Namchow Chemical Industrial Co., Ltd. 2016 Annual Report · Namchow Chemical Industrial Co., Ltd. 201. 6. ... and is not an official document of the shareholders ... The consultant

Stock Code : 1702

Namchow Chemical Industrial Co., Ltd.

2016 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, 2017

http://www.namchow.com.tw/

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, Bo-Shu Huang 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

(I) Date of Establishment ----------------------------------------------------------------------------4

(II) Company History ---------------------------------------------------------------------------------4

III. Corporate Governance Report

(I) Organizational System ------------------------------------------------------------------------- 10

(II) Background Information of Directors, Supervisors, General Managers, Vice General Managers, Assistant Managers, and Heads of Various Departments and Branches ------------------------------------------------------------------------------------------ 11

(III) Remunerations paid to directors, supervisors, general managers, and vice general managers in recent years ----------------------------------------------------------------------- 21

(IV) Status of Corporate Governance -------------------------------------------------------------- 32

(V) Public Expenditure on CPAs ------------------------------------------------------------------ 87

(VI) Information on Replacement of Accountants ---------------------------------------------- 88

(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 --------------------------------- 88

(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 ------------------------- 89

(IX) Information of Relationship among Top 10 Shareholders Who Are Related, Spouses, or Relatives Within the Second Degree of Kinship ----------------------------- 90

(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 ------ 92

IV. Fund-raising

(I) Capital and Shares ------------------------------------------------------------------------------ 93

(II) Corporate Bonds -------------------------------------------------------------------------------- 97

(III) Special Stock, Special Shares, Global Depositary Receipt, Employee Stock Option Certificate, Restricted Employee Shares and M&A or Acceptance of Transferred Shares of Another Company for Issuance of New Shares -------- --------- 97

(IV) Implementation of Capital Utilization Plan ------------------------------------------------- 97

V. Operational Status

(I) Business Content -------------------------------------------------------------------------------- 98

(II) Overview of Marketing and Production/Distribution ------------------------------------ 107

(III) Information of Employees ------------------------------------------------------------------- 132

(IV) Information on Environmental Protection Expenditure --------------------------------- 133

(V) Employer-employee Relations -------------------------------------------------------------- 133

(VI) Important Contract ---------------------------------------------------------------------------- 135

VI. Financial Status

(I) Brief Balance Sheet and Income Statement for the Past Five Years ------------------- 136

(II) Financial Analysis of the Past Five Years-------------------------------------------------- 144

(III) Supervisor Report on Reviewing the Latest Annual Financial Report ---------------- 151

(IV) Latest Financial Report ----------------------------------------------------------------------- 152

(V) Entity Financial Statement of the Latest Year Inspected and Authenticated by CPAs (Omitted) -------------------------------------------------------------------------------- 152

(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. --------------------------------------------------------------------- 153

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

(I) Financial Standing ---------------------------------------------------------------------------- 154

(II) Financial Performance ------------------------------------------------------------------------ 155

(III) Cash Flow -------------------------------------------------------------------------------------- 156

(IV) Impacts of Latest Major Capital Expenditure on Financial Business ----------------- 157

(V) Main Reasons for Profits or Losses of Latest Reinvestment Policy, Improvement Plan, and Investment Plan for the Coming Year ------------------------------------------ 158

(VI) Analysis and Assessment of Risks ---------------------------------------------------------- 161

(VII) Other important matters: None -------------------------------------------------------------- 162

VIII. Special Notes

(I) Information of associated enterprises ------------------------------------------------------ 163

(II) Organization of Latest Private Placement Securities as of the Date of Printing of Annual Report ----------------------------------------------------------------------------------- 173

(III) Latest Holding or Disposal of Company's Shares by Subsidiaries as of the Date of Printing of Annual Report ------------------------------------------------------------------ 173

(IV) Other matters requiring supplementary information: None ----------------------------- 173

※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 -------------------------- 173

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I. Letter to Shareholders

(I) 2016 Business Report

The Company has an annual revenue of NTD 2,808,091 thousand throughout 2016, an increase of NTD 27,918 thousand (1.0%) from NTD 2,780,173 thousand in 2015. The Company's consolidated revenue was NTD 16,299,714 thousand in 2015, an increase of NTD 820,171 thousand (5.3%) from NTD 15,479,543 thousand in 2014. The profits amounted to NTD 1,205,702 thousand in 2016, an increase of NTD 92,852 thousand (8.3%) from NTD 1,112,850 thousand in 2015. Both the revenue and profits set historical records in 2016. With every employee within the group working hard in 2016, most businesses accomplished growths from 2015. Frozen Noodle, Chinese Food and 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 6,583,650 thousand in 2016; the debt ratio was 54.2%, an increase of 3.8% and NTD 1,005,518 thousand from 50.4% in 2015 when the overall debts were 5,578,132 thousand. In terms of the consolidated statement, the company's debts totaled NTD 12,954,458 thousand in 2016; the debt ratio was 69.7%, an increase of 0.4% and NTD 199,200 thousand from 69.3% in 2015 when the overall debts were 12,755,258 thousand. Cash inflow as a result of business activities totaled NTD 1,597,994 thousand; the current ratio was 144.0％, which was better than 136.7% in 2015, 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 and introduce high-end fat and oil products from overseas in order to satisfy customers' demand for baking oils on all fronts. The frozen dough business continues to focus on researching and developing novel options and can tailor-make products for customers. It is a long-term trustworthy and indispensable partner for the baking industry. The ice cream business introduces new products and options each year that are particularly deeply loved by consumers. 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 last 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.

(II) Summary of 2017 Business Plan

Namchow's fat and oil business in China has rendered accomplishment with its 20 years of

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history on the market. The consultant marketing approach contributes to the formation of a life community with customers. Relatively huge growths in the revenue were seen over the past few years. In response to the increase in sales, the third oil and fat facility in China, the plant in Jinshan, Shanghai, was commissioned this April to contribute to an increase in the throughput by 40%. It is also the largest manufacturing facility that Namchow invests in China with complete management over the source of food ingredients. This year, the deployment on the China market also features expanded presence of frozen noodles and ice cream business.

Namchow has also 26 years of history with his business in Thailand. Exports have been growing rapidly since 2010, with the throughput nearly fully-loaded. The sales of rice crackers for babies, cooked rice, and cooked porridge have been growing for the past few years. In light of the promising future of the Southeast Asian market and to take advantage of the lower export tax in Thailand for deploying on markets in Europe, the US, and China, Namchow (Thailand) Ltd. acquired additional 20 thousand pings (a ping = 3.305785 m2) of land last year for expansion of its production capacity.

Namchow has been known in Taiwan for its insistence on quality products and prioritizing consumer's interest while pursuing diversity of products in order to address customers' varied needs. Sales of oils and fats, frozen dough, and frozen noodles have been growing on a yearly basis. Besides addition f oil and fat refining equipment to the Taoyuan facility at the end of two years ago, two production lines for frozen dough will be added to the Taoyuan facility this year as well. These lines will be commissioned in the second half of the year to contribute to an increase of 50% in the production capacity. Namchow continues to invest in Taiwan and builds its capacities through reinforced production, R&D, and management knowledge and skills as the the solid foundation for operating on overseas markets.

(III) Future Development Strategies and Impacts from External Environment

Future development strategies: Namchow keeps the global niche market in perspective while continuing to invest in and take root in its sales of oil, fat, rice, flour, and dairy products. So far, revenue contributed by foods has exceeded 95% of the overall revenue of the Group. In terms of daily necessities and cooked rice, efforts are also made to develop biotechnology functional products. For the past few years, Namchow Taiwan, China, or Thailand have had products sold all over the world and respective operations have shown significant growths. With root in Taiwan, developments in Mainland China, and accession to ASEAN countries as the main strategy, desirable benefits have come about. Mainland China, in particular, remains a growing market. Besides edible oils and fats and frozen dough, Namchow wants to take a step further by investing in local frozen noodles and ice cream businesses. Investments will also continue in the future in Mainland China, Taiwan, and Thailand.

Competitive environment: Competition never stops. As such, only by constant research, development, and innovation that helps create exclusive value of an enterprise can it remain steady on the market and prevent from being eliminated. Our oil and fat business, for examples, features not only self-made oils and fats but also world-famous effective products. With the two combined, they are exercising synergistic effects. In addition, we provide customers with long-term all-round services to keep the relationship going as we believe this is the only way to build and consolidate the leading positions of our oil and fat businesses on the bakery markets of both Taiwan and Mainland China.

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Regulatory environment: Consumers have become more and more concerned about the quality, safety, and sanitation of products for the past few years and Namchow has always been prioritizing consumers' rights since a long time ago. The Ministry of Health and Welfare announced the new Act Governing Food Safety and Sanitation at the end of 2015 in order to ensure food safety for consumers. Namchow started to promote traceability of ice cream products in as early as 2014 to manage their sources comprehensively, the first of its kind in Taiwan. The scope of management has also been gradually expanded. In respose to regulatory requirements, the Namchow Group even set up a food safety office where professionals are responsible for strictly safeguarding respective raw materials used within the Namchow Group, educating on food safety, and communicating information. Last year additional funding was put in safety laboratories in order to improve capabilities to perform independent inspections and management. With the new government policy, one fixed day off and one flexible rest day, which came into force this year, it has indeed increased the overhead for enterprises. Always supportive of government policies, however, we will hire more people and apply the optimal shift rotation approach to address our production demand as customer service remains our prioritized concern.

Overall environment: In August 2015, China announced that it would let the RMB significantly depreciate; financial markets around the world fell into chaos. The relatively significant depreciation stream continued into the first half of last year. Our company has decreased its foreign debt position by around 50% from a previous high level and has effectively minimized the resultant exchange loss. The global economic developments have resulted in damage done to the environment and ecology. With the Paris Agreement having officially taken effect last November, enterprises inevitably will have to increase their overhead in order to tackle the carbon reduction issue. As such, early devotion to inspecting, analyzing, and improving manufacturing processes are the short-term action items of our company. Other impacts on the future growths and performance also come from the trade and currency policies of the new US president and the labor policy - one fixed day off and one flexible rest day - of the Taiwan government. Given the above, our company will place greater emphasis on the quality, safety, and sanitation of products applying higher standards and will continue to reinforce risk control to ensure food safety. In light of the extreme climate change, Namchow is known for its long-term in-depth investigation and research and has accumulated professional knowledge to be capable of keeping track of the right timing to purchase raw materials at an optimal price so that we can remain undefeated.

Sixty-five years have passed since our company was first established. What remains unchanged is our adherence to integrity and sustainable management, our concern about the rights of our customers and the consumers. In addition, we are proactively devoted to addressing environmental protection issues and preparing responsive measures. Sustainable management that takes care of both growth and profitability is our goal. We will continue to create better investment benefits for all shareholders.

To

Namchow General Shareholders Meeting

Chairman Fei- Lung Chen

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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. 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." We are taking root in seven major fields, namely, oils and fats/dairy products, flour, rice, dining, daily cleaners, biotechnology, and complex hotels and we have production sites in Taiwan, Thailand, and China, with products sold all over the world. We are managing the global niche market on the belief of sustainability.

1.Businesses of Namchow in Taiwan (1)Cleaners – We started to produce soap in 1952 and glycerol in 1956. The most advanced equipment at the time Mazzoni was introduced in 1963 and then crystal detergent soap was developed, which remains a leading brand to this date. The bath soap workshop was added to the Taoyuan facility in 1980 for diversified management of daily cleaners such as bath 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 (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 was successfully developed in 2014 to become a one and only product on the market and is sure to bring about new business opportunities. The travel pack of crystal soap that has been available at four major convenience stores since October 2016 is thoughtfully designed for travelers and those on business trips. It is easy to carry and use.

Namchow’s cleaners have been award winners. In last year, 2016, alone, for example, Namchow Crystal Grapefruit Seed Anti-baceterial Laundry Liquids was awarded the SNQ (symbol of national quality) and was the only product selected from the environmental cleaners categories; Namchow Crystal Grapefruit Seed Anti-bacterial Handwash Series was also awarded the SNQ and was a product from the disease prevention category: It was chosen as one of the Top 5 well-reputed products in the CNS mark promotion campaign – “Good Brand + New Story” voting session and received an award from the Bureau of Standards, Metrology and Inspection. (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

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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. (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, was developed in 2004 and was introduced to the Mainland China market in 2013. Also in 2013, we produced high-quality soft-serve ice cream and supplied it to convenience stores; it became a hit and was once in shortage. As such, we added another production line to the Tainan facility. In the following year, production lines for ice cream products and crusts were built at the Taoyuan facility. The first Duroyal Cafeteria was opened in January 2016 to serve North European coffee, ice cream, desserts, and light meals. There is also an outer area where soft-serve ice cream and Chinese delicacies are available.

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 accomplishments were certified and approved by the Government. The raw materials and shipping process of all ice cream products can be controlled and found through the QR Code at present to provide consumers with assured protection. (4)Frozen dough – Having foreseen the demand of bakeries and pastries for frozen dough and in order to supply high value-added products that help customers strengthen their competitive advantages, we set up the frozen dough factory at the Zhongli site in 1991; currently four frozen dough production lines are available.

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. In 2016, our people participated in the National Agricultural Village Characteristic Rice and Grains Baking Products Competition – Rice Group and their products “Dream of My Life” and “Monthly Rice Dish” were chosen as Honorable Mention. “Dream of My Life” is also supported by consumers during the online campaign and was chosen as one of the Top 10 Rice and Grains Baking Products of 2016. (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.

Frozen noodles is delicious, convenient, fast, safe, and healthy, making it an optimal choice for dining businesses that wish to enhance their operational performance. We have around 10,000 customers in this regard domestically. New products have been introduced

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without stop reflective of the different properties of the materials, such as Chinese noodles, northern sliced noodles, northern ramen 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 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 Ministry of Health and Welfare (2014). Dietary Fiber Cooked Rice series was awarded best product in the Jade Mount Award of National Brands (2015). The Council of Agriculture delegation took part in the food expo in Japan and Healthy Grain-Rich Rice and Healthy Double-Wheat Rice was recommended by the General Assembly as a new healthy product and a commercial product (2016). Our plan in 2017 is to develop low-residue food and beverage packages that combine ambient temperature rice and prepared food whose amount of crude fiber is precisely calculated; they are professional, healthy, safe, and convenient nutritional foods for consumers with unique dietary demand. (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. Later, the Taipei SOGO Fuxing store, the Taipei Huaining store, Nankan B&Q flagship store, Namchow Taoyuan Tourist Factory store, Hsinchu Big City, Linkou store, and Shanghai Dian Shui Lou store were open. We purchased a building in Shinjuku, Tokyo, Japan in 2015 where it is planned to open Dian Shui Lou Japan store and noble woman hotel. Construction of the main structure is expected to be completed this year. Land was also purchased at Yotsuya in Shinjuku in 2016 for building Dian Shui Lou Restaurant. Construction is expected to be completed this year.

Dian Shui Lou, known for its pursuit of advancement at all times and attentive services, has been recognized in various ratings, with the most recent ones including Taiwan Quality Restaurant (Nanjing store 2010/2012) by the Ministry of Economic Affairs, "Golden Great Store" by Taoyuan County Government (Taoyuan store 2012), and the five-star restaurant in Asia Pacific - Asia Pacific Golden Award (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.

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C.Chaojiangyan Chaoguang Seafood Restaurant --- Chaojiangyan Restaurant opened in 2010. On the belief in Culture-based Food, seafood, sliced duck, Chaoguang dim sum, and Kungfu tea have been well reputed among connoisseurs by word of mouth, contributing to constantly and steadily growing business. On the rating list of Hong Kong-style restaurants released on the yam website in 2013, Chaojiangyan secured the first place with its sliced duck for being the most yummy roast duck in Taipei.

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, which was previously the location of Sincere Department Store.

(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 49586.85 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.

2.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.

The "Little Chef" instant noodles officially returned to Taiwan to be sold locally in November 2015, with three flavors "Bodhi Gingko Mushroom Noodles", "Fuling Pickled Mustard Pork Noodles", and "Thai Green Curry Chicken Noodles" available. Defined as “slow meal” noodles, the unique marketing strategy and virtual reality distribution channels have been a hot topic.

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(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. The supplies include baking oils and fats, fresh cream, frozen dough, ice cream, and Beikeshi stuffing, among others. It is a leading brand on the high-quality oil and fat market of China.

The oil and fat manufacturing facility of Namchow in Guangzhou was completed in 2007 to continue with the efforts to research, develop, innovate on, and invest in strategies so that production lines for baking oils and fats and fresh cream can keep reaching new heights in terms of productivity. Construction of the third production site in the Jinshan area of Shanghai begain in 2015. Stage 1 of the construction was completed in October 2016 and the ceremony for commissioning Jinshan Plant 1 in Shanghai and the agricultural cooperation and sustainable development in Jinshan was held. The plant will begin to contribute to production in the 4th quarter. The Shanghai Jinshan Plant, featuring food safety, complete traceability, environmental protection, and energy-saving, is the first processing plant for baking oils and fats and foods in Mainland China with complete traceability. Addition investment was made in the construction of Jinshan Plant 2; the construction is currently ongoing. In the future, Namchow will continue to focus on research and development and innovation, food safety and traceability, and environmental sustainability.

Namchow China has 25 customer service centers, 300 technicians on the service team, 269 distributors and subcontractors throughout the nation to provide real-time professional services such as forefront information/overseas site visits/tailoring and customization/professional counseling/management planning/product design/promotion support/field research and development, among others. The service centers are like the R&D centers 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 Plant (2014) and Tianjin Plant (2016) were certified by local governments as high-tech enterprises for their agricultural products fine processing technology and green process. 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 high-end beer brewed right on the spot and orthodox Bavaria cuisine. For the past 20 years, Shanghai Baolaina Co., Ltd. has been able to stand firmly and grow flourishingly in the dining industry of Shanghai for its unique charm.

Shanghai Baolaina Co., Ltd. currently has four Paulaner Restaurants (New Palace, Binjiang, Shibo, and National Convention Center), one Ambrosia Teppanyakis (Shibo), and the

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western premium cuisine - Binjiang No. 1.

Namchow is a steady participant in each professional banking exhibition and always sets up the largest stand and pavilion on the exhibition floor, provides the latest information on bakery and the latest oil and fat products, invites domestic and international industrial gurus to give professional speeches, and provides multi-facet information to exchange with the industry. Namchow is devoted to growing together with its customers, creating win-win situations.

Food safety has been a public issue of concern for the past few years. Namchow also

reinforces its management over the sources of materials for its oil and fat products. There is any internal safety committee in place, for which the executive vice present of the Group serves as the convener. The committee is responsible for strictly supervising and controlling as well as having someone to physically visit oil and fat suppliers overseas for inspections in order to ensure that sources of the raw materials meet national requirements.

As the industrial environment changes quickly, corporate social responsibility (CSR) has

become a required element for the enterprise to survive. Namchow started the practice of preparing its CSR report in 2015 and has people to take charge of enforcing related policies through the committee. In 2016, the business in China was included in the CSR report and in 2017, the business in Thailand will be, too. In the future, all business units of Namchow will take on a more rigid management attitude and fulfill its corporate social responsibility and citizenship in terms of corporate governance, food safety, and environmental sustainability.

Sixty-five years have passed yet the belief in integrity and sustainable management of the

Namchow Group has never changed. The spirit of "As Heaven's movement is ever vigorous, so must a gentleman be to constantly expect himself of additional acchievements". The management performance needs to be steady and continue to grow so that maximum benefits are possible for all stakeholders.

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III. Corporate Governance Report

(I) Organizational System

1. Organizational structure

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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

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(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 Name Sexual

Date of Election

(Inauguration) Tenure

Initial date of

inauguration

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

Shareholdi

ng

ratio

Quantity of shares

Shareholdi

ng

ratio

Quantity of

shares

Sharehol

ding

ratio

Quantity

of shares

Shareholding

ratio Title Name

Relations

hip

Chair

man ROC

Fei-Lung

Chen Male 6/10/2015 3 years 04/04/1959 33,874,934 11.52% 33,814,934 11.50% 3,577,413 1.22% 0 0.00%

Masters of Public

Administration,

University of San

Francisco

Master

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/Chie

f Operation

Officer

Fei-Peng Chen

Namchow Chemical

Industrial CO., LTD.

Employee Welfare

Committee

Representative

Yi-Wen Chen

Hwa Zhin Co., Ltd.

Representative

Cheng-Wen Chen

Cheng-Wen Chen

Brother

Father

and

Daughter

Father

and Son

Father

and Son

13

Title Natio

nality Name Sexual

Date of Election


Initial date of

inauguration

Shares held upon

inauguration

Current

shares held


spouse and minors


else's name Major

experience/

education


present



Quantity of

shares

Shareholdi

ng

ratio

Quantity of shares

Shareholdi

ng

ratio

Quantity of

shares

Sharehol

ding

ratio

Quantity

of shares

Shareholding

ratio Title Name

Relations

hip

Vice

Chair

man

ROC Fei-Peng

Chen Male 6/10/2015 3 years 03/25/1966 35,792,995 12.17% 36,920,995 12.55% 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 Yongju (Thailand) Ltd.


Director of Dian Shui Lou Restaurant Business Co., Ltd.

Chairman Fei-Lung Chen Brother

Direc

tor ROC

Representa

tive of

Lucky

Royal Co.,

Ltd.

Kan-Wen

Lee

Male 6/10/2015 3 years

06/09/2006

06/09/2006

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

Administration,

National Chung

Hsing University




Corporation

Director of Tianjin Yoshiyoshi Food Co., Ltd.

Director of Tianjin Namchow Food Co., Ltd.

Director of Guangzhou Namchow Food Co., Ltd.


None None None

14

Title Natio

nality Name Sexual

Date of Election


Initial date of

inauguration

Shares held upon

inauguration

Current

shares held


spouse and minors


else's name Major

experience/

education


present



Quantity of

shares

Shareholdi

ng

ratio

Quantity of shares

Shareholdi

ng

ratio

Quantity of

shares

Sharehol

ding

ratio

Quantity

of shares

Shareholding

ratio Title Name

Relations

hip

Direc

tor

ROC

&

US

Representa

tive of

Hwa Zhin

Co., Ltd.

Cheng-We

n Chen

Male 6/10/2015 3 years

06/09/2006

6/10/2015

646,884

0

0.22%

0.00%

646,884

0

0.22%

0.00%

0

1,765,000

0.00%

0.60%

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.

Chairman of Shanghai Qiaoxing Co., Ltd.

Director of Shanghai Baolaina Co., Ltd.






Corporation


Executive Director of Chongqing Xiaoxing Co., Ltd.



Director of Qizhi Business Administration Cultural Co.,

Ltd.

Chairman

Supervisor

Fei-Lung Chen

Namchow Chemical

Industrial CO., LTD.

Employee Welfare

Committee

Representative

Yi-Wen Chen

Father

and Son

Sister and

Brother

Indep

enden

t

Direc

tor

ROC Ding-Guo

Chen Male 6/10/2015 3 years 6/10/2015 0 0 0 0 0 0 0 0

PhD in Business

Administration,

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

15

Title Natio

nality Name Sexual

Date of Election


Initial date of

inauguration

Shares held upon

inauguration

Current

shares held


spouse and minors


else's name Major

experience/

education


present



Quantity of

shares

Shareholdi

ng

ratio

Quantity of shares

Shareholdi

ng

ratio

Quantity of

shares

Sharehol

ding

ratio

Quantity

of shares

Shareholding

ratio Title Name

Relations

hip

Indep

enden

t

Direc

tor

ROC Jin-Shih

Lin Male 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

Super

visor

ROC

&

US

Namchow

Chemical

Industrial

CO., LTD.

Employee

Welfare

Committee

Representa

tive

Yi-Wen

Chen

Female 6/8/2016 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.

Vice Chairman of Namchow Food and Dining

Consultation Co., Ltd.

Supervisor of Qizhi Business Administration Cultural Co.,

Ltd.

Chairman of Shanghai Namchow Food Co., Ltd.

Director of Shanghai Qiaoxing Co., Ltd.


Supervisor of Shanghai Qiaohao Business Administration

Co., Ltd.

Director of Shanghai Quahog Trading Co., Ltd.



Chairman of Nankyo Japan Co., Ltd.

Supervisor of Namchow Consultation Co., Ltd.

Supervisor of Chongqing Xiaoxing Co., Ltd.



Corporation

Chairman

Director

Vice General

Manager/Chie

f Operation

Officer

Fei-Lung Chen

Representative of

Hwa Zhin Co., Ltd.

Cheng-Wen Chen

Cheng-Wen Chen

Father

and

Daughter

Sister and

Brother

Sister and

Brother

Super

visor

ROC

Ting-Chen

Wu Male 06/8/2016 3 years 06/8/2016 10,713 0.00% 10,713 0.00% 123 0.00% 0 0.00%

Department of

English,

Tamkang

University

Senior Consultant at the Chairman's Office of Win

Semiconductors Corp. None None None

16

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 12.55% 3 Fei-Lung Chen 11.50% 4 Cathay Life Insurance Company, Ltd. 7.12%

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

4.08%

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

3.52%

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

1.67%

8 Investment Account with Norges Bank under the custodianship of Citibank Taiwan.

1.52%

9 Shiao-Chuan Chen-Huang 1.22% 10 Cathay United Bank 1.14%

17

Director and Supervisor Information (II)

Title

Requirement Name

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

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 Ting-Chen Wu 0 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

18

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.

19

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

Title (Note 1)

Nationality

Name Sexual

Date of Election/Inaug

uration Date

inauguration Current shares held

by spouse and minors

Shares held in someone else's

name inauguration

Main experience/education (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

Shareholding

ratio

Quantity of shares

Shareholding ratio

Quantity of

shares

Shareholding ratio

Title Name Relationship

General Manager/

Executive Vice President

ROC Kan-Wen

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

Business Administration, National Chung Tsing University

Master


Director of Ting Hao (Cayman Islands) Holdings Corporation





None None None

Chief Human Resources

Officer ROC

Wan-Jing Zhou

Female 8/19/2013 0 0.00% 30,000 0.01% 0 0.00% Ottawa University

MBA


Director of Shanghai QiaoXing Co.,Ltd.


None None None

Chairman's Special Assistant

and Chief Risk Control Officer

ROC Mei-Hui

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

Saginaw Valley State University of Michigan

MBA

Supervisor of Dian Shui Lou Restaurant Business Co., Ltd.

Supervisor of Chowfu Biotechnology Co., Ltd.

Supervisor of Shanghai Baolaina Co., Ltd.

None None None

Department

Chief Operation Officer

ROC Ming-Fen

Zhou Female 5/24/2016 0 0.00% 0 0.00% 0 0.00%

Texas A&M University

Educational Technology

Master

Entrepreneurship Class of National Chengchi University

General Manager of Lucky Royal Co., Ltd. Chaojiangyan Qingcheng Branch

General Manager of Lucky Royal Co., Ltd.

General Manager of Chow Ho Enterprise Co., Ltd.

General Manager of Dian Shui Lou Restaurant Business Co., Ltd.

None None None

20

Title (Note 1)

Nationality

Name Sexual


uration Date




name inauguration




Quantity of shares

Shareholding

ratio

Quantity of shares

Shareholding ratio

Quantity of

shares

Shareholding ratio


Department


ROC

Year

Shu-Wen Dai

Female 01/01/2015 2,136 0.00% 0 0.00% 0 0.00% Bachelor in Mass Communication, Fu Jen Catholic University

None None None None

Department

Vice General Manager

ROC Ming-Chua

n Lin Male 05/01/2013 0 0.00% 0 0.00% 0 0.00% Yilan Senior High School None None None None

Assistant Manager

ROC Rong-Zhan

g Lian Male 06/22/1996 10,069 0.00% 2,396 0.00% 0 0.00%

Bachelor’s Degree, Department of Accounting and Statistics, Tamkang Academy


Supervisor of Knowledge Flow Publishing Co., Ltd.

Director of Namchow Consultation Co., Ltd.

Supervisor of Lucky Royal Co., Ltd.

None None None

Assistant Manager

ROC

Zhou-Jing Chen

Male 05/01/1996 314 0.00% 0 0.00% 0 0.00% Bachelor in Law, Soochow University

Director of Shanghai 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 Tianjin Quahog Food Co., Ltd.

None None None

Assistant Manager

ROC Rui-Zi Zhu Female 01/01/2015 0 0.00% 0 0.00% 0 0.00% Master of Food and Nutrition, Providence University

None None None None

21

Title (Note 1)

Nationality

Name Sexual


uration Date




name inauguration




Quantity of shares

Shareholding

ratio

Quantity of shares

Shareholding ratio

Quantity of

shares

Shareholding ratio


Assistant Manager

ROC Shu-Ling

Huang Female 11/21/2016 0 0.00% 0 0.00% 0 0.00%

EMBA, National Taiwan University

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.

22

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

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

Title Name

Remuneration for directors After-tax earnings ratio of the sum of A, B, C, and D (%) (Note 10)

Remunerations for part-time employees After-tax earnings ratio of the sum of A, B, C, D, E,

F, and G (%) (Note 10)

Claim of remunerations from

re-invested

businesses other

than subsidiar

ies (Note 11)

Remunerations (A) (Note 2) Retirement and pension (B) Remunerations for directors

(C) (Note 3) Operational expenditure

(D) (Note 4)

Salary, bonus, and special expenditure (E) (Note 5)

Retirement and pension (F)

Remunerations for employees (G) (Note 6)

All companies

covered

in the Company's Financial Report

(Note 7)

All companies

covered

in the Company's Financial

Report (Note 7)

All companies

covered


(Note 7)

All companies

covered


(Note 7)

All companies

covered


(Note 7)

All companies

covered


(Note 7)

All compani

es covered

in the Compan

y's Financial Report

(Note 7)

All companies covered


(Note 7)

All compan

ies covered

All compani

es within

the Financial Report (Note 7)

Cash value

Stock value

Cash value

Stock value

Chairman Fei-Lung Chen 16,227,268 18,391,589 385,524 419,388 16,048,936 16,048,936 115,200 2,052,650 2.72% 3.06% 0 0 0 0 0 0 0 0 2.72% 3.06% None

Vice Chairman Fei-Peng Chen 9,464,184 10,451,904 335,844 355,596 10,699,291 10,669,291 90,000 90,000 1.71% 1.79% 0 0 0 0 0 0 0 0 1.71% 1.79% None

Director Representative of

Lucky Royal Co., Ltd. Kan-Wen Lee

0 0 0 0 5,349,645 5,349,645 0 0 0.44% 0.44% 10,852,547 12,474,248 288,349 295,781 233,160 0 233,160 0 1.39% 1.52% None

*Besides those disclosed in the above table, remunerations paid to directors in the most recent year for having providing services to all companies covered in the Financial Report (such as working as a consultant who is not an employee):

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

Title Name

Remuneration for directors After-tax earnings ratio of the sum of A, B, C,

and D (Note 10)

Remunerations for part-time employees After-tax earnings ratio of the sum of A, B, C, D, E, F, and G

(%) (Note 10)

Claim of remunerations from re-invested businesses other than subsidiaries

Remunerations (A) Retirement and pension (B)

Remunerations for directors (C) (Note 3)

Remunerations for directors (D) (Note 4)

Salary, bonus, and special expenditure (E) (Note 5)

Retirement and pension (F)

Remunerations for employees (G) (Note 6) (Note 2)

The Company

All companies within the Financial Report (Note 7)

The Company


The Company

All companies within the Financial Report (Note Z)

The Company


The Company


The Company


The Company


The Company All companies within the Financial Report

The Company


(Note 7)

Current value

Stock value

Current value

Stock value

director Chin-Tsai Chen

0 0 0 0 10,699,290 10,699,290 1,320,000 1,320,000 1.00% 1.00% 5,181,235 23,669,175 298,116 298,116 290,284 0 290,284 0 1.48% 3.01% None director

Representative of Hwa Zhin Co., Ltd. Cheng-Wen Chen

Independent Director

Ding-Guo Chen

Independent Director Jin-Shih Lin

*Besides those disclosed in the above table, remunerations paid to directors in the most recent year for having providing services to all companies covered in the Financial Report (such as working as a consultant who is not an employee):

23

(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 8) All companies within the Financial Report

(Note 9) H The Company (Note 8)

All companies within the Financial Report

(Note 9) I

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

Ding-Guo Chen, Jin-Shih Lin



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


Kan-Wen Lee, Chin-Tsai Chen

Cheng-Wen Chen

Chin-Tsai Chen Kan-Wen Lee, Chin-Tsai Chen

Cheng-Wen Chen


Cheng-Wen Chen Chin-Tsai Chen


Fei-Peng Chen Kan-Wen Lee, Fei-Peng Chen

Fei-Peng Chen Cheng-Wen Lee, Fei-Peng Chen Kan-Wen Lee


Fei-Lung Chen Fei-Lung Chen Fei-Lung Chen Fei-Lung Chen


Over NTD 100,000,000 Total 7 people 7 people 7 people 7 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)

24

Note 3: The value of remunerations approved to be assigned to directors by the Board of Directors in the most recent year 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 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. In addition, salaries recognized in accordance with IFRS 2: stock-based payment transaction, including employee stock option certificates, restricted employee shares, and participation in subscribing shares in cash capital increase, shall also be included as part of the remunerations.

Note 6: This means that directors and employees (including part-time general managers, vice general managers, other managers, and employees) having claimed employee remunerations (including shares and cash) shall disclose employee remunerations distributed through the Board of Directors in the most recent 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 and Exhibit 1-3 shall be completed.

Note 7: 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 8: 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 9: 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 10: 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 11: 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 I 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.

25

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

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


Report (Note 5)

The Company


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 6,032,984 10,699,290 10,699,290 60,000 820,281 0.89% 1.46% None

Supervisor Oh-Kuan Chang

Supervisor Ting-Chen Wu

(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 Oh-Kuan Chang Oh-Kuan Chang NTD 2,000,000 (inclusive) ～ NTD 5,000,000 (exclusive) Ting-Chen Wu Ting-Chen Wu

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

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



NTD 50,000,000 (inclusive) ～ NTD 100,000,000 (exclusive) Over NTD 100,000,000 Total 3 people 3 people

26

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.

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.


27

(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 8)

Claim of remunerations

from re-invested businesses other than subsidiaries

(Note 9)

The Company


(Note 5)

The Company


Report (Note 5)

The Company


(Note 5)

The Company All companies within the Financial Report

(Note 6) The Company


Cash Shares Cash Shares (Note 5) value value value value

General Manager/Executive Vice President Kan-Wen Lee

24,720,951 34,497,873 1,357,326 1,486,188 19,071,286 34,971,057 1,189,522 0 1,412,373 0 3.84% 6.00% None

Chief Operation Officer Cheng-Wen Chen

Chief Human Resources Officer

Wan-Jing Zhou

Special Assistant of the Chairman and Chief Risk

Control Officer Mei-Hui Liao

Chief Financial Officer Dong-Biao Bai

Vice President Er-Kun Zhou Chief Operation Officer Ming-Fen

Zhou Chief Operation Officer Shu-Wen Dai

Vice President Ching-Hui Yeh

General Manager of Business Department Yu-Ching Liu

Vice General Manager of Business Department

Ming-Chuan Lin

＊Regardless of their title, the information has to be disclosed as long as their ranking is equivalent to that of a general manager or vice general manager (e.g. president, chief executive officer, general director, etc.).

28

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 6) All companies within the Financial Report (Note 7) E

Below NTD 2,000,000 Tung-Piao Pai, Ming-Fen Chou, Erh-Kun Chou, Yu-Ching Liu, Ching-Hui Yeh Yu-Ching Liu, Ching-Hui Yeh, Erh-Kun Chou

NTD 2,000,000 (inclusive) ～ NTD 5,000,000 (exclusive) Ming-Chuan Lin, Mei-Hui Liao Ming-Chuan Lin, Tung-Piao Pai, Mei-Hui Liao

NTD 5,000,000 (inclusive) ～ NTD 10,000,000 (exclusive) Cheng-Wen Chen, Shu-Wen Tai, Wan-Ching Chou Shu-Wen Tai, Wan-Ching Chou

NTD 10,000,000 (inclusive) ～ NTD 15,000,000 (exclusive) Kan-Wen Lee Kan-Wen Lee, Ming-Fen Chou

NTD 15,000,000 (inclusive) ～ NTD 30,000,000 (exclusive) Cheng-Wen Chen



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. In addition, salaries recognized in accordance with IFRS 2: stock-based payment transaction, including employee stock option certificates, restricted employee shares, and participation in subscribing shares in cash capital increase, shall also be included as part of the 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.

Note 5: 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.

29

Note 6: 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 7: 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 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.

Note 9: 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.


30

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 (%)

Manager

Executive Vice President

Kan-Wen Lee

0 1,537,353 1,537,353 0.13%


Cheng-Wen Chen


Wan-Jing Zhou


Shu-Wen Dai


Ming-Fen Zhou


Ming-Chuan Lin

Special Assistant of the Chairman and

Chief Risk Control Officer

Mei-Hui Liao

Assistant Manager Rong-Zhang Lian

Assistant Manager Zhou-Jing Chen

Assistant Manager Rui-Zi Zhu

Assistant Manager Shu-Ling Huang

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.

31

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

2015 2016 2015 2016 Total remunerations for

directors 82,560,220 87,878,873 100,176,655 113,109,053

Ratio of total remunerations for directors

in after-tax earnings indicated in the entity

financial report

7.42% 7.29% 9.00% 9.38%

Total value of remunerations for

supervisors 11,295,108 10,759,290 17,685,489 17,552,555

Ratio of total remunerations for

supervisors in after-tax earnings indicated in the

entity financial report

1.10% 0.89% 1.59% 1.46%

Total value of remunerations for general managers and vice general

managers

46,945,645 46,339,085 73,917,951 72,367,491

Ratio of total remunerations for general directors and vice general

directors in after-tax earnings indicated in the

entity financial report

4.22% 3.84% 6.64% 6%

Note: The after-tax earnings were NTD 1,112,849,911 in the 2015 Entity Financial Report and those were NTD 1,205,701,295 in the 2016 Entity Financial Report.

(2)Correlation among the remuneration payment policy, standards and combination, remuneration establishing procedures, and management efficacy and risks in the future: a)The Company set up the Compensation Committee in compliance with the

32

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 findings obtained by the Company through the compensation survey conducted by a professional compensation survey institution.

b)Criteria for paying remunerations to directors and supervisors of the Company are defined in the Articles of Incorporation of the Company.

c)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.

d)Risk in the future: Liability insurance has been purchased for directors and supervisors as required by the Articles of Incorporation of the Company.

33

(IV) Status of Corporate Governance

1. Board of Directors The Board of Directors met 8 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

Frequency of attendance

through proxy

Actual attendance (seated) rate (%) [B/A] (Note 2)

Remark

Chairman Fei-Lung Chen 8 0 100%

6/10/2015 Re-elected through the shareholders' meeting

Director a Fei-Peng Chen 8 0 100%


Director b Chin-Tsai Chen 6 2 75%


Director c

Lucky Royal Co., Ltd.

Representative: Kan-Wen Lee

8 0 100%


Director d Hwa Zhin Co., Ltd.

Representative: Cheng-Wen Lee

6 2 75%

6/10/2015 Newly elected through the shareholders' meeting

Independent Director a

Ding-Guo Chen 8 0 100%


Independent Director b

Jin-Shih Lin 8 0 100%


Supervisor a Yi-Wen Chen,

Representative of Namchow

8 0 100% 6/8/2016 Re-elected through the shareholders'

34

Chemical Industrial CO., LTD.

Employee Welfare Committee

meeting

Supervisor b Oh-Kuan Chang 3 37.5% Retained

Supervisor c Ting-Chen Wu 4 0 50%


Other details to be documented:

1. 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)A total of 8 Board of Directors meetings were held by the company throughout 2016. 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.

2. 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 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:

1)January 28, 2016 The Board of Directors discussed the proposal detailing individual values of year-end bonus of 2015 for 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

35

who recused themselves.

2)July 7, 2016 The Board of Directors discussed the value of remunerations to be issued separately to five directors and two supervisors for 2015 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 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.

3)August 12, 2016 The Board of Directors discussed the proposal detailing individual values of compensation for Executive Vice President Kan-Wen Li, Chief Operation Officer Ming-Fen Chou, Chief Operation Officer Shu-Wen Tai. Director Kan-Wen Li recused himself as required by the Company Act and Article 15 of the Board of Directors Meeting Rules of the Company for conflicting interest between him and what was being discussed. Voting outcome of the case: Except for the vote that should have been casted by Director Kan-Wen Li, all the other directors present in the meeting approved the adjustment to the compensation payable to Executive Vice President Kan-Wen Li unanimously.

4)December 26, 2016 The Board of Directors discussed the proposal detailing individual values of year-end bonus of 2015 for 9 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.

3. 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.

(6)March 13, 2017 The Board of Directors decided to establish the Code of Conduct, the Operating Procedure for Handling Major Internal Information, the Merger and Acquisition Information Disclosure Self-discipline Regulations, and the Regulations Governing Controlling Legal Person Shareholders Exercising Rights and Participating in Decision-making.

(7)March 28, 2016 The Board of Directors decided to establish the Honest Management Operating Procedure and Behavioral Guide and the Board of Directors Self-evaluation or Peer Review Guidelines.

Note 1: If directors and supervisors are institutions, names of shareholders and the representative of the institutions shall be disclosed.

36

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

37

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 8 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) Remark

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

8 100%


Supervisor b Oh-Kuan Chang 3 37.5% Retained

Supervisor c Ting-Chen Wu 4 50%


Other details to be documented: (I) Composition and Responsibilities of Supervisors:

1. 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.

2. 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 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

38

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.

(III) 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 2016.

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.

39

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) Deviations from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies 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 Relations" 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

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:

Compliant

Compliant

40

Assessed areas


Yes No Summary

list of ultimate owners of those major shareholders?

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

Yes

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 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

Compliant

41

Assessed areas


Yes No Summary

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

Yes

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. The Company's Board of Directors approved the establishment of the Operating Procedure for Handling Major Internal Information on march 13, 2016 to help create a sound internal major information processing and disclosure mechanism for the company and ensure the consistency and accuracy of information released to the public by the company. Transactions or contract-signing matters between the Company and related parties and their shareholders shall also be handled 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

Compliant

42

Assessed areas


Yes No Summary

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.

(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) Our company has not

established diversified policies regarding the composition of the Board of Directors.

(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 diversification with regard to the membership of the

Compliant

43

Assessed areas


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?

No

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 responsibilities and sustainable management in the Articles of Incorporation.

(2) The Board of Directors approved the establishment of the Special Committee for Mergers and Acquisitions on March 13, 2017 only, not other

Non-compliant To be set up according to priorities in the future

44

Assessed areas


Yes No Summary

3. Has the Company

established standards and method for evaluating the performance of the Board of Directors, and implemented the performance evaluation annually?

4. Does the Company regularly

Yes

No

functional committees. 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 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.

(3) The Board of Directors approved the establishment of the Board of Directors Self-evaluation or Peer Review Guidelines on March 13, 2016 in order to consolidate corporate governance, to improved functionality of the Board of Directors, and to enhance the operating efficiency of the Board of Directors.


Non-compliant

Compliant

45

Assessed areas


Yes No Summary

evaluate the independence of CPAs?

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.

(IV) For TWSE/GTSM listed companies, is there an exclusive (combined) unit or person for corporate governance to take charge of related matters (including without limitation providing directors and supervisors with materials required for them to carry out their tasks, taking care of Board of Directors' meetings and shareholders' meetings as required by law, registering the company and changing registered information, preparing

Yes (1) Corporate governance tasks at the Company are performed by different units, namely the Department of Finance, the Accounting Office, the Administration Office (Legal Affairs), the Department of Human Resources, the Purchase Department, and the Audit Office.

(2) Materials required for directors and supervisors to perform tasks are to be provided by respective departments described under (1). The executive secretary of the Board of Directors is responsible for matters relating Board of Directors' meetings. Currently, the accounting assistant manager

Compliant

46

Assessed areas


Yes No Summary

minutes of Board of Directors' meetings and shareholders' meetings)?

is taking care of them. The Department of Finance is responsible for matters relating shareholders' meetings and the Accounting Office is responsible for initial company registration and registration of changes.

(V) Does the company establish a communication channel and build a designated section on its website for stakeholders (including without limitation shareholders, employees, customers, and suppliers, etc.) 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) Depending on the respective business unit, the Company will have related departments to communicate with stakeholders and a designated section for stakeholders is available on the Company's website in order to properly respond to corporate social responsibility issues that stakeholders are concerned about. (http://www.namchow.com.tw/csr02.html)

(3) There is also a designated section for investors set up by the Company. (http://www.namchow.com.tw/IR/01.html )

Compliant

(VI) 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

(VII) Disclosure of Information 1. Has the company

Yes


Compliant

http://www.namchow.com.tw/csr02.html

http://www.namchow.com.tw/csr02.html

http://www.namchow.com.tw/IR/01.html


47

Assessed areas


Yes No Summary

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

Yes

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) The English website is

already set up for the Company.

(2) The English Financial Report, Shareholders' Annual Report and Meeting Minutes and Corporate Social Responsibility Report are already disclosed on the Company's website.

(3) Staff at the Accounting Office have been designated to take charge of collecting information on the Company and disclosure major information on the Company; information will be entered and announced through the MOPS periodically.

(4) Spokesperson, acting spokesperson, shareholder

Compliant



48

Assessed areas


Yes No Summary

service and investment correspondence groups are available to consolidate the spokesperson system.

(5) Website of the investor conference:


(VIII) 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. Bridge Magazine is to provide employees of associated enterprises of Namchow with related internal information.

2. Employee wellness: (1)Employee Welfare Committee

has been set up . (2)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.

(3)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

Compliant

Compliant

Compliant

Compliant



49

Assessed areas


Yes No Summary

legitimacy of raw material pricing and compliance with health laws and regulations such as FGMP, HACCP, ISO-9001, ISO-22000, 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.

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

Compliant

Compliant

50

Assessed areas


Yes No Summary

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. (1)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.

(2)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.

(3)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: (1)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

Compliant

51

Assessed areas


Yes No Summary

they can 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.

(2)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

Compliant

52

Assessed areas


Yes No Summary

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 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 2016:

Fei-Lung Chen 12.7 3 hours Taiwan Corporate

Governance Association Power and legal responsibilities of directors and independent directors

12.8 3 hours Taiwan Corporate Governance Association Financial and taxation management of the company and directors and supervisors from the perspective of corporate governance

Fei-Peng Chen 12.7 3 hours Taiwan Corporate


12.8 3 hours Taiwan Corporate Governance Association Financial and taxation management of the

Compliant

53

Assessed areas


Yes No Summary

company and directors and supervisors from the perspective of corporate governance

Chin-Tsai Chen 3.4 3 hours Taiwan Corporate

Governance Association Examples of major disputes concerning financial report responsibilities of directors and supervisors

4.25 3 hours Taiwan Corporate Governance Association Corporate merger and acquisition practice and lease planning

Kan-Wen Lee 9.14 3 hours Association of Taiwan

Listed Companies Financial Industry Policies and Economic Development

10.14

3 hours Association of Taiwan Listed Companies Corporate social responsibility

Cheng-Wen Chen 12.7 3 hours Taiwan Corporate



Ding-Guo Chen 12.7 3 hours Taiwan Corporate

Governance Association

54

Assessed areas


Yes No Summary

Power and legal responsibilities of directors and independent directors


Jin-Shih Lin 3.2 3 hours National Federation of

Certified Public Accountant Associations of the Republic of China How can CPAs take part in a listed company's shareholders' meetings and Board of Directors' meetings

9.8 6 hours National Federation of Certified Public Accountant Associations of the Republic of China Analysis of inheritance and gift and trust

10.13

3 hours National Federation of Certified Public Accountant Associations of the Republic of China Evaluation of the impacts of the anti-avoidance clause

11.2 3 hours National Federation of Certified Public Accountant Associations of the Republic of China Role of CPAs in corporate governance

11.17

3 hours National Federation of Certified Public Accountant Associations of the Republic of China Prevention against insider trading

55

Assessed areas


Yes No Summary

Ting-Chen Wu 7.22 3 hours Securities & Futures

Institute How should directors and supervisors avoid insider trading

7.29 3 hours Securities & Futures Institute Legal Risks of Directors and Supervisors and Response from Perspective of Major Corporate Scandals

12.7 3 hours Taiwan Corporate Governance Association Power and legal responsibilities of directors and independent directors


Yi-Wen Chen 12.7 3 hours Taiwan Corporate



(IX) Explain improvements made according to corporate governance evaluation results released in the most recent year by the corporate governance center of Taiwan Stock Exchange and provide priorities to be reinforced and measures among those pending improvement. (Not required for companies not included in the evaluation)

56

Assessed areas


Yes No Summary

For enhanced information transparency, besides adding English to information on shareholders' meetings, the Financial Report, the Annual Report, and the Company's website, self-assessment of corporate governance was completed through the Corporate Governance Evaluation System established by the corporate governance center of Taiwan Stock Exchange in January 2016 to facilitate access by foreign capital institutions to related corporate information. The evaluation result showed that we are one of the top 36% to 50% companies. The 2017 shareholders' meeting is expected to be completed by the end of May to avoid over concentration given the fact that other companies' shareholders' meetings will be taking place around that time so that more shareholders will be able to attend it.

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.

57

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)

Number of other public

offering companies with

part-time members

hip of their

Compensation

Committee

Remark

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

Independent

Director

Ding-Guo Chen

2

Independent

Director

Jin-Shih Lin

0

Other Hai-Ming Chen

2

Note 1: Provide "director, independent director, or other" for the "status." Note 2: 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. Not an employee of the company or its associated enterprise. Not a director or supervisor of the Company or its associated enterprise. The same does not apply, however, if the independent director is set up by the Company, its parent company, or any subsidiary according to the Act or the local laws and regulations. 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. 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 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. Not a director, supervisor, manager, or a shareholder holding more than 5% of shares of a specific company or

58

institution with financial or business activities with the Company 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. None of the conditions indicated under Article 30 of the Company Act (2)Responsibilities of the Compensation Committee:

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.

1)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.

2)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.

(3)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, 2015 to June 18, 2018. The Compensation

Committee met 8 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 8 0 100%

Member Jin-Shih Lin 8 0 100%

Member Hai-Ming Chen 8 0 100%

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.

59

5. Fulfillment of social responsibilities

Assessed areas

Operational status (Note 1) Departure from Corporate Social Responsibility Best Practice Principles for TWSE/GTSM 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?

Yes

Yes

1. (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.

(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 and 2015 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.

2. 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

Compliant

Compliant

60

Assessed areas



3. Does the company have a

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

Yes

external institutions. 3. The Company's CSR promoting policy is 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.

4. (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

Compliant

Compliant

61

Assessed areas



rewards. (2) Article 8 of the Company's Organic Rules

for Compensation Committee (function exercising principle) stipulates that: 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

62

Assessed areas



Board of Directors. If a member is also the director of the Company or its reinvested business, however, no rewards 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

1. (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.

2. 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.

3. (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 Self-government

Compliant

Compliant

Compliant

63

Assessed areas



Act. Facilities are ISO-9001, ISO-22000 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

1. (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.

2. (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 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

Compliant

Compliant

64

Assessed areas



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

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 (Attachment 2) 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.

3. 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.

4. (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 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.

Compliant

Compliant

mailto:[email protected]

65

Assessed areas



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 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

Yes

Yes

Yes

Yes

(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.

5. 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.

6. (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.

7. Products of the Company are GMP, ISO-22000, CNS Mark, ISO-9001, HACCP, and Health Food certified; the marketing and labeling of products meet applicable regulatory requirements.

8. The company always evaluates the records of suppliers’ impact on the environment and society before doing business with the supplier.

Compliant

Compliant

Compliant

Compliant

66

Assessed areas



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

9. (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

(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 and

2015 CSR Report 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: December 29, 2015 The Board of Directors decided to establish the Company's Corporate Social Responsibility Best Practice Principles. 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. 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 32,800 thousand in

2016. 2.Community involvement and social service:

Free access to the Taoyuan Tourism Factory of Namchow is available. There are around 16,228 people

67

Assessed areas



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; the Thailand Erawan Shrine worship ceremony was held on September 15, 2015 to send blessings from Taiwan to Thailand. Representatives from the Thailand Trade and Economic Office in Taiwan took part in the ceremony to pray for blessings.

3.Contributions to society: (1)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.

(2)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.

(3)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 Management and the Management of the Global Market".

(4)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: (1)One hundred illuminating ropes were donated to the Fire Department of Taoyuan City Government in

2015, totaling NTD 1,904,762 in value. (2)A total of NTD 307,248 was donated throughout 2015 and NTD 282,572 throughout 2016 through joint

fund raising.

68

Assessed areas



(3)NTD150,000 was donated to the Pearl S. Buck Foundation charity event. (4)NTD 1.5 million was raised for the Nepal Earthquake relief effort. (5)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: (1)Employee safety and health: Public accident liability insurance has been purchased. (2)Safety and healthy products and production lines:

1)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. 2)Disease prevention products: Disease prevention products reviewed and recommended by the Institute for Biotechnology and Medicine Industry as authorized by the Centers 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. 3)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. 4)Other certifications obtained by Namchow products include FGMP, ISO-9001, ISO-22000, HACCP, and SGS.

(3)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.

(4)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

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Assessed areas



safety and health. (5)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.

(6)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.

(VII) In the event that validation criteria of related verification institutions are approved in the Company's CSR Report, it shall be stated so: 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.

http://fadenbook.fda.gov.tw/

http://ftracebookl.gov.tw/

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6. Implementation of ethical corporate management

Assessed areas

Operational status (Note 1) Departure from Ethical Corporate Management Best Practice Principles for TWSE/GTSM 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 external documents, as well as the commitment of its Board of Directors and management to implementing the management policies?

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 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

Compliant

71

Assessed areas


Yes No Summary

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 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.

72

Assessed areas


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

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. 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

Compliant

73

Assessed areas


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

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 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

Compliant

74

Assessed areas


Yes No Summary

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 Company evaluated the ethical records of parties it does business with and stipulated ethical conduct clauses in business contracts?

2. Has the

Company

Yes

Yes

1. (1) Article 10 of the Company's Ethical

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

Compliant

Compliant

75

Assessed areas


Yes No Summary

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 complaints and implemented the policies accordingly?

Yes

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 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 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 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

Compliant

76

Assessed areas


Yes No Summary

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. July 7, 2016 The Board of Directors discussed the value of remunerations to be issued separately to five directors and two supervisors for 2015 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 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. August 12, 2016 The Board of Directors discussed the proposal detailing individual values of compensation for Executive Vice President Kan-Wen Li, Chief Operation Officer Ming-Fen Chou, Chief Operation Officer Shu-Wen Tai. Director Kan-Wen Li recused himself as required by the Company Act and Article 15 of the Board of Directors Meeting Rules of the Company for conflicting interest between him and what was being discussed. Voting outcome of the case: Except for the vote that should have been casted by Director Kan-Wen Li, all the other directors present in the meeting approved the adjustment to the compensation payable to Executive Vice President Kan-Wen Li unanimously. The Board of Directors discussed on December 26, 2016 the proposal detailing individual values of year-end bonus of 2016 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,

77

Assessed areas


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?

5. Does the

Company hold internal and external educational trainings on operational integrity regularly?

Yes

Yes

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 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.

Compliant

Compliant

(III) Reporting System of the Company

1. Does the Company provide incentives and means for employees to

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

Compliant

78

Assessed areas


Yes No Summary

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?

3. Does the

Company assure employees who reported on malpractices that they will not be prosecuted for making such reports?

Yes

Yes

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 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

Compliant

(IV) Reinforced

79

Assessed areas


Yes No Summary

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. The Company Website http://www.namchow.com.tw/IR/15.html Market Observation Post System http://mops.twse.com.tw/mops/web/t100sb04_1

(2) The implementation efficacy is not provided.

Non-compliant

(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) 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.

(VII) 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

Market Observation Post System http：//mops.twse.com.tw/mops/web/index

(VIII) 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

Market Observation Post System http：//mops.twse.com.tw/mops/web/index




http://mops.twse.com.tw/mops/web/index

80

9. Matters that should be disclosed regarding the implementation of the internal control system: Internal Control Statement:


Internal Control System Statement Date: March 14, 2017

For the Company's internal control system of 2016, 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, 2016 (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.

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

81

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

13, 2017 with no Directors expressing dissent out of the 6 Directors in attendance.

Namchow Chemical Industrial CO., LTD. Chairman: Fei-Lung Chen General Manager: Kan-Wen Lee

When a CPA is authorized to review the internal control system, the Review Report prepared by the CPA shall be disclosed: None.

82

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)On August 24, 2016, Namchow was fined NTD 20,000 by the Department of Labor of

Taipei City Government for having violated Article 36 of the Labor Standards Act by not giving its employees at least a day off for rest after having worked for 7 days in a row. Major deficiency: Attendance management is not well done. Improvement: Attendance management has been reinforced by the management and execution units in compliance with regulatory requirements.

(2)On March 21, 2017, Taoyuan City Government fined Namchow's Taoyuan facility for having violated Article 32 Paragraph 2 of the Labor Standards Act where it says that duration of work extended by the employer for each employee combined with the normal work time may not exceed 12 hours a day. Duration of work that is extended throughout a month may not exceed 46 hours in total. The facility was fined NTD 20,000. Major deficiency: Duration of work that is extended throughout a month exceeded 46 hours in total. Improvement: Overtime management has been reinforced by the management and execution units in compliance with regulatory requirements.

(3)On March 27, 2017, Tainan City Government fined the Tainan facility of Lucky Royal Co., Ltd. for having violated Article 32 Paragraph 2 of the Labor Standards Act where it says that duration of work extended by the employer for each employee combined with the normal work time may not exceed 12 hours a day. Duration of work that is extended throughout a month may not exceed 46 hours in total. The facility was fined NTD 50,000. Major deficiency: Normal work time along with extended duration of work totaled 13 hours a day. Improvement: Overtime management has been reinforced by the management and execution units in compliance with regulatory requirements.

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 8, 2016. The 2015 Business Report and Financial Statement were recognized. Implementation: Announcement and declaration of financial reports, among others,

were completed on March 28, 2016. The 2015 earnings distribution form of the Company was recognized. Stock

dividends in the value of NTD 764,746 thousand, that is, NTD 2.60 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 July 7, 2016 that August 1 would be the baseline date for distribution of

83

cash dividends while cash dividends were actually issued on August 24.

The supervisors were re-elected, with tenure from June 17, 2016 to June 16, 2019. (2)Board of Directors:

1)On January 28, 2016, the following were approved. 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.

2)The decision was approved on March 17, 2016 The revision of Article 31, addition of Article 31-1, and revision of Article 34 of the Company's Articles of Incorporation were approved and were brought forth in the shareholders' meeting for a decision. It was approved that the general shareholders' meeting of 2016 would take place at 9:00 am on June 08, 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 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 as submitted by the Compensation Committee were approved. 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 was approved and was sent to the supervisors for verification and brought forth in the shareholders' meeting for acknowledgment.

The suggestions submitted by the Compensation Committee on the salary and compensation to be paid to Vice President Shu-Wen Tai and Assistant Manager Yi-Feng Huang of the Company were approved.

It was approved to accept the shareholders' proposals in compliance with the requirements under Article 172-1 of the Company Act.

The Internal Control System Statement that both the design and implementation of the 2016 internal control system of Namchow submitted by the Audit Office were valid was approved. It was approved the supervisors of the Company would be re-elected and the re-election would take place during the shareholders' meeting. The 2016 Shareholders Meeting Agenda of the Company was approved.

84

○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. ⑫It was approved that Subsidiary Chow Ho Enterprise Co., Ltd. would reduce its capital size by NTD 75 million and then increase it by NTD 20 million. ⑬The change of CPAs for the Company's Financial Statement to be Bo-Shu Huang and An-Tian Yu in 2016 was approved.

3)The decision was approved on May 12, 2016 ○1 The proposal of the Company serving as the endorser and guarantor for its

subsidiary Nankyo Japan Co., Ltd. in the mid-term loan the latter applied for with the Tokyo branch of Chinatrust Commercial Bank on April 28, 2016 was endorsed.

4)The decision was approved on July 7, 2016 ○1 August 1 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. ○2 The value of remunerations to be issued separately to 5 directors and 2 supervisors

for 2015 as submitted by the Compensation Committee was approved. ○3 The hiring of Ching-Hui Yeh as Vice President and General Manager of the Home Supplies Department and the suggestions provided by the Compensation Committee on the separate compensation were approved. ○4 The endorsement and guarantee provided by the Company to its subsidiaries

Nacia International Corporation and Ting Hao (Cayman Islands) Holdings Corporation in the latter's loans with financial institutions from May 07 to June 26, 2016 was endorsed.

○5 The value of remunerations to be issued separately to 12 managers for 2015 as submitted by the Compensation Committee was approved. ○6 The proposal from Director Chin-Tsai Chen for selling Namchow shares held by the subsidiary Lucky Royal Co., Ltd. to address long-term development needs and

to strengthen the financial structure with the Chairman being given complete discretion over its implementation was approved.

5)The decision was approved on August 12, 2016 ○1 The proposal detailing individual values of compensation for Executive Vice

President Kan-Wen Li, Chief Operation Officer Ming-Fen Chou, and Chief Operation Officer Shu-Wen Tai was approved.

6)The decision was approved on November 11, 2016 ○1 It was approved that the first issuance of secured common corporate bonds in the value of NTD 4 billion would take place in 2016 in order to pay back loans. ○2 It was approved that the food businesses would be restructured, with all shares of

Tianjin Namchow Food Co., Ltd., Guangzhou Namchow Food Co., Ltd., and Shanghai Namchow Food Co., Ltd. 100% held by Ting Hao (Cayman Islands) Holdings Corporation transferred to Shanghai Qiaoxing Co., Ltd.

○3 Shu-Ling Huang 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.

○4 The endorsement and guarantee provided by the Company to its subsidiaries

85

Nacia International Corporation, Ting Hao (Cayman Islands) Holdings Corporation, and Nankyo Japan Co., Ltd. in the latter's loans with financial institutions from June 27 to October 31, 2016 was endorsed.

7)The decision was approved on November 30, 2016 ○1 The 2017 Audit Plan was approved. ○2 The authorization of the Chairman to sign contracts for loans with financial

institutions on behalf of the Company in case of demand for operating funds in 2017 was approved.

○3 The serving of the Company as the guarantor and authorization of the Chairman to handle related matters with financial institutions at his full discretion on behalf of the Company in case of demand for operating funds in 2017 was approved.

○4 For other companies that do business with the Company, it there is any need in 2017, 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.

○5 The increase of capital invested by Nacia International Corporation in Shanghai QiaoHao Co.,Ltd. totaling USD 18.8 million was approved. ○6 The increase of capital invested by Ting Hao (Cayman Islands) Holdings Corporation in Shanghai QiaoXing Co.,Ltd. totaling USD 23 million was approved. ○7 The proposal of the Company serving as the endorser and guarantor for its subsidiary Nankyo Japan Co., Ltd. in the extension of the loan worth of 200 yens with the Tokyo branch of Mega International Commercial Bank was endorsed. ○8 The application for establishing a corporate head office with the Department of Industrial Development of the Ministry of Economic Affairs was approved. ○9 Establishment of Chowfu Biotechnology Co., Ltd. was approved, with a capital size of NTD 20 million.

8)The decision was approved on December 26, 2016 ○1 The proposal detailing individual values of year-end bonus of 2016 for 5 directors who are also managers and 9 managers of the Company submitted by the Compensation Committee was approved.

9)The decision was approved on March 13, 2017 ○1 The 2017 general shareholders' meeting of the Company would be secheduled to

take place at 9:00 am on May 31, 2017 (Wednesday) in the Vision Room of Taipei Foundation of Finance on 6F-6, No. 51, Hengyang Road, Taipei City.

○2 The Compensation Committee submitted the remunerations in the value of NTD 53,496 thousand to be distributed to directors and supervisors and those in the

value of NTD 13,374 thousand to be distributed to employees for 2016. ○3 The 2016 Business Report and Financial Statement of the Company would be sent

to the supervisors for verification before being brought forth in the shareholders' meeting for endorsement.

○4 The earnings distribution proposal consisting of NTD 2.8 per share to be distributed as part of the Company's cash dividends of 2016 would be sent to the supervisors for verification and brought forth in the shareholders' meeting for

86

acknowledgment. ○5 Shareholders' proposals were accepted in compliance with the requirements under Article 172-1 of the Company Act. ○6 The Internal Control System Statement that both the design and implementation of

the 2016 internal control system of the Company submitted by the Audit Office were valid was approved.

○7 The 2017 Shareholders Meeting Agenda of the Company was stipulated. ○8 Company's Organic Rules for Compensation Committee were stipulated. ○9 The standing Special Committee for Mergers and Acquisitions was established, with three selected members. ○10 Namchow Oil and Fat Business Co., Ltd and Huaqiang Enterprise Co., Ltd. were established to address the long-term development needs of the Company. ○11 The Company's Code of Conduct was established. ⑫The Operating Procedure for Handling Major Internal Information, the Merger and

Acquisition Information Disclosure Self-discipline Regulations, and the Regulations Governing Controlling Legal Person Shareholders Exercising Rights and Participating in Decision-making were established. ⑬The Procedures for the Acquisition or Disposal of Assets of the Company were revised. ⑭The proposal of the Company serving as the endorser and guarantor for its

subsidiary Nankyo Japan Co., Ltd. in the loans with financial institutions between February and March 2017 was endorsed.

10)The decision was approved on March 28, 2017 ○1 Related operations (including assets, liabilities, and revenue) of the Company's oil

and fat businesses (including frozen dough) would be separated to 100% held Namchow Oil and Fat Business Co., Ltd. and the proposal would be brought forth in the shareholders' meeting for a decision.

○2 Related operations (including assets, liabilities, and revenue) of other businesses (including frozen noodles, ambient temperature rice, home supplies, dining, and international trade) than oils and fats of the Company would be separated to the 100% held Huaqiang Enterprise Co., Ltd. and the proposal would be brought forth in the shareholders' meeting for a decision.

○3 The Company would be transformed to an investment holding company through segmentation and the name of the Company would be changed to "Namchow Investment Holding Co., Ltd.); the proposal would be brought forth in the shareholders' meeting for a decision.

○4 To facilitate the Company's plan to transform into an investment holding company, some of the Articles of Incorporation were revised and would be brought forth in the shareholders' meeting for a decision.

○5 To facilitate the Company's plan to transform into an investment holding company, the Rules and Procedures for Shareholders’ Meetings, the Endorsement and Guarantee Operating Procedure, the Operating Procedure for Providing Others with Loans, the Guidelines for Electing Board Directors and Supervisors, and the Procedure for Disposing of Assets were revised and would be brought forth in the

87

shareholders' meeting for a decision. ○6 In light of the segmentation of oil and fat businesses (including frozen dough) and

other businesses (including frozen noodles, ambient temperature rice, home supplies, dining, and international trade) and the transformation of the Company into an investment holding company, it is intended that related matters will be added and discussed during the shareholder's meeting.

○7 Honest Management Operating Procedure and Behavioral Guide was established and would be submitted to the supervisors and then brought forth in the shareholder's meeting.

○8 The Board of Directors Self-evaluation or Peer Review Guidelines were established. ○9 Note: Namchow International Coporation

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: None

(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: See the descriptions in the following table.

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 Bo-Shu Huang 2016.01~2016.12

Note: If any CPA or the accounting firm is replaced for the Company this year, the inspection periods shall be listed separately and the reason for the replacement shall be indicated in the remark column.

88

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




6 More than NTD 10,000 thousand (inclusive) 4,430 5,934 10,364

Public Expenditure on CPAs

Value: NTD 1,000

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.

Name of accountin

g firm

CPA Name

Audit public

expenditure

Non-audit public expenditure

CPA inspection period Remark

System

design

Commercial registration

Human

Resources

Other (Note 2) Subtotal

KPMG

An-Tian Yu

4,430 8 5,750 10,188 2016.01~2016.12

Other: Including group restructuring and framework adjustment service charge, group taxation planning service charge, business tax, transfer pricing report, and CSR CPA affirmation fees.

Bo-Shu Huang

Grant Thornton

Yu-Jie Luo 176 176 2016.01~2015.12

89

(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

2016 As of March 29 of the year

Increase/decrease in the number of shares held

Increase/decrease in the number of shares

pledged



pledged

Chairman and shareholder holding more than 10% of shares

Fei-Lung Chen 5,000,000 0 0

Vice Chairman and shareholder holding more than 10% of shares

Fei-Peng Chen 673,000

0

0

477,000

(22,000) 0

Director Representative of Lucky Royal Co., Ltd.: Kan-Wen Lee

0 0 0 0 Shareholder holding more than 10% of shares


Director Hwa Zhin Co., Ltd.

Representative: Cheng-Wen, Chen 0 0

10,000

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 Namchow Chemical Industrial CO., LTD. Employee Welfare Committee

0 0 0 0

Supervisor Ting-Chen Wu (Date of inauguration: June 17, 2016) 0 0 0 0

Vice General Manager/Executive Vice President

Kan-Wen Lee 0 0 0 0

Chief Operation Officer Shu-Wen Dai 0 0 0 0

Vice General Manager/Chief Operation Officer

Cheng-Wen Chen 0 0 0 0

90

Title Name

2016 As of March 29 of the year



pledged



pledged


Wan-Jing Zhou 0 0 0 0

Special Assistant of the Chairman and Chief Risk Control Officer

Mei-Hui Liao 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


Ming-Chuan Lin 0 0 0 0

Assistant Manager Rui-Zi Zhu 0 0 0 0

Assistant Manager Shu-Ling Huang (Date of inauguration: November 21, 2016) 0 0 0 0

Director Chin-Tsai Chen (Date of dismissal: December 26, 2016) 13,000 0 0 0

Supervisor Oh-Kuan Chang (Date of dismissal: June 17, 2016) 0 0 0 0

General Manager of Business Department

Yo-Qing Liu (Date of dismissal: February 1, 2016) 0 0 0 0

Vice President Er-Kun Zhou (Date of dismissal: February 16, 2016) 0 0 0 0

Vice General Manager Ching-Hui Yeh (Date of inauguration: July 18, 2016) (Date of dismissal: October 14, 2016)

0 0 0 0

Assistant Manager I-Feng Huang (Date of dismissal: October 15, 2016) 0 0 0 0

Assistant Manager Hai-Li Qi (Date of dismissal: October 31, 2016) 0 0 0 0

Head of Department of Finance

Tung-Piao Pai (Date of dismissal: April 30, 2016) 0 0 0 0

2. The counterparty for the transfer or pledge of stock options is a related party: None.

91

(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


Representative:

Fei-Lung Chen

46,041,259

33,814,934

15.65%

11.50%

0

3,577,413

0

1.22%

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


Father and Daughter None

2 Fei-Peng Chen 36,920,995 12.55% 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% 3,577,413 1.22% 0 0

Shiao-Chuan Chen-Huang Spouse None

Fei-Peng Chen Brother None

Lucky Royal Co., Ltd. Chairman None


Committee


Father and Daughter None

4 Cathay Life Insurance

Company, Ltd. 20,934,000 7.12% 0 0 0 0 None None None

5

Bank SinoPac as Custodian for

Reva Spring Ltd. Investment

Account

12,015,165 4.08% 0 0 0 0 None None None

6

Bank SinoPac as Custodian for

Ever Cosmos Ltd. Investment

Account

10,360,992 3.52% 0 0 0 0 None None None

92

7

Namchow Chemical

Industrial Co., Ltd. Employee

Welfare Committee


4,908,960

0

1.67%

0

0

686,635

0

0.23%

0

0

0

0

Fei-Lung Chen Father and Daughter None

8

Investment Account with Norges Bank

under the custodianship of Citibank Taiwan.

4,470,000 1.52% 0 0 0 0 None None None

9 Shiao-Chuan Chen-Huang 3,577,413 1.22% 33,814,934 11.50% 0 0

Fei-Lung Chen Spouse None


Committee


Mother and daughter None

10 Cathay United

Bank 3,367,000 1.14% 0 0 0 0 None None None

93

(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 99.65 330,486 0.35 95,668,371 100.00

Chow Ho Enterprise Co., Ltd. 2,499,994 100.00 4 0.00 2,499,998 100.00

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

94

IV. Fundraising

(I) Capital and Shares

1. Source of capital stock

Year/Month

Issuing 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 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

2. Shareholder structure Shareholder

structure Quantity

Government agency

Financial institution

Other institutional

investors

Foreign institution

and foreigner Individual Total

No. of persons 0 12 79 156 41,596 41,843 Shares held 0 26,530,107 69,439,000 50,608,524 147,555,331 294,132,962

Shareholding ratio 0.00% 9.02% 23.61% 17.21% 50.16% 100.00%

3. Diversification of share options Shareholding classification No. of shareholders Shares held Shareholding ratio (%)

1 - 999 30,010 2,678,234 0.91% 1,000 - 5,000 9,535 18,614,822 6.33% 5,001 - 10,000 1,161 9,082,758 3.09%

10,001 - 15,000 341 4,342,415 1.48% 15,001 - 20,000 217 4,053,844 1.38% 20,001 - 30,000 176 4,512,818 1.53% 30,001 - 40,000 92 3,245,610 1.10% 40,001 - 50,000 52 2,378,172 0.81% 50,001 - 100,000 108 7,744,751 2.63%

100,001 - 200,000 64 9,257,871 3.15% 200,001 - 400,000 36 10,335,573 3.51% 400,001 - 600,000 16 7,960,025 2.71% 600,001 - 800,000 7 4,812,269 1.64% 800,001 - 1,000,000 5 4,569,082 1.55%

More than 1,000,001 shares 23 200,544,718 68.18% Total 41,843 294,132,962 100.00%

Special stock: Not applicable

95

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 36,920,995 12.55% Fei-Lung Chen 33,814,934 11.50% Cathay Life Insurance Company, Ltd. 20,934,000 7.12% Bank SinoPac as Custodian for Reva Spring Ltd. Investment Account 12,015,165 4.08% Bank SinoPac as Custodian for Ever Cosmos Ltd. Investment Account 10,360,992 3.52% Namchow Chemical Industrial Co., Ltd. Employee Welfare Committee 4,908,960 1.67% Investment Account with Norges Bank under the custodianship of Citibank Taiwan. 4,470,000 1.52%

Shiao-Chuan Chen-Huang 3,577,413 1.22% Cathay United Bank 3,367,000 1.14%

5. Related information of market price per share, net value, earnings, and dividends for the past two years

Year

No. 2015 2016 March 29, 2017

Per share of market

price

(Note 1)

Highest 77.40 72.50 65.00

Lowest 54.10 56.6 61.00

Average 67.53 64.88 63.04

Net value of market

price

(Note 2)

Before distribution 22.17 22.45 _

After distribution 19.09 To be determined and

finalized in the shareholders meeting

_

Earnings per share

Weighted average number of shares 294,132,962 294,132,962 294,132,962

Earnings per share (Note 3) 4.49 4.86 _

Market price

Dividends

Cash 2.60 2.80 _

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 13 _

Cost-benefit ratio (Note 6) 26 23 _

Cash dividend yield (Note 7) 3.85% 4.32% _

* 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

96

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 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.

6. Company's dividend policy and implementation status Dividend policy (1)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 13, 2017; that is, NTD 2.80 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.

97

(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 2016 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: 1)Remunerations distributed to employees, directors, or supervisors in cash or in stock:

For 2016, the Company decided according to the Company's Articles of Incorporation and by the Board of Directors that 4% of the pre-tax income before remunerations for employees, directors, and supervisors are calculated would be 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 53,496 thousand and that for employees amounts to NTD 13,374 thousand. If the actually distributed value differs from the original estimated value, the difference will be listed as losses for the current term of 2017.

2)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:

1)Cash bonus (remunerations) for employees: NTD 14,029 thousand 2)Remunerations for directors and supervisors: NTD 56,116 thousand There is no difference from the original intended distribution decided by the Board of Directors.

9. Buyback of the Company stock: None.

98

(II) Corporate Bonds:

Type of corporate bond First secured corporate bonds of 2016

Date issued November 29, 2016

Denomination NTD 10 million

Location of issuance and transaction Taipei Exchange

Issuing price At full denomination

Total NTD 4 billion

Interest rate Fixed 0.75% Duration 5 years Maturity: November 29, 2021

Guarantor First Commercial Bank

Trustee Trust Department of KGI Bank

Underwriter KGI Securities Co.,Ltd.

Attorney None

CPA Po-Shu Huang, Yu-An Tien

Payback method Lump-sum repayment of principal at maturity

No repayment of principal (as of 03/29/2016) NTD 4 billion

Redemption or early payoff clause

None

Restrictions None

Name of credit rating institution, date of rating, corporate bond rating result

Taiwan Ratings Date rated: September 12, 2016 Rating outcome: First Commercial Bank twAA+

Additional rights

Value of common stock, global depositary receipts or other securities already converted (exchanged or subscribed) as of the date the Annual Report is printed

None

Issuance and conversion (exchange or subscription) guidelines None

Possible impacts of guidelines and criteria for the issuance and conversion, exchange, or subscription of shares and possible dilution of stock options and impacts on existing shareholder rights

None

Name of the custodian for the exchange object None (III) Special Shares, Global Depositary Receipt, Employee Stock Option Certificate, Restricted

Employee Shares and M&A or Acceptance of Transferred Shares of Another Company for Issuance of New Shares: None

(IV) Implementation of Capital Utilization Plan: All the previous issuance or private placement securities plans of the Company have been completed and benefits of none of those already completed in the past 3 years are yet to be shown.

99

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, personal cleaners, dishes, veggies, and fruits cleaning products 3

B. Manufacturing and distribution of baking products

Baking oils and fats, frozen dough 61

C. Manufacturing and sale of flour-based foods Frozen noodles, instant noodles 10

D. Manufacturing and sale of ice products Duroyal ice cream, Kabisuo ice cream 6

E. Manufacturing and sale of rice-based foods

Recreational foods such as aseptic cooked rice and rice crackers 10

F. Dining business Paulaner, Dian Shui Lou, Chaojiangyan, Benchangliu, Duroyal Café, Binjiang No. 1, Xianzhixuan, among others

10

(2)New products planned to be developed

A.Cleaners: Fragrant crystal soap liquids series, anti-bacterial, deodorizing, and low-sensitizing multi-purpose, natural, and highly bio-degradable laundry liquids, personal skin and home cleaning products

B.Baking products Baking oils and fats: A series of existing products with extended flavors are developed in addition to the new Beikeshi flavor and flour paste. Frozen dough: Assuring, tasty, and unique products are being developed.

C.Flour-based foods: Tasty, nutritional, and quality foods are being developed. D.Ice products: Tasty products featuring high quality texture, additional value , small-size

packaging, and refreshing are available. E.Rice food: Healthy and quality products 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

(1)Current status and developments of the industry 1)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 Namchow crystal soap series is made of natural oils and fats, with simple composition and free of additives;

100

it is highly recognized by general consumers. 2)Baking products

Banking oils and fats A. Baking oils and fats in Taiwan

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. Based on its more than 40 years of experience, the Company precisely keeps track of what is happening externally on the market and creates baking fads; internally, it reinforces production and R&D efforts to provide differential products that help satisfy customers' demand and improve their profits, which accordingly also contribute to higher sales and profits of the Company. Let Namchow become an oil and fat expert that grows together with the baking industry in Taiwan and become a strategic partner in the management of the global baking industry for joint innovation and development.

B.Baking oils and fats in Mainland China At present, local products are the mainstream on the oil and fat market in Mainland China, with major producers including Namchow, Yihai Kerry, and Fuji Shokuhin Co.,Ltd. Thanks to the growing trend in the importation of natural cream, the baking oil and fat market has gradually reached a mature and refined stage. Our oil and fat products will appear to be diversified and functional and feature comprehensive services in the future. The revenue of the baking industry throughout 2016 reached RMB 290 billion. The oil and fat market in Mainland China is showing rapid growths. It is expected that the commissioning of Namchow's facility in Shanghai and expanded production lines in the Guangzhou facility in 2017 will definitely better satisfy the needs on the market and contribute to substantial benefits.

Frozen dough A. Frozen dough in Taiwan

Frozen dough is the semi-finished product of bread. With the designed bread made into frozen dough, customers (store owners) only have to thaw, ferment, and bake it and fresh-roast bread or desserts are ready to serve (to the consumers). Consumers want their food to be fresh, convenient, tasty, safe, and healthy. Based on this management belief, the Company is promoting frozen dough to customers that it is a product designed to address consumers' demand and falling in line with the consumption trend featuring freshness, convenience, tastiness, safety, and health.

B. Frozen dough in Mainland China As the economy quickly grows in Mainland China, people's living standards are being rapidly improved as well, which is the most directly demonstrated in their dietary demand. Consumers no longer just want their food to be tasty; they are also aware of and pursuing higher-standard food sanitation and safety. Health, tastiness, and high quality become basic dietary requirements. With its abundant experience accumulated in the baking industry and the solid resources available, Namchow is committed to providing consumers with unique, tasty, and assuring baking products required on the market and to joint sustainable developments of its customers in the

101

baking industry. 3)Flour-based foods

A.Frozen noodles 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. Given the fact that people now have two days off each week and the rising awareness of their health, frozen dough is what is needed on the market. Namchow's unique insights enable it to take the lead in introducing dough ahead of the trend. Besides, Namchow is known for being an expert in R&D, production, sales and distribution, and service, its standardized professional facilities, and its advanced rapid freezing dough-making equipment in the world, top-notch technology and has been internationally certified such as FSSC22000 (international food management safety system) and Hala to help strictly monitor food safety and produce world-class quality texture dough that contributes to higher standards in the noodle industry, leading by example and opening up new opportunities.

B.Instant noodles Namchow Thailand produces instant noodles that have taken root on the ASEAN market over the long term. The "ASEAN Operation Center" is being proactively developed to help expand the ASEAN market and peripheral markets. Given the 600-million population of ASEAN and the nearly 1-billion population of the adjacent country, China, the potential is huge. Presence was established in 2014 in Myanmar instant noodles are now available at respective supermarkets in the country. Efforts are being made now to sell instant noodles to other local markets through Namchow Taiwan and Namchow China as well.

4)Ice products The ice market in Taiwan consists mainly of two segments: the premium ice cream segment featuring mainly imported premium ice cream and the general ice product segment. The latter is further divided to the medium-priced and low-priced segments, with the medium-priced segment featuring mainly good texture differential ice cream, creamy popsicles, and cones and the low-priced one featuring mainly crispy popsicles from small plants. With increased awareness about food safety, consumers are paying more attention to legal labeling and traceability of ingredients. Low birth rate and recreational foods getting more and more delicate make consumers willing to spend a little bit more money on products with additional value. The demand for small-package products is increased. As global warming continues and hot seasons become longer and longer, the demand for refreshing and cooling products is sure to grow further.

5)Rice-based foods A.Ambient-temperature rice

To go with the trend in society and taking into consideration consumers' demand for healty, safe, tasty, and convenient products, the Company continues to develop healthy, sanitary, safe, tasty, and delicious ambient temperature rice products so that consumers can eat healthily and safely.

B.Rice crackers Rice-based recreational foods are gluten free and non-GMO to make them able to meet

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consumers' demand for staying healthy. Therefore, they have started to gain prominence and become more and more acceptable as a mainstream on the western markets. This part of the market is full of development potential as suitable products can be developed for babies, women, men, and old people. The potential is infinite.

6)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. The food safety office at the headquarters has responsible people to supervise and provide assistance in spontaneous health and safety management to safeguard for consumers' health.

(2)Correlation among the upstream, mid-stream, and downstream of the industry 1)Cleaners

2)Baking products Banking oils and fats

A. Baking oils and fats in Taiwan

B.Baking oils and fats in Mainland China

Frozen dough

A. Frozen dough in Taiwan

Raw material supplier

Material supplier

Raw material Namchow oils

and fats Oil refining

Packing materials

Plastic products Paper products

Home supplies manufacturing sector

Wholesale store Chained supermarket chained supermarkets Traditional distributor

Convenience store Department store Exquisite goods Online shopping

Consumer

Base oil suppliers (palm oil, coconut oil, soybean oil, butter, and rapeseed oil,

among others)

Oil and fat manufacturing

facility

Baking and dining (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)

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)

Oil and fat manufacturing

facility Base oil suppliers

Distributor's direct customers

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B. Frozen dough in Mainland China

3)Flour-based foods

A.Frozen noodles

B.Instant noodles

4)Ice products


B.Rice crackers

Raw material (rice)

Material (packing)

Material

Instant noodles

Distributor

Importer

Retail

Retail

Raw material supply (packing/Rice and others) (packing/Rice and others)

Ambient-temperature rice manufacturing

facility

Channel (chained supermarkets/department store/chained pharmacy and cosmetics stores/clinics/shopping platforms/TV shopping channels, among others)

Raw material (rice)

Material (packing)

Material

Rice crackers

Distributor

Importer

Retail

Retail

Raw material Imported

flour

Material supplier Raw material

Poly bags Paper

products

Frozen noodles manufacturing sector

Wholesale store Department store

supermarkets Ready meals distributors

Five-star hotels Dining chain stores Group meal and sky

catering schools Sightseeing and

recreational industry

Consumer

Food and beverage stores


Frozen dough manufacturing

facility

Baking (Fresh bakeries, upgraded and transformed bakeries,

nationwide bakery chain stores, groceries, theme bakeries, hotels and restaurants, etc.)

Raw material suppliers

(flour/oils and fats, among others)

Lucky Royal Co., Ltd. Consumer

Channel (including retail: convenience

store/supermarket/Wholesale store and restaurant/ scenic areas, among others)


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6)Dining

(3)Product trends and competition

1)Cleaners ● 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.

● Multi-purpose products gaining prominence: Besides the existing cleaning feature, consumers also care about whether a cleaner has other additional features, such as anti-bacterial, softening, color-safe, skin protective, deodorizing, low sensitizing, and removal of stain, among others; these are also popular among consumers.

● Safety first: Many cleaners come into contact with people's skin. As such, their ingredients, safety, and brand creditability are becoming prioritized concerns for consumers before they make a purchase.

● Anti-bacterial products hit: As bird flu, MERS, enterovirus, and new influenza viruses continued to spread over the past few years, consumers are strongly concerned about their personal hygiene and the importance of having a clean home. Anti-bacterial, anti-viral, and skin-safe functional products, therefore, remain popular. The zeal is yet to subside.

2)Baking products A.Banking oils and fats

Oil and fat products are competitive in that they meet customers' demand and form an interdependent relationship with one being the upstream and the other downstream. 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.

B.Frozen dough Following the pace on baking markets in adjacent Asian countries, baking practitioners have also come to realize that only baking it fresh offers consumers with best experience of having fresh and tasty products. As such, the traditionally packaged bread gradually disappeared yet bakeries where fresh bread and pastries are available every day mushroomed. Older brands in the baking industry that established their presence on the market followed one another to proactively transform themselves toward fresh baking and break away from their traditional mindset in order to fight against the

Small farmer

Vegetables

Cultivation farm

Soft-shelled turtle

Fish

Beef

Wholesale

intermediary

Farmers' Association

Pork, beef, lamb, chicken, duck, geese, fish, crab, vegetables, fruits, groceries

Vegetables

Restaurant

Catering/to-go/delivery

Handy gift

Reunion/banquet

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pressure posed by major international brands on the market. In order to take care of consumers' demand and operational cost, while making it fresh, the use of simple and easy-to-operate frozen dough has come into being. Namchow offers more than a hundred frozen dough options to satisfy the needs of customers applying different distribution channels and hence is able to become a leading brand for frozen dough on both sides of the Strait.

3)Flour-based foods A.Frozen noodles

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 20 years. Sales on the market have doubled and all production lines are full-loaded because there is more demand than supply. Currently, there are two professional and advanced production lines for frozen noodles to better enrich the production volume and diversify product options, satisfying the needs of consumers and customers throughout the world.

B.Instant noodles Since January 01, 2016, the "0" tariff policy has been enforced in the ASEAN 10 + 3 countries. There is no barrier posed by tariffs any more between China and Thailand. Namchow Thailand and Namchow China hence jointly planned to introduce instant noodles of self brands in the second half of 2016 to China and start to grow this part of the business in China.

4)Ice products Duroyal and Kabisuo, the royal Russian ice products, have been the focus of product innovation and brand investment over the long term. Unique products are being researched an developed to fulfill consumers' expectations for novelty and variation and to create differential competitive advantages for customers. In 2017, to address the development trends of high value addition, refreshing and cooling, and small package in the ice product industry, Duroyal introduced new options for retailers including Kubao cotton-like ice cream, Kubao smoothies, fresh mango bars, 475 ml smaller-package family-size ice cream, Duroyal Super Premium, 475 ml Fruit Lite, and select Mochi ice cream, and more.


Modern people are busy at work; they eat well yet exercise little. This is why disease of civilization is getting more and more common. The Company will continue to proactively develop a series of healthy and tasty ready-to-serve rice, porridge, and sweets in the future to satisfy the needs of modern people for staying healthy.

B.Rice crackers Rice crackers for babies are the "rising star" Namchow Thailand. To develop this product further, Namchow Thailand will establish the "R&D Center for Baby Rice Crackers" where tremendoud manpower and resources will be devoted to help develop more advantageous products and to offer consumers more options.

6)Dining

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Innovation, differentiation, pursuit of excellence, and doing it right the first time are the Company's unchanged belief and practice to creating a comfortable dining environment. In terms of cuisines, fresh and unique local ingredients are used to prepare each intriguing and affectionate entree in a skilled and experienced way.

3. Technical and research and development status (1)Amount spent in research and development in the latest year by the Company

Year 2015 2016 2017 (estimates) Total (NTD thousand) 139,141 273,061 289,000

(2)Technologies or products successfully developed 1)Cleaners

The travel pack of crystal soap was developed and sold in the second half of 2016 to meet the demand of consumers who are frequent travelers so that they can still use crystal soap while away from home. Efforts are continued to develop laundry liquids, dining ware cleaners, and personal cleaing supplies made of natural oils and fats.


A. Baking oils and fats in Taiwan There are around 200 options of oil and fat products available now, including mixing, wrap, stuffing, cake-oriented, deep-fry, special purpose, and functional ones. Besides those produced by Namchow, natural butter from Europe and fresh cream from Japan are introduced to continue maximize service aspects and consolidate operations.

B.Baking oils and fats in Mainland China Products that are currently available for sale include mixing, wrap, liquid, stuffing oils and fats and light cream (Qiaoyi) and stuffings (Beikeshi ready-to-serve stuffings).

Frozen dough A. Frozen dough in Taiwan

Frozen dough products that are available at present are divided into 8 categories: toast, hard, sweet bread, puff, danish, bakery, Chinese, and artisan.

B. Frozen dough in Mainland China There are nearly a hundred frozen dough products available at present. They are divided into the following based on the market and from the perspective of consumers: pineapple bun, danish, croissant, puff, boiled, dim sum, artisan, share, donut, and fundamental. Namchow Dim Sum, in particular, is available exclusively in Mainland China.

3)Flour-based foods A.Frozen noodles

The 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.

B.Instant noodles Innovative instant noodles: There are the ginkgo mushroom and green curry flavors.

4)Ice products

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In 2013, collaboration began with FamilyMart in offering soft-serve ice cream. The collaboration went a step further in the exclusive commodity: Tsujiri Matcha. Ice cream, Tsujiri Matcha Mochi, and Gudetama puting flavored Mochi have successfully become hot topics on the market. New options introduced of Duroyal for retailers in 2017 were Duroyal Kubao cotton-like ice cream, Duroyal Kubao smoothies, Duroyal fresh mango bars, Duroyal Super Premium, Duroyal Fruit Lite, and Duroyal Mochi.


The Company already offers fiber-rich ambient temperature cooked rice now; it is certified as health food that can effectively regulate blood sugar and blood lipids. There is also the imperial series.

B.Rice crackers Healthy rice crackers are introduced.

(3)Future research and development plans 1)Cleaners

With the rising awareness about organic ingredients and environmental protection, consumers are concerned not only about the cleaning power but also about safety of ingredients of cleaning products when it comes to home supplies, anti-bacterial cleaning of the living environment, personal hygiene and multi-purpose high-performance laundry cleaners. In the future, the focus of R&D will be on cleaning products that are natural and highly biodegradable, can clean up clothes, and are mild on the skin.


A. Baking oils and fats in Taiwan As standards followed in the baking industry continue to improve, practitioners (customers) have a more advanced understanding of the standards applicable to baking oils and fats and their functional definitions. Efforts will continue in the future to be devoted to improving raw materials, processes, and technologies and emphasis will be placed on the research and development of functional exclusive oils and fats.

B.Baking oils and fats in Mainland China Additional flavors will be explored reflective of contemporary demand on the market for baking products according to products that are currently available in order to research and develop functional oils and fats better meeting market demand and to enrich product lines as well as to enrich Namchow product lines. The Flour paste product is expected to be produced and introduced to the market in May 2017. In the future, efforts will be made to extend the Beikeshi series according to the flavors that are popular on the market. Namchow product lines are to grow comprehensively, both horizontally and vertically.

Frozen dough Various series of frozen dough products that are even more easier to be introduced and applied by practitioners featuring different optional patterns are to be developed, e.g. Chinese pastries, Western pastries, light bread, etc. In light of the increasing emphasis that consumers place on healthy diet and environmental protection, products better

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meeting consumers' expectations will be developed. 3)Flour-based foods

A.Frozen noodles With the global market in mind, northern China noodles, including will be further introduced 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, Henan cooked noodles, etc. 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.

B.Instant noodles New flavors of instant noodles continue to be researched and developed.

4)Ice products High value-added sweets-like cup ice cream is researched and developed. Depending on the market demand, flavors are extended from existing brand series and so are smoothies-type products.


Modern people are busy at work; they eat well yet exercise little. This is why disease of civilization is getting more and more common. The Company will continue to proactively develop a series of healthy and tasty ready-to-serve rice, porridge, and sweets in the future to satisfy the needs of modern people for staying healthy.

B.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.

6)Dining Closely reflective of consumers' needs, healthy, tasty, unique, exquisite, and safe options will continue to be researched and developed for tailored service.

4. Long-term and short-term business development plans (1)Short-term business development plans

Corporate resources will be integrated to make the best use of the Company's advantageous products and strength in research and development while devoting to the research and service relating daily consumer products and providing the general public with natural, healthy, unique niche market products to create composite additional value and to improve profits.

(2)Long-term business development plans Corporate resources will be integrated to reinforce R&D and innovative applications, to improve product differentiation, to create new products, and to start new product lines and new niches. Not only unique raw materials, innovative technology, innovative products, and innovative management model, successful key factors have to be precisely kept track of in order to lead market trends in the future and ensure the continuous competitive advantages of the Company.

(II) Overview of Marketing and Production/Distribution

Since it begain to produce soap in 1952, Namchow has been adhering to for elements of

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relevance, namely raw material, technology, distribution, and culture for diversified management and has taken root in fields such as cleaners, daily necessities, oil/fat/dairy products, flour, rice, biotechnology, and dining. With production sites in Taiwan, Thailand, and China, operations are focused on niche markets, with products sold all over the world. Products in respective fields are analyzed as follows: 1. Market analysis

(1)Cleaners 1)Sale of major commodities: ○1 Major products sold are of the crystal soap series, the travel pack, bar, liquid, powder,

dining ware cleaner, grapefruit seed anti-bacterial hand wash, among others. Official website: http://www.crystalsoap.com.tw/ Crystal Facebook Group: Namchow Crystal Soap https://zh-tw.facebook.com/NC.Crystalsoap

○2 Sold to: domestic market ○3 Pattern: B to C ○4 Distribution channels: grocery stores, PXMart, convenience stores, distributors,

retailers, online shopping, etc. ○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. Namchow crystal soap of the grapefruit seed anti-bacterial series and it laundry liquids and Namchow crystal soap laundry liquids are made of natural oils and fats and the first of their kinds on the domestic market successfully developed. The market share of these laundry solutions made of natural oils and fats exceeds 95%.

C. Namchow crystal soap dining ware detergent is liquid soap made of natural oils and fats and the first successfully developed food-grade detergent in the country that can be used to wash veggies, fruits, milk bottles, and other dishes and bowels. The market share of these natural oil and fat-made detergents exceed 95%.

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 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

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concerned about the impacts of household detergents on the environment and the emphasis on natural and highly biodegradable cleaners hence takes prominence. With the introduction of the crystal soap series of products, the image of Namchow crystal soap in the hearts of consumers is no longer just a bar of hand wash soap; it is now a natural and healthy cleaning brand with natural composition that falls in line with the modern lifestyle. This brand spirit, in a midsts of environmental protection awareness and Lohas and healthy trends, is a prevailing. Due to the fact that awareness of environmental protection is gradually rising among consumers, Namchow crystal soap has become a must-have natural cleaning product in every household. Besides laundry liquids and the detergent for dining ware, Namchow also introduced the grapefruit seed anti-bacterial laundry and hand wash series to set foot in the personal hygiene field. The travel pack that was the most recently introduced makes it convenient for the brand lovers to carry it around and use it anywhere. Different types of commodities are developed to address the changes in the cleaning method and to take care of different user groups, which is well received among the consumers.

3)Competitive niche and desirable and undesirable factors for development prospects and countermeasures: ○1 Competitive niche and desirable factors for development prospects

A. Rising awareness about health and environmental protection to increase the demand for products made of natural ingredients

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. Unique natural fragrance and natural anti-bacterial sources, all-round distribution channels, and sound onine shopping network

E. Continued introduction of travel pack and enrichment of product lines for home supplies to improve the brand image, to increase brand preference, and to make the brand a preferred choice.

○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. D. Constant introduction of new high-end products to the natural market for

competitive brand prices ○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 become a natural, optimal, and environmentally-friendly cleaning product

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that demonstrates love toward family and care for the Earth. B. 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.

C. Continued development of products meeting consumers' demand and creating consumer demand and enrichment of product lines for home supplies to increase additional value and product competitive advantages to fulfill daily cleaning needs of consumers.

D. 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.

E. Collaboration with environmental protection-oriented institutions/groups to communicate the idea and products to the general public for a synergistic effect

F. 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.

(2)Baking products 1)Banking oils and fats

Baking oils and fats in Taiwan ○1 Sale of major commodities:

A. Major products sold: The Company now has around 200 oil and fat products. The diversified options empower the Company to provide tailored service and become a leading brand on the market for baking oils and fats in Taiwan. Official website: http://www.namchow.com.tw/

B. Sold to: Taiwan. C. Distribution pattern: B to B, direct-sale. D. Distribution channel: The Company has more than 3,000 distribution channels for

oils and fats throughout Taiwan and products are sold all over Taiwan. The direct-sale approach is adopted. Customers are the end users of Namchow 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, and airliner contract kitchens.

E. Market share: The estimated market share is about 30%. ○2 Future supply and demand and growth on the market:

The market for oils and fats in Taiwan is mature and stable. The government has been proactively promoting the sightseeing industry for the past few years and adopting a more proactive and open tourims policy, which will bring about positive benefits for the growth on the market. The increase in the number of visitors 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.

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○2 Competitive niche and desirable and undesirable factors for development prospects and countermeasures: A. Competitive niche and desirable factors for development prospects

(a) The Company is highly capable of keeping track of popular trends on domestic and international markets, has a historical brand, secures a leading position in the industry, and has a high market share.

(b) The products are healthy and safe, with steady optimal quality and complete options to be able to meet the demand for oils and fats of various types of customers.

(c) The company is highly capable in research and development, has advanced technology, provides professional and tailored service, and is able to quickly respond to customers' demand.

(d) The direct sale system can quickly reflect market intelligence and dynamics and helps establish a mutual-trust and reciprocal strategic partnership with customers.

B. 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) International trade is universal; information is quickly communicated; imported oil and fat brands enter Taiwan market.

C. Countermeasures (a) Continue to consolidate operations on baking and dining markets and to

expand applications of oils and fats and the scope of distribution service (b) Consolidate consultant marketing, provide one-stop service, let a professional

service to provide all round services before, during, and after sale so that differentiation can be accomplished from the competition.

Baking oils and fats in Mainland China ○1 Sale of major commodities:

A. Major products sold: 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 those produced by Namchow, natural butter from Europe and fresh cream are introduced to continue maximize service aspects and consolidate operations. Official website: http：//www.ncbakery.com

B. Sold to: Mainland China C. Pattern: B to B D. Distribution channel: The direct-sale and distribution approaches are adopted

concurrently in Mainland China. Sales to direct-sale clients account for nearly 30%. In addition, approximately 143 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.

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○2 Future supply and demand and growth on the market: Namchow oils and fats have been a leading brand on the market for oils and fats in China for 20 years. New product series for respective fields will be introduced in Mainland China to address market diversity and the demand for value-added products. The introduction of Beikeshi ready-to-serve stuffings and Flour paste, which is to be introduced to the market this May better demonstrate the leadership of Namchow's products; they are leading the developmental trends on the whole baking market. For higher requirements of the health-preserving essence of foods, Namchow also upgraded all of its products so that they are low in trans-fat; the market benefits are showing each day. While high throughput is guaranteed, high quality and the many series available to chose from also better reflect consumers' needs. In this macro-environment, Namchow oils and fats can better demonstrate their strengths and competitive advantages. Customer service centers are already operative in western areas such as Xinjiang and Inner Mongolia to develop local markets and render desirable accomplishments. Meanwhile, efforts are made to export oils to Outer Mongolia, Hong Kong, Vietnam, Myanmar, and Malaysia and Russia and Central Asian markets as well as South Asia markets such as Thailand, Indonesia, and Singapore are being proactively explored.


(a) Namchow adheres to integrity and quality and has a powerful brand and a high market share; customers are willing to grow with the Company.

(b) Product features are divided in detail; there are complete product lines; products are of high quality and are stable. All of these are leading in the industry.

(c) Reinforced R&D and innovative applications, enhanced product differentiation, and powerful tailoring capabilities to lead on the market in the future.

(d) The commissioning of the Shanghai facility contributes to increased productivity and helps satisfy the high demand.

(e) Overseas quality products are proactively introduced to grow the high-end customer base.

(f) The most powerful distribution network in Taiwan to manage each market at a depth.

(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.

(i) As the price of natural butter surges, the composite edible fats and oils of the Company can replace natural butter on the market.

(j) The Guangzhow facility will start to produce Qiaoyi 800 Light Cream in 2017 to better address market demand.

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B. Undesirable factors for development prospects (a) International brands Cargill, AAK, Shining Gold, Yihai, and Fuji entered the

market in Mainland China one after another; the competition is fierce. (b) The growth rate of the market exceeds the supply of manpower; professionals

are largely wanted. (c) Bakeries are growing at a slower pace due to the pressure of increasing rent

and manpower cost that has slowed the market growth and expansion pace. (d) The moon cake market is normalizing each year, with decreased demand; New

market opportunities need to be explored to fill the gap. (e) Rising costs of raw materials has driving prices of the Company's oil products

up a little bit. C. Countermeasures

(a) Enhance people's living standards in response to the national development strategy. Enhanced living standards will be reflected directly in consumption. More concerned about quality of life, consumers will shift their attention to the "quantity" of products to the "quality" of products. The high-quality products and services provided by Namchow better meet consumers' needs.

(b) Customers are operating toward characteristic and diversified composite management to bring more collaborative opportunities for Namchow oils and fats.

(c) The developments of third-line and fourth-line cities bring about tremendous business opportunities for the baking market. The promotion of the freshly baked model among county-level households brought about breakthroughs for customers. Namchow's brand power and service power have won trust and support from customers. More and more customers are willing to grow together with Namchow.

(d) The industry is in its high-speed growth period; there are varied types of oils and fats on the market. The high-performing products researched and developed by Namchow can better satisfy market demand.

(e) In light of the increasing prices of natural butter, the Company will maximize its promotion of composite edible oils and fats in order to secure the original market share of natural butter and to increase sales of oils and fats.

2)Frozen dough Frozen dough in Taiwan ○1 Sale of major commodities:

A. Major products sold: The Company currently has 8 categories consisting of more than 200 options of frozen dough products; the number of categories and options are leading other frozen dough brands in Taiwan. Official website: http://www.namchow.com.tw/

B. Sold to: Taiwan, US, Canada, Australia, Japan, Hong Kong, and Dubai. C. Distribution pattern: Direct sale D. Distribution channel: The Company has more than 2,000 distribution channels

throughout Taiwan for frozen dough, including grocery stores, supermarkets, convenience stores, chained bakeries, sole-proprietorship bakeries, hotels,

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restaurants, cafes, baking processing plants, handy gift stores, and aircraft caterers. E. Market share: It is estimated that the market share of the Company's frozen dough

accounts for around two-thirds of the market. ○2 Future supply and demand and growth on the market:

Based on the changes in the population structure, dietary preferences and habits, Namchow precisely keeps track of fads and trends and works together businesses (customers) in the industry in researching and developing products that are attractive to consumers, such as the Yangguozi series, bagel series, gluten free series, silver healthy series, clean label series, ready-to-kake series, Chinese dim sum series, deep fried bread series, and prepared bread series, among others. In addition, in light of the prevailing baking fad, multiple small-package frozen dough products will be introduced so that consumers can try living a baking life at home.

Opportunities for future developments: ● The evolution of grocery stores as the distribution channel completely turned

around the national consumption model. "One-stop" grocery stores become very common. Grocery stores have shifted from selling dried supplies to also providing fresh products, cooked products, and baked products. The Company has also established a desirable partnership with each distribution system.

● Convenience stores are working toward differentiation in the bread they sell. Whether it is packaged bread or freshly baked bread at the store, Chinese dim sup, or western dim sum, the Company has been able to successfully help convenience store runners introduce the frozen dough package while creating profits for them.

● In order to fight for a share on the consumer market against grocery stores and convenience stores, nation-wide or regional large chained supermarkets are proactively introducing freshly baked products as well. The enriched experience of the Company in the management, technology required of, and training staff for frozen dough businesses has enabled it to help multiple practitioners (customers) with successful introduction and maximize the scope of service.

● Composite chained food and beverage stores have been very popular for the past few years. While customers are trying to expand their presence quickly, it is particularly important that they keep track of the manufacturing and quality of products. The frozen dough supplied by the Company exercises extreme benefits in this regard as it successfully helps overcome the manufacturing and sale issue.

● Besides large tourist hotels, the number of small-to-medium-sized new motels has also been increasing each year. While businesses are trying to increase its competitive strength and to improve the ratio of return customers, the Company's frozen dough has helped them create differentiation in the catering service industry despite their limited manpower, resources, and space and can be flexibly adjusted along with other options that are available for effective control over management cost and increased net profits.


(a) The popularization of the Internet and dining information programs is inspiring

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tangibly baking practitioners to innovate and try something new. (b) Consumers and governments have increased requirements for food sanitation

and safety. With the spontaneously introduced HACCP, ISO, FSSC, and other food sanitation and safety systems, the Company's products are known for their advantages.

(c) Following implementation of the "one fixed day off and one flexible rest day" policy, baking practitioners have to tackle manpower shortage and the deployment challenge. Frozen dough becomes the best solution to the manpower issue facing baking practitioners.

B. Undesirable factors for development prospects International trade is universal; information is quickly communicated; imported oil

and fat brands enter Taiwan market. C. Countermeasures

The Company has more than 20 years of experience on the baking market of Taiwan and continues to make the best of its strengths as a leading brand on the market in terms of quickly responding to changes in market trends so that the most instantaneous services and products can be provided to the businesses (customers) to differentiate from international brands.

Frozen dough in Mainland China ○1 Sale of major commodities:

A. Major products sold: The different major series of products sold are the pineapple bun, danish, croissant, puff, boiled, dim sum, artisan, share, donut, and fundamental. Namchow Dim Sum, in particular, is available exclusively in Mainland China. Official website: http://www.ncbakery.com

B. Sold to: Mainland China C. Pattern: B to B D. Distribution channel: freshly baked bakeries, upgraded and transformed bakeries,

nationwide chained bakeries, grocery stores, theme bakeries, hotel dining channels, etc.

○2 Future supply and demand and growth on the market: The frozen dough business of Namchow in Cina set up its production site in Tianjin. As part of its long-term business plan, frozen dough production lines will be built in East China, South China, and areas with potential. The goal is to become a frozen dough producer leading the nation and with the best-covered network of facilities. Namchow captures the industrialization trend of the baking industry in Mainland China and the challenges and opportunities for the businesses during industrialization and will continue to lead on the market by introducing diversified products and working together with baking practitioners to push growths in the baking industry.

Opportunities for future developments: ● As the market for bakeries continues to grow, brand power is the key to expansion:

Although growths on the baking market are ongoing, they appear to be polarized. The constantly climbing overhead, including raw materials, manpower, rent, utilities, and coal, among others is posing sterner challenges for the managers. A

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brand with a robust foundation will be able to grow quickly while an undesirably composed one will be removed from the market.

● The production model transits from traditional labor to industrialization: As the baking industry quickly grows, so do chained bakeries at regional, local, and city levels. Shortage of manpower hence becomes more and more common. The cost of labor quickly surges. As such, the traditional manned production model can no longer work. Enterprises start to shift toward industrialization by constantly expanding facilities and investing in equipment.

● Fresh baking becomes a trend and terminal bakery prices surge: The traditional packaged bread gradually died out. Consumers now prefer freshly baked choices. Bakeries or composite stores featuring fresh baking have become a commonplace among more and more baking practitioners for the past few years, indicating that there is still room for frozen dough products to grow.

● 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.

○3 Competitive niche and desirable and undesirable factors for development prospects and countermeasures:

A. 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.

B. Undesirable factors for development prospects Overhead including the cost of raw materials, manpower, and rent surged to make the situation worse on the baking market.

C. 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.

(3)Flour-based foods 1)Frozen noodles ○1 Sale of major commodities:

A. 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.ncbakery.com

B. 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

http://www.sanuki.com.tw/

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C. Pattern: B to B, B to C. D. Distribution channel:

(a) Major customers vertically integrated by the Namchow Group: Benchangliu Professional Noodles Stores, Dian Shui Lou Restaurant

(b) Dining market: Various famous dining chain stores such as Noble, IKEA, Very Thai Noodles, Watami, Tonkatsu, Regent, Grand Hyatt Taipei, Leofoo Village, Janfusun Fancy World, Black Palace Ribs, MOMO, Yoshinoya, Manlai Ramen, Hello Kitty Theme Hot Pot Restaurant, Fujio Food, Evergreen, Sky Bakery, and large frozen products distributors, among others.

(c) Consumer products market: Well-known chained distribution channels such as supermarkets, seafood markets, and grocery stores throughout Taiwan and convenience stores

E. 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. Brand publicity is successfully established.

○2 Future supply and demand and growth on the market: Socioeconomic advancement contributes to an increased ratio of people eating out. 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 a topnotch professional manufacturer and supplier in the industry of frozen noodles in 17 years. The competitive niche of frozen noodles lies in the supply of innovative and differential commodities and high value-added products that 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. 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.


(a) With noodles producing technology that leads the world, noodles are cooked to the extent where they taste the best and frozen fresh at -35 following the same principle for handmade noodles.

(b) Before eating, one only has to reheat it. It is easy. No thawing is required. As soon as the noodles separate from one another, they are ready to serve. A convenient and tasty dish is served just like that. It is safe, tasty, with good texture and smells good. It is always in the "most delicious" state.

(c) Easy to operate, easy to preserve, free of scrappage, and diversified ways of preparing to create high additional value and to offer dining businesses with plenty of room for survival and development

(d) The FSSC22000 (including HACCP) international certification guarantees safety and sanitation and absence of preservatives and assures quality, making it a safe and healthy option for the general consumers.

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B. Undesirable factors for development prospects Growing sales bring full loads for production lines.

C. Countermeasures Additional production lines to provide more sufficient production volume and more

diversified options that help satisfy consumers' demand. 2)Instant noodles ○1 Sale of major commodities:

A. Main products sold: Mee Jang and Little Chef series of instant noodles. B. Sold to: Taiwan, Mainland China, 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. With the world in mind, packaged foods started to be developed and instant noodles and rick crackers are produced. Following an overview of Namchow's products and its management capabilities, corporate resources were combined to jointly plan introduction of self-brand instant noodles into Mainland China to proactively grow the market in China.


(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. B. Undesirable factors for development prospects

Unstable prices of raw materials C. Countermeasures

(a) More mobile in global procurement in the acquisition of competitive raw materials

(b) Expedite development, cultivation, and acquisition of talent to form a professional management team and get ready for globalization

(4)Ice products 1)Sale of major commodities:

○1 Major products sold include A.Duroyal ice products

(a) Retail ● Ice cream bar: Kuangshiqipai series, Super ice cream bars ● Cones: Duroyal select chocolate stuffing cones, double chocolate cones,

Oubuleike cones, premium cones, strawberry cones ● Ice cream in barrels: Duroyal super series, Duroyal select series, Duroyal low

fat series, Enjoy series ●475 ml ice cream: Duroyal Super Premium, Duroyal Fruit Lite. ●Popsicles: Duroyal Valentin Fruit, Duroyal Mango and Fruits Bar

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●Cup ice: Kubao cotton-like ice cream, Kubao smoothies ●Ice cream desserts: Maqibing series, Dafu series

(b) Distribution channel: The products are meant as raw materials for ice cream, sweets, soft-serve ice cream, and reconstituted drinks and are supplied to intermediaries in the dining business. ●Products: Duroyal Ice Cream, Duroyal Soft-serve Ice Cream, Duroyal Super

Ice Cream, Duroyal Smoothies B. Kabisuo Royal Russian Ice Cream

(a) Retail: The products are meant as sweet desserts. ●475 ml, 120ml

(b) 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. ●5 liters, 3 liters

C. OEM, ODM (a) Retail: The products are meant as sweet desserts.

● Yuanzu Ice Cream Cakes and Desserts, Family Mart Collection, among others (b) 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. ● Family Mart Soft-serve ice cream, among others Official website: Duroyal http：//www.duroyal.com.tw/

Kabisuohttp：//www.kabisuoicecream.com.tw ○2 Sold to: Taiwan market ○3 Distribution Pattern: B to B, B to C. ○4 Distribution channel: The products are available at convenience stores, supermarkets,

wholesale stores, dining channels, more than 35,000 sale locations throughout the nation.

○5 Market share: The market share exceeds 30%. 2)Future supply and demand and growth on the market:

Although the overall throughput on the market for ice products remains greater than the demand and competition is fierce, the low birth rate has driven recreational foods to become more exquisite and the demand for high value-added products to increase while that for low-price ice products to shrink. This are positive developments for Duroyal and Kabisuo, which are positioned to be moderate-to-high-priced and premium ice products. In addition, the heated competition among distribution channels makes it necessary for practitioners to customize their products and create differentiation. Royal Ice Products can take advantage of its outstanding development and production capabilities in creating products of a high CP ratio and to bring about more collaborative opportunities.

3)Competitive niche and desirable and undesirable factors for development prospects and countermeasures: ○1 Competitive niche and desirable factors for development prospects

A. Long-term devotion to product innovation has rendered differential products with entry barriers.

http://www.duroyal.com.tw/

http://www.kabisuoicecream.com.tw/index/index_1.htm

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B. Persistent investment in brand advertising to keep the brand new to consumers despite elapsed time

C. Carefully selecting safe, quality, stable raw materials and strict process and quality control, it is the only ice products supplier throughout Taiwan that has joined hands with the Board of Science and Technology of the Executive Yuan and the Ministry of Economic Affairs in promoting the "Project of Traceability Cloud Application on Safe Foods." People can check related safety information by scanning the barcode on the floor with their smart phone or visit the website to search for a product's traceability records to make sure that the product's quality is free of concern.

D. Sound warehousing and logistic systems to maintain the display and quality of ice products.

E. 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.

F. The Namchow Group has set up its food safety office that has complete equipment and professional full-time staff to take charge of auditing and supervising food ingredients and materials, labeling, and the ultimate regulatory compliance of related operations.

○2 Undesirable factors for development prospects Numerous competing products; the competition is fierce.

○3 Countermeasures Research and develop unique products to satisfy consumers' expectations for novelty and variation and to create product advantages through differentiation for enhanced brand value.

(5)Rice-based foods 1)Ambient-temperature rice ○1 Sale of major commodities:

A. Major products sold are biotechnology cooked rice - fiber-rich cooked rice, imperial rice, among other ambient temperature rice.

Official website: http：//www.omefun.com.tw/

B. Sold to: Domestic and international markets such as the United States, Australia, Norway, the United Kingdom, among others.

C. Distribution channel: Biotechnology cooked rice is distributed through retail markets (COSTCO and supermarkets in department stores), electronic virtual platform (online shopping malls, group purchase platforms), and special channels (TV shopping channels, chained comestics and drugs stores, clinics, and pharmacies).

○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.

http://www.omefun.com.tw/

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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. 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. 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 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. In light of the fact that Colon cancer has been the No. 1 cause of death for 7 years in a row; statistics show that each year around 200 to 300 thousand people need to complete colonscopic procedures; the government is also proactively promoting early discovery for early treatment; and more and more people started to value the importance of colonoscopy, there will be higher and higher demand for low-residue foods. The Company plans to develop low-residue meal boxes in 2017 that feature ambient temperature rice and prepared food whose crude fiber is carefully calculated to meet the criteria for a low residue diet. For distribution markets, the advanced health examination center, chained medical supplies store, and nutrition division at respective hospitals are targeted channels. It is expected that professional, healthy, convenient, and safe nutritional food will be available for consumers in need.


(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.

B. Undesirable factors for development prospects

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Ambient-temperature sterile-packaged rice is an emerging product on the market and is yet to be widely accepted.

C. 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. (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. 2)Rice crackers ○1 Sale of major commodities:

A.Major products sold are rice crackers and baby rice crackers. B. 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. This part of the market is full of development potential as suitable products can be developed for babies, women, men, and old people. The potential is infinite. Deployment on the Myanmar market began in 2014. Products are sold in respective supermarkets in Myanmar. Meanwhile, thin rice crackers and baby rice crackers started to enter the China market. The deployment scale was expanded in 2016 to proactively access Cambodia and Laos.


(a) The exclusive jasmine rice from Thailand is of unique fragrance and texture. (b) Robust market development capabilities (c) Long-term collaboration with western markets to win trust. (d) Competitive prices

B. Undesirable factors for development prospects Unstable prices of raw materials

C. 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

(6)Dining 1)Dining in Taiwan ○1 Sale of major commodities:

A. Providing consumers with dining service, banquet sites, recreation and entertainment (DIY).

B. Sites: Taipei, New Taipei, Taoyuan, and Hsinchu ○2 Brands and business locations:

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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/NCGTYTF/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 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

1. Guandu Store

2. Taoyuan Store

3. Qingcheng Store

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

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/NCGTYTF/flash.index.html

Taoyuan Store

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Brand Location

Duroyal Cafe The first Duroyal Cafe flagship store features mainly a North European style, with an easy 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: Both revenues and annual growth rates since 2006 of the dining market have been on the increase. As single upstarts and nuclear families became the mainstream over the past few years, the demand for eating out has increased. In addition, the multiple policies implemented by the government, the development of tourism, and the promotion of local delicacies have all brought about positive benefits for the market as a whole. In the 21st century, Taiwan will inevitably develop toward sightseeing, tourism, and dining industries and the competition among cuisines from different countries in the dining industry will continue to be fierce. 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 in 2016, where it opened Dian Shui Lou and Duroyal Cafe later to contribute to the development of food and beverage business in Linkou and the sales have been reaching new heights. This year (2017), the dining business will reach out to Tokyo, Japan, the city of international delicacies, with the establishment of the second Dian Shui Lou overseas. The location is right next to the Shinjuku of the subway and across from Isetan Department Store combining both fashion and culture. It is easily accessible and targets higher-end customers and tourists to satisfy their consumption demand.


(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.

(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.

(e) There are a variety of choices over products to give away in holiday seasons; the production and sales are steadily growing.

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(f) Outstanding brand image and access to group resources for maximum advantages of the Group

(g) Sightseeing and tourism factory resources are combined. B. 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.

(c) Livestock and poultry disease and collaboration in the government's labor safety policy have driven up the goods receiving cost and personnel cost.

(d) Surges in oil and electricity, food ingredient, and human resources have increased the cost.

C. 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.

(c) We continue to insist on going the right way to strengthen consumers' confidence in our brand. In the food safety storm, consumers are willing to pay a higher value for eating safely.

2)Dining in mainland China ○1 Distribution of locations major products are sold to:

A. Dining services for consumers B. Location: Shanghai, China

○2 Brands and business locations:

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Brand Location

Shanghai Paulaner Bee 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. New Palace Store 2. Binjiang Store 3. World's Fair Store 4. National Convention Center 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/

World's Fair Store

KÄFER 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 KÄFER, the restaurant mainly deals with European continental cuisines and provides topnotch western cuisines without borders. http：//www.bln-restaurants.com/kaefer/

Binjiang Store

Dian Shui Lou Delicacies transcend borders and are not bound by localities. Dian Shui Lou serves a variety of cuisines, including authentic Jiangzhe dishes, exotic meals, and Taiwan-style choices, enriching the presentation of a banquet to make it wonderful! 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

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for development in the future. ○4 Competitive niche and desirable and undesirable factors for development prospects

and countermeasures: A. 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.

B. Undesirable factors for development prospects (a) Increased costs of operation such as rent and human resources. (b) Fierce competition on the dining market. (c) Policy changes in the macro-environment (d) Changes in the eating out habit and the rise of delivery service (e) Inflation

C. Countermeasures (a) creating monopoly value on the dining market. (b) Introducing new accessories for reduced cost and enhanced profitability (c) Taking advantage of online resources to increase operating efficiency and

competitiveness. (d) Developing the catering market (e) Periodically maintaining restaurant decorations and equipment

2. Purposes and production processes of main products (1)Purposes of main products

1)Cleaners: For cleaning clothes, dishes, skin, and the living environment, etc. 2)Baking products ○1 Baking oils and fats: For use by baking practitioners in producing various baked

products such as bread, cake, and Chinese dim sum. ○2 Frozen dough: frozen semi-finished products that fall in the bread category. With the

designed bread made into frozen dough, customers (store owners) only have to thaw, ferment, and bake it and fresh-roast bread or desserts are ready to serve (to the consumers).

3)Flour-based foods ○1 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.

○2 Instant noodles: Delicious, tasty, fast, convenient, and nutritious products are made. 4)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.

5)Rice-based foods ○1 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.

○2 Rice crackers: Delicious and tasty desserts and foods that are popular among the

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young and the old are produced through the continuous and automatic production process to meet the demand for eating healthily.

6)Dining Dining in Taiwan: Serving authentic local, sanitary, and safe delicious cuisines and

providing thoughtful and tailored services Dining in Mainland China: Providing subordinate restaurants with consistent

semi-finished products applying the central kitchen idea to reduce the cost and expenditure. Providing freshly made meals and catering service

(2)Production and preparation processes of main products 1)Production flowchart for cleaners

2)Production flowchart of baked products

Banking oils and fats

Frozen dough

3)Production flowchart for flour-based foods

Frozen noodles

Instant noodles

4)Production flowchart for ice products

Boiling Pressing

Cutting Printing Packaging

Packaging Boiling

Finished product

Finished product

Filling

Packaging Finished product

Mixing with salt water or alkaline

water

Pouring in flour to make dough

Producing into four

bands

Cutting four bands into pieces

Boiling in water

Four body taking shape

Detecting 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

Raw material Refining Deodorizing Reconstituting

Freezing and combining

Filling and packaging

Ripening Warehousing

Formula reconstitution

Dough mixing Shaping Quick freezing Packaging Warehousing

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5)Production flowchart for Rice-based foods

Ambient-temperature rice

Rice crackers

3. Supply of main raw materials

(1)Cleaners The main raw ingredient of soap is oil and fat; it can be 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, natural ingredients, care for family and caring for the Earth remain as the focus so that consumers can fully feel the value of our products.

(2)Baking products 1)Banking 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.

2)Frozen dough Main raw materials are the oils and fats, flour, yeast, chicken eggs, sugar, and various

stuffing, among others. ○1 Oils and fats: The Company supplies oils and fats meant particularly for the production

of frozen dough and that can be used in food processing. Unique oils and fats can be tailor made reflective of the frozen dough product and production process requirements.

○2 Flour: Imported and domestic quality wheat is used to produce the special wheat

Cooling Homogenization

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

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powder that is suitable for frozen dough. At least two suppliers of wheat powder are used to ensure steady source of raw materials and quality of products.

○3 White sugar: Quality white sugar is used to ensure food sanitation and safety. ○4 Eggs: The eggs are from quality suppliers with a HACCP process and meeting food

sanitation and safety requirements. ○5 Various stuffings: Quality stuffings suppliers meeting national specifications are

chosen. Quality stuffings are mixed and produced. (3)Flour-based foods

1)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 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.

2)Instant noodles The main raw material is flour. The international market price of wheat and harvest seasons of wheat in areas around the world have to be kept track of. The exchange rate factor has to be considered and a global purchase strategy is applied to obtain flour supplies.

(4)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. is to import dairy products

from New Zealand where cows are let to roam the prairie in the nature. The required quantities are to be purchased whenever it is considered appropriate according to the international market price and there has to be the safety stock.

○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.

(5)Rice-based foods 1)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

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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.

2)Rice crackers The main raw material is rice. Quality Jasmine rice from Thailand and other special rice are selected for the production in order to ensure quality of rice and steady supply. Contracts are entered into with suppliers to create a long-term partnership.

(6)Dining ○1 Self-made beer: With the German wine-maker based on site, quality of fresh-brewed beer

is carefully controlled. ○2 All the main raw materials are CAS, GMP, FGMP, HACCP, ISO22000, and ISO9001

certified and are strictly safeguarded in terms of sanitation and safety. In addition, food ingredient traceability is carefully created. Suppliers are being managed. For prioritized food materials, professionals from the food safety office will visit the site to make sure that they are grown or slaughtered in a sanitary and safe way. All meat products and seafood come with test reports and are sanitary and safe. In addition, local seasonal fresh food ingredients are used through collaboration with respective farmers' associations and farmers.

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. Data of major suppliers in the past two years

Unit: NT$1,000 2016 2015

No. Title value

Ratio in net purchases

throughout the year (%)

Relationship with the issuer

Title value

Ratio in net purchases



1 Fangshun United (Beijing) Cereals & Oils Co., Ltd.

854,520 11 None Wilmar Trading Pte Ltd. 732,760 12 None

2 Fangshun United (Beijing) Cereals & Oils Co., Ltd.

686,477 11 None

Other 7,348,255 89 - Other 4,977,197 78 - Net purchases 8,202,775 100 - Net purchases 6,396,434 100 -

Data of major sales customers in the past two years Unit: NT$1,000

2016 2015

No. Title value Ratio in net sales



Title value

Ratio in net sales throughout the year

(%)


Customers without reaching 10% or more of the total value of sales in any of these two years Other 16,258,380 100 - Other 15,446,582 100 - Net sales 16,258,380 100 - Net sales 15,446,582 100 -

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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.

5. Production volumes/values in the past two years Unit: Ton - NTD thousand

Year

Output Volume 2016 2015

Main products Throughput Production volume Production value Throughput Production volume Production value Oils and fats 185,843 134,048 5,676,287 185,843 127,145 6,260,834 Cleaners 9,420 6,364 251,187 9,420 8,716 358,195 Ice products 17,606 7,646 645,422 17,606 9,388 713,355 Foods 56,153 30,438 2,010,641 50,780 21,554 1,519,443 Frozen dough 9,798 6,963 553,880 9,798 5,869 494,398 Other 2,098 446 273,156 2,098 686 429,321 - - - - - - Total 280,918 185,905 9,410,573 275,545 173,357 9,775,546

6. Sales volume/values in the past two years

Unit: Ton - NTD thousand Year

Output Volume

Main products

2016 2015 Domestic International Domestic International

Sold volume Sold value Sold

volume Sold value Volume Value Volume Value

Oils and fats 17,845 1,246,135 119,232 8,720,550 17,265 1,168,565 108,425 8,114,492 Cleaners 6,674 492,921 0 16 8,509 603,539 7 218 Ice products 10,046 849,339 331 132,651 8,796 974,295 379 125,917 Foods 4,750 285,696 16,003 2,183,986 1,841 188,628 27,690 1,931,108 Frozen dough 7,239 747,800 479 79,281 4,095 492,560 353 48,477 Dining 0 685,565 0 601,782 0 586,672 0 840,716 Other 0 142 426 273,851 0 142 595 404,216

Total 46,554 4,307,598 136,471 11,992,117 40,506 4,014,401 137,449 11,465,144

(III) Information of Employees

Information of employees in the past two years and up to the date of printing of the Annual Report Year 2015 2016 As of

March 29, 2017

Number of

employees

Domestic 1,289 1,390 1,378

International 2,866 3,006 3,175

Total 4,155 4,396 4,553

Mean age 36.1 35.91 35.69 Mean seniority in service 6.43 6.29 6.02

Education

Distribution

Ratio

PhD 3 (0.07%)

3 (0.07%)

3 (0.07%)

Master 176 (4.24%)

193 (4.39%)

200 (4.39%)

College and University Graduate

1,446 (34.80%)

1,635 (37.19%)

1,670 (36.68%)

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Senior high/vocational high school graduate

1,270 (30.57%)

1,317 (29.96%)

1,382 (30.35%)

Below senior high/vocational high

1,260 (30.32%)

1,248 (28.39%)

1,298 (28.51%)

(IV) Information on Environmental Protection Expenditure:

1. Taoyuan Plant The emission delivery pipeline for the boiler cleaning tower was found during the inspection by the Environmental Protection Bureau on July 21, 2016 to have been damaged and a fine of NTD 100 thousand was imposed for having violated the requirement under Article 23 Paragraph 1 of the Air Pollution Control Act. Improvement measure The corroded area was first patched with white iron sheet on July 27, 2016 and the improvement was confirmed by the Environmental Protection Bureau to have been completed. The emission pipeline was changed to be of stainless steel to prevent against damage caused by rusting and corrosion again. The replacement was completed on October 30, 2016, costing a total of NTD 195,000.

2. Guangzhou Plant Guangzhou Namchow has spent on environmental protection since 2016 as follows:

Date completed Description value

(RMB)

1 2016.03 Purchase of the precision filter emissions capture equipment as part of the odor capture and processing device project 206,000

2 2016.03 Installation of the precision filter emissions capture equipment as part of the odor capture and processing device project 230,000

3 2016.10 Sewage odor capture and processing as part of the odor capture and processing device project 350,000

4 2016.11 Stage 1 repairs and remodeling of the sewage station 2,250,000 5 2016.12 2016 environmental protection monitoring 15,000 6 2016.01~12 Operating cost of the sewage treatment station 895,675 7 2016.01~12 Cost of transferring dangerous waste 42,785 8 2016.01~12 Sludge discharge cost 701

Total 3,990,161

(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: (i) 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.

(ii) Retirement system: The Namchow Group recognizes the cost of retirement fund set aside each year based on

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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.

(iii) 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.

(iv) Employee benefits: Employee Welfare Committee The Employee Welfare Committee is established to plan for the establishment of a welfare system and to continue promoting various benefits; the information is provided to colleagues through the intranet of the Company. 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

(v) Continuing education and training: Employees are important assets of Namchow. The Company proactively develops talent through various types of educational training: Internal training: Labor Safety and Health and Food Safety and Health Training,

136

Introduction to Cleaning and Disinfection Technology for Cleaners Used Inside the Plant, GMP Practice,Food Safety Management System HACCP Training, Production Supervisor Quality Training/Food Safety, Leadership Cultivation and Development Program, etc. 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 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.

(vi) Workplace and personal safety: Create a safe, sanitary, and healthy workplace, hold fire prevention/public safety training, employee safety educational training, rescue staff safety and health educational training, and safety and health ideas and prevention against disasters, among others.

(vii) 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.

(viii) Employer-employee disputes in the past three years: None

(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.

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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) 2012 2013 2014 2015 2016

Current assets - 6,313,685 8,498,553 9,391,406 7,476,410 Funds and long-term investments - 90,862 41,453 40,715 40,414

Real estate, manufacturing facilities and equipment - 6,353,212 7,774,260 8,216,461 10,443,803

Intangible assets - 105,417 105,417 105,417 105,417 Other Assets - 395,375 494,631 645,336 511,124 Gross assets - 13,258,551 16,914,314 18,399,335 18,577,168

Current liabilities

Before distribution - 5,122,599 6,178,713 6,871,475 5,192,049

After distribution - 5,710,865 6,796,392 7,636,221 Note 2

Non-current liabilities - 3,508,300 5,483,023 5,883,783 7,762,409 Others - - - - -

Gross liabilities



Capital stock - 2,941,330 2,941,330 2,941,330 2,941,330 Capital reserve - 332,677 424,437 520,786 640,075

Retained earnings



Other equities - 32,816 204,619 59,781 (391,236) Treasury stock - (530,114) (530,114) (530,114) (530,114) Non-controlling interests - 159,420 171,735 144,258 52,621

Total shareholders’ equity



Inspecting (Reviewing) CPA - Xiu-Yu Lin An-Tian Yu An-Tian Yu An-Tian Yu

Lin Wu Xiu-Yu Lin Xiu-Yu Lin Bo-Shu Huang Inspection (Review) Feedback - No reservations 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.

138

2. Brief Consolidated Income Statement - International Financial Reporting Standards

Unit: NT$1,000 Year

No. Financial data of the past 5 years (Note 1)

2012 2013 2014 2015 2016 Business income - 13,426,115 14,831,846 15,479,543 16,299,714 Gross operating profit - 4,325,418 4,918,316 5,608,250 6,139,689 Business loss - 1,387,009 1,577,941 1,955,419 2,023,364 Non-business income and expenditure - (58,912) 662 (214,378) (205,488)

Pre-tax net profits (losses) - 1,328,097 1,578,603 1,741,041 1,817,876 Continuing department Net profits of the term

- 899,546 1,008,737 1,163,961 1,170,309

Gains and losses for the discontinued department - - - - -

Net profits (losses) of the term - 899,546 1,008,737 1,163,961 1,170,309

Other comprehensive gains and losses of the term (After-tax net value)

- 102,365 165,608 (177,248) (499,100)

Sum of general gains and losses of the term - 1,001,911 1,174,345 986,713 671,209

The net profits belong to the client of the parent company - 854,366 948,634 1,112,850 1,205,702

The net profits are part of non-controlling interests - 45,180 60,103 51,111 (35,393)

The sum of general gains and losses belongs to the client of the parent company.

- 948,536 1,109,117 940,307 715,727

The sum of general gains and losses is part of non-controlling interests.

- 53,375 65,228 46,406 (44,518)

Earnings per share - 3.44 3.82 4.49 4.86 Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

139

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)

2012 2013 2014 2015 2016 Current assets - 1,021,536 1,419,456 1,121,981 1,149,576 Funds and long-term investments 5,086,250 6,009,097 7,250,538 8,169,568 Real estate, manufacturing facilities and equipment

- 2,649,554 2,674,472 2,665,947 2,736,856

Intangible assets - - - - - Other Assets - 11,703 24,458 39,485 97,739 Gross assets - 8,769,043 10,127,483 11,077,951 12,153,739

Current liabilities Before distribution - 1,860,731 1,068,458 1,409,720 1,268,854 After distribution - 2,448,997 1,686,137 2,174,466 Note 2

Non-current liabilities - 2,440,080 3,978,182 4,168,412 5,314,796 Others - - - - -

Gross liabilities Before distribution - 4,300,811 5,046,640 5,578,132 6,583,650 After distribution - 4,889,077 5,664,319 6,342,878 Note 2

Capital stock - 2,941,330 2,941,330 2,941,330 2,941,330 Capital reserve - 332,677 424,437 520,786 640,075

Retained earnings Before distribution - 1,691,523 2,040,571 2,508,036 2,910,034 After distribution - 1,103,257 1,422,892 1,743,290 Note 2

Other equities - 32,816 204,619 59,781 (391,236) Treasury stock - (530,114) (530,114) (530,114) (530,114) Shareholders’ equity Total

Before distribution - 4,468,232 5,080,843 5,499,819 5,570,089 After distribution - 3,879,966 5,698,522 4,735,073 Note 2

Inspecting (Reviewing) CPA - Xiu-Yu Lin An-Tian Yu An-Tian Yu An-Tian Yu

Lin Wu Xiu-Yu Lin Xiu-Yu Lin Bo-Shu Huang

Inspection (Review) Feedback - No

reservations 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.

140

4. Brief Entity Income Statement - International Financial Reporting Standards Unit: NT$1,000

Year No.


Business income - 2,390,240 2,578,036 2,780,173 2,808,091 Gross operating profit - 802,546 868,415 1,006,609 972,280 Business loss - 20,259 (19,319) (2,165) (45,125) Non-business income and expenditure - 842,008 1,089,021 1,334,909 1,315,666

Pre-tax net profits (losses) - 862,267 1,069,702 1,332,744 1,270,541

Continuing department - 854,366 948,634 1,112,850 1,205,702 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 1,205,702

Other comprehensive gains and losses of the term - 94,170 160,483 (172,543) (489,975)

(After-tax net value) Sum of general gains and losses of the term - 948,536 1,109,117 940,307 715,727

Earnings per share - 3.44 3.82 4.49 7.86 Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

141

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)

2012 2013 2014 2015 2016 Current assets 4,922,792 - - - - Funds and long-term investments 89,876 - - - -

Fixed assets 6,309,229 - - - - Intangible assets 119,796 - - - - Other Assets 71,185 - - - - Gross assets 11,512,878 - - - -

Current liabilities

Before distribution 3,390,734 - - - -

After distribution 3,684,867 - - - -

Long-term liabilities 3,450,716 - - - - Others 577,784 - - - -

Gross liabilities



Capital stock 2,941,330 - - - - Capital reserve 383,072 - - - -

Retained earnings

Before distribution 709,309 - - - -

After distribution 415,176 - - - -

Financial instruments Unrealized losses of falling prices

(344,735) - - - -

Cumulative translation adjustment 360,689 - - - -

Unrealized revaluation increments 317,893 - - - -

Treasury stock (188,250) - - - - Not recognized as pension (234,612) - - - - Net losses of cost

Shareholders’ equity Total



Inspecting (Reviewing) CPA

Bo-Shu Huang - - - - Xiu-Yu Lin

Inspection (Review) Feedback

No reservations - - - -

Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

142

6. Brief Consolidated Income Statement - National Financial Accounting Standards Unit: NT$1,000

Year No.


2012 2013 2014 2015 2016 Business income 12,060,837 - - - - Gross operating profit 3,537,090 - - - - Business loss 814,871 - - - - Non-business income and interest 102,273 - - - - Non-business costs and losses 188,795 - - - - Continuing department Pre-tax gains and losses

728,349 - - - -

Continuing department Gains and losses

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 477,723 - - - - Earnings per share 1.80 - - - - Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

143

7. Brief Entity Asset Balance Sheet - National Financial Accounting Standards Unit: NT$1,000

Year No.


2012 2013 2014 2015 2016 Current assets 961,456 - - - - Funds and long-term investments 4,230,431 - - - - Fixed assets 2,423,424 - - - - Intangible assets - - - - - Other Assets 195,928 - - - - Gross assets 7,811,239 - - - - Current liabilities

Before distribution 694,047 - - - - After distribution 988,180 - - - -

Long-term liabilities 2,899,582 - - - - Others 272,914 - - - - Gross liabilities

Before distribution 3,866,543 - - - - After distribution 4,160,676 - - - -

Capital stock 2,941,330 - - - - Capital reserve 383,072 - - - - Retained earnings

Before distribution 709,309 - - - - After distribution 415,176 - - - -

Financial instruments (344,735) - - - - Unrealized losses of falling

prices Cumulative translation adjustment 360,689 - - - - Unrealized revaluation increments 317,893 - - - - Treasury stock (188,250) - - - - Not recognized as pension (234,612) - - - - Net losses of cost Shareholders’ equity Total



Inspecting (Reviewing) CPA Bo-Shu Huang - - - -

Xiu-Yu Lin Inspection (Review) Feedback

No reservations - - - -

Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

144

8. Brief Entity Income Statement - National Financial Accounting Standards Unit: NT$1,000

Year No.


Business income 2,348,488 - - - - Gross operating profit 697,959 - - - - Business loss (46,443) - - - - Non-business income and interest 603,367 - - - - Non-business costs and losses 87,446 - - - - Continuing department Pre-tax gains and losses 469,478 - - - -

Continuing department Gains and losses 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 446,212 - - - - Earnings per share 1.80 - - - - Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.

145

(II) Financial Analysis of 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 2016

Financial structure %

Liabilities to assets ratio 66 65 69 69 70

Permanent capital to real estate, manufacturing facilities and equipment ratio

131 128 138 141 129

Liquidity

Current Ratio (%) 142 123 138 137 144

Quick Ratio (%) 97 87 2015 111 2015

Interest protection multiples 7 15 14 13 12

Operating performance

Average collection turnover(times) 6.69 7.79 8.65 9.06 9.43 Average collection days 55 47 42 40 39 Inventory turnover (times) 5.83 5.62 5.43 5.69 5.69 Average payables turnover (times) 15.66 15.76 15.07 14.19 13.60 Average inventory turnover days 63 65 67 64 64 Real estate, manufacturing facilities and equipment turnover (times) 2.01 2.14 2.09 1.94 1.75

Total asset turnover (times) 1.04 1.08 0.98 0.87 0.88

Profitability

Return on total assets (%) 5 8 7 7 7 Return on equity (%) 12 21 20 21 21 Pretax income to paid-in capital (%) 24 45 54 59 62 Net profit rate (%) 4 7 7 8 7 Earnings per share (NT$) (Note 2) 1.73 3.44 3.82 4.49 4.86

Cash Flow Cash flow ratio (%) 36 32 28 39 31 Cash flow adequacy ratio (%) 155 127 91 106 73 Cash flow reinvestment ratio (%) 8 10 6 11 4

Leverage Operating leverage 5 4 4 3 3 Financial leverage 1 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 current net cash inflow from operating activities in 2016 reduced by around NTD 1.1 billion from 2015 mainly

because the international prices of oils and fats were rising in the first half of 2016 while they were falling in 2015. As a result, the inventory of 2016 increased by around NTD 600 million from 2015. For the pension fund, it is required by domestic laws and regulations that around NTD 300 million have to be paid. As such, what are affected include the cash flow ratio, the cash flow adequacy ratio, and the cash reinvestment ratio.

2. The Company issued corporate bonds worth NTD 4 billion and it affected the short-term and long-term debt ratios. As such, what is affected is the cash flow ratio.

3. The Company expanded its facilities and invested in equipment in both Taiwan and Mainland China. The value increased by around NTD 1.8 billion in 2016 from 2015. As such, what are affected include the cash flow adequacy ratio and the cash reinvestment ratio.

Note 1: Financial data from the past 5 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.

146

2. Financial Analysis - Entity Financial Statement by the International Financial Accounting Standards

Year Analyze



Liabilities to assets ratio

51

49

50

50

54


270

261

350

375

410

Liquidity

Current Ratio (%) 126 55 133 80 91

Quick Ratio (%) 79 32 87 48 54

Interest protection multiples 10 16 18 21 20


Average collection turnover(times) 4.63 4.75 4.84 4.98 4.94 Average collection days 79 77 75 73 74 Inventory turnover (times) 4.54 4.27 4.11 4.23 4.44 Average payables turnover (times) 14.18 13.73 12.12 12.25 13.36 Average inventory turnover days 80 85 89 86 82 Real estate, manufacturing facilities and equipment turnover (times) 0.91 0.90 0.97 1.07 1.07

Total asset turnover (times) 0.31 0.29 0.27 0.26 0.24

Profitability

Return on total assets (%) 6 11 11 11 11 Return on equity (%) 12 21 20 21 22 Pretax income to paid-in capital (%) 15 29 36 45 43 Net profit rate (%) 18 36 37 40 43 Earnings per share (NT$) (Note 2) 1.73 3.44 3.82 4.49 4.86

Cash Flow

Cash flow ratio (%) 8 3 -34 24 -9

Cash flow adequacy ratio (%) 13 12 -14 4 -2

Cash flow reinvestment ratio (%) (Note 3) - - - - -

Leverage 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.) 1. The current net cash inflow from operating activities in 2016 reduced by around NTD 400 million from 2015

mainly because the international prices of oils and fats were rising in the first half of 2016 while they were falling in 2015. As a result, the inventory of 2016 increased by around NTD 60 million from 2015. For the pension fund, it is required by domestic laws and regulations that around NTD 200 million have to be paid. As such, what are affected include the cash flow ratio, the cash flow adequacy ratio, and the cash reinvestment ratio.


3. The Company expanded its facilities and invested in equipment. The value increased by around NTD 100 million in 2016 from 2015. As such, what are affected include the cash flow adequacy ratio and the cash reinvestment 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


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 2016, business profits were all smaller than the costs of interest. As such, the financial

leverage data are not provided.

147

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 (2) Net cash flow adequacy ratio = net cash flow from business activities of the past five years/past five 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)

148

3. Financial Analysis - Consolidated Financial Statement by the National Financial Accounting Standards

Year Analyze



Liabilities to assets ratio

64

-

-

-

-


129 - - - -

Liquidity

Current Ratio (%) 145 - - - -

Quick Ratio (%) 99 - - - -

Interest protection multiples 8 - - - -


Average collection turnover(times) 6.70 - - - - Average collection days 54 - - - - Inventory turnover (times) 5.83 - - - - Average payables turnover (times) 15.66 - - - - Average inventory turnover days 63 - - - - Fixed asset turnover (times) 1.89 - - - - Total asset turnover (times) 1.04 - - - -

Profitability

Return on total assets (%) 5 - - - - Return on shareholders’ equity (%) 12 - - - - Ratio in paid-in capital (%)

Business profits 28 - - - - Pre-tax profits 25 - - - -

Net profit rate (%) 4 - - - - Earnings per share (NT$) (Note 2) 1.8 - - - -

Cash Flow

Cash flow ratio (%) 40 - - - -

Cash flow adequacy ratio (%) 62 - - - -

Cash flow reinvestment ratio (%) 9 - - - -

Leverage Operating leverage 6 - - - -

Financial leverage 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: The 2012 financial materials were inspected and certified by a CPA. 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.

149

4. Financial Analysis - Entity Financial Statement by the National Financial Accounting Standards

Year Analyze



Liabilities to assets ratio 49 - - - -

Permanent capital to fixed assets ratio 282 - - - -

Liquidity

Current Ratio (%) 139 - - - -

Quick Ratio (%) 86 - - - -

Interest protection multiples 10 - - - -


Receivables turnover(times) 4.72 - - - - Average collection days 77 - - - - Inventory turnover (times) 4.54 - - - - Payables turnover (times) 5 - - - - Average inventory turnover days 80 - - - - Fixed asset turnover (times) 1.00 - - - - Total asset turnover (times) 0.31 - - - -

Profitability

Return on total assets (%) 6 - - - - Return on shareholders’ equity (%) 11 - - - - Ratio in paid-in capital (%)

Business profits (2) - - - - Pre-tax profits 16 - - - -

Net profit rate (%) 19 - - - - Earnings per share (NT$) (Note 2) 1.80 - - - -

Cash Flow

Cash flow ratio (%) 22 - - - -

Cash flow adequacy ratio (%) 43 - - - -

Cash flow reinvestment ratio (%) Note 4 - - - -

Leverage Operating leverage (19) - - - -

Financial leverage (Note 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: The 2012 financial materials were inspected and certified by a CPA. Note 2: The earnings per share are calculated with the number of shares of common stock already issued applying the


Note 3: In 2012, all business incomes were smaller than the interest costs. Therefore, financial leverage data are not displayed.

Note 4: Because the ratio is a negative value, it is of no significance in comparison and is not listed.

150

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 five years

(capital expenditure + increased inventory + cash dividends) (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)

151

(III) Supervisor Report on Reviewing the Latest Annual Financial Report


Supervisor's Review Report

The Board of Directors prepared and submitted the Company's 2016 Business Report, Entity and

Consolidated Financial Statements and earnings distribution proposal. The Entity and Consolidated

Financial Statements, in particular, were already inspected by CPA Po-Shu Huang and CPA An-Tian

Yu 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 2017 Shareholders’ Meeting

Supervisor: Ting-Chen Wu


Yi-Wen Chen, Representative of Employee Welfare Committee

March 17, 2017

152

(IV) Latest Financial Report

Please refer to page 175-249 of this annual report.

(V) Entity Financial Statement of the Latest Year Inspected and Authenticated by CPAs

Please refer to page 250-314 of this annual report.

153

(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.

154

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. 2016 2015 Difference

Value % Current assets 7,476,410 9,391,406 (1,914,996) (19) Long-term investments 40,414 40,715 (301) (1) Real estate, manufacturing facilities and equipment 10,388,063 8,152,440 2,235,623 27 Other Assets 672,281 814,774 (142,493) (17) Gross assets 18,577,168 18,399,335 177,833 1 Current liabilities 5,192,049 6,871,475 (1,679,426) (24) Long-term liabilities 6,532,507 4,488,105 2,044,402 46 Others liabilities 1,229,902 1,395,678 (165,776) (12) Gross liabilities 12,954,458 12,755,258 199,200 2 Capital stock 2,941,330 2,941,330 0 0 Capital reserve 640,075 520,786 119,289 23 Retained earnings 2,910,034 2,508,036 401,998 16 Others (868,729) (326,075) (542,654) 166 Total shareholders’ equity 5,622,710 5,644,077 (21,367) (0) 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 Real estate, factories, and equipment: The main increase comes from the investment in workshops and equipment of production facilities on both sides of the Strait. Impacts and response plans in the future: None Current liabilities, Long term liabilities: Secured corporate bonds in the value of NTD 4 billion were issued for the first

time on November 29, 2016. All were used to pay back the short-term loan and hence the short-term and long-term debt ratios were affected.

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 Retained earnings: because of the increased earnings of the Group Impacts and response plans in the future: None Others: It is mainly because of the NTD 438,291 thousand of difference from conversion for the subsidary as a result of RMB depreciation in 2016 applying the equity method. Impacts and response plans in the future: None

155

(II) Financial Performance

Financial Performance Comparison and Analysis Table Unit: NT$1,000

Year No. 2016 2015 Increased/reduced value Variation

Ratio % Net revenue 16,299,714 15,479,543 820,171 5 Operating cost 10,160,025 9,871,293 288,732 3 Gross operating profit 6,139,689 5,608,250 531,439 9 Business expenditure 4,116,325 3,652,831 463,494 13 Business profits 2,023,364 1,955,419 67,945 3 Non-business income and expenditure (205,488) (214,378) 8,890 (4) Pre-tax profits of continuing department 1,817,876 1,741,041 76,835 4 Personal Income Tax 647,567 577,080 70,487 12 After-tax profits of continuing department 1,170,309 1,163,961 6,348 1 1. Descriptions of the increase or decrease in the ratio: (changes by 20% or more and NTD 10 million or more)

The Company continued to grow steadily. 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.

156

(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

5,330,938 1,597,994 3,767,247 3,161,685 - -

(1) Liquidity analysis of the past two years

Year No.

2016 2015 Ratio of

increase/decrease (%)

Cash flow ratio 31 39 (21) Cash flow adequacy ratio 73 106 (31) Cash flow reinvestment ratio 4 11 (64) Description: 1. The current net cash inflow from operating activities in 2016 reduced by around NTD 1.1 billion from 2015 mainly

because the international prices of oils and fats were rising in the first half of 2016 while they were falling in 2015. As a result, the inventory of 2016 increased by around NTD 600 million from 2015. For the pension fund, it is required by domestic laws and regulations that around NTD 300 million have to be paid. As such, what are affected include the cash flow ratio, the cash flow adequacy ratio, and the cash reinvestment ratio.


3. The Company expanded its facilities and invested in equipment in both Taiwan and Mainland China. The value increased by around NTD 1.8 billion in 2016 from 2015. As such, what are affected include the cash flow adequacy ratio and the cash 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 management plan

3,161,685 2,900,600 (1,254,285) 4,808,000 - -

(1) Business activities: Business income for the year will increase to keep the net cash flow associated with business activities relatively positive and increasing.

(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.

157

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

1. Major capital expenditure and funding source Unit: NTD thousand

Project Actual or expected funding source

Actual or expected date of completion

Required funds Total

Year

2014 2015 2016 2017 2018 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


June 2016 56,000 36,255 19,745

Tianjin Jihao - Cooling equipment and packaging machine

Self-capital May 2017 93,679 47,467 46,212

NCGZ new facility, warehouse, and mechanical and engineering accessories

Self-capital September 2017 415,567 124,758 202,927 76,882 11,000

Tianjin Qiaohao - Ice cream production line Self-capital January 2017 23,139 12,397 10,742 Shanghai Namchow - keep-warm plates and cooling engineering


June 2018 64,244 0 60,944 2,475 825

Shanghai Namchow-Production line for frozen noodles


December 2017 105,276 0 102,849 2,428

Shanghai Namchow - Earthwork


December 2017 475,782 222,836 241,327 11,619

Shanghai Namchow-Steel structure


December 2017 98,974 24,426 64,638 9,910

Shanghai Namchow - Mechanical and electrical


December 2017 84,817 31,019 50,175 3,623

Shanghai Namchow - oil and fat equipment


December 2017 167,340 34,864 128,128 4,348

Shanghai Namchow - Construction of workshops


December 2016 150,283 150,283

Shanghai Namchow-Purchase of noodles freezing equipment


August 2017 79,532 42,615 36,917

Nankyo Japan-Removal and re-construction


December 2017 164,340 818 163,522

Namchow Japan - Construction of New Building


December 2017 429,404 107,351 322,054

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.

158

(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. 1,027,405 100 304,789 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 4,350 Trading of foods and others The production and distribution policy is bringing about profits.


Nacia International Corporation 343,443 100 1,113,580 Reinvestment holding



Chow Ho Enterprise Co., Ltd. 25,000 100 (4,689) 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 (29,756) Production and sale of ice cream and investment in dining business

Fluctuating prices of raw materials to drive the cost up


Investment in warehouses

Qizhi Business Administration Cultural Co., Ltd. 763 90 10 Publishing and issuance of books

Reduced publications and release volume inside the Company


Namchow (BVI) Ltd. 69,133 58 (85,304) Reinvestment holding Supplementary listing of income tax from the previous year


Dian Shui Lou Restaurant Business Co., Ltd. 104,000 100 12,412 Wholesale of liquors and cigars, retail of

liquors and cigars, and dining business



Namchow Food and Dining Consultation Co., Ltd. 5,000 100 (1,292) Restaurants and food consulting Cost increase

Additional revenue from expanded services


Ting Hao (Cayman Islands) 2,010,124 100 1,105,419 Reinvestment holding The production and None No substantial

159

Description

No.


at end of term (%)




plan


future

Holdings Corporation distribution policy is bringing about profits.

investment plans yet

Nacia International Corporation 476,680 100 (2,105) Reinvestment holding Cost increase None


Tianjin Namchow Food Co., Ltd. 756,875 100 400,828 Production and sale of household oils,

artificial butter, and deep fry oil



Shanghai Qiaohao Co.,Ltd. 6,055 100 17,562 Importation and exportation The production and distribution policy is bringing about profits.


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 382,111 100 (4,620)

Packaged foods, sales of restaurant equipment, goods, and technical imports and exports

Gradual completion of construction for initial operation


Investment in frozen noodles production lines

Tianjin Yoshiyoshi Food Co., Ltd. 121,100 100 109,234 Development, manufacturing, and sale of

dairy products and related services



BaolaiNa Co., Ltd. 112,018 58 47,052 Chinese and western foods and beverages and self-made beer music restaurant



Guangzhou Namchow Co., Ltd. 544,950 100 623,684 Manufacturing and sale of edible oils and

fats


None New facilities and warehouse investment

Shanghai Qizhi Co., Ltd. 4,541 100 - Commerce, business administration, and investment consulting Yet to begin operations None


Shanghai QiaoXing Co.,Ltd. 792,971 100 1,318,462 Wholesale of edible oils and fats and foods and importation/exportation



Shanghai Namchow Food Co.,Ltd. 676,597 100 (44,056) Sale, development, production, and

processing of edible oil and fat products, Duration of construction None Investment in

facility

160

Description

No.


at end of term (%)




plan


future

fast-frozen foods, and frozen foods equipment

Namchow Japan 308,530 100 (16,303) Restaurant, beverages, and alcohol business Yet to begin operations None Construction of new building

Namchow Consultation 5,000 100 (1,099) Restaurant and food and management consulting Cost increase



Tianjin Qiaohao 55,092 100 (90) Manufacturing and sale of packaged foods Yet to begin operations None

Investment in ice cream production lines

Chongqing Qiaoxing 94,200 100 6,095 Corporate management and investment consulting and delivery and shipping center



161

(VI) Analysis of Risks in Recent Years as of the Date Annual Report was Printed

1. Impacts of changes in the interest rate and exchange rate and inflation 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 and countermeasures in the future:

Over the past few years and as of the date the Annual Report was printed, the Company did not have any high-risk and high-leverage investments. The Company lent funds to others over the past few years and as of the date the Annual Report was printed but the funds lending occurred between the Company and its subsidiaries, not external companies. The fund lending with subsidiaries as mentioned in the foregoing was meant to serve as the operating fund of the said subsidiaries. The Company was engaged in endorsement and guarantee over the past few years and as of the date the Annual Report was printed but it was between the Company and subsidiaries 100% held by the Company or those 100% held directly or indirectly by the Company, not external companies. The endorsement and guarantee mentioned in the foregoing was meant to support the limits of financing applied for by the said subsidiaries.

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 2016 totaled NTD 273,061 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 2016, 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 298,000 thousand for 2017.

4. Impacts of important domestic and international policies and regulatory changes on the Company's financial performance: None

5. The effects that technological changes and industry changes have on the financial operations of the company as well as the response measures: None.

6. Impacts of changes in the corporate image on the management of corporate risks and

162

countermeasures: None. 7. Expected benefits and possible risks of merger and acquisition as well as the response

measures: 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 2016, 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 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

163

VIII. Special Notes

(I) Information 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 2016 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

Nacia International Corporation

Namchow Chemical

Industrial Co., Ltd.

Chowho Co., Ltd.

Namchow Consultation Co., Ltd.

Nankyo Japan Co., Ltd.


Qizhi Cultural Co., Ltd.

Shanghai Qiaohao Trading Co.,Ltd.

Tianjin Qiaohao Food 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.

Shanghai Qiaohao Trading Co.,Ltd.

Shanghai Qiaohao Food Co.,Ltd.

Chongqing Xiaoxing Co., Ltd.

164

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. 1986.08.26 7F, No. 64, Huaning Street, Taipei City 956,684 Manufacturing and sale of ice products

Namchow (Thailand) Ltd. 1989.03.01 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. 1988.09.21 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. 1999.11.20 2F, No. 64, Huaning Street, Taipei City 25,000 Management of chained noodles stores

Qizhi Business Administration Cultural Co., Ltd. 1987.11.05 2F, No. 64, Huaning Street, Taipei City 1,000 Publishing

Nacia International Corporation 1996.05.24

Trinity Chambers, P.O.Box 4301. Road Town Tortola, British Virgin Islands 378,438 Investment holding

Shanghai Qiaohao Trading Co.,Ltd. 2001.03.26 Room 337 of Xinxing Building at No. 2005, Yanggao North Road,

Waigao Bridge, Shanghai 6,055 Trade

Nacia International Corporation 2002.09.05

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 1996.06.07 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. 1992.09.16 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. 2003.01.27 No. 52, Bohai Road, Economic and Technological Development Zone,

Tianjin 121,100 Production and sale of fresh cream

Namchow (BVI) Ltd. 1992.10.16 Trinity Chambers, P.O.Box 4301. Road Town Tortola, British Virgin Islands 156,219 Investment holding

Shanghai BaolaiNa Co., Ltd. 1996.03.29 Room 310, No. 58, Huaihaizhong Road, Shanghai 112,018 Restaurant management Dian Shui Lou Restaurant Business Co., Ltd. 2004.12.31 4F, No. 338, Chongqing North Road Sec. 3, Taipei 104,000 Restaurant management

Guangzhou Namchow Food Co.,Ltd. 2005.09.16 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. 2007.12.17 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. 2010.08.02 Unit 1803, No. 889, Yishan Road, Xuhui District, Shanghai 60,550 Sales company that undertakes

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products within the Group for sale. Shanghai Qiaohao Business Administration Co.,Ltd 2010.06.28 Unit F, 6F, 4th Building, No. 889, Yishan Road, Shanghai 961 Exhibition and business information

consulting Shanghai Qiaohao Food Co.,Ltd 2010.09.02 No. 780, Jiugong Road, Jinshan Industrial Park, Shanghai 382,111 Manufacturing, distribution, and

sale of packaged foods Namchow Food and Dining Consultation Co., Ltd. 2011.11.11 7F, No. 276, Chongqing North Road Sec. 3, Taipei 5,000 Restaurant business and

management consulting

Shanghai Namchow Food Co.,Ltd. 2012.08.21

No. 399, Guangye Road, Jinshan Industrial Park, Shanghai 676,597

Production and processing of edible oils and fats, frozen foods, among others

Namchow Japan 2014.05.02 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 2014.08.14 7F, No. 276, Chongqing North Road Sec. 3, Taipei 5,000 Restaurant and food and management consulting

Tianjin Qiaohao Food Co.,Ltd. 2016.11.28 No. 52, Bohai Road, Technological Development Zone, Tianjin 55,092 Manufacturing, distribution, and sale of packaged foods

Chongqing Qiaoxing 2016.10.13 No. 319, Haier Road, Jiangbei District, Chongqing

94,200 Distribution and sale of foods and corporate business investment 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.

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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


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.

167

Tianjin Yoshiyoshi Food Co., Ltd. Production and sale of fresh cream Yes Fresh cream products are sold by Tianjin Namchow Co.,Ltd.

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. Holding and distribution company Yes

Sale of oil and fat products from Tianjin Namchow, Guangzhou Namchow, and Tianjin Yoshiyoshi Food Co., Ltd.


Exhibition and business information consulting Yes Design and planning for companies within the Group to attend exhibitions

Shanghai Qiaohao Food Co.,Ltd

Manufacturing and sale of packaged foods Yes Manufacturing and sale of products of the Group


Restaurant business and management consulting None

Shanghai Namchow Food Co.,Ltd. Production of processed frozen foods Yes Manufacturing and sale of products of the Group

Namchow Japan Restaurant, beverages, and alcohol business None

Namchow Consultation

Restaurant and food and management consulting None

Tianjin Qiaohao Food Co.,Ltd.

Manufacturing, distribution, and sale of packaged foods

Yes Sale of products of the Group

Chongqing Qiaoxing

Distribution and sale of foods and corporate consulting Yes Storage, transportation, and sale of products of the Group

168

5. Profile of directors, supervisors, and general managers of individual associated enterprises

Name of Business Title Name or Representative Number of shares held Shareholding

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 Mei-Hui Liao Supervisor Rong-Zhang Lian Chow Ho Enterprise Co., Ltd. Chairman Fei-Lung Chen, Representative of Namchow Chemical

Industrial CO., LTD. 2,500,000 100.00%


Director Ming-Feng Chou, Representative of Namchow Chemical Industrial CO., LTD.

Supervisor Yi-Wen Chen Qizhi Business Administration Cultural Co., Ltd.

Chairman Fei-Lung Chen, Representative of Namchow Chemical Industrial CO., LTD. 80,000 80.00%


Director Cheng-Wen 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. Chairman 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 Cheng-Wen Chen, Representative of Lucky Royal Co., Ltd.

Director Yi-Wen Chen, Representative of Lucky Royal Co., Ltd.

Director Wan-Ching Chou, Representative of Lucky Royal Co., Ltd.

Nacia International Corporation Chairman Fei-Lung Chen, Representative of Namchow Chemical

Industrial CO., LTD. 1,250 100.00%


Director Yi-Wen Chen, Representative of Namchow Chemical Industrial CO., LTD.

Director Cheng-Wen Chen, 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. 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 Yi-Wen Chen, Representative of Nancia CO., LTD. Director Kan-Wen Li, 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 Shanghai QiaoXing

Co.,Ltd. 100.00%

Director Kan-Wen Li, Representative of Shanghai QiaoXing

169


ratio Co.,Ltd.

Director Cheng-Wen Chen, Representative of Shanghai QiaoXing Co.,Ltd.

Director Zhou-Jing Chen, Representative of Shanghai QiaoXing Co.,Ltd.

Supervisor Shi-Wei Wang, Representative of Shanghai QiaoXing Co.,Ltd.

Tianjin Yoshiyoshi Food Co., Ltd. Chairman Yi-Wen Chen, Representative of Tianjin Namchow Oils

and Fats Company 100.00%

Director Kan-Wen Li, Representative of Tianjin Namchow Oils and Fats Company

Director Cheng-Wen Chen, 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 Cheng-Wen Chen, Representative of Namchow (BVI) Ltd. 100.00%

Vice Chairman Li-Ming Chen, Representative of Namchow (BVI) Ltd.

Vice Chairman Jian-Fan Yu

Director Yi-Wen Chen, Representative of Namchow (BVI) Ltd.

Director Wan-Ching Chou, Representative of Namchow (BVI) Ltd.

Supervisor Mei-Hui Liao, 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 Cheng-Wen Chen, Representative of Namchow Chemical Industrial CO., LTD.

Director Shu-Wen Tai, Representative of Namchow Chemical Industrial CO., LTD.

Director Ming-Feng Chou, Representative of Namchow Chemical Industrial CO., LTD.

Director Yi-Jian Wei, Representative of Namchow Chemical Industrial CO., LTD.

Yongju (Thailand) Ltd. Director Fei-Lung Chen, Representative of Namchow Chemical Industrial CO., LTD. 100,000 100.00%


Director Yi-Jian Wei, Representative of Namchow Chemical Industrial CO., LTD.

Shanghai Qiaohao Trading Co.,Ltd. Chairman Cheng-Wen Chen, Representative of Nancia International

Corporation 100.00%

Director Yi-Wen Chen, Representative of Nancia International Corporation

Director Wan-Ching Chou, Representative of Nancia International Corporation

Supervisor Mei-Hui Liao, Representative of Nancia International Corporation

Dian Shui Lou Director Fei-Lung Chen, Representative of Lucky Royal Co., Ltd. 10,400,000 100.00%

170


ratio Restaurant Business Co., Ltd. Director Fei-Peng Chen, Representative of Lucky Royal Co., Ltd. Chairman Yi-Wen Chen, Representative of Lucky Royal Co., Ltd. Supervisor Mei-Hui Liao, Representative of Lucky Royal Co., Ltd. Guangzhou Namchow Food Co., Ltd. Chairman Yi-Wen Chen, Representative of Shanghai QiaoXing

Co.,Ltd. 100.00%

Director Kan-Wen Li, Representative of Shanghai QiaoXing Co.,Ltd.




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., Chairman Cheng-Wen Chen, Representative of Ting Hao (Cayman

Islands) Holdings Corporation 100.00%

Director Yi-Wen Chen, Representative of Ting Hao (Cayman Islands) Holdings Corporation

Director Kan-Wen Li, Representative of Ting Hao (Cayman Islands) Holdings Corporation

Director Shu-Wen Tai, Representative of Ting Hao (Cayman Islands) Holdings Corporation

Supervisor Shi-Wei Wang, Representative of Ting Hao (Cayman Islands) Holdings Corporation


Executive Director

Cheng-Wen Chen, Representative of Shanghai Qiaohao Trading Co.,Ltd. 100.00%

Supervisor Yi-Wen Chen, Representative of Shanghai Qiaohao Trading Co.,Ltd.

Shanghai Qiaohao Food Co.,Ltd. Chairman Yi-Wen Chen, Representative of Shanghai Qiaohao

Trading Co.,Ltd. 100.00%

Director Cheng-Wen Chen, Representative of Shanghai Qiaohao Trading Co.,Ltd.

Director Zhou-Jing Chen, Representative of Shanghai Qiaohao Trading Co.,Ltd.



Chairman Zhi-Mei Wang, Representative of Lucky Royal Co., Ltd. 500,000 100.00%

Vice Chairman Yi-Wen Chen, Representative of Lucky Royal Co., Ltd.

Director Zhou-Jing Chen, Representative of Lucky Royal Co., Ltd.

Supervisor Mei-Hui Liao, Representative of Lucky Royal Co., Ltd. Shanghai Namchow Food Co.,Ltd. Chairman Yi-Wen Chen, Representative of Shanghai QiaoXing

Co.,Ltd. 100.00%



Supervisor Shi-Wei Wang, Representative of Shanghai QiaoXing

171


ratio Co.,Ltd.

Namchow Japan Chairman Yi-Wen Chen, Representative of Namchow Chemical Industrial CO., LTD. 100.00%

Supervisor Mei-Hui Liao, 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.

Tianjin Qiaohao Food Co.,Ltd. Chairman Yi-Wen Chen, Representative of Shanghai Qiaohao

Trading Co.,Ltd. 55,092 100.00%

Director Cheng-Wen Chen, Representative of Shanghai Qiaohao Trading Co.,Ltd.

Director Zhou-Jing Chen, Representative of Shanghai Qiaohao Trading Co.,Ltd.


Chongqing Qiaoxing Executive Director

Cheng-Wen Chen, Representative of Shanghai QiaoXing Co.,Ltd. 94,200 100.00%

Supervisor Yi-Wen Chen, Representative of Shanghai QiaoXing Co.,Ltd.

172

(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 4,312,673 774,146 3,538,527 1,320,015 (9,607) (29,756) (0.31) Namchow Thailand 0004 891,865 1,730,710 328,555 1,402,155 2,031,217 351,581 304,789 32.97 Yongju (Thailand) 0005 9,647 60,447 38,568 21,879 102,974 6,237 4,350 43.50 Nancia 0006 378,438 7,377,112 1,638,983 5,738,129 0 (10,879) 1,113,580 890,864.00 Namchow BVI 0007 156,219 463,046 347,871 115,175 0 (21,282) (85,304) (16.53) Shanghai BaolaiNa 0008 112,018 438,496 127,945 310,551 868,253 109,737 81,209 - Chowho 0009 25,000 24,415 6,438 17,976 24,171 (4,730) (4,689) (1.88) Qizhi 0011 1,000 136 1 135 70 11 10 0.10 Shanghai Chowho 0015 6,055 490,301 446,637 43,664 703,449 27,921 20,757 - Ting Hao (Cayman Islands) 0017 560,087 6,515,703 1,530,502 4,985,200 0 (73,881) 1,105,419 59.75 Namchow International Corporation (originally MIC) 0018 386,612 1,632,079 141 1,631,939 0 (325) (2,105) (0.16)

Tianjin Namchow 0019 756,875 2,646,167 611,648 2,034,520 2,728,126 393,383 400,828 - Tianjin Yoshiyoshi 0020 121,100 463,329 68,857 394,472 790,889 146,832 109,234 - Dian Shui Lou 0021 104,000 267,794 130,197 137,597 495,188 12,859 12,412 1.19 Guangzhou Namchow 0023 544,950 4,252,128 1,586,464 2,665,664 3,153,888 742,109 623,684 - Shanghai Qizhi 0024 4,541 4,776 0 4,776 0 0 0 - Shanghai QiaoXing Co.,Ltd., 0025 792,971 9,653,193 3,987,115 5,666,078 9,090,625 1,597,984 1,241,842 - Qiaohao Business Administration Co.,Ltd 0026 961 923 0 923 0 0 0 -

Qiaohao Food Co.,Ltd. 0027 382,111 538,736 173,781 364,955 0 (6,504) (4,620) - Namchow Food and Dining Consultation 0028 5,000 593 375 219 0 (1,294) (1,292) (2.58)

Shanghai Namchow 0029 676,597 2,210,406 1,582,914 627,491 0 (78,704) (44,056) - Nankyo Japan Co., Ltd. 0030 58,800 890,710 642,066 248,644 0 (6,510) (16,303) - Namchow Consultation 0031 5,000 4,570 729 3,841 0 (1,104) (1,099) (2.20) Chongqing Qiaoxing 0032 94,200 57,154 35,895 21,259 144,640 7,964 6,095 - Tianjin Qiaohao Food Co.,Ltd. 0033 55,092 105,318 50,000 55,318 0 (89) (90) -

(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.

173

(II) Organization of Latest Private Placement Securities as of the Date of Printing of Annual Report: None

(III) Holding or disposal of the Company's shares by its subsidiaries of the latest year and up to the date of printing of the Annual Report:

Unit: NTD 1,000; Share; %

Subsidiaries Title

Paid-in capital

Funding

source

The Company Shareholding ratio

Date of acquisition or disposal

Number of shares acquired and value

Number of shares disposed

of and value

Investment Gains and

losses

Number of shares held as of the date the Annual Report was printed and

value

Pledge created

Value of endorsement and guarantee

of the Company to its subsidiary

Value lent by the

Company to its

subsidiary

Lucky Royal Co.,

Ltd. 956,684

Self Fundi

ng 99.65%

By January 01, 2016

46,041,259 shares acquired

Value when acquired 530,113 thousand

46,041,259 shares Value 530,113

thousand None None None

2016 None None None

This year up to the date the

Annual Report was printed

None None None

(IV) Other matters requiring supplementary information: None

※ Latest Matters with Important Impacts on Shareholder Rights or Security Prices Indicated in Article 36 Paragraph 3 Subparagraph 2 of the Securities Exchange Act as of the Date of Printing of Annual Report: None

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Documents

Namchow Chemical Industrial Co., Ltd. 2016 Annual Report · Namchow Chemical Industrial Co., Ltd. 201. 6. ... and is not an official document of the shareholders ... The consultant