts to

sell.

Rec

ogni

tion

of d

epre

ciat

ion

of th

ose

asse

ts w

ould

cea

se.

- 17

-

149

Inve

stm

ents

in A

ssoc

iate

s and

Joi

nt V

entu

res

An

asso

ciat

e is

an

entit

y ov

er w

hich

the

Gro

up h

as s

igni

fican

t inf

luen

ce a

nd th

at is

nei

ther

a s

ubsi

diar

y no

r an

inte

rest

in a

join

t ven

ture

. A jo

int v

entu

re is

a jo

int a

rran

gem

ent w

here

by th

e G

roup

and

oth

er p

artie

s th

at h

ave

join

t con

trol o

f the

arr

ange

men

t and

the

right

s to

the

net a

sset

s of t

he a

rrang

emen

t. Th

e G

roup

use

s the

equ

ity m

etho

d to

acc

ount

for i

ts in

vest

men

ts in

ass

ocia

tes a

nd jo

int v

entu

res.

Und

er th

e eq

uity

met

hod,

inve

stm

ents

in a

n as

soci

ate

and

a jo

int v

entu

re a

re in

itial

ly re

cogn

ized

at c

ost a

nd

adju

sted

ther

eafte

r to

reco

gniz

e th

e G

roup

’s s

hare

of p

rofit

or l

oss

and

othe

r com

preh

ensi

ve in

com

e of

the

asso

ciat

e an

d jo

int

vent

ure.

The

Gro

up a

lso

reco

gniz

es t

he c

hang

es i

n th

e G

roup

’s s

hare

of

equi

ty o

f as

soci

ates

and

join

t ven

ture

attr

ibut

able

to th

e G

roup

. A

ny e

xces

s of

the

cost

of a

cqui

sitio

n ov

er th

e G

roup

’s s

hare

of n

et fa

ir va

lue

of th

e id

entif

iabl

e as

sets

and

lia

bilit

ies

of a

n as

soci

ate

reco

gniz

ed a

t the

dat

e of

acq

uisi

tion

is re

cogn

ized

as

good

will

, whi

ch is

incl

uded

w

ithin

the

carr

ying

am

ount

of t

he in

vest

men

t and

is n

ot a

mor

tized

. Any

exc

ess

of th

e G

roup

’s s

hare

of n

et

fair

valu

e of

the

ide

ntifi

able

ass

ets

and

liabi

litie

s ov

er t

he c

ost

of a

cqui

sitio

n, a

fter

reas

sess

men

t, is

reco

gniz

ed im

med

iate

ly in

pro

fit o

r los

s. W

hen

the

Gro

up s

ubsc

ribes

for

add

ition

al n

ew s

hare

s of

an

asso

ciat

e an

d jo

int

vent

ure

at a

per

cent

age

diff

eren

t fro

m i

ts e

xist

ing

owne

rshi

p pe

rcen

tage

, the

res

ultin

g ca

rryi

ng a

mou

nt o

f th

e in

vest

men

t di

ffer

s fr

om th

e am

ount

of t

he G

roup

’s p

ropo

rtion

ate

inte

rest

in th

e as

soci

ate

and

join

t ven

ture

. The

Gro

up re

cord

s su

ch a

diff

eren

ce a

s an

adj

ustm

ent t

o in

vest

men

ts w

ith th

e co

rres

pond

ing

amou

nt c

harg

ed o

r cr

edite

d to

ca

pita

l su

rplu

s -

chan

ges

in t

he G

roup

’s s

hare

of

equi

ty o

f as

soci

ates

and

joi

nt v

entu

res.

If th

e G

roup

’s

owne

rshi

p in

tere

st i

s re

duce

d du

e to

the

subs

crip

tion

of a

dditi

onal

new

sha

res

of t

he a

ssoc

iate

and

join

t ve

ntur

e, t

he p

ropo

rtion

ate

amou

nt o

f th

e ga

ins

or l

osse

s pr

evio

usly

rec

ogni

zed

in o

ther

com

preh

ensi

ve

inco

me

in r

elat

ion

to th

at a

ssoc

iate

and

join

t ven

ture

is r

ecla

ssifi

ed to

pro

fit o

r lo

ss o

n th

e sa

me

basi

s as

w

ould

be

requ

ired

had

the

inve

stee

dire

ctly

dis

pose

d of

the

rela

ted

asse

ts o

r lia

bilit

ies.

Whe

n th

e ad

just

men

t sh

ould

be

debi

ted

to c

apita

l su

rplu

s, bu

t th

e ca

pita

l su

rplu

s re

cogn

ized

fro

m i

nves

tmen

ts a

ccou

nted

for

us

ing

the

equi

ty m

etho

d is

insu

ffic

ient

, the

shor

tage

is d

ebite

d to

reta

ined

ear

ning

s. W

hen

the

Gro

up’s

sha

re o

f los

ses

of a

n as

soci

ate

and

a jo

int v

entu

re e

qual

s or

exc

eeds

its

inte

rest

in th

at

asso

ciat

e an

d jo

int v

entu

re (w

hich

incl

udes

any

car

ryin

g am

ount

of t

he in

vest

men

t acc

ount

ed fo

r usi

ng th

e eq

uity

met

hod

and

long

-term

inte

rest

s th

at, i

n su

bsta

nce,

for

m p

art o

f th

e G

roup

’s n

et in

vest

men

t in

the

asso

ciat

e an

d jo

int

vent

ure)

, th

e G

roup

dis

cont

inue

s re

cogn

izin

g its

sha

re o

f fu

rther

los

ses.

Add

ition

al

loss

es a

nd l

iabi

litie

s ar

e re

cogn

ized

onl

y to

the

ext

ent

that

the

Gro

up h

as i

ncur

red

lega

l ob

ligat

ions

, or

cons

truct

ive

oblig

atio

ns, o

r mad

e pa

ymen

ts o

n be

half

of th

at a

ssoc

iate

and

join

t ven

ture

. Th

e en

tire

carr

ying

am

ount

of t

he in

vest

men

t (in

clud

ing

good

will

) is t

este

d fo

r im

pairm

ent a

s a si

ngle

ass

et

by c

ompa

ring

its re

cove

rabl

e am

ount

with

its c

arry

ing

amou

nt. A

ny im

pairm

ent l

oss r

ecog

nize

d is

ded

ucte

d fr

om t

he c

arry

ing

amou

nt o

f th

e in

vest

men

t. A

ny r

ever

sal

of t

hat

impa

irmen

t lo

ss i

s re

cogn

ized

to

the

exte

nt th

at th

e re

cove

rabl

e am

ount

of t

he in

vest

men

t sub

sequ

ently

incr

ease

s. Th

e G

roup

dis

cont

inue

s th

e us

e of

the

equi

ty m

etho

d fr

om th

e da

te o

n w

hich

its

inve

stm

ent c

ease

s to

be

an

asso

ciat

e an

d a

join

t ven

ture

. Any

ret

aine

d in

vest

men

t is

mea

sure

d at

fai

r va

lue

at th

at d

ate

and

the

fair

valu

e is

reg

arde

d as

its

fai

r va

lue

on i

nitia

l re

cogn

ition

as

a fin

anci

al a

sset

. The

diff

eren

ce b

etw

een

the

prev

ious

car

ryin

g am

ount

of

the

asso

ciat

e an

d th

e jo

int v

entu

re a

ttrib

utab

le to

the

reta

ined

inte

rest

and

its

fair

valu

e is

inc

lude

d in

the

det

erm

inat

ion

of t

he g

ain

or l

oss

on d

ispo

sal

of t

he a

ssoc

iate

and

the

joi

nt

vent

ure.

The

Gro

up a

ccou

nts

for

all

amou

nts

prev

ious

ly r

ecog

nize

d in

oth

er c

ompr

ehen

sive

inc

ome

in

rela

tion

to th

at a

ssoc

iate

and

the

join

t ven

ture

on

the

sam

e ba

sis

as w

ould

be

requ

ired

had

that

ass

ocia

te

dire

ctly

dis

pose

d of

the

rela

ted

asse

ts o

r lia

bilit

ies.

If an

inve

stm

ent i

n an

ass

ocia

te b

ecom

es a

n in

vest

men

t in

a jo

int

vent

ure

or a

n in

vest

men

t in

a j

oint

ven

ture

bec

omes

an

inve

stm

ent

in a

n as

soci

ate,

the

Gro

up

cont

inue

s to

appl

y th

e eq

uity

met

hod

and

does

not

rem

easu

re th

e re

tain

ed in

tere

st.

- 18

-

Prop

erty

, Pla

nt a

nd E

quip

men

t Pr

oper

ty, p

lant

and

equ

ipm

ent a

re ta

ngib

le it

ems

that

are

hel

d fo

r use

in th

e pr

oduc

tion

or s

uppl

y of

goo

ds

or s

ervi

ces,

for

rent

al to

oth

ers,

or f

or a

dmin

istra

tive

purp

oses

and

are

exp

ecte

d to

be

used

for

mor

e th

an

one

perio

d. T

he c

ost o

f an

item

of p

rope

rty, p

lant

and

equ

ipm

ent s

hall

be re

cogn

ized

as a

n as

set i

f, an

d on

ly

if, it

is p

roba

ble

that

futu

re e

cono

mic

ben

efits

ass

ocia

ted

with

the

item

will

flow

to th

e G

roup

and

the

cost

of t

he i

tem

can

be

mea

sure

d re

liabl

y. P

rope

rty,

plan

t an

d eq

uipm

ent

are

stat

ed a

t co

st l

ess

reco

gniz

ed

accu

mul

ated

dep

reci

atio

n an

d re

cogn

ized

acc

umul

ated

impa

irmen

t los

s. Fr

eeho

ld la

nd is

not

dep

reci

ated

. D

epre

ciat

ion

is r

ecog

nize

d us

ing

the

stra

ight

-line

met

hod.

Eac

h si

gnifi

cant

par

t is

depr

ecia

ted

sepa

rate

ly.

The

estim

ated

use

ful

lives

, re

sidu

al v

alue

s an

d de

prec

iatio

n m

etho

ds a

re r

evie

wed

at

the

end

of e

ach

repo

rting

per

iod,

with

the

effe

cts o

f any

cha

nges

in th

e es

timat

es a

ccou

nted

for o

n a

pros

pect

ive

basi

s. A

sset

s hel

d un

der f

inan

ce le

ases

are

dep

reci

ated

ove

r the

ir ex

pect

ed u

sefu

l liv

es o

n th

e sa

me

basi

s as o

wne

d as

sets

. Ass

ets

are

depr

ecia

ted

over

the

shor

ter o

f the

leas

e te

rm a

nd th

eir u

sefu

l liv

es u

sing

the

stra

ight

-line

m

etho

d.

Any

gai

n or

los

s ar

isin

g on

the

dis

posa

l or

ret

irem

ent

of a

n ite

m o

f pr

oper

ty,

plan

t an

d eq

uipm

ent

is de

term

ined

as

the

diff

eren

ce b

etw

een

the

sale

s pr

ocee

ds a

nd t

he c

arry

ing

amou

nt o

f th

e as

set

and

is

reco

gniz

ed in

pro

fit o

r los

s. In

vest

men

t Pro

pert

ies

Inve

stm

ent p

rope

rties

are

pro

perti

es h

eld

to e

arn

rent

als

or f

or c

apita

l app

reci

atio

n. I

nves

tmen

t pro

perti

es

also

incl

ude

land

hel

d fo

r a c

urre

ntly

und

eter

min

ed fu

ture

use

. In

vest

men

t pr

oper

ties

are

mea

sure

d in

itial

ly a

t co

st,

incl

udin

g tra

nsac

tion

cost

s. Su

bseq

uent

to

initi

al

reco

gniti

on,

inve

stm

ent

prop

ertie

s ar

e m

easu

red

at c

ost

less

acc

umul

ated

dep

reci

atio

n an

d ac

cum

ulat

ed

impa

irmen

t los

s. D

epre

ciat

ion

is re

cogn

ized

usi

ng th

e st

raig

ht-li

ne m

etho

d. T

he e

stim

ated

use

ful l

ives

and

resi

dual

val

ues a

re

revi

ewed

at t

he e

nd o

f eac

h re

porti

ng p

erio

d.

Any

gai

n or

los

s ar

isin

g on

the

der

ecog

nitio

n of

inv

estm

ent

prop

ertie

s is

cal

cula

ted

as t

he d

iffer

ence

be

twee

n th

e ne

t dis

posa

l pro

ceed

s an

d th

e ca

rryi

ng a

mou

nt o

f the

ass

et a

nd is

incl

uded

in p

rofit

or l

oss

in

the

perio

d in

whi

ch th

e pr

oper

ty is

der

ecog

nize

d.

Inta

ngib

le A

sset

s In

tang

ible

ass

ets

with

fin

ite u

sefu

l liv

es t

hat

are

acqu

ired

sepa

rate

ly a

re i

nitia

lly m

easu

red

at c

ost

and

subs

eque

ntly

m

easu

red

at

cost

le

ss

accu

mul

ated

am

ortiz

atio

n an

d ac

cum

ulat

ed

impa

irmen

t lo

ss.

Am

ortiz

atio

n is

rec

ogni

zed

on a

stra

ight

-line

bas

is.

The

estim

ated

use

ful

lives

, re

sidu

al v

alue

s, an

d am

ortiz

atio

n m

etho

ds a

re re

view

ed a

t the

end

of e

ach

repo

rting

per

iod,

with

the

effe

cts

of a

ny c

hang

es in

th

e es

timat

es b

eing

acc

ount

ed f

or o

n a

pros

pect

ive

basi

s. Th

e re

sidu

al v

alue

of

an in

tang

ible

ass

et w

ith a

fin

ite u

sefu

l life

shal

l be

assu

med

zer

o un

less

the

Gro

up e

xpec

ts to

dis

pose

of t

he in

tang

ible

ass

et b

efor

e th

e en

d of

its e

cono

mic

life

.

- 19

-

150

Impa

irm

ent o

f Tan

gibl

e an

d In

tang

ible

Ass

ets O

ther

Tha

n G

oodw

ill

At t

he e

nd o

f eac

h re

porti

ng p

erio

d, th

e G

roup

revi

ews

the

carr

ying

am

ount

s of

its

tang

ible

and

inta

ngib

le

asse

ts, e

xclu

ding

goo

dwill

, to

dete

rmin

e w

heth

er th

ere

is a

ny in

dica

tion

that

thos

e as

sets

hav

e su

ffer

ed a

n im

pairm

ent l

oss.

If an

y su

ch in

dica

tion

exis

ts, t

he re

cove

rabl

e am

ount

of t

he a

sset

is e

stim

ated

in o

rder

to

dete

rmin

e th

e ex

tent

of t

he im

pairm

ent l

oss.

Whe

n it

is n

ot p

ossi

ble

to e

stim

ate

the

reco

vera

ble

amou

nt o

f an

indi

vidu

al a

sset

, the

Gro

up e

stim

ates

the

reco

vera

ble

amou

nt o

f th

e ca

sh-g

ener

atin

g un

it to

whi

ch th

e as

set

belo

ngs.

Cor

pora

te a

sset

s ar

e al

loca

ted

to th

e in

divi

dual

cas

h-ge

nera

ting

units

on

a re

ason

able

and

co

nsis

tent

bas

is; o

ther

wis

e, c

orpo

rate

ass

ets a

re a

lloca

ted

to th

e sm

alle

st g

roup

of c

ash-

gene

ratin

g un

its o

n a

reas

onab

le a

nd c

onsi

sten

t allo

catio

n ba

sis.

Inta

ngib

le a

sset

s w

ith in

defin

ite u

sefu

l liv

es a

nd in

tang

ible

ass

ets

not y

et a

vaila

ble

for

use

are

test

ed f

or

impa

irmen

t at l

east

ann

ually

, and

whe

neve

r the

re is

an

indi

catio

n th

at th

e as

set m

ay b

e im

paire

d.

The

reco

vera

ble

amou

nt is

the

high

er o

f fai

r val

ue le

ss c

osts

to s

ell a

nd v

alue

in u

se. I

n as

sess

ing

valu

e in

us

e, t

he G

roup

use

s th

e es

timat

ed c

ash

flow

s di

scou

nted

by

the

futu

re p

re-ta

x di

scou

nt r

ate,

and

the

di

scou

nt ra

te re

flect

s the

cur

rent

mar

ket t

ime

valu

e of

mon

ey a

nd th

e sp

ecifi

c ris

ks to

the

asse

t for

est

imat

ed

futu

re c

ash

flow

s not

yet

adj

ustin

g to

the

mar

ket.

If th

e re

cove

rabl

e am

ount

of

an a

sset

or

cash

-gen

erat

ing

unit

is e

stim

ated

to

be l

ess

than

its

car

ryin

g am

ount

, the

car

ryin

g am

ount

of t

he a

sset

or c

ash-

gene

ratin

g un

it is

redu

ced

to it

s rec

over

able

am

ount

. W

hen

an im

pairm

ent l

oss i

s su

bseq

uent

ly re

vers

ed, t

he c

arry

ing

amou

nt o

f the

ass

et o

r cas

h-ge

nera

ting

unit

is in

crea

sed

to th

e re

vise

d es

timat

e of

its

reco

vera

ble

amou

nt, b

ut o

nly

to th

e ex

tent

of t

he c

arry

ing

amou

nt

that

wou

ld h

ave

been

det

erm

ined

had

no

impa

irmen

t los

s be

en re

cogn

ized

for t

he a

sset

or c

ash-

gene

ratin

g un

it in

prio

r yea

rs. A

reve

rsal

of a

n im

pairm

ent l

oss i

s rec

ogni

zed

in p

rofit

or l

oss.

Fina

ncia

l Ins

trum

ents

Fi

nanc

ial a

sset

s an

d fin

anci

al li

abili

ties

are

reco

gniz

ed w

hen

the

Gro

up b

ecom

es a

par

ty to

the

cont

ract

ual

prov

isio

ns o

f the

inst

rum

ents

.

Fina

ncia

l as

sets

and

fin

anci

al l

iabi

litie

s ar

e in

itial

ly m

easu

red

at f

air

valu

e. T

rans

actio

n co

sts

that

are

di

rect

ly a

ttrib

utab

le t

o th

e ac

quis

ition

or

issu

ance

of

finan

cial

ass

ets

and

finan

cial

lia

bilit

ies

(oth

er t

han

finan

cial

ass

ets

and

finan

cial

lia

bilit

ies

at F

VTP

L) a

re a

dded

to

or d

educ

ted

from

the

fai

r va

lue

of t

he

finan

cial

ass

ets

or f

inan

cial

lia

bilit

ies,

as a

ppro

pria

te,

on i

nitia

l re

cogn

ition

. Tr

ansa

ctio

n co

sts

dire

ctly

at

tribu

tabl

e to

the

acq

uisi

tion

of f

inan

cial

ass

ets

or f

inan

cial

lia

bilit

ies

at F

VTP

L ar

e re

cogn

ized

im

med

iate

ly in

pro

fit o

r los

s. a.

Fi

nanc

ial a

sset

s A

ll re

gula

r pur

chas

es o

r sal

es o

f fin

anci

al a

sset

s ar

e re

cogn

ized

and

der

ecog

nize

d on

a tr

ade

date

bas

is.

All

regu

lar p

urch

ases

or s

ales

of f

inan

cial

ass

ets

are

buy

or s

ell o

f fin

anci

al a

sset

s in

the

perio

d se

t by

regu

latio

n or

mar

ket c

onve

ntio

n.

1)

Mea

sure

men

t cat

egor

y

Fina

ncia

l as

sets

are

cla

ssifi

ed in

to th

e fo

llow

ing

cate

gorie

s: F

inan

cial

ass

ets

at F

VTP

L, f

inan

cial

as

sets

at a

mor

tized

cos

t, an

d in

vest

men

ts in

equ

ity in

strum

ents

at F

VTO

CI.

a)

Fina

ncia

l ass

ets a

t FV

TPL

Fina

ncia

l ass

ets

are

clas

sifie

d as

at F

VTP

L w

hen

such

a fi

nanc

ial a

sset

is m

anda

toril

y cl

assi

fied

or d

esig

nate

d as

at

FVTP

L. F

inan

cial

ass

ets

man

dato

rily

clas

sifie

d as

at

FVTP

L in

clud

e in

vest

men

ts in

equ

ity in

stru

men

ts w

hich

are

not

des

igna

ted

as a

t FV

TOC

I and

deb

t ins

trum

ents

th

at d

o no

t mee

t the

am

ortiz

ed c

ost c

riter

ia o

r the

FV

TOC

I crit

eria

.

- 20

-

Fina

ncia

l as

sets

at

FVTP

L ar

e su

bseq

uent

ly m

easu

red

at f

air

valu

e, w

ith a

ny g

ains

or

loss

es

aris

ing

on r

emea

sure

men

t rec

ogni

zed

in p

rofit

or

loss

. Fai

r va

lue

is d

eter

min

ed in

the

man

ner

desc

ribed

in N

ote

33.

b)

Fi

nanc

ial a

sset

s at a

mor

tized

cos

t Fi

nanc

ial

asse

ts t

hat

mee

t th

e fo

llow

ing

cond

ition

s ar

e su

bseq

uent

ly m

easu

red

at a

mor

tized

co

st:

i. Th

e fin

anci

al a

sset

is

held

with

in a

bus

ines

s m

odel

who

se o

bjec

tive

is t

o ho

ld f

inan

cial

as

sets

in o

rder

to c

olle

ct c

ontra

ctua

l cas

h flo

ws;

and

ii.

Th

e co

ntra

ctua

l ter

ms o

f the

fina

ncia

l ass

et g

ive

rise

on sp

ecifi

ed d

ates

to c

ash

flow

s tha

t are

so

lely

pay

men

ts o

f prin

cipa

l and

inte

rest

on

the

prin

cipa

l am

ount

out

stan

ding

. Su

bseq

uent

to

initi

al r

ecog

nitio

n, f

inan

cial

ass

ets

at a

mor

tized

cos

t, in

clud

ing

cash

and

cas

h eq

uiva

lent

s, tra

de r

ecei

vabl

es,

othe

r re

ceiv

able

s an

d ot

her

finan

cial

ass

ets,

are

mea

sure

d at

am

ortiz

ed c

ost,

whi

ch e

qual

s th

e gr

oss

carr

ying

am

ount

det

erm

ined

usi

ng th

e ef

fect

ive

inte

rest

m

etho

d le

ss a

ny im

pairm

ent l

oss.

Exch

ange

diff

eren

ces a

re re

cogn

ized

in p

rofit

or l

oss.

Inte

rest

inco

me

is c

alcu

late

d by

app

lyin

g th

e ef

fect

ive

inte

rest

rate

to th

e gr

oss

carr

ying

am

ount

of

a fi

nanc

ial a

sset

. C

ash

equi

vale

nts i

nclu

de ti

me

depo

sits

with

orig

inal

mat

uriti

es w

ithin

3 m

onth

s fro

m th

e da

te o

f ac

quis

ition

, w

hich

are

hig

hly

liqui

d, r

eadi

ly c

onve

rtibl

e to

a k

now

n am

ount

of

cash

and

are

su

bjec

t to

an

insi

gnifi

cant

ris

k of

cha

nges

in

valu

e. T

hese

cas

h eq

uiva

lent

s ar

e he

ld f

or t

he

purp

ose

of m

eetin

g sh

ort-t

erm

cas

h co

mm

itmen

ts.

c)

In

vest

men

ts in

equ

ity in

stru

men

ts a

t FV

TOC

I O

n in

itial

reco

gniti

on, t

he G

roup

may

mak

e an

irre

voca

ble

elec

tion

to d

esig

nate

inve

stm

ents

in

equi

ty i

nstru

men

ts a

s at

FV

TOC

I. D

esig

natio

n as

at

FVTO

CI

is n

ot p

erm

itted

if

an e

quity

in

vest

men

t is

held

for t

radi

ng o

r if i

t is

cont

inge

nt c

onsi

dera

tion

reco

gniz

ed b

y an

acq

uire

r in

a bu

sine

ss c

ombi

natio

n.

Inve

stm

ents

in

equi

ty i

nstru

men

ts a

t FV

TOC

I ar

e su

bseq

uent

ly m

easu

red

at f

air

valu

e w

ith

gain

s an

d lo

sses

aris

ing

from

cha

nges

in f

air

valu

e re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e an

d ac

cum

ulat

ed in

oth

er e

quity

. The

cum

ulat

ive

gain

or l

oss w

ill n

ot b

e re

clas

sifie

d to

pro

fit o

r lo

ss o

n di

spos

al o

f the

equ

ity in

vest

men

ts; i

nste

ad, t

hey

will

be

trans

ferr

ed to

reta

ined

ear

ning

s. D

ivid

ends

on

thes

e in

vest

men

ts in

equ

ity in

stru

men

ts a

re re

cogn

ized

in p

rofit

or l

oss

whe

n th

e G

roup

’s r

ight

to r

ecei

ve th

e di

vide

nds

is e

stab

lishe

d, u

nles

s th

e di

vide

nds

clea

rly r

epre

sent

a

reco

very

of p

art o

f the

cos

t of a

n in

vest

men

t.

2)

Impa

irmen

t of f

inan

cial

ass

ets

The

Gro

up r

ecog

nize

s a

loss

allo

wan

ce f

or e

xpec

ted

cred

it lo

sses

on

finan

cial

ass

ets

at a

mor

tized

co

st (i

nclu

ding

trad

e re

ceiv

able

s), a

s wel

l as c

ontra

ct a

sset

s. Th

e G

roup

alw

ays

reco

gniz

es li

fetim

e ex

pect

ed c

redi

t los

ses

(EC

Ls) f

or tr

ade

rece

ivab

les

and

othe

r re

ceiv

able

s. Fo

r all

othe

r fin

anci

al in

stru

men

ts, t

he G

roup

reco

gniz

es li

fetim

e EC

Ls w

hen

ther

e ha

s be

en a

sig

nific

ant i

ncre

ase

in c

redi

t ris

k si

nce

initi

al r

ecog

nitio

n. I

f, on

the

othe

r ha

nd, t

he c

redi

t ris

k on

a f

inan

cial

ins

trum

ent

has

not

incr

ease

d si

gnifi

cant

ly s

ince

ini

tial

reco

gniti

on, t

he G

roup

m

easu

res t

he lo

ss a

llow

ance

for t

hat f

inan

cial

inst

rum

ent a

t an

amou

nt e

qual

to 1

2-m

onth

EC

Ls.

- 21

-

151

Expe

cted

cre

dit l

osse

s re

flect

the

wei

ghte

d av

erag

e of

cre

dit l

osse

s w

ith th

e re

spec

tive

risks

of

a de

faul

t occ

urrin

g as

the

wei

ghts

. Life

time

ECL

repr

esen

ts th

e ex

pect

ed c

redi

t los

ses

that

will

resu

lt fr

om a

ll po

ssib

le d

efau

lt ev

ents

ove

r th

e ex

pect

ed l

ife o

f a

finan

cial

ins

trum

ent.

In c

ontra

st,

12-m

onth

EC

L re

pres

ents

the

porti

on o

f life

time

ECL

that

is e

xpec

ted

to re

sult

from

def

ault

even

ts on

a fi

nanc

ial i

nstru

men

t tha

t are

pos

sibl

e w

ithin

12

mon

ths a

fter t

he re

porti

ng d

ate.

Th

e im

pairm

ent

loss

of

all f

inan

cial

ass

ets

is r

ecog

nize

d in

pro

fit o

r lo

ss b

y a

redu

ctio

n in

thei

r ca

rryi

ng a

mou

nts

thro

ugh

a lo

ss a

llow

ance

acc

ount

, exc

ept f

or in

vest

men

ts in

deb

t ins

trum

ents

that

ar

e m

easu

red

at F

VTO

CI,

for

whi

ch t

he l

oss

allo

wan

ce i

s re

cogn

ized

in

othe

r co

mpr

ehen

sive

in

com

e an

d th

e ca

rryi

ng a

mou

nts o

f suc

h fin

anci

al a

sset

s are

not

redu

ced.

3)

Der

ecog

nitio

n of

fina

ncia

l ass

ets

The

Gro

up d

erec

ogni

zes

a fin

anci

al a

sset

onl

y w

hen

the

cont

ract

ual r

ight

s to

the

cash

flo

ws

from

th

e as

set e

xpire

or w

hen

it tra

nsfe

rs th

e fin

anci

al a

sset

and

sub

stan

tially

all

the

risks

and

rew

ards

of

owne

rshi

p of

the

asse

t to

anot

her p

arty

. O

n de

reco

gniti

on o

f a

finan

cial

ass

et i

n its

ent

irety

, th

e di

ffer

ence

bet

wee

n th

e as

set’s

car

ryin

g am

ount

and

the

sum

of

the

cons

ider

atio

n re

ceiv

ed a

nd r

ecei

vabl

e an

d th

e cu

mul

ativ

e ga

in o

r lo

ss

that

had

bee

n re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e is

reco

gniz

ed in

pro

fit o

r los

s.

b.

Equi

ty in

stru

men

ts

Deb

t and

equ

ity in

stru

men

ts is

sued

by

the

entit

y in

the

Gro

up a

re c

lass

ified

as e

ither

fina

ncia

l lia

bilit

ies

or a

s eq

uity

in a

ccor

danc

e w

ith th

e su

bsta

nce

of th

e co

ntra

ctua

l arr

ange

men

ts a

nd th

e de

finiti

ons

of a

fin

anci

al li

abili

ty a

nd a

n eq

uity

inst

rum

ent.

Equi

ty i

nstru

men

ts is

sued

by

the

entit

y in

the

Gro

up a

re r

ecog

nize

d at

the

pro

ceed

s re

ceiv

ed, n

et o

f di

rect

issu

e co

sts.

Rep

urch

ase

of th

e G

roup

’s o

wn

equi

ty in

stru

men

ts is

reco

gniz

ed in

and

ded

ucte

d di

rect

ly fr

om e

quity

. N

o ga

in o

r lo

ss i

s re

cogn

ized

in

prof

it or

los

s on

the

pur

chas

e, s

ale,

iss

ue o

r ca

ncel

latio

n of

the

C

ompa

ny’s

ow

n eq

uity

inst

rum

ents

.

c.

Fina

ncia

l lia

bilit

ies

1)

Subs

eque

nt m

easu

rem

ent

Ex

cept

for

fin

anci

al l

iabi

litie

s at

FV

TPL,

all

finan

cial

lia

bilit

ies

are

mea

sure

d at

am

ortiz

ed c

ost

usin

g th

e ef

fect

ive

inte

rest

met

hod.

2)

Der

ecog

nitio

n of

fina

ncia

l lia

bilit

ies

The

diff

eren

ce b

etw

een

the

carr

ying

am

ount

of

a fin

anci

al l

iabi

lity

dere

cogn

ized

and

the

co

nsid

erat

ion

paid

, inc

ludi

ng a

ny n

on-c

ash

asse

ts tr

ansf

erre

d or

liab

ilitie

s as

sum

ed, i

s rec

ogni

zed

in

prof

it or

loss

.

d.

Con

verti

ble

bond

s Th

e co

mpo

nent

par

ts o

f co

mpo

und

inst

rum

ents

(i.e

. co

nver

tible

bon

ds)

issu

ed b

y th

e C

ompa

ny a

re

clas

sifie

d se

para

tely

as

finan

cial

lia

bilit

ies

and

equi

ty i

n ac

cord

ance

with

the

sub

stan

ce o

f th

e co

ntra

ctua

l arr

ange

men

ts a

nd th

e de

finiti

ons o

f a fi

nanc

ial l

iabi

lity

and

an e

quity

inst

rum

ent.

- 22

-

On

initi

al re

cogn

ition

, the

fair

valu

e of

the

liabi

lity

com

pone

nt is

est

imat

ed u

sing

the

prev

ailin

g m

arke

t in

tere

st r

ate

for

sim

ilar

non-

conv

ertib

le i

nstru

men

ts.

This

am

ount

is

reco

rded

as

a lia

bilit

y on

an

amor

tized

cos

t ba

sis

usin

g th

e ef

fect

ive

inte

rest

met

hod

until

ext

ingu

ishe

d up

on c

onve

rsio

n or

the

in

stru

men

t’s m

atur

ity d

ate.

Any

em

bedd

ed d

eriv

ativ

e lia

bilit

y is

mea

sure

d at

fair

valu

e.

The

conv

ersi

on o

ptio

n cl

assi

fied

as e

quity

is

dete

rmin

ed b

y de

duct

ing

the

amou

nt o

f th

e lia

bilit

y co

mpo

nent

from

the

fair

valu

e of

the

com

poun

d in

stru

men

t as

a w

hole

. Thi

s is r

ecog

nize

d an

d in

clud

ed

in e

quity

, net

of

inco

me

tax

effe

cts,

and

is n

ot s

ubse

quen

tly r

emea

sure

d. I

n ad

ditio

n, t

he c

onve

rsio

n op

tion

clas

sifie

d as

equ

ity w

ill re

mai

n in

equ

ity u

ntil

the

conv

ersi

on o

ptio

n is

exe

rcis

ed, i

n w

hich

cas

e,

the

bala

nce

reco

gniz

ed i

n eq

uity

will

be

trans

ferr

ed t

o ca

pita

l su

rplu

s -

shar

e pr

emiu

ms.

Whe

n th

e co

nver

sion

opt

ion

rem

ains

une

xerc

ised

at m

atur

ity, t

he b

alan

ce re

cogn

ized

in e

quity

will

be

trans

ferr

ed

to c

apita

l sur

plus

- sh

are

prem

ium

s. Tr

ansa

ctio

n co

sts

that

rela

te to

the

issu

e of

the

conv

ertib

le n

otes

are

allo

cate

d to

the

liabi

lity

and

equi

ty

com

pone

nts

in p

ropo

rtion

to

the

allo

catio

n of

the

gro

ss p

roce

eds.

Tran

sact

ion

cost

s re

latin

g to

the

eq

uity

com

pone

nt a

re re

cogn

ized

dire

ctly

in e

quity

. Tra

nsac

tion

cost

s rel

atin

g to

the

liabi

lity

com

pone

nt

are

incl

uded

in th

e ca

rryi

ng a

mou

nt o

f the

liab

ility

com

pone

nt.

e.

D

eriv

ativ

e fin

anci

al in

stru

men

ts

The

Gro

up e

nter

s in

to a

var

iety

of

deriv

ativ

e fin

anci

al in

stru

men

ts to

man

age

its e

xpos

ure

to in

tere

st ra

te, f

orei

gn e

xcha

nge

rate

and

fue

l pric

e ris

ks, i

nclu

ding

for

eign

exc

hang

e fo

rwar

d co

ntra

cts,

inte

rest

rate

swap

s, cu

rren

cy o

ptio

ns sw

aps a

nd fu

el sw

aps.

Der

ivat

ives

are

initi

ally

reco

gniz

ed a

t fai

r val

ue a

t the

dat

e th

e de

rivat

ive

cont

ract

s ar

e en

tere

d in

to a

nd

are

subs

eque

ntly

rem

easu

red

to th

eir f

air v

alue

at t

he e

nd o

f eac

h re

porti

ng p

erio

d. T

he re

sulti

ng g

ain

or

loss

is r

ecog

nize

d in

pro

fit o

r lo

ss im

med

iate

ly u

nles

s th

e de

rivat

ive

is d

esig

nate

d an

d ef

fect

ive

as a

he

dgin

g in

stru

men

t, in

whi

ch e

vent

, the

tim

ing

of th

e re

cogn

ition

in p

rofit

or l

oss d

epen

ds o

n th

e na

ture

of

the

hed

ging

rel

atio

nshi

p. W

hen

the

fair

valu

e of

a d

eriv

ativ

e fin

anci

al i

nstru

men

t is

pos

itive

, the

de

rivat

ive

is re

cogn

ized

as

a fin

anci

al a

sset

; whe

n th

e fa

ir va

lue

of a

der

ivat

ive

finan

cial

inst

rum

ent i

s ne

gativ

e, th

e de

rivat

ive

is re

cogn

ized

as a

fina

ncia

l lia

bilit

y.

H

edge

Acc

ount

ing

The

Gro

up e

nter

s in

to s

ome

deriv

ativ

e tra

nsac

tions

tha

t ai

m t

o m

anag

e in

tere

st r

ates

, for

eign

exc

hang

e ra

tes,

fuel

pric

es,

and

othe

r fa

ctor

s af

fect

ing

gain

s or

los

ses

on a

sset

s an

d lia

bilit

ies.

The

hedg

ing

trans

actio

ns a

re d

efin

ed a

s ca

sh f

low

hed

ges.

Whe

n en

terin

g in

to h

edgi

ng t

rans

actio

ns,

the

Gro

up h

as

prep

ared

off

icia

l doc

umen

ts th

at d

escr

ibe

the

hedg

ing

rela

tions

hip

betw

een

hedg

ing

inst

rum

ents

and

item

s w

hich

hav

e be

en h

edge

d, th

e ob

ject

ive

of ri

sk m

anag

emen

t, th

e he

dgin

g st

rate

gy, a

nd th

e w

ay to

eva

luat

e th

e ef

fect

iven

ess o

f the

hed

ging

inst

rum

ent.

Th

e ef

fect

ive

porti

on o

f cha

nges

in th

e fa

ir va

lue

of d

eriv

ativ

es th

at a

re d

esig

nate

d an

d qu

alify

as

cash

flow

he

dges

is re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e. T

he g

ain

or lo

ss re

latin

g to

the

inef

fect

ive

porti

on is

re

cogn

ized

imm

edia

tely

in p

rofit

or l

oss.

The

asso

ciat

ed g

ains

or

loss

es th

at w

ere

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

are

recl

assi

fied

from

eq

uity

to p

rofit

or

loss

as

a re

clas

sific

atio

n ad

just

men

t in

the

line

item

rel

atin

g to

the

hedg

ed it

em in

the

sam

e pe

riod

as w

hen

the

hedg

ed i

tem

aff

ects

pro

fit o

r lo

ss.

If a

hedg

e of

a f

orec

aste

d tra

nsac

tion

subs

eque

ntly

res

ults

in th

e re

cogn

ition

of

a no

n-fin

anci

al a

sset

or

a no

n-fin

anci

al li

abili

ty, t

he a

ssoc

iate

d ga

ins

and

loss

es t

hat

wer

e re

cogn

ized

in

othe

r co

mpr

ehen

sive

inc

ome

are

rem

oved

fro

m e

quity

and

are

in

clud

ed in

the

initi

al c

ost o

f the

non

-fina

ncia

l ass

et o

r non

-fina

ncia

l lia

bilit

y.

- 23

-

152

Star

ting

from

201

8, th

e G

roup

dis

cont

inue

s he

dge

acco

untin

g on

ly w

hen

the

hedg

ing

rela

tions

hip

ceas

es to

m

eet

the

qual

ifyin

g cr

iteria

; fo

r in

stan

ce, w

hen

the

hedg

ing

inst

rum

ent

expi

res

or i

s so

ld, t

erm

inat

ed o

r ex

erci

sed.

The

cum

ulat

ive

gain

or

loss

on

the

hedg

ing

inst

rum

ent t

hat h

as b

een

prev

ious

ly r

ecog

nize

d in

ot

her c

ompr

ehen

sive

inco

me

from

the

perio

d in

whi

ch th

e he

dge

was

eff

ectiv

e re

mai

ns s

epar

atel

y in

equ

ity

until

the

fore

cast

ed tr

ansa

ctio

n oc

curs

. Whe

n a

fore

cast

ed tr

ansa

ctio

n is

no

long

er e

xpec

ted

to o

ccur

, the

ga

in o

r los

s acc

umul

ated

in e

quity

is re

cogn

ized

imm

edia

tely

in p

rofit

or l

oss.

Prov

isio

ns

The

Gro

up r

ecog

nize

s pr

ovis

ions

whe

n th

e G

roup

has

a p

rese

nt o

blig

atio

n (le

gal o

r co

nstru

ctiv

e) a

risin

g fr

om p

ast

even

ts (

lega

l or

con

stru

ctiv

e ob

ligat

ion)

, pa

ymen

t fo

r th

e ob

ligat

ion

is p

roba

ble,

and

the

ex

pend

iture

for s

ettli

ng th

e ob

ligat

ion

can

be e

stim

ated

relia

bly.

Th

e am

ount

reco

gniz

ed a

s a

prov

isio

n is

the

best

est

imat

e of

the

expe

nditu

re re

quire

d to

set

tle th

e pr

esen

t ob

ligat

ion,

taki

ng in

to a

ccou

nt th

e ris

ks a

nd u

ncer

tain

ties s

urro

undi

ng th

e ob

ligat

ion

as o

f the

bal

ance

she

et

date

. W

hen

a pr

ovis

ion

is m

easu

red

usin

g th

e ca

sh f

low

s es

timat

ed t

o se

ttle

the

pres

ent

oblig

atio

n, i

ts ca

rryi

ng a

mou

nt is

the

pres

ent v

alue

of t

hose

cas

h flo

ws.

Airc

raft

leas

e co

ntra

cts

Whe

n an

airc

raft

leas

e co

ntra

cts

expi

res

and

the

leas

ed it

em w

ill b

e re

turn

ed to

the

less

or, t

he G

roup

will

as

sess

if th

ere

are

exis

ting

oblig

atio

ns e

xist

and

if it

is re

quire

d to

reco

gniz

e a

prov

isio

n w

hen

sign

ing

the

leas

e co

ntra

ct.

Rev

enue

Rec

ogni

tion

Whe

n ap

plyi

ng IF

RS

15 d

urin

g 20

18, t

he G

roup

reco

gniz

es re

venu

e by

app

lyin

g th

e fo

llow

ing

step

s:

Iden

tifyi

ng th

e co

ntra

ct w

ith th

e cu

stom

er;

Iden

tifyi

ng th

e pe

rfor

man

ce o

blig

atio

ns in

the

cont

ract

;

D

eter

min

e th

e tra

nsac

tion

pric

e;

Allo

cate

the

trans

actio

n pr

ice

to th

e pe

rfor

man

ce o

blig

atio

ns in

the

cont

ract

; and

R

ecog

nize

reve

nue

whe

n th

e G

roup

satis

fies a

per

form

ance

obl

igat

ion.

Sh

ippi

ng se

rvic

e re

venu

e Pa

ssen

ger a

nd c

argo

reve

nue

are

reco

gniz

ed a

s rev

enue

whe

n th

e pa

ssen

gers

and

goo

ds a

re a

ctua

lly c

arrie

d.

Whe

n th

e tic

kets

are

sold

, due

to th

e fa

ct th

at th

e fu

lfillm

ent o

blig

atio

ns o

f the

ship

men

t hav

e no

t bee

n m

et,

the

rele

vant

am

ount

of r

even

ue is

firs

t rec

orde

d as

con

tract

liab

ilitie

s unt

il pa

ssen

gers

act

ually

boa

rd.

L

easi

ng

At t

he in

cept

ion

of a

con

tract

, the

Gro

up a

sses

ses w

heth

er th

e co

ntra

ct is

, or c

onta

ins,

a le

ase.

Th

e G

roup

as l

esse

e Th

e G

roup

reco

gniz

es ri

ght-o

f-us

e as

sets

and

leas

e lia

bilit

ies

for a

ll le

ases

at t

he c

omm

ence

men

t dat

e of

a

leas

e, e

xcep

t fo

r sh

ort-t

erm

lea

ses

and

low

-val

ue a

sset

lea

ses

acco

unte

d fo

r ap

plyi

ng a

rec

ogni

tion

exem

ptio

n w

here

leas

e pa

ymen

ts a

re re

cogn

ized

as e

xpen

ses o

n a

stra

ight

-line

bas

is o

ver t

he le

ase

term

s. R

ight

-of-

use

asse

ts a

re i

nitia

lly m

easu

red

at c

ost,

whi

ch c

ompr

ises

the

ini

tial

mea

sure

men

t of

lea

se

liabi

litie

s ad

just

ed f

or l

ease

pay

men

ts m

ade

at o

r be

fore

the

com

men

cem

ent

date

, plu

s an

y in

itial

dire

ct

cost

s inc

urre

d an

d an

est

imat

e of

cos

ts n

eede

d to

rest

ore

the

unde

rlyin

g as

sets

, and

less

any

leas

e in

cent

ives

re

ceiv

ed.

Rig

ht-o

f-us

e as

sets

are

sub

sequ

ently

mea

sure

d at

cos

t le

ss a

ccum

ulat

ed d

epre

ciat

ion

and

impa

irmen

t lo

sses

and

adj

uste

d fo

r an

y re

mea

sure

men

t of

the

lea

se l

iabi

litie

s. R

ight

-of-

use

asse

ts a

re

pres

ente

d on

a se

para

te li

ne in

the

cons

olid

ated

bal

ance

shee

ts.

- 24

-

Rig

ht-o

f-us

e as

sets

are

dep

reci

ated

usi

ng t

he s

traig

ht-li

ne m

etho

d fr

om t

he c

omm

ence

men

t da

tes

to t

he

earli

er o

f th

e en

d of

the

usef

ul li

ves

of th

e rig

ht-o

f-us

e as

sets

or

the

end

of th

e le

ase

term

s. H

owev

er, i

f le

ases

tran

sfer

ow

ners

hip

of th

e un

derly

ing

asse

ts to

the

Gro

up b

y th

e en

d of

the

leas

e te

rms

or if

the

cost

s of

rig

ht-o

f-use

ass

ets

refle

ct t

hat

the

Gro

up w

ill e

xerc

ise

a pu

rcha

se o

ptio

n, t

he G

roup

dep

reci

ates

the

rig

ht-o

f-us

e as

sets

from

the

com

men

cem

ent d

ates

to th

e en

d of

the

usef

ul li

ves o

f the

und

erly

ing

asse

ts.

Leas

e lia

bilit

ies

are

initi

ally

mea

sure

d at

the

pre

sent

val

ue o

f th

e le

ase

paym

ents

, whi

ch c

ompr

ise

fixed

pa

ymen

ts,

in-s

ubst

ance

fix

ed p

aym

ents

, va

riabl

e le

ase

paym

ents

whi

ch d

epen

d on

an

inde

x or

a r

ate,

re

sidu

al v

alue

gua

rant

ees,

the

exer

cise

pric

e of

a p

urch

ase

optio

n if

the

less

ee i

s re

ason

ably

cer

tain

to

exer

cise

tha

t op

tion,

and

pay

men

ts o

f pe

nalti

es f

or t

erm

inat

ing

a le

ase

if th

e le

ase

term

ref

lect

s su

ch

term

inat

ion,

less

any

lea

se i

ncen

tives

pay

able

. The

leas

e pa

ymen

ts a

re d

isco

unte

d us

ing

the

inte

rest

rat

e im

plic

it in

a l

ease

, if

that

rat

e ca

n be

rea

dily

det

erm

ined

. If

that

rat

e ca

nnot

be

read

ily d

eter

min

ed, t

he

Gro

up u

ses t

he le

ssee

’s in

crem

enta

l bor

row

ing

rate

.

Subs

eque

ntly

, le

ase

liabi

litie

s ar

e m

easu

red

at a

mor

tized

cos

t us

ing

the

effe

ctiv

e in

tere

st m

etho

d, w

ith

inte

rest

exp

ense

rec

ogni

zed

over

the

leas

e te

rms.

Whe

n th

ere

is a

cha

nge

in a

leas

e te

rm, a

cha

nge

in th

e am

ount

s exp

ecte

d to

be

paya

ble

unde

r a re

sidu

al v

alue

gua

rant

ee, a

cha

nge

in th

e as

sess

men

t of a

n op

tion

to

purc

hase

an

unde

rlyin

g as

set,

or a

cha

nge

in fu

ture

leas

e pa

ymen

ts re

sulti

ng fr

om a

cha

nge

in a

n in

dex

or a

ra

te u

sed

to d

eter

min

e th

ose

paym

ents

, th

e G

roup

rem

easu

res

the

leas

e lia

bilit

ies

with

a c

orre

spon

ding

ad

just

men

t to

the

right

-of-

use-

asse

ts. L

ease

liab

ilitie

s ar

e pr

esen

ted

on a

sep

arat

e lin

e in

the

cons

olid

ated

ba

lanc

e sh

eets

. V

aria

ble

leas

e pa

ymen

ts th

at d

o no

t dep

end

on a

n in

dex

or a

rate

are

reco

gniz

ed a

s ex

pens

es in

the

perio

ds

in w

hich

they

are

incu

rred

. Fo

r sa

le a

nd le

aseb

ack

trans

actio

ns, i

f th

e tra

nsfe

r of

an

asse

t sat

isfie

s th

e re

quire

men

ts o

f IF

RS

15 to

be

acco

unte

d fo

r as a

sale

, the

Gro

up re

cogn

izes

onl

y th

e am

ount

of a

ny g

ain

or lo

ss w

hich

rela

tes t

o th

e rig

hts

trans

ferr

ed to

the

buye

r-les

sor,

and

adju

sts

the

off-

mar

ket t

erm

s to

mea

sure

the

sale

pro

ceed

s at

fair

valu

e.

If th

e tra

nsfe

r doe

s no

t sat

isfy

the

requ

irem

ents

of I

FRS

15 to

be

acco

unte

d fo

r as a

sal

e, it

is a

ccou

nted

for

as a

fina

ncin

g tra

nsac

tion.

E

mpl

oyee

Ben

efits

a.

Sh

ort-t

erm

em

ploy

ee b

enef

its

Liab

ilitie

s re

cogn

ized

in

resp

ect

of s

hort-

term

em

ploy

ee b

enef

its a

re m

easu

red

at t

he u

ndis

coun

ted

amou

nt o

f the

ben

efits

exp

ecte

d to

be

paid

in e

xcha

nge

for t

he re

late

d se

rvic

es.

b.

Ret

irem

ent b

enef

its

Paym

ents

to

the

defin

ed c

ontri

butio

n re

tirem

ent

bene

fit p

lan

are

reco

gniz

ed a

s ex

pens

es w

hen

empl

oyee

s hav

e re

nder

ed se

rvic

es e

ntitl

ing

them

to th

e co

ntrib

utio

ns.

Def

ined

ben

efit

cost

s (in

clud

ing

serv

ice

cost

, ne

t in

tere

st a

nd r

emea

sure

men

t) un

der

the

defin

ed

cont

ribut

ion

retir

emen

t ben

efit

plan

are

det

erm

ined

usi

ng th

e pr

ojec

ted

unit

cred

it m

etho

d. S

ervi

ce c

ost

(incl

udin

g cu

rren

t se

rvic

e co

st a

nd p

ast

serv

ice

cost

) an

d ne

t in

tere

st o

n th

e ne

t de

fined

ben

efit

liabi

litie

s (a

sset

s) a

re r

ecog

nize

d as

em

ploy

ee b

enef

its e

xpen

se i

n th

e pe

riod

in w

hich

the

y oc

cur.

Rem

easu

rem

ent,

com

pris

ing

actu

aria

l gai

ns a

nd lo

sses

and

the

retu

rn o

n pl

an a

sset

s (ex

clud

ing

inte

rest

), is

rec

ogni

zed

in o

ther

com

preh

ensi

ve i

ncom

e in

the

per

iod

in w

hich

it

occu

rs.

Rem

easu

rem

ent

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

is re

flect

ed im

med

iate

ly in

reta

ined

ear

ning

s an

d w

ill n

ot b

e re

clas

sifie

d to

pro

fit o

r los

s.

Net

def

ined

ben

efit

liabi

litie

s (as

sets

) rep

rese

nt th

e ac

tual

def

icit

in th

e G

roup

’s d

efin

ed b

enef

it pl

ans.

- 25

-

153

Bor

row

ing

Cos

ts

Bor

row

ing

cost

s di

rect

ly a

ttrib

utab

le t

o th

e ac

quis

ition

, co

nstru

ctio

n or

pro

duct

ion

of q

ualif

ying

ass

ets

(ass

ets w

hich

are

subs

tant

ially

read

y fo

r the

ir in

tend

ed u

se o

r sal

e th

roug

h a

fairl

y lo

ng p

erio

d) a

re a

dded

to

the

cost

of t

hose

ass

ets,

until

such

tim

e as

the

asse

ts a

re su

bsta

ntia

lly re

ady

for t

heir

inte

nded

use

or s

ale.

In

vest

men

t inc

ome

earn

ed o

n th

e te

mpo

rary

inve

stm

ent o

f spe

cific

bor

row

ings

pen

ding

thei

r exp

endi

ture

on

qual

ifyin

g as

sets

is d

educ

ted

from

the

borr

owin

g co

sts e

ligib

le fo

r cap

italiz

atio

n.

Oth

er th

an th

at w

hich

is st

ated

abo

ve, a

ll ot

her b

orro

win

g co

sts a

re re

cogn

ized

in p

rofit

or l

oss i

n th

e pe

riod

in w

hich

they

are

incu

rred

. G

over

nmen

t Gra

nts

Gov

ernm

ent g

rant

s ar

e no

t rec

ogni

zed

until

ther

e is

reas

onab

le a

ssur

ance

that

the

Gro

up w

ill c

ompl

y w

ith

the

cond

ition

s atta

ched

to th

em a

nd th

at th

e gr

ants

will

be

rece

ived

. G

over

nmen

t gr

ants

are

rec

ogni

zed

in p

rofit

or

loss

on

a sy

stem

atic

bas

is o

ver

the

perio

ds i

n w

hich

the

G

roup

reco

gniz

es a

s exp

ense

s the

rela

ted

cost

s for

whi

ch th

e gr

ants

are

inte

nded

to c

ompe

nsat

e.

Gov

ernm

ent g

rant

s th

at a

re r

ecei

vabl

e as

com

pens

atio

n fo

r ex

pens

es o

r lo

sses

alre

ady

incu

rred

or

for

the

purp

ose

of g

ivin

g im

med

iate

fina

ncia

l sup

port

to th

e G

roup

with

no

futu

re re

late

d co

sts

are

reco

gniz

ed in

pr

ofit

or lo

ss in

the

perio

d in

whi

ch th

ey a

re re

ceiv

ed.

The

bene

fit o

f a

gove

rnm

ent l

oan

rece

ived

at a

bel

ow-m

arke

t rat

e of

inte

rest

is tr

eate

d as

a g

over

nmen

t gr

ant

mea

sure

d as

the

diff

eren

ce b

etw

een

the

proc

eeds

rec

eive

d an

d th

e fa

ir va

lue

of t

he lo

an b

ased

on

prev

ailin

g m

arke

t int

eres

t rat

es.

Freq

uent

Fly

er P

rogr

ams

The

Com

pany

has

a “

Dyn

asty

Fly

er P

rogr

am”

thro

ugh

whi

ch p

rogr

am m

embe

rs c

an c

onve

rt ac

cum

ulat

ed

mile

age

to a

cab

in u

pgra

de,

free

tic

kets

and

oth

er m

embe

r re

war

ds a

nd o

pera

tes

a “T

iger

club

Mem

ber

Priv

ilege

Pro

gram

” to

pro

vide

mem

bers

with

acc

umul

ated

tic

ket

rew

ard

bonu

ses,

whi

ch c

an b

e us

ed t

o of

fset

the

paym

ents

for

airf

are,

lugg

age

fees

, prio

rity

chec

k-in

s, an

d or

derin

g of

mea

ls in

flig

ht c

abin

s. A

po

rtion

of

pass

enge

r re

venu

e at

tribu

tabl

e to

the

rew

ards

for

the

fre

quen

t fly

er p

rogr

am i

s de

ferr

ed. T

he

Com

pany

sho

uld

reco

gniz

es t

his

defe

rred

rev

enue

as

reve

nue

only

whe

n th

e C

ompa

ny h

as f

ulfil

led

its

oblig

atio

ns o

n th

e gr

antin

g of

rew

ards

or

whe

n th

e pe

riod

for

conv

ertin

g th

e m

ileag

e to

rew

ards

has

ex

pire

d.

Shar

e-ba

sed

Paym

ent A

rran

gem

ents

Eq

uity

-set

tled

shar

e-ba

sed

paym

ents

to e

mpl

oyee

s ar

e m

easu

red

at th

e fa

ir va

lue

of th

e eq

uity

inst

rum

ents

at

the

gran

t dat

e.

The

fair

valu

e de

term

ined

at

the

gran

t da

te o

f th

e eq

uity

-set

tled

shar

e-ba

sed

paym

ents

is

expe

nsed

on

a st

raig

ht-li

ne b

asis

ove

r th

e ve

stin

g pe

riod,

bas

ed o

n th

e G

roup

’s e

stim

ate

of e

quity

ins

trum

ent

that

will

ev

entu

ally

ves

t, w

ith a

cor

resp

ondi

ng in

crea

se in

cap

ital s

urpl

us -

empl

oyee

sha

re o

ptio

ns. T

he f

air

valu

e de

term

ined

at t

he g

rant

dat

e of

the

equi

ty-s

ettle

d sh

are-

base

d pa

ymen

ts is

reco

gniz

ed a

s an

exp

ense

in fu

ll at

the

gran

t dat

e w

hen

the

gran

ted

shar

e op

tions

are

ves

ted

imm

edia

tely

.

- 26

-

Tax

atio

n In

com

e ta

x ex

pens

e re

pres

ents

the

sum

of t

he c

urre

nt ta

x an

d de

ferr

ed ta

x.

a.

Cur

rent

tax

Th

e cu

rren

t tax

liab

ilitie

s ar

e ba

sed

on c

urre

nt ta

xabl

e pr

ofit.

Sin

ce p

art o

f the

inco

me

and

expe

nses

are

ta

xabl

e or

ded

uctib

le i

n ot

her

perio

ds,

or i

n ac

cord

ance

with

the

rel

evan

t ta

x la

ws

are

taxa

ble

or

dedu

ctib

le,

curr

ent

taxa

ble

prof

it di

ffer

s fr

om n

et p

rofit

rep

orte

d in

the

con

solid

ated

sta

tem

ents

of

com

preh

ensi

ve in

com

e. T

he G

roup

’s c

urre

nt ta

x lia

bilit

ies

are

calc

ulat

ed b

y th

e ta

x ra

te w

as le

gisl

ated

or

subs

tant

ially

legi

slat

ed a

t the

bal

ance

shee

t dat

e.

Acc

ordi

ng to

the

Inco

me

Tax

Law

, an

addi

tiona

l tax

at 1

0% o

f una

ppro

pria

ted

earn

ings

is p

rovi

ded

for

as in

com

e ta

x in

the

year

the

shar

ehol

ders

app

rove

the

rete

ntio

n of

thes

e ea

rnin

gs.

Adj

ustm

ents

of p

rior y

ears

’ tax

liab

ilitie

s are

add

ed to

or d

educ

ted

from

the

curr

ent y

ear’

s tax

pro

visi

on.

b.

D

efer

red

tax

Def

erre

d ta

x is

rec

ogni

zed

on t

empo

rary

diff

eren

ces

betw

een

the

carr

ying

am

ount

s of

ass

ets

and

liabi

litie

s in

the

con

solid

ated

fin

anci

al s

tate

men

ts a

nd t

he c

orre

spon

ding

tax

bas

es u

sed

in t

he

com

puta

tion

of ta

xabl

e pr

ofit.

Def

erre

d ta

x lia

bilit

ies a

re g

ener

ally

reco

gniz

ed fo

r all

taxa

ble

tem

pora

ry

diff

eren

ces.

Def

erre

d ta

x as

sets

are

gen

eral

ly r

ecog

nize

d fo

r al

l de

duct

ible

tem

pora

ry d

iffer

ence

s, un

used

los

s ca

rryf

orw

ards

and

unu

sed

tax

cred

its f

or p

urch

ases

of

mac

hine

ry,

equi

pmen

t an

d te

chno

logy

, res

earc

h an

d de

velo

pmen

t exp

endi

ture

s, an

d pe

rson

nel t

rain

ing

expe

nditu

res

to th

e ex

tent

th

at i

t is

pro

babl

e th

at t

axab

le p

rofit

will

be

avai

labl

e ag

ains

t w

hich

tho

se d

educ

tible

tem

pora

ry

diff

eren

ces c

an b

e ut

ilize

d.

Def

erre

d ta

x lia

bilit

ies

are

reco

gniz

ed fo

r tax

able

tem

pora

ry d

iffer

ence

s as

soci

ated

with

inve

stm

ents

in

subs

idia

ries

and

asso

ciat

es a

nd in

tere

sts

in jo

int v

entu

res,

exce

pt w

here

the

Gro

up is

abl

e to

con

trol t

he

reve

rsal

of t

he te

mpo

rary

diff

eren

ce a

nd it

is p

roba

ble

that

the

tem

pora

ry d

iffer

ence

will

not

reve

rse

in

the

fore

seea

ble

futu

re.

Def

erre

d ta

x as

sets

aris

ing

from

ded

uctib

le t

empo

rary

diff

eren

ces

asso

ciat

ed

with

such

inve

stm

ents

and

inte

rest

s are

onl

y re

cogn

ized

to th

e ex

tent

that

it is

pro

babl

e th

at th

ere

will

be

suff

icie

nt ta

xabl

e pr

ofit

agai

nst w

hich

to u

tiliz

e th

e be

nefit

s of

the

tem

pora

ry d

iffer

ence

s an

d th

ey a

re

expe

cted

to re

vers

e in

the

fore

seea

ble

futu

re.

The

carr

ying

am

ount

of d

efer

red

tax

asse

ts is

revi

ewed

at t

he e

nd o

f eac

h re

porti

ng p

erio

d an

d re

duce

d to

the

exte

nt th

at it

is n

o lo

nger

pro

babl

e th

at s

uffic

ient

taxa

ble

prof

it w

ill b

e av

aila

ble

to a

llow

all

or

part

of th

e as

sets

to b

e re

cove

red.

A p

revi

ousl

y un

reco

gniz

ed d

efer

red

tax

asse

t is

also

revi

ewed

at t

he

end

of e

ach

repo

rting

per

iod

and

reco

gniz

ed to

the

exte

nt th

at it

has

bec

ome

prob

able

that

futu

re ta

xabl

e pr

ofit

will

allo

w th

e de

ferr

ed ta

x as

set t

o be

reco

vere

d.

Def

erre

d ta

x lia

bilit

ies a

nd a

sset

s are

mea

sure

d at

the

tax

rate

s tha

t are

exp

ecte

d to

app

ly in

the

perio

d in

w

hich

the

liabi

litie

s ar

e se

ttled

or

the

asse

ts a

re r

ealiz

ed, b

ased

on

tax

rate

s (a

nd ta

x la

ws)

that

hav

e be

en e

nact

ed o

r sub

stant

ivel

y en

acte

d by

the

end

of th

e re

porti

ng p

erio

d. T

he m

easu

rem

ent o

f def

erre

d ta

x lia

bilit

ies

and

asse

ts re

flect

s th

e ta

x co

nseq

uenc

es th

at w

ould

follo

w fr

om th

e m

anne

r in

whi

ch th

e G

roup

exp

ects

, at t

he e

nd o

f the

repo

rting

per

iod,

to re

cove

r or s

ettle

the

carr

ying

am

ount

of i

ts a

sset

s an

d lia

bilit

ies.

c.

Cur

rent

and

def

erre

d ta

xes f

or th

e ye

ar

C

urre

nt a

nd d

efer

red

taxe

s ar

e re

cogn

ized

in p

rofit

or

loss

, exc

ept w

hen

they

rel

ate

to it

ems

that

are

re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e or

dire

ctly

in e

quity

, in

whi

ch c

ase,

the

curr

ent a

nd d

efer

red

taxe

s are

als

o re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e or

dire

ctly

in e

quity

, res

pect

ivel

y.

- 27

-

154

Mai

nten

ance

and

Ove

rhau

l Cos

ts

Rou

tine

mai

nten

ance

cos

ts a

re re

cogn

ized

in p

rofit

or l

oss i

n th

e pe

riod

in w

hich

they

are

incu

rred

. Th

e ov

erha

ul c

osts

of

an o

wne

d or

leas

ed a

ircra

ft th

at m

eet t

he c

riter

ia f

or f

ixed

ass

et c

apita

lizat

ion

are

capi

taliz

ed a

s re

plac

emen

ts f

or a

ircra

ft an

d en

gine

s an

d ar

e de

prec

iate

d on

a s

traig

ht-li

ne b

asis

ove

r th

e ex

pect

ed a

nnua

l ove

rhau

l cyc

le.

5

. C

RIT

ICA

L A

CC

OU

NT

ING

JU

DG

ME

NT

S A

ND

KE

Y S

OU

RC

ES

OF

EST

IMA

TIO

N

UN

CE

RT

AIN

TY

In

the

app

licat

ion

of th

e G

roup

’s a

ccou

ntin

g po

licie

s as

dis

clos

ed i

n N

ote

4, m

anag

emen

t is

req

uire

d to

m

ake

judg

men

ts, e

stim

atio

ns a

nd a

ssum

ptio

ns a

bout

the

carr

ying

am

ount

s of

ass

ets

and

liabi

litie

s th

at a

re

not r

eadi

ly a

ppar

ent f

rom

oth

er s

ourc

es. T

he e

stim

ates

and

ass

ocia

ted

assu

mpt

ions

are

bas

ed o

n hi

stor

ical

ex

perie

nce

and

othe

r fac

tors

that

are

con

side

red

rele

vant

. Act

ual r

esul

ts m

ay d

iffer

from

thes

e es

timat

es.

The

estim

ates

and

und

erly

ing

assu

mpt

ions

are

rev

iew

ed o

n an

ong

oing

bas

is.

Rev

isio

ns t

o ac

coun

ting

estim

ates

are

rec

ogni

zed

in th

e pe

riod

in w

hich

the

estim

ates

are

rev

ised

if th

e re

visi

ons

affe

ct o

nly

that

pe

riod

or in

the

perio

d of

the

revi

sion

s an

d fu

ture

per

iods

if th

e re

visi

ons

affe

ct b

oth

curr

ent a

nd f

utur

e pe

riods

. K

ey S

ourc

es o

f Est

imat

ion

Unc

erta

inty

Th

e ke

y as

sum

ptio

ns c

once

rnin

g th

e fu

ture

and

oth

er k

ey so

urce

s of e

stim

atio

n un

certa

inty

at t

he e

nd o

f the

re

porti

ng p

erio

d th

at h

ave

a si

gnifi

cant

risk

cau

sing

a m

ater

ial a

djus

tmen

t to

the

carr

ying

am

ount

s of

ass

ets

and

liabi

litie

s with

in th

e ne

xt fi

nanc

ial y

ear a

re d

iscu

ssed

bel

ow.

Def

ined

Ben

efit

Obl

igat

ions

Th

e pr

esen

t va

lue

of d

efin

ed b

enef

it ob

ligat

ions

at

the

end

of t

he r

epor

ting

perio

d is

cal

cula

ted

usin

g ac

tuar

ial

assu

mpt

ions

. Th

ose

assu

mpt

ions

, w

hich

are

bas

ed o

n m

anag

emen

t’s j

udgm

ents

and

est

imat

es,

com

pris

e th

e di

scou

nt ra

te a

nd e

xpec

ted

retu

rn o

n pl

an a

sset

s. C

hang

es in

act

uaria

l ass

umpt

ions

may

hav

e a

mat

eria

l im

pact

on

the

amou

nt o

f def

ined

ben

efit

oblig

atio

ns.

6

. C

ASH

AN

D C

ASH

EQ

UIV

AL

EN

TS

Dec

embe

r 31

20

20

20

19

C

ash

on h

and

and

revo

lvin

g fu

nds

$

33

3,67

7

$

483,

951

Che

ckin

g ac

coun

ts a

nd d

eman

d de

posi

ts

17,6

90,1

86

7,20

6,93

8 C

ash

equi

vale

nts

Tim

e de

posi

ts w

ith o

rigin

al m

atur

ities

of l

ess t

han

thre

e m

onth

s

6,

980,

493

16,5

65,8

21

Rep

urch

ase

agre

emen

ts c

olla

tera

lized

by

bond

s

2,

121,

581

4,20

2,81

8

$

27,1

25,9

37

$

28

,459

,528

- 28

-

The

mar

ket r

ate

inte

rval

s of

cas

h in

ban

ks a

nd c

ash

equi

vale

nts

at th

e en

d of

the

repo

rting

per

iod

wer

e as

fo

llow

s:

D

ecem

ber

31

2020

2019

Ban

k ba

lanc

e

0%-1

.9%

0%-1

.9%

Ti

me

depo

sits

with

orig

inal

mat

uriti

es o

f les

s tha

n th

ree

mon

ths

0.

24%

-2.2

0%

0.

59%

-3.5

5%

Rep

urch

ase

agre

emen

ts c

olla

tera

lized

by

bond

s

0.22

%-0

.55%

0.47

%-0

.7%

Th

e G

roup

des

igna

ted

som

e de

posi

ts d

enom

inat

ed i

n U

SD a

nd r

epur

chas

e ag

reem

ents

col

late

raliz

ed b

y bo

nds

as h

edgi

ng in

stru

men

ts to

avo

id e

xcha

nge

rate

fluc

tuat

ions

on

final

pay

men

ts o

f airc

raft

orde

rs a

nd

prep

aym

ents

for

equ

ipm

ent,

and

appl

ied

cash

flo

w h

edge

acc

ount

ing

to h

edge

its

for

eign

exc

hang

e ex

posu

re. T

he c

ontra

ct in

form

atio

n is

as f

ollo

ws:

Mat

urity

Dat

e

Subj

ect

C

arry

ing

Val

ue

D

ecem

ber 3

1, 2

020

20

21.1

.4-2

021.

11.1

F

inan

cial

ass

ets f

or h

edgi

ng -

curr

ent

$

7,6

13,6

36

Impa

ct o

n co

mpr

ehen

sive

inco

me

(loss

)

Rec

ogni

zed

in

Oth

er

Com

preh

ensi

ve

Inco

me

(Los

s)

For t

he y

ear e

nded

Dec

embe

r 31,

202

0

$ (3

72,6

32)

The

amou

nt o

f he

dgin

g in

stru

men

t se

ttlem

ents

rec

ogni

zed

as p

repa

ymen

ts f

or e

quip

men

t in

202

0 w

as

$81,

111

thou

sand

.

7.

FIN

AN

CIA

L IN

STR

UM

EN

TS

AT

FA

IR V

AL

UE

TH

RO

UG

H P

RO

FIT

OR

LO

SS (F

VTP

L)

Dec

embe

r 31

20

20

20

19

Fi

nanc

ial a

sset

s - c

urre

nt

Fi

nanc

ial a

sset

s man

dato

rily

clas

sifie

d at

FV

TPL

Der

ivat

ive

finan

cial

inst

rum

ents

(not

und

er h

edge

acc

ount

ing)

Fo

reig

n ex

chan

ge fo

rwar

d co

ntra

cts

$

-

$

43

4 N

on-d

eriv

ativ

e fin

anci

al a

sset

s

B

enef

icia

ry c

ertif

icat

es

274,

761

511,

758

$

274

,761

$ 5

12,1

92

Fi

nanc

ial l

iabi

litie

s - c

urre

nt

D

eriv

ativ

e fin

anci

al in

stru

men

ts (n

ot u

nder

hed

ge a

ccou

ntin

g) -

Fore

ign

exch

ange

forw

ard

cont

ract

s

$

-

$

11,7

49

- 29

-

155

At

the

end

of t

he r

epor

ting

perio

d, o

utst

andi

ng f

orei

gn e

xcha

nge

forw

ard

cont

ract

s no

t un

der

hedg

e ac

coun

ting

wer

e as

follo

ws:

Cur

renc

y

Mat

urity

Dat

e

Not

iona

l Am

ount

(I

n T

hous

ands

)

Dec

embe

r 31,

201

9

Buy

forw

ard

cont

ract

s N

TD/U

SD

20

20.0

1.15

-202

0.07

.31

NTD

570,

571/

USD

19,0

00

8.

FIN

AN

CIA

L A

SSE

TS

AT

FV

TO

CI

Inve

stm

ents

in E

quity

Inst

rum

ents

D

ecem

ber

31

2020

2019

Non

-cur

rent

Fore

ign

inve

stm

ents

U

nlis

ted

shar

es

$

134

,042

$ 1

82,3

56

Dom

estic

inve

stm

ents

Unl

iste

d sh

ares

29

,704

26

,865

$ 1

63,7

46

$

209

,221

Th

ese

inve

stm

ents

in

equi

ty i

nstru

men

ts a

re n

ot h

eld

for

tradi

ng. I

nste

ad, t

hey

are

held

for

med

ium

- to

lo

ng-te

rm st

rate

gic

purp

oses

. Acc

ordi

ngly

, the

man

agem

ent e

lect

ed to

des

igna

te th

ese

inve

stm

ents

in e

quity

in

stru

men

ts a

s at

FV

TOC

I as

it be

lieve

s th

at re

cogn

izin

g sh

ort-t

erm

fluc

tuat

ions

in th

ese

inve

stm

ents

’ fai

r va

lues

in p

rofit

or l

oss

wou

ld n

ot b

e co

nsis

tent

with

the

Gro

up’s

stra

tegy

of h

oldi

ng th

ese

inve

stm

ents

for

long

-term

pur

pose

s.

9.

FIN

AN

CIA

L A

SSE

TS

AT

AM

OR

TIZ

ED

CO

ST

D

ecem

ber

31

2020

2019

Cur

rent

Tim

e de

posi

ts w

ith o

rigin

al m

atur

ities

of m

ore

than

3 m

onth

s

$ 6

,551

,693

$ 2

,355

,095

Non

-cur

rent

Tim

e de

posi

ts w

ith o

rigin

al m

atur

ities

of m

ore

than

1 y

ear

$

31

1,59

6

$

105,

586

The

inte

rest

rate

s fo

r tim

e de

posi

ts w

ith o

rigin

al m

atur

ities

of m

ore

than

3 m

onth

s w

ere

0.21

%-1

.90%

and

0.

60%

-1.3

0% a

s of D

ecem

ber 3

1, 2

020

and

2019

, res

pect

ivel

y.

- 30

-

10.

NO

TE

S R

EC

EIV

AB

LE

AN

D A

CC

OU

NT

S R

EC

EIV

AB

LE

D

ecem

ber

31

2020

2019

Not

es re

ceiv

able

$

655

$

29

9,24

5

Acc

ount

s rec

eiva

ble

A

ccou

nts r

ecei

vabl

e

9,

903,

008

8,44

0,25

4 Le

ss: A

llow

ance

for i

mpa

irmen

t los

s

(2

06,1

52)

(218

,665

)

9,69

6,85

6

8,

221,

589

$

9,6

97,5

11

$

8,5

20,8

34

The

aver

age

cred

it pe

riod

was

7 t

o 55

day

s. In

det

erm

inin

g th

e re

cove

rabi

lity

of a

tra

de r

ecei

vabl

e, t

he

Gro

up c

onsi

dere

d an

y ch

ange

in

the

cred

it qu

ality

of

the

rece

ivab

le s

ince

the

dat

e cr

edit

was

ini

tially

gr

ante

d to

the

end

of

the

repo

rting

per

iod,

and

any

allo

wan

ce f

or i

mpa

irmen

t lo

ss w

as b

ased

on

the

estim

ated

irre

cove

rabl

e am

ount

s de

term

ined

by

refe

renc

e to

the

Gro

up’s

pas

t def

ault

expe

rienc

e w

ith th

e co

unte

rpar

ty a

nd a

n an

alys

is o

f the

cou

nter

party

’s c

urre

nt fi

nanc

ial p

ositi

on. T

he G

roup

ado

pted

a p

olic

y of

on

ly d

ealin

g w

ith e

ntiti

es t

hat

are

rate

d th

e eq

uiva

lent

of

inve

stm

ent

grad

e or

hig

her

and

obta

inin

g su

ffic

ient

col

late

ral,

whe

re a

ppro

pria

te, a

s a

mea

ns o

f m

itiga

ting

the

risk

of f

inan

cial

loss

fro

m d

efau

lts.

Cre

dit r

atin

g in

form

atio

n is

obta

ined

from

inde

pend

ent r

atin

g ag

enci

es w

here

ava

ilabl

e or

, if n

ot a

vaila

ble,

th

e G

roup

use

s ot

her

publ

icly

ava

ilabl

e fin

anci

al in

form

atio

n or

its

own

tradi

ng r

ecor

ds to

rat

e its

maj

or

cust

omer

s. Th

e G

roup

’s e

xpos

ure

and

the

cred

it ra

tings

of i

ts c

ount

erpa

rties

are

con

tinuo

usly

mon

itore

d an

d th

e ag

greg

ate

valu

e of

tran

sact

ions

con

clud

ed is

spr

ead

amon

gst a

ppro

ved

coun

terp

artie

s. C

redi

t exp

osur

e is

con

trolle

d by

cou

nter

party

lim

its t

hat

are

revi

ewed

and

app

rove

d by

the

risk

man

agem

ent

com

mitt

ee

annu

ally

. Th

e G

roup

app

lies

the

sim

plifi

ed a

ppro

ach

to a

llow

ing

for

expe

cted

cre

dit l

osse

s pr

escr

ibed

by

IFR

S 9,

w

hich

per

mits

the

use

of

lifet

ime

expe

cted

los

s al

low

ance

for

all

trade

rec

eiva

bles

. The

exp

ecte

d cr

edit

loss

es o

n tra

de r

ecei

vabl

es a

re e

stim

ated

usi

ng a

pro

visi

on m

atrix

by

refe

renc

e to

pas

t def

ault

expe

rienc

e w

ith th

e de

btor

s an

d an

ana

lysi

s of

the

debt

ors’

cur

rent

fin

anci

al p

ositi

on, a

djus

ted

for

gene

ral e

cono

mic

co

nditi

ons

of th

e in

dust

ry in

whi

ch th

e de

btor

s op

erat

e an

d an

ass

essm

ent o

f bot

h th

e cu

rren

t as

wel

l as

the

fore

cast

ed d

irect

ion

of e

cono

mic

con

ditio

ns a

t th

e re

porti

ng d

ate.

As

the

Gro

up’s

his

toric

al c

redi

t lo

ss

expe

rienc

e do

es n

ot s

how

sig

nific

antly

diff

eren

t lo

ss p

atte

rns

for

diff

eren

t cu

stom

er s

egm

ents

, th

e lo

ss

allo

wan

ce b

ased

on

the

past

due

stat

us is

not

furth

er d

istin

guis

hed

acco

rdin

g to

the

diff

eren

t seg

men

ts o

f the

G

roup

’s c

usto

mer

bas

e.

The

Gro

up w

rites

off

a tr

ade

rece

ivab

le w

hen

ther

e is

info

rmat

ion

indi

catin

g th

at th

e de

btor

is e

xper

ienc

ing

seve

re fi

nanc

ial d

iffic

ulty

and

ther

e is

no

real

istic

pro

spec

t of

reco

very

. For

acc

ount

s re

ceiv

able

that

hav

e be

en w

ritte

n of

f, th

e G

roup

con

tinue

s to

eng

age

in e

nfor

cem

ent

activ

ity t

o at

tem

pt t

o re

cove

r th

e re

ceiv

able

s whi

ch a

re d

ue. W

here

reco

verie

s are

mad

e, th

ese

are

reco

gniz

ed in

pro

fit o

r los

s. Th

e fo

llow

ing

tabl

e de

tails

the

loss

allo

wan

ce o

f tra

de re

ceiv

able

s bas

ed o

n th

e G

roup

’s p

rovi

sion

mat

rix.

D

ecem

ber 3

1, 2

020

N

ot P

ast D

ue

Up

to 3

0 D

ays

31

to 6

0 D

ays

61

to 9

0 D

ays

Ove

r 90

Day

s

Tot

al

Ex

pect

ed c

redi

t los

s rat

e

0.14

%

0.

18%

1.20

%

53

.78%

92.7

4%

G

ross

car

ryin

g am

ount

$ 9

,304

,785

$ 25

6,17

8

$ 13

4,11

1

$ 5,

513

$

202,

421

$

9,90

3,00

8 Lo

ss a

llow

ance

(life

time

ECLs

)

(1

3,39

2)

(4

70)

(1,6

08)

(2,9

65)

(187

,718

)

(2

06,1

52)

A

mor

tized

cos

t

$ 9

,291

,393

$ 25

5,70

8

$ 13

2,50

3

$ 2,

548

$

14,7

03

$

9,69

6,85

6

- 31

-

156

Dec

embe

r 31,

201

9

Not

Pas

t Due

U

p to

30

Day

s 3

1 to

60

Day

s 6

1 to

90

Day

s O

ver

90 D

ays

T

otal

Expe

cted

cre

dit l

oss r

ate

0.

12%

0.15

%

6.

16%

15.2

5%

97

.18%

Gro

ss c

arry

ing

amou

nt

$

6,7

05,6

62

$

1,33

2,64

0

$ 97

,700

$ 11

3,71

6

$ 19

0,53

6

$ 8,

440,

254

Loss

allo

wan

ce (l

ifetim

e EC

Ls)

(8,1

23)

(2,0

19)

(6,0

21)

(17,

340)

(185

,162

)

(2

18,6

65)

A

mor

tized

cos

t

$ 6

,697

,539

$ 1,

330,

621

$

91,6

79

$

96,3

76

$

5,37

4

$ 8,

221,

589

The

mov

emen

ts o

f the

loss

allo

wan

ce o

f tra

de re

ceiv

able

s wer

e as

follo

ws:

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

B

alan

ce a

t Jan

uary

1

$

218

,665

$ 2

27,3

06

Add

: Net

rem

easu

rem

ent o

f los

s allo

wan

ce

4,89

5

24

,096

Le

ss: A

mou

nts w

ritte

n of

f

(17,

398)

(3

2,71

7)

Fore

ign

exch

ange

gai

ns a

nd lo

sses

(1

0)

(3)

Loss

of c

ontro

l of s

ubsi

diar

ies

(-)

(17)

Bal

ance

at D

ecem

ber 3

1

$ 2

06,1

52

$

218

,665

11.

INV

EN

TO

RIE

S

Dec

embe

r 31

20

20

20

19

A

ircra

ft sp

are

parts

$ 7

,898

,482

$ 7

,578

,125

Ite

ms f

or in

-flig

ht sa

le

627,

437

571,

601

Wor

k in

pro

cess

- m

aint

enan

ce se

rvic

es

214,

362

283,

933

Oth

ers

47

,824

36

,454

$ 8

,788

,105

$ 8

,470

,113

Th

e op

erat

ing

cost

s re

cogn

ized

for

the

yea

rs e

nded

Dec

embe

r 31

, 202

0 an

d 20

19 i

nclu

ded

loss

es f

rom

in

vent

ory

writ

e-do

wns

of $

190,

548

thou

sand

and

$32

7,91

9 th

ousa

nd, r

espe

ctiv

ely.

12.

NO

N-C

UR

RE

NT

ASS

ET

S H

EL

D F

OR

SA

LE

Dec

embe

r 31

20

20

20

19

Lo

ng-te

rm e

quity

inve

stm

ents

hel

d fo

r sal

e - A

sian

Com

pres

sor

Tech

nolo

gy S

ervi

ces

$

89,

296

$

-

To e

nhan

ce i

ts c

ompe

titiv

enes

s, th

e C

ompa

ny p

lans

to

intro

duce

new

airc

raft

and

retir

e ol

d ai

rcra

ft ac

cord

ing

to a

pla

nned

sche

dule

. Suc

h ai

rcra

ft, c

lass

ified

as n

on-c

urre

nt a

sset

s he

ld fo

r sal

e, h

ad a

n or

igin

al

book

val

ue w

hich

was

hig

her t

han

the

expe

cted

sale

pric

e an

d w

hich

was

reco

gniz

ed a

s an

impa

irmen

t los

s. H

owev

er, t

he a

ctua

l los

s sha

ll be

iden

tifie

d by

the

actu

al sa

le p

rice.

- 32

-

The

Com

pany

com

plet

ed t

he d

ispo

sal

proc

edur

es o

f so

me

airc

raft

and

reco

gniz

ed a

los

s on

dis

posa

l of

$1

0,46

2 th

ousa

nd in

201

9. T

he f

air

valu

e w

as d

eter

min

ed b

y tra

nsac

tions

of

the

rela

ted

mar

ket,

and

the

prop

osed

sale

pric

e w

as b

ased

on

the

curr

ent s

tatu

s of t

he a

ircra

ft. T

he fa

ir va

lue

is c

lass

ified

as L

evel

3.

13

. SU

BSI

DIA

RIE

S Su

bsid

iary

incl

uded

in th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts:

Prop

ortio

n of

O

wne

rshi

p (%

)

Dec

embe

r 31

In

vest

or C

ompa

ny

In

vest

ee C

ompa

ny

M

ain

Bus

ines

ses a

nd P

rodu

cts

20

20

20

19

C

hina

Airl

ines

, Ltd

. T

iger

air T

aiw

an C

o., L

td. (

Not

e)

Air

trans

porta

tion

81

77

T

aiw

an A

ircra

ft M

aint

enan

ce

And

Eng

inee

ring

Co.

, Ltd

.

Airc

raft

mai

nten

ance

100

10

0

C

AL-

Dyn

asty

Inte

rnat

iona

l A

hol

ding

com

pany

, rea

l est

ate

and

hote

l se

rvic

es

10

0

100

C

AL-

Asi

a In

vest

men

t

Gen

eral

inve

stm

ent

10

0

100

D

ynas

ty A

erot

ech

Inte

rnat

iona

l C

orp.

C

lean

ing

of a

ircra

ft an

d m

aint

enan

ce o

f m

achi

ne a

nd e

quip

men

t

100

10

0

Y

estri

p

Tra

vel b

usin

ess

10

0

100

C

al P

ark

R

eal e

stat

e le

ase

and

inte

rnat

iona

l tra

de

10

0

100

C

al H

otel

Co.

, Ltd

. H

otel

bus

ines

s

100

10

0

Sab

re T

rave

l Net

wor

k (T

aiw

an)

Sal

e an

d m

aint

enan

ce o

f har

dwar

e an

d so

ftwar

e

94

94

M

anda

rin A

irlin

es

Air

trans

porta

tion

and

mai

nten

ance

of

airc

raft

94

94

T

aiw

an A

ir C

argo

Ter

min

al

(Not

e)

Air

carg

o an

d st

orag

e

59

59

K

aohs

iung

Cat

erin

g Se

rvic

es,

Ltd.

I

n-fli

ght c

ater

ing

54

54

T

aoyu

an In

tern

atio

nal A

irpor

t Se

rvic

es

Airp

ort s

ervi

ces

49

49

T

aiw

an A

irpor

t Ser

vice

s (N

ote)

A

irpor

t ser

vice

s

48

48

Glo

bal S

ky E

xpre

ss

For

war

ding

and

stor

age

of a

ir ca

rgo

25

25

C

al-D

ynas

ty

Dyn

asty

Pro

perti

es C

o., L

td.

Rea

l est

ate

man

agem

ent

10

0

100

In

tern

atio

nal

Dyn

asty

Hot

el o

f Haw

aii,

Inc.

H

otel

bus

ines

s

100

10

0 Ta

iwan

Airp

ort S

ervi

ces

Tai

wan

Airp

ort S

ervi

ce (S

amoa

) A

irpor

t sup

porti

ng se

rvic

e an

d in

vest

men

t

100

10

0 N

ote:

Pr

opor

tion

of o

wne

rshi

p is

con

side

red

from

the

pers

pect

ive

of th

e G

roup

. Ex

cept

that

the

Com

pany

has

con

trol o

ver T

aoyu

an In

tern

atio

nal A

irpor

t Ser

vice

, Tai

wan

Airp

ort S

ervi

ce

and

Glo

bal

Sky

Expr

ess,

the

othe

rs a

re i

nves

tees

tha

t th

e C

ompa

ny h

ad m

ore

than

50%

of

thei

r vo

ting

shar

es. T

he a

bove

fin

anci

al i

nfor

mat

ion

of t

he s

ubsi

diar

ies

for

the

year

s en

ded

Dec

embe

r 31

, 202

0 an

d 20

19 w

as re

porte

d ac

cord

ing

to fi

nanc

ial r

epor

ts th

at w

ere

not r

evie

wed

by

inde

pend

ent a

udito

rs.

In o

rder

to p

repa

re f

or th

e lis

ting

of T

iger

air

Taiw

an C

o., L

td. a

nd c

ompl

y w

ith th

e ru

les

rela

ting

to th

e ex

amin

atio

n fo

r pub

lic li

stin

g, th

e re

leas

e of

the

shar

es o

f Tig

erai

r Tai

wan

Co.

, Ltd

. hel

d by

the

Com

pany

an

d M

anda

rin A

irlin

es w

as re

solv

ed in

the

shar

ehol

ders

’ mee

ting

of th

e C

ompa

ny o

n Ju

ne 2

5, 2

019,

and

in

the

shar

ehol

ders

’ m

eetin

g of

Man

darin

Airl

ines

on

June

27,

201

9. T

he s

hare

s sh

all

be s

ubsc

ribed

by

all

shar

ehol

ders

of

the

Com

pany

and

Man

darin

Airl

ines

on

the

basi

s of

the

perc

enta

ge o

f sh

areh

oldi

ngs.

For

the

wai

ver

of s

ubsc

ribed

sha

res

by th

e or

igin

al s

hare

hold

ers

or th

e un

ders

ubsc

ribed

por

tion,

the

chai

rman

w

as a

utho

rized

to

desi

gnat

e sp

ecifi

c pe

rson

s fo

r su

bscr

iptio

n. T

he s

ubsc

riptio

n pr

ice

was

set

at

$41

per

shar

e. I

n O

ctob

er a

nd D

ecem

ber

2019

, th

e sh

ares

wer

e fu

lly p

aid

and

wer

e co

mpl

etel

y de

liver

ed a

nd

trans

ferr

ed. A

tota

l of 4

5,66

1,00

0 sh

ares

wer

e di

spos

ed o

f, an

d th

e G

roup

’s is

sued

sha

re c

apita

l dec

reas

ed

to 7

7%. T

he a

mou

nt o

f pro

ceed

s fr

om d

ispo

sal w

as $

1,86

6,47

4 th

ousa

nd, a

nd th

e re

late

d ga

in o

n di

spos

al

was

$1,

254,

633

thou

sand

and

reco

gniz

ed a

s cap

ital s

urpl

us.

- 33

-

157

To s

treng

then

the

cap

ital

stru

ctur

e of

Tig

erai

r Ta

iwan

Co.

, Ltd

., th

e bo

ard

of d

irect

ors

of t

he C

ompa

ny

appr

oved

the

pla

n to

iss

ue o

rdin

ary

shar

es f

or c

ash

at $

25 p

er s

hare

on

Aug

ust

6, 2

020.

The

Com

pany

su

bscr

ibed

for 4

7,22

8 th

ousa

nd sh

ares

in O

ctob

er 2

020

and

26,2

86 th

ousa

nd sh

ares

in N

ovem

ber 2

020.

The

pr

opor

tion

of o

wne

rshi

p of

the

Gro

up in

crea

sed

to 8

1%. B

ecau

se th

e sh

ares

are

sub

scrib

ed a

t a p

erce

ntag

e di

ffer

ent f

rom

its

exis

ting

owne

rshi

p pe

rcen

tage

, the

Com

pany

’s r

etai

ned

earn

ings

dec

reas

ed b

y $1

69,2

72

thou

sand

.

14

. IN

VE

STM

EN

TS

AC

CO

UN

TE

D F

OR

USI

NG

TH

E E

QU

ITY

ME

TH

OD

Dec

embe

r 31

20

20

20

19

In

vest

men

ts in

ass

ocia

tes

$

1,0

79,8

52

$

1,2

08,4

95

Inve

stm

ents

in jo

intly

con

trolle

d en

titie

s

89

0,95

0

1,

015,

298

$

1,9

70,8

02

$

2,2

23,7

93

a.

The

amou

nt o

f inv

estm

ent i

n as

soci

ates

wer

e as

follo

ws:

D

ecem

ber

31

2020

2019

U

nlis

ted

com

pani

es

C

hina

Airc

raft

Serv

ices

$

277,

234

$

46

1,26

3 D

ynas

ty H

olid

ays

5,23

7

10

,004

A

irpor

t Air

Car

go T

erm

inal

(Xia

men

)

47

6,21

9

44

6,16

1 A

irpor

t Air

Car

go S

ervi

ce (X

iam

en)

270,

046

248,

350

East

ern

Uni

ted

Inte

rnat

iona

l Log

istic

s (H

oldi

ngs)

Ltd

.

51

,116

42

,717

$ 1

,079

,852

$ 1

,208

,495

A

t the

end

of t

he re

porti

ng p

erio

d, th

e pr

opor

tion

of o

wne

rshi

p an

d vo

ting

right

s in

ass

ocia

tes

held

by

the

Gro

up w

ere

as fo

llow

s:

Prop

ortio

n of

Ow

ners

hip

and

Vot

ing

Rig

hts

Dec

embe

r 31

N

ame

of A

ssoc

iate

2020

2019

Chi

na A

ircra

ft Se

rvic

es

20

%

20

%

Dyn

asty

Hol

iday

s

20

%

20

%

Airp

ort a

ir C

argo

Ter

min

al (X

iam

en)

28

%

28

%

Airp

ort a

ir C

argo

Ser

vice

(Xia

men

)

28%

28%

Ea

ster

n U

nite

d In

tern

atio

nal L

ogis

tics (

Hol

ding

s) L

td.

35

%

35

%

- 34

-

The

inve

stm

ent i

ncom

e of

ass

ocia

tes a

ccou

nted

for u

sing

the

equi

ty m

etho

d w

as a

s fol

low

s:

20

20

20

19

C

hina

Airc

raft

Serv

ices

$ (1

02,7

58)

$

10

,365

D

ynas

ty H

olid

ays

(4,7

40)

15

Airp

ort a

ir C

argo

Ter

min

al (X

iam

en)

25,5

78

21,5

35

Airp

ort a

ir C

argo

Ser

vice

(Xia

men

)

19

,124

25

,146

Ea

ster

n U

nite

d In

tern

atio

nal L

ogis

tics (

Hol

ding

s) L

td.

13,9

40

3,38

7

$

(4

8,85

6)

$

60

,448

O

ther

com

preh

ensi

ve i

ncom

e of

ass

ocia

tes

acco

unte

d fo

r us

ing

the

equi

ty m

etho

d in

202

0 an

d 20

19

com

pris

ed o

f los

ses i

n th

e am

ount

of $

0.

The

finan

cial

sta

tem

ents

use

d as

a b

asis

of

the

amou

nts

and

rela

ted

info

rmat

ion

on t

he i

nves

tmen

ts

acco

unte

d fo

r usi

ng th

e eq

uity

met

hod

and

the

shar

e of

pro

fit o

r los

s an

d ot

her c

ompr

ehen

sive

inco

me

of th

ose

inve

stm

ents

for t

he y

ears

end

ed D

ecem

ber 3

1, 2

020

and

2019

wer

e al

l ind

epen

dent

ly a

udite

d,

exce

pt t

hose

of

Chi

na A

ircra

ft Se

rvic

es a

nd E

aste

rn U

nite

d In

tern

atio

nal

Logi

stic

s (H

oldi

ng)

Ltd.

H

owev

er, t

he m

anag

emen

t det

erm

ined

that

ther

e w

ould

hav

e be

en n

o si

gnifi

cant

adj

ustm

ents

had

this

inve

stee

’s fi

nanc

ial s

tate

men

ts b

een

inde

pend

ently

aud

ited.

Th

e bo

ard

of d

irect

ors

of th

e C

ompa

ny d

ecid

ed to

sel

l par

t of t

he e

quity

of D

ynas

ty H

olid

ays

to H

.I.S.

Ta

iwan

Co.

, Ltd

. on

Janu

ary

21, 2

019,

and

com

plet

ed th

e tra

nsac

tion

on J

anua

ry 3

1, 2

109.

Afte

r th

e sa

le o

f the

equ

ity, t

he G

roup

’s is

sued

sha

re c

apita

l dec

reas

ed fr

om 5

1% to

20%

. Dyn

asty

Hol

iday

s w

as

clas

sifie

d as

an

asso

ciat

e si

nce

the

Gro

up lo

st c

ontro

l of

the

subs

idia

ry. T

here

fore

, the

rel

evan

t ass

ets

and

liabi

litie

s w

ere

not c

onso

lidat

ed in

the

curr

ent p

erio

d, a

nd o

nly

the

prof

it an

d lo

ss fr

om J

anua

ry 1

, 20

19 t

o Ja

nuar

y 31

, 20

19 w

ere

cons

olid

ated

. Fo

r in

form

atio

n ab

out

the

disp

osal

of

the

subs

idia

ry,

plea

se re

fer t

o N

ote

30.

b.

In

vest

men

ts in

join

tly c

ontro

lled

entit

ies

The

inve

stm

ents

in jo

intly

con

trolle

d en

titie

s wer

e as

follo

ws:

D

ecem

ber

31

2020

2019

Chi

na P

acifi

c C

ater

ing

Serv

ices

$

695,

959

$

80

1,07

1 C

hina

Pac

ific

Laun

dry

Serv

ices

14

9,35

3

16

8,54

7 N

OR

DA

M A

sia

Ltd.

37

,767

37

,813

D

elic

a In

tern

atio

nal C

o., L

td.

7,87

1

7,

867

$

89

0,95

0

$ 1

,015

,298

A

t the

end

of

the

repo

rting

per

iod,

the

prop

ortio

n of

ow

ners

hip

and

votin

g rig

hts

in jo

intly

con

trolle

d en

titie

s hel

d by

the

Gro

up w

ere

as fo

llow

s:

Pr

opor

tion

of O

wne

rshi

p an

d V

otin

g R

ight

s

D

ecem

ber

31

2020

2019

Chi

na P

acifi

c C

ater

ing

Serv

ices

51%

51%

C

hina

Pac

ific

Laun

dry

Serv

ices

55%

55%

N

OR

DA

M A

sia

Ltd.

49%

49%

D

elic

a In

tern

atio

nal C

o., L

td.

51

%

51

%

- 35

-

158

The

Gro

up e

nter

ed i

nto

a jo

int

vent

ure

agre

emen

t w

ith t

he T

aiko

o G

roup

to

inve

st i

n C

hina

Pac

ific

Cat

erin

g Se

rvic

es a

nd C

hina

Pac

ific

Laun

dry

Serv

ices

. Acc

ordi

ng to

the

agre

emen

t, bo

th p

artie

s ha

ve

the

maj

ority

of v

otin

g po

wer

in th

e bo

ard

of d

irect

ors t

o pa

ss a

mot

ion

for v

eto,

and

ther

efor

e th

e G

roup

do

es n

ot h

ave

cont

rol.

To e

nhan

ce th

e G

roup

’s m

aint

enan

ce c

apab

ilitie

s, th

e C

ompa

ny e

stab

lishe

d a

join

t ven

ture

with

the

US

NO

RD

AM

Aer

ospa

ce G

roup

in

Dec

embe

r 20

17,

to p

rovi

de t

hrus

t re

vers

ers

and

com

posi

te r

epai

r se

rvic

es i

n A

sia

unde

r th

e N

OR

DA

M b

rand

. N

OR

DA

M h

as f

iled

for

Cha

pter

11

bank

rupt

cy

reor

gani

zatio

n in

the

USA

on

July

22,

201

8 to

solv

e th

e bu

sine

ss d

ispu

te w

ith it

s coo

pera

tive

partn

er, s

o its

ope

ratio

n w

as n

ot im

pact

ed. A

s a

resu

lt, N

OR

DA

M A

sia

susp

ende

d its

ope

ratio

n fr

om O

ctob

er 5

, 20

18 to

Oct

ober

4, 2

019

and

resu

med

bus

ines

s on

Oct

ober

4, 2

019.

The

Com

pany

incr

ease

d th

e ca

pita

l of

NO

RD

AM

Asi

a by

$35

,525

thou

sand

in N

ovem

ber 2

019.

To

exp

and

the

Gro

up’s

cat

erin

g bu

sine

ss, K

aohs

iung

Cat

erin

g en

tere

d in

to a

join

t ven

ture

agr

eem

ent

with

a J

apan

ese

bran

d co

mpa

ny t

o in

vest

in

Del

ica

Inte

rnat

iona

l C

o, L

td.,

with

the

Jap

anes

e br

and

com

pany

hav

ing

the

right

to

mak

e de

cisi

ons

on o

pera

tions

, and

the

refo

re, t

he G

roup

doe

s no

t ha

ve

cont

rol.

Det

ails

of i

nves

tmen

t inc

ome

attri

buta

ble

to in

vest

men

t in

join

tly c

ontro

lled

entit

ies w

ere

as fo

llow

s:

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

C

hina

Pac

ific

Cat

erin

g Se

rvic

es

$

(136

,459

)

$ 2

56,8

99

Chi

na P

acifi

c La

undr

y Se

rvic

es

(15,

475)

15

,030

N

OR

DA

M A

sia

Ltd.

(4

6)

(70)

D

elic

a In

tern

atio

nal C

o., L

td.

2

(2

)

$ (1

51,9

78)

$

271

,857

O

ther

com

preh

ensi

ve i

ncom

e of

ass

ocia

tes

acco

unte

d fo

r us

ing

the

equi

ty m

etho

d in

202

0 an

d 20

19

com

pris

ed o

f los

ses i

n th

e am

ount

s of $

34,2

71 th

ousa

nd a

nd $

(32,

102)

thou

sand

, res

pect

ivel

y.

The

finan

cial

sta

tem

ents

use

d as

a b

asis

of

the

amou

nts

and

rela

ted

info

rmat

ion

on t

he i

nves

tmen

ts

acco

unte

d fo

r usi

ng th

e eq

uity

met

hod

and

the

shar

e of

pro

fit o

r los

s an

d ot

her c

ompr

ehen

sive

inco

me

of th

ose

inve

stm

ents

for t

he y

ears

end

ed D

ecem

ber 3

1, 2

020

and

2019

wer

e al

l ind

epen

dent

ly a

udite

d,

exce

pt fo

r NO

RD

AM

Asi

a Li

mite

d. H

owev

er, t

he m

anag

emen

t det

erm

ined

that

ther

e w

ould

hav

e be

en

no si

gnifi

cant

adj

ustm

ents

had

this

inve

stee

’s fi

nanc

ial s

tate

men

ts b

een

inde

pend

ently

aud

ited.

Fo

r de

tails

on

serv

ices

, maj

or b

usin

ess

offic

es a

nd th

e co

untry

whe

re th

e ab

ove

asso

ciat

es a

nd jo

intly

co

ntro

lled

entit

ies

are

regi

ster

ed,

refe

r to

Tab

le 6

“N

ames

, Lo

catio

ns,

And

Oth

er I

nfor

mat

ion

of

Inve

stee

s O

ver

Whi

ch t

he C

ompa

ny E

xerc

ises

Sig

nific

ant

Influ

ence

”, a

nd T

able

7 “

Inve

stm

ents

In

Mai

nlan

d C

hina

”, fo

llow

ing

thes

e no

tes t

o th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts.

- 36

-

15.

PRO

PER

TY, P

LA

NT

AN

D E

QU

IPM

EN

T

Free

hold

Lan

d

Bui

ldin

gs

Fl

ight

E

quip

men

t

Equ

ipm

ent

unde

r Fi

nanc

e L

ease

s

Oth

ers

T

otal

Cos

t

Bal

ance

at J

anua

ry 1

, 20

19

$

1,

015,

564

$

13

,993

,585

$ 2

59,6

95,1

30

$

25

,805

,008

$

17,9

17,7

80

$

318

,427

,067

A

dditi

ons

-

20

9,41

3

2,

248,

856

-

86

4,22

3

3,

322,

492

Dis

posa

ls

-

(1,1

30 )

(20,

698,

042 )

(668

,721

)

(3

93,0

58 )

(21,

760,

951 )

R

ecla

ssifi

catio

n

-

1,90

6,07

8

30

,831

,748

(2

5,13

1,81

3 )

(1

,537

,494

)

6,

068,

519

Net

exc

hang

e di

ffere

nce

(13,

065 )

(23,

883 )

-

-

(2,4

58 )

(39,

406 )

Lo

ss o

f con

trol o

f su

bsid

iarie

s

-

-

-

(4

,474

)

(2

,158

)

(6

,632

)

Bal

ance

at D

ecem

ber 3

1,

2019

$

1,00

2,49

9

$

16,0

84,0

63

$

272

,077

,692

$

-

$

16,8

46,8

35

$

306

,011

,089

Acc

umul

ated

dep

reci

atio

n

and

impa

irmen

t

Bal

ance

at J

anua

ry 1

, 20

19

$

-

$

(6

,574

,873

)

$ (1

23,5

07,6

57 )

$

(1

4,63

4,82

2 )

$

(10,

601,

997 )

$

(155

,319

,349

) D

epre

ciat

ion

expe

nse

-

(4

66,9

43 )

(18,

571,

992 )

(741

,852

)

(9

21,2

46 )

(20,

702,

033 )

D

ispo

sals

-

1,

014

14,8

99,5

62

79,8

66

355,

222

15,3

35,6

64

Rec

lass

ifica

tion

-

-

(14,

706,

083 )

15,2

94,6

96

(45,

103 )

543,

510

Net

exc

hang

e di

ffere

nce

-

12

,262

-

-

1,

989

14,2

51

Loss

of c

ontro

l of

subs

idia

ries

-

-

-

2,

112

1,72

7

3,

839

B

alan

ce a

t Dec

embe

r 31,

20

19

$

-

$

(7

,028

,540

)

$ (1

41,8

86,1

70 )

$

-

$

(1

1,20

9,40

8 )

$ (1

60,1

24,1

18 )

B

alan

ce a

t Dec

embe

r 31,

20

19, n

et v

alue

$

1,00

2,49

9

$

9,05

5,52

3

$ 1

30,1

91,5

22

$

-

$

5,

637,

427

$

145

,886

,971

Cos

t

Bal

ance

at J

anua

ry 1

, 20

20

$

1,

002,

499

$

16

,084

,063

$ 2

72,0

77,6

92

$

-

$

16

,846

,835

$ 3

06,0

11,0

89

Add

ition

s

-

48,8

09

653,

519

-

53

5,18

7

1,

237,

515

Dis

posa

ls

(1

8,02

6 )

(3

75,0

83 )

(3,7

24,6

58 )

-

(3

87,8

58 )

(4,5

05,6

25 )

Rec

lass

ifica

tion

-

30

4

13

,000

,582

-

70,0

81

13,0

70,9

67

Net

exc

hang

e di

ffere

nce

(28,

650 )

(52,

458 )

-

-

(5,5

97 )

(86,

705 )

Bal

ance

at D

ecem

ber 3

1,

2020

$

955,

823

$

15

,705

,635

$ 2

82,0

07,1

35

$

-

$

17

,058

,648

$ 3

15,7

27,2

41

A

ccum

ulat

ed d

epre

ciat

ion

an

d im

pairm

ent

B

alan

ce a

t Jan

uary

1,

2020

$

-

$

(7,0

28,5

40 )

$

(141

,886

,170

)

$

-

$

(11,

209,

408 )

$

(160

,124

,118

) D

epre

ciat

ion

expe

nse

-

(4

92,7

34 )

(18,

007,

550 )

-

(9

25,1

38 )

(19,

425,

422 )

D

ispo

sals

-

37

1,93

3

3,

452,

870

-

38

1,03

7

4,

205,

840

Rec

lass

ifica

tion

-

-

1,48

9,15

8

-

1,34

8

1,

490,

506

Net

exc

hang

e di

ffere

nce

-

27

,704

-

-

4,

516

32,2

20

Impa

irmen

t los

ses

-

-

(4

24,5

73 )

-

-

(424

,573

)

Bal

ance

at D

ecem

ber 3

1,

2020

$

-

$

(7,1

21,6

37 )

$

(155

,376

,265

)

$

-

$

(11,

747,

645 )

$

(174

,245

,547

)

Bal

ance

at D

ecem

ber 3

1,

2020

, net

val

ue

$

95

5,82

3

$

8,58

3,99

8

$ 1

26,6

30,8

70

$

-

$

5,

311,

003

$

141

,481

,694

- 37

-

159

The

recl

assi

ficat

ion

mos

tly re

sulte

d fr

om th

e tra

nsfe

r of p

repa

ymen

ts fo

r equ

ipm

ent.

Prop

erty

, pla

nt a

nd e

quip

men

t are

dep

reci

ated

on

a st

raig

ht-li

ne b

asis

ove

r the

est

imat

ed u

sefu

l life

of t

he

asse

t: B

uild

ing

Mai

n bu

ildin

gs

45

-55

year

s O

ther

s

10-2

5 ye

ars

Mac

hine

ry a

nd e

quip

men

t

El

ectro

-mec

hani

cal e

quip

men

t

25 y

ears

O

ther

s

3-13

yea

rs

Off

ice

equi

pmen

t

3-15

yea

rs

Leas

ehol

d im

prov

emen

ts

Bui

ldin

g im

prov

emen

ts

5

year

s O

ther

s

3-5

year

s A

sset

s lea

sed

to o

ther

s

3-5

year

s Fl

ight

equ

ipm

ent a

nd e

quip

men

t und

er fi

nanc

e le

ases

A

irfra

mes

15-2

5 ye

ars

Airc

raft

cabi

ns

7-

20 y

ears

En

gine

s

10-2

0 ye

ars

Hea

vy m

aint

enan

ce o

n ai

rcra

ft

6-8

year

s En

gine

ove

rhau

ls

3-

10 y

ears

La

ndin

g ge

ar o

verh

auls

7-12

yea

rs

Rep

aira

ble

spar

e pa

rts

3-

15 y

ears

Le

ased

airc

raft

impr

ovem

ents

5-

12 y

ears

R

egar

ding

cha

nges

in f

leet

com

posi

tion,

cur

rent

and

for

ecas

ted

mar

ket v

alue

, and

oth

er te

chni

cal f

acto

rs,

the

Com

pany

rec

ogni

zed

impa

irmen

t los

ses

on a

ircra

ft eq

uipm

ent o

f $42

4,57

3 th

ousa

nd in

202

0. T

he fa

ir va

lue

was

det

erm

ined

bas

ed o

n ai

rcra

ft co

nditi

ons a

nd m

arke

t est

imat

es.

Ref

er to

Not

e 34

for t

he c

arry

ing

amou

nts o

f pro

perty

, pla

nt a

nd e

quip

men

t ple

dged

by

the

Gro

up.

Bas

ed o

n th

e pa

rticu

larit

y of

ris

k in

the

avia

tion

indu

stry

, all

of th

e G

roup

’s a

sset

s su

ch a

s ai

rcra

ft, r

eal

esta

te, a

nd m

ovab

le p

rope

rty a

re a

dequ

atel

y in

sure

d to

div

ersi

fy th

e po

tent

ial r

isk

rela

ted

to o

pera

tions

. Th

e G

roup

gen

erat

ed th

e fo

llow

ing

non-

cash

inve

stm

ent a

ctiv

ities

rela

ted

to th

e pu

rcha

se o

f pro

perty

, pla

nt

and

equi

pmen

t in

2020

and

201

9:

Dec

embe

r 31

20

20

20

19

In

crea

se in

pro

perty

, pla

nt a

nd e

quip

men

t

$ 1

,237

,515

$ 3

,322

,492

C

apita

lized

inte

rest

pai

d

-

(6,4

14)

Pu

rcha

se o

f pro

perty

, pla

nt a

nd e

quip

men

t pai

d

$ 1

,237

,515

$ 3

,316

,078

16.

INV

EST

ME

NT

PR

OPE

RT

IES

D

ecem

ber

31

2020

2019

Car

ryin

g am

ount

In

vest

men

t pro

perti

es

$

2,0

74,7

98

$

2,0

75,0

68

- 38

-

The

inve

stm

ent p

rope

rties

hel

d by

the

Gro

up w

ere

land

loca

ted

in N

anka

n an

d bu

ildin

gs in

Tai

pei,

whi

ch

wer

e al

l lea

sed

to o

ther

s. Th

e bu

ildin

gs a

re d

epre

ciat

ed o

n a

stra

ight

-line

bas

is o

ver 5

5 ye

ars.

The

fair

valu

e of

the

inve

stm

ent

prop

ertie

s he

ld b

y th

e G

roup

was

$2,

488,

931

thou

sand

and

$2,

506,

230

thou

sand

as o

f Dec

embe

r 31,

202

0 an

d 20

19, r

espe

ctiv

ely.

In a

dditi

on, m

anag

emen

t ass

esse

d th

at th

ere

was

no

sign

ifica

nt d

iffer

ence

in th

e fa

ir va

lue

as o

f Dec

embe

r 31,

202

0 an

d 20

19. T

he a

bove

fair

valu

e va

luat

ion

was

per

form

ed b

y in

depe

nden

t qu

alifi

ed p

rofe

ssio

nal

valu

ers,

and

the

futu

re i

ncom

e ev

alua

ted

by

man

agem

ent w

as b

ased

on

mar

ket t

rans

actio

ns.

All

of th

e G

roup

’s in

vest

men

t pro

perti

es w

ere

held

und

er fr

eeho

ld in

tere

st.

Cos

t

Acc

umul

ated

Net

Val

ue

Bal

ance

at J

anua

ry 1

, 201

9

$ 2

,082

,390

$

(7,0

45)

$

2,0

75,3

45

Dep

reci

atio

n ex

pens

e

-

(277

)

(2

77)

Bal

ance

at D

ecem

ber 3

1, 2

019

$

2,0

82,3

90

$

(7

,322

)

$ 2

,075

,068

B

alan

ce a

t Jan

uary

1, 2

020

$

2,0

82,3

90

$

(7

,322

)

$ 2

,075

,068

D

epre

ciat

ion

expe

nse

-

(2

70)

(270

)

B

alan

ce a

t Dec

embe

r 31,

202

0

$ 2

,082

,390

$

(7,5

92)

$

2,0

74,7

98

17.

OT

HE

R IN

TA

NG

IBL

E A

SSE

TS

Com

pute

r So

ftw

are

Cos

t

Rel

atio

nshi

p B

etw

een

Clie

nts

A

ccum

ulat

ed

Am

ortiz

atio

n

Net

Val

ue

B

alan

ce a

t Jan

uary

1, 2

019

$

2,2

37,3

82

$

18

6,19

7

$ (

1,21

2,78

3)

$ 1

,210

,796

A

dditi

ons

172,

639

-

-

172,

639

Am

ortiz

atio

n ex

pens

es

-

-

(198

,237

)

(1

98,2

37)

Dis

posa

l of s

ubsi

diar

ies

(3,8

58)

-

1,

357

(2,5

01)

Effe

cts o

f exc

hang

e ra

te c

hang

es

-

-

(5)

(5)

B

alan

ce a

t Dec

embe

r 31,

201

9

$ 2

,406

,163

$

186,

197

$

(1,

409,

668)

$

1,1

82,6

92

B

alan

ce a

t Jan

uary

1, 2

020

$

2,4

06,1

63

$

18

6,19

7

$ (

1,40

9,66

8)

$ 1

,182

,692

A

dditi

ons

130,

461

-

-

130,

461

Rec

lass

ifica

tion

(765

,426

)

-

735,

881

(29,

545)

A

mor

tizat

ion

expe

nses

-

-

(2

06,9

36)

(206

,936

) D

ispo

sal

(7

,554

)

-

7,24

3

(3

11)

Effe

cts o

f exc

hang

e ra

te c

hang

es

-

-

(10)

(10)

Bal

ance

at D

ecem

ber 3

1, 2

020

$

1,7

63,6

44

$

18

6,19

7

$

(873

,490

)

$ 1

,076

,351

Th

e ab

ove

othe

r int

angi

ble

asse

ts a

re a

mor

tized

on

a str

aigh

t-lin

e ba

sis o

ver 2

-16

year

s.

- 39

-

160

18.

OT

HE

R A

SSE

TS

D

ecem

ber

31

2020

2019

C

urre

nt

Te

mpo

rary

pay

men

ts

$

13

6,68

1

$

296,

759

Prep

aym

ents

34

8,55

4

1,

690,

368

Res

trict

ed a

sset

s

11

,065

14

,618

O

ther

s

36

4,87

9

65

3,96

6

$

861,

179

$

2,

655,

711

N

on-c

urre

nt

Pr

epay

men

ts fo

r airc

raft

$

5,

725,

340

$

8,

863,

861

Prep

aym

ents

- lo

ng-te

rm

2,21

6,04

9

2,

819,

575

Ref

unda

ble

depo

sits

1,

138,

943

1,26

1,61

1 R

estri

cted

ass

ets

240,

467

64,2

13

Oth

er fi

nanc

ial a

sset

s

18

,078

19

,103

O

ther

s

14,0

15

142,

700

$

9,

352,

892

$

13

,171

,063

Th

e pr

epay

men

ts f

or a

ircra

ft co

mpr

ised

the

prep

aid

depo

sits

and

cap

italiz

ed in

tere

st f

rom

the

purc

hase

of

ATR

72-6

00, A

321n

eo, A

320n

eo a

nd B

777F

airc

raft.

For

det

ails

on

the

airc

raft

purc

hase

con

tract

s, re

fer t

o N

ote

35.

19

. B

OR

RO

WIN

GS

a.

Sh

ort-t

erm

loan

s

Dec

embe

r 31

20

20

20

19

B

ank

loan

s - u

nsec

ured

$ 1

,932

,000

$

380,

000

In

tere

st ra

tes

0.

92%

-1.2

8%

0.

95%

-1.0

7%

a.

Sh

ort-t

erm

bill

s pay

able

Dec

embe

r 31

20

20

20

19

C

omm

erci

al p

aper

$ 8

,100

,000

$

- Le

ss: U

nam

ortiz

ed d

isco

unt o

n bi

lls p

ayab

le

(11,

118)

-

$ 8

,088

,882

$

-

Ann

ual d

isco

unt r

ate

0.

99%

-1.0

0%

-

- 40

-

b.

Long

-term

bor

row

ings

D

ecem

ber

31

2020

2019

Uns

ecur

ed b

ank

loan

s

$

23,4

70,6

96

$

1,

929,

827

Secu

red

bank

loan

s

39

,584

,540

34

,064

,099

C

omm

erci

al p

aper

Pr

ocee

ds fr

om is

sue

29,4

90,0

00

31,7

30,0

00

Less

: Una

mor

tized

dis

coun

t

22

,532

60

,143

92,5

22,7

04

67,6

63,7

83

Less

: Cur

rent

por

tion

15,2

34,3

74

14,1

48,8

92

$

77

,288

,330

$

53,5

14,8

91

In

tere

st ra

tes

0.

81%

-1.6

3%

0.

55%

-1.7

3%

For

info

rmat

ion

on s

ecur

ed b

ank

loan

s w

hich

wer

e se

cure

d by

bui

ldin

gs, m

achi

nery

equ

ipm

ent

and

fligh

t equ

ipm

ent,

refe

r to

Not

e 34

. B

ank

loan

s (N

ew T

aiw

an d

olla

rs) a

re re

paya

ble

quar

terly

, sem

iann

ually

or i

n lu

mp

sum

upo

n m

atur

ity.

Rel

ated

info

rmat

ion

is su

mm

ariz

ed a

s fol

low

s:

D

ecem

ber

31

2020

2019

Perio

ds

20

09.2

.4-

2032

.6.3

0

2008

.2.2

6-

2030

.4.2

5 Th

e G

roup

has

not

e is

suan

ce f

acili

ties

(NIF

s) o

btai

ned

from

cer

tain

fin

anci

al in

stitu

tions

. The

NIF

s, w

ith v

ario

us m

atur

ities

unt

il M

arch

202

5, w

ere

used

by

the

Gro

up t

o gu

aran

tee

com

mer

cial

pap

ers

issu

ed. A

s of

Dec

embe

r 31

, 202

0 an

d 20

19, t

he c

omm

erci

al p

aper

s w

ere

issu

ed a

t di

scou

nt r

ates

of

1.02

63%

-1.1

629%

and

1.1

300%

-1.3

380%

, res

pect

ivel

y.

In a

ccor

danc

e w

ith t

he “

Reg

ulat

ions

on

Rel

ief

and

Rev

italiz

atio

n M

easu

res

for

Indu

strie

s an

d En

terp

rises

Aff

ecte

d by

Sev

ere

Pneu

mon

ia w

ith N

ovel

Pat

hoge

ns”

endo

rsed

by

the

Min

istry

of

Tran

spor

tatio

n an

d C

omm

unic

atio

ns a

nd th

e “O

pera

tiona

l Gui

des

on R

elie

f Loa

n G

uara

ntee

s for

Aili

ng

Avi

atio

n In

dust

ry A

ffec

ted

by S

ever

e Pn

eum

onia

with

Nov

el P

atho

gens

”, t

he C

ompa

ny a

pplie

d fo

r pr

ojec

t fin

ance

loa

ns f

rom

fin

anci

al i

nstit

utio

ns t

o m

aint

ain

its o

pera

tions

; an

d sp

ecia

l fu

nds,

cred

it gu

aran

tees

alo

ng w

ith s

ubsi

dize

d in

tere

st ra

tes

wer

e pr

ovid

ed b

y th

e go

vern

men

t. Th

e to

tal a

mou

nt o

f th

e lo

ans

is $

24,3

90,0

00 t

hous

and,

whi

ch s

hall

be r

epai

d w

ithin

2 y

ears

fro

m t

he d

ate

of i

nitia

l dr

awdo

wn.

As

of D

ecem

ber

31,

2020

, th

e C

ompa

ny h

ad m

ade

a dr

awdo

wn

in t

he a

mou

nt o

f $2

3,48

0,00

0 th

ousa

nd.

- 41

-

161

20.

BO

ND

S PA

YA

BL

E

Dec

embe

r 31

20

20

20

19

U

nsec

ured

cor

pora

te b

onds

firs

t-tim

e is

sued

in 2

013

$

-

$

2,75

0,00

0 U

nsec

ured

cor

pora

te b

onds

firs

t-tim

e is

sued

in 2

016

2,35

0,00

0

4,

700,

000

Uns

ecur

ed c

orpo

rate

bon

ds se

cond

-tim

e is

sued

in 2

016

2,50

0,00

0

5,

000,

000

Uns

ecur

ed c

orpo

rate

bon

ds fi

rst-t

ime

issu

ed in

201

7

1,

000,

000

2,35

0,00

0 U

nsec

ured

cor

pora

te b

onds

seco

nd-ti

me

issu

ed in

201

7

2,

600,

000

3,50

0,00

0 U

nsec

ured

cor

pora

te b

onds

firs

t-tim

e is

sued

in 2

018

4,50

0,00

0

4,

500,

000

Uns

ecur

ed c

orpo

rate

bon

ds fi

rst-t

ime

issu

ed in

201

9

3,

500,

000

3,50

0,00

0 C

onve

rtibl

e bo

nds -

sixt

h-tim

e is

sued

5,

832,

859

5,75

2,62

5

22,2

82,8

59

32,0

52,6

25

Less

: Cur

rent

por

tion

and

put o

ptio

n of

con

verti

ble

bond

s

11

,982

,859

10

,000

,000

$

10,3

00,0

00

$

22

,052

,625

R

elat

ed is

suan

ce c

ondi

tions

wer

e as

follo

ws:

Cat

egor

y

Peri

od

C

ondi

tions

Rat

e (%

)

Se

ven-

year

priv

ate

unse

cure

d bo

nds -

issu

ed a

t pa

r in

Janu

ary

2013

; rep

ayab

le in

Ja

nuar

y 20

19 a

nd 2

020;

1.8

5% in

tere

st p

.a.,

paya

ble

annu

ally

.

20

13.0

1.17

- 20

20.0

1.17

P

rinci

pal r

epay

able

in

Janu

ary

of 2

019

and

2020

; ind

icat

or ra

te;

paya

ble

annu

ally

.

1.

85

Five

-yea

r uns

ecur

ed b

onds

- is

sued

at p

ar in

M

ay 2

016;

repa

yabl

e in

May

202

0 an

d 20

21;

1.19

% in

tere

st p

.a.,

paya

ble

annu

ally

.

20

16.0

5.26

- 20

21.0

5.26

P

rinci

pal r

epay

able

in M

ay

of 2

020

and

2021

; int

eres

t p.

a. p

ayab

le a

nnua

lly.

1.

19

Five

-yea

r uns

ecur

ed b

onds

- is

sued

at p

ar in

Se

ptem

ber 2

016;

repa

yabl

e in

Sep

tem

ber 2

020

and

2021

; 1.0

8% in

tere

st p

.a.,

paya

ble

annu

ally

.

20

16.0

9.27

- 20

21.0

9.27

P

rinci

pal r

epay

able

in

Sept

embe

r of 2

020

and

2021

; int

eres

t p.a

. pay

able

an

nual

ly.

1.

08

Thre

e-ye

ar p

rivat

e un

secu

red

bond

s - is

sued

at

par i

n M

ay 2

017;

repa

yabl

e on

due

dat

e;

inte

rest

of 1

.2%

p.a

., pa

yabl

e an

nual

ly.

20

17.0

5.19

- 20

20.0

5.19

P

rinci

pal r

epay

able

on

due

date

; ind

icat

or ra

te;

paya

ble

annu

ally

.

1.

20

Seve

n-ye

ar p

rivat

e un

secu

red

bond

s - is

sued

at

par i

n M

ay 2

017;

repa

yabl

e on

due

dat

e;

inte

rest

of 1

.75%

p.a

., pa

yabl

e an

nual

ly.

20

17.0

5.19

- 20

24.0

5.19

P

rinci

pal r

epay

able

on

due

date

; ind

icat

or ra

te;

paya

ble

annu

ally

.

1.

75

Thre

e-ye

ar p

rivat

e un

secu

red

bond

s - is

sued

at

par i

n O

ctob

er 2

017;

repa

yabl

e on

due

dat

e;

inte

rest

of 1

.14%

p.a

., pa

yabl

e an

nual

ly.

20

17.1

0.12

- 20

20.1

0.12

P

rinci

pal r

epay

able

on

due

date

; ind

icat

or ra

te;

paya

ble

annu

ally

.

1.

14

Five

-yea

r priv

ate

unse

cure

d bo

nds -

issu

ed a

t par

in

Oct

ober

201

7; re

paya

ble

in O

ctob

er 2

021

and

2022

; 1.4

5% in

tere

st p

.a.,

paya

ble

annu

ally

.

20

17.1

0.12

- 20

22.1

0.12

P

rinci

pal r

epay

able

in

Oct

ober

of 2

021

and

2022

; ind

icat

or ra

te;

paya

ble

annu

ally

.

1.

45

Five

-yea

r priv

ate

unse

cure

d bo

nds -

issu

ed a

t par

in

Nov

embe

r 201

8; re

paya

ble

in

Nov

embe

r 202

2 an

d 20

23; 1

.32%

inte

rest

p.a

., pa

yabl

e an

nual

ly

20

18.1

1.30

- 20

23.1

1.30

P

rinci

pal r

epay

able

in

Nov

embe

r of 2

022

and

2023

; ind

icat

or ra

te;

paya

ble

annu

ally

1.

32

(Con

tinue

d)

- 42

-

Cat

egor

y

Peri

od

C

ondi

tions

Rat

e (%

)

Fi

ve-y

ear p

rivat

e un

secu

red

bond

s - is

sued

at p

ar

in N

ovem

ber 2

018;

repa

yabl

e in

N

ovem

ber 2

022

and

2023

; 1.4

5% in

tere

st p

.a.,

paya

ble

annu

ally

20

18.1

1.30

- 20

25.1

1.30

P

rinci

pal r

epay

able

in

Nov

embe

r of 2

022

and

2023

; ind

icat

or ra

te;

paya

ble

annu

ally

1.

45

Five

-yea

r priv

ate

unse

cure

d bo

nds -

issu

ed a

t par

in

June

201

9; re

paya

ble

in Ju

ne 2

023

and

2024

; 1.1

0% in

tere

st p

.a.,

paya

ble

annu

ally

20

19.0

6.21

- 20

24.0

6.21

P

rinci

pal r

epay

able

in Ju

ne

of 2

023

and

2024

; in

dica

tor r

ate;

pay

able

an

nual

ly

1.

10

Seve

n-ye

ar p

rivat

e un

secu

red

bond

s - is

sued

at

par i

n Ju

ne 2

019;

repa

yabl

e in

June

202

5 an

d 20

26; 1

.32%

inte

rest

p.a

., pa

yabl

e an

nual

ly

20

19.0

6.21

- 20

26.0

6.21

P

rinci

pal r

epay

able

in Ju

ne

of 2

025

and

2026

; in

dica

tor r

ate;

pay

able

an

nual

ly

1.

32

Five

-yea

r con

verti

ble

bond

s - is

sued

at d

isco

unt

in D

ecem

ber 2

013;

repa

yabl

e in

lum

p su

m

upon

mat

urity

; 1.3

821%

dis

coun

t rat

e p.

a.

20

18.0

1.30

- 20

23.0

1.30

E

xcep

t for

con

verti

ng to

sh

are

capi

tal o

r buy

ing

back

, prin

cipa

l rep

ayab

le

in D

ecem

ber o

f 202

3

-

(Con

clud

ed)

The

Com

pany

issu

ed it

s 20

16 f

irst u

nsec

ured

cor

pora

te b

onds

with

a f

ace

valu

e of

$5,

000,

000

thou

sand

, an

d th

e pu

rcha

sers

of t

he b

onds

incl

uded

Man

darin

Airl

ines

Co.

, Ltd

. and

Sab

re T

rave

l Net

wor

k (T

aiw

an)

Co.

, Ltd

., w

hich

had

a fa

ce v

alue

of $

150,

000

thou

sand

, and

the

amou

nt w

as e

limin

ated

in th

e co

nsol

idat

ed

finan

cial

stat

emen

ts.

The

Com

pany

issu

ed th

e six

th is

sue

of it

s uns

ecur

ed c

onve

rtibl

e bo

nds,

and

the

issu

ance

con

ditio

ns w

ere

as

follo

ws:

a.

The

hold

ers m

ay d

eman

d a

lum

p-su

m p

aym

ent f

or th

e bo

nds u

pon

mat

urity

. b.

Th

e ho

lder

s ca

n re

ques

t tha

t the

Com

pany

repu

rcha

se th

eir b

onds

at f

ace

valu

e on

the

third

ann

iver

sary

of

the

offe

ring

date

. The

hol

ders

can

exe

rcis

e th

e rig

ht to

sell

on Ja

nuar

y 30

, 202

1.

c.

The

Com

pany

may

red

eem

the

bond

s at

fac

e va

lue

betw

een

Apr

il 30

, 201

8 an

d D

ecem

ber

20, 2

022

unde

r cer

tain

con

ditio

ns.

d.

Bet

wee

n Ja

nuar

y 26

, 201

4 an

d D

ecem

ber 1

6, 2

018

(exc

ept f

or th

e pe

riod

betw

een

the

form

er d

ivid

end

date

and

the

dat

e of

the

div

iden

d de

clar

atio

n on

rec

ord)

, ho

lder

s m

ay c

onve

rt th

e bo

nds

to t

he

Com

pany

’s o

rdin

ary

shar

es.

The

initi

al c

onve

rsio

n pr

ice

was

set

at

NT$

13.2

, w

hich

is

subj

ect

to

adju

stm

ent i

f the

re is

a c

apita

l inj

ectio

n by

cas

h, s

hare

div

iden

d di

strib

utio

n, a

nd th

e pr

opor

tion

of c

ash

divi

dend

s pe

r sha

re in

mar

ket p

rice

exce

edin

g 1.

5%. B

ecau

se th

e C

ompa

ny d

istri

bute

d ca

sh d

ivid

ends

on

July

29,

201

9, th

e co

nver

sion

pric

e w

as a

djus

ted

to N

T$12

.6.

The

conv

ertib

le b

onds

con

tain

bot

h lia

bilit

y an

d eq

uity

com

pone

nts.

The

equi

ty c

ompo

nent

was

pre

sent

ed

in e

quity

und

er th

e he

adin

g of

cap

ital s

urpl

us -

optio

ns. T

he e

ffec

tive

inte

rest

rate

of t

he li

abili

ty c

ompo

nent

w

as 1

.382

1% p

er a

nnum

on

initi

al re

cogn

ition

.

Proc

eeds

from

issu

ance

$ 6

,012

,000

Eq

uity

com

pone

nt

(409

,978

)

Li

abili

ty c

ompo

nent

at t

he d

ate

of is

suan

ce

$

5,6

02,0

22

- 43

-

162

The

seve

nth

issu

e of

the

Com

pany

’s u

nsec

ured

con

verti

ble

bond

s w

as re

solv

ed b

y th

e bo

ard

of d

irect

ors

of

the

Com

pany

on

Aug

ust

7, 2

019.

The

cum

ulat

ive

face

val

ue o

f th

e bo

nds

shal

l no

t ex

ceed

$3,

000,

000

thou

sand

. The

bon

ds a

re i

ssue

d at

100

%-1

00.5

% o

f th

e fa

ce v

alue

, and

the

iss

uanc

e pe

riod

is 5

yea

rs.

Dur

ing

the

perio

d of

pub

lic o

ffer

ings

, the

stoc

k m

arke

t and

the

dom

estic

cap

ital m

arke

t wer

e vo

latil

e du

e to

C

oron

aviru

s Pne

umon

ia a

nd th

e ch

ange

s in

the

shar

e pr

ice

of th

e C

ompa

ny w

ere

unfa

vora

ble

to th

e se

vent

h is

sue

of th

e C

ompa

ny’s

uns

ecur

ed c

onve

rtibl

e bo

nds.

Afte

r com

preh

ensi

ve c

onsi

dera

tion,

the

issu

ance

was

su

spen

ded

with

the

perm

issi

on o

f th

e co

mpe

tent

aut

horit

y ba

sed

on th

e be

st in

tere

st o

f th

e C

ompa

ny a

nd

the

shar

ehol

ders

’ equ

ity.

The

seve

nth

issu

e of

the

Com

pany

’s u

nsec

ured

con

verti

ble

bond

s w

as re

solv

ed b

y th

e bo

ard

of d

irect

ors

of

the

Com

pany

on

Aug

ust

6, 2

020.

The

cum

ulat

ive

face

val

ue o

f th

e bo

nds

shal

l no

t ex

ceed

$6,

000,

000

thou

sand

. The

bon

ds a

re is

sued

at 1

00%

-100

.5%

of t

he fa

ce v

alue

, and

the

issu

ance

per

iod

is 5

yea

rs.

21.

LE

ASI

NG

a.

R

ight

-of-

use

asse

ts

D

ecem

ber

31

2020

2019

C

arry

ing

amou

nts

Land

$

7,81

3,33

5

$

8,15

3,38

2 B

uild

ings

1,

394,

386

824,

955

Flig

ht e

quip

men

t

50

,644

,652

62

,052

,701

O

ther

equ

ipm

ent

9,16

4

2,

579

$

59

,861

,537

$

71,0

33,6

17

Fo

r Y

ear

End

ed D

ecem

ber

31

2020

2019

A

dditi

ons t

o rig

ht-o

f-use

ass

ets

$

2,

463,

869

$

5,

863,

625

D

epre

ciat

ion

for r

ight

-of-

use

asse

ts

La

nd

$

36

2,38

6

$

376,

425

Bui

ldin

gs

335,

553

798,

933

Flig

ht e

quip

men

t

11

,041

,881

10

,721

,575

O

ther

equ

ipm

ent

1,53

5

2,

157

$

11

,741

,555

$

11,8

99,0

90

b.

Leas

e lia

bilit

ies

Dec

embe

r 31

20

20

20

19

C

arry

ing

amou

nts

C

urre

nt

$

2,

525,

957

$

2,

340,

873

Non

-cur

rent

$

13,2

79,7

92

$

15

,801

,724

- 44

-

Ran

ge o

f dis

coun

t rat

e fo

r lea

se li

abili

ties (

incl

ude

US

leas

e he

dgin

g in

stru

men

ts):

Dec

embe

r 31

20

20

20

19

La

nd

1.

09%

-1.8

0%

1.

09%

-1.6

5%

Bui

ldin

gs

0%

-3.5

6%

0%

-3.5

6%

Flig

ht e

quip

men

t

0.68

%-3

.34%

2.49

%-3

.34%

O

ther

equ

ipm

ent

1.

06%

-1.5

0%

1.

06%

-1.5

0%

c.

Fi

nanc

ial l

iabi

litie

s und

er h

edge

acc

ount

ing

The

Gro

up s

peci

fies

a pa

rt of

US

leas

e co

ntra

ct a

s he

dgin

g in

stru

men

ts t

o av

oid

exch

ange

rat

e flu

ctua

tions

in p

asse

nger

reve

nue,

and

app

lies t

he a

ccou

ntin

g tre

atm

ent o

f cas

h flo

w h

edgi

ng. T

he le

ase

info

rmat

ion

is a

s fol

low

s:

Mat

urity

Dat

e

Subj

ect

C

arry

ing

Val

ue

Dec

embe

r 31,

202

0 2

022.

2.9-

2028

.5.1

5 F

inan

cial

liab

ilitie

s for

hed

ging

- cu

rren

t

$

8,12

0,44

5

Fin

anci

al li

abili

ties f

or h

edgi

ng -

non-

curr

ent

32,4

55,3

33

Dec

embe

r 31,

201

9 2

021.

4.15

-202

8.5.

15

Fin

anci

al li

abili

ties f

or h

edgi

ng -

curr

ent

8,57

7,48

2

Fin

anci

al li

abili

ties f

or h

edgi

ng -

non-

curr

ent

42,4

20,2

05

Influ

ence

of c

ompr

ehen

sive

inco

me

Rec

ogni

zed

in

Oth

er

Com

preh

ensi

ve

Inco

me

R

ecla

ssifi

ed to

In

com

e

For t

he y

ear e

nded

Dec

embe

r 31,

202

0

$ 2

,099

,550

$

352,

674

For t

he y

ear e

nded

Dec

embe

r 31,

201

9

1,

457,

058

(24,

029)

d.

As

less

ees,

Chi

na A

irlin

es,

Man

darin

Airl

ines

and

Tig

erai

r Ta

iwan

lea

sed

ten

777-

300E

R p

lane

s, fif

teen

A33

0-30

0 pl

anes

, fift

een

737-

800

plan

es, t

en A

320-

200

plan

es, f

ive

ERJ1

90 p

lane

s an

d th

ree

AR

T72-

600

plan

es fo

r ope

ratio

n, le

ase

perio

d ar

e 6

to 1

2 ye

ars

from

Feb

ruar

y 20

06 to

May

202

8. T

he

rent

al p

ricin

g m

etho

d is

par

tly a

fix

ed a

mou

nt o

f fu

nds,

and

som

e of

them

are

flo

atin

g re

nts,

float

ing

rent

s ar

e ac

cord

ing

to b

ench

mar

k ra

tio, t

he re

nt is

revi

sed

ever

y ha

lf ye

ar. W

hen

the

leas

e ex

pire

s, th

e le

ase

agre

emen

ts h

ave

no p

urch

ase

right

s. Th

e in

form

atio

n of

refu

ndab

le d

epos

its a

nd is

suan

ce o

f let

ter o

f cre

dit d

ue to

rent

al o

f pla

nes:

D

ecem

ber

31

2020

2019

Ref

unda

ble

depo

sits

$

725,

135

$

73

7,89

5 C

redi

t gua

rant

ees

1,

756,

656

1,71

7,95

3

- 45

-

163

CA

L Pa

rk,

and

Taoy

uan

Inte

rnat

iona

l A

irpor

t Se

rvic

e si

gned

a B

OT

cont

ract

with

a l

and

leas

e ag

reem

ent,

for t

he d

etai

ls fo

r the

leas

e ag

reem

ent,

plea

se re

fer t

o N

ote

35. T

he le

ase

incl

udes

an

optio

n to

ext

end

the

leas

e, a

s it i

s not

pos

sibl

e to

ext

end

the

leas

e, th

e am

ount

of t

he le

ase

rela

ted

to th

e pe

riod

cove

red

by th

e op

tion

is n

ot in

clud

ed in

the

leas

e lia

bilit

y. If

the

amou

nt o

f the

ext

ende

d le

ase

perio

d is

in

clud

ed in

the

leas

e lia

bilit

y, th

e le

ase

liabi

lity

will

incr

ease

by

$885

,657

thou

sand

on

Dec

embe

r 31

, 20

20.

Taiw

an A

ir C

argo

Ter

min

al C

o. a

nd C

AA

sig

ned

a B

OT

cont

ract

with

a l

and

leas

e ag

reem

ent.

For

deta

ils, p

leas

e re

fer t

o N

ote

35.

e.

In

Sep

tem

ber 2

019,

the

Com

pany

sig

ned

a re

ntal

con

tract

for s

ix A

321n

eo w

ith A

ir Le

ase

Cor

pora

tion,

w

hich

is e

xpec

ted

to b

e in

trodu

ced

betw

een

2021

and

202

2.

In O

ctob

er 2

019,

the

Com

pany

sig

ned

a re

ntal

let

ter

of i

nten

t fo

r ei

ght

A32

1neo

with

CA

LC L

ease

C

orpo

ratio

n, w

hich

is e

xpec

ted

to b

e in

trodu

ced

in 2

022.

In

Feb

ruar

y 20

20, T

iger

air

Taiw

an C

o., L

td. s

igne

d a

rent

al l

ette

r of

int

ent

for

eigh

t A

321n

eo w

ith

ICB

C L

ease

Cor

pora

tion,

whi

ch is

exp

ecte

d to

be

intro

duce

d in

202

1.

The

Com

pany

als

o si

gned

rela

ted

airc

raft

purc

hase

agr

eem

ent,

plea

se re

fer t

o no

te 3

5 fo

r det

ails

.

f. In

ord

er t

o re

vita

lize

asse

ts a

nd s

treng

then

the

finan

cial

stru

ctur

e, t

he C

ompa

ny s

old

five

of it

s ow

n A

330-

300

airc

raft

to A

ltava

ir L.

P. i

n Se

ptem

ber

2019

thr

ough

sal

e an

d le

aseb

ack

arra

ngem

ent

for

$4,9

05,6

60 th

ousa

nd. T

he le

ase

term

was

5 to

6 y

ears

and

a lo

ss o

f $1

03,7

75 th

ousa

nd w

as in

curr

ed.

The

leas

e ag

reem

ent h

ad n

o te

rms

for

leas

e re

new

al o

r of

ftake

rig

hts.

The

annu

al le

ase

paym

ents

for

ea

ch a

ircra

ft ar

e fr

om U

S$5,

389

thou

sand

to U

S$5,

437

thou

sand

.

g.

Oth

er le

ase

info

rmat

ion

The

Gro

up u

ses o

pera

ting

leas

e ag

reem

ent f

or in

vest

men

t pro

perti

es, r

efer

to N

ote

16.

F

or th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Shor

t-ter

m a

nd lo

w p

rice

leas

e pa

ymen

t

$

41,5

68

$

52

,675

To

tal o

f lea

se c

ash

outfl

ow

$

(12

,410

,357

)

$ (

13,8

84,3

67)

The

Gro

up c

hoos

es to

wai

ve th

e re

cogn

ition

of t

he c

ontra

ct p

rovi

sion

s for

the

shor

t-ter

m le

ases

and

low

pr

ice

leas

e, a

nd d

oes n

ot re

cogn

ize

the

rela

ted

right

-of-u

se a

sset

s and

leas

e lia

bilit

ies f

or su

ch le

ase.

22.

OT

HE

R P

AY

AB

LE

S

Dec

embe

r 31

20

20

20

19

Fu

el c

osts

$

1,

853,

717

$

3,

723,

213

Gro

und

serv

ice

expe

nses

95

6,95

6

1,

262,

878

Rep

air e

xpen

ses

366,

589

1,20

8,87

5 In

tere

st e

xpen

se

120,

550

219,

660

Shor

t-ter

m e

mpl

oyee

ben

efits

1,

948,

982

2,04

0,71

8 Te

rmin

al su

rcha

rges

42

0,19

4

1,

122,

532

Com

mis

sion

exp

ense

s

18

4,36

3

50

9,52

0 O

ther

s

2,

454,

906

3,10

0,57

6

$

8,30

6,25

7

$

13,1

87,9

72

- 46

-

23.

CO

NT

RA

CT

LIA

BIL

ITIE

S/D

EFE

RR

ED

RE

VE

NU

E

D

ecem

ber

31

2020

2019

Con

trac

t L

iabi

litie

s

Con

trac

t L

iabi

litie

s

Freq

uent

flye

r pro

gram

s

$

2,67

1,20

3

$

2,89

5,53

5 A

dvan

ce ti

cket

sale

s

2,

659,

093

20,4

01,5

49

Oth

ers

168

-

$

5,33

0,46

4

$

23,2

97,0

84

C

urre

nt

$

3,

569,

360

$

21

,060

,773

N

on-c

urre

nt

1,76

1,10

4

2,

236,

311

$

5,

330,

464

$

23

,297

,084

24

. PR

OV

ISIO

NS

D

ecem

ber

31

2020

2019

Ope

ratin

g le

ases

- ai

rcra

ft

$

14,5

34,2

86

$

10

,371

,857

Cur

rent

$

164,

800

$

36

0,39

3 N

on-c

urre

nt

14,3

69,4

86

10,0

11,4

64

$

14

,534

,286

$

10,3

71,8

57

Air

craf

t Lea

se

Con

trac

t

Bal

ance

at J

anua

ry 1

, 201

9

$

8,

794,

539

Add

ition

al p

rovi

sion

s rec

ogni

zed

4,

608,

924

Usa

ge

(2

,799

,314

) Ef

fect

of e

xcha

nge

rate

cha

nges

(232

,292

)

Bal

ance

at D

ecem

ber 3

1, 2

019

$

10,3

71,8

57

B

alan

ce a

t Jan

uary

1, 2

020

$

10,3

71,8

57

Add

ition

al p

rovi

sion

s rec

ogni

zed

6,

075,

077

Usa

ge

(1

,308

,170

) Ef

fect

of e

xcha

nge

rate

cha

nges

(604

,478

)

Bal

ance

at D

ecem

ber 3

1, 2

020

$

14,5

34,2

86

The

Gro

up le

ased

flig

ht e

quip

men

t und

er o

pera

ting

leas

e ag

reem

ents

. Und

er th

e co

ntra

cts,

whe

n th

e le

ases

ex

pire

and

the

equi

pmen

t is

retu

rned

to th

e le

ssor

, the

flig

ht e

quip

men

t has

to b

e re

paire

d ac

cord

ing

to th

e ex

pect

ed y

ears

of

use,

num

ber

of f

light

hou

rs, f

light

cyc

les

and

the

num

ber

of e

ngin

e re

volu

tions

. The

G

roup

had

exi

stin

g ob

ligat

ions

to

reco

gniz

e pr

ovis

ions

whe

n si

gnin

g a

leas

e or

dur

ing

the

leas

e te

rm.

Tige

rair

Taiw

an C

o., L

td. a

lso

leas

ed fl

ight

equ

ipm

ent u

nder

ope

ratin

g le

ase

agre

emen

ts. I

n ac

cord

ance

to

the

cont

ract

, Ti

gera

ir m

ust

pay

mai

nten

ance

res

erve

s m

onth

ly a

ccor

ding

to

the

actu

al n

umbe

r of

flig

ht

hour

s.

- 47

-

164

25.

RE

TIR

EM

EN

T B

EN

EFI

T P

LA

NS

a.

Def

ined

con

tribu

tion

plan

s Th

e G

roup

ado

pted

a p

ensi

on p

lan

unde

r th

e La

bor

Pens

ion

Act

(LP

A),

whi

ch i

s a

stat

e-m

anag

ed

defin

ed c

ontri

butio

n pl

an.

Und

er t

he L

PA,

an e

ntity

mak

es m

onth

ly c

ontri

butio

ns t

o em

ploy

ees’

in

divi

dual

pen

sion

acc

ount

s at 6

% o

f mon

thly

sala

ries a

nd w

ages

. Em

ploy

ees

base

d in

the

Uni

ted

Stat

es a

nd J

apan

of

Chi

na A

irlin

es C

o.,

Ltd.

and

sub

sidi

arie

s ar

e m

embe

rs o

f th

e U

nite

d st

ates

and

Jap

an g

over

nmen

t re

tirem

ent

bene

fit p

lans

. Su

bsid

iarie

s sh

ould

ap

prop

riate

a s

peci

fic p

ortio

n to

retir

emen

t ben

efit

plan

s. Th

e ob

ligat

ion

to th

e go

vern

men

t ret

irem

ent

bene

fit p

lans

of C

hina

Airl

ines

Co.

, Ltd

. and

subs

idia

ries i

s to

appr

opria

te a

spec

ific

porti

on a

mou

nt.

b.

D

efin

ed b

enef

it pl

ans

The

defin

ed b

enef

it pl

an a

dopt

ed b

y th

e C

ompa

ny a

nd in

acc

orda

nce

with

the

Labo

r Sta

ndar

ds L

aw is

op

erat

ed b

y th

e go

vern

men

t. Pe

nsio

n be

nefit

s ar

e ca

lcul

ated

on

the

basi

s of

the

leng

th o

f se

rvic

e an

d av

erag

e m

onth

ly s

alar

ies

of th

e si

x m

onth

s be

fore

retir

emen

t. Th

e C

ompa

ny a

nd s

ubsi

diar

y co

ntrib

ute

amou

nts

equa

l to

2%-1

5% o

f to

tal m

onth

ly s

alar

ies

and

wag

es to

a p

ensi

on f

und

adm

inis

tere

d by

the

pens

ion

fund

mon

itorin

g co

mm

ittee

. Pen

sion

con

tribu

tions

are

dep

osite

d in

the

Ban

k of

Tai

wan

in th

e co

mm

ittee

’s n

ame.

Bef

ore

the

end

of e

ach

year

, the

Gro

up a

sses

ses

the

bala

nce

in th

e pe

nsio

n fu

nd. I

f th

e am

ount

of

the

bala

nce

in th

e pe

nsio

n fu

nd is

inad

equa

te to

pay

ret

irem

ent b

enef

its f

or e

mpl

oyee

s w

ho c

onfo

rm to

retir

emen

t req

uire

men

ts in

the

next

yea

r, th

e G

roup

is re

quire

d to

fund

the

diff

eren

ce in

on

e ap

prop

riatio

n th

at s

houl

d be

mad

e be

fore

the

end

of M

arch

of

the

next

yea

r. Th

e pe

nsio

n fu

nd is

m

anag

ed b

y th

e B

urea

u of

Lab

or F

unds

, Min

istry

of

Labo

r (th

e “B

urea

u”);

the

Gro

up h

as n

o rig

ht to

in

fluen

ce th

e in

vest

men

t pol

icy

and

stra

tegy

. Th

e am

ount

s inc

lude

d in

the

cons

olid

ated

bal

ance

shee

ts in

resp

ect o

f the

Gro

up’s

def

ined

ben

efit

plan

s w

ere

as fo

llow

s:

Dec

embe

r 31

20

20

20

19

Pr

esen

t val

ue o

f def

ined

ben

efit

oblig

atio

n

$

18,7

93,5

09

$

18

,457

,304

Fa

ir va

lue

of p

lan

asse

ts

(9,0

55,7

68)

(9,0

22,2

69)

D

efic

it (n

et d

efin

ed b

enef

it lia

bilit

ies)

$

9,73

7,74

1

$

9,43

5,03

5 M

ovem

ents

in n

et d

efin

ed b

enef

it lia

bilit

ies (

asse

ts) w

ere

as fo

llow

s:

Pres

ent V

alue

of

the

Def

ined

B

enef

it O

blig

atio

n

Fair

Val

ue o

f th

e Pl

an A

sset

s

Net

Def

ined

B

enef

it L

iabi

litie

s (A

sset

s)

Bal

ance

at J

anua

ry 1

, 201

9

$

17,4

64,8

56

$

(8

,661

,474

)

$

8,80

3,38

2 C

urre

nt se

rvic

e co

st

1,

321,

600

-

1,

321,

600

Net

inte

rest

exp

ense

(inc

ome)

16

1,80

8

(8

6,23

4)

75

,574

R

ecog

nize

d in

pro

fit o

r los

s

1,

483,

408

(86,

234)

1,39

7,17

4 (C

ontin

ued)

- 48

-

Pres

ent V

alue

of

the

Def

ined

B

enef

it O

blig

atio

n

Fair

Val

ue o

f th

e Pl

an A

sset

s

Net

Def

ined

B

enef

it L

iabi

litie

s (A

sset

s)

Rem

easu

rem

ent

R

etur

n on

pla

n as

sets

(exc

ludi

ng a

mou

nts

incl

uded

in n

et in

tere

st)

$

-

$

(3

08,2

23)

$

(3

08,2

23)

Act

uaria

l (ga

in) l

oss -

cha

nges

in

dem

ogra

phic

ass

umpt

ions

15

,959

-

15,9

59

Act

uaria

l (ga

in) l

oss -

cha

nges

in fi

nanc

ial

assu

mpt

ions

44

0,37

4

-

440,

374

Act

uaria

l (ga

in) l

oss -

exp

erie

nce

adju

stm

ents

63

3,68

3

-

633,

683

Rec

ogni

zed

in o

ther

com

preh

ensi

ve in

com

e

1,

090,

016

(308

,223

)

78

1,79

3 C

ontri

butio

ns fr

om th

e em

ploy

er

-

(1

,418

,970

)

(1

,418

,970

) B

enef

its p

aid

(1,4

52,6

32)

1,45

2,63

2

-

Oth

ers

(128

,344

)

-

(128

,344

) B

alan

ce a

t Dec

embe

r 31,

201

9

18

,457

,304

(9

,022

,269

)

9,

435,

035

Cur

rent

serv

ice

cost

1,32

3,03

6

-

1,32

3,03

6 N

et in

tere

st e

xpen

se (i

ncom

e)

126,

390

(63,

554)

62,8

36

Rec

ogni

zed

in p

rofit

or l

oss

1,44

9,42

6

(6

3,55

4)

1,

385,

872

Rem

easu

rem

ent

R

etur

n on

pla

n as

sets

(exc

ludi

ng a

mou

nts

incl

uded

in n

et in

tere

st)

-

(3

03,4

07)

(303

,407

) A

ctua

rial (

gain

) los

s - c

hang

es in

de

mog

raph

ic a

ssum

ptio

ns

9,77

0

-

9,77

0 A

ctua

rial (

gain

) los

s - c

hang

es in

fina

ncia

l as

sum

ptio

ns

658,

370

-

65

8,37

0 A

ctua

rial (

gain

) los

s - e

xper

ienc

e ad

just

men

ts

34,4

17

-

34

,417

R

ecog

nize

d in

oth

er c

ompr

ehen

sive

inco

me

702,

557

(303

,407

)

39

9,15

0 C

ontri

butio

ns fr

om th

e em

ploy

er

-

(1

,304

,769

)

(1

,304

,769

) B

enef

its p

aid

(1,6

38,2

30)

1,63

8,23

0

-

Oth

ers

(177

,547

)

-

(177

,547

)

B

alan

ce a

t Dec

embe

r 31,

202

0

$

18,7

93,5

09

$

(9

,055

,768

)

$

9,73

7,74

1 (C

oncl

uded

) Th

roug

h th

e de

fined

ben

efit

plan

s un

der

the

Labo

r St

anda

rds

Law

, th

e G

roup

is

expo

sed

to t

he

follo

win

g ris

ks:

1)

Inve

stm

ent

risk:

The

pla

n as

sets

are

inv

este

d in

dom

estic

and

for

eign

equ

ity a

nd d

ebt

secu

ritie

s, ba

nk d

epos

its,

etc.

The

inv

estm

ent

is c

ondu

cted

at

the

disc

retio

n of

the

Bur

eau

or u

nder

the

m

anda

ted

man

agem

ent.

How

ever

, in

acco

rdan

ce w

ith re

leva

nt re

gula

tions

, the

retu

rn g

ener

ated

by

plan

ass

ets s

houl

d no

t be

belo

w th

e in

tere

st ra

te fo

r a 2

-yea

r tim

e de

posi

t with

loca

l ban

ks.

2)

Inte

rest

risk

: A d

ecre

ase

in th

e go

vern

men

t bon

d in

tere

st ra

te w

ill in

crea

se th

e pr

esen

t val

ue o

f the

de

fined

ben

efit

oblig

atio

n; h

owev

er, t

his

will

be

parti

ally

off

set b

y an

incr

ease

in th

e re

turn

on

the

plan

’s d

ebt i

nves

tmen

ts.

3)

Sala

ry r

isk:

The

pre

sent

val

ue o

f th

e de

fined

ben

efit

oblig

atio

n is

cal

cula

ted

by r

efer

ence

to

the

futu

re s

alar

ies

of p

lan

parti

cipa

nts.

As

such

, an

incr

ease

in th

e sa

lary

of

the

plan

par

ticip

ants

will

in

crea

se th

e pr

esen

t val

ue o

f the

def

ined

ben

efit

oblig

atio

n.

- 49

-

165

The

actu

aria

l va

luat

ions

of

the

pres

ent

valu

e of

the

def

ined

ben

efit

oblig

atio

n w

ere

carr

ied

out

by

qual

ified

act

uarie

s. Th

e si

gnifi

cant

ass

umpt

ions

use

d fo

r the

pur

pose

s of t

he a

ctua

rial v

alua

tions

wer

e as

fo

llow

s:

D

ecem

ber

31

2020

2019

Dis

coun

t rat

e(s)

0.32

%-0

.80%

0.63

%-1

.10%

Ex

pect

ed ra

te(s

) of s

alar

y in

crea

se

1.

00%

-2.5

0%

1.

00%

-2.5

0%

If po

ssib

le r

easo

nabl

e ch

ange

in e

ach

of th

e si

gnifi

cant

act

uaria

l ass

umpt

ions

will

occ

ur a

nd a

ll ot

her

assu

mpt

ions

will

rem

ain

cons

tant

, the

pre

sent

val

ue o

f th

e de

fined

ben

efit

oblig

atio

n w

ould

inc

reas

e (d

ecre

ase)

as f

ollo

ws:

Dec

embe

r 31

20

20

20

19

D

isco

unt r

ate(

s)

0.25

%/0

.5%

incr

ease

$

(438

,527

)

$

(939

,308

) 0.

25%

/0.5

% d

ecre

ase

457,

422

1,00

0,77

1 Ex

pect

ed ra

te(s

) of s

alar

y in

crea

se

0.5%

incr

ease

83

0,32

9

96

9,32

4 0.

5% d

ecre

ase

(772

,927

)

(9

27,1

80)

The

sens

itivi

ty a

naly

sis

pres

ente

d ab

ove

may

not

be

repr

esen

tativ

e of

the

actu

al c

hang

e in

the

pres

ent

valu

e of

the

defin

ed b

enef

it ob

ligat

ion

as it

is u

nlik

ely

that

the

chan

ge in

ass

umpt

ions

wou

ld o

ccur

in

isol

atio

n of

one

ano

ther

as s

ome

of th

e as

sum

ptio

ns m

ay b

e co

rrel

ated

.

D

ecem

ber

31

2020

2019

The

expe

cted

con

tribu

tions

to th

e pl

an fo

r the

nex

t yea

r

$ 9

16,6

27

$

930

,963

The

aver

age

dura

tion

of th

e de

fined

ben

efit

oblig

atio

n

8-11

yea

rs

8-

11 y

ears

26.

EQ

UIT

Y

a.

Shar

e ca

pita

l O

rdin

ary

shar

es

Dec

embe

r 31

20

20

20

19

N

umbe

rs o

f aut

horiz

ed sh

ares

(in

thou

sand

s)

7,00

0,00

0

7,

000,

000

Am

ount

of a

utho

rized

shar

es

$

70

,000

,000

$

70,0

00,0

00

Am

ount

of i

ssue

d sh

ares

$

54,2

09,8

46

$

54

,209

,846

- 50

-

b.

Cap

ital s

urpl

us

D

ecem

ber

31

2020

2019

Issu

ance

of c

onve

rtibl

e bo

nds i

n ex

cess

of p

ar v

alue

and

co

nver

sion

pre

miu

m

$

14

6,35

1

$

315,

114

Div

iden

d di

strib

uted

to su

bsid

iarie

s

-

3,90

9 R

etire

men

t of t

reas

ury

shar

es

33,5

13

33,5

13

Expi

red

empl

oyee

shar

e op

tions

11

,747

11

,747

Lo

ng-te

rm in

vest

men

ts

119,

134

118,

962

Bon

ds p

ayab

le e

quity

com

pone

nt

409,

978

409,

978

Diff

eren

ce in

sale

pric

e of

shar

es o

f sub

sidi

arie

s and

boo

k va

lue

-

1,12

9,08

0 O

ther

s

46

6,60

4

46

6,60

4

$ 1

,187

,327

$ 2

,488

,907

Th

e ca

pita

l su

rplu

s fr

om s

hare

s is

sued

in

exce

ss o

f pa

r (in

clud

ing

addi

tiona

l pa

id-in

cap

ital

from

is

suan

ce o

f ord

inar

y sh

ares

and

trea

sury

sha

re tr

ansa

ctio

ns) a

nd th

e di

ffer

ence

in s

ale

pric

e of

sha

res

of

subs

idia

ries

and

book

val

ue m

ay b

e us

ed t

o of

fset

def

icits

; in

add

ition

, w

hen

the

Com

pany

has

no

defic

it, su

ch c

apita

l sur

plus

may

be

dist

ribut

ed a

s cas

h di

vide

nds

or tr

ansf

erre

d to

cap

ital (

but l

imite

d to

a

certa

in p

erce

ntag

e of

the

Com

pany

’s p

aid-

in c

apita

l on

year

ly b

asis

). Th

e ca

pita

l sur

plus

from

long

-term

inve

stm

ents

, em

ploy

ee s

hare

opt

ions

exp

ired,

div

iden

ds d

istri

bute

d to

sub

sidi

arie

s an

d re

tirem

ent

of t

reas

ury

shar

es m

ay n

ot b

e us

ed f

or a

ny p

urpo

se.

Besi

des,

capi

tal

surp

lus

from

con

vers

ion

of e

mpl

oyee

sha

res

and

conv

ertib

le b

onds

pay

able

may

not

be

used

for

any

pu

rpos

e.

c.

A

ppro

pria

tion

of e

arni

ngs a

nd d

ivid

end

polic

y U

nder

the

div

iden

d po

licy

as s

et f

orth

in

the

Com

pany

’s A

rticl

es o

f In

corp

orat

ion

(the

“Arti

cles

”),

whe

re t

he C

ompa

ny m

ade

a pr

ofit

in a

fis

cal

year

, the

pro

fit s

hall

be f

irst

utili

zed

for

payi

ng t

axes

, of

fset

ting

loss

es o

f pr

evio

us y

ears

, set

ting

asid

e as

lega

l res

erve

10%

of

the

rem

aini

ng p

rofit

, set

ting

asid

e or

reve

rsin

g a

spec

ial r

eser

ve in

acc

orda

nce

with

the

law

s and

regu

latio

ns, a

nd th

en a

ny re

mai

ning

pr

ofit

toge

ther

with

any

und

istri

bute

d re

tain

ed e

arni

ngs

shal

l be

use

d by

the

Com

pany

’s b

oard

of

dire

ctor

s as

the

basi

s fo

r pr

opos

ing

a di

strib

utio

n pl

an, w

hich

is to

dis

tribu

te d

ivid

ends

and

bon

us n

o le

ss t

han

50%

of

the

rem

aini

ng p

rofit

and

und

istri

bute

d re

tain

ed e

arni

ngs.

The

divi

dend

s an

d bo

nus

men

tione

d ab

ove

can

be d

istri

bute

d in

the

form

of n

ew sh

ares

or c

ash,

and

the

cash

div

iden

ds sh

ould

be

no le

ss th

an 3

0% o

f the

tota

l div

iden

ds.

Und

er th

e C

ompa

ny A

ct, i

f sur

plus

ear

ning

s ar

e di

strib

uted

in th

e fo

rm o

f new

sha

res,

the

dist

ribut

ion

of s

hare

s sh

all b

e ap

prov

ed in

the

mee

ting

of th

e bo

ard

of d

irect

ors;

if s

uch

earn

ings

are

dis

tribu

ted

in

the

form

of

cash

, the

cas

h di

strib

utio

n sh

all

be a

utho

rized

afte

r a

reso

lutio

n ha

s be

en a

dopt

ed b

y a

maj

ority

vot

e at

a m

eetin

g of

the

boa

rd o

f di

rect

ors

atte

nded

by

two-

third

s of

the

tot

al n

umbe

r of

di

rect

ors;

and

in a

dditi

on, a

repo

rt of

suc

h di

strib

utio

n sh

all b

e su

bmitt

ed to

the

shar

ehol

ders

’ mee

ting.

If

the

Gro

up h

as n

o lo

ss, a

ccor

ding

to la

ws

and

regu

latio

ns, t

he G

roup

can

dis

tribu

te it

s ca

pita

l res

erve

, in

who

le o

r in

par

t, by

iss

uing

new

sha

res

or c

ash

base

d on

fin

anci

al,

busi

ness

and

man

agem

ent

cons

ider

atio

ns. I

f suc

h su

rplu

s ea

rnin

gs is

dis

tribu

ted

in th

e fo

rm o

f new

sha

res,

it sh

all b

e ap

prov

ed b

y a

mee

ting

of th

e bo

ard

of d

irect

ors;

if s

uch

surp

lus

earn

ing

is d

istri

bute

d in

the

form

of c

ash,

it s

hall

be

auth

oriz

ed a

fter a

reso

lutio

n ha

s be

en a

dopt

ed b

y a

maj

ority

vot

e at

a m

eetin

g of

the

boar

d of

dire

ctor

s at

tend

ed b

y tw

o-th

irds

of t

he t

otal

num

ber

of d

irect

ors;

and

in

addi

tion

ther

eto

a re

port

of s

uch

dist

ribut

ion

shal

l be

subm

itted

to th

e sh

areh

olde

rs’ m

eetin

g.

- 51

-

166

Und

er th

e di

vide

nd p

olic

y as

set f

orth

in th

e C

ompa

ny’s

Arti

cles

of I

ncor

pora

tion

(the

“Arti

cles

”) b

ased

on

the

amen

ded

Com

pany

Act

, whe

re th

e C

ompa

ny m

ade

prof

it in

a fi

scal

yea

r, th

e pr

ofit

shal

l be

first

utili

zed

for p

ayin

g ta

xes,

offs

ettin

g lo

sses

of p

revi

ous

year

s, se

tting

asi

de a

s a

lega

l res

erve

10%

of t

he

rem

aini

ng p

rofit

, se

tting

asi

de o

r re

vers

ing

a sp

ecia

l re

serv

e in

acc

orda

nce

with

the

law

s an

d re

gula

tions

, and

then

any

rem

aini

ng p

rofit

toge

ther

with

any

und

istri

bute

d re

tain

ed e

arni

ngs

shal

l be

us

ed b

y th

e C

ompa

ny’s

boa

rd o

f di

rect

ors

as t

he b

asis

for

pro

posi

ng a

dis

tribu

tion

plan

with

due

co

nsid

erat

ion

of a

ny fu

ture

airc

raft

acqu

isiti

on p

lans

and

fund

dem

ands

, whi

ch sh

ould

be

reso

lved

in th

e sh

areh

olde

rs’

mee

ting

for

the

dist

ribut

ion

of d

ivid

ends

and

bon

uses

to s

hare

hold

ers

by c

ash

or s

hare

s (c

ash

divi

dend

s ca

nnot

be

less

than

30%

of

tota

l di

vide

nds

dist

ribut

ed).

How

ever

, if

the

Com

pany

’s

prof

it be

fore

tax

in

a fis

cal

year

afte

r de

duct

ions

for

the

abo

vem

entio

ned

item

s is

not

suf

ficie

nt f

or

earn

ings

dis

tribu

tion,

reta

ined

ear

ning

s can

be

used

as a

supp

lem

ent f

or th

e de

ficie

ncy.

Th

e C

ompa

ny s

hall

set a

side

pro

fits

as a

lega

l res

erve

unt

il th

e le

gal r

eser

ve a

mou

nts

to th

e au

thor

ized

ca

pita

l. Th

e le

gal r

eser

ve c

ould

be

used

for

offs

ettin

g de

ficit

of th

e C

ompa

ny. I

f th

e C

ompa

ny h

as n

o de

ficit

in a

fis

cal y

ear,

the

Com

pany

can

dis

tribu

te a

ll or

par

t of

the

capi

tal s

urpl

us b

y ca

sh o

r sh

ares

w

ith d

ue c

onsi

dera

tion

of f

inan

ce,

mar

ketin

g an

d m

anag

emen

t re

quire

men

ts i

n ac

cord

ance

with

the

la

ws a

nd re

gula

tions

. Th

e di

strib

utio

n of

div

iden

ds s

houl

d be

res

olve

d an

d re

cogn

ized

in

the

shar

ehol

ders

’ m

eetin

g in

the

cu

rren

t yea

r. 1)

O

ffse

tting

def

icit

in 2

019

O

n Ju

ne 2

3, 2

020,

the

boar

d pr

opos

ed to

off

set t

he a

ccum

ulat

ed d

efic

it in

201

9. T

he d

efic

it in

clud

ed

a ne

t lo

ss o

f $1

,199

,798

tho

usan

d, n

egat

ive

adju

stm

ent

of o

ther

ret

aine

d ea

rnin

gs o

f $5

77,4

27

thou

sand

, the

rem

aini

ng a

mou

nt o

f acc

umul

ated

def

icit

was

$1,

777,

225

thou

sand

.

The

offs

ettin

g of

def

icit

for 2

019

is s

ubje

ct to

the

reso

lutio

n of

the

shar

ehol

ders

in th

eir m

eetin

g to

be

hel

d on

June

23,

202

0.

2)

O

ffse

tting

of d

efic

it in

202

0

On

Mar

ch 1

8, 2

021,

the

boa

rd p

ropo

sed

to o

ffse

t th

e ac

cum

ulat

ed d

efic

it in

202

0. T

he d

efic

it in

clud

ed a

net

inc

ome

of $

140,

000

thou

sand

and

the

begi

nnin

g ba

lanc

e of

und

istri

bute

d re

tain

ed

earn

ings

of $

0, n

egat

ive

adju

stm

ent o

f oth

er re

tain

ed e

arni

ngs

of $

490,

581

thou

sand

, the

rem

aini

ng

amou

nt o

f ac

cum

ulat

ed d

efic

it w

as $

350,

581

thou

sand

and

was

off

set

by c

apita

l re

serv

e of

$3

50,5

81 th

ousa

nd.

- 52

-

d.

Oth

er e

quity

item

s Th

e m

ovem

ent o

f oth

er e

quity

item

s is a

s fol

low

s:

Exc

hang

e D

iffer

ence

s on

Tra

nsla

tion

of

the

Fina

ncia

l St

atem

ents

of

Fore

ign

Ope

ratio

ns

Unr

ealiz

ed G

ain

(Los

s) o

n Fi

nanc

ial A

sset

s at

FV

TO

CI

Gai

n (L

oss)

on

Hed

ging

In

stru

men

ts

T

otal

Bal

ance

at J

anua

ry 1

, 201

9

$

(9,6

64)

$

42

,619

$

25,2

68

$

58

,223

Ex

chan

ge d

iffer

ence

s on

trans

latio

n of

the

finan

cial

st

atem

ents

of f

orei

gn o

pera

tions

(6

5,24

6)

-

-

(65,

246)

C

umul

ativ

e lo

ss o

n ch

ange

s in

fair

valu

e of

hed

ging

inst

rum

ents

-

-

1,

378,

603

1,37

8,60

3 C

umul

ativ

e ga

in o

n ch

ange

s in

fair

valu

e of

hed

ging

inst

rum

ents

re

clas

sifie

d to

pro

fit o

r los

s

-

-

20

,014

20

,014

U

nrea

lized

gai

n on

fina

ncia

l ass

ets

at F

VTO

CI

-

79

,392

-

79,3

92

Effe

cts o

f inc

ome

tax

11,8

35

(14,

854)

(2

79,6

04)

(282

,623

) O

ther

com

preh

ensi

ve in

com

e (lo

ss) r

ecog

nize

d in

the

perio

d

(5

3,41

1)

64,5

38

1,11

9,01

3

1,

130,

140

Dis

posa

l of s

ubsi

diar

ies

8,36

8

10

5

-

8,47

3 Tr

ansf

ers o

f ini

tial c

arry

ing

amou

nt o

f hed

ged

item

s

-

-

(6

03)

(603

)

B

alan

ce a

t Dec

embe

r 31,

201

9

$

(54,

707)

$

107,

262

$

1,1

43,6

78

$

1,1

96,2

33

B

alan

ce a

t Jan

uary

1, 2

020

$

(5

4,70

7)

$

10

7,26

2

$ 1

,143

,678

$ 1

,196

,233

Ex

chan

ge d

iffer

ence

s on

trans

latio

n of

the

finan

cial

st

atem

ents

of f

orei

gn o

pera

tions

(9

9,77

4)

-

-

(99,

774)

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umul

ativ

e lo

ss o

n ch

ange

s in

fair

valu

e of

hed

ging

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rum

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-

-

1,

921,

255

1,92

1,25

5 C

umul

ativ

e ga

in o

n ch

ange

s in

fair

valu

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hed

ging

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clas

sifie

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fit o

r los

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-

-

(2

93,5

18)

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,518

) U

nrea

lized

gai

n on

fina

ncia

l ass

ets

at F

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(4

5,58

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-

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5,58

8)

Effe

cts o

f inc

ome

tax

20,2

29

9,68

5

(3

65,7

45)

(335

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) O

ther

com

preh

ensi

ve in

com

e (lo

ss) r

ecog

nize

d in

the

perio

d

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9,54

5)

(35,

903)

1,

261,

992

1,14

6,54

4 Tr

ansf

ers o

f ini

tial c

arry

ing

amou

nt o

f hed

ged

item

s

-

-

20

0,98

9

20

0,98

9

Bal

ance

at D

ecem

ber 3

1, 2

020

$

(1

34,2

52)

$

71

,359

$ 2

,606

,659

$ 2

,543

,766

- 53

-

167

e.

Non

-con

trolli

ng in

tere

sts

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

B

egin

ning

bal

ance

$ 3

,578

,345

$ 2

,965

,512

N

et (l

oss)

inco

me

attri

buta

ble

to n

on-c

ontro

lling

inte

rest

s

(419

,814

)

52

4,79

6 Fo

reig

n ex

chan

ge d

iffer

ence

s

1,

826

(7

,706

) A

ctua

rial g

ains

and

loss

es o

n de

fined

ben

efit

plan

s

43

,157

(1

00,1

36)

Cas

h flo

w h

edge

on

chan

ges i

n fa

ir va

lue

of h

edgi

ng in

stru

men

ts

2,

993

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3,22

7)

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ulat

ive

(loss

) gai

n ar

isin

g on

cha

nges

in fa

ir va

lue

of

hedg

ing

inst

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ents

recl

assi

fied

to p

rofit

or l

oss

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00)

8,52

8 Ef

fect

of i

ncom

e ta

x

(9,2

72)

22,5

86

37

,104

(8

9,95

5)

Dis

posa

l of s

ubsi

diar

ies

-

(2

4,95

7)

Dis

posa

l of p

art e

quity

of s

ubsi

diar

ies

-

61

9,38

7 O

utst

andi

ng sh

are

optio

ns h

eld

by e

mpl

oyee

s of s

ubsid

iarie

s

52

-

Acq

uisi

tion

of n

on-c

ontro

lling

inte

rest

s in

subs

idia

ries

331,

427

- D

ivid

ends

pai

d by

subs

idia

ries

(3

75,0

24)

(416

,438

)

Endi

ng b

alan

ce

$

3,1

52,0

90

$

3,5

78,3

45

f. Tr

easu

ry sh

ares

Tr

easu

ry s

hare

s ar

e th

e C

ompa

ny’s

sha

res

held

by

its s

ubsi

diar

ies

as o

f D

ecem

ber

31, 2

020

and

2019

w

ere

as fo

llow

s:

(I

n T

hous

ands

of S

hare

s)

Peri

od o

f Tre

asur

y Sh

ares

N

umbe

r of

Sh

ares

, B

egin

ning

of

Yea

r

Red

uctio

n D

urin

g th

e Y

ear

Num

ber

of

Shar

es, E

nd o

f Y

ear

For t

he y

ear e

nded

Dec

embe

r 31,

202

0

2,

889

(814

)

2,

075

For t

he y

ear e

nded

Dec

embe

r 31,

201

9

2,

889

-

2,

889

S

ubsi

diar

y

Shar

es

(In

Tho

usan

ds)

C

arry

ing

Am

ount

Mar

ket V

alue

D

ecem

ber 3

1, 2

020

M

anda

rin A

irlin

es

2,07

5

$ 2

4,99

9

$ 2

4,99

9

D

ecem

ber 3

1, 2

019

M

anda

rin A

irlin

es

2,07

5

$ 1

8,79

6

$ 1

8,79

6 D

ynas

ty A

erot

ech

Inte

rnat

iona

l Cor

p.

814

7,37

6

7,

376

$

26,

172

$

26,

172

The

abov

e ac

quis

ition

s by

sub

sidi

arie

s of

the

Com

pany

’s s

hare

s in

pre

viou

s ye

ars

was

due

to

inve

stm

ent p

lann

ing.

The

shar

es o

f the

Com

pany

hel

d by

its s

ubsi

diar

ies w

ere

treat

ed a

s tre

asur

y sh

ares

. Th

e su

bsid

iarie

s ca

n ex

erci

se s

hare

hold

ers’

rig

ht o

n th

ese

treas

ury

shar

es,

exce

pt f

or t

he r

ight

to

subs

crib

e fo

r the

Com

pany

’s n

ew sh

ares

and

vot

ing

right

s.

- 54

-

Dyn

asty

Aer

otec

h In

tern

atio

nal C

orp.

sol

d a

tota

l of 8

14 th

ousa

nd s

hare

s of

the

Com

pany

in 2

020

and

the

disp

osal

pric

e w

as $

6,85

4 th

ousa

nd.

27

. N

ET

INC

OM

E a.

R

even

ue

F

or th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Pass

enge

r

$

25,7

04,3

67

$

111

,413

,435

C

argo

81

,917

,976

43

,793

,256

O

ther

s

7,

628,

207

13,2

37,4

69

$

115

,250

,550

$ 1

68,4

44,1

60

b.

Oth

er in

com

e

F

or th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Inte

rest

inco

me

$

282

,506

$ 4

17,4

46

Subs

idy

inco

me

29,3

09

38,6

21

Div

iden

d in

com

e

23

,043

21

,422

O

ther

s

351,

716

241,

499

$

686

,574

$ 7

18,9

88

c.

Oth

er g

ains

and

loss

es

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

G

ain

on d

ispo

sal p

rope

rty, p

lant

and

equ

ipm

ent

$

13

,347

$

32,4

60

Net

gai

n on

fina

ncia

l ass

ets a

t FV

TPL

2,28

7

27

,580

G

ain

(loss

) on

fore

ign

exch

ange

, net

52

7,23

4

(1

41,6

11)

Impa

irmen

t los

s on

flyin

g eq

uipm

ent

(424

,573

)

-

Fore

ign

inve

stm

ent i

mpa

irmen

t los

s und

er e

quity

met

hod

(46,

757)

-

Gai

n on

dis

posa

l of i

nves

tmen

ts

-

7,

656

Loss

on

non-

curr

ent a

sset

s hel

d fo

r sal

e

-

(10,

462)

Lo

ss o

n sa

le a

nd le

aseb

ack

-

(1

03,7

75)

Oth

ers

(337

,528

)

(2

85,6

60)

$

(265

,990

)

$ (4

73,8

12)

- 55

-

168

d.

Fina

nce

cost

s

F

or th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Inte

rest

exp

ense

B

onds

pay

able

$

342,

963

$

42

9,45

7 B

ank

loan

s

93

0,08

3

77

1,28

0 In

tere

st o

n le

ase

liabi

litie

s

1,

784,

917

2,13

9,38

2

$ 3

,057

,963

$ 3

,340

,119

Cap

italiz

atio

n in

tere

st

$

78,8

63

$

46

,528

Cap

italiz

atio

n ra

te

0.

71%

-1.9

2%

1.

01%

-1.3

5%

e.

D

epre

ciat

ion

and

amor

tizat

ion

expe

nse

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

Pr

oper

ty, p

lant

, equ

ipm

ent

$

19,4

25,4

22

$

20

,702

,033

R

ight

of u

se a

sset

s

11

,741

,555

11

,899

,090

In

vest

men

t pro

perti

es

270

277

Inta

ngib

le a

sset

s

206,

936

198,

237

D

epre

ciat

ion

and

amor

tizat

ion

expe

nse

$

31,3

74,1

83

$

32

,799

,637

An

anal

ysis

of d

epre

ciat

ion

by fu

nctio

n

O

pera

ting

cost

s

$

30

,171

,665

$

30,9

27,9

97

Ope

ratin

g ex

pens

es

995,

582

1,67

3,40

3

$

31,1

67,2

47

$

32

,601

,400

An

anal

ysis

of a

mor

tizat

ion

by fu

nctio

n

O

pera

ting

cost

s

$

14

,312

$

12,3

80

Ope

ratin

g ex

pens

es

192,

624

185,

857

$

20

6,93

6

$

198,

237

f. Em

ploy

ee b

enef

its e

xpen

se

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

Po

st-e

mpl

oym

ent b

enef

its

Def

ined

con

tribu

tion

plan

$

551,

154

$

57

4,80

9 D

efin

ed b

enef

it pl

an

1,38

5,87

2

1,

397,

174

$

1,

937,

026

$

1,

971,

983

(Con

tinue

d)

- 56

-

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

O

ther

em

ploy

ee b

enef

its

Sala

ry e

xpen

ses

$

17

,958

,185

$

20,8

13,7

57

Pers

onne

l ser

vice

exp

ense

s

5,

400,

252

5,50

6,86

7

$

23,3

58,4

37

$

26

,320

,624

An

anal

ysis

of e

mpl

oyee

ben

efits

exp

ense

by

func

tion

Ope

ratin

g co

sts

$

20,4

66,0

80

$

23

,699

,685

O

pera

ting

expe

nses

4,

829,

383

4,59

2,92

2

$

25,2

95,4

63

$

28

,292

,607

(C

oncl

uded

) A

ccor

ding

to th

e C

ompa

ny’s

arti

cles

, the

Com

pany

acc

rues

com

pens

atio

n of

em

ploy

ees

at ra

tes

of n

o le

ss th

an 3

% o

f th

e ne

t pro

fit b

efor

e in

com

e ta

x an

d co

mpe

nsat

ion

of e

mpl

oyee

s, an

d ac

crue

s pr

ofit

bonu

s at a

cer

tain

rate

of p

rofit

bef

ore

tax

on th

e ba

sis o

f the

col

lect

ive

agre

emen

t sig

ned

with

the

Chi

na

Airl

ines

Em

ploy

ees

Uni

on.

For

the

year

s en

ded

Dec

embe

r 31

, 20

20 a

nd 2

019,

the

Com

pany

has

ex

perie

nced

a d

efic

it, a

nd th

eref

ore,

no

com

pens

atio

n of

em

ploy

ees i

s est

imat

ed.

Mat

eria

l di

ffer

ence

s be

twee

n su

ch e

stim

ated

am

ount

s an

d th

e am

ount

s pr

opos

ed b

y th

e bo

ard

of

dire

ctor

s on

or b

efor

e th

e da

te th

at th

e an

nual

con

solid

ated

fina

ncia

l sta

tem

ents

are

aut

horiz

ed fo

r iss

ue

are

adju

sted

in th

e ye

ar th

at th

e bo

nuse

s an

d re

mun

erat

ion

wer

e re

cogn

ized

. If t

here

is a

cha

nge

in th

e pr

opos

ed a

mou

nts

afte

r th

e an

nual

con

solid

ated

fin

anci

al s

tate

men

ts w

ere

auth

oriz

ed f

or i

ssue

, th

e di

ffer

ence

s are

reco

rded

as a

cha

nge

in th

e ac

coun

ting

estim

ate.

In

form

atio

n on

the

com

pens

atio

n of

em

ploy

ees

and

rem

uner

atio

n of

dire

ctor

s an

d su

perv

isor

s re

solv

ed

by t

he C

ompa

ny’s

boa

rd o

f di

rect

ors

in 2

020

and

2019

is

avai

labl

e at

the

Mar

ket

Obs

erva

tion

Post

Sy

stem

web

site

of t

he T

aiw

an S

tock

Exc

hang

e.

28

. IN

CO

ME

TA

X

a.

Inco

me

tax

expe

nse

reco

gniz

ed in

pro

fit o

r los

s Th

e m

ajor

com

pone

nts o

f tax

exp

ense

wer

e as

follo

ws:

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

C

urre

nt ta

x

C

urre

nt y

ear

$

118

,814

$ 5

23,6

70

Prio

r yea

r adj

ustm

ent

(2

9,84

5)

(5,5

46)

Inco

me

tax

on u

napp

ropr

iate

d ea

rnin

gs

628

378

Def

erre

d ta

x

C

urre

nt y

ear

(551

,574

)

35

,149

A

djus

tmen

ts to

def

erre

d ta

x at

tribu

tabl

e to

cha

nges

in ta

x ra

tes

and

law

s

87

,994

24

,534

Inco

me

tax

expe

nse

reco

gniz

ed in

pro

fit o

r los

s

$ (3

73,9

83)

$

578

,185

- 57

-

169

A re

conc

iliat

ion

of a

ccou

ntin

g pr

ofit

and

inco

me

tax

expe

nse

is a

s fol

low

s:

F

or th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Prof

it be

fore

tax

$ (6

53,7

97)

$

(9

6,81

7)

In

com

e ta

x ex

pens

e ca

lcul

ated

at t

he st

atut

ory

rate

(% fo

r 201

9,

20%

for 2

018)

$ (1

30,7

59)

$

(1

9,36

2)

Effe

ct o

f diff

eren

t tax

of s

ubsi

diar

ies

(8

,456

)

1,

680

Effe

ct o

f adj

ustm

ent t

o in

com

e ta

x

Non

-ded

uctib

le e

xpen

ses i

n de

term

inin

g ta

xabl

e in

com

e

388,

066

16,9

36

Tax-

exem

pt in

com

e

(7

11,0

01)

(45,

861)

In

com

e ta

x on

una

ppro

pria

ted

earn

ings

(5%

)

62

8

37

8 B

asic

inco

me

tax

-

8,

468

Ove

rsea

s inc

ome

tax

expe

nse

16,2

44

11,1

57

Unr

ecog

nize

d lo

ss c

arry

forw

ards

, inv

estm

ent t

ax c

redi

ts a

nd

tem

pora

ry d

iffer

ence

12

,129

58

6,13

5 A

djus

tmen

ts fo

r prio

r yea

rs’ t

ax

(29,

845)

(5

,546

) A

djus

tmen

ts to

def

erre

d ta

x at

tribu

tabl

e to

cha

nges

in ta

x ra

tes

and

law

s

87

,994

24

,534

A

djus

tmen

ts to

cha

nges

in ta

x ra

tes a

nd la

ws

1,01

7

(3

34)

Oth

er

In

com

e ta

x ex

pens

e re

cogn

ized

in p

rofit

or l

oss

$

(373

,983

)

$ 5

78,1

85

b.

In

com

e ta

x re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e

2020

2019

Def

erre

d ta

x

Rec

ogni

zed

in o

ther

com

preh

ensi

ve in

com

e

Tran

slat

ion

of fi

nanc

ial s

tate

men

ts o

f for

eign

ope

ratio

ns

$

19

,864

$

13,4

54

Fair

valu

e ch

ange

s of f

inan

cial

ass

ets a

t FV

TOC

I

9,

685

(14,

854)

H

edgi

ng in

stru

men

ts fa

ir va

lue

reva

luat

ion

for c

ash

flow

he

dgin

g

(3

66,0

22)

(278

,664

) A

ctua

rial g

ain

or lo

ss o

n de

fined

ben

efit

plan

79

,830

15

6,35

9

Tota

l inc

ome

tax

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

$ (2

56,6

43)

$

(123

,705

)

- 58

-

c.

Def

erre

d ta

x as

sets

and

liab

ilitie

s Fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

020

Beg

inni

ng

Bal

ance

Rec

ogni

zed

in

Prof

it or

Los

s

Rec

ogni

zed

in

Oth

er

Com

preh

ensi

ve

Inco

me

E

xcha

nge

Diff

eren

ce

E

ndin

g B

alan

ce

D

efer

red

tax

asse

ts

Tem

pora

ry d

iffer

ence

s

D

efin

ed b

enef

it pl

ans

$ 1,

891,

851

$ (1

5,52

0 )

$ 80

,246

$

-

$

1,95

6,57

7 Fr

eque

nt fl

yer p

rogr

ams

59

2,97

7

(42,

447 )

-

-

550,

530

Mai

nten

ance

rese

rves

2,24

0,00

3

282,

021

-

-

2,

522,

024

Allo

wan

ce fo

r red

uctio

n of

inve

ntor

y

296,

857

(4

1,59

0 )

-

-

25

5,26

7 O

ther

s

315,

938

36

7,22

8

77

,917

(17,

281 )

743,

802

$ 5,

337,

626

$ 54

9,69

2

$

158,

163

$ (1

7,28

1 )

$ 6,

028,

200

D

efer

red

tax

liabi

litie

s

Te

mpo

rary

diff

eren

ces

Unr

ealiz

ed fo

reig

n ex

chan

ge g

ains

$

81,7

77

$ 81

,656

$

-

$

-

$

163,

433

Oth

ers (

Not

e)

47

5,36

5

4,45

6

414,

806

(3

4,97

6 )

85

9,65

1

$

557,

142

$ 86

,112

$

414,

806

$ (3

4,97

6 )

$ 1,

023,

084

For t

he y

ear e

nded

Dec

embe

r 31,

201

9

B

egin

ning

B

alan

ce

R

ecog

nize

d in

Pr

ofit

or L

oss

Rec

ogni

zed

in

Oth

er

Com

preh

ensi

ve

Inco

me

E

xcha

nge

Diff

eren

ce

E

ndin

g B

alan

ce

D

efer

red

tax

asse

ts

Tem

pora

ry d

iffer

ence

s

D

efin

ed b

enef

it pl

ans

$ 1,

765,

052

$ (2

9,56

0 )

$ 15

6,35

9

$

-

$

1,89

1,85

1 Fr

eque

nt fl

yer p

rogr

ams

51

0,06

0

82,9

17

-

-

59

2,97

7 M

aint

enan

ce re

serv

es

1,

811,

848

42

8,15

5

-

-

2,24

0,00

3 A

llow

ance

for r

educ

tion

of in

vent

ory

33

5,71

1

(38,

854 )

-

-

296,

857

Oth

ers

72

9,39

9

(429

,580

)

15,1

13

1,

006

31

5,93

8

$

5,15

2,07

0

$

13,0

78

$ 17

1,47

2

$

1,00

6

$

5,33

7,62

6

Def

erre

d ta

x lia

bilit

ies

Tem

pora

ry d

iffer

ence

s

U

nrea

lized

fore

ign

exch

ange

gai

ns

$ 17

$

81,7

60

$ -

$ -

$ 81

,777

O

ther

s (N

ote)

188,

430

(8

,999

)

295,

177

75

7

475,

365

$ 18

8,44

7

$

72,7

61

$ 29

5,17

7

$

757

$ 55

7,14

2

- 59

-

170

Ded

uctib

le te

mpo

rary

diff

eren

ces,

and

unus

ed lo

ss c

arry

forw

ards

for w

hich

no

defe

rred

tax

asse

ts h

ave

been

reco

gniz

ed in

the

cons

olid

ated

bal

ance

shee

ts.

D

ecem

ber

31

2020

2019

Loss

car

ryfo

rwar

ds

2021

$

-

$ 2

,899

,496

20

22

-

61

9,79

9 20

25

18,1

24

18,1

24

2026

34

4,20

0

54

6,89

9 20

27

68,4

15

68,4

15

2028

67

1,52

9

1,

706,

913

2029

1,

645,

438

955,

250

2030

85

2,28

1

-

$

3,5

99,9

87

$

6,8

14,8

96

D

iffer

ence

in d

epre

ciat

ion

$

4,5

63,9

24

$

1,3

48,0

96

d.

Unu

sed

tax

loss

car

ryfo

rwar

ds a

s of D

ecem

ber 3

1, 2

020

wer

e as

follo

ws:

Exp

iry

Yea

r

Unu

sed

Am

ount

Chi

na A

irlin

es, L

td.

20

28

$

495,

779

2029

1,43

9,28

7

$

1,9

35,0

66

M

anda

rin A

irlin

e C

o., L

td.

20

26

$

312,

724

2028

72,5

89

2030

524,

678

$

909,

991

Ti

gera

ir Ta

iwan

Co.

, Ltd

.

2030

$

2,0

56,9

78

Ta

oyua

n In

tern

atio

nal A

irpor

t Ser

vice

s

2030

$

55

6,79

0

Taiw

an A

irpor

t Ser

vice

s

2030

$

22

3,80

5 (C

ontin

ued)

- 60

-

Exp

iry

Yea

r

Unu

sed

Am

ount

Sabr

e Tr

avel

Net

wor

k (T

aiw

an)

20

30

$

75,1

88

C

al H

otel

Co.

, Ltd

.

2030

$

11

4,97

5

Kao

hsiu

ng C

ater

ing

Serv

ices

, Ltd

.

2030

$

85

,648

Taiw

an A

ircra

ft M

aint

enan

ce A

nd E

ngin

eerin

g C

o., L

td.

20

25

$

18,1

24

2026

31,4

76

2027

68,4

15

2028

103,

161

2029

206,

151

2030

241,

955

$

669,

282

(Con

clud

ed)

e.

In

com

e ta

x as

sess

men

t Th

e in

com

e ta

x re

turn

s fo

r 20

18 o

f th

e C

ompa

ny a

nd it

s su

bsid

iarie

s ha

ve b

een

exam

ined

by

the

tax

auth

oriti

es.

29.

EA

RN

ING

PE

R S

HA

RE

Th

e nu

mer

ator

s and

den

omin

ator

s use

d in

cal

cula

ting

earn

ings

per

shar

e w

ere

as fo

llow

s:

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

B

asic

ear

ning

s (lo

ss) p

er sh

are

$

0.

03

$

(0

.22)

D

ilute

d ea

rnin

gs (l

oss)

per

shar

e

$

0.03

$

(0.2

2)

Ea

rnin

gs (l

oss)

use

d in

the

com

puta

tion

of b

asic

ear

ning

s per

shar

e

$

140,

000

$

(1,

199,

798)

Ef

fect

of p

oten

tially

dilu

tive

ordi

nary

shar

es:

Inte

rest

on

conv

ertib

le b

onds

(afte

r tax

)

-

-

Earn

ings

(los

s) u

sed

in th

e co

mpu

tatio

n of

dilu

ted

earn

ings

(los

s) p

er

shar

e

$

14

0,00

0

$ (

1,19

9,79

8)

- 61

-

171

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

In

thou

sand

s

Wei

ghte

d av

erag

e nu

mbe

r of o

rdin

ary

shar

es in

com

puta

tion

of b

asic

ea

rnin

gs p

er sh

are

5

,418

,776

5,4

18,0

96

Effe

ct o

f pot

entia

lly d

ilutiv

e or

dina

ry sh

ares

:

C

onve

rtibl

e bo

nds

Com

pens

atio

n of

em

ploy

ees o

r bon

uses

issu

ed to

em

ploy

ees

-

-

Wei

ghte

d av

erag

e nu

mbe

r of o

rdin

ary

shar

es u

sed

in th

e co

mpu

tatio

n of

dilu

ted

earn

ings

per

shar

e

5,4

18,7

76

5

,418

,096

If

the

Gro

up o

ffer

ed t

o se

ttle

com

pens

atio

n or

bon

uses

pai

d to

em

ploy

ees

in c

ash

or s

hare

s, th

e G

roup

as

sum

ed t

he e

ntire

am

ount

of

the

com

pens

atio

n or

bon

uses

wou

ld b

e se

ttled

in

shar

es a

nd t

he r

esul

ting

pote

ntia

l sh

ares

wer

e in

clud

ed i

n th

e w

eigh

ted

aver

age

num

ber

of s

hare

s ou

tsta

ndin

g us

ed i

n th

e co

mpu

tatio

n of

dilu

ted

earn

ings

per

sha

re,

if th

e ef

fect

is

dilu

tive.

Suc

h di

lutiv

e ef

fect

of

the

pote

ntia

l sh

ares

was

inc

lude

d in

the

com

puta

tion

of d

ilute

d ea

rnin

gs p

er s

hare

unt

il th

e nu

mbe

r of

sha

res

to b

e di

strib

uted

to e

mpl

oyee

s is r

esol

ved

in th

e fo

llow

ing

year

.

30.

DIS

POSA

L O

F SU

BSI

DIA

RIE

S O

n Ja

nuar

y 21

, 201

9, th

e bo

ard

of d

irect

ors

of th

e Co

mpa

ny d

ecid

ed to

sel

l par

t of

Dyn

asty

Hol

iday

s to

H

.I.S.

Tai

wan

Co.

, Ltd

. for

dis

posa

l pric

e of

$34

,036

thou

sand

and

a g

ain

on d

ispo

sal o

f $7,

656

thou

sand

. A

fter t

he d

ispo

sal,

the

prop

ortio

n of

ow

ners

hip

decr

ease

d fr

om 5

1% to

20%

, and

the

Com

pany

lost

con

trol

of th

e su

bsid

iary

. a.

C

onsi

dera

tion

rece

ived

from

dis

posa

ls

Con

side

ratio

n re

ceiv

ed in

cas

h an

d ca

sh e

quiv

alen

ts

$ 3

4,03

6

b.

Ana

lysi

s of a

sset

s and

liab

ilitie

s on

the

date

con

trol w

as lo

st C

urre

nt a

sset

s

Cas

h an

d ca

sh e

quiv

alen

ts

$ 5

1,44

9 O

ther

cur

rent

ass

ets

47,5

10

Non

-cur

rent

ass

ets

17,0

35

Cur

rent

liab

ilitie

s

(4

9,74

2)

Non

-cur

rent

liab

ilitie

s

(1

5,31

8)

Net

ass

ets d

ispo

sed

of

$

50,

934

c.

G

ain

on d

ispo

sals

of s

ubsi

diar

ies

C

onsi

dera

tion

rece

ived

$ 3

4,03

6 N

et a

sset

s dis

pose

d of

(5

0,93

4)

Fair

valu

e of

equ

ity

10,1

87

Non

-con

trolli

ng in

tere

sts

24,9

57

Rec

lass

ifica

tion

of o

ther

com

preh

ensi

ve in

com

e in

resp

ect o

f sub

sidi

arie

s

(1

0,59

0)

Gai

n on

dis

posa

l

$

7,65

6

- 62

-

d.

Net

cas

h in

flow

on

disp

osal

of s

ubsi

diar

ies

C

onsi

dera

tion

rece

ived

in c

ash

and

cash

equ

ival

ents

$

34,

036

Less

: Cas

h an

d ca

sh e

quiv

alen

t bal

ance

s dis

pose

d of

(5

1,44

9)

$ (1

7,41

3)

31

. C

API

TA

L M

AN

AG

EM

EN

T

The

Gro

up m

anag

es i

ts c

apita

l to

ens

ure

that

ent

ities

in

the

Gro

up w

ill b

e ab

le t

o co

ntin

ue a

s go

ing

conc

erns

whi

le m

axim

izin

g th

e re

turn

to

stak

ehol

ders

thr

ough

the

opt

imiz

atio

n of

the

deb

t an

d eq

uity

ba

lanc

e. T

he c

apita

l st

ruct

ure

of t

he G

roup

con

sist

s of

net

deb

t (b

orro

win

gs o

ffse

t by

cas

h an

d ca

sh

equi

vale

nts)

and

equ

ity o

f the

Gro

up c

ompr

isin

g is

sued

cap

ital,

rese

rves

, ret

aine

d ea

rnin

gs, o

ther

equ

ity a

nd

non-

cont

rolli

ng in

tere

sts.

To s

uppo

rt its

ope

ratin

g ac

tiviti

es a

nd p

urch

ase

of a

ircra

ft, th

e G

roup

nee

ds to

mai

ntai

n su

ffic

ient

cap

ital.

Ther

efor

e, t

he g

oal

of c

apita

l m

anag

emen

t is

to

ensu

re f

inan

cial

res

ourc

es a

nd o

pera

ting

plan

is a

ble

to

supp

ort t

he f

utur

e w

orki

ng c

apita

l, ca

pita

l exp

endi

ture

s, de

bt r

epay

men

t and

div

iden

d ex

pens

es a

nd o

ther

ne

eds.

32

. FI

NA

NC

IAL

INST

RU

ME

NT

S

a.

Fina

ncia

l ins

trum

ents

not

eva

luat

ed a

t fai

r val

ue

Exce

pt a

s de

taile

d in

the

fol

low

ing

tabl

e, t

he m

anag

emen

t co

nsid

ers

the

carr

ying

am

ount

s of

fin

anci

al a

sset

s and

fina

ncia

l lia

bilit

ies r

ecog

nize

d in

the

finan

cial

stat

emen

ts a

s app

roxi

mat

ing

thei

r fa

ir va

lues

.

D

ecem

ber

31

2020

2019

Car

ryin

g A

mou

nt

Fa

ir V

alue

Car

ryin

g A

mou

nt

Fa

ir V

alue

Fi

nanc

ial l

iabi

litie

s

Bon

ds p

ayab

le

$

22,2

82,8

59

$

22,4

59,6

85

$

32,0

52,6

25

$

32,0

62,8

74

Som

e lo

ng-te

rm b

orro

win

gs a

nd c

apita

l le

ase

oblig

atio

ns a

re f

loat

ing-

rate

fin

anci

al l

iabi

litie

s, so

th

eir c

arry

ing

amou

nts

are

thei

r fai

r va

lues

. Fai

r va

lues

of b

ond

paya

ble

tradi

ng in

OTC

are

bas

ed

on q

uote

d m

arke

t pric

es (L

evel

1).

b.

Fa

ir va

lue

of fi

nanc

ial i

nstru

men

ts m

easu

red

at fa

ir va

lue

on a

recu

rrin

g ba

sis

The

follo

win

g ta

ble

prov

ides

an

anal

ysis

of

finan

cial

inst

rum

ents

that

are

mea

sure

d su

bseq

uent

to

initi

al r

ecog

nitio

n at

fai

r va

lue,

gro

uped

into

Lev

els

1 to

3 b

ased

on

the

degr

ee to

whi

ch th

e fa

ir va

lue

is o

bser

vabl

e:

1)

Leve

l 1

fair

valu

e m

easu

rem

ents

are

tho

se d

eriv

ed f

rom

quo

ted

pric

es (

unad

just

ed)

in a

ctiv

e m

arke

ts fo

r ide

ntic

al a

sset

s or l

iabi

litie

s; 2)

Le

vel 2

fair

valu

e m

easu

rem

ents

are

thos

e de

rived

from

inpu

ts o

ther

than

quo

ted

pric

es in

clud

ed

with

in L

evel

1 t

hat

are

obse

rvab

le f

or t

he a

sset

or

liabi

lity,

eith

er d

irect

ly (

i.e. a

s pr

ices

) or

in

dire

ctly

(i.e

. der

ived

from

pric

es);

and

- 63

-

172

3)

Leve

l 3 fa

ir va

lue

mea

sure

men

ts a

re th

ose

deriv

ed fr

om v

alua

tion

tech

niqu

es th

at in

clud

e in

puts

fo

r the

ass

et o

r lia

bilit

y th

at a

re n

ot b

ased

on

obse

rvab

le m

arke

t dat

a (u

nobs

erva

ble

inpu

ts).

Dec

embe

r 31,

202

0

L

evel

1

L

evel

2

L

evel

3

T

otal

Fina

ncia

l ass

ets a

t FV

TPL

Dom

estic

mon

ey

mar

ket f

unds

$ 27

4,76

1

$ -

$

-

$ 27

4,76

1

Fina

ncia

l ass

ets a

t FV

TOC

I

In

vest

men

ts in

equ

ity

inst

rum

ents

U

nite

d sh

ares

- do

mes

tic

$

-

$ -

$

46,2

89

$

46,2

89

Unl

iste

d sh

ares

- fo

reig

n

-

-

11

7,45

7

11

7,45

7

$ -

$

-

$ 16

3,74

6

$ 16

3,74

6

Fina

ncia

l ass

ets f

or

hedg

ing

$

7,61

3,63

6

$ -

$

-

$ 7,

613,

636

Fi

nanc

ial l

iabi

litie

s for

he

dgin

g

$ 40

,575

,778

$

9,

307

$

-

$ 40

,585

,085

D

ecem

ber 3

1, 2

019

Lev

el 1

Lev

el 2

Lev

el 3

Tot

al

Fi

nanc

ial a

sset

s at

FVTP

L

D

omes

tic m

oney

m

arke

t fun

ds

$

511,

758

$

-

$ -

$

511,

758

Fore

ign

exch

ange

ag

reem

ent

-

43

4

-

434

$

511,

758

$

434

$

-

$ 51

2,19

2

Fina

ncia

l ass

ets a

t FV

TOC

I

In

vest

men

ts in

equ

ity

inst

rum

ents

U

nite

d sh

ares

- do

mes

tic

$

-

$ -

$

26,8

65

$

26,8

65

Unl

iste

d sh

ares

- fo

reig

n

-

-

18

2,35

6

18

2,35

6

$ -

$

-

$ 20

9,22

1

$ 20

9,22

1 (C

ontin

ued)

- 64

-

L

evel

1

L

evel

2

L

evel

3

T

otal

Fina

ncia

l lia

bilit

ies a

t FV

TPL

Der

ivat

ive

inst

rum

ents

$ -

$

11,7

49

$

-

$ 11

,749

Fina

ncia

l ass

ets f

or

hedg

ing

$

-

$ 14

7

$ 9,

479

$

9,62

6

Fina

ncia

l lia

bilit

ies f

or

hedg

ing

$

50,9

97,6

87

$

37,0

69

$

3,95

5

$ 51

,038

,711

(C

oncl

uded

) Th

ere

wer

e no

tran

sfer

s bet

wee

n Le

vels

1 a

nd 2

in th

e cu

rren

t per

iod.

4)

Val

uatio

n te

chni

ques

and

inpu

ts a

pplie

d fo

r Lev

el 2

fair

valu

e m

easu

rem

ent

Fi

nanc

ial I

nstr

umen

ts

V

alua

tion

Tec

hniq

ues a

nd In

puts

Der

ivat

ives

inst

rum

ents

Dis

coun

ted

cash

flow

s.

Futu

re c

ash

flow

s are

est

imat

ed b

ased

on

obse

rvab

le fo

rwar

d ex

chan

ge ra

tes a

t the

end

of t

he re

porti

ng p

erio

d an

d co

ntra

ct fo

rwar

d ra

tes,

disc

ount

ed a

t a ra

te th

at re

flect

s the

cr

edit

risk

of v

ario

us c

ount

erpa

rties

. 5)

V

alua

tion

tech

niqu

es a

nd in

puts

app

lied

for L

evel

3 fa

ir va

lue

mea

sure

men

t Th

e fa

ir va

lues

of

fore

ign

exch

ange

s an

d fu

el o

ptio

ns a

re d

eter

min

ed u

sing

opt

ion

pric

ing

mod

els

whe

re t

he s

igni

fican

t un

obse

rvab

le i

nput

s ar

e im

plie

d flu

ctua

tion.

Cha

nges

in

the

impl

ied

fluct

uatio

ns u

sed

in is

olat

ion

wou

ld re

sult

in a

n in

crea

se o

r dec

reas

e in

the

fair

valu

e of

th

e fo

reig

n ex

chan

ge fo

rwar

d co

ntra

cts a

nd fu

el o

ptio

ns.

The

dom

estic

unl

iste

d eq

uity

inv

estm

ent

is b

ased

on

the

com

para

tive

com

pany

val

uatio

n to

es

timat

e th

e fa

ir va

lue.

The

mai

n as

sum

ptio

ns a

re b

ased

on

the

mul

tiplie

r of t

he m

arke

t pric

e of

th

e co

mpa

rabl

e lis

ted

com

pany

and

the

net v

alue

per

sha

re, w

hich

hav

e co

nsid

ered

the

liqui

dity

di

scou

nt. T

he h

ighe

r the

mul

tiplie

r or t

he lo

wer

the

liqui

dity

dis

coun

t, th

e hi

gher

the

fair

valu

e of

the

rele

vant

fina

ncia

l ins

trum

ents

. Th

e m

ovem

ents

of L

evel

3 fi

nanc

ial i

nstru

men

ts a

re a

s fol

low

s:

Mul

tiplic

ator

Liq

uidi

ty

Dis

coun

t

Dec

embe

r 31,

202

0

0.79

-16.

32

80%

D

ecem

ber 3

1, 2

019

0.

75-1

3.23

80

%

- 65

-

173

Der

ivat

ive

Inst

rum

ents

Equ

ity

Inst

rum

ents

Bal

ance

at J

anua

ry 1

, 202

0

$

5,52

4

$ 2

09,2

21

Rec

ogni

zed

in o

ther

com

preh

ensi

ve in

com

e

(5

,524

)

(4

5,47

5)

B

alan

ce a

t Dec

embe

r 31,

202

0

$

-

$ 1

63,7

46

B

alan

ce a

t Jan

uary

1, 2

019

$

4,

901

$

132

,191

R

ecog

nize

d in

oth

er c

ompr

ehen

sive

inco

me

623

77,0

30

B

alan

ce a

t Dec

embe

r 31,

201

9

$

5,52

4

$ 2

09,2

21

Bec

ause

som

e fin

anci

al in

stru

men

ts a

nd n

onfin

anci

al in

stru

men

ts m

ay n

ot h

ave

thei

r fai

r val

ues

disc

lose

d, th

e to

tal f

air

valu

e di

sclo

sed

here

in is

not

the

tota

l val

ue o

f th

e G

roup

’s c

olle

ctiv

e in

stru

men

ts.

c.

C

ateg

orie

s of f

inan

cial

inst

rum

ents

Dec

embe

r 31

20

20

20

19

Fi

nanc

ial a

sset

s

Fina

ncia

l ass

ets a

t FV

TPL

$

27

4,76

1

$

512,

192

Fina

ncia

l ass

ets f

or h

edgi

ng

7,61

3,63

6

9,

626

Fina

ncia

l ass

ets a

t am

ortiz

ed c

ost (

Not

e 1)

45

,898

,091

43

,143

,106

Fi

nanc

ial a

sset

s at F

VTP

CI -

equ

ity in

stru

men

t inv

estm

ent

163,

746

209,

221

Fi

nanc

ial l

iabi

litie

s

Fina

ncia

l lia

bilit

ies a

t FV

TPL

-

11

,749

Fi

nanc

ial l

iabi

litie

s for

hed

ging

40

,585

,085

51

,038

,711

Fi

nanc

ial l

iabi

litie

s at a

mor

tized

cos

t (N

ote

2)

165,

458,

441

144,

459,

429

Not

e 1:

Th

e ba

lanc

es in

clud

e lo

ans

and

rece

ivab

les

mea

sure

d at

am

ortiz

ed c

ost,

whi

ch c

ompr

ise

cash

an

d ca

sh e

quiv

alen

ts,

note

s an

d ac

coun

ts r

ecei

vabl

e, a

ccou

nts

rece

ivab

le -

rel

ated

par

ties,

othe

r rec

eiva

bles

, ref

unda

ble

depo

sits

and

oth

er re

stric

ted

finan

cial

ass

ets.

Not

e 2:

Th

e ba

lanc

es i

nclu

de f

inan

cial

lia

bilit

ies

mea

sure

d at

am

ortiz

ed c

ost,

whi

ch c

ompr

ise

shor

t-ter

m d

ebts

, sho

rt-te

rm n

otes

pay

able

, not

es a

nd a

ccou

nts

paya

ble,

acc

ount

s pa

yabl

e -

rela

ted

parti

es, o

ther

pay

able

s, bo

nds

paya

ble,

long

-term

loan

s, le

ase

liabi

litie

s pa

yabl

e, le

ase

liabi

litie

s, pr

ovis

ions

, par

t of

othe

r cu

rren

t lia

bilit

ies,

part

of o

ther

non

-cur

rent

liab

ilitie

s an

d gu

aran

tee

depo

sits

.

d.

Fina

ncia

l ris

k m

anag

emen

t obj

ectiv

es a

nd p

olic

ies

The

Gro

up h

as r

isk

man

agem

ent

and

hedg

ing

stra

tegi

es t

o re

spon

d to

cha

nges

in

the

econ

omic

and

fin

anci

al e

nviro

nmen

t an

d in

the

fue

l m

arke

t. To

red

uce

the

finan

cial

ris

ks f

rom

cha

nges

in

inte

rest

rate

s, in

exc

hang

e ra

tes

and

in f

uel

pric

es, t

he G

roup

has

its

ope

ratin

g co

sts

stay

with

in a

spe

cifie

d ra

nge

by u

sing

app

ropr

iate

fin

anci

al h

edgi

ng in

stru

men

ts a

nd h

edgi

ng p

erce

ntag

es in

acc

orda

nce

with

th

e “P

roce

ssin

g Pr

ogra

m o

f D

eriv

ativ

e Fi

nanc

ial

Inst

rum

ent

Tran

sact

ions

” ap

prov

ed b

y th

e G

roup

sh

areh

olde

rs to

redu

ce th

e im

pact

of m

arke

t pric

e ch

ange

s on

ear

ning

s. Th

ese

risks

incl

ude

mar

ket r

isk

(incl

udin

g fo

reig

n cu

rren

cy ri

sk, i

nter

est r

ate

risk

and

othe

r pric

e ris

k), c

redi

t ris

k an

d liq

uidi

ty ri

sk.

- 66

-

In a

dditi

on,

the

Gro

up h

as a

ris

k m

anag

emen

t co

mm

ittee

, w

hich

mee

ts p

erio

dica

lly t

o ev

alua

te t

he

perf

orm

ance

of

deriv

ativ

e in

stru

men

ts a

nd d

eter

min

e th

e ap

prop

riate

hed

ging

per

cent

age.

Thi

s co

mm

ittee

info

rms

the

Gro

up o

f glo

bal e

cono

mic

and

fina

ncia

l con

ditio

ns, c

ontro

ls th

e en

tire

finan

cial

ris

k re

sulti

ng fr

om c

hang

es in

the

finan

cial

env

ironm

ent a

nd fu

el p

rices

, and

dev

elop

s th

e st

rate

gy a

nd

resp

onse

to a

void

fina

ncia

l ris

k w

ith th

e as

sist

ance

of f

inan

cial

risk

exp

erts

to e

ffec

t ris

k m

anag

emen

t. 1)

M

arke

t ris

k Th

e G

roup

is p

rimar

ily e

xpos

ed to

the

finan

cial

risk

s of

cha

nges

in fo

reig

n cu

rren

cy e

xcha

nge

rate

s an

d in

tere

st ra

tes.

The

Gro

up e

nter

ed in

to d

eriv

ativ

e fin

anci

al in

stru

men

ts to

man

age

its e

xpos

ure

to

fore

ign

curr

ency

ris

k an

d in

tere

st r

ate

risk.

The

Gro

up e

nter

s in

to f

orei

gn e

xcha

nge

forw

ard

cont

ract

s, fo

reig

n cu

rren

cy o

ptio

n co

ntra

cts,

and

inte

rest

sw

ap c

ontra

cts

with

fai

r va

lues

tha

t ar

e hi

ghly

neg

ativ

ely

corr

elat

ed t

o th

e fa

ir va

lues

of

hedg

ed i

tem

s an

d ev

alua

tes

the

hedg

ing

effe

ctiv

enes

s of t

hese

inst

rum

ents

per

iodi

cally

. a)

Fo

reig

n cu

rren

cy ri

sk

The

Gro

up e

nter

s in

to fo

reig

n cu

rren

cy o

ptio

n co

ntra

cts

to h

edge

aga

inst

the

risks

on

chan

ge in

re

late

d ex

chan

ge r

ates

, ent

ers

into

for

war

d co

ntra

cts

to h

edge

aga

inst

the

risks

on

chan

ges

in

fore

ign-

curr

ency

ass

ets,

liabi

litie

s and

com

mitm

ents

in th

e re

late

d ex

chan

ge ra

tes.

Sens

itivi

ty a

naly

sis

The

Gro

up w

as m

ainl

y ex

pose

d to

the

US

dolla

r. Th

e fo

llow

ing

deta

ils th

e G

roup

’s s

ensi

tivity

to a

one

dol

lar

incr

ease

or

decr

ease

in th

e N

ew

Taiw

an d

olla

r (th

e fu

nctio

nal

curr

ency

) ag

ains

t th

e re

leva

nt f

orei

gn c

urre

ncie

s (i.

e. t

he U

S do

llar)

. Thi

s is

the

sens

itivi

ty r

ate

used

whe

n re

porti

ng f

orei

gn c

urre

ncy

risk

inte

rnal

ly to

key

m

anag

emen

t pe

rson

nel

and

repr

esen

ts m

anag

emen

t’s a

sses

smen

t of

the

rea

sona

bly

poss

ible

ch

ange

in

fore

ign

exch

ange

rat

es. T

he s

ensi

tivity

ana

lysi

s in

clud

ed o

nly

outs

tand

ing

fore

ign

curr

ency

den

omin

ated

mon

etar

y ite

ms

and

fore

ign

curr

ency

for

war

d co

ntra

cts

desi

gnat

ed a

s ca

sh f

low

hed

ges

and

adju

sts

thei

r tra

nsla

tion

at t

he e

nd o

f th

e re

porti

ng p

erio

d fo

r U

S$1

incr

ease

/dec

reas

e ag

ains

t the

New

Tai

wan

dol

lar.

Whe

n N

ew T

aiw

an d

olla

rs in

crea

se o

ne d

olla

r aga

inst

U.S

. dol

lars

and

all

othe

r var

iabl

es w

ere

held

con

stan

t, th

ere

wou

ld b

e an

incr

ease

in p

re-ta

x pr

ofit

and

othe

r com

preh

ensi

ve in

com

e fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 20

20 o

f $3

45,4

40 t

hous

and

and

$1,1

50,8

96 t

hous

and

and

a de

crea

se i

n pr

e-ta

x pr

ofit

and

othe

r co

mpr

ehen

sive

inc

ome

for

the

year

end

ed D

ecem

ber

31,

2019

of $

105,

266

thou

sand

and

$1,

612,

256

thou

sand

, res

pect

ivel

y.

The

Gro

up’s

hed

ging

stra

tegy

is

to e

nter

int

o fo

reig

n ex

chan

ge f

orw

ard

cont

ract

s to

avo

id

exch

ange

rat

e ex

posu

re o

f its

for

eign

cur

renc

y de

nom

inat

ed r

ecei

pts

and

paym

ents

and

to

man

age

exch

ange

rate

exp

osur

e of

its

airc

raft

prep

aym

ents

in th

e ne

xt y

ear.

Thos

e tra

nsac

tions

ar

e de

sign

ated

as

cash

flo

w h

edge

s. W

hen

fore

cast

ed p

urch

ases

act

ually

tak

e pl

ace,

bas

is

adju

stm

ents

are

mad

e to

the

initi

al c

arry

ing

amou

nts o

f hed

ged

item

s. Fo

r th

e he

dges

of

high

ly p

roba

ble

airc

raft

prep

aym

ents

, as

the

criti

cal t

erm

s (i.

e. th

e no

tiona

l am

ount

, use

ful l

ife a

nd u

nder

lyin

g as

set)

of th

e fo

reig

n ex

chan

ge f

orw

ard

cont

ract

s an

d th

eir

corr

espo

ndin

g he

dged

item

s ar

e th

e sa

me,

the

Gro

up p

erfo

rms

a qu

alita

tive

asse

ssm

ent o

f th

e ef

fect

iven

ess,

and

it is

exp

ecte

d th

at th

e va

lue

of th

e fo

reig

n ex

chan

ge fo

rwar

d co

ntra

cts a

nd th

e va

lue

of th

e co

rres

pond

ing

hedg

ed it

ems

will

sys

tem

atic

ally

cha

nge

in th

e op

posit

e di

rect

ion

in

resp

onse

to m

ovem

ents

in th

e un

derly

ing

exch

ange

rate

s.

- 67

-

174

The

follo

win

g ta

ble

sum

mar

izes

the

info

rmat

ion

rela

ting

to th

e he

dgin

g of

fore

ign

curr

ency

risk

. D

ecem

ber 3

1, 2

020

N

otio

nal

Line

Item

in

C

arry

ing

Am

ount

H

edgi

ng In

stru

men

ts

C

urre

ncy

A

mou

nt

M

atur

ity

Fo

rwar

d R

ate

B

alan

ce S

heet

Ass

et

Li

abili

ty

Ca

sh fl

ow h

edge

A

ircra

ft re

ntal

s -

forw

ard

exch

ange

co

ntra

cts

N

TD/U

SD

N

TD 1

27,9

06/

USD

4,37

1 20

21.1

.8-

2021

.11.

9

28.5

-29.

7

Fina

ncia

l ass

ets f

or

hedg

ing

- cur

rent

/ lia

bilit

ies f

or h

edgi

ng -

curr

ent

$

-

$

3,

513

Avi

atio

n fu

el -

forw

ard

exch

ange

con

tract

s

NTD

/USD

NTD

142

,045

/ U

SD5,

000

2021

.1.2

9-

2021

.5.2

8

29.9

-29.

8

Fina

ncia

l ass

ets f

or

hedg

ing

- cur

rent

/ lia

bilit

ies f

or h

edgi

ng -

curr

ent

-

5,

794

The

abov

emen

tione

d he

dgin

g in

stru

men

ts a

pplie

d he

dge

acco

untin

g. T

he b

ook

valu

e of

oth

er

equi

ty f

or e

ach

hedg

ing

item

(ai

rcra

ft re

ntal

s in

U.S

. dol

lars

and

avi

atio

n fu

el)

was

$(3

,513

) th

ousa

nd a

nd $

(5,7

94) t

hous

and,

resp

ectiv

ely.

Fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

020

Com

preh

ensi

ve In

com

e

Hed

ging

Gai

n (L

oss)

R

ecog

nize

d in

O

ther

C

ompr

ehen

sive

In

com

e

Am

ount

R

ecla

ssifi

ed to

Pr

ofit

and

Los

s an

d th

e A

djus

ted

Lin

e It

em

C

ash

flow

hed

ge

A

ircra

ft re

ntal

s

$

4,93

9

$

11,9

08

(Not

e)

Avi

atio

n fu

el

4,36

7

(16,

616)

Airc

raft

prep

aym

ents

(101

,570

)

-

M

aint

enan

ce c

ost

-

5

$

(9

2,26

4)

$

(4

,703

)

Not

e:

Incr

ease

in o

pera

ting

cost

s or e

xcha

nge

loss

. Th

e am

ount

of g

ains

and

loss

es o

n he

dgin

g in

stru

men

ts fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

020

recl

assi

fied

from

pro

fit o

r los

s to

prep

aym

ents

for e

quip

men

t was

$11

9,87

8 th

ousa

nd.

Dec

embe

r 31,

201

9

Not

iona

l

Li

ne It

em in

Car

ryin

g A

mou

nt

Hed

ging

Inst

rum

ents

Cur

renc

y

Am

ount

Mat

urity

Forw

ard

Rat

e

Bal

ance

She

et

A

sset

Liab

ility

Cash

flow

hed

ge

Airc

raft

rent

als -

fo

rwar

d ex

chan

ge

cont

ract

s

N

TD/U

SD

N

TD50

9,50

7/

USD

16,9

67

20

20.1

.21-

20

20.1

2.24

29.5

-30.

8

Fina

ncia

l ass

ets f

or

hedg

ing

- cur

rent

/ lia

bilit

ies f

or h

edgi

ng -

curr

ent

$

38

$

8,49

1

Avi

atio

n fu

el -

forw

ard

exch

ange

con

tract

s

NTD

/USD

NTD

660,

661/

U

SD22

,000

2020

.2.2

7-

2020

.11.

30

29

.7-3

0.7

Fi

nanc

ial a

sset

s for

he

dgin

g - c

urre

nt/

liabi

litie

s for

hed

ging

- cu

rren

t

32

10,1

93

Airc

raft

prep

aym

ents

- fo

rwar

d ex

chan

ge

cont

ract

s

N

TD/U

SD

N

TD1,

411,

411/

U

SD47

,000

2020

.11.

4

29.6

-30.

5

Fina

ncia

l ass

ets f

or

hedg

ing

- cur

rent

/ lia

bilit

ies f

or h

edgi

ng -

curr

ent

77

18,3

85

The

abov

emen

tione

d he

dgin

g in

stru

men

ts a

pplie

d he

dge

acco

untin

g. T

he b

ook

valu

e of

oth

er

equi

ty f

or e

ach

hedg

ing

item

(ai

rcra

ft re

ntal

s in

U.S

. do

llars

, av

iatio

n fu

el a

nd a

ircra

ft pr

epay

men

ts) w

as $

(8,4

53) t

hous

and,

$(1

0,16

1) th

ousa

nd a

nd $

(18,

308)

thou

sand

, res

pect

ivel

y.

- 68

-

For t

he y

ear e

nded

Dec

embe

r 31,

201

9 C

ompr

ehen

sive

Inco

me

Hed

ging

Gai

n (L

oss)

R

ecog

nize

d in

O

ther

C

ompr

ehen

sive

In

com

e

Am

ount

R

ecla

ssifi

ed to

Pr

ofit

and

Los

s an

d th

e A

djus

ted

Lin

e It

em

C

ash

flow

hed

ge

A

ircra

ft re

ntal

s

$ (3

5,89

7)

$

9,

137

(Not

e)

Avi

atio

n fu

el

(10,

161)

(5

3)

A

ircra

ft pr

epay

men

ts

(1

7,70

5)

-

$ (6

3,76

3)

$

9,

084

N

ote:

D

ecre

ase

in o

pera

ting

cost

s or e

xcha

nge

loss

. A

nd th

e am

ount

of

gain

s an

d lo

sses

on

hedg

ing

inst

rum

ents

for

the

year

end

ed D

ecem

ber

31,

2019

recl

assi

fied

from

pro

fit o

r los

s to

prep

aym

ents

for e

quip

men

t was

$(6

03) t

hous

and.

b)

Inte

rest

rate

risk

Th

e G

roup

ent

ers

into

int

eres

t sw

ap c

ontra

cts

to h

edge

aga

inst

the

ris

ks o

n ch

ange

in

net

liabi

litie

s in

tere

st ra

tes.

The

risk

is m

anag

ed b

y th

e G

roup

by

mai

ntai

ning

an

appr

opria

te m

ix o

f fix

ed a

nd f

loat

ing

rate

bor

row

ings

, and

usi

ng in

tere

st r

ate

swap

con

tract

s an

d fo

rwar

d in

tere

st ra

te c

ontra

cts.

Th

e ca

rryi

ng a

mou

nt o

f th

e G

roup

’s f

inan

cial

ass

ets

and

finan

cial

liab

ilitie

s w

ith e

xpos

ure

to

inte

rest

rate

s at t

he e

nd o

f the

repo

rting

per

iod

wer

e as

follo

ws.

Dec

embe

r 31

20

20

20

19

Fa

ir va

lue

inte

rest

rate

risk

$

68,8

83,6

67

$

91

,414

,806

C

ash

flow

inte

rest

rate

risk

11

2,32

4,30

5

77

,821

,887

Se

nsiti

vity

ana

lysi

s Th

e se

nsiti

vity

ana

lyse

s be

low

wer

e de

term

ined

bas

ed o

n th

e G

roup

’s e

xpos

ure

to in

tere

st ra

tes

for

both

der

ivat

ives

and

non

-der

ivat

ive

inst

rum

ents

at

the

end

of t

he r

epor

ting

perio

d. F

or

float

ing

rate

lia

bilit

ies,

the

anal

ysis

was

pre

pare

d as

sum

ing

the

amou

nt o

f th

e lia

bilit

y ou

tsta

ndin

g at

the

end

of th

e re

porti

ng p

erio

d w

as o

utst

andi

ng f

or th

e w

hole

yea

r. A

one

yar

d (2

5 ba

sis)

poi

nt in

crea

se o

r dec

reas

e w

as u

sed

whe

n re

porti

ng in

tere

st ra

te ri

sk in

tern

ally

to k

ey

man

agem

ent

pers

onne

l an

d re

pres

ents

man

agem

ent’s

ass

essm

ent

of t

he r

easo

nabl

y po

ssib

le

chan

ge in

inte

rest

rate

s.

Had

int

eres

t ra

tes

incr

ease

d by

one

yar

d (2

5 ba

sis)

poi

nts

and

all

othe

r va

riabl

es b

een

held

co

nsta

nt,

the

Gro

up’s

pre

-tax

prof

it fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 20

20 w

ould

hav

e de

crea

sed

by $

280,

811

thou

sand

. H

ad in

tere

st ra

tes

incr

ease

d by

one

yar

d (2

5 ba

sis)

poi

nts

and

had

all o

ther

var

iabl

es b

een

held

co

nsta

nt,

the

Gro

up’s

pre

-tax

prof

it fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 20

19 w

ould

hav

e de

crea

sed

by $

194,

555

thou

sand

.

- 69

-

175

c)

Oth

er p

rice

risk

The

Gro

up w

as e

xpos

ed to

fuel

pric

e ris

k on

its p

urch

ase

of a

viat

ion

fuel

. The

Gro

up e

nter

s int

o fu

el sw

ap c

ontra

cts t

o he

dge

agai

nst a

dver

se ri

sks o

n fu

el p

rice

chan

ges.

D

ecem

ber 3

1, 2

020

N

otio

nal

Line

Item

in

C

arry

ing

Am

ount

H

edgi

ng In

stru

men

t

Cur

renc

y

Am

ount

Mat

urity

Forw

ard

Rat

e

Bal

ance

She

et

A

sset

Liab

ility

Cash

flow

hed

ges -

fu

el o

ptio

ns

U

SD

-

-

-

Fi

nanc

ial a

sset

s for

he

dgin

g - c

urre

nt/

liabi

litie

s for

hed

ging

- cu

rren

t

$

-

$

-

Hed

ge a

ccou

ntin

g co

ntin

ues

to b

e ap

plie

d to

the

abo

vem

entio

ned

hedg

ing

inst

rum

ents

. Th

e ca

rryi

ng a

mou

nt o

f oth

er e

quity

for e

ach

hedg

ing

item

(fue

l pay

men

ts) w

as $

0.

For t

he y

ear e

nded

Dec

embe

r 31,

202

0 C

ompr

ehen

sive

Inco

me

Hed

ging

Gai

n R

ecog

nize

d in

O

ther

C

ompr

ehen

sive

In

com

e

Am

ount

R

ecla

ssifi

ed to

Pr

ofit

and

Los

s an

d th

e A

djus

ted

Lin

e It

em

C

ash

flow

hed

ges -

fuel

opt

ions

$

(5,5

24)

$

(52,

853)

(N

ote)

N

ote:

In

crea

se in

ope

ratin

g co

sts.

Dec

embe

r 31,

201

9

Not

iona

l

Li

ne It

em in

Car

ryin

g A

mou

nt

Hed

ging

Inst

rum

ent

C

urre

ncy

A

mou

nt

M

atur

ity

Fo

rwar

d R

ate

B

alan

ce S

heet

Ass

et

Li

abili

ty

Ca

sh fl

ow h

edge

s -

fuel

opt

ions

USD

NT$

5,52

4

2020

.3.3

1-

2020

.12.

31

U

S$49

.65-

U

S$80

.75

Fi

nanc

ial a

sset

s for

he

dgin

g - c

urre

nt/

liabi

litie

s for

hed

ging

- cu

rren

t

$

9,47

9

$

3,

955

Hed

ge a

ccou

ntin

g co

ntin

ues

to b

e ap

plie

d to

the

abo

vem

entio

ned

hedg

ing

inst

rum

ents

. Th

e ca

rryi

ng a

mou

nt o

f oth

er e

quity

for e

ach

hedg

ing

item

(fue

l pay

men

ts) w

as $

5,52

4 th

ousa

nd.

For t

he y

ear e

nded

Dec

embe

r 31,

201

9 C

ompr

ehen

sive

Inco

me

Hed

ging

Gai

n (L

oss)

R

ecog

nize

d in

O

ther

C

ompr

ehen

sive

In

com

e

Am

ount

R

ecla

ssifi

ed to

Pr

ofit

and

Los

s an

d th

e A

djus

ted

Lin

e It

em

C

ash

flow

hed

ges -

fuel

opt

ions

$

623

$

(13,

597)

(N

ote)

N

ote:

In

crea

se in

ope

ratin

g co

sts.

- 70

-

Sens

itivi

ty a

naly

sis

The

sens

itivi

ty a

naly

sis

belo

w w

as d

eter

min

ed b

ased

on

the

expo

sure

to f

uel p

rice

risks

at t

he

end

of th

e re

porti

ng p

erio

d.

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

Pr

e-ta

x Pr

ofit

Incr

ease

(D

ecre

ase)

Oth

er

Com

pre-

he

nsiv

e In

com

e In

crea

se

(Dec

reas

e)

Pre-

tax

Prof

it In

crea

se

(Dec

reas

e)

Oth

er

Com

pre-

he

nsiv

e In

com

e In

crea

se

(Dec

reas

e)

Fu

el p

rice

incr

ease

of

5%

$

1,

479

$

-

$

-

$

7,

973

Fuel

pric

e de

crea

se o

f 5%

(1

,479

)

-

-

-

2)

C

redi

t ris

k

Cre

dit r

isk

refe

rs to

the

risk

that

a c

ount

erpa

rty w

ill d

efau

lt on

its

cont

ract

ual o

blig

atio

ns re

sulti

ng

in f

inan

cial

loss

to th

e G

roup

. The

Gro

up’s

cre

dit r

isk,

prim

arily

com

es f

rom

acc

ount

s re

ceiv

able

ge

nera

ted

from

ope

ratin

g ac

tiviti

es a

nd b

ank

depo

sits

gen

erat

ed f

rom

inv

estin

g ac

tiviti

es,

fixed

in

vest

men

t inc

ome

and

othe

r fin

anci

al in

stru

men

ts, o

pera

tion

rela

ted

cred

it ris

k an

d fin

anci

al c

redi

t ris

k ar

e m

anag

ed se

para

tely

.

Ope

ratio

n - r

elat

ed c

redi

t ris

k Th

e G

roup

has

est

ablis

hed

proc

edur

es to

man

agem

ent o

pera

tions

rela

ted

cred

it ris

k to

mai

ntai

n th

e qu

ality

of a

ccou

nts r

ecei

vabl

e.

To a

sses

s in

divi

dual

cus

tom

ers,

the

Gro

up c

onsi

der

into

the

finan

cial

con

ditio

n of

the

cust

omer

s, th

e cr

edit

ratin

g ag

ency

rat

ing,

the

Gro

up’s

int

erna

l cr

edit

ratin

g, t

rans

actio

n hi

stor

y an

d cu

rren

t ec

onom

ic c

ondi

tions

and

man

y ot

her f

acto

rs th

at m

ay a

ffec

t the

repa

ymen

t. So

met

imes

, the

Gro

up

uses

cer

tain

cre

dit

enha

ncem

ent

tool

s to

red

uce

the

cred

it ris

k of

spe

cific

cus

tom

ers.

Sinc

e th

e cu

stom

ers

of th

e in

dust

ry is

dis

pers

ed a

nd n

on-re

late

d, th

e cr

edit

risk

conc

entra

tion

is n

ot c

ritic

al

avia

tion.

Fi

nanc

ial c

redi

t ris

k C

redi

t ris

k on

ban

k de

posi

ts, i

nves

tmen

ts in

com

e an

d ot

her f

inan

cial

inst

rum

ents

are

mea

sure

d an

d m

onito

r by

the

Gro

up’s

fin

ance

dep

artm

ent.

The

Gro

up’s

trad

ing

partn

ers

and

othe

r pa

rties

wer

e w

ell-p

erfo

rmin

g ba

nks

and

finan

cial

inst

itutio

ns, c

orpo

ratio

ns, a

nd g

over

nmen

t age

ncie

s, an

d so

the

risk

of c

ount

erpa

rties

fai

ling

to d

isch

arge

an

oblig

atio

n is

low

; th

eref

ore,

the

re i

s no

sig

nific

ant

cred

it ris

k.

- 71

-

176

3)

Liqu

idity

risk

Th

e ob

ject

ive

of t

he G

roup

’s m

anag

emen

t of

liq

uidi

ty i

s to

mai

ntai

n ca

sh a

nd c

ash

equi

vale

nts

suff

icie

nt f

or o

pera

ting

purp

oses

, mar

keta

ble

secu

ritie

s w

ith h

igh

liqui

dity

and

loan

com

mitm

ents

th

at a

re su

ffic

ient

to e

nsur

e th

at th

e G

roup

has

ade

quat

e fin

anci

al fl

exib

ility

.

Unu

sed

Ban

k L

oan

Lim

it (U

nsec

ured

)

Th

e G

roup

(Chi

na A

irlin

es, L

td.,

Man

darin

Airl

ines

and

Tig

erai

r Tai

wan

Co.

, Lt

d.)

$

22

,429

,000

Li

quid

ity a

nd in

tere

st ri

sk ra

te ta

ble

The

follo

win

g ta

ble

show

s th

e re

mai

ning

con

tract

ual

mat

urity

ana

lysi

s of

the

Gro

up’s

fin

anci

al

liabi

litie

s w

ith a

gree

d-up

on r

epay

men

t pe

riods

, whi

ch w

ere

base

d on

the

date

the

Gro

up m

ay b

e re

quire

d to

pay

the

first

repa

ymen

t and

fina

ncia

l lia

bilit

ies

is e

valu

ated

bas

ed o

n un

disc

ount

ed c

ash

flow

s, in

clud

ing

cash

flow

s of i

nter

est a

nd p

rinci

pal.

Ban

k lo

ans

with

a r

epay

men

t on

dem

and

clau

se w

ere

incl

uded

in th

e se

cond

col

umn

of th

e ta

ble

belo

w r

egar

dles

s of

whe

ther

or

not

the

bank

s w

ould

cho

ose

to e

xerc

ise

early

the

ir rig

hts

to

repa

ymen

t. Th

e m

atur

ity d

ates

for

oth

er n

on-d

eriv

ativ

e fin

anci

al l

iabi

litie

s w

ere

base

d on

the

ag

reed

-upo

n re

paym

ent d

ates

. The

Gro

up’s

liqu

idity

ana

lysi

s for

its d

eriv

ativ

e fin

anci

al in

stru

men

ts

is a

lso

show

n in

the

follo

win

g ta

ble.

The

tabl

e w

as b

ased

on

the

undi

scou

nted

con

tract

ual n

et c

ash

inflo

ws a

nd o

utflo

ws o

n de

rivat

ive

inst

rum

ents

that

settl

e on

a n

et b

asis

, and

the

undi

scou

nted

gro

ss

cash

inf

low

s an

d ou

tflow

s on

tho

se d

eriv

ativ

es t

hat

requ

ire g

ross

set

tlem

ent.

Whe

n th

e am

ount

pa

yabl

e or

rec

eiva

ble

is n

ot f

ixed

, the

am

ount

dis

clos

ed h

as b

een

dete

rmin

ed b

y re

fere

nce

to th

e pr

ojec

ted

inte

rest

rate

s as i

llust

rate

d by

yie

ld c

urve

s at t

he e

nd o

f the

repo

rting

per

iod.

D

ecem

ber 3

1, 2

020

The

Wei

ghte

d A

vera

ge

Eff

ectiv

e In

tere

st R

ate

(%)

L

ess t

han

1 Y

ear

1

to 5

Yea

rs

O

ver

5 Y

ears

Le

ase

liabi

litie

s

1.11

28

$

3,

494,

299

$

9,

770,

964

$

7,

982,

767

Floa

ting

inte

rest

rate

lia

bilit

ies

1.

6269

26

,195

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60

,977

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D

eriv

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stru

men

ts

3.04

92

9,24

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9

32

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449

Bon

ds p

ayab

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4622

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9,

303,

608

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0,77

8

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51

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30,4

07

$

28

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-

Dec

embe

r 31,

201

9

The

Wei

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Eff

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st R

ate

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ear

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O

ver

5 Y

ears

Le

ase

liabi

litie

s

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13

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3,

357,

996

$

10

,622

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$

8,94

9,19

4 Fl

oatin

g in

tere

st ra

te

liabi

litie

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58

15,2

54,6

87

36,2

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85,6

64

Der

ivat

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383,

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$

39,4

97,4

10

$

106

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$

35,4

91,5

92

33

. R

EL

AT

ED

-PA

RT

Y T

RA

NSA

CT

ION

S Th

e tra

nsac

tions

, acc

ount

bal

ance

s, in

com

e an

d ex

pens

es b

etw

een

rela

ted

parti

es w

ere

elim

inat

ed fr

om th

e co

nsol

idat

ed re

port

and,

ther

efor

e, w

ere

not d

iscl

osed

in th

is n

ote.

Exc

ept f

or th

e di

sclo

sure

s st

ated

in o

ther

no

tes,

trans

actio

ns b

etw

een

the

Gro

up a

nd it

s rel

ated

par

ties a

re d

iscl

osed

bel

ow:

a.

Rel

ated

par

ties’

nam

es a

nd re

latio

nshi

ps

N

ame

R

elat

ions

hip

with

the

Com

pany

D

ynas

ty H

olid

ays

Ass

ocia

te (b

ecom

e as

soci

ate

in Ja

nuar

y 20

19)

Chi

na A

ircra

ft Se

rvic

e A

ssoc

iate

A

irpor

t Air

Car

go T

erm

inal

(Xia

men

) Co.

, Ltd

. A

ssoc

iate

A

irpor

t Air

Car

go S

ervi

ce (X

iam

en) C

o., L

td.

Ass

ocia

te

East

ern

Uni

ted

Inte

rnat

iona

l Log

istic

s (H

ong

Kon

g)

Ass

ocia

te

Chi

na P

acifi

c C

ater

ing

Serv

ices

J

oint

ven

ture

inve

stm

ent

Chi

na P

acifi

c La

undr

y Se

rvic

es

Joi

nt v

entu

re in

vest

men

t N

OR

DA

M A

sia

Ltd.

J

oint

ven

ture

inve

stm

ent

Del

ica

Inte

rnat

iona

l Co.

, Ltd

. J

oint

ven

ture

inve

stm

ent

Chi

na A

viat

ion

Dev

elop

men

t Fou

ndat

ion

Dire

ctor

of t

he C

ompa

ny a

nd m

ajor

shar

ehol

der

Oth

ers

Dire

ctor

, key

man

agem

ent p

erso

nnel

, cha

irman

, ge

nera

l man

ager

of t

he G

roup

, spo

use

and

seco

nd-d

egre

e re

lativ

e b.

O

pera

ting

inco

me

Fo

r th

e Y

ear

End

ed D

ecem

ber

31

Acc

ount

Item

s

Rel

ated

Par

ty T

ype

20

20

20

19

Oth

er in

com

e M

ajor

shar

ehol

der o

f the

C

ompa

ny

$

5,

097

$

25

,457

A

ssoc

iate

$

122

$

1,

239

J

oint

ven

ture

inve

stm

ent

$

22

,445

$

42,4

57

- 73

-

177

c.

Purc

hase

s

F

or th

e Y

ear

End

ed D

ecem

ber

31

Rel

ated

Par

ty T

ype

20

20

20

19

M

ajor

shar

ehol

der o

f the

Com

pany

$

11,4

17

$

56

,474

A

ssoc

iate

$

457,

005

$

41

4,10

6 Jo

int v

entu

re in

vest

men

t

$

516,

347

$

1,9

11,0

91

d.

Acc

ount

s rec

eiva

ble

- rel

ated

par

ties (

gene

rate

d by

ope

ratio

ns)

D

ecem

ber

31

Rel

ated

Par

ty T

ype

20

20

20

19

Jo

int v

entu

re in

vest

men

t

$

1,66

7

$

7,76

0 M

ajor

shar

ehol

der o

f the

Com

pany

-

2,58

8

$

1,66

7

$

10,3

48

The

rece

ivab

les

are

not g

uara

ntee

d, a

nd th

ere

is n

o al

low

ance

for d

oubt

ful a

ccou

nts

rela

ted

to a

ccou

nts

rece

ivab

le -

rela

ted

parti

es. T

he p

aym

ent p

erio

ds o

f suc

h ac

coun

ts w

ere

with

in 3

0 to

90

days

, and

ther

e ar

e no

ove

rdue

pay

men

ts.

e.

A

ccou

nts p

ayab

le -

rela

ted

parti

es (g

ener

ated

by

oper

atio

ns)

D

ecem

ber

31

Rel

ated

Par

ty T

ype

20

20

20

19

A

ssoc

iate

$

52,1

87

$

51

,333

Jo

int v

entu

re in

vest

men

t

76

,380

48

4,70

0 M

ajor

shar

ehol

der o

f the

Com

pany

-

5,98

2

$

128,

567

$

54

2,01

5 Th

e re

mai

ning

bal

ance

of n

otes

and

acc

ount

s pay

able

- re

late

d pa

rties

will

be

paid

in c

ash

if th

ey a

re n

ot

secu

red.

f. Le

ases

of p

rope

rties

(ope

ratin

g le

ases

) U

nder

an

oper

atin

g le

ase

agre

emen

t, th

e C

ompa

ny re

nted

flig

ht tr

aini

ng m

achi

nes

and

fligh

t sim

ulat

ors

from

Chi

na A

viat

ion

Dev

elop

men

t Fo

unda

tion

to tr

ain

pilo

ts, t

he C

ompa

ny p

aid

the

rent

al b

ased

on

usag

e ho

urs.

In 2

020

and

2019

, the

Com

pany

had

pai

d re

ntal

s of

abo

ut $

11,4

17 th

ousa

nd a

nd $

56,4

74

thou

sand

, res

pect

ivel

y.

g.

Endo

rsem

ents

and

gua

rant

ees

D

ecem

ber

31

2020

2019

Aut

hori

zed

Am

ount

Act

ual

Am

ount

Use

d

Aut

hori

zed

Am

ount

Act

ual

Am

ount

Use

d Th

e C

ompa

ny

C

AL

Park

$ 3

,850

,000

$ 1

,892

,540

$ 3

,850

,000

$ 2

,129

,400

Ta

iwan

Air

Car

go T

erm

inal

-

-

1,

080,

000

- Ti

gera

ir Ta

iwan

2,

656,

591

265,

062

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8

68

5,44

4 Ta

iwan

Air

Cra

ft M

aint

enan

ce

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0,00

0

1,

336,

000

2,00

0,00

0

1,

279,

827

- 74

-

h.

Com

pens

atio

n of

key

man

agem

ent p

erso

nnel

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

Sh

ort-t

erm

em

ploy

ee b

enef

its

$

33

,376

$

39,6

93

Post

-em

ploy

men

t ben

efits

2,

525

2,36

2

$

35,9

01

$

42

,055

Th

e re

mun

erat

ion

of d

irect

ors

and

key

exec

utiv

es w

as d

eter

min

ed b

y th

e re

mun

erat

ion

com

mitt

ee

havi

ng re

gard

to th

e pe

rfor

man

ce o

f ind

ivid

uals

and

mar

ket t

rend

s.

34.

PLE

DG

ED

ASS

ET

S Th

e fo

llow

ing

asse

ts w

ere

pled

ged

or m

ortg

aged

as

colla

tera

l for

long

-term

ban

k lo

ans,

leas

e ob

ligat

ions

an

d bu

sine

ss tr

ansa

ctio

ns:

Dec

embe

r 31

20

20

20

19

Pr

oper

ty, p

lant

and

equ

ipm

ent

$

34

,170

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$

31,2

60,8

01

Rig

ht-o

f-us

e as

sets

59,8

61,5

37

71,0

33,6

17

Res

trict

ed a

sset

s - n

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urre

nt

Pled

ged

certi

ficat

e de

posi

ts

30

2,80

7

13

0,05

2

$

94,3

34,4

20

$

102

,424

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35

. C

OM

MIT

ME

NT

S A

ND

CO

NT

ING

EN

T L

IAB

ILIT

IES

As

of D

ecem

ber 3

1, 2

020,

exc

ept f

or th

e di

sclo

sure

s st

ated

in o

ther

not

es, t

he G

roup

had

com

mitm

ents

and

co

ntin

gent

liab

ilitie

s as f

ollo

ws:

a.

Taiw

an A

ir C

argo

Ter

min

al C

o. (

TACT

) si

gned

a t

erm

inal

con

stru

ctio

n co

ntra

ct w

ith t

he C

ivil

Aer

onau

tics

Adm

inis

tratio

ns (

CA

A) o

n Ja

nuar

y 14

, 200

0. T

he c

harte

red

oper

atio

n pe

riod

(CO

P) is

20

year

s fr

om t

he d

ate

of t

rans

fer

of t

he c

harte

red

oper

atio

n rig

hts

from

CA

A t

o TA

CT.

The

ter

min

al

expa

nsio

n an

d im

prov

emen

ts a

nd t

he e

quip

men

t in

stal

latio

n an

d up

grad

e in

the

Tai

wan

Tao

yuan

In

tern

atio

nal A

irpor

t car

go te

rmin

al a

nd K

aohs

iung

car

go te

rmin

al w

ere

expe

cted

to b

e co

mpl

eted

in

the

first

10

year

s of

the

COP.

Thi

s co

nstru

ctio

n pr

ojec

t was

app

rove

d by

TA

CT’

s bo

ard

of d

irect

ors

in

2003

. TA

CT

filed

an

appl

icat

ion

for

a 10

-yea

r ex

tens

ion

of t

he C

OP

for

the

carg

o te

rmin

als

in t

he

Taiw

an T

aoyu

an I

nter

natio

nal A

irpor

t and

Kao

hsiu

ng I

nter

natio

nal A

irpor

t and

rec

eive

d th

e ap

prov

al

from

the

Taoy

uan

Airp

ort C

orpo

ratio

n an

d C

AA

in Ju

ly 2

013

and

July

201

5, re

spec

tivel

y.

The

orig

inal

tot

al e

xpen

ditu

re o

f th

e pr

evio

us m

ain

cons

truct

ion

proj

ect

was

$8,

490,

000

thou

sand

. H

owev

er,

TACT

file

d an

arb

itrat

ion

for

the

tota

l am

ount

of

expe

nditu

re i

n 20

12 t

o re

vise

the

tot

al

amou

nt to

$6,

840,

000

thou

sand

.

- 75

-

178

As

of D

ecem

ber

31,

2020

, TA

CT h

ad s

igne

d th

e fo

llow

ing

cons

truct

ion

cont

ract

s w

ith u

nrel

ated

pa

rties

:

Clie

nt N

ame

C

ontr

act T

itle

Con

trac

t A

mou

nt (V

AT

In

clud

ed)

C

ECI E

ngin

eerin

g C

onsu

ltant

, Inc

., Ta

iwan

C

argo

Ter

min

al E

xpan

sion

Con

stru

ctio

n C

onsu

ltant

C

ontra

ct

$

552

,285

Bin

Li C

onst

ruct

ion

Co.

, Lt

d., T

aiw

an

Car

go T

erm

inal

Exp

ansi

on a

nd E

nhan

cem

ent

Con

stru

ctio

n

27

5,00

0

Trad

e-V

an In

form

atio

n Se

rvic

es C

o.

TA

CT w

areh

ouse

man

agem

ent s

yste

m in

tegr

ated

re

visi

on c

ontra

ct

30,0

00

As

of D

ecem

ber

31, 2

020,

the

cum

ulat

ed c

onsu

ltant

ser

vice

exp

ense

and

con

stru

ctio

n eq

uipm

ent h

ad

amou

nted

to

$4

87,6

45

thou

sand

(V

AT

incl

uded

) an

d $5

,372

,129

th

ousa

nd

(VA

T in

clud

ed),

resp

ectiv

ely.

Upo

n co

mpl

etio

n of

the

proj

ects

, the

am

ount

of

$468

,754

thou

sand

(V

AT

incl

uded

) an

d $5

,306

,700

tho

usan

d (V

AT

incl

uded

) w

ere

recl

assi

fied

to p

rope

rty,

plan

t, an

d eq

uipm

ent.

The

rem

aini

ng c

umul

ativ

e pa

ymen

ts w

ere

reco

gniz

ed u

nder

con

stru

ctio

n in

pro

gres

s. A

sset

s ac

quire

d fr

om c

argo

term

inal

impr

ovem

ents

, equ

ipm

ent a

cqui

sitio

n an

d su

bseq

uent

equ

ipm

ent

acqu

isiti

on a

nd re

plac

emen

t will

be

trans

ferr

ed to

the

gove

rnm

ent w

ithou

t any

com

pens

atio

n w

hen

the

char

tere

d op

erat

ing

licen

se e

xpire

s. TA

CT s

houl

d pa

y ro

yalti

es t

o Ta

oyua

n A

irpor

t C

orpo

ratio

n an

d th

e C

AA

dur

ing

the

char

tere

d op

erat

ion

perio

d. T

he c

alcu

latio

n is

bas

ed o

n an

nual

sal

es (

incl

udin

g op

erat

ing

and

non-

oper

atin

g re

venu

e bu

t exc

ludi

ng th

e re

ntal

reve

nue

from

spe

cific

dis

trict

s), a

nd T

aoyu

an A

irpor

t Cor

pora

tion

and

the

CA

A h

ave

the

optio

n to

adj

ust t

he ro

yalty

rate

s eve

ry 3

yea

rs st

artin

g fr

om th

e da

te o

f tra

nsfe

r of t

he

char

tere

d op

erat

ion

right

s on

the

basi

s of

act

ual r

even

ue a

nd e

xpen

ditu

res.

The

curr

ent r

oyal

ty r

ate

is 6%

.

b.

CA

L Pa

rk C

o., L

td. (

“CA

L Pa

rk”)

sig

ned

“Tai

wan

Tao

yuan

Int

erna

tiona

l Airp

ort A

viat

ion

Ope

ratio

n C

ente

r (in

clud

ing

Airp

ort

Hot

el)

Con

stru

ctio

n O

pera

ting

Con

tract

” w

ith t

he C

AA

on

Sept

embe

r 20

, 20

06. H

owev

er, o

n N

ovem

ber 1

, 201

0, th

e Ta

oyua

n A

irpor

t Cor

pora

tion

took

ove

r the

CA

A’s

righ

ts o

n th

is c

ontra

ct fr

om th

e C

AA

. The

con

tract

is e

ffec

tive

for 5

0 ye

ars

(con

sist

ing

of th

e de

velo

pmen

t sta

ge

and

oper

atin

g pe

riod)

from

the

cont

ract

dat

e. T

hree

yea

rs b

efor

e co

ntra

ct e

xpiry

dat

e, C

AL

Park

has

the

first

opt

ion

to re

new

the

cont

ract

onc

e w

ith a

20-

year

ext

ensio

n.

CA

L Pa

rk’s

bus

ines

s sc

ope

incl

udes

pro

vidi

ng b

usin

ess

and

othe

r op

erat

ing

spac

e re

late

d to

civ

il ai

r tra

nspo

rt, h

otel

s, av

iatio

n se

rvic

e an

d re

late

d in

dust

ries

adhe

red

to th

e ba

se a

nd e

ssen

tial s

ervi

ces

law

an

d ap

prov

ed b

y th

e Ta

oyua

n A

irpor

t Cor

pora

tion.

C

AL

Park

sho

uld

pay

land

ren

tals

on

the

date

of t

he re

gist

ratio

n of

sur

face

righ

ts. T

he re

ntal

rate

s fo

r th

e de

velo

pmen

t sta

ge d

iffer

from

thos

e fo

r the

ope

ratio

n pe

riod.

The

rent

al ra

tes

shou

ld fo

llow

Arti

cle

No.

2 o

f th

e “R

egul

atio

ns f

or F

avor

able

Ren

tals

Reg

ardi

ng P

ublic

Lan

d Le

ase

and

Supe

rfic

ies

in

Infr

astru

ctur

e Pr

ojec

ts,”

whi

ch st

ates

that

rent

al c

alcu

latio

n in

the

deve

lopm

ent s

tage

sho

uld

incl

ude

the

land

val

ue a

dded

tax

plus

the

nece

ssar

y m

aint

enan

ce fe

e; in

the

oper

atio

n pe

riod,

rent

als

are

60%

of t

he

amou

nt b

ased

on

the

Nat

iona

l Bui

ldin

g La

nd R

enta

l Sta

ndar

d pl

us la

nd v

alue

tax,

val

ue-a

dded

tax

and

the

nece

ssar

y m

aint

enan

ce fe

e.

Dur

ing

the

50 y

ears

beg

inni

ng fr

om th

e in

itial

ope

ratio

n da

te o

f CA

L Pa

rk to

the

end

of th

e co

nstru

ctio

n pe

riod,

CA

L Pa

rk sh

ould

pay

roya

lties

bas

ed o

n th

e op

erat

ing

reve

nue

estim

ated

in th

e fin

anci

al p

lan

of

its in

vest

men

t exe

cutio

n pr

opos

al. I

f th

e sa

les

and

busi

ness

tax

decl

ared

and

file

d by

a b

usin

ess

entit

y fo

r a

sing

le y

ear

exce

eds

10%

of

the

oper

atin

g re

venu

e as

esti

mat

ed i

n th

e fin

anci

al p

lan

in i

ts in

vest

men

t exe

cutio

n pr

opos

al, C

AL

Park

shou

ld p

ay a

dditi

onal

roya

lties

at 1

0% o

f thi

s exc

ess.

- 76

-

CA

L Pa

rk s

houl

d su

bmit

the

asse

t tra

nsfe

r pla

n w

ithin

five

yea

rs b

efor

e th

e ex

piry

dat

e of

the

char

tere

d op

erat

ion

perio

d, b

egin

the

nego

tiatio

n of

the

asse

t tra

nsfe

r co

ntra

ct, a

nd c

ompl

ete

the

assi

gnat

ion

no

late

r th

an th

ree

year

s be

fore

the

expi

ry d

ate

of th

e ch

arte

red

perio

d. I

f C

AA

dec

ides

not

to k

eep

the

build

ing

and

equi

pmen

t on

the

base

are

a, C

AL

Park

sho

uld

rem

ove

all r

elat

ed b

uild

ing

and

equi

pmen

t w

ithin

thre

e m

onth

s afte

r the

exp

iry d

ate.

c.

In O

ctob

er 2

019,

the

Com

pany

sig

ned

a co

ntra

ct w

ith A

irbus

S.A

.S.

to p

urch

ase

elev

en A

321n

eo

airc

raft

and

an o

ptio

n to

pur

chas

e fiv

e A

321n

eo a

ircra

ft. T

he t

otal

list

pric

e of

the

ele

ven

airc

raft

is

US$

1,67

6,41

3 th

ousa

nd,

and

the

list

pric

e of

the

opt

ion

to p

urch

ase

five

airc

raft

is U

S$76

9,92

2 th

ousa

nd.

The

expe

cted

del

iver

y pe

riod

of t

he e

leve

n ai

rcra

ft ra

nges

fro

m 2

024

to 2

026.

As

of

Dec

embe

r 31

, 202

0, th

e lis

t pric

e ha

s be

en p

aid

in th

e am

ount

of

US$

32,5

78 th

ousa

nd (r

ecog

nize

d as

pr

epay

men

ts f

or a

ircra

ft). I

n O

ctob

er 2

019,

the

Com

pany

sig

ned

a co

ntra

ct w

ith I

nter

natio

nal

Aer

o En

gine

s C

ompa

ny to

pur

chas

e fo

ur b

acku

p en

gine

s of

A32

1neo

. The

tota

l lis

t pric

e of

the

four

eng

ines

is

US$

60,2

89 th

ousa

nd.

d.

In J

uly

and

Aug

ust 2

019,

the

Com

pany

sig

ned

a co

ntra

ct w

ith th

e B

oein

g C

ompa

ny to

pur

chas

e th

ree

B77

7F a

ircra

ft an

d ex

erci

sed

the

optio

n to

pur

chas

e th

ree

B77

7F a

ircra

ft. T

he to

tal l

ist p

rice

of th

e si

x ai

rcra

ft is

US$

2,32

0,31

5 th

ousa

nd,

and

the

expe

cted

del

iver

y pe

riod

is f

rom

202

0 to

202

3. A

s of

D

ecem

ber

31, 2

020,

two

out o

f th

e si

x ai

rcra

ft ha

s be

en d

eliv

ered

, the

list

pric

e ha

d be

en p

aid

in th

e am

ount

of U

S$12

2,18

6 th

ousa

nd (r

ecog

nize

d as

pre

paym

ents

for a

ircra

ft), a

nd th

e to

tal l

ist p

rice

of th

e re

mai

ning

four

airc

raft

is U

S$1,

552,

879.

e.

In

Oct

ober

201

9, T

iger

air

Taiw

an C

o., L

td. s

igne

d a

cont

ract

with

Airb

us S

.A.S

. to

purc

hase

sev

en

A32

0neo

airc

raft

and

an o

ptio

n to

pur

chas

e tw

o A

320n

eo a

ircra

ft. T

he t

otal

lis

t pr

ice

of t

he s

even

ai

rcra

ft is

US$

729,

746

thou

sand

, and

the

list p

rice

of th

e op

tion

to p

urch

ase

two

airc

raft

is U

S$20

8,49

9 th

ousa

nd. T

he e

xpec

ted

deliv

ery

perio

d of

the

seve

n ai

rcra

ft ra

nges

from

202

5 to

202

7. A

s of D

ecem

ber

31, 2

020,

the

list p

rice

has b

een

paid

in th

e am

ount

of U

S$18

,549

thou

sand

(rec

ogni

zed

as p

repa

ymen

ts

for

airc

raft)

. In

add

ition

, in

Dec

embe

r 20

19,

Tige

rair

Taiw

an C

o.,

Ltd.

sig

ned

a co

ntra

ct w

ith

Inte

rnat

iona

l Aer

o En

gine

s Com

pany

to p

urch

ase

two

back

up e

ngin

es o

f A32

0neo

airc

raft.

The

tota

l lis

t pr

ice

of th

e tw

o en

gine

s is

US$

27,3

45 th

ousa

nd. A

s of

Dec

embe

r 31,

202

0, th

e lis

t pric

e ha

s be

en p

aid

in t

he a

mou

nt o

f U

S$2,

988

thou

sand

(re

cogn

ized

as

prep

aym

ents

for

airc

raft)

. In

Feb

ruar

y 20

20,

Tige

rair

Taiw

an C

o.,

Ltd.

ren

ted

thre

e A

320-

neo

airc

raft

from

Sky

Hig

h 11

7 Le

asin

g C

ompa

ny

Lim

ited,

one

A32

0-ne

o ai

rcra

ft fr

om S

ky H

igh

118

Leas

ing

Com

pany

Lim

ited,

one

A32

0-ne

o ai

rcra

ft fr

om S

ky H

igh

119

Leas

ing

Com

pany

Lim

ited

and

one

A32

0-ne

o ai

rcra

ft fr

om S

ky H

igh

120

Leas

ing

Com

pany

Lim

ited.

The

tota

l lis

t pric

e w

as a

roun

d U

S$25

0,00

0 th

ousa

nd a

nd le

ase

paym

ent w

ill c

hang

e on

the

bas

is o

f ac

tual

diff

eren

ces

of t

he y

ear.

The

airc

raft

was

ini

tially

sch

edul

ed t

o be

del

iver

ed

betw

een

2021

and

202

4. A

s of

Dec

embe

r 31

, 202

0, o

ne a

ircra

ft th

at w

as s

uppo

sed

to b

e de

liver

ed in

20

21 h

ad b

een

post

pone

d.

36

. IM

PAC

T O

F C

OV

ID-1

9 Si

nce

the

outb

reak

of

the

Cov

id-1

9 in

Jan

uary

202

0, t

he c

oron

aviru

s ha

s be

com

e a

pand

emic

. Th

e pa

ndem

ic h

as n

ow s

prea

d ar

ound

the

wor

ld a

nd m

ost c

ount

ries

have

not

rem

oved

thei

r tra

vel r

estri

ctio

ns.

Bec

ause

the

num

ber o

f inb

ound

and

out

boun

d pa

ssen

gers

has

dec

reas

ed si

gnifi

cant

ly, t

he G

roup

adj

usts

the

prop

ortio

n be

twee

n pa

ssen

ger

airc

raft

and

carg

o ai

rcra

ft us

ed

in

oper

atio

ns

to

com

ply

with

th

e go

vern

men

t’s e

pide

mic

pre

vent

ion

polic

y an

d ca

ter t

o m

arke

t dem

and.

The

Com

pany

redu

ces t

he fr

eque

ncy

of p

asse

nger

air

serv

ices

that

hav

e be

en s

ever

ely

affe

cted

, use

s th

e pa

ssen

ger

airc

raft

to s

uppo

rt th

e ca

rgo

fligh

t ar

rang

emen

t an

d ex

pand

s th

e fu

nctio

n of

all-

carg

o ai

rcra

ft to

max

imiz

e th

e op

portu

nitie

s fr

om a

ir ca

rgo

busi

ness

. Sin

ce M

arch

202

0, c

argo

has

bec

ome

the

mai

n so

urce

of r

even

ue fo

r the

Gro

up.

- 77

-

179

The

Gro

up c

ontin

ues

to a

djus

t the

res

pons

e m

easu

res

acco

rdin

g to

the

situ

atio

n. In

add

ition

, to

ensu

re th

e ad

equa

te l

iqui

dity

, th

e G

roup

als

o im

plem

ents

mea

sure

s fo

r hu

man

res

ourc

e m

anag

emen

t su

ch a

s po

stpo

ning

the

hirin

g of

new

com

ers,

rela

xing

the

appl

icat

ion

of s

peci

al le

ave,

loos

enin

g th

e re

stric

tions

on

leav

e w

ithou

t pa

y, e

ncou

ragi

ng e

mpl

oyee

s to

tak

e le

ave,

adj

ustin

g w

orki

ng h

ours

and

sal

arie

s, et

c. T

he

Gro

up’s

pol

icie

s to

con

trol s

pend

ing

incl

ude

susp

ensi

on o

f no

n-ur

gent

cap

ital e

xpen

ditu

res,

redu

ctio

n in

an

d po

stpo

nem

ent o

f pay

men

ts.

Als

o, th

e G

roup

rece

ived

seve

ral r

emed

y m

easu

res

such

as g

over

nmen

t sub

sidy

for o

pera

tion

and

redu

ctio

n on

ren

t. In

202

0, b

ecau

se o

f th

e C

ovid

-19,

the

Gro

up r

ecei

ved

subs

idy

of $

1,29

3,38

8 th

ousa

nd f

or t

he

airp

ort l

andi

ng fe

es a

nd p

arki

ng fe

es, e

tc. T

he s

ubsi

dy fo

r hou

sing

and

land

rent

al, a

nd sa

lary

exp

ense

s w

as

$961

,208

thou

sand

, rec

ogni

zed

as d

educ

tion

from

oth

er in

com

e an

d ex

pens

es.

Th

e G

roup

has

obt

aine

d re

lief l

oan

from

the

gove

rnm

ent.

Ref

er to

Not

e 19

for d

etai

ls o

n th

e am

ount

of l

oan

and

its a

lloca

tion.

37

. SI

GN

IFIC

AN

T A

SSE

TS

AN

D L

IAB

ILIT

IES

DE

NO

MIN

AT

ED

IN F

OR

EIG

N C

UR

RE

NC

IES

The

follo

win

g in

form

atio

n w

as a

ggre

gate

d by

the

fore

ign

curr

enci

es o

ther

than

func

tiona

l cur

renc

ies

of th

e gr

oup

entit

ies

and

the

exch

ange

rate

s be

twee

n fo

reig

n cu

rren

cies

and

resp

ectiv

e fu

nctio

nal c

urre

ncie

s w

ere

disc

lose

d. T

he si

gnifi

cant

ass

ets a

nd li

abili

ties d

enom

inat

ed in

fore

ign

curr

enci

es w

ere

as fo

llow

s:

Dec

embe

r 31,

202

0

Fore

ign

Cur

renc

ies (

In

Tho

usan

ds)

E

xcha

nge

Rat

e

Car

ryin

g A

mou

nt

Fi

nanc

ial a

sset

s

Mon

etar

y ite

ms

USD

$

702,

507

28

.409

1

$

19,9

57,5

98

EUR

18

,250

34.8

432

635,

899

HK

D

344,

577

3.

6603

1,

261,

257

JPY

3,

475,

525

0.

2750

95

5,76

9 C

NY

56

0,25

2

4.34

40

2,43

3,73

7

Fina

ncia

l lia

bilit

ies

M

onet

ary

item

s

U

SD

2,20

8,21

4

28.4

091

62,7

33,3

83

EUR

6,

513

34

.843

2

22

6,94

9 H

KD

73

,825

3.66

03

270,

223

JPY

3,

725,

514

0.

2750

1,

024,

509

CN

Y

144,

376

4.

3440

62

7,16

8

- 78

-

Dec

embe

r 31,

201

9

Fore

ign

Cur

renc

ies (

In

Tho

usan

ds)

E

xcha

nge

Rat

e

Car

ryin

g A

mou

nt

Fi

nanc

ial a

sset

s

Mon

etar

y ite

ms

USD

$

658,

407

30

.030

0

$

19,7

71,9

57

EUR

18

,401

33.6

700

619,

571

HK

D

228,

234

3.

8595

88

0,86

8 JP

Y

6,26

2,27

2

0.27

66

1,73

2,13

0 C

NY

42

5,34

3

4.30

48

1,83

1,01

2

Fina

ncia

l lia

bilit

ies

M

onet

ary

item

s

U

SD

2,48

0,89

6

30.0

300

74,5

01,3

05

EUR

7,

638

33

.670

0

25

7,15

5 H

KD

74

,651

3.85

95

288,

117

JPY

6,

584,

434

0.

2766

1,

821,

237

CN

Y

153,

196

4.

3048

65

9,47

8 Fo

r th

e ye

ars

ende

d D

ecem

ber

31, 2

020

and

2019

, the

Gro

up’s

net

for

eign

exc

hang

e ga

in (

loss

es)

wer

e $5

27,2

34 th

ousa

nd a

nd $

(141

,611

) tho

usan

d, re

spec

tivel

y. It

is im

prac

tical

to d

iscl

ose

net f

orei

gn e

xcha

nge

gain

s (lo

sses

) by

eac

h si

gnifi

cant

for

eign

cur

renc

y du

e to

the

varie

ty o

f th

e fo

reig

n cu

rren

cy tr

ansa

ctio

ns

and

func

tiona

l cur

renc

ies o

f the

ent

ities

in th

e G

roup

.

38.

AD

DIT

ION

AL

DIS

CL

OSU

RE

S a.

Fo

llow

ing

are

the

addi

tiona

l dis

clos

ures

requ

ired

by th

e Se

curit

ies a

nd F

utur

es B

urea

u fo

r the

Com

pany

an

d its

inve

stee

s: 1

) Fin

anci

ng p

rovi

ded:

Tab

le 1

(atta

ched

). 2

) End

orse

men

ts/g

uara

ntee

s pro

vide

d: T

able

2 (a

ttach

ed).

3) M

arke

tabl

e se

curit

ies h

eld:

Tab

le 3

(atta

ched

). 4

) Mar

keta

ble

secu

ritie

s ac

quire

d an

d di

spos

ed o

f at c

osts

or p

rices

of a

t lea

st N

T$30

0 m

illio

n or

20%

of

the

paid

-in c

apita

l: N

one.

5

) Acq

uisi

tions

of

indi

vidu

al r

eal e

stat

es a

t cos

ts o

r pr

ice

of a

t lea

st N

T$30

0 m

illio

n or

20%

of

the

paid

-in c

apita

l: N

one

6)

Dis

posa

ls o

f in

divi

dual

rea

l es

tate

s at

cos

ts o

r pr

ices

of

at l

east

NT$

300

mill

ion

or 2

0% o

f th

e pa

id-in

cap

ital:

Non

e 7

) Tot

al p

urch

ases

from

or s

ales

to re

late

d pa

rties

am

ount

ing

to a

t lea

st N

T$10

0 m

illio

n or

20%

of t

he

paid

-in c

apita

l: Ta

ble

4 (a

ttach

ed)

8) R

ecei

vabl

es f

rom

rel

ated

par

ties

amou

ntin

g to

at

leas

t N

T$10

0 m

illio

n or

20%

of

the

paid

-in

capi

tal:

Tabl

e 5

(atta

ched

)

- 79

-

180

9) N

ames

, lo

catio

ns,

and

rela

ted

info

rmat

ion

of i

nves

tees

ove

r w

hich

the

Com

pany

exe

rcis

es

sign

ifica

nt in

fluen

ce: T

able

6 (a

ttach

ed)

10) D

eriv

ativ

e fin

anci

al tr

ansa

ctio

ns (N

otes

7 a

nd 3

2)

b.

In

vest

men

t in

mai

nlan

d C

hina

: Tab

le 7

(atta

ched

) c.

B

usin

ess

rela

tions

hips

and

im

porta

nt t

rans

actio

ns b

etw

een

Chi

na A

irlin

es,

Ltd.

and

its

sub

sidi

arie

s: Ta

ble

8 (a

ttach

ed)

d.

Info

rmat

ion

of m

ajor

shar

ehol

ders

: Tab

le 9

(atta

ched

) 39

. SE

GM

EN

T IN

FOR

MA

TIO

N

a.

Segm

ent i

nfor

mat

ion

Th

e G

roup

mai

nly

enga

ges

in a

ir tra

nspo

rtatio

n se

rvic

es fo

r pas

seng

ers

and

carg

o; th

e se

rvic

es in

clud

e ai

rpor

t se

rvic

e, s

tora

ge s

ervi

ce,

and

othe

r ai

r tra

nspo

rtatio

n se

rvic

es w

hich

are

bel

ow t

he f

inan

cial

th

resh

old

for a

n op

erat

ing

segm

ent o

f the

Gro

up. T

here

fore

, the

Gro

up’s

mai

n re

porta

ble

segm

ent i

s ai

r tra

nspo

rtatio

n. T

he a

ccou

ntin

g po

licie

s of

the

rep

orta

ble

segm

ent

are

cons

iste

nt w

ith t

he a

ccou

ntin

g po

licie

s des

crib

ed in

Not

e 4.

For

the

Yea

r E

nded

Dec

embe

r 31

, 202

0

Air

T

rans

port

atio

n

Oth

ers

A

djus

tmen

ts

and

Wri

te-o

ffs

T

otal

Ope

ratin

g re

venu

e

$ 1

12,0

31,1

24

$

7,

263,

997

$

(4

,044

,571

)

$ 1

15,2

50,5

50

O

pera

tion

prof

it an

d lo

sses

$

2,77

8,30

1

$

(509

,281

)

$

(84,

604)

$

2,

184,

416

Inte

rest

reve

nue

28

2,50

6 In

vest

men

ts in

com

e ac

coun

ted

for

usin

g th

e eq

uity

met

hod

(2

00,8

34)

Rev

enue

711,

308

Fina

ncia

l cos

ts

(3

,057

,963

) Ex

pens

es

(5

73,2

30)

Pr

ofit

befo

re in

com

e ta

x

$

(6

53,7

97)

Id

entif

iabl

e as

sets

$ 1

94,2

19,1

32

$

15

,319

,185

(6

,120

,289

)

$ 2

03,4

18,0

29

Inve

stm

ents

acc

ount

ed fo

r usi

ng

the

equi

ty m

etho

d

1,97

0,80

2 A

sset

s

78,8

05,2

53

To

tal a

sset

s

$

284

,194

,084

- 80

-

Fo

r th

e Y

ear

End

ed D

ecem

ber

31, 2

019

Air

T

rans

port

atio

n

Oth

ers

A

djus

tmen

ts

and

Wri

te-o

ffs

T

otal

Ope

ratin

g re

venu

e

$ 1

64,4

92,4

53

$

11

,067

,323

$

(7,1

15,6

16)

$

168

,444

,160

Ope

ratio

n pr

ofit

and

loss

es

$

1,

302,

647

$

1,

449,

620

$

(8

6,44

6)

$

2,66

5,82

1 In

tere

st re

venu

e

417,

446

Inve

stm

ents

inco

me

acco

unte

d fo

r us

ing

the

equi

ty m

etho

d

332,

305

Rev

enue

495,

249

Fina

ncia

l cos

ts

(3

,340

,119

) Ex

pens

es

(6

67,5

19)

Pr

ofit

befo

re in

com

e ta

x

$

(9

6,81

7)

Id

entif

iabl

e as

sets

$ 2

09,3

97,8

50

$

15

,915

,060

(6

,317

,254

)

$ 2

18,9

95,6

56

Inve

stm

ents

acc

ount

ed fo

r usi

ng

the

equi

ty m

etho

d

2,22

3,79

3 A

sset

s

71,8

28,5

30

To

tal a

sset

s

$

293

,047

,979

b.

G

eogr

aphi

cal s

egm

ent

The

geog

raph

ical

seg

men

t inf

orm

atio

n of

the

Com

pany

and

its

subs

idia

ries

in 2

020

and

2019

is li

sted

be

low

:

Fo

r th

e Y

ear

End

ed D

ecem

ber

31, 2

020

Am

eric

a

Nor

thea

st A

sia

So

uthe

ast A

sia

E

urop

e

Aus

tral

ia

C

hina

Dom

estic

Adj

ustm

ent a

nd

Elim

inat

ions

Con

solid

atio

n

Ope

ratin

g re

venu

e

$

53,2

48,4

99

$ 10

,515

,272

$

21,7

82,1

32

$ 9,

736,

725

$ 4,

377,

261

$ 7,

374,

972

$ 12

,260

,260

$

(4,0

44,5

71 )

$ 11

5,25

0,55

0

Ope

ratio

n pr

ofit

and

loss

es

$ 2,

184,

416

Inte

rest

reve

nue

28

2,50

6 In

vest

men

ts

inco

me

acco

unte

d fo

r us

ing

the

equi

ty

met

hod

(2

00,8

34 )

Reve

nue

71

1,30

8 In

tere

st ex

pens

e

(3,0

57,9

63 )

Expe

nses

(573

,230

)

Prof

it be

fore

in

com

e ta

x

$

(653

,797

)

Iden

tifia

ble

asse

ts

$ 1,

336,

074

$ 16

8,35

6

$

213,

936

$ 20

,984

$

15,3

83

$ 53

,322

$

207,

730,

263

$ (6

,120

,289

)

$

203,

418,

029

Inve

stm

ents

ac

coun

ted

for

usin

g th

e eq

uity

m

etho

d

1,97

0,80

2 A

sset

s

78,8

05,2

53

To

tal a

sset

s

$

284,

194,

084

For

the

Yea

r E

nded

Dec

embe

r 31

, 201

9

Am

eric

a

Nor

thea

st A

sia

So

uthe

ast A

sia

E

urop

e

Aus

tral

ia

C

hina

Dom

estic

Adj

ustm

ent a

nd

Elim

inat

ions

Con

solid

atio

n

Ope

ratin

g re

venu

e

$

40,3

24,1

60

$ 39

,232

,038

$

33,3

54,4

05

$ 15

,638

,657

$

7,07

3,17

0

$

21,7

90,9

43

$ 18

,146

,403

$

(7,1

15,6

16 )

$ 16

8,44

4,16

0

Ope

ratio

n pr

ofit

and

loss

es

$ 2,

665,

821

Inte

rest

reve

nue

41

7,44

6 In

vest

men

ts

inco

me

acco

unte

d fo

r us

ing

the

equi

ty

met

hod

33

2,30

5 Re

venu

e

495,

249

Inte

rest

expe

nse

(3

,340

,119

) Ex

pens

es

(6

67,5

19 )

Pr

ofit

befo

re

inco

me

tax

$ (9

6,81

7 )

Id

entif

iabl

e as

sets

$

1,39

9,59

1

$

222,

584

$ 15

4,07

4

$

26,7

07

$ 8,

985

$ 50

,948

$

223,

450,

021

$ (6

,317

,254

)

$

218,

995,

656

Inve

stm

ents

ac

coun

ted

for

usin

g th

e eq

uity

m

etho

d

2,22

3,79

3 A

sset

s

71,8

28,5

30

To

tal a

sset

s

$

293,

047,

979

- 81

-

181

TA

BL

E 1

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

FIN

AN

CIN

G P

RO

VID

ED

TO

OT

HE

RS

FOR

TH

E Y

EA

R E

ND

ED

DE

CE

MB

ER

31,

202

0 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs, U

nles

s Sta

ted

Oth

erw

ise)

No.

L

ende

r B

orro

wer

Fi

nanc

ial

Stat

emen

t A

ccou

nt

Rel

ated

Pa

rty

Hig

hest

B

alan

ce fo

r th

e Pe

riod

End

ing

Bal

ance

Act

ual

Bor

row

ing

Am

ount

Inte

rest

Rat

e (%

) N

atur

e of

Fi

nanc

ing

Bus

ines

s T

rans

actio

n A

mou

nt

Rea

sons

for

Shor

t-te

rm

Fina

ncin

g

Allo

wan

ce fo

r Im

pair

men

t L

oss

Col

late

ral

Fina

ncin

g L

imit

for

Eac

h B

orro

wer

Agg

rega

te

Fina

ncin

g L

imit

Not

e It

em

Val

ue

1 C

al-D

ynas

ty In

tern

atio

nal

Dyn

asty

Hot

el o

f H

awai

i, In

c.

Not

es re

ceiv

able

Y

$ 10

3,24

4

$ 99

,432

$ 28

,409

2.

25

Shor

t-ter

m

finan

cing

fa

cilit

y is

ne

cess

ary

$

- O

pera

ting

cycl

e ca

pita

l ex

pend

iture

$

-

$

-

$ 14

4,12

8

$ 28

8,25

6

Not

e 1:

Th

e m

axim

um a

mou

nt o

f loa

ns to

oth

ers b

y th

e G

roup

is u

p to

40%

of t

he G

roup

's ne

t wor

th a

s sta

ted

in it

s lat

est f

inan

cial

stat

emen

ts.

Not

e 2:

Th

e m

axim

um a

mou

nt o

f loa

ns to

an

indi

vidu

al c

ount

erpa

rty b

y th

e G

roup

is u

p to

20%

of t

he G

roup

's ne

t wor

th a

s sta

ted

in it

s lat

est f

inan

cial

stat

emen

ts.

182

TA

BL

E 2

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

EN

DO

RSE

ME

NT

/GU

AR

AN

TE

E P

RO

VID

ED

FO

R T

HE

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

020

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

, Unl

ess S

tate

d O

ther

wis

e)

No.

E

ndor

sem

ent/

Gua

rant

ee

Prov

ider

Cou

nter

part

y L

imit

on E

ach

Cou

nter

part

y’s

End

orse

men

t/ G

uara

ntee

A

mou

nt

(Not

e 1)

Max

imum

B

alan

ce fo

r th

e Pe

riod

E

ndin

g B

alan

ce

Act

ual

Bor

row

ing

Am

ount

Val

ue o

f C

olla

tera

ls

Prop

erty

, Pla

nt

or E

quip

men

t

Rat

io o

f A

ccum

ulat

ed

Am

ount

of

Col

late

ral t

o N

et E

quity

of

the

Lat

est

Fina

ncia

l St

atem

ent (

%)

Max

imum

C

olla

tera

l/ G

uara

ntee

A

mou

nts

Allo

wab

le

(Not

e 2)

End

orse

men

t/ G

uara

ntee

G

iven

by

Pare

nt

on B

ehal

f of

Subs

idia

ries

End

orse

men

t/ G

uara

ntee

G

iven

by

Subs

idia

ries

on

Beh

alf o

f Par

ent

End

orse

men

t/ G

uara

ntee

G

iven

on

Beh

alf

of C

ompa

nies

in

Mai

nlan

d C

hina

Nam

e N

atur

e of

Rel

atio

nshi

p

0 C

hina

Airl

ines

C

AL

Park

10

0% o

wne

d su

bsid

iary

$ 11

,511

,896

$ 3,

850,

000

$

3,85

0,00

0

$ 1,

892,

540

$

- 6.

69

$

28,7

79,7

41

Y

N

N

(the

“Com

pany

”) T

iger

air T

aiw

an C

o., L

td.

75.8

6% o

wne

d su

bsid

iary

by

dire

ct a

nd in

dire

ct

hold

ings

11,5

11,8

96

3,03

8,19

7

2,

656,

591

265,

062

- 4.

62

28,7

79,7

41

Y

N

N

Taiw

an A

ircra

ft M

aint

enan

ce

and

Engi

neer

ing

Co.

, Ltd

. 10

0% o

wne

d su

bsid

iary

11

,511

,896

2,

000,

000

2,00

0,00

0

1,

336,

000

- 3.

47

28,7

79,7

41

Y

N

N

Not

e 1:

B

ased

on

the

Com

pany

’s g

uide

lines

, the

max

imum

am

ount

of g

uara

ntee

to a

n in

divi

dual

cou

nter

party

is u

p to

20%

of t

he C

ompa

ny’s

shar

ehol

ders

’ equ

ity.

Not

e 2:

B

ased

on

the

Com

pany

’s g

uide

lines

, the

allo

wab

le a

ggre

gate

am

ount

of c

olla

tera

l gua

rant

ee is

up

to 5

0% o

f the

Com

pany

’s sh

areh

olde

rs’ e

quity

. 183

TA

BL

E 3

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

MA

RK

ET

AB

LE

SE

CU

RIT

IES

HE

LD

D

EC

EM

BE

R 3

1, 2

020

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

, Unl

ess S

tate

d O

ther

wis

e)

Hol

ding

Com

pany

Nam

e M

arke

tabl

e Se

curi

ty T

ype

and

Issu

er/N

ame

Rel

atio

nshi

p w

ith th

e H

oldi

ng

Com

pany

Fi

nanc

ial S

tate

men

t Acc

ount

Dec

embe

r 31

, 202

0

Not

e N

umbe

r of

Sh

ares

/Uni

ts

Car

ryin

g A

mou

nt

Perc

enta

ge o

f O

wne

rshi

p (%

)

Mar

ket V

alue

or

Net

Ass

et

Val

ue

C

hina

Airl

ines

(“Pa

rent

com

pany

”)

Shar

es

Ever

est I

nves

tmen

t Hol

ding

s Ltd

. - o

rdin

ary

shar

es

- Fi

nanc

ial a

sset

s at F

VTO

CI -

non

-cur

rent

1,

359,

368

$

106,

779

13.5

9

$ 11

7,45

7 N

ote

1

Ever

est I

nves

tmen

t Hol

ding

s Ltd

. - p

refe

renc

e sh

ares

-

Fina

ncia

l ass

ets a

t FV

TOC

I - n

on-c

urre

nt

135,

937

10,6

78

-

Chu

ng H

ua E

xpre

ss C

o.

- Fi

nanc

ial a

sset

s at F

VTO

CI -

non

-cur

rent

1,

100,

000

29,7

04

11.0

0

29

,704

-

Ja

rdin

e A

ir Te

rmin

al S

ervi

ces

- Fi

nanc

ial a

sset

s at F

VTP

L - c

urre

nt

12,0

00,0

00

- 15

.00

- -

Th

e G

rand

Hi L

ai H

otel

-

Fina

ncia

l ass

ets a

t FV

TPL

- cur

rent

4,

021

- 0.

02

- -

M

anda

rin A

irlin

es

Shar

es

Chi

na A

irlin

es

Pare

nt c

ompa

ny

Fina

ncia

l ass

ets a

t FV

TOC

I - n

on-c

urre

nt

2,07

4,62

8

24

,999

-

24,9

99

-

Cal

-Asi

a In

vest

men

t Sh

ares

Ta

ikoo

(Xia

men

) Lan

ding

Gea

r Ser

vice

s -

Fina

ncia

l ass

ets a

t FV

TPL

- cur

rent

-

- 2.

59

- N

ote

2

HA

ECO

Com

posi

te S

truct

ures

(Jin

jiang

) -

Fina

ncia

l ass

ets a

t FV

TOC

I - n

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16

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16,5

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Not

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bre

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el N

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wan

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enef

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plet

on S

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55

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t FV

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277,

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ynas

ty A

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rnat

iona

l Cor

p.

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efic

iary

cer

tific

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349,

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Not

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et a

sset

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ue w

as $

117,

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e 2:

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sue

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ecau

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is a

lim

ited

com

pany

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ote

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The

tabl

e on

ly li

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inan

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ass

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with

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mou

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in S

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ote

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Ta

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tern

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71

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542

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e:

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and

reve

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e no

t dire

ctly

cor

rela

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beca

use

of th

e pa

rticu

lar i

ndus

try c

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istic

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d th

eref

ore

the

turn

over

rate

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186

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HIN

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31,

2020

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2019

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ares

/Uni

ts

Perc

enta

ge

of

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ners

hip

(%)

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ryin

g A

mou

nt

Chi

na A

irlin

es, L

td.

CA

L Pa

rk

Taoy

uan,

Tai

wan

R

eal e

stat

e le

ase

and

inte

rnat

iona

l tra

de

$

1,50

0,00

0 $

1,

500,

000

15

0,00

0,00

0 10

0.00

$

1,

605,

033

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9,35

0 $

53

,770

N

ote

4

Man

darin

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ines

Ta

ipei

, Tai

wan

A

ir tra

nspo

rtatio

n an

d m

aint

enan

ce o

f airc

raft

2,

042,

368

2,

042,

368

18

8,15

4,02

5 93

.99

1,

223,

259

(3

76,2

55)

(3

53,6

42)

Not

es 1

and

4

Ta

iwan

Air

Car

go T

erm

inal

Ta

oyua

n, T

aiw

an

Air

carg

o an

d st

orag

e

1,35

0,00

0

1,35

0,00

0

135,

000,

000

54.0

0

1,55

6,13

3

318,

494

17

2,01

7 -

C

al-D

ynas

ty In

tern

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nal

Los A

ngel

es, U

SA

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oldi

ng c

ompa

ny, r

eal e

stat

e an

d ho

tel s

ervi

ces

U

S$

26,1

45

US$

26

,145

2,61

4,50

0 10

0.00

1,18

8,11

0

(21,

960)

(20,

542)

Not

e 2

Chi

na P

acifi

c C

ater

ing

Serv

ices

Ta

oyua

n, T

aiw

an

In-fl

ight

cat

erin

g

439,

110

43

9,11

0

43,9

11,0

00

51.0

0

695,

959

(2

67,5

66)

(1

36,4

59)

-

Taoy

uan

Inte

rnat

iona

l Airp

ort S

ervi

ces

Taoy

uan,

Tai

wan

A

irpor

t ser

vice

s

147,

000

14

7,00

0

34,3

00,0

00

49.0

0

602,

688

(2

58,8

94)

(1

26,8

58)

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CA

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stm

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of t

he B

ritis

h V

irgin

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nds

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inve

stm

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7,

172

US$

7,

172

7,

172,

346

100.

00

46

9,97

9

45,0

68

45

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-

Sa

bre

Trav

el N

etw

ork

(Tai

wan

) Ta

ipei

, Tai

wan

Sa

le a

nd m

aint

enan

ce o

f har

dwar

e an

d so

ftwar

e

52,2

00

52

,200

13,0

21,0

42

93.9

3

232,

883

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9,99

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(4

6,95

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-

Chi

na A

ircra

ft Se

rvic

e H

ong

Kon

g In

tern

atio

nal A

irpor

t A

irpor

t ser

vice

s H

K$

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00

HK

$ 58

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28,4

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00

20.0

0

277,

234

(5

13,7

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(1

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58)

-

Taiw

an A

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t Ser

vice

s Ta

ipei

, Tai

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A

irpor

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vice

s

12,2

89

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26,6

44

47.3

5

200,

794

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4,21

4)

-

Kao

hsiu

ng C

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ing

Serv

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K

aohs

iung

, Tai

wan

In

-flig

ht c

ater

ing

38

3,84

6

383,

846

21

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53

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51

2,92

6

9,12

9

(8,3

09)

Not

e 5

C

al H

otel

Co.

, Ltd

. Ta

oyua

n, T

aiw

an

Hot

el b

usin

ess

46

5,00

0

465,

000

46

,500

,000

10

0.00

405,

353

(7

3,58

6)

(7

3,90

6) N

ote

4

Chi

na P

acifi

c La

undr

y Se

rvic

es

Taoy

uan,

Tai

wan

C

lean

ing

and

leas

ing

of th

e to

wel

of a

irlin

es, h

otel

s, re

stau

rant

s and

hea

lth c

lubs

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500

13

7,50

0

13,7

50,0

00

55.0

0

149,

353

(2

8,13

7)

(1

5,47

5)

-

D

ynas

ty A

erot

ech

Inte

rnat

iona

l Cor

p.

Taoy

uan,

Tai

wan

C

lean

ing

of a

ircra

ft an

d m

aint

enan

ce o

f mac

hine

and

eq

uipm

ent

77,2

70

77

,270

77,2

70

100.

00

13

6,63

0

33,9

86

33

,967

N

ote

4

Y

estri

p

Taip

ei, T

aiw

an

Trav

el b

usin

ess

26

,265

26,2

65

1,

600,

000

100.

00

10

,270

(15,

067)

(14,

998)

Not

e 4

D

ynas

ty H

olid

ays

Toky

o, Ja

pan

Trav

el b

usin

ess

JPY

8,

000

JPY

20

,400

160

20.0

0

5,23

7

(23,

701)

(4,7

40)

-

Glo

bal S

ky E

xpre

ss

Taip

ei, T

aiw

an

Forw

ardi

ng a

nd st

orag

e of

air

carg

o

2,

500

2,

500

25

0,00

0 25

.00

7,

643

7,

796

1,

949

-

Tige

rair

Taiw

an C

o., L

td.

Taip

ei, T

aiw

an

Air

trans

porta

tion

and

mai

nten

ance

of a

ircra

ft

3,10

9,90

7

1,27

2,06

3

212,

420,

046

75.8

6

2,30

4,11

3

(1,3

71,0

56)

(9

56,0

08)

Not

e 4

Ta

iwan

Airc

raft

Mai

nten

ance

and

En

gine

erin

g C

o., L

td.

Taoy

uan,

Tai

wan

A

ircra

ft m

aint

enan

ce

1,

350,

000

1,

350,

000

13

5,00

0,00

0 10

0.00

699,

793

(2

22,2

23)

(2

22,1

96)

-

N

OR

DA

M A

sia

Ltd.

Ta

oyua

n, T

aiw

an

Airc

raft

mai

nten

ance

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75

2,

450

3,

797,

500

49.0

0

37,7

67

(9

3)

(4

6)

-

M

anda

rin A

irlin

es

Tige

rair

Taiw

an C

o., L

td.

Taip

ei, T

aiw

an

Air

trans

porta

tion

and

mai

nten

ance

of a

ircra

ft

154,

330

15

4,33

0

15,4

33,0

00

5.51

167,

400

(1

,371

,056

)

(104

,501

) -

Ta

iwan

Airp

ort S

ervi

ces

Taip

ei, T

aiw

an

Airp

ort s

ervi

ces

11

,658

11,6

58

46

9,75

5 1.

08

4,

567

(1

56,7

39)

(1

,688

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CA

L-A

sia

Inve

stm

ent

East

ern

Uni

ted

Inte

rnat

iona

l Log

istic

s H

ong

Kon

g

Forw

ardi

ng a

nd st

orag

e of

air

carg

o H

K$

3,32

9 H

K$

3,32

9

1,05

0,00

0 35

.00

51

,116

39,8

29

13

,940

-

Taiw

an A

irpor

t Ser

vice

s Ta

iwan

Airp

ort S

ervi

ce (S

amoa

)

Sam

oa

Airp

ort s

ervi

ces a

nd in

vest

men

t

US$

5,

877

US$

5,

877

-

100.

00

37

3,44

2

22,3

55

22

,355

N

ote

3

K

aohs

iung

Cat

erin

g Se

rvic

es

Del

ica

Inte

rnat

iona

l Co.

, Ltd

. K

aohs

iung

, Tai

wan

C

ater

ing

busi

ness

10,2

00

10

,200

1,02

0,00

0 51

.00

7,

871

4

2

-

Not

e 1:

A

dopt

ed th

e tre

asur

y sh

ares

met

hod

in re

cogn

izin

g in

vest

men

t inc

ome

or lo

ss.

Not

e 2:

R

epre

sent

s the

con

solid

ated

fina

ncia

l inf

orm

atio

n of

the

fore

ign

hold

ing

com

pany

dis

clos

ed in

acc

orda

nce

with

loca

l reg

ulat

ions

. N

ote

3:

The

Com

pany

doe

s not

issu

e sh

ares

bec

ause

it is

a li

mite

d co

mpa

ny.

Not

e 4:

D

iffer

ence

cau

sed

by le

ase

arra

ngem

ent b

etw

een

cons

olid

ated

ent

ities

. N

ote

5:

Diff

eren

ce c

ause

d by

acq

uisi

tion.

187

TA

BL

E 7

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

INV

EST

ME

NT

S IN

MA

INL

AN

D C

HIN

A

FOR

TH

E Y

EA

R E

ND

ED

DE

CE

MB

ER

31,

202

0 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs/R

enm

inbi

/U.S

. Dol

lars

, Unl

ess S

tate

d O

ther

wis

e)

Chi

na A

irlin

es

Inve

stee

Com

pany

Nam

e M

ain

Bus

ines

s and

Pr

oduc

t

Tot

al A

mou

nt

of P

aid-

in

Cap

ital

I nve

stm

ent

Typ

e

Acc

umul

ated

O

utflo

w o

f In

vest

men

t fr

om T

aiw

an a

s of

Jan

uary

1,

2020

Inve

stm

ent F

low

A

ccum

ulat

ed

Out

flow

of

Inve

stm

ent

from

Tai

wan

as

of D

ecem

ber

31,

2020

Net

Inco

me

(Los

s) o

f th

e In

vest

ee

% O

wne

rshi

p of

Dir

ect o

r In

dire

ct

Inve

stm

ent

Inve

stm

ent

Gai

n (L

oss)

Car

ryin

g A

mou

nt

as o

f

Dec

embe

r 31

, 20

20

Acc

umul

ated

In

war

d R

emitt

ance

of

Ear

ning

s as o

f D

ecem

ber

31,

2020

Out

flow

In

flow

A

irpor

t Air

Car

go T

erm

inal

(X

iam

en) C

o., L

td.

Forw

ardi

ng a

nd st

orag

e of

air

carg

o $

1,

105,

474

(RM

B 25

4,48

0)

Indi

rect

(N

ote

1)

$

118,

920

(US$

4,

186)

$

- $

-

$

118,

920

(US$

4,

186)

$

91,3

11

(RM

B 21

,367

) 14

.00

$

12,7

94

(RM

B 2,

991)

$

238,

717

(RM

B 54

,953

) $

10

0,47

0 (U

S$

3,53

7)

(N

ote

2)

A

irpor

t Air

Car

go S

ervi

ce

(Xia

men

) Co.

, Ltd

. Fo

rwar

ding

and

stor

age

of a

ir ca

rgo

60

,817

(R

MB

14,0

00)

Indi

rect

(N

ote

1)

55

,325

(U

S$

1,94

7)

-

-

55,3

25

(US$

1,

947)

68

,272

(R

MB

15,9

76)

14.0

0

9,56

6 (R

MB

2,23

7)

134,

918

(RM

B 31

,058

)

44,3

33

(US$

1,

561)

(Not

e 2)

Taik

oo (X

iam

en) L

andi

ng

Gea

r Ser

vice

s

Land

ing

gear

m

aint

enan

ce se

rvic

es

2,36

0,51

1 (U

S$

83,0

90)

Indi

rect

(N

ote

1)

61

,114

(U

S$

2,15

1)

-

-

61,1

14

(US$

2,

151)

-

2.58

9

-

-

-

H

AEC

O C

ompo

site

St

ruct

ures

(Jin

jiang

) C

ompo

site

mat

eria

l

331,

335

(US$

11

,663

) In

dire

ct

(Not

e 1)

18,0

68

(US$

63

6)

-

-

18,0

68

(US$

63

6)

- 5.

45

-

16

,585

(R

MB

3,81

8)

10,1

28

(US$

35

7)

Acc

umul

ated

Inve

stm

ent i

n M

ainl

and

Chi

na a

s of

Dec

embe

r 31

, 202

0

Inve

stm

ent A

mou

nt

Aut

hori

zed

by In

vest

men

t C

omm

issi

on, M

OE

A

Lim

it on

Inve

stm

ent

$2

53,4

27

(US$

8,92

0)

$618

,216

(Not

e 3)

$3

4,53

5,69

0 (N

ote

4)

(C

ontin

ued)

188

Taiw

an A

irpor

t Ser

vice

s

Inve

stee

Com

pany

M

ain

Bus

ines

s and

Pr

oduc

t Pa

id-in

Cap

ital

Met

hod

of

Inve

stm

ent

Acc

umul

ated

O

utw

ard

Rem

ittan

ce fo

r In

vest

men

t fr

om T

aiw

an a

s of

Jan

uary

1,

2020

Rem

ittan

ce o

f Fun

ds

Acc

umul

ated

O

utw

ard

Rem

ittan

ce fo

r In

vest

men

t fr

om T

aiw

an a

s of

Dec

embe

r 31

, 20

20

Net

Inco

me

(Los

s) o

f the

In

vest

ee

% O

wne

rshi

p of

Dir

ect o

r In

dire

ct

Inve

stm

ent

Inve

stm

ent

Inco

me

(Los

s)

Car

ryin

g A

mou

nt a

s of

Dec

embe

r 31

, 20

20

Acc

umul

ated

R

epat

riat

ion

of

Inve

stm

ent

Inco

me

as o

f D

ecem

ber

31,

2020

Out

war

d In

war

d

A

irpor

t Air

Car

go T

erm

inal

(X

iam

en) C

o., L

td.

Forw

ardi

ng a

nd st

orag

e of

air

carg

o

$ 1,

105,

474

(RM

B 25

4,48

0 )

Indi

rect

(N

ote

5)

$

114,

158

(US$

4,

018)

$

- $

-

$

114,

158

(US$

4,

018)

$

91,3

11

(RM

B 21

,367

) 14

.00

$

12,7

84

(RM

B 2,

991)

$

237,

502

(RM

B 54

,673

) $

12

9,01

0 (U

S$

4,54

1)

A

irpor

t Air

Car

go S

ervi

ce

(Xia

men

) Co.

, Ltd

. Fo

rwar

ding

and

stor

age

of a

ir ca

rgo

60,8

17

(RM

B 14

,000

) In

dire

ct

(Not

e 5)

54,7

37

(US$

1,

927)

-

-

54

,737

(U

S$

1,92

7)

68,2

72

(RM

B 15

,976

) 14

.00

9,

558

(RM

B 2,

237)

13

5,12

8 (R

MB

31,1

07)

59

,426

(U

S$

2,09

2)

Acc

umul

ated

Out

war

d

Rem

ittan

ce fo

r In

vest

men

t in

M

ainl

and

Chi

na a

s of D

ecem

ber

31, 2

020

Inve

stm

ent A

mou

nts A

utho

rize

d by

In

vest

men

t Com

mis

sion

, MO

EA

Upp

er L

imit

on th

e A

mou

nt o

f In

vest

men

t Stip

ulat

ed b

y

Inve

stm

ent C

omm

issi

on, M

OE

A

$1

68,8

95

(US$

5,94

5)

$168

,895

(U

S$5,

945)

$2

54,4

38

(Not

e 6)

Not

e 1:

C

hina

Airl

ines

, Ltd

. the

“Co

mpa

ny”

inve

sted

in C

AL-

Asi

a In

vest

men

t, w

hich

, in

turn

, inv

este

d in

a c

ompa

ny lo

cate

d in

mai

nlan

d C

hina

. N

ote

2:

The

inw

ard

rem

ittan

ce o

f ear

ning

s in

2020

am

ount

ed to

US$

3,53

6,56

1 an

d U

S$1,

560,

538.

N

ote

3:

The

amou

nt c

ompr

ised

US$

19,8

28,3

24, R

MB

4,20

0,00

0 an

d N

T$36

,666

,667

. N

ote

4:

The

limit

stat

ed in

the

Inve

stm

ent C

omm

issi

on’s

regu

latio

n, “

Inve

stm

ent o

r Tec

hnic

al C

oope

ratio

n in

Mai

nlan

d C

hina

Adj

ustm

ent R

ule,

” is

the

larg

er o

f the

Com

pany

’s n

et a

sset

val

ue o

r 60%

of t

he c

onso

lidat

ed n

et a

sset

val

ue.

Not

e 5:

Ta

iwan

Airp

ort S

ervi

ces i

nves

ted

in T

aiw

an A

irpor

t Ser

vice

s (Sa

moa

), w

hich

in re

turn

, inv

este

d in

a c

ompa

ny lo

cate

d in

mai

nlan

d C

hina

. N

ote

6:

The

RM

B a

nd U

.S. d

olla

r am

ount

s of a

sset

s are

tran

slat

ed a

t yea

r-end

rate

s and

thos

e of

gai

ns (l

osse

s), a

t the

ave

rage

of t

he y

ear-e

nd ra

tes f

or th

e re

porti

ng p

erio

d.

(C

oncl

uded

)

189

TA

BL

E 8

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

BU

SIN

ESS

RE

LA

TIO

NSH

IPS

AN

D IM

POR

TA

NT

TR

AN

SAC

TIO

NS

BE

TW

EE

N C

HIN

A A

IRL

INE

S, L

TD

. AN

D IT

S SU

BSI

DIA

RIE

S FO

R T

HE

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

020

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

)

No.

C

ompa

ny N

ame

Rel

ated

Par

ty

Nat

ural

of

Rel

atio

nshi

p (N

ote

1)

Inte

rcom

pany

Tra

nsac

tions

Fina

ncia

l Sta

tem

ent A

ccou

nt

Am

ount

T

rans

actio

n C

rite

ria

% o

f Tot

al

Con

solid

ated

T

otal

Rev

enue

or

Ass

ets

0 C

hina

Airl

ines

, Ltd

. G

loba

l Sky

Exp

ress

a

Car

go re

venu

e

$

137,

081

The

sam

e as

ord

inar

y tra

nsac

tions

0.

12

Man

darin

Airl

ines

a

Oth

er o

pera

ting

reve

nue

123,

469

The

sam

e as

ord

inar

y tra

nsac

tions

0.

11

Tige

rair

Taiw

an C

o., L

td.

a O

ther

ope

ratin

g re

venu

e

24

0,76

8 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.21

Ta

oyua

n In

tern

atio

nal A

irpor

t Ser

vice

s a

Airp

ort s

ervi

ce c

osts

1,

043,

264

The

sam

e as

ord

inar

y tra

nsac

tions

0.

91

Taiw

an A

irpor

t Ser

vice

a

Airp

ort s

ervi

ce c

osts

10

7,48

2 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.09

D

ynas

ty A

erot

ech

Inte

rnat

iona

l Cor

p.

a A

irpor

t ser

vice

cos

ts

352,

214

The

sam

e as

ord

inar

y tra

nsac

tions

0.

31

Taiw

an A

ir C

argo

Ter

min

al

a O

ther

ope

ratin

g co

sts

659,

596

The

sam

e as

ord

inar

y tra

nsac

tions

0.

57

CA

L Pa

rk

a O

ther

ope

ratin

g co

sts

209,

701

The

sam

e as

ord

inar

y tra

nsac

tions

0.

18

Man

darin

Airl

ines

a

Acc

ount

s pay

able

- re

late

d pa

rties

10

1,72

5 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.03

Ta

oyua

n In

tern

atio

nal A

irpor

t Ser

vice

s a

Acc

ount

s pay

able

- re

late

d pa

rties

21

5,54

2 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.07

M

anda

rin A

irlin

es

a B

onds

pay

able

- no

n-cu

rren

t

12

5,00

0 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.04

1

Taiw

an A

ir C

argo

Ter

min

al

Chi

na A

irlin

es, L

td.

b Sa

les r

even

ue

659,

596

The

sam

e as

ord

inar

y tra

nsac

tions

0.

57

2 M

anda

rin A

irlin

es

Taiw

an A

irpor

t Ser

vice

c

Airp

ort s

ervi

ce c

osts

15

2,47

5 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.13

C

hina

Airl

ines

, Ltd

. b

Ope

ratin

g ex

pens

es

123,

469

The

sam

e as

ord

inar

y tra

nsac

tions

0.

11

Chi

na A

irlin

es, L

td.

b A

ccou

nts r

ecei

vabl

e - r

elat

ed p

artie

s

10

1,72

5 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.03

C

hina

Airl

ines

, Ltd

. b

Fina

ncia

l ass

ets a

t am

ortiz

ed c

osts

12

5,00

0 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.04

3

Taoy

uan

Inte

rnat

iona

l Airp

ort S

ervi

ces

Chi

na A

irlin

es, L

td.

b A

irpor

t ser

vice

reve

nue

1,04

3,26

4 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.91

C

hina

Airl

ines

, Ltd

. b

Acc

ount

s rec

eiva

ble

- rel

ated

par

ties

215,

542

The

sam

e as

ord

inar

y tra

nsac

tions

0.

07

4 Ta

iwan

Airp

ort S

ervi

ce

Chi

na A

irlin

es, L

td.

b O

pera

ting

reve

nue

107,

482

The

sam

e as

ord

inar

y tra

nsac

tions

0.

09

Man

darin

Airl

ines

c

Ope

ratin

g re

venu

e

15

2,47

5 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.13

5

Dyn

asty

Aer

otec

h In

tern

atio

nal C

orp.

C

hina

Airl

ines

, Ltd

. b

Ope

ratin

g re

venu

e

35

2,21

4 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.31

6

Glo

bal S

ky E

xpre

ss

Chi

na A

irlin

es, L

td.

b O

pera

ting

expe

nse

137,

081

The

sam

e as

ord

inar

y tra

nsac

tions

0.

12

7 C

AL

Park

C

hina

Airl

ines

, Ltd

. b

Ope

ratin

g re

venu

e

20

9,70

1 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.18

C

al H

otel

Co.

, Ltd

. c

Ope

ratin

g re

venu

e

10

2,22

0 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.09

8

Cal

Hot

el C

o., L

td.

CA

L Pa

rk

c O

pera

ting

cost

s

10

2,22

0 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.09

9

Tige

rair

Taiw

an C

o., L

td.

Chi

na A

irlin

es, L

td.

b O

pera

ting

expe

nses

24

0,76

8 Th

e sa

me

as o

rdin

ary

trans

actio

ns

0.21

(C

ontin

ued)

190

Not

e 1:

Th

e th

ree

dire

ctio

nal t

ypes

for t

rans

actio

ns b

y bu

sine

ss re

latio

nshi

p be

twee

n C

hina

Airl

ines

, Ltd

. and

its s

ubsi

diar

ies a

re a

s fol

low

s: a.

Pa

rent

to su

bsid

iarie

s. b.

Su

bsid

iarie

s to

pare

nt.

c.

Subs

idia

ries t

o su

bsid

iarie

s. N

ote

2:

Inte

rcom

pany

tran

sact

ions

wer

e el

imin

ated

in th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts.

Not

e 3:

Th

e C

ompa

ny o

nly

disc

lose

s tra

nsac

tion

amou

nts o

r bal

ance

s of m

ore

than

$10

0,00

0 th

ousa

nd.

(C

oncl

uded

) 191

TA

BL

E 9

C

HIN

A A

IRL

INE

S, L

TD

.

INFO

RM

AT

ION

OF

MA

JOR

ST

OC

KH

OL

DE

RS

FOR

TH

E Y

EA

R E

ND

ED

DE

CE

MB

ER

31,

202

0

Nam

e of

Maj

or S

hare

hold

er

Shar

es

Num

ber

of

Shar

es

Perc

enta

ge o

f O

wne

rshi

p (%

)

Chi

na A

viat

ion

Dev

elop

men

t Fou

ndat

ion

(CA

DF)

1,86

7,34

1,93

5 34

.44

Nat

iona

l Dev

elop

men

t Fun

d (N

DF)

519,

750,

519

9.59

Not

e 1:

Th

e in

form

atio

n of

maj

or sh

areh

olde

rs p

rese

nted

in th

is ta

ble

is p

rovi

ded

by th

e Ta

iwan

Dep

osito

ry &

C

lear

ing

Cor

pora

tion

base

d on

the

num

ber

of o

rdin

ary

shar

es a

nd p

refe

rred

sha

res

held

by

shar

ehol

ders

with

ow

ners

hip

of 5

% o

r gr

eate

r, th

at h

ave

been

iss

ued

with

out

phys

ical

reg

istra

tion

(incl

udin

g tre

asur

y sh

ares

) by

the

Com

pany

as

of th

e la

st b

usin

ess

day

for

the

curr

ent q

uarte

r. Th

e sh

are

capi

tal i

n th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts m

ay d

iffer

from

the

actu

al n

umbe

r of s

hare

s th

at

have

bee

n is

sued

with

out p

hysi

cal r

egis

tratio

n be

caus

e of

diff

eren

t pre

para

tion

basi

s. N

ote

2:

If a

shar

ehol

der d

eliv

ers

the

shar

ehol

ding

s to

the

trust,

the

abov

e in

form

atio

n w

ill b

e di

sclo

sed

by th

e in

divi

dual

trus

ter

who

ope

ned

the

trust

acc

ount

. For

sha

reho

lder

s w

ho d

ecla

re in

side

r sh

areh

oldi

ngs

with

ow

ners

hip

grea

ter

than

10

%

in

acco

rdan

ce

with

th

e Se

curit

y an

d Ex

chan

ge

Act

, th

e sh

areh

oldi

ngs

incl

ude

shar

es h

eld

by s

hare

hold

ers

and

thos

e de

liver

ed t

o th

e tru

st o

ver

whi

ch

shar

ehol

ders

hav

e rig

hts

to d

eter

min

e th

e us

e of

tru

st p

rope

rty.

For

info

rmat

ion

rela

ting

to i

nsid

er

shar

ehol

ding

dec

lara

tion,

ple

ase

refe

r to

Mar

ket O

bser

vatio

n Po

st S

yste

m.

- 92

-

192

IND

EPE

ND

EN

T A

UD

ITO

RS’

REP

OR

T

The

Boa

rd o

f Dire

ctor

s and

the

Shar

ehol

ders

C

hina

Airl

ines

, Ltd

.

Opi

nion

We

have

au d

ited

the

acco

mpa

nyin

g fin

anci

al s

tate

men

ts o

f Chi

na A

irlin

es, L

td. (

the

“Com

pany

”),

whi

ch c

ompr

ise

the

bala

nce

shee

ts a

s of

Dec

embe

r 31

, 20

20 a

nd 2

019,

and

the

sta

tem

ents

of

com

preh

ensi

ve in

com

e, c

hang

es in

equ

ity a

nd c

ash

flow

s fo

r the

yea

rs th

en e

nded

, and

the

note

s to

th

e fin

anci

al s

tate

men

ts,

incl

udin

g a

sum

mar

y of

sig

nific

ant

acco

untin

g po

licie

s (c

olle

ctiv

ely

refe

rred

to a

s the

“fin

anci

al st

atem

ents

”).

In o

ur o

pini

on, t

he a

ccom

pany

ing

finan

cial

sta

tem

ents

pre

sent

fai

rly, i

n al

l mat

eria

l res

pect

s, th

e fin

anci

al p

ositi

on o

f th

e C

ompa

ny a

s of

Dec

embe

r 31

, 20

20 a

nd 2

019,

and

its

fin

anci

al

perf

orm

ance

and

its

cas

h flo

ws

for

the

year

s th

en e

nded

in

acco

rdan

ce w

ith t

he R

egul

atio

ns

Gov

erni

ng th

e Pr

epar

atio

n of

Fin

anci

al R

epor

ts b

y Se

curit

ies I

ssue

rs a

nd o

ther

regu

latio

ns.

Bas

is fo

r O

pini

on

We

c ond

ucte

d ou

r au

dits

in a

ccor

danc

e w

ith th

e Re

gula

tions

Gov

erni

ng A

uditi

ng a

nd A

ttest

atio

n of

Fin

anci

al S

tate

men

ts b

y C

ertif

ied

Publ

ic A

ccou

ntan

ts a

nd a

uditi

ng s

tand

ards

gen

eral

ly a

ccep

ted

in th

e R

epub

lic o

f C

hina

. Our

res

pons

ibili

ties

unde

r th

ose

stan

dard

s ar

e fu

rther

des

crib

ed in

the

Aud

itors

’ R

espo

nsib

ilitie

s fo

r th

e A

udit

of th

e Fi

nanc

ial S

tate

men

ts s

ectio

n of

our

rep

ort.

We

are

inde

pend

ent

of t

he C

ompa

ny i

n ac

cord

ance

with

The

Nor

m o

f Pr

ofes

sion

al E

thic

s fo

r Ce

rtifie

d Pu

blic

Acc

ount

ant o

f the

Rep

ublic

of C

hina

, and

we

have

fulfi

lled

our o

ther

eth

ical

resp

onsi

bilit

ies

in a

ccor

danc

e w

ith t

hese

req

uire

men

ts. W

e be

lieve

tha

t th

e au

dit

evid

ence

we

have

obt

aine

d is

su

ffic

ient

and

app

ropr

iate

to p

rovi

de a

bas

is fo

r our

opi

nion

.

Key

Aud

it M

atte

rs

Key

aud

it m

atte

rs a

re th

ose

mat

ters

that

, in

our p

rofe

ssio

nal j

udgm

ent,

wer

e of

mos

t sig

nific

ance

in

our

audi

t of

the

finan

cial

sta

tem

ents

for

the

year

end

ed D

ecem

ber

31, 2

020.

The

se m

atte

rs w

ere

addr

esse

d in

the

cont

ext o

f ou

r au

dit o

f th

e fin

anci

al s

tate

men

ts a

s a

who

le, a

nd in

for

min

g ou

r op

inio

n th

ereo

n, a

nd w

e do

not

pro

vide

a se

para

te o

pini

on o

n th

ese

mat

ters

.

Key

aud

it m

atte

r in

the

audi

t of t

he C

ompa

ny’s

fina

ncia

l sta

tem

ents

is st

ated

bel

ow:

Rec

ogni

tion

of C

argo

Rev

enue

In a

cco r

danc

e w

ith IF

RS

15 “

Rev

enue

from

Con

tract

s w

ith C

usto

mer

s”, c

argo

sal

es a

re a

ccou

nted

fo

r as

carg

o re

venu

e af

ter r

elev

ant t

rans

porta

tion

serv

ices

hav

e be

en p

rovi

ded.

For

the

year

end

ed

Dec

embe

r 31,

202

0, c

argo

reve

nue

amou

nted

to N

T$81

,692

,574

thou

sand

. Ref

er to

Not

es 4

and

26

to th

e ac

com

pany

ing

finan

cial

stat

emen

ts fo

r det

aile

d in

form

atio

n.

- 1 -

(App

endi

x 2)

C

argo

rat

es a

re h

ighl

y af

fect

ed b

y th

e su

pply

and

dem

and

of t

he m

arke

t an

d sa

les

can

only

be

reco

gniz

ed

afte

r re

leva

nt

trans

porta

tion

serv

ices

ar

e pr

ovid

ed,

The

inpu

t, pr

oces

sing

an

d m

aint

enan

ce o

f fr

eigh

t inf

orm

atio

n on

the

air

way

bills

invo

lve

man

ual o

pera

tions

. The

refo

re, w

e id

entif

ied

the

reco

gniti

on o

f car

go re

venu

e as

a k

ey a

udit

mat

ter.

Our

mai

n au

dit p

roce

dure

s per

form

ed in

clud

ed th

e fo

llow

ing:

1.

W

e un

ders

tood

the

inte

rnal

con

trols

rela

ted

to th

e re

cogn

ition

of c

argo

, inc

ludi

ng m

anua

l and

au

tom

atic

con

trol.

2.

We

unde

rsto

od a

nd te

sted

the

effe

ctiv

enes

s of t

he in

form

atio

n sy

stem

rela

ted

to th

e re

cogn

ition

of

car

go re

venu

e.

3.

We

sam

pled

the

air w

aybi

lls, c

onfir

med

that

car

go ra

tes w

ere

cons

iste

nt w

ith th

ose

stat

ed in

air

way

bills

, and

ver

ified

the

amou

nt o

f car

go re

venu

e.

Oth

er M

atte

r - A

udit

by O

ther

Inde

pend

ent A

udito

rs

The

finan

cial

sta

tem

ents

of

som

e in

vest

men

ts a

ccou

nted

for

usi

ng th

e eq

uity

met

hod

in N

ote

13

wer

e au

dite

d by

oth

er in

depe

nden

t aud

itors

, and

our

aud

it op

inio

n is

bas

ed s

olel

y on

the

repo

rts o

f ot

her a

udito

rs. A

s of

Dec

embe

r 31,

202

0, th

e af

orem

entio

ned

inve

stm

ents

acc

ount

ed fo

r usi

ng th

e eq

uity

met

hod

amou

nted

to

NT$

2,30

4,11

3 th

ousa

nd, r

epre

sent

ing

0.88

% o

f to

tal

asse

ts. F

or t

he

year

end

ed D

ecem

ber

31, 2

020,

com

preh

ensi

ve in

com

e (lo

ss) (

incl

udin

g sh

are

of p

rofit

or l

oss

of

subs

idia

ries,

asso

ciat

es a

nd j

oint

ven

ture

s an

d sh

are

of o

ther

com

preh

ensi

ve i

ncom

e (lo

ss)

of

subs

idia

ries,

asso

ciat

es a

nd j

oint

ven

ture

s ac

coun

ted

for

usin

g th

e eq

uity

met

hod)

am

ount

ed t

o N

T$(9

52,2

89) t

hous

and.

R

espo

nsib

ilitie

s of M

anag

emen

t and

Tho

se C

harg

ed w

ith G

over

nanc

e fo

r th

e Fi

nanc

ial

Stat

emen

ts

Man

agem

ent i

s re

spon

sibl

e fo

r th

e pr

epar

atio

n an

d fa

ir pr

esen

tatio

n of

the

finan

cial

sta

tem

ents

in

acco

rdan

ce w

ith t

he R

egul

atio

ns G

over

ning

the

Pre

para

tion

of F

inan

cial

Rep

orts

by

Secu

ritie

s Is

suer

s, an

d fo

r su

ch i

nter

nal

cont

rol

as m

anag

emen

t de

term

ines

is

nece

ssar

y to

ena

ble

the

prep

arat

ion

of fi

nanc

ial s

tate

men

ts th

at a

re fr

ee fr

om m

ater

ial m

isst

atem

ent,

whe

ther

due

to f

raud

or

err

or.

In p

repa

ring

the

finan

cial

sta

tem

ents

, m

anag

emen

t is

res

pons

ible

for

ass

essi

ng t

he C

ompa

ny’s

ab

ility

to c

ontin

ue a

s a

goin

g co

ncer

n, d

iscl

osin

g, a

s ap

plic

able

, mat

ters

rel

ated

to g

oing

con

cern

an

d us

ing

the

goin

g co

ncer

n ba

sis

of a

ccou

ntin

g un

less

man

agem

ent e

ither

inte

nds

to li

quid

ate

the

Com

pany

or t

o ce

ase

oper

atio

ns, o

r has

no

real

istic

alte

rnat

ive

but t

o do

so.

Thos

e ch

arge

d w

ith g

over

nanc

e, in

clud

ing

the

audi

t com

mitt

ee a

nd s

uper

viso

rs, a

re re

spon

sibl

e fo

r ov

erse

eing

the

Com

pany

’s fi

nanc

ial r

epor

ting

proc

ess.

Aud

itors

’ Res

pons

ibili

ties f

or th

e A

udit

of th

e Fi

nanc

ial S

tate

men

ts

Our

obj

ectiv

es a

re to

obt

ain

reas

onab

le a

ssur

ance

abo

ut w

heth

er th

e fin

anci

al st

atem

ents

as a

who

le

are

free

from

mat

eria

l mis

stat

emen

t, w

heth

er d

ue to

frau

d or

err

or, a

nd to

issu

e an

aud

itors

’ rep

ort

that

incl

udes

our

opi

nion

. Rea

sona

ble

assu

ranc

e is

a h

igh

leve

l of a

ssur

ance

, but

is n

ot a

gua

rant

ee

that

an

audi

t co

nduc

ted

in a

ccor

danc

e w

ith t

he a

uditi

ng s

tand

ards

gen

eral

ly a

ccep

ted

in t

he

Rep

ublic

of

Chi

na w

ill a

lway

s de

tect

a m

ater

ial

mis

stat

emen

t w

hen

it ex

ists

. Mis

stat

emen

ts c

an

aris

e fr

om fr

aud

or e

rror

and

are

con

side

red

mat

eria

l if,

indi

vidu

ally

or i

n th

e ag

greg

ate,

they

cou

ld

reas

onab

ly b

e ex

pect

ed to

influ

ence

the

econ

omic

dec

isio

ns o

f us

ers

take

n on

the

basi

s of

thes

e fin

anci

al st

atem

ents

.

- 2 -

193

As

part

of a

n au

dit i

n ac

cord

ance

with

the

audi

ting

stan

dard

s ge

nera

lly a

ccep

ted

in th

e Re

publ

ic o

f C

hina

, w

e ex

erci

se p

rofe

ssio

nal

judg

men

t an

d m

aint

ain

prof

essi

onal

ske

ptic

ism

thr

ough

out

the

audi

t. W

e al

so:

1.

Iden

tify

and

asse

ss th

e ris

ks o

f mat

eria

l mis

stat

emen

t of t

he fi

nanc

ial s

tate

men

ts, w

heth

er d

ue

to f

raud

or

erro

r, de

sign

and

per

form

aud

it pr

oced

ures

res

pons

ive

to t

hose

ris

ks, a

nd o

btai

n au

dit e

vide

nce

that

is s

uffic

ient

and

app

ropr

iate

to p

rovi

de a

bas

is fo

r our

opi

nion

. The

risk

of

not d

etec

ting

a m

ater

ial m

isst

atem

ent r

esul

ting

from

frau

d is

hig

her t

han

for o

ne re

sulti

ng fr

om

erro

r, as

frau

d m

ay in

volv

e co

llusi

on, f

orge

ry, i

nten

tiona

l om

issi

ons,

mis

repr

esen

tatio

ns, o

r the

ov

errid

e of

inte

rnal

con

trol.

2.

Obt

ain

an u

nder

stan

ding

of

inte

rnal

con

trol

rele

vant

to

the

audi

t in

ord

er t

o de

sign

aud

it pr

oced

ures

that

are

app

ropr

iate

in th

e ci

rcum

stan

ces,

but n

ot fo

r the

pur

pose

of e

xpre

ssin

g an

op

inio

n on

the

effe

ctiv

enes

s of t

he C

ompa

ny’s

inte

rnal

con

trol.

3.

Eval

uate

the

appr

opria

tene

ss o

f acc

ount

ing

polic

ies

used

and

the

reas

onab

lene

ss o

f acc

ount

ing

estim

ates

and

rela

ted

disc

losu

res m

ade

by m

anag

emen

t. 4.

C

oncl

ude

on t

he a

ppro

pria

tene

ss o

f m

anag

emen

t’s u

se o

f th

e go

ing

conc

ern

basi

s of

ac

coun

ting

and,

bas

ed o

n th

e au

dit

evid

ence

obt

aine

d, w

heth

er a

mat

eria

l un

certa

inty

exi

sts

rela

ted

to e

vent

s or

con

ditio

ns t

hat

may

cas

t si

gnifi

cant

dou

bt o

n th

e C

ompa

ny’s

abi

lity

to

cont

inue

as

a go

ing

conc

ern.

If w

e co

nclu

de th

at a

mat

eria

l unc

erta

inty

exi

sts,

we

are

requ

ired

to d

raw

atte

ntio

n in

our

aud

itors

’ rep

ort t

o th

e re

late

d di

sclo

sure

s in

the

finan

cial

stat

emen

ts o

r, if

such

dis

clos

ures

are

inad

equa

te, t

o m

odify

our

opi

nion

. Our

con

clus

ions

are

bas

ed o

n th

e au

dit

evid

ence

obt

aine

d up

to

the

date

of

our

audi

tors

’ re

port.

How

ever

, fu

ture

eve

nts

or

cond

ition

s may

cau

se th

e Co

mpa

ny to

cea

se to

con

tinue

as a

goi

ng c

once

rn.

5.

Eval

uate

the

over

all p

rese

ntat

ion,

stru

ctur

e an

d co

nten

t of

the

finan

cial

sta

tem

ents

, inc

ludi

ng

the

disc

losu

res,

and

whe

ther

the

finan

cial

sta

tem

ents

repr

esen

t the

und

erly

ing

trans

actio

ns a

nd

even

ts in

a m

anne

r tha

t ach

ieve

s fai

r pre

sent

atio

n.

6.

Obt

ain

suff

icie

nt a

ppro

pria

te a

udit

evid

ence

rega

rdin

g th

e fin

anci

al in

form

atio

n of

the

entit

ies

or b

usin

ess

activ

ities

with

in th

e C

ompa

ny to

exp

ress

an

opin

ion

on th

e fin

anci

al s

tate

men

ts.

We

are

resp

onsi

ble

for

the

dire

ctio

n, s

uper

visi

on a

nd p

erfo

rman

ce o

f th

e au

dit.

We

rem

ain

sole

ly re

spon

sibl

e fo

r our

aud

it op

inio

n.

We

com

mun

icat

e w

ith th

ose

char

ged

with

gov

erna

nce

rega

rdin

g, a

mon

g ot

her m

atte

rs, t

he p

lann

ed

scop

e an

d tim

ing

of th

e au

dit a

nd s

igni

fican

t aud

it fin

ding

s, in

clud

ing

any

sign

ifica

nt d

efic

ienc

ies

in in

tern

al c

ontro

l tha

t we

iden

tify

durin

g ou

r aud

it.

We

also

pro

vide

tho

se c

harg

ed w

ith g

over

nanc

e w

ith a

sta

tem

ent

that

we

have

com

plie

d w

ith

rele

vant

et

hica

l re

quire

men

ts

rega

rdin

g in

depe

nden

ce,

and

to

com

mun

icat

e w

ith

them

al

l re

latio

nshi

ps a

nd o

ther

mat

ters

that

may

rea

sona

bly

be th

ough

t to

bear

on

our

inde

pend

ence

, and

w

here

app

licab

le, r

elat

ed sa

fegu

ards

. Fr

om th

e m

atte

rs c

omm

unic

ated

with

thos

e ch

arge

d w

ith g

over

nanc

e, w

e de

term

ine

thos

e m

atte

rs

that

wer

e of

mos

t sig

nific

ance

in th

e au

dit o

f the

fina

ncia

l sta

tem

ents

for t

he y

ear e

nded

Dec

embe

r 31

, 202

0 an

d ar

e th

eref

ore

the

key

audi

t mat

ters

. We

desc

ribe

thes

e m

atte

rs in

our

aud

itors

’ rep

ort

unle

ss la

w o

r re

gula

tion

prec

lude

s pu

blic

dis

clos

ure

abou

t the

mat

ter

or w

hen,

in e

xtre

mel

y ra

re

circ

umst

ance

s, w

e de

term

ine

that

a m

atte

r sh

ould

not

be

com

mun

icat

ed in

our

repo

rt be

caus

e th

e ad

vers

e co

nseq

uenc

es o

f do

ing

so w

ould

rea

sona

bly

be e

xpec

ted

to o

utw

eigh

the

publ

ic in

tere

st

bene

fits o

f suc

h co

mm

unic

atio

n.

- 3 -

The

enga

gem

ent p

artn

ers

on th

e au

dit r

esul

ting

in th

is in

depe

nden

t aud

itors

’ re

port

are

Jui-C

han

Hua

ng a

nd S

hiuh

-Ran

, Che

ng.

Del

oitte

& T

ouch

e Ta

ipei

, Tai

wan

R

epub

lic o

f Chi

na

Mar

ch 1

8, 2

021

N

otic

e to

Rea

ders

Th

e ac

com

pany

ing

finan

cial

sta

tem

ents

are

int

ende

d on

ly t

o pr

esen

t th

e fin

anci

al p

ositi

on,

finan

cial

per

form

ance

and

cas

h flo

ws

in a

ccor

danc

e w

ith a

ccou

ntin

g pr

inci

ples

and

pra

ctic

es

gene

rally

acc

epte

d in

the

Repu

blic

of C

hina

and

not

thos

e of

any

oth

er ju

risd

ictio

ns. T

he st

anda

rds,

proc

edur

es a

nd p

ract

ices

to

audi

t su

ch f

inan

cial

sta

tem

ents

are

tho

se g

ener

ally

app

lied

in t

he

Repu

blic

of C

hina

.

For

the

conv

enie

nce

of r

eade

rs, t

he in

depe

nden

t aud

itors

’ rep

ort a

nd th

e ac

com

pany

ing

finan

cial

st

atem

ents

hav

e be

en tr

ansl

ated

into

Eng

lish

from

the

orig

inal

Chi

nese

ver

sion

pre

pare

d an

d us

ed

in t

he R

epub

lic o

f C

hina

. If

ther

e is

any

con

flict

bet

wee

n th

e En

glis

h ve

rsio

n an

d th

e or

igin

al

Chi

nese

ver

sion

or

any

diffe

renc

e in

the

inte

rpre

tatio

n of

the

two

vers

ions

, the

Chi

nese

-lang

uage

in

depe

nden

t aud

itors

’ rep

ort a

nd fi

nanc

ial s

tate

men

ts sh

all p

reva

il.

- 4 -

194

CH

INA

AIR

LIN

ES,

LT

D.

BA

LA

NC

E S

HE

ET

S D

EC

EM

BE

R 3

1, 2

020

AN

D 2

019

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

)

20

20

20

19

ASS

ET

S

Am

ount

%

A

mou

nt

%

CU

RR

ENT

ASS

ETS

Cas

h an

d ca

sh e

quiv

alen

ts (N

otes

4, 6

and

30)

$

19,9

59,8

20

8

$

20,6

26,0

14

8 Fi

nanc

ial a

sset

s at f

air v

alue

thro

ugh

prof

it or

loss

- cu

rren

t (N

otes

4, 7

and

30)

-

-

43

4

-

Fina

ncia

l ass

ets a

t am

ortiz

ed c

ost -

cur

rent

(Not

es 9

and

30)

5,

863,

137

2

1,

460,

450

- Fi

nanc

ial a

sset

s for

hed

ging

- cu

rren

t (N

otes

4, 6

and

30)

7,

613,

636

3

9,

588

- N

otes

and

acc

ount

s rec

eiva

bles

, net

(Not

es 4

, 10

and

30)

9,19

8,05

5

4

7,69

4,43

1

3

Acc

ount

s rec

eiva

bles

- re

late

d pa

rties

(Not

e 31

)

10

1,42

4

-

232,

386

- O

ther

rece

ivab

les

427,

722

-

56

0,81

9

-

Cur

rent

tax

asse

ts (N

otes

4 a

nd 2

7)

60,1

29

-

52

,776

-

Inve

ntor

ies,

net (

Not

es 4

and

11)

8,

093,

152

3

8,

246,

515

3 N

on-c

urre

nt a

sset

s hel

d fo

r sal

e (N

otes

4 a

nd 1

2)

89,2

96

-

-

- O

ther

cur

rent

ass

ets (

Not

e 17

)

45

2,41

4

-

2,10

6,19

9

1

To

tal c

urre

nt a

sset

s

51

,858

,785

20

40

,989

,612

15

NO

N-C

UR

REN

T A

SSET

S

Fi

nanc

ial a

sset

s at f

air v

alue

thro

ugh

othe

r com

preh

ensi

ve in

com

e - n

on-c

urre

nt (N

otes

4, 8

and

30)

14

7,16

1

-

107,

856

- In

vest

men

ts a

ccou

nted

for u

sing

the

equi

ty m

etho

d (N

otes

4 a

nd 1

3)

12,3

21,1

57

5

13

,482

,877

5

Prop

erty

, pla

nt a

nd e

quip

men

t (N

otes

4, 1

4 an

d 32

)

12

6,41

4,46

2

48

13

1,02

9,88

6

49

R

ight

-of-

use

asse

ts (N

otes

4, 2

0 an

d 32

)

54

,555

,761

21

64

,262

,830

24

In

vest

men

t pro

perti

es (N

otes

4 a

nd 1

5)

2,04

7,44

8

1

2,04

7,44

8

1

Oth

er in

tang

ible

ass

ets (

Not

es 4

and

16)

86

7,45

3

-

971,

298

- D

efer

red

tax

asse

ts (N

otes

4 a

nd 2

7)

4,98

1,85

9

2

4,75

7,14

2

2

Oth

er n

on-c

urre

nt a

sset

s (N

otes

17,

20

and

30)

7,71

5,67

9

3

11,2

27,5

56

4

Tota

l non

-cur

rent

ass

ets

209,

050,

980

80

227,

886,

893

85

T

OTA

L

$ 2

60,9

09,7

65

100

$

268

,876

,505

10

0

L

IAB

ILIT

IES

AN

D E

QU

ITY

CU

RR

ENT

LIA

BIL

ITIE

S

Sh

ort-t

erm

bill

s pay

able

(Not

es 1

8 an

d 30

)

$

8,08

8,88

2

3

$

-

- Fi

nanc

ial l

iabi

litie

s at f

air v

alue

thro

ugh

prof

it or

loss

- cu

rren

t (N

otes

4, 7

and

30)

-

-

11

,749

-

Fina

ncia

l lia

bilit

ies f

or h

edgi

ng -

curr

ent (

Not

es 4

, 20

and

30)

8,12

6,23

9

3

8,61

0,01

5

3

Not

es a

nd a

ccou

nts p

ayab

le (N

ote

30)

1,12

8,51

7

1

1,22

2,41

0

-

Acc

ount

s pay

able

- re

late

d pa

rties

(Not

e 31

)

58

8,23

4

-

1,46

9,43

4

1

Oth

er p

ayab

les (

Not

es 2

1 an

d 26

)

7,

128,

080

3

10

,892

,203

4

Tax

liabi

litie

s - c

urre

nt

2

-

-

-

Leas

e lia

bilit

ies -

cur

rent

(Not

es 4

and

20)

84

2,59

2

-

695,

215

- C

ontra

ct li

abili

ties c

urre

nt (N

otes

4 a

nd 2

2)

3,21

8,84

6

1

18,5

84,2

87

7 B

onds

pay

able

and

put

opt

ion

of c

onve

rtibl

e bo

nds -

cur

rent

por

tion

(Not

es 4

, 19,

30

and

31)

12,1

32,8

59

5

10

,000

,000

4

Loan

s and

deb

ts -

curr

ent p

ortio

n (N

otes

18,

30

and

32)

14,7

98,4

42

6

13

,708

,320

5

Oth

er c

urre

nt li

abili

ties

687,

317

-

2,

806,

540

1

Tota

l cur

rent

liab

ilitie

s

56

,740

,010

22

68

,000

,173

25

NO

N-C

UR

REN

T LI

AB

ILIT

IES

Fina

ncia

l lia

bilit

ies f

or h

edgi

ng -

non-

curr

ent (

Not

es 4

, 20

and

30)

32,4

55,3

33

13

42,4

20,2

05

16

Bon

ds p

ayab

le (N

otes

4, 1

9, 3

0 an

d 31

)

10

,300

,000

4

22,3

52,6

25

8 Lo

ans a

nd d

ebts

(Not

es 1

8, 3

0 an

d 32

)

68

,815

,395

26

48

,618

,168

18

C

ontra

ct li

abili

ties (

Not

es 4

and

22)

1,

761,

104

1

2,

236,

311

1 Pr

ovis

ions

(Not

es 4

and

23)

13

,741

,244

5

9,43

1,73

6

4

Def

erre

d ta

x lia

bilit

ies (

Not

es 4

and

27)

87

5,38

8

-

399,

253

- Le

ase

liabi

litie

s - n

on-c

urre

nt (N

otes

4 a

nd 2

0)

10,0

55,7

76

4

10

,909

,262

4

Acc

rued

pen

sion

cos

ts (N

otes

5 a

nd 2

4)

8,21

7,39

5

3

7,58

8,74

5

3

Oth

er n

on-c

urre

nt li

abili

ties

388,

637

-

36

6,25

5

-

To

tal n

on-c

urre

nt li

abili

ties

146,

610,

272

56

144,

322,

560

54

To

tal l

iabi

litie

s

20

3,35

0,28

2

78

21

2,32

2,73

3

79

EQU

ITY

(Not

es 1

9 an

d 25

)

Sh

are

capi

tal

54,2

09,8

46

21

54,2

09,8

46

20

Cap

ital s

urpl

us

1,18

7,32

7

-

2,48

8,90

7

1

Ret

aine

d ea

rnin

gs (a

ccum

ulat

ed d

efic

it)

Lega

l res

erve

-

-

46

6,41

6

-

Spec

ial r

eser

ve

-

-

12,9

67

- U

napp

ropr

iate

d re

tain

ed e

arni

ngs (

accu

mul

ated

def

icit)

(3

50,5

81)

-

(1

,777

,225

)

-

Tota

l ret

aine

d ea

rnin

gs

(350

,581

)

-

(1,2

97,8

42)

- O

ther

equ

ity

2,54

3,76

6

1

1,19

6,23

3

-

Trea

sury

shar

es

(30,

875)

-

(43,

372)

-

To

tal e

quity

57

,559

,483

22

56

,553

,772

21

TOTA

L

$ 2

60,9

09,7

65

100

$

268

,876

,505

10

0 Th

e ac

com

pany

ing

note

s are

an

inte

gral

par

t of t

he fi

nanc

ial s

tate

men

ts.

- 5 -

CH

INA

AIR

LIN

ES,

LT

D.

STA

TE

ME

NT

S O

F C

OM

PREH

EN

SIV

E IN

CO

ME

FO

R T

HE

YE

AR

S E

ND

ED

DE

CE

MB

ER

31,

202

0 A

ND

201

9 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs, E

xcep

t Ear

ning

s (L

oss)

Per

Sha

re)

2020

2019

A

mou

nt

%

Am

ount

%

R

EVEN

UE

(Not

es 4

, 26

and

31)

$

106

,327

,123

100

$ 1

46,3

72,4

01

1

00

C

OST

S (N

otes

4, 1

1, 2

6 an

d 31

)

95

,190

,179

89

13

5,00

8,16

6

92

GR

OSS

PR

OFI

T

11

,136

,944

11

11

,364

,235

8

O

PER

ATI

NG

EX

PEN

SES

(Not

es 4

, 26

and

31)

6,25

2,08

9

6

11,2

84,0

00

8

OPE

RA

TIN

G P

RO

FIT

4,88

4,85

5

5

80,2

35

-

NO

N-O

PER

ATI

NG

INC

OM

E A

ND

EX

PEN

SES

Oth

er in

com

e (N

ote

26)

440,

761

-

52

4,23

3

-

Oth

er g

ains

and

loss

es (N

otes

12,

13,

14

and

26)

(523

,827

)

-

(569

,582

)

-

Fina

nce

cost

s (N

otes

26

and

31)

(2,7

80,3

63)

(3)

(3,0

34,1

72)

(2)

Shar

e of

the

prof

it of

ass

ocia

tes a

nd jo

int v

entu

res

(Not

e 13

)

(1

,850

,331

)

(2

)

1,

811,

960

1

Tota

l non

-ope

ratin

g in

com

e an

d ex

pens

es

(4,7

13,7

60)

(5)

(1,2

67,5

61)

(1)

PR

OFI

T (L

OSS

) BEF

OR

E IN

CO

ME

TAX

17

1,09

5

-

(1,1

87,3

26)

(1)

IN

CO

ME

TAX

EX

PEN

SE (N

otes

4 a

nd 2

7)

31,0

95

-

12

,472

-

N

ET IN

CO

ME

(LO

SS)

140,

000

-

(1

,199

,798

)

(1

)

OTH

ER C

OM

PREH

ENSI

VE

INC

OM

E (L

OSS

)

Ite

ms t

hat w

ill n

ot b

e re

clas

sifie

d su

bseq

uent

ly to

pr

ofit

or lo

ss:

Loss

on

hedg

ing

inst

rum

ents

subj

ect t

o ba

sis

adju

stm

ents

(Not

es 4

, 25

and

30)

(474

,202

)

-

(17,

705)

- U

nrea

lized

(los

s) g

ain

on in

vest

men

ts in

equ

ity

inst

rum

ents

des

igna

ted

as a

t fai

r val

ue th

roug

h ot

her c

ompr

ehen

sive

inco

me

(Not

es 4

and

25)

39

,305

-

24,4

90

- R

emea

sure

men

t of d

efin

ed b

enef

it pl

ans (

Not

es 4

an

d 24

)

(4

94,2

18)

(1)

(562

,259

)

-

Shar

e of

the

othe

r com

preh

ensi

ve lo

ss o

f as

soci

ates

and

join

t ven

ture

s acc

ount

ed fo

r us

ing

the

equi

ty m

etho

d (N

otes

4 a

nd 2

5)

(9,0

95)

-

(7

2,71

8)

-

(Con

tinue

d)

- 6 -

195

CH

INA

AIR

LIN

ES,

LT

D.

STA

TE

ME

NT

S O

F C

OM

PREH

EN

SIV

E IN

CO

ME

FO

R T

HE

YE

AR

S E

ND

ED

DE

CE

MB

ER

31,

202

0 A

ND

201

9 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs, E

xcep

t Ear

ning

s (L

oss)

Per

Sha

re)

2020

2019

A

mou

nt

%

Am

ount

%

In

com

e ta

x re

latin

g to

item

s tha

t will

not

be

recl

assi

fied

subs

eque

ntly

to p

rofit

or l

oss

(N

ote

27)

$

16

3,17

2

-

$

10

1,25

9

-

Item

s tha

t may

be

recl

assi

fied

subs

eque

ntly

to p

rofit

or

loss

:

Ex

chan

ge d

iffer

ence

s on

trans

latio

n of

the

finan

cial

stat

emen

ts o

f for

eign

ope

ratio

ns

(Not

es 4

and

25)

(1

01,1

42)

-

(5

9,17

4)

-

Shar

e of

the

othe

r com

preh

ensi

ve lo

ss o

f as

soci

ates

and

join

t ven

ture

s acc

ount

ed fo

r us

ing

the

equi

ty m

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men

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)

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Th

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s are

an

inte

gral

par

t of t

he fi

nanc

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tate

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ts.

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clud

ed)

- 7 -

196

CH

INA

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LIN

ES,

LT

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ME

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are

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-

1,

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yea

r end

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ecem

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or th

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et o

f inc

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tax

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3

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552,

713

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tal c

ompr

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me

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the

year

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ass

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-

172

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Cha

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Net

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$

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The

acco

mpa

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tes a

re a

n in

tegr

al p

art o

f the

fina

ncia

l sta

tem

ents

.

197

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2020

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CA

SH F

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Inco

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tax

$

17

1,09

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for:

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28

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29

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169,

158

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ugh

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it or

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10

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47

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92

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on in

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ts a

ccou

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46

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Fina

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2,

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2 R

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5,58

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6

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616,

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10

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5 O

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1,

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5 C

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sets

and

liab

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d as

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alue

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4,

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66

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507,

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130,

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351,

186

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13

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15

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228,

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460,

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912,

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16

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10,4

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26,0

14

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

fina

ncia

l sta

tem

ents

. (C

oncl

uded

) - 1

0 -

198

CH

INA

AIR

LIN

ES,

LT

D.

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

FOR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1, 2

020

AN

D 2

019

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

, Unl

ess S

tate

d O

ther

wis

e)

1.

GE

NE

RA

L IN

FOR

MA

TIO

N

Chi

na A

irlin

es, L

td. (

the

“Com

pany

”) w

as f

ound

ed in

195

9 an

d its

sha

res

have

bee

n lis

ted

on th

e Ta

iwan

St

ock

Exch

ange

sin

ce F

ebru

ary

26,

1993

. Th

e Co

mpa

ny p

rimar

ily p

rovi

des

air

trans

port

serv

ices

for

pa

ssen

gers

and

car

go. I

ts o

ther

ope

ratio

ns in

clud

e (a

) mai

l ser

vice

s; (b

) gro

und

serv

ices

and

rout

ine

airc

raft

mai

nten

ance

; (c)

maj

or m

aint

enan

ce o

f flig

ht e

quip

men

t; (d

) com

mun

icat

ions

and

dat

a pr

oces

sing

ser

vice

s to

oth

er a

irlin

es; (

e) th

e sa

le o

f airc

raft

parts

, equ

ipm

ent a

nd th

e en

tire

airc

raft;

and

(f) l

easi

ng o

f airc

raft.

Th

e m

ajor

sha

reho

lder

s of

the

Com

pany

are

Chi

na A

viat

ion

Dev

elop

men

t Fo

unda

tion

(CA

DF)

and

N

atio

nal D

evel

opm

ent F

und

(ND

F), E

xecu

tive

Yua

n. A

s of D

ecem

ber 3

1, 2

020

and

2019

, CA

DF

and

ND

F jo

intly

hel

d 44

.03%

of

the

Com

pany

’s s

hare

s. A

s of

Dec

embe

r 31

, 20

20 a

nd 2

019,

the

Com

pany

had

11

,534

and

12,

175

empl

oyee

s, re

spec

tivel

y.

2.

APP

RO

VA

L O

F FI

NA

NC

IAL

ST

AT

EM

EN

TS

The

finan

cial

stat

emen

ts w

ere

appr

oved

by

the

Com

pany

’s b

oard

of d

irect

ors o

n M

arch

18,

202

1.

3.

APP

LIC

AT

ION

OF

NEW

, AM

EN

DE

D A

ND

RE

VIS

ED

ST

AN

DA

RD

S A

ND

INT

ER

PRE

TA

TIO

NS

a.

In

itial

app

licat

ion

of t

he a

men

dmen

ts t

o th

e In

tern

atio

nal

Fina

ncia

l R

epor

ting

Stan

dard

s (IF

RS)

, In

tern

atio

nal A

ccou

ntin

g St

anda

rds (

IAS)

, IFR

IC In

terp

reta

tions

(IFR

IC),

and

SIC

Inte

rpre

tatio

ns (S

IC)

(col

lect

ivel

y, th

e “I

FRSs

”) e

ndor

sed

and

issu

ed in

to e

ffec

t by

the

Fina

ncia

l Sup

ervi

sory

Com

mis

sion

(F

SC)

Ex

cept

for t

he fo

llow

ing,

the

initi

al a

pplic

atio

n of

the

IFR

Ss e

ndor

sed

and

issu

ed in

to e

ffec

t by

the

FSC

di

d no

t hav

e m

ater

ial i

mpa

ct o

n th

e C

ompa

ny’s

acc

ount

ing

polic

ies:

A

men

dmen

t to

IFR

S 16

“C

ovid

-19-

Rel

ated

Ren

t Con

cess

ions

” Th

e C

ompa

ny e

lect

ed t

o ap

ply

the

prac

tical

exp

edie

nt p

rovi

ded

in t

he a

men

dmen

t to

IFR

S 16

with

re

spec

t to

rent

con

cess

ions

neg

otia

ted

with

the

less

or a

s a

dire

ct c

onse

quen

ce o

f th

e C

OV

ID-1

9. T

he

rela

ted

acco

untin

g po

licie

s ar

e st

ated

in

Not

e 4.

Prio

r to

the

app

licat

ion

of t

he a

men

dmen

t, th

e C

ompa

ny sh

all d

eter

min

e w

heth

er o

r not

the

abov

emen

tione

d re

nt c

once

ssio

ns n

eed

to b

e ac

coun

ted

for

as le

ase

mod

ifica

tions

. Th

e C

ompa

ny a

pplie

d th

e am

endm

ent

from

Jan

uary

1,

2020

. B

ecau

se t

he a

bove

men

tione

d re

nt

conc

essi

ons

affe

ct o

nly

in 2

020,

ret

rosp

ectiv

e ap

plic

atio

n of

the

am

endm

ent

has

no i

mpa

ct o

n th

e re

tain

ed e

arni

ngs a

s of J

anua

ry 1

, 202

0.

- 11

-

b.

The

IFR

Ss e

ndor

sed

by th

e FS

C fo

r app

licat

ion

star

ting

from

202

1

New

IFR

Ss

E

ffec

tive

Dat

e A

nnou

nced

by

IASB

A

men

dmen

ts to

IFR

S 4 “

Exte

nsio

n of

the

Tem

pora

ry E

xem

ptio

n fr

om

App

lyin

g IF

RS

9”

Eff

ectiv

e im

med

iate

ly u

pon

prom

ulga

tion

by th

e IA

SB

Am

endm

ents

to IF

RS

9, IA

S 39

, IFR

S 7,

IFR

S 4

and

IFR

S 16

“I

nter

est R

ate

Ben

chm

ark

Ref

orm

- Ph

ase

2”

Jan

uary

1, 2

021

A

s of

the

dat

e th

e fin

anci

al s

tate

men

ts w

ere

auth

oriz

ed f

or i

ssue

, th

e C

ompa

ny i

s co

ntin

uous

ly

asse

ssin

g th

e po

ssib

le im

pact

that

the

appl

icat

ion

of o

ther

stan

dard

s an

d in

terp

reta

tions

will

hav

e on

the

Com

pany

’s fi

nanc

ial p

ositi

on a

nd fi

nanc

ial p

erfo

rman

ce a

nd w

ill d

iscl

ose

the

rele

vant

impa

ct w

hen

the

asse

ssm

ent i

s com

plet

ed.

c.

N

ew IF

RSs

in is

sue

but n

ot y

et e

ndor

sed

and

issu

ed in

to e

ffec

t by

the

FSC

New

IFR

Ss

E

ffec

tive

Dat

e A

nnou

nced

by

IASB

(Not

e 1)

“A

nnua

l Im

prov

emen

ts to

IFR

S St

anda

rds 2

018-

2020

” J

anua

ry 1

, 202

2 (N

ote

2)

Am

endm

ents

to IF

RS

3 “R

efer

ence

to th

e C

once

ptua

l Fra

mew

ork”

J

anua

ry 1

, 202

2 (N

ote

3)

Am

endm

ents

to IF

RS

10 a

nd IA

S 28

“Sa

le o

r Con

tribu

tion

of A

sset

s be

twee

n an

Inve

stor

and

its A

ssoc

iate

or J

oint

Ven

ture

” T

o be

det

erm

ined

by

IASB

IFR

S 17

“In

sura

nce

Con

tract

s”

Jan

uary

1, 2

023

Am

endm

ents

to IF

RS

17

Jan

uary

1, 2

023

Am

endm

ents

to IA

S 1

“Cla

ssifi

catio

n of

Lia

bilit

ies a

s Cur

rent

or

Non

-cur

rent

” J

anua

ry 1

, 202

3

Am

endm

ents

to IA

S 1

“Dis

clos

ure

of A

ccou

ntin

g Po

licie

s”

Jan

uary

1, 2

023

(Not

e 6)

A

men

dmen

ts to

IAS

8 “D

efin

ition

of A

ccou

ntin

g Es

timat

es”

Jan

uary

1, 2

023

(Not

e 7)

A

men

dmen

ts to

IAS

16 “

Prop

erty

, Pla

nt a

nd E

quip

men

t - P

roce

eds

befo

re In

tend

ed U

se”

Jan

uary

1, 2

022

(Not

e 4)

Am

endm

ents

to IA

S 37

“O

nero

us C

ontra

cts -

Cos

t of F

ulfil

ling

a C

ontra

ct”

Jan

uary

1, 2

022

(Not

e 5)

Not

e 1:

U

nles

s st

ated

oth

erw

ise,

the

abo

ve N

ew I

FRSs

are

eff

ectiv

e fo

r an

nual

rep

ortin

g pe

riods

be

ginn

ing

on o

r afte

r the

ir re

spec

tive

effe

ctiv

e da

tes.

Not

e 2:

Th

e am

endm

ents

to IF

RS

9 w

ill b

e ap

plie

d pr

ospe

ctiv

ely

to m

odifi

catio

ns a

nd e

xcha

nges

of

finan

cial

liab

ilitie

s th

at o

ccur

on

or a

fter

the

annu

al r

epor

ting

perio

ds b

egin

ning

on

or a

fter

Janu

ary

1, 2

022.

The

am

endm

ents

to I

AS

41 “

Agr

icul

ture

” w

ill b

e ap

plie

d pr

ospe

ctiv

ely

to

the

fair

valu

e m

easu

rem

ents

on

or a

fter

the

annu

al r

epor

ting

perio

ds b

egin

ning

on

or a

fter

Janu

ary

1, 2

022.

The

am

endm

ents

to IF

RS

1 “F

irst-t

ime

Ado

ptio

ns o

f IFR

Ss”

will

be

appl

ied

retro

spec

tivel

y fo

r ann

ual r

epor

ting

perio

ds b

egin

ning

on

or a

fter J

anua

ry 1

, 202

2.

Not

e 3:

Th

e am

endm

ents

are

app

licab

le to

bus

ines

s co

mbi

natio

ns fo

r whi

ch th

e ac

quis

ition

dat

e is

on

or a

fter t

he b

egin

ning

of t

he a

nnua

l rep

ortin

g pe

riod

begi

nnin

g on

or a

fter J

anua

ry 1

, 202

2.

Not

e 4:

Th

e am

endm

ents

are

app

licab

le t

o pr

oper

ty,

plan

t an

d eq

uipm

ent

that

are

bro

ught

to

the

loca

tion

and

cond

ition

nec

essa

ry f

or th

em to

be

capa

ble

of o

pera

ting

in th

e m

anne

r int

ende

d by

man

agem

ent o

n or

afte

r Jan

uary

1, 2

021.

N

ote

5:

The

amen

dmen

ts a

re a

pplic

able

to c

ontra

cts

for

whi

ch th

e en

tity

has

not y

et f

ulfil

led

all i

ts ob

ligat

ions

on

Janu

ary

1, 2

022.

- 12

-

199

Not

e 6:

Th

e am

endm

ents

will

be

appl

ied

pros

pect

ivel

y fo

r an

nual

rep

ortin

g pe

riods

beg

inni

ng o

n or

af

ter J

anua

ry 1

, 202

3.

Not

e 7:

Th

e am

endm

ents

are

app

licab

le to

cha

nges

in a

ccou

ntin

g es

timat

es a

nd c

hang

es in

acc

ount

ing

polic

ies

that

occ

ur o

n or

afte

r th

e be

ginn

ing

of th

e an

nual

rep

ortin

g pe

riod

begi

nnin

g on

or

afte

r Jan

uary

1, 2

023.

Th

e ap

plic

atio

n of

new

IFR

Ss in

issu

e bu

t not

yet

end

orse

d an

d is

sued

into

eff

ect b

y th

e FS

C w

ould

not

ha

ve a

ny m

ater

ial i

mpa

ct o

n th

e C

ompa

ny’s

acc

ount

ing

polic

ies.

As o

f the

dat

e th

e fin

anci

al st

atem

ents

w

ere

auth

oriz

ed f

or i

ssue

, th

e C

ompa

ny i

s co

ntin

uous

ly a

sses

sing

the

pos

sibl

e im

pact

tha

t th

e ap

plic

atio

n of

oth

er s

tand

ards

and

inte

rpre

tatio

ns w

ill h

ave

on t

he C

ompa

ny’s

fin

anci

al p

ositi

on a

nd

finan

cial

per

form

ance

and

will

dis

clos

e th

e re

leva

nt im

pact

whe

n th

e as

sess

men

t is c

ompl

eted

.

4.

SIG

NIF

ICA

NT

AC

CO

UN

TIN

G P

OL

ICIE

S St

atem

ent o

f Com

plia

nce

The

finan

cial

stat

emen

ts h

ave

been

pre

pare

d in

acc

orda

nce

with

the

Reg

ulat

ions

Gov

erni

ng th

e Pr

epar

atio

n of

Fin

anci

al R

epor

ts b

y Se

curit

ies I

ssue

rs a

nd o

ther

regu

latio

ns.

B

asis

of P

repa

ratio

n Th

e fin

anci

al s

tate

men

ts h

ave

been

pre

pare

d on

the

hist

oric

al c

ost b

asis

exc

ept f

or f

inan

cial

inst

rum

ents

whi

ch a

re m

easu

red

at fa

ir va

lue.

Th

e fa

ir va

lue

mea

sure

men

ts, w

hich

are

gro

uped

into

Lev

els

1 to

3 b

ased

on

the

degr

ee to

whi

ch th

e fa

ir va

lue

mea

sure

men

t in

puts

are

obse

rvab

le a

nd b

ased

on

the

sign

ifica

nce

of t

he i

nput

s to

the

fai

r va

lue

mea

sure

men

t in

its e

ntire

ty, a

re d

escr

ibed

as f

ollo

ws:

a.

Le

vel 1

inpu

ts a

re q

uote

d pr

ices

(una

djus

ted)

in a

ctiv

e m

arke

ts fo

r ide

ntic

al a

sset

s or l

iabi

litie

s; b.

Le

vel 2

inpu

ts a

re in

puts

oth

er th

an q

uote

d pr

ices

incl

uded

with

in L

evel

1 th

at a

re o

bser

vabl

e fo

r an

as

set o

r lia

bilit

y, e

ither

dire

ctly

(i.e

. as p

rices

) or i

ndire

ctly

(i.e

. der

ived

from

pric

es);

and

c.

Leve

l 3 in

puts

are

uno

bser

vabl

e in

puts

for a

n as

set o

r lia

bilit

y.

Whe

n pr

epar

ing

thes

e pa

rent

com

pany

onl

y fin

anci

al s

tate

men

ts, t

he C

ompa

ny u

sed

the

equi

ty m

etho

d to

ac

coun

t for

its i

nves

tmen

ts in

sub

sidi

arie

s, as

soci

ates

and

join

t ven

ture

s. In

ord

er fo

r the

am

ount

s of

the

net

prof

it fo

r th

e ye

ar, o

ther

com

preh

ensi

ve in

com

e fo

r th

e ye

ar a

nd to

tal e

quity

in th

e pa

rent

com

pany

onl

y fin

anci

al s

tate

men

ts t

o be

the

sam

e w

ith t

he a

mou

nts

attri

buta

ble

to t

he o

wne

rs o

f th

e C

ompa

ny i

n its

st

anda

lone

fina

ncia

l sta

tem

ents

, adj

ustm

ents

aris

ing

from

the

diff

eren

ces

in a

ccou

ntin

g tre

atm

ents

bet

wee

n th

e pa

rent

com

pany

onl

y ba

sis

and

the

stan

dalo

ne b

asis

wer

e m

ade

to in

vest

men

ts a

ccou

nted

for u

sing

the

equi

ty m

etho

d, th

e sh

are

of p

rofit

or

loss

of

subs

idia

ries,

asso

ciat

es a

nd jo

int v

entu

res,

the

shar

e of

oth

er

com

preh

ensi

ve i

ncom

e of

sub

sidi

arie

s, as

soci

ates

and

joi

nt v

entu

res

and

the

rela

ted

equi

ty i

tem

s, as

ap

prop

riate

, in

thes

e pa

rent

com

pany

onl

y fin

anci

al st

atem

ents

. C

urre

nt a

nd N

on-c

urre

nt A

sset

s and

Lia

bilit

ies

Cur

rent

ass

ets i

nclu

de:

a.

A

sset

s hel

d pr

imar

ily fo

r the

pur

pose

of t

radi

ng;

b.

A

sset

s exp

ecte

d to

be

real

ized

with

in 1

2 m

onth

s afte

r the

repo

rting

per

iod;

and

- 13

-

c.

Cas

h an

d ca

sh e

quiv

alen

ts u

nles

s the

ass

et is

rest

ricte

d fr

om b

eing

exc

hang

ed o

r use

d to

settl

e a

liabi

lity

for a

t lea

st 1

2 m

onth

s afte

r the

repo

rting

per

iod.

C

urre

nt li

abili

ties i

nclu

de:

a.

Liab

ilitie

s hel

d pr

imar

ily fo

r the

pur

pose

of t

radi

ng;

b.

Liab

ilitie

s due

to b

e se

ttled

with

in 1

2 m

onth

s afte

r the

repo

rting

per

iod;

and

c.

Li

abili

ties

for w

hich

the

Com

pany

doe

s no

t hav

e an

unc

ondi

tiona

l rig

ht to

def

er s

ettle

men

t for

at l

east

12 m

onth

s afte

r the

repo

rting

per

iod.

A

sset

s and

liab

ilitie

s tha

t are

not

cla

ssifi

ed a

s cur

rent

are

cla

ssifi

ed a

s non

-cur

rent

. Fo

reig

n C

urre

ncie

s In

pre

parin

g th

e fin

anci

al s

tate

men

ts o

f the

Com

pany

, tra

nsac

tions

in c

urre

ncie

s ot

her t

han

the

Com

pany

’s

func

tiona

l cur

renc

y (f

orei

gn c

urre

ncie

s) a

re r

ecog

nize

d at

the

rate

s of

exc

hang

e pr

evai

ling

at th

e da

tes

of

the

trans

actio

ns. A

t the

end

of e

ach

repo

rting

per

iod,

mon

etar

y ite

ms

deno

min

ated

in fo

reig

n cu

rren

cies

are

re

trans

late

d at

the

rate

s pr

evai

ling

at th

at d

ate.

Non

-mon

etar

y ite

ms

that

are

mea

sure

d at

his

toric

al c

ost i

n a

fore

ign

curr

ency

are

not

ret

rans

late

d. N

on-m

onet

ary

item

s m

easu

red

at f

air

valu

e th

at a

re d

enom

inat

ed in

fo

reig

n cu

rren

cies

are

retra

nsla

ted

at th

e ra

tes p

reva

iling

at t

he d

ate

whe

n th

e fa

ir va

lue

was

det

erm

ined

. Ex

chan

ge d

iffer

ence

s on

mon

etar

y ite

ms

aris

ing

from

set

tlem

ent o

r tra

nsla

tion

are

reco

gniz

ed in

pro

fit o

r lo

ss in

the

perio

d in

whi

ch th

ey a

rise

exce

pt fo

r: a.

Ex

chan

ge d

iffer

ence

s on

for

eign

cur

renc

y bo

rrow

ings

rel

atin

g to

ass

ets

unde

r co

nstru

ctio

n fo

r fu

ture

pr

oduc

tive

use,

whi

ch a

re in

clud

ed in

the

cost

of t

hose

ass

ets

whe

n th

ey a

re re

gard

ed a

s an

adj

ustm

ent

to in

tere

st c

osts

on

thos

e fo

reig

n cu

rren

cy b

orro

win

gs;

b.

Exch

ange

diff

eren

ces o

n tra

nsac

tions

ent

ered

into

in o

rder

to h

edge

cer

tain

fore

ign

curr

ency

risk

s. Ex

chan

ge d

iffer

ence

s ar

isin

g on

the

retra

nsla

tion

of n

on-m

onet

ary

item

s ar

e in

clud

ed in

pro

fit o

r lo

ss f

or

the

perio

d ex

cept

for e

xcha

nge

diff

eren

ces

aris

ing

from

the

retra

nsla

tion

of n

on-m

onet

ary

item

s in

resp

ect

of w

hich

gai

ns a

nd l

osse

s ar

e re

cogn

ized

dire

ctly

in

othe

r co

mpr

ehen

sive

inc

ome,

in

whi

ch c

ase,

the

ex

chan

ge d

iffer

ence

s are

als

o re

cogn

ized

dire

ctly

in o

ther

com

preh

ensi

ve in

com

e.

For

the

purp

oses

of

pres

entin

g fin

anci

al s

tate

men

ts,

the

asse

ts a

nd l

iabi

litie

s of

the

Com

pany

’s f

orei

gn

oper

atio

ns a

re t

rans

late

d in

to N

ew T

aiw

an d

olla

rs u

sing

exc

hang

e ra

tes

prev

ailin

g at

the

end

of

each

re

porti

ng p

erio

d. I

ncom

e an

d ex

pens

e ite

ms

are

trans

late

d at

the

ave

rage

exc

hang

e ra

tes

for

the

perio

d.

Exch

ange

diff

eren

ces a

risin

g ar

e re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e (a

ttrib

uted

to th

e ow

ners

of t

he

Com

pany

and

non

-con

trolli

ng in

tere

sts a

s app

ropr

iate

). O

n th

e di

spos

al o

f a fo

reig

n op

erat

ion,

all

of th

e ex

chan

ge d

iffer

ence

s ac

cum

ulat

ed in

equ

ity in

resp

ect o

f th

at o

pera

tion

attri

buta

ble

to th

e ow

ners

of t

he C

ompa

ny a

re re

clas

sifie

d to

pro

fit o

r los

s. In

vent

orie

s In

vent

orie

s ar

e pr

imar

ily e

xpen

dabl

e an

d no

nexp

enda

ble

parts

and

mat

eria

ls, s

uppl

ies

used

in o

pera

tions

an

d ite

ms

for

in-fl

ight

sal

e an

d ar

e st

ated

at

the

low

er o

f co

st o

r ne

t re

aliz

able

val

ue.

The

cost

s of

in

vent

orie

s sol

d or

con

sum

ed a

re d

eter

min

ed u

sing

the

wei

ghte

d-av

erag

e m

etho

d.

- 14

-

200

Non

-cur

rent

Ass

ets H

eld

for

Sale

N

on-c

urre

nt a

sset

s ar

e cl

assi

fied

as h

eld-

for-s

ale

if th

eir

carr

ying

am

ount

will

be

reco

vere

d pr

inci

pally

th

roug

h a

sale

tran

sact

ion

rath

er th

an th

roug

h co

ntin

uing

use

. Thi

s co

nditi

on is

rega

rded

as

met

onl

y w

hen

the

sale

is h

ighl

y pr

obab

le a

nd th

e N

on-c

urre

nt a

sset

is a

vaila

ble

for i

mm

edia

te sa

le in

its p

rese

nt c

ondi

tion.

To

mee

t th

e cr

iteria

for

the

sal

e be

ing

high

ly p

roba

ble,

the

app

ropr

iate

lev

el o

f m

anag

emen

t m

ust

be

com

mitt

ed to

the

sale

, whi

ch s

houl

d be

exp

ecte

d to

qua

lify

for r

ecog

nitio

n as

a c

ompl

eted

sal

e w

ithin

one

ye

ar fr

om th

e da

te o

f cla

ssifi

catio

n.

Non

-cur

rent

ass

ets

clas

sifie

d as

hel

d-fo

r-sal

e ar

e m

easu

red

at th

e lo

wer

of

thei

r pr

evio

us c

arry

ing

amou

nt

and

fair

valu

e le

ss c

osts

to se

ll. R

ecog

nitio

n of

dep

reci

atio

n of

thos

e as

sets

wou

ld c

ease

. In

vest

men

ts A

ccou

nted

for

by th

e E

quity

Met

hod

Inve

stm

ents

in

subs

idia

ries,

asso

ciat

es a

nd j

oint

ly c

ontro

lled

entit

ies

are

acco

unte

d fo

r by

the

equ

ity

met

hod.

a.

In

vest

men

t in

subs

idia

ries

Su

bsid

iarie

s (in

clud

ing

spec

ial p

urpo

se e

ntiti

es) a

re th

e en

titie

s con

trolle

d by

the

Com

pany

. U

nder

the

equ

ity m

etho

d, t

he i

nves

tmen

t is

ini

tially

rec

ogni

zed

at c

ost

and

the

carr

ying

am

ount

is

incr

ease

d or

dec

reas

ed to

reco

gniz

e th

e C

ompa

ny’s

sha

re o

f the

pro

fit o

r los

s an

d ot

her c

ompr

ehen

sive

in

com

e of

the

sub

sidi

ary

afte

r th

e da

te o

f ac

quis

ition

. B

esid

es,

the

Com

pany

als

o re

cogn

izes

the

C

ompa

ny’s

shar

e of

the

chan

ges i

n ot

her e

quity

of t

he su

bsid

iary

. C

hang

es in

the

Com

pany

’s o

wne

rshi

p in

tere

sts

in s

ubsi

diar

ies

that

do

not r

esul

t in

the

Com

pany

’s lo

ss

of c

ontro

l ove

r th

e su

bsid

iarie

s ar

e ac

coun

ted

for

as e

quity

tran

sact

ions

. Any

diff

eren

ce b

etw

een

the

carr

ying

am

ount

s of

the

inv

estm

ent

and

the

fair

valu

e of

the

con

side

ratio

n pa

id o

r re

ceiv

ed i

s re

cogn

ized

dire

ctly

in e

quity

. W

hen

the

Com

pany

’s s

hare

of

loss

es o

f a

subs

idia

ry e

qual

s or

exc

eeds

its

inte

rest

in th

at s

ubsi

diar

y (w

hich

inc

lude

s an

y ca

rryi

ng a

mou

nt o

f th

e in

vest

men

t in

sub

sidi

ary

acco

unte

d fo

r by

the

equ

ity

met

hod

and

long

-term

inte

rest

s th

at, i

n su

bsta

nce,

for

m p

art o

f th

e C

ompa

ny’s

net

inve

stm

ent i

n th

e su

bsid

iary

), th

e C

ompa

ny c

ontin

ues r

ecog

nizi

ng it

s sha

re o

f fur

ther

loss

es.

The

acqu

isiti

on c

ost i

n ex

cess

of t

he a

cqui

sitio

n-da

te fa

ir va

lue

of th

e id

entif

iabl

e ne

t ass

ets

acqu

ired

is re

cogn

ized

as

good

will

. G

oodw

ill i

s no

t am

ortiz

ed.

The

acqu

isiti

on-d

ate

fair

valu

e of

the

net

id

entif

iabl

e as

sets

acq

uire

d in

exc

ess o

f the

acq

uisi

tion

cost

is re

cogn

ized

imm

edia

tely

in p

rofit

or l

oss.

Whe

n th

e C

ompa

ny c

ease

s to

hav

e co

ntro

l ove

r a

subs

idia

ry, a

ny r

etai

ned

inve

stm

ent i

s m

easu

red

at

fair

valu

e at

tha

t da

te a

nd t

he d

iffer

ence

bet

wee

n th

e pr

evio

us c

arry

ing

amou

nt o

f th

e su

bsid

iary

at

tribu

tabl

e to

the

reta

ined

inte

rest

and

its

fair

valu

e is

incl

uded

in th

e de

term

inat

ion

of th

e ga

in o

r los

s. Fu

rther

mor

e, t

he C

ompa

ny a

ccou

nts

for

all

amou

nts

prev

ious

ly r

ecog

nize

d in

oth

er c

ompr

ehen

sive

in

com

e in

rel

atio

n to

tha

t su

bsid

iary

on

the

sam

e ba

sis

as w

ould

be

requ

ired

if th

e C

ompa

ny h

ad

dire

ctly

dis

pose

d of

the

rela

ted

asse

ts o

r lia

bilit

ies.

Prof

its a

nd lo

sses

fro

m d

owns

tream

tra

nsac

tions

with

a s

ubsi

diar

y ar

e el

imin

ated

in

full.

Pro

fits

and

loss

es fr

om u

pstre

am w

ith a

subs

idia

ry a

nd si

de st

ream

tran

sact

ions

bet

wee

n su

bsid

iarie

s are

reco

gniz

ed

in t

he C

ompa

ny’s

fin

anci

al s

tate

men

ts o

nly

to t

he e

xten

t of

int

eres

ts i

n th

e su

bsid

iary

tha

t ar

e no

t re

late

d to

the

Com

pany

.

- 15

-

b.

Inve

stm

ents

in a

ssoc

iate

s and

join

t ven

ture

s A

n as

soci

ate

is a

n en

tity

over

whi

ch t

he C

ompa

ny h

as s

igni

fican

t in

fluen

ce a

nd t

hat

is n

eith

er a

su

bsid

iary

nor

an

inte

rest

in a

joi

nt v

entu

re.

A j

oint

ven

ture

is

a jo

int

arra

ngem

ent

whe

reby

the

C

ompa

ny a

nd o

ther

par

ties

that

hav

e jo

int c

ontro

l of t

he a

rran

gem

ent a

nd th

e rig

hts

to th

e ne

t ass

ets

of

the

arra

ngem

ent.

The

Com

pany

use

s th

e eq

uity

met

hod

to a

ccou

nt f

or it

s in

vest

men

ts in

ass

ocia

tes

and

join

t ven

ture

s. U

nder

the

equ

ity m

etho

d, a

n in

vest

men

t in

an

asso

ciat

e an

d jo

intly

con

trolle

d en

tity

is i

nitia

lly

reco

gniz

ed a

t cos

t and

adj

uste

d th

erea

fter

to r

ecog

nize

the

Com

pany

’s s

hare

of

the

prof

it or

loss

and

ot

her

com

preh

ensi

ve in

com

e of

the

asso

ciat

e an

d jo

intly

ven

ture

s. Th

e C

ompa

ny a

lso

reco

gniz

es th

e ch

ange

s in

the

Com

pany

’s s

hare

of

equi

ty o

f as

soci

ates

and

joi

ntly

ven

ture

s at

tribu

tabl

e to

the

C

ompa

ny.

Whe

n th

e C

ompa

ny s

ubsc

ribes

for

add

ition

al n

ew s

hare

s of

an

asso

ciat

e an

d jo

int

vent

ures

at

a pe

rcen

tage

diff

eren

t fr

om i

ts e

xist

ing

owne

rshi

p pe

rcen

tage

, th

e re

sulti

ng c

arry

ing

amou

nt o

f th

e in

vest

men

t diff

ers

from

the

amou

nt o

f th

e C

ompa

ny’s

pro

porti

onat

e in

tere

st in

the

asso

ciat

e an

d jo

int

vent

ures

. Th

e C

ompa

ny

reco

rds

such

a

diff

eren

ce

as

an

adju

stm

ent

to

inve

stm

ents

w

ith t

he

corr

espo

ndin

g am

ount

cha

rged

or

cred

ited

to c

apita

l sur

plus

. If

the

Com

pany

’s o

wne

rshi

p in

tere

st is

re

duce

d du

e to

the

subs

crip

tion

of a

dditi

onal

new

sha

res

of th

e as

soci

ate

and

join

tly c

ontro

lled

entit

y,

the

prop

ortio

nate

am

ount

of t

he g

ains

or l

osse

s pre

viou

sly

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

in

rela

tion

to th

at a

ssoc

iate

and

join

t ven

ture

s is r

ecla

ssifi

ed to

pro

fit o

r los

s on

the

sam

e ba

sis a

s wou

ld b

e re

quire

d ha

d th

e in

vest

ee d

irect

ly d

ispo

sed

of t

he r

elat

ed a

sset

s or

lia

bilit

ies.

Whe

n th

e ad

just

men

t sh

ould

be

debi

ted

to c

apita

l sur

plus

, but

the

capi

tal s

urpl

us re

cogn

ized

from

inve

stm

ents

acc

ount

ed fo

r us

ing

the

equi

ty m

etho

d is

insu

ffic

ient

, the

shor

tage

is d

ebite

d to

reta

ined

ear

ning

s. W

hen

the

Com

pany

’s s

hare

of l

osse

s of

an

asso

ciat

e an

d jo

int v

entu

res

equa

ls o

r exc

eeds

its

inte

rest

in

that

ass

ocia

te a

nd jo

int v

entu

res

whi

ch in

clud

es a

ny c

arry

ing

amou

nt o

f th

e in

vest

men

t acc

ount

ed f

or

usin

g th

e eq

uity

met

hod

and

long

-term

int

eres

ts t

hat,

in s

ubst

ance

, for

m p

art

of t

he C

ompa

ny’s

net

in

vest

men

t in

the

asso

ciat

e an

d jo

int v

entu

res

entit

y, th

e C

ompa

ny d

isco

ntin

ues

reco

gniz

ing

its s

hare

of

furth

er lo

sses

. Add

ition

al lo

sses

and

liab

ilitie

s ar

e re

cogn

ized

onl

y to

the

exte

nt th

at th

e C

ompa

ny h

as

incu

rred

lega

l obl

igat

ions

, or c

onst

ruct

ive

oblig

atio

ns, o

r mad

e pa

ymen

ts o

n be

half

of th

at a

ssoc

iate

and

jo

int v

entu

res.

Any

exc

ess

of th

e co

st o

f acq

uisit

ion

over

the

Com

pany

’s s

hare

of t

he n

et fa

ir va

lue

of th

e id

entif

iabl

e as

sets

and

lia

bilit

ies

of a

n as

soci

ate

and

join

t ve

ntur

es r

ecog

nize

d at

the

dat

e of

acq

uisi

tion

is re

cogn

ized

as

good

will

, w

hich

is

incl

uded

with

in t

he c

arry

ing

amou

nt o

f th

e in

vest

men

t an

d is

not

am

ortiz

ed.

Any

exc

ess

of t

he C

ompa

ny’s

sha

re o

f th

e ne

t fa

ir va

lue

of t

he i

dent

ifiab

le a

sset

s an

d lia

bilit

ies o

ver t

he c

ost o

f acq

uisit

ion,

afte

r rea

sses

smen

t, is

reco

gniz

ed im

med

iate

ly in

pro

fit o

r los

s. Th

e en

tire

carr

ying

am

ount

of t

he in

vest

men

t (in

clud

ing

good

will

) is

test

ed fo

r im

pairm

ent a

s a

sing

le

asse

t by

com

parin

g its

reco

vera

ble

amou

nt w

ith it

s car

ryin

g am

ount

. Any

impa

irmen

t los

s rec

ogni

zed

is no

t allo

cate

d to

any

ass

et, i

nclu

ding

goo

dwill

, tha

t for

ms

part

of th

e ca

rryi

ng a

mou

nt o

f the

inve

stm

ent.

Any

rev

ersa

l of

tha

t im

pairm

ent

loss

is

reco

gniz

ed t

o th

e ex

tent

tha

t th

e re

cove

rabl

e am

ount

of

the

inve

stm

ent s

ubse

quen

tly in

crea

ses.

The

Com

pany

dis

cont

inue

s th

e us

e of

the

equ

ity m

etho

d fr

om t

he d

ate

on w

hich

it

ceas

es t

o ha

ve

sign

ifica

nt in

fluen

ce a

nd jo

int c

ontro

l. A

ny re

tain

ed in

vest

men

t is m

easu

red

at fa

ir va

lue

at th

at d

ate

and

the

fair

valu

e is

reg

arde

d as

its

fai

r va

lue

on i

nitia

l re

cogn

ition

as

a fin

anci

al a

sset

. The

diff

eren

ce

betw

een

the

prev

ious

car

ryin

g am

ount

of

the

asso

ciat

e an

d th

e jo

intly

con

trolle

d en

tity

attri

buta

ble

to

the

reta

ined

inte

rest

and

its

fair

valu

e is

incl

uded

in th

e de

term

inat

ion

of th

e ga

in o

r los

s on

dis

posa

l of

the

asso

ciat

e an

d th

e jo

intly

con

trolle

d en

tity.

The

Com

pany

acc

ount

s fo

r al

l am

ount

s pr

evio

usly

re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e in

rela

tion

to th

at a

ssoc

iate

and

the

join

tly c

ontro

lled

entit

y on

the

sam

e ba

sis

as w

ould

be

requ

ired

if th

at a

ssoc

iate

had

dire

ctly

dis

pose

d of

the

rela

ted

asse

ts o

r lia

bilit

ies.

- 16

-

201

Whe

n th

e C

ompa

ny tr

ansa

cts

with

its

asso

ciat

e an

d jo

int v

entu

res,

prof

its a

nd lo

sses

resu

lting

from

the

trans

actio

ns w

ith th

e as

soci

ate

are

reco

gniz

ed in

the

Com

pany

’ fin

anci

al st

atem

ents

onl

y to

the

exte

nt o

f in

tere

sts i

n th

e as

soci

ate

and

the

join

tly c

ontro

lled

entit

y th

at a

re n

ot re

late

d to

the

Com

pany

. Pr

oper

ty, P

lant

and

Equ

ipm

ent

Prop

erty

, pla

nt a

nd e

quip

men

t are

tang

ible

item

s th

at a

re h

eld

for u

se in

the

prod

uctio

n or

sup

ply

of g

oods

or

ser

vice

s, fo

r re

ntal

to o

ther

s, or

for

adm

inis

trativ

e pu

rpos

es a

nd a

re e

xpec

ted

to b

e us

ed f

or m

ore

than

on

e pe

riod.

The

cos

t of a

n ite

m o

f pro

perty

, pla

nt a

nd e

quip

men

t sha

ll be

reco

gniz

ed a

s an

asse

t if,

and

only

if,

it is

pro

babl

e th

at fu

ture

eco

nom

ic b

enef

its a

ssoc

iate

d w

ith th

e ite

m w

ill fl

ow to

the

Com

pany

; and

the

cost

of t

he it

em c

an b

e m

easu

red

relia

bly.

Pro

perty

, pla

nt a

nd e

quip

men

t are

sta

ted

at c

ost l

ess

reco

gniz

ed

accu

mul

ated

dep

reci

atio

n an

d re

cogn

ized

acc

umul

ated

impa

irmen

t los

s. Fr

eeho

ld la

nd is

not

dep

reci

ated

. D

epre

ciat

ion

is r

ecog

nize

d us

ing

the

stra

ight

-line

met

hod.

Eac

h si

gnifi

cant

par

t is

depr

ecia

ted

sepa

rate

ly.

The

estim

ated

use

ful

lives

, re

sidu

al v

alue

s an

d de

prec

iatio

n m

etho

ds a

re r

evie

wed

at

the

end

of e

ach

repo

rting

per

iod,

with

the

effe

cts o

f any

cha

nges

in th

e es

timat

es a

ccou

nted

for o

n a

pros

pect

ive

basi

s. A

sset

s hel

d un

der f

inan

ce le

ases

are

dep

reci

ated

ove

r the

ir ex

pect

ed u

sefu

l liv

es o

n th

e sa

me

basi

s as o

wne

d as

sets

. Ass

ets

are

depr

ecia

ted

over

the

shor

ter o

f the

leas

e te

rm a

nd th

eir u

sefu

l liv

es u

sing

the

stra

ight

-line

m

etho

d.

Any

gai

n or

los

s ar

isin

g on

the

dis

posa

l or

ret

irem

ent

of a

n ite

m o

f pr

oper

ty,

plan

t an

d eq

uipm

ent

is de

term

ined

as

the

diff

eren

ce b

etw

een

the

sale

s pr

ocee

ds a

nd t

he c

arry

ing

amou

nt o

f th

e as

set

and

is

reco

gniz

ed in

pro

fit o

r los

s. In

vest

men

t Pro

pert

ies

Inve

stm

ent p

rope

rties

are

pro

perti

es h

eld

to e

arn

rent

als

or f

or c

apita

l app

reci

atio

n. I

nves

tmen

t pro

perti

es

also

incl

ude

land

hel

d fo

r a c

urre

ntly

und

eter

min

ed fu

ture

use

. In

vest

men

t pr

oper

ties

are

mea

sure

d in

itial

ly a

t co

st,

incl

udin

g tra

nsac

tion

cost

s. Su

bseq

uent

to

initi

al

reco

gniti

on,

inve

stm

ent

prop

ertie

s ar

e m

easu

red

at c

ost

less

acc

umul

ated

dep

reci

atio

n an

d ac

cum

ulat

ed

impa

irmen

t los

s. A

ny g

ain

or l

oss

aris

ing

on t

he d

erec

ogni

tion

of i

nves

tmen

t pr

oper

ties

is c

alcu

late

d as

the

diff

eren

ce

betw

een

the

net d

ispo

sal p

roce

eds

and

the

carr

ying

am

ount

of t

he a

sset

and

is in

clud

ed in

pro

fit o

r los

s in

th

e pe

riod

in w

hich

the

prop

erty

is d

erec

ogni

zed.

In

tang

ible

Ass

ets

Inta

ngib

le a

sset

s w

ith f

inite

use

ful

lives

tha

t ar

e ac

quire

d se

para

tely

are

ini

tially

mea

sure

d at

cos

t an

d su

bseq

uent

ly

mea

sure

d at

co

st

less

ac

cum

ulat

ed

amor

tizat

ion

and

accu

mul

ated

im

pairm

ent

loss

. A

mor

tizat

ion

is r

ecog

nize

d on

a s

traig

ht-li

ne b

asis

. Th

e es

timat

ed u

sefu

l liv

es,

resi

dual

val

ues,

and

amor

tizat

ion

met

hods

are

revi

ewed

at t

he e

nd o

f eac

h re

porti

ng p

erio

d, w

ith th

e ef

fect

s of

any

cha

nges

in

the

estim

ates

bei

ng a

ccou

nted

for

on

a pr

ospe

ctiv

e ba

sis.

The

resi

dual

val

ue o

f an

inta

ngib

le a

sset

with

a

finite

use

ful l

ife s

hall

be a

ssum

ed to

be

zero

unl

ess

the

Com

pany

exp

ects

to d

ispo

se o

f the

inta

ngib

le a

sset

be

fore

the

end

of it

s eco

nom

ic li

fe.

- 17

-

Impa

irm

ent o

f Tan

gibl

e an

d In

tang

ible

Ass

ets O

ther

Tha

n G

oodw

ill

At

the

end

of e

ach

repo

rting

per

iod,

the

Com

pany

rev

iew

s th

e ca

rryi

ng a

mou

nts

of i

ts t

angi

ble

and

inta

ngib

le a

sset

s, ex

clud

ing

good

will

, to

dete

rmin

e w

heth

er th

ere

is a

ny in

dica

tion

that

thos

e as

sets

hav

e su

ffer

ed a

n im

pairm

ent l

oss.

If an

y su

ch in

dica

tion

exis

ts, t

he re

cove

rabl

e am

ount

of t

he a

sset

is e

stim

ated

in

ord

er to

det

erm

ine

the

exte

nt o

f the

impa

irmen

t los

s. W

hen

it is

not

pos

sibl

e to

est

imat

e th

e re

cove

rabl

e am

ount

of a

n in

divi

dual

ass

et, t

he C

ompa

ny e

stim

ates

the

reco

vera

ble

amou

nt o

f the

cas

h-ge

nera

ting

unit

to

whi

ch t

he a

sset

bel

ongs

. C

orpo

rate

ass

ets

are

allo

cate

d to

the

ind

ivid

ual

cash

-gen

erat

ing

units

on

a re

ason

able

and

con

sist

ent

basi

s; o

ther

wis

e, c

orpo

rate

ass

ets

are

allo

cate

d to

the

sm

alle

st g

roup

of

cash

-gen

erat

ing

units

on

a re

ason

able

and

con

sist

ent a

lloca

tion

basi

s. In

tang

ible

ass

ets

with

inde

finite

use

ful l

ives

and

inta

ngib

le a

sset

s no

t yet

ava

ilabl

e fo

r us

e ar

e te

sted

for

im

pairm

ent a

t lea

st a

nnua

lly, a

nd w

hene

ver t

here

is a

n in

dica

tion

that

the

asse

t may

be

impa

ired.

Th

e re

cove

rabl

e am

ount

is th

e hi

gher

of f

air v

alue

less

cos

ts to

sel

l and

val

ue in

use

. In

asse

ssin

g va

lue

in

use,

the

Com

pany

use

s th

e es

timat

ed c

ash

flow

s di

scou

nted

by

the

futu

re p

re-ta

x di

scou

nt r

ate,

and

the

di

scou

nt ra

te re

flect

s the

cur

rent

mar

ket t

ime

valu

e of

mon

ey a

nd th

e sp

ecifi

c ris

ks to

the

asse

t for

est

imat

ed

futu

re c

ash

flow

s not

yet

adj

ustin

g to

the

mar

ket.

If th

e re

cove

rabl

e am

ount

of

an a

sset

or

cash

-gen

erat

ing

unit

is e

stim

ated

to

be l

ess

than

its

car

ryin

g am

ount

, the

car

ryin

g am

ount

of t

he a

sset

or c

ash-

gene

ratin

g un

it is

redu

ced

to it

s rec

over

able

am

ount

. W

hen

an im

pairm

ent l

oss

is s

ubse

quen

tly is

reve

rsed

, the

car

ryin

g am

ount

of

the

asse

t or

cash

-gen

erat

ing

unit

is in

crea

sed

to th

e re

vise

d es

timat

e of

its

reco

vera

ble

amou

nt, b

ut o

nly

to th

e ex

tent

of

the

carr

ying

am

ount

tha

t w

ould

hav

e be

en d

eter

min

ed h

ad n

o im

pairm

ent

loss

bee

n re

cogn

ized

for

the

ass

et o

r ca

sh-g

ener

atin

g un

it in

prio

r yea

rs. A

reve

rsal

of a

n im

pairm

ent l

oss i

s rec

ogni

zed

in p

rofit

or l

oss.

Fina

ncia

l Ins

trum

ents

Fi

nanc

ial

asse

ts a

nd f

inan

cial

lia

bilit

ies

are

reco

gniz

ed w

hen

the

Com

pany

bec

omes

a p

arty

to

the

cont

ract

ual p

rovi

sion

s of t

he in

stru

men

ts.

Fi

nanc

ial

asse

ts a

nd f

inan

cial

lia

bilit

ies

are

initi

ally

mea

sure

d at

fai

r va

lue.

Tra

nsac

tion

cost

s th

at a

re

dire

ctly

attr

ibut

able

to

the

acqu

isiti

on o

r is

suan

ce o

f fin

anci

al a

sset

s an

d fin

anci

al l

iabi

litie

s (o

ther

tha

n fin

anci

al a

sset

s an

d fin

anci

al l

iabi

litie

s at

FV

TPL)

are

add

ed t

o or

ded

ucte

d fr

om t

he f

air

valu

e of

the

fin

anci

al a

sset

s or

fin

anci

al l

iabi

litie

s, as

app

ropr

iate

, on

ini

tial

reco

gniti

on.

Tran

sact

ion

cost

s di

rect

ly

attri

buta

ble

to t

he a

cqui

sitio

n of

fin

anci

al a

sset

s or

fin

anci

al l

iabi

litie

s at

FV

TPL

are

reco

gniz

ed

imm

edia

tely

in p

rofit

or l

oss.

a.

Fina

ncia

l ass

ets

All

regu

lar p

urch

ases

or s

ales

of f

inan

cial

ass

ets

are

reco

gniz

ed a

nd d

erec

ogni

zed

on a

trad

e da

te b

asis

. A

ll re

gula

r pur

chas

es o

r sal

es o

f fin

anci

al a

sset

s ar

e bu

y or

sel

l of f

inan

cial

ass

ets

in th

e pe

riod

set b

y re

gula

tion

or m

arke

t con

vent

ion.

1)

M

easu

rem

ent c

ateg

ory

Fina

ncia

l as

sets

are

cla

ssifi

ed in

to th

e fo

llow

ing

cate

gorie

s: F

inan

cial

ass

ets

at F

VTP

L, f

inan

cial

as

sets

at a

mor

tized

cos

t, an

d in

vest

men

ts in

equ

ity in

strum

ents

at F

VTO

CI.

a)

Fina

ncia

l ass

ets a

t FV

TPL

Fi

nanc

ial a

sset

s ar

e cl

assi

fied

as a

t FV

TPL

whe

n su

ch a

fina

ncia

l ass

et is

man

dato

rily

clas

sifie

d or

des

igna

ted

as a

t FV

TPL.

Fin

anci

al a

sset

s m

anda

toril

y cl

assi

fied

as a

t FV

TPL

incl

ude

inve

stm

ents

in e

quity

inst

rum

ents

whi

ch a

re n

ot d

esig

nate

d as

at F

VTO

CI a

nd d

ebt i

nstru

men

ts

that

do

not m

eet t

he a

mor

tized

cos

t crit

eria

or t

he F

VTO

CI c

riter

ia.

- 18

-

202

Fina

ncia

l as

sets

at

FVTP

L ar

e su

bseq

uent

ly m

easu

red

at f

air

valu

e, w

ith a

ny g

ains

or

loss

es

aris

ing

on r

emea

sure

men

t rec

ogni

zed

in p

rofit

or

loss

. Fai

r va

lue

is d

eter

min

ed in

the

man

ner

desc

ribed

in N

ote

31.

b)

Fina

ncia

l ass

ets a

t am

ortiz

ed c

ost

Fina

ncia

l as

sets

tha

t m

eet

the

follo

win

g co

nditi

ons

are

subs

eque

ntly

mea

sure

d at

am

ortiz

ed

cost

: i.

The

finan

cial

ass

et i

s he

ld w

ithin

a b

usin

ess

mod

el w

hose

obj

ectiv

e is

to

hold

fin

anci

al

asse

ts in

ord

er to

col

lect

con

tract

ual c

ash

flow

s; a

nd

ii.

The

cont

ract

ual t

erm

s of t

he fi

nanc

ial a

sset

giv

e ris

e on

spec

ified

dat

es to

cas

h flo

ws t

hat a

re

sole

ly p

aym

ents

of p

rinci

pal a

nd in

tere

st o

n th

e pr

inci

pal a

mou

nt o

utst

andi

ng.

Su

bseq

uent

to

initi

al r

ecog

nitio

n, f

inan

cial

ass

ets

at a

mor

tized

cos

t, in

clud

ing

cash

and

cas

h eq

uiva

lent

s, tra

de r

ecei

vabl

es,

othe

r re

ceiv

able

s an

d ot

her

finan

cial

ass

ets,

are

mea

sure

d at

am

ortiz

ed c

ost,

whi

ch e

qual

s th

e gr

oss

carr

ying

am

ount

det

erm

ined

usi

ng th

e ef

fect

ive

inte

rest

m

etho

d le

ss a

ny im

pairm

ent l

oss.

Exch

ange

diff

eren

ces a

re re

cogn

ized

in p

rofit

or l

oss.

Inte

rest

inco

me

is c

alcu

late

d by

app

lyin

g th

e ef

fect

ive

inte

rest

rate

to th

e gr

oss

carr

ying

am

ount

of

a fi

nanc

ial a

sset

. C

ash

equi

vale

nts i

nclu

de ti

me

depo

sits

with

orig

inal

mat

uriti

es w

ithin

3 m

onth

s fro

m th

e da

te o

f ac

quis

ition

, w

hich

are

hig

hly

liqui

d, r

eadi

ly c

onve

rtibl

e to

a k

now

n am

ount

of

cash

and

are

su

bjec

t to

an

insi

gnifi

cant

ris

k of

cha

nges

in

valu

e. T

hese

cas

h eq

uiva

lent

s ar

e he

ld f

or t

he

purp

ose

of m

eetin

g sh

ort-t

erm

cas

h co

mm

itmen

ts.

c)

Inve

stm

ents

in e

quity

inst

rum

ents

at F

VTO

CI

O

n in

itial

reco

gniti

on, t

he C

ompa

ny m

ay m

ake

an ir

revo

cabl

e el

ectio

n to

des

igna

te in

vest

men

ts in

equ

ity i

nstru

men

ts a

s at

FV

TOC

I. D

esig

natio

n at

FV

TOC

I is

not

per

mitt

ed i

f an

equ

ity

inve

stm

ent i

s he

ld fo

r tra

ding

or i

f it i

s co

ntin

gent

con

side

ratio

n re

cogn

ized

by

an a

cqui

rer i

n a

busi

ness

com

bina

tion.

In

vest

men

ts i

n eq

uity

ins

trum

ents

at

FVTO

CI

are

subs

eque

ntly

mea

sure

d at

fai

r va

lue

with

ga

ins

and

loss

es a

risin

g fr

om c

hang

es in

fai

r va

lue

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

and

accu

mul

ated

in o

ther

equ

ity. T

he c

umul

ativ

e ga

in o

r los

s will

not

be

recl

assi

fied

to p

rofit

or

loss

on

disp

osal

of t

he e

quity

inve

stm

ents

; ins

tead

, the

y w

ill b

e tra

nsfe

rred

to re

tain

ed e

arni

ngs.

Div

iden

ds o

n th

ese

inve

stm

ents

in e

quity

inst

rum

ents

are

reco

gniz

ed in

pro

fit o

r los

s w

hen

the

Com

pany

’s ri

ght t

o re

ceiv

e th

e di

vide

nds

is e

stabl

ishe

d, u

nles

s th

e di

vide

nds

clea

rly re

pres

ent a

re

cove

ry o

f par

t of t

he c

ost o

f an

inve

stm

ent.

2)

Im

pairm

ent o

f fin

anci

al a

sset

s

The

Com

pany

rec

ogni

zes

a lo

ss a

llow

ance

for

exp

ecte

d cr

edit

loss

es o

n fin

anci

al a

sset

s at

am

ortiz

ed c

ost (

incl

udin

g tra

de re

ceiv

able

s), a

s wel

l as c

ontra

ct a

sset

s. Th

e C

ompa

ny a

lway

s re

cogn

izes

life

time

expe

cted

cre

dit l

osse

s (E

CLs

) fo

r tra

de r

ecei

vabl

es a

nd

othe

r rec

eiva

bles

. For

all

othe

r fin

anci

al in

stru

men

ts, t

he C

ompa

ny re

cogn

izes

life

time

ECLs

whe

n th

ere

has

been

a si

gnifi

cant

incr

ease

in c

redi

t ris

k si

nce

initi

al re

cogn

ition

. If,

on th

e ot

her h

and,

the

cred

it ris

k on

a f

inan

cial

ins

trum

ent

has

not

incr

ease

d si

gnifi

cant

ly s

ince

ini

tial

reco

gniti

on, t

he

Com

pany

mea

sure

s the

loss

allo

wan

ce fo

r tha

t fin

anci

al in

stru

men

t at a

n am

ount

equ

al to

12-

mon

th

ECLs

.

- 19

-

Expe

cted

cre

dit l

osse

s re

flect

the

wei

ghte

d av

erag

e of

cre

dit l

osse

s w

ith th

e re

spec

tive

risks

of

a de

faul

t occ

urrin

g as

the

wei

ghts

. Life

time

ECL

repr

esen

ts th

e ex

pect

ed c

redi

t los

ses

that

will

resu

lt fr

om a

ll po

ssib

le d

efau

lt ev

ents

ove

r th

e ex

pect

ed l

ife o

f a

finan

cial

ins

trum

ent.

In c

ontra

st,

12-m

onth

EC

L re

pres

ents

the

porti

on o

f life

time

ECL

that

is e

xpec

ted

to re

sult

from

def

ault

even

ts on

a fi

nanc

ial i

nstru

men

t tha

t are

pos

sibl

e w

ithin

12

mon

ths a

fter t

he re

porti

ng d

ate.

Th

e im

pairm

ent

loss

of

all f

inan

cial

ass

ets

is r

ecog

nize

d in

pro

fit o

r lo

ss b

y a

redu

ctio

n in

thei

r ca

rryi

ng a

mou

nts

thro

ugh

a lo

ss a

llow

ance

acc

ount

, exc

ept f

or in

vest

men

ts in

deb

t ins

trum

ents

that

ar

e m

easu

red

at F

VTO

CI,

for

whi

ch t

he l

oss

allo

wan

ce i

s re

cogn

ized

in

othe

r co

mpr

ehen

sive

in

com

e an

d th

e ca

rryi

ng a

mou

nts o

f suc

h fin

anci

al a

sset

s are

not

redu

ced.

3)

Der

ecog

nitio

n of

fina

ncia

l ass

ets

The

Com

pany

der

ecog

nize

s a fi

nanc

ial a

sset

onl

y w

hen

the

cont

ract

ual r

ight

s to

the

cash

flow

s fro

m

the

asse

t exp

ire o

r whe

n it

trans

fers

the

finan

cial

ass

et a

nd s

ubst

antia

lly a

ll th

e ris

ks a

nd re

war

ds o

f ow

ners

hip

of th

e as

set t

o an

othe

r par

ty.

On

dere

cogn

ition

of

a fin

anci

al a

sset

at a

mor

tized

cos

t in

its e

ntire

ty, t

he d

iffer

ence

bet

wee

n th

e as

set’s

car

ryin

g am

ount

and

the

sum

of

the

cons

ider

atio

n re

ceiv

ed a

nd r

ecei

vabl

e is

rec

ogni

zed

in

prof

it or

loss

. On

dere

cogn

ition

of

an in

vest

men

t in

a de

bt in

stru

men

t at F

VTO

CI,

the

diff

eren

ce

betw

een

the

asse

t’s c

arry

ing

amou

nt a

nd th

e su

m o

f the

con

side

ratio

n re

ceiv

ed a

nd re

ceiv

able

and

th

e cu

mul

ativ

e ga

in o

r lo

ss w

hich

had

bee

n re

cogn

ized

in

othe

r co

mpr

ehen

sive

inc

ome

is re

cogn

ized

in p

rofit

or l

oss.

How

ever

, on

dere

cogn

ition

of a

n in

vest

men

t in

an e

quity

inst

rum

ent a

t FV

TOC

I, th

e di

ffer

ence

bet

wee

n th

e as

set’s

car

ryin

g am

ount

and

the

sum

of

the

cons

ider

atio

n re

ceiv

ed a

nd r

ecei

vabl

e is

rec

ogni

zed

in p

rofit

or

loss

, and

the

cum

ulat

ive

gain

or

loss

whi

ch h

ad

been

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

is tr

ansf

erre

d di

rect

ly to

reta

ined

ear

ning

s, w

ithou

t re

cycl

ing

thro

ugh

prof

it or

loss

.

b.

Equi

ty in

stru

men

ts

D

ebt a

nd e

quity

inst

rum

ents

issu

ed b

y th

e C

ompa

ny a

re c

lass

ified

as

eith

er f

inan

cial

liab

ilitie

s or

as

equi

ty i

n ac

cord

ance

with

the

sub

stan

ce o

f th

e co

ntra

ctua

l ar

rang

emen

ts a

nd t

he d

efin

ition

s of

a

finan

cial

liab

ility

and

an

equi

ty in

stru

men

t. Eq

uity

inst

rum

ents

issu

ed b

y th

e C

ompa

ny a

re re

cogn

ized

at t

he p

roce

eds

rece

ived

, net

of d

irect

issu

e co

sts.

Rep

urch

ase

of t

he C

ompa

ny’s

ow

n eq

uity

ins

trum

ents

is

reco

gniz

ed i

n an

d de

duct

ed d

irect

ly f

rom

eq

uity

. No

gain

or l

oss

is re

cogn

ized

in p

rofit

or l

oss

on th

e pu

rcha

se, s

ale,

issu

e or

can

cella

tion

of th

e C

ompa

ny’s

ow

n eq

uity

inst

rum

ents

.

c.

Fina

ncia

l lia

bilit

ies

1)

Subs

eque

nt m

easu

rem

ent

Ex

cept

for

fin

anci

al l

iabi

litie

s at

FV

TPL,

all

finan

cial

lia

bilit

ies

are

mea

sure

d at

am

ortiz

ed c

ost

usin

g th

e ef

fect

ive

inte

rest

met

hod.

2)

Der

ecog

nitio

n of

fina

ncia

l lia

bilit

ies

The

diff

eren

ce b

etw

een

the

carr

ying

am

ount

of

a fin

anci

al l

iabi

lity

dere

cogn

ized

and

the

co

nsid

erat

ion

paid

, inc

ludi

ng a

ny n

on-c

ash

asse

ts tr

ansf

erre

d or

liab

ilitie

s as

sum

ed, i

s rec

ogni

zed

in

prof

it or

loss

.

- 20

-

203

d.

Con

verti

ble

bond

s Th

e co

mpo

nent

par

ts o

f co

mpo

und

inst

rum

ents

(i.e

. co

nver

tible

bon

ds)

issu

ed b

y th

e C

ompa

ny a

re

clas

sifie

d se

para

tely

as

finan

cial

lia

bilit

ies

and

equi

ty i

n ac

cord

ance

with

the

sub

stan

ce o

f th

e co

ntra

ctua

l arr

ange

men

ts a

nd th

e de

finiti

ons o

f a fi

nanc

ial l

iabi

lity

and

an e

quity

inst

rum

ent.

On

initi

al re

cogn

ition

, the

fair

valu

e of

the

liabi

lity

com

pone

nt is

est

imat

ed u

sing

the

prev

ailin

g m

arke

t in

tere

st r

ate

for

sim

ilar

non-

conv

ertib

le i

nstru

men

ts.

This

am

ount

is

reco

rded

as

a lia

bilit

y on

an

amor

tized

cos

t ba

sis

usin

g th

e ef

fect

ive

inte

rest

met

hod

until

ext

ingu

ishe

d up

on c

onve

rsio

n or

the

in

stru

men

t’s m

atur

ity d

ate.

Any

em

bedd

ed d

eriv

ativ

e lia

bilit

y is

mea

sure

d at

fair

valu

e.

The

conv

ersi

on o

ptio

n cl

assi

fied

as e

quity

is

dete

rmin

ed b

y de

duct

ing

the

amou

nt o

f th

e lia

bilit

y co

mpo

nent

from

the

fair

valu

e of

the

com

poun

d in

stru

men

t as

a w

hole

. Thi

s is r

ecog

nize

d an

d in

clud

ed

in e

quity

, net

of

inco

me

tax

effe

cts,

and

is n

ot s

ubse

quen

tly r

emea

sure

d. I

n ad

ditio

n, t

he c

onve

rsio

n op

tion

clas

sifie

d as

equ

ity w

ill re

mai

n in

equ

ity u

ntil

the

conv

ersi

on o

ptio

n is

exe

rcis

ed, i

n w

hich

cas

e,

the

bala

nce

reco

gniz

ed i

n eq

uity

will

be

trans

ferr

ed t

o ca

pita

l su

rplu

s -

shar

e pr

emiu

ms.

Whe

n th

e co

nver

sion

opt

ion

rem

ains

une

xerc

ised

at m

atur

ity, t

he b

alan

ce re

cogn

ized

in e

quity

will

be

trans

ferr

ed

to c

apita

l sur

plus

- sh

are

prem

ium

s.

Tran

sact

ion

cost

s th

at r

elat

e to

the

issu

ance

of

the

conv

ertib

le n

otes

are

allo

cate

d to

the

liabi

lity

and

equi

ty c

ompo

nent

s in

pro

porti

on to

the

allo

catio

n of

the

gros

s pr

ocee

ds. T

rans

actio

n co

sts

rela

ting

to

the

equi

ty c

ompo

nent

are

rec

ogni

zed

dire

ctly

in

equi

ty.

Tran

sact

ion

cost

s re

latin

g to

the

lia

bilit

y co

mpo

nent

are

incl

uded

in th

e ca

rryi

ng a

mou

nt o

f the

liab

ility

com

pone

nt.

e.

D

eriv

ativ

e fin

anci

al in

stru

men

ts

The

Com

pany

ent

ers i

nto

a va

riety

of d

eriv

ativ

e fin

anci

al in

stru

men

ts to

man

age

its e

xpos

ure

to in

tere

st ra

te, f

orei

gn e

xcha

nge

rate

and

fue

l pric

e ris

ks, i

nclu

ding

for

eign

exc

hang

e fo

rwar

d co

ntra

cts,

inte

rest

rate

swap

s, cu

rren

cy o

ptio

ns sw

aps a

nd fu

el sw

aps.

Der

ivat

ives

are

initi

ally

reco

gniz

ed a

t fai

r val

ue a

t the

dat

e th

e de

rivat

ive

cont

ract

s ar

e en

tere

d in

to a

nd

are

subs

eque

ntly

rem

easu

red

to th

eir f

air v

alue

at t

he e

nd o

f eac

h re

porti

ng p

erio

d. T

he re

sulti

ng g

ain

or

loss

is r

ecog

nize

d in

pro

fit o

r lo

ss im

med

iate

ly u

nles

s th

e de

rivat

ive

is d

esig

nate

d an

d ef

fect

ive

as a

he

dgin

g in

stru

men

t, in

whi

ch e

vent

, the

tim

ing

of th

e re

cogn

ition

in p

rofit

or l

oss d

epen

ds o

n th

e na

ture

of

the

hed

ging

rel

atio

nshi

p. W

hen

the

fair

valu

e of

a d

eriv

ativ

e fin

anci

al i

nstru

men

t is

pos

itive

, the

de

rivat

ive

is re

cogn

ized

as

a fin

anci

al a

sset

; whe

n th

e fa

ir va

lue

of a

der

ivat

ive

finan

cial

inst

rum

ent i

s ne

gativ

e, th

e de

rivat

ive

is re

cogn

ized

as a

fina

ncia

l lia

bilit

y.

Der

ivat

ives

em

bedd

ed in

hyb

rid c

ontra

cts

that

con

tain

fin

anci

al a

sset

hos

ts th

at is

with

in th

e sc

ope

of

IFR

S 9

are

not s

epar

ated

; ins

tead

, the

cla

ssifi

catio

n is

det

erm

ined

in a

ccor

danc

e w

ith th

e en

tire

hybr

id

cont

ract

. Der

ivat

ives

em

bedd

ed in

non

-der

ivat

ive

host

con

tract

s th

at a

re n

ot fi

nanc

ial a

sset

s w

ithin

the

scop

e of

IFR

S 9

(e.g

., fin

anci

al l

iabi

litie

s) a

re t

reat

ed a

s se

para

te d

eriv

ativ

es w

hen

they

mee

t th

e de

finiti

on o

f a

deriv

ativ

e, t

heir

risks

and

cha

ract

eris

tics

are

not

clos

ely

rela

ted

to t

hose

of

the

host

cont

ract

s, an

d th

e ho

st c

ontra

cts a

re n

ot m

easu

red

at F

VTP

L.

Hed

ge A

ccou

ntin

g Th

e C

ompa

ny e

nter

s in

to s

ome

deriv

ativ

e tra

nsac

tions

that

aim

to m

anag

e in

tere

st ra

tes,

fore

ign

exch

ange

ra

tes,

fuel

pric

es,

and

othe

r fa

ctor

s af

fect

ing

gain

s or

los

ses

on a

sset

s an

d lia

bilit

ies.

The

hedg

ing

trans

actio

ns a

re d

efin

ed a

s ca

sh f

low

hed

ges.

Whe

n en

terin

g in

to h

edgi

ng tr

ansa

ctio

ns, t

he C

ompa

ny h

as

prep

ared

off

icia

l doc

umen

ts th

at d

escr

ibe

the

hedg

ing

rela

tions

hip

betw

een

hedg

ing

inst

rum

ents

and

item

s w

hich

hav

e be

en h

edge

d, th

e ob

ject

ive

of ri

sk m

anag

emen

t, th

e he

dgin

g st

rate

gy, a

nd th

e w

ay to

eva

luat

e th

e ef

fect

iven

ess o

f the

hed

ging

inst

rum

ent.

- 21

-

The

effe

ctiv

e po

rtion

of c

hang

es in

the

fair

valu

e of

der

ivat

ives

that

are

des

igna

ted

and

qual

ify a

s ca

sh fl

ow

hedg

es is

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me.

The

gai

n or

loss

rela

ting

to th

e in

effe

ctiv

e po

rtion

is

reco

gniz

ed im

med

iate

ly in

pro

fit o

r los

s. Th

e as

soci

ated

gai

ns o

r lo

sses

that

wer

e re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e ar

e re

clas

sifie

d fr

om

equi

ty to

pro

fit o

r lo

ss a

s a

recl

assi

ficat

ion

adju

stm

ent i

n th

e lin

e ite

m r

elat

ing

to th

e he

dged

item

in th

e sa

me

perio

d as

whe

n th

e he

dged

ite

m a

ffec

ts p

rofit

or

loss

. If

a he

dge

of a

for

ecas

ted

trans

actio

n su

bseq

uent

ly r

esul

ts in

the

reco

gniti

on o

f a

non-

finan

cial

ass

et o

r a

non-

finan

cial

liab

ility

, the

ass

ocia

ted

gain

s an

d lo

sses

tha

t w

ere

reco

gniz

ed i

n ot

her

com

preh

ensi

ve i

ncom

e ar

e re

mov

ed f

rom

equ

ity a

nd a

re

incl

uded

in th

e in

itial

cos

t of t

he n

on-fi

nanc

ial a

sset

or n

on-fi

nanc

ial l

iabi

lity.

St

artin

g fr

om 2

018,

the

Com

pany

dis

cont

inue

s hed

ge a

ccou

ntin

g on

ly w

hen

the

hedg

ing

rela

tions

hip

ceas

es

to m

eet t

he q

ualif

ying

crit

eria

; for

inst

ance

, whe

n th

e he

dgin

g in

stru

men

t exp

ires

or is

sol

d, te

rmin

ated

or

exer

cise

d. T

he c

umul

ativ

e ga

in o

r lo

ss o

n th

e he

dgin

g in

stru

men

t tha

t has

bee

n pr

evio

usly

rec

ogni

zed

in

othe

r com

preh

ensi

ve in

com

e fr

om th

e pe

riod

in w

hich

the

hedg

e w

as e

ffec

tive

rem

ains

sep

arat

ely

in e

quity

un

til th

e fo

reca

sted

tran

sact

ion

occu

rs. W

hen

a fo

reca

sted

tran

sact

ion

is n

o lo

nger

exp

ecte

d to

occ

ur, t

he

gain

or l

oss a

ccum

ulat

ed in

equ

ity is

reco

gniz

ed im

med

iate

ly in

pro

fit o

r los

s. Pr

ovis

ions

Th

e C

ompa

ny r

ecog

nize

s pr

ovis

ions

whe

n th

e C

ompa

ny h

as a

pre

sent

obl

igat

ion

(lega

l or

con

stru

ctiv

e)

aris

ing

from

pas

t eve

nts

(lega

l or c

onst

ruct

ive

oblig

atio

n), p

aym

ent f

or th

e ob

ligat

ion

is p

roba

ble,

and

the

expe

nditu

re fo

r set

tling

the

oblig

atio

n ca

n be

est

imat

ed re

liabl

y.

The

amou

nt re

cogn

ized

as

a pr

ovis

ion

is th

e be

st e

stim

ate

of th

e ex

pend

iture

requ

ired

to s

ettle

the

pres

ent

oblig

atio

n, ta

king

into

acc

ount

the

risks

and

unc

erta

intie

s sur

roun

ding

the

oblig

atio

n as

of t

he b

alan

ce s

heet

da

te.

Whe

n a

prov

isio

n is

mea

sure

d us

ing

the

cash

flo

ws

estim

ated

to

settl

e th

e pr

esen

t ob

ligat

ion,

its

carr

ying

am

ount

is th

e pr

esen

t val

ue o

f tho

se c

ash

flow

s. W

hen

the

airc

raft

leas

e co

ntra

cts

expi

re a

nd w

ill

be re

turn

ed to

less

or, t

he C

ompa

ny w

ill a

sses

s if t

here

are

exi

stin

g ob

ligat

ions

and

if a

pro

visi

on is

requ

ired

whe

n si

gnin

g th

e le

ase

cont

ract

. R

even

ue R

ecog

nitio

n Th

e C

ompa

ny re

cogn

izes

reve

nue

by a

pply

ing

the

follo

win

g st

eps:

Id

entif

ying

the

cont

ract

with

the

cust

omer

;

Id

entif

ying

the

perf

orm

ance

obl

igat

ions

in th

e co

ntra

ct;

Det

erm

ine

the

trans

actio

n pr

ice;

A

lloca

te th

e tra

nsac

tion

pric

e to

the

perf

orm

ance

obl

igat

ions

in th

e co

ntra

ct; a

nd

Rec

ogni

ze re

venu

e w

hen

the

Com

pany

satis

fies a

per

form

ance

obl

igat

ion.

Sh

ippi

ng se

rvic

e re

venu

e Pa

ssen

ger a

nd c

argo

reve

nue

are

reco

gniz

ed a

s rev

enue

whe

n th

e pa

ssen

gers

and

goo

ds a

re a

ctua

lly c

arrie

d.

Whe

n th

e tic

kets

are

sold

, due

to th

e fa

ct th

at th

e fu

lfillm

ent o

blig

atio

ns o

f the

ship

men

t hav

e no

t bee

n m

et,

the

rele

vant

am

ount

of r

even

ue is

firs

t rec

orde

d as

con

tract

liab

ilitie

s unt

il pa

ssen

gers

act

ually

boa

rd.

L

easi

ng

At t

he in

cept

ion

of a

con

tract

, the

Com

pany

ass

esse

s whe

ther

the

cont

ract

is, o

r con

tain

s, a

leas

e.

The

Com

pany

as l

esse

e Th

e C

ompa

ny re

cogn

izes

righ

t-of-

use

asse

ts a

nd le

ase

liabi

litie

s for

all

leas

es a

t the

com

men

cem

ent d

ate

of

a le

ase,

exc

ept

for

shor

t-ter

m l

ease

s an

d lo

w-v

alue

ass

et l

ease

s ac

coun

ted

for

appl

ying

a r

ecog

nitio

n ex

empt

ion

whe

re le

ase

paym

ents

are

reco

gniz

ed a

s exp

ense

s on

a st

raig

ht-li

ne b

asis

ove

r the

leas

e te

rms.

- 22

-

204

Rig

ht-o

f-us

e as

sets

are

ini

tially

mea

sure

d at

cos

t, w

hich

com

pris

es t

he i

nitia

l m

easu

rem

ent

of l

ease

lia

bilit

ies

adju

sted

for

lea

se p

aym

ents

mad

e at

or

befo

re th

e co

mm

ence

men

t da

te, p

lus

any

initi

al d

irect

co

sts i

ncur

red

and

an e

stim

ate

of c

osts

nee

ded

to re

stor

e th

e un

derly

ing

asse

ts, a

nd le

ss a

ny le

ase

ince

ntiv

es

rece

ived

. R

ight

-of-

use

asse

ts a

re s

ubse

quen

tly m

easu

red

at c

ost

less

acc

umul

ated

dep

reci

atio

n an

d im

pairm

ent

loss

es a

nd a

djus

ted

for

any

rem

easu

rem

ent

of t

he l

ease

lia

bilit

ies.

Rig

ht-o

f-us

e as

sets

are

pr

esen

ted

on a

sepa

rate

line

in th

e ba

lanc

e sh

eets

. R

ight

-of-

use

asse

ts a

re d

epre

ciat

ed u

sing

the

stra

ight

-line

met

hod

from

the

com

men

cem

ent

date

s to

the

ea

rlier

of

the

end

of th

e us

eful

live

s of

the

right

-of-

use

asse

ts o

r th

e en

d of

the

leas

e te

rms.

How

ever

, if

leas

es tr

ansf

er o

wne

rshi

p of

the

unde

rlyin

g as

sets

to th

e C

ompa

ny b

y th

e en

d of

the

leas

e te

rms

or if

the

cost

s of

rig

ht-o

f-us

e as

sets

ref

lect

tha

t th

e C

ompa

ny w

ill e

xerc

ise

a pu

rcha

se o

ptio

n, t

he C

ompa

ny

depr

ecia

tes

the

right

-of-

use

asse

ts f

rom

the

com

men

cem

ent

date

s to

the

end

of

the

usef

ul l

ives

of

the

unde

rlyin

g as

sets

. Le

ase

liabi

litie

s ar

e in

itial

ly m

easu

red

at t

he p

rese

nt v

alue

of

the

leas

e pa

ymen

ts, w

hich

com

pris

e fix

ed

paym

ents

, in

-sub

stan

ce f

ixed

pay

men

ts,

varia

ble

leas

e pa

ymen

ts w

hich

dep

end

on a

n in

dex

or a

rat

e,

resi

dual

val

ue g

uara

ntee

s, th

e ex

erci

se p

rice

of a

pur

chas

e op

tion

if th

e le

ssee

is

reas

onab

ly c

erta

in t

o ex

erci

se t

hat

optio

n, a

nd p

aym

ents

of

pena

lties

for

ter

min

atin

g a

leas

e if

the

leas

e te

rm r

efle

cts

such

te

rmin

atio

n, le

ss a

ny l

ease

inc

entiv

es p

ayab

le. T

he le

ase

paym

ents

are

dis

coun

ted

usin

g th

e in

tere

st r

ate

impl

icit

in a

lea

se, i

f th

at r

ate

can

be r

eadi

ly d

eter

min

ed. I

f th

at r

ate

cann

ot b

e re

adily

det

erm

ined

, the

C

ompa

ny u

ses t

he le

ssee

’s in

crem

enta

l bor

row

ing

rate

.

Subs

eque

ntly

, le

ase

liabi

litie

s ar

e m

easu

red

at a

mor

tized

cos

t us

ing

the

effe

ctiv

e in

tere

st m

etho

d, w

ith

inte

rest

exp

ense

rec

ogni

zed

over

the

leas

e te

rms.

Whe

n th

ere

is a

chan

ge in

a le

ase

term

, a c

hang

e in

the

amou

nts e

xpec

ted

to b

e pa

yabl

e un

der a

resi

dual

val

ue g

uara

ntee

, a c

hang

e in

the

asse

ssm

ent o

f an

optio

n to

pu

rcha

se a

n un

derly

ing

asse

t, or

a c

hang

e in

futu

re le

ase

paym

ents

resu

lting

from

a c

hang

e in

an

inde

x or

a

rate

use

d to

det

erm

ine

thos

e pa

ymen

ts, t

he C

ompa

ny r

emea

sure

s th

e le

ase

liabi

litie

s w

ith a

cor

resp

ondi

ng

adju

stm

ent t

o th

e rig

ht-o

f-us

e-as

sets

. Lea

se li

abili

ties a

re p

rese

nted

on

a se

para

te li

ne in

the

bala

nce

shee

ts.

Var

iabl

e le

ase

paym

ents

that

do

not d

epen

d on

an

inde

x or

a ra

te a

re re

cogn

ized

as

expe

nses

in th

e pe

riods

in

whi

ch th

ey a

re in

curr

ed.

For

sale

and

leas

ebac

k tra

nsac

tions

, if

the

trans

fer

of a

n as

set s

atis

fies

the

requ

irem

ents

of

IFR

S 15

to b

e ac

coun

ted

for

as a

sal

e, th

e C

ompa

ny r

ecog

nize

s on

ly th

e am

ount

of a

ny g

ain

or lo

ss w

hich

rela

tes

to th

e rig

hts

trans

ferr

ed to

the

buye

r-le

ssor

, and

adj

usts

the

off-

mar

ket t

erm

s to

mea

sure

the

sale

pro

ceed

s at

fair

valu

e. I

f th

e tra

nsfe

r do

es n

ot s

atis

fy t

he r

equi

rem

ents

of

IFR

S 15

to

be a

ccou

nted

for

as

a sa

le,

it is

ac

coun

ted

for a

s a fi

nanc

ing

trans

actio

n.

Em

ploy

ee B

enef

its

a.

Shor

t-ter

m e

mpl

oyee

ben

efits

Li

abili

ties

reco

gniz

ed i

n re

spec

t of

sho

rt-te

rm e

mpl

oyee

ben

efits

are

mea

sure

d at

the

und

isco

unte

d am

ount

of t

he b

enef

its e

xpec

ted

to b

e pa

id in

exc

hang

e fo

r the

rela

ted

serv

ices

. b.

R

etire

men

t ben

efits

Pa

ymen

ts t

o th

e de

fined

con

tribu

tion

retir

emen

t be

nefit

pla

n ar

e re

cogn

ized

as

expe

nses

whe

n em

ploy

ees h

ave

rend

ered

serv

ices

ent

itlin

g th

em to

the

cont

ribut

ions

. D

efin

ed b

enef

it co

sts

(incl

udin

g se

rvic

e co

st,

net

inte

rest

and

rem

easu

rem

ent)

unde

r th

e de

fined

co

ntrib

utio

n re

tirem

ent b

enef

it pl

an a

re d

eter

min

ed u

sing

the

proj

ecte

d un

it cr

edit

met

hod.

Ser

vice

cos

t (in

clud

ing

curr

ent

serv

ice

cost

and

pas

t se

rvic

e co

st)

and

net

inte

rest

on

the

net

defin

ed b

enef

it lia

bilit

ies

(ass

ets)

are

rec

ogni

zed

as e

mpl

oyee

ben

efits

exp

ense

in

the

perio

d in

whi

ch t

hey

occu

r. R

emea

sure

men

t, co

mpr

isin

g ac

tuar

ial g

ains

and

loss

es a

nd th

e re

turn

on

plan

ass

ets (

excl

udin

g in

tere

st),

- 23

-

is r

ecog

nize

d in

oth

er c

ompr

ehen

sive

inc

ome

in t

he p

erio

d in

whi

ch i

t oc

curs

. Re

mea

sure

men

t re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e is

refle

cted

imm

edia

tely

in re

tain

ed e

arni

ngs

and

will

not

be

recl

assi

fied

to p

rofit

or l

oss.

N

et d

efin

ed b

enef

it lia

bilit

ies

(ass

ets)

rep

rese

nt t

he a

ctua

l de

ficit

in t

he C

ompa

ny’s

def

ined

ben

efit

plan

s. B

orro

win

g C

osts

B

orro

win

g co

sts

dire

ctly

attr

ibut

able

to

the

acqu

isiti

on,

cons

truct

ion

or p

rodu

ctio

n of

qua

lifyi

ng a

sset

s (a

sset

s whi

ch a

re su

bsta

ntia

lly re

ady

for t

heir

inte

nded

use

or s

ale

thro

ugh

a fa

irly

long

per

iod)

are

add

ed to

th

e co

st o

f tho

se a

sset

s, un

til su

ch ti

me

as th

e as

sets

are

subs

tant

ially

read

y fo

r the

ir in

tend

ed u

se o

r sal

e.

Inve

stm

ent i

ncom

e ea

rned

on

the

tem

pora

ry in

vest

men

t of s

peci

fic b

orro

win

gs p

endi

ng th

eir e

xpen

ditu

re o

n qu

alify

ing

asse

ts is

ded

ucte

d fr

om th

e bo

rrow

ing

cost

s elig

ible

for c

apita

lizat

ion.

O

ther

than

that

whi

ch is

stat

ed a

bove

, all

othe

r bor

row

ing

cost

s are

reco

gniz

ed in

pro

fit o

r los

s in

the

perio

d in

whi

ch th

ey a

re in

curr

ed.

Gov

ernm

ent G

rant

s G

over

nmen

t gra

nts

are

not r

ecog

nize

d un

til th

ere

is r

easo

nabl

e as

sura

nce

that

the

Com

pany

will

com

ply

with

the

cond

ition

s atta

ched

to th

em a

nd th

at th

e gr

ants

will

be

rece

ived

. G

over

nmen

t gr

ants

are

rec

ogni

zed

in p

rofit

or

loss

on

a sy

stem

atic

bas

is o

ver

the

perio

ds i

n w

hich

the

C

ompa

ny re

cogn

izes

as e

xpen

ses t

he re

late

d co

sts f

or w

hich

the

gran

ts a

re in

tend

ed to

com

pens

ate.

G

over

nmen

t gra

nts

that

are

rec

eiva

ble

as c

ompe

nsat

ion

for

expe

nses

or

loss

es a

lread

y in

curr

ed o

r fo

r th

e pu

rpos

e of

giv

ing

imm

edia

te fi

nanc

ial s

uppo

rt to

the

Com

pany

with

no

futu

re re

late

d co

sts

are

reco

gniz

ed

in p

rofit

or l

oss i

n th

e pe

riod

in w

hich

they

are

rece

ived

. Th

e be

nefit

of

a go

vern

men

t loa

n re

ceiv

ed a

t a b

elow

-mar

ket r

ate

of in

tere

st is

trea

ted

as a

gov

ernm

ent

gran

t m

easu

red

as t

he d

iffer

ence

bet

wee

n th

e pr

ocee

ds r

ecei

ved

and

the

fair

valu

e of

the

loan

bas

ed o

n pr

evai

ling

mar

ket i

nter

est r

ates

. Fr

eque

nt F

lyer

Pro

gram

s Th

e Co

mpa

ny h

as a

“D

ynas

ty F

lyer

Pro

gram

” th

roug

h w

hich

pro

gram

mem

bers

can

con

vert

accu

mul

ated

m

ileag

e to

a c

abin

upg

rade

, fre

e tic

kets

and

oth

er m

embe

r rew

ards

. A

por

tion

of p

asse

nger

reve

nue

attri

buta

ble

to th

e re

war

ds fo

r the

freq

uent

flye

r pr

ogra

m is

def

erre

d. T

he

Com

pany

reco

gniz

es th

is d

efer

red

reve

nue

as re

venu

e on

ly w

hen

the

Com

pany

has

fulfi

lled

its o

blig

atio

ns

on th

e gr

antin

g of

rew

ards

or w

hen

the

perio

d fo

r con

verti

ng th

e m

ileag

e to

rew

ards

has

exp

ired.

Sh

are-

base

d Pa

ymen

t Arr

ange

men

ts

Equi

ty-s

ettle

d sh

are-

base

d pa

ymen

ts to

em

ploy

ees

are

mea

sure

d at

the

fair

valu

e of

the

equi

ty in

stru

men

ts

at th

e gr

ant d

ate.

Th

e fa

ir va

lue

dete

rmin

ed a

t th

e gr

ant

date

of

the

equi

ty-s

ettle

d sh

are-

base

d pa

ymen

ts i

s ex

pens

ed o

n a

stra

ight

-line

bas

is o

ver t

he v

estin

g pe

riod,

bas

ed o

n th

e C

ompa

ny’s

est

imat

e of

equ

ity in

stru

men

t tha

t will

ev

entu

ally

ves

t, w

ith a

cor

resp

ondi

ng in

crea

se in

cap

ital s

urpl

us -

empl

oyee

sha

re o

ptio

ns. T

he f

air

valu

e de

term

ined

at t

he g

rant

dat

e of

the

equi

ty-s

ettle

d sh

are-

base

d pa

ymen

ts is

reco

gniz

ed a

s an

exp

ense

in fu

ll at

the

gran

t dat

e w

hen

the

gran

ted

shar

e op

tions

are

ves

ted

imm

edia

tely

.

- 24

-

205

Tax

atio

n In

com

e ta

x ex

pens

e re

pres

ents

the

sum

of t

he c

urre

nt ta

x an

d de

ferr

ed ta

x.

a.

Cur

rent

tax

Th

e cu

rren

t tax

liab

ilitie

s ar

e ba

sed

on c

urre

nt ta

xabl

e pr

ofit.

Sin

ce p

art o

f the

inco

me

and

expe

nses

are

ta

xabl

e or

ded

uctib

le i

n ot

her

perio

ds,

or i

n ac

cord

ance

with

the

rel

evan

t ta

x la

ws

are

taxa

ble

or

dedu

ctib

le, c

urre

nt ta

xabl

e pr

ofit

diff

ers

from

net

pro

fit r

epor

ted

in th

e st

atem

ents

of

com

preh

ensi

ve

inco

me.

The

Com

pany

’s c

urre

nt t

ax l

iabi

litie

s ar

e ca

lcul

ated

by

the

tax

rate

was

leg

isla

ted

or

subs

tant

ially

legi

slat

ed a

t the

bal

ance

shee

t dat

e.

Acc

ordi

ng to

the

Inco

me

Tax

Law

, an

addi

tiona

l tax

at 1

0% o

f una

ppro

pria

ted

earn

ings

is p

rovi

ded

for

as in

com

e ta

x in

the

year

the

shar

ehol

ders

app

rove

the

rete

ntio

n of

thes

e ea

rnin

gs.

Adj

ustm

ents

of p

rior y

ears

’ tax

liab

ilitie

s are

add

ed to

or d

educ

ted

from

the

curr

ent y

ear’

s tax

pro

visi

on.

b.

D

efer

red

tax

Def

erre

d ta

x is

rec

ogni

zed

on t

empo

rary

diff

eren

ces

betw

een

the

carr

ying

am

ount

s of

ass

ets

and

liabi

litie

s in

the

finan

cial

stat

emen

ts a

nd th

e co

rres

pond

ing

tax

base

s use

d in

the

com

puta

tion

of ta

xabl

e pr

ofit.

Def

erre

d ta

x lia

bilit

ies

are

gene

rally

rec

ogni

zed

for

all t

axab

le te

mpo

rary

diff

eren

ces.

Def

erre

d ta

x as

sets

are

gen

eral

ly re

cogn

ized

for a

ll de

duct

ible

tem

pora

ry d

iffer

ence

s, un

used

loss

car

ryfo

rwar

ds

and

unus

ed

tax

cred

its

for

purc

hase

s of

m

achi

nery

, eq

uipm

ent

and

tech

nolo

gy,

rese

arch

an

d de

velo

pmen

t ex

pend

iture

s, an

d pe

rson

nel

train

ing

expe

nditu

res

to t

he e

xten

t th

at i

t is

pro

babl

e th

at

taxa

ble

prof

it w

ill b

e av

aila

ble

agai

nst w

hich

thos

e de

duct

ible

tem

pora

ry d

iffer

ence

s can

be

utili

zed.

D

efer

red

tax

liabi

litie

s ar

e re

cogn

ized

for t

axab

le te

mpo

rary

diff

eren

ces

asso

ciat

ed w

ith in

vest

men

ts in

su

bsid

iarie

s an

d as

soci

ates

and

inte

rest

s in

join

t ven

ture

s, ex

cept

whe

re th

e C

ompa

ny is

abl

e to

con

trol

the

reve

rsal

of t

he te

mpo

rary

diff

eren

ce a

nd it

is p

roba

ble

that

the

tem

pora

ry d

iffer

ence

will

not

reve

rse

in th

e fo

rese

eabl

e fu

ture

. Def

erre

d ta

x as

sets

aris

ing

from

ded

uctib

le te

mpo

rary

diff

eren

ces

asso

ciat

ed

with

such

inve

stm

ents

and

inte

rest

s are

onl

y re

cogn

ized

to th

e ex

tent

that

it is

pro

babl

e th

at th

ere

will

be

suff

icie

nt ta

xabl

e pr

ofit

agai

nst w

hich

to u

tiliz

e th

e be

nefit

s of

the

tem

pora

ry d

iffer

ence

s an

d th

ey a

re

expe

cted

to re

vers

e in

the

fore

seea

ble

futu

re.

The

carr

ying

am

ount

of d

efer

red

tax

asse

ts is

revi

ewed

at t

he e

nd o

f eac

h re

porti

ng p

erio

d an

d re

duce

d to

the

exte

nt th

at it

is n

o lo

nger

pro

babl

e th

at s

uffic

ient

taxa

ble

prof

it w

ill b

e av

aila

ble

to a

llow

all

or

part

of th

e as

sets

to b

e re

cove

red.

A p

revi

ousl

y un

reco

gniz

ed d

efer

red

tax

asse

t is

also

revi

ewed

at t

he

end

of e

ach

repo

rting

per

iod

and

reco

gniz

ed to

the

exte

nt th

at it

has

bec

ome

prob

able

that

futu

re ta

xabl

e pr

ofit

will

allo

w th

e de

ferr

ed ta

x as

set t

o be

reco

vere

d.

Def

erre

d ta

x lia

bilit

ies a

nd a

sset

s are

mea

sure

d at

the

tax

rate

s tha

t are

exp

ecte

d to

app

ly in

the

perio

d in

w

hich

the

liabi

litie

s ar

e se

ttled

or

the

asse

ts a

re r

ealiz

ed, b

ased

on

tax

rate

s (a

nd ta

x la

ws)

that

hav

e be

en e

nact

ed o

r sub

stan

tivel

y en

acte

d by

the

end

of th

e re

porti

ng p

erio

d. T

he m

easu

rem

ent o

f def

erre

d ta

x lia

bilit

ies

and

asse

ts re

flect

s th

e ta

x co

nseq

uenc

es th

at w

ould

follo

w fr

om th

e m

anne

r in

whi

ch th

e C

ompa

ny e

xpec

ts, a

t th

e en

d of

the

rep

ortin

g pe

riod,

to

reco

ver

or s

ettle

the

car

ryin

g am

ount

of

its

asse

ts a

nd li

abili

ties.

c.

C

urre

nt a

nd d

efer

red

taxe

s for

the

year

C

urre

nt a

nd d

efer

red

taxe

s ar

e re

cogn

ized

in p

rofit

or

loss

, exc

ept w

hen

they

rel

ate

to it

ems

that

are

re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e or

dire

ctly

in e

quity

, in

whi

ch c

ase,

the

curr

ent a

nd d

efer

red

taxe

s are

als

o re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e or

dire

ctly

in e

quity

, res

pect

ivel

y.

- 25

-

Mai

nten

ance

and

Ove

rhau

l Cos

ts

Rou

tine

mai

nten

ance

cos

ts a

re re

cogn

ized

in p

rofit

or l

oss i

n th

e pe

riod

in w

hich

they

are

incu

rred

. Th

e ov

erha

ul c

osts

of

an o

wne

d or

leas

ed a

ircra

ft th

at m

eet t

he c

riter

ia f

or f

ixed

ass

et c

apita

lizat

ion

are

capi

taliz

ed a

s re

plac

emen

ts f

or a

ircra

ft an

d en

gine

s an

d ar

e de

prec

iate

d on

a s

traig

ht li

ne b

asis

ove

r th

e ex

pect

ed a

nnua

l ove

rhau

l cyc

le.

5

. C

RIT

ICA

L A

CC

OU

NT

ING

JU

DG

ME

NT

S A

ND

KE

Y S

OU

RC

ES

OF

EST

IMA

TIO

N

UN

CE

RT

AIN

TY

In

the

appl

icat

ion

of th

e Co

mpa

ny’s

acc

ount

ing

polic

ies

as d

iscl

osed

in N

ote

4, m

anag

emen

t is

requ

ired

to

mak

e ju

dgm

ents

, est

imat

ions

and

ass

umpt

ions

abo

ut th

e ca

rryi

ng a

mou

nts

of a

sset

s an

d lia

bilit

ies

that

are

no

t rea

dily

app

aren

t fro

m o

ther

sou

rces

. The

est

imat

es a

nd a

ssoc

iate

d as

sum

ptio

ns a

re b

ased

on

hist

oric

al

expe

rienc

e an

d ot

her f

acto

rs th

at a

re c

onsi

dere

d re

leva

nt. A

ctua

l res

ults

may

diff

er fr

om th

ese

estim

ates

. Th

e es

timat

es a

nd u

nder

lyin

g as

sum

ptio

ns a

re r

evie

wed

on

an o

ngoi

ng b

asis

. R

evis

ions

to

acco

untin

g es

timat

es a

re r

ecog

nize

d in

the

perio

d in

whi

ch th

e es

timat

es a

re r

evis

ed if

the

revi

sion

s af

fect

onl

y th

at

perio

d or

in th

e pe

riod

of th

e re

visi

ons

and

futu

re p

erio

ds if

the

revi

sion

s af

fect

bot

h cu

rren

t and

fut

ure

perio

ds.

Key

Sou

rces

of E

stim

atio

n U

ncer

tain

ty

The

key

assu

mpt

ions

con

cern

ing

the

futu

re a

nd o

ther

key

sour

ces o

f est

imat

ion

unce

rtain

ty a

t the

end

of t

he

repo

rting

per

iod

that

hav

e a

sign

ifica

nt r

isk

of c

ausi

ng a

mat

eria

l adj

ustm

ent t

o th

e ca

rryi

ng a

mou

nts

of

asse

ts a

nd li

abili

ties w

ithin

the

next

fina

ncia

l yea

r are

dis

cuss

ed b

elow

.

Def

ined

Ben

efit

Obl

igat

ions

Th

e pr

esen

t va

lue

of d

efin

ed b

enef

it ob

ligat

ions

at

the

end

of t

he r

epor

ting

perio

d is

cal

cula

ted

usin

g ac

tuar

ial

assu

mpt

ions

. Th

ose

assu

mpt

ions

, w

hich

are

bas

ed o

n m

anag

emen

t’s j

udgm

ents

and

est

imat

es,

com

pris

e th

e di

scou

nt ra

te a

nd e

xpec

ted

retu

rn o

n pl

an a

sset

s. C

hang

es in

act

uaria

l ass

umpt

ions

may

hav

e a

mat

eria

l im

pact

on

the

amou

nt o

f def

ined

ben

efit

oblig

atio

ns.

6

. C

ASH

AN

D C

ASH

EQ

UIV

AL

EN

TS

D

ecem

ber

31

2020

2019

Cas

h on

han

d an

d re

volv

ing

fund

s

$

65,9

87

$

58

,661

C

heck

ing

acco

unts

and

dem

and

depo

sits

12

,864

,010

4,

867,

015

Cas

h eq

uiva

lent

s

Ti

me

depo

sits

with

orig

inal

mat

uriti

es o

f les

s tha

n th

ree

mon

ths

5,88

0,68

2

12

,662

,162

R

epur

chas

e ag

reem

ents

col

late

raliz

ed b

y bo

nds

1,14

9,14

1

3,

038,

176

$

19

,959

,820

$

20,6

26,0

14

- 26

-

206

The

mar

ket r

ate

inte

rval

s of

cas

h in

ban

ks a

nd c

ash

equi

vale

nts

at th

e en

d of

the

repo

rting

per

iod

wer

e as

fo

llow

s:

D

ecem

ber

31

2020

2019

Ban

k ba

lanc

e

0.00

%-1

.90%

0.01

%-1

.90%

Ti

me

depo

sits

with

orig

inal

mat

uriti

es o

f les

s tha

n th

ree

mon

ths

0.

30%

-0.5

5%

0.

60%

-2.5

5%

Rep

urch

ase

agre

emen

ts c

olla

tera

lized

by

bond

s

0.41

%-0

.49%

0.55

%-0

.70%

Th

e C

ompa

ny d

esig

nate

d so

me

depo

sits

den

omin

ated

in U

SD a

nd re

purc

hase

agr

eem

ents

col

late

raliz

ed b

y bo

nds

as h

edgi

ng in

stru

men

ts to

avo

id e

xcha

nge

rate

fluc

tuat

ions

on

final

pay

men

ts o

f airc

raft

orde

rs a

nd

prep

aym

ents

for

equ

ipm

ent,

and

appl

ied

cash

flo

w h

edge

acc

ount

ing

to h

edge

its

for

eign

exc

hang

e ex

posu

re. T

he c

ontra

ct in

form

atio

n is

as f

ollo

ws:

M

atur

ity D

ate

Su

bjec

t

Car

ryin

g V

alue

Dec

embe

r 31,

202

0

2021

.1.4

-202

1.11

.1

Fin

anci

al a

sset

s for

hed

ging

- cu

rren

t

$ 7

,613

,636

Im

pact

on

com

preh

ensi

ve in

com

e (lo

ss)

Rec

ogni

zed

in

Oth

er

Com

preh

ensi

ve

Inco

me

(Los

s)

For t

he y

ear e

nded

Dec

embe

r 31,

202

0

$ (3

72,6

32)

The

amou

nt o

f he

dgin

g in

stru

men

t se

ttlem

ents

rec

ogni

zed

as p

repa

ymen

ts f

or e

quip

men

t in

202

0 w

as

$81,

111

thou

sand

.

7.

FIN

AN

CIA

L IN

STR

UM

EN

TS

AT

FA

IR V

AL

UE

TH

RO

UG

H P

RO

FIT

OR

LO

SS (F

VTP

L)

Dec

embe

r 31

20

20

20

19

Fi

nanc

ial a

sset

s - c

urre

nt

Fi

nanc

ial a

sset

s man

dato

rily

clas

sifie

d at

FV

TPL

Der

ivat

ive

finan

cial

inst

rum

ents

(not

und

er h

edge

acc

ount

ing)

Fo

reig

n ex

chan

ge fo

rwar

d co

ntra

cts

$

-

$

43

4

Fina

ncia

l lia

bilit

ies -

cur

rent

Der

ivat

ive

finan

cial

inst

rum

ents

(not

und

er h

edge

acc

ount

ing)

Fo

reig

n ex

chan

ge fo

rwar

d co

ntra

cts

$

-

$

11,

749

- 27

-

At

the

end

of t

he r

epor

ting

perio

d, o

utst

andi

ng f

orei

gn e

xcha

nge

forw

ard

cont

ract

s no

t un

der

hedg

e ac

coun

ting

wer

e as

follo

ws:

C

urre

ncy

M

atur

ity D

ate

N

otio

nal A

mou

nt

(In

Tho

usan

ds)

D

ecem

ber 3

1, 2

019

B

uy fo

rwar

d co

ntra

cts

NTD

/USD

2020

.01.

15-2

020.

07.3

1 N

TD57

0,57

1/U

SD19

,000

8

. FI

NA

NC

IAL

ASS

ET

S A

T F

AIR

VA

LU

E T

HR

OU

GH

OTH

ER

CO

MPR

EHE

NSI

VE

INC

OM

E In

vest

men

ts in

Equ

ity In

stru

men

ts

Dec

embe

r 31

20

20

20

19

N

on-c

urre

nt

Fo

reig

n in

vest

men

ts

Unl

iste

d sh

ares

$ 1

17,4

57

$

80

,991

D

omes

tic in

vest

men

ts

U

nlis

ted

shar

es

29,7

04

26,8

65

$

147

,161

$ 1

07,8

56

Thes

e in

vest

men

ts i

n eq

uity

ins

trum

ents

are

not

hel

d fo

r tra

ding

. Ins

tead

, the

y ar

e he

ld f

or m

ediu

m-

to

long

-term

stra

tegi

c pu

rpos

es. A

ccor

ding

ly, t

he m

anag

emen

t ele

cted

to d

esig

nate

thes

e in

vest

men

ts in

equ

ity

inst

rum

ents

as

at F

VTO

CI a

s it

belie

ves

that

reco

gniz

ing

shor

t-ter

m fl

uctu

atio

ns in

thes

e in

vest

men

ts’ f

air

valu

es in

pro

fit o

r los

s w

ould

not

be

cons

iste

nt w

ith th

e C

ompa

ny’s

stra

tegy

of h

oldi

ng th

ese

inve

stm

ents

fo

r lon

g-te

rm p

urpo

ses.

9

. FI

NA

NC

IAL

ASS

ET

S A

T A

MO

RT

IZE

D C

OST

D

ecem

ber

31

2020

2019

Cur

rent

Tim

e de

posi

ts w

ith o

rigin

al m

atur

ities

of m

ore

than

3 m

onth

s

$ 5

,863

,137

$ 1

,460

,450

Th

e ra

nge

of i

nter

est

rate

s fo

r tim

e de

posi

ts w

ith o

rigin

al m

atur

ities

of

mor

e th

an 3

mon

ths

was

ap

prox

imat

ely

0.40

%-0

.53%

and

0.6

0%-2

.44%

per

ann

um a

s of D

ecem

ber 3

1, 2

020

and

2019

, res

pect

ivel

y.

- 28

-

207

10.

NO

TE

S R

EC

EIV

AB

LE

AN

D A

CC

OU

NT

S R

EC

EIV

AB

LE

Dec

embe

r 31

20

20

20

19

N

otes

rece

ivab

le

$

-

$

29

7,07

5

Acc

ount

s rec

eiva

ble

A

t am

ortiz

ed c

ost

Gro

ss c

arry

ing

amou

nt

9,36

3,77

7

7,

577,

460

Less

: Allo

wan

ce fo

r im

pairm

ent l

oss

(165

,722

)

(1

80,1

04)

9,

198,

055

7,39

7,35

6

$ 9

,198

,055

$ 7

,694

,431

Th

e av

erag

e cr

edit

perio

d w

as 7

to

55 d

ays.

In d

eter

min

ing

the

reco

vera

bilit

y of

a t

rade

rec

eiva

ble,

the

C

ompa

ny c

onsi

dere

d an

y ch

ange

in th

e cr

edit

qual

ity o

f th

e re

ceiv

able

sin

ce th

e da

te c

redi

t was

initi

ally

gr

ante

d to

the

end

of

the

repo

rting

per

iod,

and

any

allo

wan

ce f

or i

mpa

irmen

t lo

ss w

as b

ased

on

the

estim

ated

irre

cove

rabl

e am

ount

s det

erm

ined

by

refe

renc

e to

the

Com

pany

’s p

ast d

efau

lt ex

perie

nce

with

the

coun

terp

arty

and

an

anal

ysis

of

the

coun

terp

arty

’s c

urre

nt f

inan

cial

pos

ition

. Th

e C

ompa

ny a

dopt

ed a

po

licy

of o

nly

deal

ing

with

ent

ities

that

are

rate

d th

e eq

uiva

lent

of i

nves

tmen

t gra

de o

r hig

her a

nd o

btai

ning

su

ffic

ient

col

late

ral,

whe

re a

ppro

pria

te, a

s a

mea

ns o

f m

itiga

ting

the

risk

of f

inan

cial

loss

fro

m d

efau

lts.

Cre

dit r

atin

g in

form

atio

n is

obta

ined

from

inde

pend

ent r

atin

g ag

enci

es w

here

ava

ilabl

e or

, if n

ot a

vaila

ble,

th

e C

ompa

ny u

ses

othe

r pub

licly

ava

ilabl

e fin

anci

al in

form

atio

n or

its

own

tradi

ng re

cord

s to

rate

its

maj

or

cust

omer

s. Th

e C

ompa

ny’s

exp

osur

e an

d th

e cr

edit

ratin

gs o

f its

cou

nter

parti

es a

re c

ontin

uous

ly m

onito

red

and

the

aggr

egat

e va

lue

of t

rans

actio

ns c

oncl

uded

is

spre

ad a

mon

gst

appr

oved

cou

nter

parti

es.

Cre

dit

expo

sure

is

cont

rolle

d by

cou

nter

party

lim

its t

hat

are

revi

ewed

and

app

rove

d by

the

ris

k m

anag

emen

t co

mm

ittee

ann

ually

. Th

e C

ompa

ny a

pplie

s th

e si

mpl

ified

app

roac

h to

allo

win

g fo

r exp

ecte

d cr

edit

loss

es p

resc

ribed

by

IFR

S 9,

w

hich

per

mits

the

use

of

lifet

ime

expe

cted

los

s al

low

ance

for

all

trade

rec

eiva

bles

. The

exp

ecte

d cr

edit

loss

es o

n tra

de r

ecei

vabl

es a

re e

stim

ated

usi

ng a

pro

visi

on m

atrix

by

refe

renc

e to

pas

t def

ault

expe

rienc

e w

ith th

e de

btor

s an

d an

ana

lysi

s of

the

debt

ors’

cur

rent

fin

anci

al p

ositi

on, a

djus

ted

for

gene

ral e

cono

mic

co

nditi

ons

of th

e in

dust

ry in

whi

ch th

e de

btor

s op

erat

e an

d an

ass

essm

ent o

f bot

h th

e cu

rren

t as

wel

l as

the

fore

cast

ed d

irect

ion

of e

cono

mic

con

ditio

ns a

t the

rep

ortin

g da

te. A

s th

e C

ompa

ny’s

his

toric

al c

redi

t los

s ex

perie

nce

does

not

sho

w s

igni

fican

tly d

iffer

ent

loss

pat

tern

s fo

r di

ffer

ent

cust

omer

seg

men

ts,

the

loss

al

low

ance

bas

ed o

n th

e pa

st du

e st

atus

is n

ot fu

rther

dist

ingu

ishe

d ac

cord

ing

to th

e di

ffer

ent s

egm

ents

of t

he

Com

pany

’s c

usto

mer

bas

e.

The

Com

pany

writ

es o

ff a

trade

rec

eiva

ble

whe

n th

ere

is i

nfor

mat

ion

indi

catin

g th

at t

he d

ebto

r is

ex

perie

ncin

g se

vere

fin

anci

al d

iffic

ulty

and

the

re i

s no

rea

listic

pro

spec

t of

rec

over

y. F

or a

ccou

nts

rece

ivab

le th

at h

ave

been

writ

ten

off,

the

Com

pany

con

tinue

s to

eng

age

in e

nfor

cem

ent a

ctiv

ity to

atte

mpt

to

reco

ver t

he re

ceiv

able

s whi

ch a

re d

ue. W

here

reco

verie

s are

mad

e, th

ese

are

reco

gniz

ed in

pro

fit o

r los

s.

- 29

-

The

follo

win

g ta

ble

deta

ils t

he l

oss

allo

wan

ce o

f tra

de r

ecei

vabl

es b

ased

on

the

Com

pany

’s p

rovi

sion

m

atrix

. D

ecem

ber 3

1, 2

020

N

ot P

ast D

ue

Up

to 3

0 D

ays

31

to 6

0 D

ays

61

to 9

0 D

ays

Ove

r 90

Day

s

Tot

al

Ex

pect

ed c

redi

t los

s rat

e

-

1.04

%

47

.77%

100%

100%

-

Gro

ss c

arry

ing

amou

nt

$

9,1

67,2

02

$

29,4

63

$

3,36

6

$ 2,

887

$

160,

859

$

9,36

3,77

7 Lo

ss a

llow

ance

(life

time

ECLs

)

(5

9)

(3

09)

(1,6

08)

(2,8

87)

(160

,859

)

(1

65,7

22)

A

mor

tized

cos

t

$ 9

,167

,143

$ 29

,154

$ 1,

758

$

-

$ -

$

9,19

8,05

5 D

ecem

ber 3

1, 2

019

N

ot P

ast D

ue

Up

to 3

0 D

ays

31

to 6

0 D

ays

61

to 9

0 D

ays

Ove

r 90

Day

s

Tot

al

Ex

pect

ed c

redi

t los

s rat

e

0.03

%

0.

15%

15.8

9%

22

.14%

100%

-

Gro

ss c

arry

ing

amou

nt

$

6,0

70,7

53

$

1,24

1,76

6

$ 37

,891

$ 73

,058

$ 15

3,99

2

$ 7,

577,

460

Loss

allo

wan

ce (l

ifetim

e EC

Ls)

(2,0

52)

(1,8

62)

(6,0

20)

(16,

178)

(153

,992

)

(1

80,1

04)

A

mor

tized

cos

t

$ 6

,068

,701

$ 1,

239,

904

$

31,8

71

$

56,8

80

$

-

$ 7,

397,

356

The

mov

emen

ts o

f the

loss

allo

wan

ce o

f acc

ount

s rec

eiva

bles

wer

e as

follo

ws:

F

or th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Bal

ance

at J

anua

ry 1

$ 1

80,1

04

$

191

,079

A

dd: N

et re

mea

sure

men

t of l

oss a

llow

ance

3,

000

24,0

00

Less

: Am

ount

s writ

ten

off

(1

7,38

2)

(34,

975)

Fo

reig

n ex

chan

ge g

ains

and

loss

es

-

-

B

alan

ce a

t Dec

embe

r 31

$

165

,722

$ 1

80,1

04

11

. IN

VE

NT

OR

IES

D

ecem

ber

31

2020

2019

Airc

raft

spar

e pa

rts

$

7,2

51,3

53

$

7,3

90,9

81

Item

s for

in-fl

ight

sale

62

7,43

7

57

1,60

1 W

ork

in p

roce

ss -

mai

nten

ance

serv

ices

21

4,36

2

28

3,93

3

$ 8

,093

,152

$ 8

,246

,515

Th

e op

erat

ing

cost

s fo

r th

e ye

ars

ende

d D

ecem

ber

31,

2020

and

201

9 in

clud

ed l

osse

s fr

om i

nven

tory

w

rite-

dow

ns o

f 190

,548

thou

sand

and

$31

7,62

9 th

ousa

nd, r

espe

ctiv

ely.

- 30

-

208

12.

NO

N-C

UR

RE

NT

ASS

ET

S H

EL

D F

OR

SA

LE

Dec

embe

r 31

20

20

20

19

A

ircra

ft he

ld fo

r sal

e

$ 8

9,29

6

$

- To

enh

ance

its

com

petit

iven

ess,

the

Com

pany

pla

ns t

o in

trodu

ce n

ew a

ircra

ft an

d re

tire

old

airc

raft

acco

rdin

g to

a p

lann

ed sc

hedu

le. S

uch

airc

raft,

cla

ssifi

ed a

s non

-cur

rent

ass

ets

held

for s

ale,

had

an

orig

inal

bo

ok v

alue

whi

ch w

as h

ighe

r tha

n th

e ex

pect

ed sa

le p

rice

and

whi

ch w

as re

cogn

ized

as a

n im

pairm

ent l

oss.

How

ever

, the

act

ual l

oss s

hall

be id

entif

ied

by th

e ac

tual

sale

pric

e.

In 2

019,

the

Com

pany

com

plet

ed th

e di

spos

al p

roce

dure

s of s

ome

airc

raft

and

reco

gniz

ed a

loss

on

disp

osal

of

$10

,462

thou

sand

for t

he y

ear e

nded

Dec

embe

r 31,

201

9.

The

fair

valu

e w

as d

eter

min

ed b

y tra

nsac

tions

of t

he re

late

d m

arke

t, an

d th

e pr

opos

ed s

ale

pric

e w

as b

ased

on

the

curr

ent s

tatu

s of t

he a

ircra

ft. T

he fa

ir va

lue

is c

lass

ified

as L

evel

3.

13

. IN

VE

STM

EN

TS

AC

CO

UN

TE

D F

OR

USI

NG

TH

E E

QU

ITY

ME

TH

OD

Dec

embe

r 31

20

20

20

19

In

vest

men

ts in

subs

idia

ries

$

11

,155

,607

$

12,0

04,1

80

Inve

stm

ents

in a

ssoc

iate

s

28

2,47

1

47

1,26

7 In

vest

men

ts in

join

tly c

ontro

lled

entit

ies

883,

079

1,00

7,43

0

$

12,3

21,1

57

$

13

,482

,877

a.

Inve

stm

ent i

n su

bsid

iarie

s

Dec

embe

r 31

20

20

20

19

U

nlis

ted

com

pani

es

Ti

gera

ir Ta

iwan

Co.

, Ltd

.

$

2,30

4,11

3

$

1,94

6,32

8 C

AL

Park

1,

605,

033

1,55

2,31

0 M

anda

rin A

irlin

es

1,22

3,25

9

1,

494,

603

CA

L-D

ynas

ty In

tern

atio

nal

1,18

8,11

0

1,

276,

546

Taiw

an A

ir C

argo

Ter

min

al

1,55

6,13

3

1,

517,

946

Taoy

uan

Inte

rnat

iona

l Airp

ort S

ervi

ces

602,

688

737,

245

CA

L-A

sia

Inve

stm

ent

469,

979

559,

562

Sabr

e Tr

avel

Net

wor

k (T

aiw

an)

232,

883

460,

213

CA

L H

otel

40

5,35

3

47

9,25

9 Ta

iwan

Airp

ort S

ervi

ces

200,

794

276,

134

Dyn

asty

Aer

otec

h In

tern

atio

nal C

orp

136,

630

88,3

13

Taiw

an A

ircra

ft M

aint

enan

ce A

nd E

ngin

eerin

g C

o., L

td.

699,

793

921,

989

Yes

trip

10,2

70

25,2

68

Glo

bal S

ky E

xpre

ss

7,64

3

7,

294

Kao

hsiu

ng C

ater

ing

Serv

ices

51

2,92

6

66

1,17

0

$

11,1

55,6

07

$

12

,004

,180

- 31

-

At t

he e

nd o

f the

repo

rting

per

iod,

the

prop

ortio

n of

ow

ners

hip

and

votin

g rig

hts i

n su

bsid

iarie

s he

ld b

y th

e C

ompa

ny w

ere

as fo

llow

s:

D

ecem

ber

31

2020

2019

Tige

rair

Taiw

an C

o., L

td.

76

%

69

%

Taiw

an A

ir C

argo

Ter

min

al

54

%

54

%

CA

L Pa

rk

10

0%

10

0%

Man

darin

Airl

ines

94%

94%

C

AL-

Dyn

asty

Inte

rnat

iona

l

100%

100%

Ta

oyua

n In

tern

atio

nal A

irpor

t Ser

vice

s

49%

49%

C

AL-

Asi

a In

vest

men

t

100%

100%

Sa

bre

Trav

el N

etw

ork

(Tai

wan

)

94%

94%

Ta

iwan

Airp

ort S

ervi

ces

47

%

47

%

CA

L H

otel

100%

100%

D

ynas

ty A

erot

ech

Inte

rnat

iona

l Cor

p

100%

100%

Ta

iwan

Airc

raft

Mai

nten

ance

And

Eng

inee

ring

Co.

, Ltd

.

100%

100%

D

ynas

ty H

olid

ays

Yes

trip

10

0%

10

0%

Glo

bal S

ky E

xpre

ss

25

%

25

%

Kao

hsiu

ng C

ater

ing

Serv

ices

54%

54%

Ea

ch o

f th

e C

ompa

ny’s

hol

ding

s of

the

issu

ed s

hare

cap

ital o

f Ta

oyua

n In

tern

atio

nal A

irpor

t Ser

vice

, Ta

iwan

Airp

ort

Serv

ice

and

Glo

bal

Sky

Expr

ess

did

not

exce

ed 5

0%,

but

since

the

Com

pany

had

co

ntro

l ove

r the

se in

vest

ees,

they

wer

e lis

ted

as su

bsid

iarie

s. In

ord

er to

pre

pare

for t

he li

stin

g of

Tig

erai

r Tai

wan

Co.

, Ltd

. and

com

ply

with

the

rule

s re

latin

g to

the

exam

inat

ion

for

publ

ic l

istin

g, t

he r

elea

se o

f th

e sh

ares

of

Tige

rair

Taiw

an C

o.,

Ltd.

hel

d by

the

C

ompa

ny w

as re

solv

ed in

the

shar

ehol

ders

’ mee

ting

of th

e C

ompa

ny o

n Ju

ne 2

5, 2

019.

The

shar

es sh

all

be s

ubsc

ribed

by

all s

hare

hold

ers

of th

e C

ompa

ny o

n th

e ba

sis

of th

e pe

rcen

tage

of s

hare

hold

ings

. For

th

e w

aive

r of

sub

scrib

ed s

hare

s by

the

orig

inal

sha

reho

lder

s or

the

und

ersu

bscr

ibed

por

tion,

the

ch

airm

an w

as a

utho

rized

to d

esig

nate

spe

cific

per

sons

for s

ubsc

riptio

n. T

he s

ubsc

riptio

n pr

ice

was

set

at

$41

per

sha

re.

In O

ctob

er a

nd D

ecem

ber

2019

, th

e sh

ares

wer

e fu

lly p

aid

and

wer

e co

mpl

etel

y de

liver

ed a

nd t

rans

ferr

ed. T

he a

mou

nt o

f pr

ocee

ds f

rom

dis

posa

l w

as $

1,67

9,78

9 th

ousa

nd, a

nd t

he

rela

ted

gain

on

disp

osal

was

$1,

129,

080

thou

sand

and

reco

gniz

ed a

s cap

ital s

urpl

us.

To s

treng

then

the

capi

tal s

truct

ure

of T

iger

air T

aiw

an C

o., L

td.,

the

boar

d of

dire

ctor

s of

the

Com

pany

ap

prov

ed th

e pl

an to

issu

e or

dina

ry s

hare

s fo

r cas

h at

$25

per

sha

re o

n A

ugus

t 6, 2

020.

The

Com

pany

su

bscr

ibed

for 4

7,22

8 th

ousa

nd s

hare

s in

Oct

ober

202

0 an

d 26

,286

thou

sand

sha

res

in N

ovem

ber 2

020.

B

ecau

se th

e sh

ares

are

sub

scrib

ed a

t a p

erce

ntag

e di

ffer

ent f

rom

its

exis

ting

owne

rshi

p pe

rcen

tage

, the

C

ompa

ny’s

reta

ined

ear

ning

s dec

reas

ed b

y $1

69,2

72 th

ousa

nd.

Th

e sh

are

of p

rofit

or l

oss o

f sub

sidi

arie

s rec

ogni

zed

unde

r the

equ

ity m

etho

d w

as a

s fol

low

s:

20

20

20

19

Sh

are

of p

rofit

(los

s)

$

(1,

590,

853)

$ 1

,529

,721

- 32

-

209

b.

Inve

stm

ents

in a

ssoc

iate

s

Dec

embe

r 31

20

20

20

19

U

nlis

ted

com

pani

es

C

hina

Airc

raft

Serv

ices

$ 2

77,2

34

$

461

,263

D

ynas

ty H

olid

ays

5,23

7

10

,004

$ 2

82,4

71

$

471

,267

A

t the

end

of t

he re

porti

ng p

erio

d, th

e pr

opor

tion

of o

wne

rshi

p an

d vo

ting

right

s in

ass

ocia

tes

held

by

the

Com

pany

wer

e as

follo

ws:

D

ecem

ber

31

2020

2019

Chi

na A

ircra

ft Se

rvic

es

20

%

20

%

Dyn

asty

Hol

iday

s (N

ote)

20%

20%

N

ote:

Dyn

asty

Hol

iday

s was

list

ed a

s an

asso

ciat

e on

Janu

ary

31, 2

019.

Th

e re

cogn

ized

inve

stm

ent i

ncom

e of

ass

ocia

tes a

ccou

nted

for u

sing

the

equi

ty m

etho

d w

as a

s fol

low

s:

20

20

20

19

C

hina

Airc

raft

Serv

ices

$ (1

02,7

58)

$

10

,365

D

ynas

ty H

olid

ays

(4,7

40)

15

$

(107

,498

)

$

10,3

80

The

boar

d of

dire

ctor

s of

the

Com

pany

dec

ided

to s

ell a

por

tion

of th

e eq

uity

of i

ts s

ubsi

diar

y, D

ynas

ty

Hol

iday

s, to

H.I.

S. T

aiw

an C

o., L

td. o

n Ja

nuar

y 21

, 201

9 an

d co

mpl

eted

the

trans

actio

n on

Jan

uary

31,

21

09. A

fter t

he d

ispo

sal o

f the

equ

ity, t

he C

ompa

ny’s

issu

ed s

hare

cap

ital d

ecre

ased

from

51%

to 2

0%.

Dyn

asty

Hol

iday

s w

as c

lass

ified

as

an a

ssoc

iate

sin

ce t

he C

ompa

ny l

ost

cont

rol

of t

he s

ubsi

diar

y.

Ther

efor

e, th

e re

leva

nt a

sset

s an

d lia

bilit

ies

wer

e no

t con

solid

ated

in th

e cu

rren

t per

iod

and

only

the

prof

it an

d lo

ss f

rom

Jan

uary

1, 2

019

to J

anua

ry 3

1, 2

019

wer

e co

nsol

idat

ed. F

or in

form

atio

n on

the

disp

osal

of t

he su

bsid

iary

, ref

er to

Not

e 31

.

c.

Inve

stm

ents

in jo

intly

con

trolle

d en

titie

s Th

e in

vest

men

ts in

join

tly c

ontro

lled

entit

ies w

ere

as fo

llow

s:

D

ecem

ber

31

2020

2019

Chi

na P

acifi

c C

ater

ing

Serv

ices

$

695,

959

$

80

1,07

0 C

hina

Pac

ific

Laun

dry

Serv

ices

14

9,35

3

16

8,54

7 N

OR

DA

M A

sia

37,7

67

37,8

13

$

88

3,07

9

$ 1

,007

,430

- 33

-

At t

he e

nd o

f the

repo

rting

per

iod,

the

perc

enta

ges

of o

wne

rshi

p an

d vo

ting

right

s in

join

tly c

ontro

lled

entit

ies h

eld

by th

e C

ompa

ny w

ere

as fo

llow

s:

Dec

embe

r 31

20

20

20

19

C

hina

Pac

ific

Cat

erin

g Se

rvic

es

51

%

51

%

Chi

na P

acifi

c La

undr

y Se

rvic

es

55

%

55

%

NO

RD

AM

Asi

a

49%

49%

Th

e C

ompa

ny s

igne

d a

join

t ven

ture

agr

eem

ent w

ith th

e Ta

ikoo

Com

pany

to in

vest

in C

hina

Pac

ific

Cat

erin

g Se

rvic

es a

nd C

hina

Pac

ific

Laun

dry

Serv

ices

. Acc

ordi

ng to

the

agre

emen

t, bo

th p

artie

s ha

ve

the

maj

ority

of

votin

g po

wer

in

the

boar

d of

dire

ctor

s to

pas

s a

mot

ion

for

veto

, an

d th

eref

ore

the

Com

pany

doe

s not

hav

e co

ntro

l. To

enh

ance

the

Com

pany

’s m

aint

enan

ce c

apab

ilitie

s, th

e C

ompa

ny e

stab

lishe

d a

join

t ven

ture

with

the

US

NO

RD

AM

Aer

ospa

ce G

roup

in D

ecem

ber

2017

, to

prov

ide

thru

st r

ever

sers

and

com

posi

te r

epai

r se

rvic

es i

n A

sia

unde

r th

e N

OR

DA

M b

rand

. N

OR

DA

M h

as f

iled

for

Cha

pter

11

bank

rupt

cy

reor

gani

zatio

n in

the

USA

on

July

22,

201

8 to

solv

e th

e bu

sine

ss d

ispu

te w

ith it

s coo

pera

tive

partn

er, s

o its

ope

ratio

n w

as n

ot i

mpa

cted

. N

OR

DA

M A

sia

susp

ende

d its

ope

ratio

n fr

om O

ctob

er 5

, 20

18 t

o O

ctob

er 4

, 20

19 a

nd r

esum

ed b

usin

ess

on O

ctob

er 4

, 20

19.

The

Com

pany

inc

reas

ed t

he c

apita

l of

N

OR

DA

M A

sia

by $

35,5

25 th

ousa

nd in

Nov

embe

r 201

9.

Det

ails

of

the

inve

stm

ent

inco

me

attri

buta

ble

to i

nves

tmen

ts i

n jo

intly

con

trolle

d en

titie

s w

ere

as

follo

ws:

D

ecem

ber

31

2020

2019

Chi

na P

acifi

c C

ater

ing

Serv

ices

$ (1

36,4

59)

$

256

,899

C

hina

Pac

ific

Laun

dry

Serv

ices

(1

5,47

5)

15,0

30

NO

RD

AM

Asi

a

(4

6)

(70)

$ (1

51,9

80)

$

271

,859

Th

e C

ompa

ny’s

sha

res

of o

ther

com

preh

ensi

ve in

com

e of

sub

sidi

arie

s, as

soci

ates

and

join

tly c

ontro

lled

entit

ies w

ere

loss

es o

f $4,

890

thou

sand

and

$85

,977

thou

sand

in 2

020

and

2019

, res

pect

ivel

y.

The

finan

cial

sta

tem

ents

use

d as

a b

asis

of t

he a

mou

nts

of a

nd r

elat

ed in

form

atio

n on

the

inve

stm

ents

acco

unte

d fo

r usi

ng th

e eq

uity

met

hod

and

the

shar

e of

pro

fit o

r los

s an

d ot

her c

ompr

ehen

sive

inco

me

of th

ose

inve

stm

ents

for t

he y

ears

end

ed D

ecem

ber 3

1, 2

020

and

2019

wer

e al

l ind

epen

dent

ly a

udite

d,

exce

pt f

or C

hina

Airc

raft

Serv

ices

. How

ever

, the

man

agem

ent d

eter

min

ed th

at th

ere

wou

ld h

ave

been

no

sign

ifica

nt a

djus

tmen

ts h

ad th

is in

vest

ee’s

fina

ncia

l sta

tem

ents

bee

n in

depe

nden

tly a

udite

d.

For

deta

ils o

n se

rvic

es, m

ajor

bus

ines

s of

fices

and

the

coun

try w

here

the

abov

e as

soci

ates

and

join

tly

cont

rolle

d en

titie

s ar

e re

gist

ered

, re

fer

to T

able

6 “

Nam

es,

Loca

tions

, A

nd O

ther

Inf

orm

atio

n of

In

vest

ees

Ove

r W

hich

the

Com

pany

Exe

rcis

es S

igni

fican

t In

fluen

ce”,

and

Tab

le 7

“In

vest

men

ts I

n M

ainl

and

Chi

na”,

follo

win

g th

e no

tes t

o th

e fin

anci

al st

atem

ents

.

- 34

-

210

14.

PRO

PER

TY, P

LA

NT

AN

D E

QU

IPM

EN

T

Free

hold

Lan

d

Bui

ldin

gs

Fl

ight

E

quip

men

t

Equ

ipm

ent

unde

r Fi

nanc

e L

ease

s

Oth

ers

T

otal

Cos

t

Bal

ance

at J

anua

ry 1

, 20

19

$

19

3,01

3

$

7,33

5,53

7

$ 2

55,5

79,6

27

$

25

,211

,677

$

6,34

0,54

6

$ 2

94,6

60,4

00

Add

ition

s

-

37,7

25

2,21

1,32

1

-

148,

696

2,39

7,74

2 D

ispo

sals

-

(1

62 )

(20,

698,

042 )

(79,

866 )

(85,

852 )

(20,

863,

922 )

R

ecla

ssifi

catio

n

-

10,6

58

29,8

15,0

08

(25,

131,

811 )

106,

257

4,80

0,11

2

Bal

ance

at D

ecem

ber 3

1,

2019

$

193,

013

$

7,

383,

758

$

266

,907

,914

$

-

$

6,50

9,64

7

$ 2

80,9

94,3

32

A

ccum

ulat

ed d

epre

ciat

ion

an

d im

pairm

ent

B

alan

ce a

t Jan

uary

1,

2019

$

-

$

(3,8

80,6

02 )

$

(122

,357

,428

)

$

(14,

074,

608 )

$

(5

,318

,708

)

$ (1

45,6

31,3

46 )

Dep

reci

atio

n ex

pens

e

-

(175

,943

)

(1

8,18

6,43

4 )

(7

41,7

80 )

(284

,537

)

(1

9,38

8,69

4 )

Dis

posa

ls

-

162

14,8

99,5

62

79,8

66

76,5

86

15,0

56,1

76

Rec

lass

ifica

tion

-

-

(14,

692,

000 )

14,7

36,5

22

(45,

104 )

(582

)

Bal

ance

at D

ecem

ber 3

1,

2019

$

-

$

(4,0

56,3

83 )

$

(140

,336

,300

)

$

-

$

(5,5

71,7

63 )

$

(149

,964

,446

)

Bal

ance

at D

ecem

ber 3

1,

2019

, net

val

ue

$

19

3,01

3

$

3,32

7,37

5

$ 1

26,5

71,6

14

$

-

$

93

7,88

4

$ 1

31,0

29,8

86

C

ost

B

alan

ce a

t Jan

uary

1,

2020

$

193,

013

$

7,

383,

758

$

266

,907

,914

$

-

$

6,50

9,64

7

$ 2

80,9

94,3

32

Add

ition

s

-

19,4

64

621,

587

-

21

8,60

3

85

9,65

4 D

ispo

sals

(11,

420 )

(369

,651

)

(3

,718

,075

)

-

(171

,769

)

(4

,270

,915

) R

ecla

ssifi

catio

n

-

-

11

,792

,738

-

8,26

9

11

,801

,007

Bal

ance

at D

ecem

ber 3

1,

2020

$

181,

593

$

7,

033,

571

$

275

,604

,164

$

-

$

6,56

4,75

0

$ 2

89,3

84,0

78

A

ccum

ulat

ed d

epre

ciat

ion

an

d im

pairm

ent

B

alan

ce a

t Jan

uary

1,

2020

$

-

$

(4,0

56,3

83 )

$

(140

,336

,300

)

$

-

$

(5,5

71,7

63 )

$

(149

,964

,446

) D

epre

ciat

ion

expe

nse

-

(1

80,6

09 )

(17,

588,

803 )

-

(2

93,6

13 )

(18,

063,

025 )

D

ispo

sals

-

36

9,65

1

3,

446,

678

-

17

1,37

8

3,

987,

707

Impa

irmen

t los

ses

-

-

(424

,573

)

-

-

(4

24,5

73 )

Rec

lass

ifica

tion

-

-

1,48

9,15

8

-

5,56

3

1,

494,

721

B

alan

ce a

t Dec

embe

r 31,

20

20

$

-

$

(3

,867

,341

)

$ (1

53,4

13,8

40 )

$

-

$

(5

,688

,435

)

$ (1

62,9

69,6

16 )

B

alan

ce a

t Dec

embe

r 31,

20

20, n

et v

alue

$

181,

593

$

3,

166,

230

$

122

,190

,324

$

-

$

867,

315

$

126

,414

,462

R

ecla

ssifi

catio

n is

mai

nly

resu

lted

from

the

trans

fer o

f pre

paym

ents

for e

quip

men

t.

- 35

-

The

abov

e ite

ms o

f pro

perty

, pla

nt a

nd e

quip

men

t are

dep

reci

ated

on

a st

raig

ht-li

ne b

asis

ove

r the

est

imat

ed

usef

ul li

fe o

f the

ass

et:

Bui

ldin

g

M

ain

build

ings

45-5

5 ye

ars

Oth

ers

10

-25

year

s M

achi

nery

and

equ

ipm

ent

Elec

tro-m

echa

nica

l equ

ipm

ent

25

yea

rs

Oth

ers

3-

13 y

ears

O

ffic

e eq

uipm

ent

3-

15 y

ears

Le

aseh

old

impr

ovem

ents

B

uild

ing

impr

ovem

ents

5 ye

ars

Oth

ers

3-

5 ye

ars

Flig

ht e

quip

men

t and

equ

ipm

ent u

nder

fina

nce

leas

es

Airf

ram

es

18

-25

year

s A

ircra

ft ca

bins

10-2

0 ye

ars

Engi

nes

12

-20

year

s H

eavy

mai

nten

ance

on

airc

raft

6-

8 ye

ars

Engi

ne o

verh

auls

3-10

yea

rs

Land

ing

gear

ove

rhau

ls

8-12

yea

rs

Rep

aira

ble

spar

e pa

rts

3-

15 y

ears

Le

ased

airc

raft

impr

ovem

ents

5-

12 y

ears

R

egar

ding

cha

nges

in fl

eet c

ompo

sitio

n, c

urre

nt a

nd fo

reca

sted

mar

ket v

alue

s, an

d ot

her t

echn

ical

fact

ors,

the

Com

pany

reco

gniz

ed im

pairm

ent l

osse

s on

a pa

rt of

airc

raft

equi

pmen

t of $

424,

573

thou

sand

in 2

020.

R

efer

to

Not

e 32

for

the

car

ryin

g am

ount

s of

airc

raft

equi

pmen

t an

d rig

ht-o

f-us

e as

sets

ple

dged

by

the

Com

pany

. B

ased

on

the

parti

cula

rity

of ri

sk in

the

avia

tion

indu

stry

, all

of th

e C

ompa

ny’s

ass

ets

such

as

airc

raft,

real

es

tate

, and

mov

able

pro

perty

are

ade

quat

ely

insu

red

to d

iver

sify

the

pote

ntia

l ris

k re

late

d to

ope

ratio

ns.

15.

INV

EST

ME

NT

PR

OPE

RT

IES

D

ecem

ber

31

2020

2019

Car

ryin

g am

ount

In

vest

men

t pro

perti

es

$

2,0

47,4

48

$

2,0

47,4

48

The

inve

stm

ent p

rope

rties

hel

d by

the

Com

pany

wer

e la

nd lo

cate

d in

Nan

kan,

whi

ch w

ere

leas

ed to

oth

ers.

The

fair

valu

e of

the

inve

stm

ent p

rope

rties

hel

d by

the

Com

pany

was

$2,

456,

472

thou

sand

and

$2,

473,

771

thou

sand

as

of D

ecem

ber

31,

2020

and

201

9, r

espe

ctiv

ely.

The

fai

r va

lue

valu

atio

n w

as p

erfo

rmed

by

inde

pend

ent q

ualif

ied

prof

essi

onal

val

uers

, and

the

futu

re in

com

e ev

alua

ted

by m

anag

emen

t was

bas

ed o

n m

arke

t tra

nsac

tions

. All

of th

e C

ompa

ny’s

inve

stm

ent p

rope

rties

wer

e he

ld u

nder

free

hold

inte

rest

.

- 36

-

211

16.

OT

HE

R IN

TA

NG

IBL

E A

SSE

TS

Com

pute

r So

ftw

are

Cos

ts

Acc

umul

ated

A

mor

tizat

ion

N

et V

alue

B

alan

ce a

t Jan

uary

1, 2

019

$

2,0

60,7

85

$

(1,

081,

077)

$

979,

708

Add

ition

s

15

7,57

1

-

157,

571

Am

ortiz

atio

n ex

pens

e

-

(165

,981

)

(1

65,9

81)

Bal

ance

at D

ecem

ber 3

1, 2

019

$

2,2

18,3

56

$

(1,

247,

058)

$

971,

298

Bal

ance

at J

anua

ry 1

, 202

0

$ 2

,218

,356

$ (

1,24

7,05

8)

$

97

1,29

8 A

dditi

ons

95,2

17

-

95

,217

A

mor

tizat

ion

expe

nse

-

(1

69,1

58)

(169

,158

) R

ecla

ssifi

catio

n

(7

65,7

86)

735,

882

(2

9,90

4)

Bal

ance

at D

ecem

ber 3

1, 2

020

$

1,5

47,7

87

$

(6

80,3

34)

$

86

7,45

3 Th

e ab

ove

item

s of o

ther

inta

ngib

le a

sset

s are

am

ortiz

ed o

n a

stra

ight

-line

bas

is o

ver 2

-10

year

s.

17.

OT

HE

R A

SSE

TS

D

ecem

ber

31

2020

2019

Cur

rent

Tem

pora

ry p

aym

ents

$

19,1

11

$

94

,682

Pr

epay

men

ts

134,

055

1,55

1,11

3 O

ther

s

29

9,24

8

46

0,40

4

$

452,

414

$

2,1

06,1

99

N

on-c

urre

nt

Pr

epay

men

ts fo

r airc

raft

$

5,0

69,5

41

$

8,3

22,5

18

Prep

aym

ents

- lo

ng-te

rm

2,04

2,60

9

2,

264,

220

Ref

unda

ble

depo

sits

58

5,45

1

62

1,71

5 O

ther

fina

ncia

l ass

ets

18,0

78

19,1

03

$

7,7

15,6

79

$

11,2

27,5

56

The

prep

aym

ents

for

airc

raft

com

pris

ed th

e pr

epai

d de

posi

ts a

nd c

apita

lized

inte

rest

fro

m th

e pu

rcha

se o

f A

321n

eo a

nd B

777F

airc

raft.

For

det

ails

on

the

A32

1neo

and

B77

7F a

ircra

ft pu

rcha

se c

ontra

cts,

refe

r to

N

ote

33.

- 37

-

18.

BO

RR

OW

ING

S a.

Sh

ort-t

erm

bill

s pay

able

D

ecem

ber

31

2020

2019

Com

mer

cial

pap

er

$

8,1

00,0

00

$

-

Less

: Una

mor

tized

dis

coun

t on

bills

pay

able

11

,118

-

$

8,0

88,8

82

$

-

A

nnua

l dis

coun

t rat

e

0.99

%-1

.00%

-

b.

Long

-term

bor

row

ings

Dec

embe

r 31

20

20

20

19

U

nsec

ured

ban

k lo

ans

$

21

,650

,000

$

650,

000

Secu

red

bank

loan

s

32

,885

,883

30

,435

,870

C

omm

erci

al p

aper

Pr

ocee

ds fr

om is

sue

29,1

00,0

00

31,3

00,0

00

Less

: Una

mor

tized

dis

coun

t

22

,046

59

,382

83,6

13,8

37

62,3

26,4

88

Less

: Cur

rent

por

tion

14,7

98,4

42

13,7

08,3

20

$

68

,815

,395

$

48,6

18,1

68

In

tere

st ra

tes

0.

81%

-1.2

2%

1.

08%

-1.4

6%

For i

nfor

mat

ion

on se

cure

d ba

nk lo

ans w

hich

wer

e se

cure

d by

flig

ht e

quip

men

t, re

fer t

o N

ote

32.

Ban

k lo

ans

(New

Tai

wan

dol

lars

and

U.S

. dol

lars

) ar

e re

paya

ble

quar

terly

, sem

iann

ually

or

in lu

mp

sum

upo

n m

atur

ity. R

elat

ed in

form

atio

n is

sum

mar

ized

as f

ollo

ws:

Dec

embe

r 31

20

20

20

19

Pe

riods

2016

/6/2

7-

2032

/6/3

0

2008

/2/2

6-

2030

/4/2

5 Th

e C

ompa

ny h

as n

ote

issu

ance

faci

litie

s (N

IFs)

obt

aine

d fr

om c

erta

in fi

nanc

ial i

nstit

utio

ns. T

he N

IFs,

with

var

ious

mat

uriti

es u

ntil

Mar

ch 2

025,

wer

e us

ed b

y th

e C

ompa

ny to

gua

rant

ee c

omm

erci

al p

aper

w

hich

it is

sued

. The

com

mer

cial

pap

er w

as is

sued

at d

isco

unt r

ates

of

1.02

63%

-1.1

167%

in 2

020

and

1.13

00%

-1.1

680%

in 2

019.

In

acc

orda

nce

with

the

“R

egul

atio

ns o

n R

elie

f an

d R

evita

lizat

ion

Mea

sure

s fo

r In

dust

ries

and

Ente

rpris

es A

ffec

ted

by S

ever

e Pn

eum

onia

with

Nov

el P

atho

gens

” en

dors

ed b

y th

e M

inis

try o

f Tr

ansp

orta

tion

and

Com

mun

icat

ions

and

the

“Ope

ratio

nal G

uide

s on

Rel

ief L

oan

Gua

rant

ees f

or A

iling

A

viat

ion

Indu

stry

Aff

ecte

d by

Sev

ere

Pneu

mon

ia w

ith N

ovel

Pat

hoge

ns”,

the

Com

pany

app

lied

for

proj

ect

finan

ce l

oans

fro

m f

inan

cial

ins

titut

ions

to

mai

ntai

n its

ope

ratio

ns;

and

spec

ial

fund

s, cr

edit

guar

ante

es a

long

with

sub

sidi

zed

inte

rest

rate

s w

ere

prov

ided

by

the

gove

rnm

ent.

The

tota

l am

ount

of

the

loan

s is

$20

,000

,000

tho

usan

d, w

hich

sha

ll be

rep

aid

with

in 2

yea

rs f

rom

the

dat

e of

ini

tial

draw

dow

n. A

s of

Dec

embe

r 31

, 20

20,

the

Com

pany

had

mad

e a

draw

dow

n in

the

am

ount

of

$20,

000,

000

thou

sand

.

- 38

-

212

19

. B

ON

DS

PAY

AB

LE

D

ecem

ber

31

2020

2019

Uns

ecur

ed c

orpo

rate

bon

ds fi

rst-t

ime

issu

ed in

201

3

$

-

$

2,

750,

000

Uns

ecur

ed c

orpo

rate

bon

ds fi

rst-t

ime

issu

ed in

201

6

2,

500,

000

5,00

0,00

0 U

nsec

ured

cor

pora

te b

onds

seco

nd-ti

me

issu

ed in

201

6

2,

500,

000

5,00

0,00

0 U

nsec

ured

cor

pora

te b

onds

firs

t-tim

e is

sued

in 2

017

1,00

0,00

0

2,

350,

000

Uns

ecur

ed c

orpo

rate

bon

ds se

cond

-tim

e is

sued

in 2

017

2,60

0,00

0

3,

500,

000

Uns

ecur

ed c

orpo

rate

bon

ds fi

rst-t

ime

issu

ed in

201

8

4,

500,

000

4,50

0,00

0 U

nsec

ured

cor

pora

te b

onds

firs

t-tim

e is

sued

in 2

019

3,50

0,00

0

3,

500,

000

Con

verti

ble

bond

s - si

xth-

time

issu

e

5,

832,

859

5,75

2,62

5

22,4

32,8

59

32,3

52,6

25

Less

: Cur

rent

por

tion

and

put o

ptio

n of

con

verti

ble

bond

s

12,1

32,8

59

10,0

00,0

00

$

10

,300

,000

$

22,3

52,6

25

Rel

ated

issu

ance

con

ditio

ns w

ere

as fo

llow

s:

Cat

egor

y

Peri

od

C

ondi

tions

Rat

e (%

)

Se

ven-

year

priv

ate

unse

cure

d bo

nds -

issu

ed a

t pa

r in

Janu

ary

2013

; rep

ayab

le in

Janu

ary

2019

and

202

0; 1

.85%

inte

rest

p.a

., pa

yabl

e an

nual

ly

20

13.0

1.17

- 20

20.0

1.17

P

rinci

pal r

epay

able

in

Janu

ary

of 2

019

and

2020

; in

dica

tor r

ate;

pay

able

an

nual

ly

1.

85

Five

-yea

r uns

ecur

ed b

onds

- is

sued

at p

ar in

M

ay 2

016;

repa

yabl

e in

May

202

0 an

d 20

21; 1

.19%

inte

rest

p.a

., pa

yabl

e an

nual

ly

20

16.0

5.26

- 20

21.0

5.26

P

rinci

pal r

epay

able

in M

ay o

f 20

20 a

nd 2

021;

inte

rest

p.a

. pa

yabl

e an

nual

ly

1.

19

Five

-yea

r uns

ecur

ed b

onds

- is

sued

at p

ar in

Se

ptem

ber 2

016;

repa

yabl

e in

Se

ptem

ber 2

020

and

2021

; 1.0

8% in

tere

st

p.a.

, pay

able

ann

ually

20

16.0

9.27

- 20

21.0

9.27

P

rinci

pal r

epay

able

in

Sept

embe

r of 2

020

and

2021

; int

eres

t p.a

. pay

able

an

nual

ly

1.

08

Thre

e-ye

ar p

rivat

e un

secu

red

bond

s - is

sued

at

par i

n M

ay 2

017;

repa

yabl

e on

due

dat

e;

inte

rest

of 1

.2%

p.a

., pa

yabl

e an

nual

ly

20

17.0

5.19

- 20

20.0

5.19

P

rinci

pal r

epay

able

on

due

date

; ind

icat

or ra

te;

paya

ble

annu

ally

1.

20

Seve

n-ye

ar p

rivat

e un

secu

red

bond

s - is

sued

at

par i

n M

ay 2

017;

repa

yabl

e on

due

dat

e;

inte

rest

of 1

.75%

p.a

., pa

yabl

e an

nual

ly

20

17.0

5.19

- 20

24.0

5.19

P

rinci

pal r

epay

able

on

due

date

; ind

icat

or ra

te;

paya

ble

annu

ally

1.

75

Thre

e-ye

ar p

rivat

e un

secu

red

bond

s - is

sued

at

par i

n O

ctob

er 2

017;

repa

yabl

e on

due

dat

e;

inte

rest

of 1

.14%

p.a

., pa

yabl

e an

nual

ly

20

17.1

0.12

- 20

20.1

0.12

P

rinci

pal r

epay

able

on

due

date

; ind

icat

or ra

te;

paya

ble

annu

ally

1.

14

Five

-yea

r priv

ate

unse

cure

d bo

nds -

issu

ed a

t pa

r in

Oct

ober

201

7; re

paya

ble

in O

ctob

er

2021

and

202

2; 1

.45%

inte

rest

p.a

., pa

yabl

e an

nual

ly

20

17.1

0.12

- 20

22.1

0.12

P

rinci

pal r

epay

able

in

Oct

ober

of 2

021

and

2022

; in

dica

tor r

ate;

pay

able

an

nual

ly

1.

45

Five

-yea

r priv

ate

unse

cure

d bo

nds -

issu

ed a

t pa

r in

Nov

embe

r 201

8; re

paya

ble

in

Nov

embe

r 202

2 an

d 20

23; 1

.32%

inte

rest

p.

a., p

ayab

le a

nnua

lly

20

18.1

1.30

- 20

23.1

1.30

P

rinci

pal r

epay

able

in

Nov

embe

r of 2

022

and

2023

; ind

icat

or ra

te;

paya

ble

annu

ally

1.

32

(Con

tinue

d)

- 39

-

Cat

egor

y

Peri

od

C

ondi

tions

Rat

e (%

)

Se

ven-

year

priv

ate

unse

cure

d bo

nds -

issu

ed a

t pa

r in

Nov

embe

r 201

8; re

paya

ble

in

Nov

embe

r 202

2 an

d 20

23; 1

.45%

inte

rest

p.

a., p

ayab

le a

nnua

lly

20

18.1

1.30

- 20

25.1

1.30

P

rinci

pal r

epay

able

in

Nov

embe

r of 2

022

and

2023

; ind

icat

or ra

te;

paya

ble

annu

ally

1.

45

Five

-yea

r priv

ate

unse

cure

d bo

nds -

issu

ed a

t pa

r in

June

201

9; re

paya

ble

in Ju

ne 2

023

and

2024

; 1.1

0% in

tere

st p

.a.,

paya

ble

annu

ally

20

19.0

6.21

- 20

24.0

6.21

P

rinci

pal r

epay

able

in Ju

ne o

f 20

23 a

nd 2

024;

indi

cato

r ra

te; p

ayab

le a

nnua

lly

1.

10

Seve

n-ye

ar p

rivat

e un

secu

red

bond

s - is

sued

at

par i

n Ju

ne 2

019;

repa

yabl

e in

June

202

5 an

d 20

26; 1

.32%

inte

rest

p.a

., pa

yabl

e an

nual

ly

20

19.0

6.21

- 20

26.0

6.21

P

rinci

pal r

epay

able

in Ju

ne o

f 20

25 a

nd 2

026;

indi

cato

r ra

te; p

ayab

le a

nnua

lly

1.

32

Five

-yea

r con

verti

ble

bond

s - is

sued

at

disc

ount

in Ja

nuar

y 20

18; r

epay

able

in lu

mp

sum

upo

n m

atur

ity; 1

.382

1% d

isco

unt r

ate

p.a.

20

18.0

1.30

- 20

23.0

1.30

E

xcep

t for

con

verti

ng to

shar

e ca

pita

l or b

uyin

g ba

ck,

prin

cipa

l rep

ayab

le in

D

ecem

ber o

f 202

3

-

(Con

clud

ed)

The

Com

pany

issu

ed it

s 20

16 f

irst u

nsec

ured

cor

pora

te b

onds

with

a f

ace

valu

e of

$5,

000,

000

thou

sand

, an

d th

e pu

rcha

sers

of t

he b

onds

incl

uded

Man

darin

Airl

ines

Co.

, Ltd

. and

Sab

re T

rave

l Net

wor

k (T

aiw

an)

Co.

, Ltd

., w

hich

had

a fa

ce v

alue

of $

150,

000

thou

sand

, and

the

amou

nt w

as e

limin

ated

in th

e C

ompa

ny’s

fin

anci

al st

atem

ents

. Th

e C

ompa

ny is

sued

the

sixth

issu

e of

its u

nsec

ured

con

verti

ble

bond

s, an

d th

e is

suan

ce c

ondi

tions

wer

e as

fo

llow

s: a.

Th

e ho

lder

s may

dem

and

a lu

mp-

sum

pay

men

t for

the

bond

s upo

n m

atur

ity.

b.

The

hold

ers

can

requ

est t

hat t

he C

ompa

ny re

purc

hase

thei

r bon

ds a

t fac

e va

lue

on th

e th

ird a

nniv

ersa

ry

of th

e of

ferin

g da

te. T

he h

olde

rs c

an e

xerc

ise

the

right

to se

ll on

Janu

ary

30, 2

021.

c.

Th

e C

ompa

ny m

ay r

edee

m th

e bo

nds

at f

ace

valu

e be

twee

n A

pril

30, 2

018

and

Dec

embe

r 20

, 202

2 un

der c

erta

in c

ondi

tions

. d.

B

etw

een

Janu

ary

26, 2

014

and

Dec

embe

r 16,

201

8 (e

xcep

t for

the

perio

d be

twee

n th

e fo

rmer

div

iden

d da

te a

nd t

he d

ate

of t

he d

ivid

end

decl

arat

ion

on r

ecor

d),

hold

ers

may

con

vert

the

bond

s to

the

C

ompa

ny’s

ord

inar

y sh

ares

. Th

e in

itial

con

vers

ion

pric

e w

as s

et a

t N

T$13

.2,

whi

ch i

s su

bjec

t to

ad

just

men

t if t

here

is a

cap

ital i

njec

tion

by c

ash,

sha

re d

ivid

end

dist

ribut

ion,

and

the

prop

ortio

n of

cas

h di

vide

nds

per s

hare

in m

arke

t pric

e ex

ceed

ing

1.5%

. Bec

ause

the

Com

pany

dis

tribu

ted

cash

div

iden

ds

on Ju

ly 2

9, 2

019,

the

conv

ersi

on p

rice

was

adj

uste

d to

NT$

12.6

. Th

e co

nver

tible

bon

ds c

onta

in b

oth

liabi

lity

and

equi

ty c

ompo

nent

s. Th

e eq

uity

com

pone

nt w

as p

rese

nted

in

equ

ity u

nder

the

head

ing

of c

apita

l sur

plus

- op

tions

. The

eff

ectiv

e in

tere

st ra

te o

f the

liab

ility

com

pone

nt

was

1.3

821%

per

ann

um o

n in

itial

reco

gniti

on.

Pr

ocee

ds fr

om is

suan

ce

$

6,0

12,0

00

Equi

ty c

ompo

nent

(4

09,9

78)

Liab

ility

com

pone

nt a

t the

dat

e of

issu

ance

$ 5

,602

,022

- 40

-

213

The

seve

nth

issu

e of

the

Com

pany

’s u

nsec

ured

con

verti

ble

bond

s w

as re

solv

ed b

y th

e bo

ard

of d

irect

ors

of

the

Com

pany

on

Aug

ust

7, 2

019.

The

cum

ulat

ive

face

val

ue o

f th

e bo

nds

shal

l no

t ex

ceed

$3,

000,

000

thou

sand

. The

bon

ds a

re i

ssue

d at

100

%-1

00.5

% o

f th

e fa

ce v

alue

, and

the

iss

uanc

e pe

riod

is 5

yea

rs.

Dur

ing

the

perio

d of

pub

lic o

ffer

ings

, the

stoc

k m

arke

t and

the

dom

estic

cap

ital m

arke

t wer

e vo

latil

e du

e to

C

oron

aviru

s Pne

umon

ia a

nd th

e ch

ange

s in

the

shar

e pr

ice

of th

e C

ompa

ny w

ere

unfa

vora

ble

to th

e se

vent

h is

sue

of th

e C

ompa

ny’s

uns

ecur

ed c

onve

rtibl

e bo

nds.

Afte

r com

preh

ensi

ve c

onsi

dera

tion,

the

issu

ance

was

su

spen

ded

with

the

perm

issi

on o

f th

e co

mpe

tent

aut

horit

y ba

sed

on th

e be

st in

tere

st o

f th

e C

ompa

ny a

nd

the

shar

ehol

ders

’ equ

ity.

The

seve

nth

issu

e of

the

Com

pany

’s u

nsec

ured

con

verti

ble

bond

s w

as re

solv

ed b

y th

e bo

ard

of d

irect

ors

of

the

Com

pany

on

Aug

ust

6, 2

020.

The

cum

ulat

ive

face

val

ue o

f th

e bo

nds

shal

l no

t ex

ceed

$6,

000,

000

thou

sand

. The

bon

ds a

re is

sued

at 1

00%

-100

.5%

of t

he fa

ce v

alue

, and

the

issu

ance

per

iod

is 5

yea

rs.

20.

LE

ASE

AG

RE

EM

EN

TS

a.

Rig

ht-o

f-us

e as

sets

D

ecem

ber

31

2020

2019

Car

ryin

g am

ount

s

La

nd

$

3,

367,

875

$

3,

442,

366

Bui

ldin

gs

6,98

6,86

6

6,

950,

330

Flig

ht e

quip

men

t

44

,201

,020

53

,870

,134

$

54,5

55,7

61

$

64

,262

,830

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

A

dditi

ons t

o rig

ht-o

f-use

ass

ets

$

2,

084,

799

$

5,

043,

409

D

epre

ciat

ion

for r

ight

-of-

use

asse

ts

La

nd

$

17

2,75

7

$

171,

147

Bui

ldin

gs

383,

898

767,

939

Flig

ht e

quip

men

t

9,

399,

066

9,07

0,85

5

$

9,95

5,72

1

$

10,0

09,9

41

b.

Leas

e lia

bilit

ies

Dec

embe

r 31

20

20

20

19

C

arry

ing

amou

nts

C

urre

nt

$

84

2,59

2

$

695,

215

Non

-cur

rent

$

10,0

55,7

76

$

10

,909

,262

- 41

-

Ran

ge o

f dis

coun

t rat

e fo

r lea

se li

abili

ties (

incl

ude

US

leas

e he

dgin

g in

stru

men

ts):

D

ecem

ber

31

2020

2019

La

nd

1.

09%

-1.6

5%

1.

09%

-1.6

5%

Bui

ldin

gs

0%

-3.5

6%

0%

-3.5

6%

Flig

ht e

quip

men

t

0.68

%-3

.16%

2.49

%-3

.16%

c.

Fina

ncia

l lia

bilit

ies u

nder

hed

ge a

ccou

ntin

g Th

e C

ompa

ny s

peci

fies

a pa

rt of

US

leas

e co

ntra

ct a

s he

dgin

g in

stru

men

ts t

o av

oid

exch

ange

rat

e flu

ctua

tions

is p

asse

nger

reve

nue,

and

app

lies t

he a

ccou

ntin

g tre

atm

ent o

f cas

h flo

w h

edgi

ng. T

he le

ase

info

rmat

ion

is a

s fol

low

s:

Mat

urity

Dat

e

Subj

ect

C

arry

ing

Val

ue

D

ecem

ber 3

1, 2

020

20

22.2

.9-2

028.

5.15

F

inan

cial

liab

ilitie

s for

hed

ging

- cu

rren

t

$

8,12

0,44

5

F

inan

cial

liab

ilitie

s for

hed

ging

- no

n-cu

rren

t

32

,455

,333

Dec

embe

r 31,

201

9

2021

.4.1

5-20

28.5

.15

Fin

anci

al li

abili

ties f

or h

edgi

ng -

curr

ent

8,57

7,48

2

F

inan

cial

liab

ilitie

s for

hed

ging

- no

n-cu

rren

t

42

,420

,205

Influ

ence

of c

ompr

ehen

sive

inco

me

Rec

ogni

zed

in

Oth

er

Com

preh

ensi

ve

Inco

me

R

ecla

ssifi

ed to

In

com

e

For t

he y

ear e

nded

Dec

embe

r 31,

202

0

$ 2

,099

,550

$

352,

674

For t

he y

ear e

nded

Dec

embe

r 31,

201

9

1,

457,

058

(24,

029)

d.

Mat

eria

l lea

sing

act

iviti

es a

nd te

rms

A

s le

ssee

, Chi

na A

irlin

es le

ased

ten

777-

300E

R p

lane

s, fif

teen

A33

0-30

0 pl

anes

and

fift

een

737-

800

plan

es fo

r ope

ratio

n, le

ase

perio

d ar

e 8

to 1

2 ye

ars f

rom

Feb

ruar

y 20

06 to

May

202

8. T

he re

ntal

pric

ing

met

hod

is p

artly

a f

ixed

am

ount

of

fund

s, an

d so

me

of t

hem

are

flo

atin

g re

nts,

float

ing

rent

s ar

e ac

cord

ing

to b

ench

mar

k ra

tio, t

he r

ent

is r

evis

ed e

very

hal

f ye

ar. W

hen

the

leas

e ex

pire

s, th

e le

ase

agre

emen

ts h

ave

no p

urch

ase

right

s. Th

e in

form

atio

n of

refu

ndab

le d

epos

its a

nd is

suan

ce o

f let

ter o

f cre

dit d

ue to

rent

al o

f pla

nes:

D

ecem

ber

31

2020

2019

Ref

unda

ble

depo

sits

$

438,

117

$

46

3,11

5 C

redi

t gua

rant

ees

1,

330,

772

1,40

6,70

2

e.

Leas

e ag

reem

ent

The

Com

pany

sign

ed a

rent

al c

ontra

ct fo

r six

A32

1neo

with

Air

Leas

e C

orpo

ratio

n on

Sep

tem

ber 2

019,

w

hich

is e

xpec

ted

to b

e in

trodu

ced

betw

een

2021

and

202

2.

- 42

-

214

The

Com

pany

sig

ned

a re

ntal

let

ter

of i

nten

t fo

r ei

ght

A32

1neo

with

CA

LC L

ease

Cor

pora

tion

on

Oct

ober

201

9, w

hich

is e

xpec

ted

to b

e in

trodu

ced

in 2

022.

Th

e C

ompa

ny a

lso

sign

ed re

late

d ai

rcra

ft pu

rcha

se a

gree

men

t, pl

ease

refe

r to

note

33

for d

etai

ls.

f. Sa

le a

nd le

aseb

ack

In

ord

er t

o re

vita

lize

asse

ts a

nd s

treng

then

the

finan

cial

stru

ctur

e, t

he C

ompa

ny s

old

five

of it

s ow

n A

330-

300

airc

raft

to A

ltava

ir L.

P. i

n Se

ptem

ber

2019

thr

ough

sal

e an

d le

aseb

ack

arra

ngem

ent

for

$4,9

05,6

60 th

ousa

nd. T

he le

ase

term

was

5 to

6 y

ears

and

a lo

ss o

f $1

03,7

75 th

ousa

nd w

as in

curr

ed.

The

leas

e ag

reem

ent h

ad n

o te

rms

for

leas

e re

new

al o

r of

ftake

rig

hts.

The

annu

al le

ase

paym

ents

for

ea

ch a

ircra

ft ar

e fr

om U

S$5,

389

thou

sand

to U

S$5,

437

thou

sand

. A

s les

see,

the

Com

pany

leas

ed o

ffic

e bu

ildin

gs a

nd e

quip

men

t fro

m C

AL

Park

. Lea

se p

erio

d is

2 y

ears

, an

d th

e fix

ed p

aym

ent (

tax

incl

uded

) is $

20,2

38 th

ousa

nd p

er m

onth

.

g.

Oth

er le

ase

info

rmat

ion

The

Com

pany

use

s ope

ratin

g le

ase

agre

emen

t for

inve

stm

ent p

rope

rties

, ref

er to

Not

e 15

.

Fo

r th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Shor

t-ter

m a

nd lo

w p

rice

leas

e pa

ymen

t

$

16,4

50

$

18

,144

To

tal o

f lea

se c

ash

outfl

ow

$

(10

,528

,143

)

$ (

11,5

83,3

49)

The

Com

pany

cho

oses

to w

aive

the

reco

gniti

on o

f the

con

tract

pro

visi

ons

for t

he s

hort-

term

leas

es a

nd

low

pric

e le

ase,

and

doe

s not

reco

gniz

e th

e re

late

d rig

ht-o

f-us

e as

sets

and

leas

e lia

bilit

ies f

or su

ch le

ase.

21.

OT

HE

R P

AY

AB

LE

S

Dec

embe

r 31

20

20

20

19

Fu

el c

osts

$

1,

718,

503

$

3,

419,

803

Shor

t-ter

m e

mpl

oyee

ben

efits

1,

592,

141

1,57

7,32

2 G

roun

d se

rvic

e ex

pens

es

956,

831

1,17

8,18

4 Te

rmin

al su

rcha

rges

34

6,95

2

91

4,42

8 R

epai

r exp

ense

s

28

5,14

6

1,

136,

588

Com

mis

sion

exp

ense

s

18

4,36

3

50

9,52

0 In

tere

st e

xpen

ses

116,

168

214,

089

Oth

ers

1,92

7,97

6

1,

942,

269

$

7,

128,

080

$

10

,892

,203

- 43

-

22.

CO

NT

RA

CT

LIA

BIL

ITIE

S/D

EFE

RR

ED

RE

VE

NU

E

D

ecem

ber

31

2020

2019

Con

trac

t L

iabi

litie

s

Con

trac

t L

iabi

litie

s

Freq

uent

flye

r pro

gram

s

$

2,65

7,94

2

$

2,88

4,12

2 A

dvan

ce ti

cket

sale

s

2,

322,

008

17,9

36,4

76

$

4,

979,

950

$

20

,820

,598

Cur

rent

$

3,21

8,84

6

$

18,5

84,2

87

Non

-cur

rent

1,

761,

104

2,23

6,31

1

$

4,97

9,95

0

$

20,8

20,5

98

23.

PRO

VIS

ION

S

Dec

embe

r 31

20

20

20

19

O

pera

ting

leas

es -

airc

raft

$

13

,741

,244

$

9,43

1,73

6

Cur

rent

$

-

$

- N

on-c

urre

nt

13,7

41,2

44

9,43

1,73

6

$

13,7

41,2

44

$

9,

431,

736

The

Com

pany

rent

ed fl

ight

equ

ipm

ent u

nder

ope

ratin

g le

ase

agre

emen

ts. U

nder

the

cont

ract

s (s

ome

of th

e le

ased

flig

ht e

quip

men

t’s le

ase

paym

ents

are

cal

cula

ted

mon

thly

), w

hen

the

leas

e ex

pire

s and

the

equi

pmen

t is

ret

urne

d to

the

less

or, t

he f

light

equ

ipm

ent h

as to

be

repa

ired

acco

rdin

g to

the

expe

cted

yea

rs o

f us

e,

num

ber

of f

light

hou

rs,

fligh

t cy

cle

and

the

num

ber

of e

ngin

e re

volu

tions

. Th

e C

ompa

ny h

ad e

xist

ing

oblig

atio

ns to

reco

gniz

e pr

ovis

ions

whe

n si

gnin

g a

leas

e or

dur

ing

the

leas

e te

rm.

Air

craf

t Lea

se

Con

trac

t

Bal

ance

at J

anua

ry 1

, 201

9

$

7,

999,

015

Add

ition

al p

rovi

sion

s rec

ogni

zed

3,

616,

519

Usa

ge

(1

,970

,226

) Ef

fect

of e

xcha

nge

rate

cha

nges

(213

,572

)

Bal

ance

at D

ecem

ber 3

1, 2

019

$

9,43

1,73

6

Bal

ance

at J

anua

ry 1

, 202

0

$

9,

431,

736

Add

ition

al p

rovi

sion

s rec

ogni

zed

5,

580,

416

Usa

ge

(7

05,1

17)

Effe

ct o

f exc

hang

e ra

te c

hang

es

(5

65,7

91)

B

alan

ce a

t Dec

embe

r 31,

202

0

$

13

,741

,244

- 44

-

215

24.

RE

TIR

EM

EN

T B

EN

EFI

T P

LA

NS

a.

Def

ined

con

tribu

tion

plan

s Th

e Co

mpa

ny a

dopt

ed a

pen

sion

pla

n un

der

the

Labo

r Pe

nsio

n A

ct (

LPA

), w

hich

is a

sta

te-m

anag

ed

defin

ed c

ontri

butio

n pl

an.

Und

er t

he L

PA,

an e

ntity

mak

es m

onth

ly c

ontri

butio

ns t

o em

ploy

ees’

in

divi

dual

pen

sion

acc

ount

s at 6

% o

f mon

thly

sala

ries a

nd w

ages

. b.

D

efin

ed b

enef

it pl

ans

The

Com

pany

ado

pted

the

defin

ed b

enef

it pl

an u

nder

the

Labo

r St

anda

rds

Law

, und

er w

hich

pen

sion

be

nefit

s ar

e ca

lcul

ated

on

the

basi

s of

the

len

gth

of s

ervi

ce a

nd a

vera

ge m

onth

ly s

alar

ies

of t

he s

ix

mon

ths

befo

re re

tirem

ent.

The

Com

pany

con

tribu

te a

mou

nts

equa

l to

15%

of t

otal

mon

thly

sal

arie

s an

d w

ages

to a

pen

sion

fund

adm

inis

tere

d by

the

pens

ion

fund

mon

itorin

g co

mm

ittee

. Pen

sion

con

tribu

tions

ar

e de

posi

ted

in th

e B

ank

of T

aiw

an in

the

com

mitt

ee’s

nam

e.

Bef

ore

the

end

of e

ach

year

, the

Com

pany

ass

esse

s the

bal

ance

in th

e pe

nsio

n fu

nd. I

f the

am

ount

of t

he

bala

nce

in t

he p

ensi

on f

und

is i

nade

quat

e to

pay

ret

irem

ent

bene

fits

for

empl

oyee

s w

ho c

onfo

rm t

o re

tirem

ent

requ

irem

ents

in

the

next

yea

r, th

e C

ompa

ny i

s re

quire

d to

fun

d th

e di

ffer

ence

in

one

appr

opria

tion

that

sho

uld

be m

ade

befo

re t

he e

nd o

f M

arch

of

the

next

yea

r. Th

e pe

nsio

n fu

nd i

s m

anag

ed b

y th

e B

urea

u of

Lab

or F

unds

, Min

istry

of L

abor

(the

“B

urea

u”);

the

Com

pany

has

no

right

to

influ

ence

the

inve

stm

ent p

olic

y an

d st

rate

gy.

Th

e am

ount

s in

clud

ed in

the

bala

nce

shee

ts in

resp

ect o

f the

Com

pany

’s d

efin

ed b

enef

it pl

ans

wer

e as

fo

llow

s:

D

ecem

ber

31

2020

2019

Pres

ent v

alue

of d

efin

ed b

enef

it ob

ligat

ion

$

14

,458

,016

$

13,9

32,5

11

Fair

valu

e of

pla

n as

sets

(6

,240

,621

)

(6

,343

,766

)

Net

def

ined

ben

efit

liabi

litie

s

$

8,

217,

395

$

7,

588,

745

Mov

emen

ts in

net

def

ined

ben

efit

liabi

litie

s (as

sets

) wer

e as

follo

ws:

Pres

ent V

alue

of

the

Def

ined

B

enef

it O

blig

atio

n

Fair

Val

ue o

f th

e Pl

an A

sset

s

Net

Def

ined

B

enef

it L

iabi

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Bal

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anua

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9

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rvic

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1,

187,

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ecog

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fit o

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1,

305,

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t

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urn

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ts (e

xclu

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ount

s in

clud

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-

(219

,345

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(2

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uaria

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hang

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sum

ptio

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290,

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491,

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781,

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ontri

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om th

e em

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-

(1

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its p

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blig

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Fair

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f th

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an A

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Net

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enef

it L

iabi

litie

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sset

s)

Dire

ct p

aym

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o em

ploy

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rom

the

empl

oyer

$

(117

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$

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fect

of e

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cha

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70

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70

Bal

ance

at D

ecem

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019

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11

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5 Se

rvic

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urre

nt se

rvic

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1,

186,

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1,

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inte

rest

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ome)

96

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3)

52

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nize

d in

pro

fit o

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s

1,

282,

983

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Act

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498,

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4 A

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209,

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ance

at D

ecem

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020

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$

8,

217,

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(Con

clud

ed)

Thro

ugh

the

defin

ed b

enef

it pl

ans

unde

r th

e La

bor

Stan

dard

s La

w,

the

Com

pany

is

expo

sed

to t

he

follo

win

g ris

ks:

1)

Inve

stm

ent

risk:

The

pla

n as

sets

are

inv

este

d in

dom

estic

and

for

eign

equ

ity a

nd d

ebt

secu

ritie

s, ba

nk d

epos

its,

etc.

The

inv

estm

ent

is c

ondu

cted

at

the

disc

retio

n of

the

Bur

eau

or u

nder

the

m

anda

ted

man

agem

ent.

Bas

ed o

n re

leva

nt r

egul

atio

ns, t

he r

etur

n ge

nera

ted

by p

lan

asse

ts s

houl

d no

t be

belo

w th

e in

tere

st ra

te fo

r a tw

o-ye

ar ti

me

depo

sit w

ith lo

cal b

anks

. 2)

In

tere

st ri

sk: A

dec

reas

e in

the

gove

rnm

ent b

ond

inte

rest

rate

will

incr

ease

the

pres

ent v

alue

of t

he

defin

ed b

enef

it ob

ligat

ion;

how

ever

, thi

s w

ill b

e pa

rtial

ly o

ffse

t by

an in

crea

se in

the

retu

rn o

n th

e pl

an’s

deb

t inv

estm

ents

. 3)

Sa

lary

ris

k: T

he p

rese

nt v

alue

of

the

defin

ed b

enef

it ob

ligat

ion

is c

alcu

late

d by

ref

eren

ce t

o th

e fu

ture

sal

arie

s of

pla

n pa

rtici

pant

s. Th

us, a

n in

crea

se i

n th

e sa

larie

s of

the

pla

n pa

rtici

pant

s w

ill

incr

ease

the

pres

ent v

alue

of t

he d

efin

ed b

enef

it ob

ligat

ions

. Th

e ac

tuar

ial

valu

atio

ns o

f th

e pr

esen

t va

lue

of t

he d

efin

ed b

enef

it ob

ligat

ion

wer

e ca

rrie

d ou

t by

qu

alifi

ed a

ctua

ries.

The

sign

ifica

nt a

ssum

ptio

ns u

sed

for t

he p

urpo

ses o

f the

act

uaria

l val

uatio

ns w

ere

as

follo

ws:

Dec

embe

r 31

20

20

20

19

D

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unt r

ate

0.

34%

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%

Expe

cted

rate

of s

alar

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crea

se

1.

00%

1.00

%

- 46

-

216

If po

ssib

le r

easo

nabl

e ch

ange

in e

ach

of th

e si

gnifi

cant

act

uaria

l ass

umpt

ions

will

occ

ur a

nd a

ll ot

her

assu

mpt

ions

will

rem

ain

cons

tant

, the

pre

sent

val

ue o

f th

e de

fined

ben

efit

oblig

atio

n w

ould

inc

reas

e (d

ecre

ase)

as f

ollo

ws:

Dec

embe

r 31

20

20

20

19

D

isco

unt r

ate

0.25

%/0

.5%

incr

ease

$ (3

18,9

04)

$

(613

,408

) 0.

25%

/0.5

% d

ecre

ase

$

332

,769

$ 6

53,4

13

Expe

cted

rate

of s

alar

y in

crea

se

0.5%

incr

ease

$ 6

51,6

73

$

626

,743

0.

5% d

ecre

ase

$

(610

,077

)

$ (6

00,0

73)

The

sens

itivi

ty a

naly

sis

pres

ente

d ab

ove

may

not

be

repr

esen

tativ

e of

the

actu

al c

hang

e in

the

pres

ent

valu

e of

the

defin

ed b

enef

it ob

ligat

ion

as it

is u

nlik

ely

that

the

chan

ge in

ass

umpt

ions

wou

ld o

ccur

in

isol

atio

n of

one

ano

ther

as s

ome

of th

e as

sum

ptio

ns m

ay b

e co

rrel

ated

.

D

ecem

ber

31

2020

2019

The

expe

cted

con

tribu

tions

to th

e pl

an fo

r the

nex

t yea

r

$ 7

40,7

77

$

736

,056

The

aver

age

dura

tion

of th

e de

fined

ben

efit

oblig

atio

n

9.5

year

s

9.6

year

s 25

. E

QU

ITY

a.

Sh

are

capi

tal

Ord

inar

y sh

ares

D

ecem

ber

31

2020

2019

Num

ber o

f aut

horiz

ed sh

ares

(in

thou

sand

s)

7,00

0,00

0

7,

000,

000

Am

ount

of a

utho

rized

shar

es

$

70

,000

,000

$

70,0

00,0

00

Am

ount

of i

ssue

d sh

ares

$

54,2

09,8

46

$

54

,209

,846

b.

Cap

ital s

urpl

us

D

ecem

ber

31

2020

2019

Inco

me

of c

onve

rtibl

e bo

nds i

n ex

cess

of p

ar v

alue

and

co

nver

sion

pre

miu

m

$

14

6,35

1

$

315,

114

Div

iden

ds d

istri

bute

d to

subs

idia

ries

-

3,

909

Ret

irem

ent o

f tre

asur

y sh

ares

33

,513

33

,513

D

iffer

ence

in sa

le p

rice

of sh

are

of su

bsid

iarie

s and

boo

k va

lue

-

1,

129,

080

Expi

red

empl

oyee

shar

e op

tions

11

,747

11

,747

Lo

ng-te

rm in

vest

men

ts

119,

134

118,

962

Bon

ds p

ayab

le e

quity

com

pone

nt

409,

978

409,

978

Oth

ers

466,

604

466,

604

$

1,1

87,3

27

$

2,4

88,9

07

- 47

-

Th

e ca

pita

l su

rplu

s fr

om s

hare

s is

sued

in

exce

ss o

f pa

r (a

dditi

onal

pai

d-in

cap

ital

from

iss

uanc

e of

or

dina

ry s

hare

s) m

ay b

e us

ed to

off

set a

def

icit;

in a

dditi

on, w

hen

the

Com

pany

has

no

defic

it, s

uch

capi

tal

surp

lus

may

be

dist

ribut

ed a

s ca

sh d

ivid

ends

or

trans

ferr

ed t

o ca

pita

l (li

mite

d to

a c

erta

in

perc

enta

ge o

f the

Com

pany

’s p

aid-

in c

apita

l).

The

capi

tal s

urpl

us fr

om lo

ng-te

rm in

vest

men

ts, e

mpl

oyee

sha

res

optio

ns e

xpire

d, d

ivid

ends

dis

tribu

ted

to su

bsid

iarie

s and

retir

emen

t of t

reas

ury

shar

es m

ay n

ot b

e us

ed fo

r any

pur

pose

, exp

ect f

or o

ffse

tting

a

defic

it. A

s fo

r ca

pita

l sur

plus

fro

m c

onve

rsio

n of

con

verti

ble

bond

s pa

yabl

e m

ay n

ot b

e us

ed f

or a

ny

purp

ose.

c.

App

ropr

iatio

n of

ear

ning

s and

div

iden

d po

licy

Und

er t

he d

ivid

end

polic

y as

set

for

th i

n th

e C

ompa

ny’s

Arti

cles

of

Inco

rpor

atio

n (th

e “A

rticl

es”)

, w

here

the

Com

pany

mad

e a

prof

it in

a f

isca

l ye

ar, t

he p

rofit

sha

ll be

firs

t ut

ilize

d fo

r pa

ying

tax

es,

offs

ettin

g lo

sses

of

prev

ious

yea

rs, s

ettin

g as

ide

as le

gal r

eser

ve 1

0% o

f th

e re

mai

ning

pro

fit, s

ettin

g as

ide

or re

vers

ing

a sp

ecia

l res

erve

in a

ccor

danc

e w

ith th

e la

ws a

nd re

gula

tions

, and

then

any

rem

aini

ng

prof

it to

geth

er w

ith a

ny u

ndis

tribu

ted

reta

ined

ear

ning

s sh

all

be u

sed

by t

he C

ompa

ny’s

boa

rd o

f di

rect

ors

as th

e ba

sis

for

prop

osin

g a

dist

ribut

ion

plan

, whi

ch is

to d

istri

bute

div

iden

ds a

nd b

onus

no

less

tha

n 50

% o

f th

e re

mai

ning

pro

fit a

nd u

ndis

tribu

ted

reta

ined

ear

ning

s. Th

e di

vide

nds

and

bonu

s m

entio

ned

abov

e ca

n be

dis

tribu

ted

in th

e fo

rm o

f new

shar

es o

r cas

h, a

nd th

e ca

sh d

ivid

ends

shou

ld b

e no

less

than

30%

of t

he to

tal d

ivid

ends

. U

nder

the

Com

pany

Act

, if s

urpl

us e

arni

ngs

are

dist

ribut

ed in

the

form

of n

ew s

hare

s, th

e di

strib

utio

n of

sha

res

shal

l be

appr

oved

in th

e m

eetin

g of

the

boar

d of

dire

ctor

s; if

suc

h ea

rnin

gs a

re d

istri

bute

d in

th

e fo

rm o

f ca

sh, t

he c

ash

dist

ribut

ion

shal

l be

aut

horiz

ed a

fter

a re

solu

tion

has

been

ado

pted

by

a m

ajor

ity v

ote

at a

mee

ting

of t

he b

oard

of

dire

ctor

s at

tend

ed b

y tw

o-th

irds

of t

he t

otal

num

ber

of

dire

ctor

s; a

nd in

add

ition

, a re

port

of s

uch

dist

ribut

ion

shal

l be

subm

itted

to th

e sh

areh

olde

rs’ m

eetin

g.

If th

e C

ompa

ny h

as n

o lo

ss, a

ccor

ding

to la

ws

and

regu

latio

ns, t

he C

ompa

ny c

an d

istri

bute

its

capi

tal

rese

rve,

in w

hole

or i

n pa

rt, b

y is

suin

g ne

w sh

ares

or c

ash

base

d on

fina

ncia

l, bu

sine

ss a

nd m

anag

emen

t co

nsid

erat

ions

. If s

uch

surp

lus

earn

ings

is d

istri

bute

d in

the

form

of n

ew s

hare

s, it

shal

l be

appr

oved

by

a m

eetin

g of

the

boar

d of

dire

ctor

s; if

suc

h su

rplu

s ea

rnin

g is

dis

tribu

ted

in th

e fo

rm o

f cas

h, it

sha

ll be

au

thor

ized

afte

r a re

solu

tion

has

been

ado

pted

by

a m

ajor

ity v

ote

at a

mee

ting

of th

e bo

ard

of d

irect

ors

atte

nded

by

two-

third

s of

the

tot

al n

umbe

r of

dire

ctor

s; a

nd i

n ad

ditio

n th

eret

o a

repo

rt of

suc

h di

strib

utio

n sh

all b

e su

bmitt

ed to

the

shar

ehol

ders

’ mee

ting.

U

nder

the

divi

dend

pol

icy

as se

t for

th in

the

Com

pany

’s A

rticl

es o

f Inc

orpo

ratio

n (th

e “A

rticl

es”)

bas

ed

on th

e am

ende

d C

ompa

ny A

ct, w

here

the

Com

pany

mad

e pr

ofit

in a

fisc

al y

ear,

the

prof

it sh

all b

e fir

st ut

ilize

d fo

r pay

ing

taxe

s, of

fset

ting

loss

es o

f pre

viou

s ye

ars,

setti

ng a

side

as

a le

gal r

eser

ve 1

0% o

f the

re

mai

ning

pro

fit, s

ettin

g as

ide

or re

vers

ing

a sp

ecia

l res

erve

in a

ccor

danc

e w

ith th

e la

ws a

nd re

gula

tions

, an

d th

en a

ny r

emai

ning

pro

fit to

geth

er w

ith a

ny u

ndis

tribu

ted

reta

ined

ear

ning

s sh

all b

e us

ed b

y th

e C

ompa

ny’s

boa

rd o

f di

rect

ors

as th

e ba

sis

for

prop

osin

g a

dist

ribut

ion

plan

with

due

con

side

ratio

n of

an

y fu

ture

airc

raft

acqu

isiti

on p

lans

and

fun

d de

man

ds, w

hich

sho

uld

be r

esol

ved

in th

e sh

areh

olde

rs’

mee

ting

for t

he d

istri

butio

n of

div

iden

ds a

nd b

onus

es to

sha

reho

lder

s by

cas

h or

sha

res

(cas

h di

vide

nds

cann

ot b

e le

ss th

an 3

0% o

f tot

al d

ivid

ends

dis

tribu

ted)

. How

ever

, if t

he C

ompa

ny’s

pro

fit b

efor

e ta

x in

a

fisca

l yea

r af

ter

dedu

ctio

ns f

or th

e ab

ovem

entio

ned

item

s is

not

suf

ficie

nt f

or e

arni

ngs

dist

ribut

ion,

re

tain

ed e

arni

ngs c

an b

e us

ed a

s a su

pple

men

t for

the

defic

ienc

y.

The

Com

pany

sha

ll se

t asi

de p

rofit

s as

a le

gal r

eser

ve u

ntil

the

lega

l res

erve

am

ount

s to

the

auth

oriz

ed

capi

tal.

The

lega

l res

erve

cou

ld b

e us

ed fo

r of

fset

ting

defic

it of

the

Com

pany

. If

the

Com

pany

has

no

defic

it in

a f

isca

l yea

r, th

e C

ompa

ny c

an d

istri

bute

all

or p

art o

f th

e ca

pita

l sur

plus

by

cash

or

shar

es

with

due

con

side

ratio

n of

fin

ance

, m

arke

ting

and

man

agem

ent

requ

irem

ents

in

acco

rdan

ce w

ith t

he

law

s and

regu

latio

ns.

- 48

-

217

The

dist

ribut

ion

of d

ivid

ends

sho

uld

be r

esol

ved

and

reco

gniz

ed i

n th

e sh

areh

olde

rs’

mee

ting

in t

he

follo

win

g ye

ar.

1)

Off

setti

ng o

f def

icit

in 2

019

O

n Ju

ne 2

3, 2

020,

the

boar

d pr

opos

ed to

off

set t

he a

ccum

ulat

ed d

efic

it in

201

9. T

he d

efic

it in

clud

ed

a ne

t lo

ss o

f $1

,199

,798

tho

usan

d, n

egat

ive

adju

stm

ent

of o

ther

ret

aine

d ea

rnin

gs o

f $5

77,4

27

thou

sand

, the

rem

aini

ng a

mou

nt o

f ac

cum

ulat

ed d

efic

it w

as $

1,77

7,22

5 th

ousa

nd. T

he C

ompa

ny

cove

red

the

defic

it w

ith le

gal r

eser

ve o

f $4

66,4

16 th

ousa

nd, s

peci

al r

eser

ve o

f $1

2,96

7 th

ousa

nd

and

capi

tal r

eser

ve o

f $1,

297,

843

thou

sand

.

2)

Off

setti

ng o

f def

icit

in 2

020

O

n M

arch

18,

202

1, t

he b

oard

pro

pose

d to

off

set

the

accu

mul

ated

def

icit

in 2

020.

The

def

icit

incl

uded

a n

et i

ncom

e of

$14

0,00

0 th

ousa

nd a

nd th

e be

ginn

ing

bala

nce

of u

ndis

tribu

ted

reta

ined

ea

rnin

gs o

f $0,

neg

ativ

e ad

just

men

t of o

ther

reta

ined

ear

ning

s of

$49

0,58

1 th

ousa

nd, t

he re

mai

ning

am

ount

of

accu

mul

ated

def

icit

was

$35

0,58

1 th

ousa

nd a

nd w

as o

ffse

t by

cap

ital

rese

rve

of

$350

,581

thou

sand

. d.

O

ther

equ

ity it

ems

The

mov

emen

t of o

ther

equ

ity it

ems i

s as f

ollo

ws:

Exc

hang

e D

iffer

ence

s on

Tra

nsla

tion

of

the

Fina

ncia

l St

atem

ents

of

Fore

ign

Ope

ratio

ns

Unr

ealiz

ed G

ain

(Los

s) o

n Fi

nanc

ial A

sset

s at

FV

TO

CI

Gai

n (L

oss)

on

Hed

ging

In

stru

men

ts

T

otal

Bal

ance

at J

anua

ry 1

, 201

9

$

(9,6

64)

$

42

,619

$

25,2

68

$

58

,223

Ex

chan

ge d

iffer

ence

s on

trans

latio

n of

the

finan

cial

st

atem

ents

of f

orei

gn o

pera

tions

(5

9,17

4)

-

-

(59,

174)

C

umul

ativ

e lo

ss o

n ch

ange

s in

fair

valu

e of

hed

ging

inst

rum

ents

-

-

1,

398,

296

1,39

8,29

6 C

umul

ativ

e ga

in o

n ch

ange

s in

fair

valu

e of

hed

ging

inst

rum

ents

re

clas

sifie

d to

pro

fit o

r los

s

-

-

9,

305

9,30

5 U

nrea

lized

gai

n on

fina

ncia

l ass

ets

at F

VTO

CI

-

24

,490

-

24,4

90

Shar

e of

pro

fit o

r ass

ocia

tes

acco

unte

d fo

r usi

ng e

quity

m

etho

d

(6

,072

)

54

,902

(7

,187

)

41

,643

Ef

fect

s of i

ncom

e ta

x

11

,835

(1

4,85

4)

(281

,401

)

(2

84,4

20)

Oth

er c

ompr

ehen

sive

inco

me

(loss

) rec

ogni

zed

in th

e pe

riod

(53,

411)

64

,538

1,

119,

013

1,13

0,14

0 D

ispo

sal o

f sub

sidi

arie

s

8,

368

105

-

8,

473

Tran

sfer

s of i

nitia

l car

ryin

g am

ount

of h

edge

d ite

ms

-

-

(603

)

(6

03)

B

alan

ce a

t Dec

embe

r 31,

201

9

$

(54,

707)

$

107,

262

$

1,1

43,6

78

$

1,1

96,2

33

(Con

tinue

d)

- 49

-

Exc

hang

e D

iffer

ence

s on

Tra

nsla

tion

of

the

Fina

ncia

l St

atem

ents

of

Fore

ign

Ope

ratio

ns

Unr

ealiz

ed G

ain

(Los

s) o

n Fi

nanc

ial A

sset

s at

FV

TO

CI

Gai

n (L

oss)

on

Hed

ging

In

stru

men

ts

T

otal

Bal

ance

at J

anua

ry 1

, 202

0

$

(54,

707)

$

107,

262

$

1,1

43,6

78

$

1,1

96,2

33

Exch

ange

diff

eren

ces o

n tra

nsla

tion

of th

e fin

anci

al

stat

emen

ts o

f for

eign

ope

ratio

ns

(101

,142

)

-

-

(1

01,1

42)

Cum

ulat

ive

loss

on

chan

ges i

n fa

ir va

lue

of h

edgi

ng in

stru

men

ts

-

-

1,90

7,40

1

1,

907,

401

Cum

ulat

ive

gain

on

chan

ges i

n fa

ir va

lue

of h

edgi

ng in

stru

men

ts

recl

assi

fied

to p

rofit

or l

oss

-

-

(283

,210

)

(2

83,2

10)

Unr

ealiz

ed g

ain

on fi

nanc

ial a

sset

s at

FV

TOC

I

-

39,3

05

-

39

,305

Sh

are

of p

rofit

or a

ssoc

iate

s ac

coun

ted

for u

sing

equ

ity

met

hod

1,36

8

(8

4,89

3)

2,83

7

(8

0,68

8)

Effe

cts o

f inc

ome

tax

20,2

29

9,68

5

(3

65,0

36)

(335

,122

) O

ther

com

preh

ensi

ve in

com

e (lo

ss) r

ecog

nize

d in

the

perio

d

(7

9,54

5)

(35,

903)

1,

261,

992

1,14

6,54

4 Tr

ansf

ers o

f ini

tial c

arry

ing

amou

nt o

f hed

ged

item

s

-

-

20

0,98

9

20

0,98

9

Bal

ance

at D

ecem

ber 3

1, 2

020

$

(1

34,2

52)

$

71

,359

$ 2

,606

,659

$ 2

,543

,766

(C

oncl

uded

) e.

Tr

easu

ry sh

ares

Tr

easu

ry s

hare

s ar

e th

e C

ompa

ny’s

sha

res

held

by

its s

ubsi

diar

ies,

as o

f Dec

embe

r 31,

202

0 an

d 20

19

wer

e as

follo

ws:

(I

n T

hous

ands

of S

hare

s)

Peri

od o

f Tre

asur

y Sh

ares

N

umbe

r of

Sh

ares

, B

egin

ning

of

Yea

r

Red

uctio

n D

urin

g th

e Y

ear

Num

ber

of

Shar

es, E

nd o

f Y

ear

For t

he y

ear e

nded

Dec

embe

r 31,

202

0

2,

889

(814

)

2,

075

For t

he y

ear e

nded

Dec

embe

r 31,

201

9

2,

889

-

2,

889

S

ubsi

diar

y

Shar

es

(In

Tho

usan

ds)

C

arry

ing

Am

ount

Mar

ket V

alue

D

ecem

ber 3

1, 2

020

M

anda

rin A

irlin

es

2,07

5

$ 2

4,99

9

$ 2

4,99

9

Dec

embe

r 31,

201

9

Man

darin

Airl

ines

2,

075

$

18,

796

$

18,

796

Dyn

asty

Aer

otec

h In

tern

atio

nal C

orp

81

4

7,

376

7,37

6

$ 2

6,17

2

$ 2

6,17

2

- 50

-

218

The

abov

e ac

quis

ition

s by

sub

sidi

arie

s of

the

Com

pany

’s s

hare

s in

pre

viou

s ye

ars

was

due

to

inve

stm

ent p

lann

ing.

The

shar

es o

f the

Com

pany

hel

d by

its s

ubsi

diar

ies w

ere

treat

ed a

s tre

asur

y sh

ares

. Th

e su

bsid

iarie

s ca

n ex

erci

se s

hare

hold

ers’

rig

ht o

n th

ese

treas

ury

shar

es,

exce

pt f

or t

he r

ight

to

subs

crib

e fo

r the

Com

pany

’s n

ew sh

ares

and

vot

ing

right

s. D

ynas

ty A

erot

ech

Inte

rnat

iona

l Cor

p. s

old

a to

tal o

f 814

thou

sand

sha

res

of th

e C

ompa

ny in

202

0 an

d th

e di

spos

al p

rice

was

$6,

854

thou

sand

.

26.

NE

T IN

CO

ME

a.

R

even

ue

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

Pa

ssen

ger

$

20

,508

,133

$

96,1

76,8

65

Car

go

81,6

92,5

74

43,4

06,4

87

Oth

ers

4,12

6,41

6

6,

789,

049

$

106

,327

,123

$ 1

46,3

72,4

01

b.

Oth

er in

com

e

F

or th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Inte

rest

inco

me

$

208

,081

$ 3

14,9

44

Div

iden

d in

com

e

8,

720

10,1

12

Subs

idy

inco

me

29,3

09

38,6

21

Oth

ers

194,

651

160,

556

$

440

,761

$ 5

24,2

33

c.

Oth

er g

ains

and

loss

es

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

G

ain

on d

ispo

sal p

rope

rty, p

lant

and

equ

ipm

ent

$

8,

005

$

26

,377

N

et lo

ss o

n fin

anci

al a

sset

s as h

eld

for t

radi

ng

3,59

6

25

,700

G

ain

(loss

) on

fore

ign

exch

ange

, net

25

9,79

6

(2

62,6

10)

Impa

irmen

t los

s rec

ogni

zed

on n

on-c

urre

nt a

sset

s hel

d fo

r sal

e

(4

6,75

7)

- Im

pairm

ent l

oss r

ecog

nize

d on

flig

ht e

quip

men

t

(424

,573

)

-

Gai

n on

dis

posa

l of i

nves

tmen

t

-

7,65

6 Lo

ss o

n no

n-cu

rren

t ass

ets h

eld

for s

ale

-

(1

0,46

2)

Loss

on

sale

and

leas

ebac

k

-

(103

,775

) O

ther

s

(3

23,8

94)

(252

,468

)

$ (5

23,8

27)

$

(569

,582

)

- 51

-

d.

Fina

nce

cost

s

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

In

tere

st e

xpen

se

Bon

ds p

ayab

le

$

34

4,03

4

$

431,

599

Ban

k lo

ans

834,

611

703,

681

Inte

rest

on

leas

e lia

bilit

ies

1,60

1,71

8

1,

898,

892

$

2,7

80,3

63

$

3,0

34,1

72

Info

rmat

ion

abou

t cap

italiz

ed in

tere

st w

as a

s fol

low

s:

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

C

apita

lizat

ion

inte

rest

$

75

,701

$

36,4

04

Cap

italiz

atio

n ra

te

0.

71%

-1.4

5%

1.

01%

-1.2

8%

e.

Dep

reci

atio

n an

d am

ortiz

atio

n ex

pens

es

F

or th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Prop

erty

, pla

nt a

nd e

quip

men

t

$

18,0

63,0

25

$

19

,388

,694

R

ight

-of-

use

asse

ts

9,

955,

721

10,0

09,9

41

Inta

ngib

le a

sset

s

16

9,15

8

16

5,98

1

$

28,1

87,9

04

$

29

,564

,616

An

anal

ysis

of d

epre

ciat

ion

by fu

nctio

n

O

pera

ting

cost

s

$

27,3

60,9

11

$

28

,373

,597

O

pera

ting

expe

nses

65

7,83

5

1,

025,

038

$

28

,018

,746

$

29,3

98,6

35

A

n an

alys

is o

f am

ortiz

atio

n by

func

tion

Ope

ratin

g ex

pens

es

$

16

9,15

8

$

165,

981

f.

Empl

oyee

ben

efits

exp

ense

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

Po

st-e

mpl

oym

ent b

enef

its

Def

ined

con

tribu

tion

plan

s

$

347,

320

$

37

3,18

7 D

efin

ed b

enef

it pl

ans

1,23

9,18

0

1,

249,

749

$

1,

586,

500

$

1,

622,

936

(Con

tinue

d)

- 52

-

219

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

O

ther

em

ploy

ee b

enef

its

Sala

ry e

xpen

ses

$

12

,892

,488

$

14,4

75,1

15

Labo

r and

hea

lth in

sura

nce

1,14

9,06

5

1,

282,

461

Pers

onne

l ser

vice

exp

ense

s

3,

303,

051

4,58

9,29

9

$

17,3

44,6

04

$

20

,346

,875

An

anal

ysis

of e

mpl

oyee

ben

efits

exp

ense

by

func

tion

Ope

ratin

g co

sts

$

14

,918

,454

$

17,8

62,9

54

Ope

ratin

g ex

pens

es

4,01

2,65

0

4,

106,

857

$

18

,931

,104

$

21,9

69,8

11

(Con

clud

ed)

Acc

ordi

ng to

the

Com

pany

’s a

rticl

es, t

he C

ompa

ny a

ccru

es c

ompe

nsat

ion

of e

mpl

oyee

s at

rate

s of

no

less

than

3%

of

the

net p

rofit

bef

ore

inco

me

tax

and

com

pens

atio

n of

em

ploy

ees,

and

accr

ues

prof

it bo

nus a

t a c

erta

in ra

te o

f pro

fit b

efor

e ta

x on

the

basi

s of t

he c

olle

ctiv

e ag

reem

ent s

igne

d w

ith th

e C

hina

A

irlin

es E

mpl

oyee

s U

nion

. For

the

yea

rs e

nded

Dec

embe

r 31

, 202

0 an

d 20

19, t

he c

ompe

nsat

ion

of

empl

oyee

s was

not

est

imat

ed si

nce

it w

as a

loss

bef

ore

inco

me

tax.

M

ater

ial

diff

eren

ces

betw

een

such

est

imat

ed a

mou

nts

and

the

amou

nts

prop

osed

by

the

boar

d of

di

rect

ors

on o

r be

fore

the

date

the

annu

al f

inan

cial

sta

tem

ents

are

aut

horiz

ed f

or is

sue

are

adju

sted

in

the

year

that

the

bonu

s an

d re

mun

erat

ion

wer

e re

cogn

ized

. If t

here

is a

cha

nge

in th

e pr

opos

ed a

mou

nts

afte

r the

ann

ual f

inan

cial

sta

tem

ents

wer

e au

thor

ized

for i

ssue

, the

diff

eren

ces

are

reco

rded

as

a ch

ange

in

the

acco

untin

g es

timat

e.

Info

rmat

ion

on th

e co

mpe

nsat

ion

of e

mpl

oyee

s an

d re

mun

erat

ion

of d

irect

ors

and

supe

rvis

ors

reso

lved

by

the

Com

pany

’s b

oard

of d

irect

ors

is a

vaila

ble

at th

e M

arke

t Obs

erva

tion

Post

Sys

tem

web

site

of t

he

Taiw

an S

tock

Exc

hang

e.

27

. IN

CO

ME

TA

X

a.

In

com

e ta

x re

cogn

ized

in p

rofit

or l

oss

The

maj

or c

ompo

nent

s of t

ax e

xpen

se w

ere

as fo

llow

s:

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

C

urre

nt ta

x

C

urre

nt y

ear

$

15,

676

$

8,

836

Prio

r yea

r adj

ustm

ent

280

(6,6

58)

Def

erre

d ta

x

C

urre

nt y

ear

(67,

746)

(1

6,21

8)

Adj

ustm

ents

to d

efer

red

tax

attri

buta

ble

to c

hang

es in

tax

rate

s an

d la

ws

82,8

85

26,5

12

In

com

e ta

x ex

pens

e re

cogn

ized

in p

rofit

or l

oss

$

31,

095

$

12,

472

- 53

-

A re

conc

iliat

ion

of a

ccou

ntin

g pr

ofit

and

inco

me

tax

expe

nse

is a

s fol

low

s:

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

Pr

ofit

befo

re ta

x

$

171,

095

$

(1,

187,

326)

Inco

me

tax

expe

nse

calc

ulat

ed a

t the

stat

utor

y ra

te

$

34

,219

$

(237

,465

) A

dd (d

educ

t) ta

x ef

fect

s of:

Non

dedu

ctib

le e

xpen

ses i

n de

term

inin

g ta

xabl

e in

com

e

36

9,51

8

17

,900

Ta

x-ex

empt

inco

me

(334

,324

)

(3

47,3

38)

Ove

rsea

s inc

ome

tax

expe

nse

15,6

76

8,83

6 U

nrec

ogni

zed

loss

car

ryfo

rwar

ds a

nd in

vest

men

t tax

cre

dits

(137

,159

)

55

0,68

5 A

djus

tmen

ts fo

r prio

r yea

rs’ t

ax

280

(6,6

58)

Adj

ustm

ents

to d

efer

red

tax

attri

buta

ble

to c

hang

es in

tax

rate

s an

d la

ws

82,8

85

26,5

12

In

com

e ta

x ex

pens

e re

cogn

ized

in p

rofit

or l

oss

$

31

,095

$

12,4

72

b.

In

com

e ta

x re

cogn

ized

in o

ther

com

preh

ensi

ve in

com

e

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

D

efer

red

tax

R

ecog

nize

d in

oth

er c

ompr

ehen

sive

inco

me

Tran

slat

ion

of fo

reig

n op

erat

ions

$

20,2

29

$

11

,835

Fa

ir va

lue

reva

luat

ion

of h

edgi

ng in

stru

men

ts fo

r cas

h flo

w

hedg

es

(365

,036

)

(2

81,4

01)

Act

uaria

l gai

n or

loss

on

defin

ed b

enef

it pl

an

98,8

44

112,

452

Fair

valu

e ch

ange

s of f

inan

cial

ass

ets a

t FV

TOC

I

9,

685

(14,

854)

Tota

l inc

ome

tax

reco

gniz

ed in

oth

er c

ompr

ehen

sive

inco

me

$

(236

,278

)

$ (1

71,9

68)

c.

Def

erre

d ta

x as

sets

and

liab

ilitie

s Fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

020

Beg

inni

ng

Bal

ance

R

ecog

nize

d in

Pr

ofit

or L

oss

Rec

ogni

zed

in

Oth

er

Com

pre-

he

nsiv

e In

com

e

End

ing

Bal

ance

D

efer

red

tax

asse

ts

Tem

pora

ry d

iffer

ence

s

D

efin

ed b

enef

it pl

ans

$

1,5

27,2

11

$

30

,333

$

98,8

44

$

1,6

56,3

88

Freq

uent

flye

r pro

gram

s

59

0,69

4

(4

2,81

7)

-

547,

877

Mai

nten

ance

rese

rve

2,06

3,48

5

29

5,84

9

-

2,35

9,33

4 A

llow

ance

for r

educ

tion

of

inve

ntor

y

29

4,79

9

(4

1,59

0)

-

253,

209

Oth

ers

280,

953

(195

,593

)

79

,691

16

5,05

1

$

4,7

57,1

42

$

46

,182

$

178,

535

$

4,9

81,8

59

(Con

tinue

d)

- 54

-

220

Beg

inni

ng

Bal

ance

R

ecog

nize

d in

Pr

ofit

or L

oss

Rec

ogni

zed

in

Oth

er

Com

pre-

he

nsiv

e In

com

e

End

ing

Bal

ance

Def

erre

d ta

x lia

bilit

ies

Te

mpo

rary

diff

eren

ces

Unr

ealiz

ed fo

reig

n ex

chan

ge

gain

s

$

81

,778

$

61,3

22

$

-

$

14

3,10

0 O

ther

s (N

ote)

31

7,47

5

-

414,

813

732,

288

$

39

9,25

3

$

61,3

22

$

41

4,81

3

$

875,

388

(Con

clud

ed)

For t

he y

ear e

nded

Dec

embe

r 31,

201

9

B

egin

ning

B

alan

ce

Rec

ogni

zed

in

Prof

it or

Los

s R

ecog

nize

d in

O

ther

C

ompr

e-

hens

ive

Inco

me

E

ndin

g B

alan

ce

D

efer

red

tax

asse

ts

Tem

pora

ry d

iffer

ence

s

D

efin

ed b

enef

it pl

ans

$

1,3

96,0

33

$

18

,726

$

112,

452

$

1,5

27,2

11

Freq

uent

flye

r pro

gram

s

51

0,06

0

80

,634

-

590,

694

Mai

nten

ance

rese

rve

1,67

4,97

3

38

8,51

2

-

2,06

3,48

5 A

llow

ance

for r

educ

tion

of

inve

ntor

y

33

3,65

3

(3

8,85

4)

-

294,

799

Oth

ers

646,

627

(377

,534

)

11

,860

28

0,95

3

$ 4

,561

,346

$

71,4

84

$

12

4,31

2

$ 4

,757

,142

Def

erre

d ta

x lia

bilit

ies

Te

mpo

rary

diff

eren

ces

Unr

ealiz

ed fo

reig

n ex

chan

ge

gain

s

$

-

$

81

,778

$

-

$

81,7

78

Oth

ers (

Not

e)

21,1

95

-

29

6,28

0

31

7,47

5

$

21,1

95

$

81

,778

$

296,

280

$

39

9,25

3

- 55

-

Ded

uctib

le te

mpo

rary

diff

eren

ces,

unus

ed lo

ss c

arry

forw

ards

and

unu

sed

inve

stm

ent c

redi

ts fo

r w

hich

no

def

erre

d ta

x as

sets

hav

e be

en re

cogn

ized

in th

e ba

lanc

e sh

eets

are

as f

ollo

ws:

Dec

embe

r 31

20

20

20

19

Lo

ss c

arry

forw

ards

20

21

$

-

$

2,8

99,4

96

2022

-

619,

799

2026

-

202,

699

2028

49

5,77

9

1,

519,

941

2029

1,

439,

287

760,

157

$

1,9

35,0

66

$

6,0

02,0

92

O

ther

$ 4

,479

,141

$ 1

,097

,908

d.

Unu

sed

tax

loss

car

ryfo

rwar

ds a

s of D

ecem

ber 3

1, 2

020

wer

e as

follo

ws:

Exp

iry

Yea

r

Unu

sed

Am

ount

2028

$

49

5,77

9 20

29

1,

439,

287

$ 1

,935

,066

e.

Inco

me

tax

retu

rns

The

inco

me

tax

retu

rns o

f the

Com

pany

thro

ugh

2018

hav

e be

en e

xam

ined

by

the

tax

auth

oriti

es.

28.

EA

RN

ING

S PE

R S

HA

RE

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

B

asic

ear

ning

s per

shar

e

$

0.03

$

(0.2

2)

Dilu

ted

earn

ings

per

shar

e

$

0.03

$

(0.2

2)

F

or th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Earn

ings

use

d in

the

com

puta

tion

of b

asic

ear

ning

s per

shar

e

$

140,

000

$

(1,

199,

798)

Ef

fect

of p

oten

tially

dilu

tive

ordi

nary

shar

es:

Inte

rest

on

conv

ertib

le b

onds

(afte

r tax

)

-

-

Earn

ings

use

d in

the

com

puta

tion

of d

ilute

d ea

rnin

gs p

er sh

are

$

140,

000

$

(1,

199,

798)

- 56

-

221

F

or th

e Y

ear

End

ed D

ecem

ber

31

2020

2019

Wei

ghte

d av

erag

e nu

mbe

r of o

rdin

ary

shar

es in

com

puta

tion

of b

asic

ea

rnin

gs p

er sh

are

(in th

ousa

nds)

5,4

18,7

76

5

,418

,096

Ef

fect

of p

oten

tially

dilu

tive

ordi

nary

shar

es:

Con

verti

ble

bond

s (in

thou

sand

s)

-

-

W

eigh

ted

aver

age

num

ber o

f ord

inar

y sh

ares

use

d in

the

com

puta

tion

of d

ilute

d ea

rnin

gs p

er sh

are

(in th

ousa

nds)

5,4

18,7

76

5

,418

,096

If

the

Com

pany

off

ers t

o se

ttle

com

pens

atio

n or

bon

uses

pai

d to

em

ploy

ees

in c

ash

or s

hare

s, th

e C

ompa

ny

assu

mes

the

ent

ire a

mou

nt o

f th

e co

mpe

nsat

ion

or b

onus

es w

ould

be

settl

ed i

n sh

ares

, and

the

res

ultin

g po

tent

ial

shar

es w

ere

incl

uded

in

the

wei

ghte

d av

erag

e nu

mbe

r of

sha

res

outs

tand

ing

used

in

the

com

puta

tion

of d

ilute

d ea

rnin

gs p

er s

hare

, if

the

effe

ct i

s di

lutiv

e. S

uch

dilu

tive

effe

ct o

f th

e po

tent

ial

shar

es w

as i

nclu

ded

in t

he c

ompu

tatio

n of

dilu

ted

earn

ings

per

sha

re u

ntil

the

num

ber

of s

hare

s to

be

dist

ribut

ed to

em

ploy

ees i

s res

olve

d in

the

follo

win

g ye

ar.

29

. C

API

TA

L M

AN

AG

EM

EN

T

The

Com

pany

man

ages

its

capi

tal t

o en

sure

that

ent

ities

in th

e C

ompa

ny w

ill b

e ab

le to

con

tinue

as

goin

g co

ncer

ns w

hile

max

imiz

ing

the

retu

rn t

o st

akeh

olde

rs t

hrou

gh t

he o

ptim

izat

ion

of t

he d

ebt

and

equi

ty

bala

nce.

The

cap

ital

stru

ctur

e of

the

Com

pany

con

sist

s of

net

deb

t (b

orro

win

gs o

ffse

t by

cas

h an

d ca

sh

equi

vale

nts)

and

equ

ity o

f the

Com

pany

com

pris

ing

issu

ed c

apita

l, re

serv

es, r

etai

ned

earn

ings

, oth

er e

quity

an

d no

n-co

ntro

lling

inte

rests

. To

sup

port

its o

pera

ting

activ

ities

and

pur

chas

e of

airc

raft,

the

Com

pany

nee

ds t

o m

aint

ain

suff

icie

nt

capi

tal.

Ther

efor

e, th

e go

al o

f cap

ital m

anag

emen

t is t

o en

sure

fina

ncia

l res

ourc

es a

nd o

pera

ting

plan

is a

ble

to su

ppor

t the

futu

re w

orki

ng c

apita

l, ca

pita

l exp

endi

ture

s, de

bt re

paym

ent a

nd d

ivid

end

expe

nses

and

oth

er

need

s.

30.

FIN

AN

CIA

L IN

STR

UM

EN

TS

a.

Fa

ir va

lues

of f

inan

cial

instr

umen

ts n

ot m

easu

red

at fa

ir va

lue

D

ecem

ber

31

2020

2019

Car

ryin

g A

mou

nt

Fa

ir V

alue

Car

ryin

g A

mou

nt

Fa

ir V

alue

Fina

ncia

l lia

bilit

ies

B

onds

pay

able

$ 22

,432

,859

$

22

,609

,683

$

32

,352

,625

$

32

,363

,301

Som

e lo

ng-te

rm b

orro

win

gs a

re fl

oatin

g-ra

te fi

nanc

ial l

iabi

litie

s, so

thei

r car

ryin

g am

ount

s are

thei

r fai

r va

lues

. The

fair

valu

es o

f bon

ds p

ayab

le a

re b

ased

on

thos

e w

hich

are

trad

ed in

the

stoc

k ex

chan

ge a

nd

base

d on

quo

ted

mar

ket p

rices

(Lev

el 1

).

- 57

-

b.

Fair

valu

e of

fina

ncia

l ins

trum

ents

mea

sure

d at

fair

valu

e on

a re

curr

ing

basi

s Th

e fo

llow

ing

tabl

e pr

ovid

es a

n an

alys

is o

f fin

anci

al in

stru

men

ts th

at a

re m

easu

red

subs

eque

nt to

initi

al

reco

gniti

on a

t fa

ir va

lue,

gro

uped

int

o Le

vels

1 t

o 3

base

d on

the

deg

ree

to w

hich

the

fai

r va

lue

is

obse

rvab

le:

1)

Leve

l 1

fair

valu

e m

easu

rem

ents

are

tho

se d

eriv

ed f

rom

quo

ted

pric

es (

unad

just

ed)

in a

ctiv

e m

arke

ts fo

r ide

ntic

al a

sset

s or l

iabi

litie

s; 2)

Le

vel 2

fai

r va

lue

mea

sure

men

ts a

re th

ose

deriv

ed f

rom

inpu

ts o

ther

than

quo

ted

pric

es in

clud

ed

with

in L

evel

1 t

hat

are

obse

rvab

le f

or t

he a

sset

or

liabi

lity,

eith

er d

irect

ly (

i.e.

as p

rices

) or

in

dire

ctly

(i.e

. der

ived

from

pric

es);

and

3)

Leve

l 3 fa

ir va

lue

mea

sure

men

ts a

re th

ose

deriv

ed fr

om v

alua

tion

tech

niqu

es th

at in

clud

e in

puts

for

the

asse

t or l

iabi

lity

that

are

not

bas

ed o

n ob

serv

able

mar

ket d

ata

(uno

bser

vabl

e in

puts

). D

ecem

ber 3

1, 2

020

Lev

el 1

Lev

el 2

Lev

el 3

Tot

al

Fi

nanc

ial a

sset

s at F

VTO

CI

Inve

stm

ents

in e

quity

inst

rum

ents

U

nlis

ted

shar

es -

dom

estic

$

-

$

-

$

29,7

04

$

29

,704

U

nlis

ted

shar

es -

fore

ign

-

-

117,

457

117,

457

$

-

$

-

$

14

7,16

1

$

147,

161

Fi

nanc

ial a

sset

s for

hed

ging

$

7,61

3,63

6

$

-

$

-

$

7,61

3,63

6

Fina

ncia

l lia

bilit

ies f

or h

edgi

ng

$

40,

575,

778

$

5,

794

$

-

$

40,

581,

572

Dec

embe

r 31,

201

9

L

evel

1

L

evel

2

L

evel

3

T

otal

Fina

ncia

l ass

ets a

t FV

TPL

Der

ivat

ive

inst

rum

ents

$

-

$

434

$

-

$

43

4

Fina

ncia

l ass

ets a

t FV

TOC

I

In

vest

men

ts in

equ

ity in

stru

men

ts

Unl

iste

d sh

ares

- do

mes

tic

$

-

$

-

$

26

,865

$

26,8

65

Unl

iste

d sh

ares

- fo

reig

n

-

-

80

,991

80

,991

$

-

$

-

$

107,

856

$

10

7,85

6

Fina

ncia

l lia

bilit

ies a

t FV

TPL

Der

ivat

ive

inst

rum

ents

$

-

$

11,7

49

$

-

$

11

,749

Fina

ncia

l ass

ets f

or h

edgi

ng

$

-

$

10

9

$

9,47

9

$

9,58

8

Fina

ncia

l lia

bilit

ies f

or h

edgi

ng

$

50,

997,

687

$

28

,578

$

3,95

5

$ 5

1,03

0,22

0 Th

ere

wer

e no

tran

sfer

s bet

wee

n Le

vel 2

and

3 in

the

curr

ent a

nd p

rior p

erio

ds.

- 58

-

222

4)

Val

uatio

n te

chni

ques

and

inpu

ts a

pplie

d fo

r Lev

el 2

fair

valu

e m

easu

rem

ent

Fina

ncia

l Ins

trum

ents

Val

uatio

n T

echn

ique

s and

Inpu

ts

D

eriv

ativ

e in

stru

men

ts

Th

e fa

ir va

lues

of d

eriv

ativ

es (e

xcep

t opt

ions

) hav

e be

en

dete

rmin

ed b

ased

on

disc

ount

ed c

ash

flow

ana

lyse

s usin

g in

tere

st y

ield

cur

ves a

pplic

able

for t

he d

urat

ion

of th

e de

rivat

ives

. The

est

imat

es a

nd a

ssum

ptio

ns th

at th

e C

ompa

ny

used

to d

eter

min

e th

e fa

ir va

lues

are

iden

tical

to th

ose

used

in

the

pric

ing

of fi

nanc

ial i

nstru

men

ts fo

r mar

ket p

artic

ipan

ts.

5)

Val

uatio

n te

chni

ques

and

inpu

ts a

pplie

d fo

r Lev

el 3

fair

valu

e m

easu

rem

ent

Th

e fa

ir va

lues

of

curr

ency

opt

ions

and

fue

l op

tions

are

det

erm

ined

usi

ng o

ptio

n pr

icin

g m

odel

s w

here

the

sig

nific

ant

unob

serv

able

inp

uts

are

impl

ied

fluct

uatio

n. A

n in

crea

se i

n th

e im

plie

d flu

ctua

tion

used

in is

olat

ion

wou

ld re

sult

in a

dec

reas

e in

the

fair

valu

e of

cur

renc

y op

tions

and

fuel

op

tions

. Th

e do

mes

tic u

nlis

ted

equi

ty in

vest

men

t is b

ased

on

the

com

para

tive

com

pany

val

uatio

n to

esti

mat

e th

e fa

ir va

lue.

The

mai

n as

sum

ptio

ns a

re b

ased

on

the

mul

tiplie

r of

the

mar

ket

pric

e of

the

co

mpa

rabl

e lis

ted

com

pany

and

the

net

val

ue p

er s

hare

, w

hich

hav

e co

nsid

ered

the

liq

uidi

ty

disc

ount

. The

hig

her

the

mul

tiplie

r or

the

low

er th

e liq

uidi

ty d

isco

unt,

the

high

er th

e fa

ir va

lue

of

the

rele

vant

fina

ncia

l ins

trum

ents

. Th

e m

ovem

ents

of L

evel

3 fi

nanc

ial i

nstru

men

ts a

re a

s fol

low

s:

M

ultip

licat

or

L

iqui

dity

D

isco

unt

D

ecem

ber 3

1, 2

020

0.

79-1

6.32

80%

D

ecem

ber 3

1, 2

019

0.

75-1

3.23

80%

Der

ivat

ive

Inst

rum

ents

Equ

ity

Inst

rum

ents

Bal

ance

at J

anua

ry 1

, 202

0

$

5,52

4

$ 1

07,8

56

Oth

er c

ompr

ehen

sive

inco

me

reco

gniz

ed d

urin

g th

e pe

riod

(5,5

24)

39,3

05

B

alan

ce a

t Dec

embe

r 31,

202

0

$

-

$ 1

47,1

61

Der

ivat

ive

Inst

rum

ents

Equ

ity

Inst

rum

ents

Bal

ance

at J

anua

ry 1

, 201

9

$

4,90

1

$

83,3

66

Rec

ogni

zed

in o

ther

com

preh

ensi

ve in

com

e

62

3

24

,490

Bal

ance

at D

ecem

ber 3

1, 2

019

$

5,

524

$

107

,856

B

ecau

se s

ome

finan

cial

ins

trum

ents

and

non

finan

cial

ins

trum

ents

may

not

hav

e th

eir

fair

valu

es

disc

lose

d, t

he t

otal

fai

r va

lue

disc

lose

d he

rein

is

not t

he t

otal

val

ue o

f th

e C

ompa

ny’s

col

lect

ive

inst

rum

ents

.

- 59

-

c.

Cat

egor

ies o

f fin

anci

al in

stru

men

ts

D

ecem

ber

31

2020

2019

Fina

ncia

l ass

ets

Fi

nanc

ial a

sset

s at F

VTP

L

$

-

$

434

Fina

ncia

l ass

ets f

or h

edgi

ng

7,61

3,63

6

9,

588

Fina

ncia

l ass

ets a

t am

ortiz

ed c

ost (

Not

e 1)

36

,153

,687

31

,214

,918

Fi

nanc

ial a

sset

s at F

VTO

CI -

equ

ity in

stru

men

t inv

estm

ent

147,

161

107,

856

Fi

nanc

ial l

iabi

litie

s

Fina

ncia

l lia

bilit

ies a

t FV

TPL

-

11

,749

Fi

nanc

ial l

iabi

litie

s for

hed

ging

40

,581

,572

51

,030

,220

Fi

nanc

ial l

iabi

litie

s at a

mor

tized

cos

t (N

ote

2)

148,

012,

657

129,

800,

759

Not

e 1:

Th

e ba

lanc

es in

clud

e fin

anci

al a

sset

s m

easu

red

at a

mor

tized

cos

t, w

hich

com

pris

e ca

sh a

nd

cash

equ

ival

ents

, tim

e de

posi

ts w

ith o

rigin

al m

atur

ities

of

mor

e th

an 3

mon

ths,

note

s an

d ac

coun

ts r

ecei

vabl

e, a

ccou

nts

rece

ivab

le -

rel

ated

par

ties,

othe

r re

ceiv

able

s, re

fund

able

de

posi

ts a

nd o

ther

rest

ricte

d fin

anci

al a

sset

s. N

ote

2:

The

bala

nce

of f

inan

cial

lia

bilit

ies

mea

sure

d at

am

ortiz

ed c

ost

com

pris

ed s

hort-

term

not

es

paya

ble,

not

es a

nd a

ccou

nts

paya

ble,

acc

ount

s pa

yabl

e - r

elat

ed p

artie

s, ot

her p

ayab

les,

bond

s pa

yabl

e an

d lo

ng-te

rm lo

ans,

leas

e lia

bilit

ies,

prov

isio

ns, p

arts

of o

ther

cur

rent

liab

ilitie

s, pa

rts

of o

ther

non

curr

ent l

iabi

litie

s and

gua

rant

ee d

epos

its.

d.

Fi

nanc

ial r

isk

man

agem

ent o

bjec

tives

and

pol

icie

s Th

e C

ompa

ny h

as r

isk

man

agem

ent

and

hedg

ing

stra

tegi

es t

o re

spon

d to

cha

nges

in

the

econ

omic

, fin

anci

al e

nviro

nmen

t and

in th

e fu

el m

arke

t. To

redu

ce th

e fin

anci

al ri

sks f

rom

cha

nges

in in

tere

st ra

tes,

in e

xcha

nge

rate

s an

d fu

el p

rices

, the

Com

pany

has

its

oper

atin

g co

sts

stay

with

in a

spe

cifie

d ra

nge

by

usin

g ap

prop

riate

fin

anci

al h

edgi

ng i

nstru

men

ts a

nd h

edgi

ng p

erce

ntag

es i

n ac

cord

ance

with

the

“P

roce

ssin

g Pr

ogra

m

of

Der

ivat

ive

Fina

ncia

l In

stru

men

t Tr

ansa

ctio

ns”

appr

oved

by

C

ompa

ny

shar

ehol

ders

to

redu

ce t

he i

mpa

ct o

f m

arke

t pr

ice

on e

arni

ngs.

Thes

e ris

ks i

nclu

de m

arke

t ris

k (in

clud

ing

fore

ign

curr

ency

risk

, int

eres

t rat

e ris

k an

d ot

her p

rice

risk)

, cre

dit r

isk

and

liqui

dity

risk

. In

add

ition

, the

Com

pany

has

a ri

sk m

anag

emen

t com

mitt

ee, w

hich

mee

ts p

erio

dica

lly to

eva

luat

e th

e pe

rfor

man

ce o

f de

rivat

ive

inst

rum

ents

and

det

erm

ine

the

appr

opria

te h

edgi

ng p

ortio

n. T

his

com

mitt

ee

info

rms

the

Com

pany

of

glob

al e

cono

mic

and

fin

anci

al c

ondi

tions

, co

ntro

ls t

he C

ompa

ny’s

ent

ire

finan

cial

ris

k re

sulti

ng f

rom

cha

nges

in

the

finan

cial

env

ironm

ent

and

fuel

pric

es, a

nd d

evel

ops

the

stra

tegy

and

res

pons

e to

avo

id f

inan

cial

ris

k w

ith th

e as

sist

ance

of

finan

cial

risk

exp

erts

to e

ffec

t ris

k m

anag

emen

t. 1)

M

arke

t ris

k Th

e C

ompa

ny is

prim

arily

exp

osed

to th

e fin

anci

al r

isks

of

chan

ges

in f

orei

gn c

urre

ncy

exch

ange

ra

tes

and

inte

rest

rat

es. T

he C

ompa

ny e

nter

ed in

to d

eriv

ativ

e fin

anci

al in

stru

men

ts to

man

age

its

expo

sure

to fo

reig

n cu

rren

cy ri

sk a

nd in

tere

st ra

te ri

sk.

The

Com

pany

ent

ers

into

for

war

d co

ntra

cts,

fore

ign

curr

ency

opt

ion

cont

ract

s, an

d in

tere

st s

wap

co

ntra

cts w

ith fa

ir va

lues

that

are

hig

hly

nega

tivel

y co

rrel

ated

to th

e fa

ir va

lues

of h

edge

d ite

ms a

nd

eval

uate

s the

hed

ging

eff

ectiv

enes

s of t

hese

inst

rum

ents

per

iodi

cally

.

- 60

-

223

a)

Fore

ign

curr

ency

risk

Th

e C

ompa

ny e

nter

s in

to c

urre

ncy

optio

n to

hed

ge a

gain

st t

he r

isks

of

chan

ges

in r

elat

ed

exch

ange

rate

s, an

d en

ters

into

fore

ign

exch

ange

forw

ard

cont

ract

s to

hed

ge a

gain

st th

e ris

ks o

f ch

ange

s in

the

rela

ted

exch

ange

rate

s of f

orei

gn-c

urre

ncy

asse

ts, l

iabi

litie

s and

com

mitm

ents

. Se

nsiti

vity

ana

lysi

s Th

e C

ompa

ny is

mai

nly

expo

sed

to th

e U

.S. d

olla

r. Th

e fo

llow

ing

deta

ils t

he C

ompa

ny’s

sen

sitiv

ity t

o a

one

dolla

r in

crea

se a

nd d

ecre

ase

in t

he

New

Tai

wan

dol

lar

(the

func

tiona

l cu

rren

cy)

agai

nst

the

U.S

. dol

lar.

The

sens

itivi

ty a

mou

nt

used

whe

n re

porti

ng f

orei

gn c

urre

ncy

risk

inte

rnal

ly to

key

man

agem

ent p

erso

nnel

and

whi

ch

repr

esen

ts m

anag

emen

t’s a

sses

smen

t of

the

rea

sona

bly

poss

ible

cha

nge

in f

orei

gn e

xcha

nge

rate

s is

one

dol

lar.

The

sens

itivi

ty a

naly

sis

incl

uded

onl

y ou

tsta

ndin

g fo

reig

n cu

rren

cy

deno

min

ated

mon

etar

y ite

ms

and

fore

ign

exch

ange

for

war

d co

ntra

cts

desi

gnat

ed a

s ca

sh f

low

he

dges

and

adj

usts

thei

r tra

nsla

tion

at th

e en

d of

the

repo

rting

per

iod

for t

he N

ew T

aiw

an d

olla

r st

reng

then

ing

or w

eake

ning

one

dol

lar a

gain

st th

e U

.S. d

olla

r. W

hen

New

Tai

wan

dol

lars

incr

ease

one

dol

lar a

gain

st U

.S. d

olla

rs a

nd a

ll ot

her v

aria

bles

wer

e he

ld c

onst

ant,

ther

e w

ould

be

an i

ncre

ase

in p

re-ta

x pr

ofit

of $

126,

947

thou

sand

and

oth

er

com

preh

ensi

ve i

ncom

e of

$1,

155,

267

thou

sand

for

the

yea

r en

ded

Dec

embe

r 31

, 20

20.

A

decr

ease

in

pre-

tax

prof

it of

$40

,775

tho

usan

d an

d in

crea

se i

n pr

e-ta

x ot

her

com

preh

ensi

ve

inco

me

of $

1,62

9,22

3 th

ousa

nd fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

019.

Th

e C

ompa

ny’s

hed

ging

stra

tegy

is to

ent

er in

to f

orei

gn e

xcha

nge

forw

ard

cont

ract

s to

avo

id

exch

ange

rat

e ex

posu

re o

f its

for

eign

cur

renc

y de

nom

inat

ed r

ecei

pts

and

paym

ents

and

to

man

age

exch

ange

rate

exp

osur

e of

its

airc

raft

prep

aym

ents

in th

e ne

xt y

ear.

Thos

e tra

nsac

tions

ar

e de

sign

ated

as

cash

flo

w h

edge

s. W

hen

fore

cast

ed p

urch

ases

act

ually

tak

e pl

ace,

bas

is

adju

stm

ents

are

mad

e to

the

initi

al c

arry

ing

amou

nts o

f hed

ged

item

s. Fo

r th

e he

dges

of

high

ly p

roba

ble

airc

raft

prep

aym

ents

, as

the

criti

cal t

erm

s (i.

e. th

e no

tiona

l am

ount

, use

ful l

ife a

nd u

nder

lyin

g as

set)

of th

e fo

reig

n ex

chan

ge f

orw

ard

cont

ract

s an

d th

eir

corr

espo

ndin

g he

dged

item

s ar

e th

e sa

me,

the

Com

pany

per

form

s a

qual

itativ

e as

sess

men

t of

the

effe

ctiv

enes

s, an

d it

is e

xpec

ted

that

the

valu

e of

the

fore

ign

exch

ange

forw

ard

cont

ract

s and

th

e va

lue

of th

e co

rres

pond

ing

hedg

ed it

ems w

ill sy

stem

atic

ally

cha

nge

in th

e op

posi

te d

irect

ion

in re

spon

se to

mov

emen

ts in

the

unde

rlyin

g ex

chan

ge ra

tes.

The

follo

win

g ta

ble

sum

mar

izes

the

info

rmat

ion

rela

ting

to th

e he

dgin

g of

fore

ign

curr

ency

risk

. Fo

r the

info

rmat

ion

rela

ted

to le

ase

cont

ract

as h

edgi

ng in

stru

men

ts, p

leas

e re

fer t

o N

ote

20.

D

ecem

ber 3

1, 2

020

N

otio

nal

Line

Item

in

C

arry

ing

Am

ount

H

edgi

ng In

stru

men

ts

C

urre

ncy

A

mou

nt

M

atur

ity

Fo

rwar

d R

ate

B

alan

ce S

heet

Ass

et

Li

abili

ty

Ca

sh fl

ow h

edge

A

viat

ion

fuel

- fo

rwar

d ex

chan

ge c

ontra

cts

N

TD/U

SD

N

TD 1

42,0

45/

USD

5,0

00

20

21.1

.29-

20

21.5

.28

29

.4-2

9.8

Fi

nanc

ial a

sset

s for

he

dgin

g - c

urre

nt/

liabi

litie

s for

hed

ging

- cu

rren

t

$

-

$

5,

794

The

abov

emen

tione

d he

dgin

g in

stru

men

ts a

pplie

d he

dge

acco

untin

g. T

he b

ook

valu

e of

oth

er

equi

ty fo

r eac

h he

dgin

g ite

m (a

viat

ion

fuel

) was

$(5

,794

) tho

usan

d.

- 61

-

For t

he y

ear e

nded

Dec

embe

r 31,

202

0 C

ompr

ehen

sive

Inco

me

Hed

ging

Gai

n R

ecog

nize

d in

O

ther

C

ompr

ehen

sive

In

com

e

Am

ount

R

ecla

ssifi

ed to

Pr

ofit

and

Los

s an

d th

e A

djus

ted

Lin

e It

em

C

ash

flow

hed

ge

Avi

atio

n fu

el

$

4,

367

$

(1

6,61

6)

Airc

raft

prep

aym

ents

(101

,570

)

-

Mai

nten

ance

cos

t

-

5

$

(97,

203)

$

(16,

611)

Fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 20

20,

the

amou

nt o

f he

dgin

g in

stru

men

ts r

ecla

ssifi

ed t

o pr

epay

men

ts fo

r equ

ipm

ent w

as $

119,

878

thou

sand

. D

ecem

ber 3

1, 2

019

N

otio

nal

Line

Item

in

C

arry

ing

Am

ount

H

edgi

ng In

stru

men

ts

C

urre

ncy

A

mou

nt

M

atur

ity

Fo

rwar

d R

ate

B

alan

ce S

heet

Ass

et

Li

abili

ty

Ca

sh fl

ow h

edge

A

viat

ion

fuel

- fo

rwar

d ex

chan

ge c

ontra

cts

N

TD/U

SD

N

TD66

0,66

1/

USD

22,0

00

20

20.2

.27-

20

20.1

1.30

29.7

-30.

7

Fina

ncia

l ass

ets f

or

hedg

ing

- cur

rent

/ lia

bilit

ies f

or h

edgi

ng -

curr

ent

$

32

$ 1

0,19

3

Airc

raft

rent

als -

fo

rwar

d ex

chan

ge

cont

ract

s

N

TD/U

SD

N

TD1,

411,

411/

U

SD47

,000

2020

.11.

4

29.6

-30.

5

Fina

ncia

l ass

ets f

or

hedg

ing

- cur

rent

/ lia

bilit

ies f

or h

edgi

ng -

curr

ent

77

18,3

85

The

abov

emen

tione

d he

dgin

g in

stru

men

ts a

pplie

d he

dge

acco

untin

g. T

he b

ook

valu

e of

oth

er

equi

ty f

or e

ach

hedg

ing

item

(av

iatio

n fu

el a

nd a

ircra

ft re

ntal

s in

U.S

. dol

lars

) w

as $

(10,

161)

th

ousa

nd a

nd $

(18,

308)

thou

sand

, res

pect

ivel

y.

For t

he y

ear e

nded

Dec

embe

r 31,

201

9 C

ompr

ehen

sive

Inco

me

Hed

ging

Gai

n R

ecog

nize

d in

O

ther

C

ompr

ehen

sive

In

com

e

Am

ount

R

ecla

ssifi

ed to

Pr

ofit

and

Los

s an

d th

e A

djus

ted

Lin

e It

em

C

ash

flow

hed

ge

A

ircra

ft re

ntal

s

$ (2

2,21

4)

$

28,

374

(N

ote)

A

viat

ion

fuel

(1

0,16

1)

(53)

Airc

raft

prep

aym

ents

(17,

705)

-

$

(50,

080)

$ 2

8,32

1

Not

e:

Dec

reas

e in

ope

ratin

g co

sts o

r for

eign

exc

hang

e lo

ss.

For

the

year

end

ed D

ecem

ber

31,

2019

, th

e am

ount

of

hedg

ing

inst

rum

ents

rec

lass

ified

to

prep

aym

ents

for e

quip

men

t was

$(6

03) t

hous

and.

- 62

-

224

b)

Inte

rest

rate

risk

Th

e C

ompa

ny e

nter

s in

to in

tere

st s

wap

con

tract

s to

hed

ge a

gain

st t

he r

isks

on

chan

ge i

n ne

t lia

bilit

ies i

nter

est r

ates

.

The

risk

is m

anag

ed b

y th

e C

ompa

ny t

hrou

gh m

aint

aini

ng a

n ap

prop

riate

mix

of

fixed

and

flo

atin

g ra

te b

orro

win

gs,

and

usin

g in

tere

st r

ate

swap

con

tract

s an

d fo

rwar

d in

tere

st r

ate

cont

ract

s. Th

e ca

rryi

ng a

mou

nt o

f the

Com

pany

’s fi

nanc

ial l

iabi

litie

s w

ith e

xpos

ure

to in

tere

st ra

tes

at th

e en

d of

the

repo

rting

per

iod

wer

e as

follo

ws.

Dec

embe

r 31

20

20

20

19

Fa

ir va

lue

inte

rest

rate

risk

$

63,0

08,6

37

$

83

,350

,312

C

ash

flow

inte

rest

rate

risk

10

2,60

1,08

7

73

,930

,965

Se

nsiti

vity

ana

lysi

s Th

e se

nsiti

vity

ana

lyse

s be

low

wer

e de

term

ined

bas

ed o

n th

e Co

mpa

ny’s

exp

osur

e to

inte

rest

rate

s fo

r bot

h de

rivat

ives

and

non

-der

ivat

ive

inst

rum

ents

at t

he e

nd o

f the

repo

rting

per

iod.

For

flo

atin

g ra

te l

iabi

litie

s, th

e an

alys

is w

as p

repa

red

assu

min

g th

e am

ount

of

the

liabi

lity

outs

tand

ing

at th

e en

d of

the

repo

rting

per

iod

was

out

stan

ding

for t

he w

hole

yea

r. O

ne y

ard

(25

basi

s) i

ncre

ase

or d

ecre

ase

was

use

d w

hen

repo

rting

int

eres

t ra

te r

isk

inte

rnal

ly t

o ke

y m

anag

emen

t pe

rson

nel

and

repr

esen

ts m

anag

emen

t’s a

sses

smen

t of

the

rea

sona

bly

poss

ible

ch

ange

in in

tere

st ra

tes.

H

ad in

tere

st r

ates

incr

ease

d by

one

yar

d (2

5 ba

sis)

and

all

othe

r va

riabl

es b

een

held

con

stan

t, th

e C

ompa

ny’s

pre

-tax

prof

it fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 202

0 w

ould

hav

e de

crea

sed

by

$256

,503

thou

sand

. H

ad in

tere

st r

ates

incr

ease

d by

one

yar

d (2

5 ba

sis)

and

all

othe

r va

riabl

es b

een

held

con

stan

t, th

e C

ompa

ny’s

pre

-tax

prof

it fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 201

9 w

ould

hav

e de

crea

sed

by

$184

,827

thou

sand

.

c)

Oth

er p

rice

risk

Th

e C

ompa

ny w

as e

xpos

ed t

o fu

el p

rice

risk

on i

ts p

urch

ase

of a

viat

ion

fuel

. The

Com

pany

en

ters

into

fuel

swap

con

tract

s to

hedg

e ag

ains

t adv

erse

risk

s on

fuel

pric

e ch

ange

s.

Dec

embe

r 31,

202

0

Not

iona

l

Li

ne It

em in

Car

ryin

g A

mou

nt

Hed

ging

Inst

rum

ent

C

urre

ncy

A

mou

nt

M

atur

ity

Fo

rwar

d R

ate

B

alan

ce S

heet

Ass

et

Li

abili

ty

Ca

sh fl

ow h

edge

s - fu

el

optio

ns

U

SD

-

-

-

Fi

nanc

ial a

sset

s for

he

dgin

g - c

urre

nt/

liabi

litie

s for

hed

ging

- cu

rren

t

$

-

$

-

The

abov

emen

tione

d he

dgin

g in

stru

men

ts a

pplie

d he

dge

acco

untin

g. T

he b

ook

valu

e of

oth

er

equi

ty fo

r eac

h he

dgin

g ite

m (f

uel p

aym

ents

) was

$0.

- 63

-

For t

he y

ear e

nded

Dec

embe

r 31,

202

0 C

ompr

ehen

sive

Inco

me

Hed

ging

Gai

n (L

oss)

R

ecog

nize

d in

O

ther

C

ompr

ehen

sive

In

com

e

Am

ount

R

ecla

ssifi

ed to

Pr

ofit

and

Los

s an

d th

e A

djus

ted

Lin

e It

em

C

ash

flow

hed

ges -

fuel

opt

ions

$

(5,5

24)

$

(52,

853)

(N

ote)

N

ote:

In

crea

se in

ope

ratin

g co

sts.

Dec

embe

r 31,

201

9

Not

iona

l

Li

ne It

em in

Car

ryin

g A

mou

nt

Hed

ging

Inst

rum

ent

C

urre

ncy

A

mou

nt

M

atur

ity

Fo

rwar

d R

ate

B

alan

ce S

heet

Ass

et

Li

abili

ty

Ca

sh fl

ow h

edge

s - fu

el

optio

ns

U

SD

N

TD5,

524

20

20.3

.31-

20

20.1

2.31

USD

49.6

5-

USD

80.7

5

Fina

ncia

l ass

ets f

or

hedg

ing

- cur

rent

/ lia

bilit

ies f

or h

edgi

ng -

curr

ent

$

9,47

9

$

3,

955

The

abov

emen

tione

d he

dgin

g in

stru

men

ts a

pplie

d he

dge

acco

untin

g. T

he b

ook

valu

e of

oth

er

equi

ty fo

r eac

h he

dgin

g ite

m (f

uel p

aym

ents

) was

$5,

524

thou

sand

. Fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

019

Com

preh

ensi

ve In

com

e

Hed

ging

Gai

n (L

oss)

R

ecog

nize

d in

O

ther

C

ompr

ehen

sive

In

com

e

Am

ount

R

ecla

ssifi

ed to

Pr

ofit

and

Los

s an

d th

e A

djus

ted

Lin

e It

em

C

ash

flow

hed

ges -

fuel

opt

ions

$

623

$

(13,

597)

(N

ote)

N

ote:

In

crea

se in

ope

ratin

g co

sts.

Sens

itivi

ty a

naly

sis

The

sens

itivi

ty a

naly

sis

belo

w w

as d

eter

min

ed b

ased

on

the

expo

sure

to f

uel p

rice

risks

at t

he

end

of th

e re

porti

ng p

erio

d.

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

Pr

e-ta

x Pr

ofit

Incr

ease

(D

ecre

ase)

Oth

er

Com

pre-

he

nsiv

e In

com

e In

crea

se

(Dec

reas

e)

Pre-

tax

Prof

it In

crea

se

(Dec

reas

e)

Oth

er

Com

pre-

he

nsiv

e In

com

e In

crea

se

(Dec

reas

e)

Fu

el p

rice

incr

ease

of

5%

$

1,

479

$

-

$

-

$

7,

973

Fuel

pric

e de

crea

se o

f 5%

(1

,479

)

-

-

-

- 64

-

225

2)

Cre

dit r

isk

C

redi

t ris

k re

fers

to th

e ris

k th

at a

cou

nter

party

will

def

ault

on it

s co

ntra

ctua

l obl

igat

ions

resu

lting

in

fin

anci

al l

oss

to t

he C

ompa

ny.

The

Com

pany

’s c

redi

t ris

k, p

rimar

ily c

omes

fro

m a

ccou

nts

rece

ivab

le g

ener

ated

fro

m o

pera

ting

activ

ities

, ban

k de

posi

ts g

ener

ated

fro

m i

nves

ting

activ

ities

, fix

ed in

vest

men

t inc

ome

and

othe

r fin

anci

al in

stru

men

ts. O

pera

tion

rela

ted

cred

it ris

k an

d fin

anci

al

cred

it ris

k ar

e m

anag

ed se

para

tely

.

Ope

ratio

n - r

elat

ed c

redi

t ris

k Th

e C

ompa

ny h

as e

stab

lishe

d pr

oced

ures

to m

anag

emen

t ope

ratio

ns re

late

d cr

edit

risk

to m

aint

ain

the

qual

ity o

f acc

ount

s rec

eiva

ble.

To

ass

ess i

ndiv

idua

l cus

tom

ers,

the

Com

pany

con

side

r int

o th

e fin

anci

al c

ondi

tion

of th

e cu

stom

ers,

the

cred

it ra

ting

agen

cy ra

ting,

the

Com

pany

’s in

tern

al c

redi

t rat

ing,

tran

sact

ion

hist

ory

and

curr

ent

econ

omic

con

ditio

ns a

nd m

any

othe

r fa

ctor

s th

at m

ay a

ffec

t th

e re

paym

ent.

Som

etim

es,

the

Com

pany

use

s cer

tain

cre

dit e

nhan

cem

ent t

ools

to re

duce

the

cred

it ris

k of

spec

ific

cust

omer

s. Si

nce

the

cust

omer

s of

the

indu

stry

is d

ispe

rsed

and

non

-rela

ted,

the

cred

it ris

k co

ncen

tratio

n is

not

cr

itica

l avi

atio

n.

Fina

ncia

l cre

dit r

isk

Cre

dit r

isk

on b

ank

depo

sits

, inv

estm

ents

inco

me

and

othe

r fin

anci

al in

stru

men

ts a

re m

easu

red

and

mon

itor

by th

e C

ompa

ny’s

fin

ance

dep

artm

ent.

The

Com

pany

’s tr

adin

g pa

rtner

s an

d ot

her

parti

es

wer

e w

ell-p

erfo

rmin

g ba

nks

and

finan

cial

inst

itutio

ns, c

orpo

ratio

ns, a

nd g

over

nmen

t age

ncie

s, an

d so

the

ris

k of

cou

nter

parti

es f

ailin

g to

dis

char

ge a

n ob

ligat

ion

is l

ow;

ther

efor

e, t

here

is

no

sign

ifica

nt c

redi

t ris

k.

Endo

rsem

ents

giv

en b

y th

e C

ompa

ny o

n be

half

of it

s sub

sidi

arie

s can

be

foun

d in

Not

es 3

1(g)

.

3)

Liqu

idity

risk

Th

e ob

ject

ive

of th

e C

ompa

ny’s

man

agem

ent o

f liq

uidi

ty is

to m

aint

ain

cash

and

cas

h eq

uiva

lent

s su

ffic

ient

for

ope

ratin

g pu

rpos

es, m

arke

tabl

e se

curit

ies

with

hig

h liq

uidi

ty a

nd lo

an c

omm

itmen

ts

that

are

suff

icie

nt to

ens

ure

that

the

Com

pany

has

ade

quat

e fin

anci

al fl

exib

ility

. Li

quid

ity a

nd in

tere

st ri

sk ra

te ta

ble

The

follo

win

g ta

ble

show

s th

e re

mai

ning

con

tract

ual m

atur

ity a

naly

sis

of th

e C

ompa

ny’s

fina

ncia

l lia

bilit

ies

with

agr

eed-

upon

repa

ymen

t per

iods

, whi

ch w

ere

base

d on

the

date

the

Com

pany

may

be

requ

ired

to p

ay th

e fir

st re

paym

ent a

nd fi

nanc

ial l

iabi

litie

s is

eva

luat

ed b

ased

on

undi

scou

nted

cas

h flo

ws,

incl

udin

g ca

sh fl

ows o

f int

eres

t and

prin

cipa

l.

Ban

k lo

ans

with

a r

epay

men

t on

dem

and

clau

se w

ere

incl

uded

in th

e se

cond

col

umn

of th

e ta

ble

belo

w r

egar

dles

s of

whe

ther

or

not

the

bank

s w

ould

cho

ose

to e

xerc

ise

early

the

ir rig

hts

to

repa

ymen

t. Th

e m

atur

ity d

ates

for

oth

er n

on-d

eriv

ativ

e fin

anci

al l

iabi

litie

s w

ere

base

d on

the

ag

reed

-upo

n re

paym

ent

date

s. Th

e C

ompa

ny’s

liq

uidi

ty a

naly

sis

for

its d

eriv

ativ

e fin

anci

al

inst

rum

ents

is

also

sho

wn

in t

he f

ollo

win

g ta

ble.

The

tab

le w

as b

ased

on

the

undi

scou

nted

co

ntra

ctua

l net

cas

h in

flow

s an

d ou

tflow

s on

der

ivat

ive

inst

rum

ents

that

set

tle o

n a

net b

asis

, and

th

e un

disc

ount

ed g

ross

cas

h in

flow

s and

out

flow

s on

thos

e de

rivat

ives

that

requ

ire g

ross

settl

emen

t. W

hen

the

amou

nt p

ayab

le o

r rec

eiva

ble

is n

ot fi

xed,

the

amou

nt d

iscl

osed

has

bee

n de

term

ined

by

refe

renc

e to

the

pro

ject

ed i

nter

est

rate

s as

illu

stra

ted

by y

ield

cur

ves

at t

he e

nd o

f th

e re

porti

ng

perio

d.

- 65

-

Dec

embe

r 31,

202

0

The

Wei

ghte

d A

vera

ge

Eff

ectiv

e In

tere

st R

ate

(%)

L

ess t

han

1 Y

ear

1

to 5

Yea

rs

O

ver

5 Y

ears

Fi

nanc

e le

ase

liabi

litie

s

0.13

55

$

91

5,89

7

$

2,77

8,98

4

$

9,92

9,84

2 Fl

oatin

g in

tere

st ra

te

liabi

litie

s

0.91

02

15,5

59,4

92

54,8

22,4

66

14,7

52,3

47

Hed

ging

inst

rum

ents

0.25

41

9,24

9,60

9

32

,978

,809

1,

815,

449

Bon

ds p

ayab

le

2.

4622

12

,685

,204

9,

303,

608

1,28

0,77

9

$

38,4

10,2

02

$

99

,883

,867

$

27,7

78,4

17

Dec

embe

r 31,

201

9

The

Wei

ghte

d A

vera

ge

Eff

ectiv

e In

tere

st R

ate

(%)

L

ess t

han

1 Y

ear

1

to 5

Yea

rs

O

ver

5 Y

ears

Fi

nanc

e le

ase

liabi

litie

s

0.14

48

$

91

4,41

9

$

3,36

2,18

1

$

10,4

51,0

21

Floa

ting

inte

rest

rate

lia

bilit

ies

0.

9576

14

,284

,090

34

,457

,400

14

,787

,869

H

edgi

ng in

stru

men

ts

3.

1131

10

,060

,822

39

,729

,062

6,

373,

333

Bon

ds p

ayab

le

2.

5273

10

,823

,905

19

,871

,174

3,

383,

401

$

36

,083

,236

$

97,4

19,8

17

$

34

,995

,624

Lo

an c

omm

itmen

ts

Dec

embe

r 31

20

20

20

19

U

nuse

d ba

nk lo

an li

mit

(uns

ecur

ed)

$

21

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,000

$

18,4

22,0

00

- 66

-

226

31.

RE

LA

TE

D-P

AR

TY

TR

AN

SAC

TIO

NS

Exce

pt f

or th

e di

sclo

sure

s st

ated

in o

ther

not

es, t

rans

actio

ns b

etw

een

the

Com

pany

and

its

rela

ted

parti

es

are

disc

lose

d be

low

: a.

R

elat

ed p

artie

s’ n

ames

and

rela

tions

hips

Nam

e

Rel

atio

nshi

p w

ith th

e C

ompa

ny

Taiw

an A

ircar

go T

erm

inal

Com

pany

S

ubsi

diar

y Ta

oyua

n In

tern

atio

nal A

irpor

t Ser

vice

Co.

, Ltd

. S

ubsi

diar

y Sa

bre

Trav

el N

etw

ork

(Tai

wan

), Lt

d.

Sub

sidi

ary

Taiw

an A

irpor

t Ser

vice

Co.

, Ltd

. S

ubsi

diar

y Ta

iwan

Airp

ort S

ervi

ce (S

amoa

) S

ubsi

diar

y D

ynas

ty A

erot

ech

Inte

rnat

iona

l Cor

p.

Sub

sidi

ary

Yes

trip

Sub

sidi

ary

Glo

bal S

ky E

xpre

ss

Sub

sidi

ary

Man

darin

Airl

ines

S

ubsi

diar

y C

AL

Park

S

ubsi

diar

y C

AL

Hot

el C

o., L

td.

Sub

sidi

ary

CA

L-A

sia

Inve

stm

ent

Sub

sidi

ary

Dyn

asty

Hol

iday

s, In

c.

Ass

ocia

te (b

ecom

e as

soci

ate

in Ja

nuar

y 20

19)

CA

L-D

ynas

ty In

tern

atio

nal I

nc.

Sub

sidi

ary

Tige

rair

Taiw

an C

o., L

td.

Sub

sidi

ary

Taiw

an A

ircra

ft M

aint

enan

ce a

nd E

ngin

eerin

g C

o., L

td.

Sub

sidi

ary

Kao

hsiu

ng C

ater

ing

Serv

ices

S

ubsi

diar

y

Chi

na A

ircra

ft Se

rvic

e A

ssoc

iate

A

irpor

t Air

Car

go T

erm

inal

(Xia

men

) Co.

, Ltd

. A

ssoc

iate

A

irpor

t Air

Car

go S

ervi

ce (X

iam

en) C

o., L

td.

Ass

ocia

te

East

ern

Uni

ted

Inte

rnat

iona

l Log

istic

s (H

ong

Kon

g)

Ass

ocia

te

Chi

na P

acifi

c C

ater

ing

Serv

ices

J

oint

ven

ture

inve

stm

ent

Chi

na P

acifi

c La

undr

y Se

rvic

es

Joi

nt v

entu

re in

vest

men

t N

OR

DA

M A

sia

Ltd.

J

oint

ven

ture

inve

stm

ent

Del

ica

Inte

rnat

iona

l Co.

, Ltd

. J

oint

ven

ture

inve

stm

ent

Chi

na A

viat

ion

Dev

elop

men

t Fou

ndat

ion

Dire

ctor

of t

he C

ompa

ny a

nd m

ajor

sh

areh

olde

r O

ther

s D

irect

or, k

ey m

anag

emen

t per

sonn

el,

chai

rman

, gen

eral

man

ager

of t

he

Com

pany

, spo

use

and

seco

nd-d

egre

e re

lativ

e b.

O

pera

ting

inco

me

Fo

r th

e Y

ear

End

ed D

ecem

ber

31

Acc

ount

Item

s

Rel

ated

Par

ty T

ype

20

20

20

19

Oth

er in

com

e S

ubsi

diar

y

$

696,

100

$

2,5

77,0

39

M

ajor

shar

ehol

der o

f the

C

ompa

ny

$

5,

097

$

25

,457

A

ssoc

iate

$

122

$

1,

239

J

oint

ven

ture

inve

stm

ent

$

22

,445

$

42,4

57

- 67

-

c.

Purc

hase

s

F

or th

e Y

ear

End

ed D

ecem

ber

31

Rel

ated

Par

ty T

ype

20

20

20

19

Su

bsid

iary

$ 2

,611

,679

$ 3

,915

,258

M

ajor

shar

ehol

der o

f the

Com

pany

$

11,4

17

$

56

,474

A

ssoc

iate

$

457,

005

$

41

4,10

6 Jo

int v

entu

re in

vest

men

t

$

516,

347

$

1,9

11,0

91

d.

A

ccou

nts r

ecei

vabl

e - r

elat

ed p

artie

s (ge

nera

ted

by o

pera

tions

)

Dec

embe

r 31

R

elat

ed P

arty

Typ

e

2020

2019

Subs

idia

ry

$

99

,757

$

222,

038

Join

t ven

ture

inve

stm

ent

1,66

7

7,

760

Maj

or sh

areh

olde

r of t

he C

ompa

ny

-

2,

588

$

10

1,42

4

$

232,

386

The

rece

ivab

les

are

not g

uara

ntee

d, a

nd th

ere

is n

o al

low

ance

for d

oubt

ful a

ccou

nts

rela

ted

to a

ccou

nts

rece

ivab

le -

rela

ted

parti

es. T

he p

aym

ent p

erio

ds o

f suc

h ac

coun

ts w

ere

with

in 3

0 to

90

days

, and

ther

e ar

e no

ove

rdue

pay

men

ts.

e.

A

ccou

nts p

ayab

le -

rela

ted

parti

es (g

ener

ated

by

oper

atio

ns)

D

ecem

ber

31

Rel

ated

Par

ty T

ype

20

20

20

19

Su

bsid

iary

$

459,

667

$

92

7,41

9 A

ssoc

iate

52

,187

51

,333

Jo

int v

entu

re in

vest

men

t

76

,380

48

4,70

0 M

ajor

shar

ehol

der o

f the

Com

pany

-

5,98

2

$

588,

234

$

1,4

69,4

34

The

rem

aini

ng b

alan

ce o

f not

es a

nd a

ccou

nts p

ayab

le -

rela

ted

parti

es w

ill b

e pa

id in

cas

h if

they

are

not

se

cure

d.

f.

Leas

es o

f pro

perti

es (o

pera

ting

leas

es)

The

Com

pany

ren

ted

out p

lane

s to

Man

darin

Airl

ines

und

er a

n op

erat

ing

leas

e co

ntra

ct. T

he m

onth

ly

rent

rec

eive

d is

bas

ed o

n fli

ght h

ours

. In

2020

and

201

9, th

e re

ntal

s re

ceiv

ed a

mou

nted

to $

384,

080

thou

sand

and

$1,

624,

568

thou

sand

, res

pect

ivel

y.

Und

er a

n op

erat

ing

leas

e ag

reem

ent,

the

Com

pany

rent

ed fl

ight

trai

ning

mac

hine

s an

d fli

ght s

imul

ator

s fr

om C

hina

Avi

atio

n D

evel

opm

ent F

ound

atio

n to

trai

n pi

lots

. The

Com

pany

pai

d th

e re

ntal

bas

ed o

n us

age

hour

s. In

202

0 an

d 20

19,

the

Com

pany

pai

d re

ntal

s of

abo

ut $

11,4

17 t

hous

and

and

$56,

474

thou

sand

, res

pect

ivel

y.

In M

arch

201

0, th

e C

ompa

ny s

igne

d a

year

ly re

new

able

ope

ratin

g le

ase

agre

emen

t to

use

the

Ope

ratin

g an

d A

viat

ion

Hea

dqua

rters

bui

ldin

g of

the

Taiw

an T

aoyu

an I

nter

natio

nal A

irpor

t with

CA

L Pa

rk. I

n 20

20 a

nd 2

019,

the

Com

pany

pai

d re

ntal

s of $

207,

003

and

$231

,288

thou

sand

, res

pect

ivel

y.

- 68

-

227

g.

Endo

rsem

ents

and

gua

rant

ees

D

ecem

ber

31

2020

2019

Aut

hori

zed

Am

ount

Act

ual

Am

ount

Use

d

Aut

hori

zed

Am

ount

Act

ual

Am

ount

Use

d Th

e C

ompa

ny

C

AL

Park

$ 3

,850

,000

$ 1

,892

,540

$ 3

,850

,000

$ 2

,129

,400

Ta

iwan

Air

Car

go T

erm

inal

-

-

1,

080,

000

- Ti

gera

ir Ta

iwan

2,

656,

591

265,

062

3,01

2,66

8

68

5,44

4 Ta

iwan

Air

Cra

ft M

aint

enan

ce

2,00

0,00

0

1,

336,

000

2,00

0,00

0

1,

279,

827

h.

Bon

ds p

ayab

le -

rela

ted

parti

es

R

elat

ed p

artie

s th

at in

vest

ed in

the

first

issu

e of

uns

ecur

ed b

onds

in 2

016

(Not

e 19

) are

sum

mar

ized

as

follo

ws:

Dec

embe

r 31

, 202

0

Rel

ated

Par

ty

U

nits

Agg

rega

te

Par/

Dol

lars

Th

e fir

st is

sue

of u

nsec

ured

bon

ds in

201

6

Man

darin

Airl

ines

125

$

12

5,00

0 Sa

bre

Trav

el N

etw

ork

(Tai

wan

)

25

25,0

00

In 2

020,

inte

rest

exp

ense

was

$2,

499

thou

sand

. Thi

s bon

ds p

ayab

le w

ill b

e pa

id o

ff in

May

202

1. A

s of

Dec

embe

r 31,

202

0 th

e in

tere

st p

ayab

le w

as $

1,07

1 th

ousa

nd.

i.

Com

pens

atio

n of

key

man

agem

ent p

erso

nnel

For

the

Yea

r E

nded

Dec

embe

r 31

20

20

20

19

Sh

ort-t

erm

em

ploy

ee b

enef

its

$

33

,376

$

39,6

93

Post

-em

ploy

men

t ben

efits

2,

525

2,36

2

$

35,9

01

$

42

,055

Th

e re

mun

erat

ion

of d

irect

ors

and

key

exec

utiv

es w

as d

eter

min

ed b

y th

e re

mun

erat

ion

com

mitt

ee

havi

ng re

gard

to th

e pe

rfor

man

ce o

f ind

ivid

uals

and

mar

ket t

rend

s.

32.

PLE

DG

ED

ASS

ET

S Th

e fo

llow

ing

asse

ts w

ere

pled

ged

or m

ortg

aged

as

colla

tera

l for

long

-term

ban

k lo

ans,

leas

e ob

ligat

ions

an

d bu

sine

ss tr

ansa

ctio

ns:

Dec

embe

r 31

20

20

20

19

Pr

oper

ty, p

lant

and

equ

ipm

ent

$

30,1

13,1

71

$

26

,956

,631

R

ight

-of-

use

asse

t

54

,555

,761

64

,262

,830

$

84,6

68,9

32

$

91

,219

,461

- 69

-

33

. C

OM

MIT

ME

NT

S A

ND

CO

NT

ING

EN

T L

IAB

ILIT

IES

As

of D

ecem

ber 3

1, 2

020,

exc

ept f

or th

e di

sclo

sure

s st

ated

in o

ther

not

es, t

he C

ompa

ny h

ad c

omm

itmen

ts

and

cont

inge

nt li

abili

ties a

s fol

low

s: a.

In

Oct

ober

201

9, t

he C

ompa

ny s

igne

d a

cont

ract

with

Airb

us S

.A.S

. to

pur

chas

e el

even

A32

1neo

ai

rcra

ft an

d an

opt

ion

to p

urch

ase

five

A32

1neo

airc

raft.

The

tot

al li

st p

rice

of t

he e

leve

n ai

rcra

ft is

U

S$1,

676,

413

thou

sand

, an

d th

e lis

t pr

ice

of t

he o

ptio

n to

pur

chas

e fiv

e ai

rcra

ft is

US$

769,

922

thou

sand

. The

exp

ecte

d de

liver

y pe

riods

of t

he e

leve

n ai

rcra

ft ar

e fr

om 2

024

to 2

026.

As

of D

ecem

ber

31, 2

020,

the

list

pric

e of

the

four

teen

airc

raft

had

been

pai

d in

the

amou

nt o

f U

S$32

,578

tho

usan

d (r

ecog

nize

d as

pre

paym

ents

for

airc

raft)

. In

Oct

ober

201

9, t

he C

ompa

ny s

igne

d a

cont

ract

with

In

tern

atio

nal A

ero

Engi

nes

Com

pany

to p

urch

ase

four

bac

kup

engi

nes

of A

321n

eo. T

he to

tal l

ist p

rice

of th

e fo

ur e

ngin

es is

US$

60,2

89 th

ousa

nd. T

he C

ompa

ny a

lso

sign

ed re

late

d ai

rcra

ft re

ntal

agr

eem

ent,

plea

se re

fer t

o N

ote

20 fo

r det

ails

. b.

In

Jul

y an

d A

ugus

t 201

9, th

e C

ompa

ny s

igne

d a

cont

ract

with

the

Boe

ing

Com

pany

to p

urch

ase

thre

e 77

7F a

ircra

ft an

d ex

erci

sed

the

optio

n to

pur

chas

e th

ree

777F

airc

raft.

The

tota

l lis

t pr

ice

of t

he s

ix

airc

raft

is U

S$2,

320,

315

thou

sand

, and

the

exp

ecte

d de

liver

y pe

riods

are

fro

m 2

020

to 2

023.

As

of

Dec

embe

r 31

, 202

0, tw

o ou

t of

the

six

airc

raft

has

been

del

iver

ed, t

he li

st p

rice

had

been

pai

d in

the

amou

nt o

f US$

122,

186

thou

sand

(rec

ogni

zed

as p

repa

ymen

ts fo

r airc

raft)

, and

the

tota

l lis

t pric

e of

the

rem

aini

ng fo

ur a

ircra

ft is

US$

1,55

2,87

9.

34

. IM

PAC

T O

F C

OV

ID-1

9

Sinc

e th

e ou

tbre

ak o

f th

e C

ovid

-19

in J

anua

ry 2

020,

the

cor

onav

irus

has

beco

me

a pa

ndem

ic.

The

pand

emic

has

now

spr

ead

arou

nd th

e w

orld

and

mos

t cou

ntrie

s ha

ve n

ot re

mov

ed th

eir t

rave

l res

trict

ions

. B

ecau

se th

e nu

mbe

r of i

nbou

nd a

nd o

utbo

und

pass

enge

rs h

as d

ecre

ased

sig

nific

antly

, the

Com

pany

adj

usts

the

prop

ortio

n be

twee

n pa

ssen

ger

airc

raft

and

carg

o ai

rcra

ft us

ed i

n op

erat

ions

to

com

ply

with

the

go

vern

men

t’s e

pide

mic

pre

vent

ion

polic

y an

d ca

ter t

o m

arke

t dem

and.

The

Com

pany

redu

ces t

he fr

eque

ncy

of p

asse

nger

air

serv

ices

that

hav

e be

en s

ever

ely

affe

cted

, use

s th

e pa

ssen

ger

airc

raft

to s

uppo

rt th

e ca

rgo

fligh

t ar

rang

emen

t an

d ex

pand

s th

e fu

nctio

n of

all-

carg

o ai

rcra

ft to

max

imiz

e th

e op

portu

nitie

s fr

om a

ir ca

rgo

busi

ness

. Sin

ce M

arch

202

0, c

argo

has

bec

ome

the

mai

n so

urce

of r

even

ue fo

r the

Com

pany

. Th

e C

ompa

ny c

ontin

ues

to a

djus

t the

res

pons

e m

easu

res

acco

rdin

g to

the

situ

atio

n. In

add

ition

, to

ensu

re

the

adeq

uate

liqu

idity

, the

Com

pany

als

o im

plem

ents

mea

sure

s fo

r hu

man

res

ourc

e m

anag

emen

t suc

h as

po

stpo

ning

the

hirin

g of

new

com

ers,

rela

xing

the

appl

icat

ion

of s

peci

al le

ave,

loos

enin

g th

e re

stric

tions

on

leav

e w

ithou

t pa

y, e

ncou

ragi

ng e

mpl

oyee

s to

tak

e le

ave,

adj

ustin

g w

orki

ng h

ours

and

sal

arie

s, et

c. T

he

Com

pany

’s p

olic

ies

to c

ontro

l spe

ndin

g in

clud

e su

spen

sion

of n

on-u

rgen

t cap

ital e

xpen

ditu

res,

redu

ctio

n in

un

nece

ssar

y ex

pens

es fo

r adm

inis

trativ

e m

anag

emen

t and

sale

s, ne

gotia

tion

with

supp

liers

for a

low

er p

rice

and

post

pone

men

t of p

aym

ents

. In

202

0, b

ecau

se o

f th

e C

ovid

-19,

the

Com

pany

rec

eive

d su

bsid

y of

$1,

251,

632

thou

sand

for

the

airp

ort

land

ing

fees

and

par

king

fee

s, et

c. T

he s

ubsi

dy f

or h

ousi

ng a

nd l

and

rent

al,

and

sala

ry e

xpen

ses

was

$7

45,8

20 th

ousa

nd, r

ecog

nize

d as

ded

uctio

n fr

om o

ther

inco

me

and

expe

nses

.

The

Com

pany

has

obt

aine

d re

lief l

oan

from

the

gove

rnm

ent.

Ref

er to

Not

e 18

for d

etai

ls o

n th

e am

ount

of

loan

and

its a

lloca

tion.

- 70

-

228

35.

SIG

NIF

ICA

NT

ASS

ET

S A

ND

LIA

BIL

ITIE

S D

EN

OM

INA

TE

D IN

FO

RE

IGN

CU

RR

EN

CIE

S Th

e fo

llow

ing

info

rmat

ion

was

agg

rega

ted

by th

e fo

reig

n cu

rren

cies

oth

er th

an fu

nctio

nal c

urre

ncie

s of

the

Com

pany

ent

ities

and

the

exch

ange

rat

es b

etw

een

fore

ign

curr

enci

es a

nd r

espe

ctiv

e fu

nctio

nal c

urre

ncie

s w

ere

disc

lose

d. T

he si

gnifi

cant

ass

ets a

nd li

abili

ties d

enom

inat

ed in

fore

ign

curr

enci

es w

ere

as fo

llow

s: D

ecem

ber 3

1, 2

020

Fore

ign

Cur

renc

ies

(In

Tho

usan

ds)

E

xcha

nge

Rat

e

Car

ryin

g A

mou

nt

Fi

nanc

ial a

sset

s

Mon

etar

y ite

ms

USD

$ 64

0,41

1

28.4

091

$

18

,193

,504

EU

R

18,2

46

34

.843

2

63

5,75

2 H

KD

33

8,88

0

3.66

03

1,24

0,40

3 JP

Y

3,41

7,97

2

0.27

50

939,

942

RM

B

546,

452

4.

3440

2,

373,

786

Fi

nanc

ial l

iabi

litie

s

Mon

etar

y ite

ms

USD

1,

927,

625

28

.409

1

54

,762

,089

EU

R

6,51

3

34.8

432

226,

949

HK

D

72,3

97

3.

6603

26

4,99

4 JP

Y

2,98

6,25

6

0.27

50

821,

220

RM

B

136,

957

4.

3440

59

4,94

1 D

ecem

ber 3

1, 2

019

Fore

ign

Cur

renc

ies

(In

Tho

usan

ds)

E

xcha

nge

Rat

e

Car

ryin

g A

mou

nt

Fi

nanc

ial a

sset

s

Mon

etar

y ite

ms

USD

$

502,

608

30

.030

0

$

15,0

93,3

28

EUR

18

,401

33.6

700

619,

571

HK

D

225,

078

3.

8595

86

8,68

9 JP

Y

5,53

1,84

9

0.27

66

1,53

0,10

9 R

MB

37

1,64

2

4.30

48

1,59

9,84

6

Fina

ncia

l lia

bilit

ies

M

onet

ary

item

s

U

SD

2,17

9,05

6

30.0

300

65,4

37,0

49

EUR

7,

639

33

.670

0

25

7,21

1 H

KD

67

,529

3.85

95

260,

630

JPY

5,

706,

141

0.

2766

1,

578,

319

RM

B

132,

622

4.

3048

57

0,91

3

- 71

-

For t

he y

ears

end

ed D

ecem

ber 3

1, 2

020

and

2019

, the

Com

pany

’s n

et fo

reig

n ex

chan

ge (l

osse

s) g

ains

wer

e $2

59,7

96 th

ousa

nd a

nd $

(262

,610

) tho

usan

d, re

spec

tivel

y. It

is im

prac

tical

to d

iscl

ose

net f

orei

gn e

xcha

nge

gain

s (lo

sses

) by

each

sign

ifica

nt fo

reig

n cu

rren

cy d

ue to

the

varie

ty o

f the

fore

ign

curre

ncy

trans

actio

ns.

36.

AD

DIT

ION

AL

DIS

CL

OSU

RE

S

a.

Follo

win

g ar

e th

e ad

ditio

nal d

iscl

osur

es re

quire

d by

the

Secu

ritie

s and

Fut

ures

Bur

eau

for t

he C

ompa

ny

and

its in

vest

ees:

1) F

inan

cing

pro

vide

d: T

able

1 (a

ttach

ed).

2) E

ndor

sem

ents

/gua

rant

ees p

rovi

ded:

Tab

le 2

(atta

ched

). 3

) Mar

keta

ble

secu

ritie

s hel

d: T

able

3 (a

ttach

ed).

4) M

arke

tabl

e se

curit

ies

acqu

ired

and

disp

osed

of a

t cos

ts or

pric

es o

f at l

east

NT$

300

mill

ion

or 2

0%

of th

e pa

id-in

cap

ital:

Non

e.

5) A

cqui

sitio

ns o

f in

divi

dual

rea

l est

ates

at c

osts

or

pric

e of

at l

east

NT$

100

mill

ion

or 2

0% o

f th

e pa

id-in

cap

ital:

Non

e.

6) D

ispo

sals

of

indi

vidu

al r

eal

esta

tes

at c

osts

or

pric

es o

f at

lea

st N

T$10

0 m

illio

n or

20%

of

the

paid

-in c

apita

l: N

one.

7

) Tot

al p

urch

ases

from

or s

ales

to re

late

d pa

rties

am

ount

ing

to a

t lea

st N

T$10

0 m

illio

n or

20%

of t

he

paid

-in c

apita

l: Ta

ble

4 (a

ttach

ed).

8

) Rec

eiva

bles

fro

m r

elat

ed p

artie

s am

ount

ing

to a

t le

ast

NT$

100

mill

ion

or 2

0% o

f th

e pa

id-in

ca

pita

l: Ta

ble

5 (a

ttach

ed).

9

) Nam

es,

loca

tions

, an

d re

late

d in

form

atio

n of

inv

este

es o

ver

whi

ch t

he C

ompa

ny e

xerc

ises

si

gnifi

cant

influ

ence

: Tab

le 6

(atta

ched

). 10

) Der

ivat

ive

finan

cial

tran

sact

ions

: Not

es 7

and

30.

b.

Inve

stm

ent i

n m

ainl

and

Chi

na: T

able

7 (a

ttach

ed).

c.

Info

rmat

ion

of m

ajor

shar

ehol

ders

: Tab

le 8

(atta

ched

). 37

. SE

GM

EN

T IN

FOR

MA

TIO

N

The

Com

pany

mai

nly

enga

ges

in a

ir tra

nspo

rtatio

n se

rvic

es f

or p

asse

nger

s, ca

rgo

and

othe

rs. T

he m

ajor

re

venu

e-ge

nera

ting

asse

t is

the

fle

et,

whi

ch i

s jo

intly

use

d fo

r pa

ssen

ger

and

carg

o se

rvic

es.

Thus

, th

e C

ompa

ny’s

sol

e re

porta

ble

segm

ent i

s th

e fli

ght s

egm

ent.

For o

pera

ting

segm

ent r

epor

ting

in th

e fin

anci

al

stat

emen

ts,

the

Com

pany

’s

repo

rtabl

e se

gmen

t co

mpr

ises

th

e fli

ght

and

the

non-

fligh

t bu

sine

ss

depa

rtmen

ts.

- 72

-

229

TA

BL

E 1

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

FIN

AN

CIN

G P

RO

VID

ED

TO

OT

HE

RS

FOR

TH

E Y

EA

R E

ND

ED

DE

CE

MB

ER

31,

202

0 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs, U

nles

s Sta

ted

Oth

erw

ise)

No.

L

ende

r B

orro

wer

Fi

nanc

ial

Stat

emen

t A

ccou

nt

Rel

ated

Pa

rty

Hig

hest

B

alan

ce fo

r th

e Pe

riod

End

ing

Bal

ance

Act

ual

Bor

row

ing

Am

ount

Inte

rest

Rat

e (%

) N

atur

e of

Fi

nanc

ing

Bus

ines

s T

rans

actio

n A

mou

nt

Rea

sons

for

Shor

t-te

rm

Fina

ncin

g

Allo

wan

ce fo

r Im

pair

men

t L

oss

Col

late

ral

Fina

ncin

g L

imit

for

Eac

h B

orro

wer

Agg

rega

te

Fina

ncin

g L

imit

Not

e It

em

Val

ue

1 C

al-D

ynas

ty In

tern

atio

nal

Dyn

asty

Hot

el o

f H

awai

i, In

c.

Not

es re

ceiv

able

Y

$ 10

3,24

4

$ 99

,432

$ 28

,409

2.

25

Shor

t-ter

m

finan

cing

fa

cilit

y is

ne

cess

ary

$

- O

pera

ting

cycl

e ca

pita

l ex

pend

iture

$

-

$

-

$ 14

4,12

8

$ 28

8,25

6

Not

e 1:

Th

e m

axim

um a

mou

nt o

f loa

ns to

oth

ers b

y th

e C

ompa

ny is

up

to 4

0% o

f the

Com

pany

's ne

t wor

th a

s sta

ted

in it

s lat

est f

inan

cial

stat

emen

ts.

Not

e 2:

Th

e m

axim

um a

mou

nt o

f loa

ns to

an

indi

vidu

al c

ount

erpa

rty b

y th

e C

ompa

ny is

up

to 2

0% o

f the

Com

pany

's ne

t wor

th a

s sta

ted

in it

s lat

est f

inan

cial

stat

emen

ts.

230

TA

BL

E 2

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

EN

DO

RSE

ME

NT

/GU

AR

AN

TE

E P

RO

VID

ED

FO

R T

HE

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

020

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

, Unl

ess S

tate

d O

ther

wis

e)

No.

E

ndor

sem

ent/

Gua

rant

ee

Prov

ider

Cou

nter

part

y L

imit

on E

ach

Cou

nter

part

y’s

End

orse

men

t/ G

uara

ntee

A

mou

nt

(Not

e 1)

Max

imum

B

alan

ce fo

r th

e Pe

riod

E

ndin

g B

alan

ce

Act

ual

Bor

row

ing

Am

ount

Val

ue o

f C

olla

tera

ls

Prop

erty

, Pla

nt

or E

quip

men

t

Rat

io o

f A

ccum

ulat

ed

Am

ount

of

Col

late

ral t

o N

et E

quity

of

the

Lat

est

Fina

ncia

l St

atem

ent (

%)

Max

imum

C

olla

tera

l/ G

uara

ntee

A

mou

nts

Allo

wab

le

(Not

e 2)

End

orse

men

t/ G

uara

ntee

G

iven

by

Pare

nt

on B

ehal

f of

Subs

idia

ries

End

orse

men

t/ G

uara

ntee

G

iven

by

Subs

idia

ries

on

Beh

alf o

f Par

ent

End

orse

men

t/ G

uara

ntee

G

iven

on

Beh

alf

of C

ompa

nies

in

Mai

nlan

d C

hina

Nam

e N

atur

e of

Rel

atio

nshi

p

0 C

hina

Airl

ines

C

AL

Park

10

0% su

bsid

iary

$ 11

,511

,896

$ 3,

850,

000

$

3,85

0,00

0

$ 1,

892,

540

$

- 6.

69

$

28,7

79,7

41

Y

N

N

(the

“Com

pany

”) T

iger

air T

aiw

an C

o., L

td.

75.8

6% su

bsid

iary

by

dire

ct a

nd in

dire

ct

hold

ings

11,5

11,8

96

3,03

8,19

7

2,

656,

591

265,

062

- 4.

62

28,7

79,7

41

Y

N

N

Taiw

an A

ircra

ft M

aint

enan

ce

and

Engi

neer

ing

Co.

, Ltd

. 10

0% su

bsid

iary

11

,511

,896

2,

000,

000

2,00

0,00

0

1,

336,

000

- 3.

47

28,7

79,7

41

Y

N

N

Not

e 1:

B

ased

on

the

Com

pany

’s g

uide

lines

, the

max

imum

am

ount

of g

uara

ntee

to a

n in

divi

dual

cou

nter

party

is u

p to

20%

of t

he C

ompa

ny’s

shar

ehol

ders

’ equ

ity.

Not

e 2:

B

ased

on

the

Com

pany

’s g

uide

lines

, the

allo

wab

le a

ggre

gate

am

ount

of c

olla

tera

l gua

rant

ee is

up

to 5

0% o

f the

Com

pany

’s sh

areh

olde

rs’ e

quity

. 231

TA

BL

E 3

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

MA

RK

ET

AB

LE

SE

CU

RIT

IES

HE

LD

D

EC

EM

BE

R 3

1, 2

020

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

, Unl

ess S

tate

d O

ther

wis

e)

Hol

ding

Com

pany

Nam

e M

arke

tabl

e Se

curi

ty T

ype

and

Issu

er/N

ame

Rel

atio

nshi

p w

ith th

e H

oldi

ng

Com

pany

Fi

nanc

ial S

tate

men

t Acc

ount

Dec

embe

r 31

, 202

0

Not

e N

umbe

r of

Sh

ares

/Uni

ts

Car

ryin

g A

mou

nt

Perc

enta

ge o

f O

wne

rshi

p (%

)

Mar

ket V

alue

or

Net

Ass

et

Val

ue

C

hina

Airl

ines

(“Pa

rent

com

pany

”)

Shar

es

Ever

est I

nves

tmen

t Hol

ding

s Ltd

. - o

rdin

ary

shar

es

- Fi

nanc

ial a

sset

s at F

VTO

CI -

non

-cur

rent

1,

359,

368

$

106,

779

13.5

9

$ 11

7,45

7 N

ote

1

Ever

est I

nves

tmen

t Hol

ding

s Ltd

. - p

refe

renc

e sh

ares

-

Fina

ncia

l ass

ets a

t FV

TOC

I - n

on-c

urre

nt

135,

937

10,6

78

-

Chu

ng H

ua E

xpre

ss C

o.

- Fi

nanc

ial a

sset

s at F

VTO

CI -

non

-cur

rent

1,

100,

000

29,7

04

11.0

0

29

,704

Ja

rdin

e A

ir Te

rmin

al S

ervi

ces

- Fi

nanc

ial a

sset

s at F

VTP

L - c

urre

nt

12,0

00,0

00

- 15

.00

-

Th

e G

rand

Hi L

ai H

otel

-

Fina

ncia

l ass

ets a

t FV

TPL

- cur

rent

4,

021

- 0.

02

-

M

anda

rin A

irlin

es

Shar

es

Chi

na A

irlin

es

Pare

nt c

ompa

ny

Fina

ncia

l ass

ets a

t FV

TOC

I - n

on-c

urre

nt

2,07

4,62

8

24

,999

-

24,9

99

-

Cal

-Asi

a In

vest

men

t Sh

ares

Ta

ikoo

(Xia

men

) Lan

ding

Gea

r Ser

vice

s -

Fina

ncia

l ass

ets a

t FV

TPL

- cur

rent

-

- 2.

59

- N

ote

2

HA

ECO

Com

posi

te S

truct

ures

(Jin

jiang

) -

Fina

ncia

l ass

ets a

t FV

TOC

I - n

on-c

urre

nt

-

16

,585

5.

45

16,5

85

Not

e 2

Sa

bre

Trav

el N

etw

ork

(Tai

wan

) B

enef

icia

ry c

ertif

icat

es

Fran

klin

Tem

plet

on S

inoA

m M

oney

Mar

ket F

und

- Fi

nanc

ial a

sset

s at F

VTP

L - c

urre

nt

4,05

1,15

3

42

,247

-

42,2

47

-

FSIT

C M

oney

Mar

ket F

und

- Fi

nanc

ial a

sset

s at F

VTP

L - c

urre

nt

308,

094

55,4

11

-

55

,411

Ta

iwan

Airp

ort S

ervi

ces

Shar

es

Tran

sAsi

a A

irway

s -

Fina

ncia

l ass

ets a

t FV

TPL

- cur

rent

2,

277,

786

- 0.

40

- -

D

ynas

ty A

erot

ech

Inte

rnat

iona

l Cor

p.

Ben

efic

iary

cer

tific

ates

Ta

ishi

n 16

99 M

oney

Mar

ket F

und

- Fi

nanc

ial a

sset

s at F

VTP

L - c

urre

nt

349,

523

4,77

1 -

4,77

1 -

K

aohs

iung

Cat

erin

g Se

rvic

es

Ben

efic

iary

cer

tific

ates

Pr

uden

tial F

inan

cial

Mon

ey M

arke

t Fun

d -

Fina

ncia

l ass

ets a

t FV

TPL

- cur

rent

5,

407,

832

86,2

81

-

86

,281

-

Pr

uden

tial F

inan

cial

Ret

urn

Fund

-

Fina

ncia

l ass

ets a

t FV

TPL

- cur

rent

4,

493,

628

70,9

49

-

70

,949

Ta

ishi

n 16

99 M

oney

Mar

ket F

und

- Fi

nanc

ial a

sset

s at F

VTP

L - c

urre

nt

1,10

6,80

7

15

,103

15,1

03

Not

e 1:

Th

e su

bsid

iary

’s n

et a

sset

val

ue w

as $

117,

457

thou

sand

, whi

ch in

clud

ed o

rdin

ary

shar

es a

nd p

refe

renc

e sh

ares

as o

f and

for t

he y

ear e

nded

Dec

embe

r 31,

202

0.

Not

e 2:

Th

e C

ompa

ny d

oes n

ot is

sue

shar

es b

ecau

se it

is a

lim

ited

com

pany

. N

ote

3:

The

tabl

e on

ly li

sts f

inan

cial

ass

ets t

hat a

re in

acc

orda

nce

with

IFR

S 9.

232

TA

BL

E 4

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

TO

TA

L P

UR

CH

ASE

S FR

OM

OR

SA

LE

S T

O R

ELA

TE

D P

AR

TIE

S A

MO

UN

TIN

G T

O A

T L

EA

ST N

T$1

00 M

ILL

ION

OR

20%

OF

THE

PA

ID-I

N C

API

TA

L FO

R T

HE

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

020

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

, Unl

ess S

tate

d O

ther

wis

e)

Com

pany

Nam

e R

elat

ed P

arty

N

atur

e of

Rel

atio

nshi

p T

rans

actio

n D

etai

ls A

bnor

mal

Tra

nsac

tion

Not

e/A

ccou

nt P

ayab

le o

r R

ecei

vabl

e N

ote

Purc

hase

/ Sa

le

Am

ount

%

of

Tot

al

Paym

ent T

erm

s U

nit P

rice

Pa

ymen

t Ter

ms

End

ing

Bal

ance

%

of

Tot

al

Chi

na A

irlin

es, L

td.

Taiw

an A

ir C

argo

Ter

min

al

Subs

idia

ry

Purc

hase

$ 65

9,59

6 0.

69

30 d

ays

$ -

-

$ (6

7,46

5)

(3.3

9)

-

(“C

hina

Airl

ines

”)

Taiw

an A

irpor

t Ser

vice

s Su

bsid

iary

Pu

rcha

se

107,

482

0.11

40

day

s

-

-

(1

3,04

6)

(0.7

6)

-

Man

darin

Airl

ines

Su

bsid

iary

Sa

le

(221

,527

) (0

.21)

2

mon

ths

- -

69,1

79

0.71

-

Ti

gera

ir Ta

iwan

Su

bsid

iary

Sa

le

(240

,768

) (0

.23)

1

mon

th

12,0

08

0.12

Ta

oyua

n In

tern

atio

nal A

irpor

t Ser

vice

Su

bsid

iary

Pu

rcha

se

1,04

3,26

4 1.

10

40 d

ays

- -

(215

,542

) (1

2.56

) -

D

ynas

ty A

erot

ech

Inte

rnat

iona

l Cor

p.

Subs

idia

ry

Purc

hase

35

2,21

4 0.

37

2 m

onth

s

-

-

(4

9,10

8)

(2.8

6)

-

CA

L Pa

rk

Subs

idia

ry

Purc

hase

20

9,70

1 0.

22

2 m

onth

s

-

-

-

- -

G

loba

l Sky

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ress

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bsid

iary

Sa

le

(139

,335

) (0

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15

day

s

-

-

8,

180

0.

08

-

East

ern

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ted

Inte

rnat

iona

l Log

istic

s Eq

uity

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hod

inve

stee

Pu

rcha

se

388,

451

0.41

2

mon

ths

- -

(41,

725)

(2

.43)

-

C

hina

Pac

ific

Cat

erin

g Se

rvic

es

Equi

ty-m

etho

d in

vest

ee

Purc

hase

47

3,46

0 0.

50

90 d

ays

- -

(71,

674)

(4

.18)

-

Man

darin

Airl

ines

Ta

iwan

Airp

ort S

ervi

ces

Sam

e pa

rent

com

pany

Pu

rcha

se

152,

475

4.14

1

mon

th

- -

(22,

407)

(5

.58)

-

Ti

gera

ir Ta

iwan

Sa

me

pare

nt c

ompa

ny

Purc

hase

14

9,04

8 4.

05

1 m

onth

-

-

(1

1,71

1)

(2.9

2)

C

al H

otel

C

AL

Park

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me

pare

nt c

ompa

ny

Purc

hase

10

2,22

0 48

.59

1 m

onth

-

-

(7

6)

(0.2

5)

-

233

TA

BL

E 5

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

RE

CE

IVA

BL

ES

FRO

M R

EL

AT

ED

PA

RT

IES

AM

OU

NT

ING

TO

AT

LEA

ST N

T$1

00 M

ILL

ION

OR

20%

OF

THE

PA

ID-I

N C

API

TA

L D

EC

EM

BE

R 3

1, 2

020

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

, Unl

ess S

tate

d O

ther

wis

e)

Com

pany

Nam

e R

elat

ed P

arty

N

atur

e of

Rel

atio

nshi

p E

ndin

g B

alan

ce

Tur

nove

r R

ate

Ove

rdue

A

mou

nts R

ecei

ved

in S

ubse

quen

t Pe

riod

Allo

wan

ce fo

r B

ad D

ebts

A

mou

nt

Act

ion

Tak

en

M

anda

rin A

irlin

es

Chi

na A

irlin

es

Pare

nt c

ompa

ny

$

101

,725

N

ote

$

-

-

$

56,8

70

$

-

Ta

oyua

n In

tern

atio

nal A

irpor

t Ser

vice

C

hina

Airl

ines

Pa

rent

com

pany

21

5,54

2 3.

71

- -

215,

542

-

Not

e:

Acc

ount

s rec

eiva

ble

and

reve

nue

wer

e no

t dire

ctly

cor

rela

ted

beca

use

of th

e pa

rticu

lar i

ndus

try c

hara

cter

istic

s, an

d th

eref

ore

the

turn

over

rate

was

not

app

licab

le.

234

TA

BL

E 6

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

NA

ME

S, L

OC

AT

ION

S, A

ND

OT

HE

R IN

FOR

MA

TIO

N O

F IN

VE

STE

ES

OV

ER

WH

ICH

TH

E C

OM

PAN

Y E

XE

RC

ISE

S SI

GN

IFIC

AN

T IN

FLU

EN

CE

FO

R T

HE

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

020

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

and

For

eign

Cur

renc

ies i

n T

hous

ands

, Unl

ess S

tate

d O

ther

wis

e)

Inve

stor

Com

pany

In

vest

ee C

ompa

ny

Loc

atio

n M

ain

Bus

ines

s and

Pro

duct

Inve

stm

ent A

mou

nt

Bal

ance

as o

f Dec

embe

r 31

, 202

0 N

et In

com

e (L

oss)

of t

he

Inve

stee

Inve

stm

ent

Inco

me

(Los

s)

Not

e D

ecem

ber

31,

2020

D

ecem

ber

31,

2019

N

umbe

r of

Sh

ares

/Uni

ts

Perc

enta

ge

of

Ow

ners

hip

(%)

Car

ryin

g A

mou

nt

Chi

na A

irlin

es, L

td.

CA

L Pa

rk

Taoy

uan,

Tai

wan

R

eal e

stat

e le

ase

and

inte

rnat

iona

l tra

de

$

1,50

0,00

0 $

1,

500,

000

15

0,00

0,00

0 10

0.00

$

1,

605,

033

$

9,35

0 $

53

,770

N

ote

4

Man

darin

Airl

ines

Ta

ipei

, Tai

wan

A

ir tra

nspo

rtatio

n an

d m

aint

enan

ce o

f airc

raft

2,

042,

368

2,

042,

368

18

8,15

4,02

5 93

.99

1,

223,

259

(3

76,2

55)

(3

53,6

42)

Not

es 1

and

4

Ta

iwan

Air

Car

go T

erm

inal

Ta

oyua

n, T

aiw

an

Air

carg

o an

d st

orag

e

1,35

0,00

0

1,35

0,00

0

135,

000,

000

54.0

0

1,55

6,13

3

318,

494

17

2,01

7 -

C

al-D

ynas

ty In

tern

atio

nal

Los A

ngel

es, U

SA

A h

oldi

ng c

ompa

ny, r

eal e

stat

e an

d ho

tel s

ervi

ces

U

S$

26,1

45

US$

26

,145

2,61

4,50

0 10

0.00

1,18

8,11

0

(21,

960)

(20,

542)

Not

e 2

Chi

na P

acifi

c C

ater

ing

Serv

ices

Ta

oyua

n, T

aiw

an

In-fl

ight

cat

erin

g

439,

110

43

9,11

0

43,9

11,0

00

51.0

0

695,

959

(2

67,5

66)

(1

36,4

59)

-

Taoy

uan

Inte

rnat

iona

l Airp

ort S

ervi

ces

Taoy

uan,

Tai

wan

A

irpor

t ser

vice

s

147,

000

14

7,00

0

34,3

00,0

00

49.0

0

602,

688

(2

58,8

94)

(1

26,8

58)

-

CA

L-A

sia

Inve

stm

ent

Terr

itory

of t

he B

ritis

h V

irgin

Isla

nds

Gen

eral

inve

stm

ent

US$

7,

172

US$

7,

172

7,

172,

346

100.

00

46

9,97

9

45,0

68

45

,068

-

Sa

bre

Trav

el N

etw

ork

(Tai

wan

) Ta

ipei

, Tai

wan

Sa

le a

nd m

aint

enan

ce o

f har

dwar

e an

d so

ftwar

e

52,2

00

52

,200

13,0

21,0

42

93.9

3

232,

883

(4

9,99

5)

(4

6,95

1)

-

Chi

na A

ircra

ft Se

rvic

e H

ong

Kon

g In

tern

atio

nal A

irpor

t A

irpor

t ser

vice

s H

K$

58,0

00

HK

$ 58

,000

28,4

00,0

00

20.0

0

277,

234

(5

13,7

90)

(1

02,7

58)

-

Taiw

an A

irpor

t Ser

vice

s Ta

ipei

, Tai

wan

A

irpor

t ser

vice

s

12,2

89

12

,289

20,6

26,6

44

47.3

5

200,

794

(1

56,7

39)

(7

4,21

4)

-

Kao

hsiu

ng C

ater

ing

Serv

ices

K

aohs

iung

, Tai

wan

In

-flig

ht c

ater

ing

38

3,84

6

383,

846

21

,494

,637

53

.67

51

2,92

6

9,12

9

(8,3

09)

Not

e 5

C

al H

otel

Co.

, Ltd

. Ta

oyua

n, T

aiw

an

Hot

el b

usin

ess

46

5,00

0

465,

000

46

,500

,000

10

0.00

405,

353

(7

3,58

6)

(7

3,90

6) N

ote

4

Chi

na P

acifi

c La

undr

y Se

rvic

es

Taoy

uan,

Tai

wan

C

lean

ing

and

leas

ing

of th

e to

wel

of a

irlin

es, h

otel

s, re

stau

rant

s and

hea

lth c

lubs

137,

500

13

7,50

0

13,7

50,0

00

55.0

0

149,

353

(2

8,13

7)

(1

5,47

5)

-

D

ynas

ty A

erot

ech

Inte

rnat

iona

l Cor

p.

Taoy

uan,

Tai

wan

C

lean

ing

of a

ircra

ft an

d m

aint

enan

ce o

f mac

hine

and

eq

uipm

ent

77,2

70

77

,270

77,2

70

100.

00

13

6,63

0

33,9

86

33

,967

N

ote

4

Y

estri

p

Taip

ei, T

aiw

an

Trav

el b

usin

ess

26

,265

26,2

65

1,

600,

000

100.

00

10

,270

(15,

067)

(14,

998)

Not

e 4

D

ynas

ty H

olid

ays

Toky

o, Ja

pan

Trav

el b

usin

ess

JPY

8,

000

JPY

20

,400

160

20.0

0

5,23

7

(23,

701)

(4,7

40)

-

Glo

bal S

ky E

xpre

ss

Taip

ei, T

aiw

an

Forw

ardi

ng a

nd st

orag

e of

air

carg

o

2,

500

2,

500

25

0,00

0 25

.00

7,

643

7,

796

1,

949

-

Tige

rair

Taiw

an C

o., L

td.

Taip

ei, T

aiw

an

Air

trans

porta

tion

and

mai

nten

ance

of a

ircra

ft

3,10

9,90

7

1,27

2,06

3

212,

420,

046

75.8

6

2,30

4,11

3

(1,3

71,0

56)

(9

56,0

08)

Not

e 4

Ta

iwan

Airc

raft

Mai

nten

ance

and

En

gine

erin

g C

o., L

td.

Taoy

uan,

Tai

wan

A

ircra

ft m

aint

enan

ce

1,

350,

000

1,

350,

000

13

5,00

0,00

0 10

0.00

699,

793

(2

22,2

23)

(2

22,1

96)

-

N

OR

DA

M A

sia

Ltd.

Ta

oyua

n, T

aiw

an

Airc

raft

mai

nten

ance

37,9

75

2,

450

3,

797,

500

49.0

0

37,7

67

(9

3)

(4

6)

-

M

anda

rin A

irlin

es

Tige

rair

Taiw

an C

o., L

td.

Taip

ei, T

aiw

an

Air

trans

porta

tion

and

mai

nten

ance

of a

ircra

ft

154,

330

15

4,33

0

15,4

33,0

00

5.51

167,

400

(1

,371

,056

)

(104

,501

) -

Ta

iwan

Airp

ort S

ervi

ces

Taip

ei, T

aiw

an

Airp

ort s

ervi

ces

11

,658

11,6

58

46

9,75

5 1.

08

4,

567

(1

56,7

39)

(1

,688

) -

CA

L-A

sia

Inve

stm

ent

East

ern

Uni

ted

Inte

rnat

iona

l Log

istic

s H

ong

Kon

g

Forw

ardi

ng a

nd st

orag

e of

air

carg

o H

K$

3,32

9 H

K$

3,32

9

1,05

0,00

0 35

.00

51

,116

39,8

29

13

,940

-

Taiw

an A

irpor

t Ser

vice

s Ta

iwan

Airp

ort S

ervi

ce (S

amoa

)

Sam

oa

Airp

ort s

ervi

ces a

nd in

vest

men

t

US$

5,

877

US$

5,

877

-

100.

00

37

3,44

2

22,3

55

22

,355

N

ote

3

K

aohs

iung

Cat

erin

g Se

rvic

es

Del

ica

Inte

rnat

iona

l Co.

, Ltd

. K

aohs

iung

, Tai

wan

C

ater

ing

busi

ness

10,2

00

10

,200

1,02

0,00

0 51

.00

7,

871

4

2

-

Not

e 1:

A

dopt

ed th

e tre

asur

y sh

ares

met

hod

in re

cogn

izin

g in

vest

men

t inc

ome

or lo

ss.

Not

e 2:

R

epre

sent

s the

fina

ncia

l inf

orm

atio

n of

the

fore

ign

hold

ing

com

pany

dis

clos

ed in

acc

orda

nce

with

loca

l reg

ulat

ions

. N

ote

3:

The

Com

pany

doe

s not

issu

e sh

ares

bec

ause

it is

a li

mite

d co

mpa

ny.

Not

e 4:

D

iffer

ence

cau

sed

by le

ase

arra

ngem

ent b

etw

een

cons

olid

ated

ent

ities

. N

ote

5:

Diff

eren

ce c

ause

d by

acq

uisi

tion.

235

TA

BL

E 7

C

HIN

A A

IRL

INE

S, L

TD

. AN

D S

UB

SID

IAR

IES

INV

EST

ME

NT

S IN

MA

INL

AN

D C

HIN

A

FOR

TH

E Y

EA

R E

ND

ED

DE

CE

MB

ER

31,

202

0 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs/R

enm

inbi

/U.S

. Dol

lars

, Unl

ess S

tate

d O

ther

wis

e)

Chi

na A

irlin

es

Inve

stee

Com

pany

Nam

e M

ain

Bus

ines

s and

Pr

oduc

t

Tot

al A

mou

nt

of P

aid-

in

Cap

ital

Inve

stm

ent

Typ

e

Acc

umul

ated

O

utflo

w o

f In

vest

men

t fr

om T

aiw

an a

s of

Jan

uary

1,

2020

Inve

stm

ent F

low

A

ccum

ulat

ed

Out

flow

of

Inve

stm

ent

from

Tai

wan

as

of D

ecem

ber

31,

2020

Net

Inco

me

(Los

s) o

f th

e In

vest

ee

% O

wne

rshi

p of

Dir

ect o

r In

dire

ct

Inve

stm

ent

Inve

stm

ent

Gai

n (L

oss)

Car

ryin

g A

mou

nt

as o

f

Dec

embe

r 31

, 20

20

Acc

umul

ated

In

war

d R

emitt

ance

of

Ear

ning

s as o

f D

ecem

ber

31,

2020

Out

flow

In

flow

A

irpor

t Air

Car

go T

erm

inal

(X

iam

en) C

o., L

td.

Forw

ardi

ng a

nd st

orag

e of

air

carg

o $

1,

105,

474

(RM

B 25

4,48

0)

Indi

rect

(N

ote

1)

$

118,

920

(US$

4,

186)

$

- $

-

$

118,

920

(US$

4,

186)

$

91,3

11

(RM

B 21

,367

) 14

.00

$

12,7

94

(RM

B 2,

991)

$

238,

717

(RM

B 54

,953

) $

10

0,47

0 (U

S$

3,53

7)

(N

ote

2)

A

irpor

t Air

Car

go S

ervi

ce

(Xia

men

) Co.

, Ltd

. Fo

rwar

ding

and

stor

age

of a

ir ca

rgo

60

,817

(R

MB

14,0

00)

Indi

rect

(N

ote

1)

55

,325

(U

S$

1,94

7)

-

-

55,3

25

(US$

1,

947)

68

,272

(R

MB

15,9

76)

14.0

0

9,56

6 (R

MB

2,23

7)

134,

918

(RM

B 31

,058

)

44,3

33

(US$

1,

561)

(Not

e 2)

Taik

oo (X

iam

en) L

andi

ng

Gea

r Ser

vice

s

Land

ing

gear

m

aint

enan

ce se

rvic

es

2,36

0,51

1 (U

S$

83,0

90)

Indi

rect

(N

ote

1)

61

,114

(U

S$

2,15

1)

-

-

61,1

14

(US$

2,

151)

-

2.58

9

-

-

-

H

AEC

O C

ompo

site

St

ruct

ures

(Jin

jiang

) C

ompo

site

mat

eria

l

331,

335

(US$

11

,663

) In

dire

ct

(Not

e 1)

18,0

68

(US$

63

6)

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ning

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ount

ed to

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latio

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ule,

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er o

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r 60%

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onso

lidat

ed n

et a

sset

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ue.

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e 5:

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iwan

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ort S

ervi

ces i

nves

ted

in T

aiw

an A

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t Ser

vice

s (Sa

moa

), w

hich

in re

turn

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este

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ompa

ny lo

cate

d in

mai

nlan

d C

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ote

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B a

nd U

.S. d

olla

r am

ount

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sset

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tran

slat

ed a

t yea

r-end

rate

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thos

e of

gai

ns (l

osse

s), a

t the

ave

rage

of t

he y

ear-e

nd ra

tes f

or th

e re

porti

ng p

erio

d.

(C

oncl

uded

) 237

TA

BL

E 8

C

HIN

A A

IRL

INE

S, L

TD

.

INFO

RM

AT

ION

OF

MA

JOR

ST

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OL

DE

RS

FOR

TH

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EA

R E

ND

ED

DE

CE

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ER

31,

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e of

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or S

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er

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es

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ber

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es

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enta

ge o

f O

wne

rshi

p (%

)

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na A

viat

ion

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DF)

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iona

l Dev

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t Fun

d (N

DF)

519,

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519

9.59

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e 1:

Th

e in

form

atio

n of

maj

or sh

areh

olde

rs p

rese

nted

in th

is ta

ble

is p

rovi

ded

by th

e Ta

iwan

Dep

osito

ry &

C

lear

ing

Cor

pora

tion

base

d on

the

num

ber

of o

rdin

ary

shar

es a

nd p

refe

rred

sha

res

held

by

shar

ehol

ders

with

ow

ners

hip

of 5

% o

r gr

eate

r, th

at h

ave

been

iss

ued

with

out

phys

ical

reg

istra

tion

(incl

udin

g tre

asur

y sh

ares

) by

the

Com

pany

as

of th

e la

st b

usin

ess

day

for

the

curr

ent q

uarte

r. Th

e sh

are

capi

tal i

n th

e fin

anci

al s

tate

men

ts m

ay d

iffer

fro

m th

e ac

tual

num

ber

of s

hare

s th

at h

ave

been

is

sued

with

out p

hysi

cal r

egis

tratio

n be

caus

e of

diff

eren

t pre

para

tion

basi

s. N

ote

2:

If a

shar

ehol

der d

eliv

ers

the

shar

ehol

ding

s to

the

trust,

the

abov

e in

form

atio

n w

ill b

e di

sclo

sed

by th

e in

divi

dual

trus

ter

who

ope

ned

the

trust

acc

ount

. For

sha

reho

lder

s w

ho d

ecla

re in

side

r sh

areh

oldi

ngs

with

ow

ners

hip

grea

ter

than

10

%

in

acco

rdan

ce

with

th

e Se

curit

y an

d Ex

chan

ge

Act

, th

e sh

areh

oldi

ngs

incl

ude

shar

es h

eld

by s

hare

hold

ers

and

thos

e de

liver

ed t

o th

e tru

st o

ver

whi

ch

shar

ehol

ders

hav

e rig

hts

to d

eter

min

e th

e us

e of

tru

st p

rope

rty.

For

info

rmat

ion

rela

ting

to i

nsid

er

shar

ehol

ding

dec

lara

tion,

ple

ase

refe

r to

Mar

ket O

bser

vatio

n Po

st S

yste

m.

- 81

-

238

China Airlines Co., Ltd.


Spokesperson & Deputy Spokesman

Name Spokesman Deputy Spokesman Lu, Shwu-Huoy Wang, Wei

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

Organiza on Unit Address Tel Headquarter No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan 886-3-399-8888 Taipei Branch No.131, Sec on 3, Nanjing East Road, Taipei City 104, Taiwan 886-2-2715-2233 Cargo Sales & Service, Taiwan No.3, Aly. 123, Ln. 405, Dunhua N. Rd., Songshan Dist., Taipei City 105, Taiwan 886-2-2715-5151 Kaohsiung Branch 6 Floor, Asia-Paci c Financial Plaza, No.38 Of Xin Guang Road, Lingya District, Kaohsiung City 802, Taiwan 886-7-213-1200 Tainan Branch Room A, 6 Floor, No.358, Sec on 1, Tungmen Road, Tainan, Taiwan 886-6-235-8099 Taichung Branch Room 2, 15th Floor, No.218, Sec on 2, Taiwan Boulevard, West District, Taichung City 403, Taiwan 886-4-2325-9592 Maintenance Div. No.15, Hangqin S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan 886-3-383-4251 Cargo Sales & Services Mainland China Suite 22i, No.726 Of West Yanan Road, Changning District, Shanghai, China 86-21-2220-3292 Beijing O ce Bright China Chang An Building, Tower2, Unit 1025, No.7 Jianguomen Nei Avenue, Beijing, China 86-10-6510-2671 Shanghai O ce Suite 22a, No.726 Of West Yanan Road, Changning District, Shanghai, China 86-21-2220-3333 Guangzhou O ce Room 1210, 12th Floor, Teem Tower, No.208 Of Tianhe Road, Tianhe District, Guangzhou, Guangdong, China 86-20-8527-2950 Shenzhen O ce Room 4805, O ce Tower, Shun Hing Di Wang Commercial Center, No.5002 Of Shen Nan East Road, Luohu District, Shenzhen,

Guangdong, China 86-755-8246-3560 Xian O ce Room 810, 8th Floor, Gaoxin Building 9, Gaoxin 4th Road, High-Tech Zone, Xi'an, Shaanxi, China 86-29-8985-1902 Chengdu O ce Room 1608, South Tower, Baoli Center Building, No.7, Consulate Rd. Chengdu, China 86-28-8602-7508 Zhengzhou O ce Rooms 1101-1102, Tower B, Yuhong Interna onal Building, No.59 Of Zijingshan Road, Zhengzhou, Henan, China 86-371-5562-9880 Changsha O ce Room 1207 Pinghetang business building, No.88, Huangxing Middle Road, Furong district, Changsha City, Hunan province, China 86-731-8224-0871 Shenyang O ce Room 1110, Tower E, Fortune Center, No. 59 of North Sta on Road, Shen He District, Shenyang, Liaoning, China 86-24-3128-7021 Xiamen O ce Unit 3310, 33rd Floor, Bank Center, No.189 Of Xiahe Road, Xiamen, Fujian, China 86-592-2388-388 Nanjing O ce Room B1-B2, Building 38, Nanjing Center Building, No.1 South Zhongshan Road, Qinhuai District, Nanjing, China 86-25-8467-1050 Ningbo O ce Room 1515, Zhongshan Building, No93 East Zhongshan Road, Haishu District, Ningbo, China 86-574-8775-4090 Hangzhou O ce Room 2307, Building 2, China Qian Tang Avia on Building, No.66, Shimin St., Jianggan District, Hangzhou, China 86-571-8668-4214 Fuzhou Sta om Room 2508, Zhonggeng Youth Plaza, No.83 Of East Road, Gulou District, Fuzhou, Fujian, China 86-591-8755-9705 Chongqing Sta on Room 2202, No.3 Building, Zhongyu Plaza, No.86 Of Hongjin Avenue, Yubei District, Chongqing, China 86-023-8828-0118 Haikou O ce 18E, Huanhai Business Building, No.15, Jinmao W. Rd., Haukuo Hainan, China 86-898-6853-9677 Nanchang Sta on Rm 511, o ce building 7, hengmaodreamwrold Square, 438 Beijing E. Rd, Nanchang, Jiangxi Province, China 86-0791-8378-0580 Sanya Sta on Room 306, Floor 3rd, Exit and entry administra on of Sanya comprehensive service center, Sanya Phoenix Int'l Airport, Hainan,

China 86-0898-8802-4956 Wenzhou Sta on Room 2310, Huameng Business Palace, No.2 Of Chezhan Road, Lucheng District, Wenzhou, Zhejiang, China 86-0577-8605-2181 Wuxi Sta on Room 1611-1612, 16th Floor, Columbus building, No 282, ChangJiang North Road, New District Wuxi, Jiangsu China 86-0510-8522-8710 Yancheng Sta on Room B1207, East Building High-End Business O ce (Hbo), Ren Min South Road No.1, Yancheng, Jiangsu, China 86-515-8996-6950 Qingdao O ce Unit 2801, O ce Tower, Shangri-La Centre, No.9 Xiang Gang Zhong Lu, Qingdao, China 86-532-6887-7106 Wuhan O ce Room 1315, 13F, New World Interna onal Trade Building,568 Jianshe Avenue, Wuhan, China 86-27-8555-8172 Changchun O ce Rooms 6006, 6th Floor, Bai-Nau Technology Building, No.1313 Of Gong Nong Road, Chaoyang District, Changchun, Jilin, China 86-431-8920-7672 Xuzhou Sta on Room 537, CUMT University Science Park, Jiefang S. Road, Xuzhou City, Jiangsu, China 86-516-8379-0550 Cargo Sales & Services, Japan Ni ochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan 81-3-6378-8860 Tokyo Branch Ni ochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan 81-3-6378-8855 Osaka Branch Nakanoshima Mitsui Bldg. 9F 3-3, 3-Chome Nakanoshima Kita-Ku Osaka-Shi, Osaka 530-0005, Japan 81-6-6459-5783 Sapporo Branch Kita 1 Jo Mitsui Building 3F, Kita 1, Jo Nishi 5, Chuo-ku, Sapporo-Shi Hokkaido, 060-0001, Japan 81-11-218-6766 Shizuoka Sta on Shizuoka Ariport Terminal Bldg. 1F, 3336-4, Sakaguchi, Makinohara-Shi, Shizuoka, 421-0411, Japan 81-548-29-2668 Toyama Sta on Toyama Airport Interna onal Terminal Building 3F, 191 Akigashima, Toyama-Shi, 939-8252, Japan 81-76-461-7200 Kagoshima Sta on Kagoshima Airport Interna anl Terminal Bldg. 1355-4 Fumoto, Kirishima, Kagoshima 899-6404, Japan 81-995-57-9898 Miyazaki Sta on Miyazaki Airport, Akae Miyazaki 880-0912, Japan 81-985-64-9811 Nagoya Branch 3F, NMF Nagoya-Fushimi Building, Nishiki 2-9-27, Naka-ku, Nagoya, Aichi, 460-0003, Japan 81-52-202-7253 Fukuoka Branch Daihakata Bldg. 8F, 2-20-1 Hakata Ekimae, Hakata-Ku, Fukuoka 812-0011, Japan 81-92-471-7788 Hiroshima Branch Hiroshima-Mitsui Bldg. 7F 2-7-10, Ote-Machi, Naka-Ku, Hiroshima-Shi, Hiroshima, 730-0051, Japan 81-82-542-0883 Takamatsu Sta on Takamatsu Airport Building, Oka, Konan-cho, Takamatsu, Kagawa, 761-1401, Japan 81-87-815-8702 Kumamoto Sta on Kumamoto Airport Int'l Terminal Bldg. 1802-2 Oyatsu, Mashiki-machi, Kamimashiki-gun, Kumamoto 861-2204, Japan 81-96-285-1814 Okinawa Branch Gojinsha Naha Matsuyama Bldg. 3F, 2-1-12 Matsuyama, Naha-Shi, Okinawa 900-0032, Japan 81-98-863-1013 Korea Branch 3F, eplaza Bldg., 25, Sejong-daero 4-gil, Jung-gu, Seoul, Republic of Korea 04527 82-2-317-8888 Busan Branch 3F, Kyo-Won B/D, Jungang Daero 216, Dong-Gu, Busan, Korea, 48733 82-51-462-8885 Hong Kong Branch Suites 2701-2705, 27F Devon House, Taikoo Place, 979 King's Road, Hong Kong 852-2843-9800 Thailand Branch 4Fl., The Peninsula Plaza Bangkok, 153 Rajadamri Rd., Bangkok 10330, Thailand 66-2-250-9898 Bali Branch Departure Int'l Terminal 2nd FL., No. A0-12B Ngurah Rai Airport. Tuban-Bali, Indonesia 62-361-935-7298 Malaysia Branch Unit 15.01, Level 15, AMODA Building, 22, Jalan Imbi, 55100 Kuala Lumpur, Malaysia 60-3-2142-7344 Penang Branch Unit 9.04, Level 9, Menara Boustead Penang, 39 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia 60-4-228-9227 Singapore Branch 302 Orchard Road, #14-01 Tong Building Singapore 238862 65-6-737-2144 Cambodia Branch #10, St.596 Toul Kork, Sangkat Beoung Kok II, Khan Toul Kork, Phnom Penh, Cambodia 855-23-883-696/686 Myanmar Branch No.353/355, Bo Aung Kyaw Street, Kyauktada Township, Yangon, Myanmar 95-1-839-2663 Philippines Branch G/F Unit-1 Golden Empire Tower 1322 Roxas Boulevard Cor. Padre Faura St., Ermita Manila, Philippines 63-2-8354-6700 to 09 Indonesia Branch In land Tower, M1 Floor, Jl. Jend. Sudirman Kav.32, Jakarta 10220, Indonesia 62-21-251-0788 Vietnam Branch 1B, 7F Crescent Plaza 105 Ton Dat Tien St., Dist.7, Ho Chi Minh City, Vietnam 84-28-5414-1008 Hanoi Branch 4th Floor, Opera Business Center, 60 Ly Thai To Street, Hoan Kiem District, Hanoi, Vietnam 84-24-3936-6364 Palau Branch P.O. BOX 10027 Koror, Republic of Palau 96940 680-488-8888 Australia Branch Suite 1, Level 1, Nigel Love Building, 10 Arrivals Crt. Sydney Interna onal Airport Mascot NSW 2020, Australia 61-2-8339-9188 Brisbane Branch 1G35, Brisbane International Terminal, Airport Drive, Brisbane Airport QLD 4008, Australia 61-7-3860-5611 Melbourne Branch Level 2, North End, Terminal 2, Melbourne Airport, Tullamarine 3045 61-3-9907-0910 New Zealand Branch GM60, Level 1, Auckland Interna onal Airport, Auckland 2150, New Zealand 64-9-256-8088 India Branch O ce No.323, 3rd Floor, MGF Metropolis, M.G. Road, Gurgaon 122001, Haryana, India 91-124-711-5000 Los Angeles Branch 200 N. Con nental Blvd., Suite 100, El Segundo, CA 90245, U.S.A. 1-310-322-2888 New York Branch 633 3rd Ave., 8th Fl., Suite 800, New York, NY 10017, U.S.A. 1-917-368-2000 San Francisco Branch 433 Airport Blvd., Suite 501 Burlingame, CA 94010, U.S.A. 1-650-931-8000 Honolulu Branch 1830 Ala Moana Blvd Room 212, Honolulu, Hawaii 96815, U.S.A. 1-808-955-0088 Canada Branch Suite 240-10451 Shellbridge Way, Richmond, Bri sh Columbia, V6X 2W8, Canada 1-604-242-1168 Cargo Sales & Services The Americas 5651 West 96th Street, Los Angeles, CA 90045, U.S.A. 1-310-646-1260 Guam Branch 518 Pale San Vitores Road, Suite 202-203, Concorde Center, Tumon, Guam 96913, U.S.A. 1-671-649-0861 Netherlands Branch O cia Gebouw I, De Boelelaan 7, 6th Floor, 1083 HJ Amsterdam, The Netherlands 31-20-646-1001 Germany Branch Kaiserstr. 53, 60329 Frankfurt, Germany 49-69-297-0580 Italy Branch Via Lucullo 3, 00187, Rome, Italy 39-06-474-5045 Cargo Sales & Services, Europe Cargo Center Luxair, L-1360, Luxembourg 352-348-363-9500 Austria Branch Mariahilfer Strasse 123/8 O.G. 1060 Vienna, Austria 43-1-8130-156 The United Kingdom Branch Minstrel House, 1F, 2 Chapel Place, Rivington Street, London, EC2A 3DQ 44-208-587-3688

Stock Transfer Agent: Name: Address: Website: Tel:

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

Auditors: Name: Auditors: Address: Website: Tel:

Deloi e & Touche Huang, Jui-Chan ; Cheng, Shiuh-Ran 20F., No. 100, Songren Rd., Xinyi Dist., Taipei City 110, Taiwan

h p://www.deloi e.com.tw 886-2-2725-9988

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

china airlines co., ltd. chairman

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