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Stock Code : 1702 Namchow Chemical Industrial Co., Ltd. 2015 Annual Report Notice to readers This English version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail. Website to Search for the Annual Report:http://mops.twse.com.tw Company website: www.namchow.com.tw Printed on March 29, 2016

Namchow Chemical Industrial Co., Ltd. 2015 Annual … · Namchow Chemical Industrial Co., Ltd. 201. ... 201 VIII. Special Notes ... The Company has an annual revenue of NTD 2,780,173

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Stock Code : 1702

Namchow Chemical Industrial Co., Ltd.

2015 Annual Report

Notice to readers

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

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

version and Chinese version, the Chinese version shall prevail.

Website to Search for the Annual Report:http://mops.twse.com.tw

Company website: www.namchow.com.tw

Printed on March 29, 2016

1.Spokesperson Information:

Name Zhou-Jing Chen Jung-Chang Lien (Agent)

Title Assistant Manager Assistant Manager

Telephone (02) 2535-1251#320 (02)2535-1251#270

Email [email protected] [email protected]

2.Addresses and Telephone Numbers of the Main Office and Factory:

Address of Main Office No. 100, Sec. 4 Yenping Road, Taipei City

Telephone (02)2535-1251

Factory Address No. 35, Xingbang Road, Guishan District,

Taoyuan City

Telephone (03)361-5571

3.Stock Transfer Information:

Name of Stock Transfer

Agency

Agency Department of Chinatrust Commerical Bank

Address 5F, No. 83, Sec. 1, Chongqing South Road, Taipei City

Telephone (02)6636-5566

Website http://ecorp.ctbcbank.com/cts/index.jsp

4.Certified Public Accountant for the Most Recent Year:

Name of Firm KPMG Taiwan

Name of CPA An-Tian Yu, Xiu-Yu Lin

Address 68F, No. 7, Section 5, Xinyi Road, Taipei City

Telephone (02)8101-6666

Website www.kpmg.com.tw

5.Name of Trading Site for Listed Securities Overseas and Inquiry Information: None

6.Company Website: www.namchow.com.tw

Table of Contents

I. Letter to Shareholders ……………………………………………………………… 1

II. Company Profile ……………………………………………………………………. 5

(I) Date of Establishment………………………………………………………. 5

(II) Company History……………………………………………………………. 5

III. Corporate Governance Report……………………………………………………... 12

(I) Organizational System……………………………………………………… 12

(II) Background Information of Directors, Supervisors, General Managers,

Vice General Managers, Assistant Managers, and Heads of Various

Departments and Branches………………………………………………….

14

(III) Remunerations paid to directors, supervisors, general managers, and vice

general managers in the last years…………………………………………..

31

(IV) Status of Corporate Governance……………………………………………. 45

(V) Public Expenditure on CPAs………………………………………………... 102

(VI) Information on Replacement of Accountants……………………………….. 103

(VII) Disclosure of Name, Position, and Duration of Service at Firms or Their

Associated Enterprises within Past Year of Chairman, General Manager,

and Managers in Charge of Financial or Accounting Affairs……………….

103

(VIII) Transfer of Stock Options and Changes in Equity Pledge of Directors,

Supervisors, Managers, and Shareholders Holding More Than 10% of

Shares in the Latest Year and as of the Date of Printing of Annual Report…

104

(IX) Information of Relationship among Top 10 Shareholders Who Are Related,

Spouses, or Relatives Within the Second Degree of Kinship……………….

106

(X) Shares Held by Company, Directors, Supervisors, Managers of Company,

and Businesses Controlled Directly or Indirectly by Company of Same

Reinvestment Business and Consolidated Calculation of Comprehensive

Shareholding Ratio………………………………………………………….

108

IV. Fundraising………………………………………………………………………….. 109

(I) Capital and Shares ………………………………………………………….. 109

(II) Corporate Debts, Special Shares, Global Depositary Receipt, Employee

Stock Option Certificate, Restricted Employee Shares and M&A (Including

Merger, Acquisition, and Segmentation)…………………………………….

115

(III) Implementation of Capital Utilization Plan…………………………………. 115

V. Operational Status ………………………………………………………………….. 116

(I) Business Content……………………………………………………………. 116

(II) Overview of Marketing and Production/Distribution………………………. 122

(III) Information of Employees………………………………………………….. 160

(IV) Information of Environmental Protection Expenditure……………………... 161

(V) Employer-employee Relations……………………………………………… 162

(VI) Important Contract…………………………………………………………... 165

VI. Financial Status ……………………………………………………………………... 166

(I) Brief Balance Sheet and Income Statement for the Past Five Years………... 166

(II) Financial Analysis for the Past Five Years…………………………………. 176

(III) Supervisor Report on Reviewing the Latest Annual Financial Report…...… 188

(IV) Latest Financial Report……………………………………………………… 189

(V) Latest Corporate Entity Financial Reports Audited and Certified by CPA…. 189

(VI) Impacts of Latest Financial Difficulties Encountered by Company and Its

Associated Enterprises on Company's Financial Standing as of Date of

Printing of Annual Report…………………………………………………...

189

VII. Discussion and Analysis of Financial Standing and Financial Performance and

Risks…………………………………………………………………………………..

190

(I) Financial Standing ……………………………………………………….…. 190

(II) Financial Performance ……………………………………………………… 192

(III) Cash Flow…………………………………………………………………… 193

(IV) Impacts of Latest Major Capital Expenditure on Financial Business………. 195

(V) Main Reasons for Profits or Losses of Latest Reinvestment Policy,

Improvement Plan, and Investment Plan for the Coming Year……………..

196

(VI) Analysis and Assessment of Risks…………………………………………. 200

(VII) Other Important Matters……………………………………………………. 201

VIII. Special Notes………………………………………………………………………… 202

(I) Related Materials of Associated Enterprises……………………………….. 202

(II) Organization of Latest Private Placement Securities as of the Date of

Printing of Annual Report …………………………………………………..

214

(III) Latest Holding or Disposal of Company's Shares by Subsidiaries as of the

Date of Printing of Annual Report…………………………………………..

214

(IV) Other Required Supplementary Matters…………………………………….. 214

※ Latest Matters with Important Impacts on Shareholder Rights or Security

Prices Indicated in Article 36 Paragraph 2 Subparagraph 2 of the Securities

Exchange Act as of the Date of Printing of Annual Report…………………..

214

1

I. Letter to Shareholders

(I) 2015 Business Report

The Company has an annual revenue of NTD 2,780,173 thousand throughout 2015, an

increase of NTD 202,137 thousand (7.8%) from NTD 2,578,036 thousand in 2014. The

Company's consolidated revenue was NTD 15,479,543 thousand in 2015, an increase of

NTD 647,697 thousand (4.4%) from NTD 14,831,846 thousand in 2014. The profits

amounted to NTD 1,112,850 thousand in 2015, an increase of NTD 164,216 thousand

(17.3%) from NTD 948,634 thousand in 2014. Both the revenue and profits set historical

records in 2015, continuing the growth momentum of respective affiliated businesses in

2014 from 2013. With every employee within the group working hard in 2015, most

businesses accomplished growths from 2014. Taiwan's Oil & Fat, Frozen Dough, Frozen

Noodle, Namchow (Thailand) Ltd., in particular, showed relatively high growths. Our

company has always been known for its quality, safe, and healthy products. We have an

internal food safety committee consisting of experts with exclusive responsibilities to

carefully control, monitor, and effectively manage the source of raw materials supplied. We

physically visit the facilities of our overseas suppliers and pursue the highest testing criteria.

Our efforts have gained confidence and support from consumers. All businesses have

continued to perform and grow well.

Financially, the company's debts totaled NTD 5,578,132 thousand in 2015; the debt

ratio was 50.4%, an increase of 0.6% and NTD 531,492 thousand from 49.8% in 2014 when

the overall debts were 5,046,640 thousand. In terms of the consolidated statement, the

company's debts totaled NTD 12,755,258 thousand in 2015; the debt ratio was 69.3%, an

increase of 0.4% and NTD 1,093,522 thousand from 68.9% in 2014 when the overall debts

were 11,661,736 thousand. Cash inflow as a result of business activities totaled NTD

2,710,224 thousand; the current ratio was 136.7%, which was comparable to 137.5% in

2014, indicating that the overall financial outlook was relatively desirable.

As far as research and development is concerned, crystal detergent soaps and grapefruit

seed antiseptic products have been recognized by consumers and the public since a long

time ago because they are made with natural fats and feature no additives. The fat and oil

business continues to research and develop healthy and special-purpose oils such as oil for

making pineapple cakes and that for deep-fry purpose in the food and beverage industry.

Meanwhile, two types of premium fresh cream are introduced from Japan to suit the needs

2

for making various salty or sweet pastries. When used in combination with Namchow's

butter, they give rise to all kinds of cakes. The frozen dough business continues to focus on

researching and developing novel options to attract consumers and can tailor-make products

for customers. It is a long-term trustworthy partner in the baking industry. The ice cream

business introduces new products each year, which are always well accepted by consumers.

To meet the needs of respective customers, different flavors of soft-serve ice cream are

introduced to the market on a quarterly basis. The ambient-temperature rice business

produces ready-to-serve cooked fiber-rich rice with a health-preserving appeal. It is claimed

to be able to regulate blood sugar and lipid and the first healthy rice certified with health

claims in the country. In February this year, it was selected by the Council of Agriculture

under the Executive Yuan to be a proactively developed seed player in an effort to reinforce

distribution of domestic agricultural products around the world. It is indeed an elite

processed food with exportation potential.

3

(II) Summary of 2016 Business Plan

The fat and oil business adopts a consultation-based marketing strategy that has

significantly helped grow the revenue for the past six years. In response to the increase in

sales, the third production line for oils and fats newly built at the Guangzhou facility was

commissioned in June two years ago ;and the ground was broken for the construction of

the Jinshan Plant in Shanghai on March 9 last year; the investment is expected to total

around NTD 2.1 billion. ,For Stage 1, production of oils and fats and frozen noodles will

be commissioned in October this year and the production lines for frozen dough and fresh

cream will be expanded for Stage 2.

Namchow insists quality for its oil and fat products. Thanks to the replacement of

orders on the market, the sales climbed significantly. Expansion of the fat and oil refining

equipment with an investment of NTD 60 million at the Taoyuan facility was completed at

the end of last year, contributing to an increase in the throughput of around 30%. In terms of

the catering business in Taiwan, Dian Shui Lou restaurants use mostly local food ingredients

that are carefully prepared to win the hearts of consumers of different generations and are

widely accepted and spoken well of. A new store was opened at Big City in Hsinchu two

years ago. The seventh Dian Shui Lou Restaurant and Duroyal Cafe opened at Mitsui Outlet

Park this year. The business has been doing well with outstanding sales since they were

opened.

Namchow has invested in Thailand for 25 years. Exportation has grown quickly since

2010 and the throughput utilization rate has reached the high level. For the next two to three

years, it is expected that NTD 500 million will be invested to constantly advance the

production efficacy. Attempts such as baby rice crackers, cooked rice, and cooked porridge

for the past few years have continued to bring about favorable results. The Southeast Asian

market has a promising future. Namchow Thailand is the springboard for the group to take

part in ASEAN markets.

To meet regulatory requirements and the high corporate standards, additional NTD 37

million will be invested in the main food safety laboratory to be set up at the Taoyuan Plan.

The laboratory will be devoted to autonomous tests and autonomous management. The

Guangzhou Plant was certified as a high-tech enterprise for its agricultural products fine

processing technology and green process last year and also designated as an "Guangdong

Province Baking Oil and Fat Engineering Technical Research Center enterprise" by the

4

Guangdong Provincial Department of Science and Technology in December. The Jinshan

Plant in Shanghai received subsidies totaling RMB 18.76 million for industrial

transformation and upgrade from Shanghai City Government for its energy-saving,

carbon-reduction, and food safety-related investments at the end of last year. All of the said

accomplishments are possible because of the endless effort of Namchow in food safety and

the reinforced investment in environmental protection. Since it was first established in 1952,

64 years have passed. What remains unchanged is the integrity and emphasis on the rights of

consumers and the pursuit of being number one in respective business fields. Namchow

serves as the best example by consolidating corporate social responsibilities in its

management.

Under the effort, belief, and determination of all staff, I believe that we will continue to

reach new heights in business performance and create even greater investment benefits.

Please continue to support and encourage us to the best extent possible.

To

Namchow General Shareholders Meeting

Chen Fei Lung

Chairman

5

II. Company Profile

(I) Date of Establishment: March 29, 1952

(II) Company History:

Namchow Chemical Industrial Co., Ltd. was established in 1952 by Mr. Qizhi Chen, an

overseas Chinese in the Philippines. He took over Namchow Industrial Co., Ltd. and reorganized it.

Sixty-four years have passed. The Company has been focusing on six major fields, namely oils and

fats/dairy products, flour, rice, dining, daily detergent supplies, and biotechnology, with products

sold around the world. The Company's sustainable management goal is to be "based in Taiwan" and

to "deploy around the globe."

1. Businesses of Namchow in Taiwan

1) Detergents -- Namchow soaps were produced for the first time in 1952, followed by the

production of glycerin in 1956. The most advanced equipment in the world was introduced in 1963.

Namchow Crystal Soap that is completely different from its counterparts on the market was

developed and has remained a leading brand among laundry soaps to this date. The soap

manufacturing facility was added in Taoyuan in 1980 to diversify the Company's management of

the cleaning supplies field consisting of soap and shampoo. As people get more and more aware of

environmental protection, natural cleaning daily supplies started to gain prominence again.

Namchow is known for being active in its devotion to the research and development of new product

series. It introduced the liquid crystal soap exclusively for laundry (2010) and introduced again the

natural and septic laundry liquid crystal soap in 2012 as well as cleaning solutions for food

containers of the same grade as those for cleaning vegetables and fruits. The Company also

researched and developed the Crystal Grapefruit Seed Spray Dry Hand Wash. The "Antrodia

cinnamomea Bath Soap" developed with Alishan Antrodia cinnamomea extract solution in 2014 is a

star product in the future.

Namchow cleaners have won countless awards in recent years: Featuring purity and free of

additives, the Namchow liquid crystal soap won in the best product category of the "Jade Mount

Award of the Ninth National Brands" of 2012 and Namchow became the first and the only one

cleaner manufacturer that has won this Award since its inception. In 2013, the Namchow Crystal

Grapefruit Seed Antiseptic Series won in the two categories, namely best product and first national

place, of the Jade Mount Award of the Tenth National Brands. Products in this series including

spray dry hand wash, hand wash solution, and hand wash soap were reviewed by the Centers for

Disease Control of the Ministry of Health and Welfare and were recommended by the Centers for

6

Disease Control in the prevention against diseases. The Namchow Crystal Grapefruit Seed Liquid

Laundry Soap was approved and recommended under the "Infectious Disease Prevention-Related

Products Referral Program" organized by the Institute for Biotechnology and Medicine Industry as

authorized by the Centers for Disease Control of the Ministry of Health and Welfare and won the

SQM National Quality Symbol.

2) Oils and fats -- Namchow started technical collaboration with ミヨシ, one of the Top 10

oils and fats enterprises in Japan in 1971 in the production of baking oils and fats to supply bread,

pastry, cookies, ice cream, and instant noodles manufacturers. Namchow butter oil substitute,

Yufeng Brand, and Weijia series of edible oils and fats have been deeply trusted and supported by

customers for the past nearly half century. Namchow is devoted to becoming the most trustworthy

partner of the baking industry and carefully practices consultation-based marketing and one-stop

service.

As consumers become more and more concerned about food safety, Namchow is reinforcing

its management of raw materials of oils and fats at the source. It has an internal Food Safety

Committee convened by the Deputy Executive President of the Group to careful monitor, control

and physically visit overseas oil and fat suppliers and to ensure that sources of the raw materials for

oils and fats meet national requirements.

3) Ice cream -- International Royal Dairy Products Company was established in 1988. (In

December 1997), Royal and Lucky merged to be Lucky Royal Co., Ltd., using Duroyal as its brand

to develop unique and high value-added products and become one of the largest ice cream

production and distribution company throughout Taiwan. The premium ice cream brand "Kabisuo"

developed in 2004 entered the Mainland Chinese market in 2013. The soft-serve ice cream was

supplied to convenience stores in 2013 and triggered a sales spree. One production line was added

to the Tainan facility in the same year. New production lines for ice cream and crusts were built for

the Taoyuan facility in 2014. The ice cream business is a huge addition to the momentum of the

overall operation. The first Duroyal Cafe opened in January 2016 to serve North European coffee,

ice cream, sweets, light food, and there is a "to go" area that sells soft-serve ice cream and Chinese

delicacy.

Lucky Royal Co., Ltd. took part in the "The Project of Traceability Cloud Application on Safe

Food" of the Department of Industrial Technology under the Ministry of Economic Affairs. The

Project began in November 2012, was officially operative at the end of November 2013, and was

closed out at the end of March 2014. The accomplishments were certified and approved by the

Government. The raw materials and shipping process of all ice cream products can be controlled

7

and found through the QR Code at present to provide consumers with assured protection.

4) Frozen dough-- Seeing in advance the demand of bread/pastry makers for frozen dough and

in order to provide even higher value-added products that help strengthen customers' competitive

advantages, the frozen dough facility was set up at the Zhongli site in 1991. As the market

developed and grew, the second production line was added in 1995 and the third and fourth ones

were added in 1998.

Namchow is known for its powerful capability in the research and development of frozen

dough. Featuring desirable quality, safety, health, time-effectiveness, cost-effectiveness,

manpower-saving, and easy-operation in addition to constant research and development of new

products, Namchow has been able to create its own product features and become an indispensable

best partner of the baking industry. Its products have been sold to Japan, Hong Kong, Shanghai, the

US, Canada, Australia, and Dubai.

5) Frozen noodles -- The frozen noodles technical collaborative contract was signed with

Katoji Co., Ltd. in Japan in 1998. Namchow became the first enterprise producing frozen noodles in

Taiwan. Premium Frozen Noodles were introduced to the market in January 1999 and the second

production line was added in 2012.

Frozen noodles feature tastiness, convenience, fastness, safety, and health. Best quality

products are provided to dining businesses and chained noodle stores. There are around 10,000 plus

customers in the nation. For the past few years, many flour-based foods that are popular among

Chinese, such as Chinese noodles, northern sliced noodles, northern ramen, have been developed

and sold to overseas markets such as the US, Canada, Hong Kong, Australia, Switzerland, Austria,

and Indonesia.

6) Aseptic cooked rice -- NTD 300 million was invested in 2004 in the Zhongli site for the

production of ambient temperature ready-to-serve rice. The rice is meant mainly for exportation and

has successfully entered markets in the US, Australia, Norway, and the UK, among others so far.

Namchow Dietary Fiber Cooked Rice has been certified, reviewed, and approved by the

Department of Health for being able to help bring down the fasting blood sugar level as is proven in

the animal laboratory and been honored as Health Food and Certified Quality Rice (2008). The

Dietary Fiber Cooked Rice took part in the first Demonstrative Screening Campaign of Cooked

Quality Convenience Foods and was honored as "Cooked Quality Convenience Food" by the

Department of Industrial Development of the Ministry of Economic Affairs (2012). The Dietary

Fiber Cooked Rice - Healthy Double-Wheat Rice received the Health Food Permit issued by the

8

Ministry of Health and Welfare for having been proven "through animal experiments" to be

"capable of bringing down total cholesterol in the serum (2014). Dietary Fiber Cooked Rice series

was awarded best product in the Jade Mount Award of National Brands (2015) and was chosen to

be seed players (Healthy Double-Wheat Rice, Healthy Grain-Rich Rice, White Chrysanthemum

Cooked Rice) through the screening campaign of processed food producers and their products with

potential of exportation organized for the first time by the Council of Agriculture in February this

year to become the pioneers of Taiwan rice to enter markets around the world.

7) Dining --

A. Chow Ho Benchangliu Professional Noodles Stores --- Chow Ho Enterprise was

established in 1999 and the demonstrative noodles store Benchangliu was opened to be the antenna

for collecting market information on frozen noodles and serve as the platform for exchange with

customers. The store is located in the tourism factory in Taoyuan.

B. Dian Shui Lou Restaurant --- The Nanjing flagship store opened in 2005. The classic and

elegant Jiangnan design style and authentic Jiang-Zhe flavor is widely well received. Presence was

established in the Fuxing Branch of Pacific SOGO in 2006. Huaining Store opened in 2009. The

Nankan Flagship Store was opened at the Decor House Shopping Mall in 2011 with the "cooked

food to go" area. Presence was established in the Taoyuan Tourism Factory of Namchow in 2012

and the first overseas location opened in the same year on Yishan Road of Shanghai. The Big City

Hsinchu branch became operative in 2014 and there was the invitation in 2016 to establish presence

at Mitsui Outlet Park. A building has been purchased in Shinjuku, Tokyo, Japan for the plan of

opening Dian Shui Lou in Japan and a hotel for high-end women.

Dian Shui Lou, known for its pursuit of advancement at all times and attentive services, has

been recognized in various ratings: a five-star in the 2010 Northern Taiwan Restaurant Survey,

Symbol of Taiwan Delicacy from the Ministry of Economic Affairs in 2011, a five-star in the 2012

Taiwan Restaurant Survey, and the five-star restaurant in Asia Pacific - Asia Pacific Golden Award

of 2015. In various voting contests, it is on the list of Ten Most Famous Chinese Dishes jointly

elected among experts across the Taiwan Strait, the 2012 Popular Restaurant of the Delicacy Month

of Taiwan, a five-star in the Taiwan Beef Noodles Accreditation, and the first place in the Popular

Steamed Dumplings PK of Taiwan.

C. Chaojiangyan Chaoguang Seafood Restaurant --- Chaojiangyan Restaurant opened in

2010. Since it was first opened, "Culture-based Food" has been its management belief. Entrees such

as seafood, sliced duck, Chaoguang dim sum, and Kungfu tea have been well reputed among

connoisseurs by word of mouth. On the rating list of Hong Kong-style restaurants released on the

9

yam website in 2013, Chaojiangyan secured the first place.

D. Taipei Paulaner Restaurant --- Paulaner is famous in Shanghai and returned to Taiwan in

2009 to open stores. The first store was located on the campus of Taipei National University of the

Arts in Guandu and the Taoyuan Tourism Factory was chosen for the establishment of the brewery.

Both equipment and raw materials are imported from Germany and the brewer is German, too.

Presence was established at Urban 1 on No. 1, Qingcheng Street in 2010. The Filipino live band

from New Palace Restaurant Shanghai is a great place for office workers to visit and relax

themselves.

8) Taoyuan Tourism Factory of Namchow -- Certified by the Government to be a tourism

factory, the Taoyuan facility of Namchow opened in 2012. The factory has a footage of 3,300

square meters and covers seven major areas: (1) Namchow Founder Memorial Park; (2) Oil & Fat

Visitor Hallway; (3) Crystal Soap Experience; (4) Dian Shui Lou Cultural Dining; (5) Benchangliu

Demonstrative Noodles Store, Paulaner Brewery, and Dining Demonstrative Center; (6) Thailand

Erawan Shrine Worship Area; and (7) Thailand Cultural House & Thai Food Restaurant. Most of

the visitors represent schools and government agencies. The Taoyuan Tourism Factory has

developed a new look for it is closely related to tourism, education, people-to-people diplomacy,

and local clusters, demonstrating the management by an enterprise of its social responsibilities and

the devotion to promoting local industrial developments.

(II) Overseas Businesses of Namchow

1) Namchow Thailand-- Established in 1989, Namchow Thailand is the first overseas base of

Namchow. The facility in Ban Pong became operative in 1991 to produce instant noodles, rice

crackers, among other products. With settlement-oriented management, multiple food certificates

have been obtained for many years to be the most powerful cornerstone for exportation to Europe

and America. Namchow Thailand is even recognized as a benchmark enterprise by the local

government and is often the first-choice enterprise where the Thai Government receives foreign

representatives or ambassadors. Thin rice crackers produced by Namchow Thailand feature low in

oil, health, and tastiness and received the Golden Award following the screening process by the

German Agricultural Society. The product is sold to major continents such as Europe, Asia, and

America. Efforts have been devoted to the research and development of products such as rice

crackers for babies, cooked rice, and cooked porridge for the past years. These products are sold to

places around the world with fruitful results.

10

The "Little Chef" instant noodles officially returned to Taiwan to be sold locally in November

2015. The high-end three flavors "Bodhi Gingko Mushroom Noodles", "Fuling Pickled Mustard

Pork Noodles", and "Thai Green Curry Chicken Noodles"; they are defined as "slow noodle". The

unique marketing strategy and virtual reality distribution channels have been a hot topic.

2) Oils, fats, and bakery businesses in China-- Tianjin Namchow Oils and Fats Company

was established in 1996. The name was changed to Tianjin Namchow Food Co., Ltd. in 2013.

Various types of banking oils are produced. It is a leading brand on the market of quality oils and

fats. Associated enterprises were established later, namely Shanghai Namchow Food Co., Ltd.,

Guangzhou Namchow Food Co., Ltd., Shanghai Qiaoxing Co., Ltd., and Shanghai Quahog Trading

Co., Ltd.

Tianjin Yoshiyoshi Food Co., Ltd. was established in 2003 to be devoted to the production of

fresh cream and to meet the business demand of high-end customers. In order to supply customers

in the southern part of China, the oil and fat manufacturing facility of Namchow in Guangzhou was

completed in 2007 and expanded in 2015. The production line for frozen dough was set up in the

Tianjin facility in 2011. The third production base was built in the Jinshan area of Shanghai in 2015

and production is expected to begin in the fourth quarter of 2016.

After Namchow established its presence in China, customer service centers were set up in

various areas of China one after another in order to better meet customers' demand. The customer

service center is like the R&D center for customers. Tianjin Namchow Food Co., Ltd. and

Guangzhou Namchow Food Co., Ltd. were both approved and certified by the highest food safety

regulations, the AIB Food Safety Comprehensive Standards, in 2009; the first of its kind in the

baking oil and fat industry of mainland China. The Guangzhou facility was certified as a high-tech

enterprise for its agricultural products fine processing technology and green process. The income

tax rate may be reduced from 25% to 15% for a period of three years, that is, from 2014 to 2016.

The Jinshan Plant in Shanghai received subsidies totaling RMB 18.76 million because it was rated

"2015 Shanghai City Industrial Transformation and Upgrade Development Project" enterprise for

its energy-saving, carbon-reduction, and food safety-related investments, the one and only food

enterprise and Taiwan capital-based enterprise to get the honor. Guangzhou Namchow Food Co.,

Ltd. was designated as a "Guangdong Province Baking Oil and Fat Engineering Technical Research

Center enterprise" by the Guangdong Provincial Department of Science and Technology (2015).

3) Shanghai Paulaner Dining Business - Shanghai Baolaina Co., Ltd. was established in

1996 with technical authorization from the Germany Paulaner Group. The first Paulaner Restaurant

was opened on Fenyang Road, Shanghai, in 1997; it is a garden and beer restaurant that combines

11

high-end beer brewed right on the spot and orthodox Bavaria cuisine. The dining industry has been

flourishing in Shanghai for the past 20 years. Shanghai Paulaner remains steady and is widely loved

and recognized; it is obviously popular among consumers.

Shanghai Baolaina Co., Ltd. currently has four Paulaner Restaurants (Fenyang, New Palace,

Binjiang, Shibo), one Restaurant Ambrosia Japanese & Yakiniku, two Ambrosia Teppanyakis

(Fengyang, Shibo), one Deli & Bakery, and the western premium cuisine - Binjiang No. 1

(collaborative with the German dining group Kafar to provide premium European delicacies).

As the industrial environment changes, corporate social responsibilities (CSRs) have become a

pre-requisite for a company to exist. Namchow started to prepare its CSR Report in 2015 and

promote related policies through its committee in order to fulfill its corporate social responsibilities

in terms of corporate governance, food safety, and environmental sustainability. In other words,

Namchow is devoted to business management and has spared no efforts in upgrading the industry.

With sole sponsorship, it organized the World Market Namchow global partners platform exhibition

in 2014 to display complete product lines of Namchow, including cleaners, oils and fats, baking, ice

cream, rice, noodles, frozen foods, and dining and to explain to customers that Namchow can

provide best quality and high value-added products as well as one-stop service. At the end of the

same year, the "Happy New Year of the Goat - Baking Handy Gift Carnival" exhibition was

organized also with sole sponsorship where 62 bakeries throughout Taiwan were invited to take part;

it helped bring about new hope for the sluggish baking industry in Taiwan and rebuild confidence at

that time.

The stocks of Namchow were traded publicly in 1973. The diversified developments had to do

with raw materials, the technology, the distribution channel, and the culture. Pulses and trends in

the industrial setting have been kept track of following the principles of "knowing how to change,

seeking to change, responding to change, and remaining unchanged." In the future, Namchow will

continue to honor the spirit: As Heaven's movement is ever vigorous, so must a gentleman

ceaselessly strive along and to seek advancements on a daily basis to catch up with time and to

march on the path to sustainable development.

12

III. Corporate Governance Report

(I) Organizational System

1. Organizational structure

董事會董事長副董事長董事

獨立董事

總經理

股東會

稽核室

風險控制

薪資報酬委員會

監察人

總裁

董事長室

功能單位 國內事業

油脂/冷凍麵糰事業部

海外事業

冰淇淋事業部

國際貿易事業部

虛擬系統與電子商務事業部

家品事業部

急凍熟麵事業部

觀光工廠

餐飲事業

泰南僑

上海餐飲

南僑中國

日本南僑

法務

總務

企業社會責任委員會 食品安全辦公室

桃園廠

中壢廠

常溫米飯事業部

工程部

人力資源處

財務處

行政管理處

資訊處

會計處

Shareholders' Meeting

Supervisor

Board of Directors

Chairman

Vice Chairman

Director

Independent

Director Chairman's Office Chairman

Vice Chairman

Director Independent Director Compensation Committee Auditor's Office

Risk Control President

Functional Unit General Manager Domestic Business Overseas Business

Corporate Social Responsibility

Office Food Safety Office

Human

Resources

Office

Zhongli Plant

Taoyuan Plant Aseptic Cooked

Rice Department

Engineering

Department

Financial Affairs

Office

Administration

Office

Legal Affairs

General Affairs

Department

Information

Office

Accounting

Office

Oils and

Fats/Frozen Dough

Department

Oils and

Fats/Frozen Dough

Department

Ice Cream

Department

International Trade

Department

Department of

Virtual Reality

System and

E-Commerce

Home Supplies

Department

Frozen Noodles

Department

Tourism Factory

Dining Business

Namchow

Thailand

Namchow

China

Shanghai

Dining

Namchow

Japan

13

2. Major Departments and Their Scope of Operation

Department Scope of Operation

Oils and Fats/Frozen Dough

Department

Research and development, production, and

distribution of professional oils and fats and frozen

dough products

Home Supplies Department+ Research and development, production, and

distribution of daily cleaners

International Trade Department

Importation and exportation of goods, exportation

affairs and procurement of raw materials, packing

materials, and equipment

Frozen Noodles Department Research and development, production, and

domestic distribution of frozen noodles

Aseptic Cooked Rice

Department

Research and development, production, and

domestic distribution of aseptic cooked rice

Department of Virtual Reality

System and E-Commerce

Planning and operation of e-commerce within the

Group

(platform-based, cross-border, and social

media-based e-commerce)

Joint Logistics Office for the

Dining Business

Planning, implementation, and service windows

for Namchow and reinvested dining businesses

Administrative function Management of legal affairs and general affairs

Information Development, construction, and management of

the information system

Financial Affairs Financial management and capital utilization plan

Accounting Bookkeeping and taxes processing and

management

Engineering Department Assistance in, implementation, and management of

engineering-related affairs

Human Resources Management of human resources and

organizational development

14

(II) Background Information of Directors, Supervisors, General Managers, Vice General Managers, Assistant Managers, and Heads of

Various Departments and Branches

Director and Supervisor Information (I)

Title

Natio

nality

Nam

e

Date of Election

(Inauguration)

Tenure

Initial date of inaugur

ation

Shares held upon

inauguration

Current shares held

Current shares held by spouse

and minors

Shares held in someone else's

name Major

experience/ education

Positions served at the Company and other

companies at present

Other supervisors, directors, or supervisors that are a spouse

or within two degrees of kinship

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Title Name Relationship

Chairm

an

RO

C

Fei-L

ung

Chen

6/10/2015 3

years 48/04/04 33,874,974 11.52% 33,814,934 11.50% 7,577,413 2.57% 0 0.00%

Masters of

Public

Administratio

n, University

of San

Francisco

Chairman of Lucky Royal Co.,

Ltd.

Chairman of Chow Ho

Enterprise Co., Ltd.

Chairman of Qizhi Business

Administration Cultural Co.,

Ltd.

Chairman of Hwa Zhin Co.,

Ltd.

Chairman of Namchow (BVI)

Ltd.

Chairman of Nacia

International Corporation

Chairman of Ting Hao

(Cayman Islands) Holdings

Corporation

Director of Namchow

(Thailand) Ltd.

Director of Yongju (Thailand)

Ltd.

Director of Namchow

International Corporation

Director of Dian Shui Lou

Restaurant Business Co., Ltd.

Director

Supervisor

Director

Vice General

Manager/Vice

President

Fei-Peng

Chen

Namchow

Chemical

Industrial

CO., LTD.

Employee

Welfare

Committee

Representat

ive

Yi-Wen

Chen

Hwa Zhin

Co., Ltd.

Representat

ive

Cheng-Wen

Chen

Cheng-Wen

Chen

Brother

Father

and

Daughter

Father

and Son

Father

and Son

15

Title

Natio

nality

Nam

e

Date of Election

(Inauguration)

Tenure

Initial date of inaugur

ation

Shares held upon

inauguration

Current shares held

Current shares held by spouse

and minors

Shares held in someone else's

name Major

experience/ education

Positions served at the Company and other

companies at present

Other supervisors, directors, or supervisors that are a spouse

or within two degrees of kinship

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Title Name Relationship

Vice C

hairm

an

RO

C

Fei-P

eng C

hen

6/10/2015 3

years 55/03/25 35,792,995 12.17% 36,097,995 12.27% 0 0.00% 0 0.00%

Department of

Economics,

Soochow

University

Director of Lucky Royal Co.,

Ltd.

Director of Chow Ho Enterprise

Co., Ltd.

Director of Qizhi Business

Administration Cultural Co.,

Ltd.

Director of Hwa Zhin Co., Ltd.

Director of Namchow (BVI)

Ltd.

Director of Ting Hao (Cayman

Islands) Holdings Corporation

Director of Nacia International

Corporation

Director of Namchow

(Thailand) Ltd.

Director of Yongju (Thailand)

Ltd.

Director of Namchow

International Corporation

Director of Dian Shui Lou

Restaurant Business Co., Ltd.

Chairman Fei-Lung

Chen

Brother

16

Title

Natio

nality

Nam

e

Date of Election

(Inauguration)

Tenure

Initial date of inaugur

ation

Shares held upon

inauguration

Current shares held

Current shares held by spouse

and minors

Shares held in someone else's

name Major

experience/ education

Positions served at the Company and other

companies at present

Other supervisors, directors, or supervisors that are a spouse

or within two degrees of kinship

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Title Name Relationship

Directo

r

RO

C

Rep

rese

ntati

ve

of

Luc

ky

Roy

al

Co.,

Ltd.

Kan-

Wen

Lee

6/10/2015 3

years

95/06/09

95/06/09

46,041,259

26,583

15.65%

0.01%

46,041,259

26,583

15.65%

0.01%

0 0.00% 0 0.00%

Masters of

Business

Administratio

n, National

Chung Hsing

University

Director of Lucky Royal Co.,

Ltd.

Director of Ting Hao (Cayman

Islands) Holdings Corporation

None None None

17

Title

Natio

nality

Nam

e

Date of Election

(Inauguration)

Tenure

Initial date of inaugur

ation

Shares held upon

inauguration

Current shares held

Current shares held by spouse

and minors

Shares held in someone else's

name Major

experience/ education

Positions served at the Company and other

companies at present

Other supervisors, directors, or supervisors that are a spouse

or within two degrees of kinship

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Title Name Relationship

Directo

r

RO

C

&

US

Rep

rese

ntati

ve

of

Hw

a

Zhi

n

Co.,

Ltd.

Chen

g-W

en

Chen

6/10/2015 3

years

95/06/09

6/10/2015

646,884

0

0.22%

0.00%

646,884

0

0.22%

0.00%

0 0.00% 0 0.00%

Masters,

Graduate

Institute of Financial

Affairs,

Golden Gate University

Executive Director of Shanghai

Qizhi Business Consultation

Co. Ltd.

Director of Shanghai Namchow

Food Co., Ltd.

Executive Director of Shanghai

Quahog Business

Administration Co., Ltd.

Executive Director of Shanghai

Quahog Food Co., Ltd.

Chairman of Shanghai Quahog

Trading Co., Ltd.

Executive Director of Shanghai

Qiaoxing Co., Ltd.

Director/Vice Chairman of

Shanghai Baolaina Co., Ltd.

Director of Tianjin Yoshiyoshi

Food Co., Ltd.

Director/General Manager of

Tianjin Namchow Food Co.,

Ltd.

Director of Nacia International

Corporation

Director of Namchow

International Corporation

Director of Ting Hao (Cayman

Islands) Holdings Corporation

Director of Guangzhou

Namchow Food Co., Ltd.

Chairman

Supervisor

Fei-Lung

Chen

Namchow

Chemical

Industrial

CO., LTD.

Employee

Welfare

Committee

Representat

ive

Yi-Wen

Chen

Father

and Son

Sister and

Brother

18

Title

Natio

nality

Nam

e

Date of Election

(Inauguration)

Tenure

Initial date of inaugur

ation

Shares held upon

inauguration

Current shares held

Current shares held by spouse

and minors

Shares held in someone else's

name Major

experience/ education

Positions served at the Company and other

companies at present

Other supervisors, directors, or supervisors that are a spouse

or within two degrees of kinship

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Title Name Relationship

Directo

r

RO

C

Chin

-Tsai C

hen

6/10/2015 3

years 90/05/25 507,312 0.17% 520,312 0.18% 0 0.00% 0 0.00%

Masters of

Accounting,

Tamkang

University

Supervisor of Shanghai

Namchow Food Co., Ltd.

Director of Shanghai Quahog

Trading Co., Ltd.

Director of Shanghai Baolaina

Co., Ltd.

Vice Chairman of Shangyin

Technology Co., Ltd.

Director of Tianjin Yoshiyoshi

Food Co., Ltd.

Director of Tianjin Namchow

Food Co., Ltd.

Supervisor of Taipei Financial

Building Co., Ltd.

Independent Director of Tong

Hsing Electronic Industries,

Ltd.

Director of Qizhi Business

Administration Cultural Co.,

Ltd.

Director of Nacia International

Corporation

Director of Namchow (BVI)

Ltd.

Supervisor of Yingfutong

Network

Director of Inventec Solar

Energy Corporation

Director of Yongju (Thailand)

Ltd.

Director of Namchow

(Thailand) Ltd.

Director of Ting Hao (Cayman

Islands) Holdings Corporation

Independent Director of Kinsus

Interconnect Technology Corp.

Director of Shin Sheng San

Venture Co., Ltd.

Director of Guangzhou

Namchow Food Co., Ltd.

Supervisor of Dian Shui Lou

Restaurant Business Co., Ltd.

None None None

19

Title

Natio

nality

Nam

e

Date of Election

(Inauguration)

Tenure

Initial date of inaugur

ation

Shares held upon

inauguration

Current shares held

Current shares held by spouse

and minors

Shares held in someone else's

name Major

experience/ education

Positions served at the Company and other

companies at present

Other supervisors, directors, or supervisors that are a spouse

or within two degrees of kinship

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Title Name Relationship

Ind

epe

nde

nt

Dir

ect

or

RO

C

Din

g-G

uo

Chen

6/10/2015 3

years 6/10/2015 0 0 0 0 0 0 0 0

PhD in

Business

Administratio

n, University

of Michigan

Lecturer, Business

Management, College of

Business and Management,

Tamkang University

Chairman of the Chinese

Academy of Business

General Counsel of Ruentex

Group

Consultant and professor at

Shanghai Fudan University,

Shandong University, Zhejiang

University, and Leadership

Academy at the headquarters of

China Petroleum and Chemical

Corporation

Director, consultant, and

professor at the Antai

Management College of

Shanghai Jiaotong University

Emeritus professor at the

School of Management,

Chinese University of Hong

Kong

None None None

Ind

epe

nde

nt

Dir

ect

or

RO

C

Jin-S

hih

Lin

6/10/2015 3

years 6/10/2015 0 0 0 0 0 0 0 0

Department of

Accounting,

Tamkang

University

CPA at Jin-Shih Lin

Accounting Firm

Supervisor of Prolific

Technology Inc. None None None

20

Title

Natio

nality

Nam

e

Date of Election

(Inauguration)

Tenure

Initial date of inaugur

ation

Shares held upon

inauguration

Current shares held

Current shares held by spouse

and minors

Shares held in someone else's

name Major

experience/ education

Positions served at the Company and other

companies at present

Other supervisors, directors, or supervisors that are a spouse

or within two degrees of kinship

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Title Name Relationship

Su

perv

isor

RO

C

&

US

Oh

-Ku

an C

han

g

6/10/2013 3

years 6/8/2007 237,136 0.08% 187,136 0.06% 0 0.00% 0 0.00%

Department of

English,

Tamkang

University

Director of Tong Hwa

Enterprises Co., Ltd. None None None

Su

perv

isor

RO

C

&

US

Rep

rese

ntati

ve

of

Na

mch

ow

Che

mic

al

Ind

ustri

al

CO.

,

LT

D.

Em

ploy

ee

Wel

fare

Co

mm

ittee

Yi-

Wen

Chen

6/10/2013 3

years 6/10/2013

4,908,960

0

1.67%

0

4,908,960

0

1.67%

0

0

686,635

0

0.23%

0 0.00%

Master of

Arts,

University of

San Francisco

Chairman of Tianjin Namchow

Food Co., Ltd.

Chairman of Tianjin

Yoshiyoshi Food Co., Ltd.

Chairman of Guangzhou

Namchow Food Co., Ltd.

Chairman of Dian Shui Lou

Restaurant Business Co., Ltd.

Supervisor of Chow Ho

Enterprise Co., Ltd.

Supervisor of Namchow Food

and Dining Consultation Co.,

Ltd.

Supervisor of Qizhi Business

Administration Cultural Co.,

Ltd.

Chairman of Shanghai

Namchow Food Co., Ltd.

Supervisor of Shanghai

Qiaoxing Co., Ltd.

Supervisor of Shanghai

Qiaohao Food Co., Ltd.

Supervisor of Shanghai

Qiaohao Business

Administration Co., Ltd.

Chairman

Director

Vice General

Manager/Vice

President

Fei-Lung

Chen

Representat

ive of Hwa

Zhin Co.,

Ltd. Cheng-Wen

Chen

Cheng-Wen

Chen

Father

and

Daughter

Sister and

Brother

Sister and

Brother

21

Table 1: Major shareholders of institutional shareholders

Name of institutional shareholder Major shareholders of institutional shareholders

Lucky Royal Co., Ltd. Namchow Chemical Industrial CO., LTD. (99.65%)

Hwa Zhin Co., Ltd. Fei-Lung Chen (45%), Fei-Peng Chen (45%)

Namchow Chemical Industrial CO., LTD. Employee Welfare Committee

Not applicable

Table 2: Major shareholders of major shareholders who are institutions

Name of institution Serial No.

Name of major shareholder of the institution Shareholding ratio

Namchow Chemical Industrial

CO., LTD.

1 Lucky Royal Co., Ltd. 15.65%

2 Fei-Peng Chen 12.27%

3 Fei-Lung Chen 11.50%

4 Cathay Life Insurance Company, Ltd. 5.05%

5 Bank SinoPac as Custodian for Reva Spring Ltd. Investment Account

3.94%

6 Bank SinoPac as Custodian for Ever Cosmos Ltd. Investment Account

3.40%

7 Shiao-Chuan Chen-Huang 2.58%

8 Public Service Pension Fund Management Board 1.91%

9 Cathay United Bank 1.90%

10 Namchow Chemical Industrial CO., LTD. Employee Welfare Committee

1.67%

22

Director and Supervisor Information (II)

Name

Title

Requirement

More than five years of work experience and the following

professional eligibility

Compliance with the independence

requirement (Note)

Number of other public

offering companies where the position of part-time

independent director is

held

Lecturer or higher

ranking at the

business, legal

affairs, financial affairs, or accounting department,

or other departments relating to corporate

operation of public and

private colleges

and universities

Judge, prosecutor,

lawyer, CPA, or

other professionals

and technicians that have taken and

been approved in

national exams

required for corporate operation

Work experience required

for business,

legal affairs,

financial affairs,

accounting, or

corporate operation

1 2 3 4 5 6 7 8 9 10

Chairman Fei-Lung Chen 0

Director Fei-Peng Chen 0

Director Chin-Tsai Chen 2

Director

Lucky Royal Co., Ltd.

0 Representative: Kan-Wen Lee

Director

Hwa Zhin Co., Ltd.

0 Representative: Cheng-Wen Lee

Independent Director

Ding-Guo Chen 0

Independent Director

Jin-Shih Lin 0

Supervisor

Namchow Chemical Industrial CO., LTD. Employee Welfare Committee

0

Representative: Yi-Wen Lee

Supervisor Oh-Kuan Chang

0

23

Note: When any of the following conditions is met for each director or supervisor during the two years prior to and during their tenure, please check "" in the box underneath each conditional code.

(1) Not an employee of the company or its associated enterprise. (2) Not a director or supervisor of the company or its associated enterprise (this, however,

does not include an independent director at the company or its parent company or the subsidiary where the company holds more than 50% of voting shares directly and indirectly.)

(3) Not a natural person shareholder that holds by himself/herself or by his/her spouse or minor child in someone else's name more than 1% of all circulating shares of the company or is on the Top 10 shareholding list.

(4) Not the spouse, a relative within the second degree of kinship, or a direct blood relative within the fifth degree of kinship of the said people indicated in the foregoing three subparagraphs

(5) Not a director, supervisor, or employee of an institutional shareholder directly holding more than 5% of all circulating shares of the company or a director, supervisor, or employee of an institutional shareholder on the Top 5 shareholding list.

(6) Not a director, supervisor, manager, or a shareholder holding more than 5% of shares of a specific company or institution with financial or business activities with the company

(7) Not a professional providing services or consultations on business, legal affairs, financial affairs, and accounting at the company or its associated enterprise or the owner, partner, director, supervisor, manager, and his/her spouse of a sole proprietorship or collaborative company or institution. This does not include members of compensation committee who exercise power in accordance with Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Compensation committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.

(8) Not the spouse or a relative within the second degree of kinship to any other director of the Company.

(9) None of the conditions indicated under Article 30 of the Company Act (10) Not a government agency, juristic person, or its representative set forth in Article 27 of

the Company Act.

24

2. Background Information of General Managers, Vice General Managers, Assistant Managers, and Heads of Various Departments and

Branches

Title

(Note

1)

Nation

ality Name

Date of

Election/Inau

guration

inauguration

Current shares

held by spouse

and minors

Shares held in

someone else's

name

inauguration

Main

experience/educati

on

(Note 2)

Positions at other companies held at

present

Managers who are

a spouse or a

relative

within the second

degree of kinship

Quantity

of shares

Shareh

olding

ratio

Quantity

of shares

Sharehol

ding

ratio

Quantity

of shares

Shareh

olding

ratio

Title Nam

e

Relat

ionsh

ip

General

Manager

/

Executiv

e Vice

President

Year Kan-We

n Lee 09/09/1997 26,583 0.01% 0 0.00% 0 0.00%

Business

Administration,

National Chung

Tsing University

Master

Director of Lucky Royal Co., Ltd.

Director of Ting Hao (Cayman Islands)

Holdings Corporation

None None None

25

Title

(Note

1)

Nation

ality Name

Date of

Election/Inau

guration

inauguration

Current shares

held by spouse

and minors

Shares held in

someone else's

name

inauguration

Main

experience/educati

on

(Note 2)

Positions at other companies held at

present

Managers who are

a spouse or a

relative

within the second

degree of kinship

Quantity

of shares

Shareh

olding

ratio

Quantity

of shares

Sharehol

ding

ratio

Quantity

of shares

Shareh

olding

ratio

Title Nam

e

Relat

ionsh

ip

Vice

General

Manager

/

Vice

President

Year

US

Cheng-

Wen

Chen

03/21/2013 0 0.00% 0 0.00% 0 0.00%

Golden Gate

University

Master, Graduate

School of Finance

Executive Director of Shanghai Qizhi

Business Consultation Co. Ltd.

Director of Shanghai Namchow Food Co.,

Ltd.

Executive Director of Shanghai Quahog

Business Administration Co., Ltd.

Executive Director of Shanghai Quahog

Food Co., Ltd.

Chairman of Shanghai Quahog Trading

Co., Ltd.

Executive Director of Shanghai Qiaoxing

Co., Ltd.

Director/Vice Chairman of Shanghai

Baolaina Co., Ltd.

Director of Tianjin Yoshiyoshi Food Co.,

Ltd.

Director/General Manager of Tianjin

Namchow Food Co., Ltd.

Director of Nacia International

Corporation

Director of Namchow International

None None None

26

Title

(Note

1)

Nation

ality Name

Date of

Election/Inau

guration

inauguration

Current shares

held by spouse

and minors

Shares held in

someone else's

name

inauguration

Main

experience/educati

on

(Note 2)

Positions at other companies held at

present

Managers who are

a spouse or a

relative

within the second

degree of kinship

Quantity

of shares

Shareh

olding

ratio

Quantity

of shares

Sharehol

ding

ratio

Quantity

of shares

Shareh

olding

ratio

Title Nam

e

Relat

ionsh

ip

Corporation

Director of Ting Hao (Cayman Islands)

Holdings Corporation

Director of Guangzhou Namchow Food

Co., Ltd.

Chief

Financial

Officer

Year

Austra

lia

Dongbia

o Bai 07/01/1991 0 0.00% 397 0.00% 0 0.00%

Department of

Banking and

Insurance,

Overseas Chinese

University

Director of Shanghai Quahog Trading Co.,

Ltd.

Director of Tianjin Yoshiyoshi Food Co.,

Ltd.

Director of Knowledge Flow Publishing

Co., Ltd.

Director of Nacia International

Corporation

None None None

27

Title

(Note

1)

Nation

ality Name

Date of

Election/Inau

guration

inauguration

Current shares

held by spouse

and minors

Shares held in

someone else's

name

inauguration

Main

experience/educati

on

(Note 2)

Positions at other companies held at

present

Managers who are

a spouse or a

relative

within the second

degree of kinship

Quantity

of shares

Shareh

olding

ratio

Quantity

of shares

Sharehol

ding

ratio

Quantity

of shares

Shareh

olding

ratio

Title Nam

e

Relat

ionsh

ip

Director of Namchow (BVI) Ltd.

Supervisor of Lucky Royal Co., Ltd.

Chief

Human

Resource

s Officer

Year

Wan-Jin

g Zhou 8/19/2013 0 0.00% 30,000 0.01% 0 0.00%

Ottawa University

MBA None None None None

Special

Assistant

of the

Chairma

n and

Chief

Risk

Control

Officer

Year

Mei-Hui

Liao 10/12/2015 0 0.00% 0 0.00% 0 0.00%

Saginaw Valley

State University of

Michigan

MBA

None None None None

Vice

President

Year

Ming-Fe

n Zhou 03/21/2013 0 0.00% 0 0.00% 0 0.00%

Texas A&M

University

Educational

General Manager of Lucky Royal Co.,

Ltd. Chaojiangyan Qingcheng Branch

General Manager of Lucky Royal Co.,

None None None

28

Title

(Note

1)

Nation

ality Name

Date of

Election/Inau

guration

inauguration

Current shares

held by spouse

and minors

Shares held in

someone else's

name

inauguration

Main

experience/educati

on

(Note 2)

Positions at other companies held at

present

Managers who are

a spouse or a

relative

within the second

degree of kinship

Quantity

of shares

Shareh

olding

ratio

Quantity

of shares

Sharehol

ding

ratio

Quantity

of shares

Shareh

olding

ratio

Title Nam

e

Relat

ionsh

ip

Technology

Master

Graduated from the

Entrepreneurship

Class of National

Chengchi

University

Ltd.

General Manager of Chow Ho Enterprise

Co., Ltd.

General Manager of Dian Shui Lou

Restaurant Business Co., Ltd.

Vice

President

Year

Shu-We

n Dai 01/01/2015 2,136 0.00% 0 0.00% 0 0.00%

Department of

Mass

Communication,

Fu Jen Catholic

University

None None None None

Departm

ent

Vice

General

Manager

Year

Ming-Ch

uan Lin 05/01/2013 0 0.00% 0 0.00% 0 0.00%

Yilan Senior High

School None None None None

Assistant

Manager

Year

Rong-Zh

ang Lian 06/22/1996 10,069

0.003

% 2,396 0.00% 0 0.00%

Department of

Accounting and

Statistics, Tamkang

University

Director of Tianjin Yoshiyoshi Food Co.,

Ltd.

Supervisor of Knowledge Flow Publishing

Co., Ltd.

Director of Namchow Consultation Co.,

None None None

29

Title

(Note

1)

Nation

ality Name

Date of

Election/Inau

guration

inauguration

Current shares

held by spouse

and minors

Shares held in

someone else's

name

inauguration

Main

experience/educati

on

(Note 2)

Positions at other companies held at

present

Managers who are

a spouse or a

relative

within the second

degree of kinship

Quantity

of shares

Shareh

olding

ratio

Quantity

of shares

Sharehol

ding

ratio

Quantity

of shares

Shareh

olding

ratio

Title Nam

e

Relat

ionsh

ip

Ltd.

Supervisor of Lucky Royal Co., Ltd.

Assistant

Manager

Year

Zhou-Jin

g Chen 05/01/1996 314 0.00% 0 0.00% 0 0.00%

Department of

Law, Soochow

University

Director of Shanghai Namchow Food Co.,

Ltd.

Director of Tianjin Yoshiyoshi Food Co.,

Ltd.

Director of Tianjin Namchow Food Co.,

Ltd.

Director of Knowledge Flow Publishing

Co., Ltd.

Director of Namchow Food and Dining

Consultation Co., Ltd.

Director of Namchow Consultation Co.,

Ltd.

Director of Guangzhou Namchow Food

Co., Ltd.

None None None

Assistant

Manager

Year

Yi-Feng

Huang 06/21/2012 2,000 0.00% 0 0.00% 0 0.00%

Graduate Institute

of Civil

Engineering,

National Taiwan

University

None None None None

30

Title

(Note

1)

Nation

ality Name

Date of

Election/Inau

guration

inauguration

Current shares

held by spouse

and minors

Shares held in

someone else's

name

inauguration

Main

experience/educati

on

(Note 2)

Positions at other companies held at

present

Managers who are

a spouse or a

relative

within the second

degree of kinship

Quantity

of shares

Shareh

olding

ratio

Quantity

of shares

Sharehol

ding

ratio

Quantity

of shares

Shareh

olding

ratio

Title Nam

e

Relat

ionsh

ip

Master

Assistant

Manager

Year

Rui-Zi

Zhu 01/01/2015 0 0.00% 0 0.00% 0 0.00%

Master of Food and

Nutrition,

Providence

University

None None None None

Assistant

Manager

Year

Hai-Li

Qi 11/06/2015 0 0.00% 0 0.00% 0 0.00%

Graduate Institute

of Labor Relations,

Chinese Culture

University

Master

None None None None

Note 1: It shall include the information of general managers, vice general managers, assistant managers, and heads of respective departments and

branches; regardless of their title, the information has to be disclosed as long as their ranking is equivalent to that of a general manager,

vice general manager, or assistant manager.

Note 2: For the experience relevant to the current position, such as employment at an audit and certification accounting firm or an associated

enterprise during the said period, the title and responsibilities shall be specified.

31

(III) Remunerations paid to directors, supervisors, general managers, and vice general managers in the last years

(1) (1-1) Remunerations for directors (including independent directors) (Disclose the individual's name and how the remuneration is paid)

Unit: NTD

Title Name

Remuneration for directors

Sum of A, B, C, and D

and its after-tax

earnings ratio

(Note 11)

Remunerations for part-time employees Sum of A, B,

C, D E, F, and G

its after-tax

earnings ratio

(Note 11)

Claim of

remunerations from re-inve

sted busine

sses other than

subsidiaries (Note 12)

Remunerations (A)

(Note 2)

Retirement and pension

(B)

Remunerations for directors

(C) (Note 3)

Operational expenditure (D) (Note 4)

Salaries, prizes, and

special expenditure (E)

(Note 5)

Retirement and pension

(F)

Remunerations for employees (G) (Note 6)

Shares available for subscription

with an employee stock option

certificate (H) (Note 7)

Restrictive shares for

employees (I) (Note 13)

The Compa

ny

All compan

ies within

the Financi

al Report (Note

8)

The Compa

ny

All compan

ies within

the Financi

al Report (Note

8)

The Compa

ny

All compan

ies within

the Financi

al Report (Note

8)

The Compa

ny

All compan

ies within

the Financi

al Report (Note

8)

The

Compa

ny

All compa

nies within

the Financ

ial Report (Note

8)

The Compan

y

All compani

es within

the Financial Report (Note 8)

The Compan

y

All compani

es within

the Financial Report (Note 8)

The Company

All companies within the Financial Report

(Note 8) The

Compa

ny

All compa

nies within

the Financ

ial Report (Note

8)

The

Compa

ny

All compa

nies within

the Financ

ial Report (Note

8)

The

Compa

ny

All compa

nies within

the Financ

ial Report (Note

8)

Current value

Stock value

Cash value

Stock value

Chairman Fei-Lung

Chen

14,807,26

8

16,977,27

9 385,524 419,288

16,834,66

2

16,834,66

2 133,200 2,155,178 2.89% 3.27% 0 0 0 0 0 0 0 0 0 0 0 0 2.89% 3.27% None

Vice

Chairman

Fei-Peng

Chen 9,126,184

10,113,90

4 335,844 355,596

11,223,10

8

11,223,10

8 90,000 90,000 1.87% 1.96% 0 0 0 0 0 0 0 0 0 0 0 0 1.87% 1.96% None

Director

Representat

ive of

Lucky

Royal Co.,

Ltd.

Kan-Wen

Lee

0 0 0 0 5,611,554 5,611,554 0 0 0.5% 0.5% 9,648,400 11,525,55

4 264,156 275,304 203,918 0 232,142 0 0 0 0 0 1.41% 1.59% None

* According to the new requirements of 2015, remunerations shall be disclosed for individual directors and supervisors if the total value of remunerations paid to all directors and supervisors reaches 2% of the after-tax net profits of the Company and remunerations received by any director/supervisor exceed NTD 15 million.

* Retirement and pension as listed above show the value set aside and the associated proportion.

32

(1-2) Remunerations for directors (including independent directors) (The names shall be summarized and disclosed reflective of the bracket.)

Unit: NTD

Title Name

Remuneration for directors Sum of A, B, C,

and D

and

its after-tax

earnings

ratio

(Note 11)

Remunerations for part-time employees

Sum of A, B, C, D

E, F, and G

its after-tax

earnings

ratio

(Note 11)

Claim of

remunera

tions

from

re-invest

ed

business

es other

than

subsidiar

ies (Note

12)

Remunerations (A)

(Note 2)

Retirement and

pension

(B)

Remunerations for

directors (C)

(Note 3)

Operational

expenditure

(D) (Note 4)

Salaries, prizes, and

special expenditure

(E)

(Note 5)

Retirement and

pension

(F)

Remunerations for employees (G)

(Note 6)

Shares available

for subscription

with

an employee stock

option

certificate (H)

(Note 7)

Restrictive

shares for

employees (I)

(Note 13)

The

Company

All

companie

s within

the

Financial

Report

(Note 8)

The

Company

All

companie

s within

the

Financial

Report

(Note 8)

The

Company

All

companie

s within

the

Financial

Report

(Note 8)

The

Company

All

companie

s within

the

Financial

Report

(Note 8)

The

Compan

y

All

compani

es within

the

Financial

Report

(Note 8)

The

Company

All

companies

within the

Financial

Report

(Note 8)

The

Company

All

companies

within the

Financial

Report

(Note 8)

The Company

All companies

within the

Financial Report

(Note 8)

The

Compan

y

All

compani

es within

the

Financial

Report

(Note 8)

The

Compan

y

All

compani

es within

the

Financial

Report

(Note 8)

The

Compan

y

All

compani

es within

the

Financial

Report

(Note 8)

Cash

value

Shares

value

Cash

value

Shares

value

Director Chin-Tsai

Chen

0 0 0 0 11,223,108 11,223,108 704,000 704,000 1.07% 1.39% 1,552,090 11,986,958 112,976 144,792 304,228 0 304,228 0 0 0 0 0 1.25% 2.51% None

Director

Hwa Zhin

Co., Ltd.

Representativ

e

Cheng-Wen

Chen

Director

Hwa Zhin

Co., Ltd.

Representativ

e

Ming-Liang

Ho

Indepen

dent

Director

Ding-Guo

Chen

Indepen

dent

Director

Jin-Shih Lin

Note: Retirement and pension as listed above show the value set aside and the associated proportion.

33

(2-1)Remuneration bracket table

Bracket by which remunerations are paid to individual directors of the company

Name of director

Sum of the said four types of remunerations (A+B+C+D)

Sum of the said seven types of remunerations (A+B+C+D+E+F+G)

The Company (Note 9) All companies within the Financial Report

(Note 10) The Company (Note 9)

All companies within the Financial Report (Note 10)

J

Below NTD 2,000,000 Ding-Guo Chen, Jin-Shih

Lin Ding-Guo Chen,

Jin-Shih Lin Ding-Guo Chen,

Jin-Shih Lin Ding-Guo Chen, Jin-Shih

Lin

NTD 2,000,000 (inclusive) ~ NTD 5,000,000 (exclusive) Ming-Liang Ho,

Cheng-Wen Chen Ming-Liang Ho,

Cheng-Wen Chen Ming-Liang Ho Ming-Liang Ho

NTD 5,000,000 (inclusive) ~ NTD 10,000,000 (exclusive) Kan-Wen Lee, Chin-Tsai

Chen Kan-Wen Lee, Chin-Tsai Chen

Cheng-Wen Lee, Chin-Tsai Chen

Cheng-Wen Chen

NTD 10,000,000 (inclusive) ~ NTD 15,000,000 (exclusive) Kan-Wen Lee Chin-Tsai Chen

NTD 15,000,000 (inclusive) ~ NTD 30,000,000 (exclusive) Fei-Peng Chen Fei-Peng Chen Fei-Peng Chen Kan-Wen Lee, Fei-Peng

Chen

NTD 30,000,000 (inclusive) ~ NTD 50,000,000 (exclusive) Fei-Lung Chen Fei-Lung Chen Fei-Lung Chen Fei-Lung Chen

NTD 50,000,000 (inclusive) ~ NTD 100,000,000 (exclusive)

Over NTD 100,000,000

Total 8 people 8 people 8 people 8 people

Note 1: Names of directors shall be listed separately (both the name of the institution and its representative shall be listed for an institutional

shareholder) and individual payments made shall be disclosed through a summary. If the director is also a general manager or vice general manager, this table and the following table (3-1 or 3-2) shall be completed.

Note 2: The remunerations paid to directors in the latest year (including salaries, additional pay, service pay, various prizes, rewards, among others)

Note 3: Value of remunerations planned to be paid to directors that have been approved by the Board of Directors prior to the shareholders meeting on the annual earnings distribution proposal.

Note 4: Related expenses for carrying our tasks incurred by directors in the latest year (including transportation, special expenditure, various allowances, dormitory, and car, among other actual items provided) For housing, automobiles, and other transportation tools or expenses that are specific to individuals, the nature and cost of the assets provided, the actual or market-value-based rental, the cost of gasoline, and other payments shall be disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be included in the calculation of remunerations.

Note 5: Salaries, additional pay, service pay, various prizes, rewards, transportation, special expenditure, various allowances, dormitory, cars, and other actual items that are claimed by directors and employees (including part-time general managers, vice general managers, other managers, and employees) in the latest year For housing, automobiles, and other transportation tools or expenses that are specific to individuals, the nature and cost of the assets provided, the actual or market-value-based rental, the cost of gasoline, and other payments

34

shall be disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be included in the calculation of remunerations.

Note 6: Bonus (including stock bonus and cash bonus) available for directors and employees (including part-time general managers, vice general managers, other managers, and employees) in the latest year. The value of bonus planned to be distributed to employees that has been approved by the Board of Directors prior to the earnings distribution proposal for the latest year shall be disclosed. If it is impossible to estimate the value planned to be distributed this year, follow the actual value distributed last year and calculate proportionally. In addition, the attached Table 1-3 shall be completed.

Note 7: Shares (excluding those already executed) available for subscription with an employee stock option certificate subscribed by directors who are also employees (including part-time general managers, vice general managers, other managers, and employees) as of the date of printing of Annual Report. Besides this table, Exhibit 15 shall completed.

Note 8: The total value of remunerations paid to directors of the Company by all companies in the Consolidated Report (including the Company) shall be disclosed.

Note 9: For the total value of various remunerations paid to each director by the Company, disclose the name of the director in the respective bracket.

Note 10: For the total value of various remunerations paid to each director of the Company by all companies (including the Company) in the Consolidated Report, disclose the name of the director in the respective bracket.

Note 11: After-tax pure earnings are those in the latest year. When the International Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in the entity or individual financial report from the most recent year.

Note 12: a. The value of related remunerations claimed by directors of the Company from reinvested businesses other than subsidiaries shall be specified in this column.

b. In the event that directors of the Company claim related remunerations from reinvested businesses other than subsidiaries, the said remunerations shall be combined in Column J of the remuneration bracket table and the name of the column shall be changed to "all reinvested businesses."

c. Remunerations are the compensation, rewards, employee bonus, and operational expenses, among others, claimed by directors of the Company who serve as the director, supervisor, or manager at a reinvested business other than the subsidiary.

Note 13: Restrictive new shares obtained by directors who are also employees (including part-time general managers, vice general managers, other managers, and employees) as of the date of printing of Annual Report. Besides this table, Exhibit 15-1 shall completed.

* The content of the remunerations disclosed in this table differs from the idea of income indicated in the Income Tax Act. As such, the purpose of this table is for disclosure of information only, not for taxation.

35

(2-2)Remunerations for Supervisors (The names shall be summarized and disclosed reflective of the bracket.)

Unit: NTD

Title Name

Remunerations for supervisors Sum of A, B, and C

After-tax earnings ratio

(Note 8)

Claim of

remunerations

from

re-invested

businesses

other than

subsidiaries

(Note 9)

Remunerations (A)

(Note 2)

Remunerations (B)

(Note 3)

Operational expenditure

(C)

(Note 4)

The

Company

All

companies

within the

Financial

Report

(Note 5)

The

Company

All

companies

within the

Financial

Report

(Note 5)

The

Company

All

companies

within the

Financial

Report

(Note 5)

The

Company

All

companies

within the

Financial

Report

(Note 5)

Supervisor

Namchow

Chemical

Industrial

CO., LTD.

Employee

Welfare

Committee

Representative

Yi-Wen Chen

0 5,598,371 11,223,108 11,223,108 72,000 864,010 1.01% 1.59% None

Supervisor Oh-Kuan

Chang

36

(3-1)Remuneration bracket table

Bracket by which remunerations are paid to individual supervisors of

the company

Name of supervisor

Sum of the said three types of remunerations (A+B+C)

The Company (Note 6) All companies within the Financial

Report (Note 7) D

Below NTD 2,000,000

NTD 2,000,000 (inclusive) ~ NTD 5,000,000 (exclusive)

NTD 5,000,000 (inclusive) ~ NTD 10,000,000 (exclusive) Yi-Wen Chen, Oh-Kuan Chang Oh-Kuan Chang

NTD 10,000,000 (inclusive) ~ NTD 15,000,000 (exclusive) Yi-Wen Chen

NTD 15,000,000 (inclusive) ~ NTD 30,000,000 (exclusive)

NTD 30,000,000 (inclusive) ~ NTD 50,000,000 (exclusive)

NTD 50,000,000 (inclusive) ~ NTD 100,000,000 (exclusive)

Over NTD 100,000,000

Total 2 people 2 people

Note 1: Names of supervisors shall be listed separately (both the name of the institution and its representative shall be listed for an institutional shareholder) and individual payments made shall be disclosed through a summary.

Note 2: The remunerations paid to supervisors in the latest year (including salaries, additional pay, service pay, various prizes, rewards, among others)

Note 3: Value of remunerations approved by the Board of Directors to be distributed to supervisors in the most recent year

Note 4: Related expenses for carrying our tasks incurred by supervisors in the latest year (including transportation, special expenditure, various allowances, dormitory, and car, among other actual items provided) For housing, automobiles, and other transportation tools or expenses that are specific to individuals, the nature and cost of the assets provided, the actual or market-value-based rental, the cost of gasoline, and other payments shall be disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be included in the calculation of remunerations.

Note 5: The total value of remunerations paid to supervisors of the Company by all companies in the Consolidated Report (including the Company) shall be disclosed.

Note 6: For the total value of various remunerations paid to each supervisor by the Company, disclose the name of the supervisor in the respective bracket.

Note 7: For the total value of various remunerations paid to each supervisor of the Company by all companies (including the Company) in the Consolidated Report, disclose the name of the supervisor in the respective bracket.

Note 8: After-tax pure earnings are those in the latest year. When the International Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in the entity or individual financial report from the most recent year.

37

Note 9: a. The value of related remunerations claimed by supervisors of the Company from reinvested businesses other than subsidiaries shall be specified in this column.

b. In the event that supervisors of the Company claim related remunerations from reinvested businesses other than subsidiaries, the said remunerations shall be combined in Column D of the remuneration bracket table and the name of the column shall be changed to "all reinvested businesses."

c. Remunerations are the compensation, rewards (including rewards for employees, directors, and supervisors) and operational expenditures claimed by supervisors of the Company who serve as the director, supervisor, or manager at a reinvested business other than the subsidiary.

* The content of the remunerations disclosed in this table differs from the idea of income indicated in the Income Tax Act. As such, the purpose of this table is for disclosure of information only, not for taxation.

38

(3-2)Remunerations for general managers and vice general managers (The names shall be summarized and disclosed reflective of the bracket.)

Title Name

Salaries (A)

(Note 2)

Retirement and

pension (B)

Prizes and

special

expenditure (C)

(Note 3)

Employee remunerations (D)

(Note 4)

After-tax

earnings ratio

of the sum of

A, B, C, and D

(%)

(Note 9)

Number of

employee

stock option

certificates

obtained

(Note 5)

Restrictive

new shares

obtained

(Note 11)

Cla

im

of

re

mu

ner

atio

ns

fro

m

re-i

nve

ste

d

bus

ine

sse

s

oth

er

tha

n

sub

sidi

arie

s (Note

10)

The

Comp

any

All

compa

nies

within

the

Financ

ial

Report

(Note

6)

The

Comp

any

All

compa

nies

within

the

Financ

ial

Report

(Note

6)

The

Compa

ny

All

compani

es

within

the

Financia

l Report

(Note 6)

The

Company

All companies

within the

Financial

Report

(Note 6)

The

Com

pany

All

compa

nies

within

the

Financ

ial

Report

(Note

6)

The

Com

pany

All

comp

anies

withi

n the

Fina

ncial

Repo

rt

(Note

6)

The

Com

pany

All

co

mp

ani

es

wit

hin

the

Fin

anc

ial

Rep

ort (Note

6)

Cash

value

Sha

res

val

ue

Cash

value

Shar

es

value

Vice General

Manager/Executiv

e Vice President

Kan-W

en

Lee

26,023,441 38,348,808 1,363,932 1,494,792 18,437,495 32,696,262 1,120,777 0 1,378,089 0 4.22% 6.64% 0 0 0 0 None

Vice General

Manager/Vice

President

Cheng-

Wen

Chen

Special Assistant

of the Chairman

and Chief Risk

Control Officer

Mei-H

ui Liao

Chief Financial

Officer

Dongbi

ao Bai

39

Chief Human

Resources Officer

Wan-Ji

ng

Zhou

Vice President Ming-F

en

Zhou

Vice President Shu-W

en Dai

Vice President Er-Kun

Zhou

General Manager

of Business

Department

Shu-Mi

ng

Zhang

General Manager

of Business

Department

Yo-Qin

g Liu

Vice General

Manager of

Business

Department

Ming-

Chuan

Lin

40

Remuneration bracket table

Bracket by which remunerations are paid to

respective general managers and vice general

managers of the Company

Name of General Manager/Vice General Manager

The Company (Note 7) All companies within the Financial Report

(Note 8) E

Below NTD 2,000,000 Dong-Biao Bai, Ming-Fen Zhou,

Mei-Hui Liao, Yo-Qing Liu Mei-Hui Liao, Yo-Qing Liu

NTD 2,000,000 (inclusive) ~ NTD 5,000,000

(exclusive)

Ming-Chuan Lin, Shu-Ming Zhang,

Cheng-Wen Chen Ming-Chuan Lin, Shu-Ming Zhang

NTD 5,000,000 (inclusive) ~ NTD 10,000,000

(exclusive)

Wan-Qing Zhou, Shu-Wen Dai,

Er-Kun Zhou

Wan-Qing Zhou, Dong-Biao Bai, Shu-Wen

Dai, Er-Kun Zhou, Ming-Fen Zhou

NTD 10,000,000 (inclusive) ~ NTD 15,000,000

(exclusive)

Kan-Wen Lee Kan-Wen Lee, Cheng-Wen Chen

NTD 15,000,000 (inclusive) ~ NTD 30,000,000

(exclusive)

NTD 30,000,000 (inclusive) ~ NTD 50,000,000

(exclusive)

NTD 50,000,000 (inclusive) ~ NTD

100,000,000 (exclusive)

Over NTD 100,000,000

Total 11 people 11 people

Note 1: Names of general managers and vice general managers shall be listed separately and individual payments made shall be disclosed through a summary. If the director is also a general

manager or vice general manager, this table and the above table (1-1 or 1-2) shall be completed.

Note 2: Salaries, additional pay, and service pay for general managers and vice general managers in the latest year.

Note 3: Various prizes, awards, transportation, special expenditure, various allowances, dormitory, cars, and other actual items provided and other compensations for general managers and vice

general managers in the latest year. For housing, automobiles, and other transportation tools or expenses that are specific to individuals, the nature and cost of the assets provided, the

actual or market-value-based rental, the cost of gasoline, and other payments shall be disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be

included in the calculation of remunerations.

Note 4: Employee remunerations (including stock and cash) distributed to general managers and vice general managers as approved by the Board of Directors in the latest year. If it is

impossible to estimate the value planned to be distributed this year, follow the actual value distributed last year and calculate proportionally. In addition, the attached Table 1-3 shall be

completed. After-tax pure earnings are those in the latest year. When the International Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in the entity

or individual financial report from the most recent year.

41

Note 5: Shares (excluding those already executed) available for subscription with an employee stock option certificate subscribed by general managers and vice general managers who are also

employees as of the date of printing of Annual Report. Besides this table, Exhibit 15 shall completed.

Note 6: The total value of remunerations paid to general managers and vice general managers of the Company by all companies in the Consolidated Report (including the Company) shall be

disclosed.

Note 7: For the total value of various remunerations paid to each general manager and vice general manager by the Company, disclose the name of the general manager and the vice general

manager in the respective bracket.

Note 8: For the total value of various remunerations paid to each general manager and vice general manager of the Company by all companies (including the Company) in the Consolidated

Report, disclose the name of the general manager and vice general manager in the respective bracket.

Note 9: After-tax pure earnings are those in the latest year. When the International Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in the entity or

individual financial report from the most recent year.

Note 10: a. The value of related remunerations claimed by general managers and vice general managers of the Company from reinvested businesses other than subsidiaries shall be specified in

this column.

b. In the event that general managers and vice general managers of the Company claim related remunerations from reinvested businesses other than subsidiaries, the said

remunerations shall be combined in Column E of the remuneration bracket table and the name of the column shall be changed to "all reinvested businesses."

c. Remunerations are the compensation, rewards (including rewards for employees, directors, and supervisors) and operational expenses, among others, claimed by general managers

and vice general managers of the Company who serve as the director, supervisor, or manager at a reinvested business other than the subsidiary.

Note 11: Restrictive new shares obtained by directors who are also employees (including part-time general managers, vice general managers, other managers, and employees) as of the date of

printing of Annual Report. Besides this table, Exhibit 15-1 shall completed.

* The content of the remunerations disclosed in this table differs from the idea of income indicated in the Income Tax Act. As such, the purpose of this table is for disclosure of information only,

not for taxation.

42

(2) Names and distribution of managers assigned with employee rewards

Title

(Note 1)

Name

(Note 1) Stock value Current value Total

After-tax

earnings ratio

(%)

Man

ager

Executive Vice

President

Kan-Wen

Lee

0 1,573,637 1,573,637 0.14%

Vice President Cheng-Wen

Chen

Chief Human Resources

Officer

Wan-Jing

Zhou

Special Assistant of the

Chairman and Chief

Risk Control Officer

Mei-Hui

Liao

Vice President Ming-Fen

Zhou

Vice President Shu-Wen

Dai

Vice General Manager

of Business Department

Ming-Chuan

Lin

Assistant Manager Rong-Zhang

Lian

Assistant Manager Zhou-Jing

Chen

Assistant Manager Yi-Feng

Huang

Assistant Manager Rui-Zi Zhu

Assistant Manager Hai-Li Qi

Note 1: The name and title of the individual shall be disclosed but distribution of profits may be

disclosed through a summary.

Note 2: Employee remunerations (including stock and cash) distributed to managers through the

Board of Directors in recent years. If it is impossible to estimate the value planned to be

distributed this year, follow the actual value distributed last year and calculate

proportionally. After-tax pure earnings are those in the latest year. When the International

Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in

the entity or individual financial report from the most recent year.

Note 3: For the applicability of managers, follow the Tai-Cai-Zheng-San No. 0920001301 letter

dated March 27, 2003.

(1) General managers and people of equivalent ranking

(2) Vice general managers and people of equivalent ranking

(3) Assistant managers and people of equivalent ranking

(4) Head of Department of Finance

(5) Head of Accounting Department

(6) Other people handling corporate affairs and signature rights

Note 4: If directors, general managers, and vice general managers receive employee

remunerations (including stock and cash), this table needs to be completed in addition to

Exhibit 1-2.

43

(3) Compare and describe separately the analysis of ratios of total remunerations paid to

directors, supervisors, general managers, and vice general managers of the Company for

the past two years by the Company and all companies in the Consolidated Report in

after-tax earnings indicated in the entity or individual financial reports. In addition,

describe correlation among the remuneration payment policy, standards and combination,

remuneration establishing procedures, and management efficacy and risks in the future.

1. Ratios of remunerations paid in the past two years in after-tax earnings indicated in the

entity financial report:

Year The Company

All companies in the

Consolidated Report

2014 2015 2014 2015

Total remunerations for

directors 60,864,682 82,560,220 76,746,668 100,176,655

Ratio of total

remunerations for directors

in after-tax earnings

indicated in the entity

financial report

6.42% 7.42% 8.09% 9.00%

Total value of

remunerations for

supervisors

6,902,162 11,295,108 13,041,605 17,685,489

Ratio of total

remunerations for

supervisors in after-tax

earnings indicated in the

entity financial report

0.73% 1.10% 1.37% 1.59%

Total value of

remunerations for general

managers and vice general

managers

40,496,446 46,945,645 65,949,992 73,917,951

Ratio of total

remunerations for general

directors and vice general

directors in after-tax

earnings indicated in the

entity financial report

4.27% 4.22% 6.95% 6.64%

Note: The after-tax earnings were NTD 948,633,723 in the 2014 Entity Financial

Report and those were NTD 1,112,849,911 in the 2015 Entity Financial Report.

2. Correlation among the remuneration payment policy, standards and combination,

remuneration establishing procedures, and management efficacy and risks in the future:

(1) The Company set up the Compensation Committee in compliance with the

Regulations Governing the Appointment and Exercise of Powers by the

Compensation committee of a Company Whose Stock is Listed on the Stock

Exchange or Traded Over the Counter. The Committee evaluates and decides the

remuneration payment policy according to the company's management strategy,

manpower utilization policy, and payment capability and establishes and

periodically reviews the remuneration levels for directors, supervisors, and

managers of the Company and provides the Board of Directors with suggestions

accordingly for the latter's reference while making decisions by referring to the

44

findings obtained by the Company through the compensation survey conducted by

a professional compensation survey institution.

(2) Criteria for paying remunerations to directors and supervisors of the Company are

defined in the Articles of Incorporation of the Company.

(3) Salaries for general managers and vice general managers of the Company are paid

according to their personal performance and their contribution to the overall

operation of the Company and taking into account of the market salary level found

out in the survey conducted by the professional institution. The distribution of

bonus is to be based on the performance management guidelines of the Company

with reference to the annual management performance of the Company and the

individual.

(4) Risk in the future: Liability insurance has been purchased for directors and

supervisors as required by the Articles of Incorporation of the Company.

45

(IV) Status of Corporate Governance

1. Board of Directors

The Board of Directors met 11 times (A) in the latest year. Attendance of directors and

supervisors in the meetings is as follows:

Title Name (Note 1) Actual

frequency of

attendance

(being

seated) in

meetings B

Frequenc

y of

attendan

ce

through

proxy

Actual attendance

(seated) rate (%)

[B/A] (Note 2)

Remark

Chairman Fei-Lung Chen 11 0 100% Re-elected through the

shareholders' meeting

on June 10, 2015

Director Fei-Peng Chen 9 2 81.8% Re-elected through the

shareholders' meeting

on June 10, 2015

Director Chin-Tsai

Chen

11 0 100% Re-elected through the

shareholders' meeting

on June 10, 2015

Director Kan-Wen Lee,

Representative

of Lucky

Royal Co.,

Ltd.

10 1 90.9% Re-elected through the

shareholders' meeting

on June 10, 2015

Director Ming-Liang

Ho,

Representative

of Hwa Zhin

Co., Ltd.

5 0 45.5% Retained

Director Cheng-Wen

Chen,

Representative

of Hwa Zhin

Co., Ltd.

4 1 36.4% Newly elected through

the shareholders'

meeting on June 10,

2015

Independent

Director

Ding-Guo

Chen

5 0 45.5% Newly elected through

the shareholders'

46

meeting on June 10,

2015

Independent

Director

Jin-Shih Lin 5 1 45.5% Newly elected through

the shareholders'

meeting on June 10,

2015

Supervisor Yi-Wen Chen,

Representative

of Namchow

Chemical

Industrial CO.,

LTD.

Employee

Welfare

Committee

5 0 45.5%

Supervisor Oh-Kuan

Chang

5 0 45.5%

Other details to be documented:

I. The items included in Article 14-3 of the Securities and Exchange Act and other

comments objected or retained by other Independent Directors in record or the

resolutions of the Board of directors in a written statement should indicate the date,

period, content of the motion, opinions of all Independent Directors and how the

company handles the opinion of the Independent Directors:

1. Two independent directors were elected through the shareholders' meeting in 2015

of the Company. A total of six Board of Directors meetings were held following the

election of independent directors. There are no items included in Article 14-3 of the

Securities Exchange Act and comments objected or retained by other Independent

Directors in record or the resolutions of the Board of directors in a written statement.

II. For the enforcement of recusal upon conflicts of interest among directors, the name of

the director, content of the proposal, reason for the recusal, and participation in the

voting process or not shall be described.

1. Article 31 of the Company's Corporate Governance Best-Practice Principles

stipulates that:

Directors of the Company shall be highly self-disciplined. For proposals brought forth

by the Board of Directors that will undermine the interests of directors themselves and

the Company's interests, the directors shall recuse themselves and may not take part in

the discussion and voting process. They may not exercise voting rights on behalf of

other directors in this case, either. Self-discipline shall be expected among directors,

too. No inadequate mutual support is allowed.

For spontaneous recusals of directors, they shall be specified in the meeting agenda of

47

the Board of Directors.

2. Article 15 of the Board of Directors Meeting Rules of the Company stipulates:

For matters to be discussed in the meeting that concern the interests of participating

directors or the institutions they represent, there should be descriptions of important

contents concerning conflicts of interest in the current meeting. In cases of undermine

interests of the Company, the directors may not take part in the discussion and voting

process and shall recuse themselves during discussion and voting and they may not

exercise voting rights on behalf of other directors.

For a resolution, the votes that directors not allowed to exercise voting rights as

indicated in the foregoing paragraph are entitled to will not be counted in the overall

number of voting rights.

3. Proposals relating to the Company's Board of Directors and concerning directors in

the latest year up to the date of printing of Annual Report:

February 12, 2015 The Board of Directors discussed the proposal detailing

individual values of year-end bonus of 2014 for directors and managers of the

Company submitted by the Compensation Committee. The five directors of the

Company, namely Chairman Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and

Directors Chin-Tsai Chen, Kan-Wen Lee, and Ming-Liang Ho were recused in

accordance with the Company Act and Article 15 of the Board of Directors Meeting

Rules of the Company: Directors who are stakeholders of matters being discussed

shall recuse themselves.

Voting outcome of this case: The case was approved unanimously, without taking

into account of the directors who recused themselves.

June 18, 2015 The Board of Directors discussed the value of remunerations to be

issued separately to five directors and two supervisors for 2014 as submitted by the

Compensation Committee. The five directors of the Company, namely Chairman

Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and Directors Chin-Tsai Chen,

Kan-Wen Lee, and Ming-Liang Ho were recused in accordance with the Company

Act and Article 15 of the Board of Directors Meeting Rules of the Company:

Directors who are stakeholders of matters being discussed shall recuse themselves.

Voting outcome of this case: The case was approved unanimously, without taking

into account of the directors who recused themselves.

June 18, 2015 The Board of Directors discussed and nominated independent

directors Ding-Guo Chen and Jin-Shih Lin and Professor Hai-Ming Chen to be the

members of the 3rd Intake of Compensation Committee, with a tenure that begins on

June 19, 2015 and ends on June 18, 2018. The two independent directors Ding-Guo

Chen and Jin-Shih Lin of the Company recused themselves in accordance with the

Company Act and Article 15 of the Board of Directors Meeting Rules of the

Company: Directors who are stakeholders of matters being discussed shall recuse

themselves.

Voting outcome of this case: The case was approved unanimously among attending

directors, without taking into account of directors who were nominated.

48

August 13, 2015 The Board of Directors discussed the separate remuneration

suggestions for the two independent directors Ding-Guo Chen and Jin-Shih Lin as

submitted by the Compensation Committee. The two independent directors

Ding-Guo Chen and Jin-Shih Lin of the Company recused themselves in accordance

with the Company Act and Article 15 of the Board of Directors Meeting Rules of the

Company: Directors who are stakeholders of matters being discussed shall recuse

themselves.

Voting outcome of this case: The case was approved unanimously among all

attending directors except for the two independent directors who recused

themselves.

January 28, 2016 The Board of Directors discussed the proposal detailing individual

values of year-end bonus of 2015 for 5 directors and 13 managers of the Company

submitted by the Compensation Committee. 。 The five directors of the Company,

namely Chairman Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and Directors

Chin-Tsai Chen, Kan-Wen Lee, and Cheng-Wen Chen were recused in accordance

with the Company Act and Article 15 of the Board of Directors Meeting Rules of the

Company: Directors who are stakeholders of matters being discussed shall recuse

themselves.

Voting outcome of this case: The case was approved unanimously, without taking

into account of the directors who recused themselves.

III. Reinforced assessments of functional objectives of the Board of Directors (e.g. to set

up the Audit Committee and to enhance information transparency, among others) and

implementation status of the objectives of the immediate year and the latest year.

1. It was decided in the general shareholders' meeting of 2014 that independent

directors will be added according to law under Article 18 of the Company's

Articles of Incorporation.

2. In response to the addition of independent directors, the Guidelines for Electing

Board Directors and Supervisors and the Procedures for the Acquisition or

Disposal of Assets of the Company were amended through the general

shareholders' meeting in 2014.

3. December 11, 2014 The Board of Directors decided to revise the Company's

Corporate Governance Best-Practice Principles and Ethical Corporate

Management Rules.

4. June 10, 2015 Ding-Guo Chen and Jin-Shih Lin were elected independent directors

through the general shareholders' meeting.

5. December 29, 2015 The Board of Directors decided to establish the Company's

Corporate Social Responsibility Best Practice Principles.

Note 1: If directors and supervisors are institutions, names of shareholders and the representative

of the institutions shall be disclosed.

Note 2: (1) In the event that directors or supervisors leave before a year is completed, the date

49

when they leave should be indicated in the memo column. The actual attendance

(seated) rate (%), on the other hand, shall be calculated by the number of Board of

Directors meetings held during service and the frequency number of attendance

(being seated) in the meetings.

(2) Before a year is completed, upon any re-election of directors or supervisors, names

of the said directors/supervisors, new and old, shall be listed and it shall be specified

in the remark column that a specific director or supervisor is old, new, or re-elected,

and the date of re-election. The actual attendance (seated) rate (%), on the other hand,

is to be calculated by the number of Board of Directors meetings held during service

and the frequency number of attendance (being seated) in the meetings.

50

2. State of operations of the Audit Committee:

There is no Audit Committee available at the Company yet so no related information can be

disclosed.

Participation of supervisors in the operations of the Board of Directors:

The Board of Directors met 11 times (A) in the latest year, where supervisors are seated as follows:

Title Name The actual frequency

of being seated in the

meetings

(B)

Actual seated rate

(%)

(B/A) (Note)

Supervisor Yi-Wen Chen, Representative of Namchow Chemical Industrial CO., LTD. Employee Welfare Committee

5 45.5%

Supervisor Oh-Kuan Chang 5 45.5%

Other details to be documented:

(I) Composition and Responsibilities of Supervisors:

I. Communication between Supervisors and Company employees and shareholders (e.g.

communication channel and method, among others)

1. Article 45 of the Company's Corporate Governance Best-Practice Principles stipulates

that:

To facilitate discovery of possible loopholes of the Company in a timely manner,

communication channels should be available at the Company among its employees,

shareholders, stakeholders, and supervisors.

Once found, loopholes shall be prevented from spreading by supervisors taking

appropriate measures in a timely manner. When it is required, reporting to related

competent authorities or units shall also be done.

In the event that independent directors, general managers, and heads of the finance,

accounting, R&D, and internal audit departments or the CPA of the Company resigns

or is replaced, supervisors shall get into the bottom to find out the underlying causes.

Supervisors shall be responsible for compensating the Company for its losses that

result from their negligence at work.

2. Communication: Supervisors can communicate with employees and shareholders by

means of various reporting forms or channels, such as by phone, fax, or through email.

II. Communication between supervisors and the internal audit head and the CPA (e.g. on the

financial and business status of the Company, the means, and the results, among others)

1. Article 44 of the Company's Corporate Governance Best-Practice Principles stipulates

51

that:

Supervisors may investigate the business and financial status of the Company at any

time and related departments in the Company shall cooperate by providing the required

books and documents.

When inspecting the Company's finance and business operations, supervisors may

authorize an attorney or the CPA with the review on behalf of the Company. The

Company, however, shall inform related people of their confidentiality obligation.

The Board of Directors or managers shall submit reports as requested by supervisors

and may not obstruct, circumvent, or refuse inspection behavior of supervisors for any

reason.

While supervisors fulfill their duties, the Company shall provide with necessary

assistance as required, with the necessary and reasonable expenses incurred to be borne

by the Company.

2. Communication: Supervisors understand the operational status and audit status of the

Company by means of the audit reports periodically provided by the audit unit and

communicate with audit supervisors during Board of Directors meetings. Supervisors

may also communicate with the CPA by phone, through email, by fax, and through

meetings in order to understand the financial and operational status of the Company.

(II) If supervisors seated in Board of Directors meetings state opinions, the date of the Board of

Directors meeting, session number, contents of the proposal, and decision made by the Board

of Directors, and how stated opinions of the supervisors are handled by the Company shall be

described.

Supervisors did not state opinions while being seated in Board of Directors meetings

throughout 2015.

Note:

* In case of resignation of supervisors before the year is completed, the date of resignation shall be

stated in the remark column. The actual seated rate (%), on the other hand, shall be calculated by

the number of actual frequency of the supervisors being seated in the meetings during their tenure.

* Before a year is completed, upon any re-election of supervisors, names of the said supervisors,

new and old, shall be listed and it shall be specified in the remark column that a specific

supervisor is old, new, or re-elected, and the date of re-election. The actual seated rate (%), on the

other hand, is calculated by the frequency of the supervisor being seated in the meetings during

his/her tenure.

52

3. Corporate governance implementation status and deviations from Corporate Governance

Best-Practice Principles for TWSE/TPEx Listed Companies and reasons

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

(I) Does the company establish and disclose its corporate governance principles in accordance with the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies?

Yes

The Board of Directors decided on December 11, 2014 to establish the Company's Corporate Governance Best-Practice Principles and upload it to the MOPS on December 12, 2014 while at the same time disclosing it in the "Investors" section of the Company's website.

Compliant

(II) Shareholding structure & shareholders' rights

1. Does the company establish internal operating procedures for handling shareholder suggestions, questions, disputes or litigation and handle related matters accordingly?

2. Does the company have a list of major shareholders that have actual control over the Company and a list of ultimate owners of those major shareholders?

Yes

Yes

1. Article 13 of the Company's Corporate

Governance Best-Practice Principles stipulates that: To ensure protection over shareholders' rights, the Company shall have specialists to handle properly shareholder suggestions, questions, and disputes. In the event that decisions made in shareholders' meetings or Board of Directors meetings violate laws and regulations or the Company's Articles of Incorporation or that directors, supervisors, or managers violate laws and regulations or the Company's Articles of Incorporation while performing their duties to accordingly undermine shareholders' rights, the Company shall handle properly lawsuits filed by shareholders by laws. Information of the contact window for shareholders is available in the "Stakeholders" section of the Company's website to handle issues concerning shareholders.

2. Article 19 of the Company's Corporate Governance Best-Practice Principles stipulates that: The Company shall keep track of the list of major shareholders that hold a relatively larger ratio of shares at any time and are actually in control of the Company and their ultimate

Compliant

Compliant

53

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

3. Has the company established and implemented risk management and firewall systems within its affiliated enterprises?

Yes

owners at any time. The Company shall periodically disclose information such as pledge, increase or decrease in shares held of the Company, or other important matters that might result in changes to shareholding composition of shareholders holding more than 10% of the Company's shares to facilitate supervision by other shareholders. The said major shareholders under Paragraph 1 refer to those with a shareholding ratio of 5% or higher or on the Top 10 shareholding list; the Company, however, may set a lower shareholding ratio reflective of the actual control they have over the Company's shareholding status. The Department of Finance of the Company is in charge of this.

3. (1) Article 14 of the Company's Corporate Governance Best-Practice Principles stipulates that: The responsibilities of management over the personnel, assets, and finance of the Company and its associated enterprises shall be specific and risk assessment shall be precisely done and an adequate firewall shall be established.

(2) Article 17 of the Company's Corporate Governance Best-Practice Principles stipulates that: Business correspondence between the Company and its associated enterprises shall be based on the principle of fairness and legitimacy. Written regulations shall be established to govern mutual financial operations. For contracts to be signed, pricing requirements and payment method shall be specified to eradicate abnormal transactions. Transactions or contract-signing matters between the Company and related parties and their shareholders shall also be handled

Compliant

54

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

4. Has the company established internal rules against insiders trading with undisclosed information?

Yes

in accordance with the principle stated in the preceding paragraph and transfer of interest is strictly prohibited.

4. Article 10 of the Company's Management and Control Operating Guidelines for the Prevention against Insider Trading stipulates the prohibition of insider trading: Upon actually knowing of any information that will have a material impact on the price of the Company's stock price, buy or sale of the any shares or equity-type securities of the company that are listed on an exchanges or traded in securities firms is disallowed prior to the public disclosure of such information or within 12 hours after its public disclosure.

Compliant

(III) Composition and Responsibilities of the Board of Directors 1. Has the Board of

Directors developed and implemented a diversified policy for the composition of its members?

No

1. (1) The Company has not established a diversification policy on the membership of the Board of Directors yet.

(2) The Company does not set restrictions with regard to the gender, age, nationality, and culture of directors to be elected. The professional knowledge and skills of the Company's directors shall meet the following requirements indicated in Article 20 of the Company's Corporate Governance Best-Practice Principles: Members of the Board of Directors shall generally be equipped with the knowledge, skills, and quality required for performing their duties. In order to accomplish the ideal goals of corporate governance, the Board of Directors shall generally be equipped with the following capabilities: (1) operational judgement, (2) accounting and financial analysis, (3) administration, (4) risk management, (5) industrial knowledge, (6) perspectives of the international market, (7) leadership, and (8) decision-making.

(3) The Company has actually consolidated

Compli

ant

55

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

2. Does the Company voluntarily establish other functional committees in addition to Compensation Committee and Audit Committee that are established as required by laws?

3. Has the Company established standards and method for evaluating the performance of the Board of Directors, and implemented the performance evaluation

No

No

diversification with regard to the membership of the Board of Directors. Independent directors Mr. Ding-Guo Chen and Mr. Jin-Shih Lin nominated by the Board of Directors were approved on March 20, 2015. Mr. Ding-Guo Chen is a chair professor on business administration at the College of Management of Tamkang University and the general counsel of the Ruentex Group while Mr. Jin-Shih Lin is a CPA at the Lin Jin-Shih Accounting Firm. Both of them were elected through the general shareholders meeting of 2015. Nomination at the Company has been diversified.

2. (1) Article 25 of the Company's Corporate Governance Best-Practice Principles stipulates that: In order to normalize the supervisory function and strengthen the management mechanism, the Company's Board of Directors may set up various functional committees to take charge of auditing, nomination, risk management, or others taking into consideration the scale of the Board of Directors and the number of independent directors available and may set up the Environmental Protection Committee or other committees and include the ideas of corporate social responisibilities and sustainable management in the Articles of Incorporation.

(2) No other functional committees are available at present.

3. (1) The Company has not established its own guidelines for evaluating the performance of the Board of Directors yet.

(2) The Company's Board of Directors abide by government laws and regulations, the Company's Articles of Incorporation, decisions reached in shareholders' meetings, the Company's Board of Directors Meeting

Non-complian

t To be set up

according to

priorities in the future

Non-complian

t

56

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

annually?

4. Does the Company regularly evaluate the independence of CPAs?

Yes

Rules, and the Company's Corporate Governance Best-Practice Principles. Members of the Company's Board of Directors must precisely and truthfully carry out tasks, honor the due diligence duty as good-will administrator and exercise functions in a highly self-disciplined and cautious way. While performing tasks relating to the Company, decisions shall be made through shareholders' meetings as is indicated in regulatory requirements and the Company's Articles of Incorporation, the decisions of the Board of Directors shall be precisely followed.

4. Article 28 of the Company's Corporate Governance Best-Practice Principles stipulates that: The Company shall choose professional, responsible, and independent CPAs to periodically inspect the financial status and internal control of the Company. The Company shall precisely discuss and seek improvements with regard to abnormalities or deficiencies that are found or disclosed during audits by the CPA and the introduced substantial improvement or loophole prevention opinions. The Company shall periodically (at least once a year) evaluate the independence of CPAs hired. In the event that the CPA has not been replaced for five consecutive years or has been punished or has his/her independence undermined, the Company shall consider the necessity to replace the CPA and submit the conclusion to the Board of Directors.

Compliant

57

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

(IV) Does the company establish a communication channel and build a designated section on its website for stakeholders, and properly respond to corporate social responsibility issues that stakeholders are concerned about?

Yes (1) Article 49 of the Company's Corporate Governance Best-Practice Principles stipulates that: The Company shall keep communication channels open with its corresponding bank and other creditors, employees, consumers, suppliers, communities, or stakeholders of the Company and respect and maintain legal rights that it is entitled to.

(2) There is the Stakeholders section available on the website of the Company.

(3) The Company has also set up the section for Investors.

Compliant

(V) Does the company designate a professional shareholder service agency to deal with affairs relating to shareholders meetings?

Yes The Company authorizes China Trust with the professional shareholder service, which, internally, is the responsibility of the Company's Department of Finance.

Compliant

(VI) Disclosure of Information

1. Has the company established a corporate website to disclose information regarding the company's financial, business and corporate governance status?

2. Does the company have other information disclosure channels (e.g., maintaining an

Yes

Yes

1. Article 55 of the Company's Corporate

Governance Best-Practice Principles stipulates that the Company shall set up a website taking advantage of the convenience of the Internet where related financial and operational information and corporate governance information is disclosed for the reference of shareholders and stakeholders. (http://www.namchow.com.tw/IR/05.html) There should be exclusive people to be responsible for maintaining the website in the preceding paragraph. All the data disclosed should be true and accurate and updated in real time to avoid the concern of misleading people. Related information is disclosed on the Company's website.

2. Other ways of information disclosure: (1) No English website is set up yet. (2) Staff at the Accounting Office have been

designated to take charge of collecting

Compli

ant

Compliant

58

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

English website, appointing responsible people to handle information collection and disclosure, creating a spokesperson system, webcasting investor conference on company website)?

information on the Company and disclosure major information on the Company; information will be entered and announced through the MOPS periodically.

(3) Spokesperson, acting spokesperson, shareholder service and investment correspondence groups are available to consolidate the spokesperson system.

(4) Investors conference website: http://www.namchow.com.tw/IR/11.html

(VII) Is there any other important information available to facilitate a better understanding of the company’s corporate governance practices (including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, continuing education of directors and supervisors, the implementation of risk management policies and risk evaluation standards, the implementation of customer relations policies, and purchasing insurance for directors and supervisors)?

Yes 1. Employee rights: The Employee Welfare Committee is already set up for the Company, with group insurance of employees, manager liability insurance, and integrity insurance of related employees purchased.

2. Employee wellness: Employee Welfare Committee has been set up . Emphasis is placed on gender equity and

adequate day-care measures are provided for the employees' reference. Meanwhile, the adequacy of day-care measures is discussed on a yearly basis.

Public folders are available in the Outlook feature to be accessed by respective business units and functional or administrative units of the Company. The folders provide staff with information on business operation, health insurance, labor insurance, and welfare.

3. Investor relations: There is a section for Investors on the website of the Company to disclose company information and provide it to investors.

4. Supplier relations: Desirable supplier relationship is maintained. By comparing prices, it ensures the legitimacy of raw material pricing and compliance with health laws and regulations

Compliant

Compliant

Compliant

Compliant

59

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

such as FGMP, HACCP, ISO-9001, ISO-22000, ISO-14064-1, CNS mark, certification criteria for health foods and recommendation requirements for disease preventive products to help control quality of raw materials and equipment and to ask suppliers to provide with corresponding product laboratory test certificates. Protection of the quality, health, and safety of products

5. Rights of stakeholders: Article 49 of the Company's Corporate Governance Best-Practice Principles stipulates that the Company shall keep communication channels open with its corresponding bank and other creditors, employees, consumers, suppliers, communities, or stakeholders of the Company and respect and maintain legal rights they deserve. In case of management acquisitions, the Company shall pay attention to the soundness of the Company's financial structure in the future. When the legal rights of stakeholders are infringed upon, the Company shall handle them adequately by the principle of sincerity. There is the Stakeholders section available on the website of the Company.

Compliant

60

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

6. Implementation of risk management policy and risk measuring criteria: Article 16 of the Company's Corporate Governance Best-Practice Principles stipulates that the Company shall establish a sound financial, operational, and accounting management system in compliance with applicable laws and regulations and shall adequately and comprehensively assess risks associated with the corresponding bank, customers, and suppliers with its affiliated enterprises in order to implement a necessary control mechanism that helps minimize credit risk. There are related departments responsible at

the Company to evaluate and analyze matters such as major operational policies, investment plans, acquisition and disposal of assets, endorsement and guarantee, fund lending, and banking/financing before they are submitted to the Board of Directors for a decision.

The Audit Office has stipulated the Annual Audit Plan and precisely implemented it according to risk assessment outcome in order to consolidate the supervisory mechanism and to control and manage various risks.

For the compensation liability inflicted upon directors and supervisors during their tenure within the scope of tasks they carry out, the liability insurance has been purchased; the latter will help minimize and dilute the risk of major damage to the Company or borne by shareholders as a result of mistakes or negligent behavior of directors and supervisors.

7. Implementation of customer policies: Protection of consumer rights of end

customers: It is the Company's policy to provide consumers with healthy, safe, and desirable quality products so that they can

Compli

ant

Compliant

61

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

eat healthily and safely. Related certifications on the manufacture and the sanitary, safe, and healthy benefits of products have been obtained; products of optimal quality are provided to consumers. The liability insurance has been purchased for products. In addition, there is the 0800 hotline for customer service.

Competitive advantages of clients: It is the Company's policy to create a Win-Win situation that contributes to co-prosperity and co-sharing of maximum benefits among downstream customers. Downstream clients are provided with the Company's information through the Company's website, the Outlook feature, and the ERP system. In addition, quality, health, and safety of products are maintained to seek various certifications, to promote brand publicity, and to provide clients and employees with information on how to enhance their technical and marketing/management capabilities by means of the bi-monthly professional journal entitled "Namchow Frozen Dough and Baking Oils and Fats" that is issued by an associated enterprise.

8. Purchase of liability insurance by the Company for its directors and supervisors: Article 38 of the Company's Corporate Governance Best-Practice Principles stipulates that the Company may purchase liability insurance for the tasks performed by directors during their tenure as required by laws in accordance with the Articles of Incorporation or decisions reached through shareholders' meetings in order to minimize and dilute the risk of major damage to the Company or borne by shareholders as a result of wrong or negligent behavior of directors. The decision that the Articles of Incorporation were to be revised and the Board of Directors

Compliant

62

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

would be authorized to purchase the said insurance was reached in the 2010 general shareholders' meeting and liability insurance has been purchased for directors and supervisors since January 1, 2011.

9. Continuing education sought by directors and supervisors: Continuing education sought by directors and supervisors in 2015:

Fei-Lung Chen 12.15 3 hours Something about integrity-based

management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance

Association) 12.17 3 hours Mainstream - CSR and sustainable

governance (Taiwan Corporate Governance

Association)

Fei-Peng Chen

12.15 3 hours Something about integrity-based management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance Association)

12.17 3 hours Mainstream - CSR and sustainable governance Taiwan Corporate Governance Association

Chin-Tsai Chen

08.12 3 hours Mainstream - CSR and sustainable governance (Taiwan Corporate Governance Association)

10.22 3 hours Corporate social responsibilities and sustainable competitive

Compliant

63

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

advantages (Taiwan Corporate Governance Association)

Kan-Wen Lee

01.22 3 hours Corporate Social Responsibility Report - Seminar on the Value of Sustainable Management (Securities and Futures Institute )

06.26 6 hours International Seminar on "Corporate Governance, Financial Supervision, and Law" (Taiwan Stock Exchange)

Cheng-Wen Chen

12.2-4 6 hours EXCEL in Risk Management Data Analysis and Application Workshop (Taiwan Academy of Banking and Finance)

12.15 3 hours Something about integrity-based management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance Association)

12.17 3 hours Mainstream - CSR and sustainable governance (Taiwan Corporate Governance Association)

Ding-Guo Chen

03.19 3 hours Corporate Mergers & Acquisitions and Legal Liabilities of Directors and Supervisors (Taiwan Corporate Governance Association)

11.10 3 hours Risk Management and Internal Control (Taiwan Corporate Governance

64

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

Association)

12.15 3 hours Something about integrity-based management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance Association)

12.17 3 hours Mainstream - CSR and sustainable governance (Taiwan Corporate Governance Association)

Jin-Shih Lin

02.13 3 hours Update on the Profit-seeking Enterprise Income Tax Act and Precautions on Declaration and Inspections (National Federation of Certified Public Accountant Associations of the Republic of China)

07.28 3 hours Practical application of cases confirmed through inspections or authentication of non-historical financial information (National Federation of Certified Public Accountant Associations of the Republic of China)

07.29 3 hours New Company-related Laws and Regulations and Practical Analysis of the Future (National Federation of Certified Public Accountant Associations of the Republic of China)

08.17 6 hours Analysis of Latest Information Included in Newly Promulgated Taxation Affairs of 2015 (National Federation of Certified Public Accountant Associations of the Republic of China)

65

Assessed areas

Operational status (Note 1) Deviatio

ns from

Corporat

e

Governa

nce

Best-Pra

ctice

Principl

es for

TWSE/

TPEx

Listed

Compan

ies and

reasons

Yes No Summary

Oh-Kuan Chang

12.15 3 hours Something about integrity-based management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance Association)

12.17 3 hours Mainstream - CSR and sustainable governance (Taiwan Corporate Governance Association)

Yi-Wen Chen

12.15 3 hours Something about integrity-based management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance Association)

12.17 3 hours Mainstream - CSR and sustainable governance (Taiwan Corporate Governance Association)

(VIII) Does the company have corporate governance self-assessment report or have engaged any other professional organization to conduct such assessment? (If so, please describe the opinion of the board, the results of self or outside evaluation, major deficiencies found, suggestions, or improvement actions taken) (Note 2)

No The Company started to evaluate its own corporate governance in 2015; the operation, however, has not been completed and no written records have been kept on related operations.

Non-compliant

66

Note 1: Regardless of the answer, "Yes" or "No", descriptions need to be provided in the

summary column.

Note 2: The so-called corporate governance self-assessment report refers to the fact that the

Company performs assessments on its own according to the corporate governance

self-assessment items and provides descriptions and produces a report on the current

corporate operation and implementation status of each item included in the

self-assessment.

67

4. If the Company has a Compensation Committee, the composition, responsibilities, and

operations of the Committee shall be disclosed.

(1) Membership of Compensation Committee

Status

(Note

1)

Require

ment

Name

More than five years of work

experience

and the following professional

eligibility

Compliance with the independence

requirement (Note 2)

Numb

er of

other

public

offerin

g

compa

nies

with

part-ti

me

memb

ership

of

their

Comp

ensati

on

Comm

ittee

Rema

rk

(Note

3)

Lecturer

or higher

ranking

at the

business,

legal

affairs,

financial

affairs,

or

accounti

ng

departme

nt, or

other

departme

nts

relating

to

corporat

e

operatio

n of

public

and

private

colleges

and

universit

ies

Judge,

prosecutor

, lawyer,

CPA, or

other

profession

als and

technician

s that

have

taken and

been

approved

in national

exams

required

for

corporate

operation

Work

experienc

e required

for

business,

legal

affairs,

financial

affairs,

accountin

g, or

corporate

operation

1 2 3 4 5 6 7 8

Indep

endent

Direct

or

Ding-G

uo

Chen

1

Indep

endent

Direct

or

Jin-Shi

h Lin

0

Other Hai-Mi

ng

Chen

2

Note 1: Provide "director, independent director, or other" for the "status."

68

Note 2: Note: When any of the following conditions is met for each member during the two years

prior to and during their tenure, please check "" in the box underneath each conditional

code.

(1) Not an employee of the company or its associated enterprise.

(2) Not a director or supervisor of the Company or its associated enterprise. This, however, does not include independent directors of the

Company or its parent company, or subsidiary where the Company holds directly or indirectly more than 50% of the voting shares.

(3) Not a natural person shareholder that holds by himself/herself or by his/her spouse or minor child in someone else's name more than

1% of all circulating shares of the Company or is on the Top 10 shareholding list.

(4) Not the spouse, a relative within the second degree of kinship, or a direct blood relative within the third degree of kinship of the said

people indicated in the foregoing three subparagraphs

(5) Not a director, supervisor, or employee of an institutional shareholder directly holding more than 5% of all circulating shares of the

Company or a director, supervisor, or employee of an institutional shareholder on the Top 5 shareholding list.

(6) Not a director, supervisor, manager, or a shareholder holding more than 5% of shares of a specific company or institution with

financial or business activities with the Company

(7) Not a professional providing services or consultations on business, legal affairs, financial affairs, and accounting at the Company or its

associated enterprise or the owner, partner, director, supervisor, manager, and his/her spouse of a sole proprietorship or collaborative

company or institution.

(8) None of the conditions indicated under Article 30 of the Company Act

Note 3: If the status of a member is director, please explain if he/she meets the requirements

under Article 6 Paragraph 5 of the Regulations Governing the Appointment and Exercise

of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the

Stock Exchange or Traded Over the Counter.

(2) State of operations of the compensation committee

1. The Company's Compensation Committee has 3 members in total.

2. Current members will serve from June 19, 2012 to June 18, 2015 for the second intake and

from June 19, 2015 to June 18, 2018 for the third intake. The Compensation Committee met

six times (A) in the latest year. Qualification and attendance of members are as follows:

Title Name

The actual frequency

of attendance

in the meetings

(B)

Frequency of

attendance through proxy

Actual attendance

rate (%) (B/A) (Note)

Remark

Convener Ding-Guo

Chen 6 0 100%

Re-elected (Date of

re-election: June 18, 2015)

Member Hai-Ming

Chen 5 1 83%

Re-elected (Date of

re-election: June 18, 2015)

Member Dai-Zhou

Li 1 0 100%

Resigned as member of

Namchow Compensation

Committee on February 1,

2015.

69

Member Jin-Shih

Lin 4 1 80%

New member, with a tenure

that begins on February 12,

2015 (Date of re-election:

February 12, 2015)

Re-elected (Date of

re-election: June 18, 2015)

Other details to be documented:

1. If the Board of Directors does not accept or modifies suggestions provided by the

Compensation Committee, the date of the Board of Directors meeting, the session number,

contents of the proposal, decisions made by the Board of Directors, and management of

opinions from the Compensation Committee by the Company should be stated (If the

compensation and rewards approved by the Board of Directors are superior to those

advised by the Compensation Committee, there should be descriptions of the differences

and reasons considered).

2. For decisions made by the Compensation Committee, as long as there are members

objecting or having their reservations that are recorded or stated in writing, the date of the

Compensation Committee meeting, the session number, contents of the proposal, and how

opinions from all members and from opposing members are handled should be described.

Note:

(1) In the event that members of the Compensation Committee resign before a year is completed,

the date of resignation should be indicated in the remark column. The actual attendance rate

(%), on the other hand, shall be calculated by the number of Compensation Committee

meetings held during service and the frequency number of attendance in the meetings.

(2) Before a year is completed, upon any re-election of Compensation Committee members,

new and old, shall be listed and it shall be specified in the remark column that a specific

member is old, new, or re-elected, and the date of re-election. The actual attendance rate (%),

on the other hand, is to be calculated by the number of Compensation Committee meetings

held during service and the frequency number of attendance in the meetings.

70

5. Fulfillment of social responsibilities

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

(I) Consolidation of corporate governance

1. Does the company establish corporate social responsibility policy or system and examine its implementation results?

2. Does the company

provide educational training on corporate social responsibility on a regular basis?

3. Does the company have a

Yes

Yes

Yes

I. 1. 52 of the Company's Corporate

Governance Best-Practice Principles stipulates that while maintaining normal operations and developments and realizing maximum interests for its shareholders, the Company shall pay attention to consumer rights, environmental protection in communities, and public interest, among others, as well as its social responsibilities.

2. The CSR (corporate social responsibility) system has been jointly promoted by respective functional units under the leadership of Vice Executive President and the CSR Report has been compiled accordingly.

3. The 2014 CSR Report has been completed for the Company and been released in the CSR section on the website of the Company.

4. December 29, 2015 The Board of Directors decided to establish the Company's Corporate Social Responsibility Best Practice Principles.

5. KPMG Sustainability Consulting is authorized by the Company to assist in the compilation of the CSR Report and provides management suggestions after it is completed.

II. The Company has been preparing the CSR Report on a yearly basis since 2015. KPMG Sustainability Consulting is authorized to provide assistance and educational training. In addition, related supervisors are assigned to receive educational training organized by external institutions.

III. The Company's CSR promoting policy is

Compliant

Compliant

Compliant

71

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

unit that specializes (or is involved) in CSR practices? Is the CSR unit run by senior management and reports its progress to the Board of Directors?

4. Has the company established a reasonable salary remuneration policy, and integrated the employee performance evaluation system with its CSR policy, and established an effective reward and disciplinary system?

Yes

made by the Board of Directors and jointly implemented by respective functional units under the General Manager's Office while its implementation status is reported by the Executive Vice President to the Board of Directors.

IV. (1) Article 7 of the Company's Organic Rules for Compensation Committee stipulates the scope of responsibility: The Committee shall pay attention as good-will administrator and truthfully exercise the following functions while at the same time submitting suggestions to the Board of Directors for discussion. Suggestions regarding the compensation and rewards for supervisors, however, are to be submitted to the Board of Directors for discussion and shall be limited to those authorized to be handled by the Board of Directors under the Articles of Incorporation or decisions made through shareholders' meetings. (I) Stipulate and periodically discuss

the annual and long-term performance goals and compensation and reward policies, systems, standards, and structures for directors, supervisors, and managers of the Company.

(II) Periodically evaluate the accomplishment of performance goals by directors, supervisors, and managers of the Company and stipulate the contents and values of their individual compensation and rewards.

(2) Article 8 of the Company's Organic Rules for Compensation Committee (function exercising principle) stipulates that:

Compliant

72

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

The Committee shall abide by the following principles when exercising functions in the preceding article: (I) Ensure that the Company's

compensation and rewards arrangement mets applicable regulatory requirements and is sufficient to attract oustanding talent.

(II) For the performance assessment and compensation and rewards of directors, supervisors, and managers, payments shall be made with reference to counterparts' levels and taking into account of personal performance, corporate management performance, and reasonable association with risks in the future.

(III) Directors and managers shall not be misled to engage themselves in behavior exceeding the risk appetite of the Company for the pursuit of their own compensation and rewards.

(IV) Industrial characteristics and corporate operational essence shall be taken into consideration while the ratio of bonus distributed based on the short-term performance of directors and high-ranking managers and the payment period of partially changed compensation and rewards is being decided.

(V) Rewards for members of the Committee are to be decided by the Board of Directors. If a member is also the director of the Company or its reinvested business, however, no rewards

73

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

will be paid. (II) Development of a Sustainable Environment

1. Has the Company endeavored to improve the efficiency of resource utilization and used recycled materials which have a low impact on the environment?

2. Has the Company

developed an appropriate environmental management system, given its distinctive characteristics?

3. Has the Company

monitored the impact of climate change on business operations, conducted greenhouse gas inventory and formulated strategies for energy conservation and carbon and greenhouse gas reduction?

Yes

Yes

Yes

I. (1) The Company authorizes a registered

service provider to take charge of the recycling of waste.

(2) The Company mainly produces foods and the use of materials needs to comply with food-grade requirements. Packaging cartons are produced with renewable paper.

II. The Company maintains a workplace and

natural environment that is compliant with public safety and construction laws and regulations, fire-fighting laws and regulations, labor safety and health laws and regulations, the Waste Disposal Act, and energy-saving and carbon reduction requirements and prepares reports accordingly.

III. (1) The Company has not established corporate strategies to save energy and reduce carbon emissions as well as greenhouse gases.

(2) The general affairs staff in respective offices of the Company and specialists at respective facilities are responsible for managing the workplace of employees and protecting the natural environment. Office: Inspections by the Public Utilities Division of the Department of Economic Development under the Taipei City Government confirmed compliance of room temperature and lighting with the requirements and criteria indicated in the Taipei City Industrial and Commercial Energy-saving and Carbon Reduction Assistance and Management

Compliant

Compliant

Compliant

74

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

Self-government Act. Facilities are ISO-9001, ISO-22000, and ISO-14064-1 certified and various environmental, occupational safety and health, food safety, and information safety management systems are confirmed to be compliant with requirements.

(III) Protection of public interest in society

1. Has the Company developed its policies and procedures in accordance with applicable laws and regulations and the International Bill of Human Rights?

2. Does the Company have

means through which employees may raise complaints? Are employee complaints being handled properly?

Yes

Yes

I. (1) Employee rights: Labor Insurance,

National Health Insurance, and appropriations for the pension fund have been precisely taken care of according to laws.

(2) Insurance. Public accidents liability insurance and group insurance have also been purchased for employees.

(3) The guidelines for preventing against sexual harassments and filing complaints accordingly have been established and implemented in compliance with laws and regulations such as the Act of Gender Equality in Employment, the Occupational Safety and Health Act, and the People with Disabilities Rights Protection Act promulgated by the government.

(4) Other management methods and procedures: The Code of Conduct has been established and released in Outlook to be followed by employees.

II. (1) The human resources unit and legal affairs unit accept complaints filed by respective employees and review them case by case.

(2) The Company has also established the "Sexual Harassment Prevention and Control and Complaint Filing Guidelines for Namchow and Its

Compliant

Compliant

75

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

3. Does the Company

provide employees with a safe and healthy work environment as well as periodic safety and health education?

4. Does the Company have channels to communicate with employees on a regular basis, and inform them in a reasonable way of operational changes that may be of a significant impact?

Yes

Yes

Associated Enterprises" in compliance with the Act of Gender Equality in Employment. The goal of equal rights to work and abolition of sexual discrimination is fulfilled through open and just communication mechanisms and channels.

(3) Upon infringement such as sexual harassment, one can file a complaint through the sexual harassment mailbox: [email protected] and report it or request a written complaint form from the Human Resources Unit and complete it to unveil the incident. The complaint hotline is 02-25352958. For a sustained complaint, the subsequent management shall be based on the requirements indicated in the guidelines.

III. Employee health examination: Employees are entitled to periodical health examinations (once a year or every two years) done by healthcare professionals at contract medical institutions. The workplace is configured in compliance with applicable requirements of the Occupational Safety and Health Act and is the responsibility of specialized safety staff.

IV. (1) The Company holds employer-employee meetings from time to time.

(2) Article 51 of the Company's Corporate Governance Best-Practice Principles stipulates that:

The Company shall establish communication channels and encourage its employees to communicate directly with the management, directors, or supervisors and to adequately reflect the feedback that employees have on the management and financial standing of

Compliant

Compliant

76

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

5. Has the Company

implemented an effective training program that helps employees develop skills over the course of their career?

6. Has the Company established any consumer protection policies and complaint procedures regarding R&D, purchase, production, operation and service?

7. Has the Company

complied with laws and

Yes

Yes

Yes

the Company and major decisions concerning employee benefits.

(3) There are the Employee Welfare Committee and Union available to meet periodically or on an ad hoc basis for smooth communications.

(4) Operational plans of the Company have been announced and published internally and externally through Outlook, Bridge Magazine, and the website of the Namchow Group.

(5) There is the section for Stakeholders on the Company's website where employees can communicate their opinions.

V. Staff training, career development, and performance assessment guidelines are available under (III) of the Human Resources Policy in II of the Employee Handbook of the Company.

VI. (1) Article 52 of the Company's

Corporate Governance Best-Practice Principles stipulates that while maintaining normal operations and developments and realizing maximum interests for its shareholders, the Company shall pay attention to consumer rights, environmental protection in communities, and public interest, among others, as well as its social responsibilities. The Company manages raw materials from suppliers from the source and has a Food Safety Office in place to ensure the healthy status and safety of products developed and produced.

(2) Consumer complaints: There is the 0800 hotline for consumers to provide feedback.

VII. Products of the Company are GMP, ISO-22000, CNS Mark, ISO-9001,

Compliant

Compliant

Compliant

77

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

international standards concerning the marketing and labeling of products and services?

8. Has the company

evaluated the records of suppliers’ impact on the environment and society before doing business with the supplier?

9. Do contracts between the Company and its major suppliers include termination clauses which come into force once the suppliers breach the corporate social responsibility policy and cause significant impact on the environment and society?

Yes

Yes

ISO-14064-1, HACCP, and Health Food certified; the marketing and labeling of products meet applicable regulatory requirements.

VIII. The company always evaluates the

records of suppliers’ impact on the environment and society before doing business with the supplier.

IX. (1) Contracts between the Company and

its major suppliers include termination or dismissal clauses which come into force once the suppliers breach the corporate social responsibility policy and cause significant impact on the environment and society.

(2) Requirements in the Purchase Contract of the Company: The Company may change the content of purchase whenever it is considered necessary, to which the supplier may not object. If a supplier violates the CSR policy and results in significant impacts on the environment and society, the Company will discontinue transactions immediately.

Compliant

Compliant

(IV) Reinforced Information Disclosure

1. Has the Company disclosed relevant and reliable information regarding its corporate social responsibility on its website and the MOPS?

Yes

1. The Company already completed the 2014

CSR Report in 2015 and disclosed relevant and reliable CSR information on the Company's website and the MOPS.

Compliant

(V) If the Company has its own CSR principles established according to the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, please describe the differences between its implementation and the principles: 1. The Board of Directors decided to establish the Company's CSR Practical Principles on

December 29, 2015.

78

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

2. The CSR Report is to be compiled jointly by respective relevant functional units under the leadership of the Executive Vice President of the Company and under the guidance of KPMG Sustainability Consulting. The 2014 CSR Report was completed in the fourth quarter of 2015.

3. The Company does not have differences in the implementation of its CSRs and the established principles.

(VI) Other Important Information to Help Understand Utilization of Corporate Social Responsibilities:

1. Environmental Protection: Related costs of environmental protection totaled NTD 30,637

thousand in 2015.

2. Community involvement and social service:

Free access to the Taoyuan Tourism Factory of Namchow is available. There are around

17,335 people on average visiting the factory each month and services available include crystal

soap marking DIY, Dian Shui Lou steamed dumplings DIY, Dian Shui Lou egg tart DIY,

Kabisuo honey toast DIY, Paulaner pizza DIY, and Kabisuo ice cream DIY. The factory

facilitates people-to-people diplomacy, industrial exchange and welcomes visits by government

agencies and schools of all levels. Returning to the neighborhood is done from time to time; the

carnival fair was held in the spring of 2014 from April 6 to April 7.

3. Contributions to society:

Namchow has been adhering to its corporate management and product development

principle of "safeguarding the Earth and protecting future generations." It provides safety,

healthy, and quality products and dining services.

Its crystal soap is the mother of corporate developments. The product is 100% natural. The

second generation featuring laundry crystal soap detergents and food container cleansing

solution introduced in the past few years was honored with the Jade Mount Award of

National Brands in 2012 and three of the products were certified with the benefit to

prevent against diseases in 2014. The "Antrodia cinnamomea" series of products was

developed with the state-grade Alishan Antrodia cinnamomea extract solution to hopefully

further diversify choices of natural and healthy cleansing products.

Namchow created a transparent cloud system for food traceability. In the World Market

Namchow exhibition between October 13 to 17 of 2014, the 8 stands in total

accommodated around 300 seats to activate the 20-year development plan of the Namchow

Group of developing a global niche market while based in Taiwan. The food value chain

traceability cloud application program of the Namchow Group was introduced and

Commissioner Been-Huan Chiang was invited as the VIP to speak on "Cloud Source

79

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

Management and the Management of the Global Market".

The Handy Gift Carnival of the Namchow Group between December 26 and 28 of 2014

combined exclusive local pastries of Taiwan with local culture and international

sightseeing industries. Sixty-two benchmark handy-gift businesses throughout Taiwan

gathered. There were a total of 120 stands to sell benchmark pastries and desserts,

including pineapple cakes, sun cakes, mother's cakes, egg rolls, cake, candy and cookies.

There were seven kinds of pineapple cakes and 26 kinds of mother's cakes alone. In total,

the handy gifts that appeared in the exhibition could be divided into 15 categories

consisting of 122 products. This is the latest picture of the handy-gift industry in Taiwan.

The exhibition helped create a new outlook for 2015 of the Taiwan handy-gift industry.

4. Public interest:

One hundred illuminating ropes were donated to the Fire Department of Taoyuan City

Government, totaling NTD 1,904,762 in value.

A total of NTD 307,248 was donated throughout 2015 through joint fund raising.

NTD 1.5 million was raised for the Nepal Earthquake relief effort.

Other donations throughout 2014 including those made to the Single Parent Education

Foundation and the Dalongtong campaign in the Datong District of Taipei City, etc.

5. Consumer rights: There is the 0800 consumer service hotline available and product liability

insurance and public accident liability insurance have been purchased.

6. Human rights: The public accident liability insurance and group insurance have been purchased

and construction safety and management have been implemented. The Namchow Guidelines

for Preventing against Sexual Harassments and Filing Complaints are established and the

complaint channel is made available.

7. Safety and health:

Employee safety and health: Public accident liability insurance has been purchased.

Safety and healthy products and production lines:

a. CNS Mark: Since 1952 when Namchow Soap became the fifth product to bear the

CNS mark in Taiwan, it is now the only one that has been in existence among the Top

180 products approved for the CNS Mark back then.

b. Disease prevention products: Disease prevention products reviewed and recommended

by the Institute for Biotechnology and Medicine Industry as authorized by the Centers

80

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

for Disease Control of the Ministry of Health and Welfare include Namchow Crystal

Grapefruit Seed Spray Dry Hand Wash, Namchow Crystal Grapefruit Seed Antiseptic

Hand Wash Solution, and Namchow Crystal Grapefruit Seed Antiseptic Hand Soap.

c. Health foods: Health foods reviewed and approved by the Ministry of Health and

Welfare include Dietary Fiber Cooked Rice Healthy Grains and Dietary Fiber Cooked

Rice Double-Wheat.

d. Other certifications obtained by Namchow products include FGMP, ISO-9001,

ISO-22000, ISO-14064-1, HACCP, and SGS.

In response to the government's Project of Traceability Cloud Application on Safe Foods",

the Namchow Group has configured Namchow system quality information management.

Suppliers can control their shipping and quality assurance processes through this platform

while Namchow can review the receiving, acceptance, shipping, and quality assurance

processes and distributors and service providers within the network can manage receiving

and acceptance of goods. Meanwhile, related product resume information is provided for

inquiries by consumers that can be accomplished easily by applying the GS1 international

code about information from the farmland to the dining table.

There is already a Food Safety and Health Office and food safety regulatory supervisor

under the Executive Vice President's office of associated enterprises of Namchow to take

charge of communicating food safety-related laws and regulations, organizing educational

training and monitoring compliance and perform ultimate review and audit supervision on

the legitimacy of operations relating to the labeling of additives in raw materials of foods

produced by respective business units and food safety and health.

The Company has disclosed the name of the Company's product, name, address, business

registration number, factory registration number, registration document number, product

storage and transport conditions, product traceability system connection codes, packing

specifications, and packing materials of the responsible domestic manufacturer on the

Food and Drug Administration registry http://fadenbook.fda.gov.tw.

The Company has disclosed the name of its products, name of the Company, specification,

nutrition label, composition table, final report, and warnings on the Food and Drug

Administration traceability information management system: http://ftracebook.fda.gov.tw.

81

Assessed areas

Operational status (Note 1) Departure

from

Corporate

Social

Responsibi

lity Best

Practice

Principles

for

TWSE/GT

SM listed

companies

and

reasons

Yes No Brief Descriptions (Note 2)

(VII) In the event that validation criteria of related verification institutions are approved in the

Company's CSR Report, it shall be stated so:

(1) The CSR Report is to be compiled jointly by respective relevant functional units under

the leadership of the Executive Vice President of the Company and under the guidance of

KPMG Sustainability Consulting. The 2014 CSR Report was completed in the fourth

quarter of 2015 and validated by the KPMG.

Note 1: Regardless of the answer, "Yes" or "No", descriptions need to be provided in the

summary column.

Note 2: If the CSR Report has been prepared, how the CSR Report can be accessed and the index

page number may be indicated in the Brief Descriptions column instead.

6. Implementation of ethical corporate management

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

(I) Establishment of ethical corporate management policy and proposal 1. Has the

Company declared its ethical corporate management policies and procedures in its rules and

Yes

1. (1) Article 6 of the Company's Ethical Corporate Management Rules deals with policies: The Company, based on its management beliefs of honesty, transparency, and responsibility, establishes integrity-based policies and a desirable corporate management and risk control mechanism to help create a management setting in favor

Compliant

82

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

external documents, as well as the commitment of its Board of Directors and management to implementing the management policies?

of sustainable developments. (2) Article 3 of the Company's Ethical

Corporate Management Rules prohibits dishonest behavior: Staff of the Company may not provide, promise, request, or accept, directly or indirectly, unjustified interests or engage themselves in dishonest behavior against integrity, which is illegal, or against the authorized duties in order to obtain or keep the interests (collectively "dishonest behavior") while conducting business. The preceding paragraph shall apply to public servants, political candidates, members of a party or someone taking a partisan position and any public or private enterprise or institution and its director, supervisor, manager, employee, actual controller, or stakeholder.

(3) Article 4 of the Company's Ethical Corporate Management Rules deals with the types of interests: "Interest" indicated herein refers to any object of value, including money, gift, commission, position, service, preferred treatment, or rebate in any form or under any title. This, however, does not include normal social etiquettes that are occasional and do not affect specific rights and obligations.

(4) Article 5 of the Company's Ethical Corporate Management Rules deals with compliance with regulatory requirements: The Company shall abide by applicable laws and regulations, such as the Company Act, Securities Exchange Act, Commercial Accounting Act, Political Donations Act, Law Against Accepting Bribes Act, Government Procurement Act, Public Officer Conflict of Interest Avoidance Act, Listing-related regulations, or others that have to do with commercial behavior, which shall serve as the fundamental premises for consolidating ethical corporate management.

(5) Article 9 of the Company's Ethical Corporate Management Rules deals with the undertaking and implementation: The ethical corporate management policy is

83

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

2. Has the

Company established policies to prevent unethical conduct with relevant procedures, guidelines of conduct, punishment for violation, rules of appeal clearly stated in the policies, and implemented the policies?

Yes

specified on the website and annual report of the Company. Both the Board of Directors and the management shall undertake to proactively consolidate them and precisely implement them as part of internal management and external commercial activities.

2. (1) Article 7 of the Company's Ethical Corporate Management Rules deals with preventive measures: The Company establishes operating procedures or behavioral norms against dishonest behavior in compliance with these Rules and substantially specifies precautions of the Company's staff while carrying out duties.

(2) Article 8 of the Company's Ethical Corporate Management Rules specifies the scope of ethical corporate management. The preventive proposal stipulated by the Company shall cover preventive measures against the following behavior: (I) Bribing others and accepting bribery (II) Providing illegal political donations (III) Unjustified charity donations or

sponsorship (IV) Providing or accepting unreasonable

gifts, treatment, or other unjustified interests

(3) Article 19 of the Company's Ethical Corporate Management Rules deals with reporting and punishment: In case of violations of ethical corporate management requirements by the staff of the Company, they shall be reported to the supervisor, manager, internal audit head, the Human Resources Office, or another suitable head spontaneously. The Company will precisely keep confidential the status of the reporter and the reported content. The Company insists on a zero-loophole principle with regard to its operations. If staff of the Company try to inadequately benefit themselves or other people taking advantage of the duties they perform to accordingly result in losses suffered by the Company, they shall be dismissed and compensate all losses suffered as such by the Company unconditionally.

Compliant

84

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

3. Has the

Company established appropriate precautionary measures for operating activities with higher risk of unethical conducts provided in Paragraph 2, Article 7 of the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies or within its scope of business?

Yes

When found with violations with ethical corporate management rules, the Company will punish the violators in accordance with its Merit and Demerit Procedures, depending on the severity of the circumstances. Those dismissed will never be able to work for the Company and its associated enterprises again. There is a complaint filing system available in the Company to serve as a means for violators of these Rules to seek relief measures in compliance with applicable requirements.

3. Articles 11, 12, 13, and 14 of the Company's Ethical Corporate Management Rules deal with respective requirements of preventive measures under Article 7 Paragraph 2 of the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies that can be taken: Article 11 Prohibited bribery and acceptance of bribery Staff of the Company shall act rigidly and may not provide, promise, request, or accept, directly or indirectly, unjustified interests while conducting business, including bribery, rebate, commission, facilitation payment or other unjustified interests provided to or accepted from customers, agents, contractors, suppliers, public servants, or other stakeholders in other ways. This, however, does not include those in compliance with the laws in the locality of operation. Article 12 Prohibited provision of illegal political donations The staff of the Company shall abide by the Political Donations Act and applicable internal operating procedures of the Company when providing donations, directly or indirectly, to political parties or organizations and individuals taking part in political campaigns and may not seek business interests or trading advantages accordingly. Article 13 Prohibited justified charity donations or sponsorship For charity donations or sponsorship, the staff of the Company shall comply with applicable laws and regulations and the internal operating procedure and may not use it as a

Compliant

85

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

means of bribery in disguise. Article 14 No unreasonable gifts, treatment, or other justified interests The Company absolutely prohibits that the staff of the Company request any donations, preferred or special treatment, directly, or indirectly, from suppliers, distributors, or clients doing business with the Company or seeking to have transactions with the Company, including special and luxurious meals or other forms of reception that have nothing to do with business or the local custom. Staff of the Company may not accept donations or preferred deals provided by any supplier, distributor, or customer unless they are part of a local custom or etiquette. Without prior reporting to the head of their department in advance in writing, staff of the Company may not accept gift or donations from related manufacturers during celebrations or networking events organized by the Company. Except when on a business trip and except for conditions approved by the Company, it is strictly prohibited that staff of the Company receive any reception by the supplier, distributor, or customer on a trip. Staff on a business trip (or on public errands) may not accept invitations for attending a feast or reception by the counterparty that is unjustified or inflicts the staff on a business trip (or on public errands) with malfeasance. What the staff on a business trip (or on public errands) do and say represent the Company and hence special attention should be paid. If the staff get into trouble or engage in events that undermine the reputation of the Company, they will be strictly punished once found. Staff of the Company may not borrow money from suppliers, distributors, or customers that do business with the Company or engage in other paid or free rental or use behaviors.

(II) Consolidation of ethical corporate management

1. Has the

Yes

1. (1) Article 10 of the Company's Ethical

Compliant

86

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

Company evaluated the ethical records of parties it does business with and stipulated ethical conduct clauses in business contracts?

2. Has the

Company established a dedicated (concurrent) unit under the Board of Directors to promote ethical corporate management, and reported the status of implementation to the Board of Directors periodically?

3. Has the

Company established policies to prevent conflict of interests, provided appropriate channels for filing related

Yes

Yes

Corporate Management Rules deals with ethical corporate management activities: The Company conducts business activities in a fair way. Before business correspondence begins, the Company will consider the legitimacy and presence of dishonest behavior records or not of the agents, suppliers, customers, or other counterparts in business transactions and avoid doing business with those with prior records of dishonest behavior.

(2) The anti-bribery clause has been added to purchase contracts and engineering contracts.

(3) For counterparts, the ethical corporate management clause is added only to important transaction contracts.

2. Article 15 of the Company's Ethical Corporate Management Rules deals with the organization and responsibilities:

The Company's Board of Directors shall pay due attention as good-will administrator to help the Company prevent against dishonest behavior, to reflect on the implementation efficacy from time to time, and to constantly seek improvements to help ensure consolidation of the ethical corporate management policy. In order to normalize ethical corporate management, the Human Resources Office of the Company is in charge of establishing and monitoring the implementation of the ethical corporate management policy and preventive solution and periodically reporting to the Board of Directors.

3. (1) Article 17 of the Company's Ethical Corporate Management Rules specifies avoidance upon conflicts of interest for the staff of the Company: Directors of the Company shall be highly self-disciplined. For proposals brought forth by the Board of Directors that concern the interests of directors themselves and the Institution they represent to accordingly undermine interests of the Company, the directors

Compliant

Compliant

87

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

complaints and implemented the policies accordingly?

may state opinions and answer questions but may not take part in the discussion and voting process. They shall recuse themselves during discussion and voting and may not exercise voting rights on behalf of other directors. Self-discipline shall be expected among directors, too. No inadequate mutual support is allowed. Staff of the Company may not help themselves, their spouse, parents, children, or other people receive unjustified interests taking advantage of the position they hold in the Company.

(2) Implementation: The Board of Directors discussed on

February 12, 2015 the proposal detailing individual values of year-end bonus of 2014 for directors and managers of the Company submitted by the Compensation Committee. The five directors of the Company, namely Chairman Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and Directors Chin-Tsai Chen, Kan-Wen Lee, and Ming-Liang Ho were recused in accordance with the Company Act and Article 15 of the Board of Directors Meeting Rules of the Company: Directors who are stakeholders of matters being discussed shall recuse themselves. Voting outcome of this case: The case was approved unanimously, without taking into account of the directors who recused themselves.

June 18, 2015 The Board of Directors discussed the value of remunerations to be issued separately to five directors and two supervisors for 2014 as submitted by the Compensation Committee. The five directors of the Company, namely Chairman Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and Directors Chin-Tsai Chen, Kan-Wen Lee, and Ming-Liang Ho were recused in accordance with the Company Act and Article 15 of the

88

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

Board of Directors Meeting Rules of the Company: Directors who are stakeholders of matters being discussed shall recuse themselves. Voting outcome of this case: The case was approved unanimously, without taking into account of the directors who recused themselves.

The Board of Directors discussed and nominated on June 18, 2015 independent directors Ding-Guo Chen and Jin-Shih Lin and Professor Hai-Ming Chen to be the members of the 3rd Intake of Compensation Committee. The two independent directors Ding-Guo Chen and Jin-Shih Lin of the Company recused themselves in accordance with the Company Act and Article 15 of the Board of Directors Meeting Rules of the Company: Directors who are stakeholders of matters being discussed shall recuse themselves. Voting outcome of this case: The case was approved unanimously among attending directors, without taking into account of directors who were nominated.

August 13, 2015 The Board of Directors discussed the separate remuneration suggestions for the two independent directors Ding-Guo Chen and Jin-Shih Lin as submitted by the Compensation Committee. The two independent directors Ding-Guo Chen and Jin-Shih Lin of the Company recused themselves in accordance with the Company Act and Article 15 of the Board of Directors Meeting Rules of the Company: Directors who are stakeholders of matters being discussed shall recuse themselves. Voting outcome of this case: The case was approved unanimously among all attending directors except for the two independent directors who recused themselves.

The Board of Directors discussed on

89

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

4. Has the

company had effective accounting and internal control systems set up to facilitate ethical corporate management, and have those systems been audited by either internal auditors or CPAs on a regular basis?

Yes

January 28, 2016 the proposal detailing individual values of year-end bonus of 2015 for directors and managers of the Company submitted by the Compensation Committee. The case was approved unanimously, without taking into account of the directors who recused themselves. The five directors of the Company, namely Chairman Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and Directors Chin-Tsai Chen, Kan-Wen Lee, and Cheng-Wen Chen were recused in accordance with the Company Act and Article 15 of the Board of Directors Meeting Rules of the Company: Directors who are stakeholders of matters being discussed shall recuse themselves. Voting outcome of this case: The case was approved unanimously, without taking into account of the directors who recused themselves.

When one of the directors engages in transactions with the Company, the supervisor shall sign the Contract on behalf of the Company.

4. (1) Article 18 of the Company's Ethical Corporate Management Rules deals with accounting and internal control: The Company has established effective accounting and internal control systems for business activities at higher risk of dishonest behavior. There is no outstanding account or secretly retained account. The systems are discussed from time to time as well to make sure that their design and implementation continue to be valid. The internal audit staff of the Company shall periodically inspect compliance with the system indicated in the preceding paragraph and produce the Audit Report to be submitted to the Board of Directors.

(2) When the CPA performs reviews and inspections, implementation of internal control is included and suggestions regarding internal control will be

Compliant

90

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

5. Does the

Company hold internal and external educational trainings on operational integrity regularly?

Yes

provided. 5. Although the Company does not hold internal

educational training on ethical corporate management regularly, responsible heads and related staff, however, are sent to attend educational training on ethical corporate management organized by the competent authority and related institutions if it is considered necessary.

(III) Reporting System of the Company

1. Does the Company provide incentives and means for employees to report malpractices? Does the company assign dedicated personnel to investigate reported malpractices?

2. Has the Company established any standard procedures or confidentiality measures for handling reported malpractices?

Yes

Yes

1. Article 19 of the Company's Ethical Corporate Management Rules deals with reporting and punishment: In case of violations of ethical corporate management requirements by the staff of the Company, they shall be reported to the supervisor, manager, internal audit head, the Human Resources Office, or another suitable head spontaneously.

2. Article 19 of the Company's Ethical Corporate Management Rules deals with reporting and punishment: In case of violations of ethical corporate management requirements by the staff of the Company, they shall be reported to the supervisor, manager, internal audit head, the Human Resources Office, or another suitable head spontaneously. The Company will precisely keep confidential the status of the reporter and the reported content. The Company insists on a zero-loophole principle with regard to its operations. If staff of the Company try to inadequately benefit themselves or other people taking advantage of the duties they perform to accordingly result in losses suffered by the Company, they shall be dismissed and compensate all losses suffered as such by the Company unconditionally. When found with violations with ethical

Compliant

Compliant

91

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

3. Does the

Company assure employees who reported on malpractices that they will not be prosecuted for making such reports?

Yes

corporate management rules, the Company will punish the violators in accordance with its Merit and Demerit Procedures, depending on the severity of the circumstances. Those dismissed will never be able to work for the Company and its associated enterprises again. There is a complaint filing system available in the Company to serve as a means for violators of these Rules to seek relief measures in compliance with applicable requirements.

3. The Company assures employees who reported on malpractices that they will not be prosecuted for making such reports.

Compliant

(IV) Reinforced Information Disclosure

1. Has the Company disclosed information regarding the company's ethical corporate management principles and implementation status on its website and the MOPS.?

No

1. (1) The Ethical Corporate Management Rules

are already disclosed on the website of the Company and on the MOPS. Website of the Company http://www.namchow.com.tw/IR/15.html MOPS: http://mops.twse.com.tw/mops/web/t100sb04_1

(2) The implementation efficacy is not provided.

Non-complia

nt

(V) If the Company has its own Ethical Corporate Management Rules established according to the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe the differences between its implementation and the principles: The Company established the new Ethical Corporate Management Rules on December 11, 2014. Review of the Rules did not reveal differences between actual implementation and the established guidelines.

(VI) Other important information that helps understand the implementation of ethical corporate management of the Company: (e.g. discussion and correction of the Ethical Corporate Management Rules established by the Company)

92

Assessed areas

Operational status (Note 1) Departure from Ethical

Corporate Management Best Practice Principles for TWSE/GTS

M Listed Companies

and Reasons

Yes No Summary

The Company established the new Ethical Corporate Management Rules on December 11, 2014.

Note 1: Regardless of the answer, "Yes" or "No", descriptions need to be provided in the summary column.

7. How they may be found shall be disclosed if the Company has established Corporate

Governance Principles and related regulations:

Website of the Namchow Group: www.namchow.com.tw

MOPS http://mops.twse.com.tw/mops/web/index

8. Other important information that is sufficient to boost knowledge of corporate governance

shall be disclosed as well:

Website of the Namchow Group: www.namchow.com.tw

MOPS http://mops.twse.com.tw/mops/web/index

93

9. Matters that should be disclosed regarding the implementation of the internal control

system:

1) Internal Control Statement:

Namchow Chemical Industrial CO., LTD.

Internal Control System Statement

Date: March 18, 2016

For the Company's internal control system of 2015, we would like to declare as follows

according to the results of spontaneous inspections:

I. The Company knows that establishing, enforcing, and maintaining an internal control

system is the responsibility of the Company's Board of Directors and managers and has

such a system in place already. It is meant to reasonably ensure fulfillment of the

operational efficacy and efficiency (including profits, performance, and protection of

asset security), reliability of financial reports, and compliance with applicable laws and

regulations, among other goals.

II. The internal control system has its inherited restrictions that cannot be overcome with

improved design. An effective internal control system can also only reasonably ensure the

fulfillment of the three goals stated above and its effectiveness may change as the

environment or situation changes. There is a self-surveillance mechanism; however, built

inside the internal control system of the Company that helps the Company take a

corrective action against deficiencies confirmed.

III. The Company determines the effectiveness of the design and implementation of its

internal control system in accordance with the items in "Governing Regulations for Public

Company's Establishment of Internal Control System" (hereinafter called "Governing

Regulations") that are related to the effectiveness of internal control systems. The items

adopted in the Governing Regulations for determining the internal control system are the

five constitutional elements of the internal control system divided according to the

management and control process: 1. control environment, 2. risk assessment, 3. control

process, 4. information and communication, and 5. supervision. Each element further

encompasses several items. Please refer to "Governing Regulations" for details.

IV. The Company has adopted the abovementioned determining items and conducted

inspection of the design and effectiveness of its internal control system.

V. Pursuant to the results of the abovementioned inspections, the Company is of the view

that the design and implementation of its internal control system as of December 31, 2015

(including its supervision and management of subsidiaries), including its awareness the

extent by which the operating effects and efficiency goals are fulfilled, reliability of

financial reporting, and compliance with relevant laws and regulations, are such that it is

effective and capable of reasonably ensuring that the aforementioned goals can be

achieved.

94

VI. This Statement constitutes a major part of the Company's Annual Report and the

Company's Prospectus that are made available to the public. The Company shall be

legally liable under Articles 20, 32, 171 and 174 of the Securities and Exchange Act with

respect to any unlawful aspects such as falsehood or concealment of facts in relation to

the aforesaid statement.

VII. This Statement was approved at the meeting of the Company's Board of Directors on

March 17, 2016 with no Directors expressing dissent out of the 7 Directors in attendance.

Namchow Chemical Industrial CO., LTD.

Fei-Lung Chen

Chairman

Kan-Wen Lee

General Manager

2) When a CPA is authorized to review the internal control system, the Review Report

prepared by the CPA shall be disclosed: None.

10. Any legal sanctions against the Company or its internal personnel, or any disciplinary

action taken by the Company against its own personnel for violating internal control

requirements, in the latest year or during the current fiscal year up to the printing of the

Annual Report; and a description of the main shortcomings in the company's internal

control system as well as an indication of measures for improvement

1) The Company was fined by the Department of Health of the Taipei City Government NTD 30

million on October 20, 2014 for its people failing to apply for tests before importing edible

oils between 2013 and August 2014. Since the applicable laws were wrong, the Company

appealed and the original punishment was voided on January 23, 2015. The Taipei City

Government already corrected the fine to be NTD 7.05 million on January 30, 2015. For the

acts between August 7, 2014 and August 24, 2014, a fine of NTD 3 million was finalized. The

fine of NTD 4.05 million between March 2013 and May 2014 has been appealed at the

Supreme Administrative Court at present. For the 30 batches of edible fats and oils imported

on November 28, 2012, the Department of Health of Taipei City Government fined NTD 150

thousand on October 16, 2015. Namchow appealed on November 17, 2015.

Major deficiency: Edible oil products were imported without applying for tests as required.

Improvement: The raw material and additive safety review mechanism (with food safety

control features, subordinate directly under the Executive Vice President

who reports to the Board of Directors" was set up on December 19, 2013.

The Food Safety and Health Management Guidelines were established by

the Food Safety Regulatory Unit on June 27, 2014. The Company's

95

procurement and payment revolving internal control system (SOP#A02)

was revised on November 11, 2014. The collaborative coordinating unit has

been added to the operating procedure for the procurement and payment

revolving internal control system (SOP). The said collaborative coordinating

unit includes the Product Development Office, the Warehousing Division,

the Quality Control Section, the Production Control Section, Procurement

Status Control, and audits are performed by the Audit Office in compliance

with the internal control system. The scale of the food safety regulatory unit

was expanded on July 14, 2015, with the addition of the Food Safety Office

that reports to the Executive Vice President, who will then report to the

Board of Directors.

2) The Department of Labor of Taipei City Government fined the Company NTD 20 thousand on

July 17, 2015 for not giving employees days off on holidays. The Company disagreed on the

decision and appealed on August 17, 2015. The appeal was overruled on March 02, 2016.

Whether an administrative lawsuit will be filed will be evaluated within two months.

Major deficiency: The personnel calculation basis differs from that adopted by the Department

of Labor.

Improvement: Adjustments have been made according to laws to prevent against doubts.

96

11. Important decision reached in shareholders' meetings and made by the Board of Directors

in the latest year as of the date of printing of Annual Report.

1) Shareholders' Meeting:

1. The following were approved in the general shareholders' meeting on June 10, 2015.

The 2014 Business Report and Financial Statement were recognized.

Implementation: Announcement and declaration of financial reports, among others, were

completed on March 26, 2015.

The 2014 earnings distribution form of the Company was recognized. Stock dividends in the

value of NTD 617,679 thousand, that is, NTD 2.10 per share, are to be distributed. Once

approved in the general shareholders' meeting, the Board of Directors will be authorized to

set the baseline date for distribution of cash dividends separately.

Implementation: It was determined in the Board of Directors meeting on June 18, 2015 that

July 13 would be the baseline date for distribution of cash dividends while cash dividends

were actually issued on August 6.

Changes made to the Company's Rules and Procedures for Shareholders’ Meetings and

Guidelines for Electing Board Directors and Supervisors were approved.

Implementation: They shall be implemented following revisions.

2) Board of Directors:

1. The decision was approved on February 12, 2015.

The year-end bonus proposal for 2014 for directors and managers of the Company that was

submitted by the Compensation Committee was approved unanimously among all directors

that were present in the meeting except for votes from those who recused themselves.

The capital lent by the Company to Nankyo Japan Co., Ltd. totaling NTD 449,790,000

(equivalent to JPY 550 million only at the time it was loaned) is planned to be transferred to

be the capital stock; that is, JPY 850 million in total has been increased in the investment in

Nankyo Japan Co., Ltd.

Jin-Shih Lin was nominated as member of the Company's Compensation Committee.

2. The decision was approved on March 20, 2015.

The Company's 2015 general shareholders' meeting was convened and were scheduled to

take place at 9:00 am on the morning of June 10, 2015 (Wednesday) in the Leadership Hall

of the Taipei International District of Commerce on the third floor of No. 51, Hengyang

Road, Taipei City.

The 2014 Business Report and Financial Statement of the Company were approved and sent

to the supervisors for verification before being brought forth in the shareholders' meeting for

97

endorsement.

The earnings distribution proposal consisting of NTD 2.1 per share to be distributed as part

of the Company's cash dividends of 2014 has been approved. Cash dividends are issued to

the minimum of one NTD (rounded to the integer) and the fractional shares are to be

included as part of the Company's other income. Once verified to be accurate by supervisors,

it would be brought forth in the shareholders' meeting for endorsement and the Board of

Directors would be authorized through the shareholders' meeting to set a separate baseline

date, the date of issuance for distribution of interest, and to handle other related matters.

NTD 34, 151 thousand as remunerations for directors and supervisors were to be issued by

the Company for 2014.

Seven directors were to be re-elected during the general shareholders' meeting; among them,

two were independent directors, with a tenure that begins on June 19, 2015 and ends on June

18, 2018. Election of independent directors was done applying the nomination system. They

were elected from the list of independent directors during the shareholders' meeting.

Independent and non-independent directors were elected together but the votes were counted

separately.

Nomination period, openings, and handling location. Openings: 2; Nomination period: from

March 27, 2015 to April 7, 2015. Handling location: Department of Finance, Namchow

Chemical Industrial Co., Ltd. (Address: 2F, No. 100, Yenping North Road Section 4,

Datong District, Taipei City; Telephone: (02) 25351251).

Independent director candidates Ding-Guo Chen and Jin-Shih Lin nominated by the Board

of Directors were approved. The Department of Finance was authorized to accept

nominations during the period announced by the Company and nominations of independent

directors were accepted at the location announced by the Company.

Shareholders' proposals were accepted in compliance with the requirements under Article

172-1 of the Company Act.

After the Chairperson asked individual directors for opinions, the Internal Control System

Statement that both the design and implementation of the 2014 internal control system of

Namchow submitted by the Audit Office were valid was approved unanimously.

Changes made to the Company's Rules and Procedures for Shareholders’ Meetings and

Guidelines for Electing Board Directors and Supervisors were approved unanimously

among all directors that were present and were brought forth in the shareholders' meeting for

a decision.

98

○11 The 2015 Shareholders Meeting Agenda of the Company was stipulated.

3. The decision was approved on April 28, 2015.

Nominees Professor Ding-Guo Chen and CPA Jin-Shih Lin as independent directors by the

Company's Board of Directors were included in the list of independent director candidates to

be re-elected in the 2015 general shareholders' meeting.

4. The decision was approved on June 18, 2015.

July 13 was set to be the baseline date for distribution of cash dividends and the Chairman

was authorized to handle the case at its full discretion by laws.

The Compensation Committee submitted (1) values of remunerations to be distributed to

individual directors and supervisors for 2014; (2) values of bonuses to be distributed to

individual managers for 2014; and (3) adjustment of the separate remunerations for the

Chief Human Resources Officer Wan-Qing Zhou of the Company.

The endorsement and guarantee provided by the Company to its subsidiary Nacia

International Corporation during the latter's loan with Cathay United Bank in May 2015 was

endorsed.

5. The decision was approved on June 18, 2015.

Mr. Fei-Lung Chen was elected as the new Chairman of the Company, Fei-Peng Chen as the

Vice Chairman.

Nomination of independent directors Ding-Guo Chen and Jin-Shih Lin and Professor

Hai-Ming Chen to be the members of the 3rd Intake of Compensation Committee.

6. The decision was approved on August 13, 2015.

Yo-Qing Liu was hired to serve as General Manager of the Home Supplies Department and

the Compensation Committee provided suggestions on the compensation and salary for

General Manager Yo-Qing Liu after assessment.

Separate remuneration suggestions for the two independent directors Ding-Guo Chen and

Jin-Shih Lin were submitted by the Compensation Committee.

The endorsement and guarantee provided by the Company to its subsidiaries Nacia

International Corporation and Ting Hao (Cayman Islands) Holdings Corporation during the

latter's loans with financial institutions from June 10 to July 31, 2015 was endorsed.

The Taoyuan County Pharmaceutical Manufacturing License No. 6132070034 was canceled

for discontinued operations of the pharmaceutical company.

To streamline the investment framework of the Company in food business in mainland

China, individual subsidies set up in mainland China were held directly and indirectly 100%

99

by Ting Hao (Cayman Islands) Holdings Corporation: (1) The 50% shares held by

Namchow International Corporation of Tianjin Yoshiyoshi Food Co., Ltd. were all

transferred to Tianjin Namchow Food Co., Ltd. (2) Namchow International Corporation

again transferred 32.43% shares that it held of Ting Hao (Cayman Islands) Holdings

Corporation to Nacia International Corporation and then wrote them off. (3) Nacia

International Corporation transferred 100% of the shares that it held of Shanghai Qiaohao

Trading Co., Ltd. to Ting Hao (Cayman Islands) Holdings Corporation.

7. The decision was approved on October 8, 2015.

Mei-Hui Liao was hired as the special assistant to the Chairman of the Company and Chief

Risk Control Officer and the Compensation Committee provided suggestions on the salary

and compensation payable to her after assessment.

8. The decision was approved on November 5, 2015.

Hai-Li Qi was hired to serve as the assistant manager at the Human Resources Office of the

Company and the Compensation Committee provided suggestions on the salary and

compensation payable to her after assessment.

The Operating Procedure for Applying for Suspension and Reinstatement of Transactions of

the Company was established.

9. The decision was approved on December 29, 2015.

The Audit Office stipulated the Company's 2016 Audit Plan.

To meet the demand for operating funds of 2016, it is requested to authorize the Chairman to

sign contracts for loans with financial institutions on behalf of the Company.

If subsidiaries of the Company, namely Lucky Royal Co., Ltd., Namchow (BVI) Ltd., Nacia

International Corp., Ting Hao (Cayman Islands) Holding Corp., and others have demand for

operating funds in 2016, the Company will serve as the guarantor and the Chairman is

authorized to handle related matters with financial institutions at his full discretion on behalf

of the Company.

For other companies that do business with the Company, it there is any need in 2016, the

Company will serve as the guarantor and the Chairman is authorized to handle related

matters with financial institutions at his full discretion on behalf of the Company.

The Company's Corporate Social Responsibility Best Practice Principles were established.

The endorsement and guarantee by the Company for its subsidiary Nankyo Japan Co., Ltd.

in the loan with financial institutions in November 2015 was endorsed.

The Food Safety Laboratory was set up at the headquarters to govern laboratories at

100

respective subsidiaries and to perform tests on its own, which helps normalize autonomous

management by food businesses.

10. The decision was approved on January 28, 2016.

The Compensation Committee submitted its suggestions on the values of year-end bonuses

from 2015 to be distributed to 5 directors and 13 managers of the Company.

The Compensation Committee submitted its suggestions on remunerations to be distributed

to directors and supervisors of the Company and the Articles of Incorporation were

amended.

The Compensation Committee submitted its suggestions on remunerations to be distributed

to employees of the Company and the Articles of Incorporation were amended.

11. The decision was approved on March 17, 2016.

Article 31 of the Company's Articles of Incorporation was revised and Article 31-1 was

added and Article 34 was revised.

The Company's 2016 general shareholders' meeting was convened and were scheduled to

take place at 9:00 am on the morning of June 8, 2016 (Wednesday) in the Leadership Hall of

the Taipei International District of Commerce on the third floor of No. 51, Hengyang Road,

Taipei City.

The Compensation Committee submitted the remunerations in the value of NTD 56,116

thousand to be distributed to directors and supervisors and those in the value of NTD 14,029

thousand to be distributed to employees for 2015.

The 2015 Business Report and Financial Statement of the Company were approved and sent

to the supervisors for verification before being brought forth in the shareholders' meeting for

endorsement.

The earnings distribution proposal consisting of NTD 2.6 per share to be distributed as part

of the Company's cash dividends of 2015 has been approved. Cash dividends are issued to

the minimum of one NTD (rounded to the integer) and the fractional shares are to be

included as part of the Company's other income. Once verified to be accurate by supervisors,

it would be brought forth in the shareholders' meeting for endorsement and the Board of

Directors would be authorized through the shareholders' meeting to set a separate baseline

date, the date of issuance for distribution of interest, and to handle other related matters.

The Compensation Committee submitted its suggestions on the salary and compensation to

be paid to Vice President Shu-Wen Dai and Assistant Manager Yi-Feng Huang of the

Company.

101

Shareholders' proposals were accepted in compliance with the requirements under Article

172-1 of the Company Act.

After the Chairperson asked individual directors for opinions, the Internal Control System

Statement that both the design and implementation of the 2015 internal control system of

Namchow submitted by the Audit Office were valid was approved unanimously.

Supervisors of the Company were re-elected.

The 2016 Shareholders Meeting Agenda of the Company was stipulated.

○11 Chief Financial Officer Dong-Biao Bai retired on April 30, 2016. The position was filled by

the Chairman's special assistant Mei-Hui Liao.

○12 Subsidiary Chow Ho Enterprise Co., Ltd. reduced its capital size by NTD 75 million and

then increased it by NTD 20 million.

○13 The CPAs for the Company's Financial Statement are changed to Bo-Shu Huang and

An-Tian Yu in 2016.

12. Main contents of different opinions of directors or supervisors that are recorded and

stated in writing on important decisions made by the Board of Directors in the latest year

and as of the date of printing of Annual Report: None.

13. Summary of resignations and dismissals of the Company's Chairman, general managers,

accounting heads, financial heads, internal audit heads, and R&D heads in the latest year

as of the date of printing of Annual Report: Financial Head--Chief Financial Officer of the

Company Mr. Dong-Biao Bai retired on April 30, 2016. It was approved in the meeting of the

Board of Directors on March 17, 2016 that the position would be filled by the Chairman's

special assistant Mei-Hui Liao.

102

(V) Public Expenditure on CPAs

1. When the non-audit public expenditure paid to CPAs and their firms and their associated

enterprises accounts for more than one-fourth of the audit public expenditure, the values

of both audit and non-audit public expenditures and contents of non-audit services shall

be disclosed: None.

2. When the accounting firm is changed and the audit public expenditure in the year of

replacement is reduced compared to that in the preceding year, the audit public

expenditures before and after the replacement and the reasons shall be disclosed: None.

3. When the audit public expenditure is reduced by more than 15% from the preceding year,

the value reduced and its ratio and cause shall be disclosed: None.

CPA public expenditure information bracket table

Name of accounting

firm

Name of CPA Inspection period Remark

KPMG An-Tian Yu Xiu-Yu Lin 104.01~104.12

Note: If any CPA or the accounting firm is replaced for the Company this year, the inspection

periods shall be listed separately.

In addition, the reason for the replacement shall be indicated in the remark column.

Value: NTD 1,000

Entry of public expenditure

Value bracket Audit public

expenditure

Non-audit

public

expenditure

Total

1 Below NTD 2,000 thousand

2 Between NTD 2,000 (inclusive)

thousand and NTD 4,000 thousand

3 Between NTD 4,000 (inclusive)

thousand and NTD 6,000 thousand 3,780 880 4,660

4 Between NTD 6,000 (inclusive)

thousand and NTD 8,000 thousand

5 Between NTD 8,000 (inclusive)

thousand and NTD 10,000 thousand

6 More than NTD 10,000 thousand

(inclusive)

103

Public Expenditure on CPAs

Value: NTD 1,000

Name of

accounti

ng firm

Name of

CPA

Audit

public

expenditu

re

Non-audit public expenditure

CPA

inspectio

n period Remark

System

Design

Busines

s

Registra

tion

Human

Resourc

es

Other

(Note 2)

Subtotal

KPMG

An-Tian

Yu 3,780 9 695 704

104.01

~104.12

Other:

Including the business tax, transfer pricing report, and CSR CPA affirmation fees

Xiu-Yu

Lin

Grant

Thornto

n

Yu-Jie

Luo

176 176

01.2014

~12.201

4

Note 1: If any CPA or the accounting firm is replaced for the Company this year, the inspection

periods shall be listed separately. In addition, the reason for the replacement shall be

indicated in the remark column and information on audit and non-audit public expenditure

shall be disclosed.

Note 2: The non-audit public expenditure shall be listed separately by the service item. When

"Other" of non-audit public expenditure reaches 25% of the total value of non-audit public

expenditure, contents of the service shall be listed in the remark column.

(VI) Information on the Replacement of CPAs: No CPAs were replaced in the past two years

and thereafter for the Company.

(VII) Disclosure of Name, Position, and Duration of Service at Firms or Their Associated

Enterprises within Past Year of Chairman, General Manager, and Managers in

Charge of Financial or Accounting Affairs: None.

104

(VIII) Transfer of Stock Options and Changes in Equity Pledge of Directors, Supervisors, Managers, and Shareholders Holding More

Than 10% of Shares in the Latest Year and as of the Date of Printing of Annual Report

1. Changes in the stock options of directors, supervisors, managers, and heavyweight shareholders:

Title Name

2015 As of March 29 of the year

Increase/decrease

in the number of

shares held

Increase/decrease

in the number of

shares pledged

Increase/decrease

in the number of

shares held

Increase/decrease

in the number of

shares pledged

Chairman and shareholder

holding more than 10% of

shares

Fei-Lung Chen 0

(70,000)

0

0 5,000,000

Vice Chairman and

shareholder holding more than

10% of shares

Fei-Peng Chen 0 0 305,000 0

Director Representative of Lucky Royal Co., Ltd.: Kan-Wen Lee

0 0 0 0 Shareholder holding more than

10% of shares Lucky Royal Co., Ltd.

Director Chin-Tsai Chen 13,000 0 13,000 0

Director Representative of Hwa Zhin Co., Ltd.: Cheng-Wen Chen 0 0 0 0

Independent Director Ding-Guo Chen (Date of inauguration: June 19, 2015) 0 0 0 0

Independent Director Jin-Shih Lin (Date of inauguration: June 19, 2015) 0 0 0 0

Supervisor Oh-Kuan Chang 0 0 0 0

Supervisor Namchow Chemical Industrial CO., LTD. Employee Welfare

Committee 0 0 0 0

General Manager Kan-Wen Lee 0 0 0 0

Vice President Shu-Wen Dai 0

(3,000) 0 0 0

Vice General Manager/Vice

President Cheng-Wen Chen 0 0 0 0

Chief Human Resources

Officer Wan-Jing Zhou 0 0 0 0

Chief Risk Control Officer Mei-Hui Liao (Date of inauguration: October 12, 2015) 0 0 0

Assistant Manager Zhou-Jing Chen 0 0 0 0

Assistant manager and head of

the Accounting Department Rong-Zhang Lian 0 0 0 0

Vice General Manager of

Business Department Ming-Chuan Lin 0 0 0 0

Assistant Manager Yi-Feng Huang 0 0 0 0

105

Title Name

2015 As of March 29 of the year

Increase/decrease

in the number of

shares held

Increase/decrease

in the number of

shares pledged

Increase/decrease

in the number of

shares held

Increase/decrease

in the number of

shares pledged

Assistant Manager Rui-Zi Zhu (Date of inauguration: January 1, 2015) 0 0 0 0

Assistant Manager Hai-Li Qi (Date of inauguration: November 06, 2015) 0 0 0 0

Head of Department of

Finance Dongbiao Bai 0 0 0 0

General Manager of Business

Department Shu-Ming Zhang (Date of dismissal: August 3, 2015) 0 0 0 0

General Manager of Business

Department

Yo-Qing Liu (Date of inauguration: August 3, 2015) (Date of

dismissal: February 1, 2016) 0 0 0 0

Vice President Er-Kun Zhou (Date of dismissal: February 16, 2016) 0

(4,000) 0 0 0

2. The counterparty for the transfer or pledge of stock options is a related party: None.

106

(IX) Information of Relationship among Top 10 Shareholders Who Are Related, Spouses, or Relatives Within the Second Degree of Kinship

No. Name

Oneself Spouse, minor

child(ren)

Shares held in someone else's name

Total

The title or name and relationship among

shareholders in the Top shareholding list who are

related, spouse to each other, or relatives within

the second degree of kinship

Remark

Quantity of shares

Shareholding ratio

Quantity of shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Title Relationship

1

Lucky Royal

Co., Ltd.

Representative:

Fei-Lung Chen

46,041,259

33,814,934

15.65%

11.50%

0

7,577,413

0

2.58%

0

0

0

0

Fei-Lung Chen Chairman None

Fei-Peng Chen Vice Chairman None

Shiao-Chuan

Chen-Huang Spouse None

Fei-Peng Chen Brother None

Lucky Royal

Co., Ltd. Chairman None

Namchow

Chemical

Industrial CO.,

LTD.

Employee

Welfare

Committee

Representative:

Yi-Wen Lee

Father and

Daughter None

2 Fei-Peng Chen 36,097,995 12.27% 0 0 0 0

Fei-Lung Chen Brother None

Lucky Royal

Co., Ltd. Vice Chairman None

3 Fei-Lung Chen 33,814,934 11.50% 7,577,413 2.58% 0 0

Shiao-Chuan

Chen-Huang Spouse None

Fei-Peng Chen Brother None

Lucky Royal

Co., Ltd. Chairman None

Namchow

Chemical

Industrial CO.,

LTD.

Employee

Welfare

Committee

Representative:

Yi-Wen Lee

Father and

Daughter None

4

Cathay Life

Insurance

Company, Ltd.

14,849,000 5.05% 0 0 0 0 None None None

5

Bank SinoPac

as Custodian

for Reva

Spring Ltd.

Investment

Account

11,520,165 3.91% 0 0 0 0 None None None

107

6

Bank SinoPac

as Custodian

for Ever

Cosmos Ltd.

Investment

Account

9,980,992 3.39% 0 0 0 0 None None None

7 Shiao-Chuan

Chen-Huang 7,577,413 2.58% 33,814,934 11.50% 0 0

Fei-Lung Chen Spouse None

Namchow

Chemical

Industrial CO.,

LTD.

Employee

Welfare

Committee

Representative:

Yi-Wen Lee

Mother and

daughter None

9

Public Service

Pension Fund

Management

Board

5,631,000 1.91% 0 0 0 0 None None None

8 Cathay United

Bank 5,575,000 1.90% 0 0 0 0 None None None

10

Namchow

Chemical

Industrial Co.,

Ltd. Employee

Welfare

Committee

Representative:

Yi-Wen Lee

4,908,960

0

1.67%

0

0

686,635

0

0.23%

0

0

0

0

Fei-Lung Chen Father and

Daughter None

Shiao-Chuan

Chen-Huang

Mother and

daughter None

108

(X) Shares Held by Company, Directors, Supervisors, Managers of Company, and Businesses

Controlled Directly or Indirectly by Company of Same Reinvestment Business and

Consolidated Calculation of Comprehensive Shareholding Ratio

Unit: Share; %

Reinvested

business (Note)

Company

Directors, supervisors, managers,

and directly or indirectly

controlled businesses

Comprehensive investment

Quantity of

shares

Shareholding

ratio

Quantity of

shares

Shareholding

ratio

Quantity of

shares

Shareholding

ratio

Namchow

(Thailand) Ltd. 9,244,995 100.00 4 0.00 9,244,999 100.00

Yongju (Thailand)

Ltd. 100,000 100.00 - - 100,000 100.00

Nacia International

Corporation 1,250 100.00 - - 1,250 100.00

Lucky Royal Co.,

Ltd. 95,337,885 99.65 326,768 0.34 95,664,653 100.00

Chow Ho Enterprise

Co., Ltd. 7,999,994 100.00 5 0.00 7,999,999 100.00

Qizhi Co., Ltd. 80,000 80.00 20,000 20.00 100,000 100.00

Namchow Japan 3 100.00 - - 3 100.00

Namchow

Consultation 500,000 100.00 - - 500,000 100.00

Note: The long-term investments of the Company adopting the equity method

109

IV. Fundraising

(I) Capital and Shares

1. Source of capital stock

Year/

Month

Issu

ing

pric

e

Approved capital stock Paid-in capital stock Remark

Quantity of

shares value

Quantity of

shares value

Source of

capital

stock

Share

value

written off

by assets

other than

cash

Other

1998

Augus

t

10 400,000,000

shares

NTD 4

billion

294,132,962

shares NT$2,941,329,620

Capital

increase

with

capital

reserve

-

Date of approval

for capital

increase

and document

number

FSC (I) No.

0930131932 on

July 19, 2004

Type of share Approved capital stock

Remark Circulating shares Shares yet to be issued Total

Common stock 294,132,962 shares 105,867,038 shares 400,000,000 shares Listed stock

Related information of the general declaration system: Not applicable

110

2. Shareholder structure

Shareholder

structure

Quantity

Governm

ent

agency

Financial

institution

Other

institutional

investors

Foreign

institution

and foreigner

Individual Total

No. of persons 0 13 78 161 36,995 37,247

Shares held 0 21,966,107 73,184,164 59,673,239 139,309,452 294,132,962

Shareholding ratio 0.00% 7.47% 24.88% 20.29% 47.36% 100.00%

3. Diversification of share options

Shareholding classification No. of shareholders Shares held Shareholding ratio

(%)

1 - 999 26,799 2,737,006 0.93%

1,000 - 5,000 8,464 16,665,288 5.68%

5,001 - 10,000 962 7,534,289 2.56%

10,001 - 15,000 308 3,889,561 1.32%

15,001 - 20,000 184 3,425,891 1.16%

20,001 - 30,000 155 3,972,014 1.35%

30,001 - 40,000 76 2,710,885 0.92%

40,001 - 50,000 53 2,461,173 0.84%

50,001 - 100,000 84 5,864,705 1.99%

100,001 - 200,000 67 9,219,804 3.13%

200,001 - 400,000 38 11,335,513 3.85%

400,001 - 600,000 16 7,892,712 2.68%

600,001 - 800,000 10 6,793,619 2.31%

800,001 - 1,000,000 7 6,200,628 2.11%

More than 1,000,001 shares 24 203,429,874 69.17%

Total 37,247 294,132,962 100.00%

Special stock: Not applicable

4. Names of major shareholders: Shareholders holding 5% or more of total shares or in the

Top 10 stock option holding ratio list

Name of major shareholder/shares held Shares held Shareholding ratio

Lucky Royal Co., Ltd. 46,041,259 15.65%

Fei-Peng Chen 36,097,995 12.27%

Fei-Lung Chen 33,814,934 11.50%

Cathay Life Insurance Company, Ltd. 14,849,000 5.05%

Bank SinoPac as Custodian for Reva Spring Ltd.

Investment Account 11,580,165 3.94%

Bank SinoPac as Custodian for Ever Cosmos Ltd.

Investment Account 10,010,992 3.40%

Shiao-Chuan Chen-Huang 7,577,413 2.58%

111

Public Service Pension Fund Management Board 5,631,000 1.91%

Cathay United Bank 5,575,000 1.90%

Namchow Chemical Industrial Co., Ltd. Employee

Welfare Committee 4,908,960 1.67%

112

5. Related information of market price per share, net value, earnings, and dividends for the

past two years

Year

No.

2014 2015 March 29, 2016

Market

price

per share

(Note 1)

Highest 72.10 77.40 68.50

Lowest 40.75 55.00 56.60

Average 57.33 66.79 62.39

Market

price

Net value

(Note 2)

Before distribution 21.17 22.75 _

After distribution 18.86

To be

determined and

finalized in the

shareholders

meeting

_

Market

price

Earnings

Weighted average number

of shares 294,132,962 294,132,962 294,132,962

Earnings per share (Note

3) 3.82 4.49 _

Market

price

Dividends

Cash 2.10 2.60 _

Free

share

assignment

Earnings-based

share

assignment

0 0 _

Capital

reserve-based

share

assignment

0 0 _

Accumulated unpaid

dividends (Note 4) 0 0 _

Investment

return

analysis

Price-earnings ratio (Note

5) 15 15 _

Cost-benefit ratio (Note 6) 27 26 _

Cash dividend yield (Note

7) 3.66% 3.89% _

* If there are shares assigned with earnings or upon capital increase with capital reserve,

information of the market price and cash dividends adjusted retroactively according to the

number of shares issued shall also be disclosed.

Note 1: The highest and lowest market prices of common stock each year are shown and the

annual average market price is calculated according to the strike price and the trading

volume in each year.

Note 2: Please fill in distributions decided in the shareholders meeting of the following year

113

according to the number of shares that were already issued for the specific year.

Note 3: If retroactive adjustments are required because of free share distribution, earnings per

share before and after adjustments shall be shown.

Note 4: For the equity shares issuance criteria, if there are requirements that dividends not

distributed for a specific year can be carried over to the year with earnings, the dividends

that have not been paid up to the said year with earnings shall be disclosed separately.

Note 5: Price-earnings ratio = Average closing price per share for the year/earnings per share.

Note 6: Cost-benefit ratio = Average closing price per share for the year/cash dividends per share.

Note 7: Cash dividend yield = cash dividends per share/average closing price per share for the

year

Note 8: For the net value per share and earnings per share, data inspected (reviewed) by CPAs

from the latest quarter up to the date of printing of the Annual Report shall be provided.

For the other columns, data of the immediate year up to the date of printing of the Annual

Report shall be provided.

114

6. Company's dividend policy and implementation status

(1) Dividend policy

The Company's dividend policy is based on its current and future development

plans, taking into consideration the investment environment, demand for capital,

and domestic and international competition as well as shareholders' benefits. Each

year, no less than 30% of earnings available for distribution are appropriated to be

the dividend bonus for shareholders. While dividend bonus is to be distributed to

shareholders, they may be done in cash and (or) stock. Cash dividends may not be

below 10% of the total value of dividends.

(2) Intended distribution of dividends through the current shareholders meeting: Cash

dividends are intended to be distributed as per the decision made by the Board of

Directors on March 17, 2016; that is, NTD 2.60 per share will be distributed.

7. Impacts of free share assignment intended through the current shareholders meeting on the

Company's operational performance and earnings per share: None.

8. Remunerations for employees, directors, and supervisors:

(1) Percentages or ranges of remunerations for employees, directors, and supervisors

under the Articles of Incorporation:

Article 31 of the Articles of Incorporation: In cases of profits for the year, the

company shall set aside no less than 1% to be the remunerations for employees and

no more than 5% to be those for board directors and supervisors. If there are

accumulated losses, however, the value to make up for the losses should be set

aside first.

Article 31-1 of the Articles of Incorporation: In the event that the annual audit

renders earnings, the company shall pay taxes according to law and cover

accumulated losses before setting aside 10% to be the legal reserve; if the legal

reserve has reached the company's paid-in capital size, however, it is allowed not

to set aside further earnings. From the remainder, the special reserve shall be set

aside or reversed as required by law and any further remainder after that shall be

brought forth in the shareholders' meeting based on the Earnings Distribution

Proposal prepared by the Board of Directors along with accumulated retained

earnings for a decision on assignment of dividend bonus to shareholders.

(2) Basis for estimating the amount of remunerations for employees, directors and

supervisors, basis for calculating the number of shares to be distributed as

employee remunerations, and the accounting treatment of the discrepancy, if any,

between the actual distributed amount and the estimated amount, for the current

period:

The Company based its estimation of remunerations for employees, directors, and

supervisors for 2015 on the pre-tax income before remunerations for employees,

directors, and supervisors are calculated for the year and estimated as advised by

the Articles of Incorporation and the Compensation Committee and according to

the ratio approved as a decision of the Board of Directors. If the actually

distributed value differs from the estimated value, it is considered as changes in

accounting estimates and will be listed as gains or losses of the year where the

value is actually distributed.

(3) Remuneration proposals passed by the Board of Directors:

A. Remunerations distributed to employees, directors, or supervisors in cash or

in stock:

As per the decisions made according to the Company's Articles of

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Incorporation and by the Board of Directors, 4% of the pre-tax income before

remunerations for employees, directors, and supervisors are calculated is set

aside to be the remunerations for directors and supervisors and 1% to be the

remunerations for employees. The value of remunerations for directors and

supervisors set aside this year total NTD 56,116 thousand and that for

employees amounts to NTD 14,029 thousand. If the actually distributed value

differs from the original estimated value, the difference will be listed as losses

for the current term of 2016.

B. Employee remunerations distributed in stock and their ratio in the after-tax

income indicated in the Entity Financial Statement of the current term and

their ratio in the overall remunerations assigned to employees: Not applicable.

(4) Actual distribution of remunerations for employees, directors, and supervisors for

the previous year:

A. Cash bonus (remunerations) for employees: NTD 8,538 thousand

B. Remunerations for directors and supervisors: NTD 34,151 thousand

There is no difference from the original intended distribution decided by the

Board of Directors.

9. Buyback of the Company stock: None.

(II) Corporate Debts, Special Shares, Global Depositary Receipt, Employee Stock Option

Certificate, Restricted Employee Shares and M&A (Including Merger, Acquisition, and

Segmentation): None

(III) Implementation of Capital Utilization Plan: None

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V. Operational Status

(I) Business Content

1. Scope of activity

(1) Main activities and their ratios in operations

Business activities Main products

Ratio in the

consolidated

revenue of

the Group

(%)

A. Manufacturing and sale of

cleaners

Crystal soap series, liquid crystal

soap, antiseptic series, and herbal

nourishing soap series 4

B. Manufacturing and sale of

oils and fats

Namchow butter oil substitute, King

Brand g Brand pastry margarine, and

Weijia series of butter 60

C. Manufacturing and sale of

flour-based foods

Frozen dough, frozen noodles,

instant noodles 8

D. Manufacturing and sale of

ice products

Duroyal ice cream, Kabisuo Russian

ice cream 7

E. Manufacturing and sale of

rice-based foods

Recreational foods such as aseptic

cooked rice and rice crackers 9

F. Dining business

Paulaner, Dian Shui Lou,

Chaojiangyan, Benchangliu, Kabisuo

Café, Duroyal Café, Binjiang No. 1,

Xianzhixuan, Beikeli, among others

12

(2) New products planned to be developed

A. Cleaners: Research and development of the natural antiseptic crystal series, natural, and

biodegradable cleaning products

B. Oils and fats: Research and development of zero-transfat series to be introduced to the

market

C. Flour-based foods: Development of tasty, nutritional, and quality foods

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D. Ice products: Continuous development of optimal, safe, and high-quality new flavors

E. Rice-based foods: Development of recreational foods that are healthy, sanitary, and of

optimal quality

F. Dining: Emphasis is placed on the food ingredients and the introduction of seasonal

cuisines and constantly research and development of new cuisines.

2. Industrial Overview

A. Cleaners

The constantly improving living standards and rising awareness of environmental protection

have made consumers constantly pay attention to cleaning products that are highly

biodegradable and will not hurt the ecological environment. The crystal soap series of

Namchow is made with natural oils and fats, without any additives, and hence has been

recognized by consumers as a whole.

B. Oils and fats

In light of the fact that transfat has an effect on the human health and the future trends on the

overall market, the oil and fat series of the Company continues to feature zero-transfat products

and is tailor-made as per customers' requirements in order to satisfy customers' needs for

products and to further maintain an interdependent upstream-downstream relationship with

customers. Meanwhile, the package after-sale service and baking workshops are available to

add to the differential competitive advantages and to accordingly boost the Company's sales

and profits.

C. Flour-based foods

As socioeconomics advances, the ratio of people eating out is increasing. With two days off a

week and rising awareness of staying healthy, Taiwanese people pursue healthy, tasty, and

high-quality products. In light of the above, the Company continues to introduce exquisite and

project-based commodities and develop new products jointly with its clients; these products

feature unique styles and desirable quality to earn recognition among consumers. The

Company's products are assuring, tasty, and unique.

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D. Ice products

There are two major trends in the development of the ice products industry: Because of a low

birth rate and recreational foods getting more and more exquisite, consumers are willing to

spend more money purchasing products of additional value. In addition, as the awareness of

food safety surges, consumers pay more and more attention to legal labeling, food traceability,

health and safety and they demand that products should have clean labels and as few additives

as possible.

E. Rice-based foods

To go with trends in society, consumers appeal to the pursuit of safe and tasty products. With

this belief in mind, the Company continues to develop nutritional, healthy, tasty, and delicious

products.

F. Dining

A dining business needs to be able to provide tasty cuisines that satisfy the needs of the taste

buds of customers while at the same time constantly developing new options so that the

restaurant can keep its customers interested at all times. The dining business of Namchow

features introduction of new cuisines in season and prepared with local ingredients. Besides

introducing new options by the season, there are theme cuisines from time to time to best

satisfy the needs of consumers.

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3. Technical and research and development status

(1) Amount spent in research and development in the latest year by the Company

Year 2014 2015 2016 (estimates)

Total (NTD

thousand) 125,678 139,141 169,000

(2) Developed product items

A. Cleaners

The development of 100% natural laundry liquids, bathing, food container cleaning, and herbal

nourishing soaps, among other products, has continued.

B. Oils and fats

The development of zero-transfat series of products and exclusive oils for cakes, frozen bread,

and pineapples has continued.

C. Flour-based foods

Frozen dough: with products including croissants, Danish bread, puff pastry, and soft

European bread products

Frozen noodles: with products including Japanese Udon, ramen, soba, spaghetti, Chinese

cooked noodles, Chinese wide noodles, yolk ramen, pink cherry noodles, and

northern China knife-sliced noodles, and northern China ramen.

Instant noodles: New flavors such as ginkgo mushrooms and green curry are researched and

developed.

D. Ice products

The Super Premium French ice cream - the Parfait series, and Kabisuo Russian ice cream of

Duroyal were introduced.

E. Rice-based foods

Rice: There are healthy rice products certified as health foods and capable of regulating blood

sugar and blood lipid at the moment~Dietary fiber cooked rice, imperial rice, healthy

double-wheat rice, prepared porridges and rice, among other products. A series of

health-preserving rice-based products will continued to be developed on a proactive basis in the

future to satisfy the needs for people to stay healthy.

Rice crackers: Health-oriented rice crackers have been introduced.

(3) Future research and development plans

A. Cleaners

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As the awareness of organic properties and environmental protection continued to rise in the

past few years, consumers emphasize not only the good or bad cleansing power but also safe

composition of cleaning products when it comes to home supplies and cleaning products that

help maintain the household environment. Natural and highly biodegradable cleaning products

will be the focus of research and development in the future.

B. Oils and fats

The emphasis is placed on the fundamental research of oils and fats to continue creating

differential competitive advantages for customers with one-stop and 360-degree all-around

professional services as well as customized product specifications. Our oil and fat products will

appear to be diversified and functional and feature comprehensive services in the future.

C. Flour-based foods

Frozen dough: Frozen dough is the product designed to meet consumer needs. Trends are

precisely kept track of according to the changes in the demographic structure,

dietary preferences and habits. Continous efforts will be made jointly with

customers in the research and development of tasty and assuring products

attractive to consumers.

Frozen noodles: The competitive niche of frozen noodles lies in the supply of innovative and

differential commodities and high value-added products. With the latest food

technology and technique, they fall in line with the diversified lifestyles of

modern people and satisfy the pluralistic needs of dining service providers in

creating a desirable customer relationship.

Instant noodles: Positioned to be slow food and enjoying life, these noodles provide consumers

with convenience and introduce the idea of multiple nutrients in one dish.

D. Ice products

Namchow is the first of its kind in Taiwan to commission the "Traceability Cloud Application

on Safe Foods - the Private Cloud System" where all of its 239 products are made available.

Data of more than 130 suppliers and more than 900 raw materials are filed and managed on the

private cloud resume inquiry website. The only food manufacturer that also produces ice cream

in Taiwan, all of Namchow's products are managed over the cloud for traceability. Consumers

and clients can search for product information, nutrition label, raw material information,

product tests, process information, and circulating temperature, among others. The public and

transparent information enables consumers and clients to buy and eat with assurance.

E. Rice-based foods

Rice: Modern people eat well but do not exercise as much. This gives rise to more

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and more civilization diseases. Namchow will continue to proactively

develop a series of health-preserving rice products in the future.

Rice crackers: Namchow will continue to develop products that meet health demand and are

suitable for respective age groups, such as babies, teenagers, and old people.

F. Dining

In terms of the dining business, comfortable dining environments will be created on the

unchanged belief of "innovation, differentiation, pursuit of excellence, and one-stop service." In

terms of cuisines, fresh and unique local ingredients are used to prepare each intriguing and

affectionate entree in a skilled and experienced way.

4. Long-term and short-term business development plans

(1) Short-term business development plans

Corporate resources will be integrated to make the best of the Company’s advantages with

regard to products it owns and its research and development performance and to be devoted to

the research and service relating to daily consumer products and to provide general consumers

with market-oriented products that are natural, healthy, and exquisite; they will help create

additional value and enhance profitability.

(2) Long-term business development plans

Corporate resources will be integrated to strengthen application of research, development, and

innovation and to improve product differentiation, develop new products, new businesses and

new niches. Not only the technique and products are innovative, the operational model is also

innovative. What is also needed is to precisely keep track of key factors to success in order to

lead the future market and to ensure that the Company keeps its competitive advantages.

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(II) Overview of Marketing and Production/Distribution

Since 1952, when Namchow started to produce soaps, it has been adhering to the belief of

managing multiple aspects, in terms of raw materials, technique, distribution channels, and culture.

Its six major fields, daily cleaners, oils and fats/dairy products, flour, rice, biotechnology, and

dining feature production in Taiwan, Thailand, and China. Operations are based on niche markets

while products are sold to places around the world. Products in respective fields are analyzed as

follows:

1. Market analysis

A. Cleaners

(1) Sale of major commodities:

1) Major products sold are the crystal soaps: solid, liquid, powdered forms, detergents for

food containers, antiseptic series, Crystal bath wash series, herbal nourishing soap series,

among other cleaners.

Official website: http://www.crystalsoap.com.tw/

2) Sold to: domestic market

3) Pattern: B to C

4) Distribution channels: wholesale supermarkets, PXMart, stores for military and public

servants only, distributors and retailers, online shopping malls, among others.

5) Market share:

A) Namchow crystal soaps are the first brand in Taiwan and account for 75% of all

soaps on the local market.

B) The liquid crystal soap grapefruit seed antiseptic laundry soap and liquid crystal soap

of Namchow are products made of natural oils and fats and also the first liquid soap

successfully researched and developed on the domestic market. They account for

more than 95% of all laundry detergents made of natural oils and fats that are

available on the market.

C) The liquid crystal soap for food containers of Namchow is a product made of natural

oils and fats and the first one successfully researched and developed domestically for

washing vegetables and fruits. It accounts for more than 95% of all dish detergents

made of natural oils and fats that are available on the market.

D) The laundry powder made of crystal soap of Namchow is fine powder ground from

natural soaps that features easy rinsing and solubility. It is an innovative product of

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laundry powder made from soaps and accounts for more than 95% of all powdered

soap made of natural oils and fats that are available on the market.

E) Shreds and chips made of Namchow crystal soaps account for around 75% of all

equivalent products made of natural oils and fats that are available on the market.

(2) Future supply and demand and growth on the market:

As the national income in Taiwan increases, awareness of environmental protection rises, and

the organic and natural fad emerges, consumers start to evaluate corporate social

responsibilities while pursuing natural products. Soap products that are made of natural oils

and fats, environmental, and skin friendly have gradually become a lifestyle and attitude and

this is also what supports the steady growth of the crystal soap series of products of

Namchow.

Consumers emphasize not only the good or bad cleansing power but also safe composition of

cleaning products when it comes to home supplies and cleaning products that help maintain

the household environment. In addition, they are more and more concerned about the impacts

of household detergents on the environment and the emphasis on natural and highly

biodegradable cleaners hence takes prominence.

Future development trends of the cleaner industry:

1) The rise of natural and environmentally-friendly cleaners: The constantly improving living

standards and rising awareness of environmental protection have made consumers constantly pay

attention to cleaning products that are highly biodegradable and will not hurt the ecological

environment.

2) The emphasis over multi-purpose products: Besides originally expected cleaning properties of

detergents, consumers are paying attention to additional features of products, if any, including

antiseptic, softening, and color-safe, among other auxiliary features that are popular among

consumers.

3) Components and safety of cleaners are prioritized concern: Because many cleaning products

come into contact with the human body directly, what they are made of and their safety have

gradually become a prioritized concern of consumers before they make a purchase.

4) Popular antiseptic and disinfectant products: Because of the spread of the bird flu, MERS,

enterovirus, and new flu virus, consumers are highly concerned about their personal hygiene and the

importance of a clean home. As such, products claimed to be antiseptic, disinfectant, and anti-virus

continue to be a hit.

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With the introduction of the crystal soap series of Namchow, the products have transformed from

being just a bar of hand wash soap to being a brand that is natural, healthy, fashionable, and modern

in the heart of people nowadays. This brand spirit has made the crystal soap of Namchow a

must-have natural rinsing product with the rising awareness of environmental protection and

LOHAS and health. Besides the liquid laundry crystal soap for washing clothes and that for

washing food containers in the kitchen, Namchow went ahead to introduce the grapefruit seed series

of hand wash products and set foot in the personal cleaning field. Different types of products have

been developed in response to the changing cleaning methods in order to take care of different user

populations comprehensively and the effort has been recognized by general consumers.

(3) Competitive niche and desirable and undesirable factors for development prospects and

countermeasures:

1) Competitive niche and desirable factors for development prospects

A) There is great demand and potential for natural products as the awareness of health

and environmental protection rises.

B) Unique products of the crystal brand of Namchow supported by powerful assets are

widely loved by consumers.

C) Successful development of the grapefruit seed series of products helps extend the life

span of crystal soap products and add to the value of the brand.

D) Products are known for its unique natural fragrance; there is a normal special

distribution channel and network.

2) Undesirable factors for development prospects

A) Fluctuating and rising costs of raw materials and oils on the international market

B) Increasing costs of distribution channels on a daily basis

C) Consumer habit of switching among different products because they want to try

something new.

3) Countermeasures

A) Persistent assertions over "natural", "skin-friendly", and "environmental": To help

consumers feel that their money is well spent, quality of the existing crystal soap

series of products has been constantly improved and messages about products being

natural and environmentally-friendly of the new generation are communicated so that

consumers of the new generation know and understand the benefits brought about by

the soap itself. The defined brand positioning has helped the crystal soap series

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become a natural, optimal, and environmentally-friendly cleaning product that

demonstrates love toward family and care for the Earth.

B) Continuing reinforcement of the existing intensive distribution network, with product

penetration and coverage as the biggest goal of distribution, to precisely enable each

household to have access to the crystal soap series of products at any time.

C) Collaboration with environmental protection-oriented institutions/groups to

communicate the idea and products to the general public for a synergistic effect

D) Continued promotion of the antiseptic series that spans over household cleaning and

personal cleaning fields so that consumers obviously feel the benefits of products that

work 99.99% in inhibiting bacteria supported by the SGS test.

E) Proactively researching and developing various new crystal products manufactured

with 100% natural oils and fats; the products include household cleaning series and

personal hygiene series to precisely promote the ideas of love for family and care for

the Earth and to fulfill the responsibilities as protector of the social environment.

B. Oils and fats

(1) Sale of major commodities:

1) Major products sold include mixing oils and fats, wrap oils and fats, stuffing oils and fats,

cake-oriented oils and fats, deep-fry oils and fats, special purpose oils and fats, among

others. Around 200 in total, there is a variety of choices of products available. Besides

self-made oils and fats, natural butter is introduced from Europe and cream from Japan to

continue maximizing the scope of service and manage natural butter from Europe and

cream from Japan at better depths.

Official webpage: Taiwan oils and fats

http://www.namchow.com.tw/namchow_OFD.html

Mainland China oils and fats http://www.ncbakery.com/

2) Sold to: Taiwan, mainland China

3) Pattern: B to B

Taiwan market for oils and fats: The products are sold throughout Taiwan. There are

around 3,000 distributors for direct sales; that is, the clients are the end users of

Namchow's oil and fat products. The clients include wholesale stores, supermarkets,

convenience stores, chained bakeries, independent bakeries, hotels, restaurants,

composite cafes, baking processing plants, cakes and pastries stores, handy gift stores,

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and airliner contract kitchens.

Mainland China market for oils and fats: Both direct and indirect sales are adopted as

the distribution models in mainland China. Sales to direct-sale clients account for nearly

40%. In addition, approximately 140 quality distributors were developed and continuous

efforts are made to develop new distributors, with dispatching locations scattered around

the nation; they form the most competitive cold chain inventory and logistics system.

(2) Future supply and demand and growth on the market:

Oils and fats have been a core business for the Namchow Group. Featuring one-stop

professional service, outstanding technology, and tailored product specifications, they

continue to create differential competitive advantages for clients. Namchow has spent many

years in the development of oils and fats to precisely keep track of market trends and create a

baking trend while internally it reinforces the production, research, and development of

differential products in order to satisfy clients' needs and improve clients' profits and

accordingly increase the Company's sales and profits, making Namchow an expert in oils and

fats that grows together with the baking industry and a strategic partner of all businesses in

the global baking industry for common innovative developments. To date, Namchow has

always insisted to be based on customer value and devoted to growing together with its clients.

Thanks to the professional, ethical, and corporate culture-based consensus team, the Company

has been able to constantly introduce high-quality oils and fats that meet current and future

needs on the market.

Opportunities on the Taiwan market for oils and fats: After the oil safety incident in 2014,

some companies went out of business on the baking oil and fat market. The Company,

however, with the support from its huge customer base, has managed to accomplish a

constantly increasing market share for the products of the highest safety standards that are

healthy and of optimal quality that it provides. The increase in the number of visitors in the

past few years has helped drive up the demand for and requirements of handy gifts and helped

these products to secure a position on the high-end market. Consumers are highly picky about

the quality and taste of baked foods. The constantly improving production technique and

technology has also contributed to steady growths in the oil and fat industry.

Opportunities on the mainland China market for oils and fats: The mainland China market

for oils and fats showed rapid development trends; the market scale was worth RMB 7.019

billion in 2011 and it increased to approximately RMB 11.371 billion in 2015. The annual

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growth rate managed to remain at around 13%. It is expected the commissioning of the

Shanghai facility of Namchow in the fourth quarter of 2016 will help satisfy the huge demand

on the market for oils and fats in the future to accordingly realize a growth in gains.

Namchow's oils and fats have always been a leading brand on the mainland China market.

Continuous efforts have been devoted to the research and development of products in various

new fields in order to meet the demand for diversification and products of additional value on

the market. The introduction of Beikeshi ready-to-serve stuffing, for example, has helped

demonstrate the leadership of the Company's products. In addition, to improve the demand for

healthy foods, Namchow took the lead to upgrade all of its products to be low in transfat,

which will gradually contribute to its competitive advantages on the market.

(3) Competitive niche and desirable and undesirable factors for development prospects and

countermeasures:

1) Competitive niche and desirable factors for development prospects

A) Namchow insists on honesty, quality, and has a powerful brand. It keeps track of

popular trends on domestic and international markets and secures a leading position in

the industry with a high market share. Clients are willing to grow together with

Namchow.

B) Product functions are detail-oriented. They are healthy and safe and feature steady and

optimal quality and complete product choices to meet the demand for oils and fats of

various types of clients; this is unprecedented in the industry. In addition, the

Company proactively introduces quality products from overseas to develop the

high-end market.

C) Powerful R&D capability, advanced technology, professional tailored service, and

improved product differentiation have all helped quickly address customer demand to

accordingly secure an upstream-downstream relationship with customers.

D) The direct-sale system quickly reflects market leads to help form a mutual-trust and

reciprocal strategic partnership with customers.

E) Consultation-oriented marketing and one-stop service. There are professional service

teams to provide all-around services at the front, middle, and late stages of a

distribution process.

F) The commissioning of the Shanghai facility contributes to increased productivity and

helps satisfy the high demand.

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G) The customer service center with the highest penetration rate in the nation provides

customers with timely research and development and high value-added services right

on the spot.

H) Professional workshops, exhibitions, and training classes are proactively organized at

individual locations to help customers improve their management efficacy.

2) Undesirable factors for development prospects

A) There are a variety of recreational foods (such as cookies) already packaged currently

imported from overseas to squeeze the local market and to accordingly undermine the

sales of baking oils and fats.

B) The growth rate of the market exceeds the supply of manpower; professionals are

largely wanted.

C) Increased costs in the running of a bakery have caused the growth and expansion rate

on the market to slow down; so is the growth.

E) Competition on the market has become more and more fierce; products and services

are copying one another.

3) Countermeasures

A) Continuing to create differential competitive advantages for customers and keep track

of popular trends in the baking industry

B) Reinforcing the production, research, and development to provide differential products

that help satisfy customers' needs and increase profits for customers.

C. Flour-based foods

C1. Frozen dough

(1) Sale of major commodities:

1) Frozen dough in Taiwan: Nine major types of frozen dough products are sold ~ toast,

health-oriented, rigid, sweet bread, puff pastry, Danish, western pastries, Chinese pastries,

soft bread, more than 200 items in total. Namchow is a leader among all the frozen dough

brands in Taiwan for it has the widest supply of products.

Official website: http://www.frozendough.com.tw/

2) Frozen dough in mainland China: Mainly Namchow American desserts, Danish bread,

puff pastry, sweet bread, crackers, European bread, cookies, toast and bread, rigid bread,

among others, are sold. Namchow American desserts, in particular, are exclusively

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available at Namchow.

3) Sold to: domestic market, mainland China market and other overseas markets such as the

United States, Canada, Australia, Japan, Hong Kong, and Dubai.

4) Pattern: B to B

5) Distribution channel:

Frozen dough in Taiwan: There are more than 2,000 stores selling the frozen dough,

including wholesale stores, supermarkets, convenience stores, chained bakeries,

independent bakeries, hotels, restaurants, composite cafe, baking processing plants,

handy gift stores, and airliner contract kitchens.

Frozen dough in mainland China: With an emphasis on in-depth integration and

far-reaching developments with clients, the clients can mainly be divided into the

following~large chained bakeries, small-to-medium-sized chained bakeries, bread

sections in wholesale stores, restaurants, hotels, and cafes, among others.

(2) Future supply and demand and growth on the market:

With the emphasis placed by food and health governing authorities in different countries

around the world on the safety and management of raw materials in the food industry in

recent years and the increase in the concern about food safety and a healthy diet among

consumers, it helps the Company secure its presence on the market for frozen dough products

and become a leading brand across the Strait of Taiwan. Frozen dough is a leading and

far-reaching investment on the market that begins with taking the lead, goes through

educating customers, and contributes to the establishment of a successful win-win operational

model with customers in order to lay the groundwork for the business.

1) Opportunities for frozen dough in Taiwan:

A) Popular network and food programs: Consumers can access popular baking information

quickly in a timely manner through the network or on TV, which has formed tangible incentives for

the baking industry to seek innovations and changes and this trend has also made customers more

reliant on the Company to constantly introduce new frozen dough products.

B) Increased demand from consumers and governments for healthy and safe foods: Because of

the increasing awareness among consumers, customers must choose products and suppliers with

high health and safety criteria and requirements. The spontaneous introduction of food health and

safety systems such as HACCP, ISO, and FSSC contributes to the advantages that the frozen dough

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business of the Company possesses.

C) Altered consumption habits of consumers in sluggish economy: Consumers in an M-shaped

society tend to buy the cheap one of products that are highly similar but are also willing to spend

more time in buying value-added products. Since the frozen dough business of the Company was

established, it has been devoted to researching and developing characteristic products and providing

them to customers. On the one hand, these products separate themselves from their competitors. On

the other hand, the appearance and quality of these products gain approval among customers and are

adopted accordingly to satisfy highly-demanding consumers and create a win-win-win situation for

the Company, its customers, and the consumers.

D) As the prices of raw materials continue to surge around the world, consumers are

becoming more and more calculating. Clients (customers) have to deal with the pressure brought

about by price surges that happen one after another and adequately increase the selling prices of

their products while at the same time introducing new high-end products. Under this circumstance,

the propositions of the Company’s frozen dough business successfully connect with consumers'

demand.

2) Opportunities for frozen dough in mainland China:

A) While the market for cake stores continues to grow, brand power is the key to expansion:

The growth rate in the overall food industry of China is not as high as it used to be. It is

approximately equivalent to the increase in the per-capita GDP as a whole. The growth momentum

on the baking market continued; nevertheless, the developments tend to be polarized. As the

operational costs such as raw materials, manpower, rent, and utilities continue to surge, businesses

on the baking market are faced with even sterner challenges. Brands with robust foundations are

able to grow quickly while bakeries of undesirable composition are going out of business.

B) Production model transits from traditional artificial production to industrialized

production: As the baking industry grows quickly, so does the growth of regional and local

chained bakeries. The shortage in manpower has also become more and more common. Meanwhile,

artificial costs quickly surge. The manpower-based traditional production model is getting outdated

in accommodating the rapid corporate developments. Therefore, the production model started to be

industrialized, with constant investments in large factories and equipment. The huge investments in

industrialized, however, pose challenges not only in terms of funding but also in software and

management issues such as talent training, quality stability, refrigerated delivery to retail shops and

the bridging issue. These are the challenges that have to be dealt with when businesses are being

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industrialized.

C) Fresh-baking is the trend to bring up the end baking price: Fresh-baked bread is getting

more and more popular among consumers while bread supplied in traditional package is getting

outdated. Fresh baking has become a consensus among more and more bakeries. Bakeries in China,

however, have not yet been able to provide one-stop service. As such, quality of products at many

bakeries cannot truly successfully add value to the products. This shows that there is still significant

room to be desired when it comes to the operational model for frozen dough and diversification of

fresh-baked products.

D) Increased demand from consumers and governments for healthy and safe foods: Because

of the increasing awareness among consumers, customers must choose products and suppliers with

high health and safety criteria and requirements. Transparency of and control over the composition

has been one of the requirements of customers for their suppliers for the past few years.

The Namchow Group sensitively captured the trends in the baking industry and the challenges and

opportunities while bakeries are developing toward industrialization by being the first to invest in

frozen dough factories that help the Group continue to lead on the market and introduce diversified

products and jointly push the growth in the baking industry jointly with its counterparts.

(3) Competitive niche and desirable and undesirable factors for development prospects and

countermeasures:

1) Competitive niche and desirable factors for development prospects

A) The frozen dough factory is internationally certified (ISO9001, ISO22000); the quality

is steady and guaranteed.

B) Rich experience in producing frozen dough, controlling and getting insights of the

baking market, and outstanding research, development, and production capabilities.

C) Omnipresent services from back office to the front stage to provide customers with

comprehensive solutions. There is an in-depth understanding of the customer's

operational model and cold chain status. Tailored professional consultation-based

marketing is reflective of the conditions of different customers and the different

business development stages, which not only brings about demand for commodities

for customers but also provide customers with training on how to promote products,

retail services, and help customers increase their baking competitive advantages for

mutual growths.

2) Undesirable factors for development prospects

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A) The surging costs of raw materials and manpower pose even sterner challenges on the

baking market.

3) Countermeasures

A) Customers are provided with the needs to develop new products and apply the baking

technique to become a loyal partner of customers while they run bakeries.

B) Assistance is provided to customers while they maximize operational and management

aspects and enrich product lines.

C2. Frozen noodles

(1) Sale of major commodities:

1) Main products sold include Japanese Udon, ramen, soba, spaghetti, northern China

noodles, Chinese wide noodles, Henan cooked noodles, yolk ramen, among others.

Official website: http://www.sanuki.com.tw/

2) Sold to: domestic market, mainland China market and other overseas markets such as

Europe, the United States, Australia, Canada, Zurich in Switzerland, Indonesia, and Hong

Kong

3) Pattern: B to B, B to C.

4) Distribution channel: Namchow has been focusing on the domestic dining market for

many years. There are currently more than 20,000 customers throughout Taiwan at

present. Namchow's dining services are available at five-star hotels, high-end Japanese

cuisine, composite/theme-based dining chain stores, food courts, airports, freeway rest

areas, traffic arteries, scenic areas, schools/institutions, airport catering service, Chinese

restaurants, fast food stores, steak houses, private lodging, and online shopping, among

others. Consumers can purchase Namchow's products at department store supermarkets,

seafood stores, wholesale stores, shopping malls, among other famous chain stores, and

SOGO, Shin Kong Mitsukoshi, Wellcome, Jasons, Citysuper, Matsusei, RT-Mart,

Carrefour, Far Eastern Amart, Taisugar, and Dale.

5) Market share: Namchow's Premium Frozen Noodles has a market share of more than

70%. Each year, a headcount of more than 2 million consumers consume them. These

consumers and customers offer the best testimonials to successfully establish brand

publicity.

(2) Future supply and demand and growth on the market:

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Frozen noodles are popular among advanced countries in Europe, the United States, and Japan

and serve as the steam engine for the food industry to seek further advancement and

innovation. Taiwanese people are entitled to two days off each week from work and as the

awareness of staying healthy rises, frozen noodles will be needed on the market. With

unprecedented visions, Namchow took the lead to become the first to introduce frozen

noodles and has specialized in research and development, production, distribution, and service.

The standard and professional factory, quick freezing noodle production equipment that is

leading in the world, and topnotch technology have successfully been FSSC22000

(international food safety certification system) certified. Food safety is strictly monitored. The

noodles are of world-class quality texture to boost the industrial criteria for noodles and set a

benchmark and help create new opportunities.

Thanks to the pursuit of health, high quality, and delicious food, with Premium Frozen

Noodles that feature unique commodity advantages and professional frozen noodles core

production technology, Namchow has been able to become the one and only professional

manufacturer and supplier in the industry of frozen noodles in 17 years. Sales on the market

have doubled for the past few years. The fully-loaded production line was unable to meet the

increasing demand. The second production line that was newly established offers more

sufficient production volume and more diversified options to satisfy the needs of consumers

and customers around the world.

Eyeing on the global market, Namchow introduces the new northern China noodles this year

to enter the largest mainstream market of Chinese noodles in the world. Products of Namchow

such as northern China knife-sliced noodles, northern China ramen, homemade noodles,

butterfly noodles, among others, were chosen to be the noodles to be used at the Taipei

International Beef Noodle Festival contest and the 2015 Hong Kong International Beef

Noodle Festival. Famous beef noodle stores such as Master Hong, Master Deng, San Xia San

Jue, and Li's Family only use these noodles, too. The noodles are available at supermarkets in

department stores, wholesale stores, seafood stores of Farmers' Associations as well. The

sales and profits of the company are enhanced and created. The future is in perspective while

Namchow stands in Taiwan and tries to reach out to the world.

(3) Competitive niche and desirable and undesirable factors for development prospects and

countermeasures:

1) Competitive niche and desirable factors for development prospects

A) Socioeconomic advancement contributes to an increased ratio of people eating out.

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B) FSSC22000 (including HACCP) certified, safe and healthy, without preservatives and

artificial additives at all, an assuring great choice for the health of general consumers

C) Easy to operate, easy to preserve, free of scrappage, and diversified ways of preparing

to offer dining businesses with plenty of room for survival and development

D) Innovative and differential commodities and high value-added commodities to reflect

the diversified lifestyles of modern people and the pluralistic needs of dining

businesses and to create desirable customer relations

E) Frozen noodles are the right solution to the problem as the service sector flourishes

and quality of life for Taiwanese people increases on a daily basis and make Namchow

the one and only professional manufacturer in Taiwan.

2) Undesirable factors for development prospects

A) Growing sales bring full loads for production lines.

3) Countermeasures

A) Additional production lines to provide more sufficient production volume and more

diversified options that help satisfy consumers' demand.

C3. Instant noodles

(1) Sale of major commodities:

1) Main products sold: Mee Jang and Little Chef series of instant noodles.

2) Sold to: Taiwan, Southeast Asia, Australia

(2) Future supply and demand and growth on the market:

In light of the world trade internationalization and liberation trends, the Company invested in

Thailand in 1990 by setting up its overseas production site. Namchow (Thailand) produced

instant noodles and rice crackers in the beginning.

With the food safety incident breaking out in 2014, Namchow (Thailand) decided to sell its

safe and tasty Little Chef instant noodles back to Taiwan and repositioned instant noodles to

be slow noodles. Little Chef Slow Noodles were introduced to enable consumers in Taiwan to

enjoy noodles made with solid ingredients and materials that are safe and tasty and were

planned to be sold through virtual channels and physical channels. Virtual channels include

Yam, YAHOO, PChome, momo, among other shopping platforms while physical channels

include 300 convenience stores and supermarkets at department stores throughout the greater

Taipei area.

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(3) Competitive niche and desirable and undesirable factors for development prospects and

countermeasures:

1) Competitive niche and desirable factors for development prospects

A) Keeping track of trends on the market and rich in experience, capable of researching

and developing products in a professional way

B) ISO 9001, ISO 14001, GMP, HACCP, BRC, Halal Thai, and IFSOU Kosher certified:

Product quality and safety are assured.

C) Flexible production schedule to provide best-in-class supply chain services.

2) Undesirable factors for development prospects

A) Unstable prices of raw materials

3) Countermeasures

A) More mobile in global procurement in the acquisition of competitive raw materials

D. Ice products

(1) Sale of major commodities:

1) Main products sold include Duroyal and Kabisuo series of ice products, such as ice cream

bars, cones, popsicles, and ice cream in barrels, among others.

Official website: Duroyal http://www.duroyal.com.tw/

Kabisuo http://www.kabisuoicecream.com.tw/index/index_1.htm

2) Sold to: Taiwan market

3) Pattern: B to B, B to C. The products are available at convenience stores, supermarkets,

wholesale stores, dining channels, more than 35,000 sale locations throughout the nation.

The market share exceeds 30%. OEM and ODM businesses of ice products have been

even expanded since 2009, making Namchow one of the largest ice products producers in

Taiwan.

4) Distribution channel:

A) Duroyal Ice Cream

I. Retail: The products are meant as sweet desserts.

I) Ice cream bar: Kuangshiqipai series, Super Kuanshiqipai series, sesame,

and honeydew ice cream bars

II) Cones: Duroyal select chocolate stuffing cones, double chocolate cones,

Oubuleike cones, premium cones, strawberry cones, grapefruit fragrance

brown sugar cones

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III) Ice cream in barrels: Duroyal super series, Duroyal select series, Duroyal

low fat series, Enjoy series, and Amazing series

IV) Popsicles: Duroyal green mango popsicles

V) Ice cream desserts: Maqibing series, Dafu series

II. Distribution channel: The products are meant as raw materials for ice cream, sweets,

reconstituted drinks, and soft-serve ice cream and are supplied to intermediaries in

the dining business.

I) Products: Duroyal Ice Cream, Duroyal Soft-serve Ice Cream, Duroyal

Parfait Ice Cream, and Duroyal Super Ice Cream

B) Kabisuo Royal Russian Ice Cream

I. Retail: The products are meant as sweet desserts.

I) 475 ml, 120ml

II. Distribution channel: The products are meant as raw materials for ice cream, sweets,

and reconstituted drinks and are supplied to intermediaries in the dining business.

I) 5 liters, 3 liters

C) OEM, ODM

I. Retail: The products are meant as sweet desserts.

I) Yuanzu Ice Cream Cakes and Desserts, Family Mart Collection, among

others

II. Distribution channel: The products are meant as raw materials for ice cream, sweets,

and reconstituted drinks and are supplied to intermediaries in the dining business.

I) Family Mart Soft-serve ice cream, among others

(2) Future supply and demand and growth on the market:

Because of a low birth rate and recreational foods getting more and more exquisite,

consumers are willing to spend more money purchasing products of additional value. In

addition, as the awareness of food safety surges, consumers pay more and more attention to

legal labeling, food traceability, health and safety. The Company takes part in the Project of

Traceability Cloud Application on Safe Foods of the Department of Industrial Technology

under the Ministry of Economic Affairs. Raw materials and transport control of all ice

products can be found applying the QR Code so that consumers feel more assured and

protected with what they eat.

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The Company runs popular and premium ice cream markets with its two brands, Duroyal and

Kabisuo. The premium ice cream market features mainly imported premium products while

the popular market consists of middle-priced and low-priced products. For the middle-priced

category, there are mainly differential ice cream, ice cream bars, and cones with favorable

texture while the low-priced segment consists mainly of water-based popsicles supplied by

small local factories.

Being optimistic about business opportunities in ice products, Duroyal again introduced brand

new strawberry cones, grapefruit brown sugar cones, sesame ice cream bars without addition

of artificial colors and spices for retail sales and the Amazing series that is known for its rich

stuffing in 2016. For the distribution channel, there are the highest-grade French Ice Cream

Parfait in the Super Premium series of Duroyal and the American Rock-and-Roll Style

Duroyal Super Ice Cream series.

(3) Competitive niche and desirable and undesirable factors for development prospects and

countermeasures:

1) Competitive niche and desirable factors for development prospects

A) Production sites are located in Tainan and Taoyuan and are ISO9001, 22000, and

HACCP certified. Safe and optimal raw materials are carefully selected and there is

strict process quality control. Quality of the products is free of concern.

B) Product innovation and brand investment have been the long-term focus of Duroyal

and Kabisuo. Characteristic products are being researched and developed to satisfy

consumers' expectations for novelty and changes and create differential competitive

advantages for customers.

C) Ice produces are an industry featuring a high degree of automation in the production

process. Duroyal has become a No. 1 brand on the market and its production has

reached the level of an economy of scale.

D) Sound warehousing and logistic systems to maintain the display and quality of ice

products.

E) Persistent investment in brand advertising to keep the brand new to consumers despite

elapsed time

F) The one and only ice products food factory in Taiwan. All products are managed over

the cloud for traceability. Consumers and customers can find product information,

nutrition label, raw material information, product test, process information and data

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about their circulation and temperature. The information is released to the public and

is transparent so that consumers and customers can buy them and eat them with

assurance.

2) Undesirable factors for development prospects

A) A variety of products on the market for fierce competition

3) Countermeasures

B) Continuous focus on product innovation and brand investment. Products with

exclusive characteristics are being researched and developed to satisfy consumers'

expectations for novelty and changes.

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E. Rice-based foods

E1. Rice

(1) Sale of major commodities:

1) Main products sold are the biotech cooked rice - Dietary fiber cooked rice, healthy

double-wheat rice, and impirial rice, among others.

Official website: http://www.omefun.com.tw/

2) Sold to: Domestic and international markets such as the United States, Australia, Norway,

the United Kingdom, among others.

3) Distribution channel: Biotech cooked rice is available on the retail market (chained

supermarkets and department store supermarkets), e-commerce virtual platforms (online

shopping malls, group purchase platforms, Alibaba International E-Commerce Platform),

and special channels (TV shopping channels, chained pharmacies, clinics, and

pharmacies), among others.

(2) Future supply and demand and growth on the market:

Food security has become a global concern. Our government is also proactively promoting

local consumption to boost consumption of local rice by initiating the one-more-bite of rice

movement in Taiwan; it will help increase consumption of rice and reduce farmland lying

fallow and enhance the food self-support rate.

Ambient temperature sterile-packaged rice has been prevailing in Japan, Korea, and even

mainland China, where rice is the staple. In Taiwan, however, it is still at the budding phase

now. Ambient temperature sterile-packaged rice marks a new milestone reached by Namchow

on the rice market. In response to the rising trend of having Chinese food, business

opportunities surface on the market to bring rice back home and reintroduce it on the dining

table at home; It helps develop the market share for the staple, rice, in Taiwan, arouse the

value of traditional rice culture, and create new business opportunities.

Modern people eat well but exercise little; this gives rise to more and more civilization

diseases. Obesity, diabetes, hypertension, hypercholesterolemia, and kidney disease, in

particular, are increasing. Statistics of the National Health Insurance Administration show that

more than 2 million people seek treatment because of hyperglycemia and high cholesterol

levels domestically. The Company current supplies healthy rice products certified as health

foods that can effectively regulate blood sugar and blood lipid and will continue to

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proactively develop a series of health-preserving rice products. Taiwan is turning into an aged

society. Preventive and functional traditional rice staple will be optimal in keeping oneself

healthy and caring for one's future.

The rice series of products are made available on the Alibaba International E-Commerce

Platform in 2016. There are English descriptions of product features that are supported by

professional licenses and certificates and a variety of photos of real products, among other

information and introduction to help reach out to the overseas market. Certified by the US

FDA, products are now sold to the United States and Australia, among other countries.

Western people are accustomed to using long-grain rice. As such, we also import different

kinds of rice from overseas, process them, and export them, in order to increase the

competitive advantages of our rice products on the international market. The bonded factory

approved to be set up in 2010 can import rice from Thailand, Pakistan, and India, produce

them on the domestic production platforms, and export them overseas. In addition, we have

also applied for and have been approved for the Islam HALAL certification to proactively

expand our exportation network.

(3) Competitive niche and desirable and undesirable factors for development prospects and

countermeasures:

1) Competitive niche and desirable factors for development prospects

A) The Company is the only one in Taiwan that produces ambient-temperature

sterile-packaged rice; there are no other competitors on the market yet.

B) Approved by the government and certified as health food, the products have

health-preserving claims.

C) Ready-to-serve after having been microwaved for 90 seconds; they are delicious and

convenient and can satisfy the quick needs of consumers.

2) Undesirable factors for development prospects

A) Ambient-temperature sterile-packaged rice is an emerging product on the market and

is yet to be widely accepted.

3) Countermeasures

A) The dietary fiber cooked rice online shopping mall is created by means of online

resources to focus attention on the target consumer population.

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B) Phased promotion helps consumers understand the strengths and characteristics of

products.

C) Creating incentives for consumers to keep buying and building the brand image and

reputation.

E2. Rice cookies

(1) Sale of major commodities:

1) Main products sold include rice crackers, rice crackers for babies, prepared cooked rice,

among others.

2) Sold to: Europe, America, Australia, Africa, and Southeast Asia

(2) Future supply and demand and growth on the market:

Because rice-based recreational foods are gluten free and non-GMO and meet the demand for

eating healthily, they have begun to gain prominence on the mainstream market in the western

world and are full of development potential. Products can be developed to suit the needs of

babies, women, men, and old people and hence the development potential is infinite. The

market for baby rice cookies has been successfully developed in 2014 in the United States,

Canada, and the United Kingdom. Development of the market in Australia, Europe, Korea,

and China was expanded in 2015. Baby rice crackers are the "Rising Star" of Namchow

Thailand.

(3) Competitive niche and desirable and undesirable factors for development prospects and

countermeasures:

1) Competitive niche and desirable factors for development prospects

A) Product development capability and perfect quality

B) Flexible production schedule to provide best-in-class supply chain services.

C) Long-term collaboration with western markets to win trust.

2) Undesirable factors for development prospects

A) Unstable prices of raw materials

3) Countermeasures

A) Strengthened research and development to maximize product differentiation and to

keep the leading strength

B) Extension of product items to create monopoly value

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F. Dining

F1. Dining in Taiwan

(1) Sale of major commodities:

1) Dining services for consumers

2) Sites: Taipei, Taoyuan, and Hsinchu

(2) Brands and business locations:

Brand Location

Benchangliu Professional Noodles and Rice

Namchow introduced Japanese frozen noodles

to Taiwan in 1998. Both the production and

sale take place in Taiwan. Benchangliu was

opened particularly for demonstration

purpose.

Udon, Chinese ramen, and other noodles are

served in the store. There are also special set

meals and rice options to satisfy the dining

needs of consumers who demand

exquisiteness, delicious taste, fast service, and

convenience.

http://www.namchow.com.tw/mobile/large/NC

GTYTF/flash.index.html

Taoyuan Store

Paulaner Fresh-brewed Beer Restaurant

Fresh-brewed German beer and self-made

German pork knuckle, sausage, chop meal,

and pizza, among other delicious entrees are

served in the store.

From the Guandu Store, one can overlook the

natural views of the Guandu plains. The

Taoyuan Store is equipped with a beer

brewery facility where one can watch at a

1. Guandu Store

2. Taoyuan Store

3. Qingcheng Store

143

close distance how beer is made. The

Qingcheng Store features exotic cuisines

where a live band from the Philippines is

performing.

https://www.facebook.com/taipeipaulaner

Dian Shui Lou Jiangzhe Cuisine

The restaurant features a southern China

architecture style. One can see artificial

landscapes resembling views in southern

China everywhere. They are the classic scenic

characteristics of Dian Shui Lou.

Local cuisines from Jiangsu and Zhejiang are

served in the store and are customized to suit

the needs of consumers reflective of the

characteristics of the shopping district the

restaurant is located in.

http://www.dianshuilou.com.tw/

1. Nanjing Store

2. Fuxing Store

3. Huaning Store

4. Nankan Store

5. Taoyuan Store

6. Hsinchu Store

7. Linkou Store

Chaojiangyan Chaoguang Cuisine

Local entrees, desserts, and live seafood from

Chaozhou and Guangzhou are served in the

store. With the unique preparation technique,

delicacies and intriguing cuisines from

Chaozhou are reproduced. The restaurant

attracts mostly celebrities from the political

and business circles.

http://www.chaojiangyan.com.tw/

Qingcheng Store

Kabisuo Cafe

Mostly traditional Russian cuisines are served.

Along with the Kabisuo Russian ice cream

that is highly recommended in the store, one

is able to enjoy a feast from a different nation.

http://www.kabisuoicecream.com.tw/index/ind

ex_1.htm

Lishui Store

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Thai Cuisine Restaurant

Authentic Thai food is served and quality

fresh spices from Thailand are mixed to

produce the most authentic Thai curry and

facilitate the preparation of real Thai cuisines.

http://www.namchow.com.tw/mobile/large/NC

GTYTF/flash.index.html

Taoyuan Store

Duroyal Cafe

The first Duroyal Cafe flagship store opened

at Mitsui Outlet Park as invited in 2016.

Featuring a Northern European style, the cafe

is filled with active and young aura. The store

serves salads, bread, and food from Northern

Europe, European bread, pound cake, and

various creative ice cream and desserts.

https://www.facebook.com/MR.J.DUROYAL/?

fref=ts

Linkou Store

(3) Future supply and demand and growth on the market:

Namchow runs its dining business on the beliefs of innovation and differentiation. Its

restaurants have been providing authentic and classic menus for a long term and combined

local and seasonal fresh food ingredients in the research and development of unique and

innovative recipes that have been honored with countless awards since history. Namchow was

invited to set up its presence at Mitsui Outlet Park this year (2016), where it opened Dian Shui

Lou and Duroyal Cafe later to help inspire the food and beverage business at Linkou. It is

believed that the move will bring about another wave of business growth.

(4) Competitive niche and desirable and undesirable factors for development prospects and

countermeasures:

1) Competitive niche and desirable factors for development prospects

A) The promotion of tourism and delicacies by the government has brought about positive

benefits on the dining market.

B) Promoting multi-national cuisines to differentiate from the general market

C) The restaurant has been developing innovative cuisines with seasonal and local food

ingredients to keep customers interested in dining at the restaurants at all times.

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D) Food safety issue has gained prominence. The Group established its own food safety

office to take charge of assisting restaurants in proactively spontaneous health

management and manage food ingredients from the source.

2) Undesirable factors for development prospects

A) The competition on the dining market is fierce and appears to be saturated.

B) The commodity price is rising yet people's income is not increased, which has an

effect on the number of people eating out and the budget they have on food

consumption.

3) Countermeasures

A) One-stop service, select food ingredients, and changing menus help meet the demand

of consumers, increase the number of customers, and consolidate the customer base.

B) Taking advantage of online resources to increase operating efficiency and

competitiveness.

F2. Dining in mainland China

(1) Major products are sold to:

1 Dining services for consumers

2 Location: Shanghai, China

(2) Brands and business locations:

Brand Location

Paulaner Fresh-brewed Beer Restaurant

Fresh-brewed German beer and authentic

Bavarian cuisines (German pork knuckle, sausage)

are served. There is also a live band from the

Philippines performing on site to let every

customer feel the happy and noisy aura. The

restaurant also provides various banquet services

and is capable of accommodating various large

networking activities to satisfy the needs of

different customers.

http://www.bln-restaurants.com/paulaner/

1. Fenyang Store

2. New Palace

Store

3. Binjiang Store

4. World's Fair

Store

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Ambrosia Premium Japanese Cuisine

It was once rated by the world-famous travel

network Conde Nast Traveler to be the only best

new restaurant in Shanghai and one of the Top 75

high-end restaurants in the world. Xianzhixuan

Japanese Cuisine Restaurant cares about the natural

flavor of each food ingredient and the uniqueness of

drinks and provides wedding reception services.

Fenyang Store

Ambrosia Teppanyaki

The Teppanyaki restaurant is designed with

high-end fume-free iron plates. One can watch the

artistic performance of the chefs while they are

preparing Teppanyaki cuisines and enjoy a

different dining experience.

http://www.bln-restaurants.com/ambrosia/

1. Fenyang Store

2. World's Fair

Store

KÄ FER Binjiang No. 1 Premium European

Cuisine

Located on the bank of Pudong River of Shanghai,

it was previously the Longhua Garden, the only

historical house by the river. With the partnership

with the well-known Germany high-end dining

business KÄ FER, the restaurant mainly deals with

European continental cuisines and provides

topnotch western cuisines without borders.

http://www.bln-restaurants.com/kaefer/

Binjiang Store

Deli and Bakery

There are meals, cuisines, pastries, bread, and

sandwiches. One can also enjoy coffee, flower tea,

and homemade noodles and rice. Consumers have

comprehensive choices. To serve office workers

and residents in the surroundings, they also deliver

orders, which is well received among consumers.

Fenyang Store

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http://www.bln-restaurants.com/the-deli-bakery/

Dian Shui Lou Jiangzhe Cuisine

The restaurant entered Shanghai in 2012 and

combines preferred flavours and styles from

Jiangsu, Zhejiang, and Shanghai with addition of

local cuisines from Taiwan and consumers'

favorite cuisines from Sichuan. The rich food

options and careful preparing process are widely

loved by gourmands.

http://www.bln-restaurants.com/dian-shui-lou/

Yishan Store

(3) Future supply and demand and growth on the market:

Namchow set foot in the dining market for the first time in 1997 by opening Paulaner Beer &

Garden Restaurant in Shanghai. Persistently devoted to developing delicacies, Namchow has

set up dining locations throughout the whole Shanghai area and has developed different kinds

of theme foods and beverages. As the living standards and consumption levels improve in

Shanghai, the local dietary culture is developing quickly, too. Namchow Shanghai has many

brands and is able to combine resources inside the Group to satisfy the needs of different

consumer populations. They are highly competitive on the dining market and it is expected

that there is even more room for development in the future.

(4) Competitive niche and desirable and undesirable factors for development prospects and

countermeasures:

1) Competitive niche and desirable factors for development prospects

A) Outstanding brand image

B) Proactively developing customer sources and providing tailored services

C) Combining Group resources and making the best of the Group advantages

2) Undesirable factors for development prospects

A) Increased costs of operation such as rent and human resources

B) Fierce competition on the dining market

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3) Countermeasures

A) Creating high accession barriers and creating monopoly value on the dining market

B) Being novel and changeable in terms of service and marketing in order to attract

consumption and increase profitability

C) Taking advantage of online resources to increase operating efficiency and

competitiveness.

2. Purposes and production processes of main products and correlation among the upstream,

mid-stream, and downstream of the industry

(1) Purposes of main products

A. Cleaners: Namchow Crystal Soap, based on the persistent belief of "made with natural

oils and fats", develops home cleaning and personal hygiene products.

B. Oils and fats: Oils and fats for baking and food processing are produced and products in

various new fields continue to be researched, developed, and introduced to address the various

needs on the baking market.

C. Flour-based foods

Frozen dough: Semi-finished products that fall in the category of bread. Produced frozen

dough is provided to clients (stores). They only have to thaw, ferment, and bake it to render

fresh-baked bread or pastries at any time. It is fresh, convenient, quick, delicious, safe, and

healthy.

Frozen noodles: With noodles producing technology that leads the world, noodles are cooked

to the extent where they taste the best and frozen fresh at -35. Before eating, one only has to

reheat it. It is easy, convenient, tasty, safe, and can accommodate diversified preparation

techniques.

Instant noodles: Delicious, tasty, fast, convenient, and nutritious products are made.

D. Ice products: Duroyal and Kabisuo have been devoted to product innovation and brand

investment for the long term. Unique and characteristic ice products are researched and

developed to satisfy the taste buds of consumers for sweets.

E. Rice-based foods

Ambient-temperature rice: Raw rice is prepared applying high technology to render delicious

cooked rice that can be kept at ambient temperature. The rice is claimed to exercise

health-preserving benefits. Rice is made delicious and easily accessible.

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Rice crackers: Delicious and tasty desserts and foods that are popular among the young and

the old are produced through the continuous and automatic production process to meet the

demand for eating healthily.

F. Dining: Supplied to restaurants for preparing meals.

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(2) Production and preparation processes of main products

1) Production flowchart for cleaners

2) Production flowchart for oils and fats

3) Production flowchart for flour-based foods

3-1) Production flowchart for frozen dough

3-2) Production flowchart for frozen noodles

3-3) Production flowchart for instant noodles

Boiling Pressing Cutting Printing Packaging

Packaging

Boiling

Finished product

Finished

product

Filling

Raw

material

Refining

Deodorizing

Reconstituti

ng Freezing and

combining

Filling and

packaging

Ripening Warehousin

g

Formula

reconstitution Dough mixing Shaping

Quick freezing

Packaging

Warehousin

g

Packagi

ng

Finished

product

Mixing with salt

water or alkaline

water

Pouring in flour

to make dough

Producin

g into four

bands

Cutting four

bands into

pieces

Boiling in

water

Four body taking

shape

Detectin

g the

weight

Quick freezing

Boxing Entering

freezer

Flour Mixing of the

formula Proofing

Rolling

Slitting and waving

Cooling

Deep

frying

Cutting and metering

Pouring Steaming

Assembly and packaging

(bread and seasonings)

Metal and weight

detection

Boxing Warehousing and

shipping

151

4) Production flowchart for ice products

5) Production flowchart for ice crackers

5-1) Production flowchart for ambient-temperature rice

5-2) Production flowchart for rice crackers

Cooling Homogeniz

ation

Ripening Seasoning

Sterilizing

Mixing of raw materials

Freezing

Filling

Rice

refining

Rice washing

and soaking

Metering and

filling

Steam pressurized

heating

(sterilization, α

processing)

Filling of

cooking water

Cooking

Sterile

packaging

Reverse steaming

and cooking

Cooling

Drying Package

inspection

Imperial rice

Storage at ambient

temperature

Rice

refining Rice washing and

soaking

Grinding rice into

powder Steaming

Cooling

Ripening

Warehousing and

shipping

Packaging

Seasoning

Rolling into shape Drying for the first

time Drying for the second

time

Baking or frying in oil

152

(3) Correlation among the upstream, mid-stream, and downstream of the industry

1) Correlation among the upstream, mid-stream, and downstream of cleaners

2) Correlation among the upstream, mid-stream, and downstream of oils and fats

3) Correlation among the upstream, mid-stream, and downstream of four-based foods.

3-1)Correlation among the upstream, mid-stream, and downstream of frozen dough

3-2) Correlation among the upstream, mid-stream, and downstream of frozen noodles

Raw

mater

ial

suppli

er

Raw material

Namchow

oils and fats

Oil refining

Mater

ial

suppli

er

Packing

materials

Plastic products

Paper products

Home

suppli

es

manu

factur

ing

sector

Wholesale store

Chained

supermarket

Stores serving

military staff,

teachers, and

public servants Traditional

distributor

Convenience

store

Department store

Exquisite goods

grocery store

Cons

umer

Base oil suppliers (palm oil,

coconut oil, soybean oil,

butter, and rapeseed oil,

among others)

Baking and dining (wholesale

stores/supermarkets/convenience

stores/chained bakeries/independent

bakeries/hotels/restaurants/composite food and

beverage stores/baking processing plants/cake

and pastry stores/handy gift stores/airliner

contract kitchens, among others)

Oil and fat

manufacturing

facility

Raw material

suppliers

(flour/oils and

fats, among

others)

Frozen dough

manufacturing

facility

Baking

(wholesale stores/supermarkets/convenience

stores/chained bakeries/independent

bakeries/hotels/restaurants/composite food and

beverage stores/baking processing plants/handy gift

stores/airliner contract kitchens, among others)

153

3-3) Correlation among the upstream, mid-stream, and downstream of instant noodles

4) Correlation among the upstream, mid-stream, and downstream of ice products

5) Correlation among the upstream, mid-stream, and downstream of rice-based products

5-1) Correlation among the upstream, mid-stream, and downstream of ambient-temperature

rice

Raw materials

suppliers

(four/acetic starch,

salt, among others)

Frozen noodles

manufacturing

facility

Channels

(five-star hotels, high-end Japanese cuisine,

composite/them food and beverage chain stores,

food court, airports, freeway rest areas, traffic

arteries, scenic areas, schools/institutions, airport

catering service, Chinese restaurants, fast food

stores, steak houses, private lodging, and online

shopping, among others)

Upstream Raw material (flour) Material (packing) Material

Thailand Importation Importation Importation Thailand Thailand

Namchow

Thailand

Market

Instant

noodles

Distribut

or Importer

Retail

Retail

Raw material Manufacturing

company Distribution channel (retail and sales) Consumer

154

5-2) Correlation among the upstream, mid-stream, and downstream of rice crackers

6) Correlation among the upstream, mid-stream, and downstream of dining

Raw material supply

(packing/Rice and others)

(packing/Rice and

others)

Ambient-temperature

rice

manufacturing facility

Channel (chained supermarkets/department store

supermarkets/chained pharmacy and cosmetics

stores/clinics/shopping platforms/TV shopping

channels, among others)

Upstream Raw material (rice)

Material (packing) Material

Thailand Importation Importation Importation Thailand Thailand

Namchow

Thailand

Market

Distribut

or Importer

Retail

Retail

Rice crackers

Small farmer

Vegetables

Cultivation farm

Soft-shelled turtle

Fish

Beef

Wholesale

intermedia

ry

Farmers'

Association

Pork, beef, lamb,

chicken, duck, geese,

fish, crab, vegetables,

fruits, groceries

Vegetables

Restaurant

Catering/to-go/delive

ry

Handy gift

Reunion/banquet

155

3. Supply of main raw materials

(1) Cleaners

The main raw materials are the oils and fats, namely butter, coconut oil, palm oil, and canola oil,

which are bulky raw materials on the international market. Because of the climate and international

supply and demand, prices on the international market fluctuate. Selling prices on the market need

to be planned in advance to reflect the cost and to avoid undermined profits as a result of the

fluctuations. In terms of marketing, the assertion of loving for family and the Earth continues to be

passed down so that consumers fully feel that the products are worth the money.

(2) Oils and fats

The most important raw materials for oils and fats are palm oil, coconut oil, soybean oil, butter, and

rapeseed oil, all of which are bulky raw materials on the international market, whose supply and

demand at the source are under close control by related units to make sure that they are imported by

schedule. Main raw materials for oils and fats are highly affected by the abnormal global climate;

there is minimal control over them. The ability to keep track of the latest prices and information at

any time makes effective and reasonable control over the cost of raw materials to be purchased and

those in stock possible.

(3) Frozen dough

Main raw materials are the flour, oils and fats, yeast, chicken eggs, sugar, and various stuffing,

among others. Flour needs to be supplied by domestic flour manufacturers while oils and fats are

provided by the Company's oils and fats business. The mutual support inside the Company in the

research and development of oils and fats particularly needed for the production of the frozen dough

is the key to the management advantages.

(4) Frozen noodles

1) The main raw materials of Udon are the flour, acetic starch, and salt. The flour is imported by

Namchow from Australia. Flour has been able to be purchased at appropriate time points

reflective of the international factor, changes in prices, and the production and distribution

plan to keep reasonable inventory. Acetic starch is supplied by domestic dealers. The dealers

set their own secure volumes.

2) The main raw materials of ramen, soba, spaghetti, and Chinese noodles are flour, acetic starch,

gluten, egg white powder, improver, alkali, salt, and pigments, among others. Besides flour,

salt, and improver, which are manufactured domestically, all the others are purchased through

156

agencies. All of the raw materials are closely monitored according to the production and

distribution plan at the source of supply by related units and there is reasonable inventory at

any time.

(5) Instant noodles

The main raw material is flour. In order to get steady source of supply, it is necessary to keep track

of prices of wheat on the international market at all times and take into consideration the exchange

rate.

(6) Ice products

The main raw materials are the skimmed milk powder, clarified butter, oils and fats, and special

sugar, among others.

1) Skimmed milk powder, clarified butter: Lucky Royal Co., Ltd. imports products from New

Zealand, where cows are raised in a natural and pure environment.

The needed volume is purchased at appropriate time points according to the prices on the

international market and safe inventory is kept.

2) Oils and fats: Namchow oils and fats are used because they are of optimal quality and come

from safe sources. The supply is steady and prices are reasonable.

3) Special sugar: The special sugar from the Taiwan Sugar Corporation is used. Taiwan Sugar is

known for its scientific sugar production methods and quality products. The supply is steady

and prices are reasonable.

157

(7) Ambient-temperature rice

The main raw materials are the packing materials and rice.

1) Packing material: The sealing film and shallow plates used for the ambient-temperature rice

are made of multi-layered obstructive functional materials that can completely keep off

oxygen to accordingly inhibit the growth of microorganisms. There are no similar products

available in Taiwan and hence they have to be imported from Japan. Joint development with

domestic famous packing material heavyweight manufacturers will be a goal in the future to

bring down the packaging cost.

2) Rice: CNS first-grade optimal rice grown locally in Taiwan is used as the main ingredient for

the delicious cooked rice. Efforts will be placed to further investigate the feasibility of

devoted contract cultivation in order to maintain steady quantity and quality of this main raw

material for the product and storage and transport conditions will be carefully monitored.

What is the most important is that a complete product production traceability and follow-up

system has been in place to enable the general consumers to feel safe and assured with what

they eat.

(8) Rice crackers

The main raw material is rice. Quality Thai rice and other special types of rice are used for

production. Meanwhile, contracts are signed with suppliers to ensure steady quality and quantity of

the rice supplied.

(9) Dining

All the main raw materials are CAS, GMP, FGMP, HACCP, ISO22000 and ISO9001-certified

products that are approved by the government to closely safeguard consumers' health and safety. A

system has been built to proactively trace sources of food ingredients and manage the suppliers.

Livestock, meat products, and seafood are supplied with test reports to prove that they are healthy

and safe. Meanwhile, we collaborate with Farmers' Associations in different places to have access

to local and seasonal food ingredients.

158

4. Names of customers with 10% or more purchases or sales and the value of purchases or

sales in the past two years and their ratios: please describe the reason for the increase or

decrease.

(1) Data of major suppliers in the past two years

Unit: NTD thousand

2015 2014

No. Title value

Ratio in net

purchases

throughout the

year (%)

Relations

hip with

the issuer

Title value

Ratio in net

purchases

throughout the

year (%)

Relations

hip with

the issuer

1 Wilmar Trading Pte Ltd. 732,760 11 None Wilmar Trading Pte Ltd. 741,762 10 None

Other 5,663,674 89 - Other 6,565,196 90 -

Net purchases 6,396,434 100 - Net purchases 7,306,958 100 -

(2) Data of major sales customers in the past two years

Unit: NTD thousand

2015 2014

No. Title value

Ratio in net sales

throughout the

year (%)

Relationship with

the issuer Title value

Ratio in net sales

throughout the

year (%)

Relationship with

the issuer

Customers without reaching 10% or more of the total value of sales in any of these two years

Other 15,446,582 100 - Other 14,763,103 100 -

Net sales 15,446,582 100 - Net sales 14,763,103 100 -

Reason for the increase or decrease:

Purchase: mainly because of the fluctuating oil and fat prices on the international market and changes caused

by adjustment of the inventory

Sales: The increase is mainly the result of business growth.

159

5. Production volumes/values in the past two years

Unit: Ton - NTD thousand

Year

2015 2014 Volume

Main products Throughput Production volume Production value Throughput

Production

volume Production value

Oils and fats 185,843 127,145 6,260,834 172,998 118,090 6,039,474

Cleaners 9,420 8,716 358,195 9,420 9,250 381,515

Ice products 17,561 9,349 687,050 17,561 12,621 860,263

Foods 100,578 40,244 2,040,146 100,354 43,348 1,897,895

Other 2,098 686 429,321 2,098 723 421,899

Total 315,500 186,140 9,775,547 302,431 184,032 9,601,047

6. Sales volume/values in the past two years

Unit: Ton - NTD thousand

Year 2015 2014

Volume Domestic International Domestic International

Main products

Sold

volume Sold value Sold volume Sold value Volume Value Volume Value

Oils and fats 17,265 1,168,565 108,425 8,114,492 16,208 1,067,532 101,732 7,524,475

Cleaners 8,509 603,539 7 218 9,124 663,843 0 0

Ice products 8,738 974,295 379 125,917 11,968 1,474,601 383 127,722

Foods 15,270 681,187 28,042 1,979,585 13,591 561,544 26,063 1,587,074

Dining 0 586,672 0 840,716 0 534,736 0 863,175

Other 0 142 595 404,216 0 150 644 426,995

Total 49,782 4,014,400 137,448 11,465,143 50,892 4,302,406 128,823 10,529,442

160

(III) Information of Employees

Information of employees in the past two years and up to the date of printing of the Annual

Report

Year 2014 2015 As of

March 29, 2016

Number

of

employee

s

Domestic 1,208 1,289 1,303

International 2,841 2,866 2,999

Total 4,049 4,155 4,302

Mean age 35.3 36.1 36.0

Mean seniority in service 6.07 6.43 6.33

Educatio

n

Distributi

on

Ratio

PhD 2

(0.05%)

3

(0.07%)

3

(0.07%)

Master 127

(3.14%)

176

(4.24%)

181

(4.21%)

College and University

Graduate

1,301

(32.13%)

1,446

(34.80%)

1,475

(34.29%)

Senior high/vocational

high school graduate

1,405

(34.70%)

1,270

(30.57%)

1,323

(30.75%)

Below senior

high/vocational high

1,214

(29.98%)

1,260

(30.32%)

1,320

(30.68%)

161

(IV) Information on Environmental Protection Expenditure:

1. Tainan Plant

(1) The Tainan plant was inspected by the Environmental Protection Bureau of Tainan City

Government on January 6, 2015 for water pollution (Inspection No.: 14-W-275193; Test

Report No.: RW-104-01-007).

(2) It was determined by the Environmental Protection Bureau of Tainan City Government

that the Tainan plant was in violation of the requirement under Article 7 Paragraph 1 of the

Water Pollution Control Act and Article 2 of the Effluent Standards. The plant was fined

NTD 80 thousand according to Article 40 Paragraph 1 of the Water Pollution Control Act

and the requirement in Appendix 1 under Article 2 of the Punishment Guidelines for the

Value of Fine for Violating the Water Pollution Control Act.

(3) The Environmental Protection Bureau of Tainan City Government visited the plant again

in July for sampling and the secondary inspection and the plant was determined to be met

regulatory requirements.

(4) Waste water treatment, management, and requirements will be reinforced at the plant to

ensure compliance with regulatory requirements.

(5) There is no concern of environmental pollution and no compensation was involved.

2. Tianjin Plant

Total values of losses (including compensation) and punishments suffered by Namchow

Tianjin because of polluting the environment in 2015

Namchow Tianjin 2015 GL Date Receipt Number Value (RMB)

Fine for sewage treatment

test results exceeding limits 2015-11-02 515110132 14,890.18

Cause of the fine: Total phosphorus exceeds the limit. Current preventive measure: Detection

devices have been installed.

The detection devices configured total around RMB 11,000 in value.

162

(V) Employer-employee Relations

Since the Company was established, it has been valuing benefits for and the health of its employees

very much and looking at employees as its most important assets. Therefore, when planning and

implementing respective personnel systems and welfare measures, the Company place employees at

the core. Various personnel and welfare systems are described as follows:

1. Personnel system:

Personnel guidelines are established in compliance with the Labor Standards Act and applicable

laws and regulations; there are requirements on the wages, working hours, leave, layoff, benefits,

retirement, labor safety and health, gender equity, and various types of welfare for employees.

2. Retirement system:

The Namchow Group recognizes the cost of retirement fund set aside each year based on the

results provided by the actuary and sets aside the retirement reserve for employees who are

applicable under the old retirement system and save it in the special account at the Trust

Department of the Bank of Taiwan. The Employee Retirement Reserve Supervisory Committee

is responsible for the supervision. For employees who are applicable under the Labor Pension

Act, on the other hand, 6% of their salaries is set aside to their Personal Labor Pension Account

at the Bureau of Labor Insurance to accomplish the goal of taking care of their employees career

and life after retirement.

The government started to enforce setting aside the balance of retirement fund for employees

under the old system in 2016. As required, at the end of March each year, the employer must set

aside the balance yet to be paid to the retirement fund for employees who are qualified for

retirement but are still in service. Namchow will follow the government's requirement by setting

aside the said balance.

3. Gender equity in employment:

The guidelines for handling complaints about sexual harassment are established to proactively

protect gender equity in employment and enable both genders to apply their skills in a fair, open,

and just working environment. Meanwhile, the Company works with registered legal daycare

centers which provide children of its employees with preferred rates so that employees can take

care of their family and their work at the same time. The hope is that employees can grow

together with the Company.

4. Employee benefits:

1) Employee Welfare Committee

The Employee Welfare Committee is established to plan for the establishment of a welfare

163

system and to continue promoting various benefits; the information is provided to

colleagues through the intranet of the Company.

2) The following shows the various benefits made available by the Company and the

Employee Welfare Committee. The fundamental welfare value that each employee is

entitled to each year totals around NTD 7,800.

Type No.

Education support Scholarship

Preferred rates are offered to the Company's employees by

collaborative daycare centers that are registered by law.

Subsidies for

clubs/activities Employee travels/outings/reunions/necessary equipment and venue

for the society and activities

Festival gifts Dragon Boat Festival/Mid-Autumn Festival/Double Ninth

Festival/New Year's Day/Spring Festival

Birthday subsidies Birthday gift

Employee insurance Labor Insurance/National Health Insurance

Group Insurance (life, accidents, medical care in an accident,

hospitalized medical care, and cancer medical care)

Retirement Fund There is the retirement fund set aside for each employee in

accordance with the Labor Standards Act and the Labor Pension Act.

Medical care Health examination (once a year for employees at each factory and

the cafeteria and once every two years for employees at the main

office and operation sites)

Consolation money for hospitalized employees or their linear

relatives

Red envelopes for a wedding and white envelopes for a funeral

5. Continuing education and training:

Employees are important assets of Namchow. The Company proactively develops talent through

various types of educational training:

1) Internal training: Zhongli Plant_Labor Safety and Health and Food Safety and Health

Training (12/2/2015), Zhongli Plant&Taoyuan _ Introduction to Cleaning and

Disinfection Technology for Cleaners Used Inside the Plant_Safe Handling of Chemicals

164

(6/5/2015), Taoyuan Plant_GMP Practice (9/21/2015), Royal Tainan Plant_Production

Supervisor Quality Training/Food Safety (1/9/2015), Chaojiangyan_Reception Etiquettes

(4/10/2015&4/17/2015)……etc.

2) External Training: Employees can submit a request to be approved by the head of their

department and take part in external training programs that suit their needs at work, e.g. the

Food Bioactivity Test Method Seminar (8/17/2015), Professional Skills

Development/Management (5/25/2015), Food Safety Control System Fundamental

Training (10/19/2015)...... etc.

3) Participating in exhibitions/seminars: To help extend the horizon of its employees and help

them absorb new knowledge, the Company sends them to attend food fairs and seminars in

the nation and overseas.

6. Workplace and personal safety:

To create a safe, sanitary, and healthy workplace, fire prevention/public safety trainings and

employee safety educational trainings (4/29/2015, 5/4/2015, 5/5/2015) are organized at each

plant for the first half and the second half of the year.

7. Employer-employee Relations:

Being aware of the importance of co-existence and co-prosperity between employers and

employees, the Company proactively promotes a harmonious employer/employee relationship by

comprehensively reinforcing communication and coordination and constantly improving the

workplace. In addition, the industrial union is established by law. The parties communicate with

each other periodically and from time to time to reach a consensus. In the future, efforts will

continue to bring together the employer and the employees by heart applying the principle of

integrity to jointly create profits.

8. Employer-employee disputes in the past three years: None

165

(VI) Important Contract

Nature of

contract Client

Start/end dates of

contract Main contents Restrictions

Use of

brewing

technique

Namchow

BVI and

Germany

Paulaner

12.1.1996-12.1.2016 1200 liters (inclusive) and less: 170

Euros of royalties shall be paid for

each hundred liters of beer

produced; From 1201 liters to 2,400

liters: 130 Euros of royalties shall

be paid for each hundred liters of

beer produced; From 2401 liters to

6,000 liters: 110 Euros of royalties

shall be paid for each hundred liters

of beer produced; 6,000 liters and

more: 90 Euros shall be paid for

each hundred liters of beer

produced.

Use of

brewing

technique

Lucky

Royal and

Germany

Paulaner

07/01/2009 ~ the

parties agree to

dismiss the Contract

250 liters (inclusive) and less: 170

Euros of royalties shall be paid for

each hundred liters of beer

produced; From 251 liters to 2,500

liters: 130 Euros of royalties shall

be paid for each hundred liters of

beer produced; 2,501 liters and

more: 110 Euros shall be paid for

each hundred liters of beer

produced.

166

VI. Financial Status

(I) Brief Balance Sheet and Income Statement for the Past Five Years

1. Brief Consolidated Asset Balance Sheet - International Financial Reporting Standards

Unit: NT$1,000

Year

No.

Financial data of the past 5 years (Note 1)

2011 2012 2013 2014 2015

Current assets - - 6,313,685 8,498,553 9,391,406

Funds and long-term

investments - -

90,862 41,453 40,715

Real estate, manufacturing

facilities and equipment - -

6,353,212 7,774,260 8,216,461

Intangible assets - - 105,417 105,417 105,417

Other Assets - - 395,375 494,631 645,336

Gross assets - - 13,258,551 16,914,314 18,399,335

Current

liabilities

Before

distributio

n

- -

5,122,599 6,178,713 6,871,475

After

distributio

n

- -

5,710,865 6,796,392 Note 2

Non-current liabilities - - 3,508,300 5,483,023 5,883,783

Others - - - - -

Gross

liabilities

Before

distributio

n

- -

8,630,899 11,661,736 12,755,258

After

distributio

n

- -

9,219,165 12,279,415 Note 2

Capital stock - - 2,941,330 2,941,330 2,941,330

Capital reserve - - 332,677 424,437 520,786

Retained

earnings

Before

distributio

n

- -

1,691,523 2,040,571 2,508,036

After

distributio

n

- -

1,103,257 1,422,892 Note 2

Other equities - - 32,816 204,619 59,781

Treasury stock - - (530,114) (530,114) (530,114)

Non-controlling interests - - 159,420 171,735 144,258

Shareholders’

equity

Before

distributio

n

- -

4,627,652 5,252,578 5,644,077

Total

After

distributio

n

- -

4,039,386 4,634,899 Note 2

Inspecting (Reviewing)

CPA - -

Xiu-Yu Lin

Lin Wu

An-Tian Yu

Xiu-Yu Lin

An-Tian Yu

Xiu-Yu Lin

Inspection (Review) - - No No No

167

Feedback reservations reservations reservations

Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

Note 2: To be finalized after a decision is made in the shareholders meeting.

168

2. Brief Consolidated Income Statement - International Financial Reporting Standards

Unit: NT$1,000

Year

No.

Financial data of the past 5 years (Note 1)

2011 2012 2013 2014 2015

Business income - - 13,426,115 14,831,846 15,479,543

Gross operating profit - - 4,325,418 4,918,316 5,608,250

Business loss - - 1,387,009 1,577,941 1,955,419

Non-business income and

expenditure - - (58,912) 662 (214,378)

Pre-tax net profits (losses) - - 1,328,097 1,578,603 1,741,041

Continuing department

Net profits of the term - - 899,546 1,008,737 1,163,961

Gains and losses for the

discontinued department - - - - -

Net profits (losses) of the

term - - 899,546 1,008,737 1,163,961

Other comprehensive gains

and losses of the term

(After-tax net value)

- - 102,365 165,608 (177,248)

Sum of general gains and

losses of the term - - 1,001,911 1,174,345 986,713

The net profits belong to the

client of the parent company - - 854,366 948,634 1,112,850

The net profits are part of

non-controlling interests - - 45,180 60,103 51,111

The sum of general gains

and losses belongs to the

client of the parent

company.

- - 948,536 1,109,117 940,307

The sum of general gains

and losses is part of

non-controlling interests.

- - 53,375 65,228 46,406

Earnings per share - - 3.44 3.82 4.49

Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

169

3. Brief Entity Asset Balance Sheet - International Financial Reporting Standards

Unit: NT$1,000

Year

No.

Financial data of the past 5 years (Note 1)

2011 2012 2013 2014 2015

Current assets - - 1,021,536 1,419,456 1,121,981

Funds and long-term

investments 5,086,250 6,009,097 7,250,538

Real estate, manufacturing

facilities and equipment - - 2,649,554 2,674,472 2,665,947

Intangible assets - - - - -

Other Assets - - 11,703 24,458 39,485

Gross assets - - 8,769,043 10,127,483 11,077,951

Current

liabilities

Before

distribution - - 1,860,731 1,068,458 1,409,720

After

distribution - - 2,448,997 1,686,137 Note 2

Non-current liabilities - - 2,440,080 3,978,182 4,168,412

Others - - - - -

Gross

liabilities

Before

distribution - - 4,300,811 5,046,640 5,578,132

After

distribution - - 4,889,077 5,664,319 Note 2

Capital stock - - 2,941,330 2,941,330 2,941,330

Capital reserve - - 332,677 424,437 520,786

Retained

earnings

Before

distribution - - 1,691,523 2,040,571 2,508,036

After

distribution - - 1,103,257 1,422,892 Note 2

Other equities - - 32,816 204,619 59,781

Treasury stock - - (530,114) (530,114) (530,114)

Shareholders

’ equity

Before

distribution - - 4,468,232 5,080,843 5,499,819

Total

After

distribution - - 3,879,966 5,698,522 Note 2

Inspecting (Reviewing) CPA - - Xiu-Yu Lin An-Tian Yu An-Tian Yu

Lin Wu Xiu-Yu Lin Xiu-Yu Lin

Inspection (Review)

Feedback - - No reservations No reservations No reservations

Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

Note 2: To be finalized after a decision is made in the shareholders meeting.

170

4. Brief Entity Income Statement - International Financial Reporting Standards

Unit: NT$1,000

Year

No.

Financial data of the past 5 years (Note 1)

2011 2012 2013 2014 2015

Business income - - 2,390,240 2,578,036 2,780,173

Gross operating profit - - 802,546 868,415 1,006,609

Business loss - - 20,259 (19,319) (2,165)

Non-business income

and expenditure - - 842,008 1,089,021 1,334,909

Pre-tax net profits

(losses) - - 862,267 1,069,702 1,332,744

Continuing department - - 854,366 948,634 1,112,850

Net profits of the term

Gains and losses for the

discontinued department - - - - -

Net profits (losses) of

the term - - 854,366 948,634 1,112,850

Other comprehensive

gains and losses of the

term - - 94,170 160,483 (172,543)

(After-tax net value)

Sum of general gains

and losses of the term - - 948,536 1,109,117 940,307

Earnings per share - - 3.44 3.82 4.49

Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

171

5. Brief Consolidated Asset Balance Sheet - National Financial Accounting Standards

Unit: NT$1,000

Year

No.

Financial data of the past 5 years (Note 1)

2011 2012 2013 2014 015

Current assets 4,968,521 4,922,792 - - -

Funds and long-term

investments 90,264 89,876 - - -

Fixed assets 6,419,745 6,309,229 - - -

Intangible assets 126,530 119,796 - - -

Other Assets 68,741 71,185 - - -

Gross assets 11,673,801 11,512,878 - - -

Current

liabilities

Before

distribution 4,945,566 3,390,734 - - -

After distribution 5,107,339 3,684,867 - - -

Long-term liabilities 2,263,132 3,450,716 - - -

Others 466,242 577,784 - - -

Gross

liabilities

Before

distribution 7,674,940 7,419,234 - - -

After distribution 7,836,713 7,713,367 - - -

Capital stock 2,941,330 2,941,330 - - -

Capital reserve 357,838 383,072 - - -

Retained

earnings

Before

distribution 424,870 709,309 - - -

After distribution 263,097 415,176 - - -

Financial instruments

Unrealized losses of falling

prices

(345,691) (344,735) - - -

Cumulative translation

adjustment 438,843 360,689 - - -

Unrealized revaluation

increments 317,893 317,893 - - -

Treasury stock (188,250) (188,250) - - -

Not recognized as pension

Net losses of cost (111,973) (234,612) - - -

Shareholde

rs’ equity

Before

distribution 3,998,861 4,093,644 - - -

Total After distribution 3,837,088 3,799,511 - - -

Inspecting (Reviewing) CPA

Bo-Shu

Huang

An-Tian Yu

Bo-Shu Huang

Xiu-Yu Lin

- - -

Inspection (Review)

Feedback

No

reservations

No

reservations - - -

Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

172

6. Brief Consolidated Income Statement - National Financial Accounting Standards

Unit: NT$1,000

Year

No.

Financial data of the past 5 years (Note 1)

2011 2012 2013 2014 2015

Business income 11,020,127 12,060,837 - - -

Gross operating profit 3,038,633 3,537,090 - - -

Business loss 600,351 814,871 - - -

Non-business income

and interest 205,872 102,273 - - -

Non-business costs and

losses 196,236 188,795 - - -

Continuing department 609,987 728,349 - - -

Pre-tax gains and losses

Continuing department

Gains and losses 394,081 477,723 - - -

Gains and losses for the

discontinued department - - - - -

Extraordinary gains or

losses - - - - -

cumulative effect of

changes in accounting

standards

- - - - -

Gains and losses of the

term 394,081 477,723 - - -

Earnings per share 1.40 1.80 - - -

Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

173

7. Brief Entity Asset Balance Sheet - National Financial Accounting Standards

Unit: NT$1,000

Year

No.

Financial data of the past 5 years (Note 1)

2011 2012 2013 2014 2015

Current assets 947,175 961,456 - - -

Funds and long-term

investments 3,852,466 4,230,431 - - -

Fixed assets 2,265,396 2,423,424 - - -

Intangible assets - - - - -

Other Assets 194,681 195,928 - - -

Gross assets 7,259,718 7,811,239 - - -

Current

liabilities

Before

distribution 1,680,881 - - - -

After

distribution 1,842,654 - - - -

Long-term liabilities 1,555,461 2,899,582 - - -

Others 188,516 272,914 - - -

Gross

liabilities

Before

distribution 3,424,858 - - - -

After

distribution 3,586,631 - - - -

Capital stock 2,941,330 2,941,330 - - -

Capital reserve 357,838 383,072 - - -

Retained

earnings

Before

distribution 424,870 - - - -

After

distribution 263,097 - - - -

Financial instruments

Unrealized losses of

falling prices

(345,691) (344,735) - - -

Cumulative translation

adjustment 438,843 360,689 - - -

Unrealized revaluation

increments 317,893 317,893 - - -

Treasury stock (188,250) (188,250) - - -

Not recognized as

pension

Net losses of cost

(111,973) (234,612) - - -

Shareholder

s’ equity

Total

Before

distribution 3,834,860 - - - -

After

distribution 3,673,087 - - - -

Inspecting (Reviewing)

CPA

Bo-Shu Huang

An-Tian Yu

Bo-Shu Huang

Xiu-Yu Lin - - -

174

Inspection (Review)

Feedback No reservations No reservations - - -

Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

175

8. Brief Entity Income Statement - National Financial Accounting Standards

Unit: NT$1,000

Year

No.

Financial data of the past 5 years (Note 1)

2011 2012 2013 2014 2015

Business income 2,333,784 2,348,488 - - -

Gross operating profit 669,581 697,959 - - -

Business loss (39,029) (46,443) - - -

Non-business income and

interest 461,524 603,367 - - -

Non-business costs and

losses 50,836 87,446 - - -

Continuing department

Pre-tax gains and losses 371,659 469,478 - - -

Continuing department

Gains and losses 348,114 446,212 - - -

Gains and losses for the

discontinued department - - - - -

Extraordinary gains or

losses - - - - -

cumulative effect of

changes in accounting

standards

- - - - -

Gains and losses of the

term 348,114 446,212 - - -

Earnings per share 1.40 1.80 - - -

Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

176

(II) Financial Analysis for the Past Five Years

1. Financial Analysis - Consolidated Financial Statement by the International Financial

Accounting Standards

Year

Analyze

Analysis of the past five years (Note 1)

2012 2013 2014 2015 Year

Fi

na

nc

ial

str

uc

tur

e

%

Liabilities to assets ratio 66 65 69 69 -

Permanent capital to real estate,

manufacturing facilities and equipment

ratio

131 128 138 141 -

Li

qu

idi

ty

Current Ratio (%) 142 123 138 137 -

Quick Ratio (%) 97 87 2015 111 -

Interest protection multiples 7 15 14 13 -

O

pe

rat

in

g

pe

rf

or

m

an

ce

Average collection turnover(times) 6.69 7.79 8.65 9.06 -

Average collection days 55 47 42 40 -

Inventory turnover (times) 5.83 5.62 5.43 5.69 -

Average payables turnover (times) 15.66 15.76 15.07 14.19 -

Average inventory turnover days 63 65 67 64 -

Real estate, manufacturing facilities

and equipment turnover (times) 2.01 2.14 2.09 1.94 -

Total asset turnover (times) 1.04 1.08 0.98 0.87 -

Pr

ofi

ta

bil

ity

Return on total assets (%) 5 8 7 7 -

Return on equity (%) 12 21 20 21 -

Pretax income to paid-in capital (%) 24 45 54 59 -

Net profit rate (%) 4 7 7 8 -

Earnings per share (NT$) (Note 2) 1.73 3.44 3.82 4.49 -

Ca

sh

Fl

o

w

Cash flow ratio (%) 36 32 28 39 -

Cash flow adequacy ratio (%) 155 127 91 106 -

Cash flow reinvestment ratio (%) 8 10 6 11 -

Le

ve

ra

ge

Operating leverage 5 4 4 3 -

Financial leverage 1 1 1 1 -

Descriptions of changes in the financial ratios: (If the increase or decrease does not reach 20%, the analysis can be

waived.)

1. The revenue grew and profits increased. The net cash inflow from business activities increased around NTD 1

billion in 2015 from 2014 (+89%). The oil and fat prices were climbing in 2014 on the international market but

they were falling in 2015. Therefore, the inventory dropped from 2014 to 2015 by around NTD 250 million and

other payable amounts increased in 2015 from 2014 by around NTD 230 million. These affected the cash flow

177

ratio, cash flow adequacy ratio, and cash flow reinvestment ratio.

2. The revenue grew and business profits increased in 2015 from 2014 by around NTD 380 million (+24%) to

accordingly affect the operational leverage.

Note 1: Financial data from the past 4 years have all been inspected and authenticated by CPAs.

Note 2: The earnings per share are calculated with the number of shares of common stock already issued applying

the weighted average method. The number of shares increased as a result of earnings or capitalizing with

capital reserve, on the other hand, is adjusted and calculated retroactively.

178

2. Financial Analysis - Entity Financial Statement by the International Financial Accounting

Standards

Year

Analyze

Analysis of the past five years (Note 1)

2012 2013 2014 2015 Year

Fi

na

nc

ial

str

uc

tur

e

%

Liabilities to assets ratio 51 49 50 50 -

Permanent capital to real estate,

manufacturing facilities and equipment

ratio

270 261 350 375 -

Li

qu

idi

ty

Current Ratio (%) 126 55 133 80 -

Quick Ratio (%) 79 32 87 48 -

Interest protection multiples 10 16 18 21 -

O

pe

rat

in

g

pe

rf

or

m

an

ce

Average collection turnover(times) 4.63 4.75 4.84 4.98 -

Average collection days 79 77 75 73 -

Inventory turnover (times) 4.54 4.27 4.11 4.23 -

Average payables turnover (times) 14.18 13.73 12.12 12.25 -

Average inventory turnover days 80 85 89 86 -

Real estate, manufacturing facilities

and equipment turnover (times) 0.91 0.90 0.97 1.07 -

Total asset turnover (times) 0.31 0.29 0.27 0.26 -

Pr

ofi

ta

bil

ity

Return on total assets (%) 6 11 11 11 -

Return on equity (%) 12 21 20 21 -

Pretax income to paid-in capital (%) 15 29 36 45 -

Net profit rate (%) 18 36 37 40 -

Earnings per share (NT$) (Note 2) 1.73 3.44 3.82 4.49 -

Ca

sh

Fl

o

w

Cash flow ratio (%) 8 3 -34 24 -

Cash flow adequacy ratio (%) 13 12 -14 4 -

Cash flow reinvestment ratio (%) (Note

3) - - - - -

Le

ve

ra

ge

Operating leverage (Note 3) - 40 - - -

Financial leverage (Note 4) - - - - -

Descriptions of changes in the financial ratios: (If the increase or decrease does not reach 20%, the analysis can be

waived.)

179

1. The Company's pre-tax net profits increased from NTD 1,069,702 thousand in 2014 to NTD 1,332,744 thousand

in 2015 (+25%). This affected the pretax income to paid-in capital ratio, cash flow ratio, cash flow adequacy

ratio, and cash reinvestment ratio.

2. The Company lent around NTD 250 million to Namchow Japan in 2014 to accordingly affect the current ratio,

quick ratio, and cash flow ratio in 2014.

3. The new inflow of cash for business activities increased around NTD 690 million in 2015 from 2014 and the

pre-tax net profits surged significantly from 2012 to 2015. Cash dividends issued also climbed on a yearly basis.

These affected the cash flow ratio, cash flow adequacy ratio, and cash reinvestment ratio.

4. The original receivables (for Namchow Japan) totaled NTD 250 million. Debt equity swap was used as the

investment capital stock and short-term loans and notes as part of current liabilities increased in 2015 from 2014

by around NTD 350 million. These affected the current ratio and the quick ratio.

Note 1: Financial data of the past few years have all been inspected and authenticated by CPAs.

Note 2: The earnings per share are calculated with the number of shares of common stock already issued applying the

weighted average method. The number of shares increased as a result of earnings or capitalizing with capital

reserve, on the other hand, is adjusted and calculated retroactively.

Note 3: Because the ratio is a negative value, it is of no significance in comparison and is not listed.

Note 4: Between 2012 and 2015, business profits were all smaller than the costs of interest. As such, the financial

leverage data are not provided.

180

Calculation formula:

1. Financial structure

(1) Liabilities to assets ratio = total liabilities/total assets

(2) Permanent capital to real estate, manufacturing facilities and equipment ratio = (shareholders'

equity net value + non-current liabilities)/real estate, manufacturing facility and equipment

net value.

2. Liquidity

(1) Current ratio = current assets/current liabilities

(2) Quick ratio = (current assets - inventory - pre-paid costs)/current liabilities

(3) Interest protection multiples = Pre-income tax and interest profits/interest expenditure of the

term

3. Operating performance

(1) Receivables (including accounts receivable and bills receivable that are incurred as a result of

business operation) = net sales/balance from average receivables of each term (including

accounts receivable and bills receivable)

(2) Average collection days = 365/receivables turnover

(3) Inventory turnover = sales cost/average inventory value

(4) Payables (including accounts payable and bills payable that are incurred as a result of

business operation) = sales cost/balance from average payables of each term (including

accounts payable and bills payable)

(5) Average inventory turnover days = 365/inventory turnover

(6) Real estate, manufacturing facility and equipment turnover = net sales/net average real estate,

manufacturing facility, and equipment value

(7) Total asset turnover = net sales/gross assets on average

4. Profitability

(1) Return on assets = [after-tax gains and losses + interest × (1-tax rate)]/gross assets on average

(2) Return on shareholders' equity = after-tax gains and losses/net shareholders’ equity on

average

(3) Net profit rate = after-tax gains and losses/net sales

(4) Earnings per share = (after-tax profits - special stock dividends)/ weighted average of issued

shares

5. Cash Flow

(1) Cash flow ratio = Net cash flow from business activities/current liabilities

181

(2) Net cash flow adequacy ratio = net cash flow from business activities of the past five

years/past 5 years (capital expenditure + increased inventory + cash dividends)

(3) Cash flow reinvestment ratio = (net cash flow from business activities - cash dividends)/(net

value of real estate, manufacturing facility, and equipment + long-term investment + other

assets + working capital)

6. Leverage:

(1) Operating leverage = (net business income - variable business costs and expenses)/ business

profits

(2) Financial leverage = business profits/(business profits - cost of interest)

182

3. Financial Analysis - Consolidated Financial Statement by the National Financial

Accounting Standards

Year

Analyze

Analysis of the past five years (Note 1)

2011 2012 2013 2014 2015

Financial

structure %

Liabilities to assets ratio 66 64 - - -

Permanent capital to real

estate, manufacturing

facilities and equipment

ratio

105 129 - - -

Liquidity

Current Ratio (%) 100 145 - - -

Quick Ratio (%) 67 99 - - -

Interest protection

multiples 7 8 - - -

Operating

performance

Average collection

turnover(times) 6.44 6.70 - - -

Average collection days 57 54 - - -

Inventory turnover (times) 6.04 5.83 - - -

Average payables turnover

(times) 14.68 15.66 - - -

Average inventory

turnover days 60 63 - - -

Fixed asset turnover

(times) 1.91 1.89 - - -

Total asset turnover

(times) 1.04 1.04 - - -

Profitability

Return on total assets (%) 4 5 - - -

Return on shareholders’

equity (%) 10 12 - - -

Ratio in

paid-in

capital

(%)

Business

profits 20 28 - - -

Pre-tax

profits 21 25 - - -

Net profit rate (%) 4 4 - - -

Earnings per share (NT$)

(Note 2) 1.4 1.8 - - -

Cash Flow

Cash flow ratio (%) 10 40 - - -

Cash flow adequacy ratio

(%) 40 62 - - -

Cash flow reinvestment 1 9 - - -

183

ratio (%)

Leverage Operating leverage 7 6 - - -

Financial leverage 1 1 - - -

Descriptions of changes in the financial ratios: (If the increase or decrease does not reach 20%, the

analysis can be waived.) Starting from 2013, the International Accounting Standards are adopted and

hence comparison of the last two years is not applicable.

Note 1: Financial data from 2011 and 2012 have all been inspected and authenticated by CPAs.

Note 2: The earnings per share are calculated with the number of shares of common stock already

issued applying the weighted average method. The number of shares increased as a result

of earnings or capitalizing with capital reserve, on the other hand, is adjusted and

calculated retroactively.

184

4. Financial Analysis - Entity Financial Statement by the National Financial Accounting

Standards

Year

Analyze

Analysis of the past five years (Note 1)

2011 2012 2013 2014 2015

Financial

structure %

Liabilities to assets ratio 47 49 - - -

Permanent capital to fixed

assets ratio 238 282 - - -

Liquidity

Current Ratio (%) 56 139 - - -

Quick Ratio (%) 33 86 - - -

Interest protection

multiples 10 10 - - -

Operating

performance

Receivables

turnover(times) 4.95 4.72 - - -

Average collection days 74 77 - - -

Inventory turnover (times) 4.60 4.54 - - -

Payables turnover(times) 5 5 - - -

Average inventory

turnover days 79 80 - - -

Fixed asset turnover

(times) 1.03 1.00 - - -

Total asset turnover

(times) 0.32 0.31 - - -

Profitability

Return on total assets (%) 6 6 - - -

Return on shareholders’

equity (%) 9 11 - - -

Ratio in

paid-in

capital (%)

Business

profits (1) (2) - - -

Pre-tax

profits 13 16 - - -

Net profit rate (%) 15 19 - - -

Earnings per share (NT$)

(Note 2) 1.40 1.80 - - -

Cash Flow

Cash flow ratio (%) 14 22 - - -

Cash flow adequacy ratio

(%) 68 43 - - -

Cash flow reinvestment

ratio (%) Note 4 Note 4 - - -

Leverage Operating leverage (21) (19) - - -

Financial leverage (Note - - - - -

185

3)

Descriptions of changes in the financial ratios: (If the increase or decrease does not reach 20%, the

analysis can be waived.) Starting from 2013, the International Accounting Standards are adopted and

hence comparison of the last two years is not applicable.

Note 1: Financial data from 2011 and 2012 have all been inspected and authenticated by CPAs.

Note 2: The earnings per share are calculated with the number of shares of common stock already

issued applying the weighted average method. The number of shares increased as a result

of earnings or capitalizing with capital reserve, on the other hand, is adjusted and

calculated retroactively.

Note 3: Between 2011 and 2012, business profits were all smaller than the costs of interest. As

such, the financial leverage data are not provided.

Note 4: Because the ratio is a negative value, it is of no significance in comparison and is not

listed.

186

Calculation formula:

1. Financial structure

(1) Liabilities to assets ratio = total liabilities/total assets

(2) Permanent capital to fixed assets ratio = (Net shareholders’ equity +permanent

liabilities)/net fixed assets

2. Liquidity

(1) Current ratio = current assets/current liabilities

(2) Quick ratio = (current assets - inventory - pre-paid costs)/current liabilities

(3) Interest protection multiples = Pre-income tax and interest profits/interest expenditure of the

term

3. Operating performance

(1) Receivables (including accounts receivable and bills receivable that are incurred as a result of

business operation) = net sales/balance from average receivables of each term (including

accounts receivable and bills receivable)

(2) Average collection days = 365/receivables turnover

(3) Inventory turnover = sales cost/average inventory value

(4) Payables (including accounts payable and bills payable that are incurred as a result of

business operation) = sales cost/balance from average payables of each term (including

accounts payable and bills payable)

(5) Average inventory turnover days = 365/inventory turnover

(6) Fixed asset turnover = net sales/net fixed assets on average

(7) Total asset turnover = net sales/gross assets on average

4. Profitability

(1) Return on assets = [after-tax gains and losses + interest × (1-tax rate)]/gross assets on average

(2) Return on shareholders' equity = after-tax gains and losses/net shareholders’ equity on

average

(3) Net profit rate = after-tax gains and losses/net sales

(4) Earnings per share = (after-tax profits - special stock dividends)/ weighted average of issued

shares

5. Cash Flow

(1) Cash flow ratio = Net cash flow from business activities/current liabilities

(2) Net cash flow adequacy ratio = net cash flow from business activities of the past five

years/past 5 years (capital expenditure + increased inventory + cash dividends)

187

(3) Cash flow reinvestment ratio = (net cash flow from business activities - cash

dividends)/(gross fixed assets + long-term investments + other assets + working capital)

6. Leverage:

(1) Operating leverage = (net business income - variable business costs and expenses)/ business

profits

(2) Financial leverage = business profits/(business profits - cost of interest)

188

(III) Supervisor Report on Reviewing the Latest Annual Financial Report

Namchow Chemical Industrial CO., LTD.

Supervisor's Review Report

The Board of Directors prepared and submitted the Company's 2015 Business Report, Entity and

Consolidated Financial Statements and earnings distribution proposal. The Entity and Consolidated

Financial Statements, in particular, were already inspected by CPA An-Tian Yu and CPA Xiu-Yu

Lin of KPMG and the Inspection Report is presented. The said Business Report, Entity and

Consolidated Financial Statements and earnings distribution proposal have been reviewed by me

and believed to be adequate. This report is hence presented in accordance with Article 219 of the

Company Act for your review.

To

The company’s 2016 Shareholders’ Meeting

Supervisors:

Chang Oh Kuan

Namchow Chemical Industrial CO., LTD.

Employee Welfare Committee

Representative Chen Yi Wen

March 22, 2016

189

(IV) Latest Financial Report

Please refer to page 215-290 of this annual report.

(V) Latest Corporate Entity Financial Reports Audited and Certified by CPA

Please refer to page 291-348 of this annual report.

(VI) Impacts of Latest Financial Difficulties Encountered by Company and Its Associated

Enterprises on Company's Financial Standing as of Date of Printing of Annual Report:

None

190

VII. Discussion and Analysis of Financial Standing and

Financial Performance and Risks

(I) Financial Standing

Financial Standing Comparison and Analysis Table

Unit: NT$1,000

Year

No. 2015 2014

Difference

Value %

Current assets 9,391,406 8,498,553 892,853 11

Long-term

investments 40,715 41,453 (738) (2)

Real estate,

manufacturing

facilities and

equipment 8,152,440 7,774,260 378,180 5

Other Assets 814,774 600,048 214,726 36

Gross assets 18,399,335 16,914,314 1,485,021 9

Current liabilities 6,871,475 6,178,713 692,762 11

Long-term liabilities 4,488,105 4,297,111 190,994 4

Others 1,395,678 1,185,912 209,766 18

Gross liabilities 12,755,258 11,661,736 1,093,522 9

Capital stock 2,941,330 2,941,330 0 0

Capital reserve 520,786 424,437 96,349 23

Retained earnings 2,508,036 2,040,571 467,465 23

Other (326,075) (153,760) (172,315) 112

Total shareholders’

equity 5,644,077 5,252,578 391,499 7

Description: Main causes of major changes to assets, liabilities, and equities of the past two

years (changes by 20% or more and NTD 10 million or more) and their impacts and

countermeasures

Other assets: The increase came from investment-oriented real estate (NTD 64,021 thousand

in Namchow Tianjin) and down payment of NTD 178,212 thousand for the

equipment at the Jinshan Plant.

Impacts and response plans in the future: None

Capital reserve: because of Namchow issuing cash dividends to its subsidiary Lucky Royal Co.,

Ltd. (treasury stock)

Impacts and response plans in the future: None

191

Retained earnings: because of the increased earnings of the Group

Impacts and response plans in the future: None

Other: It is mainly because of the appreciation of RMB in 2014 that resulted in the

increase of NTD 141,978 thousand converted from the difference in shares by the

subsidiary applying the equity method and the depreciation of RMB in 2015 that

resulted in the decrease of NTD 85,617 converted from the difference in shares by

the subsidiary applying the equity method. Impacts and response plans in the

future: None

192

(II) Financial Performance

Financial Performance Comparison and Analysis Table

Unit: NT$1,000

Year

No. 2015 2014

Increased/reduced

value

Variable ratio

(%)

Net revenue 15,479,543 14,831,846 647,697 4

Operating cost 9,871,293 9,913,530 (42,237) 0

Gross operating profit 5,608,250 4,918,316 689,934 14

Business expenditure 3,652,831 3,340,375 312,456 9

Business profits 1,955,419 1,577,941 377,478 24

Non-business income and

expenditure (214,378) 662 (215,040)

(32,483)

Pre-tax profits of

continuing department 1,741,041 1,578,603 162,438

10

Personal Income Tax 577,080 569,866 7,214 1

After-tax profits of

continuing department 1,163,961 1,008,737 155,224

15

1. Descriptions of the increase or decrease in the ratio: (changes by 20% or more and NTD 10

million or more)

1. Business profits: mainly contributed to by the growing revenue and increased profits for

the Group

2. Non-business income and expenditure: Mainly caused by the depreciation of RMB that

resulted in the exchange losses worth NTD 226,569 thousand for the loans gotten out by

the subsidiary in mainland China in US dollar.

2. There were no changes to the contents of main business scope of the Company.

3. It is expected that the revenue will keep growing in the following year for the Company.

193

(III) Cash Flow

Cash flow analysis Unit: NT$1,000

Balance of

cash at start of

term

Net cash flow

from business

activities

throughout the

year

Cash outflow

throughout the

year

Balance of

cash

(shortage)

Remedies for shortage in

cash

Investment

plan

Wealth

management

plan

4,461,887 2,710,224 1,841,173 5,330,938 - -

(1) Liquidity analysis of the past two years

Year

No.

2015 2014

Ratio of

increase/decrease

(%)

Cash flow ratio 39 28 39

Cash flow adequacy ratio 106 91 16

Cash flow reinvestment ratio 11 6 83

Description:

The revenue grew and profits increased. The net cash inflow from business activities

increased around NTD 1 billion in 2015 from 2014 (+89%). The oil and fat prices were

climbing in 2014 on the international market but they were falling in 2015. Therefore,

the inventory dropped from 2014 to 2015 by around NTD 250 million and other

payable amounts increased in 2015 from 2014 by around NTD 230 million. These

affected the cash flow ratio, cash flow adequacy ratio, and cash flow reinvestment

ratio.

(2) Cash utilization and liquidity analysis for the coming year: Unit: NT$1,000

Balance of

cash at start of

term

Net cash flow

from business

activities

throughout the

year

Cash outflow

throughout the

year

Balance of

cash

(shortage)

Remedies for shortage in

cash

Investment

plan

Wealth

managemen

t plan

5,330,938 2,900,600 (3,423,238) 4,808,300 - -

1 Business activities: Business income for the year will increase to keep the net cash flow

associated with business activities relatively positive and increasing.

194

2 Investment activities: It is the estimated capital expenditure because of new business or

investments in new products in the coming year.

3 Financing: This refers mainly to the issuance of cash dividends and loans with

banks.

Expected remedies and liquidity analysis upon shortage in cash: It is expected that the working

cash flow of the Company will meet the cash requirements in the coming year to be sufficient

to support normal operations. As such, there are no measures required to make up for the

shortage in cash such as investment plans or wealth management plans.

195

(IV) Impacts of Latest Major Capital Expenditure on Financial Business

(1) Major capital expenditure and funding source Unit: NT$1,000

Project

Actual or

expected

funding

source

Actual or

expected date

of completion

Required

funds

Total

2013 2014 2015 2016 2017

Zhongli Plant FD

Production Line -

Machinery and

equipment

Bank loans

and

self-capital

December

2016 56,000 56,000

Tainan Plant

Warehouse and

Comprehensive

Administrative

Office

Bank loans

and

self-capital

June 2016 56,000 36,255 19,745

Lucky Royal Co.,

Ltd.- Taoyuan

Facility for

Producing Ice

Products

Bank loans

and

self-capital

September

2015 223,000 217,132 5,868

NCTJ Newly Built

Warehouse Self-capital June 2015 296,431 208,698 61,465 26,268

NCGZ Newly Built

Facilities and

Warehouse

Self-capital August 2016 550,422 124,758 202,927 222,737

Namchow Japan -

Land and Removal

Bank loans

and

self-capital

December

2015 674,238 633,390 40,848

Namchow Japan -

Construction of

New Building

Bank loans

and

self-capital

December

2016 403,942 104,920 299,022

(2) Expected impacts of possible benefits on financial operations

In response to the operating demand, investing in building new facilities and purchasing

production equipment will help upgrade the operational scale and profits for the Group and

bring about positive benefits for financial business.

196

(V) Main Reasons for Profits or Losses of Latest Reinvestment Policy, Improvement Plan, and Investment Plan for the Coming Year

Reinvestment Analysis Table Unit: NT$1,000

Description

No. Value invested

Holding ratio

at end of term

(%)

Gains and

losses of the

term

Main scope of operation

Main reason

for profits or

losses

Improvement

plan

Other investment

plans in the future

Namchow (Thailand)

Ltd. 1,027,405 100 245,413

Profits from investment, operation, production, and

sales

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

Mostro (Thailand) Ltd. 10,201 100 4,951 Trading of foods and others

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

Nacia International

Corporation 343,443 100 1,102,199 Reinvestment holding

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

Chow Ho Enterprise

Co., Ltd. 80,000 100 (3,884) Dining business

Fluctuating

food

ingredients

and rising

costs

Increased

revenue and

expanded

sales

No substantial

investment plans

yet

Lucky Royal Co., Ltd. 938,438 100 50,683 Production and sale of ice cream and investment in

dining business

The

production and

distribution

policy is

bringing about

profits.

None Ice products

production line

197

Description

No. Value invested

Holding ratio

at end of term

(%)

Gains and

losses of the

term

Main scope of operation

Main reason

for profits or

losses

Improvement

plan

Other investment

plans in the future

Qizhi Business

Administration

Cultural Co., Ltd.

763 90 25 Publishing and issuance of books

Reduced

publications

and release

volume inside

the Company

None

No substantial

investment plans

yet

Namchow (BVI) Ltd. 69,133 58 120,860 Reinvestment holding

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

Dian Shui Lou

Restaurant Business

Co., Ltd.

104,000 100 5,222 Wholesale of liquors and cigars, retail of liquors and

cigars, and dining business

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

Namchow Food and

Dining Consultation

Co., Ltd.

5,000 100 (875) Restaurants and food consulting Cost increase

Increased

revenue and

expanded

sales

No substantial

investment plans

yet

Ting Hao (Cayman

Islands) Holdings

Corporation

378,438 100 1,063,076 Reinvestment holding

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

Nacia International

Corporation 476,680 100 283,312 Reinvestment holding

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

198

Description

No. Value invested

Holding ratio

at end of term

(%)

Gains and

losses of the

term

Main scope of operation

Main reason

for profits or

losses

Improvement

plan

Other investment

plans in the future

Tianjin Namchow

Food Co., Ltd. 756,875 100 316,782

Production and sale of household oils, artificial

butter, and deep fry oil

The

production and

distribution

policy is

bringing about

profits.

None

Butter Cream and

warehouse

engineering

Shanghai Qiaohao Co.,

Ltd 6,055 100 13,522 Importation and exportation

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

Shanghai Qiaohao

Business

Administration Co.,

Ltd

961 100 - Commerce, business administration, and investment

consulting

Yet to begin

operations None

No substantial

investment plans

yet

Shanghai Qiaohao

Food Co., Ltd 4,807 100 -

Packaged foods, sales of restaurant equipment,

goods, and technical imports and exports

Yet to begin

operations None

No substantial

investment plans

yet

Tianjin Yoshiyoshi

Food Co., Ltd. 121,100 100 133,724

Development, manufacturing, and sale of dairy

products and related services

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

BaolaiNa Co., Ltd. 112,018 58 62,139 Chinese and western foods and beverages and

self-made beer music restaurant

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

199

Description

No. Value invested

Holding ratio

at end of term

(%)

Gains and

losses of the

term

Main scope of operation

Main reason

for profits or

losses

Improvement

plan

Other investment

plans in the future

Guangzhou Namchow

Co., Ltd. 544,950 100 458,415 Manufacturing and sale of edible oils and fats

The

production and

distribution

policy is

bringing about

profits.

None

Processing third

line and newly

built facilities

Shanghai Qizhi Co.,

Ltd. 4,541 100 -

Commerce, business administration, and investment

consulting

Yet to begin

operations None

No substantial

investment plans

yet

Shanghai QiaoXing

Co.,Ltd. 60,550 100 265,922

Wholesale of edible oils and fats and foods and

importation/exportation

The

production and

distribution

policy is

bringing about

profits.

None

No substantial

investment plans

yet

Tianjin Namchow

Food Co.,Ltd. 676,597 100 -

Sale, development, production, and processing of

edible oil and fat products, fast-frozen foods, and

frozen foods

Yet to begin

operations

Manufacturing

and sale of

products once

construction

of the plant is

completed

No substantial

investment plans

yet

Namchow Japan 308,530 100 (15,913) Restaurant, beverages, and alcohol business Yet to begin

operations None

Construction of

new building

Namchow Consultation 5,000 100 (41) Restaurant and food and management consulting Cost increase

Increased

revenue and

expanded

sales

No substantial

investment plans

yet

200

(VI) Analysis and Assessment of Risks

1. Impacts of changes in the interest rate and exchange rate and inflation of the latest year on the

Company's gains and losses and response measures in the future:

The Company periodically evaluates the borrowing rates banks offer and is keeping close

correspondence with banks in order to get preferred borrowing rates. For exchange rates, there

are specific foreign exchange manipulation strategies and strict control process flows in place to

facilitate close monitoring over changes in foreign exchange. Although there are impacts on the

inflation, they are not obvious.

2. Main causes of the policies to engage in high-risk, high-leverage, lending, endorsement and

guarantee, and derivatives trading of the latest year and countermeasures in the future:

The Company does provide endorsements and guarantees to its subsidiaries but has never

engaged in high-risk and high-leverage investments.

3. Research and development plan of the latest year and in the future and expected cost of

research and development to be invested in:

Respective businesses within the Group are equipped with their own research and development

units that modify, develop, and seek innovations for products at any time. The cost already

invested in research and development in 2015 totaled NTD 139,141 thousand. Research and

development units in respective businesses are meant to ensure that existing products of the

Company keep their leading positions on the market. According to the product study in 2015,

the zero transfat series of oil and fat products will continue to be developed; the latest food

technology and technique will be applied to increase the quantities of exquisite frozen food

products of high additional value to be produced so as to satisfy the pluralistic needs of

consumers; and the development of natural cleaners for use exclusively at home and for

personal hygiene will continue to honor the principles of nature and environmental protection.

In terms of rice, there are currently two healthy rice products certified as health foods with

proven claims of blood sugar regulating and blood lipid regulating effects. Efforts will continue

in the future to proactively develop a series of rice products that can help preserve health. The

cost of research and development is estimated to have totaled NTD 169,000 thousand for 2016.

4. Impacts of important domestic and international policies and regulatory changes of the latest

year on the Company's financial performance: None

5. Impacts of changes in technology of the latest year on the Company's financial performance

and countermeasures: None.

6. Impacts of changes in the corporate image of the latest year on the management of corporate

risks and countermeasures: None.

7. Expected benefits and possible risks of acquisitions: None.

8. Expected benefits and possible risks of the expansion of manufacturing facilities:

Investments made by the Company in the past two years were in the expansion of production

lines and increase of the throughput in order to address the insufficient market demand. In the

future, the focus will be placed on improving the overall revenue and profits of the Group to

bring about positive benefits for the financial performance.

9. Risks encountered with focused purchases or sales:

(1) In 2015, the only supplier from whom companies within the Group imported more

than 10% of goods was an oil and fat trading company. The global oil and fat raw

material market, however, is huge; in the others, the Company can change its

201

procurement target at any time and hence there is no risk of disconnected supply.

(2) Among the sales targets of the Company, there are no clients accounting for 10% of all

sales and there is no risk of focused sales.

10. Impacts of transfer or exchange of stock options in large quantities by directors, supervisors, or

heavyweight shareholders holding more than 10% of all shares on the Company and the risks

and countermeasures: None.

11. Impacts of the change in the management on the Company and the risks and countermeasures:

None.

12. Lawsuits and non-lawsuit events: Major lawsuits and non-lawsuits or administrative disputes

with a finalized verdict or ongoing proceedings that involve the Company, the Company's

directors, supervisors, general managers, actual person in charge, and shareholders holding

more than 10% of all shares, and the associated companies shall be listed. If the results are

likely to have significant impacts on shareholders' equity or prices of securities, the facts, target

value, and start date of the lawsuit, main clients involved, and handling status as of the date of

printing of the Annual Report shall be disclosed.

The Company was fined by the Department of Health of the Taipei City Government NTD 30

million on October 20, 2014 for its people failing to apply for tests before importing edible oils

between 2013 and August 2014. Since the applicable laws were wrong, the Company appealed

and the original punishment was voided on January 23, 2015. The Taipei City Government

already corrected the fine to be NTD 7.05 million on January 30, 2015. For the acts between

August 7, 2014 and August 24, 2014, a fine of NTD 3 million was finalized. The fine of NTD

4.05 million between March 2013 and May 2014 has been appealed at the Supreme

Administrative Court at present.

13. Other important risks and countermeasures: None

(VII) Other important matters: None

202

VIII. Special Notes

(I) Related materials of associated enterprises

1. Consolidated Financial Statement of Associated Enterprises

Companies that should be included in the compiled Consolidated Financial Statement

of associated enterprises for 2015 in accordance with the Criteria Governing

Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated

Financial Statements of Affiliated Enterprises are identical to those that should be

compiled in the Consolidated Statement of Parent Company and Subsidiaries as per the

7th Communique of Financial Accounting Standards. Therefore, the Consolidated

Financial Statement of associated enterprises is not prepared separately.

2. Consolidated Business Report of Associated Enterprises

(1) Overview of Associated Enterprises

1) Organizational Chart of Associated Enterprises

203

Nacia International Corporation

Namchow Chemical

Industrial Co., Ltd.

Chowho Co., Ltd.

Namchow Consultation Co., Ltd.

Nankyo Japan Co., Ltd.

Lucky Royal Co., Ltd.

Qizhi Cultural Co., Ltd.

Shanghai Qiaohao Trading Co.,Ltd.

Shanghai Qiaohao Trading Co.,Ltd.

Shanghai Qiaohao Business Administration Co.,Ltd

Nacia International Corporation

Ting Hao (Cayman Islands) Holdings

Corporation

Tianjin Namchow Food Co.,Ltd.

Tianjin Yoshiyoshi Food Co., Ltd.

Guangzhou Namchow Food Co.,Ltd.

Shanghai Qizhi Consulting Co., Ltd.

Shanghai QiaoXing Co.,Ltd.

Shanghai Namchow Food Co.,Ltd.

Namchow Food and Dining Consultation

Co., Ltd.

Namchow (BVI) Ltd.

Shanghai BaolaiNa Co., Ltd.

Dian Shui Lou Restaurant Business Co.,

Ltd.

204

2) Profile of various associated enterprises of Namchow

Unit: NT$1,000

Date of

Establishment

Address Paid-in capital

size

Main scope of operation or production

Lucky Royal Co., Ltd. 75.08.26 7F, No. 64, Huaning Street, Taipei City 956,684 Manufacturing and sale of ice products

Namchow (Thailand) Ltd. 78.03.01 75/28-29, 19th Floor, Ocean Tower 2 Bldg, Soi Sukhumvit 19(Soi Wattana)

Sukhumvit Rd., North Klongtoey, Wattana Bangkok10110

1,027,405 Processing and sale of instant noodles and rice

crackers

Yongju (Thailand) Ltd. 77.09.21 75/28-29, 19th Floor, Ocean Tower 2 Bldg, Soi Sukhumvit 19(Soi Wattana)

Sukhumvit Rd., North Klongtoey, Wattana Bangkok10111

10,201 Land rental

Chow Ho Enterprise Co., Ltd. 88.11.20 2F, No. 64, Huaning Street, Taipei City 80,000 Management of chained noodles stores

Qizhi Business Administration

Cultural Co., Ltd.

76.11.05 2F, No. 64, Huaning Street, Taipei City 1,000 Publishing

Nacia International Corporation 85.05.24 Trinity Chambers, P.O.Box 4301. Road Town

Road Town, Tortola, B.V.I.

378,438 Investment holding

Shanghai Qiaohao Trading

Co.,Ltd.

90.03.26 Room 337 of Xinxing Building at No. 2005, Yanggao North Road, Waigao

Bridge, Shanghai

6,055 Trade

Nacia International Corporation 91.09.05 4th Floor,HarbourCentre,P.O.Box613,George Town,

Grand Cayman, Cayman Islands, British West Indies

386,612 Investment holding

Ting Hao (Cayman Islands)

Holdings Corporation

85.06.07 3rd Floor, Genesis Building, P.O.Box 613, George Town,

Grand Cayman, Cayman Islands, British West Indies

560,087 Investment holding

Tianjin Namchow Food Co.,Ltd. 81.09.16 No. 52, Bohai Road, Economic and Technological Development Zone, Tianjin 756,875 Production and sale of oil and fat products

Tianjin Yoshiyoshi Food Co.,

Ltd.

92.01.27 No. 52, Bohai Road, Economic and Technological Development Zone, Tianjin 121,100 Production and sale of fresh cream

Namchow (BVI) Ltd. 81.10.16 Akara Bldg,24 De Castro Street,Wickhams Cay 1,

Road Town,Tortola,British Virgin

156,219 Investment holding

Shanghai BaolaiNa Co., Ltd. 85.03.29 Room 310, No. 58, Huaihaizhong Road, Shanghai 112,018 Restaurant management

Dian Shui Lou Restaurant

Business Co., Ltd.

93.12.31 4F, No. 338, Chongqing North Road Sec. 3, Taipei 104,000 Restaurant management

Guangzhou Namchow Food

Co.,Ltd.

94.09.16 No. 333, Lianguang Road, East Section of Guangzhou Economic and

Technological Development Zone

544,950 Production and sale of oil and fat products

Shanghai Qizhi Business

Consulting Co., Ltd.

96.12.17 Unit A, 6F, 4th Building, No. 889, Yishan Road, Caohe Emerging Technology

Research and Development Zone, Shanghai

4,541 Business administration and investment

consulting

Shanghai QiaoXing Co.,Ltd. 99.08.02 Unit 1803, No. 889, Yishan Road, Xuhui District, Shanghai 60,550 Sales company that undertakes products within

the Group for sale.

Shanghai Qiaohao Business

Administration Co.,Ltd

99.06.28 Unit F, 6F, 4th Building, No. 889, Yishan Road, Shanghai 961 Exhibition and business information consulting

205

Shanghai Qiaohao Food Co.,Ltd 99.09.02 Unit 02, Building 1, Qilai Guest House on Yishan Road, Shanghai 4,807 Sale and distribution of packaged foods

Namchow Food and Dining

Consultation Co., Ltd.

100.11.11 7F, No. 276, Chongqing North Road Sec. 3, Taipei 5,000 Restaurant business and management

consulting

Shanghai Namchow Food

Co.,Ltd.

101.08.21 Section 12, Building 1, No. 888, Yuegong Road, Jinshan Industrial Park,

Shanghai

676,597 Production and processing of edible oils and

fats, frozen foods, among others

Namchow Japan 05.02.2014 東京都新宿区四谷四丁目 30 エスツウィン新宿 3 階 308,530 Restaurant, beverages, and alcohol business

Namchow Consultation 08.14.2014 7F, No. 276, Chongqing North Road Sec. 3, Taipei 5,000 Restaurant and food and management

consulting

3) The Company does not have the conditions determined to be a controlling or subordinate relationship under Article 369-3 of the

Company Act.

206

4) Industries covered in the scope of operation of associated enterprises as a whole and interaction and division of labor:

Name of associated

enterprise

Industry covered in the scope of

operation

Business

correspondence Interaction and division of labor

Namchow Chemical

Industrial CO., LTD.

Production and sale of oil and fat

products Yes

Some oil and fat products are sold to Lucky Royal Co., Ltd. to be the latter’s' production raw

materials.

Production and sale of frozen dough Yes Some of the bread products are sold to restaurants as their purchases.

Production and sale of cleaners Yes Some of the bread products are sold to restaurants as their purchases.

Production and sale of frozen

noodles Yes

Some of frozen noodles are sold to Chow Ho Enterprise Co., Ltd. to be the purchases by

chained bakeries while Lucky Royal Co., Ltd. is authorized as the general distributor for the

remainder.

Lucky Royal Co., Ltd. Production and sale of ice cream Yes Oil and fat raw materials are purchased from Namchow.

Sale and distribution of frozen

noodles Yes The frozen noodles produced by Namchow are undertaken to be sold.

Restaurant management Yes Some of the restaurants' food ingredients are purchased from Chowho and Namchow.

Namchow (Thailand) Ltd. Instant noodles and rice crackers,

among others None

Manufacturing, sale, and processing None

Yongju (Thailand) Ltd. Land rental Yes Land is leased to Namchow (Thailand) Ltd.

Chow Ho Enterprise Co.,

Ltd.

Management of chained noodles

stores Yes

Frozen noodles are purchased from Namchow while some of the ingredients are sold to Dian

Shui Lou and Lucky Royal

Qizhi Business

Administration Cultural

Co., Ltd.

Magazine publishing and release Yes Publications on associated enterprises

Nacia International

Corporation Investment holding None

Shanghai Qiaohao Co., Ltd Trade None

Nacia International

Corporation Investment holding None

Ting Hao (Cayman

Islands) Holdings

Corporation

Investment holding None

Tianjin Namchow Food

Co.,Ltd.

Production and sale of oil and fat

products Yes The products are sold by Shanghai QiaoXing Co.,Ltd.

Tianjin Yoshiyoshi Food

Co., Ltd. Production and sale of fresh cream Yes Fresh cream products are sold by Tianjin Namchow Co.,Ltd.

207

Namchow (BVI) Ltd. Investment holding None

Shanghai BaolaiNa Co.,

Ltd. Restaurant management None

Dian Shui Lou Restaurant

Business Co., Ltd. Restaurant management Yes Some of the food ingredients are purchased from Chowho.

Guangzhou Namchow

Food Co.,Ltd.

Production and sale of oil and fat

products Yes The products are sold by Shanghai QiaoXing Co.,Ltd.

Shanghai Qizhi Business

Consulting Co., Ltd.

Business administration and

investment consulting None

Shanghai QiaoXing

Co.,Ltd. Sales company Yes

Sale of oil and fat products from Tianjin Namchow, Guangzhou Namchow, and Tianjin

Yoshiyoshi Food Co., Ltd.

Shanghai Qiaohao

Business Administration

Co.,Ltd

Exhibition and business information

consulting Yes Design and planning for companies within the Group to attend exhibitions

Shanghai Qiaohao Food

Co.,Ltd

Sale and distribution of packaged

foods None

Namchow Food and

Dining Consultation Co.,

Ltd.

Restaurant business and

management consulting None

Shanghai Namchow Food

Co.,Ltd.

Production and processing of edible

oils and fats, frozen foods, among

others

None

Namchow Japan Restaurant, beverages, and alcohol

business None

Namchow Consultation Restaurant and food and

management consulting None

208

5) Profile of directors, supervisors, and general managers of individual associated enterprises

Name of Business Title Name or Representative

Number of shares

held Shareholdi

ng ratio

Lucky Royal Co., Ltd. Chairman

Fei-Lung Chen, Representative of Namchow

Chemical Industrial CO., LTD. 95,337,885 99.65%

Director

Fei-Peng Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Director

Kan-Wen Lee, Representative of Namchow

Chemical Industrial CO., LTD.

Supervisor Dongbiao Bai

Supervisor Rong-Zhang Lian

Chow Ho Enterprise Co., Ltd. Chairman

Fei-Lung Chen, Representative of Namchow

Chemical Industrial CO., LTD. 7,999,994 100.00%

Director

Fei-Peng Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Director

Heng-Li Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Supervisor

Yi-Wen Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Qizhi Business Administration

Cultural Co., Ltd. Chairman

Fei-Lung Chen, Representative of Namchow

Chemical Industrial CO., LTD. 80,000 80.00%

Director

Fei-Peng Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Director

Chin-Tsai Chen, Representative of Lucky Royal

Co., Ltd. 10,000 10.00%

Supervisor

Yi-Wen Chen, Representative of Namchow

Chemical Industrial CO., LTD. 80,000 80.00%

Namchow (BVI) Ltd. Director

Fei-Lung Chen, Representative of Lucky Royal

Co., Ltd. 3,000,000 58.14%

Director

Fei-Peng Chen, Representative of Lucky Royal

Co., Ltd.

Director

Chin-Tsai Chen, Representative of Lucky Royal

Co., Ltd.

Director

Heng-Li Chen, Representative of Lucky Royal Co.,

Ltd.

Director

Dong-Biao Bai, Representative of Lucky Royal

Co., Ltd.

Nacia International Corporation Director

Fei-Lung Chen, Representative of Namchow

Chemical Industrial CO., LTD. 1,250 100.00%

Director

Fei-Peng Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Director

Chin-Tsai Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Director

Cheng-Wen Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Director

Dong-Biao Bai, Representative of Namchow

Chemical Industrial CO., LTD.

Nacia International Corporation Chairman

Fei-Lung Chen, Representative of Nancia CO.,

LTD. 12,770,000 100.00%

Director

Fei-Peng Chen, Representative of Nancia CO.,

LTD.

Director

Cheng-Wen Chen, Representative of Nancia CO.,

LTD.

209

Name of Business Title Name or Representative Number of shares

Ting Hao (Cayman Islands)

Holdings Corporation Chairman

Fei-Lung Chen, Representative of Nancia CO.,

LTD. 12,500,000 100.00%

Director

Fei-Peng Chen, Representative of Nancia CO.,

LTD.

Director

Chin-Tsai Chen, Representative of Nancia CO.,

LTD.

Director

Kan-Wen Chen, Representative of Nancia CO.,

LTD.

Director

Heng-Li Chen, Representative of Nancia CO.,

LTD.

Director

Cheng-Wen Chen, Representative of Nancia CO.,

LTD.

Tianjin Namchow Food

Co.,Ltd. Chairman

Yi-Wen Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation 100.00%

Director

Chin-Tsai Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation

Director

Cheng-Wen Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation

Director

Zhou-Jing Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation

Tianjin Yoshiyoshi Food Co.,

Ltd. Chairman

Yi-Wen Chen, Representative of Tianjin Namchow

Oils and Fats Company 100.00%

Director

Chin-Tsai Chen, Representative of Tianjin

Namchow Oils and Fats Company

Director

Cheng-Wen Chen, Representative of Tianjin

Namchow Oils and Fats Company

Director

Dong-Biao Bai, Representative of Tianjin

Namchow Oils and Fats Company

Director

Rong-Zhang Lian , Representative of Tianjin

Namchow Oils and Fats Company

Director

Zhou-Jing Chen, Representative of Tianjin

Namchow Oils and Fats Company

Supervisor

Mei-Hui Liao, Representative of Tianjin Namchow

Oils and Fats Company

Shanghai BaolaiNa Chairman

Heng-Li Chen, Representative of Namchow (BVI)

Ltd. 100.00%

Vice

Chairman

Cheng-Wen Chen, Representative of Namchow

(BVI) Ltd.

Vice

Chairman

Li-Ming Chen, Representative of Namchow (BVI)

Ltd.

Vice

Chairman Jian-Fan Yu

Director

Chin-Tsai Chen, Representative of Namchow

(BVI) Ltd.

Supervisor

Yi-Wen Chen, Representative of Namchow (BVI)

Ltd.

Namchow (Thailand) Ltd. Director

Fei-Lung Chen, Representative of Namchow

Chemical Industrial CO., LTD. 9,245,000 100.00%

Director

Fei-Peng Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Director

Chin-Tsai Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Director

Yi-Jian Wei, Representative of Namchow

Chemical Industrial CO., LTD.

210

Name of Business Title Name or Representative Number of shares

Yongju (Thailand) Ltd. Director

Fei-Lung Chen, Representative of Namchow

Chemical Industrial CO., LTD. 100,000 100.00%

Director

Fei-Peng Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Director

Yi-Jian Wei, Representative of Namchow

Chemical Industrial CO., LTD.

Shanghai Qiaohao Co., Ltd Chairman

Cheng-Wen Chen, Representative of Nancia

International Corporation 100.00%

Director

Chin-Tsai Chen, Representative of Nancia

International Corporation

Director

Dong-Biao Bai, Representative of Nancia

International Corporation

Dian Shui Lou Restaurant

Business Co., Ltd. Director

Fei-Lung Chen, Representative of Lucky Royal

Co., Ltd. 6,000,000 100.00%

Director

Fei-Peng Chen, Representative of Lucky Royal

Co., Ltd.

Chairman

Yi-Wen Chen, Representative of Lucky Royal Co.,

Ltd.

Supervisor

Chin-Tsai Chen, Representative of Lucky Royal

Co., Ltd.

Guangzhou Namchow Food

Co., Ltd. Chairman

Yi-Wen Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation 100.00%

Director

Chin-Tsai Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation

Director

Cheng-Wen Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation

Director

Zhou-Jing Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation

Shanghai Qizhi Business

Consulting Co., Ltd. Chairman

Cheng-Wen Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation 100.00%

Supervisor

Xi-Bin Chen, Representative of Ting Hao (Cayman

Islands) Holdings Corporation

Shanghai QiaoXing Co.,Ltd.,

Executive

Director

Cheng-Wen Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation 100.00%

Supervisor

Yi-Wen Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation

Qiaohao Business

Administration Co.,Ltd Chairman

Cheng-Wen Chen, Representative of Shanghai

Qiaohao Trading Co.,Ltd. 100.00%

Supervisor

Yi-Wen Chen, Representative of Shanghai

Qiaohao Trading Co.,Ltd.

Qiaohao Food Co.,Ltd. Chairman

Cheng-Wen Chen, Representative of Shanghai

Qiaohao Trading Co.,Ltd. 100.00%

Supervisor

Yi-Wen Chen, Representative of Shanghai

Qiaohao Trading Co.,Ltd.

Namchow Food and Dining

Consultation Co., Ltd. Chairman

Zhi-Mei Wang, Representative of Lucky Royal

Co., Ltd. 500,000 100.00%

Vice

Chairman

Heng-Li Chen, Representative of Lucky Royal Co.,

Ltd.

Director

Zhou-Jing Chen, Representative of Lucky Royal

Co., Ltd.

Supervisor

Yi-Wen Chen, Representative of Lucky Royal Co.,

Ltd.

Shanghai Namchow Food

Co.,Ltd. Chairman

Yi-Wen Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation 100.00%

211

Name of Business Title Name or Representative Number of shares

Director

Cheng-Wen Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation

Director

Zhou-Jing Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation

Supervisor

Chin-Tsai Chen, Representative of Ting Hao

(Cayman Islands) Holdings Corporation

Namchow Japan Chairman

Yi-Wen Chen, Representative of Namchow

Chemical Industrial CO., LTD. 3 100.00%

Director

Tian-Shi Tong, Representative of Namchow

Chemical Industrial CO., LTD.

Namchow Consultation Chairman

Zhi-Mei Wang, Representative of Namchow

Chemical Industrial CO., LTD. 500,000 100.00%

Director

Rong-Zhang Lian, Representative of Namchow

Chemical Industrial CO., LTD.

Director

Zhou-Jing Chen, Representative of Namchow

Chemical Industrial CO., LTD.

Supervisor

Yi-Wen Chen, Representative of Namchow

Chemical Industrial CO., LTD.

212

(2) Overview of individual associated enterprises' operation Unit: NTD 1,000

Name of company Code Paid-in

capital size Gross assets

Gross

liabilities Net value

Business

income

Business

profits

Gains and

losses of the

term (after

tax)

Earnings per

share

(NT$/after

tax)

Lucky Royal 0001 956,684 4,681,496 766,701 3,914,795 1,407,721 (4,914) 50,683 0.53

Namchow Thailand 0004 891,865 1,394,822 281,321 1,113,501 1,744,061 289,329 245,413 26.55

Yongju (Thailand) 0005 9,647 59,745 41,966 17,779 98,269 6,769 4,951 49.51

Nancia 0006 378,438 6,822,132 1,771,792 5,050,340 0 (12,854) 1,102,199 881,759.20

Namchow BVI 0007 156,219 354,788 21,227 333,561 0 (24,209) 120,860 23.42

Shanghai BaolaiNa 0008 112,018 435,891 142,304 293,588 1,235,189 91,546 62,139 -

Chowho 0009 80,000 9,431 6,586 2,845 28,301 (3,877) (3,884) (0.49)

Qizhi 0011 1,000 127 1 125 85 25 25 0.25

Shanghai Chowho 0015 6,055 136,882 111,054 25,828 246,576 14,573 13,522 -

Ting Hao (Cayman

Islands) 0017 560,087 5,778,563 874,600 4,903,963 0 (57,545) 1,063,076 57.46

Namchow

International

Corporation

(originally MIC) 0018 386,612 1,777,923 6,106 1,771,817 0 (249) 283,312 22.19

Tianjin Namchow 0019 756,875 3,532,468 1,681,895 1,850,573 2,741,791 381,966 316,782 -

Tianjin Yoshiyoshi 0020 121,100 404,753 91,867 312,886 770,007 174,122 133,724 -

Dian Shui Lou 0021 104,000 210,961 85,776 125,185 398,084 6,886 5,222 0.50

Guangzhou

Namchow 0023 544,950 4,642,124 2,264,778 2,377,346 3,015,288 719,524 596,066 -

Shanghai Qizhi 0024 4,541 5,167 0 5,167 0 0 0 -

Shanghai QiaoXing

Co.,Ltd., 0025 60,550 2,664,027 1,836,547 827,480 8,079,908 281,385 265,922 -

Qiaohao Business

Administration

Co.,Ltd 0026 961 999 0 999 0 0 0 -

213

Qiaohao Food

Co.,Ltd. 0027 4,807 8,425 3,430 4,995 0 0 0 -

Namchow Food and

Dining Consultation 0028 5,000 1,932 421 1,511 0 (879) (875) (1.75)

Shanghai Namchow 0029 676,597 1,608,437 891,372 717,065 0 0 0 -

Nankyo Japan Co.,

Ltd. 0030 58,800 667,126 406,139 260,986 0 (5,371) (15,913) -

Namchow

Consultation 0031 5,000 4,991 50 4,940 0 (51) (41) (0.08)

(3) Relations Report

The Company is not an affiliate of another company as indicated in the chapter about Associated Enterprises of the Company Act and hence it is not

necessary to compile the Relations Report with its controlling companies.

214

(II) Organization of latest private placement securities as of the date of printing of annual

report: None

(III) Latest holding or disposal of company's shares by subsidiaries as of the date of printing of

annual report: None

(IV) Other required supplementary matters: None

※ Latest Matters with Important Impacts on Shareholder Rights or Security Prices

Indicated in Article 36 Paragraph 2 Subparagraph 2 of the Securities Exchange Act as of

the Date of Printing of Annual Report: None

Namchow Chemical Industrial CO., LTD.

Person in Charge:

215

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

AND SUBSIDIARIES

Consolidated Financial Statements

For the Years Ended December 31, 2015 and 2014

(With Independent Auditors' Report Thereon)

Address: No. 100, Yanping N. Rd., Sec 4., Taipei, Taiwan R.O.C

Tel: (02)2535-1251

216

Independent Auditors’ Report

The Board of Directors

Namchow Chemical Industrial Co., Ltd.:

We have audited the accompanying consolidated balance sheets of Namchow Chemical Industrial Co., Ltd. and

subsidiaries (the Group) as of December 31, 2015 and 2014, and the related consolidated statements of

comprehensive income as well as the consolidated statements of changes in equity and of cash flows for the

years ended December 31, 2015 and 2014. These consolidated financial statements are the responsibility of the

Group's management. Our responsibility is to express an opinion on these consolidated financial statements

based on our audits.

We conducted our audits in accordance with the "Regulations Governing Auditing and Certification of Financial

Statements by Certified Public Accountants" and the generally accepted auditing standards in the Republic of

China. Those regulations and standards require that we plan and perform the audit to obtain reasonable assurance

about whether the consolidated financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial

statements. An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall consolidated financial statement presentation. We believe that our

audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to in the first paragraph present fairly, in all

material respects, the consolidated financial position of the Group as of December 31, 2015 and 2014, and the

consolidated results of its operations and its cash flows for the years ended December 31, 2015 and 2014, in

conformity with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers", and the

International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC

Interpretations endorsed by the R.O.C. Financial Supervisory Commission.

217

We have also audited the standalone financial statements of Namchow Chemical Industrial Co., Ltd. as of

December 31, 2015 and 2014, and its related consolidated statements of comprehensive income, as well as the

consolidated statements of changes in equity and of cash flows for the years ended December 31, 2015 and 2014,

on which we have issued an unqualified audit opinion.

KPMG

March 17, 2016

218

December 31, 2015 December 31, 2014

Assets Amount % Amount %

Current assets:

Cash and cash equivalents (notes 6(a) and (t)) $ 5,330,938 29 4,461,887 26

Financial assets at fair value through profit or loss-current (notes 6(b) and (t)) - - 50 -

Debt investment without active market-current (notes 6(c) and (t)) 249,750 2 - -

Notes receivable, net (notes 6(d) and (t)) 215,745 1 187,029 1

Accounts receivable, net (notes 6(d) and (t)) 1,502,657 8 1,505,716 9

Other receivables (notes 6(d), (s) and (t)) 143,597 1 153,583 1

Current income tax assets 13,680 - - -

Inventories (note 6(e)) 1,603,068 9 1,856,898 11

Prepayments 186,262 1 194,077 1

Other current assets 145,709 1 139,313 1

Total current assets 9,391,406 52 8,498,553 50

Non-current assets:

Available-for-sale financial assets-non-current (notes 6(b) and (t)) 13,549 - 14,287 -

Financial assets at cost-non-current (notes 6(f) and (t)) 27,166 - 27,166 -

Property, plant and equipment (notes 6(g), 8 and 9) 8,152,440 44 7,774,260 46

Investment property (note 6(h)) 64,021 - - -

Goodwill (note 6(i)) 105,417 1 105,417 1

Deferred income tax assets (note 6(n)) 33,432 - 27,461 -

Prepayments for equipment 234,258 1 56,046 -

Long-term prepaid rents 223,998 1 127,476 1

Other non-current assets (note 8) 153,648 1 283,648 2

Total non-current assets 9,007,929 48 8,415,761 50

Total assets $ 18,399,335 100 16,914,314 100

December 31, 2015 December 31, 2014

Liabilities and Stockholders' Equity Amount % Amount %

Current liabilities:

Short-term borrowings (notes 6(i), (t), 8 and 9) $ 3,612,664 20 3,405,688 20

Short-term commercial paper payable (notes 6(i) and (t)) 149,967 1 99,994 1

Current portion of long-term borrowings (notes 6(j), (t) and 8) 529,086 3 466,463 3

Notes payable (note 6(t)) 157 - 1,116 -

Accounts payable (note 6(t)) 721,917 4 663,996 4

Other payables (notes 6(o), (r), (s), (t) and 9) 1,261,772 7 1,028,208 6

Current income tax liabilities 159,599 1 171,578 1

Deferred revenue (note 6(q)) 349,410 2 282,132 2

Other current liabilities 86,903 - 59,538 -

Total current liabilities 6,871,475 38 6,178,713 37

Non-current liabilities:

Long-term borrowings (notes 6(j), (t) and 8) 4,488,105 24 4,297,111 25

Provision liabilities-non-current (note 6(k)) 8,585 - 8,585 -

Deferred income tax liabilities (note 6(n)) 769,801 4 605,543 4

Accrued pension liabilities-non-current (note 6(m)) 548,175 3 517,934 3

Other non-current liabilities 69,117 - 53,850 -

Total non-current liabilities 5,883,783 31 5,483,023 32

Total liabilities 12,755,258 69 11,661,736 69

Equity attributable to shareholders of the parent (notes 6(b), (n) and (o)):

Common stock 2,941,330 16 2,941,330 17

Capital surplus 520,786 3 424,437 3

Retained earnings:

Legal reserve 308,586 2 213,723 1

Special reserve 512,508 3 512,508 3

Unappropriated earnings 1,686,942 9 1,314,340 8

2,508,036 14 2,040,571 12

Other equities:

Financial statement translation differences for foreign operations 66,204 - 210,304 1

Unrealized gains (losses) on valuation of available-for-sale financial assets (6,423) - (5,685) -

59,781 - 204,619 1

Treasury stock (530,114) (3) (530,114) (3)

Total equity 5,499,819 30 5,080,843 30

Non-controlling interests 144,258 1 171,735 1

Total equity attributable to shareholders of the parent 5,644,077 31 5,252,578 31

Total liabilities and stockholders' equity $ 18,399,335 100 16,914,314 100

219

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2015 and 2014

(Expressed in thousands of New Taiwan dollars)

2015 2014

Amount % Amount %

Revenue (note 6(q)) $ 15,479,543 100 14,831,846 100

Operating costs (notes 6(e), (g), (l), (m), (o), (r), 7 and 9) 9,871,293 64 9,913,530 67

Gross profit 5,608,250 36 4,918,316 33

Operating expenses (notes 6(d), (g), (l), (m), (o), (r) and 7):

Selling expenses 2,326,392 15 2,094,263 14

General and administrative expenses 1,187,298 7 1,120,434 8

Research and development expenses 139,141 1 125,678 1

Total operating expenses 3,652,831 23 3,340,375 23

Operating profit 1,955,419 13 1,577,941 10

Non-operating income and expenses (notes 6(f), (g), (h) and 6(s)):

Other income 184,129 2 157,000 1

Other gains and losses (248,047) (2) (30,377) -

Finance costs (150,460) (1) (125,961) (1)

Total non-operating income and expenses (214,378) (1) 662 -

Net income before tax 1,741,041 12 1,578,603 10

Less: income tax expenses (note 6(n)) 577,080 4 569,866 4

Net income 1,163,961 8 1,008,737 6

Other comprehensive income (loss):

Items that will not be reclassified subsequently to profit or loss (note 6(m)):

Remeasurements of the defined benefit plans (27,724) - (11,300) -

Income tax expense related to items that will not be reclassified subsequently - - - -

Total Items that will not be reclassified subsequently to profit or loss (27,724) - (11,300) -

Items that may be reclassified subsequently to profit or loss (note 6(o)):

Financial statements translation differences on foreign operations (148,786) (1) 177,728 1

Unrealized gains (losses) on valuation of available-for-sale financial assets (738) - (820) -

Income tax expense relating to components of other comprehensive income (loss) - - - -

Total Items that may be reclassified subsequently to profit or loss (149,524) (1) 176,908 1

Other comprehensive income (loss), net of tax (177,248) (1) 165,608 1

Total comprehensive income $ 986,713 7 1,174,345 7

Net income attributable to:

Shareholders of the parent $ 1,112,850 8 948,633 6

Non-controlling interests 51,111 - 60,104 -

$ 1,163,961 8 1,008,737 6

Total comprehensive income attributable to:

Shareholders of the parent $ 940,307 7 1,109,117 7

Non-controlling interests 46,406 - 65,228 -

$ 986,713 7 1,174,345 7

Basic earnings per share (in New Taiwan dollars) (note 6(p)) $ 4.49 3.82

Diluted earnings per share (in New Taiwan dollars) (note 6(p)) $ 4.48 3.82

220

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2015 and 2014

(Expressed in thousands of New Taiwan dollars)

Equity attributable to shareholders of the parent Other equity adjustments Financial

statements

Unrealized

gain (loss) on

Retained earnings translation valuation of Total equity

Common

stock

Capital

surplus

Legal

reserve

Special

reserve

Unappropriated

earnings

Total

differences for

foreign

operations

available-for-s

ale financial

assets

Total

Treasury

stock

attributable to

shareholders of

the parent

Non-controllin

g interests Total

Balance at January 1, 2014 $ 2,941,330 332,677 128,287 512,508 1,050,728 1,691,523 37,681 (4,865) 32,816 (530,114) 4,468,232 159,420 4,627,652

Appropriations and distributions:

Legal reserve - - 85,436 - (85,436) - - - - - - - -

Cash dividends and adjustment of capital surplus for Company's

cash dividends received by subsidiaries

-

91,760

-

-

(588,266)

(588,266)

-

-

-

-

(496,506)

-

(496,506)

Net income - - - - 948,634 948,634 - - - - 948,634 60,103 1,008,737

Other comprehensive income (loss) - - - - (11,320) (11,320) 172,623 (820) 171,803 - 160,483 5,125 165,608

Total comprehensive income (loss) - - - - 937,314 937,314 172,623 (820) 171,803 - 1,109,117 65,228 1,174,345

Cash dividends to non-controlling interest from subsidiaries - - - - - - - - - - - (52,913) (52,913)

Balance at December 31, 2014 2,941,330 424,437 213,723 512,508 1,314,340 2,040,571 210,304 (5,685) 204,619 (530,114) 5,080,843 171,735 5,252,578

Appropriations and distributions:

Legal reserve - - 94,863 - (94,863) - - - - - - - -

Cash dividends and adjustment of capital surplus for Company's

cash dividends received by subsidiaries

-

96,349

-

-

(617,680)

(617,680)

-

-

-

-

(521,331)

-

(521,331)

Net income - - - - 1,112,850 1,112,850 - - - - 1,112,850 51,111 1,163,961

Other comprehensive income (loss) - - - - (27,705) (27,705) (144,100) (738) (144,838) - (172,543) (4,705) (177,248)

Total comprehensive income (loss) - - - - 1,085,145 1,085,145 (144,100) (738) (144,838) - 940,307 46,406 986,713

Cash dividends to non-controlling interest from subsidiaries - - - - - - - - - - - (73,883) (73,883)

Balance at December 31, 2015 $ 2,941,330 520,786 308,586 512,508 1,686,942 2,508,036 66,204 (6,423) 59,781 (530,114) 5,499,819 144,258 5,644,077

221

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2015 and 2014

(Expressed in thousands of New Taiwan dollars)

2015 2014

Cash flows from operating activities:

Consolidated net income before tax $ 1,741,041 1,578,603

Adjustments:

Adjustments to reconcile profit and loss

Depreciation 656,829 609,544

Provisions for bad debt 2,565 368

Gains on financial assets at fair value through profit or loss 50 (2,803)

Interest expenses 150,460 125,961

Interest income (94,068) (47,373)

Losses on disposal of property, plant and equipment, net 6,485 4,392

Gains on disposal of investments, net - (25,930)

Impairment losses on non-financial assets - 20,000

Total adjustments to reconcile profit and loss 722,321 684,159

Changes in assets / liabilities relating to operating activities:

Net changes in operating assets:

Notes receivable (28,716) (28,353)

Accounts receivable 1,004 54,112

Other receivables 110,394 43,122

Inventories 253,830 (75,207)

Prepayments 3,756 (101,610)

Other current assets (6,396) (45,697)

Total changes in operating assets, net 333,872 (153,633)

Net changes in operating liabilities:

Notes payable (959) 1,055

Accounts payable 57,921 17,773

Other payables 259,203 45,156

Provisions liabilities - 1,825

Other current liabilities 27,365 6,502

Net defined benefit liabilities 2,517 3,311

Deferred revenue 67,278 40,181

Total changes in operating liabilities, net 413,325 115,803

Total changes in operating assets / liabilities, net 747,197 (37,830)

Total adjustments 1,469,518 646,329

Cash provided by operating activities 3,210,559 2,224,932

Interest income received 94,068 47,373

Interest paid (149,951) (124,188)

Income tax paid (444,452) (441,113)

Net cash provided by operating activities 2,710,224 1,707,004

Cash flows from investing activities:

Acquisition of debt investments without active market (249,750) -

Proceeds from disposal of financial assets at cost - 43,490

Proceeds from capital reduction of financial assets at cost - 30,666

Acquisition of property, plant and equipment (1,408,065) (2,078,746)

Proceeds from disposal of property, plant and equipment 14,902 50,597

Decrease in Long-term prepaid rents 7,369 -

Decrease (increase) in other non-current assets 26,109 (168,987)

Net cash used in investing activities (1,609,435) (2,122,980)

Cash flows from financing activities:

Increase in short-term borrowings 10,893,563 9,235,626

Decrease in short-term borrowings (10,643,489) (7,775,624)

Increase in short-term commercial paper payable 49,973 55,043

Proceeds from long-term borrowings 1,272,609 4,165,804

Repayment of long-term borrowings (1,067,923) (2,909,591)

Increase (decrease) in other non-current liabilities 15,267 (5,624)

Cash dividends paid (691,563) (641,179)

Net cash provided by (used in) financing activities (171,563) 2,124,455

Effects of changes in exchange rates (60,175) 232,433

Increase in cash and cash equivalents 869,051 1,940,912

Cash and cash equivalents at beginning of period 4,461,887 2,520,975

Cash and cash equivalents at end of period $ 5,330,938 4,461,887

222

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

(Expressed in thousands of New Taiwan dollars unless otherwise stated)

(1) Organization and Business Scope

Namchow Chemical Industrial Co., Ltd. (the Company) was incorporated on March 29, 1952 as a

corporation limited by shares under the laws of the Republic of China (R.O.C.). The consolidated financial

statements comprise the Company and its Subsidiaries (the Group). The Company is engaged in the

manufacture, sale, and processing of edible and non-edible oil products and frozen dough, as well as dish

and laundry liquid detergent, It also provides management consulting services.

(2) Financial Statements Authorization Date and Authorization Process

The consolidated financial statements were approved by the Board of Directors on March 17, 2016.

(3) New Standards and Interpretations Not Yet Adopted

(a) The effect of the new announcements and revisions of the standards and interpretations endorsed by

the Financial Supervisory Commission ("FSC")

The Group has adopted to prepare financial reports according to IFRSs 2013 endorsed by the FSC from 2015

onward (not including IFRS 9 Financial Instruments). A summary of the differences between IFRSs 2013

and 2010 are as follows:

New announcements/revisions/amendments of

standards and interpretations

Effective date per

IASB

Amendment to IFRS 1: Limited Exemption from Comparative IFRS 7

Disclosures for First-time Adopters

July 1, 2010

Amendment to IFRS 1: Severe Hyperinflation and Removal of Fixed Dates for

First-time Adopters

July 1, 2011

Amendment to IFRS 1: Government Loans January 1, 2013

Amendment to IFRS 7: Disclosures – Transfers of Financial Assets July 1, 2011

Amendment to IFRS 7: Disclosures – Offsetting Financial Assets and Financial

Liabilities

January 1, 2013

IFRS 10 Consolidated Financial Statements January 1, 2013

(subsidiaries

effective on

January 1, 2014)

IFRS 11 Joint Arrangements January 1, 2013

IFRS 12 Disclosure of Interests in Other Entities January 1, 2013

IFRS 13 Fair Value Measurement January 1, 2013

Amendment to IAS 1: Presentation of Items of Other Comprehensive Income July 1, 2012

Amendment to IAS 12: Deferred Tax: Recovery of Underlying Assets January 1, 2012

Revision to IAS 19 Employee Benefits January 1, 2013

Revision to IAS 27 Separate Financial Statements January 1, 2013

Amendment to IAS 32: Offsetting Financial Assets and Financial Liabilities January 1, 2014

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine January 1, 2013

223

Except for the following, the Group assessed that adopting IFRSs 2013 will not have significant

impacts on the consolidated financial statements.

i) Amendments to IAS 1-Presentation of Items of Other Comprehensive Income

According to the amendments to IAS 1, items of other comprehensive income will be grouped into two

categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be

reclassified subsequently to profit or loss when specific conditions are met. In addition, income tax on items

of other comprehensive income is also required to be allocated on the same basis. The aforementioned

allocation basis will not be strictly enforced prior to the adoption of the amendments. The Group has also

revised the disclosure of the statement of comprehensive income in both current and prior periods.

ii) IFRS 13-Fair Value Measurement

IFRS 13 defines the meaning of fair value and sets the method of calculation and the presentation of

measurement of fair value. The Group follows the new amendments to disclose the fair value measurement,

and there is no need to disclose the information of comparable period. As the adoption will be postponed until

2015, the Group does not expect any significant influence on its financial condition and performance.

(b) New standards and interpretations not yet endorsed by the FSC

The new standards and amendments issued by the IASB that may have an impact to the consolidated financial

statements but not yet endorsed by the FSC are summarized as follows:

New standards and amendments and interpretations

Effective date

per IASB

IFRS 9 "Financial Instruments" January 1, 2018

Amended IFRS 10 and IAS 28 "Sale or Contribution of Assets between an

Investor and its Associate or Joint Venture"

Effective date to

be determined by

IASB

Amended IFRS 10, IFRS 12 and IAS 28 " Investment Entities-Applying the

Consolidation Exception"

January 1, 2016

Amendments to IFRS 11 "Acquisitions of an Interest in Joint Operation" January 1, 2016

IFRS 14 "Regulatory Deferral Accounts" January 1, 2016

IFRS 15 "Revenue from Contracts with Customers" January 1, 2018

IFRS 16 "Leases" January 1, 2019

Amended IAS 1 "Disclosure Initiative" January 1, 2016

Amended to IAS 7 "Disclosure Initiative" January 1, 2017

Amended to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Losses" January 1, 2017

Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of

Depreciation and Amortization"

January 1, 2016

224

Amendments to IAS 16 and IAS 41"Bearer Plants" January 1, 2016

Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" July 1, 2014

Amendments to IAS 27 "Equity Method in Separate Financial Statements" January 1, 2016

Amendments to IAS 36 "Recoverable Amount Disclosures for Non-financial

Assets"

January 1, 2014

Amendments to IAS 39 "Novation of Derivatives and Continuation of Hedge

Accounting"

January 1, 2014

Annual improvements to IFRSs 2010-2012 cycle and to IFRSs 2011-2013 cycle July 1, 2014

Annual improvements to IFRSs 2012-2014 cycle January 1, 2016

IFRIC 21 "Levies" January 1, 2014

The Group is currently evaluating the impact of the abovementioned standards and amendments on the Group's

financial position and operating results. Any related impact will be disclosed when the evaluation is completed.

(4) Significant Accounting Policies

The consolidated financial statements are the English translation of the Chinese version prepared and used

in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the

English and Chinese language financial statements, the Chinese version shall prevail.

The significant accounting policies presented in the financial statements are summarized as follows. The

following accounting policies have been applied consistently throughout the presented periods in the

financial statements.

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the

Preparation of Financial Reports by Securities Issuers (the Regulations) and the IFRSs endorsed by the FSC.

(b) Basis of preparation

i) Basis of measurement

The financial statements have been prepared on a historical cost basis, unless, otherwise stated (please refer to

the summary of the significant accounting policies).

225

ii) Functional and presentation currency

The functional currency of each individual consolidated entity is determined based on the primary economic

environment in which the entity operates. The Group's consolidated financial statements are presented in New

Taiwan dollars, which is Company's functional currency. The assets and liabilities of foreign operations are

translated to the Group's functional currency at the exchange rates at the reporting date. The income and

expenses of foreign operations are translated to the Group's functional currency at the average rate. Foreign

currency differences are recognized in other comprehensive income. All financial information presented in

New Taiwan dollars has been rounded to the nearest thousand.

(c) Basis of consolidation

i) Principles of preparation of consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.

The Company controls an investee when the investor is exposed, or has rights, to variable returns from its

involvement with the investee and has the ability to affect those returns through its control over the investee.

The financial statements of the subsidiaries are included in the consolidated financial statements from the date

that control commences until the date that control ceases. Transactions and balances, and any unrealized

income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated

financial statements. The comprehensive income from subsidiaries is allocated to the Company and its

non-controlling interests, even if the non-controlling interests have a deficit balance.

When necessary, adjustments are made to the financial statements of the subsidiaries to bring their accounting

policies into line with those used by the Group.

Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over its

subsidiaries are accounted for as equity transactions. Any difference between the amount by which the

noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognized

directly in equity and attributed to the shareholders of the parent.

ii) List of the subsidiaries included in the consolidated financial statements

Percentage of

ownership

Name investor Name of investee Scope of business December

31, 2015

December

31, 2014

Description

The Company Namchow (Thailand) Ltd. Manufacturing

and selling of

instant noodles

and rice cracker

100% 100%

The Company Mostro (Thailand) Ltd. Manufacturing

and selling of

food

100% 100%

The Company Nacia International Corp. (Nacia

Co.)

Holding of

investments

100% 100%

226

The Company Chow Ho Enterprise Co., Ltd.

(Chow Ho Co.)

Catering services,

food and beverage

retailing, and

frozen food

manufacturing

100% 100%

The Company Lucky Royal Co., Ltd. (Lucky Co.) Manufacturing,

selling and

processing of

various food and

beverage products

99% 99%

The Company Nankyo Japan Co., Ltd. (Nankyo

Japan Co.)

Catering services,

Bistro and

wine-selling

100% 100%

The Company Namchow Consulting Company,

Ltd. (Namchow Consulting Co.)

Catering services,

food and beverage

retailing and other

consulting

services

100% 100%

The Company &

Lucky Co.

Navigator Business Publications

Co., Ltd. (NBP Co., Ltd.)

Publishing,

distributing and

selling of printed

publications

90% 90% Note 2

Lucky Co. Namchow (British Virgin Island)

Ltd. (Namchow BVI Co.)

Holding of

investments

58% 58% Note 3

Lucky Co. Dian Shui Lou Restaurant Business

Co., Ltd. (Dian Shui Lou Co.)

Liquor importing

and retailing, and

catering services

99% 99% Note 4

Lucky Co. Namchow Gastronomy Consulting

Company, Ltd. (Namchow

Gastronomy Consulting Co.)

Catering services

and food

consulting

services

99% 99% Note 4

Namchow BVI Co. Shanghai Bao Lai Na Company

Limited. (Bao Lai Na Co.)

Multinational

eateries, and the

promotion and

management of

craft beers

58% 58% Note 3

Nacia Co. &

Namchow

International Co.

Ting Hao(Cayman Islands)Holding

Corp. (Ting Hao Cayman Co.)

Holding of

investments

100% 100% Note 5

Nacia Corp. Namchow International Corp.

(Namchow International Co.)

Holding of

investments

100% 100%

Nacia International

Corp.

Shanghai Qiaohao Trading Co., Ltd

(Shanghai Qiaohao Co.)

Holding of

investments and

international trade

100% 100%

Shanghai Qiaohao

Co.

Shanghai Qiaohao Enterprise

Management Co., Ltd. (Shanghai

Qiaohao Enterprise Management

Co.)

Business

management and

investment

consulting

services

100% 100%

227

Shanghai Qiaohao

Co.

Shanghai Qiaohao Food Co., Ltd.

(Shanghai Qiaohao Food Co.)

Food packaging,

selling and

trading of

restaurant

equipment

100% 100%

Ting Hao Cayman

Co.

Tianjin Namchow Food Co.,Ltd.

( Tianjin Namchow Co.)

Manufacturing,

and selling of

edible oil and

related services

100% 100%

Ting Hao Cayman

Co.

Guangzhou Namchow Food Co.,

Ltd. (Guangzhou Namchow Co.)

Manufacturing,

and selling of

edible oil and

related services

100% 100%

Ting Hao Cayman

Co.

Shanghai Qizhi Business Consulting

Co., Ltd. (Shanghai Qizhi Co.)

Business

management and

investment

consulting

services

100% 100%

Ting Hao Cayman

Co.

Shanghai Qiaoxing Co., Ltd.

(Shanghai Qiaoxing Co.)

Selling of edible

oil, food retailing

and international

trade

100% 100%

Ting Hao Cayman

Co.

Shanghai Namchow Food co., Ltd.

(Shanghai Namchow Co.)

Developing,

manufacturing,

processing and

selling of edible

oil, and frozen

food

manufacturing

100% 100%

Tianjin Namchow

Co. & Namchow

International Co.

Tianjin Yoshi Yoshi Food Co.,Ltd.

(Tianjin Yoshi Yoshi Co.)

Developing ,

manufacturing,

and selling of

dairy products

and related

services

100% 100% Note 1

Note 1: As of December 31, 2015 and 2014, the Company, directly and indirectly, holds 100% shares of Tianjin

Yoshi Yoshi Co. According to the Group's strategy, Namchow International Corp signed a stock transfer

contract with Tianjin Namchow Co. and disposed 50% shares of Tianjin Yoshi Yoshi Co. stock. The transfer

date was October 1, 2015.

Note 2: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 89.97% shares of NBP Co.

Note 3: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 57.94% shares of Namchow

(BVI Co.) and Bao Lai Na Co.

Note 4: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 99.65% shares of Dian Shui

Lou Co. and Namchow Gastronomy Consulting Co.

Note 5: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 100% shares of Ting Hao

Cayman Co. According to the Group’s strategy, Namchow International Corp. signed a stock transfer contract

with Nacia International Corp. and disposed 32.43% shares of Ting Hao (Cayman Island) stock. The transfer

date was October 1, 2015.

228

(d) Foreign currency

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the

exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign

currencies at the reporting date are remeasured to the functional currency at the exchange rate at that date. The

foreign currency gain or loss on monetary items is the difference between amortized cost in the functional

currency at the beginning of the year adjusted for the effective interest and payments during the year, and the

amortized cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are

retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Non-monetary items in a foreign currency that are measured based on historical cost are translated using the

exchange rate at the date of translation.

Foreign currency differences arising from remeasurement are recognized in profit or loss, except for the

difference resulting from available-for-sale equity investment which is recognized in other comprehensive

income arising from the remeasurement.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor

likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to

form part of a net investment in the foreign operation and are recognized in other comprehensive income, and

presented in the translation reserve in equity.

(e) Classification of current and non-current assets and liabilities

i) An entity shall classify an asset as current when:

i. It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;

ii. It holds the asset primarily for the purpose of trading;

iii. It expects to realize the asset within twelve months after the reporting period; or

iv. The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or

used to settle a liability for at least twelve months after the reporting period.

An entity shall classify all other assets as non-current.

ii) An entity shall classify a liability as current when:

i. It expects to settle the liability in its normal operating cycle;

ii. It holds the liability primarily for the purpose of trading;

iii. The liability is due to be settled within twelve months after the reporting period even if

refinancing or a revised repayment plan is arranged between the reporting date and the

issuance date of the financial statements; or

iv. It does not have an unconditional right to defer settlement of the liability for at least twelve

months after the reporting period. Terms of a liability that could, at the option of the

counterparty, result in its settlement by the issue of equity instruments do not affect its

classification.

229

An entity shall classify all other liabilities as non-current.

(f) Cash and cash equivalents

Cash comprises cash in hand and demand deposits. Cash equivalent refers to short term investments with high

liquidity that are subject to insignificant risk of changes in their fair value and can be cashed into fixed amount

of money. The definition of time deposit is similar to that of cash equivalent; however, the purpose of holding

time deposit is for short term cash commitment rather than investment.

Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are

included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash

flows.

(g) Financial instruments

Financial assets and financial liabilities are initially recognized when the Group becomes a party to the

contractual provisions of the instruments.

i) Financial assets

The Group classifies financial assets into the following categories: available-for-sale financial assets and loans

and receivables.

i. Available-for-sale financial assets

Available-for-sale financial assets are recognized initially at fair value, plus, any directly

attributable transaction cost. Subsequent to initial recognition, they are measured at fair

value, and changes therein, other than impairment losses, dividend income, and foreign

currency differences on available-for-sale debt instruments, are recognized in other

comprehensive income and presented in the fair value reserve in equity. When an

investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or

loss, and is included in non-operating income and expense. The purchase disposal of

financial assets are recognized using trade-date accounting.

Investments in equity instruments that do not have a quoted market price in an active market,

and whose fair value cannot be reliably measured, are measured at amortized cost, and are

included in financial assets measured at cost.

Dividend income is recognized in profit or loss on the date that the Group's right to receive

payment is established. However, in the case of quoted securities, the ex-dividend date is

normally recognized. Such dividend income is included in non-operating income and

expense.

ii. Loans and Receivables

Loans and receivables are financial assets with fixed or determinable payments that are not

quoted in an active market. Receivables comprise trade receivables, other receivables, and

investment in debt security with no active market. Such assets are recognized initially at fair

value, plus, any directly attributable transaction costs. Subsequent to initial recognition,

receivables are measured at amortized cost using the effective interest method, less, any

impairment losses other than insignificant interest on short-term receivables. The purchase

disposal of financial assets are recognized using trade-date accounting.

230

Interest income is recognized in profit or loss, and it is included in non-operating income

and expense.

iii. Impairment of financial assets

A financial asset is impaired if, and only if, there is an objective evidence of impairment as

a result of one or more events that occurred after the initial recognition of the asset (a ‘loss

event') and that loss event (or events) has an impact on the estimated future cash flows of

the financial asset that can be estimated reliably.

The objective evidence that financial assets are impaired includes default or delinquency by

a debtor, restructuring of an amount due to the Group on terms that the Group would not

consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse

changes in the payment status of borrowers or issuers, economic conditions that correlate

with defaults, or the disappearance of an active market for a security. In addition, for an

investment in an equity security, a significant or prolonged decline in its fair value below its

cost is accounted for as objective evidence of impairment.

The Group considers evidence of impairment for receivables at both a specific asset and

collective level. Receivables that are not individually significant are collectively assessed

for impairment by grouping together receivables with similar risk characteristics.

If objective evidence of an impairment exists, an impairment loss should be recognized.

An impairment loss in respect of a financial asset is calculated as the difference between its

carrying amount and the present value of the estimated future cash flows discounted at the

asset's original effective interest rate. Collateral and proceeds from insurance should also

be considered when determining the estimated future cash flows. Losses are recognized in

profit or loss and reflected in an allowance account against receivables. When a

subsequent event causes the amount of impairment loss to decrease, the decrease in

impairment loss is reversed through profit or loss. However, the reversing amount cannot

exceed the amortized balance of the assets assuming no impairment was recognized in prior

periods.

An impairment loss in respect of a financial asset measured at cost is calculated as the

difference between its carrying amount and the present value of the estimated future cash

flows discounted at the current market rate of return for a similar financial asset. Such

impairment loss is not reversible in subsequent periods.

An impairment loss in respect of a financial asset is deducted from the carrying amount,

except for trade receivables, for which an impairment loss is reflected in an allowance

account against the receivables. When it is determined a receivable is uncollectible, it is

written off from the allowance account. Any subsequent recovery of receivable written off

is recorded in the allowance account. Changes in the amount of the allowance account are

recognized in profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the

losses accumulated in the fair value reserve in equity to profit or loss.

Impairment losses recognized on an available-for-sale equity security are not reversed

through profit or loss. Any subsequent recovery in the fair value of an impaired

available-for-sale equity security is recognized in other comprehensive income, and

accumulated in other equity.

231

If, in a subsequent period, the fair value of an impaired available-for-sale debt security

increases and the increase can be related objectively to an event occurring after the

impairment loss was recognized, then the impairment loss is reversed, with the amount of

the reversal recognized in profit or loss.

Impairment losses and recoveries are recognized in profit or loss. Recovery and loss on

doubtful debts of account receivables are included in operating expense; others are included

in non-operating income and expense.

iv. Derecognition of financial assets

The Group derecognizes financial assets when the contractual rights of the cash inflow from

the asset are terminated, or when the Group transfers substantially all the risks and rewards

of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the carrying

amount and the sum of the consideration received or receivables and any cumulative gain or

loss that had been recognized in other comprehensive income and presented in other equity

-unrealized gains or losses from available-for-sale financial assets is recognized in profit

or loss, and included in non-operating income and expense.

The Group separates the part that continues to be recognized and the part that is

derecognized, based on the relative fair values of those parts on the date of the transfer. The

difference between the carrying amount allocated to the part derecognized and the sum of

the consideration received for the part derecognized, and any cumulative gain or loss

allocated to it that had been recognized in other comprehensive income shall be recognized

in profit or loss, and is included in non-operating income and expense.

A cumulative gain or loss that had been recognized in other comprehensive income is

allocated between the part that continues to be recognized and the part that is derecognized,

based on the relative fair values of those parts.

ii) Financial liabilities and equity instruments

i. Other financial liabilities

Financial liabilities not classified as held-for-trading or designated as at fair value through

profit or loss, which comprise loans and borrowings, and trade and other payables, are

measured at fair value plus any directly attributable transaction cost at the time of initial

recognition. Subsequent to initial recognition, they are measured at amortized cost

calculated using the effective interest method. Interest expense not capitalized as capital cost

is recognized in profit or loss, and is recorded under non-operating income and expenses.

ii. Derecognition of financial liabilities

The Group derecognizes a financial liability when its contractual obligation has been

discharged or cancelled or has expired.

The difference between the carrying amount of a financial liability removed and the

consideration paid (including any non-cash assets transferred or liabilities assumed) is

recognized in profit or loss, and is included in non-operating income and expense.

232

iii. Offsetting of financial assets and liabilities

The Group presents financial assets and liabilities on a net basis when the Group has the

legally enforceable right to offset, and intends to settle such financial assets and liabilities

on a net basis or to realize the assets and settle the liabilities simultaneously.

iv. Financial guarantee contract

A financial guarantee contract is a contract that requires the issuer to make specified

payments to reimburse the holder of a loss it incurs because a specified debtor fails to make

payment when due in accordance with the original or modified terms of a debt instrument.

A financial guarantee contract not designated as at fair value through profit or loss issued by

the Group is recognized initially at fair value plus any directly attributable transaction cost.

After initial recognition, it is measured at the higher of (a) the contractual obligation amount

determined in accordance with IAS 37; or (b) the amount initially recognized less, when

appropriate, cumulative amortization recognized in accordance with accounting policies.

iii) Derivative financial instruments

The Group holds derivative financial instruments to hedge its foreign currency and interest rate exposures.

Derivatives are recognized initially at fair value and attributable transaction costs are recognized in profit or

loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein

are recognized in profit or loss, and are included in non-operating income and expense.

When a derivative is designated as a hedging instrument, its timing of recognition in profit or loss is determined

based on the nature of the hedging relationship. When the fair value of a derivative instrument is positive, it is

classified as a financial asset, and when the fair value is negative, it is classified as a financial liability.

(h) Inventories

The cost of inventories consists of all costs of purchase, costs of conversion, and other costs incurred in bringing

the inventories to their present location and condition. The cost of inventories includes an appropriate share of

fixed production overhead based on normal capacity and allocated variable production overhead based on

actual output. However, unallocated fixed production overhead arising from lower or idle capacity is

recognized in cost of goods sold during the period. If actual capacity is higher than normal capacity, fixed

production overhead should be allocated based on actual capacity. The method of valuing inventories is the

weighted-average method.

Inventories are measured at the lower of cost or net realizable value. Net realizable value is the estimated selling

price in the ordinary course of business, less the estimated costs of completion and selling expenses at the end

of the period. When the cost of inventories is higher than the net realizable value, inventories are written

down to net realizable value, and the write-down amount is charged to current year's cost of goods sold. If net

realizable value increases in the future, the cost of inventories is reversed within the original write-down

amount, and such reversal is treated as a reduction of cost of goods sold.

233

(i) Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not

for sale in the ordinary course of business, or to use in the production or supply of goods or services or for

administrative purposes. Investment property is measured at cost on initial recognition and subsequently

measured under the cost model, and the depreciation expense is calculated using the depreciable amount. The

depreciation method, the useful life, and the residual amount are the same as those adopted for property, plant

and equipment. Cost includes expenditure that is directly attributable to the acquisition of the investment

property.

When the use of an investment property changes such that it is reclassified as property, plant and equipment, its

carrying amount at the date of reclassification becomes its cost for subsequent accounting.

(j) Property, plant and equipment

i) Recognition and measurement

Property, plant and equipment are measured at cost, less, accumulated depreciation and accumulated impairment

losses. Cost includes expenditure that is directly attributed to the acquisition of the asset, and any borrowing

cost that is eligible for capitalization.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of

the item shall be depreciated separately, unless the useful life and the depreciation method of a significant part

of an item of property, plant and equipment are the same as the useful life and depreciation method of another

significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined

as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be

recognized as non-operating income and expense.

ii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with

the expenditure will flow to the Group. The carrying amount of those parts that are replaced is derecognized.

Ongoing repairs and maintenance are expensed as incurred.

iii) Depreciation

The depreciable amount of an asset is determined after deducting its residual amount from its original cost and is

depreciated using the straight-line method over its useful life. Assets are evaluated based on their individually

significant components, and if the useful life of a component varies from that of others, then this component

should be separately depreciated. The depreciation charge for each period shall be recognized in profit or loss.

Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives, for the current and comparative years, of significant items of property, plant and

equipment are as follows:

Buildings 3~60 years

Machinery equipment 1~20 years

Other equipment 1~40 years

234

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ

from the previous estimates, the changes are accounted for as a change in an accounting estimate.

(k) Leases

i) Prepaid land lease

Prepaid land lease is the Group's right of land use, which is recorded under acquisition costs, and is

amortized within a useful term of 50 years by using the straight-line method, and is also reclassified as prepaid

expenses and long-term prepaid rents.

ii) Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term. Initial

direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the

leased asset and recognized as an expense over the lease term on the same basis as the lease income. Incentives

granted to the lessee to enter into an operating lease are spread over the lease term on a straight-line basis so

that the lease income received is reduced accordingly.

iii) Lessee

Leases in which the Group assumes substantially all of the risks and rewards of ownership are classified as

finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair

value or the present of the minimum lease payments. Subsequent minimum lease payments are attributable to

finance cost and the reduction of the outstanding liabilities, and the finance cost is allocated to each period

during the lease term using a constant periodic rate of interest on the remaining balance of the liability.

Other leases are operating leases and are not recognized in the Group's statement of financial position. Payments

made under an operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss

on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral of

the total lease expense over the term of the lease. Any benefit provided by the lessor for the purpose of

reaching the agreement is accounted for as a reduction of lease expense on a straight-line basis.

(l) Intangible assets-Goodwill

i) Recognition

Upon conversion to the IFRSs endorsed by the Financial Supervisory Commission, R.O.C., the Group can

choose to restate all its business combinations that occurred on and after January 1, 2012. For those

acquisitions that occurred prior to January 1 2012, any excess of the cost of acquisition over the Company's

share of the net fair value of the identifiable assets recognized at the date of acquisition is recognized as

goodwill.

ii) Measurement

Goodwill is measured at cost, less, accumulated impairment losses.

Goodwill is not amortized. Instead, it is tested for impairment annually, or more frequently, when there is an

indication that the cash generating unit may be impaired.

235

(m) Impairment-non-financial assets

With regard to non-financial assets (other than inventories, deferred tax assets and employee benefits), the Group

assesses at the end of each reporting period whether there is any indication that an impairment loss has

occurred, and estimates the recoverable amount for assets with an indication of impairment. If it is not possible

to determine the recoverable amount for the individual asset, then the Group will have to determine the

recoverable amount for the asset's cash-generating unit.

Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with indefinite useful

lives or those not yet in use is required to be tested at least annually.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value less costs

to sell or its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the

carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss.

An impairment loss shall be recognized immediately in profit or loss.

For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition

date, be allocated to each of the acquirer's cash-generating units, or groups of cash-generating units, that are

expected to benefit from the synergies of the combination. If the carrying amount of the cash-generating units

exceeds the recoverable amount of the units, the entity shall recognize the impairment loss, and the impairment

loss shall be allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss

for goodwill is prohibited.

The Group assesses at the end of each reporting period whether there is any indication that an impairment loss

recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any

such indication exists, the entity shall estimate the recoverable amount of that asset. Impairment loss is

reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable

amount, increasing the individual asset's or cash-generating unit's carrying amount to its estimated recoverable

amount. The reversal of an impairment loss of an individual asset or cash-generating unit cannot exceed the

carrying amount of the individual asset or cash-generating unit, less any depreciation or amortization, had it not

recognized an impairment loss.

(n) Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation

that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle

the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that

reflects the current market assessments of the time value of money and the risks specific to the liability. The

unwinding of the discount is recognized as finance cost.

Site restoration reservation is the obligation of removement, moving and reinstatement after the Group obtained

or has used the lease asset for a while. The Group recognized its related cost as expense during the lease term.

236

(o) Treasury stock

Under the cost method, the treasury stock account is debited for the cost of the Group's shares purchased.

When the disposal price of treasury stock is greater than the cost, the difference is credited to capital surplus-

treasury stock; otherwise, the excess of the cost over the price is debited to capital surplus generated from

similar treasury stock transactions. If the capital surplus-treasury stock account is insufficient to cover the

excess of the cost over the price, retained earnings should be debited for the remaining amount. The book

value of each share of treasury stock is equal to its weighted-average cost and is calculated by each group

according to the reason for purchase.

When treasury stock is retired, capital surplus and common stock are debited according to the ratio of retiring

treasury stock to total issued stock. When the book value of the retiring treasury stock is higher than the sum of

its par value and capital surplus, the difference is debited to capital surplus generated from similar treasury

stock transactions. If the capital surplus-treasury stock account is insufficient to cover the difference,

retained earnings should be debited for the remaining amount. When the book value of the retiring treasury

stock is lower than the sum of its par value and capital surplus, the difference is credited to capital surplus

generated from similar treasury stock transactions. The shares that are owned by the Company's subsidiaries

are seen as treasury stock.

(p) Revenue

i) Sale of goods

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the

consideration received or receivable, net of returns, trade discounts, and volume rebates. Revenue is recognized

when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks

and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the

associated costs and possible return of goods can be estimated reliably, there is no continuing management

involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that

discounts will be granted and the amount can be measured reliably, then the discount is recognized as a

reduction of revenue as the sales are recognized.

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement.

For export transactions, transfer occurs upon loading the goods onto the relevant carrier at the port; however,

for sales in the domestic market, transfer usually occurs when the product is received at the customer's

warehouse.

Transactions on catering industry are basically completed over-the-counter, and the cash is collected by the

franchisee after authorization is granted. As such, revenue is recognized upon the provision of goods and

services, and booked at the end of the month.

ii) Customer loyalty program

Customer loyalty program of the Group is to provide customer bonus point and rights to purchase merchandise

according to the discount price. The fair value of the consideration received or receivable was allocated to

bonus point and other component of the sale. The amount allocated to bonus point can be valued according to

the fair value of the merchandise sold at discount price. Revenue is recognized when customers use their bonus

points in exchange for a discount price or complimentary items upon purchasing of any merchandise. Revenue

is calculated based on the estimated volume of the merchandise sold.

237

iii) Rendering of services

The Group is engaged in providing management services. Revenue from services rendered is recognized in

profit or loss in proportion to the stage of completion of the transaction at the reporting date and the account

collectability can be reasonably estimated.

(q) Employee benefits

i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit

expense in profit or loss in the periods during which services are rendered by employees.

ii) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net

obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the

amount of future benefit that employees have earned in return for their service in the current and prior periods;

that benefit is discounted to determine its present value.

The fair value of any plan assets is deducted. The discount rate is the yield at the reporting date (market yields of

high-quality corporate bonds or government bonds) on bonds that have maturity dates approximating the terms

of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to

be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the

calculation results in a benefit to the Group, the recognized asset is limited to the total of the present value of

economic benefits available in the form of any future refunds from the plan or reductions in future

contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to

any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to

the Group if it is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by

employees is recognized immediately in profit or loss.

Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the

return on plan assets (excluding interest) and (3) the effect of the asset ceiling (if any, excluding interest), are

recognized immediately in other comprehensive income. The Group can reclassify the amounts recognized in

other comprehensive income to retained earnings.

iii) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related

service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans

if the Group has a present legal or constructive obligation to pay this amount as a result of past service

provided by the employee, and the obligation can be estimated reliably.

238

(r) Income tax

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business

combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes

shall be recognized in profit or loss.

Current taxes comprise the expected tax payable or receivable on the taxable income or loss for the year and any

adjustment to tax payable or receivable in respect of previous years. It is measured using tax rates enacted or

substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for

financial reporting purposes and their respective tax bases. Deferred taxes shall not be recognized for the

exceptions below:

i) Assets and liabilities that are initially recognized but are not related to the business combination

and have no effect on net income or taxable gains (losses) during the transaction.

ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where

there is a high probability that such temporary differences will not reverse.

iii) Initial recognition of goodwill.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when

the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted

by the end of the reporting period.

Deferred tax assets and liabilities may be offset against each other if the following criteria are met:

i) The entity has the legal right to settle tax assets and liabilities on a net basis; and

ii) The taxing of deferred tax assets and liabilities fulfills one of the scenarios below:

i. levied by the same taxing authority; or

ii. levied by different taxing authorities, but where each such authority intends to settle tax

assets and liabilities (where such amounts are significant) on a net basis every year of the

period of expected asset realization or debt liquidation, or where the timing of asset

realization and debt liquidation is matched.

A deferred tax asset should be recognized for unused tax losses, unused tax credits, and deductible temporary

differences to the extent that it is probable that future taxable profit will be available against which they can be

utilized. Such deferred tax assets shall also be reviewed at each reporting date, and are reduced to the extent

that it is no longer probable that the related tax benefit will be realized.

239

(s) Earnings per share

The Group discloses the Company's basic and diluted earnings per share attributable to ordinary equity holders

of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary

shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. The

calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the

Company, divided by the weighted-average number of ordinary shares outstanding after the adjustment on the

effects of all dilutive potential ordinary shares. Employee bonuses are settled by issuing shares that are yet to

be approved at the shareholders' meeting.

(t) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn

revenues and incur expenses (including revenues and expenses relating to transactions with other components

of the Group) and each operating segment consists of standalone financial information. Operating results of the

operating segment are regularly reviewed by the Group's chief operating decision maker to make decisions

about resources to be allocated to the segment and to assess its performance.

(5) Significant Accounting Judgments and Sources of Estimation Uncertainty

The preparation of the consolidated financial statements in conformity with the IFRSs endorsed by the FSC

requires management to make judgments, estimates and assumptions that affect the application of the

accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may

differ from these estimates.

Management will continually review the estimates and basic assumptions. Changes in accounting estimates

will be recognized in the period of change and the future period of their impact.

There are no critical judgments in applying accounting policies that have significant effect on the amounts

recognized in the financial statements.

For information about critical judgments in applying accounting policies that have the most significant

effect on the amounts recognized in these consolidated financial statements, please refer to the following

notes:

(a) Note 6(g)-Key assumptions used in discounted cash flow projections.

(b) Notes 6(k)-Provision.

(c) Notes 6(m)-Measurement of defined benefit obligations

(d) Notes 6(n)-Utilization of tax losses.

(e) Notes 6(q)-Assumption of expecting redeem rate on deferred revenue.

240

(6) Description of Significant Accounts

(a) Cash and cash equivalents

December 31,

2015

December 31,

2014

Cash on hand $ 6,938 9,402

Savings and checking deposits 2,431,750 1,767,374

Time deposits 2,892,250 2,653,198

Cash in transit - 31,913

Cash and cash equivalents pen statements of cash flow $ 5,330,938 4,461,887

The Group's exposure to interest rate risk and the sensitivity analysis on the financial instruments held by the

Group are disclosed in note 6(t).

(b) Financial assets

i) Available-for-sale financial assets-non-current

December 31,

2015

December 31,

2014

Investment in listed securities

Stocks listed on domestic markets $ 13,549 14,287

Please refer to note 6(t) for credit risk, exchange rate risk and interest rate risk.

As of December 31, 2015 and 2014, the Group did not pledge its available-for-sale financial instruments.

ii) Sensitivity analysis-market price risk

If the market price of the available-for-sale financial assets fluctuates (assuming that all other variables remain

the same), the impact on other comprehensive income will be as follows:

2015 2014

Fluctuation in market

price at reporting

date

Other

comprehensive

income (after

tax)

Net income

Other

comprehensive

income (after

tax)

Net income

Increase 1% $ 135 - 143 -

Decrease 1% $ (135) - (143) -

241

iii) Non hedging derivatives

The Group uses derivative financial instruments to manage exposures due to fluctuations of foreign exchange

risk from its operating activities, investing activities and financing activities. As of December 31, 2014, the

Group reported the following derivatives financial instruments as available-for-sale financial assets and

liabilities without the application of hedge accounting.

Fair value

Contract

amount

(in thousands)

December 31, 2014

Forward contracts $ 50 USD 1,740

As of December 31, 2014, the financial instruments had maturity periods from November 4, 2014 to June 15,

2015.

(c) Debt investment without an active market

December 31,

2015

December 31,

2014

Finance product $ 249,750 -

The Group invested in finance products without public quotation, and the fair value can be reliably measured on

December 14, 2015. It can be redeemed at any time, and the expected rate of return was 3.4%.

As of December 31, 2015, the Group's debt investment without an active market was not provided as pledged

assets.

(d) Notes and accounts receivable, and other receivable

December 31,

2015

December 31,

2014

Notes receivable $ 215,745 187,029

Accounts receivable 1,538,286 1,540,781

Other receivable 143,597 153,583

Less: allowance for impairment 35,629 35,065

$ 1,861,999 1,846,328

The Group has not provided the notes and accounts receivable as collateral or factored them for cash.

242

The Group's aging analysis of overdue notes and accounts receivable, and other receivable was as follows:

December 31,

2015

December 31,

2014

Past due 0~60 days $ 129,191 112,438

Past due 61~365 days 4,853 10,535

Past due over one year 1,132 768

$ 135,176 123,741

The movement in the allowance for impairment with respect to notes and accounts receivable during the year

was as follows:

Individually

assessed

impairment

Collectively

assessed

impairment

Total

Balance at January 1, 2015 $ 35,065 - 35,065

Impairment loss recognized 2,565 - 2,565

Written off (1,491) - (1,491)

Effect of changes in exchange rate (510) - (510)

Balance at December 31, 2015 $ 35,629 - 35,629

Individually

assessed

impairment

Collectively

assessed

impairment

Total

Balance at January 1, 2014 $ 35,138 - 35,138

Impairment loss recognized 368 - 368

Written off (1,382) - (1,382)

Effect of changes in exchange rate 941 - 941

Balance at December 31, 2014 $ 35,065 - 35,065

243

(e) Inventories

The components of the Group's inventories were as follows:

December 31,

2015

December 31,

2014

Merchandise $ 69,514 70,156

Finished goods 502,741 554,277

Work in progress 85,322 95,523

Raw materials 573,668 761,698

Supplies 161,570 190,317

Goods in transit 210,253 184,927

Total $ 1,603,068 1,856,898

As of December 31, 2015 and 2014, the Group's inventories were not provided as pledged assets.

Except for operating costs arising from the ordinary sale of inventories, other gains and losses directly recorded

under operating cost in the years 2015 and 2014 are as follows:

2015 2014

Loss on decline in market value of inventory $ 3,711 3,014

Loss (gain) on physical count 3,882 1,086

Loss on scrap of inventory 18,447 19,854

Income from sale of scrap (20,357) (21,700)

Total $ 5,683 2,254

(f) Financial assets carried at cost

December 31,

2015

December 31,

2014

Domestic unlisted company $ 27,166 27,166

The Group holds unlisted stocks on domestic market-Global Securities Finance Corporation. In September

2014, the Company reduced both its capital and its return of capital of financial assets using the cost method on

a pro rata basis amounting to $30,666.

Namchow BVI Co. sold its common stocks in Xiamen Jintong Detergent Co., Ltd. amounting to USD1,436

($43,490). The disposal profit was $25,930, which was recognized as other income.

The aforementioned stocks held by the Group, whose fair value cannot be reliably measured, are measured at

amortized cost. The range of the estimated fair value was significant and cannot be reasonably evaluated.

244

Therefore, the management of the Group considered it cannot be evaluated reliably.

245

As of December 31, 2015 and 2014, the Group's financial assets carried at cost were not provided as pledged

assets.

(g) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group were as follows:

Land Buildings Machinery

Other

equipment

Prepayments

for equipment Total

Cost:

Balance at January 1, 2015 $ 2,699,639 2,530,308 5,271,109 2,635,244 437,777 13,574,077

Additions 16,327 48,447 110,107 267,716 728,125 1,170,722

Disposals - - (50,632) (50,569) - (101,201)

Reclassification - (13,576) 144,083 46,660 (228,491) (51,324)

Effect of changes in exchange rates 13,918 (41,728) (120,377) (32,695) (9,368) (190,250)

Balance at December 31, 2015 $ 2,729,884 2,523,451 5,354,290 2,866,356 928,043 14,402,024

Balance at January 1, 2014 $ 2,110,676 2,122,525 4,726,885 2,280,282 410,216 11,650,584

Additions 632,829 171,991 347,141 524,709 413,649 2,090,319

Disposals - (46) (35,194) (253,042) (37,004) (325,286)

Reclassification - 173,686 71,904 35,409 (360,716) (79,717)

Effect of changes in exchange rates (43,866) 62,152 160,373 47,886 11,632 238,177

Balance at December 31, 2014 $ 2,699,639 2,530,308 5,271,109 2,635,244 437,777 13,574,077

Depreciation and impairment loss:

Balance at January 1, 2015 $ 31,953 1,023,375 3,186,199 1,558,290 - 5,799,817

Depreciation - 92,505 268,670 291,908 - 653,083

Disposal - - (43,514) (36,300) - (79,814)

Reclassification - (14,983) (9,184) 9,165 - (15,002)

Effect of changes in exchange rates - (16,210) (72,666) (19,624) - (108,500)

Balance at December 31, 2015 $ 31,953 1,084,687 3,329,505 1,803,439 - 6,249,584

Balance at January 1, 2014 $ 31,953 915,328 2,872,082 1,478,009 - 5,297,372

Depreciation - 84,614 234,241 290,689 - 609,544

Disposal - (7) (30,747) (239,543) - (270,297)

Reclassification - - 60 2,007 - 2,067

Impairment loss - - 20,000 - - 20,000

Effect of changes in exchange rates - 23,440 90,563 27,128 - 141,131

Balance at December 31, 2014 $ 31,953 1,023,375 3,186,199 1,558,290 - 5,799,817

Carrying value:

December 31, 2015 $ 2,697,931 1,438,764 2,024,785 1,062,917 928,043 8,152,440

December 31, 2014 $ 2,667,686 1,506,933 2,084,910 1,076,954 437,777 7,774,260

246

i) Impairment loss and subsequent reversal

As of December 2014, since the estimated recoverable amount of certain department of the Group was lower

than its book value, the Company recognized an impairment loss of $20,000. The discount rate used for

estimating the recoverable amount was 11.46% in 2014.

2015 2014

Beginning balance $ 243,114 223,076

Impairment loss recognized - 20,000

Written-off - -

Effect of changes in exchange rates - 38

Ending balance $ 243,114 243,114

ii) Collateral

Please refer to note 8 for information on pledged property, plant and equipment as of December 31, 2015 and

2014.

(h) Investment property

Buildings

Cost:

Balance as at January 1, 2015 $ -

Reclassification 84,212

Effect of changes in exchange rates (1,604)

Balance as at December 31, 2015 $ 82,608

Depreciation:

Balance as at January 1, 2015 $ -

Depreciation 3,746

Reclassification 14,907

Effect of changes in exchange rates (66)

Balance as at December 31, 2015 $ 18,587

Carrying value:

Balance as at December 31, 2015 $ 64,021

Fair value:

Balance as at December 31, 2015 $ 75,615

Investment property comprises a number of commercial properties that are leased to third parties. Each of the

247

leases contains an initial non-cancellable period of 5 years. Subsequent renewals are negotiable with the lessee,

and no contingent rents are charged. Please refer to note 6(s) for further information.

248

The fair value of investment property (as disclosed in the financial statements) is based on a valuation by the

management of the Group. The range of yields applied to the net annual rentals to determine the fair value of

the property was as follows:

Region 2015

Xuhui Dist, Shanghai 4.42%

As of December 31, 2015 and 2014, the Group's investment properties were not provided as pledged assets.

(i) Goodwill

Goodwill arising from the merger was as follows:

Fair value of consideration transferred $ 721,574

Less: Fair value of identifiable net assets 571,794

$ 149,780

December 31,

2015

December 31,

2014

Cost $ 149,780 149,780

Less: Accumulated amortization 44,363 44,363

Book value $ 105,417 105,417

Nacia Co. acquired 50% of Namchow International Co.'s equity on July 15, 2010. Nacia Co. recognized a

goodwill of $9,687.

Namchow International Co. invested in Ting Hao Cayman Co. and acquired 19.35% of its equity in June 2004.

Namchow International Co. recognized a goodwill of $140,093. The goodwill was amortized in five years

which had ceased since 2006.

(j) Short-term and long-term borrowings

The details, terms and clauses of the Group's short-term and long-term borrowings were as follows:

i) Short-term borrowings

December 31, 2015

Currency

Range of interest

rates (%)

Year of

maturity

Amount

Unsecured loans THB 6.50~7.38 105 $ 1,383

Unsecured loans EUR 1.45~1.55 105 1,388,430

Unsecured loans USD 1.05~2.17 105 1,609,786

Unsecured loans TWD 1.00~1.19 105 610,000

Unsecured loans JPY 1.68 105 3,065

249

Total $ 3,612,664

250

December 31, 2014

Currency

Range of interest

rates (%)

Year of

maturity

Amount

Unsecured loans THB 6.75~7.40 104 $ 1,414

Unsecured loans EUR 1.73~1.75 104 56,076

Unsecured loans USD 1.04~1.97 104 3,018,153

Unsecured loans TWD 1.05~1.35 104 300,000

Unsecured loans JPY 0.97~1.76 104 30,045

Total $ 3,405,688

As of December 31, 2015 and 2014, the unused credit facilities amounted to $8,072,542 thousand and

$7,495,598 thousand, respectively.

ii) Short-term commercial paper payable

December 31, 2015

Guarantee or

acceptance institution

Range of

interest rates

(%)

Amount

Commercial paper payable TA CHING BILLS

FINANCE

CORPORATION

0.61~0.69 $ 65,000

Commercial paper payable CHINA BILLS

FINANCE

CORPORATION

0.61 25,000

Commercial paper payable MEGA BILLS FINANCE

CO., LTD.

0.80~1.18 30,000

Commercial paper payable DAH CHUNG BILLS

CORPORATION

0.77 20,000

Commercial paper payable TAIWAN FINANCE 0.90 10,000

CORPORATION

150,000

Less: discount 33

Total $ 149,967

251

December 31, 2014

Guarantee or

acceptance institution

Range of

interest rates

(%)

Amount

Commercial paper payable TA CHING BILLS

FINANCE

CORPORATION

1.18 $ 50,000

Commercial paper payable CHINA BILLS

FINANCE

CORPORATION

0.78 20,000

Commercial paper payable MEGA BILLS FINANCE 1.18~1.20 30,000

CO., LTD.

100,000

Less: discount 6

Total $ 99,994

The Group did not pledge assets against the short-term commercial paper payable.

As of December 31, 2015 and 2014, the unused credit facilities amounted to $240,000 thousand and $380,000

thousand, respectively.

iii) Long-term borrowings

December 31, 2015

Currency

Range of interest

rates (%)

Year of

maturity

Amount

Secured loans TWD 1.79~1.87 105~116 $ 2,254,600

Secured loans JPY 2.00 106 403,596

Unsecured loans TWD 1.52~1.85 105~108 1,374,875

Unsecured loans USD 1.07~1.78 105~109 921,773

Unsecured loans JPY 0.98 109 8,880

Unsecured loans EUR 0.83 109 53,467

Total $ 5,017,191

Current $ 529,086

Non-current 4,488,105

Total $ 5,017,191

252

December 31, 2014

Currency

Range of interest

rates (%)

Year of

maturity

Amount

Secured loans TWD 1.79~1.80 104~116 $ 1,500,000

Secured loans JPY 2.00~2.10 106 391,608

Unsecured loans TWD 1.54~1.89 104~106 2,089,508

Unsecured loans USD 0.98~1.65 104~109 782,458

Total $ 4,763,574

Current $ 466,463

Non-current 4,297,111

Total $ 4,763,574

As of December 31, 2015 and 2014, the unused credit facilities amounted to $0 thousand, and $800,000

thousand, respectively.

The Group has disclosed the related risk exposure to the financial instruments in note 6(t).

The Group has pledge certain assets against the loans; please refer to note 8 for additional information.

iv) Commitments of loan contracts

The Group entered into syndicated loan contract amounting to $1,800,000 with Industrial Bank of Taiwan and

nine other banks on October 24, 2014. The main purpose of the loan was to repay the previous medium-term

loan contract and to increase the limit of debt ratio. The following is a summary of the debt ratio calculated

according to the contract:

i. The borrower is obligated to maintain the following financial ratios, which are assessed

annually, within the designated length of the contract:

1) Debt ratio shall not exceed 250%

2) The interest coverage ratio shall not be lower than 2.5 times of the loan interest.

3) The identifiable net worth shall not be less than $3,000,000.

All of the aforementioned financial ratios and obligations are calculated based on the

calculation used in the consolidated financial statements.

ii. Unless a written consent from the lending bank is obtained, the borrower shall not engage in

the following events:

1) Merger, separation, selling, or transferring of the Company's shares.

2) All events outlined in Article 185 of the ROC Company Act.

If there is any breach of the contract, after obtaining the consent from most of the banks, the

credit limit will either be fully or partially cancelled, depending on the decision made by the

banks. Also, the Group will be requested to pay all the remaining balance in an earlier time,

and all the agreement stated in the contract will be considered invalid.

253

In addition, the Group signed the first supplementary contract on December 16, 2015. The financial ratio was

adjusted as follows:

i. The debt ratio for both 2015 and 2016 shall not exceed 295%; for 2017 and 2018, the debt

ratio shall not exceed 285% and 250%, respectively.

ii. The interest coverage ratio shall not be less than 300%.

iii. The identifiable net worth shall not be less than $4,000,000.

The Group renewed its contracts with Taishin International Bank Co., Ltd., Mega International Commercial

Bank, and Industrial Bank of Taiwan, amounting to $200,000 thousand, $300,000 thousand, and $200,000

thousand, respectively, in May, June, and November, respectively, of 2014. The following is a summary of the

debt ratio calculated according to the contract, wherein the borrower is obligated to maintain the following

financial ratios which are assessed annually, within the designated length based on the said contracts :

i. Debt ratio shall not exceed 250%

ii. The interest coverage ratio shall not be lower than 2.5 times of the loan interest.

iii. The identifiable net worth shall not be less than $2,200,000.

In addition, the Group signed a supplementary amounting to $200,000 thousand with Industrial Bank of Taiwan

in October 2015. The financial ratios were adjusted as follows:

i. Debt ratio shall not exceed 295%

ii. The interest coverage ratio shall not be lower than 3 times of the loan interest.

iii. The identifiable net worth shall not be less than $4,000,000.

The Group renewed its loan contract amounting to $200,000 thousand with CTBC Bank on August 25, 2015.

The main purpose of the loan was to repay the previous long-term loan contract. The borrower is obligated to

maintain the following financial ratios, which are assessed semi-annually, within the designated length of the

contract.

i. Debt ratio shall not exceed 250%

ii. The interest coverage ratio shall not be lower than 2.5 times of the loan interest.

iii. The identifiable net worth shall not be less than $2,200,000.

All of the aforementioned financial ratios and obligations are calculated based on the calculation used in the

consolidated financial statements.

The Group was in compliance with the covenants (described above) in 2015 and 2014.

254

(k) Provisions

The information of the Group's provisions for the years ended December 31, 2015 and 2014 were as follows:

Site restoration

Balance as of January 1, 2015 $ 8,585

Provisions made during the year -

Balance as of December 31, 2015 $ 8,585

Balance as of January 1, 2014 $ 6,760

Provisions made during the year 1,825

Balance as of December 31, 2014 $ 8,585

The provision was the estimation for removing, moving and restoring the lease assets according to the lease,

which was recognized as long-term liability. The future cost shall result in an uncertainty of provision due to

the long-term lease of the restaurant. Related costs are expected to paid in full after the lease term reaches its

maturity.

(l) Operating leases

Non-cancellable rental payables of operating leases were as follows:

December 31,

2015

December 31,

2014

One year $ 160,919 211,108

Less than five years 282,947 409,170

More than five years 192,221 471,064

$ 636,087 1,091,342

The Group leases offices, restaurant and transport equipment under operating leases. The leases typically run for

a period of 1 to 6 years. The lease payment will be adjusted to reflect market price.

For the years ended December 31, 2015 and 2014, lease expenses were $270,807 thousand and $211,108

thousand, respectively.

(m) Employee benefits

i) Defined benefit plans

The following table shows a reconciliation between the present value of the defined benefit obligation and the

fair value of plan assets:

December 31,

2015

December 31,

2014

The present value of the defined benefit obligations $ 595,286 573,882

Fair value of plan assets (47,111) (55,948)

255

The net defined benefit liability $ 548,175 517,934

256

The Group established the pension fund account for the defined benefit plan in Bank of Taiwan. The plan, under

the Labor Standards Law, provides benefits based on an employee's length of service and average monthly

salary for the six-month period prior to retirement.

i. Composition of plan assets

The Group allocates pension funds in accordance with the Regulations for Revenues,

Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are

managed by the Bureau of Labor Funds, Ministry of Labors. Minimum annual

distributions of the funds by the Bureau shall be no less than the earnings attainable from

the two-year time deposits with the interest rates offered by local banks.

The Group's Bank of Taiwan labor pension reserve account balance amounted to $47,111

thousand at the end of the reporting period. For information on the utilization of the labor

pension fund assets including the asset allocation and yield of the fund, please refer to the

website of the Bureau of Labor Funds, Ministry of Labor.

ii. Movements in present value of defined benefit plan obligation

The movements in present value of the Group's defined benefit plan obligation for the years

ended December 31, 2015 and 2014 were as follows:

2015 2014

Defined benefit obligation at 1 January $ 573,882 571,946

Current service costs and interest 20,756 21,472

Remeasurements of the net defined benefit liability

(asset)

-Due to changes in financial assumption of

actuarial (losses) gains

28,737 11,748

Past services cost and settlement losses (235) -

Benefits paid by the plan (27,854) (31,284)

Defined benefit obligation at 31 December $ 595,286 573,882

257

iii. Movements in fair value of defined benefit plan assets

The movements in the fair value of the defined benefit plan assets for the years ended

December 31, 2015 and 2014 were as follows:

2015 2014

Fair value of plan assets, January 1 $ 55,948 68,623

Remeasurements of the net defined benefit liability

(asset)

-Return on plan assets (excluding amounts

included in net interest expense)

632 1,359

-Due to changes in financial assumption of

actuarial (losses) gains

1,013 448

Contributions made 17,372 16,802

Benefits paid by the plan (27,854) (31,284)

Fair value of plan assets, December 31 $ 47,111 55,948

iv. Expenses recognized in profit or loss

The expenses recognized on profit or loss for the years ended December 31, 2015 and 2014

were as follows:

2015 2014

Current service cost $ 8,687 8,925

Net interest on the defined benefit liability (asset) 9,821 11,187

Past servies cost and settlement losses (235) -

$ 18,273 20,112

2015 2014

Operating costs $ 7,185 7,473

Selling expenses 3,371 3,892

General and administration expenses 7,092 8,104

Research and development expenses 625 643

$ 18,273 20,112

258

v. Remeasurement in the net defined benefit liability (asset) recognized in other

comprehensive income

The Group's remeasurement in the net defined benefit liability (asset) recognized in other

comprehensive income for the years ended December 31, 2015 and 2014 were as follows:

2015 2014

Cumulative amount, January 1 $ 84,583 73,283

Recognized during the period 27,724 11,300

Cumulative amount, December 31 $ 112,307 84,583

vi. Actuarial assumptions

The following are the Group's principal actuarial assumptions at the reporting dates:

December 31,

2015

December 31,

2014

Discount rate 1.63~1.88% 2.00%

Future salary increases rate 1.00~2.00% 1.00~2.00%

The Group expects to make contributions of $15,973 thousand to the defined benefit plans

in the next year starting from the reporting date of 2015.

The weighted average duration of the defined benefit obligation is 12.10~20.54 years.

vii. Sensitivity analysis

When calculating the present value of the defined benefit obligation, the Group uses

judgments and estimations to determine the related actuarial assumptions, including

discount rate, employee turnover rates and future salary changes, as of the financial

statement date. Any changes in the actuarial assumptions may significantly impact the

amount of the defined benefit obligation.

As of December 31, 2015, the present value of defined benefit obligation impact was as

follow:

The impact of defined benefit

obligation Increase Decrease

Discount rate (0.25%) $ (12,588) 13,050

Future salary increase rate (0.25%) 12,802 (12,408)

Reasonably possible changes at the reporting date to one of the relevant actuarial

assumptions, holding other assumptions remain constant, would have affected the defined

benefit obligation by the amounts shown above. The method used in the sensitivity

analysis is consistent with the calculation of the pension liabilities in the balance sheets.

259

There is no change in the method and assumptions used in the preparation of the sensitivity

analysis for 2015 and 2014.

ii) Defined contribution plans

The Company and its subsidiaries in Taiwan have made monthly contributions equal to 6% of each employee's

monthly wages to the labor pension personal account at the Bureau of the Labor Insurance in accordance with

the provisions of the Labor Pension Act. Subsidiaries in China have made monthly contributions equal to 20%

of each employee’s monthly wages to China Social Security Fund in accordance with the provisions of the

Endowment Insurance of the People’s Republic of China. Under this defined contribution plan, the Group

contributes a fixed amount to the Bureau of the Labor Insurance and China Social Security Fund without

additional legal or constructive obligations.

The Group's pension costs under the defined contribution plan were $133,090 thousand and $118,982 thousand

for the years 2015 and 2014, respectively.

(n) Income tax

i) Income tax expenses

The amount of the Group's income tax for the years ended December 31, 2015 and 2014, were as follows:

2015 2014

Current income tax expense

Current period $ 466,556 465,899

Adjustment for prior periods (47,763) 40,483

418,793 506,382

Deferred tax benefit

Origination and reversal of temporary differences 158,287 63,484

Income tax expenses on continuing operations $ 577,080 569,866

No income tax recognized in other comprehensive income for 2015 and 2014.

260

Reconciliations of the Group's income tax expense and the profit before tax for 2015 and 2014 were as follows:

2015 2014

Income before tax $ 1,741,041 1,578,603

Income tax calculated on pretax accounting income at

statutory rate

$ 295,977 268,363

Effect of tax rates in foreign jurisdiction 369,098 356,470

Adjustment for prior periods (47,763) 40,483

Non-deduction expenses 11,924 15,603

Tax-exempt expense (16,725) (15,976)

Investment income (132,791) (121,871)

Estimated withholding tax of attributable earnings of

subsidiaries in Mainland China

40,117 15,683

Interest withholding tax on disposal of investments - 3,655

Current-year losses for which no deferred income tax

assets was recognized

41,533 5,114

Unrecognized changes in temporary differences 3,973 911

10% surtax on undistributed earnings 23,472 15,932

Others (11,735) (14,501)

Total $ 577,080 569,866

ii) Recognized deferred tax assets and liabilities

i. Unrecognized deferred income tax assets

The Deferred income tax assets that have not been recognized by the Group are as follows:

December 31,

2015

December 31,

2014

Deductible temporary differences $ 4,682 1,395

Impairment loss 19,072 17,842

Tax losses 17,632 18,498

$ 41,386 37,735

Tax losses are applied to Income Tax Act that can be carried forward for ten years, after

assessed by tax authority, to offset taxable income before apply to tax rate. Deferred

income tax assets have not been recognized in respect of these items because it is not

probable that the future taxable profit will be available, against which, the Group can utilize

the benefits therefore.

261

As of December 31, 2015, the amount of tax losses not yet recognized as deferred tax assets

and their last year for credit is as follows:

Year

Amount

Year of expiration

2008 $ 3,443 2018

2009 33,520 2019

2010 10,542 2020

2011 15,947 2021

2012 21,537 2022

2013 8,252 2023

2014 5,988 2024

2015 4,490 2025

$ 103,719

ii. Recognized deferred income tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2015 and 2014 were as

follows:

Deferred tax liabilities:

Withholding

tax of

attributable

earnings of

subsidiaries in

Mainland

China

Foreign

investment

income

accounted for

using equity

method

Depreciation

difference

between

financial and

tax reporting

Land value

increment tax Other Total

Balance at January 1, 2015 $ 144,677 90,496 65,798 304,572 - 605,543

Recognized in profit or loss 5,086 169,101 (10,033) - 104 164,258

Balance at December 31, 2015 $ 149,763 259,597 55,765 304,572 104 769,801

Balance at January 1, 2014 $ 139,980 26,113 68,038 304,572 - 538,703

Recognized in profit or loss 4,697 64,383 (2,240) - - 66,840

Balance at December 31, 2014 $ 144,677 90,496 65,798 304,572 - 605,543

Deferred tax assets:

Loss carry

forward

Allowance for

inventory

valuation Other Total

Balance at January 1, 2015 $ - 2,849 24,612 27,461

Recognized in profit or loss 4,389 (173) 1,755 5,971

262

Balance at December 31, 2015 $ 4,389 2,676 26,367 33,432

Balance at January 1, 2014 $ - 3,678 20,427 24,105

Recognized in profit or loss - (829) 4,185 3,356

Balance at December 31, 2014 $ - 2,849 24,612 27,461

263

iii) Examination and approval

The tax returns of the Company have been examined by the tax authorities through 2013.

iv) Imputation tax information

The components of unappropriated earnings were as follows:

December 31,

2015

December 31,

2014

Derived from year 1997 and prior years $ - -

Derived from year 1998 and thereafter 1,686,942 1,314,340

$ 1,686,942 1,314,340

December 31,

2015

December 31,

2014

Balance of imputation credit account (ICA) $ 73,577 23,225

2015(estimated) 2014(actual)

imputation tax credit ratio of earnings to residents of

ROC 4.35% 7.65%

Effective January 1, 2015, the imputation tax credit of dividends or earnings distributed to individual shareholder

who are residents of the ROC was adjusted to half of the original amount. Furthermore, the imputation tax

credit of dividends or earnings distributed to individual shareholders resulting from the 10% surtax on

unappropriated earnings was also adjusted to half of the original amount.

Under the integrated income tax system, the above imputation credit account and creditable ratio were calculated

according to the formal interpretation No.10204562810 issued by Taxation Administration, Ministry of

Finance, R.O.C. on October 17, 2013.

(o) Capital and other equity

As of December 31, 2015 and 2014, the total value of authorized ordinary shares amounted to $4,000,000

thousand, with par value of $10 per share, of which 400,000 thousand shares, 294,133 shares were issued. All

issued shares were paid up upon issuance.

A reconciliation of the Company's outstanding shares of the years 2015 and 2014 were as follows:

Unit: thousand shares 2015 2014

Balance at January 1 (Balance at December 31) 294,133 294,133

264

i) Additional paid-in capital

The components of additional paid-in capital as of December 31, 2015 and 2014, were as follows:

December 31,

2015

December 31,

2014

Share premium $ 1,280 1,280

Treasury stock 519,506 423,157

$ 520,786 424,437

The Company's subsidiary, Lucky Co., was awarded with cash dividends on August 6, 2015 and June 25, 2014

amounting to $96,349 thousand and $91,760 thousand, respectively, and they were recognized as capital

surplus-treasury stock transactions.

In accordance with the ROC Company Act in January 2012, realized capital surplus can be used to increase

share capital or to distribute as cash dividends after offsetting losses. The aforementioned capital surplus

includes share premiums and donation gains. In accordance with the Securities Offering and Issuance

Guidelines, the amount of capital surplus to increase share capital shall not exceed 10 percent of the actual

share capital amount.

ii) Retained earnings

As the Company is in a fluctuating business environment and in its growth stage, the dividend policy states that

the distribution of dividends varies depend on the Company's cash position and reflects its capital budget and

working capital demands. However, distribution of earnings shall be distributed preferably by using stock

dividends.

In accordance with the Company's articles of incorporation, the Company must retain 10% of its after-tax

earnings as legal reserve (less deficits of prior years, if any) and then provide a special reserve for the

stockholders' equity account. The remaining amount should be distributed as follows:

i. Remuneration of directors and supervisors as propose by the Board of Directors;

ii. 1% is distributed as employee bonuses.

iii. 50% to 100% of the remainder, as necessary, should be distributed as dividends, in which

cash dividends should be at least 10% of the total dividends distributed.

The abovementioned distribution of earnings should be proposed by the Board of Directors and is subject to the

stockholders' approval.

For the upcoming three years, The Company plans to distribute all the earnings of each year, and the ratio of

cash and stock distributed is determined in accordance with the policy in The Company's articles of

incorporation and with consideration of The Company's financial situation.

265

In accordance with the amendments to the Company Act in May 2015, employee bonuses and the directors' and

supervisors' remuneration are no longer part of the appropriations of earnings. The Board of Directors proposed

the amendments on March 17, 2016, which will be approved at the 2016 annual shareholders’ meeting. Please

refer to employee benefits expense in Note 6(r).

i. Legal reserve

In accordance with the Company Act as amended in January 2012, that companies must

retain 10% of their annual net earnings, as defined in the Act, until such retention equals the

amount of issued share capital. When a company incurs no loss, it may, pursuant to a

resolution to be adopted by the shareholders' meeting as required, distribute its legal reserve

by issuing new shares or cash. Only the portion of legal reserve which exceeds 25% of the

issued share capital may be distributed.

ii. Special earnings reserve

As the Company opted for the exemptions allowed under IFRS 1 "First-time Adoption of

International Financial Reporting Standards" during the Company's first-time adoption of

the IFRS as endorsed by the FSC, unrealized revaluation increments and cumulative

translation adjustments of $512,508 thousand, which were previously recognized in

shareholders' equity were reclassified to retained earnings. In accordance with Regulatory

Permit No.1010012865 as issued by the FSC on April 6, 2012, a special reserve is

appropriated from retained earnings for the aforementioned reclassification. In addition,

during the use, disposal or reclassifications of relevant assets, this special reserve is reverted

to distributable earnings proportionately. The carrying amount of special reserve amounted

to $512,508 thousand as of December 31, 2015.

For the regulatory permission mentioned above, the Company is also required to set aside

an additional special reserve, as part of the distribution of its annual earnings, equal to the

difference between the amount of the above-mentioned special reserve and net debit balance

of the other components of stockholders’ equity.

iii. Distribution of retained earnings

For the year 2014 and 2013, the estimated amounts of employees' bonuses was $8,538

thousand and $7,689 thousand, respectively, and the estimated amounts of directors' and

supervisors' emoluments was $34,151 thousand and $30,757 thousand, respectively. Such

amounts were estimated by multiplying after-tax income by the percentage of distribution of

employees' bonuses and directors' and supervisors' emoluments, and recorded as cost of

sales or operating expenses in the period. The actual amount of employee bonus and

remuneration to the board of directors and supervisors distributed for the years 2014 and

2013 is identical to that estimated in the financial report ended 2014 and 2013, and related

information can be accessed through the Market Observation Post System.

266

The appropriations of 2014 and 2013 earnings as dividends to stockholders that were

approved by the Company's shareholders during their meetings on June 10, 2015, and June

6, 2014, respectively, were as follows:

2014 2013 Amount

per share

(NT

dollars)

Total

amount

Amount

per share

(NT

dollars)

Total

amount

Dividends distributed to

common shareholders:

Cash $ 2.10 617,680 2.00 588,266

iii) Treasury stock

None shares were purchased by the Company and its subsidiaries during the years 2015 and 2014. The reason is

that the subsidiaries held by long-term of the Company shares previous years. As of December 31, 2015 and

2014, the subsidiaries held the Company’s shares as follows:

December 31, 2015

Number of

shares (in

Market

price per

Adjusted

cost per

Total

market

Total

treasury Subsidary name thousand) share share value stock

Lucky Co. 46,041 67.90 11.51 $ 3,126,201 530,114 December 31, 2014 Number of

shares (in

Market

price per

Adjusted

cost per

Total

market

Total

treasury Subsidary name thousand) share share value stock

Lucky Co. 46,041 55.30 11.51 $ 2,546,082 530,114

267

iv) Other equities

Foreign

exchange

differences

arising from

foreign

operation

Available-f

or-sale

financial

assets

Non-contro

lling

interests Total

Balance as of January 1, 2015 $ 210,304 (5,685) 5,056 209,675

Foreign exchange differences arising

from foreign operation

(58,483) - (4,686) (63,169)

Exchange differences on translation

financial statements of foreign

subsidiaries accounted for using

equity method

(85,617) - - (85,617)

Unrealized gains (losses) from

available-for-sale financial assets

- (598)

- (598)

Unrealized gains (losses) on

available-for-sale financial assets,

subsidiaries accounted for using

equity method

-

(140)

-

(140)

Balance as of December 31, 2015 $ 66,204 (6,423) 370 60,151

Balance as of January 1, 2014 $ 37,681 (4,865) (49) 32,767

Foreign exchange differences arising

from foreign operation

30,645 - 5,105 35,750

Exchange differences on translation

financial statements of foreign

subsidiaries accounted for using

equity method

141,978 - - 141,978

Unrealized gains (losses) from

available-for-sale financial assets

- (664)

- (664)

Unrealized gains (losses) on

available-for-sale financial assets,

subsidiaries accounted for using

equity method

-

(156)

-

(156)

Balance as of December 31, 2014 $ 210,304 (5,685) 5,056 209,675

268

(p) Earnings per share

The calculation of the Group's basic earnings per share and diluted earnings per share for the years ended

December 31, 2015 and 2014, was as follows:

i) Basic earnings per share

2015 2014

Net income attributable to common shareholders of the

Company $ 1,112,850 948,634

Weighted-average number of common shares 248,092 248,092

Basic earnings per share (in NT dollars) $ 4.49 3.82

ii) Diluted earnings per share

2015 2014

Net income attributable to common shareholders of the

Company (diluted) $ 1,112,850 948,634

Weighted-average number of common shares (basic) 248,092 248,092

Impact of potential common shares

Effect of employee's bonuses 263 266

Weighted-average number of shares outstanding

(diluted) 248,355 248,358

Diluted earnings per share (in NT dollars) $ 4.48 3.82

(q) Revenue

The details of the Group's revenue for the years ended December 31, 2015 and 2014, are as follows:

2015 2014

Sale of goods $ 15,446,582 14,763,103

Service income 31,556 30,255

Revenue on conversion 1,405 38,488

$ 15,479,543 14,831,846

269

The articles of incorporation of the Company and its subsidiary, Shanghai Qiaoxing Co., are in accordance with

those of the customer loyalty program, which aim to boost the sales on all of their liquid products (such as

edible and non-edible oil products, as well as dish and laundry liquid detergent) by providing customers bonus

points in exchange for a discount price or complimentary items upon purchasing of any merchandise. Deferred

income is derived from the fair value of the bonus points or complimentary items which have not been

exchanged by the customers.

December 31,

2015

December 31,

2014

The Company $ 92,977 79,496

Shanghai Qiaoxing Co. 256,433 202,636

Total $ 349,410 282,132

(r) Employees' compensation and directors' remuneration

In accordance with the Company's article in March 17, 2016, this has been revised but has not yet been approved

by the shareholders meeting. If there is profit for the year, the Company should contribute more than 1% of its

profit as employee compensation, and less than 5% as directors' remuneration. However, if the Company has

accumulated deficits, the profit should be reserved to offset the deficit. The amount of remuneration to

directors, and compensation to employees had been approved by the board of directors.

The Company estimated its employee compensation and directors' remuneration amounting to $14,029 thousand

and $56,116 thousand for the year 2015, respectively. The estimated amounts mentioned above are based on

the net profit before tax of each respective ending period, multiplied by the percentage of the employee

compensation, and the directors' remuneration, as specified in the Company's article. The estimations are

recorded under operating expenses and cost. The differences between the estimated amounts in financial

statements and actual amounts approved by the Board of Directors, if any, shall be accounted for as changes in

accounting estimates and recognized in 2016.

(s) Non-operating income and expenses

i) Other income

2015 2014

Interest income $ 94,068 47,373

Government grants 47,847 76,570

Rental income 7,671 1,984

Other 34,543 31,073

$ 184,129 157,000

270

The Company recalled and disposed its products because it violated the Act Governing Food Safety and

Sanitation. However, the Company did not inform the Department of Public Health (DOH), Taoyuan, and has

to penalty of $3,000 thousand, which was recognized as loss. However, the Company appealed to the DOH,

Taoyuan regarding the said penalty. As a result, on December 24, 2015, the DOH, Taoyuan, decided to reduce

the amount to $300 thousand instead of $3,000 thousand, which were recognized as other accounts payable and

other accounts receivable, respectively. Therefore, the difference of $2,700 thousand, which the Company is

expected to receive from the DOH, Taoyuan, was recognized as other gains as of December 31, 2015.

ii) Other gains and losses

2015 2014

Gains (loss) of foreign exchange $ (226,569) (6,327)

Loss on disposal of property, plant and equipment, net (6,485) (4,392)

Depreciation of investment property (3,746) -

Penal loss - (7,050)

Net gains (losses) on disposal of financial assets

(liabilities) measured at fair value through profit or loss

6,712 2,850

Gains on disposal of investments - 25,930

Impairment loss on non-financial assets - (20,000)

Handling charges - (11,303)

Other (17,959) (10,085)

$ (248,047) (30,377)

The Company declared its 30 batches of raw materials as industrial materials during the period from 2013 to

August 2014. However, the said materials were not registered with the Food and Drug Administration (FDA),

Ministry of Health and Welfare, which violated the Act Governing Food Safety and Sanitation. Therefore, On

October 15, 2014, the Company was ordered by the DOH of Taoyuan County Government to temporarily

cease its production on all types of edible oil, as well as recall 123 kinds of its products island-wide. In addition,

the Company was requested to pay the penalty amounting to $30,000 thousand by the DOH of Taipei City

Government. On October 19, 2014, the DOH of Taoyuan City Government gave the Company the permission

on all of its recalled products to be sold again in the market under the condition that the said products will have

to be examined and approved by the FDA for market consumption. On January 23, 2015, the DOH of Taipei

City Government revoked its decision on the amount the Company has to pay for its penalty; instead of

paying the fine of $30,000 thousand, on January 30, 2015, the Company will only have to pay the amount of

$7,050 thousand as ordered by the DOH of Taipei City Government. On December 31, 2015, the Company

paid the DOH of Taipei City Government the requested amount in full.

iii) Finance costs

2015 2014

Interest expenses $ 150,460 125,961

271

(t) Financial instruments

i) Credit risk

i. Credit risk exposure

The maximum credit risk exposure of the Group's financial assets is equal to their carrying

amount.

ii. Concentration of credit risk

The Group's cash and cash equivalents and accounts receivable are the main source of

potential credit risk. The Group deposits its cash and cash equivalents in different financial

institutions and has no concentration of credit risk on an individual customer. Therefore, the

Group concluded that it is not exposed to credit risk.

ii) Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments but

excluding the impact of netting agreements.

Carrying

amount

Contractual

cash flows

Within a

year

1-2 years

2-5 years

More than 5

years

December 31, 2015

Non-derivative financial liabilities

Secured loans $ 2,658,196 2,802,668 83,945 496,940 2,052,142 169,641

Short-term commercial paper payable 149,967 150,000 150,000 - - -

Notes payable 157 157 157 - - -

Accounts payable 721,917 721,917 721,971 - - -

Unsecured loans 5,971,659 6,057,293 4,115,619 1,475,238 453,729 -

Other payable 873,222 873,222 873,222 - - -

$ 10,375,118 10,605,257 5,944,914 1,972,178 2,505,871 169,641

December 31, 2014

Non-derivative financial liabilities

Secured loans $ 1,891,608 2,042,333 103,153 375,351 1,394,188 169,641

Short-term commercial paper payable 99,994 100,000 100,000 - - -

Notes payable 1,116 1,116 1,116 - - -

Accounts payable 663,996 663,996 663,996 - - -

Unsecured loans 6,277,654 6,397,787 3,896,216 2,050,590 405,896 45,085

Other payable 690,070 690,070 690,070 - - -

$ 9,624,438 9,895,302 5,454,551 2,425,941 1,800,084 214,726

The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier

or at significantly different amounts.

272

iii) Currency risk

i. Risk exposure

The Group's financial assets and financial liabilities exposed to significant currency risk

were as follows:

Foreign

currency

Exchange

rate

NTD

December 31, 2015

Financial assets:

Monetary assets:

USD $ 3,560 32.85 118,169

Financial liabilities:

Monetary liabilities:

USD $ 79,968 32.85 2,624,965

EUR $ 40,685 35.88 1,459,778

December 31, 2014

Financial assets:

Monetary assets:

USD $ 3,605 31.65 114,095

Financial liabilities:

Monetary liabilities:

USD $ 120,591 31.65 3,816,691

ii. Sensitivity analysis

The Group's exposure to foreign currency risk arose from cash and cash equivalents,

accounts and other receivables, loans and borrowings, and accounts and other payables that

were denominated in foreign currencies. A 1% appreciation (depreciation) of the NTD

against the USD, and EUR as of December 31, 2015 and 2014, would have increased

(decreased) the net income before tax by $98,048 thousand and $98,324 thousand,

respectively.

iii. Foreign exchange gain and loss on monetary item

Since the Group has many kinds of functional currency, the information on foreign

exchange gain (loss) on monetary items is disclosed by total amount. For the years 2015

and 2014, foreign exchange gain (loss) (including realized and unrealized abortions)

amounted to $(226,569) thousand and $(6,327) thousand.

iv) Interest rate risk analysis

Please refer to the note on liquidity risk management for the interest rate exposure of the Group's financial assets

and liabilities.

273

The following sensitivity analysis is based on the risk exposure to interest rates on derivative and non-derivative

financial instruments on the reporting date. Regarding assets with variable interest rates, the analysis is on the

basis of the assumption that the amount of assets outstanding at the reporting datewas outstanding throughout

the year. The rate of change is expressed as the increment or decrement by 1% when reporting to the

management internally, which also represents the management's assessment of the reasonable interest rate

change.

If the interest rate had increased / decreased by 1%, the Group's net income before tax would have increased /

decreased by $71,628 thousand and $67,805 thousand for the years ended December 31, 2015 and 2014,

respectively, with all other variable factors remaining constant.

v) Fair value and carrying amount

i. Categories and fair value of financial instruments

Except for the followings, carrying amount of the Group's financial assets and liabilities are

valuated approximately to their fair value, and are not based on observable market date and

the value measurements which are not reliable. No additional fair value disclosure is

required in accordance to the Regulations.

December 31, 2015 Fair value Carrying

amount

Level 1 Level 2 Level 3 Total

Available-for-sale financial

assets

Domestic listed stock $ 13,549 13,549 - - 13,549

Financial assets at cost 27,166 - - - -

Subtotal 40,715 13,549 - - 13,549

Loans and receivables

Cash and cash equivalents 5,330,938 - - - -

Debt bond investment

without active market

249,750 - - - -

Accounts and notes

receivable and other

1,861,999 - - - -

receivables

Subtotal 7,442,687 - - - -

Total $ 7,483,402 13,549 - - 13,549

274

December 31, 2015 Fair value Carrying

amount

Level 1 Level 2 Level 3 Total

Financial liabilities

measured at amortized cost

Short-term borrowings $ 3,612,664 - - - -

Short-term commercial

paper payable

149,967 - - - -

Notes and accounts

payable

722,074 - - - -

Other payables 873,222 - - - -

Long-term borrowings

(including current

5,017,191 - - - -

portion)

Subtotal 10,375,118 - - - -

Total $ 10,375,118 - - - -

December 31, 2014 Fair value Carrying

amount

Level 1 Level 2 Level 3 Total

Financial assets at fair value

through profit or loss

Derivative financial assets $ 50 - 50 - 50

Available-for-sale financial

assets

Domestic listed stock 14,287 14,287 - - 14,287

Financial assets at cost 27,166 - - - -

Subtotal 41,453 14,287 - - 14,287

Loans and receivables

Cash and cash equivalents 4,461,887 - - - -

Accounts and notes

receivable and other

1,846,328 - - - -

receivables

Subtotal 6,308,215 - - - -

Total $ 6,349,718 14,287 50 - 14,337

275

December 31, 2014 Fair value Carrying

amount

Level 1 Level 2 Level 3 Total

Financial liabilities

measured at amortized cost

Short-term borrowings $ 3,405,688 - - - -

Short-term commercial

paper payable

99,994 - - - -

Notes and accounts

payable

665,112 - - - -

Other payables 690,070 - - - -

Long-term borrowings

(including current

4,763,574 - - - -

portion)

Total $ 9,624,438 - - - -

ii. Valuation techniques and assumptions used in fair value determination

1) Non-derivative financial instruments

Financial instruments traded in active markets are based on quoted market prices. The

quoted price of a financial instrument obtained from main exchanges and on-the-run

bonds from Taipei Exchange can be used as a basis to determine the fair value of the

listed companies’ equity instrument and debt instrument of the quoted price in an

active market.

Stocks of listed Companies and open ended funds are financial assets possessing

standard provision and trading in active markets. The fair values are determined based

on the market quotes and net assets value, respectively.

2) Derivative financial instrument

Fair value of forward currency exchange is usually determined by using the forward

currency rate.

iii. Fair value hierarchy

The Group used the fair value that can be observed in the market to measure the value of

assets and liabilities. Fair value levels are based on the degree in which the fair value can be

observed and grouped in to Levels 1 to 3 as follows:

1) Level 1: quoted prices (unadjusted) in active markets for identified assets or liabilities.

2) Level 2: inputs, other than the quoted prices included within Level 1 that are

observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.

derived from prices).

3) Level 3: inputs for assets or liabilities that are not based on observable market data

(unobservable inputs).

276

There was no such situation that the Company reclassified the financial instruments from

one level to another as of the reporting date.

(u) Financial risk management

i) Overview

The Group is exposed to the following risks arising from financial instruments:

i. Credit risk

ii. Liquidity risk

iii. Market risk

This note discloses information about the Group's exposure to the aforementioned risks, and its goals, policies,

and procedures regarding the measurement and management of these risks. For additional quantitative

disclosures of these risks, please refer to the notes regarding each risk disclosed throughout the financial report.

ii) Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the risk management

framework.

The Group's risk management policies are established to identify and analyze the risks faced by the Group, to set

appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies

and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The

Group, through its training and management standards and procedures, aims to develop a disciplined and

constructive control environment in which all employees understand their roles and obligations.

The Group's Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both

regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the

Precursory Audit Committee.

iii) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to

meet its contractual obligations, and arises principally from the Group's receivables from customers and

investment securities.

i. Trade and other receivables

The Group's exposure to credit risk is influenced mainly by the individual characteristics of

each customer. However, management also considers the demographics of the Group's

customer base, including the default risk of the industry and country in which customers

operate, as these factors may have an influence on credit risk, particularly during

deteriorating economic circumstances. In 2015 and 2014, there was no geographical

concentration of credit risk regarding the Group's revenue.

277

The Group have established a credit policy under which each new customer is analyzed

individually for creditworthiness before the Group's standard payment and delivery terms

and conditions are offered. Purchase limits are established for each customer, which

represent the maximum open amount without requiring approval; these limits are reviewed

on a periodic basis. Customers that fail to meet the Group's benchmark creditworthiness

may transact with the Group only on a prepayment basis.

The Group set the allowance for bad debt account to reflect the estimated losses for trade,

other receivables, and investment. The allowance for bad debt account consists of specific

losses relating to individually significant exposure and unrecognized losses arising from

similar assets groups. The allowance for bad debt account is based on historical collection

record of similar financial assets..

ii. Investments

The credit risk exposure in the bank deposits, fixed income investment and other financial

instruments is measured and monitored by the Group's finance department. Since those who

transact with the Group are banks and other external parties with good credit standing, there

are no non-compliance issues, and therefore, there is no significant credit risk.

iii. Guarantees

Pursuant to the Group’s policies, it is only permissible to provide financial guarantees to

subsidiaries. As of December 31, 2015 and 2014, the Group did not provide any

endorsement and guarantees to preparation of the third-party.

iv) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its

financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to

managing liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities

when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage

to the Group's reputation.

The Group uses activity-based costing to estimate the cost of its products and services, which assists it in

monitoring cash flow requirements and optimizing its cash return on investments. The Group aims to maintain

the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess

of the expected cash flows on financial liabilities (other than trade payables) over the succeeding 60 days. The

Group also monitors the level of expected cash outflows on trade and other payables. This excludes the

potential impact of extreme circumstances that cannot be reasonably predicted. The Group has unused short

term bank facilities of $8,312,542 thousand on December 31, 2015.

278

v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity

prices will affect the Group's income or the value of its holdings of financial instruments. The objective of

market risk management is to manage and control market risk exposures within acceptable parameters.

i. Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are

denominated in a currency other than the respective functional currencies of the Group's

entities, primarily TWD, CNY, JPY and THB. The currencies used in these transactions are

the TWD, USD, THB, JPY and CNY.

Interest expenses are denominated in the same currency as that of the principal. Generally,

the currency of loans matches that of the Group's operating cash flow, primarily consisting

of TWD, USD, THB, CNY, and JPY.

With regard to monetary assets and liabilities denominated in a foreign currency, when a

short-term risk exposure exists, the Group relies on immediate foreign exchange

transactions to ensure the net exposure to foreign exchange risk is maintained at an

acceptable level.

ii. Interest rate risk

The interest rates of the Group's long-term and short-term borrowings are floating. Hence,

changes in market conditions will cause fluctuations in the effective interest rate of the

aforementioned loans. The Group's finance department monitors and measures potential

changes in market conditions to achieve a fixed interest rate on the Group's loans.

iii. Other market price risk

The Group does not enter into any commodity contracts other than to meet the Group's

expected usage and sales requirements; such contracts are not settled on a net basis.

(v) Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence

and to sustain future development of the business. Capital consists of ordinary shares, capital surplus, retained

earnings, and non-controlling interests of the Group. The Board of Directors monitors the return on capital as

well as the level of dividends to ordinary shareholders.

The Group's debt-to-adjusted-capital ratio at the end of the reporting period was as follows:

December 31,

2015

December 31,

2014

Total liabilities $ 12,755,258 11,661,736

Less: cash and cash equivalents 5,330,938 4,461,887

Net debt $ 7,424,320 7,199,849

Total equity $ 5,644,077 5,252,578

Debt-to-adjusted-capital ratio 132% 137%

279

As of December 31, 2015, there were no changes in the Group's approach of capital management.

(7) Related-party Transactions

(a) Parent company and ultimate controlling party

The Company is the ultimate controlling party of the Group.

(b) Significant transactions with related parties

i) Leases

Type of related parties Object Period 2015 2014

Key management Building 2015.1.1~

2016.12.31

2013.1.1~

2014.12.31

$ 8,169 7,641

As of December 31, 2015 and 2014, the rent expense due to the aforementioned transactions was paid.

(c) Personnel transactions from key management

The compensation of the key management personnel comprised as the following:

2015 2014

Short-term employee benefits $ 195,701 173,861

Post-employments benefits 2,672 2,551

$ 198,373 176,412

(8) Pledged Assets

The carrying values of pledged assets were as follows:

Pledged assets

Object

December 31,

2015

December 31,

2014

Other non-current assets:

Time deposits Operating lease deposits $ 408 408

Property, plant and equipment:

Land Short-term and long-term

borrowings

2,477,812 2,442,952

Buildings Short-term and long-term

borrowings

282,539 300,288

Machinery and other Short-term and long-term 97 103

equipment borrowings

$ 2,760,856 2,743,751

280

(9) Significant Commitments and Contingencies

(a) Major contracts not recognized the commitment:

i) The Group's unrecognized contractual commitments were as follows:

December 31,

2015

December 31,

2014

Acquisition of property, plant and equipment $ 1,287,873 393,600

ii) The Group's unused letters of credit for purchases of materials:

December 31,

2015

December 31,

2014

Unused letters of credit for purchases of materials $ 61,875 42,218

iii) Long-term letters of credit guarantee bill:

December 31,

2015

December 31,

2014

Long-term letters of credit guarantee bill $ 392,000 392,000

(b) The Group's subsidiary, Dian Shui Lou Co., signed several lease contracts which will get 5% to 12%

commission of revenue. The contracts expire from February 29, 2016 to July 28, 2017.

(c) Namchow BVI Co. and Paulaner Brauhaus Consult GmbH (PBCG) have entered into a contract for

the use of the PBCG brand name and beer brewing techniques. In accordance with the contract, PBCG

has to provide the right to use its brand name and its management consultation service for restaurant

management, information service and brewing methods. The contract content is as follows:

i) Contract for the use of PBCG brand name: The contract lasts for 10 years, starting from

February 15, 1997 to February 15, 2007, with the option of extending it for an additional of five

years to a maximum of 10 years. The contract was extended. The terms of the contract state that a

royalty of 3% of service revenue (net of beer sales) for using the brand name will be paid to

PBCG based on a predetermined exchange rate with the Euro. In addition, after July 1, 2000, the

Company need not have to pay for the royalty anymore.

ii) Contract for the use of the beer brewing techniques: The contract lasts for 10 years, starting from

December 1, 1996 to December 1, 2006, with the option of extending it for an additional of five

years to a maximum of 10 years. In accordance with the contract, as royalty for the beer brewery,

starting from July 1, 2008, Namchow BVI Ltd. would have to pay the amount of 170 Euros for

every one hundred litres if the production is below 1,200 litres; 130 Euros for every one hundred

litres if the production is within the range of 1,201 to 2,400 litres; and 110 Euros for every one

hundred litres if the production ranges from 2,401 to 6,000 litres. The amount will be reduced to

90 Euros if the production is more than 6,000 litres.

281

The royalty payments made by Namchow BVI Co.,which are in accordance with the aforementioned contracts in

2015 and 2014, were $26,249 thousand and $31,171 thousand, respectively. As of December 31, 2015 and

2014, the royalty payables amounted to $2,422 thousand and $2,675 thousand, respectively, which were

recorded under accrued expenses and other current liabilities.

(d) Paulaner Brauchaus Consult GmbH (PBCG) has to provide information services and brewing methods

to Lucky Co. Contract for the use of the beer brewing techniques: In accordance with the contract, as

royalty for the beer brewery, starting from July 1, 2009, Lucky Co. would have to pay amount of 170

Euros for every one hundred litres if the production is below 250 litres; and 130 Euros for every one

hundred litres if the production ranges from 251 to 2,500 litres. The amount will be reduced to 110

Euros if the production is more than 2,501 litres.

The royal payments made by Lucky Co., which are in accordance with the aforementioned contracts in 2015 and

2014, were $1,813 thousand and $2,046 thousand, respectively. As of December 31, 2015 and 2014, the royalty

payables amounted to $617 thousand and $395 thousand, which were recorded under other payables.

(10) Significant Losses from Calamity: None.

(11) Significant Subsequent Events: None.

(12) Others

The employee benefit expenses, depreciation and amortization, categorized by function, were as follows:

By function 2015 2014

By nature

Operating

costs

Operating

expenses

Total

Operating

costs

Operating

expenses

Total

Employee benefits

Salary 857,075 1,132,463 1,989,538 792,444 998,475 1,790,919

Labor and health insurance 235,212 85,604 320,816 202,083 71,215 273,298

Pension 64,609 86,754 151,363 58,322 80,772 139,094

Others 83,651 85,600 169,251 109,513 71,725 181,238

Depreciation (note 1) 482,113 170,970 653,083 457,338 152,206 609,544

Amortization - - - - - -

note 1: Depreciation expenses for investment property recognized under other income and expenses amounting to

$3,746 thousand for 2015 were excluded.

282

(13) Other Disclosures

(a) Information on significant transactions

The following is the information on significant transactions required by the "Regulations Governing the Preparation of Financial Reports by

Securities Issuers" for the Group:

i) Loans extended to other parties:

Unit: thousand dollars

No.

Name of

Name of

Financial

statement

account

Related Highest balance

of financing to

other parties

Ending Amount

actually

drawn

Range of

interest

rates

Purposes of fund

financing for the

borrowers

Transaction

amount for

business between

Reasons for

short-term

financing

Allowance

for bad

debt

Collateral Financing limit

for each

borrowing

Maximum

financing

limit for the

lender borrower party during the year balance (Note 7) two parties Item Value company lender

1 The company Nankyo Japan

Co.

Other

accounts

receivable-

related parties

Yes 249,730 - - - 2 - Capital need

for operation

- - 2,199,928

(Note 1)

2,199,928

(Note 1)

2 Guangzhou

Namchow Co.

Shanghai

Namchow Co.

Other

long-term

accounts

receivable-

related parties

Yes 750,000 750,000 750,000 4% 2 - Capital need

for operation

- - 2,377,346

(Note 2)

2,377,346

(Note 2)

Note 1: Base on the Company’s guidelines, the allowable aggregate amount of financing provided to others cannot exceed 40% of the Company’s stockholder’s equity; the maximum financing provided to an individual company

cannot exceed 40% of the Company’s stockholder’s equity.

Note 2: Base on the Guangzhou Namchow Co.’s guidelines, the allowable aggregate amount of financing provided to others and the maximum financing provided to an individual company cannot exceed 100% of the Guangzhou

Namchow Co’s stockholder’s equity.

Note 3: The transactions within the Group were eliminated in the consolidated financial statements.

ii) Guarantees and endorsements for other parties:

Unit: thousand dollars

Name

Counter-party of guarantee

and endorsement

Limitation on

amount of

guarantees and

Highest balance

for guarantees

and

Ending

balance of

guarantees

Amount

Property

pledged on

guarantees

Ratio of accumulated

amounts of guarantees

and endorsements to

Maximum

allowable

amount for

Parent company

endorsement /

guarantees to

Subsidiary

endorsement /

guarantees to

Endorsements/

guarantees to

third parties on

No.

of

company

Name Relationship

with the

company

endorsements

for one party

endorsements

during the year

and

endorsements

actually

drawn

and

endorsements

(Amount)

net worth of the latest

financial statements

guarantees

and

endorsements

third parties

on behalf of

subsidiary

third parties

on behalf of

parent company

behalf of

company in

Mainland China

0 The

Company

Nacia Co. 2 5,499,819 356,700 310,300 117,160 - 5.64% 5,499,819 Y

0 The

Company

Ting Hao Cayman

Co.

3 5,499,819 884,500 493,000 435,000 - 8.96% 5,499,819 Y

0 The

Company

Tianjin Namchow

Co.

3 5,499,819 429,200 - - - - % 5,499,819 Y Y

0 The

Company

Guangzhou

Namchow Co.

3 5,499,819 435,000 - - - - % 5,499,819 Y Y

0 The

Company

Nankyo Japan Co. 2 5,499,819 552,344 552,344 434,824 - 10.04% 5,499,819 Y

1 Lucky Co. Dian Shui Lou

Co.

2 3,914,795 76,000 46,000 6,214 - 1.18% 3,914,795

Note 1: The guarantee's relationship with the guarantor is as follows:

(1) Ordinary business relationship.

(2) A subsidiary whose common stock is more than 50% directly owned by the guarantor.

(3) An investee whose common stock is more than 50% owned by the parent company and its subsidiary in aggregate.

(4) The parent company owns, directly or indirectly via subsidiaries, more than 50% of the guarantor's common stock.

(5) A company in the same trade that is mutually guaranteed pursuant to the covenants of a construction contract upon contracting a project.

(6) A company that is guaranteed proportionately according to the guarantor's ownership percentage due to co-investment by various investors.

Note 2: According to Namchow Co.’s guarantee and endorsement policies, the total guarantee and endorsement not exceed 100% of Namchow Co.’s net worth, while the total guarantees and endorsements for an individual party

not exceed 100% of Namchow Co.’s net worth.

Note 3: According to Lucky Co.’s guarantee and endorsement policies, the total guarantee and endorsement not exceed 100% of Lucky Co.’s net worth, while the total guarantees and endorsements for an individual party not

exceed 100% of Namchow Co.’s net worth.

Note 4: The transactions within the Group were eliminated in the consolidated financial statements.

iii) Securities held as of December 31, 2015 (excluding investment in subsidiaries, associates and joint ventures):

Unit: thousand dollars

Nature and name Relationship Ending balance Maximum

Name of holder

of security

with the security

issuer

Account name Number of

shares

Book value

Holding

percentage

Market

value

(Note 1)

investment

in 2015

Remarks

The Company Global securities

Financial Corporation Investee accounted for by

cost method

Financial assets carries at cost-noncurrent

3,504 27,166 0.87 % 27,166 57,832

The Company

Stock:

Capital Co., Ltd

Available-for-sale financial

asset-noncurrent

1,108

10,979

0.05

%

10,979

16,186

Lucky Co., Ltd.

Stock: The Company

Parent company

Available-for-sale financial

asset-noncurrent

46,041

3,126,201

15.65

%

3,126,201

530,114

Note

2

Lucky Co., Ltd.

Stock:

Capital Co., Ltd

Available-for-sale financial asset-noncurrent

259

2,570

0.01 %

2,570

3,789

Note 1: For financial assets carried at cost-non-current in listed companies, market value is determined by the latest monthly average sales price. Market value of unlisted

companies is the net worth or the book value prevailing on the balance sheet date.

Note 2: The stated book value is after subtraction of the amount being reclassified treasury stock.

283

iv) Accumulated holding amount of a single security in excess of $300 million or 20% of Namchow Co.'s issued share capital:

None.

v) Acquisition of real estate in excess of $300 million or 20% of Namchow Co.'s issued share capital: None.

vi) Disposal of real estate in excess of $300 million or 20% of Namchow Co.'s issued share capital: None.

vii) Sales to and purchases from related parties in excess of $100 million or 20% of Namchow Co.'s issued share capital:

Unit: thousand dollars

Name of

Transaction details

Status and reason for

deviation from arm's-

length transaction

Account / note receivable

(payable)

company Counter-party Relationship Purchase /

Sale

Amount

Percentage of

total purchases /

sales

Credit

period

Unit price

Credit period

Balance

Percentage of total

accounts / notes

receivable (payable)

Remarks

The Company Lucky Co. Subsidiary (Sales) (228,697) 8 % Note - 46,530 8% Note 2

Tianjin Namchow

Co.

Shanghai Qiaoxing

Co.

Subsidiary (Sales) (2,383,423) 87 % Note - 622,386 94% Note 2

Guangzhou

Namchow Co.

Shanghai Qiaoxing

Co.

Subsidiary (Sales) (2,988,796) 99 % Note - 582,932 100% Note 2

Tianjin Yoshi Yoshi

Co.

Shanghai Qiaoxing

Co.

Subsidiary (Sales) (764,666) 98 % Note - - -% Note 2

Tianjin Namchow

Co.

Tianjin Yoshi Yoshi

Co.

Subsidiary (Sales) (213,808) 8 % Note - 26,397 4% Note 2

Note 1: Depending on capital movement motor adjustment.

Note 2: All inter-company accounts and transactions are eliminated.

viii) Receivables from related parties in excess of $100 million or 20% of Namchow Co.'s issued share capital:

Unit: thousand dollars

Name of related

Counter-party

Relationship

Balance of

receivables from

Turnover

rate

Overdue amount Amounts received in Allowances

for bad

party related party (Note 1) Amount Action taken subsequent period debts

Guangzhou

Namchow Co.

Shanghai Qiaoxing

Co.

Subsidiary 582,932 - - 582,932

(As of March 17, 2016)

-

Guangzhou

Namchow Co.

Shanghai

Namchow Co.

Subsidiary 762,509 - - -

(As of March 17, 2016)

-

Tianjin Namchow

Co.

Shanghai Qiaoxing

Co.

Subsidiary 622,386 - - 622,386

(As of March 17, 2016)

-

Note: The transactions within the Group were eliminated in the consolidated financial statements.

ix) Derivative financial instrument transactions: None.

x) Business relationships and significant intercompany transactions:

Unit: thousand dollars

Existing Transaction details

No. Name of company Name of counter-

party

relationship

with the

counter-part

y

Account name Amount

Trading terms

Percentage of the

total consolidated

revenue or total

assets

0 The Company Lucky Co. 1 Sales revenue 228,697 No significant

differences

1.48%

0 The Company Lucky Co. 1 Accounts receivable 46,530 No significant

differences

0.25%

1 Tianjin Namchow Co. Tianjin Yoshi Yoshi Co. 1 Sales revenue 213,808 No significant

differences

1.38%

1 Tianjin Namchow Co. Tianjin Yoshi Yoshi Co. 1 Accounts receivable 26,397 Adjust from capital

dispatching

0.14%

1 Tianjin Namchow Co. Guangzhou Namchow

Co.

3 Sales revenue 11,064 No significant

differences

0.07%

1 Tianjin Namchow Co. Guangzhou Namchow

Co.

3 Accounts receivable 15,267 Adjust from capital

dispatching

0.08%

1 Tianjin Namchow Co. Shanghai Qiaoxing Co. 3 Sales revenue 2,383,423 No significant

differences

15.40%

1 Tianjin Namchow Co. Shanghai Qiaoxing Co. 3 Accounts receivable 622,386 Adjust from capital

dispatching

3.38%

2 Chow Ho Co. The Company 2 Sales revenue 7,653 No significant

differences

0.05%

3 Chow Ho Co. The Company 2 Accounts receivable 1,266 No significant

differences

0.01%

3 Guangzhou Namchow

Co.

Shanghai Qiaoxing Co. 3 Sales revenue 2,988,796 No significant

differences

19.31%

284

Existing Transaction details

No. Name of company Name of counter-

party

relationship

with the

counter-part

y

Account name Amount

Trading terms

Percentage of the

total consolidated

revenue or total

assets

3 Guangzhou Namchow

Co.

Shanghai Namchow Co. 3 Long-term other accounts

receivable-related parties

762,509 Interest calculated in

accordance with the

mutually agreed interest

rate

4.14%

3 Guangzhou Namchow

Co.

Shanghai Qiaoxing Co. 3 Accounts receivable 582,932 Adjust from capital

dispatching

3.77%

4 Tianjin Yoshi Yoshi

Co.

Shanghai Qiaoxing Co. 3 Sales revenue 764,666 No significant

differences

4.94%

4 Tianjin Yoshi Yoshi

Co.

Shanghai Qiaoxing Co. 3 Accounts receivable 31,314 Adjust from capital

dispatching

0.20%

5 Mostro (Thailand) Ltd. Namchow (Thailand)

Ltd.

3 Sales revenue 98,254 No significant

differences

0.63%

5 Mostro (Thailand) Ltd. Namchow (Thailand)

Ltd.

3 Accounts receivable 6,189 No significant

differences

0.03%

Note 1: Company numbering is as follows:

(1) Parent company - 0.

(2) Subsidiary starts from 1.

Note 2: The number of the relationship with the transaction counterparty represents the following:

(1) 1 represents downstream transactions.

(2) 2 represents upstream transactions.

(3) 3 represents sidestream transactions.

(b) Information on investees:

The following is the information on investees for the year 2015 (excluding information on investees in Mainland China):

Unit: thousand dollars Name of Name of Original cost Ending balance Maximum Net income Investment

investor investee Address Scope of business December 31,

2015

December 31,

2014

Shares Percentage

of ownership

Book value investment

amount in 2015

(losses) of

investee

income

(losses)

Remarks

The Company Namchow (Thailand) Ltd. Bangkok, Thailand Manufacturing and selling instant noodles

and rice cracker

1,027,405 1,027,405 9,245 100.00% 1,131,170 1,027,405 245,413 245,413

The Company Mostro (Thailand) Ltd. Bangkok, Thailand Manufacturing and selling food 10,201 10,201 100 100.00% 17,779 10,201 4,951 4,951

The Company Nacia Co. Tortola, British Virgin Islands Holding of investments 343,443 343,443 1 100.00% 5,050,316 343,443 1,102,199 1,102,199

The Company Chow Ho Co. Taipei, Taiwan Catering services, food and beverage

retailing, and frozen food manufacturing

80,000 80,000 8,000 100.00% 2,771 80,000 (3,884) (3,884)

The Company Lucky Co. Taipei, Taiwan Manufacturing, selling and processing

various food and beverage products

938,438 938,438 95,338 99.00% 744,331 938,438 50,683 50,505

The Company Chi Zhi Co. Taipei, Taiwan Publishing, distributing and selling

printed publications

763 763 80 80.00% 100 763 25 21

The Company Nankyo Japan Co. Tokyo, Japan Catering services, Bistro and wine-selling 308,530 58,800 -

(note 2)

100.00% 260,986 308,530 (15,913) (15,913)

The Company Namchow Consulting Co. Taipei, Taiwan Catering services, food and beverage

retailing and other consulting

5,000 5,000 500 100.00% 4,940 5,000 (41) (41)

Lucky Co. Namchow BVI Co. Tortola, British Virgin Islands Holding of investments 69,133 69,133 3,000 58.00% 193,931 69,133 120,860 70,267 Note 1

Lucky Co. Dian Shui Lou Co. Taipei, Taiwan Liquor importing and retailing 104,000 104,000 10,400 100.00% 125,185 104,000 5,222 5,222 Note 1

Lucky Co. Namchow Gastronomy

Consulting Co.

Taipei, Taiwan Catering services and food consulting 5,000 5,000 500 100.00% 1,511 5,000 (875) (875) Note 1

Lucky Co. Chi Zhi Co. Taipei, Taiwan Publishing, distributing and selling

printed publications

100 100 10 10.00% 100 100 25 -

Nacia Co. Ting Hao Cayman Co. Gayman Islands British West Indies. Holding of investments 2,010,124 378,438 18,500 100.00% 4,999,693 2,010,124 1,063,076 825,227

Nacia Co. Namchow International Co. Cayman Islandls British West Indies. Holding of investments 476,680 476,680 12,770 100.00% 1,787,366 476,680 283,312 283,312

Namchow International

Co.

Ting Hao Cayman Co. Gayman Islands British West Indies. Holding of investments -

(note 3)

363,300 -

(note 3)

- %

(note 3)

-

(note 3)

363,300 1,063,076 237,849

Note 1: Its investment gain and loss are also recognized by Namchow Co.

Note 2: The Company holds the shares in subsidiaries Nankyo Japan Co. totaling 3 shares.

Note 3: According to the Group’s strategy, Namchow International Corp. signed a stock transfer contract with Nacia International Corp. and disposal all the shares of Ting Hao (Cayman Island) stock. The transfer date was October 1, 2015.

(c) Information on investment in Mainland China:

i) Information on investment in Mainland China:

Unit: thousand dollars

Name of investee

Scope of business

Issued capital

Method of

investment

Cumulative

investment (amount)

Investment flow during

current period

Cumulative

investment (amount)

Net income

(losses) of

Direct / indirect

investment

Maximum

investment in

Investment

income (loss)

Book

Accumulated

remittance of

in Mainland China (Note 1) from Taiwan as of

January 1, 2015

Remittance

amount

Repatriation

amount

from Taiwan as of

December 31, 2015

investee holding

percentage

2015 (note 2) value earnings in

current period

Tianjin Namchow Co. Manufacturing and selling of

edible fat

756,875 (3) 372,813 - - 372,813 316,782 100.00% 756,875 316,782

((2)b.)

1,850,573 30,245

Shanghai Qiaohao Co. Holding of investments and

international trade 6,055 (3) - - - - 13,522 100.00% 6,055 15,920

((2)b.) 21,596 -

285

Name of investee

Scope of business

Issued capital

Method of

investment

Cumulative

investment (amount)

Investment flow during

current period

Cumulative

investment (amount)

Net income

(losses) of

Direct / indirect

investment

Maximum

investment in

Investment

income (loss)

Book

Accumulated

remittance of

in Mainland China (Note 1) from Taiwan as of

January 1, 2015

Remittance

amount

Repatriation

amount

from Taiwan as of

December 31, 2015

investee holding

percentage

2015 (note 2) value earnings in

current period

Shanghai Qiaohao

Enterprise Management Co.

Business management and

investment consulting 961 (3) - - - - - 100.00% 961 -

((2)b.) 999 -

Shanghai Namchow Food

Co.

Food packaging, selling and

trading of restaurant equipment

and trading

4,807 (3) - - - - - 100.00% 4,807 -

((2)b.)

4,995 -

Tianjin Yoshi Yoshi Co. Developing , manufacturing, and

selling of dairy products and

related services

121,100 (3) - - - - 133,724 100.00% 121,100 133,724

((2)b.)

312,886 -

Bao Lai Na Co. Multinational eateries, and the

promotion, and management of

self-made beers

112,018 (3) 79,468 - - 79,468 62,139 57.94% 112,018 36,003

((2)c.)

170,105 35,967

Guangzhou Namchow Co. Developing, manufacturing, and

selling of dairy products and

related services

544,950 (3) - - - - 596,066 100.00% 544,950 596,066

((2)b.)

2,377,346 90,736

Shanghai Qizhi Co. Business management and

investment consulting services

4,541 (3) - - - - - 100.00% 4,541 -

((2)b.)

5,167 -

Shanghai Qiaoxing Co. Selling of dairy products, food

retailing and international trade

60,550 (3) - - - - 265,922 100.00% 60,550 253,383

((2)c.)

746,823 60,491

Shanghai Namchow Co. Developing, manufacturing, and

selling of dairy products and

frozen food manufacturing

676,597 (3) - - - - - 100.00% 676,597 -

((1))

717,065 -

Note 1: The method of investment is divided into the following four categories:

(1) Remittance from third-region companies to invest in Mainland China.

(2) Through the establishment of third-region companies then investing in Mainland China.

(3) Through transferring the investment to third-region existing companies then investing in Mainland China.

(4) Other methods: EX: delegated investments.

Note 2: Amount of investment income (loss) was recognized base on:

(1) There is no investment income for the preparatory case.

(2) Investment gains and losses were based on three basic:

a. The financial statements audited by an international accounting from that has a cooperative relationship with accounting firms of the Republic of China.

b. The financial statements audited by the auditors of the parent company.

c. Others: the local accounting firm to check the financial reports and the accounts' working papers were reviewed by the auditors of the parest company review Check local

accountants working papers.

Note 3: The transactions within the Group were eliminated in the consolidated financial statements.

ii) Limitation on investment in Mainland China:

Company name

Accumulated investment

amount in Mainland China as

of December 31, 2015

Investment (amount) approved

by Investment Commission,

Ministry of Economic Affairs

Maximum investment amount

set by Investment Commission,

Ministry of Economic Affairs

The Company 372,813 2,387,466 3,299,891

Lucky Co. 79,468 96,722 2,348,877

iii) Significant transactions with investees in Mainland China:

In 2015, sales to subsidiaries via a third party amounted to $15,826 thousand, and as of December 31, the resulting account receivables

amounted to $1,930 thousand. (All inter-company accounts and transactions were eliminated.)

286

(14) Segment Information

(a) General information

There are six service departments which should be reported: Butter department, detergent department, ice cream

department, food department, beverages department and management and rental revenue department. The

Butter department provides manufacturing and selling of edible oil, detergent department provides

manufacturing and selling of detergent; ice cream department provides manufacturing and selling of variant ice

cream; food department provides manufacturing and selling of instant noodles and rice cracker; beverages

department provides liquor importing and retailing and management and rental revenue department provides

business management and investment consulting services.

A reportable department is a strategic business unit providing different products and services. Because each

strategic business unit requires different kinds of techniques and marketing tactics, it should be separately

managed.

(b) Information on income and loss, assets, liabilities, basis of measurement, and the reconciliation for

reportable segments

The Group uses the internal management report and the chief operating decision maker reviews the basis to

determine allocation of resource and makes a performance evaluation. The internal management report includes

profit before taxation, but not includes any extraordinary activity. Because taxation and extraordinary activity

are managed on a group basis, they are not able to be allocated to each reportable segment. In addition, not all

profit or loss from reportable segments includes significant non-cash items such as depreciation and

amortization. The reportable amount is consistent with the report used by the chief operating decision maker.

The operating segment accounting policies are consistent with those described in note 4 "Significant Accounting

Policies".

The Group treated intersegment sales and transfers as third-party transactions and are measured at market price.

287

Information on reportable segments and reconciliation for the Group is as follows:

2015

Edible and

non-edible

oil products

Detergent

products

Ice cream

products Foods Beverages

Management

and rental

revenue

Adjustments

or

elimination Total

Revenue:

Revenue from external customers $ 9,283,057 603,757 1,100,212 2,660,772 1,823,046 8,699 - 15,479,543

Inter-segment revenues 24,273 - 403 265,282 10,593 108,899 (409,450) -

Total revenue $ 9,307,330 603,757 1,100,615 2,926,054 1,833,639 117,598 (409,450) 15,479,543

Reportable segment profit or loss $ 1,611,826 (21,198) 17,554 207,518 109,817 12,873 17,029 1,955,419

Other revenue 184,129

Other gains and losses (248,047)

Finance costs (150,460)

Net income before tax $ 1,741,041

288

2014

Edible and

non-edible

oil products

Detergent

products

Ice cream

products Foods Beverages

Management

and rental

revenue

Adjustments

or

elimination Total

Revenue:

Revenue from external customers $ 8,592,007 663,843 1,602,322 2,148,618 1,816,640 8,416 - 14,831,846

Inter-segment revenues 7,462 - 20,603 219,010 23,232 92,857 (363,164) -

Total revenue $ 8,599,469 663,843 1,622,925 2,367,628 1,839,872 101,273 (363,164) 14,831,846

Reportable segment profit or loss $ 1,231,427 36,610 115,636 84,533 94,977 8,432 6,326 1,577,941

Other revenue 157,000

Other gains and losses (30,377)

Finance costs (125,961)

Net income before tax $ 1,578,603

i) In 2015 and 2014, inter-segment revenues of $409,450 and $363,164 respectively, should be eliminated from total revenue.

ii) Share of associate profit under equity method amounting to $17,029 and $6,326, respectively, should be eliminated.

289

(c) Information about the products and services

Revenue from the external customers of the Group was as follows:

Products and services 2015 2014

Baking oil, cooking oil and industrial oil $ 9,283,057 8,592,007

Frozen dough, noodles and cooked rice 2,660,772 2,148,618

Restaurant Business 1,823,046 1,816,640

Ice cream products 1,100,212 1,602,322

Others 612,456 672,259

Total $ 15,479,543 14,831,846

(d) Geographical information

In presenting information on the basis of geography, segment revenue is based on the geographical location of

customers, and segment assets are based on the geographical location of the assets.

Geographical information 2015 2014

Revenue from external customers:

China $ 9,429,646 8,935,173

Taiwan 4,305,821 4,302,405

Thailand 1,744,076 1,594,268

Total $ 15,479,543 14,831,846

Geographical information

December 31,

2015

December 31,

2014

Non-current assets:

Taiwan $ 3,585,650 3,492,335

China 3,827,476 3,392,912

Thailand 768,391 823,519

Japan 644,673 584,317

290

Total $ 8,826,190 8,293,083

Non-current assets include investment accounted for under the equity method, property, plant and equipment,

investment property, intangible assets, and other assets, not including financial instruments, deferred tax

assets, pension fund assets, and rights arising from insurance contract (non-current).

(e) Information about major customers

For the years 2015 and 2014, the Group had no major customer who constituted 10% or more of net sales.

291

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Financial Statements

For the Years Ended December 31, 2015 and 2014

(With Independent Auditors' Report Thereon)

Address: No. 100, Yanping. N. Rd., Sec. 4., Taipei, Taiwan R.O.C

Tel: (02)2535-1251

Note to Readers

The accompanying financial statements are intended only to present the financial position, results of operations, and cash flows in accordance with the International Financial Reporting Standards approved by the R.O.C. Financial Supervisory Commission. The standards, procedures and practices to audit

such financial statements are those generally accepted and applied in the Republic of China.

The auditors' report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language auditors' report and financial

statements, the Chinese version shall prevail.

292

Independent Auditors’ Report

The Board of Directors

Namchow Chemical Industrial Co., Ltd.:

We have audited the accompanying balance sheets of Namchow Chemical Industrial Co., Ltd. (the Company) as

of December 31, 2015 and 2014, and the related statements of comprehensive income as well as the statements

of changes in equity and of cash flows for the years ended December 31, 2015 and 2014. These financial

statements are the responsibility of the Company's management. Our responsibility is to express an opinion on

these financial statements based on our audits.

We conducted our audits in accordance with the "Regulations Governing Auditing and Certification of Financial

Statements by Certified Public Accountants" and the generally accepted auditing standards in the Republic of

China. Those regulations and standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free of material misstatement. An audit includes examining, on a

test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as well as evaluating

the overall financial statement presentation. We believe that our audits provide a reasonable basis for our

opinion.

In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects,

the financial position of the Company as of December 31, 2015 and 2014, and the results of its operations

and its cash flows for the years ended December 31, 2015 and 2014, in conformity with the "Regulations

Governing the Preparation of Financial Reports by Securities Issuers".

KPMG

March 17, 2016

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Balance Sheets

December 31, 2015 and 2014

(expressed in thousands of New Taiwan dollars)

293

December 31, 2015 December 31, 2014

Assets Amount % Amount %

Current assets:

Cash and cash equivalents (notes 6(a) and (q)) $ 87,031 1 84,016 1

Notes receivable, net (notes 6(c) and (q)) 107,245 1 113,705 1

Accounts receivable, net (notes 6(c) and (q)) 401,383 4 396,375 4

Accounts receivable-related-parties(notes 6(c), (q) and 7) 52,865 1 41,527 -

Other receivables (notes 6(c), (p) and (q)) 5,481 - 25,433 -

Other receivables-related-parties (notes 6(c), (q) and 7) 9,465 - 261,522 3

Current income tax assets 4,994 - - -

Inventories (note 6(d)) 403,539 4 435,113 4

Prepayments 47,611 - 59,599 1

Other current assets 2,367 - 2,166 -

Total current assets 1,121,981 11 1,419,456 14

Non-current assets:

Available-for-sale financial assets-non-current (notes 6(b) and (q)) 10,979 - 11,577 -

Financial assets at cost-non-current (notes 6(e) and (q)) 27,166 - 27,166 -

Investments accounted for under equity method (note 6(f)) 7,212,393 65 5,970,354 59

Property, plant and equipment (notes 6(g), 7, 8 and 9) 2,579,439 23 2,585,502 26

Investment property (note 6(h)) 86,508 1 88,970 1

Deferred income tax assets (note 6(k)) 4,389 - - -

Prepayments for equipment 24,159 - 12,323 -

Other non-current assets (note 8) 10,937 - 12,135 -

Total non-current assets 9,955,970 89 8,708,027 86

Total assets $ 11,077,951 100 10,127,483 100

December 31, 2015 December 31, 2014

Liabilities and Stockholders' Equity Amount % Amount %

Current liabilities:

Short-term borrowings (notes 6(i), (q) and 9) $ 500,000 5 217,012 2

Short-term commercial paper payable (notes 6(i) and (q)) 89,967 1 19,994 -

Current portion of long-term borrowings (notes 6(i), (q) and 8) 202,783 2 260,033 3

Accounts payable (note 6(q)) 126,427 1 152,652 2

Accounts payable-related-parties (note 7) 7,840 - 2,554 -

Other payables (notes 6(l), (o), (p) and (q)) 352,806 3 290,980 3

Other payables-related-parties (notes 6(q) and 7) 20,877 - 11,662 -

Current income tax liabilities - - 17,978 -

Deferred revenue (note 6(n)) 92,977 1 79,496 1

Other current liabilities 16,043 - 16,097 -

Total current liabilities 1,409,720 13 1,068,458 11

Non-current liabilities:

Long-term borrowings (notes 6(i), (q) and 8) 3,326,692 30 3,329,475 33

Deferred income tax liabilities (note 6(k)) 498,559 5 329,458 3

Accrued pension liabilities-non-current (note 6(j)) 342,923 3 318,873 3

Other non-current liabilities 238 - 376 -

Total non-current liabilities 4,168,412 38 3,978,182 39

Total liabilities 5,578,132 51 5,046,640 50

Shareholders' equity (notes 6(b), (j), (k) and (l)):

Common stock 2,941,330 26 2,941,330 29

Capital surplus 520,786 4 424,437 4

Retained earnings:

Legal reserve 308,586 3 213,723 2

Special reserve 512,508 5 512,508 5

Unappropriated earnings 1,686,942 15 1,314,340 13

2,508,036 23 2,040,571 20

Other equities:

Financial statement translation differences for foreign operations 66,204 1 210,304 2

Unrealized gains (losses) on valuation of available-for-sale financial assets (6,423) - (5,685) -

59,781 1 204,619 2

Treasury stock (530,114) (5) (530,114) (5)

Total equity 5,499,819 49 5,080,843 50

Total liabilities and stockholders' equity $ 11,077,951 100 10,127,483 100

294

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Statements of Comprehensive Income

For the years ended December 31, 2015 and 2014

(Expressed in thousands of New Taiwan dollars)

2015 2014

Amount % Amount %

Revenue (notes 6(n) and 7) $ 2,780,173 100 2,578,036 100

Operating costs (notes 6(d), (g), (j), (l), (o), and 7) 1,773,564 64 1,709,621 66

Gross profit 1,006,609 36 868,415 34

Operating expenses (notes 6(c), (g), (j), (l), (o), and 7):

Selling expenses 593,675 22 488,042 19

General and administrative expenses 372,652 13 357,207 14

Research and development expenses 42,447 2 42,485 2

Total operating expenses 1,008,774 37 887,734 35

Operating profit (2,165) (1) (19,319) (1)

Non-operating income and expenses (notes 6(f), (g), (p) and 7):

Other income 27,253 1 18,143 1

Other gains and losses (7,644) - (33,313) (1)

Finance costs (67,951) (2) (63,684) (2)

Shares of profit from the subsidiaries 1,383,251 50 1,167,875 45

Total non-operating income and expenses 1,334,909 49 1,089,021 43

Net income before tax 1,332,744 48 1,069,702 42

Less: income tax expenses (note 6(k)) 219,894 8 121,068 5

Net income 1,112,850 40 948,634 37

Other comprehensive income (loss):

Items that will not be reclassified subsequently to profit or loss (note 6(j)):

Remeasurements of the defined benefit plans (28,889) (1) (17,658) (1)

Shares of other comprehensive income of subsidiaries accounted for under equity method-items

that will not be reclassified subsequently to profit or loss

1,184 - 6,338 -

Income tax expense related to items that will not be reclassified subsequently - - - -

Total Items that will not be reclassified subsequently to profit or loss (27,705) (1) (11,320) (1)

Items that may be reclassified subsequently to profit or loss (note 6(l)):

Financial statements translation differences for foreign operations (58,483) (2) 30,645 1

Unrealized gains (losses) on valuation of available-for-sale financial assets (598) - (664) -

Shares of other comprehensive income of subsidiaries accounted for under equity method-items

that may be reclassitied subsequently to profit or loss

(85,757) (3) 141,822 6

Income tax expense relating to components of other comprehensive income (loss) - - - -

Total Items that may be reclassified subsequently to profit or loss (144,838) (5) 171,803 7

Other comprehensive income (loss), net of tax (172,543) (6) 160,483 6

Total comprehensive income $ 940,307 34 1,109,117 43

Basic earnings per share (in New Taiwan dollars) (note 6(m)) $ 4.49 3.82

Diluted earnings per share (in New Taiwan dollars) (note 6(m)) $ 4.48 3.82

295

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Statements of Changes in Equity

For the years ended December 31, 2015 and 2014

(Expressed in thousands of New Taiwan dollars)

Other equity adjustments Financial

statements

Unrealized

gain (loss) on

Retained earnings translation valuation of

Common

stock

Capital

surplus

Legal

reserve

Special

reserve

Unappropriated

earnings

Total

differences for

foreign

operations

available-for-s

ale financial

assets

Total

Treasury

stock Total

Balance at January 1, 2014 $ 2,941,330 332,677 128,287 512,508 1,050,728 1,691,523 37,681 (4,865) 32,816 (530,114) 4,468,232

Appropriations and distributions (note 1):

Legal reserve - - 85,436 - (85,436) - - - - - -

Cash dividends - 91,760 - - (588,266) (588,266) - - - - (496,506)

Net income - - - - 948,634 948,634 - - - - 948,634

Other comprehensive income (loss) - - - - (11,320) (11,320) 172,623 (820) 171,803 - 160,483

Total comprehensive income (loss) - - - - 937,314 937,314 172,623 (820) 171,803 - 1,109,117

Balance at December 31, 2014 2,941,330 424,437 213,723 512,508 1,314,340 2,040,571 210,304 (5,685) 204,619 (530,114) 5,080,843

Appropriations and distributions (note 2):

Legal reserve - - 94,863 - (94,863) - - - - - -

Cash dividends - 96,349 - - (617,680) (617,680) - - - - (521,331)

Net income - - - - 1,112,850 1,112,850 - - - - 1,112,850

Other comprehensive income (loss) - - - - (27,705) (27,705) (144,100) (738) (144,838) - (172,543)

Total comprehensive income (loss) - - - - 1,085,145 1,085,145 (144,100) (738) (144,838) - 940,307

Balance at December 31, 2015 $ 2,941,330 520,786 308,586 512,508 1,686,942 2,508,036 66,204 (6,423) 59,781 (530,114) 5,499,819

Supplemental disclosure:

1: Directors' and supervisors' renumeration, and employee bonuses, amounting to $30,757 and $7,689, respectively, were deducted from profit or loss.

2: Directors' and supervisors' renumeration, and employee bonuses, amounting to $34,151 and $8,538, respectively, were deducted from profit or loss.

296

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Statements of Cash Flows

For the years ended December 31, 2015 and 2014

(Expressed in thousands of New Taiwan dollars)

2015 2014

Cash flows from operating activities:

Net income before tax $ 1,332,744 1,069,702

Adjustments:

Adjustments to reconcile profit and loss

Depreciation 108,215 102,194

Provisions for bad debt 1,020 1,009

Interest expenses 67,951 63,684

Interest income (1,293) (1,636)

Shares of profit of subsidiaries accounted for under equity method (1,383,251) (1,167,875)

Losses on disposal of property, plant and equipment, net 34 351

Impairment loss on non-financial assets - 20,000

Total adjustments to reconcile profit and loss (1,207,324) (982,273)

Changes in assets / liabilities relating to operating activities:

Net changes in operating assets:

Notes receivable 6,460 (7,157)

Accounts receivable (6,028) (47,856)

Accounts receivable-related-parties (11,338) (3,579)

Other receivables 19,952 (20,000)

Other receivables-related-parties 252,057 (258,434)

Inventories 31,574 (37,457)

Prepayments 11,988 (38,403)

Other current assets (201) (810)

Total changes in operating assets, net 304,464 (413,696)

Net changes in operating liabilities:

Accounts payable (26,225) 31,069

Accounts payable-related-parties 5,286 (2,831)

Other payables 53,652 37,115

Other payables-related-parties 9,215 (1,140)

Other current liabilities (54) 8,807

Net defined benefit liabilities (4,839) (4,282)

Deferred revenue 13,481 3,663

Total changes in operating liabilities, net 50,516 72,401

Total changes in operating assets / liabilities, net 354,980 (341,295)

Total adjustments (852,344) (1,323,568)

Cash provided by operating activities 480,400 (253,866)

Interest income received 1,293 1,636

Interest paid (68,414) (63,422)

Income tax paid (78,154) (42,715)

Net cash provided by (used in) operating activities 335,125 (358,367)

Cash flows from investing activities:

Proceeds from capital reduction of financial assets at cost - 30,666

Acquisition of investments accounted for under equity method (249,730) (63,800)

Acquisition of property, plant and equipment (102,923) (158,594)

Proceeds from disposal of property, plant and equipment - 272

Decrease (increase) in other non-current assets 1,198 (4,091)

Dividend received 344,235 548,063

Net cash provided by (used in) investing activities (7,220) 352,516

Cash flows from financing activities:

Increase in short-term borrowings 2,536,999 3,937,416

Decrease in short-term borrowings (2,254,011) (3,993,852)

Increase (decrease) in short-term commercial paper payable 69,973 (24,957)

Proceeds from long-term borrowings 800,000 3,143,659

Repayment of long-term borrowings (860,033) (2,483,292)

Increase (decrease) in other non-current liabilities (138) 376

Cash dividends paid (617,680) (588,266)

Net cash used in financing activities (324,890) (8,916)

Increase (decrease) in cash and cash equivalents 3,015 (14,767)

Cash and cash equivalents at beginning of period 84,016 98,783

Cash and cash equivalents at end of period $ 87,031 84,016

297

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

December 31, 2015 and 2014

(Expressed in thousands of New Taiwan dollars unless otherwise stated)

(1) Organization and Business Scope

Namchow Chemical Industrial Co., Ltd. (the Company) was incorporated on March 29, 1952 as a

corporation limited by shares under the laws of the Republic of China (R.O.C.). The Company is engaged

in the manufacture, sale, and processing of edible and non-edible oil products and frozen dough, as well

as dish and laundry liquid detergent, It also provides management consulting services.

(2) Financial Statements Authorization Date and Authorization Process

The financial statements were approved by the Board of Directors on March 17, 2016.

(3) New Standards and Interpretations Not Yet Adopted

(a) The effect of the new announcements and revisions of the standards and interpretations endorsed by

the Financial Supervisory Commission ("FSC")

The Company has adopted to prepare financial reports according to IFRSs 2013 endorsed by the FSC

from 2015 onward (not including IFRS 9 Financial Instruments). A summary of the differences

between IFRSs 2013 and 2010 are as follows:

New announcements/revisions/amendments of

standards and interpretations

Effective date per

IASB

Amendment to IFRS 1: Limited Exemption from Comparative IFRS 7

Disclosures for First-time Adopters

July 1, 2010

Amendment to IFRS 1: Severe Hyperinflation and Removal of Fixed Dates for

First-time Adopters

July 1, 2011

Amendment to IFRS 1: Government Loans January 1, 2013

Amendment to IFRS 7: Disclosures – Transfers of Financial Assets July 1, 2011

Amendment to IFRS 7: Disclosures – Offsetting Financial Assets and Financial

Liabilities

January 1, 2013

IFRS 10 Consolidated Financial Statements January 1, 2013

(subsidiaries

effective on

January 1, 2014)

IFRS 11 Joint Arrangements January 1, 2013

IFRS 12 Disclosure of Interests in Other Entities January 1, 2013

IFRS 13 Fair Value Measurement January 1, 2013

Amendment to IAS 1: Presentation of Items of Other Comprehensive Income July 1, 2012

Amendment to IAS 12: Deferred Tax: Recovery of Underlying Assets January 1, 2012

Revision to IAS 19 Employee Benefits January 1, 2013

Revision to IAS 27 Separate Financial Statements January 1, 2013

Amendment to IAS 32: Offsetting Financial Assets and Financial Liabilities January 1, 2014

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine January 1, 2013

2

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

298

Except for the following, The Company assessed that adopting IFRSs 2013 will not have significant

impacts on the financial statements.

i) Amendments to IAS 1-Presentation of Items of Other Comprehensive Income

According to the amendments to IAS 1, items of other comprehensive income will be grouped

into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b)

items that will be reclassified subsequently to profit or loss when specific conditions are met. In

addition, income tax on items of other comprehensive income is also required to be allocated on

the same basis. The aforementioned allocation basis will not be strictly enforced prior to the

adoption of the amendments. The Company has also revised the disclosure of the statement of

comprehensive income in both current and prior periods.

ii) IFRS 13-Fair Value Measurement

IFRS 13 defines the meaning of fair value and sets the method of calculation and the presentation

of measurement of fair value. The Company follows the new amendments to disclose the fair

value measurement, and there is no need to disclose the information of comparable period. As the

adoption will be postponed until 2015, The Company does not expect any significant influence

on its financial condition and performance.

(b) New standards and interpretations not yet endorsed by the FSC

The new standards and amendments issued by the IASB that may have an impact to the financial

statements but not yet endorsed by the FSC are summarized as follows:

New standards and amendments and interpretations

Effective date

per IASB

IFRS 9 "Financial Instruments" January 1, 2018

Amended IFRS 10 and IAS 28 "Sale or Contribution of Assets between an

Investor and its Associate or Joint Venture"

Effective date to

be determined by

IASB

Amended IFRS 10, IFRS 12 and IAS 28 " Investment Entities-Applying the

Consolidation Exception"

January 1, 2016

Amendments to IFRS 11 "Acquisitions of an Interest in Joint Operation" January 1, 2016

IFRS 14 "Regulatory Deferral Accounts" January 1, 2016

IFRS 15 "Revenue from Contracts with Customers" January 1, 2018

IFRS 16 "Leases" January 1, 2019

Amended IAS 1 "Disclosure Initiative" January 1, 2016

Amended to IAS 7 "Disclosure Initiative" January 1, 2017

Amended to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Losses" January 1, 2017

Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of

Depreciation and Amortization"

January 1, 2016

Amendments to IAS 16 and IAS 41"Bearer Plants" January 1, 2016

3

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

New standards and amendments and interpretations

Effective date

per IASB

299

Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" July 1, 2014

Amendments to IAS 27 "Equity Method in Separate Financial Statements" January 1, 2016

Amendments to IAS 36 "Recoverable Amount Disclosures for Non-financial

Assets"

January 1, 2014

Amendments to IAS 39 "Novation of Derivatives and Continuation of Hedge

Accounting"

January 1, 2014

Annual improvements to IFRSs 2010-2012 cycle and to IFRSs 2011-2013 cycle July 1, 2014

Annual improvements to IFRSs 2012-2014 cycle January 1, 2016

IFRIC 21 "Levies" January 1, 2014

The Company is currently evaluating the impact of the abovementioned standards and amendments on

The Company's financial position and operating results. Any related impact will be disclosed when the

evaluation is completed.

(4) Significant Accounting Policies

The financial statements are the English translation of the Chinese version prepared and used in the

Republic of China. If there is any conflict between, or any difference in the interpretation of, the English

and Chinese language financial statements, the Chinese version shall prevail.

The significant accounting policies presented in the financial statements are summarized as follows. The

following accounting policies have been applied consistently throughout the presented periods in the

financial statements.

(a) Statement of compliance

The financial statements have been prepared in accordance with the Regulations Governing the

Preparation of Financial Report by Securities Issuers.

(b) Basis of preparation

i) Basis of measurement

The financial statements have been prepared on a historical cost basis, unless, otherwise stated

(please refer to the summary of the significant accounting policies).

ii) Functional and presentation currency

The functional currency of each individual consolidated entity is determined based on the

primary economic environment in which the entity operates. The Company's financial statements

are presented in New Taiwan dollars, which is Company's functional currency. The assets and

liabilities of foreign operations are translated to The Company's functional currency at the

exchange rates at the reporting date. The income and expenses of foreign operations are

translated to The Company's functional currency at the average rate. Foreign currency differences

are recognized in other comprehensive income. All financial information presented in New

Taiwan dollars has been rounded to the nearest thousand.

4

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

300

(c) Foreign currency

Transactions in foreign currencies are translated to the respective functional currencies of Group

entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities

denominated in foreign currencies at the reporting date are remeasured to the functional currency at

the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference

between amortized cost in the functional currency at the beginning of the year adjusted for the

effective interest and payments during the year, and the amortized cost in foreign currency translated

at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value

are retranslated to the functional currency at the exchange rate at the date that the fair value was

determined. Non-monetary items in a foreign currency that are measured based on historical cost are

translated using the exchange rate at the date of translation.

Foreign currency differences arising from remeasurement are recognized in profit or loss, except for

the difference resulting from available-for-sale equity investment which is recognized in other

comprehensive income arising from the remeasurement.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither

planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items

are considered to form part of a net investment in the foreign operation and are recognized in other

comprehensive income, and presented in the translation reserve in equity.

(d) Classification of current and non-current assets and liabilities

i) An entity shall classify an asset as current when:

i. It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;

ii. It holds the asset primarily for the purpose of trading;

iii. It expects to realize the asset within twelve months after the reporting period; or

iv. The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or

used to settle a liability for at least twelve months after the reporting period.

An entity shall classify all other assets as non-current.

ii) An entity shall classify a liability as current when:

i. It expects to settle the liability in its normal operating cycle;

ii. It holds the liability primarily for the purpose of trading;

iii. The liability is due to be settled within twelve months after the reporting period even if

refinancing or a revised repayment plan is arranged between the reporting date and the

issuance date of the financial statements; or

iv. It does not have an unconditional right to defer settlement of the liability for at least twelve

months after the reporting period. Terms of a liability that could, at the option of the

counterparty, result in its settlement by the issue of equity instruments do not affect its

classification.

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NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

301

An entity shall classify all other liabilities as non-current.

(e) Cash and cash equivalents

Cash comprises cash in hand and demand deposits. Cash equivalent refers to short term investments

with high liquidity that are subject to insignificant risk of changes in their fair value and can be cashed

into fixed amount of money. The definition of time deposit is similar to that of cash equivalent;

however, the purpose of holding time deposit is for short term cash commitment rather than

investment.

Bank overdrafts that are repayable on demand and form an integral part of The Company's cash

management are included as a component of cash and cash equivalents for the purpose of the

consolidated statement of cash flows.

(f) Financial instruments

Financial assets and financial liabilities are initially recognized when The Company becomes a party

to the contractual provisions of the instruments.

i) Financial assets

The Company classifies financial assets into the following categories: available-for-sale financial

assets and loans and receivables.

i. Available-for-sale financial assets

Available-for-sale financial assets are recognized initially at fair value, plus, any directly

attributable transaction cost. Subsequent to initial recognition, they are measured at fair

value, and changes therein, other than impairment losses, dividend income, and foreign

currency differences on available-for-sale debt instruments, are recognized in other

comprehensive income and presented in the fair value reserve in equity. When an

investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or

loss, and is included in non-operating income and expense. The purchase disposal of

financial assets are recognized using trade-date accounting.

Investments in equity instruments that do not have a quoted market price in an active market,

and whose fair value cannot be reliably measured, are measured at amortized cost, and are

included in financial assets measured at cost.

Dividend income is recognized in profit or loss on the date that The Company's right to

receive payment is established. However, in the case of quoted securities, the ex-dividend

date is normally recognized. Such dividend income is included in non-operating income and

expense.

ii. Loans and Receivables

Loans and receivables are financial assets with fixed or determinable payments that are not

quoted in an active market. Receivables comprise trade receivables, other receivables, and

investment in debt security with no active market. Such assets are recognized initially at fair

value, plus, any directly attributable transaction costs. Subsequent to initial recognition,

receivables are measured at amortized cost using the effective interest method, less, any

impairment losses other than insignificant interest on short-term receivables. The purchase

disposal of financial assets are recognized using trade-date accounting.

6

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

302

Interest income is recognized in profit or loss, and it is included in non-operating income

and expense.

iii. Impairment of financial assets

A financial asset is impaired if, and only if, there is an objective evidence of impairment as

a result of one or more events that occurred after the initial recognition of the asset (a ‘loss

event') and that loss event (or events) has an impact on the estimated future cash flows of

the financial asset that can be estimated reliably.

The objective evidence that financial assets are impaired includes default or delinquency by

a debtor, restructuring of an amount due to The Company on terms that The Company

would not consider otherwise, indications that a debtor or issuer will enter bankruptcy,

adverse changes in the payment status of borrowers or issuers, economic conditions that

correlate with defaults, or the disappearance of an active market for a security. In addition,

for an investment in an equity security, a significant or prolonged decline in its fair value

below its cost is accounted for as objective evidence of impairment.

The Company considers evidence of impairment for receivables at both a specific asset and

collective level. Receivables that are not individually significant are collectively assessed

for impairment by grouping together receivables with similar risk characteristics.

If objective evidence of an impairment exists, an impairment loss should be recognized.

An impairment loss in respect of a financial asset is calculated as the difference between its

carrying amount and the present value of the estimated future cash flows discounted at the

asset's original effective interest rate. Collateral and proceeds from insurance should also

be considered when determining the estimated future cash flows. Losses are recognized in

profit or loss and reflected in an allowance account against receivables. When a

subsequent event causes the amount of impairment loss to decrease, the decrease in

impairment loss is reversed through profit or loss. However, the reversing amount cannot

exceed the amortized balance of the assets assuming no impairment was recognized in prior

periods.

An impairment loss in respect of a financial asset measured at cost is calculated as the

difference between its carrying amount and the present value of the estimated future cash

flows discounted at the current market rate of return for a similar financial asset. Such

impairment loss is not reversible in subsequent periods.

An impairment loss in respect of a financial asset is deducted from the carrying amount,

except for trade receivables, for which an impairment loss is reflected in an allowance

account against the receivables. When it is determined a receivable is uncollectible, it is

written off from the allowance account. Any subsequent recovery of receivable written off

is recorded in the allowance account. Changes in the amount of the allowance account are

recognized in profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the

losses accumulated in the fair value reserve in equity to profit or loss.

Impairment losses recognized on an available-for-sale equity security are not reversed

through profit or loss. Any subsequent recovery in the fair value of an impaired

available-for-sale equity security is recognized in other comprehensive income, and

accumulated in other equity.

7

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

303

If, in a subsequent period, the fair value of an impaired available-for-sale debt security

increases and the increase can be related objectively to an event occurring after the

impairment loss was recognized, then the impairment loss is reversed, with the amount of

the reversal recognized in profit or loss.

Impairment losses and recoveries are recognized in profit or loss. Recovery and loss on

doubtful debts of account receivables are included in operating expense; others are included

in non-operating income and expense.

iv. Derecognition of financial assets

The Company derecognizes financial assets when the contractual rights of the cash inflow

from the asset are terminated, or when The Company transfers substantially all the risks and

rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the carrying

amount and the sum of the consideration received or receivables and any cumulative gain or

loss that had been recognized in other comprehensive income and presented in other equity

-unrealized gains or losses from available-for-sale financial assets is recognized in profit

or loss, and included in non-operating income and expense.

The Company separates the part that continues to be recognized and the part that is

derecognized, based on the relative fair values of those parts on the date of the transfer. The

difference between the carrying amount allocated to the part derecognized and the sum of

the consideration received for the part derecognized, and any cumulative gain or loss

allocated to it that had been recognized in other comprehensive income shall be recognized

in profit or loss, and is included in non-operating income and expense.

A cumulative gain or loss that had been recognized in other comprehensive income is

allocated between the part that continues to be recognized and the part that is derecognized,

based on the relative fair values of those parts.

ii) Financial liabilities and equity instruments

i. Other financial liabilities

Financial liabilities not classified as held-for-trading or designated as at fair value through

profit or loss, which comprise loans and borrowings, and trade and other payables, are

measured at fair value plus any directly attributable transaction cost at the time of initial

recognition. Subsequent to initial recognition, they are measured at amortized cost

calculated using the effective interest method. Interest expense not capitalized as capital cost

is recognized in profit or loss, and is recorded under non-operating income and expenses.

ii. Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligation has been

discharged or cancelled or has expired.

The difference between the carrying amount of a financial liability removed and the

consideration paid (including any non-cash assets transferred or liabilities assumed) is

recognized in profit or loss, and is included in non-operating income and expense.

8

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

304

iii. Offsetting of financial assets and liabilities

The Company presents financial assets and liabilities on a net basis when The Company has

the legally enforceable right to offset, and intends to settle such financial assets and

liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

iv. Financial guarantee contract

A financial guarantee contract is a contract that requires the issuer to make specified

payments to reimburse the holder of a loss it incurs because a specified debtor fails to make

payment when due in accordance with the original or modified terms of a debt instrument.

A financial guarantee contract not designated as at fair value through profit or loss issued by

The Company is recognized initially at fair value plus any directly attributable transaction

cost. After initial recognition, it is measured at the higher of (a) the contractual obligation

amount determined in accordance with IAS 37; or (b) the amount initially recognized less,

when appropriate, cumulative amortization recognized in accordance with accounting

policies.

(g) Inventories

The cost of inventories consists of all costs of purchase, costs of conversion, and other costs incurred

in bringing the inventories to their present location and condition. The cost of inventories includes an

appropriate share of fixed production overhead based on normal capacity and allocated variable

production overhead based on actual output. However, unallocated fixed production overhead arising

from lower or idle capacity is recognized in cost of goods sold during the period. If actual capacity is

higher than normal capacity, fixed production overhead should be allocated based on actual capacity.

The method of valuing inventories is the weighted-average method.

Inventories are measured at the lower of cost or net realizable value. Net realizable value is the

estimated selling price in the ordinary course of business, less the estimated costs of completion and

selling expenses at the end of the period. When the cost of inventories is higher than the net

realizable value, inventories are written down to net realizable value, and the write-down amount is

charged to current year's cost of goods sold. If net realizable value increases in the future, the cost of

inventories is reversed within the original write-down amount, and such reversal is treated as a

reduction of cost of goods sold.

(h) Investment in subsidiaries

When preparing the Company's financial statements, investments in subsidiaries which are controlled

by the Company using the equity method. Under the equity method, the net income, other

comprehensive income, and equity in the financial statements are equivalent to those attributable to

the shareholders of the parent company in the consolidated financial statements.

Changes in ownership of a subsidiary that do not result in loss of control are accounted for as equity

transactions.

9

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

305

(i) Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both,

but not for sale in the ordinary course of business, or to use in the production or supply of goods or

services or for administrative purposes. Investment property is measured at cost on initial recognition

and subsequently measured under the cost model, and the depreciation expense is calculated using the

depreciable amount. The depreciation method, the useful life, and the residual amount are the same as

those adopted for property, plant and equipment. Cost includes expenditure that is directly attributable

to the acquisition of the investment property.

When the use of an investment property changes such that it is reclassified as property, plant and

equipment, its carrying amount at the date of reclassification becomes its cost for subsequent

accounting.

(j) Property, plant and equipment

i) Recognition and measurement

Property, plant and equipment are measured at cost, less, accumulated depreciation and

accumulated impairment losses. Cost includes expenditure that is directly attributed to the

acquisition of the asset, and any borrowing cost that is eligible for capitalization.

Each part of an item of property, plant and equipment with a cost that is significant in relation to

the total cost of the item shall be depreciated separately, unless the useful life and the

depreciation method of a significant part of an item of property, plant and equipment are the

same as the useful life and depreciation method of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall

be determined as the difference between the net disposal proceeds, if any, and the carrying

amount of the item, and it shall be recognized as non-operating income and expense.

ii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits

associated with the expenditure will flow to The Company. The carrying amount of those parts

that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

iii) Depreciation

The depreciable amount of an asset is determined after deducting its residual amount from its

original cost and is depreciated using the straight-line method over its useful life. Assets are

evaluated based on their individually significant components, and if the useful life of a

component varies from that of others, then this component should be separately depreciated. The

depreciation charge for each period shall be recognized in profit or loss.

Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives, for the current and comparative years, of significant items of property,

plant and equipment are as follows:

Buildings 5~60 years

Machinery equipment 3~20 years

Other equipment 3~20 years

10

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

306

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If

expectations differ from the previous estimates, the changes are accounted for as a change in an

accounting estimate.

(k) Leases

i) Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over the

lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added

to the carrying amount of the leased asset and recognized as an expense over the lease term on

the same basis as the lease income. Incentives granted to the lessee to enter into an operating

lease are spread over the lease term on a straight-line basis so that the lease income received is

reduced accordingly.

ii) Lessee

Leases in which The Company assumes substantially all of the risks and rewards of ownership

are classified as finance leases. On initial recognition, the lease asset is measured at an amount

equal to the lower of its fair value or the present of the minimum lease payments. Subsequent

minimum lease payments are attributable to finance cost and the reduction of the outstanding

liabilities, and the finance cost is allocated to each period during the lease term using a constant

periodic rate of interest on the remaining balance of the liability.

Other leases are operating leases and are not recognized in The Company's statement of financial

position. Payments made under an operating lease (excluding insurance and maintenance

expenses) are recognized in profit or loss on a straight-line basis over the term of the lease.

Lease incentives received are recognized as an integral of the total lease expense over the term of

the lease. Any benefit provided by the lessor for the purpose of reaching the agreement is

accounted for as a reduction of lease expense on a straight-line basis.

(l) Impairment-non-financial assets

With regard to non-financial assets (other than inventories, deferred tax assets and employee benefits),

The Company assesses at the end of each reporting period whether there is any indication that an

impairment loss has occurred, and estimates the recoverable amount for assets with an indication of

impairment. If it is not possible to determine the recoverable amount for the individual asset, then The

Company will have to determine the recoverable amount for the asset's cash-generating unit.

Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with

indefinite useful lives or those not yet in use is required to be tested at least annually.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value

less costs to sell or its value in use. If, and only if, the recoverable amount of an asset is less than its

carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That

reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

11

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

307

For the purpose of impairment testing, goodwill acquired in a business combination shall, from the

acquisition date, be allocated to each of the acquirer's cash-generating units, or groups of

cash-generating units, that are expected to benefit from the synergies of the combination. If the

carrying amount of the cash-generating units exceeds the recoverable amount of the units, the entity

shall recognize the impairment loss, and the impairment loss shall be allocated to reduce the carrying

amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited.

The Company assesses at the end of each reporting period whether there is any indication that an

impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or

may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of

that asset. Impairment loss is reversed if, and only if, there has been a change in the estimates used to

determine the asset's recoverable amount, increasing the individual asset's or cash-generating unit's

carrying amount to its estimated recoverable amount. The reversal of an impairment loss of an

individual asset or cash-generating unit cannot exceed the carrying amount of the individual asset or

cash-generating unit, less any depreciation or amortization, had it not recognized an impairment loss.

(m) Treasury stock

Under the cost method, the treasury stock account is debited for the after tax cost of The Company's

shares purchased. When the disposal price of treasury stock is greater than the cost, the difference is

credited to capital surplus-treasury stock; otherwise, the excess of the cost over the price is debited to

capital surplus generated from similar treasury stock transactions. If the capital surplus-treasury

stock account is insufficient to cover the excess of the cost over the price, retained earnings should be

debited for the remaining amount. The book value of each share of treasury stock is equal to its

weighted-average cost and is calculated by each group according to the reason for purchase.

When treasury stock is retired, capital surplus and common stock are debited according to the ratio of

retiring treasury stock to total issued stock. When the book value of the retiring treasury stock is

higher than the sum of its par value and capital surplus, the difference is debited to capital surplus

generated from similar treasury stock transactions. If the capital surplus-treasury stock account is

insufficient to cover the difference, retained earnings should be debited for the remaining amount.

When the book value of the retiring treasury stock is lower than the sum of its par value and capital

surplus, the difference is credited to capital surplus generated from similar treasury stock transactions.

The shares that are owned by the Company's subsidiaries are seen as treasury stock.

(n) Revenue

i) Sale of goods

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value

of the consideration received or receivable, net of returns, trade discounts, and volume rebates.

Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales

agreement, that the significant risks and rewards of ownership have been transferred to the

customer, recovery of the consideration is probable, the associated costs and possible return of

goods can be estimated reliably, there is no continuing management involvement with the goods,

and the amount of revenue can be measured reliably. If it is probable that discounts will be

granted and the amount can be measured reliably, then the discount is recognized as a reduction

of revenue as the sales are recognized.

12

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

308

The timing of the transfers of risks and rewards varies depending on the individual terms of the

sales agreement. For export transactions, transfer occurs upon loading the goods onto the relevant

carrier at the port; however, for sales in the domestic market, transfer usually occurs when the

product is received at the customer's warehouse.

Transactions on catering industry are basically completed over-the-counter, and the cash is

collected by the franchisee after authorization is granted. As such, revenue is recognized upon the

provision of goods and services, and booked at the end of the month.

ii) Customer loyalty program

Customer loyalty program of the Company is to provide customer bonus point and rights to

purchase merchandise according to the discount price. The fair value of the consideration

received or receivable was allocated to bonus point and other component of the sale. The amount

allocated to bonus point can be valued according to the fair value of the merchandise sold at

discount price. Revenue is recognized when customers use their bonus points in exchange for a

discount price as complimentary items upon purchasing of any merchandise. Revenue is

calculated based on the estimated volume of the merchandise sold.

iii) Rendering of services

The Company is engaged in providing management services. Revenue from services rendered is

recognized in profit or loss in proportion to the stage of completion of the transaction at the

reporting date and the account collectability can be reasonably estimated.

(o) Employee benefits

i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an

employee benefit expense in profit or loss in the periods during which services are rendered by

employees.

ii) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.

The Company’s net obligation in respect of defined benefit pension plans is calculated separately

for each plan by estimating the amount of future benefit that employees have earned in return for

their service in the current and prior periods; that benefit is discounted to determine its present

value.

The fair value of any plan assets is deducted. The discount rate is the yield at the reporting date

(market yields of high-quality corporate bonds or government bonds) on bonds that have maturity

dates approximating the terms of The Company’s obligations and that are denominated in the

same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit

method. When the calculation results in a benefit to The Company, the recognized asset is limited

to the total of the present value of economic benefits available in the form of any future refunds

from the plan or reductions in future contributions to the plan. In order to calculate the present

value of economic benefits, consideration is given to any minimum funding requirements that

apply to any plan in The Company. An economic benefit is available to The Company if it is

realizable during the life of the plan, or on settlement of the plan liabilities.

13

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

309

When the benefits of a plan are improved, the portion of the increased benefit relating to past

service by employees is recognized immediately in profit or loss.

Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains

and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset ceiling

(if any, excluding interest), are recognized immediately in other comprehensive income. The

Company can reclassify the amounts recognized in other comprehensive income to retained

earnings.

iii) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are

expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or

profit-sharing plans if The Company has a present legal or constructive obligation to pay this

amount as a result of past service provided by the employee, and the obligation can be estimated

reliably.

(p) Income tax

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to

business combinations or recognized directly in equity or other comprehensive income, all current and

deferred taxes shall be recognized in profit or loss.

Current taxes comprise the expected tax payable or receivable on the taxable income or loss for the

year and any adjustment to tax payable or receivable in respect of previous years. It is measured

using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and their respective tax bases. Deferred taxes shall not be

recognized for the exceptions below:

i) Assets and liabilities that are initially recognized but are not related to the business combination

and have no effect on net income or taxable gains (losses) during the transaction.

ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where

there is a high probability that such temporary differences will not reverse.

iii) Initial recognition of goodwill.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the

period when the asset is realized or the liability is settled, based on tax rates that have been enacted or

substantively enacted by the end of the reporting period.

14

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

310

Deferred tax assets and liabilities may be offset against each other if the following criteria are met:

i) The entity has the legal right to settle tax assets and liabilities on a net basis; and

ii) The taxing of deferred tax assets and liabilities fulfills one of the scenarios below:

i. levied by the same taxing authority; or

ii. levied by different taxing authorities, but where each such authority intends to settle tax

assets and liabilities (where such amounts are significant) on a net basis every year of the

period of expected asset realization or debt liquidation, or where the timing of asset

realization and debt liquidation is matched.

A deferred tax asset should be recognized for unused tax losses, unused tax credits, and deductible

temporary differences to the extent that it is probable that future taxable profit will be available against

which they can be utilized. Such deferred tax assets shall also be reviewed at each reporting date, and

are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(q) Earnings per share

The Company discloses the Company's basic and diluted earnings per share attributable to ordinary

equity holders of the Company. The calculation of basic earnings per share is based on the profit

attributable to the ordinary shareholders of the Company divided by the weighted-average number of

ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit

attributable to ordinary shareholders of the Company, divided by the weighted-average number of

ordinary shares outstanding after the adjustment on the effects of all dilutive potential ordinary shares.

Employee bonuses are settled by issuing shares that are yet to be approved at the shareholders'

meeting.

(r) Operating segments

The Company has disclosed information about operating segments in its consolidated financial

statements. Hence no further information is disclosed in the financial statements.

(5) Significant Accounting Judgments and Sources of Estimation Uncertainty

The preparation of the financial statements in conformity with the Regulations Governing the Preparation

of Financial Report by Securities Issuers requires management to make judgments, estimates and

assumptions that affect the application of the accounting policies and the reported amount of assets,

liabilities, income and expenses. Actual results may differ from these estimates.

Management will continually review the estimates and basic assumptions. Changes in accounting estimates

will be recognized in the period of change and the future period of their impact.

There are no critical judgments in applying accounting policies that have significant effect on the amounts

recognized in the financial statements.

15

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

311

For information about critical judgments in applying accounting policies that have the most significant

effect on the amounts recognized in these consolidated financial statements, please refer to the following

notes:

(a) Note 6(g)-Key assumptions used in discounted cash flow projections.

(b) Notes 6(j)-Measurement of defined benefit obligations

(c) Notes 6(k)-Utilization of tax losses.

(d) Notes 6(n)-Assumption of expecting redeem rate on deferred revenue.

(6) Description of Significant Accounts

(a) Cash and cash equivalents

December 31,

2015

December 31,

2014

Cash on hand $ 2,712 2,748

Savings and checking deposits 84,319 81,268

Cash and cash equivalents pen statements of cash flow $ 87,031 84,016 The Company's exposure to interest rate risk and the sensitivity analysis on the financial instruments

held by the Company are disclosed in note 6(q).

(b) Available-for-sale financial assets!Dnon-current

December 31,

2015

December 31,

2014

Investment in listed securities

Stocks listed on domestic markets $ 10,979 11,577 Please refer to note 6(q) for credit risk, exchange rate risk and interest rate risk.

As of December 31, 2015 and 2014, the Company did not pledge its available-for-sale financial

instruments.

If the market price of the available-for-sale financial assets fluctuates (assuming that all other

variables remain the same), the impact on other comprehensive income will be as follows:

2015 2014

Fluctuation in market

price at reporting date

Other

comprehensive

income (after

tax)

Net income

Other

comprehensive

income (after

tax)

Net income

Increase 1% $ 110 - 116 -

Decrease 1% $ (110) - (116) -

16

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

312

(c) Notes and accounts receivable, and other receivable

December 31,

2015

December 31,

2014

Notes receivable $ 107,245 113,705

Accounts receivable 409,136 404,007

Accounts receivable-related parties 52,865 41,527

Other receivable 5,481 25,433

Other receivable-related parties 9,465 261,522

Less: allowance for impairment 7,753 7,632

$ 576,439 838,562

The Company has not provided the notes and accounts receivable as collateral or factored them for

cash.

The Company's aging analysis of overdue notes and accounts receivable, and other receivable was as

follows:

December 31,

2015

December 31,

2014

Past due 0~60 days $ 19,636 21,383

Past due 61~365 days 270 4,014

Past due over one year 962 768

$ 20,868 26,165

The movement in the allowance for impairment with respect to notes and accounts receivable during

the year was as follows:

Individually

assessed

impairment

Collectively

assessed

impairment

Total

Balance at January 1, 2015 $ 7,632 - 7,632

Impairment loss recognized 1,020 - 1,020

Written off (899) - (899)

Balance at December 31, 2015 $ 7,753 - 7,753

Individually

assessed

impairment

Collectively

assessed

impairment

Total

Balance at January 1, 2014 $ 7,615 - 7,615

Impairment loss recognized 1,009 - 1,009

Written off (992) - (992)

Balance at December 31, 2014 $ 7,632 - 7,632

17

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

313

(d) Inventories

The components of the Company's inventories were as follows:

December 31,

2015

December 31,

2014

Merchandise $ 31,131 32,959

Finished goods 129,724 112,835

Work in progress 30,471 20,910

Raw materials 191,854 244,468

Supplies 20,359 23,941

Total $ 403,539 435,113 As of December 31, 2015 and 2014, the Company's inventories were not provided as pledged assets.

Except for operating costs arising from the ordinary sale of inventories, other gains and losses directly

recorded under operating cost in the years 2015 and 2014 are as follows:

2015 2014

Loss on decline in market value of inventory $ (474) (1,772)

Loss (gain) on physical count (964) (74)

Loss on scrap of inventory 2,952 1,861

Income from sale of scrap (1,022) (946)

Total $ 492 (931) The Company reversed the allowance for loss on inventory for the years ended December 31, 2014

and 2013, when the Company sold or used the inventories for which an allowance had been provided

previously.

(e) Financial assets carried at cost

Percentage

of

ownership

Investment

cost

Book

value

December 31, 2015

Global Securities Finance Corporation, GSF 0.87 $ 27,166 27,166

December 31, 2014

Global Securities Finance Corporation, GSF 0.87 $ 27,166 27,166 The Company holds unlisted stocks on domestic market-Global Securities Finance Corporation. In

September 2014, the Company reduced both its capital and its return of capital of financial assets

using the cost method on a pro rata basis amounting to $30,666.

18

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

314

The aforementioned stocks held by the Company, whose fair value cannot be reliably measured, are

measured at amortized cost. The range of the estimated fair value was significant and cannot be

reasonably evaluated. Therefore, the management of the Company considered it cannot be evaluated

reliably.

As of December 31, 2015 and 2014, the Company's financial assets carried at cost were not provided

as pledged assets.

(f) Investments accounted for under the equity method

The details of the investments accounted for under the equity method at the reporting date were as

follows:

December 31,

2015

December 31,

2014

Subsidiaries $ 7,212,393 5,970,354 Please refer to the consolidated financial statements.

(g) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company were as

follows:

Land Buildings Machinery

Other

equipment

Prepayments

for equipment Total

Cost:

Balance at January 1, 2015 $ 1,775,064 476,220 980,424 585,126 13,462 3,830,296

Additions - 8,411 13,097 53,043 17,988 92,539

Disposals - - (7) (637) - (644)

Reclassification - 1,350 3,411 1,810 - 6,571

Balance at December 31, 2015 $ 1,775,064 485,981 996,925 639,342 31,450 3,928,762

Balance at January 1, 2014 $ 1,775,064 393,572 966,364 525,607 115,046 3,775,653

Additions - 63,960 16,391 60,813 6,571 147,735

Disposals - - (2,331) (1,294) - (3,625)

Reclassification - 18,688 - - (108,155) (89,467)

Balance at December 31, 2014 $ 1,775,064 476,220 980,424 585,126 13,462 3,830,296

Depreciation and impairment loss:

Balance at January 1, 2015 $ - 175,554 674,936 394,304 - 1,244,794

Depreciation - 17,880 36,781 50,478 - 105,139

Disposal - - (7) (603) - (610)

Balance at December 31, 2015 $ - 193,434 711,710 444,179 - 1,349,323

Balance at January 1, 2014 $ - 157,216 620,299 348,584 - 1,126,099

Depreciation - 18,338 36,688 46,671 - 101,697

Disposal - - (2,051) (951) - (3,002)

Reclassification - - 20,000 - - 20,000

Balance at December 31, 2014 $ - 175,554 674,936 394,304 - 1,244,794

Carrying value:

December 31, 2015 $ 1,775,064 292,547 285,215 195,163 31,450 2,579,439

December 31, 2014 $ 1,775,064 300,666 305,488 190,822 13,462 2,585,502

19

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

315

i) Impairment loss and subsequent reversal

As of December 2014, since the estimated recoverable amount of certain department of the

Company was lower than its book value, the Company recognized an impairment loss of $20,000.

The discount rate used for estimating the recoverable amount was 11.46% in 2014.

2015 2014

Beginning balance $ 159,021 139,021

Impairment loss recognized - 20,000

Ending balance $ 159,021 159,021

ii) Collateral

Please refer to note 8 for information on pledged property, plant and equipment as of December

31, 2015 and 2014.

(h) Investment property

Buildings

Cost:

Balance as at January 1, 2015 $ 89,467

Additions 614

Balance as at December 31, 2015 $ 90,081

Balance as at January 1, 2014 $ -

Reclassification 89,467

Balance as at December 31, 2014 $ 89,467

Depreciation:

Balance as at January 1, 2015 $ 497

Depreciation 3,076

Balance as at December 31, 2015 $ 3,573

Balance as at January 1, 2014 $ -

Depreciation 497

Balance as at December 31, 2014 $ 497

Carrying value:

Balance as at December 31, 2015 $ 86,508

Balance as at December 31, 2014 $ 88,970

Fair value:

Balance as at December 31, 2015 $ 86,508

Balance as at December 31, 2014 $ 88,970

20

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

316

Investment property comprises a number of factory that are leased to the Company's subsidiary Lucky

Co.. Each of the leases contains an initial non-cancellable period of 1 years. Subsequent renewals are

negotiable with the lessee, and no contingent rents are charged. Please refer to note 6(p) for further

information (including leasing income and direct operating expenses).

Investment property of the Company was acquired in 2014, since the Company considered that the

book value of investment property nearly equal to the fair value of investment property, the Company

is not required to take any valuation from its independent third party as reference.

As of December 31, 2015 and 2014, The Company's investment properties were not provided as

pledged assets.

(i) Short-term and long-term borrowings

The details, terms and clauses of The Company's short-term and long-term borrowings were as

follows:

i) Short-term borrowings

December 31, 2015

Currency

Range of interest

rates (%)

Year of

maturity

Amount

Unsecured loans TWD 1.06~1.17 105 $ 500,000

December 31, 2014

Currency

Range of interest

rates (%)

Year of

maturity

Amount

Unsecured loans USD 1.22 104 $ 32,012

Unsecured loans TWD 1.05~1.15 104 185,000

Total $ 217,012

As of December 31, 2015 and 2014, the unused credit facilities amounted to $2,237,707 thousand

and $2,128,491 thousand, respectively, which included the credit facilities shared with related

parties of $116,429 thousand and $257,031 thousand, respectively.

21

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

317

ii) Short-term commercial paper payable

December 31, 2015

Guarantee or

acceptance institution

Range of

interest rates

(%)

Amount

Commercial paper payable INTERNATIONAL

BILLS FINANCE

CORPORATION

0.61 $ 25,000

Commercial paper payable DAH CHUNG BILLS

CORPORATION

0.77 20,000

Commercial paper payable TA CHING BILLS

FINANCE

CORPORATION

0.61 15,000

Commercial paper payable MEGA BILLS FINANCE

CO., LTD.

0.80 20,000

Commercial paper payable TAIWAN FINANCE 0.90 10,000

CORPORATION

90,000

Less: discount 33

Total $ 89,967

December 31, 2014

Guarantee or

acceptance institution

Range of

interest rates

(%)

Amount

Commercial paper payable INTERNATIONAL

BILLS FINANCE

CORPORATION

0.78 $ 20,000

Less: discount 6

Total $ 19,994 The Company did not pledge assets against the short-term commercial paper payable.

As of December 31, 2015 and 2014, the unused credit facilities amounted to $190,000 thousand

and $320,000 thousand, respectively.

22

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

318

iii) Long-term borrowings

December 31, 2015

Currency

Range of interest

rates (%)

Year of

maturity

Amount

Secured loans TWD 1.79~1.87 105~116 $ 2,254,600

Unsecured loans TWD 1.54~1.85 105~108 1,274,875

Total $ 3,529,475

Current $ 202,783

Non-current 3,326,692

Total $ 3,529,475

December 31, 2014

Currency

Range of interest

rates (%)

Year of

maturity

Amount

Secured loans TWD 1.79~1.80 104~116 $ 1,500,000

Unsecured loans TWD 1.54~1.89 104~108 2,089,508

Total $ 3,589,508

Current $ 260,033

Non-current 3,329,475

Total $ 3,589,508

As of December 31, 2015 and 2014, the unused credit facilities amounted to $0 thousand, and

$800,000 thousand, respectively.

The Company has disclosed the related risk exposure to the financial instruments in note 6(q).

The Company has pledge certain assets against the loans; please refer to note 8 for additional

information.

iv) Commitments of loan contracts

The Company entered into syndicated loan contract amounting to $1,800,000 with Industrial

Bank of Taiwan and nine other banks on October 24, 2014. The main purpose of the loan was to

repay the previous medium-term loan contract and to increase the limit of debt ratio. The

following is a summary of the debt ratio calculated according to the contract:

i. The borrower is obligated to maintain the following financial ratios, which are assessed

annually, within the designated length of the contract:

1) Debt ratio shall not exceed 250%

2) The interest coverage ratio shall not be lower than 2.5 times of the loan interest.

3) The identifiable net worth shall not be less than $3,000,000.

23

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

319

All of the aforementioned financial ratios and obligations are calculated based on the

calculation used in the consolidated financial statements.

ii. Unless a written consent from the lending bank is obtained, the borrower shall not engage in

the following events:

1) Merger, separation, selling, or transferring of the Company's shares.

2) All events outlined in Article 185 of the ROC Company Act.

If there is any breach of the contract, after obtaining the consent from most of the banks, the

credit limit will either be fully or partially cancelled, depending on the decision made by the

banks. Also, The Company will be requested to pay all the remaining balance in an earlier

time, and all the agreement stated in the contract will be considered invalid.

In addition, The Company signed the first supplementary contract on December 16, 2015. The

financial ratio was adjusted as follows:

i. The debt ratio for both 2015 and 2016 shall not exceed 295%; for 2017 and 2018, the debt

ratio shall not exceed 285% and 250%, respectively.

ii. The interest coverage ratio shall not be less than 300%.

iii. The identifiable net worth shall not be less than $4,000,000.

The Company renewed its contracts with Taishin International Bank Co., Ltd., Mega

International Commercial Bank, and Industrial Bank of Taiwan, amounting to $200,000 thousand,

$300,000 thousand, and $200,000 thousand, respectively, in May, June, and November,

respectively, of 2014. The following is a summary of the debt ratio calculated according to the

contract, wherein the borrower is obligated to maintain the following financial ratios which are

assessed annually, within the designated length of the said contracts :

i. Debt ratio shall not exceed 250%

ii. The interest coverage ratio shall not be lower than 2.5 times of the loan interest.

iii. The identifiable net worth shall not be less than $2,200,000.

In addition, The Company signed a supplementary amounting to $200,000 thousand with

Industrial Bank of Taiwan in October 2015. The financial ratios were adjusted as follows:

i. Debt ratio shall not exceed 295%

ii. The interest coverage ratio shall not be lower than 3 times of the loan interest.

iii. The identifiable net worth shall not be less than $4,000,000.

24

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

320

The Company renewed the loan contract amounting to $200,000 thousand with CTBC Bank on

August 25, 2015. The main purpose of the loan was to repay the previous long-term loan contract.

The borrower is obligated to maintain the following financial ratios, which are assessed

semi-annually, within the designated length of the contract.

i. Debt ratio shall not exceed 250%

ii. The interest coverage ratio shall not be lower than 2.5 times of the loan interest.

iii. The identifiable net worth shall not be less than $2,200,000.

All of the aforementioned financial ratios and obligations are calculated based on the calculation

used in the consolidated financial statements.

The Company was in compliance with the covenants (described above) in 2015 and 2014.

(j) Employee benefits

i) Defined benefit plans

The following table shows a reconciliation between the present value of the defined benefit

obligation and the fair value of plan assets:

December 31,

2015

December 31,

2014

The present value of the defined benefit obligations $ 383,159 355,742

Fair value of plan assets (40,236) (36,869)

The net defined benefit liability $ 342,923 318,873 The Company established the pension fund account for the defined benefit plan in Bank of

Taiwan. The plan, under the Labor Standards Law, provides benefits based on an employee's

length of service and average monthly salary for the six-month period prior to retirement.

i. Composition of plan assets

The Company allocates pension funds in accordance with the Regulations for Revenues,

Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are

managed by the Bureau of Labor Funds, Ministry of Labors. Minimum annual

distributions of the funds by the Bureau shall be no less than the earnings attainable from

the two-year time deposits with the interest rates offered by local banks.

The Company's Bank of Taiwan labor pension reserve account balance amounted to

$40,236 thousand at the end of the reporting period. For information on the utilization of the

labor pension fund assets including the asset allocation and yield of the fund, please refer to

the website of the Bureau of Labor Funds, Ministry of Labor.

25

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

321

ii. Movements in present value of defined benefit plan obligation

The movements in present value of The Company's defined benefit plan obligation for the

years ended December 31, 2015 and 2014 were as follows:

2015 2014

Defined benefit obligation at 1 January $ 355,742 352,587

Current service costs and interest 9,719 10,988

Remeasurements of the net defined benefit liability

(asset)

-Due to changes in financial assumption of

actuarial (losses) gains

29,675 18,030

Benefits paid by the plan (11,977) (25,863)

Defined benefit obligation at 31 December $ 383,159 355,742

iii. Movements in fair value of defined benefit plan assets

The movements in the fair value of the defined benefit plan assets for the years ended

December 31, 2015 and 2014 were as follows:

2015 2014

Fair value of plan assets, January 1 $ 36,869 47,090

Remeasurements of the net defined benefit liability

(asset)

-Return on plan assets (excluding amounts

included in net interest expense)

355 946

-Due to changes in financial assumption of

actuarial (losses) gains

786 372

Contributions made 14,203 14,324

Benefits paid by the plan (11,977) (25,863)

Fair value of plan assets, December 31 $ 40,236 36,869

iv. Expenses recognized in profit or loss

The expenses recognized on profit or loss for the years ended December 31, 2015 and 2014

were as follows:

2015 2014

Current service cost $ 3,127 4,078

Net interest on the defined benefit liability (asset) 6,238 5,964

$ 9,365 10,042

26

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

322

2015 2014

Operating costs $ 3,110 3,430

Selling expenses 2,317 2,425

General and administration expenses 3,525 3,645

Research and development expenses 413 542

$ 9,365 10,042

v. Actuarial gains and losses recognized in other comprehensive income

The Company's actuarial gains and losses recognized in other comprehensive as at 2015 and

2014 were as follows:

2015 2014

Cumulative amount, January 1 $ 84,506 73,186

Recognized during the period 28,889 17,658

Using the equity method recognized actuarial

gains and loss of subsidiaries

(1,184)

(6,338)

Cumulative amount, December 31 $ 112,211 84,506

vi. Actuarial assumptions

The following are The Company's principal actuarial assumptions at the reporting dates:

December 31,

2015

December 31,

2014

Discount rate 1.63% 2.00%

Future salary increases rate 1.00% 1.00%

The Company expects to make contributions of $14,095 thousand to the defined benefit

plans in the next year starting from the reporting date of 2015.

The weighted average duration of the defined benefit obligation is 13.55 years.

vii. Sensitivity analysis

When calculating the present value of the defined benefit obligation, the Company uses

judgments and estimations to determine the related actuarial assumptions, including

discount rate, employee turnover rates and future salary changes, as of the financial

statement date. Any changes in the actuarial assumptions may significantly impact the

amount of the defined benefit obligation.

27

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

323

As of December 31, 2015, the present value of defined benefit obligation impact was as

follow:

The impact of defined benefit

obligation Increase Decrease

Discount rate (0.25%) $ (8,009) 8,300

Future salary increase rate (0.25%) 8,159 (7,911) Reasonably possible changes at the reporting date to one of the relevant actuarial

assumptions, holding other assumptions remain constant, would have affected the defined

benefit obligation by the amounts shown above. The method used in the sensitivity

analysis is consistent with the calculation of the pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of the sensitivity

analysis for 2015 and 2014.

ii) Defined contribution plans

The Company and its subsidiaries in Taiwan have made monthly contributions equal to 6% of

each employee's monthly wages to the labor pension personal account at the Bureau of the Labor.

Under this defined contribution plan, The Company contributes a fixed amount to the Bureau of

the Labor Insurance and China Social Security Fund without additional legal or constructive

obligations.

The Company's pension costs under the defined contribution plan were $20,058 thousand and

$18,514 thousand for the years 2015 and 2014, respectively.

(k) Income tax

i) Income tax expenses

The amount of The Company's income tax for the years ended December 31, 2015 and 2014,

were as follows:

2015 2014

Current income tax expense

Current period $ 28,149 48,535

Adjustment for prior periods 27,033 8,150

55,182 56,685

Deferred tax benefit

Origination and reversal of temporary differences 164,712 64,383

Income tax expenses on continuing operations $ 219,894 121,068 No income tax recognized in other comprehensive income for 2015 and 2014.

28

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

324

Reconciliations of The Company's income tax expense and the profit before tax for 2015 and

2014 were as follows:

2015 2014

Income before tax $ 1,332,744 1,069,702

Income tax calculated on pretax accounting income at

statutory rate

$ 226,566 181,849

Adjustment for prior periods 27,033 8,150

Dividend income (104,940) (98,256)

Non-deduction expenses 2,980 4,726

Exempt income (262) (302)

Current year (losses) gain for which no deferred income

tax assets was recognized

42,068 8,029

Changes in temporary differences not recognized 3,972 958

10% surtax on undistributed earnings 22,477 15,914

Total $ 219,894 121,068

ii) Recognized deferred tax assets and liabilities

i. Unrecognized deferred income tax assets

The Deferred income tax assets that have not been recognized by The Company are as

follows:

December 31,

2015

December 31,

2014

Deductible temporary differences $ 4,137 1,395

Impairment loss 19,072 17,842

$ 23,209 19,237 Tax losses are applied to Income Tax Act that can be carried forward for ten years, after

assessed by tax authority, to offset taxable income before apply to tax rate. Deferred

income tax assets have not been recognized in respect of these items because it is not

probable that the future taxable profit will be available, against which, The Company can

utilize the benefits therefore.

29

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

325

ii. Recognized deferred income tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2015 and 2014 were as

follows:

Deferred tax liabilities:

Loss carry

forward

Foreign

investment

income

accounted

for using

equity

method

Land value

increment

tax Total

Balance at January 1, 2015 $ - (90,496) (238,962) (329,458)

Recognized in profit or loss 4,389 (169,101) - (164,712)

Balance at December 31, 2015 $ 4,389 (259,597) (238,962) (494,170)

Balance at January 1, 2014 $ - (26,113) (238,962) (265,075)

Recognized in profit or loss - (64,383) - (64,383)

Balance at December 31, 2014 $ - (90,496) (238,962) (329,458)

iii) Examination and approval

The tax returns of the Company have been examined by the tax authorities through 2013.

iv) Imputation tax information

The components of unappropriated earnings were as follows:

December 31,

2015

December 31,

2014

Derived from year 1997 and prior years $ - -

Derived from year 1998 and thereafter 1,686,942 1,314,340

$ 1,686,942 1,314,340

December 31,

2015

December 31,

2014

Balance of imputation credit account (ICA) $ 73,577 23,225

2015(estimated) 2014(actual)

imputation tax credit ratio of earnings to residents of

ROC 4.35% 7.65%

30

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

326

Effective January 1, 2015, the imputation tax credit of dividends or earnings distributed to

individual shareholder who are residents of the ROC was adjusted to half of the original amount.

Furthermore, the imputation tax credit of dividends or earnings distributed to individual

shareholders resulting from the 10% surtax on unappropriated earnings was also adjusted to half

of the original amount.

Under the integrated income tax system, the above imputation credit account and creditable ratio

were calculated according to the formal interpretation No.10204562810 issued by Taxation

Administration, Ministry of Finance, R.O.C. on October 17, 2013.

(l) Capital and other equity

As of December 31, 2015 and 2014, the total value of authorized ordinary shares amounted to

$4,000,000 thousand, with par value of $10 per share, of which 400,000 thousand shares, 294,133

shares were issued. All issued shares were paid up upon issuance.

A reconciliation of the Company's outstanding shares of the years 2014 and 2013 were as follows:

Unit: thousand shares 2015 2014

Balance at January 1 (Balance at December 31) 294,133 294,133 i) Additional paid-in capital

The components of additional paid-in capital as of December 31, 2015 and 2014, were as

follows:

December 31,

2015

December 31,

2014

Share premium $ 1,280 1,280

Treasury stock 519,506 423,157

$ 520,786 424,437

The Company's subsidiary, Lucky Co. was awarded with cash dividends on August 6, 2015 and

June 25, 2014 amounting in $96,349 thousand and $91,760 thousand, respectively, and they were

recognized as capital surplus-treasury stock transactions.

In accordance with the ROC Company Act in January 2012, realized capital surplus can be used

to increase share capital or to distribute as cash dividends after offsetting losses. The

aforementioned capital surplus includes share premiums and donation gains. In accordance with

the Securities Offering and Issuance Guidelines, the amount of capital surplus to increase share

capital shall not exceed 10 percent of the actual share capital amount.

ii) Retained earnings

As the Company is in a fluctuating business environment and in its growth stage, the dividend

policy states that the distribution of dividends varies depend on the Company's cash position and

reflects its capital budget and working capital demands. However, distribution of earnings shall

be distributed preferably by using stock dividends.

31

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

327

In accordance with the Company's articles of incorporation, the Company must retain 10% of its

after-tax earnings as legal reserve (less deficits of prior years, if any) and then provide a special

reserve for the stockholders' equity account. The remaining amount should be distributed as

follows:

i. Remuneration of directors and supervisors as propose by the Board of Directors;

ii. 1% is distributed as employee bonuses.

iii. 50% to 100% of the remainder, as necessary, should be distributed as dividends, in which

cash dividends should be at least 10% of the total dividends distributed.

The abovementioned distribution of earnings should be proposed by the Board of Directors and is

subject to the stockholders' approval.

For the upcoming three years, The Company plans to distribute all the earnings of each year, and

the ratio of cash and stock distributed is determined in accordance with the policy in The

Company's articles of incorporation and with consideration of The Company's financial situation.

In accordance with the amendments to the Company Act in May 2015, employee bonuses and the

directors' and supervisors' remuneration are no longer part of the appropriations of earnings. The

Board of Directors proposed the amendments on March 17, 2016, which will be approved at the

2016 annual shareholders’ meeting. Please refer to employee benefits expense in Note 6(o).

i. Legal reserve

According to the revised Company Act effective in January 2012 that companies must

retain 10% of their annual net earnings, as defined in the Act, until such retention equals the

amount of issued share capital. When a company incurs no loss, it may, pursuant to a

resolution to be adopted by the shareholders' meeting as required, distribute its legal reserve

by issuing new shares or cash. Only the portion of legal reserve which exceeds 25% of the

issued share capital may be distributed.

ii. Special earnings reserve

As the Company opted for the exemptions allowed under IFRS 1 "First-time Adoption of

International Financial Reporting Standards" during the Company's first-time adoption of

the IFRS as endorsed by the FSC, unrealized revaluation increments and cumulative

translation adjustments of $512,508 thousand, which were previously recognized in

shareholders' equity were reclassified to retained earnings. In accordance with Regulatory

Permit No.1010012865 as issued by the FSC on April 6, 2012, a special reserve is

appropriated from retained earnings for aforementioned reclassification. In addition, during

the use, disposal or reclassifications of relevant assets, this special reserve is reverted to

distributable earnings proportionately. The carrying amount of special reserve amounted to

$512,508 thousand as of December 31, 2015.

For the regulatory permission mentioned above, the Company is also required to set aside

an additional special reserve, as part of the distribution of its annual earnings, equal to the

difference between the amount of above-mentioned special reserve and net debit balance of

the other components of stockholders’ equity.

32

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

328

iii. Distribution of retained earnings

For the years 2014 and 2013, the estimated amounts of employees' bonuses was $8,538

thousand and $7,689 thousand, respectively, and the estimated amounts of directors' and

supervisors' emoluments was $34,151 thousand and $30,757 thousand, respectively. Such

amounts were estimated by multiplying after-tax income by the percentage of distribution of

employees' bonuses and directors' and supervisors' emoluments, and recorded as cost of

sales or operating expenses in the period. The actual amount of employee bonus and

remuneration to the board of directors and supervisors distributed for the year 2014 and

2013 is identical to that estimated in the financial report ended 2014 and 2013, and related

information can be accessed through the Market Observation Post System.

The appropriations of 2014 and 2013 earnings as dividends to stockholders that were

approved by the Company's shareholders during their meetings on June 10, 2015, and June

6, 2014, respectively, were as follows:

2014 2013 Amount

per share

(NT

dollars)

Total

amount

Amount

per share

(NT

dollars)

Total

amount

Dividends distributed to

common shareholders:

Cash $ 2.10 617,680 2.00 588,266

iii) Treasury stock

None shares were purchased by the Company and its subsidiaries during the years 2015 and 2014.

The reason is that the subsidiaries held by long-term of the Company shares previous years. As of

December 31, 2015 and 2014, the subsidiaries held the Company’s shares as follows:

December 31, 2015

Number of

shares (in

Market

price per

Adjusted

cost per

Total

market

Total

treasury Subsidary name thousand) share share value stock

Lucky Co. 46,041 67.90 11.51 $ 3,126,201 530,114 December 31, 2014 Number of

shares (in

Market

price per

Adjusted

cost per

Total

market

Total

treasury Subsidary name thousand) share share value stock

Lucky Co. 46,041 55.30 11.51 $ 2,546,082 530,114

33

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

329

iv) Other equities

Foreign

exchange

differences

arising from

foreign

operation

Available-fo

r-sale

financial

assets Total

Balance as of January 1, 2015 $ 210,304 (5,685) 204,619

Foreign exchange differences arising from

foreign operation

(58,483) - (58,483)

Exchange differences on translation financial

statements of foreign subsidiaries accounted

for using equity method

(85,617) - (85,617)

Unrealized gains (losses) from

available-for-sale financial assets

- (598) (598)

Unrealized gains (losses) on available-for-sale

financial assets, subsidiaries accounted for

using equity method

-

(140)

(140)

Balance as of December 31, 2015 $ 66,204 (6,423) 59,781

Balance as of January 1, 2014 $ 37,681 (4,865) 32,816

Foreign exchange differences arising from

foreign operation

30,645 - 30,645

Exchange differences on translation financial

statements of foreign subsidiaries accounted

for using equity method

141,978 - 141,978

Unrealized gains (losses) from

available-for-sale financial assets

- (664) (664)

Unrealized gains (losses) on available-for-sale

financial assets, subsidiaries accounted for

using equity method

-

(156)

(156)

Balance as of December 31, 2014 $ 210,304 (5,685) 204,619

34

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

330

(m) Earnings per share

The calculation of the Company's basic earnings per share and diluted earnings per share for the years

ended December 31, 2015 and 2014, was as follows:

i) Basic earnings per share

2015 2014

Net income attributable to common shareholders of the

Company $ 1,112,850 948,634

Weighted-average number of common shares 248,092 248,092

Basic earnings per share (in NT dollars) $ 4.49 3.82

ii) Diluted earnings per share

2015 2014

Net income attributable to common shareholders of the

Company (diluted) $ 1,112,850 948,634

Weighted-average number of common shares (basic) 248,092 248,092

Impact of potential common shares

Effect of employee's bonuses 263 266

Weighted-average number of shares outstanding

(diluted) 248,355 248,358

Diluted earnings per share (in NT dollars) $ 4.48 3.82

(n) Revenue

The details of the Company's revenue for the years ended December 31, 2015 and 2014, are as

follows:

2015 2014

Sale of goods $ 2,770,169 2,529,337

Service income 8,599 10,212

Revenue on conversion 1,405 38,487

$ 2,780,173 2,578,036 The Company is in accordance with those of the customer loyalty program, which aim to boost the

sales on all of their liquid products, such as edible and non-edible oil products, as well as dish and

laundry liquid detergent, by providing customers bonus points in exchange for a discount price or

complimentary items upon purchasing of any merchandise. As of December 31, 2015 and 2014, the

Company had deferred income amount to $92,977 thousand and $79,496 thousand. Deferred income

is derived from the fair value of the bonus points or complimentary items which have not been

exchanged by the customers.

35

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

331

(o) Employees' compensation and directors' remuneration

In accordance with the Company's article in March 17, 2016, this has been revised but has not yet

been approved by the shareholders meeting. If there is profit for the year, the Company should

contribute more than 1% of its profit as employee compensation, and less than 5% as directors'

remuneration. However, if the Company has accumulated deficits, the profit should be reserved to

offset the deficit. The amount of remuneration to directors, and compensation to employees had been

approved by the board of directors.

The Company estimated its employee compensation and directors' remuneration amounting to $14,029

thousand and $56,116 thousand for the year 2015, respectively. The estimated amounts mentioned

above are based on the net profit before tax of each respective ending period, multiplied by the

percentage of the employee compensation, and the directors' remuneration, as specified in the

Company's article. The estimations are recorded under operating expenses and cost. The

differences between the estimated amounts in financial statements and actual amounts approved by the

Board of Directors, if any, shall be accounted for as changes in accounting estimates and recognized in

2016.

(p) Non-operating income and expenses

i) Other income

2015 2014

Interest income $ 1,293 1,636

Rental income 16,757 9,285

Other 9,203 7,222

$ 27,253 18,143

The Company recalled and disposed its products because it violated the Act Governing Food

Safety and Sanitation. However, the Company did not inform the Department of Public Health

(DOH), Taoyuan, and has to penalty of $3,000 thousand, which was recognized as loss. However,

the Company appealed to the DOH, Taoyuan regarding the said penalty. As a result, on

December 24, 2015, the DOH, Taoyuan, decided to reduce the amount to $300 thousand instead

of $3,000 thousand, which were recognized as other accounts payable and other accounts

receivable, respectively. Therefore, the difference of $2,700 thousand, which the Company is

expected to receive from the DOH, Taoyuan, was recognized as other gains as of December 31,

2015.

ii) Other gains and losses

2015 2014

Gains (loss) on foreign exchange $ (2,474) (4,470)

Loss on disposal of property, plant and equipment, net (34) (351)

Gains on disposal of investments - (20,000)

Impairment loss on non-financial assets - (7,050)

Handling charges (3,076) (497)

Other (2,060) (945)

$ (7,644) (33,313)

36

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

332

The Company declared its 30 batches of raw materials as industrial materials during the period

from 2013 to August 2014. However, the said materials were not registered with the Food and

Drug Administration (FDA), Ministry of Health and Welfare, which violated the Act Governing

Food Safety and Sanitation. Therefore, On October 15, 2014, the Company was ordered by the

DOH of Taoyuan County Government to temporarily cease its production on all types of edible

oil, as well as recall 123 kinds of its products island-wide. In addition, the Company was

requested to pay the penalty amounting to $30,000 thousand by the DOH of Taipei City

Government. On October 19, 2014, the DOH of Taoyuan City Government gave the Company

the permission on all of its recalled products to be sold again in the market under the condition

that the said products will have to be examined and approved by the FDA for market

consumption. On January 23, 2015, the DOH of Taipei City Government revoked its decision on

the amount the Company has to pay for its penalty; instead of paying the fine of $30,000

thousand, on January 30, 2015, the Company will only have to pay the amount of $7,050

thousand as ordered by the DOH of Taipei City Government. On December 31, 2015, the

Company paid the DOH of Taipei City Government the requested amount in full.

iii) Finance costs

2015 2014

Interest expenses $ 67,951 63,684

(q) Financial instruments

i) Credit risk

i. Credit risk exposure

The maximum credit risk exposure of the Company's financial assets is equal to their

carrying amount.

ii. Concentration of credit risk

The Company's cash and cash equivalents and accounts receivable are the main source of

potential credit risk. The Company deposits its cash and cash equivalents in different

financial institutions and has no concentration of credit risk on an individual customer.

Therefore, the Company concluded that it is not exposed to credit risk.

37

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

333

ii) Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest

payments but excluding the impact of netting agreements.

Carrying

amount

Contractual

cash flows

Within a

year

1-2 years

2-5 years

More than 5

years

December 31, 2015

Non-derivative financial liabilities

Secured loans $ 2,254,600 2,374,856 75,873 488,868 1,640,474 169,641

Short-term commercial paper payable 89,967 90,000 90,000 - - -

Short-term borrowings 134,267 134,267 134,267 - - -

Unsecured loans 1,774,875 1,814,297 657,151 1,027,144 130,002 -

Other payable 194,739 194,739 194,739 - - -

$ 4,448,448 4,608,159 1,152,030 1,516,012 1,770,476 169,641

December 31, 2014

Non-derivative financial liabilities

Secured loans $ 1,500,000 1,627,229 95,321 367,519 994,748 169,641

Short-term commercial paper payable 19,994 20,000 20,000 - - -

Short-term borrowings 155,206 155,206 155,206 - - -

Unsecured loans 2,306,520 2,397,156 481,126 1,889,961 26,069 -

Other payable 268,491 268,491 268,491 - - -

$ 4,250,211 4,468,082 1,020,144 2,257,480 1,020,817 169,641

The Company does not expect that the cash flows included in the maturity analysis could occur

significantly earlier or at significantly different amounts.

iii) Currency risk

i. Risk exposure

The Company's financial assets and financial liabilities exposed to significant currency risk

were as follows:

Foreign

currency

Exchange

rate

NTD

December 31, 2015

Financial assets:

Monetary assets:

USD $ 1,387 32.8250 45,531

Financial liabilities:

Monetary liabilities:

JPY $ 37 32.8250 1,230

38

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

334

Foreign

currency

Exchange

rate

TWD

December 31, 2014

Financial assets:

Monetary assets:

USD $ 1,002 31.6500 31,703

Financial liabilities:

Monetary liabilities:

JPY $ 1,439 31.6500 45,529

ii. Sensitivity analysis

The Company's exposure to foreign currency risk arise from cash and cash equivalents,

accounts and other receivables, loans and borrowings, and accounts and other payables that

were denominated in foreign currencies. A 1% appreciation (depreciation) of the TWD

against the USD, and EUR as of December 31, 2015 and 2014, would have increased

(decreased) the net income before tax by $1,121 thousand and $363 thousand, respectively.

iii. Foreign exchange gain and loss on monetary item

2015 2014 Foreign

exchange

gain (loss)

Average

exchange

rate

Foreign

exchange

gain (loss)

Average

exchange

rate

TWD $ (2,474) - (4,470) -

iv) Interest rate risk analysis

Please refer to the note on liquidity risk management for the interest rate exposure of The

Company's financial assets and liabilities.

The following sensitivity analysis is based on the risk exposure to interest rates on derivative and

non-derivative financial instruments on the reporting date. Regarding assets with variable interest

rates, the analysis is on the basis of the assumption that the amount of assets outstanding at the

reporting datewas outstanding throughout the year. The rate of change is expressed as the

increment or decrement by 1% when reporting to the management internally, which also

represents the management's assessment of the reasonable interest rate change.

If the interest rate had increased / decreased by 1%, The Company's net income before tax would

have increased / decreased by $34,191 thousand and $29,602 thousand for the years ended

December 31, 2015 and 2014, respectively, with all other variable factors remaining constant.

39

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

335

v) Fair value and carrying amount

i. Categories and fair value of financial instruments

Except for the followings, carrying amount of The Company's financial assets and liabilities

are valuated approximately to their fair value, and are not based on observable market date

and the value measurements which are not reliable. No additional fair value disclosure is

required in accordance to the Regulations.

December 31, 2015 Fair value Carrying

amount

Level 1 Level 2 Level 3 Total

Available-for-sale financial

assets

Domestic listed stock $ 10,979 10,979 - - 10,979

Financial assets at cost 27,166 - - - -

Subtotal 38,145 10,979 - - 10,979

Loans and receivables

Cash and cash equivalents 87,031 - - - -

Accounts and notes

receivable and other

receivables (including

576,439 - - - -

related parties)

Subtotal 663,470 - - - -

Total $ 701,615 10,979 - - 10,979

Financial liabilities

measured at amortized cost

Short-term borrowings $ 500,000 - - - -

Short-term commercial

paper payable

89,967 - - - -

Accounts payable 134,267 - - - -

Other payables (including

related parties)

194,739 - - - -

Long-term borrowings

(including current

3,529,475 - - - -

portion)

Total $ 4,448,448 - - - -

40

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

336

December 31, 2014 Fair value Carrying

amount

Level 1 Level 2 Level 3 Total

Financial assets at fair value

through profit or loss

Available-for-sale financial

assets

Domestic listed stock $ 11,577 11,577 - - 11,577

Financial assets at cost 27,166 - - - -

Subtotal 38,743 11,577 - - 11,577

Loans and receivables

Cash and cash equivalents 84,016 - - - -

Accounts and notes

receivable and other

receivables (including

838,562 - - - -

related parties)

Subtotal 922,578 - - - -

Total $ 961,321 11,577 - - 11,577

Financial liabilities

measured at amortized cost

Short-term borrowings $ 217,012 - - - -

Short-term commercial

paper payable

19,994 - - - -

Accounts payable 155,206 - - - -

Other payables (including

related parties)

268,491 - - - -

Long-term borrowings

(including current

3,589,508 - - - -

portion)

Total $ 4,250,211 - - - -

ii. Valuation techniques and assumptions used in fair value determination

If there are quoted prices in the active markets for financial instruments, the fair value of

those prices may be based on the quoted market prices. The market prices announced by

Securities Exchange and Over the Counter are the benchmarks of the fair value of equity

instruments and Liability instruments trading in active markets.

Stocks of listed Companies and open ended funds are financial assets possessing standard

provision and trading in active markets. The fair values are determined based on the market

quotes and net assets value, respectively.

41

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

337

(r) Financial risk management

i) Overview

The Company is exposed to the following risks arising from financial instruments:

i. Credit risk

ii. Liquidity risk

iii. Market risk

This note discloses information about the Company's exposure to the aforementioned risks, and

its goals, policies, and procedures regarding the measurement and management of these risks. For

additional quantitative disclosures of these risks, please refer to the notes regarding each risk

disclosed throughout the financial report.

ii) Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the risk

management framework.

The Company's risk management policies are established to identify and analyze the risks faced

by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to

limits. Risk management policies and systems are reviewed regularly to reflect changes in

market conditions and the Company's activities. The Company, through its training and

management standards and procedures, aims to develop a disciplined and constructive control

environment in which all employees understand their roles and obligations.

The Company's Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit

undertakes both regular and ad hoc reviews of risk management controls and procedures, the

results of which are reported to the Precursory Audit Committee.

iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial

instrument fails to meet its contractual obligations, and arises principally from The Company's

receivables from customers and investment securities.

i. Trade and other receivables

The Company's exposure to credit risk is influenced mainly by the individual characteristics

of each customer. However, management also considers the demographics of the

Company's customer base, including the default risk of the industry and country in which

customers operate, as these factors may have an influence on credit risk, particularly during

deteriorating economic circumstances. In 2015 and 2014, there was no geographical

concentration of credit risk regarding the Company's revenue.

The Company have established a credit policy under which each new customer is analyzed

individually for creditworthiness before the Company's standard payment and delivery

terms and conditions are offered. Purchase limits are established for each customer, which

represent the maximum open amount without requiring approval; these limits are reviewed

on a periodic basis. Customers that fail to meet the Company's benchmark creditworthiness

may transact with the Company only on a prepayment basis.

42

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

338

The Company set the allowance for bad debt account to reflect the estimated losses for trade,

other receivables, and investment. The allowance for bad debt account consists of specific

losses relating to individually significant exposure and unrecognized losses arising from

similar assets groups. The allowance for bad debt account is based on historical collection

record of similar financial assets..

ii. Investments

The credit risk exposure in the bank deposits, fixed income investment and other financial

instruments is measured and monitored by the Company's finance department. Since those

who transact with the Company are banks and other external parties with good credit

standing, there are no non-compliance issues, and therefore, there is no significant credit

risk.

iii. Guarantees

Pursuant to the Group's policies, it is only permissible to provide financial guarantees to

subsidiaries. As December 31, 2015 and 2014, the Company did not provide any

endorsement and guarantees to preparation of the third-party.

iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations

associated with its financial liabilities that are settled by delivering cash or another financial asset.

The Company's approach to managing liquidity is to ensure, as far as possible, that it always has

sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,

without incurring unacceptable losses or risking damage to the Company's reputation.

The Company uses activity-based costing to estimate the cost of its products and services, which

assists it in monitoring cash flow requirements and optimizing its cash return on investments.

The Company aims to maintain the level of its cash and cash equivalents and other highly

marketable debt investments at an amount in excess of the expected cash flows on financial

liabilities (other than trade payables) over the succeeding 60 days. The Company also monitors

the level of expected cash outflows on trade and other payables. This excludes the potential

impact of extreme circumstances that cannot reasonably be predicted. The Company has unused

short term bank facilities of $2,427,707 thousand on December 31, 2015.

v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates,

and equity prices will affect the Company's income or the value of its holdings of financial

instruments. The objective of market risk management is to manage and control market risk

exposures within acceptable parameters.

i. Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are

denominated in a currency other than the respective functional currencies of the Company's

entities. The currencies used in these transactions are the TWD, USD and THB.

43

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

339

Interest expenses are denominated in the same currency as that of the principal. Generally,

the currency of loans matches that of the Company's operating cash flow, primarily

consisting of TWD, USD and THB.

With regard to monetary assets and liabilities denominated in a foreign currency, when a

short-term risk exposure exists, the Company relies on immediate foreign exchange

transactions to ensure the net exposure to foreign exchange risk is maintained at an

acceptable level.

ii. Interest rate risk

The interest rates of the Company's long-term and short-term borrowings are floating.

Hence, changes in market conditions will cause fluctuations in the effective interest rate of

the aforementioned loans. The Company's finance department monitors and measures

potential changes in market conditions to achieve a fixed interest rate on the Company's

loans.

iii. Other market price risk

The Company does not enter into any commodity contracts other than to meet the

Company's expected usage and sales requirements; such contracts are not settled on a net

basis.

(s) Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market

confidence and to sustain future development of the business. Capital consists of ordinary shares,

capital surplus, retained earnings, and non-controlling interests of the Company. The Board of

Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Company's debt-to-adjusted-capital ratio at the end of the reporting period was as follows:

December 31,

2015

December 31,

2014

Total liabilities $ 5,578,132 5,046,640

Less: cash and cash equivalents 87,031 84,016

Net debt $ 5,491,101 4,962,624

Total equity $ 5,499,819 5,080,843

Debt-to-adjusted-capital ratio 99% 98%

As of December 31, 2015, there were no changes in the Company's approach of capital management.

44

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

340

(7) Related-party Transactions

(a) List of subsidiaries

Subsidiary of the Company as follows:

Ownership interest (Shareholdings: %)

Country of

incorporation

December

31, 2015

December 31,

2014 Description

Namchow (Thailand) Ltd. Thailand 100 100

Mostro (Thailand) Ltd. Thailand 100 100

Nacia International Corp. B.V.I. 100 100

Nankyo Japan Co., Ltd. Japan 100 100

Namchow Consulting Company, Ltd. Taiwan 100 100

Chow Ho Enterprise Co., Ltd. Taiwan 100 100

Lucky Royal Co., Ltd. Taiwan 99 99

Navigator Business Publications Co., Ltd. Taiwan 90 90 Note 1

Namchow (British Virgin Island) Ltd. B.V.I. 58 58 Note 2

Dian Shui Lou Restaurant Business Co., Ltd. Taiwan 99 99 Note 3

Namchow Gastronomy Consulting Company,

Ltd.

Taiwan 99 99 Note 3

Shanghai Bao Lai Na Company Limited China 58 58 Note 2

Ting Hao(Cayman Islands)Holding Corp. Cayman 100 100 Note 4

Namchow International Corp. Cayman 100 100

Shanghai Qiaohao Trading Co., Ltd China 100 100

Shanghai Qiaohao Enterprise Management Co.,

Ltd.

China 100 100

Shanghai Qiaohao Food Co., Ltd. China 100 100

Tianjin Namchow Food Co.,Ltd. China 100 100

Guangzhou Namchow Food Co., Ltd. China 100 100

Shanghai Qizhi Business Consulting Co., Ltd. China 100 100

Shanghai Qiaoxing Co., Ltd. China 100 100

Shanghai Namchow Food co., Ltd. China 100 100

Tianjin Yoshi Yoshi Food Co., Ltd. China 100 100 Note 5 Note 1: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 89.97% shares of NBP Co..

Note 2: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 57.94% shares of Namchow (BVI Co.)

and Bao Lai Na Co.

Note 3: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 99.65% shares of Dian Shui Lou Co.

and Namchow Gastronomy Consulting Co.

Note 4: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 100% shares of Ting Hao Cayman

Co.

Note 5: As of December 31, 2015 and 2014, the Company, directly and indirectly, holds 100% shares of Tianjin Yoshi

Yoshi Co.

45

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

341

(b) Parent company and ultimate controlling party

The Company is the ultimate controlling party of the Company.

(c) Significant transactions with related parties

i) Sales to related parties

Significant sales to related parties were as follows:

2015 2014

Subsidiaries $ 260,054 215,542

The selling prices and collection terms for the sales to related parties are not significantly

different from those of the third-party customers; the terms of receivables are 60 days to 90 days.

The receivables from related parties were not set with collaterals and do not need to recognize

bad debt after estimating.

ii) Management technology service revenue

The Company provided management technology service to subsidiaries recoded under service

revenue and the amounts were as follows:

2015 2014

Subsidiaries $ 8,542 8,285

iii) Rental revenue

The Company rents offices to subsidiaries and the amounts were as follows:

2015 2014

Subsidiaries $ 16,642 9,170

iv) Purchase from related parties

Purchases from related parties were as follows:

2015 2014

Subsidiaries $ 21,100 17,450

The purchase price and payment terms for the purchase from related parties are not significantly

different from those of the third-party vendors.

46

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

342

v) Property transactions disposal of property, plant and equipment

The Company sold its property, plant and equipment to related parties due to operating demand

as follows:

2015 2014

Type of related parties

Disposal

price

Disposal

income or

loss

Disposal

price

Disposal

income or

loss

Subsidiaries $ - - 463 -

vi) Leases

The Company leased buildinds from its subsidiaries due to operating demand as follows:

Type of related parties Object Period 2015 2014

Key management Building 2015.1.1~

2016.12.31

$ 11,052 8,960

vii) Lending to related parties

i. The information for the Company loans to related parties was as follows:

December 31,

2015

December 31,

2014

Subsidiaries $ - 249,730

Interest rate is calculated with 1.5% for the loan. The loan was unsecured; therefore, it need

not be recognized as bad debt after estimation.

ii. Interest revenue

The information on the interest received by the Company from its subsidiaries was as

follows:

2015 2014

Subsidiaries $ 1,253 1,580

47

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

343

viii) Receivable from related parties

The details of the receivables from related parties were as follows:

Accounts

Type of related

parties

December 31,

2015

December 31,

2014

Accounts receivable-related

parties

Subsidiaries $ 52,865 41,527

Other receivables-related parties Subsidiaries 9,465 261,522

$ 62,330 303,049

ix) Payable to related parties

The details of the Group's payable to related parties were as follows:

Accounts

Type of related

parties

December 31,

2015

December 31,

2014

Accounts payable-related parties Subsidiaries $ 7,840 2,554

Other payables-related parties Subsidiaries 20,877 11,662

$ 28,717 14,216

x) Guarantees

As of December 31, 2015 and 2014, the Company provided the amounts of $1,355,644 thousand

and $2,438,724 thousand, respectively, guarantees to its related parties.

(d) Personnel transactions from key management

The compensation of the key management personnel comprised as the following:

2015 2014

Short-term employee benefits $ 181,776 89,853

Post-employments benefits 2,672 1,952

$ 184,448 91,805

48

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

344

(8) Pledged Assets

The carrying values of pledged assets were as follows:

Pledged assets

Object

December 31,

2015

December 31,

2014

Other non-current assets:

Time deposits Operating lease deposits $ 408 408

Property, plant and equipment:

Land Short-term and long-term

borrowings

1,707,574 1,707,574

Buildings Short-term and long-term

borrowings

269,431 285,088

equipment borrowings

$ 1,977,413 1,993,070

(9) Significant Commitments and Contingencies

Major contracts not recognized the commitment:

(a) The Company's unrecognized contractual commitments were as follows:

December 31,

2015

December 31,

2014

Acquisition of property, plant and equipment $ 10,668 6,829

(b) The Company's unused letters of credit for purchases of materials:

December 31,

2015

December 31,

2014

Unused letters of credit for purchases of materials $ 28,681 31,621

(c) Long-term letters of credit guarantee bill:

December 31,

2015

December 31,

2014

Long-term letters of credit guarantee bill $ 392,000 392,000

(10) Significant Losses from Calamity: None.

(11) Significant Subsequent Events: None.

49

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

345

(12) Others

The employee benefit expenses, depreciation and amortization, categorized by function, were as follows:

By function 2015 2014

By nature

Operating

costs

Operating

expenses

Total

Operating

costs

Operating

expenses

Total

Employee benefits

Salary 182,665 399,158 581,823 164,917 325,507 490,424

Labor and health insurance 20,092 27,939 48,031 18,527 25,440 43,967

Pension 10,790 18,633 29,423 10,535 18,021 28,556

Others 12,436 9,304 21,740 12,746 10,392 23,138

Depreciation 72,762 32,377 105,139 72,845 28,852 101,697

Amortization - - - - - - As of December 31, 2015 and 2014, the depreciation expenses recognized under "non operating income

and expenses-other gains and losses" amounted to $3,076 thousand and $497 thousand, respectively.

As of December 31, 2015 and 2014, the Company had 804 and 743 employees, respectively.

50

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

346

(13) Other Disclosures

(a) Information on significant transactions

The following is the information on significant transactions required by the "Regulations Governing the Preparation of Financial

Reports by Securities Issuers" for The Company:

i) Loans extended to other parties:

Unit: thousand dollars

No.

Name of

Name of

Financial

statement

account

Related

party

Highest balance

of financing to

other parties

Ending Amount

actually

drawn

Range of

interest

rates

Purposes of fund

financing for the

borrowers

Transaction

amount for

business between

Reasons for

short-term

financing

Allowance

for bad

debt

Collateral Financing limit

for each

borrowing

Maximum

financing

limit for the

lender borrower during the year balance (Note 7) two parties Item Value company lender

1 The company Nankyo Japan

Co.

Other accounts

receivable-

related parties

Yes 249,730 - - - 2 - Capital need

for operation

- - 2,199,928

(Note 1)

2,199,928

(Note 1)

2 Guangzhou

Namchow Co.

Shanghai

Namchow Co.

Other

long-term

accounts

receivable-

related parties

Yes 750,000 750,000 750,000 4% 2 - Capital need

for operation

- - 2,377,346

(Note 2)

2,377,346

(Note 2)

Note 1: Base on the Company’s guidelines, the allowable aggregate amount of financing provided to others cannot exceed 40% of the Company’s stockholder’s equity; the maximum financing provided to an individual company

cannot exceed 40% of the Company’s stockholder’s equity.

Note 2: Base on the Guangzhou Namchow Co.’s guidelines, the allowable aggregate amount of financing provided to others and the maximum financing provided to an individual company cannot exceed 100% of the Guangzhou

Namchow Co’s stockholder’s equity.

Note 3: The transactions within The Company were eliminated in the consolidated financial statements.

ii) Guarantees and endorsements for other parties:

Unit: thousand dollars

Name

Counter-party of guarantee

and endorsement

Limitation on

amount of

guarantees and

Highest balance

for guarantees

and

Ending

balance of

guarantees

Amount

Property

pledged on

guarantees

Ratio of accumulated

amounts of guarantees

and endorsements to

Maximum

allowable

amount for

Parent company

endorsement /

guarantees to

Subsidiary

endorsement /

guarantees to

Endorsements/

guarantees to

third parties on

No.

of

company

Name Relationship

with the

company

endorsements

for one party

endorsements

during the year

and

endorsements

actually

drawn

and

endorsements

(Amount)

net worth of the latest

financial statements

guarantees

and

endorsements

third parties

on behalf of

subsidiary

third parties

on behalf of

parent company

behalf of

company in

Mainland China

0 The

Company

Nacia Co. 2 5,499,819 356,700 310,300 117,160 - 5.64% 5,499,819 Y

0 The

Company

Ting Hao Cayman

Co.

3 5,499,819 884,500 493,000 435,000 - 8.96% 5,499,819 Y

0 The

Company

Tianjin Namchow

Co.

3 5,499,819 429,200 - - - - % 5,499,819 Y Y

0 The

Company

Guangzhou

Namchow Co.

3 5,499,819 435,000 - - - - % 5,499,819 Y Y

0 The

Company

Nankyo Japan Co. 2 5,499,819 552,344 552,344 434,824 - 10.04% 5,499,819 Y

1 Lucky Co. Dian Shui Lou

Co.

2 3,914,795 76,000 46,000 6,214 - 1.18% 3,914,795

Note 1: The guarantee's relationship with the guarantor is as follows:

(1) Ordinary business relationship.

(2) A subsidiary whose common stock is more than 50% directly owned by the guarantor.

(3) An investee whose common stock is more than 50% owned by the parent company and its subsidiary in aggregate.

(4) The parent company owns, directly or indirectly via subsidiaries, more than 50% of the guarantor's common stock.

(5) A company in the same trade that is mutually guaranteed pursuant to the covenants of a construction contract upon contracting a project.

(6) A company that is guaranteed proportionately according to the guarantor's ownership percentage due to co-investment by various investors.

Note 2: According to Namchow Co.’s guarantee and endorsement policies, the total guarantee and endorsement not exceed 100% of Namchow Co.’s net worth, while the total guarantees and endorsements for an individual party

not exceed 100% of Namchow Co.’s net worth.

Note 3: According to Lucky Co.’s guarantee and endorsement policies, the total guarantee and endorsement not exceed 100% of Lucky Co.’s net worth, while the total guarantees and endorsements for an individual party not

exceed 100% of Namchow Co.’s net worth.

Note 4: The transactions within The Company were eliminated in the consolidated financial statements.

iii) Securities held as of December 31, 2015 (excluding investment in subsidiaries, associates and joint ventures):

Unit: thousand dollars

Nature and name Relationship Ending balance

Name of holder of security with the security issuer Account name Number of

shares

Book value

Holding

percentage

Market value

(Note 1)

Remarks

The Company Global securities Financial Corporation

Investee accounted for by cost method

Financial assets carries at cost-noncurrent

3,504 27,166 0.87 % 27,166

The Company

Stock:

Capital Co., Ltd

Available-for-sale financial

asset-noncurrent

1,108

10,979

0.05

%

10,979

Lucky Co.

Stock:

The Company

Available-for-sale financial asset-noncurrent

46,041

3,126,201

15.65 %

3,126,201

Note 2

Lucky Co.

Stock:

Capital Co., Ltd

Available-for-sale financial

asset-noncurrent

259

2,570

0.01

%

2,570

Note 1: For financial assets carried at cost-non-current in listed companies, market value is determined by the latest monthly average sales price. Market value of unlisted companies is the net worth or the book value prevailing on the balance sheet date.

Note 2: The stated book value is after subtraction of the amount being reclassified treasury stock.

iv) Accumulated holding amount of a single security in excess of $300 million or 20% of Namchow Co.'s issued share capital:

None.

51

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

347

v) Acquisition of real estate in excess of $300 million or 20% of Namchow Co.'s issued share capital: None.

vi) Disposal of real estate in excess of $300 million or 20% of Namchow Co.'s issued share capital: None.

vii) Sales to and purchases from related parties in excess of $100 million or 20% of Namchow Co.'s issued share capital:

Unit: thousand dollars

Name of

Transaction details

Status and reason for

deviation from arm's-

length transaction

Account / note receivable

(payable)

company Counter-party Relationship Purchase /

Sale

Amount

Percentage of

total purchases /

sales

Credit

period

Unit price

Credit period

Balance

Percentage of total

accounts / notes

receivable (payable)

Remarks

The Company Lucky Co. Subsidiary (Sales) (228,697) 8 % Note - 46,530 8%

Tianjin Namchow

Co.

Shanghai Qiaoxing

Co.

Subsidiary (Sales) (2,383,423) 87 % Note - 622,386 94%

Guangzhou

Namchow Co.

Shanghai Qiaoxing

Co.

Subsidiary (Sales) (2,988,796) 99 % Note - 582,932 100%

Tianjin Yoshi Yoshi

Co.

Shanghai Qiaoxing

Co.

Subsidiary (Sales) (764,666) 98 % Note - - -%

Tianjin Namchow

Co.

Tianjin Yoshi Yoshi

Co.

Subsidiary (Sales) (213,808) 8 % Note - 26,397 4%

Note 1: Depending on capital movement motor adjustment.

viii) Receivables from related parties in excess of $100 million or 20% of Namchow Co.'s issued share capital:

Unit: thousand dollars

Name of related

Counter-party

Relationship

Balance of

receivables from

Turnover Overdue amount Amounts received in

subsequent period

Allowances

for bad

party related party rate Amount Action taken (Note 2) debts

Guangzhou

Namchow Co.

Shanghai Qiaoxing

Co.

Subsidiary 582,932 - - 582,932

(As of March 17, 2016)

-

Guangzhou

Namchow Co.

Shanghai

Namchow Co.

Subsidiary 762,509 - - -

(As of March 17, 2016)

-

Tianjin Namchow

Co.

Shanghai Qiaoxing

Co.

Subsidiary 622,386 - - 622,386

(As of March 17, 2016)

-

ix) Derivative financial instrument transactions: None.

(b) Information on investees:

The following is the information on investees for the year 2015 (excluding information on investees in Mainland China):

Unit: thousand dollars

Name of Name of Original cost Ending balance Net income Investment

investor

investee

Address Scope of business December 31,

2015

December 31,

2014

Shares Percentage of

ownership

Book value (losses) of

investee

income

(losses)

Remarks

The Company Namchow (Thailand)

Ltd.

Bangkok, Thailand Manufacturing and selling instant

noodles and rice cracker

1,027,405 1,027,405 9,245 100.00% 1,131,170 245,413 245,413 Subsidiary

The Company Mostro (Thailand) Ltd. Bangkok, Thailand Manufacturing and selling food 10,201 10,201 100 100.00% 17,779 4,951 4,951 Subsidiary

The Company Nacia Co. Tortola, British Virgin Islands Holding of investments 343,443 343,443 1 100.00% 5,050,316 1,102,199 1,102,199 Subsidiary

The Company Chow Ho Co. Taipei, Taiwan Catering services, food and

beverage retailing, and frozen food

manufacturing

80,000 80,000 8,000 100.00% 2,771 (3,884) (3,884) Subsidiary

The Company Lucky Co. Taipei, Taiwan Manufacturing, selling and

processing various food and

beverage products

938,438 938,438 95,338 99.00% 744,331 50,683 50,505 Subsidiary

The Company Chi Zhi Co. Taipei, Taiwan Publishing, distributing and selling

printed publications

763 763 80 80.00% 100 25 21 Subsidiary

The Company Nankyo Japan Co. Tokyo, Japan Catering services, Bistro and

wine-selling

308,530 58,800 -

(note 2)

100.00% 260,986 (15,913) (15,913) Subsidiary

The Company Namchow Consulting

Co.

Taipei, Taiwan Catering services, food and

beverage retailing and other

consulting

5,000 5,000 500 100.00% 4,940 (41) (41) Subsidiary

Lucky Co. Namchow BVI Co. Tortola, British Virgin Islands Holding of investments 69,133 69,133 3,000 58.00% 193,931 120,860 70,267 Lucky Co.'s

Subsidiary

Lucky Co. Dian Shui Lou Co. Taipei, Taiwan Liquor importing and retailing 104,000 104,000 10,400 100.00% 125,185 5,222 5,222 Lucky Co.'s

Subsidiary

Lucky Co. Namchow Gastronomy

Consulting Co.

Taipei, Taiwan Catering services and food

consulting

5,000 5,000 500 100.00% 1,511 (875) (875) Lucky Co.'s

Subsidiary

Lucky Co. Chi Zhi Co. Taipei, Taiwan Publishing, distributing and selling

printed publications

100 100 10 10.00% 100 25 - Lucky Co.'s

Subsidiary

2,010,124 378,438 18,500 100.00% 4,999,693 1,063,076 825,227 Nacia Co.'s

Subsidiary

Nacia Co. Namchow International

Co.

Cayman Islandls British West

Indies.

Holding of investments 476,680 476,680 12,770 100.00% 1,787,366 283,312 283,312 Nacia Co.'s

Subsidiary

Namchow

International Co.

Ting Hao Cayman Co. Gayman Islands British West

Indies.

Holding of investments -

(note 3)

363,300 -

(note 3)

- %

(note 3)

-

(note 3)

1,063,076 237,849 Nacia Co.'s

Subsidiary

51

NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.

Notes to the Financial Statements

348