Contents. Annual Report Spokesperson Name: Ming-Fan Xie Title: President Tel:

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2 Annual Report 2016 Spokesperson Name: Ming-Fan Xie Title: President Tel: Deputy Spokesperson Name: Chun-Liang Lin Title: Assistant Vice President of Finance Tel: Name: Da-Chang Tai Title: Manager of Accounting Tel: Stock Transfer Agent President Security Corp. Address: No.8, Dongxing Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.) Tel: Website: Auditors PriceWaterhouseCooper (PwC) Auditors: Chien-Chih Wu, Yi-Chang Lin Address: 22F., No.95, Minzu 2 nd Rd., Lingya Dist., Kaohsiung City 802, Taiwan (R.O.C.) Tel.: Website: Overseas Securities Exchange None Corporate Website prince.com.tw Headquarters, Branches and Plant Head Office Address: 21F., No.11, Songgao Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.) Tel: Taichung Branch Address: 14F., No.416, Sec. 2, Chongde 2nd Rd., Beitun Dist., Taichung City 406, Taiwan (R.O.C.) Tel: Tainan Branch Address: 8F., No.398, Sec. 1, Zhonghua E. Rd., East Dist., Tainan City 701, Taiwan (R.O.C.) Tel: Kaohsiung Branch Address: 11F., No.74, Zhongzheng 2nd Rd., Lingya Dist., Kaohsiung City 802, Taiwan (R.O.C.) Tel: Contents I Letter to Shareholders... 4 II 2.1 Date of Incorporation Company History... 7 III Corporate Governance Report 3.1 Organization Directors, Supervisors and Managers Information Implementation of Corporate Governance Information Regarding the Company s Audit Fee and Independence CPA Replacement Information If the Chairman, President, and Financial or Accounting Manager of the Company who had Worked for the Independent Auditor or the Related Party in the Most Recent Year, the Name, Title, and Term with the Independent Auditor or the Related Party must be Disclosed Equity Transferred and Equity Pledged (or Changes Thereto) by Directors, Supervisors, Department Heads and Shareholders of 10% Shareholding or More during the Preceding Fiscal Year or in the Current Fiscal Year up to the Date of Printing of the Annual Report The Relationship of the Top Ten Shareholders as Defined in the Finance Standard Article Investments of Directors, Supervisors, Managers and Directly or Indirectly Controlled Business on the Reinvested Business and the Total Shareholdings Ratio IV Capital Overview 4.1 Capital and Shares Issuance of Corporate Bonds Issuance of Preferred Shares Global Depository Receipts Employee Stock Options Status of New Shares Issuance in Connection with Mergers and Acquisition Information on Implementation of the Company s Funds Utilization Plans V Operational Highlights 5.1 Business Activities Prince Housing & Development Corp. 1

3 I II 5.2 Market and Sales Overview Human Resources Disbursement of Environmental Protection Labor Relations Important Contracts Financial Information 6.1 Five-Year Financial Summary Consolidated Financial Statement Five-Year Financial Analysis Audit Committee Inspection Report Consolidated Financial Statements and Report of Independent Accountants December 31, 2016 and Parent Company Only Financial Statements and Report of Independent Accountants December 31, 2016 and Financial Difficulties Review of Financial Conditions, Operating Results, and Risk Management 7.1 Analysis of Financial Status Analysis of Operation Results Analysis of Cash Flow Major Capital Expenditure Items Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the Investment Plans for the Coming Year Analysis of Risk Management Other Major Matters Special Disclosure 8.1 Summary of Affiliated Companies Private Placement Securities in the Most Recent Years The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years Chapter I Annual Report 2016 Letter to Shareholders 2

4 Letter to Shareholders I I. Letter to Shareholders I. Report on the Business Performance in the Preceding Fiscal Year The year 2016 is considered the year of surprises due to the Brexit referendum, Mr. Trump winning the election to becoming the President of the United States, Italy's referendum against constitutional reform, etc. Each of these events is a shocking bomb to the financial markets. Domestically, the one fixed day off and one flexible rest day as well as the pension reform controversy continued, the implementation of the land transaction and ownership taxes, the limited salary growth, and the deteriorating cross-strait trade relations, have all impacted the consumption momentum and the economic climate is still rock bottom. In terms of real estate, 2016 statistics indicated that the number of housing sales transactions hit a record low. The housing market downturn is primarily caused by the tax reform. In addition, Taiwan is located at an earthquake zone and has frequent earthquakes. Tainan's earthquake during early 2016 has caused severe damages and elicited the people's yearning for safe living. Despite so, the Company still maintains the three commitment and one righteousness entrepreneurial spirit, and have always adhered to quality safety to build safer homes for consumers, continue to bid for projects, and strive to create smart and safe homes for the people. In addition, the various for-profit reinvestment businesses are stable and have continued to provide investment benefits. The construction projects completed in current year include: Taichung Cloud Century Region A and Kaohsiung Prince Cloud Region D. In the entire year, the Company gained operating revenues in the amount of NT$6.004 billion, net profit amounted to NT$1.609 billion, consolidated revenues amounted to NT$12.06 billion, and consolidated net profits amounted to NT$1.599 billion. III. Prospective Development Strategies of the Company The past performances and experiences are served as reference only, and we must look forward to the living trends of the future in order to provide better homes for the consumers. The smog problem has been severe recently, and the Company has conducted R&D on air quality detectors. We must use technologies to give us a clear grasp of the living qualities surrounding us and provide strict control for household safety, health, and comfort. We hope to incorporate culture, technology, and art to enhance the new Prince brand image. Chairman: President: Head Accountant: Cheng, Kao-Hui Hsieh, Ming-Fan Tai, Ta-Chang II. Operating Plans of the Year Summary: Looking ahead toward 2017, there are still surprises that we cannot ignore such as President Trump's new policies, the commencement of Brexit, and the French presidential election. Should the U.S. and European markets exhibit any changes, they are bound to impact Taiwan's role as the global value supply chain. Fortunately, the government is actively promoting the new southward policy and the 5+2 industry policies to deal with the rainy days ahead. In terms of real estate, although the real estate market is in a price falling and volume shrinking state; the real estate anti-inflation hedging effect will gradually emerge as the government lifts the housing market regulation, the youth peace of mind policy is on the road, the special housing loan for young people is extended by two years, and not to mention that the need to own a home will always be there. If the Government adopts the Self-use Light Tax policy, the decline will gradually stabilize. The construction sites anticipated by the Company to be completed by 2017 include: Taipei Prince Yuan- Ding, Yuan-Fu Phase-3, Taichung Prince Yu-Ding, and Kaohsiung Prince Cloud Region C town houses. In terms of reinvestment businesses, we will continue to improve the reinvestments in hotels, inns, and other ventures to create operational successes. 4 Prince Housing & Development Corp. 5

5 Company Profile II II. Company Profile Chapter II Annual Report 2016 Company Profile 2.1 Date of Incorporation: September 20, Company History Prince was founded on September 20 by Hsiu-Chi Wu, Yu-Li Hou, Zun-Xian Wu, Jyun-Jie Wu, Ching-Yuan Kao, Kao-Huei Cheng, Sheng-Ju Chuang, Xian-Fu Chuang, and Chang-Xing Wu in The changes in capital are as follows. Year Milestones 1973 Founded on September 20 with NT$37.5 million capital Increased Capital to NT$97.5 million 1976 Increased capital to NT$120 million Increased capital to NT$150 million Increased capital to NT$195 million Increased capital to NT$273 million Increased capital to NT$327.6 million Increased capital to NT$1,300 million Increased capital to NT$1,950 million 1991 Increased capital to NT$2,925 million 1992 Increased capital to NT$3, million 1993 Increased capital to NT$5, million 1994 Increased capital to NT$6, million 1995 Increased capital to NT$7, million 1996 Increased capital to NT$7, million 1997 Increased capital to NT$7, million 1998 Increased capital to NT$8, million 1999 Increased capital to NT$9, million 2002 Decreased capital to NT$9, million 2003 Decreased capital to NT$9, million 2005 Decreased capital to NT$9, million 2006 Decreased capital to NT$8, million 2007 Increased capital to NT$9,300.1 million 2008 Increased capital to NT$9, million 2010 Increased capital to NT$9, million 2011 Increased capital to NT$10, million 2012 Increased capital to NT$11, million 2013 Increased capital to NT$16, million 2014 Increased capital to NT$16, million 2015 Decreased capital to NT$16, million 6 Prince Housing & Development Corp. 7

6 Corporate Governance Report III III. Corporate Governance Report Chapter III 3.1 Organization Organization Chart Annual Report 2016 Corporate Governance Report 8 Prince Housing & Development Corp. 9

7 Corporate Governance Report III Function of Each Department Department Functions Department Functions Sales I (Taipei) Sales II (Taichung) Sales III (Tainan, Kaohsiung) Land Development Design Engineering Administration Finance 1. Operation: Prepare property sale or lease contracts, arrange contracting and sales matters. 2. Advertisement: Plan and design the advertising of houses. 3. Market research: Survey the real estate markets, collect, arrange, and analyze market data. 4. Service: Provide after-sales services. 1. Land purchase: Investigate and analyze land information and conditions, evaluate profit and loss of land development. 2. Land registration: Register buildings, transfer property rights, control process and schedule of land registration. 3. Land asset management: Create and maintain database of the company s land assets, compute land value tax and house tax, etc. 1. Architectural design: Survey and measure before engineering design, register and manage original engineering design and engineering literatures. 2. Interior design: Assist interior decoration, evaluate and conduct alteration of interior design. 1. Engineering management: Supervise construction quality and progress, evaluate external construction projects, acquire and develop construction projects, undergo construction acceptance, investigate engineering materials, and collect materials of construction and planning acts. 2. Technique Development: Research and develop in construction technique and technique cooperation, survey new techniques. 1. Administration: Responsible for the company stock affairs. 2. General Affairs: Responsible for all general affairs. 3. Human Resource: Responsible for all matters related to human resource management. 1. Investment management: Collect and analyze data of the subsidiaries, monitor operations of subsidiaries and ensure their operations are consistent with budget estimates. 2. Finance: Prepare cash budgets, plan for long-term funds, collect and distribute cash to support each branch and each subsidiary, pay salaries, and manage cash and instruments in hand. 3. Finance in Taipei: Manage cash and instruments, deal with housing and land loans, research in financial commodities, and meet the financial needs of subsidiaries. Accounting Information Technology Secretary Office Planning & Strategy Cost Control Audit Office 1. Accounting: Examine each kind of vouchers, keep bills and vouchers safely, keep track of account receivables, prepare lists of property, complete affairs pertaining to taxation, and analyze expenses of each department. 2. Cost: Collect and organize each voucher or cost source, prepare different kinds of documents to maintain individual/ summary inventory and cost accounts. 1. Overall information technology and information security. 2. Develop and maintain software programs. 3. Responsible for IT vendor management and the contracts, acquirements, and relationship with strategic IT vendors. 1. Legal: Manage the company s involvement in litigation, draft and review contracts and correspondence, participate in negotiation. 2. Public Relationship: Borden and deepen the company s network of relationship across the foreign investors, the security investment companies, and company associations, serve as the company s central contact for media and disseminate information regarding the company s activities to the public. 3. Secretary: Conduct assignments from the chairman, the supervisors and the board of directors, arrange schedules, and manage artist paintings. 1. Investment Planning: Identify effective investment strategies and conduct investment feasibility evaluation. 2. BOT projects: Operate dormitory BOT of National Taiwan University and National Cheng Kung University. 1. Follow the company policy to purchase and deliver raw materials. 2. Update costs of each project continuously from planning to settlement. 1. Perform auditing activities identified by the board of directors. 2. Evaluate the internal control system and identify the effectiveness and the efficiency of each operation cycle. 3. Report periodically the status of audit plan and provide related recommendations as well as continuous improvement. 4. Make certain that the company is in full compliance with the government laws and regulations. 10 Prince Housing & Development Corp. 11

8 Corporate Governance Report III 3.2 Directors, Supervisors and Managers Information Directors and Supervisors Title Chairman (Institutional Shareholder) Chairman (Representative) Vice Chairman (Institutional Shareholder) Vice Chairman (Representative) Director (Representative) Director (Institutional Shareholder) Director (Representative) Director Director (Institutional Shareholder) Director (Representative) Director (Representative) Director (Institutional Shareholder) Director (Representative) Director (Institutional Shareholder) Director (Representative) Nationality/ Country of Origin Tainan City R.O.C. Tainan City R.O.C. R.O.C. Tainan City R.O.C. R.O.C. Name Joyful Inv. Co., Ltd. Kao-Huei Cheng (Note 2) Uni-President Enterprises Corp. Chih-Hsien Lo (Note 2) Tsung-Ping Wu (Note 2) Kao Chyuan Inv. Corp. Hsiu-Ling Kao (Note 2) Chao-Mei Wu Tseng Gender Date Elected Term (Years) Date First Elected (Note 1) Shareholding when Elected Current Shareholding Shares % Shares % ,136, % 28,136, % M ,854, % 9,854, % (Note 1) 162,743, % 162,743, % M M (Note 1) 45,437, % 48,237, % F , % 425, % F ,023, % 39,023, % Tainan City Taipo Inv. Co., Ltd ,740, % 83,740, % R.O.C. R.O.C. Tainan City R.O.C. Taipei City R.O.C. Chien-Te Wu (Note 2) Ping-Chih Wu (Note 2) Young Yuan Inv. Co., Ltd. Chung-Ho Wu (Note 2) Hung Yao Inv. Co., Ltd. Shih-Hung Chuang (Note 2) M ,656, % 9,656, % M ,888, % 12,888, % ,969, % 14,969, % M ,209, % 5,209, % ,346, % 2,346, % M ,687, % 1,687, % Director R.O.C. Po-Yi Hou M ,701, % 13,701, % Director (Institutional Shareholder) Director (Representative) Director (Institutional Shareholder) Director (Representative) Tainan City R.O.C. Taipei City R.O.C. Yu Peng Inv. Co., Ltd. Po-Ming Hou (Note 2) Cheng Long Inv. Co., Ltd. Ying-Chih Chuang (Note 2) , % 669, % M ,923, % 22,923, % (Note 1) 25,882, % 25,882, % M , % 310, % Independent Director R.O.C. Chian Tai M Independent Director R.O.C. Ho-Yi Hung M Independent Director R.O.C. Sheng-Tsai Hsu M Spouse & Minor Shareholding Shareholding by Nominee Arrangement Experience (Education) Other Position Unit: Shares; Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship Shares % Shares % Title Name Relation ,924, % - - Director of Uni-President Enterprises Corp. (Note 2) , % - - MBA, UCLA, USA (Note 2) Director Hsiu-Ling Kao Spouse BA, Dept. of Accounting, National Chung Yuan Christian Univ. (Note 2) Marymount College USA (Note 2) Junior High School Director of Tainan Spinning Co., Ltd. Vice Chairman Director Chih-Hsien Lo Chien-Te Wu, Ping-Chih Wu, Shih-Hung Chuang , % - - MBA 3,875, % - - MS of Chemical Engineering and MS of Industrial Management, USC, USA Managing Director of Kuen Ching International Development Co. Ltd. Director of Kuen Ching International Development Co. Ltd. Director Director Chao-Mei Wu Tseng, Ping-Chih Wu, Shih-Hung Chuang Chao-Mei Wu Tseng, Ping-Chih Wu, Shih-Hung Chuang , % - - BS, Dept. of Chemistry, Fu Jen Catholic Univ. Chairman of San Shin Spinning Co., Ltd. - Spouse Son, Son, In-Law Mother, Brother, In-Law Mother, Brother, In-Law MBA, Boston Univ., USA BA, Dept. of Transportation & Communication Management, National Cheng Kung Univ. CEO of Times Square International Hotel Co., Ltd. Chairman of Universal Cement Co., Ltd. Director Chao-Mei Wu Tseng, Ping-Chih Wu, Chien-Te Wu In-Law Director Po-Ming Hou Brother Chinese Culture Univ. Chairman of Tainan Spinning Co., Ltd. Director Po-Yi Hou Brother ,624, % , % , % Hsing Wu Univ. of Science and Tech. PhD, Univ. of California, USA Finance Manager of Uni-President Enterprises Corp., Nan Ying Senior Commercial & Industrial Vocational School B.L., Dept. of Law, National Taiwan Univ., Secretary General of Southern Taiwan Science Park Bureau Director and President of Shin Bo Fiber Co., Ltd. President of Southern Taiwan Univ. of Science and Tech Secretary General of Southern Taiwan Univ. of Science and Tech Note 1: Uni-President Enterprises Corp. and Kao Chyuan Inv. Corp. stopped their director positions on Jun. 24, 2010 and reinstated on Jun. 18, Cheng Long Inv. Co., Ltd. stopped the director position on Jun. 18, 2013 and reinstated on Jun. 21, Note 2: Current position with PHD and other company. 12 Prince Housing & Development Corp. 13

9 Corporate Governance Report III Name Kao-Huei Cheng Chih-Hsien Lo Hsiu-Ling Kao Tsung-Ping Wu Current Position with PHD and Other Company Chairman of: ScinoPharm Taiwan, Ltd., Ming Da Enterprises Co., Ltd., Tainan Spinning Retail & Distribution Co., Ltd., Dong Feng Enterprises Co., Ltd., Chen Shi Investment Holding Co., Ltd., Times Square International Co., Ltd., Prince Industrial Co., Ltd., Southern Taiwan Univ. of Science and Technology, Prince Real Estate Co., Ltd. Director of: Uni-President Enterprises Corp., Uni-President Development Corp., President International Development Corp., Geng Ding Co., Ltd., Joyful Inv. Co., Ltd., Uni-President Assets Management Co., Ltd., President Fair Development Corp., President Securities Corp., Prince Property Management Consulting Co., Ltd., Yuan Sheng Industry Co., Ltd. Chairman of: Uni-President Enterprises Corp., President Chain Store Corp., Uni-President Natural Industrial Corp., Ton Yi Industrial Corp., TTET Union Corp., Kai Yu Investment Co., Ltd., President Packaging Corp., President International Development Corp., Uni-President Cold Chain Corp., Presco Netmarketing Inc., Uni-President Dream Parks Corp., Uni-OAO Travel Service Corp., Kai Nan Investment Co., Ltd., President Century Corp., Ton Yu Investment Inc., Un-President Real Estate Co., Ltd., Uni-President (Vietnam) Co.,Ltd.Uni-President (Thailand) Ltd.Uni-President (Philippines) Corp., Changjiagang President Nisshin Food Co., Ltd., Sanshuijianlibao Commerce Co., Ltd., Uni- President China Holdings Ltd. (Cayman), President Enterprises (China) Investment Co., Ltd., Tong Ren Corp., Beijing President Food Co., Ltd., Champ Green Capital Co., Ltd., Champ Green (Shanghai) Consulting Co. Ltd. Vice Chairman of: President Nisshin Corp., Prince Housing & Development Corp., Times Square International Hotel Co., Ltd. Director of: President Baseball Team Corp., Nanlien International Corp., President Entertainment Corp., Tone Sang Construction Corp., Retail Support International Corp., Presicarre Corp., President Fair Development Corp., Tainan Spinning Retail & Distribution Co., Ltd., ScinoPharm Taiwan Ltd., President Starbucks Coffee Corp., Uni-President Organics Corp., PK Venture Capital Corp., Uni-President Glass Industrial Co., Ltd., Kuang Chuan Dairy Co., Ltd., Kuang Chuan Foods Co., Ltd., Uni-President Development Corp., Tait Marketing & Distribution Co., Ltd., Weilih Food Corp., Ming Da Enterprises Co., Ltd., Geng Ding Co., Ltd., Chen Shi Investment Holding Co., Ltd., Prince Property Management Consulting Co., Ltd., Prince Industrial Co., Ltd., Prince Real Estate Co., Ltd., Uni-President Dream Parks Corp., Shanhai, Kao Chyuan Inv. Corp., President Chain Store (B) Holdings Ltd., President Chain Store (Labuan) Holdings Ltd., President Starbucks Coffee (Cayman) Holdings Ltd., Shanghai President Starbucks Coffee Co., Ltd., Cayman President Holdings Ltd., Kai Yu(B) Investment Co., Ltd., President Packaging Holdings Ltd., Uni- President Southeast Asia Holdings Ltd., PT ABC President Indonesia, President Energy Development (Cayman Islands) Ltd., Uni-President Asia Holdings Ltd., Uni-President International (HK) Co., Ltd., Yantai North Andre Juice Co., Ltd., Beijing President Enterprises Drinks & Food Co., Ltd., Wuhan President Enterprises Food Co., Ltd., Kunshan President Enterprises Food Co., Ltd., Kunming President Enterprises Corp., Chengdu President Enterprises Food Co., Ltd., Xinjiang President Enterprises Food Co., Ltd., President (Kunshan) Food Science & Technology Co., Ltd., Beijing President Enterprises Drinks & Food Co., Ltd., Uni-President Enterprises (Shanghai) Drink & Food Co., Ltd., Guangzhou President Enterprises Co., Ltd., Shenyang President Enterprises Co., Ltd., Harbin President Enterprises Co., Ltd., Hefei President Enterprises Co., Fuzhou President Enterprises Co., Ltd., Nanchang President Enterprises Co., Ltd., Zhengzhou President Enterprises Co., Ltd., Changsha President Enterprises Co., Ltd., Zhanjiang President Enterprise Co., Ltd., Nanning President Enterprise Co., Ltd., Taizhou President Enterprises Co., Ltd., Chongqing President Enterprise Co,. Ltd., Changchun President Enterprise Co., Ltd., Shijiezhuanng President Enterprise Co., Ltd., Hainan President Enterprise Co., Ltd., Jinan President Enterprise Co., Ltd., Baiyin President Enterprise Co., Ltd., Xuzhou President Enterprise Co., Ltd., Guiyang President Enterprises Co., Ltd., Akesu President Enterprise Co., Ltd., Hangzhou President Enterprise Co., Ltd., Henan President Enterprises Co., Ltd., Shanxi President Enterprises Corp., Shanghai President Enterprises Co., Ltd., Ningxia President Enterprises Co., Ltd., Inner Mongolia President Enterprises Co., Ltd., Shanxi President Enterprises Co., Ltd., Uni-President Enterprises (TianJin) Co., Ltd., Jangsu President Enterprises Co., Ltd., Hunan President Enterprises Co., Ltd., Uni-President Trading (Kunshan) Co., Ltd., Uni-President Trading (Hubei) Co., Ltd., President (Shanghai) Trading Co., Ltd., Jilin President Mineral Water Co., Ltd., Wuyuan President Enterprises Mineral Water Co., Ltd., Bama President Mineral Water Co., Ltd., Wuxue President Mineral Water Co., Ltd., Uni-President Enterprises (Hutubi) Tomato Products Technology Co., Ltd., Uni- President Shanghai Pearly Century Co., Ltd., Uni-President Enterprises (Shanghai) Management Consulting Co., Ltd., President Enterprises (Kunshan) Real Estate Development Co., Ltd. President of: Presco Netmarketing Inc. Kao Chyuan Inv. Corp., President Being Corp., President Fair Development Corp., Uni-President Department Store Chairman of: Corp., President Pharmaceutical Corp., President Drugstore Business Corp., Afternoon Tea Taiwan Corp. ScinoPharm Taiwan, Ltd., Ton Yi Industrial Corp., President International Development Corp., Uni-President Enterprises Corp., Uni-President Development Corp., President Chain Store Corp., President Securities Corp., Director of: President Securities Corp. Times Square International Hotel Co., Ltd., President Starbucks Coffee Corp., Tainan Spinning Retail & Distribution Co., Ltd. President of: Kao Chyuan Investment Corp. Chairman of Uni-President Assets Management Co., Ltd. President International Trade & Investment Corp.(Tongtai), President Chain Store Corp., Prince Housing & Development Corp., Prince Real Estate Co. Ltd., Times Square International Hotel Co., Ltd., Ton Ren Pharmaceutical Director of: Corp., ScinoPharm Taiwan, Ltd., Kuang Chuan Dairy Co., Ltd., Kuang Chuan Foods Co., Ltd., Ton Yu Investment Inc., Uni-President International (HK) Co., Ltd. President Baseball Team Corp., President Entertainment Corp., Tone Sang Construction Corp., President Kikkoman Supervisor of: Inc., Kai Yu Investment Co., Ltd., President International Development Corp., Un-President Real Estate Co., Ltd., Kai Nan Investment Co., Ltd., Tait Marketing & Distribution Co., Ltd., President Kikkoman Zhenji Foods Co., Ltd. Major shareholders of the institutional shareholders Name of Institutional Shareholders Joyful Investment Co., Ltd. Uni-President Enterprises Corp. Kao Chyuan Investment Co., Ltd. Taipo Investment Co., Ltd. Young Yuan Investment Co., Ltd. Major Shareholders of the Institutional Shareholders Chao-Yuan Cheng (50%), Miao-Yu Cheng Hung (24.5%), Li-Ling Cheng (6%), Hung-Yi Cheng (5%), Bi-Huei Cheng (3.5%), Kuo-Bi Cheng (3.5%), Huei-Yi Cheng (3.5%), Bi-Ying Cheng (3%), Kao-Huei Cheng (0.5%), Yu-Cheng Chen (0.5%) Kao Chyuan Inv. Co., Ltd. (4.79%), BNP Paribas Wealth Management Singapore Branch (3.20%), Saudi Arabian Monetary Agency (3.05%), Po-Ming Hou (2.60%), Po-Yu Hou (2.27%), Government of Singapore (2.24%), Hsiu-Ling Kao (1.64%), Hsiu-Ren Liu (1.55%), T. Rowe Price Emerging Markets Stock (1.43%), Vanguard Emerging Markets Stock Index Fund (1.32%) Hsiu-Ling Kao (61.60%), Chih-Hsien Lo (20.12%), Lai-Huan Kao (13.40%), Han-Di Kao (1.63%), Zi-Yi Kao (1.20%), Shi-Ai Lo (1.08%), Ching-Yuan Kao (0.97%) Chao-Mei Wu Tseng (8.48%), Ping-Chih Wu (20.84%), Ping-Yuan Wu (20.84%), Chien-Te Wu (18.95%), Wei-Te Wu (18.95%), Su-Mei Huang (8.88%), Cheng Ta Investment Co., Ltd. (1.41%), Ching-Mei Wu (0.31%), Ru-Yu Chiang Wu (0.31%), Jyuan Chiang Wu (0.31%) Chung-Ho Wu (27.05%), Chung-Chien Wu (24.5%), Wu Jyun Jie Charitable Foundation (24.65%), Bao-Huei Wu (8.5%), Man-Huei Wu (8.5%), Mei-Siang Chen (3.4%), Ai-Gui Huang (3.4%) Hung Yao Investment Co., Ltd. Shih-Hung Chuang (34%), Hsin-Yi Wu (33%), Yen-Yao Chuang (33%) Yu Peng Investment Co., Ltd. Po-Ming Hou (50.85%), Yi-Zhen Chang (49.15%) Cheng Long Investment Co., Ltd. Major Shareholders that are Institutional Shareholders Name of Institutional Shareholders Uni-President Enterprises Corp. Taipo Investment Co., Ltd Ying-Chih Chuang (1%), Ying-Nan Chuang (5%), Mei-Yu Chuang Chen (5%), Ching-Chih Chuang Lin (11.5%), Yun-Da Chuang (20%), Hsiu- Wen Wang (12.5%), Chih-Chin Chuang (12.5%), Ting-Ya Chuang (12.5%), Yu-Hsuan Chuang (10%), Ming Hsuan Chuang (10%) Name of Major Institutional Shareholders Kao Chyuan Investment Co., Ltd. Cheng Ta Investment Co., Ltd Major Shareholders of the Major Institutional Shareholders Hsiu-Ling Kao (61.60%), Chih-Hsien Lo (20.12%), Lai-Huan Kao (13.40%), Han-Di Kao (1.63%), Zi-Yi Kao (1.20%), Shi-Ai Lo (1.08%), Ching-Yuan Kao (0.97%) Wei-Te Wu (22.83%), Chien-Te Wu (22.83%), Ping-Chih Wu (22.83%), Ping-Yuan Wu (22.83%), Chao-Mei Wu Tseng(1.11%), Shu- Nu Wu (1.11%), Su-Mei Huang (1.01%), Chiung-Huei Hung (1.01%), Ching-Mei Wu (0.61%), Ru-Yu Chiang Wu (0.61%) Young Yuan Investment Co., Ltd. Wu Jyun Jie Charitable Foundation None Available 14 Prince Housing & Development Corp. 15

10 Corporate Governance Report III Independence and Professional Expertise of Board Members and Supervisors Independence and Professional Expertise of Board Members and Supervisors Management Team Title & Name Chairman Vice Chairman Director Director Criteria Joyful Inv. Co., Ltd. Representative: Kao-Huei Cheng Uni-President Enterprises Corp. Representative: Chih-Hsien Lo Kao Chyuan Inv. Corp. Representative: Hsiu-Ling Kao Uni-President Enterprises Corp. Representative: Tsung-Ping Wu Five or More Years of Experience or Professional Qualification Qualification of Lecturer or Justice, Procurator, Experience in above in Attorney, CPA, Business, Law, Business, Law, Specialist or Finance, Finance, Technician of Accounting, Accounting or National or Corporate Corporate Examination in Business Business Corporate Business Related Fields Related Fields Related Fields Independence Criteria (Note) Number of Independent Directorships Held in Other Public Companies Title Nationality Name Gender Date Effective Shareholding Spouse & Minor Shareholding Shareholding by Nominee Arrangement President R.O.C. Ming-Fan Xie M , % 241, % 0 0 Vice President of Secretary Vice President of Sales Unit: Shares; Unit: Shares; Experience (Education) Other Position Managers who are Spouses or Within Two Degrees of Kinship Shares % Shares % Shares % Title Name Relation R.O.C. Yi-Chun Su M , % R.O.C. Wen-Zhen Chiu M , % Vice President R.O.C. Mu-Tsun Hou M MS, Dept. of Civil Engineering, TamKang Univ. BA, Dept. of Accounting, National Chung Hsing Univ. BS, Dept. of Architecture, National Taiwan Univ. of Science & Tech. MBA, Boston Univ., USA Chairman of Cheng-Shi Construction Co., Ltd., Prince Security Co., Ltd. Director of Splendor Hotel, Splendor Assets Management Co., Ltd. Director of Prince Security Co., Ltd. President of Ta-Chen Construction &Engineering Corp Director Chao-Mei Wu Tseng - - P P P P - P P 0 Director Director Director Director Taipo Inv. Co., Ltd. Representative: Ping-Chih Wu Taipo Inv. Co., Ltd. Representative: Chien-Te Wu Young Yuan Inv. Co., Ltd. Representative: Chung-Ho Wu Hung Yao Inv. Co., Ltd. Representative: Shih-Hung Chuang Vice President of Taichung Branch Assistant Vice President of Planning & Strategy Assistant Vice President of Finance Assistant Vice President of Administration R.O.C. Xiao-Yu Chiang M , % R.O.C. Jian-Ying Wu M , % R.O.C. Chun-Liang Lin M , % R.O.C. Chun-Cheng Kuo M , % National Taiwan Univ. of Science & Tech. MBA, George Washington Univ., USA MBA, Univ. of South Australia BS, Dept. of Architecture, HuaFan Univ. Director of Prince Security Co., Ltd. Director of Prince Security Co., Ltd Supervisor of Prince Utility Co., Ltd. Director of Nantex Industry Co., Ltd Director Po-Yi Hou - - P P P - P - P P 0 Director Director Independent Director Independent Director Independent Director Yu Peng Inv. Co., Ltd. Representative: Po-Ming Hou Cheng Long Inv. Co., Ltd. Representative: Ying-Chih Chuang Chian Tai P - - P P P P P P P P P P 2 Ho-Yi Hung - - P P P P P P P P P P P 0 Sheng-Tsai Hsu - P P P P P P P P P P P P 0 Assistant Vice President of Sales Ш Manager of Accounting Manager of Planning & Strategy Manager of Land Development Manager of Design R.O.C. Ying-Jie Chuang M , % R.O.C. Da-Chang Tai M , % R.O.C. Yun-Da Chuang M ,360, % National Taipei Univ. of Business BA, Dept. of Accounting, National Cheng Kung Univ. MBA, Central Michigan Univ., USA R.O.C. Xi-Fen Chang M , % MBA, Dept. of Science Management, National Chiao Tung Univ. MS, Dept. of R.O.C. Te-Ju Yen M Architecture, Chung Yuan Christian Univ. Director of Prince Security Co., Ltd. Chairman of Jin Yi Xing Plywood Co., Ltd Note: Please tick the corresponding boxes if directors or supervisors have been any of the following during the two years prior to being elected or during the term of office: 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person s spouse, minor children, or held by the person under others names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the fifth degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking in the top five in holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business relationship with the Company. 7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. 8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company. 9. Not been a person of any conditions defined in Article 30 of the Company Law. 10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law. 8 Manager of Sales Ⅱ R.O.C. Tsung-Liang Wen Manager of IT R.O.C. Keng-Wang Chen Junior Manager of Audit Office M , % M R.O.C. Ya-Ting Xue F , % 20, % 0 0 Kainan High School of Commerce and Tech. MBA. National Taiwan Univ. BA, Dept. of Wealth and Taxation Mgmt., National Kaohsiung Univ. of Applied Sciences Prince Housing & Development Corp. 17

11 Corporate Governance Report III Remuneration Paid to Directors, Supervisors, President, and Vice Presidents Remuneration Paid to Directors Unit: Shares; Title Name Salary (A) PHD PHD All Consolidated Companies Pensions (B) PHD Remuneration All Consolidated Companies Earnings Distribution (C) PHD All Consolidated Companies Allowances (D) PHD All Consolidated Companies Summation of A, B, C, and D as % of Net Income PHD All Consolidated Companies Compensation to Directors Also Serving as Company Employees Salary, Bonuses, and Special Allowances (E) PHD All Consolidated Companies Pensions (F) PHD All Consolidated Companies PHD Employee Profit Sharing (G) All Consolidated Companies Cash Stock Cash Stock Summation of A, B, C, D, E, F, and G as % of Net Income PHD All Consolidated Companies Compensation from Affiliates Other than Subsidiari Chairman Joyful Inv. Co., Ltd. Vice Chairman & Director Uni-President Enterprises Corp. Director Kao Chyuan Inv. Co., Ltd. Director Hung Yao Inv. Co., Ltd. Director Taipo Inv. Co., Ltd. Director Young Yuan Inv. Co., Ltd. Director Yu Peng Inv. Co., Ltd. Director Cheng Long Inv. Co., Ltd. Chairman Kao-Huei Cheng Vice Chairman Chih-Hsien Lo Director Hsiu-Ling Kao Director Shih-Hung Chuang Director Chien-Te Wu Director Director Ping-Chih Wu Chung-Ho Wu - 13,875 1,590 1,590 54,437 54,437 8,863 8, % 4.89% 10,051 13, ,075-36, % 7.94% 35,434 Director Tsung-Ping Wu Director Chao-Mei Wu Tseng Director Po-Ming Hou Director Po-Yi Hou Director Ying-Chih Chuang Independent Director Chian Tai Independent Director Ho-Yi Hung Independent Director Sheng-Tsai Hsu Independent Director Ruei-Ching Lin Independent Director Chi-Ming Chang 18 Prince Housing & Development Corp. 19

12 Corporate Governance Report III Range of Remuneration Under NT$2,000,000 NT$2,000,000 ~ NT$5,000,000 NT$5,000,000 ~ NT$10,000,000 NT$10,000,000 ~ NT$15,000,000 Name of Directors Total of (A+B+C+D) Total of (A+B+C+D+E+F+G) PHD All Consolidated Companies PHD All Consolidated Companies Chih-Hsien Lo, Chian Tai, Hsiu-Ling Kao, Ho-Yi Hung, Ping-Chih Wu, Sheng-Tsai Hsu, Tsung-Ping Wu, Chi-Ming Chang, Chien-Te Wu, Ruei-Ching Lin, Chung-Ho Wu, Po-Ming Hou, Shih-Hung Chuang, Cheng Long Inv. Co., Ltd. Kao Chyuan Inv. Corp., Hung Yao Inv. Co., Ltd., Young Yuan Inv. Co., Ltd., Yu Peng Inv. Co., Ltd., Kao-Huei Cheng, Chao-Mei Wu Tseng, Po-Yi Hou, Ying-Chih Chuang Po-Ming Hou, Chian Tai, Hsiu-Ling Kao, Ho-Yi Hung, Ping-Chih Wu, Sheng-Tsai Hsu, Tsung-Ping Wu, Chi-Ming Chang, Chien-Te Wu, Ruei-Ching Lin, Chung-Ho Wu, Shih-Hung Chuang, Cheng Long Inv. Co., Ltd. Kao Chyuan Inv. Corp., Hung Yao Inv. Co., Ltd., Young Yuan Inv. Co., Ltd., Yu Peng Inv. Co., Ltd., Chih-Hsien Lo, Chao-Mei Wu Tseng, Po-Yi Hou, Ying-Chih Chuang Hsiu-Ling Kao, Chian Tai, Ping-Chih Wu, Ho-Yi Hung, Tsung-Ping Wu, Sheng-Tsai Hsu, Chien-Te Wu, Chi-Ming Chang, Chung-Ho Wu, Ruei-Ching Lin, Shih-Hung Chuang, Cheng Long Inv. Co., Ltd. Kao Chyuan Inv. Corp., Hung Yao Inv. Co., Ltd., Young Yuan Inv. Co., Ltd., Yu Peng Inv. Co., Ltd., Chao-Mei Wu Tseng, Po-Ming Hou, Po-Yi Hou, Ying-Chih Chuang Taipo Inv. Co., Ltd. Taipo Inv. Co., Ltd. Taipo Inv. Co., Ltd. Joyful Inv. Co., Ltd., Uni-President Enterprises Corp. Kao-Huei Cheng, Joyful Inv. Co., Ltd., Uni-President Enterprises Corp. Joyful Inv. Co., Ltd., Uni-President Enterprises Corp. Hsiu-Ling Kao, Chian Tai, Ping-Chih Wu, Ho-Yi Hung, Tsung-Ping Wu, Sheng-Tsai Hsu, Chien-Te Wu, Chi-Ming Chang, Chung-Ho Wu, Ruei-Ching Lin, Cheng Long Inv. Co., Ltd. Hung Yao Inv. Co., Ltd., Young Yuan Inv. Co., Ltd., Yu Peng Inv. Co., Ltd., Chao-Mei Wu Tseng, Shih-Hung Chuang, Po-Yi Hou, Ying-Chih Chuang Kao Chyuan Inv. Corp., Po-Ming Hou, Taipo Inv. Co., Ltd. Joyful Inv. Co., Ltd. Name of Supervisor Name of Supervisor Range of Remuneration Range of Remuneration Total of (A+B+C) Total of (A+B+C) PHD PHD All All Consolidated Consolidated Companies Companies Under Under NT$2,000,000 NT$2,000,000 NT$2,000,000 ~ NT$5,000,000 ~ Guang Wei Inv. Co., Ltd., Ying-Nan Chuang, Jing-Shin Chen, Chao-Wen Huang, Chien-Hung Chen, Cheng-Yang Lin Guang Guang Wei Wei Inv. Inv. Co., Co., Ltd., Ltd., Ying-Nan Ying-Nan Chuang, Chuang, Jing-Shin Chen, Chen, Chao-Wen Huang, Huang, Chien-Hung Chen, Chen, Cheng-Yang Lin Lin NT$5,000,000 ~ NT$10,000,000 ~ NT$10,000,000 ~ NT$15,000,000 ~ NT$15,000,000 NT$15,000,000 ~ NT$30,000,000 ~ NT$30,000,000 NT$30,000,000 ~ NT$50,000,000 ~ NT$50,000,000 NT$50,000,000 ~ NT$100,000,000 NT$50,000,000 ~ NT$100,000,000 Over NT$100,000,000 Over NT$100,000,000 Total Total NT$15,000,000 ~ NT$30,000,000 NT$30,000,000 ~ NT$50,000,000 NT$50,000,000 ~ NT$100,000,000 Title Supervisor Supervisor Supervisor Supervisor Supervisor Supervisor Name Guang Wei Inv. Co., Ltd. Ying-Nan Chuang Jing-Shin Chen Chao-Wen Huang Chien-Hung Chen Cheng-Yang Lin - - Chih-Hsien Lo Chih-Hsien Lo - - Kao-Huei Cheng PHD Salary (A) All Consolidated Companies Remuneration Earnings Distribution (B) PHD 12 All Consolidated Companies Allowances (C) PHD Unit: NT$ Unit: thousands; NT$ thousands; All Consolidated Companies Summation of A, B, and C as % of Net Income PHD All Consolidated Companies Compensation from Affiliates Other than Subsidiaries 300 2,185 8,780 8, % 0.72% 120 Note: The terms of above supervisors ended on June 21, 2016, and the Audit Committee replaced their positions. Uni-President Enterprises Corp., Kao-Huei Cheng Over NT$100,000, Total Remuneration Paid to Supervisors Compensation Paid to President and Vice Presidents Compensation Paid Paid to President to President and and Vice Vice Presidents Presidents Title Title President Name Name Ming-Fan Xie PHD PHD Salary (A) All Consolidated All Consolidated Companies Companies Pensions (B) PHD PHD All All Consolidated Consolidated Companies Companies Bonuses and Special Bonuses and Allowances (C) Special Allowances (C) PHD PHD All Consolidated Companies Unit: NT$ thousands; Unit: NT$ Unit: thousands; NT$ thousands; PHD PHD All Consolidated Companies President Vice Ming-Fan Wen-Zhen Xie Chiu President Vice Vice Wen-Zhen Yi-Chun Chiu President Su President 7,764 7, ,402 24,388-24, % 2.21% 4,803 Vice Vice Yi-Chun Mu-Tsun Su Hou 7,764 President President 7, ,402 24,388-24, % 2.21% 4,803 Vice Vice Xiao-Yu Chiang Mu-Tsun Hou President President (Note) Salary (A) Pensions (B) Vice Xiao-Yu Chiang Note: Xiao-Yu Chiang was promoted to the vice president of PHD Taichung branch. President (Note) Summation of Employee A, B, C, and D as % Profit Sharing (D) Summation of Employee of Net Income Compensation A, B, C, and D as % Profit Sharing from All Consolidated (D) PHD of Net Income Affiliates Compensation Companies Other than from All Consolidated PHD Subsidiaries Affiliates Companies Cash Stock Cash Stock Other than Subsidiaries Name of President and Vice President Range of Remuneration PHD All Consolidated Companies Under NT$ 2,000,000 Xiao-Yu Chiang Name of President and Vice President Xiao-Yu Chiang Range of Remuneration NT$2,000,000 ~ NT$5,000,000 Yi-Chun Su, PHD Mu-Tsun Hou All Consolidated Yi-Chun Su Companies Under NT$5,000,000 2,000,000 ~ NT$10,000,000 Xiao-Yu Wen-Zhen Chiang Chiu Wen-Zhen Xiao-Yu Chiu, Mu-Tsun Chiang Hou NT$2,000,000 NT$10,000,000 ~ NT$5,000,000 ~ NT$15,000,000 Yi-Chun Su, Mu-Tsun Hou Yi-Chun Su NT$5,000,000 NT$15,000,000 ~ NT$10,000,000 ~ NT$30,000,000 Wen-Zhen Ming-Fan Xie Chiu Wen-Zhen Ming-Fan Chiu, Xie Mu-Tsun Hou NT$10,000,000 NT$30,000,000 ~ NT$15,000,000 ~ NT$50,000,000 NT$15,000,000 NT$50,000,000 ~ NT$30,000,000 ~ NT$100,000,000 Ming-Fan Xie Ming-Fan Xie NT$30,000,000 Over NT$100,000,000 ~ NT$50,000,000 NT$50,000,000 Total ~ NT$100,000, Consolidated Companies Note: Xiao-Yu Chiang was promoted to the vice president of PHD Taichung branch. All Cash Stock Cash Stock Over NT$100,000,000 Total 5 5 Companies All Consolidated Prince Housing & Development Corp. 21

13 Corporate Governance Report III Employee Profit Sharing Granted to Management Team Management Team Director Supervisor President Vice President Title Title Chief Strategy Officer Vice Chief Strategy Officer Executive Assistant President Vice President Vice President Vice President Vice President Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President Manager Manager Manager Manager Manager Manager Junior Manager Total Remuneration PHD 111,016 All Consolidated Companies Net Income Total Remuneration as % of Net Income Total Remuneration 6.90% 82,499 Net Income Total Remuneration as % of Net Income 3.69% 127, % 98, % PHD 9, % 21, % 1,609,189 2,237,800 All Consolidated 11, % 23, % Companies PHD 32, % 36, % All Consolidated Companies Name Kao-Huei Cheng Chih-Hsien Lo Po-Ming Hou Ming-Fan Xie Wen-Zhen Chiu Yi-Chun Su Mu-Tsun Hou Xiao-Yu Chiang Jian-Ying Wu Chun-Liang Lin Chun-Cheng Kuo Ying-Jie Chuang Yun-Da Chuang Da-Chang Tai Xi-Fen Chang Te-Ju Yen Tsung-Liang Wen Keng-Wang Chen Ya-Ting Xue Profit Sharing -Stock Profit Sharing -Cash Unit: NT$ Unit: thousands; NT$ thousands; Total Total Amount as % of Net Income - 81,824 81, % Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Past Two Years and Remuneration Policy for Directors, Supervisors, Presidents and Vice Presidents Unit: NT$ thousands 35, % 36, % 3.3 Implementation of Corporate Governance Board Meeting Operation Information of Board Meeting The reelection of directors was on the Term Expiration Date, June 21, The old board meetings were held 2 times (A), and the new board meetings were held 4 times (A) in The attendance of directors and supervisors was as follows: and supervisors was as follows: Title Name Attendance in Person(B) Proxy Attendance Attendance Rate (%) [B/A] Representative Chairman Joyful Inv. Co., Ltd % Kao-Huei Cheng Renewed Vice Chairman Uni-President Enterprises. Corp % Chih-Hsien Lo Renewed Director Kao Chyuan Inv. Co., Ltd % Hsiu-Ling Kao Renewed Director Uni-President Enterprises. Corp % Tsung-Ping Wu Renewed Director Chao-Mei Wu Tseng % Renewed Director Taipo Inv. Co., Ltd % Ping-Chih Wu Renewed Director Taipo Inv. Co., Ltd % Chien-Te Wu Renewed Director Young Yuan Inv. Co., Ltd % Chung-Ho Wu Renewed Director Hung Yao Inv. Co., Ltd % Shih-Hung Chuang Renewed Remarks Director Po-Yi Hou % Renewed The term began on Jun. 21, Director Yu Peng Inv. Co., Ltd % Po-Ming Hou The term ended on Jun. 21, Director Po-Ming Hou % The term began on Jun. 21, Director Cheng Long Inv. Co., Ltd % Ying-Chih Chuang The term ended on Jun. 21, Director Ying-Chih Chuang Independent Director Chian Tai % Renewed The term began on Jun. 21, Independent Director Ho-Yi Hung % The term began on Jun. 21, Independent Director Sheng-Tsai Hsu % Independent Director Ruei-Ching Lin % The term ended on Jun. 21, Independent Director Chi-Ming Chang % The term ended on Jun. 21, The term ended on Jun. 21, Supervisor Guang Wei Inv. Co., Ltd % Ying-Nan Chuang The term ended on Jun. 21, Supervisor Jing-Shin Chen % The term ended on Jun. 21, Supervisor Chao-Wen Huang % The term ended on Jun. 21, Supervisor Chien-Hung Chen % The term ended on Jun. 21, Supervisor Cheng-Yang Lin % Other Mentionable Items: 1. If any of the following circumstances occur,, the dates of the meetings, sessions, contents of motion, all independent directors opinions and the company s response should be specified: None. (1) Matters referred to in Article 14-3 of the Securities and Exchange Act. independent (2) directors Other matters opinions involving objections and the company s or expressed reservations response by should independent be specified: directors that None. were recorded or stated in writing that require a resolution by the board of directors. (1) Matters 2. If there referred are directors to in avoidance Article of 14-3 motions of in the conflict Securities of interest, and the Exchange directors names, Act. contents of motion, causes (2) Other for avoidance matters and involving voting should objections be specified: or expressed reservations by independent directors that were The Chairman, Kao-Huei Cheng was approved to serve in the Chief Strategy Officer concurrently, and the Vice recorded Chairman, or Chih-Hsien stated in Lo writing was approved that require to serve a in resolution the Vice Chief by Strategy the board Officer of concurrently directors. in the 2 nd Board Meeting of Session Fifteen. 3. Measures taken to strengthen the functionality of the board: The Board of Directors has established an Audit motion, Committee causes for and avoidance a Remuneration and Committee voting to should assist the be board specified: in carrying out its various duties. The establishment of the Audit Committee in place of the supervisors authority had been resolved in the board The Chairman, meeting of Session Kao-Huei Fifteen, Cheng and the Audit was Committee approved have to hold serve 3 times in the of meeting Chief during Strategy The Officer establishment concurrently, and the of Vice the Management Chairman, Committee Chih-Hsien under the Lo board was of directors approved and the to Operation serve in Optimization the Vice Task Chief Force Strategy under the Officer Management Committee had been resolved in the 1 st board meeting of Session Fifteen, for the purpose of the concurrently board s understanding the 2nd Board of the company s Meeting operation of Session and strengthening Fifteen. of corporate governance. Note: (i) If director or supervisor resigned before end of year, company shall show date in note, and attendance rate (%) is attendant times of meeting in incumbent period. Audit Committee (ii) If there and is re-election a Remuneration of director and supervisor, Committee company to shall assist show former, the new, board reappointed in carrying member and out date in its note. various Attendance duties. rate (%) is attendant times of meeting in incumbent period. Other Mentionable Items: 1. If any of the following circumstances occur,, the dates of the meetings, sessions, contents of motion, all 2. If there are directors avoidance of motions in conflict of interest, the directors names, contents of 3. Measures taken to strengthen the functionality of the board: The Board of Directors has established an The establishment of the Audit Committee in place of the supervisors authority had been resolved in the board meeting of Session Fifteen, and the Audit Committee have hold 3 times of meeting during 22 Prince Housing & Development Corp. 23

14 Corporate Governance Report III The establishment of the Management Committee under the board of directors and the Operation Optimization Task Force under the Management Committee had been resolved in the 1st board meeting of Session Fifteen, for the purpose of the board s understanding of the company s operation and strengthening of corporate governance. Note: (i) If director or supervisor resigned before end of year, company shall show date in note, and attendance rate (%) is attendant times of meeting in incumbent period. (ii) If there is re-election of director and supervisor, company shall show former, new, reappointed member and date in note. Attendance rate (%) is attendant times of meeting in incumbent period Audit Committee Operation A total of 3 (A) Audit Committee meetings were held in the previous period. The attendance of the committee members was as follows: Title Name Attendance in Person(B) Proxy Attendance Attendance Rate (%) [B/A] Remarks Convener Chian Tai % The term began on Jun. 21, Member Ho-Yi Hung % The term began on Jun. 21, Member Sheng-Tsai Hsu % The term began on Jun. 21, Other mentionable items: 1. If any of the following circumstances occur, the dates of meetings, sessions, contents of motion, resolutions of the Audit Committee and the Company s response to the Audit Committee s opinion should be specified: None. (1) Matters referred to in Article 14-5 of the Securities and Exchange Act. (2) Other matters which were not approved by the Audit Committee but were approved by two-thirds or more of all directors. 2. If there are independent directors avoidance of motions in conflict of interest, the directors names, contents of motion, causes for avoidance and voting should be specified: The appointment of the three independent supervisors as the members of the Compensation Committee of Session Third concurrently had been resolved in the 2nd board meeting of Session Fifteen. 3. Communications between the independent directors, the Company's chief internal auditor and CPAs (e.g. the material items, methods and results of audits of corporate finance or operations, etc.): None. (1) The internal auditors have communicated the result of the audit reports to the members of the Audit Committee periodically, and have presented the findings of all audit reports in the quarterly meetings of the Audit Committee. Should the urgency of the matter require it, the Company's chief internal auditor will inform the members of the Audit Committee outside of the regular reporting. The communication channel between the Audit Committee and the internal auditor has been functioning well. (2) The Company s CPAs have presented the findings or the comments for the quarterly corporate financial reports, as well as those matters communication of which is required by law, in the regular quarterly meetings of the Audit Committee. Under applicable laws and regulations, the CPAs are required to communicate to the Audit Committee any material matters that they have discovered. The communication channel between the Audit Committee and the CPAs has been functioning well Corporate Governance Implementation Status and Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies Evaluation Item 1. Does the company establish and disclose the Corporate Governance Best-Practice Principles based on Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies? 2. Shareholding structure & shareholders rights (1) Does the company establish an internal operating procedure to deal with shareholders suggestions, doubts, disputes and litigations, and implement based on the procedure? (2) Does the company possess the list of its major shareholders as well as the ultimate owners of those shares? (3) Does the company establish and execute the risk management and firewall system within its conglomerate structure? (4) Does the company establish internal rules against insiders trading with undisclosed information? 3. Composition and Responsibilities of the Board of Directors (1) Does the Board develop and implement a diversified policy for the composition of its members? (2) Does the company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee? (3) Does the company establish and execute the risk management and firewall system within its conglomerate structure? (4) Does the company establish internal rules against insiders trading with undisclosed 4. Does the company set up a corporate governance unit or appoint personnel responsible for corporate governance matters (including but not limited to providing information for directors and supervisors to perform their functions, handling work related to meetings of the board of directors and the shareholders' meetings, filing company registration and changes to company registration, and producing minutes of board meetings and shareholders meetings)? Implementation Status Yes No Abstract Illustration ü ü ü ü ü ü ü ü ü ü The establishment of the Corporate Social Responsibility Best-Practice Principles and the Ethical Corporate Management Best Practice had been resolved in the board meeting on November 3 in 2016, and disclosed on the company s website. The company has designated appropriate departments to handle shareholders suggestions or disputes. The Stock Transfer Agency is responsible for collecting the updated information of the list of major shareholders and the ultimate owners of those shares. There are dedicated units responsible for operations of the company s affiliates, and they are controlled and audited by the head office. The company has established the internal rules to forbid insiders trading on undisclosed information. The company has also strongly advocated these rules in order to prevent any violations. According to Article 20 of the Corporate Governance Best-Practice Principles, the company had diversified and disclosed the members of board of directors. There are 15 directors including 3 female directors in the board of directors, and all the members nationality is R.O.C. There were 7 directors with master degree or above mostly major in finance, accounting or business to meet the professional qualification. In addition to the Audit Committee and the Compensation Committee, the establishment of the Management Committee and the Operation Optimization Task Force under the Management Committee had been resolved in the board meeting on June 21, 2016, for the purpose of the board s understanding of the company s operation. Furthermore, to strengthen the company s corporate governance, the Chairman Mr. Cheng and Vice Chairman Mr. Lo were approved to serve in the Chief Strategy Officer and the Vice Chief Strategy Officer respectively in the board meeting on July 4, The company had not established related measures. However the company s board of directors was devoted to corporate governance according to the principle of good faith for the purpose of ensuring the shareholders rights. The board of directors had approved Financial Reports CPAs Independence Assessment on March 20, The Accounting Department of the company had evaluated the accountants C.H. Wu and K.H. Wang of PwC in 2016, and the result was compliant with the company s independence evaluation criteria, in which they are proved to be competent CPAs. The company had established the Corporate Governance Task Force, whose convener was the President and members were assigned from each department of the company. Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons None None None None None 24 Prince Housing & Development Corp. 25

15 Corporate Governance Report III Evaluation Item 5. Does the company establish a communication channel and build a designated section on its website for stakeholders (including but not limited to shareholders, employees, customers, and suppliers), as well as handle all the issues they care for in terms of corporate social responsibilities? 6. Does the company appoint a professional shareholder service agency to deal with shareholder affairs? 7. Information Disclosure (1) Does the company have a corporate website to disclose both financial standings and the status of corporate governance? (2) Does the company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)? 8. Is there any other important information to facilitate a better understanding of the company s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors and supervisors training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors and supervisors)? Implementation Status Yes No Abstract Illustration ü ü ü ü ü The company had been dedicated to establish appropriate communication channels for its stakeholders, including customer service hotline, company website, quarterly publication, APP, advertisements, and occasional questionnaires. In addition, the company had provide mailbox, online message system, and 24 hour service counter for the NTU Prince Dormitory. The company s website had disclosed the contact information for different stakeholders in the Stakeholder Area. The company had designated President Securities Corp. to deal with shareholder affairs. The company had set up a website to disclose the company s relevant information. Website: The company had assigned specialists to collect and disclose its information, and also has established a spokesperson system according to the regulations. Employee rights: In addition to purchasing insurance and contributing pensions for employees, the company had built appropriate communication channels for both employees and employers. Directors and supervisors continuing education: As the following table. Consumer Protection Policy: The company had established service center to process building maintenance, repair, community safety and cleaning service. The Company has purchased D&O insurance for its directors and supervisors. Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons 9. Please explain the improvements which have been made in accordance with the results of the Corporate Governance Evaluation System released by the Corporate Governance Center, Taiwan Stock Exchange, and provide the priority enhancement measures. According to the results of the Corporate Governance Evaluation System about the company, the improvements or the expectation of future improvements in the previous year are as follow: (1) The company s audit fees paid to CPA firms were more than the non-audit fees. (2) The Chinese and English Agenda Handbook for Regular Shareholders Meeting were expected to be disclosed on time. (3) More than one-third directors (including one independent director or above) were expected to attend the Regular Shareholder s Meeting. None None None None Employee Profit Sharing Granted to Management Team Remarks Conforming to Regulations Training Hours Sponsoring Organization Course Period From To Assumed Date Title Name Taiwan Institute of Directors Global layout and transnational operational planning 3 Yes Data analysis and company fraud detection 3 Yes Taiwan Corporate Governance Association Kao-Huei Cheng Yes How does an enterprise deal with a manager committing a crime Taiwan Corporate Governance Association Represent atives of corporate directors The trend of corporation governance 3 Yes Taiwan Corporate Governance Association Taiwan Institute of Directors Global layout and transnational operational planning 3 Yes Chih-Hsien Lo Yes How does an enterprise deal with a manager committing a crime Taiwan Corporate Governance Association Represent atives of corporate directors Taiwan Institute of Directors Global layout and transnational operational planning 3 Yes Hsiu-Ling Kao Yes How does an enterprise deal with a manager committing a crime Taiwan Corporate Governance Association Represent atives of corporate directors 3 Yes How does an enterprise deal with a manager committing a crime Taiwan Corporate Governance Association Tsung-Ping Wu Represent atives of corporate directors 3 Yes The practice of the Board of Director and shareholders meeting of public release company Taiwan Corporate Governance Association Shih-Hung Chuang Represent atives of corporate directors Taiwan Institute of Directors Global layout and transnational operational planning 3 Yes Po-Ming Hou Yes How does an enterprise deal with a manager committing a crime Taiwan Corporate Governance Association Represent atives of corporate directors 3 Yes To see the clear time of insider trading from the recent trend of judicial trial Taiwan Corporate Governance Association Supervisor Chien-Hung Chen Yes The operation of the Board of Directors and its effect of the resolution Taiwan Corporate Governance Association Yes How does an enterprise deal with a manager committing a crime Taiwan Corporate Governance Association Supervisor Cheng-Yang Lin Prince Housing & Development Corp. 27

16 Corporate Governance Report III Composition, Responsibility and Operations of Compensation Committee (1) (1) Information Information of of Compensation Compensation Committee: Committee: Title & Name Criteria Five or More Years Experience or below Professional Qualifications Independence Criteria Number of Remuneration Lecturer or above in Business, Law, Finance, Accounting or Corporate Business Related Fields Qualification of Justice, Procurator, Attorney, CPA, Specialist or Technician of National Examination in Corporate Business Related Fields Experience in Business, Law, Finance, Accounting, or Corporate Business Related Fields Convener Chian Tai 3 Committee Memberships Held in Other Public Companies Commissioner Shan-Chai Hsu 0 Commissioner Ho-I Hung 0 Commissioner Ruei-Ching Lin 0 Commissioner Chi-Ming Chang 0 (2) (2) Responsibility of of Compensation Committee: a. Establish the regulations of compensation and performance for boards, supervisors and managers. b. Evaluate the compensation of directors and supervisors regularly. Committee should refer to the industry payment and consider personal performance, company s operations and future risk rather than seek the higher compensation. (3) Operation of Compensation Committee: a. Compensation committee was set up on Sep. 30, b. Current committee is in the second term, which is from Jul. 4, 2016 to Jun. 20, The board of directors approved to assign 3 members on Jul. 4, c. Committee meetings were held 3 times (A) during The attendance was as follows: Title Name Attendance in Person (B) Proxy Attendance Attendance Rate (%) [B/A] Remarks Convener Chian Tai % Renewed Commissioner Shan-Chai Hsu % Took office on 2016/7/4 Commissioner Ho-I Hung % Took office on 2016/7/4 Commissioner Chi-Ming Chang % Left office on 2016/6/21 Commissioner Ruei-Ching Lin % Left office on 2016/6/ Implementation of Corporate Social Responsibility Evaluation Item 1. Corporate Governance Implementation (1) Does the company declare its corporate social responsibility policy and examine the results of the implementation? (2) Does the company provide educational training on corporate social responsibility on a regular basis? (3) Does the company establish exclusively (or concurrently) dedicated first-line managers authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board? (4) Does the company declare a reasonable salary remuneration policy, and integrate the employee performance appraisal system with its corporate social responsibility policy, as well as establish an effective reward and disciplinary system? 2. Sustainable Environment Development (1) Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment? (2) Does the company establish proper environmental management systems based on the characteristics of their industries? Implementation Status Yes No Abstract Illustration ü ü ü ü ü ü The board of directors decided to establish the Corporate Social Responsibility Best-Practice Principles of the company. The company carries out regular trainings sessions on corporate social responsibility according to Corporate Social Responsibility Best- Practice Principles of the company and related regulations. The company has designated the Planning & Strategy Department as dedicated unit, and authorized specialized institution to prepare the 2014 Corporate Social Responsibility Report. The company has established a complete reward and disciplinary system based on the employee performance appraisal system which includes the corporate social responsibility policy as one of the most important criteria for evaluation. In addition, the remuneration paid to managers is confirmed by the Compensation Committee. The company has effectively decreased the waste of building materials through precise control over project duration. Furthermore, the company selects appropriate renewable raw materials on the basis of regulations to reduce exploitation of natural resources. The company emphasizes on environmental protection, treasures resources, and purchases the materials which are tagged green building materials, water-saving, or energy conservation. The amount of green building materials the company purchased in 2016 is NT$ 126 million. Before constructions, the company requires the contractors to submit site management plans to ensure that the air, noise, water and waste pollution situations can be effectively controlled. Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons None None 28 Prince Housing & Development Corp. 29

17 Corporate Governance Report III (3) Does the company monitor the impact of climate change on its operations and conduct greenhouse gas inspections, as well as establish company strategies for energy conservation and carbon reduction? ü The company continually dedicates to manage the construction sites, monitor the impact of climate change on the operations, conduct greenhouse gas inspections and disclose the information. In 2016, there are tons of greenhouse gas emissions from 21 construction projects, and tons from the office area. None 3. Preserving Public Welfare (1) Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights? (2) Has the company set up an employee hotline or grievance mechanism to handle complaints with appropriate solutions? (3) Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis? (4) Does the company setup a communication channel with employees on a regular basis, as well as reasonably inform employees of any significant changes in operations that may have an impact on them? (5) Does the company provide its employees with career development and training sessions? (6) Does the company establish any consumer protection mechanisms and appealing procedures regarding research development, purchasing, producing, operating and service? (7) Does the company advertise and label its goods and services according to relevant regulations and international standards? ü ü ü ü ü ü ü The company respects to employee rights through appropriate systems and welfare to protect the employees legal rights. All employees of the company can use the employee hotlines to express their grievances, and the dedicated unit will appropriately solve the problems. The company respects to labor safety and health through requiring that all construction site personnel receive trainings on health and safety. The company has setup an EIP website for immediate notification on important policies and any information. The company has provides appropriate internal education training courses, and encourages all employees to has continuing education. We had hrs of outside training and $208,000 of education training fee in The customers can use the company s website, or telephone to express their suggestions or grievances. The marketing activities and after-sales services of the company policies are according to relevant regulations. None (8) Does the company evaluate the records of suppliers impact on the environment and society before taking on business partnerships? (9) Do the 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 appreciable impact on the environment and society? 4. Enhancing Information Disclosure Does the company disclose relevant and reliable information regarding its corporate social responsibility on its website and the Market Observation Post System (MOPS)? The Cost Control Department of the company is responsible for appropriate evaluation of the suppliers on business partnerships. The contracts between the company and the major suppliers are all confirmed by the legal counsel. The company evaluation the impact on the environment caused by the purchase activities. The company enhances information disclosure according to the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies. The company has established the internet declaration system and spokesperson system, which includes one spokesperson and two deputy spokespeople. In addition, the information regarding finance and operations of the company is disclosed on our website. 5. If the Company has established the corporate social responsibility principles based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the Principles and their implementation: The board of directors decided to establish the Corporate Social Responsibility Best-Practice Principles of the company, designated the Planning & Strategy Department as dedicated unit, and authorized specialized institution to prepare the Corporate Social Responsibility Report. There is no deviation from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies. None None 6. Other important information to facilitate better understanding of the company s corporate social responsibility practices The company cares for the earth and works hard to promote ecological sustainability through designing green buildings, supporting related green activities and making related donations. 7. A clear statement shall be made below if the corporate social responsibility reports were verified by external certification institutions: The company has designated the Planning & Strategy Department as dedicated unit, and authorized specialized institution to prepare the 2016 Corporate Social Responsibility Report. 30 Prince Housing & Development Corp. 31

18 Corporate Governance Report III Implementation of Ethical Corporate Management Evaluation Item 1. Establishment of ethical corporate management policies and programs (1) Does the company declare its ethical corporate management policies and procedures in its guidelines and external documents, as well as the commitment from its board to implement the policies? (2) Does the company establish policies to prevent unethical conduct with clear statements regarding relevant procedures, guidelines of conduct, punishment for violation, rules of appeal, and the commitment to implement the policies? (3) Does the company establish appropriate precautions against high-potential unethical conducts or listed activities stated in Article 2, Paragraph 7 of the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies? 2. Fulfill operations integrity policy (1) Does the company evaluate business partners ethical records and include ethics-related clauses in business contracts? (2) Does the company establish an exclusively (or concurrently) dedicated unit supervised by the Board to be in charge of corporate integrity? Implementation Status Yes No Abstract Illustration ü ü ü ü ü The board of directors of the company has approved to establish the Ethical Corporate Management Best-Practice Principles, Ethical Corporate Management Operation Procedures and Guidelines. The company has established the operation procedures and guidelines based on the Ethical Corporate Management Best-Practice Principles, and implemented punishment for violation and rules of appeal. The company has established effective accounting and internal control systems against high-potential unethical operating activities. The company includes ethics-related clauses in business contracts of each business partner. The company has established the integrity management promotion team supervised by the Board. The company s integrity management promotion team supervises each department s implementation of integrity management based on the Ethical Corporate Management Best-Practice Principles of the company and related regulations. Evaluation Item (3) Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it? (4) Has the company established effective systems for both accounting and internal control to facilitate ethical corporate management, and are they audited by either internal auditors or CPAs on a regular basis? (5) Does the company regularly hold internal and external educational trainings on operational integrity? 3. Operation of the integrity channel (1) Does the company establish both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up? (2) Does the company establish standard operating procedures for confidential reporting on investigating accusation cases? (3) Does the company provide proper whistleblower protection? 4. Strengthening information disclosure Does the company disclose its ethical corporate management policies and the results of its implementation on the company s website and MOPS? Implementation Status Yes No Abstract Illustration ü The company has established policies to prevent conflicts of interest, in order to identify, monitor, and manage the risks of unethical conducts caused by conflicts of interest. In addition, the Audit Office regularly examines and evaluates operating activities, which providing appropriate communication channels. ü The company has established effective systems for accounting, internal control, and risk management, and the Audit Office regularly examines the implementation situation. ü ü ü ü The company reviews the audit s reports and the results completed by each department annually, and reports to board of directors and supervisors. According to Article 21 of the company s Ethical Corporate Management Operation Procedures and Guidelines, there is confidential integrity hotline set up on the company s website. The specially-assigned person of Audit Office is responsible for the integrity hotline and , dealing with the accusations or suggestions provided by the employees, suppliers and customers, and protecting the whistleblowers based on confidential retorting systems. The integrity hotline and of the company are listed below. Tel: (06) # @exchange.prince.com.tw ü The information regarding finance, operation, and corporate governance of the company is disclosed to the shareholders and stakeholders on our website. Deviations from the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons None None Deviations from the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons None None None 32 Prince Housing & Development Corp. 33

19 Corporate Governance Report III Evaluation Item Implementation Status Yes No Abstract Illustration Deviations from the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons 5. If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation. The board of directors has approved the Ethical Corporate Management Best-Practice Principles of the company on May 4, 2015, and the company will conduct the procedures gradually according to the principles. There have been no differences. 6. Other important information to facilitate a better understanding of the company s ethical corporate management policies (e.g., Review and amend its policies). None Corporate Governance Guidelines and Regulations Please refer to the company s website ( or MOPS ( Other Important Information Regarding Corporate Governance The board of directors decided to establish the Compensation Committee in 2011, and approved the Corporate Social Responsibility Best-Practice Principles and Ethical Corporate Management Best-Practice Principles (including Ethical Corporate Management Operation Procedures and Guidelines) in In the same year, the temporary board meeting prepared to amend the articles of incorporation in 2016 while the 14th directors and supervisors terms expire, for the purpose of substituting Audit Committee for supervisors. On Jun 21th, 2016, The Board of Directors decided to set up an Operating Committee and an Operating Counseling Team under it to help directors to understanding the operating process. On July 4th, 2016, The Board of Directors decided to assign Chairman, Mr. Kao-Hui, Cheng as a Chief Strategy Officer and Vice Chairman, Mr. Chih-Hsien, Lo as a vice Chief Strategy Officer Implementation of Internal Control Systems Prince Housing and Development Corporation Declaration of Internal Control March 23, 2016 The internal control system in 2015 is with the following declarations made in accordance with self-inspection conducted: 1. We understand it is the responsibility of the company s management to have internal control system established, enforced, and maintained. The company internal control system established to provide a reasonable assurance for the realization of operating effect and efficiency(including profits, performance, and assets safety), the reliability, timeliness and transparency of financial report, and the obedience of relevant regulations. 2. Internal control system is designed with limitations; therefore, no matter how perfect it is designed, an effective internal control system is to ensure the realization of the aforementioned three objectives. Due to the change of environment and condition, the effectiveness of an international control system could change at any time. Our internal control system is designed with self-monitoring mechanism; therefore, we are able to have corrective actions initiated upon identifying any nonconformity. 3. We have based on the internal control criteria of Governing Rules for handling international; control system by public offering companies (referred to as the Governing Rules hereinafter) to determine the effectiveness of internal control design and enforcement. The internal control divided into five elements: 1. Environment control, 2. Risk analysis, 3. Control process, 4.Information and communication, and 5. Supervision. Each element is subdivided into several items. Please refer to the Governing Rules for the details of the said items. 4. We have based on the aforementioned internal control criteria to inspect the effectiveness of internal control design and enforcement. 5. We believe that our audits provide a reasonable basis for our opinion. On December 31, 2016, those standards require that we plan and perform the audit to obtain reasonable assurance about whether the internal control system (including the supervision and management over the subsidiaries) including the fulfillment of business performance and efficiency, the reliability, timeliness and transparency of financial statements and the obedience of governing regulations, and the design and enforcement of internal control system is free of material misstatement and is able to ensure the realization of the aforementioned objectives. 6. The Declaration of Internal Control is the content of our annual report and prospectus for the information of the public. For any forgery and concealment of the aforementioned information to the public, we will be held responsible by law in accordance with Securities Transaction Regulation No. 20, No.32, No.171, and No We hereby declared the Declaration of Internal Control was approved by Board of Directors on March 22, 2017 unanimously by the directors at the meeting. Prince Housing and Development Corporation Chairman: Kao-Huei Cheng President: Ming-Fan Xie 34 Prince Housing & Development Corp. 35

20 Corporate Governance Report III The punishment delivered to the company and the staff of the company, or the punishment delivered by the company to the staff for a violation of internal control system, the major nonconformity, and the corrective action in the most recent years and up to the date of the annual report printed: None Major Resolutions of Shareholders Meeting and Board Meetings in the Most Recent Years and up to the Date of the Annual Report Printed: 1. Major Resolution and Executions of the Resolution of 2016 General Shareholders Meeting: (1) Accepted the business reports and financial statements for year In accordance with the company law, all related financial information has been submitted to the government agency to review. (2) Approved the distribution of retained earnings for year The available retained earnings for distribution in 2015 were NT$ billion. The distribution of cash dividend was NT$1.1 per share. Cash dividend was distributed on Aug. 8, (3) Approved the amendments to parts of Articles of Incorporation: Effective on the resolutions at general shareholders meeting, and the company has completed the changes registration to the Ministry of Economic Affairs within 15 days according to the regulations. (4) Set up the Guidelines for the Adoption of Codes of Ethical Conduct. Amended the Rules of Procedure for Board of Directors Meetings, Corporate Social Responsibility Best-Practice Principles, Ethical Corporate Management Best-Practice Principles, and Ethical Corporate Management Operation Procedures and Guidelines. Discussed Regulations Governing the Acquisition and Disposal of Assets, Guidelines for Endorsements and Guarantees, Rules of Procedure for Shareholders Meetings, and Procedures for Election of Directors and Supervisors. Effective on the resolutions at general shareholders meeting. (5) Elected the 15th directors: 12 elected directors and 3 independent directors. Effective after election at general shareholders meeting. (6) Approve to release part of director s restriction of non-competition. Effective on the resolutions at general shareholders meeting. 2. Major Resolutions during the Board of Directors Meetings in 2016 and to the Publish Date of the Annual Report: 14 th Board Meeting of the 14th (Mar. 23, 2016) (1) Approved the declaration of internal control for year (2) Accepted the business reports and financial reports for year (3) Approved the earning distribution for year (4) Approved the evaluation of the CPAs independence. (5) Approved the amendment to the company's Articles of Incorporation. (6) Approved Regulations Governing the Acquisition and Disposal of Assets, Guidelines for Endorsements and Guarantees, Rules of Procedure for Shareholders Meetings, Procedures for Election of Directors and Supervisors, Rules of Remuneration committee, Procedures for Ethical Management and Guidelines for Conduct, Rules of Ethical Management, Corporate Social Responsibility Best Practice Principles and Guidelines for the Adoption of Codes of Ethical Conduct, Audit Committee Charter and Rules Governing the Scope of Powers of Independent Directors. (7) Approved to joint sale with Prince Real Estate Co. (8) Approved to hold the 2016 general shareholders meeting. (9) Approved to donation for Tainan earthquake for NT 5 million. 15 th Board Meeting of the 14th (May 6, 2016) (1) Accepted the consolidated financial reports for the first quarter of year (2) Review the list of candidate of directors (including independent directors). 1st Board Meeting of the 15th (Jun. 21, 2016) According to company election rules, Mr. Kao-Hui, Cheng as a Chairman, and Mr. Shih-Hsien, Lo, as a vice Chairman. 2 nd Board Meeting of the 15th (Jul. 4, 2016) (1) Approved to hire Chan Tai, Ho-I Hung, and Shan-Chai Hsu as independent directors and member of the 3rd remuneration committee. (2) Approved that Kao-Hui, Cheng as Chief Strategy Officer and Chih-Hsien, Lo as vice Chief Strategy Officer. (3) Approved that Ming-Fan Xie as President (4) Approved the cash dividend record date (Jul 25, 2016) and the cash dividend payment date (August 8, 2016). (5) Approved to set up rules of Operating Committee and an Operating Counseling Team. 3 rd Board Meeting of the 15th (Aug. 2, 2016) (1) Accepted the consolidated financial reports for the second quarter of year (2) Approved to cancel the first issued secured company bonds and second unsecured company bonds. (3) Approved to hire Kao-Hui Kao (Chairman), Shih-Hsien, Lo (Vice Chairman), Bo-Ming Hou (Directors), Chun-Ho, Wu (Directors) and Chan-Bin Wu (Directors) as members of Operating Committee. 4 th Board Meeting of the 15th (Nov. 3, 2016) (1) Accepted the consolidated financial reports for the third quarter of year (2) Approved to hire Yin-Nan Chung, Chin-Shin Chen, Chao-Wen Huang, Chan-Yan Lin and Chan-Hung Chen as members of Operating Counseling Team. (3) Approved the audit plan for year (4) Approved to set up Ethical Management Team under the Board of Directors. (5) Approved the Corporate Governance Best Practice Principles. 5 th Board Meeting of the 15th (Mar. 22, 2017) (1) Approved the declaration of internal control for year (2) Accepted the business reports and financial reports for year (3) Approved the earning distribution for year The expected distribution of cash dividend was NT$1 per share and the total amount will be NT billion. (4) Approved profit distribution of employee s bonus and directors remuneration. (5) Approved to issue secured company bonds not over NT 5 billion. 36 Prince Housing & Development Corp. 37

21 Corporate Governance Report III (6) Approved the amendment the company s Acquisition or Disposal of Assets Operation Procedures, and rules of duties and remuneration when also serve in the subsidiary. (7) Approved the evaluation of the CPAs independence. (8) Approved to hire CPA Chan-Shi Wu and Kao-Hua Wang from PWC to audit 2017 financial report and to be agent of declaration of income tax. (9) Approved to hold the 2016general shareholders meeting The Directors or Supervisors who have Objected to the Resolutions Reached by the Board of Directors and the Objections are Recorded or Declared in Writing in the Most Recent Year and up to Date of the Annual Report Printed: None. Information of Audit Fees CPA firm PWC CPA Yi-Chang Lin Chien-Chih Wu Audit Fees System Design Industrial and Commercial Registration Non-Audit Fees Human Resource Other Total Term 11, ,881 5, Unit: NT$ thousands Remark - Transfer Pricing Reports: NT$766 thousands - CSR Reports: NT$1,295 thousands - Special Project: NT$816 thousands - Project Consulting: NT$418 thousands Resignation or Dismissal of the Company s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D in the Most Recent Year and up to Date of the Annual Report Printed: None. 3.4 Information Regarding the Company s Audit Fee and Independence (1) The non-auditing fees paid to CPAs, CPA firm, and the CPA form s related party accounted for over a quarter of the total auditing fees, the auditing amount and non-auditing amount; also, the non-auditing service must be disclosed: CPA firm Name Auditing period Note PWC Yi-Chang Lin Chien-Chih Wu 2016 Range of Audit fees and Non-Audit Fees Unit: NT$ thousands Item Range of Audit Fees Audit Fees Non-Audit Fees Total 1 Under NT$2, NT$2,000~ NT$3, NT$4,000~ NT$5,999-5,234 5,234 4 NT$6,000~ NT$7, NT$8,000~ NT$9, Over NT$10,000 11,547-11,547 (2) If the auditing fee paid in the year retaining service from another CPA Firms is less than the auditing fee paid in the year before, the amount of auditing fee before and after the change of CPA Firm and the reasons for the said change must be disclosed: None (3) If the auditing fee paid in the year retaining service from another CPA Firms is over 15% less than the auditing fee paid in the year before, the amount and ratio of auditing fee reduced and the reasons for the said change must be disclosed: None 3.5 CPA Replacement Information: None 3.6 If the Chairman, President, and Financial or Accounting Manager of the Company who had Worked for the Independent Auditor or the Related Party in the Most Recent Year, the Name, Title, and Term with the Independent Auditor or the Related Party must be Disclosed: None 3.7 Equity transferred and equity pledged (or changes thereto) by Directors, Supervisors, Department Heads and Shareholders of 10% Shareholding or More during the preceding fiscal year or in the current fiscal year up to the date of printing of the annual report: 38 Prince Housing & Development Corp. 39

22 Corporate Governance Report III Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders Title Name Holding Increase (Decrease) 2016 As of Apr. 20, 2017 Pledged Holding Increase (Decrease) Holding Increase (Decrease) Pledged Holding Increase (Decrease) Chairman Joyful Investment Co. Ltd Chairman Joyful Investment Co. Ltd., Rep: Kao-Huei Cheng Vice Chairman Uni-President Enterprises Corp. (Note 1) Vice Chairman Uni-President Enterprises Corp., Rep: Chih-Hsien Lo Director Kao Chyuan Inv. Co., Ltd. 4,000,000-1,600,000 - Director Kao Chyuan Inv. Co., Ltd., Rep: Hsiu-Ling Kao Director Uni-President Enterprises Corp., Rep: Tsung-Ping Wu Director Chao-Mei Wu Tseng Director Taipo Investment Co. Ltd. 7,376, Director Taipo Investment Co. Ltd., Rep: Chien-Te Wu Director Taipo Investment Co. Ltd., Rep: Ping-Chih Wu 106, Director Young Yuan Inv. Co., Ltd Director Young Yuan Inv. Co., Ltd., Rep: Chung-Ho Wu Director Hung Yao Inv. Co., Ltd Director Hung Yao Inv. Co., Ltd., Rep: Shih-Hung Chuang 1,035, Director Po-Yi Hou Director Yu-Pong Investment Corp Director Yu-Pong Investment Corp. Rep: Po-Ming Hou Director Chan-Long Investment Corp Director Chan-Long Investment Corp. Rep: Ying-Chih Chuang (300,000) Director Chi-Ming Chang Independent Director Chian Tai Title Name Holding Increase (Decrease) 2016 As of Apr. 20, 2017 Pledged Holding Increase (Decrease) Holding Increase (Decrease) Pledged Holding Increase (Decrease) Independent Director Ho-I Hung Independent Director Shan-Chai Hsu President Ming-Fan Xie (400,000) Vice President Yi-Chun Su Vice President Wen-Zhen Chiu Vice President Mu-Tsun Hou Vice President Xiao-Yu Chiang (180,000) - (9,000) - Assistant Vice President Jian-Ying Wu Assistant Vice President Chun-Liang Lin Assistant Vice President Chun-Cheng Kuo Assistant Vice President Ying-Jie Chuang (205,000) Manager Yun-Da Chuang 400, Manager Da-Chang Tai Manager Xi-Fen Chang (9,000) - (284,550) - Manager Te-Ju Yen Manager Gung-Won Chen Manager Tsung-Liang Wen Note 1: Shareholders with a stake of 10 percent or more, the recipient's name shall be disclosed along with a note explaining. Note 2: Where the recipient of the equity transfer or equity pledge has ties to the company, it has to fill in the following tabulation. Note 3: Other directors, supervisors, managers and major shareholders have no change in equity. 40 Prince Housing & Development Corp. 41

23 Corporate Governance Report III Shares Trading with Related Parties Name Reason of Transfer Date of Transaction Transferee Relationship between Transferee and Directors, Supervisors, Managers and Major Shareholders Shares Transaction Price (NTD) ing-nan Chuang Grant Yun-Ta Chuang Child of legal representative of Supervisor 400,000 Mei-Yu Chuang Chen Grant Yu-Hsuan Chuang Child of legal representative of Supervisor 300,000 Mei-Yu Chuang Chen Grant Ming-Hsuan Chuang Child of legal representative of Supervisor 300,000 Ching-Chih Chuang Lin Grant Ting-Ya Chuang Child of Director 500,000 Ching-Chih Chuang Lin Grant Chih-Chin Chuang Child of Director 100,000 Ying-Chih Chuang Grant Chih-Chin Chuang Child of Director 400,000 Ming-Fan Xie Grant Su-Chun Lu Spouse of President 200,000 Ming-Fan Xie Grant I-Ting Xie Child of President 200,000 Xiao-Yu Chiang Grant Chia-Yee Chiang Child of Vice President 180,000 Shares Pledge with Related Parties Unit: NT$ Name Reason of Transfer Date of Transaction Transferee Relationship between Transferee and Directors, Supervisors, Managers and Major Shareholders Shares Shares holding % Shares Pledged % Pledged Amount None 3.8 The relationship of the top ten shareholders as defined in the Finance Standard Article 6 : Baseline date: Apr 24, 2017 Unit: Share; % Name Shareholding Spouse & Minor Shareholding by Nominee Arrangement The relationship between any of the Company s Top Ten Share holders Remarks Shares % Shares % Shares % Name Relation Tai-Bo Investment Co. Ltd Director Uni-President Enterprises Co. 162,743, % Joyful Inv. Co., Ltd. Director Kao-Quan Investment Co. Ltd Chairman Uni-President Enterprises Co. (Rep: Chih-Hsien Lo) , % 0 0 Kao-Quan Investment Co. Ltd (Rep. Hsiu-Ling Kao) Spouse Taipo Inv. Co., Ltd. 83,740, % Uni-President Enterprises Co. Director Taipo Inv. Co., Ltd. (Rep: Wei-De Wu) 98, % Zhao-Mei Wu Zeng Mother and son Nan Shan Life Insurance Co., Ltd. 75,178, % None None Nan Shan Life Insurance Co., Ltd. (Rep. Ying-Chung Du) None None Tainan Spinning Co, Ltd. 59,185, % None None Tainan Spinning Co, Ltd. (Rep: Bo-Ming Hou) 22,923, % Xing-Yong-Xing Inv, Co. Ltd,. (Rep: Bo-Yu Hou) Brothers Kao-Quan Investment Co. Ltd 49,837, % Uni-President Enterprises Co. Director Kao-Quan Investment Co. Ltd (Rep. Hsiu-Ling Kao) 425, % Uni-President Enterprises Co. (Rep: Chih-Hsien Lo) Spouse Zhao-Mei Wu Zeng 39,023, % We-De Wu Mother and Son Joyful Inv. Co., Ltd. 28,136, % Uni-President Enterprises Co. Director 42 Prince Housing & Development Corp. 43

24 Corporate Governance Report III Name Shareholding Spouse & Minor Shareholding by Nominee Arrangement The relationship between any of the Company s Top Ten Share holders Remarks Shares % Shares % Shares % Name Relation Joyful Inv. Co., Ltd. (Rep: Li-Ling Cheng) None None Xing-Yong-Xing Inv, Co. Ltd,. 26,471, % None None Xing-Yong-Xing Inv, Co. Ltd,. (Rep: Bo-Yu Hou) Tainan Spinning Co, Ltd. (Rep: Bo-Ming Hou) Brothers Cheng-Long Inv. Co, Ltd. 25,882, % None None Cheng-Long Inv. Co, Ltd. (Rep: Ying-Chih Chuang) 310, % 5,624, % 0 0 None None San Shing Spinning Co., Ltd 23,112, % None None San Shing Spinning Co., Ltd (Rep: Chung-Ho Wu) 5,209, % 44, % 0 0 None None 3.9 Investments of Directors, Supervisors, managers and directly or indirectly controlled business on the reinvested business and the total shareholdings ratio: Total Shareholding Ratio Baseline date: Dec 31, 2016 Unit: Share; % Investees Investment of the Company Investments from Directors, Supervisors, Managers and directly or Indirectly Controlled Business Total Investment Shares % Shares % Shares % Cheng-Shi Investment Holding Co., Ltd 97,504,950, % ,504, % Ta-Chen Construction & Engineering Corp ,497, % 90,497, % Prince Utility Co., Ltd - - 3,070, % 3,070, % Cheng-Shi Construction Co., Ltd ,100, % 20,100, % Investees Investment of the Company Investments from Directors, Supervisors, Managers and directly or Indirectly Controlled Business Total Investment Shares % Shares % Shares % Prince Property Management Consulting Co. 17,146, % ,146, % Prince Apartment Management Maintain Co., Ltd - - 3,000, % 3,000, % Prince Security Co., Ltd ,172, % 13,172, % Geng-Ding Co., Ltd 18,000, % ,000, % Prince Housing Investment Co., Ltd % % Dong-Feng Enterprises Co., Ltd 4,300, % - - 4,300, % Uni-President Development Corp. 108,000, % ,000, % The Splendor Hotel Taichung 97,500, % ,500, % Time Square International Co., Ltd 73,830, % ,830, % Jin-Yi-Xing plywood Co., Ltd 3,938, % - - 3,938, % Ming-Da Enterprise Co., Ltd 200, % , % Prince Co. 1,000, % - - 1,000, % Prince Real Estate Corp. 11,208, % ,208, % PPG Investment Inc % % Queen Holdings Ltd , % 2, % Zhi-Hwa Assets Management Co., Ltd ,644, % 21,644, % 44 Prince Housing & Development Corp. 45

25 Capital Overview IV Chapter IV Annual Report 2016 Capital Overview IV. Capital Overview 4.1 Capital and Shares Source of Capital A. Issued Shares As of 05/15/2017 Authorized Capital Paid-in Capital Remark Other Capital Increased by Assets Other than Cash Sources of Capital Amount (NTD) Shares Amount (NTD) Shares Par Value (NTD) Month/ Year Mar 2003 $10 905,839,645 9,058,396, ,839,645 9,058,396,450 Cancellation of Treasure shares None None Capitalization of retained earnings and cancellation of Treasure shares Oct 2005 $10 1,200,000,000 12,000,000, ,333,032 9,013,330,320 May 2006 $10 1,200,000,000 12,000,000, ,126,032 8,651,260,320 Cancellation of Treasure shares None Oct 2007 $10 1,200,000,000 12,000,000, ,010,484 9,300,104,840 Capitalization of retained earnings None Oct 2008 $10 1,200,000,000 12,000,000, ,910,798 9,579,107,980 Capitalization of retained earnings None None Surplus and capital reserve capitalization of Treasure shares Oct 2010 $10 1,200,000,000 12,000,000, ,227,230 9,962,272,300 Oct 2011 $10 1,200,000,000 12,000,000,000 1,085,887,681 10,858,876,810 Capitalization of retained earnings None Oct $10 1,200,000,000 12,000,000,000 1,194,476,449 11,944,764,490 Capitalization of retained earnings None Sep 2013 $10 1,600,000,000 16,000,000,000 1,313,924,094 13,139,240,940 Capitalization of retained earnings None Apr 2014 $ ,000,000,000 20,000,000,000 1,613,924,094 16,139,240,940 Capital increase by cash None Sept, 2014 $10 2,000,000,000 20,000,000,000 1,662,341,817 16,623,418,170 Capitalization of retained earnings None Nov $10 2,000,000,000 20,000,000,000 1,623,326,147 16,233,261,470 Cancellation of Treasure shares None 46 Prince Housing & Development Corp. 47

26 Capital Overview IV B. Type of Stock s of 04/24/2017 Authorized Capital Share Type Remarks Issued Shares Un-issued Shares Total Shares Common Stock 1,623,326, ,673,853 2,000,000,000 C. Aggregated declaration information: N/A As of 04/24/ Status of Shareholders Total Foreign Institutions & Natural Persons Domestic Natural Persons Other Juridical Person Financial Institutions Government Agencies Item Number of Shareholders , ,510 Shareholding (shares) ,535, ,725, ,064,148 1,623,326,147 Percentage (%) 0.00% % 45.38% 8.44% % Shareholding Distribution Status A. Common Shares (The par value for each share is NT$10) Class of Shareholding (Unit : Share) As of 04/24/2017 Number of Shareholders Shareholding (Shares) Percentage 1 ~ ,360 6,260, ,000 ~ 5,000 19,678 42,413, ,001 ~ 10,000 5,009 36,238, ,001 ~ 15,000 2,353 28,059, ,001 ~ 20,000 1,104 19,504, ,001 ~ 30,000 1,208 29,212, ,001 ~ 50, ,383, ,001 ~ 100, ,504, ,001 ~ 200, ,467, ,001 ~ 400, ,022, ,001 ~ 600, ,987, ,001 ~ 800, ,049, ,001 ~ 1,000, ,834, ,000,001 or over 123 1, , Total 68,510 1,623,326, List of Major Shareholders Shareholder's Name Shares As of 04/24/2017 Shareholding Percentage Uni-President Enterprises Corp. 162,743, % Taipo Inv. Co., Ltd. 83,740, % Nan Shan Life Insurance Co., Ltd 75,178, % Tainan Spinning Co, Ltd. 59,185, % Kao-Quan Investment Co. Ltd 49,837, % Zhao Mei Wu Zeng 39,023, % Joyful Inv. Co., Ltd. 28,136, % Xing-Yong-Xing Inv, Co. Ltd,. 26,471, % Cheng Long Investment Corp 25,882, % San Shing Spinning Co., Ltd 23,112, % 48 Prince Housing & Development Corp. 49

27 Capital Overview IV Market Price, Net Worth, Earnings, and Dividends per Share Market Price per Share Item /01/ /31/2016 Highest Market Price Lowest Market Price Average Market Price Net Worth per Share Before Distribution After Distribution Note 4 N/A Earnings per Share Weighted Average Shares 1,622,670,723 1,622,670,723 1,662,670,723 Diluted Earnings Per Share Adjusted Diluted Earnings Per Share 1.38 Note 4 Dividends per Share Cash Dividends 1.1 Note 4 N/A Stock Dividends Dividends from Retained Earnings 0 Note 4 N/A Dividends from Capital Surplus 0 Note 4 N/A Accumulated Undistributed Dividends 0 0 N/A Return on Investment Price / Earnings Ratio (Note 1) N/A Price / Dividend Ratio (Note 2) Note 4 N/A Cash Dividend Yield Rate (Note 3) 0.10 Note 4 N/A Note 1: Price / Earnings Ratio = Average Market Price / Earnings per Share Note 2: Price / Dividend Ratio = Average Market Price / Cash Dividends per Share Note 3: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price Note 4: Pending Shareholders Meeting Resolution Dividend Policy and Implementation Status A. Dividend Policy If there are earnings for distribution at the end of each fiscal year, after offsetting any loss of prior year(s) and paying all taxes and dues, 10% of the remaining net earnings shall be set aside as legal reserve, then would be appropriated as special reserve in accordance with Securities Exchange Law. The remaining net earnings can be distributed together with prior accumulated unappropriated retained earnings. The Board of Directors will consider the factors that were mentioned above to make the dividend distribution proposal. The dividend should be set in the range from 50% to 100% of the accumulated unappropriated retained earnings and the amount of cash dividend shall exceed 30% of the total amount of dividends distribution. The dividends could be distributed in accordance with the resolution that is approved by the Board of Directors and the Annual Shareholders' Meeting B. Implementation Year Item Cash Dividends Stock Dividends Discussed at Shareholders meeting Discussed at Shareholders meeting C. Proposed Distribution of Dividend Unit: NT $ 1. Available for distribution a. Ua. Undistributed Earnings in the beginning 1,498,958,985 b. Plus: Net income 1,609,189,320 c. Less: Provision for legal reserve (160,918,932) d. Less: Actuarial loss on defined benefit plan (7,135,249) e. Available for distributed earnings 2,940,094, Items Payment of cash dividends ($1 per share) (1,623,623,147) 3. Accumulated un-distributed earnings 1,316,767, The effect of business performance, earnings per stock, and return on investment by stock dividend. No preparation and declaration of any financial forecast in 2014, therefore, no need to disclose the effect of issuance of bonus shares Employee Bonus and Directors' and Supervisors' Remuneration A. Information Relating to Employee Bonus and Directors and Supervisors Remuneration in the Articles of Incorporation If earnings are available for distribution at the end of a fiscal year, 10% of net earnings that is, after offsetting any loss from prior year(s) and paying all taxes and dues shall be set aside as legal reserve and appropriated in accordance with the Securities Exchange Law. The remaining net earnings can be distributed along with prior accumulated unappropriated retained earnings. The Board of Directors will consider the above-mentioned factors when making the dividend distribution proposal. 50 Prince Housing & Development Corp. 51

28 Capital Overview IV The company charter prescribes the following for the employee bonus and compensation for directors and supervisors: 1. not lower than 2 % as a bonus for employees; 2. not over 3 % as compensation for directors and supervisors; The above-mentioned bonus for employees might be a cash bonus or a stock bonus, The Board of Directors is authorized to work out the conditions and procedures of making such distribution. It may also be distributed to employees of subsidiary companies. B. The base of allocate employee bonus, directors and supervisors remuneration and stock dividends: Employee Bonus in Cash $185,821,180 Directors' and Supervisors' Remuneration $63,217,514 There is no difference from the decided amount and the recognized amount in C. Profit Distribution Approved in Board of Directors Meeting for Employee Bonus and Directors and Supervisors Remuneration (1) Recommended Distribution of Employee Bonus and Directors and Supervisors Remuneration: Employee Bonus in Cash $185,821,180 Directors' and Supervisors' Remuneration $63,217,514 (2) Ratio of Recommended Employee Stock Bonus to Capitalization of Earnings: None D. Information of 2013 Earnings Set Aside to Employee Bonus and Directors and Supervisors Remuneration: None Issuance of Corporate Bonds Type of Corporate Bonds 1 st Domestic Secured Corporate Bonds st Domestic Secured Corporate Bonds 2013 Issuance Date Par Value $100,000 $100,000 Issuance price As Par As Par Total Price $2 billions $2.5 billions Rate Fixed rate 1.33% Fixed rate 1.55% Period 5 years. Mature date: years. Mature date: Guarantee Agency Bank of Taiwan Bank of Taiwan & AgriBank Trustee Mega International Commercial Bank Taipei Fubon Bank Underwriter MasterLink Securities Corporate. Capital Securities Corporate. Lawyer Ho Yen, Yen Ho Yen, Yen Certified Public Accountant Yi Cheng, Lin and Su Chung, Cheng Yi Cheng, Lin and Kao Hwa, Wang Repayment Bullet Bullet Outstanding $2 millions $2.5 millions Redemption or Early Repayment Clause None None Covenants None None Credit Rating None None Other Rights of Bondholders Conversion Rights None None Amount of Converted or Exchanged Common Shares, ADRs None None or Other Securities Dilution Effect and Other Adverse Effects on Existing Shareholders None None Custodian None None Buyback of Treasury Stock: None 4.2 Issuance of Corporate Bonds A. On March 26th, 2012, Board of Directors decided to issue NTD 2 billion of domestic secured corporate bonds. This issuance completed on July 12, B. On March 15th, 2013, Board of Directors decided to issue NTD 2.5 billion of domestic secured corporate bonds. This issuance completed on Nov. 21, C. On March 22th, 2017, Board of Directors decided to issue 5 years period domestic secured corporate bonds which not more than NTD 5 billion. 52 Prince Housing & Development Corp. 53

29 Operational Highlights V 4.3 Issuance of Preferred Shares: None 4.4 Global depository receipts: None 4.5 Employee Stock Options: None Chapter V 4.6 Status of New Shares Issuance in Connection with Mergers and Acquisitions: None 4.7 Information on Implementation of the Company s Funds Utilization Plans Annual Report 2016 (a) Description of the plans: The decisions made by Board of Directors of issuance of bonds in 2011 will be implemented depend on our financial needs. We expect to issue 5 years period domestic secured corporate bonds which not more than NTD 5 billion to strength the financial structure and repay the secured corporate bonds issued from previous years. (b) Status of implementation: - The 2012 fist secured corporate bonds have implemented on July 12, 2012, with total NTD$2 billion to payback our short-term loans. This implementation has efficiently lower our debt rate and strengthens our financial structures. The 2013 fist secured corporate bonds have implemented on Nov 21, 2013, with total NTD$2.5 billion to payback our short-term loans. This implementation has efficiently lower our debt rate and strengthens our financial structures. Also, we issue 300 million of new common stock to increase the capital by cash, NT$10 par value with issue price of NT$ We total raised NT$ 4.34 billion. The stock has been listed for trading on Mar 21, The purpose for increasing the capital by cash is to repay the bank loans and reduce interest expense. Operational Highlights 54 Prince Housing & Development Corp. 55

30 Operational Highlights V V. Operational Highlights 5.1 Business Activities Business Scope A. Main areas of business operations 1. Construction: Design, build, operate, rent, and agency of land, commercial and residential buildings; Manufacturing, transaction and consignment of construction raw materials; Urban renewal, land rezoning and developing; Any domestic and international construction project, architecture design of professional building etc. 2. Hotel and Tourism: National Taiwan University and National Cheng Kung University dormitory BOT projects which we built, operate and manage them; Also, we enter hotel market by investing, building, and entrust operating and management rights to the professional team. So far, we have Time-Square International hotel (W Hotel) and Splendor Hotel Taichung. We invest Howard Beach Resort Kenting as well. 3. Others: Security, Apartment Management and Maintenance, Real Estate Development, Lease and Sale, Utility Facility Design, Design and Construction. In addition to the licensing business, an operating act is not prohibited or restricted. B. Revenue distribution Unit NT$ Thousands Major Divisions Total Sales (%) of total sales Construction Income 8,056,878 67% Hotel and Tourism Income 3,228,875 27% Other Operating Income 774,549 6% Total 12,060, % C. Current product line, future service and new products development Current products and services would be the basis to develop the future plan. 1. Operating business A. Products - Core Business: Focus on building and selling residential and commercial projects. - Construction: Mainly on undertake public project and other construction cases. B. Business management - implement performance management system - emphasize on human resources - By using computer and information tools to strengthen the efficiency and quality of decision. 2. Hotel and Tourism and other business - Leisure service: Howard Beach Resort Kenting, Splendor Hotel Taichung, Time Square International Hotel and BOT projects. - Apartment Management and Lease: Rent out the commercial building, house and land; Integrating security service and apartment management. - Biochemical Science and Technology: Taiwan Scino Pharm, Prince Tech, Industry Overview Construction: In the past few years, we focus on developing suburbs areas, the lands near main traffic networks, and rezoned cities. Hotel and Tourism and others: The occupancy rate of hotels and resorts under Prince Housing has already over 80%. The lease of house and land is providing a stable income as well. The correlation among upstream, midstream and downstream Construction: Upstream: The main raw materials of upstream are lands and construction materials. The source of land is from purchasing, country-owned land releasing, and cooperation method. We are also looking for the new material and facilities to improve our product quality. Midstream: Contractors of building the project. Downstream: Real estate breakage is responsible for the sales Research and Development Research and development is our target to keep pursuing. Because of the shortage of construction workers and lands, Prince focuses on research and improving our construction skills. Also, we dispatch employees to Japan on a regular basis to learn the latest and the most environmental standardized construction method. In internal management, we use digitized and standardized progress to spread the information over the company to lower operation cost. Besides, Prince is running Cloud service system in order to combine all the basis life services to enhance the living environment into a better level Long-term and Short-term Development A. Short-term Development Construction: Searching the lands near main traffic networks and new developing cities to launch the projects and planning the perfect products depend on customers need. Hotels and Tourism and others: Integrating marketing channel, fashion topic, and market trend to meet customer s need on shopping, lodging, and dinning in order to increase the occupancy rate and margin. B. Long-term Development Construction: Focus on the need of residential and commercial building; keep assets activating; cost control effectively; providing good quality and fair price products to public; nurturing talents and prudent investment, to make the maximum profit for our shareholders. Hotels and Tourism and others: Keep improving the software/hardware and service quality; providing personalized service and products; nurturing talents and increase efficiency. 56 Prince Housing & Development Corp. 57

31 Operational Highlights V 5.2 Market and Sales Overview Market Analysis A. Sales (Service) Region Area Commercial Building Housing Note Taipei Taichung Tainan Kaohsiung 1. Neihu Financial Center 2. Prince Building 3. President International Tower Wanton Financial Center 1. Prince Building 2. Prince Finance Building None 1. Prince Global Village 2. Shan Ger Li La 3. Prince International Village 4. Prince Sun Town 5. Prince Phoenix Town 6. Prince Tun Yuan 7. Prince Beauty Hall 8. Prince Mei Sui 9. Prince Vacation 10. Prince Sansia International Village 12. Guishan Global Village 1. Prince New Generation 2. Prince Manor 3. Ping Chun Fung Chia 4. Prince Sen Huo 5. Prince Yuan Ye 6. Lin Tung Boulevard 7. Prince Zuo Shin Ming A 8. Chan Chan Prince 9. Prince Culture 10. Prince Yo Life 11. Sung Guan Prince 12. Yun Yun Prince 1. Century Empire 2. Fashion Spring 3. Southern Taiwan Science Splendor 4. Prince Golden Brick 5. Century Splendor 6. Wen Yuan Hall 7. Fashion House 8. Prince Fu Di 9. Prince Wen Yuan 10. Prince. New Culture 11. Golden Age 12. Culture Hall 1. Prince Space 2. Prince Harvard 3. Prince Chun Di 4. Prince Dragon House 5. Prince In Mon Hu 6. Prince Chun Pin 7. Prince Chun Pin Haw Chia 8. Prince Dian Sha 9. Prince Sha Lui Di 10. Prince Seattle 11. Prince Tun-Yuan 12. Prince Dragon 13. Prince Jin-Hua 14. Prince Sky Building 15. Prince College 16. Taipei Sinyi 17. Central Park 18. Prince Fu 19. Prince Fu II 20. Prince Fu III 21. Prince YuDing 22. Prince HwaWei 23. Prince W 24. Prince Shin-Yi (XinChung) 13. Prince Ju 14. Prince Hui 15. Prince Dau 16. Prince Fu 17. Jing Yun Sian 18. The Cloud Century 19. Prince Hai Yan 20. Ching Fung Jing 21. Prince YuDing 22. The Cloudy Century SA 23. Prince W 24. Prince Chun 13. Prince Fung Ho 14. Nan Ger Zi Li 15. Prince New Culture II 16. Prince Hua Bo II 17. Prince Mei Xue 18. Prince Hua Bo III 19. Prince Fung Yun Hui 20. Prince i-cloud 21. Prince WIN 22. Prince Hua Bo V 23. Prince Chen Fung Hei 24. Prince Fun Yun 13. P13. Prince New York 57th Street 14. Prince Culture 15. Prince Yuan-Shan 16. Prince Town 17. Prince Shi Bo 18. Prince Shi Yun 19. Prince Hua Yang 20. Prince Bon 21. Prince Cloud D 22. Prince Cloud E 23. Prince Siao Taipei Area: 1. Taipei City 2. New Taipei City 3. Taoyoan City/ country 4. Hsinchu City/ Country Taipei Area: 1. Taichung City 2. Chunghwa City/Country Taipei Area: 1. Tainan City 2. Yulinf City/ Country 3. Chiayi City/ Country Kaohsiung Area: 1. Kaohsiung City 2. Pitung City/ Country Area Commercial Building Housing Note Taipei Taichung Tainan Kaohsiung 1. Taipei City Hall Bus Terminal Station BOT 2. Taoyoan Airport MRT station (partial) 3. Sun Bao Beito project 4. Shin Chung Fu Do Hsin commercial and residential building 5. National Palace Museum (Partial) 6. Canon Business Center 1. National Taiwan Hospital, Yuling Branch 2. Shi Bin Express (partial) 3. High Speed Railway Chunghwa Station project 1. Wu Hu Lio Bridge project 2. Tainan Spinning Dream Mall Project 3. Shi Bin Express (partial) 1. Kaohsiung MRT (partial) 2. Budda Memorial Center 3. Chia Chao Station 4. Hun Shan Shin Shin Section Project 5. Landscape project of Chen Jin Lo 1. NTU Chung Shin Dormitory 2. NTU Shia Yuan Dormitory 3. NTU Hsiu Chi House 4. Time-Square International Hotel Taipei Area: 1. Taipei City 2. New Taipei City 3. Taoyoan City/country 4. Hsinchu City/Country 1. Splendor Hotel Taichung Taichung Area: 1. Taichung City 2. Chunghwa City/Country 1. NTKU Prince Dormitory 2. ZenDa Suites 1. Howard Beach Resort Kenting (investment holdings) Tainan Area: 1. Tainan City 2. Yulinf City/Country 3. Chiayi City/Country Kaohsiung Area: 1. Kaohsiung City 2. Pitung City/Country B. Market Share (%) of Major Product Having no overall sales data of Taiwan, it is not sufficient enough to estimate the market share of our sales of real estate. C. Market demand and supply 1. Supply Construction: Product diversification Hotel and Tourism and others: More hotels have been operated in the metropolitan area and well-known scenic spot. Total hotel room numbers has grown fast. 2. Demand Construction: - Basic Market: For personal use. The demanders in this category are the real estate demanders because they usually change or buy houses not affected by the economic boom. - Investment Market: a. Investment market demand: people take the real estate as an investment tool. b. Speculative market demand: it usually happens during the booming economic period. Hotels and Tourism and others: Tourism industry has grown fast in the past few years and so does tourists. Besides, government tries hard to push no-chimney industry and allow the tourists from Mainland China. Consequently, the demand for hotel rooms increase. 3. Growth Construction: Prince already focus on its selling and marketing on integrating real estate and high-tech industry. Customers can collect new information, shop, watch entertainment show and understand how Prince manages the communities via internet at home. In the other hand, 58 Prince Housing & Development Corp. 59

32 Operational Highlights V Prince releases the application system in the smart phone online store which can attract the potential customers to view the case online via smart phone. Customers can also contact us via internet if they have any problem and we could improve the after-sale service time after time. Hotels and Tourism and others: According to the population and region in Taiwan, tourism industry will have a limited growth. Helping customer either from domestic or international build loyalty is important. D. Favorable and Unfavorable Factors in the Long-range Future 1. Competitiveness Construction: Since 1973, we insist our spirit of good location, good design, good quality, and good price. Also, Tainan Group provides us lot of resource to make the best building in Taiwan. Hotel and Tourism and others: Hotels that owned or invested by Prince are located in a metropolitan area and well-known scenic spots. Furthermore, we operate hotels with world famous hotel chain stores. Hotels and Tourism and others: - Interior: Keep improving software/hardware, facilities and service quality and strengthening employees education and training. - External part: Integrating marketing channels. Keep creating tops and making publics to put focus on us The Production Procedures of Main Products A. Major Products and Their Main Uses Construction: Prince s main products are residential buildings, houses, apartments, high-end residential buildings, stores, and high-end office buildings. Hotels and Tourism and others: lease of commercial building, hotels, shopping plaza, dormitory BOT project and investment income. B. Major Products and Their Production Processes 2. Strength Construction: A. Under circumstance of limited supply of land, market price will keep stable. B. Government opens the real estate market to foreign and China and they can invest the market directly. C. Consumers ask more about the living quality which make them willing to change or purchase a new house. D. Administrative region re-design (Taichung, Tainan, and Kaohsiung) and new public transportation (high speed rail, MRT, and high way) has been completed or extended from original route. We expected that will expand the urban living area. Hotels and Tourism and others: The brand positioning and market segmentation of W Hotel is very clear. We have a great and experienced operation team. Those are the reason why we can attract the top consumers. Also, the hotel is Shin-Yi district which is the most modern cosmopolitan district of Taipei. 3. Weakness Construction: A. A lot of pre-sale cases in the past few years made a large amount of inventory. B. Government policies are trying to slow down the selling price and speculation. C. The consumption ability decline and inflation affect the economic. Hotels and Tourism and others: More and more new competitors joint the 5 stars hotels market in Taipei, like, Humble House Taipei, Mandarin Oriental Taipei, and Eslite Hotel. Some of the old hotels are remolding and will back to the market soon, like, Grand Hyatt Taipei, and Shangri-La s Far Eastern Plaza Hotel Taipei. 4. Corresponding Policy Constructions: We will focus our project on the spirit of good location, good design, good quality and good price plus good after-sale services which will help us keep customers. Marketing Advertisement Sales Market research and evaluate Land developing Design and plan Completion and turn in house After-sale service Project contracts Project contracts Construct Completion and house inspection 60 Prince Housing & Development Corp. 61

33 Operational Highlights V Supply Status of Main Materials Constructions: 1. Location: Base on the land information, we evaluate it by researching, a roughly planning, and profit ability analyzing. If we think the land is workable after evaluating it, we would choose it as our construction site. 2. Plan and design: We will analyze again about the land features, laws, market, product position and business plan. Also, do some detail discussion about the flat space, façade, structure and facilities of the product. 3. Sales: Product cost analyzing, selling price planning, advertisement and promotion, and marketing. 4. Project: After getting permission from government, we would start to construct the site base on the permitted design. 5. Registration: After we receive the license and apply for double checking the area, we could register the land to keep the property right. 6. Turn in house: Customer would check before accept the completed and licensed building. After that, Prince will transfer the property right and building to customer. 7. After-sale service: Prince will set up a service center which will provide the services of maintenance of buildings, repair, community safety, and cleanness Major Suppliers and Clients A. Major Clients Information for the Last Two Calendar Years Unit: NT$ thousands Q1 Relation with Relation with Relation with Company Name Amount % Company Name Amount % Company Name Amount % Issuer Issuer Issuer 642, None Canon Co. Ltd 129, None Sunpower Development & Construction Co., Ltd, Changhua County Government 613, None Directorate general of Highways, MOTC, middle region construction division of western highways Directorate general of Highways, MOTC, middle region construction division of western highways Railway Reconstruction Bureau 112, None 611, None 612, None Ministry of Transportation and Communications 395, None Tong Shung Housing Co.,Ltd 51, None Changhua County Government 480, None Sunpower Development & Construction Co., Ltd, 38, None Sunpower Development & Construction Co., Ltd, 446, None Shu 356, None Directorate general of Highways, MOTC, middle region construction division of western highways 309, Chen 32, Sunpower Development & Construction Co., Ltd, Railway Reconstruction Bureau Tainan Spinning Co, Ltd. 376, , None Wu 28, None Lee 352, None Grape King Bio 280, None Canon Co. Ltd 143, None Chou 27, None Tung 232, None Tong Shung Housing Co.,Ltd 99, None Chu 26, None 83, None Li 25, None Hung Shung Housning Co., Ltd First United Co. Ltd 206, None South Region Water Resources 192, None Tainan Spinning Co, Ltd. 77, None Tseng 24, None Others 12,316, Others 9,166, Others 1,522, Net Sales 16,108, Net Sales 12,060, Net Sales 2,018, Prince Housing & Development Corp. 63

34 Operational Highlights V B. Major Suppliers Information for the Last Two Calendar Years Unit: NT$ thousands Q1 Relation with Relation with Relation with Company Name Amount % Company Name Amount % Company Name Amount % Issuer Issuer Issuer Taiwan Sugar Corporation, Taiwan Sugar Corporation, 960, None 537, None Hisn Fon Iron Co., Ltd 45, None Taichung and Chuanghwa Taichung and Chuanghwa Chou Hon Construction Co., Ltd Taiwan Sugar Corporation, 43, None 686, None Chon Yan Inteirior Co., Ltd 289, None Tainan Fan Hsun Systen Tech Co., Ltd 35, None Chu Han Contruction Co., Ltd 33, None New Taipei City Gorvenment 664, None Wen-Li Utility 191, None China Steel Structure Co., Ltd 207, None Sun Lia Inteirior Co., Ltd 169, None Hei Guan Contruction Co., Ltd Taiwan Sugar Corporation, 30, None 200, None Hisn Fon Iron Co., Ltd 114, None Kaohsiung 199, None Yeh Hsin Corpration 104, None Hien Sun Fah Iron Co., Ltd 29, None Wen-Hung Construction Company Shia-Shen-Fa Steel Company 116, None Yah Lien Tech Co., Ltd 98, None Yeh Hsin Corpration 25,465 None 97, None Taiwan Cemment Co., Ltd 16, None Chu Han Contruction Co., Ltd Shin-Chun Advertising 99, None Fan Hsun Systen Tech Co., Wen-Chun Mixed Concrete 96, None 95, None Uam Fu Corpration 14, None Ltd Universal Cement Wen-Li Utility 94, None Bie Zon Contruction Co., Ltd 79, None 11, None Corporation Others 8,093, Others 9,009, Others 1,031, Net Purchases 11,420, Net Purchases 10,788, Total Purchases 1,316, Production over the Last Two Years Output Major Products Sales over the Last Two Years Sales Year Unit Pin / NTD thousands Local Local Major Products Quantity Amount Quantity Amount House 38, ,030,233 24, ,274,930 Total 38, ,030,233 24, ,274, Human Resources Number of Employees Year Unit Pin / NTD thousands Capacity Quantity Capacity Quantity House 49,848,10 7,018,471 18, ,555,220 Total 49, ,018,471 18, ,555,220 Year /01/ /31/2017 Employees 1,672 1,553 1,671 Technician Others Total 2,664 2,603 2,702 Average Age Average Years of Service Ph.D. 0% 0% 0% Masters 6% 5% 6% Education Bachelor s Degree 50% 51% 49% Senior High School 34% 37% 34% Below Senior High School 10% 8% 11% 64 Prince Housing & Development Corp. 65

35 Operational Highlights V 5.4 Disbursement for Environmental Protection Under construction period, mud, sands and litters would result in a mess of the environment pollution. Therefore, Prince dispatches our employees to Japan to learn about the construction skills and environmental management. We always try our best to keep the site area being mess up. 5.5 Labor Relations A. Management System: Promotion, welfare, rewards and punishments, vacations, pension, and redundancy payments etc. B. Welfare: Employee welfare committee, education grant, employees' children scholarships, employee training, domestic/foreign company trip, site accident insurance, and etc. C. Prince is in order to enhance the quality of human resources and development advantages, we always hold the education events and training programs in domestic and foreign. D. The company suffered due to loss of labor disputes as so far: None 5.6 Important Contracts Agreement Party Start Date Content Restriction 1. During the construction period, the ratio of own funds to invest in this program could not lower than 30%. 2. During the operation, the ratio of stock equity to total access could lower than 25%. The ratio of current assets to current liability could not lower than 100%/ 3. None transferable B should response for access the ownership and the right of use of the land in this program. A should complete the construction in 3 years and operate it for 44 years. Students pay the rent and other expense to A. Prince Housing (A) National Taiwan University (B) Mar 17, 2005 BOT None transferable B should response for access the ownership and the right of use of the land in this program. A should get the license within 3 years started from the date contract signed. Chartered period for student dormitory is 35 years and shopping mall and hotel is 50years. Prince Housing (A) National Cheng Kung University (B) May 10, 2005 BOT Current ratio, debt ratio, and interest coverage ratio couldn t lower than the restriction number. Bank will check it once a year. Total amount is billion. The items are including medium-term loans and commercial paper. The foundation is provided to establish and operate dormitory BOT of NCKU. May 2, 2006 Prince Housing (A) Mega International Commercial Bank (B) Credit case Current ratio, debt ratio, and interest coverage ratio couldn t lower than the restriction number. Bank will check it once a year. Total amount is 21.6 billion. The items are including long-term loans and guarantee receivable. Jan 4, 2006 Prince Housing (A) Mega International Commercial Bank and other 7 financial institutions (B) Syndicated Loan 66 Prince Housing & Development Corp. 67

36 Operational Highlights V Agreement Party Start Date Content Restriction Cooperation in the construction of housing Prince Housing (A) Taiwan Sugar Corporation (B) May 18, 2007 Mainly for the transaction of Koan An lot No (Taichung). Agreed to pay for the construction and sales related expenses. No compensation for any reason. According to the contract, need to pay for the deposit of $181,090. Syndicated Loan Splendor Hotel Taichung (A) Bank SinoPac and other 3 financial institutions (B) Oct 9, 2013 Total amount is 3.3 billion. Prince Housing and China Metal are guarantors. Either Prince Housing or China Metal Current s ratio, debt ratio, and interest coverage ratio couldn t lower than the restriction number. Cooperation in the construction of housing Prince Housing (A) Tsai-Yuan, Fang (B) World Vision United Co., Ltd (B) March 5, 2012 July 17, 2012 Mainly for the transaction of Zhi San Sec. Lot No. 602 & 572 of Shi Lin District (Taipei) According to the contract, need to pay for the deposit of $350,000 and $19,570. As of Dec 31, 2012, the balance of deposit was $350,000 and $19,570. Syndicated Loan Prince Housing (A) Bank of Taiwan and other 10 financial institutions(b) Nov 28, 2013 Total amount is 2 billion. The items are including medium-term loans. The foundation is provided to establish residential buildings in Kou An Section, Taichung. Should pay the balance into a lump sum on the expiration date. Cooperation in the construction of housing Cooperation in the construction of housing Prince Housing (A) Taiwan Sugar Corporation (B) Prince Housing (A) Mega International Commercial Bank and other 3 financial institutions (B) Jan 20, 2014 Feb 10, 2014 Dec 27, 2014 Sept 18, 2015 Mainly for the transaction of Taichung Kou An Section Lot No , Tainan Ho Kuan Section Lot No. 34 & Kaohsiang Nan Zhi Section Lot No Total amount is 1.06 billion. The items are including medium-term loans. The foundation is provided to establish residential buildings in Ping-Shin Section, Dai-Ping District, Taichung. Agreed to pay for the construction and sales related expenses. No compensation for any reason. According to the contract, need to pay for the deposit of $63,880, $83,080 and $125,540. Should pay the balance into a lump sum on the expiration date. Agreement Party Start Date Content Restriction Syndicated Loan Prince Housing (A) CTBC bank and other 6 financial institutions(b) June 23,2016 Total amount is 2.1 billion. The items are including medium-term loans. Tan Mei Building is held in pledge Provide working capital for the contract period and should payback full amount on the expiration date. Syndicated Loan Prince Housing (A) Bank of Taiwan and other 3 financial institutions(b) Nov Total amount is 3.45 billion. The items are including medium-term loans billion for corporate bond guarantee and 0.5 billion for payback financial liabilities. 68 Prince Housing & Development Corp. 69

37 . Financial Information Chapter Annual Report Five-Year Financial Summary Condensed Balance Sheets and Statements of Comprehensive Income-IFRS Condensed Consolidated Balance Sheets Item Year Unit NT $ thousands Five-Year Financial Summary Mar. 31, Current assets 23,926,299 28,449,122 34,239,845 32,959,394 31,059,275 30,405,791 Property, plant and equipment 7,033,963 7,014,898 6,957,966 6,742,932 6,513,554 6,456,658 Intangible assets 2,494,229 2,425,016 2,362,995 2,302,523 2,240,916 2,225,501 Other assets 15,435,865 14,883,459 12,490,162 12,471,062 11,471,099 11,602,129 Total assets 48,890,356 52,772,495 56,050,968 54,475,911 51,284,844 50,690,079 Current liabilities Before distribution After distribution 17,279,283 15,650,361 17,219,734 12,410,602 12,812,003 11,724,820 17,876,521 16,134,538 18,549,607 14,196,261 N/A N/A Non-current liabilities 14,479,541 18,547,636 14,520,290 16,890,738 13,845,548 14,118,239 Before distribution Total liabilities After distribution Equity attributable to owners of the parent 31,758,824 34,197,997 31,740,024 29,301,340 26,657,551 25,843,059 32,356,062 34,682,174 33,069,897 31,086,999 N/A N/A 16,748,974 18,208,759 23,964,652 24,831,076 24,296,631 24,518,288 Share capital 11,944,765 13,139,241 16,623,418 16,233,261 16,233,261 16,233,261 Capital surplus 521, ,293 1,929,793 2,260,513 2,260,513 2,260,513 Retained earnings Before distribution After distribution 2,752,909 2,609,054 4,035,662 4,929,196 4,745,590 4,885, ,195 1,640,700 2,705,789 3,143,537 N/A N/A Other equity 1,590,447 1,999,611 1,436,219 1,409,109 1,058,270 1,139,877 Treasure stock -60,440-60,440-60,440-1,003-1,003-1,003 Financial Information Non-controlling interest 382, , , , , ,732 Total equity Before distribution After distribution 17,131,532 18,574,498 24,310,944 25,174,571 24,627,293 24,847,020 16,534,294 18,090,321 22,981,071 23,388,912 N/A N/A 70 Prince Housing & Development Corp. 71

38 Condensed Consolidated Statements of Comprehensive Income Item Five-Year Financial Summary From Jan. 1, 2016 to Mar. 31, 2017 Operating revenue 25,630,254 17,242,007 19,424,465 16,108,506 12,060,302 2,018,318 Gross profit 10,219,210 4,699,497 5,207,579 5,175,160 3,935, ,322 Operating income 6,902,737 2,019,543 2,465,294 2,451,399 1,513, ,040 Non-operating income and expenses -56, ,671 77,807 70, ,951-34,956 Profit before income tax 6,846,561 1,730,872 2,543,101 2,521,660 1,905, ,084 Net profit from continuing operation Loss from discontinuing operation 6,577,355 1,635,472 2,379,634 2,233,568 1,599, , Net profit 6,577,355 1,635,472 2,379,634 2,233,568 1,599, ,120 Other comprehensive income (after income tax) 489, , ,511-41, ,975 81,607 Total comprehensive income 7,067,004 2,040,204 1,812,123 2,192,065 1,241, ,727 Net profit (owners of the parent) Net profit (non-controlling interest) Comprehensive income (owners of the parent) Year Comprehensive income (non-controlling interest) Unit NT $ thousands 6,588,833 1,652,753 2,398,718 2,237,800 1,609, ,050-11,478-17,281-19,084-4,232-9,974-1,930 7,074,483 2,057,023 1,831,570 2,196,297 1,251, ,657-7,479-16,819-19,447-4,232-9,974-1,930 Earnings per share (NT$) Condensed Non-Consolidated Balance Sheets Item Five-Year Financial Summary Mar. 31, Current assets 20,963,396 24,360,677 28,613,156 26,749,012 25,713,914 Property, plant and equipment 539, , , , ,089 Intangible assets 2,484,197 2,422,945 2,361,692 2,300,439 2,239,187 Other assets 16,104,992 15,576,754 15,048,711 16,206,820 14,995,261 Total assets 40,091,735 42,865,364 46,614,285 45,853,028 43,520,451 Current liabilities Before distribution After distribution 13,514,921 11,397,412 13,482,042 9,376,137 9,127,557 14,112,159 11,881,589 14,811,915 11,161,796 N/A Non-current liabilities 9,827,840 13,259,193 9,167,591 11,645,815 10,096,263 Total liabilities Before distribution After distribution 23,342,761 24,656,605 22,649,633 21,021,952 19,223,820 23,939,999 25,140,782 23,979,506 22,807,611 N/A Share capital 11,944,765 13,139,241 16,623,418 16,233,261 16,233,261 Capital surplus 521, ,293 1,929,793 2,260,513 2,260,513 Retained earnings Before distribution After distribution 2,752,909 2,609,054 4,035,662 4,929,196 4,745, ,195 1,640,700 2,705,789 3,143,537 N/A Other equity 1,590,447 1,999,611 1,436,219 1,409,109 1,058,270 Treasure stock -60,440-60,440-60,440-1,003-1,003 Total equity Year Before distribution After distribution 16,748,974 18,208,759 23,964,652 24,831,076 24,296,631 16,151,736 17,724,582 22,634,779 23,045,417 N/A Unit NT $ thousands N/A 72 Prince Housing & Development Corp. 73

39 Condensed Non-Consolidated Statements of Comprehensive Income Item Five-Year Financial Summary Operating revenue 18,865,009 8,571,288 10,892,210 8,763,040 6,004,370 Gross profit 8,761,685 2,873,723 3,575,742 3,131,922 2,265,184 Operating income 6,715,088 1,428,187 1,986,869 1,606,015 1,021,485 Non-operating income and expenses 173, , , , ,727 Profit before income tax 6,888,749 1,707,532 2,500,888 2,447,050 1,858,212 Net profit from continuing operation Loss from discontinuing operation Year 6,588,833 1,652,753 2,398,718 2,237,800 1,609, Net profit 6,588,833 1,652,753 2,398,718 2,237,800 1,609,189 Other comprehensive income (after income tax) 485, , ,148-41, ,975 Total comprehensive income 7,074,483 2,057,023 1,831,570 2,196,297 1,251,214 Earnings per share (NT$) Unit NT $ thousands From Jan. 1, 2016 to Mar. 31, 2017 N/A Condensed Balance Sheets and Statements of Income - ROC GAAP Condensed Non-Consolidated Balance Sheets - ROC GAAP Unit NT $ thousands Year Five-Year Financial Summary Item Current assets 21,001,978 Funds and Investment 7,908,712 Fixed assets 9,660,797 Intangible assets 0 Other assets 1,609,587 Total assets 40,181,074 Current liabilities Before distribution 13,505,717 After distribution 14,102,955 Non-current liabilities 9,522,182 Other liabilities 203,348 Total liabilities Before distribution 23,231,247 After distribution 23,828,485 N/A N/A N/A N/A Share capital 11,944,765 Capital surplus 521,293 Retained earnings Unrealized gain or loss on financial instruments Before distribution 3,208,115 After distribution 1,416,401 1,416,607 Cumulative translation adjustments -43,643 Unrecognized pension cost -36,870 Treasury stock -60,440 Total equity Before distribution 16,949,827 After distribution 16,352, Prince Housing & Development Corp. 75

40 Condensed Non-Consolidated Statements of Income-ROC GAAP Item Operating revenue 7,892,497 Gross profit 3,216,120 Operating income 1,559,811 Non-operating income and gains 679,538 Non-operating income and losses -403,376 Income before income tax from continuing operation Income from continuing operation Income(loss) from discontinuing operation Five-Year Financial Summary ,835,973 1,785,930 1,991,605 (Note 1) Extraordinary items 0 Cumulative effect of changes in accounting principle Net income Earnings per share (NT$) Year 0 0 1,785,930 1,991,605 (Note 1) 1.54 (Note 1) 1.67 (Note 1) Unit NT $ thousands N/A N/A N/A N/A Note 1: Suppose the subsidiaries shareholdings of the parent company are not recognized as treasury stock. Condensed Consolidated Balance Sheets-ROC GAAP Five-Year Financial Summary Unit NT $ thousands Item Current assets 25,497,843 Funds and Investment 5,956,988 Fixed assets 16,138,473 Intangible assets 13,808 Other assets 817,409 Total assets 48,424,521 Current liabilities Before distribution 17,256,863 After distribution 17,854,101 Non-current liabilities 13,022,748 Other liabilities 810,964 Total liabilities Before distribution 31,090,575 After distribution 31,687,813 Share capital 11,944,765 Capital surplus 521,293 Retained earnings Unrealized gain or loss on financial instruments Before distribution 3,208,115 After distribution 1,416,401 1,416,607 Cumulative translation adjustments -43,643 Unrecognized pension cost -36,870 Treasury stock -60,440 Minority interest 384,119 Total equity Year Before distribution 17,333,946 After distribution 16,736,708 N/A N/A N/A N/A 76 Prince Housing & Development Corp. 77

41 Condensed Consolidated Statements of Income-ROC GAAP Unit NT $ thousands 6.2 Five-Year Financial Analysis Financial Analysis (IFRs, Consolidated) Item Year Operating revenue 14,657,742 Gross profit 4,673,645 Operating income 1,889,850 Non-operating income and gains 436,897 Non-operating income and losses -508,183 Income before income tax from continuing operation Five-Year Financial Summary ,818,564 Item Financial structure (%) Solvency (%) Year Financial analysis in the past five years Ratio of liabilities to assets Ratio of long-term capital to fixed assets Current ratio Quick ratio Times interest earned ratio Accounts receivable turnover (turns) Income from continuing operation Income(loss) from discontinuing operation 1,775, N/A N/A N/A N/A Operating ability Average collection period Inventory turnover (turns) Accounts payable turnover (turns) Extraordinary items 0 Average days in sales Cumulative effect of changes in accounting principle 1,775,845 Income before income tax 1,785,930 Consolidated net income -10,085 Net income attributable to minority interest 1.54 Earnings per share (NT$) Unqualified opinion from 2011 to 2015 Year CPA Firm CPA's Name Auditing Opinion 2012 PWC Taiwan Y.C. Lin & K.H. Wang Non-standard unqualified opinion 2013 PWC Taiwan Y.C. Lin & K.H. Wang Non-standard unqualified opinion 2014 PWC Taiwan Y.C. Lin & C.H. Wu Non-standard unqualified opinion 2015 PWC Taiwan Y.C. Lin & C.H. Wu Non-standard unqualified opinion 2016 PWC Taiwan Y.C. Lin & C.H. Wu Unqualified opinion. Profitability Cash flow Leverage Fixed assets turnover (turns) Total assets turnover (turns) Return on total assets (%) Return on stockholders' equity (%) Pre-tax income to issued capital (%) Profit ratio (%) Earnings per share ($) Cash flow ratio (%) N/A N/A Note1 Cash flow adequacy ratio (%) N/A N/A Cash reinvestment ratio (%) N/A N/A 7.35 Note1 Note1 Operating leverage Financial leverage Note 1: Not applicable by negative cash flow. 78 Prince Housing & Development Corp. 79

42 6.2.2 Financial Analysis (IFRs, Non-Consolidated) Financial Analysis (Domestic Financial Accounting Principle, Non-Consolidated) Item Financial structure (%) Year Ratio of liabilities to assets Ratio of long-term capital to fixed assets Financial analysis in the past five years Item Financial structure (%) Year Ratio of liabilities to assets 58 Ratio of long-term capital to fixed assets Financial analysis in the past five years Solvency (%) Current ratio Quick ratio Times interest earned ratio Accounts receivable turnover (turns) Solvency (%) Current ratio 156 Quick ratio 54 Times interest earned ratio 5.62 Accounts receivable turnover (turns) 6.76 Average collection period 54 Operating ability Average collection period Inventory turnover (turns) Accounts payable turnover (turns) Operating ability Inventory turnover (turns) 0.26 Accounts payable turnover (turns) 2.68 Average days in sales 1404 Fixed assets turnover (turns) 0.81 Average days in sales Fixed assets turnover (turns) Total assets turnover (turns) Return on total assets (%) N/A Profitability Total assets turnover (turns) 0.19 Return on total assets (%) 5.12 Return on stockholders' equity (%) 11 Ratio to issued capital (%) Operating income 13 Pre-tax income 15 N/A N/A N/A N/A Profitability Cash flow Return on stockholders' equity (%) Pre-tax income to issued capital (%) Profit ratio (%) Earnings per share ($) Cash flow ratio (%) N/A N/A Cash flow adequacy ratio (%) Cash reinvestment ratio (%) N/A N/A N/A N/A 6 N/A Cash flow Leverage Profit ratio (%) 23 Earnings per share ($) Cash flow ratio (%) Cash flow adequacy ratio (%) Cash reinvestment ratio (%) Operating leverage 1.48 Financial leverage 1.34 Leverage Operating leverage Financial leverage Prince Housing & Development Corp. 81

43 6.2.4 Financial Analysis (Domestic Financial Accounting Principle, Consolidated) 6.3 Audit Committee Inspection Report Item Financial structure (%) Solvency (%) Operating ability Profitability Cash flow Leverage Ratio of liabilities to assets 64.2 Ratio of long-term capital to fixed assets Financial analysis in the past five years Current ratio Quick ratio 53.8 Times interest earned ratio 3.9 Accounts receivable turnover (turns) 7.6 Average collection period 48 Inventory turnover (turns) 0.5 Accounts payable turnover (turns) 3.7 Average days in sales 747 Fixed assets turnover (turns) 0.9 Total assets turnover (turns) 0.3 Return on total assets (%) 4.3 Return on stockholders' equity (%) 10.8 Ratio to issued capital (%) Operating income 15.8 Pre-tax income 15.2 Profit ratio (%) 12.1 Earnings per share ($) Year Cash flow ratio (%) 84.7 Cash flow adequacy ratio (%) 23.8 Cash reinvestment ratio (%) 2 Operating leverage 1.3 Financial leverage 1.34 N/A N/A N/A N/A Submitted for Approval The Board of Directors has formulated and submitted the 2016 Business Report, Financial Report, and Surplus Distribution Report; whereby the audit report based on the inspection of the financial statements has been completed and submitted by Accounts Jian-Zhi Wu and Yi-Zhang Lin of PwC Taiwan. Inspection for the Business Report, Financial Report, and Surplus Distribution Report mentioned above have been completed by this Audit Committee with no incongruity identified. A report is hereby submitted pursuant to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act for your review. Respectfully yours, Prince Housing & Development Corporation Audit Committee Convener Chian Tai May 4, Prince Housing & Development Corp. 83

44 Declaration of Consolidated Financial Statements of Affiliated Enterprises For the year ended December 31, 2016, pursuant to Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises, the Company that is required to be included in the consolidated financial statements of affiliates, is the same as the Company required to be included in the consolidated financial statements of parent and subsidiary companies under International Financial Reporting Standards 10. And if relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies, it shall not be required to prepare separate consolidated financial statements of affiliates. Hereby declare, PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2016 AND 2015 PRINCE HOUSING & DEVELOPMENT CORP. By ZHENG GAO HUI Chairman March 22, For the convenience of readers and for information purpose only, the auditors report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors report and financial statements shall prevail. 84 Prince Housing & Development Corp. 85

45 Declaration of Consolidated Financial Statements of Affiliated Enterprises REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE For the year ended December 31, 2016, pursuant to Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises, the Company that is required to be included in the consolidated financial statements of affiliates, is the same as the Company required to be included in the consolidated financial statements of parent and subsidiary companies under International Financial Reporting Standards 10. And if relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies, it shall not be required to prepare separate consolidated financial statements of affiliates. PWCR To the Board of Directors and Shareholders of Prince Housing & Development Corp. Opinion We have audited the accompanying consolidated balance sheets of Prince Housing & Development Corp. and its subsidiaries (the Group ) as at December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. Hereby declare, PRINCE HOUSING & DEVELOPMENT CORP. By ZHENG GAO HUI Chairman March 22, In our opinion, based on our audits and the report of other independent accountants (please refer to the other matter section of our report), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparations of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission. Basis for opinion We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the Code ), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained and the report of other independent accountants are sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters. The accuracy of building and land sales revenue recognition timing Description Please refer to Note 4(30) for accounting policies on sales revenue, and Note 6(26) for details. For the year ended December 31, 2016, building and land sales revenue amounted to NT$ 5,274,930 thousand, representing 43.74% of consolidated operating revenue. The Group recognises building and land sales revenue and profit or loss when transferring ownership and handing over the property. Since to the Group has diverse customers, the information delivery and recording process between segments in the Group usually involved manual work, and thus may result in inappropriate timing of revenue recognition around the balance sheet date. Considering that the building and land sales revenue form most of the Group s operating revenue, we identified the accuracy of building 86 Prince Housing & Development Corp. 87

46 and land sales revenue recognition timing as a key audit matter. How our audit addressed the matter We performed the following audit procedures on the above key audit matter: A. We obtained an understanding and assessed the reasonableness of internal controls on building and land sales revenue, and tested whether the process of building and land sales revenue recognition timing had been executed effectively, including verifying documents related to the date of ownership transfer and property handover and the accuracy of recognition timing; and B. We performed cut-off test on building and land transactions around the end of the reporting period, including verifying land registration, house ownership certificate and customer signed receipts for handing over of property to confirm the building and land sales revenue recognition timing was adequate. Recognition of construction revenue- the stage of completion estimate Description Please refer to Note 4(13) and (30) for accounting policies on construction contracts and revenue recognition, and Note 6(26) for details. For the year ended December 31, 2016, construction revenue amounted to NT$ 2,781,948 thousand, representing 23.07% of consolidated operating revenue. The Group provided property construction related services. During the duration of a contract, the recognition of revenue is based on the stage of completion of a contract. The stage of completion is determined by reference to the contract costs incurred to date and the proportion that contract costs incurred for work performed to date compared to the estimated total contract costs. Aforementioned estimated total contract costs were based on contract budget details compiled by owner s design drawing, considering the changes in construction scaled caused by additional or less work, and the price fluctuations in the recent market to estimate the contract work, overhead and relevant costs. As the complexity of aforementioned total cost usually involves subjective judgment and contains a high degree of uncertainty, and the estimate of total cost affects the stage of completion and the recognition of construction revenue, thus we consider the reasonableness of the stage of completion which was applied on construction revenue recognition a key audit matter. How our audit addressed the matter We performed the following audit procedures on the above key audit matter: A. We obtained an understanding of the nature of business and industry of the Group and assessed the reasonableness of internal process of estimating total construction cost, including the unit of calculation of owner s design drawing, the procedure of estimating each construction cost and overhead, and the consistency of applying the estimation method; B. We assessed and tested the internal controls which would affect the changes of estimated total cost, including verifying the evidence of additional or less work and constructions. C. We inspected the constructing site accompanied by the supervisor and other appropriate staff at the end of the reporting period to assess the reasonableness of the stage of completion method result. D. We obtained details of construction profit or loss and performed substantive procedures, including randomly checking the incurred cost of current period with the appropriate evidence, and additional or less work with the supporting documents, and recalculated the stage of completion. Other matter Scope of the Audit We did not audit the financial statements of a wholly-owned consolidated subsidiary and investments recognized under the equity method that are included in the financial statements. Total assets (including investments accounted for under equity method) of NT$ 1,497,276 thousand and NT$ 1,843,945 thousand as at December 31, 2016 and 2015, constituted 2.92% and 3.38% of consolidated total assets. Operating income of NT$ 599,445 thousand and NT$ 534,463 thousand, for the years ended December 31, 2016 and 2015, constituted 4.97% and 3.32% of consolidated total operating income; comprehensive income accounted for under equity method of NT$ 44,904 thousand and NT$ (71,792) thousand for the years ended December 31, 2016 and 2015, constituted 3.62% and (3.28%) of consolidated total comprehensive income, respectively. Those financial statements were audited by other independent accountants whose report thereon have been furnished to us, and our opinion expressed herein is based solely on the audit reports of the other independent accountants. Other matter Parent company only financial reports We have audited and expressed an unqualified opinion on the parent company only financial statements of Prince Housing & Development Corp. as at and for the years ended December 31, 2016 and Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparations of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance, including audit committee, are responsible for overseeing the Group s financial reporting process. Auditor s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 88 Prince Housing & Development Corp. 89

47 A. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control. C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. D. Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Group to cease to continue as a going concern. E. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Wu, Chien-Chih Lin, Yi-Chang For and on behalf of PricewaterhouseCoopers, Taiwan March 22, 2017 We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation. 90 Prince Housing & Development Corp. 91

48 Assets Notes December 31, 2016 AMOUNT % December 31, 2015 AMOUNT % Current assets 1100 Cash and cash equivalents 6(1) 1110 Financial assets at fair value through profit or loss - current 6(2) and Notes receivable, net 6(3) 1170 Accounts receivable, net 6(4) 1180 Accounts receivable - related parties 1190 Receivables from customers on construction contracts 7 6(5) 1200 Other receivables 130X Inventories, net 6(6) and Prepayments 1476 Other financial assets - current Other current assets 6(7) 11XX Total Current Assets Non-current assets 1510 Financial assets at fair value through profit or loss - noncurrent 6(2) and Available-for-sale financial assets 6(8) and 8 - non-current 1543 Financial assets carried at cost - 6(9) and 8 non-current 1550 Investments accounted for under 6(10) and 8 equity method 1600 Property, plant and equipment, 6(11) and 8 net 1760 Investment property, net 6(12) and Intangible assets, net 6(13) 1840 Deferred income tax assets 6(31) 1920 Refundable deposits 7 and Other financial assets - noncurrent PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars) Other non-current assets 15XX Total Non-current assets 1XXX Total assets (Continued) December 31, 2016 Liabilities and Equity Notes AMOUNT % December 31, 2015 AMOUNT % Current liabilities 2100 Short-term borrowings 6(14) and Short-term notes and bills payable 6(15) and Notes payable 2170 Accounts payable 2190 Payables to customers on construction contracts 6(5) 2200 Other payables 2220 Other payables - related parties Current income tax liabilities 2310 Receipts in advance 6(16) 2320 Long-term liabilities, current portion PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars) 6(17)(18) and Other current liabilities 21XX Total Current Liabilities Non-current liabilities Bonds payable Long-term borrowings 6(17) 6(18) and Provisions for liabilities - noncurrent 6(19) 2570 Deferred income tax liabilities 6(31) 2610 Long-term notes and accounts payable 2640 Net defined benefit liability - non-current 7 6(20) 2645 Guarantee deposits received 2670 Other non-current liabilities 6(10) 25XX Total Non-current liabilities 2XXX Total Liabilities Equity attributable to owners of parent Share capital 3110 Common stock 6(21) 3200 Capital surplus Capital surplus 6(22) 3310 Retained earnings Legal reserve 6(23)(31) 3350 Unappropriated retained earnings Other equity interest 6(24) Other equity interest Treasury stocks 6(21) 31XX Equity attributable to owners of the parent 36XX Non-controlling interest 3XXX Total equity Significant contingent liabilities and unrecognised contract commitments 9 3X2X Total liabilities and equity The accompanying notes are an of these consolidated financial statements. The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated March 22, Prince Housing & Development Corp. 93

49 Years ended December Items Notes AMOUNT % AMOUNT % 4000 Operating revenue 6(26) and Operating costs 6(6)(30) 5900 Gross profit Operating expenses 6(30) and Selling expenses 6200 General & administrative expenses 6000 Total operating expenses 6900 Operating profit Non-operating income and expenses 7010 Other income 6(27) 7020 Other gains and losses 6(2)(28) 7050 Finance costs 6(6)(29) 7060 Share of profit/(loss) of associates and joint ventures accounted for under equity method PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars, except earnings per share) 7000 Total non-operating income 6(10) and expenses 7900 Profit before income tax 7950 Income tax expense 6(31) 8200 Profit for the period (Continued) (Continued) PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars, except earnings per share) Years ended December Items Notes AMOUNT % AMOUNT % Other comprehensive income Components of other comprehensive loss that will not be reclassified to profit or loss 8311 Actuarial loss on defined benefit 6(20) plan 8320 Share of other comprehensive (loss) income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or 6(31) loss 8310 Components of other comprehensive loss that will not be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences arising on translation of foreign operations 8362 Other comprehensive (loss) income, before tax, available- 6(8) for-sale financial assets 8360 Components of other comprehensive loss that will be reclassified to profit or loss 8300 Total other comprehensive loss for the year 8500 Total comprehensive income for the year Profit (loss), attributable to: 8610 Owners of the parent 8620 Non-controlling interest Comprehensive income (loss) attributable to: 8710 Owners of the parent 8720 Non-controlling interest Earnings per share (in dollars) 6(32) 9750 Basic earnings per share 9850 Diluted earnings per share The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated March 22, Prince Housing & Development Corp. 95

50 PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars, except as otherwise indicated) Equity attributable to owners of the parent Retained Earnings Other equity interest Noncontrolling interest Total equity Unrealized gain or loss on available-forsale financial assets Treasury stocks Total Financial statements translation differences of foreign operations Unappropriated retained earnings Capital surplus, additional paidin capital Legal reserve Share capital - common stock Notes 2015 Balance at January 1, 2015 Appropriations and distribution of 2014 earnings Legal reserve Cash dividends 6(23) Profit (loss) for the year 6(32) Other comprehensive income (loss) for the year 6(8)(20)(24) Treasury stock transactions 6(21)(22) Changes in non-controlling interest Balance at December 31, Balance at January 1, 2016 Appropriations and distribution of 2015 earnings Legal reserve Cash dividends 6(23) Profit (loss) for the year 6(32) Other comprehensive loss for the year 6(8)(20)(24) Changes in non-controlling interest Balance at December 31, 2016 The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated March 22, PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2016 AND 2015 PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2016 AND 2015 (Expressed (Expressed in thousands in thousands of New New Taiwan Taiwan dollars) dollars) Years ended December 31 Notes CASH FLOWS FROM OPERATING ACTITIES Profit before tax Adjustments Income and expenses having no effect on cash flows Net loss (gain) on financial assets at fair value through profit or loss 6(2)(28) Reversal of provision for bad debts 6(3) Provision for bad debts 6(4) Write-off of uncollectible accounts 6(3)(4) Share of profit of associates and joint ventures accounted for under 6(10) equity method Loss on disposal of property, plant and equipment (Gain) loss on disposal of investment property Property, plant and equipment transferred to expenses Depreciation 6(30) Amortization 6(13)(30) Interest expense 6(29) Interest income 6(27) Dividend income 6(27) Loss (gain) on unrealized foreign exchange Changes in assets/liabilities relating to operating activities Changes in operating assets Financial assets at fair value through profit or loss - current Notes receivable Accounts receivable Accounts receivable - related parties Receivables from customers on construction contracts Other receivables Inventories Prepayments Other current assets Other non-current liabilities Net changes in liabilities relating to operating activities Notes payable Accounts payable Payable to customers on construction contracts Other payables Other payables - related parties Receipts in advance Other current liabilities Provisions for liabilities - non-current Long-term notes and accounts payable Net defined benefit liability - non-current Other non-current liabilities Cash inflow generated from operations Interest received Cash dividend received Interest paid Income tax paid Net cash flows from operating activities (Continued) (Continued) ~14~ 96 Prince Housing & Development Corp. 97

51 PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars) CASH FLOWS FROM INVESTING ACTITIES Years ended December 31 Notes Decrease in other financial assets - current Return of share capital from available-for-sale financial assets - noncurrent Decrease in available-for-sale financial assets - non-current Return of share capital from financial assets carried at cost Return of share capital from investments accounted for under equity method Acquisition of property, plant and equipment 6(11) Proceeds from disposal of property, plant and equipment Acquisition of investment property 6(12) Proceeds from disposal of investment property Increase in intangible assets 6(13) Decrease (increase) in refundable deposits Decrease in other financial assets - non-current Net cash flows from investing activities CASH FLOWS FROM FINANCING ACTITIES Decrease in short-term borrowings Decrease in short-term notes and bills payable Repayment of long-term borrowings Proceeds from long-term borrowings Decrease in long-term notes and accounts payable Decrease in guarantee deposits received Cash dividends paid 6(23) Changes in non-controlling interest Net cash flows used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED) 1. HISTORY AND ORGANIZATION (1) Prince Housing & Development Corp. (the Company ) was established in September 1973, under the Company Act and other related regulations. The Company is primarily engaged in the construction, leasing and sale of public housing, commercial building, tourism/recreation place (children s playground, water park, etc.) and parking lot/parking tower, and leasing and sale of real estate. The common shares of the Company have been listed on the Taiwan Stock Exchange since April (2) The main activities of the Company and its subsidiaries (collectively referred herein as the Group ) are provided in Note 4(3) B. 2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION These consolidated financial statements were authorized for issuance by the Board of Directors on March 22, APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards ( IFRS ) as endorsed by the Financial Supervisory Commission ( FSC ) None. (2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group New standards, interpretatons and amendments endorsed by the FSC effective from 2017 are as follows: Effective date by International New Standards, Interpretations and Amendments Accounting Standards Board Investment entities: Applying the consolidation exception January 1, 2016 (amendments to IFRS 10, IFRS 12 and IAS 28) Accounting for acquisition of interests in joint operations January 1, 2016 (amendments to IFRS 11) IFRS 14, Regulatory deferral accounts January 1, 2016 Disclosure initiative (amendments to IAS 1) January 1, 2016 Clarification of acceptable methods of depreciation and amortization January 1, 2016 (amendments to IAS 16 and IAS 38) Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016 The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated March 22, Prince Housing & Development Corp. 99

52 New Standards, Interpretations and Amendments Effective date by International Accounting Standards Board Defined benefit plans: employee contributions (amendments to IAS 19R) July 1, 2014 Equity method in separate financial statements (amendments to IAS 27) January 1, 2016 Recoverable amount disclosures for non-financial assets (amendments to IAS 36) January 1, 2014 Novation of derivatives and continuation of hedge accounting January 1, 2014 (amendments to IAS 39) IFRIC 21, Levies January 1, 2014 Improvements to IFRSs July 1, 2014 Improvements to IFRSs July 1, 2014 Improvements to IFRSs January 1, 2016 The above standards and interpretations have no significant impact to the Group s financial condition and operating result based on the Group s assessment. (3) IFRSs issued by IASB but not yet endorsed by the FSC New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs endorsed by the FSC effective from 2017 are as follows: Effective date by International New Standards, Interpretations and Amendments Accounting Standards Board Classification and measurement of share-based payment transactions (amendments to IFRS 2) January 1, 2018 Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts January 1, 2018 (amendments to IFRS 4) IFRS 9, Financial instruments January 1, 2018 Sale of contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28) To be determined by International Accounting Standards Board IFRS 15, Revenue from contracts with customers January 1, 2018 Clarifications to IFRS 15, Revenue fromcontracts with customers (amendments to IFRS 15) January 1, 2018 IFRS 16, Leases January 1, 2019 Disclosure initiative (amendments to IAS 7) January 1, 2017 Recognition of deferred tax assets for unrealised losses January 1, 2017 (amendments to IAS 12) Transfers of investment property (amendments to IAS 40) January 1, 2018 IFRIC 22, Foreign currency transactions and advance consideration January 1, 2018 Annual improvements to IFRSs cycle- Amendments to IFRS 1, First-time adoption of International Financial Reporting Standards Annual improvements to IFRSs cycle- Amendments to IFRS 12, Disclosure of interests in other entities Annual improvements to IFRSs cycle- Amendments to IAS 28, Investments in associates and joint ventures January 1, 2018 January 1, 2017 January 1, 2018 Except for the following, the above standards and interpretations have no significant impact to the Group s financial condition and operating result based on the Group s assessment. The quantitative impact will be disclosed when the assessment is complete. A. IFRS 9, Financial instruments (a) Classification of debt instruments is driven by the entity s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading. (b) The impairment losses of debt instruments are assessed using an expected credit loss approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losses ( ECL ) or lifetime ECL (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component. B. IFRS 15 Revenue from contracts with customers IFRS 15 Revenue from contracts with customers replaces IAS 11 Construction contracts, IAS 18 Revenue and relevant interpretations. According to IFRS 15, revenue is recognised when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: Step 1: Identify contracts with customer. Step 2: Identify separate performance obligations in the contract(s). Step 3: Determine the transaction price. Step 4: Allocate the transaction price. Step 5: Recognise revenue when the performance obligation is satisfied. Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. C. IFRS 16, Leases IFRS 16, Leases, replaces IAS 17, Leases and related interpretations and SICs. The standard 100 Prince Housing & Development Corp. 101

53 requires lessees to recognise a right-of-use asset and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors. D. Amendments to IAS 40, Transfers of investment property The amendment clarified that to transfer to, or from, investment properties there must be a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A change in management s intentions, in isolation, does not provide evidence of the change in use. In addition, the amendments added examples for the evidence of a change in use. The examples include assets under construction or development (not completed properties) transfer from investment property to owner-occupied property at commencement of development with a view to owner-occupation and transfer from inventories to investment property at inception of an operating lease to another party. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. (1) Compliance statement The consolidated financial statements of the Group have been prepared in accordance with the Rules Governing the Preparation of Financial Statements by Securities Issuers, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the IFRSs ). (2) Basis of preparation A. Except for the following items, these consolidated financial statements have been prepared under the historical cost convention: (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. (b) Available-for-sale financial assets measured at fair value. (c) Defined benefit liabilities recognized based on the net amount of pension fund assets less unrecognized actuarial gains and present value of defined benefit obligation. B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5. (3) Basis of consolidation A. Basis for preparation of consolidated financial statements: (a) All subsidiaries are included in the Group s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries. (b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group. (c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. (d) Changes in a parent s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity. (e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of. 102 Prince Housing & Development Corp. 103

54 B. Subsidiaries included in the consolidated Main business Name of investor Name of subsidiary activities December 31, 2016 December 31, 2015 Description Prince Housing & Development Corp. Prince Property Management Consulting Co., Ltd. Cheng-Shi Investment Holdings Co., Ltd. Ta-Chen Construction & Engineering Corp. Ta-Chen International (Brunei) Corp. Prince Property Management Consulting Co., Ltd. Cheng-Shi Investment Holdings Co., Ltd. Prince Housing Investment Co., Ltd. BioSun Technology Co., Ltd. Dong-Feng Enterprises Co., Ltd. The Splendor Hotel Taichung Time Square International Co., Ltd. Jin-Yi-Xing Plywood Co., Ltd. Real estate managers General investments Overseas investment Anti-mildew's import and export Housebuilders and sales Note Hotels and catering Note 1 Hotels and catering Manufacture of plywood Prince Industrial Co., Ltd. Development of public housing and building Prince Real Estate Co., Ltd. Real estate trading and leasing Prince Apartment Management Maintain Co., Ltd. Management of apartment Note Note Prince Security Co., Ltd. Security Ta-Chen Construction & Engineering Corp. Prince Utility Co., Ltd. Cheng-Shi Construction Co., Ltd. Ta-Chen International (Brunei) Corp. Ta Chen Construction & Engineering (Vietnam) Corp. Ownership (%) Construction Electricity and water pipe maintenance Construction Overseas Note 4 investment Construction Note 3 Note 1: The Group does not directly or indirectly own above 50% of voting shares of The Splendor Hotel Taichung. However, as the Group has control over the finance and operations of the company, it is included in the consolidated financial statements. Note 2: The subsidiary was newly established from the land division of Jm-Yi-Xing Plywood Co., Ltd. on September 1, Note 3: Ta Chen Construction & Engineering (Vietnam) Corp. has completed liquidation process in May Note 4: Ta-Chen International (Brunei) Corp. has completed liquidation process in August Note 5: BioSun Technology Co., Ltd. has completed liquidation process in September C. Subsidiaries not included in the consolidated financial statements: None. D. Adjustments for subsidiaries with different balance sheet dates: None. E. Significant restrictions: None. F. Subsidiaries that have non-controlling interests that are material to the Group: The Group s non-controlling interest is not material and thus, is not applicable. (4) Foreign currency translation Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency ). The consolidated financial statements are presented in New Taiwan dollars, which is the Company s functional and the Group s presentation currency. A. Foreign currency transactions and balances (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise. (b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss. (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions. (d) All foreign exchange gains and losses are presented in the statement of comprehensive income within other gains and losses. B. Translation of foreign operations (a) The operating results and financial position of all the group entities, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows: i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet; ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and iii. All resulting exchange differences are recognised in other comprehensive income. (b) When the foreign operation partially disposed of or sold is an associate or joint arrangements, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even the Group still retains partial interest in the former foreign associate or joint arrangements after losing significant influence over the former foreign associate, or losing joint control of the former joint arrangements, such transactions should be accounted for as disposal of all interest in these foreign operations. 104 Prince Housing & Development Corp. 105

55 (c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even the Group still retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation. (5) Classification of current and non-current items A. If assets and liabilities are related to the construction business, they are classified as current or non-current according to their operating cycles; if they are not related to the construction business, they are classified by annual basis. B. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets: (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle; (b) Assets held mainly for trading purposes; (c) Assets that are expected to be realised within twelve months from the balance sheet date; (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date. C. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities: (a) Liabilities that are expected to be settled within the normal operating cycle; (b) Liabilities arising mainly from trading activities; (c) Liabilities that are to be settled within twelve months from the balance sheet date; (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. (6) Cash equivalents Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits mature within three months and bonds with call back options meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents. (7) Financial assets at fair value through profit or loss A. Financial assets at fair value through profit or loss are financial assets held for trading. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting. C. Financial assets at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in profit or loss. (8) Available-for-sale financial assets A. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. B. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using trade date accounting. C. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in financial assets measured at cost. (9) Receivables Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial. (10) Impairment of financial assets A. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. B. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows: (a) Significant financial difficulty of the issuer or debtor; (b) A breach of contract, such as a default or delinquency in interest or principal payments; (c) The disappearance of an active market for that financial asset because of financial difficulties; (d) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; (e) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group; (f) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered; or a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost. C. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets: 106 Prince Housing & Development Corp. 107

56 (a) Financial assets measured at amortised cost The amount of the impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account. (b) Financial assets measured at cost The amount of the impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently. Impairment loss is recognised by adjusting the carrying amount of the asset through the use of an impairment allowance account. (c) Available-for-sale financial assets The amount of the impairment loss is measured as the difference between the asset s acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, and is reclassified from other comprehensive income to profit or loss. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognised, then such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account. (11) Derecognition of financial assets The Group derecognises a financial asset when one of the following conditions is met: A. The contractual rights to receive the cash flows from the financial asset expire. B. The contractual rights to receive cash flows of the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset. C. The contractual rights to receive cash flows of the financial asset have been transferred; however, the Group has not retained control of the financial asset. (12) Inventories Except for gains or losses occurring from construction contracts that are recognised using the percentage of completion method, land held for construction, construction in progress, and buildings and land held for sale are stated at cost and evaluated at the lower of cost or net realisable value at the end of period. The individual item approach is used in the comparison of cost and net realisable value. The calculation of net realisable value is based on the estimated selling price in the normal course of business, net of estimated costs of completion and related adjusted selling expenses. The interest costs related to construction in progress are capitalised during the construction. (13) Construction contracts A. IAS 11, Construction Contracts, defines a construction contract as a contract specifically negotiated for the construction of an asset. If the outcome of a construction contract can be estimated reliably and it is probable that this contract would make a profit, contract revenue should be recognised by reference to the stage of completion of the contract activity, using the percentage-of-completion method of accounting, over the contract term. Contract costs are expensed as incurred. The stage of completion of a contract is measured by the proportion of contract costs incurred for work performed to date to the estimated total costs for the contract. An expected loss where total contract costs will exceed total contract revenue on a construction contract should be recognised as an expense as soon as such loss is probable. If the outcome of a construction contract cannot be estimated reliably, contract revenue should be recognised only to the extent of contract costs incurred that it is probable will be recoverable. B. Contract revenue should include the revenue arising from variations from the original contract work, claims and incentive payments that are agreed by the customer and can be measured reliably. C. The excess of the cumulative costs incurred plus recognised profits (less recognised losses) over the progress billings on each construction contract is presented as an asset within receivables from customers on construction contracts. While, the excess of the progress billings over the cumulative costs incurred plus recognised profits (less recognised losses) on each construction contract is presented as a liability within payables to customers on construction contracts. D. In accordance with IFRIC 15, Agreements for the Construction of Real Estate, if the buyer is able to specify the major structural elements of the design of the real estate before construction begins and/or specify major structural changes once construction is in progress, the construction contract meets the definition of construction contract and criteria in IAS 11, Construction Contracts. In accordance with the recognition criteria on the sale of goods as provided in IAS 18, Revenue, the Group recognises sales revenue for contracts of pre-selling of buildings that do not meet the definition of construction contracts. For transactions that meet the definition of construction contracts, the Group recognises contract revenue in accordance with IAS 11. (14) Investments accounted for using equity method / associates A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost. B. The Group s share of its associates post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. C. When changes in an associate s equity are not recognised in profit or loss or other comprehensive income of the associate and such changes do not affect the Group s ownership percentage of the associate, the Group recognises change in ownership interests in the associate in capital surplus in proportion to its ownership. D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group s interest in the associates. Unrealised losses are also eliminated unless the 108 Prince Housing & Development Corp. 109

57 transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group. E. In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group s ownership percentage of the associate but maintains significant influence on the associate, then capital surplus and investments accounted for under the equity method shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Group s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of. F. Upon loss of significant influence over an associate, the Group remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognised in profit or loss. G. When the Group disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, then the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach. H. When the Group disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss. If it retains significant influence over this associate, then the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss proportionately. (15) Property, plant and equipment A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised. B. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately. D. The assets residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets residual values and useful lives differ from previous estimates or the patterns of consumption of the assets future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, from the date of the change. The estimated useful lives of property, plant and equipment are as follows: (16) Operating leases (lessor/ lessee) Rental income from operating leases (excluding any benefits provided to lessee) or payments for operating leases (excluding any benefits received from lessor) are recognised as profit or loss for the period over the leasing period on a straight line basis. (17) Investment property An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 44 ~ 60 years. (18) Intangible assets Goodwill, patent rights, computer software cost and service concession are stated at acquisition cost and amortised on a straight line basis. The useful life of major intangible assets is 3~5 years, while service concession is 44 years. (19) Impairment of non-financial assets The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognising impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised. (20) Borrowings A. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. B. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. (21) Notes and accounts payable Notes and accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. However, short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial. (22) Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability specified in the contract is discharged or cancelled or expires. (23) Offsetting financial instruments Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. 110 Prince Housing & Development Corp. 111

58 (24) Financial liabilities Bonds payable Ordinary corporate bonds issued by the Group are initially recognised at fair value, net of transaction costs incurred. Ordinary corporate bonds are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is accounted for as the premium or discount on bonds payable and presented as an addition to or deduction from bonds payable, which is amortised in profit or loss as an adjustment to the finance costs over the period of bond circulation using the effective interest method. (25) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognised as interest expense. Provisions are not recognised for future operating losses. (26) Employee benefits A. Short-term employee benefits Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service. B. Pensions (a) Defined contribution plans For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments. (b) Defined benefit plans i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit net obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet) of a currency and term consistent with the currency and term of the employment benefit obligations. ii. Remeasurement arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings. iii. Past service costs are recognised immediately in profit or loss. C. Employees compensation and directors and supervisors remuneration Employees compensation and directors and supervisors remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution. (27) Income tax A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity. B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings. C. Deferred income tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. D. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed. E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously. F. A deferred tax asset shall be recognised for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised. G. Consolidated income tax return for tax filings of certain domestic subsidiaries in the Group accounted for in accordance with individual reporting situations. And subsidiaries have selected the consolidated income tax return for tax filings and pay additional 10% tax on their undistributed retained earnings. If there is any tax effect due to the adoption of the consolidated tax system, the subsidiaries can proportionately allocate the effects on tax expense (benefit), 112 Prince Housing & Development Corp. 113

59 deferred income tax and tax payable (tax refund receivable). (28) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds. (29) Dividends Dividends are recorded in the Company s financial statements in the period in which they are resolved by the Company s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance. (30) Revenue recognition A. Sales of goods The Group handles entrusted construction, sale and lease of public housings and business buildings. Revenue arising from the sales of goods is recognised when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied. For pre-selling of housing that the Group has entrusted to construction companies to build, as stated in Note 4(13), sales revenue is recognised in accordance with IAS 18, Revenue. Thus, the Group has carried over costs and recognised profit or loss when it completes transfer of title and settlement of housing. Only when housing was actually settled (or only when ownership was transferred) before balance sheet date, and related risk return was transferred would sales revenue be recognised. B. Sales of services The Group serves as real estate agency, manages apartment buildings and provides security. Revenue is recognised when transactions of service rendered can be reliably measured and future economic benefit may become inflows to the Group. C. Construction contract revenue Please refer to Note 4(13) for construction contract services provided by the Group. D. Service concession revenue Please refer to Note 4(31) for service concession contracts provided by the Group. (31) Service concession arrangements A. The Group was contracted by National Taiwan University (grantor) to provide construction for the government s infrastructure assets for public services and operate those assets for Changxing St. Campus for 44 years and 6 months, and for Shuiyuan Campus for 44 years and 4 months after construction is completed. When the term of operating period expires, the underlying infrastructure assets will be transferred to National Taiwan University without consideration. The Group allocates the fair value of the consideration received or receivable in respect of the service concession arrangement between construction services and operating services provided based on their relative fair values, and recognises such allocated amounts as revenues in accordance with IAS 11, Construction Contracts, and IAS 18, Revenue, respectively. B. Costs incurred on provision of construction services or upgrading services under a service concession arrangement are accounted for in accordance with IAS 11, Construction Contracts. C. The consideration received or receivable from the grantor in respect of the service concession arrangement is recognised at its fair value. Such considerations are recognised as an intangible asset based on how the considerations from the grantor to the operator are made as specified in the arrangement. (32) Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker. The Chief Operating Decision-Maker is responsible for allocating resources and assessing performance of the operating segments. 5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The above information is addressed below: (1) Critical judgements in applying the Group s accounting policies A. Financial assets impairment of equity investments The Group follows the guidance of IAS 39 to determine whether a financial asset equity investment is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an equity investment is less than its cost and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow. If the decline of the fair value of an individual equity investment below cost was considered significant or prolonged, the Group would suffer an additional loss in its financial statements, being the transfer of the accumulated fair value adjustments recognised in other comprehensive income on the impaired available-for-sale financial assets to profit or loss or being the recognition of the impairment loss on the impaired financial assets measured at cost in profit or loss. B. Investment property The Group uses a portion of the property for its own use and another portion to earn rentals or for capital appreciation. When these portions cannot be sold separately and cannot be leased out separately under a finance lease, the property is classified as investment property only if the own-use portion accounts for insignificant portion of the property. (2) Critical accounting estimates and assumptions Revenue recognition Construction revenue should be recognised by reference to the stage of completion in the contract period using the percentage of completion method. Construction costs are recognised in the incurred period. The stage of completion of a contract is measured by the proportion of contract costs incurred for work performed to date bear to the estimated total contract costs. 114 Prince Housing & Development Corp. 115

60 6. DETAILS OF SIGNIFICANT ACCOUNTS (1) Cash and cash equivalents December 31, 2016 December 31, 2015 Cash on hand and revolving funds $ 172,942 $ 8,989 Checking accounts and demand deposits 3,318,600 2,861,201 Time deposits 217, ,561 Repurchase bonds 940, ,000 $ 4,648,915 $ 3,800,751 A. The Group transacts with a variety of financial institutions all with high credit quality to disperse A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote. B. The repurchase bonds held by the Group has high liquidity, so they were classified as cash equivalents. (2) Financial assets at fair value through profit or loss Items December 31, 2016 December 31, 2015 Current items: Financial assets held for trading Listed (TSE and OTC) stocks $ 264,520 $ 264,520 Beneficiary certificates 400, , , ,520 Financial assets held for trading valuation adjustments ( 369) 15,241 $ 664,151 $ 479,761 Non-current items: A. The Group recognized net (loss) gain of ($15,349) and $79,305 for the years ended December 31, 2016 and 2015, respectively. B. Details of the Group s financial assets at fair value through profit or loss pledged to others as collateral are provided in Note 8. (3) Notes receivable, net December 31, 2016 December 31, 2015 Notes receivable $ 102,339 $ 135,574 Less: Allowance for doubtful accounts - ( 344) $ 102,339 $ 135,230 A. The A. The Group s Group s notes notes receivable that that were were neither neither past past due due nor nor impaired were were fully fully performing in in line with the credit standards prescribed based on counterparties industrial characteristics, scale of business and profitability. B. Movement analysis of financial assets that were impaired (allowance for doubtful accounts of notes receivable) is as follows: Years ended December 31, At January 1 $ 344 $ 540 Reversal of impairment - ( 196) Write-offs during the period ( 344) - At December 31 $ - $ 344 The The Group Group analyses based on on any any changes to to credit quality in note receivable of of individual customers from the initial granting date until the financial period-end, historical experience and current financial condition, to estimate the amount that may not be recovered. C. The Group does not hold any collateral as security. (4) Accounts receivable, net December 31, 2016 December 31, 2015 Accounts receivable $ 826,755 $ 1,865,724 Less: Allowance for doubtful accounts ( 4,298) ( 4,104) $ 822,457 $ 1,861,620 A.The The Group s Group s accounts accounts receivable receivable that that were were neither neither past past due due nor nor impaired impaired were were fully fully performing performing in in line with the credit standards prescribed based on counterparties industrial characteristics, scale of business and profitability. Accounts receivable are classified into 3 categories: (a) Sale of real estate: collection of customers loans from banks. (b) Construction contracts and sales of service: from customers with optimal collection record. (c) (c) Receivables from from travel travel department: mainly from from credit credit card card payments. (c) Receivables from travel department: mainly from credit card payments. B. B. The The ageing ageing analysis analysis of of of accounts accounts receivable that that were were past past due due but but not not impaired is is as as follows: December 31, 31, December 31, 31, Up Up to to days days $ $ 3,943 3,943 $ $ to to days days to to days days Over Over days days 1,809 1,809 1,895 1,895 $ $ 6,323 6,323 $ $ 3,037 3,037 The The The above above ageing ageing analysis analysis was was based based on on past past due due date. date. C. C. Movement Movement analysis analysis of of of financial financial assets assets that that that were were impaired impaired (allowance (allowance for for for doubtful doubtful accounts accounts of of of accounts receivable) is is as as follows: Years Years ended ended December 31, 31, At At January 11 $ $ 4,104 4,104 $ $ 7,045 7,045 Provsion for for impairment loss loss Write-offs during the the period period -- (( 3,171) At At December $ $ 4,298 4,298 $ $ 4,104 4,104 The The Group Group analyses based based on on any any changes to to credit credit quality in in accounts receivable of of individual customers from from the the initial initial granting date date until until the the financial period-end, historical experience and and 116 current Prince Housing & Development Corp. financial condition, to to estimate the the amount that that may may not not be be recovered. 117 D. D. The The Group Group does does not not hold hold any any collateral as as security. (5) (5) Construction contracts receivable (payable)

61 The Group analyses based on any changes to credit quality in accounts receivable of individual customers from the initial granting date until the financial period-end, historical experience and current financial condition, to estimate the amount that may not be recovered. D. The Group does not hold any collateral as security. (5) Construction contracts receivable (payable) December 31, 2016 December 31, 2015 Aggregate cost incurred plus recognised profits (less recognised losses) $ 18,283,104 $ 19,550,455 Less: progress billings ( 17,447,436) ( 18,707,934) Net balance sheet position for construction in progress $ 835,668 $ 842,521 Presented as: Due from customers for contract work $ 1,058,750 $ 1,347,958 Due to customers for contract work ( 223,082) ( 505,437) $ 835,668 $ 842,521 As of December 31, 2016 and 2015, the retainage relating to construction contracts amounted to $618,729 and $1,384,110, respectively; the advances received before the related construction contracts are performed amounted to $719,619. (6) Inventories December 31, 2016 Allowance for Cost valuation loss Book value Land held for construction site $ 12,602,184 ($ 65,372) $ 12,536,812 Construction in progress 3,691,313-3,691,313 Buildings and land held for sale 4,964,820 ( 49,229) 4,915,591 Prepayment for land 132, ,652 Prepayment for buildings and land 954, ,027 Merchandise 40,459-40,459 $ 22,385,455 ($ 114,601) $ 22,270,854 December 31, 2015 Allowance for Cost valuation loss Book value Land held for construction site $ 12,765,560 ($ 65,372) $ 12,700,188 Construction in progress 2,457,025-2,457,025 Buildings and land held for sale 5,882,639 ( 49,432) 5,833,207 Prepayment for land 223, ,700 Prepayment for buildings and land 947, ,991 Merchandise 47,779-47,779 $ 22,324,694 ($ 114,804) $ 22,209,890 A. The cost of inventories recognized as expense for the years ended December 31, 2016 and 2015 was $8,124,458 and $10,933,346, respectively, including the amount of $203 and $2,014, respectively, that the Group wrote down from cost to net realizable value accounted for as cost of goods sold. B. Details of the Group s inventories pledged to others as collateral are provided in Note 8. C. The interest capitalized as cost of inventory is as follows: Years ended December 31, Interest paid before capitalization $ 425,984 $ 478,106 Interest capitalized $ 184,105 $ 144,141 Annual interest rate used for capitalization 0.36%~3.93% 1.61%~3.20% D. D. Details Details of of significant inventories: (a) Buildings and land in progress (a) Buildings and land in progress Taipei branch December 31, 2016 December 31, 2015 Prince Shin Yi (XinZhuang Fuduxin) $ 2,022,377 $ 1,736,845 Ling Ko Dist. Li Shing Section No. 1209, etc. 1,515,855 1,376,328 Prince Fu III (Taoyuan Qing Sun Section No. 446) 1,438,248 1,131,432 W Prince (New Taipei City Shing Jheng Section No. 883, etc.) 950, ,064 Bali Dist Chung Chang Section No and 211-1, etc. 686, ,665 Jhong Li City Shuang Ling Section No. 1449, etc. 447, ,796 Prince Hua Wei (Shilin Dist. Zhishan Section No. 602, etc.) 269, ,680 $ 7,330,585 $ 6,327,810 Taichung branch December 31, 2016 December 31, 2015 Ping Hsin Section No. 694, etc. $ 897,690 $ 862,840 Prince Yu Ding (Hui Li Section No. 195) 855, ,080 Prince County (Chaotun Section No. 755, etc.) 320, ,571 Jin Shuei Dist. Wu Show Section No. 1037, No. 1038, No. 1040, etc. 206, ,947 Hsinfuliao Section No. 1096, No. 1098, NO.1097, No. 1108, etc. 184, ,160 W Epoch (Kao An Section No ) 139,576 21,893 The Cloud Century Special A (Kao An Section No ) - 698,401 Others 7 7 $ 2,604,119 $ 2,895,899 Tainan branch December 31, 2016 December 31, 2015 Jin Hua Section No $ 688,200 $ 688,190 Prince Feng Yun ( Hsin Ying Section No ) 665, ,433 Prince Jum Fon Huei (Yu Ming Section No ) 375, ,825 Chin An Section No. 296, No. 297, etc. 156,124 95,703 A. The cost of inventories recognized as expense for the years ended December 31, 2016 and 2015 was 118 Shan Chia Section No. 939, etc. Prince Housing 152,384 & Development Corp. 148, Others 3,524 3,524 $ 2,040,944 $ 1,767,174

62 Tainan branch December 31, 2016 December 31, 2015 Jin Hua Section No $ 688,200 $ 688,190 Prince Feng Yun ( Hsin Ying Section No ) 665, ,433 Prince Jum Fon Huei (Yu Ming Section No ) 375, ,825 Chin An Section No. 296, No. 297, etc. 156,124 95,703 Shan Chia Section No. 939, etc. 152, ,499 Others 3,524 3,524 (b) Land held for construction site (b) Land held for construction site $ 2,040,944 $ 1,767,174 Kaohsiung branch December 31, 2016 December 31, 2015 Prince Cloud B (Ren Wu New Hougang West Section No.42, etc. ) Prince Cloud C townhouse (Ren Wu New Hougang West Section No.69, etc. ) Prince Cloud C apartment (Ren Wu New Hougang West Section No etc.) $ 379,133 $ 378, , ,013 - Prince Yun (Nanzi subsection No. 158) 125,629 28,177 Ren Wu New Hougang West Section No. 88 experimental house 72,929 73,050 Prince Cloud E (Ren Wu New Hougang West Section No. 90 etc.) 4 - Prince Cloud D (Ren Wu New Hougang West Section No. 52, etc.) - 416,940 1,004, ,032 Total buildings and land in progress $ 12,980,163 $ 11,887,915 Taipei branch December 31, 2016 December 31, 2015 Zhong Li Pu Ren Lot No. 720, etc. $ 140,156 $ 140,156 Others 5,978 5,978 $ 146,134 $ 146,134 Taichung branch December 31, 2016 December 31, 2015 Tainan branch December 31, 2016 December 31, 2015 Tainan branch Shan Zhong Lot No. 1468, 1475 & 1476 etc. $ December 31, 234, $ December 31, 234, Shan Zhong Lot No. 1468, 1475 & 1476 etc. Xue Zhong Lot No. 679, etc. $ 234,699 50,798 $ 234,699 50,798 Xue Zhong Lot No. 679, etc. Yong Kang Ding An Lot No. 879, etc. 50,798 28,610 50,798 28,610 Yong Kang Ding An Lot No. 879, etc. Bei An Section No. 54-3, etc. 28,610 15,344 28,610 15,344 Bei An Section No. 54-3, etc. Chin An Section No , etc 15,344 15,139 15,344 15,139 Chin An Section No , etc Bao An Lot No. 882, etc. 15,139 10,325 15,139 10,325 Bao An Lot No. 882, etc. Others 10,325 14,550 10,325 14,550 Others $ 14, ,465 $ 14, ,465 Kaohsiung branch $ 369,465 $ 369,465 December 31, 2016 December 31, 2015 Kaohsiung branch Ren Wu New Hougang West Section No. 53, etc. December 31, 2016 December 31, 2015 $ 987,079 $ 986,221 Ren Wu New Hougang West Section No , & etc. $ 987,079 $ 986,221 Ren Wu New Hougang West Section No. 30 & 407, ,037 Da Hua Lot No. 434 & ,357 13, ,037 13,923 Da Hua Lot No. 434 & 436 $ 13,923 1,408,359 $ 13,923 1,408,181 Total land held for construction site $ 1,408,359 $ 2,401,228 1,408,181 2,402,716 Total land held for construction site $ 2,401,228 $ 2,402,716 (c) Buildings and land held for sale (c) Buildings and land held for sale (c) Buildings and land held for sale Taipei branch December 31, 2016 December 31, 2015 Prince Tanmei $ 2,270,855 $ 2,270,855 Prince Fu II 287, ,311 Prince Dragon House III 42,432 42,432 Prince Da Din 12,446 12,446 Prince Guo Boa 5,738 5,738 Taipei Shinyi - 106,741 Others $ 2,619,752 $ 3,080,069 Song Quan Lot No. 164 etc. $ 176,296 $ 176,296 Wu Feng Lot No. 365~855 etc. 175, ,661 Tu Ku Section No. 9-7, etc. 55,167 55,167 Song Chang Lot No. 557 etc. 19,912 19,912 Hou Long Zi Section No ,513 19,513 Xi Zhou Lot No etc. 11,941 11,941 Others 18,780 20,446 $ 477,270 $ 478, Prince Housing & Development Corp. 121

63 Taichung branch December 31, 2016 December 31, 2015 Chin Fon Gin $ 403,492 $ 516,970 The Cloud Century A 292,529 - Prince Fu 27,417 39,528 Jing Yun Sian 13,418 13,418 The Cloud Century A - 452,895 Hai Yan - 64,657 Others 10,889 10,889 $ 747,745 $ 1,098,357 Tainan branch December 31, 2016 December 31, 2015 Flower Bo Five $ 1,273,009 $ 1,625,272 Tun Sha Building III 28,376 28,376 Jun Chan LV 19,725 19,725 Prince Golden Age 19,572 19,572 Others 2,188 2,188 $ 1,342,870 $ 1,695,133 Kaohsiung branch December 31, 2016 December 31, 2015 Prince Cloud D $ 222,345 $ - Prince Hua Yang 81,242 79,875 Prince Dai Din 9,777 10,431 $ 313,364 $ 90,306 Total buildings and land held for sale $ 5,023,731 $ 5,963,865 (d) Prepayment for for land land Tainan branch (e) Prepayment for buildings and land (e) Prepayment for buildings and land December 31, 2016 December 31, 2015 Ren Wu New Hougang West Section No. 20, etc. $ 132,652 $ 223,700 December 31, 2016 December 31, 2015 Taisugar Nanzi Section $ 786,213 $ 258,794 Taisugar Kao An Section 95, ,397 Prince Shin Yi (Xin Zhuang Fuduxin) 72,000 37,800 $ 954,027 $ 947,991 E. Disclosure of significant constructions: (a) As (a) of As December of December 31, 31, 2016, 2016, significant constructions are are set set forth forth below: below: Estimated Percentage Accumulated Name of construction contract Contract amount construction cost of completion construction profit/(loss) Tainan Spinning Dream Mall $ 4,799,021 $ 4,707, % $ 91,948 New Construction of Chaojhou Railway Station 4,368,825 4,197, % 170,726 West Coast Expressway 130K FangLi to Dia An Construction 2,056,675 1,969, % 56,249 Taoyuan MRT Airport Line - CU03 1,609,366 1,564, % 45,155 San Bau Bei Tou DaYe - New Construction 1,627,610 1,551, % 65,101 Improvement plan for High Speed Railway ground access road 1,255,059 1,198, % 56,399 in Changhua (b) As of December 31, 2015, significant constructions are set forth below: Estimated Percentage Accumulated Name of construction contract Contract amount construction cost of completion construction profit/(loss) Tainan Spinning Dream Mall $ 4,842,473 $ 4,742, % $ 97,452 New Construction of Chaojhou Railway Station 4,274,219 4,104, % 165,202 Tseng-Wen Reservoir 3,178,480 2,862, % 314,311 West Coast Expressway 130K FangLi to Dia An Construction 2,058,381 1,969, % 30,838 Taoyuan MRT Airport Line - CU03 1,631,685 1,570, % 60,654 San Bau Bei Tou DaYe - New Construction 1,599,813 1,515, % 39,270 Improvement plan for High Speed Railway ground access road 1,210,476 1,156, % 38,576 in Changhua 122 Prince Housing & Development Corp. 123

64 (7) Other current assets Items December 31, 2016 December 31, 2015 Deferred sales commission $ 292,538 $ 324,072 Others 6,789 17,800 $ 299,327 $ 341,872 (8) Available-for-sale financial assets Items December 31, 2016 December 31, 2015 Non-current items: Listed ( TSE and OTC ) stocks $ 116,704 $ 120,252 Unlisted stocks 44,584 46,161 Valuation adjustment of availablefor-sale financial assets 161, ,413 1,051,385 1,398,529 $ 1,212,673 $ 1,564,942 A. A. The The Group Group recognised $349,085 and $27,126 in other comprehensive loss for fair value change and reclassified $1,941 and $0 from equity to profit or loss for the years ended December 31, 2016 and 2015, respectively. B. Details of the Group s available-for-sale financial assets pledged to others as collateral are provided in Note 8. (9) Financial assets carried at cost Items December 31, 2016 December 31, 2015 Non-current items: Unlisted stocks $ 877,800 $ 887,529 A. Based on the Group s intention, its investment in President Energy Development Ltd. and A. Based on the Group s intention, its investment in President Energy Development Ltd. and President International Development Corp. should be classified as available-for-sale financial assets. However, as President Energy Development Ltd. and President International Development Corp. stocks are not traded in an active market, and no sufficient industry information of companies similar to President Energy Development Ltd. and President International Development Corp. can be obtained, the fair value of the investment in President Energy Development Ltd. and President International Development Corp. stocks cannot be measured reliably. Accordingly, the Group classified those stocks as financial assets measured at cost. B. Details of the Group s financial assets measured at cost pledged to others as collateral are provided in Note 8. (10) Investments accounted for under equity method December 31, 2016 December 31, 2015 Carrying Percentage of Carrying Percentage of Name of associates amount ownership amount ownership Geng-Ding Co., Ltd. $ 320, % $ 326, % Uni-President Development Corp. 1,229, % 1,365, % PPG Investment Inc. 12, % 13, % Queen Holdings Ltd. 390, % 372, % Ming-Da Enterprise Co., Ltd. 75, % 166, % Amida Truslink Assets Management Co., Ltd. (Note) % % $ 2,029,496 $ 2,244,485 Note Note 1: : As As of of December December 31, 31, and and 2015, 2015, the the book book value value of the of Group s the Group s investment investment in Amida in Truslink Amida Assets Management Co., Ltd. was a credit balance thus, the investment was transferred to other non-current liabilities which amounted to $137,346 and $137,018, respectively. Associates A. The basic information of the associate that is material to the Group is as follows: Principal place Nature of Method of Company name of business relationship measurement Uni President Taiwan The Group holds Equity method Development Corp. more than 20% of voting rights B. The summarized financial information of the associate that is material to the Group is as follows: B. The summarized financial information of the associate that is material to the Group is as follows: Balance sheet Uni President Development Corp. December 31, 2016 December 31, 2015 Current assets $ 265,427 $ 373,344 Non-current assets 9,127,538 9,564,478 Current liabilities ( 3,319,592) ( 3,627,239) Non-current liabilities ( 1,974,139) ( 1,760,396) Total net assets $ 4,099,234 $ 4,550,187 Share in associate's net assets $ 1,229,770 $ 1,365, Prince Housing & Development Corp. 125

65 Statement of comprehensive income Statement of comprehensive income Uni President Development Corp. Years ended December 31, Revenue $ 981,167 $ 1,066,653 Profit for the period from continuing operations $ 143,048 $ 221,365 Total comprehensive income $ 143,048 $ 221,365 C. The carrying amount of the Group s interests in all individually immaterial associates and the C. The carrying amount of the Group s interests in all individually immaterial associates and the Group s share of the operating results are summarized below: As of December 31, 2016 and 2015, the carrying amount of the Group s individually immaterial associates amounted to $662,380 and $742,430, respectively. associates amounted to $662,380 and $742,430, respectively. Years ended December 31, Profit for the period from continuing operations $ 310,213 $ 56,593 Other comprehensive income, net of tax 1,396 - Total comprehensive income $ 311,609 $ 56,593 D. The Group s investments had no quoted market price. D. The Group s investments had no quoted market price. E. Share of profit of associates and joint ventures accounted for using equity method was $119,118 and $11,610 for the years ended December 31, 2016 and 2015, respectively. F. Details of the Group s investments accounted for under equity method pledged to others as collateral are provided in Note 8. (11) Property, plant and equipment A. Details of book values are as follows: December 31, 2016 December 31, 2015 Land $ 2,865,610 $ 2,858,947 Buildings and structures 3,212,229 3,391,429 Machinery and equipment 6,937 8,373 Computer and communication 10,474 15,605 equipment Transportation equipment 3,766 4,788 Office equipment 320, ,507 Leasehold improvements 24,323 25,648 Other equipment 61,353 66,339 Construction in progress and equipment under acceptance 8,057 5,296 $ 6,513,554 $ 6,742,932 B. B. Changes Changes in property, in property, plant plant and and equipment for for the the period are as follows: Year ended December 31, 2016 Opening net Closing net Cost book amount Additions Disposals Reclassifications book amount Land $ 2,858,947 $ 6,663 $ - $ - $ 2,865,610 Buildings and structures 4,445,929 10,453 ( 821) 1,114 4,456,675 Machinery and equipment 14, ,476 Computer and communication equipment 61, ,147 Transportation equipment 12, ( 1,000) - 11,803 Office equipment 800,944 32,312 ( 23,721) 4, ,179 Leasehold improvements 73, ,533 Other equipment 91,935 2,613 ( 2,570) ( 35) 91,943 Construction in progress and equipment under acceptance 5,296 8,807 - ( 6,046) 8,057 $ 8,365,379 $ 61,479 ($ 28,112) ($ 323) $ 8,398,423 Year ended December 31, 2015 Opening net Closing net Cost book amount Additions Disposals Reclassifications book amount Land $ 2,858,947 $ - $ - $ - $ 2,858,947 Buildings and structures 4,465,549 3,809 ( 23,429) - 4,445,929 Machinery and equipment 14, ,476 Computer and communication equipment 59,714 1, ,662 Transportation equipment 11,729 1,200 ( 272) - 12,657 Office equipment 788,300 18,529 ( 6,273) ,944 Leasehold improvements 47, ,533 73,533 Other equipment 90,999 3,586 ( 2,817) ,935 Construction in progress and prepayments for equipment 2,594 29,623 - ( 26,921) 5,296 $ 8,339,308 $ 58,695 ($ 32,791) $ 167 $ 8,365,379 Year ended December 31, 2016 Opening net Closing net Accumulated depreciation book amount Additions Disposals Reclassifications book amount Buildings and structures $ 1,054,500 $ 190,668 ($ 722) $ - $ 1,244,446 Machinery and equipment 6,103 1, ,539 Computer and communication equipment 46,057 5, ,673 Transportation equipment 7, ( 806) - 8,037 Office equipment 434,437 82,204 ( 23,267) - 493,374 Leasehold improvements 47,885 1, ,210 Other equipment 25,596 5,084 ( 90) - 30,590 $ 1,622,447 $ 287,307 ($ 24,885) $ - $ 1,884, Prince Housing & Development Corp. 127

66 Opening net Closing net Accumulated depreciation book amount Additions Disposals Reclassifications book amount Buildings and structures $ 907,885 $ 170,044 ($ 23,429) $ - $ 1,054,500 Machinery and equipment 4,667 1, ,103 Computer and communication equipment Year ended December 31, ,987 6, ,057 Transportation equipment 7, ( 218) - 7,869 Office equipment 353,979 86,705 ( 6,247) - 434,437 Leasehold improvements 47, ,885 Other equipment 20,428 5, ,596 $ 1,381,342 $ 270,999 ($ 29,894) $ - $ 1,622,447 C. Details C. Details of the of Group s the Group s property, property, plant plant and and equipment equipment pledged pledged to to others others as as collateral collateral are are provided provided in Note 8. (12) Investment property A. Details of book values are as follows: A. Details of book values are as follows: December 31, 2016 December 31, 2015 Land $ 265,550 $ 265,550 Leased assets-land 2,592,149 2,592,206 Leased assets-buildings 3,099,594 3,186,071 $ 5,957,293 $ 6,043,827 B. Changes in investment property for the period are as follows: B. Changes B. Changes in investment in investment property property for for the the period period are are as as follows: follows: Opening net Year ended December 31, 2016 Closing net Cost book amount Additions Disposals Reclassifications book amount Land $ 265,550 $ - $ - $ - $ 265,550 Leased assets-land 2,592,206 - ( 57) - 2,592,149 Leased assets-buildings 3,932,498 - ( 4,398) - 3,928,100 $ 6,790,254 $ - ($ 4,455) $ - $ 6,785,799 Opening net Year ended December 31, 2015 Closing net Cost book amount Additions Disposals Reclassifications book amount Land $ 203,494 $ - $ - $ 62,056 $ 265,550 Leased assets-land 2,592,341 - ( 135) - 2,592,206 Leased assets-buildings 3,941,751 1,084 ( 10,337) - 3,932,498 $ 6,737,586 $ 1,084 ($ 10,472) $ 62,056 $ 6,790,254 Opening net Year ended December 31, 2016 Closing net Accumulated depreciation book amount Additions Disposals Reclassifications book amount Leased assets-buildings $ 746,427 $ 85,889 ($ 3,810) $ - $ 828,506 Opening net Year ended December 31, 2015 Closing net Accumulated depreciation book amount Additions Disposals Reclassifications book amount Leased assets-buildings $ 662,031 $ 86,072 ($ 1,676) $ - $ 746,427 C. Rental income from the lease of the investment property and direct operating expenses arising 128 from the investment property are shown below: Years ended December 31, Prince Housing & Development Corp Opening net Closing net Accumulated depreciation book amount Additions Year Year ended ended Disposals December December 31, 31, Reclassifications book amount Leased assets-buildings $ Opening 662,031 net Opening net $ 86,072 ($ 1,676) $ - $ Closing 746,427 net Closing net C. Rental income from the lease of the investment property and direct operating expenses arising C. Rental Accumulated income depreciation from the lease book of amount the investment Additionsproperty Disposals and direct Reclassifications operating expenses book amount Accumulated depreciation book amount Additions Disposals Reclassifications book amount arising from Leased from the assets-buildings the investment property $ are are 662,031 shown shown below: $ below: 86,072 ($ 1,676) $ - 746,427 Leased assets-buildings $ 662,031 $ 86,072 ($ 1,676) $ - $ 746,427 C. Rental income from the lease of the investment property and direct Years operating ended December expenses 31, arising C. Rental income from the lease of the investment property and direct operating expenses arising from the investment property are shown below: from the investment property are shown below: Years ended December 31, Rental revenue from the lease of the investment property $ Years 294,709 ended December $ 295,085 31, Direct operating expenses arising from the investment Rental property revenue that generated from the lease rental of income the investment the period property $ 294, , , ,872 Rental revenue from the lease of the investment property $ 294,709 $ 295,085 Direct Direct operating operating expenses expenses arising arising from from the the investment Direct operating expenses arising from the investment property property that that generated did not generate rental income rental income in the period $ 156,000 $ 157,872 property that generated rental income in the period in the period $ $ 156,000- $ 157,872- D. Direct As of December operating expenses 31, 2016 arising and 2015, from the the fair investment value of the investment property held by the Group D. Direct As was property of operating $12,870,800 December that expenses did 31, and not 2016 $12,932,299, generate arising and 2015, rental from respectively. the the income fair investment value in The the of period the Group investment management $ property estimated - held $ by the the fair Group value - property D. was As based of $12,870,800 that did not December on market 31, and generate evidence 2016 $12,932,299, rental and on transaction 2015, respectively. income in the the fair price value of The period similar of Group the investment property management $ and property assessed estimated - $ held value. by the the fair - Group D. E. As value was Information of December $12,870,800 based on about 31, market and 2016 the $12,932,299, evidence investment and 2015, on property transaction the respectively. fair value that price was The of pledged the of Group similar investment management to property others property as and collateral estimated assessed held by is the value. provided the fair Group value in E. was Information based Note $12,870, on market about and evidence the $12,932,299, investment on transaction respectively. property price that of The was similar pledged Group property management to others and as assessed collateral estimated value. is the provided fair value in (13) E. based Intangible assets Note Information on market 8. about evidence the investment on transaction property price that of was similar pledged property to others and assessed collateral value. is provided in E. Information A. Note Details 8. of about book the values investment are as follows: property that was pledged to others as collateral is provided in (13) Intangible assets (13) Intangible Note 8. assets December 31, 2016 December 31, 2015 (13) Intangible A. A. Details of are as Service assets of concession book values are as follows: $ 2,239,187 $ 2,300,439 A. Details of book values are as follows: December 31, 2016 December 31, 2015 Software 1,729 1,870 Service concession December $ 31, 2,239, $ December 2,300,439 31, 2015 Trademarks and licences Service Software concession $ 2,239,187 1,729 $ 2,300,439 1,870 $ 2,240,916 $ 2,302,523 Software Trademarks and licences 1,729-1, B. Changes in intangible assets for the period are as follows: Trademarks and licences Year $ ended December 2,240,916 31, $ 2,302, B. Changes in intangible assets Opening for the net period are as $ follows: 2,240,916 $ 2,302,523 Closing net B. Changes in intangible assets for the period are as follows: Cost book amount Additions Year ended Disposals December 31, Reclassifications 2016 B. Changes in intangible assets for the period are as follows: book amount Year ended December 31, 2015 Service concession $ Opening 2,868,372 net $ Year -ended $ December - 31, $ $ Closing 2,868,372 net Software Cost Opening book amount net 3,762 Additions 516 Disposals - Reclassifications - book Closing amount 4,278 net Service Trademarks concession Cost and licences book $ amount 2,868,372 3,139 $ Additions - $ Disposals - $ Reclassifications - $ book 2,868,372 amount 3,139 Service Software concession $ $ 2,868,372 2,875,273 3,762 $ $ $ $ - - $ $ - - $ 2,868,372 2,875,789 4,278 Trademarks and licences 3,139 Year - ended December - 31, ,139 Software 3, ,278 $ Opening 2,875,273 net $ 516 $ - $ - $ Closing 2,875,789 Trademarks and licences 3, ,139 net Cost book amount Additions Year ended Disposals December 31, Reclassifications 2015 $ 2,875,273 $ 516 $ - $ - $ book 2,875,789 amount Service concession $ Opening 2,868,372 net $ - $ - $ - $ Closing 2,868,372 net Year ended December 31, 2015 Software Cost book amount 19,559 Additions 1,372 ( Disposals 17,169) Reclassifications - book amount 3,762 Opening net Closing net Service Trademarks concession and licences $ 2,868,372 3,139 $ - $ - $ - $ 2,868,372 3,139 Cost book amount Additions Disposals Reclassifications book amount Software $ 2,891,070 19,559 $ 1,372 (($ 17,169) $ - $ 2,875,273 3,762 Service concession $ 2,868,372 $ - $ - $ - $ 2,868,372 Trademarks and licences 3, ,139 Software 19,559 1,372 ( 17,169) - 3,762 $ 2,891,070 $ 1,372 ($ 17,169) $ - $ 2,875,273 Trademarks and licences 3, ,139 $ 2,891,070 $ 1,372 ($ 17,169) $ - $ 2,875,273

67 Opening net Year ended December 31, 2016 C. Details of amortization on intangible assets are as follows: C. Details of amortization on intangible assets are as follows: $ 528,075 $ 61,844 ($ 17,169) - C. Details of amortization on intangible assets are as follows: Yeaers ended December 31, 2016 Yeaers ended December , Closing net Accumulated Amortization book amount AdditionsYear ended Disposals December 31, Reclassifications 2016 book amount Service concession $ Opening 567,933 net $ 61,252 $ - $ - $ Closing 629,185 net Software Accumulated Amortization book amount 1,892 Additions 657 Disposals - Reclassifications - book amount 2,549 Trademarks Service concession and licences $ 567,933 2,925 $ 61, $ - $ - $ 629,185 3,139 Software $ 572,750 1,892 $ 62, $ - $ - $ 634,873 2,549 Trademarks and licences 2,925 Year 214 ended December - 31, ,139 $ Opening 572,750 net $ 62,123 $ - $ - $ Closing 634,873 net Accumulated Amortization book amount AdditionsYear ended Disposals December 31, Reclassifications 2015 book amount Service concession $ Opening 506,680 net $ 61,253 $ - $ - $ Closing 567,933 net Software Accumulated Amortization book amount 18,756 Additions 305 ( Disposals 17,169) Reclassifications - book amount 1,892 Trademarks Service concession and licences $ 506,680 2,639 $ 61, $ - $ - $ 567,933 2,925 Software $ 528,075 18,756 $ 61, ($( 17,169) $ - $ 572,750 1,892 Trademarks and licences 2, ,925 $ $ 572,750 Operating costs $ ,252 $ ,253 Operating Administrative costsexpenses $ 61, $ 61, Administrative expenses $ 62, $ 61, (14) Short-term borrowings (14) Short-term borrowings $ 62,123 $ 61,844 (14) Short-term borrowings December 31, 2016 December 31, 2015 Unsecured bank borrowings $ December 2,135,659 31, 2016 $ December 1,991,373 31, 2015 Unsecured Secured bank bank borrowings borrowings $ 2,135, ,000 $ 1,991, ,000 Secured bank borrowings $ 2,275, ,000 $ 2,626, ,000 Interest rate range $ 1.53%~2.70% 2,275,659 $ 1.92%~2.51% 2,626,373 Interest For details rate of range pledged assets, please refer to Note %~2.70% 1.92%~2.51% For details of pledged assets, please refer to Note 8. For details of pledged assets, please refer to Note 8. (15) Short-term notes and bills payable December 31, 2016 December 31, 2015 Commercial papers $ December 31, 490, $ December 1,060,000 31, 2015 Commercial Less: Unamortized papersdiscount ( $ 490, ) ( $ 1,060, ) Less: Unamortized discount ( $ 489, ) ( $ 1,059, ) Interest rate range $ 0.58%~1.59% 489,694 $ 0.55%~2.25% 1,059,811 Interest rate range 0.58%~1.59% 0.55%~2.25% A. The above commercial papers were issued by banks and bills financial institutions. A. The above commercial papers were issued by banks and bills financial institutions. B. For details of pledged assets, please refer to Note 8. B. For details of pledged assets, please refer to Note 8. (16) Advance receipts (16) Advance receipts Items December 31, 2016 December 31, 2015 Items December 31, 2016 December 31, 2015 Advance real estate receipts $ 1,123,109 $ 1,592,844 Advance real estate receipts $ 1,123,109 $ 1,592,844 Advance rent 132, ,283 Advance rent 132, ,283 Other advance receipts 131, ,335 Other advance receipts 131, ,335 $ 1,387,455 $ 1,875,462 $ 1,387,455 $ 1,875,462 (17) Bonds payable (17) (17) Bonds payable December 31, 2016 December 31, st secured ordinary bonds $ December 2,000,000 31, 2016 $ December 2,000,000 31, payable 1st secured ordinary bonds $ 2,000,000 $ 2,000,000 payable st secured ordinary bonds 2013 payable 1st secured ordinary bonds 2,500,000 2,500,000 payable 2,500,000 2,500,000 4,500,000 4,500,000 4,500,000 4,500,000 Less: Expiring within one year ( 2,000,000) - Less: Expiring within one year ( 2,000,000) - $ 2,500,000 $ 4,500,000 $ 2,500,000 $ 4,500,000 A. The Group issued secured ordinary bonds payable in July The significant terms of the bonds A. The Group issued secured ordinary bonds payable in July The significant terms of the bonds A. are The as Group follows: issued secured ordinary bonds payable in July The significant terms of the are (a)total bonds as follows: are issue as amount: follows: $2,000,000 (a)total Total issue issue amount: $2,000,000 (b)issue Issue price: price: At At par par value value of of $100 $100 per per bond bond (b)issue price: At par value of $100 per bond (c)coupon rate: rate: 1.33% 1.33% (c)coupon (d) Terms rate: of interest 1.33% repayment: The bonds interest is calculated on simple rate every year (d)terms of interest repayment: The bonds interest is calculated on simple rate every year starting (d)terms starting of interest July 2012 repayment: based on The the bonds coupon interest rate. is calculated on simple rate every year starting July 2012 based on the coupon rate. (e) July Repayment 2012 based term: on The the coupon bonds are rate. repaid upon the maturity of the bonds. (e)repayment (f) Period: 5 years, term: The from bonds July 12, are 2012 repaid to upon July 12, the 2017 maturity of the bonds. (e)repayment (g) The way of term: security: The bonds The bonds are repaid are secured upon the by maturity Bank of Taiwan. of the bonds. (f)period: 5 years, from July 12, 2012 to July 12, 2017 (f)period: (h) Guarantee 5 years, Bank: from The July bonds 12, 2012 are guaranteed to July 12, by 2017 Mega International Commercial Bank. B. (g)the Group way of issued security: secured The ordinary bonds are bonds secured payable by Bank in November of Taiwan The significant terms of (g)the way of security: The bonds are secured by Bank of Taiwan. (h)guarantee the bonds are Bank: as follows: The bonds are guaranteed by Mega International Commercial Bank. (h)guarantee (a) Total issue Bank: amount: The bonds $2,500,000 are guaranteed by Mega International Commercial Bank. B.The Group issued secured ordinary bonds payable in November The significant terms of B.The (b) Group Issue price: issued At secured par value ordinary of $100 bonds per bond payable in November The significant terms of the (c) bonds Coupon are rate: as follows: 1.55% the bonds are as follows: (a)total (d) Terms issue of amount: interest repayment: $2,500,000 The bonds interest is calculated on simple rate every year (a)total starting issue November amount: $2,500, based on the coupon rate. (b)issue price: At par value of $100 per bond (b)issue (e) Repayment price: At term: par value The bonds of $100 are per repaid bond upon the maturity of the bonds. (c)coupon (f) Period: rate: 5 years, 1.55% from November 21, 2013 to November 21, 2018 (c)coupon rate: 1.55% (d)terms (g) The of way interest of security: repayment: $1.5 billion The bonds and $1 interest billion is secured calculated by on Bank simple of Taiwan rate every and Agricultural year starting (d)terms Bank of of interest Taiwan, repayment: respectively. The bonds interest is calculated on simple rate every year starting November 2013 based on the coupon rate. (h) November Guarantee 2013 Bank: based The bonds the coupon are guaranteed rate. by Taipei Fubon Commercial Bank. (e)repayment term: The bonds are repaid upon the maturity of the bonds. (e)repayment term: The bonds are repaid upon the maturity of the bonds. 130 Prince Housing & Development Corp. 131

68 (18) Long-term borrowings December 31, 2016 December 31, 2015 Secured bank borrowings $ 8,682,632 $ 9,635,346 Unsecured bank borrowings 100, ,000 8,782,632 9,905,346 Less: Current portion ( 1,322,904) ( 474,592) 7,459,728 9,430,754 Commerical papers 2,339, ,600 Less: Unamortized discount ( 2,260) ( 443) 2,337, ,157 Total $ 9,797,068 $ 10,019,911 Range of maturity dates ~ ~ Range of maturity rates 0.55%~2.70% 1.74%~3.16% A.For details of restrictive covenants, please refer to Note 9. A. For details of restrictive covenants, please refer to Note 9. B. The Group and financial institutions entered into a contract for a syndicated borrowing. The Group shall redraw revolving credit line to issue abovementioned commercial paper during the credit term. For the related information, please refer to Note 9(10) and 9(12). C. For details of pledged assets, please refer to Note 8. (19) Provisions-replacement cost (19) Provisions-replacement cost Years ended December 31, At January 1 $ 84,517 $ 81,720 Additions 33,470 30,394 Used ( 42,780) ( 27,597) At December 31 $ 75,207 $ 84,517 (20) Pension (20) Pension A. (a) The Company and its domestic subsidiaries have a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company and its domestic subsidiaries contribute monthly an amount equal to 2% of the employees monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company and its domestic subsidiaries would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company and its domestic subsidiaries will make contributions to cover the deficit by next March. (b) The amounts recognised in the balance sheet are determined as follows: (b) The amounts recognised in the balance sheet are determined as follows: December 31, 2016 December 31, 2015 Present value of defined benefit obligation ($ 202,924) ($ 199,398) Fair value of plan assets 111,815 58,323 Net defined benefit liability ($ 91,109) ($ 141,075) (c) Changes in net defined benefit liability are as follows: (c) Changes in net defined benefit liability are as follows: Present value of defined benefit Fair value of Net defined obligation plan assets benefit liability Year ended December 31, 2016 At January 1 ($ 199,398) $ 58,323 ($ 141,075) Current service cost ( 964) - ( 964) Interest (expense) income ( 3,376) 558 ( 2,818) ( 203,738) 58,881 ( 144,857) Remeasurement: Change in financial assumptions ( 5,908) - ( 5,908) Experience adjustments ( 1,747) ( 457) ( 2,204) ( 7,655) ( 457) ( 8,112) Pension fund contribution - 57,072 57,072 Paid pension 8,469 ( 3,681) 4,788 At December 31 ($ 202,924) $ 111,815 ($ 91,109) Present value of defined benefit Fair value of Net defined obligation plan assets benefit liability Year ended December 31, 2015 At January 1 ($ 180,831) $ 51,440 ($ 129,391) Current service cost ( 1,667) - ( 1,667) Interest (expense) income ( 3,552) 1,424 ( 2,128) ( 186,050) 52,864 ( 133,186) Remeasurement: Change in financial assumptions ( 5,280) - ( 5,280) Experience adjustments ( 8,068) 439 ( 7,629) ( 13,348) 439 ( 12,909) Pension fund contribution - 5,020 5,020 At December 31 ($ 199,398) $ 58,323 ($ 141,075) (d) The principal actuarial assumptions used were as follows: 132 Prince Housing & Development Corp. 133

69 (d) The principal actuarial assumptions used were as follows: Years ended December 31, Discount rate 1.20%~1.40% 1.70% Future salary increases 1.50%~2.00% 1.50%~2.00% Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Mortality Table. Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows: obligation is affected. The analysis was as follows: Discount rate Future salary increases Increase Decrease Increase Decrease 0.25% 0.25% 0.25% 0.25% December 31, 2016 Effect on present value of defined benefit obligation ($ 4,604) $ 4,687 $ 4,238 ($ 4,120) December 31, 2015 Effect on present value of defined benefit obligation ($ 4,542) $ 5,238 $ 4,657 ($ 4,142) The sensitivity analysis above is based on other conditions that are unchanged but only one The sensitivity analysis above is based on other conditions that are unchanged but only one assumption is changed. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period. (e) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2017 amounts to $4,843. (f) As of December 31, 2016, the weighted average duration of that retirement plan is 9~12 years. B. (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the New Plan ) under the Labor Pension Act (the Act ), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly an amount based on 6% of the employees monthly salaries and wages to the employees individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. (b) The pension costs under the defined contribution pension plans of the Group for the years ended Dcember 31, 2016 and 2015, were $62,768 and $60,853, respectively. (21) Share capital A. Movements in the number of the Company s ordinary shares outstanding are as follows: (Units: in thousand shares) (Units: in thousand shares) Shares at January 1 and December 31 1,622,671 1,622,671 B. The Company s subsidiary, Ta-Chen Construction & Engineering Corp. (Ta-Chen) has acquired B. The Company s subsidiary, Ta-Chen Construction & Engineering Corp. (Ta-Chen) has acquired the Company s shares in an open market to maintain the equity interest of the Company s shareholders. In order to strengthen management through eliminating interlocking shareholding, the Board of Directors of Ta-Chen has resolved to reduce capital of $435,025 (elimination of 43,502 thousand shares) by returning the Company s shares (of 39,016 thousand shares) to Cheng-Shi Investment Holdings Co., Ltd. (Cheng-Shi Investment), and set the effective capital reduction date as August 5, Cheng-Shi Investment s Board of Directors has resolved the capital reduction and set the reduction effective on September 21, 2015, and returned shares to the Company. The registration of changes in capital and capital reduction as approved by the competent authority has been completed on November 18, C. As of December 31, 2016, the Company s authorized capital was $20,000,000, and the paid-in capital was $16,233,261 with a par value of NT$10 per share, consisting of 1,623,326 thousand shares of ordinary stock. D. As of December 31, 2016 and 2015, the Company s subsidiary Prince Apartment Management Maintain Co., Ltd. held the Company s stocks to maintain equity interest in the Company. The amount of shares held by the subsidiary was all 655 thousand shares, the average par value was all NT$1.52 per share, and the fair value was NT$10.50 and NT$9.40 per share, respectively. (22) Capital surplus Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient. At January 1, 2016 (At December 31, 2016) Capital surplus Share Treasury share 2016 premium transaction Others Total $ 1,375,442 $ 877,839 $ 7,232 $ 2,260,513 Capital surplus Share Treasury share 2015 premium transaction Others Total At January 1, 2015 $ 1,408,500 $ 514,061 $ 7,232 $ 1,929,793 Treasury stock transactions ( 33,058) 363, ,720 At December 31, 2015 $ 1,375,442 $ 877,839 $ 7,232 $ 2,260,513 (23) Retained earnings 134 Prince Housing & Development Corp. 135

70 (23) Retained earnings A. In accordance with the Company s Articles of Incorporation, the Company will take into consideration its future business plans and capital expenditures in determining the amount of earnings to be retained and to be distributed. In accordance with the Company Law, 10% of the current year s earnings, after payment of all taxes and after offsetting accumulated deficit, shall be set aside as legal reserve until the balance of legal reserve is equal to that of issued share capital. Afterwards, an amount shall be appropriated or reversed as special reserve in accordance with applicable legal or regulatory requirements, along with prior years accumulated unappropriated retained earnings, and then distribution should be in the following order: stock dividend and bonus to shareholders are 50%~100% of the accumulated distributable earnings, and cash dividend is at least 30% of the total stock dividend and bonus; the appropriation of earnings is proposed by the Board of Directors and resolved by the shareholders. B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company s paid-in capital. C. The Company recognized dividends distributed to owners amounting to $1,785,659 ($1.1 (in dollars) per share) and $1,329,873 ($0.8 (in dollars) per share) for the years ended December 31, 2016 and 2015, respectively. On March 22, 2017, the Board of Directors proposed that total dividends for the distribution of earnings for 2016 was $1,623,326 at $1.0 (in dollars) per share. (24) Other equity items (24) Other equity items Available-for-sale Currency investment translation Total At January 1, 2016 $ 1,407,403 $ 1,706 $ 1,409,109 Available-for-sale investment: -Loss on fair value ( 349,085) - ( 349,085) Currency translation differences: -Group - ( 1,754) ( 1,754) At December 31, 2016 $ 1,058,318 ($ 48) $ 1,058,270 Available-for-sale Available-for-sale Currency Currency investment translation Total At January 1, 2015 $ 1,434,529 $ 1,690 $ 1,436,219 Available-for-sale investment: -Loss on fair value ( 27,126) - ( 27,126) Currency translation differences: -Group At December 31, 2015 $ 1,407,403 $ 1,706 $ 1,409,109 (25) Maturity analysis of assets and liabilities (25) Maturity analysis of assets and liabilities The construction related assets and liabilities are classified as current and non-current based on the operating cycle. Related recognized amount expected to be recovered or repaid within or after 12 months from the balance sheet date is as follows: months from the balance sheet date is as follows: Within 12 months Over 12 months Total December 31, 2016 Assets Notes receivable, net $ 26,538 $ 16,930 $ 43,468 Accounts receivable, net(including related parties) 380, , ,033 Inventories 8,681,727 13,548,668 22,230,395 Construction contract receivable 476, ,819 1,058,750 $ 9,565,550 $ 14,464,096 $ 24,029,646 Liabilities Notes payable $ 32,236 $ 11,456 $ 43,692 Accounts payable 1,325,909 1,471,736 2,797,645 Construction contract payable 81, , ,082 $ 1,440,069 $ 1,624,350 $ 3,064,419 Within 12 months Over 12 months Total December 31, 2015 Within 12 months Over 12 months Total Assets December 31, 2015 Notes receivable, net $ 44,980 $ 671 $ 45,651 Assets Accounts receivable, net(including related parties) 1,582, ,393 2,180,230 Notes receivable, net $ 44,980 $ 671 $ 45,651 Inventories 8,635,309 13,526,802 22,162,111 Accounts receivable, net(including related parties) 1,582, ,393 2,180,230 Construction Inventories contract receivable 8,635, ,727 13,526, ,231 22,162,111 1,347,958 Construction contract receivable $ 11,194, ,727 $ 14,541, ,231 $ 25,735,950 1,347,958 Liabilities Liabilities Notes payable $ $ 11,194,853 11,094 $ $ 14,541,097 - $ $ 25,735,950 11,094 Accounts Notes payable payable $ 2,510,158 11,094 $ 1,529,999- $ 4,040,157 11,094 Construction Accounts payable contract payable 2,510, ,921 1,529,999 98,516 4,040, ,437 Construction contract payable $ 2,928, ,921 $ 1,628,515 98,516 $ 4,556, ,437 (26) Operating revenue $ 2,928,173 $ 1,628,515 $ 4,556,688 (26) (26) Operating Operating revenue revenue Years ended December 31, Home sales revenue $ 5,274,930 $ 8,382,243 Hospitality services revenue 2,856,156 3,073,924 Service revenue 547, ,615 Construction contract revenues 2,781,948 3,548,640 Service concession revenue -Operating service revenue 372, ,279 Other operating revenue 227, ,805 $ 12,060,302 $ 16,108,506 (27) Other income Years ended December 31, Interest income $ 10,033 $ 8,896 Dividend income 118, , Others Prince Housing 172,642 & Development Corp. 158, $ 301,136 $ 336,933 (28) Other gains and losses Years ended December 31,

71 (27) Other income (27) Other income Years ended December 31, Interest income $ 10,033 $ 8,896 Dividend income 118, ,518 Others 172, ,519 $ 301,136 $ 336,933 (28) Other gains and losses (28) Other gains and losses (28) Other gains and losses Years ended December 31, Note: Please refer to Note 9(17) for details Net (loss) gain on financial assets at fair value through profit or loss ($ 15,349) $ 79,305 Net currency exchange (loss) gain ( 6,650) 18,168 Arbitration expenses and compensation loss (Note) - ( 56,278) Others 236,775 15,689 (29) Finance costs (29) Finance costs (30) Expenses by nature (30) Expenses by nature (30) Expenses by nature $ 214,776 $ 56,884 Years ended December 31, Interest expense: Bank borrowings $ 88,143 $ 171,706 Commercial paper 31,309 36,603 Ordinary bond 120, ,953 Others 1,481 1,703 Other finance expenses 1,200 1,201 $ 243,079 $ 335,166 Year ended December 31, 2016 Operating costs Operating expenses Total Employee benefit expense Wages and salaries $ 782,266 $ 765,309 $ 1,547,575 Labor and health insurance fees 66,365 64, ,457 Pension costs 34,071 32,479 66,550 Other employee benefit expense 29,796 42,202 71,998 $ 912,498 $ 904,082 $ 1,816,580 Depreciation charges $ 85,889 $ 287,307 $ 373,196 Amortization charges $ 61,252 $ 871 $ 62,123 Year ended December 31, 2015 Operating costs Operating expenses Total Employee benefit expense Wages and salaries $ 790,765 $ 813,870 $ 1,604,635 Labor and health insurance fees 64,300 61, ,752 Pension costs 30,200 34,448 64,648 Other employee benefit expense 15,572 51,552 67,124 $ 900,837 $ 961,322 $ 1,862,159 Depreciation charges $ 86,072 $ 270,999 $ 357,071 Amortization charges $ 61,253 $ 591 $ 61,844 A. A. According According to to the the Articles Articles of of Incorporation of of the the Company, Company, when when distributing earnings, the the Company shall distribute compensation to the employees and pay remuneration to the directors that account for at least 2% and no higher than 3%, respectively, of distributable profit of the current period. If a company has accumulated deficit, earnings should be channeled to cover losses. Employees compensation can be distributed in the form of shares or in cash. Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive aforementioned stock or cash. Abovementioned distributable profit of the current period refers to the pre-tax profit before deduction of employees compensation and directors remuneration. B. For the years ended December 31, 2016 and 2015, employees compensation was accrued at $185,821, and $244,705, respectively; while directors remuneration was accrued at $63,218 and $83,250, respectively. The aforementioned amounts were recognised in salary expenses. The employees compensation and directors remuneration were accrued based on the percentage as prescribed in the Company s Articles of Incorporation and distributable profit of current period for the year ended December 31, The distributed amounts resolved by the Board of Directors were in agreement with the accrued amounts. The employees compensation will be distributed in the form of cash. Employees compensation and directors remuneration of 2015 as resolved at the meeting of Board of Directors were in agreement with those amounts recognised in the 2015 financial statements. Information about employees compensation and directors remuneration of the Company as resolved at the meeting of Board of Directors will be posted in the Market Observation Post System at the website of the Taiwan Stock Exchange. 138 Prince Housing & Development Corp. 139

72 (31) Income tax A. Income tax expense (income) (a) Components of income tax expense: (a) Components of income tax expense: Current tax: Current tax on profits for the period $ 256,531 $ 110,958 Tax on undistributed surplus earnings 27,485 85,214 Under provision of prior year's income tax Land value increment tax recognized in income tax for the period 7,952 31,079 82, ,254 Total current tax 374, ,505 Deferred tax: Origination and reversal of temporary differences Years ended December 31, ( 67,682) ( 77,413) Income tax expense $ 306,469 $ 288,092 (b) The income tax (charge)/credit relating to components of other comprehensive income is as follows: Years ended December 31, Remeasurement of defined benefit plans ($ 560) $ - (c) Reconciliation between income tax expense and accounting profit: (c) Reconciliation between income tax expense and accounting profit: (c) Reconciliation between income tax expense and accounting profit: Years ended December 31, Tax calculated based on profit before tax and statutory tax rate $ 323,966 $ 428,682 Effects recognised from adjustments under tax regulations ( 98,349) ( 301,656) Additional 10% tax on undistributed earnings 27,485 85,214 Effect from investment tax credits ( 24,113) ( 59,211) Prior year's income tax under estimation 7,952 31,079 Land value increment tax 82, ,254 Loss carryforward ( 12,655) ( 34,270) Income tax expense $ 306,469 $ 288,092 B. Amounts of deferred tax assets or liabilities as a result of temporary differences are as follows: Year ended December 31, 2016 Recognised in Recognised in other January 1 profit or loss comprehensive income December 31 Deferred tax assets Temporary difference: Rent adjusted using the straight-line method $ 104,991 ($ 2,045) $ - $ 102,946 Pensions 1,214 ( 1,636) Employee benefits 254 ( 218) - 36 Unused compensated absences Net operating loss carryforward $ 106,459 ($ 2,484) $ 560 $ 104,535 Deferred tax liabilities Temporary difference: Provision for land revaluation increment tax $ 416,005 ($ 70,166) $ - $ 345,839 Year ended December 31, 2015 Recognised in Recognised in other January 1 profit or loss comprehensive income December 31 Deferred tax assets Temporary difference: Rent adjusted using the straight-line method $ 106,693 ($ 1,702) $ - $ 104,991 Pensions 1,268 ( 54) - 1,214 Employee benefits 408 ( 154) $ 108,369 ($ 1,910) $ - $ 106,459 Deferred tax liabilities Temporary difference: Provision for land revaluation increment tax $ 495,328 ($ 79,323) $ - $ 416,005 C. According to Act for Promotion of Private Participation in Infrastructure Projects, details of the Company s investment tax credit and unrecognised deferred tax assets are as follows: The Company did not have any investment tax credit nor unrecognised deferred tax assets for the year ended December 31, Prince Housing & Development Corp. 141

73 the year ended December 31, December 31, 2015 Unrecognised Tax credit of investment Qualifying items Unused tax credits deferred tax assets usable until Investment $ 24,113 $ 24, D. D. Expiration dates dates of of loss loss carryforward and and amounts of of unrecognised deferred tax tax assets are are as as follows: Amount filed / Unused Unrecognised deferred Usable Year incurred assessed amount tax assets until In and before 2011 Amount assessed $ 1,145,299 $ 1,145, Year ended December 31, 2012 Year ended December 31, 2013 Year ended December 31, 2014 Year ended December 31, 2015 Year ended December 31, 2016 Amount assessed Amount assessed Amount filed/ assessed Amount filed Amount filed December 31, ,475 11,475 34,849 34,849 31,519 31,519 15,065 15,065 20,721 19,854 $ 1,258,928 $ 1,258,061 December 31, 2015 Amount filed / Unused Unrecognised deferred Usable Year incurred assessed amount tax assets until In and before 2011 Amount assessed $ 2,297,232 $ 2,297, Year ended December 31, 2012 Year ended December 31, 2013 Year ended December 31, 2014 Year ended December 31, 2015 Amount filed Amount filed Amount filed Amount filed 12, ,453 37,676 16,571 12, ,453 37,676 16, $ 2,584,908 $ 2,584,908 E. As of December 31, 2016, the Company s income tax returns through 2014 have been assessed and approved by the Tax Authority. F. Unappropriated retained earnings: F. Unappropriated retained earnings: December 31, 2016 December 31, 2015 Earnings generated in and after 1998 $ 3,101,014 $ 3,508,400 G.As of December 31, 2016 and 2015, the balance of the imputation tax credit account was $83, G. As of December 31, 2016 and 2015, the balance of the imputation tax credit account was $83,807 and $53,573, respectively. The creditable tax rate was 4.74% for 2015 and is estimated to be 8.15% for The tax credits to be allocated to the stockholders are calculated based on the balance of the imputation tax credit account on the day of distribution of dividends. Therefore, the creditable tax rate applicable to the stockholders for the appropriation of earnings generated in and after 1998 shall be adjusted to take into account the tax credits that might incur under the income tax laws up to the distribution date of dividends or earnings. (32) Earnings per share Year ended December 31, 2016 Weighted average number of ordinary Earnings shares outstanding per share Basic earnings per share Amount after tax (shares in thousands) (in dollars) Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares $ 1,609,189 1,622,671 $ 0.99 $ 1,609,189 1,622,671 Employees compensation - 19,768 Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares $ 1,609,189 1,642,439 $ 0.98 Basic earnings per share Profit attributable to ordinary shareholders of the parent Year ended December 31, 2015 Weighted average number of ordinary Earnings shares outstanding per share Amount after tax (shares in thousands) (in dollars) $ 2,237,800 1,622,671 $ 1.38 Diluted earnings per share Profit attributable to ordinary shareholders of the parent $ 2,237,800 1,622,671 Assumed conversion of all dilutive potential ordinary shares Employees compensation - 27,220 Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares $ 2,237,800 1,649,891 $ 1.36 (33) Operating leases 142 Prince Housing & Development Corp. 143

74 (33) Operating leases The Company s subsidiary leases office and business area under non-cancellable operating lease agreements. The lease terms are between 2011 and 2035, and all these lease agreements are renewable at the end of the lease period. Rental payment is calculated based on an agreed upon rate of revenue. The Company s subsidiary recognized rental expense of $387,246 for the years ended December 31, 2016 and The future aggregate minimum lease payments under noncancellable operating leases are as follows: operating leases are as follows: December 31, 2016 December 31, 2015 Not later than one year $ 403,952 $ 400,563 Later than one year but not later than five years 2,041,364 2,034,162 Later than five years 5,566,321 5,977,475 $ 8,011,637 $ 8,412,200 (34) Non-cash transactions (34) Non-cash transactions Investing and financing activities with no cash flow effects: Years ended December 31, A.Merchandise inventory reclassified to property, plant and equipment $ - $ 167 B.Land held for construction site reclassified to investment property $ - $ 62, RELATED PARTY TRANSACTIONS (1) Significant related party transactions and balances A. Sales of goods: (a) Years ended Decmber 31, Construction subcontracting Associates $ 113,781 $ 152,071 Other related parties 183, ,903 $ 297,666 $ 540,974 The contract prices of construction for related parties are based on expected construction cost The contract prices of construction for related parties are based on expected construction cost plus reasonable management expenses and profit, and are determined based on mutual agreements. The construction payments are collected based on the contract terms. As of December 31, 2016 and 2015, the status of the construction of the related parties undertaken by the Group was as follows: by the Group was as follows: December 31, 2016 December 31, 2015 Associates: Total amount of construction contracts that were signed but had not been settled yet $ 318,329 $ 5,435,312 Construction payments received ( 271,887) ( 4,972,256) Construction payments receivable $ 46,442 $ 463,056 Other related parties Total amount of construction contracts that were signed but had not been settled yet $ 5,054,233 $ 5,427,516 Construction payments received ( 4,886,702) ( 5,030,549) Construction payments receivable $ 167,531 $ 396,967 (b) (b) Years ended December 31, Rental income: -Other related parties $ 47,775 $ 47,334 Rent Rent is is determined determined by by mutual mutual agreements agreements and and is is collected collected monthly. monthly. B. Accounts receivable December 31, 2016 December 31, 2015 Accounts receivable - related parties: -Associates $ 2,660 $ 22,670 Other related parties 20, ,976 $ 22,660 $ 428,646 C. Rental payables December 31, 2016 December 31, 2015 Other payable: -Associates $ 701,520 $ 169,005 Long-term notes and accounts payable -Associates $ - $ 618,880 D. Others (a) (a) Years ended December 31, Rental expenses: -Associates $ 497,030 $ 558,115 Other related parties 6,594 4,456 $ 503,624 $ 562,571 (b) (b) December 31, 2016 December 31, 2015 Refundable deposits: -Associates $ 66,831 $ 66,266 E. On June 20, 2006, the Company and China Metal Products Co., Ltd. ( A party ) jointly signed a creditor s rights transfer contract with Amida Trustlink Assets Management Co., Ltd. ( B party ). 144 Under the contract, the Company and A party should Prince pay Housing $2,100,000 & Development each (totaling $4,200,000) Corp. 145 to jointly acquire whole creditor s rights of mortgages, security interests and other dependent claims (collectively referred herein as the creditor s rights) on the Splendor Hotel Taichung

75 E. On June 20, 2006, the Company and China Metal Products Co., Ltd. ( A party ) jointly signed a creditor s rights transfer contract with Amida Trustlink Assets Management Co., Ltd. ( B party ). Under the contract, the Company and A party should pay $2,100,000 each (totaling $4,200,000) to jointly acquire whole creditor s rights of mortgages, security interests and other dependent claims (collectively referred herein as the creditor s rights) on the Splendor Hotel Taichung Building, and each bears 50% rights and obligations of this acquisition; when all creditor s rights of this object turn into property rights, the Company and A party should pay B party totaling $1,000,000 as the cost and reward of B party for it is entrusted with the task to help turn the creditor s rights as stated above into property rights, but any excess cost over $1,000,000 if incurred on this task shall be borne by B party on its own; the Company should pay B party $300,000 before June 30, 2006, and the Company and A party should jointly issue a promissory note of $1,800,000 to B party on the signing date; payment should be done before July 15, The title to the creditor s rights as stated above had been transferred to the Company and A party on August 2, Total acquisition price of the creditor s rights amounted to $5,200,000, which the Company and A party bear 50% of the price each. The Company had paid its share. F. Certain short and long-term borrowings of the Company were guaranteed by its Chairman and General Manager. (2) Key management compensation Years ended December 31, Salaries and other short-term employee benefits $ 100,723 $ 140,260 Post-employment benefits - - Other long-term benefits - - Termination benefit - - Share-based payment - - $ 100,723 $ 140, PLEDGED ASSETS 8. PLEDGED ASSETS The Group s assets pledged as collateral are as follows: Pledged asset December 31, 2016 December 31, 2015 Purpose Time deposits, demand deposits and checking $ 1,490,134 $ 2,811,735 To obtain a higher credit for client, performance deposits (shown as "other financial assets guarantee, construction performance guarantee, - current" and "other financial assets - short-term and long-term borrowings, non-current") short-term commercial papers issue, member reward points and gift coupons trust account Financial assets at fair value through profit 296, ,992 Construction performance guarantees, or loss short-term and long-term borrowings Land held for construction site 7,808,509 6,974,863 Short-term borrowings, notes and bills payable and long-term borrwings Construction in progress 2,803,892 2,133,843 Short-term borrowings, notes and bills payable and long-term borrwings Buildings and land held for sale 2,270,855 - Long-term notes and bills payable Available-for-sale financial assets 757,036 1,028,798 Short-term borrowings, notes and bills payable Financial assets carried at cost 575, ,426 Short-term borrowings, notes and bills payable Investments accounted for under equity metho 1,443,473 1,582,560 Short-term borrowings, notes and bills payable Land 2,729,051 2,729,051 Construction performance guarantees, short-term borrowings, notes and bills payable and long-term borrowings Buildings 1,990,294 2,042,803 Short-term borrowings, notes and bills payable and long-term borrowings Investment property 3,851,473 4,047,218 Construction performance guarantees, short-term borrowings, notes and bills payable and long-term borrowings $ 26,016,896 $ 24,247, SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS (1) Summary of endorsements and guarantees and financial support commitments is as follows: A. Summary of endorsements and guarantees provided by the Company to subsidiaries is as follows: December 31, 2016 December 31, 2015 Total Total endorsement Amount endorsement Amount Name of company amount drawn amount drawn The Splendor Hotel Taichung $ 2,000,000 $ 1,682,206 $ 2,000,000 $ 1,708,520 Prince Real Estate Co., Ltd. 2,500, , Ta-Chen Construction & Engineering Corp. 1,900,000-1,900,000 - $ 6,400,000 $ 2,462,206 $ 3,900,000 $ 1,708,520 B. Summary of endorsements and guarantees provided by subsidiaries to the Company is as follows: 146 Prince Housing & Development Corp. 147

76 B. Summary of endorsements and guarantees provided by subsidiaries to the Company is as follows: B. Summary of endorsements and guarantees provided by subsidiaries to the Company is as follows: December 31, 2016 December 31, 2015 Total Total endorsement Amount endorsement Amount Name of company amount drawn amount drawn Prince Real Estate Co., Ltd. $ 2,500,000 $ 2,035,309 $ 2,500,000 $ 2,086,198 Ta-Chen Construction & Engineering Corp. 927, ,889 - Prince Utility Co., Ltd. 900, , , ,763 Dong-Feng Enterprises Co., Ltd ,810,889 1,810,889 $ 4,327,889 $ 2,674,072 $ 6,138,778 $ 4,535,850 C. Summary of endorsements and guarantees provided by subsidiaries to subsidiaries is as follows: C. Summary of endorsements and guarantees provided by subsidiaries to subsidiaries is as follows: C. Summary of endorsements and guarantees provided by subsidiaries to subsidiaries is as follows: December 31, 2016 December 31, 2015 Total Total Subsidiaries being endorsement Amount endorsement Amount Name of subsidiaries endorsed/guaranteed amount drawn amount drawn Prince Apartment Management Maintain Co., Ltd. Prince Property Management Consulting Co., Ltd. Prince Security Co., Ltd. $ 20,000 $ 10,000 $ 20,000 $ 10,000 Prince Security Co., Ltd. 56,000 10,000 56,000 10,000 $ 76,000 $ 20,000 $ 76,000 $ 20,000 D. The accumulated operating losses of the subsidiary, the Splendor Hotel, had exceeded 50% of its D. The accumulated operating losses of the subsidiary, the Splendor Hotel, had exceeded 50% of its paid-in capital and its current liabilities were greater than its current assets. The Company was committed to give the Splendor Hotel financial support for its continuing operations for one year from the date of the financial support letter. (2) Capital expenditures contracted for at the balance sheet date but not yet incurred are as follows: (2) Capital expenditures contracted for at the balance sheet date but not yet incurred are as follows: December 31, 2016 December 31, 2015 Property, plant and equipment $ 3,104 $ 9,517 (3) Operating lease agreements: (3) Operating lease agreements: Please refer to Note 6 (33) for details. (4) According to the sale contracts, the Company should provide warranty on the house structure and major facilities for one year from the handover day for the houses it sold. However, any damage to the houses caused by disasters, additions to the houses made by the buyers, or events that are not attributed to the Company is not included in the scope of warranty. (5) On March 17, 2005, the Company ( A party ) signed a contract with National Taiwan University ( B party ) relating to the construction and operation of dormitories on Chang-Hsing St. and Shui-Yuan Campus. The major terms of the contract are as follows: A. Under the contract, B party should be responsible for acquiring the ownership or land-use right for this project, and let A party use the land; A party must complete the construction within 3 years from the registration of the superficies, and may operate the dormitories for 44 years, collect dormitory rentals and use fees of other facilities from students, and should return the related assets to B party on the expiry of the contract. B. A party should give B party a performance guarantee of $60,000 for the construction on the signing date and $30,000 for operations before the start of operation. As of December 31, 2016 and 2015, A party had provided performance guarantee with a guarantee letter issued by the bank, all amounting to $30,000. C. A party should pay B party land rentals from the registration of the superficies, according to the terms of the contract, and pay B party operating royalties from the third year of the operation, based on 0.5% of dormitory rentals and use fees of other facilities collected from students. D. Terms of restrictions for A party: (a) The ratio of A party s own capital utilized in this project to total construction cost of this project should be at least 30%; (b) During the operation period, the ratio of shareholders equity to total assets should be at least 25%; and current ratio (current assets/current liabilities) should be at least 100%; (c) All rights acquired by A party under the contract, except for other conditions specified in the contract and approved by B party, should not be transferred, leased, registered as a liability/ obligation or become an executed object of civil litigation. (6) On May 10, 2005, the Company ( A party ) signed a contract with National Cheng Kung University ( B party ) relating to the construction and operation of student dormitories and alumni hall. The major terms of the contract are as follows: A. Under the contract, B party should be responsible for acquiring the ownership or land-use right for this project, and let A party use the land by way of registration of the superficies; A party must obtain the user license within 3 years after the signing date, and may operate the dormitories and motorcycle parking lots for 35 years from the start of operation and collect dormitory rentals and use fees of other facilities from students for 50 years from the start of construction, and should return the related assets to B party on the expiry of the contract. B. A party should give B party performance guarantee of $50,000 for this project on the signing date, which will be returned in installment according to the contractual terms. As of December 31, 2016 and 2015, A party had provided performance guarantee with a guarantee letter issued by the bank, both amounting to $20,000. C. During the operation period, A party should pay B party dormitory operating royalties based on 2% of annual operating revenue of the dormitories and auxiliary facilities operating royalties based on 4% of annual operating revenue of the auxiliary facilities. A party should pay such operating royalties for prior year before the end of June every year. Further, according to the superficies contract signed by the two parties, A party should pay B party land rentals from the registration of superficies. D. All rights acquired by A party under the contract, except for other conditions specified in the contract and approved by B party, should not be transferred, leased, registered as a liability/ obligation or become an executed object of civil litigation. (7) The Company signed a syndicated loan contract with 7 banks - Mega International Commercial Bank as the lead bank for a credit line of $2.16 billion. The syndicated loans include long-term (secured) loans and guarantee payments receivable (secured), which are used to fund the construction of dormitories in Changxing St. Campus and Shuiyuan Campus of National Taiwan University. During the loan period, the Company should maintain financial commitments such as current ratio, liability 148 Prince Housing & Development Corp. 149

77 ratio and interest coverage; those financial ratios/restrictions shall be reviewed at least once every year, based on the Company s audited annual non-consolidated financial statements. If the Company violates the above financial commitments, it shall improve its financial position by capital increase or other ways before the end of October of the following year from the year of violation; it would not be regarded as a default if the managing bank confirms that its financial position has improved completely. In case of violation, interest on the loans would be charged at the loan rate specified in the contract plus additional 0.25% per annum from the notification date of the managing bank to the completion date of financial improvement or to the date the Company gains the relief from the consortium for its violation. (8) The Company signed a loan contract with Mega International Commercial Bank for a credit line of $785 million. The loans include long-term (secured) loans and guarantee payments receivable (secured), which are used to fund the construction of student dormitories and alumnus hall of National Cheng Kung University. During the loan period, the Company should maintain financial commitments such as current ratio, liability ratio and interest coverage; those financial ratios/ restrictions shall be reviewed at least once every year. Current ratio and liability ratio shall be reviewed based on the Company s audited annual non-consolidated financial statements, and interest coverage based on the Company s revenue and expenditure table for the related project. If the Company violates the above financial commitments, it shall improve its financial position by capital increase or other ways before the end of October of the following year from the year of violation; it would not be regarded as a default if the bank confirms that its financial position has improved completely. In case of violation, interest on the loans would be charged at the loan rate specified in the contract plus additional 0.25% per annum from the notification date of the bank to the completion date of financial improvement or to the date the Company obtains a waiver from the bank for its violation. (9) The Company signed a syndicated loan contract with 10 banks - Bank of Taiwan Co., Ltd. as the lead bank for a credit line of $2 billion. The syndicated loans are medium-term (secured) loans, and are used for residential building construction cooperated by the Company and Taiwan Sugar Corporation ( TSC ) on Guo-An Sec., Xitun District, Taichung City. Furthermore, the Company shall repay in full for the balance of unpaid principal on maturity date. However, when the buildings in the case are completed and sold or when handling buyer s household debt, borrower should repay the balance of used and unpaid principal for the syndicated loans with 70% of selling consideration. The abovementioned construction has been substantially completed, thus, the Company has repaid in advance in January (10) The Company signed a syndicated loan contract with 3 financial institutions - Mega International Commercial Bank as the lead bank for a credit line of $1.06 billion. The syndicated loans include medium-term (secured) loans and commercial paper guarantees, which are used for purchases of 4 tracts of PingHsin Sections No. 694, 706, 708 and 709 in Taiping Dist., Taichung City and construction payment of residential buildings. Furthermore, the Company shall repay in full for the balance of unpaid principal on maturity date. (11) The Company signed a syndicated loan contract with 6 financial institutions CTBC Bank Co., Ltd. as the lead bank for a credit line of $2.1 billion for medium-term commercial paper, financing the working capital of the Company which provides Tanmei office building as collateral. Commercial papers issued by the Company should be 90 days. However, commercial papers issued in the terms of other commercial papers issued before the due date should be the same. The syndicated loan can be redrawn in the credit term and pay off the loan immediately. (12) The Company signed a syndicated loan contract with 3 financial institutions Bank of Taiwan Co., Ltd. as the lead bank for a credit line of $3.045 billion. The syndicated loans include medium-term guarantee payments receivable (secured) and medium-term commercial paper guarantees (secured). Bank of Taiwan and Agricultural Bank of Taiwan provided medium-term guarantee payments receivable (secured) with a credit line of $2.545 billion which are used by the Company to apply for the guarantee of corporate bond issued by the bank. International Bills Finance Corp provides medium-term commercial paper guarantees (secured) with a credit line of $500 million which are used by the Company to repay the borrowing to the financial institutions and improve financial structure. These three financial institutions shall renew the contract with the Company for another 1 year based on their individual commitments and establish the facility documentation, which is similar to the commercial paper guarantees, letter of purchase contract and others. In addition, no matter whether the bondholders receive the payment or not, the banks guarantee responsibility will be released after the debtor returns the payables to the agency. (13) On May 18, 2007, the Company signed a contract with Taiwan Sugar Corporation ( TSC ) in relation to cooperative construction of houses. According to the contract, TSC shall provide Lot No , Guo-An Sec., Xitun District, Taichung City; the Company shall provide funding for those projects and repurchase houses and land allocated to TSC amounting to $1,810,889 and shall bear all improvement fees of houses, public facilities and land, selling expenses, and other expenses or contributed expenses required under the decrees. The Company shall not ask for any compensation for price fluctuations or other reasons. Further, under the contract, the Company shall give TSC performance guarantee amounting to $181,090, on the signing date, which will be returned in installments according to the contractual terms. The Company had provided performance guarantee with a guarantee letter of the bank as follows: with a guarantee letter of the bank as follows: December 31, 2016 December 31, 2015 Lot No.12-12, and No Guo-An Sec., Xitun District, Taichung City(Note) $ - $ 181,090 Note: The usage license of the construction was granted in August 2016 and the performanc Note: The usage license of the construction was granted in August 2016 and the performance guarantee was returned in the same month. (14) On January 20, February 10 and December 27, 2014, the Company signed a contract with Taiwan Sugar Corporation ( TSC ) in relation to cooperative construction of houses. According to the contracts, TSC shall provide Taichung City Koan An Section No and Tainan City Hou Guan Section No.34 and Nanzi Dist., Kaohsiung City Nanzi 1st Section No. 158, etc; the Company shall provide funding for those projects and repurchase houses and land allocated to TSC amounting to $638,763, $830,889 and $1,255,300, and shall bear all improvement fees of houses, public facilities and land, selling expenses, and other expenses or contributed expenses required under the decrees. The Company shall not ask for any compensation for price fluctuations or other reasons. Further, under the contract, the Company shall give TSC performance guarantee amounting to $63,880, $83,080 and $125,540, respectively, on the signing date, which will be returned in instalments according to the contractual terms. The Company had provided such performance guarantee with guarantee letter of the bank as follows: 150 Prince Housing & Development Corp. 151

78 guarantee letter of the bank as follows: December 31, 2016 December 31, 2015 Taichung City Koan An Section No $ 63,880 $ 63,880 Tainan City Hou Guan Section No.34 (Note) $ - $ 83,100 Nanzi Dist., Kaohsiung City Nanzi 1st Section No. 158, etc $ 125,540 $ 125,600 Note: Note: The The construction construction has has been been completed completed in in November November and and the the performance performance guarantee guarantee has has been returned in February (15) The Company signed an agreement with Mr. Fang Tsai-Yuan and World Vision United Co., Ltd. on March 5, 2012 and July 17, 2012, respectively, for joint construction of houses. Under those agreements, Mr. Fang Tsai-Yuan and World Vision United Co., Ltd., the owners of land, shall provide the land located at Nos. 572 and 602, Sec. Zhi-Shan 1, Shilin District, Taipei City, respectively, and the Company is responsible for the construction; the houses built would be allocated to both sides based on the specified proportion. In addition, the Company shall give performance bond in the amount of $350,000 and $19,570 to Mr. Fang Tsai-Yuan and World Vision United Co., Ltd., respectively, which would be returned to the Group in installments. As of December 31, 2016 and 2015, balance of the performance bonds were as follows: December 31, 2016 and 2015, balance of the performance bonds were as follows: December 31, 2016 December 31, 2015 No. 602, Sec. Zhi-Shan 1, Shilin District, Taipei City $ 350,000 $ 350,000 No. 572, Sec. Zhi-Shan 1, Shilin District, Taipei City $ 19,570 $ 19,570 (16) As of December 31, 2016 and 2015, performance guarantee letters issued for construction (16) As of December 31, 2016 and 2015, performance guarantee letters issued for construction undertaking, warranty and leases of subsidiary, Ta-Chen Construction & Engineering Corp., amounted to $223,564 and $572,960, respectively. (17) The Subsidiary, Ta-Chen Construction & Engineering Corp. ( Ta-Chen ), Hung-Yi Construction Corp. and Evergreen International Engineering Corp. ( Evergreen ) (collectively referred herein as the joint contractors ) jointly undertook the construction of the new office building of the American Institute in Taiwan. As the joint contractors and the owner of this project both claim the counterparty defaulted on the contract, they terminated the contract and referred the dispute to arbitration. A settlement was reached in August 2013, and the joint contractors would together pay a reconciliation payment amounting to US$16.4 million, which Ta-Chen pays 68.24%. Ta-Chen has estimated and recognized related arbitration expenses, reconciliation payment and construction loss. Furthermore, the settlement agreement between Ta-Chen and the owner, including tax on settlement of $30,178 paid to the Taxation Bureau on behalf of the owner, has been reached. As 2 years have passed from the application of tax refunds and the probability of tax refund is remote, the related other receivables were written off and loss of $30,178 was recognised in Furthermore, Ta-Chen has paid the settlement on behalf of the joint contractors. Ta-Chen planned to request Evergreen to pay all payments of $221,100 on behalf of other joint contractors. As the joint contractors have disagreement regarding the contract, Ta-Chen has filed an arbitration application with the Chinese Arbitration Association, Taipei, and received an arbitration award on March 27, 2015 wherein, Evergreen International Engineering shall pay Ta-Chen a total amount of $169,765 plus interest at 5% per annum from December 17, 2013 until the date of payment. Additionally, on June 15, 2015, the arbitration court corrected the payment to $201,427. Ta-Chen reached an agreement with Evergreen on June 18, 2015 that Evergreen shall pay $195,000 and both sides shall withdraw revocation proceedings or application for compulsory enforcement. Therefore, Ta-Chen has written off other receivables and recognized loss of $ 26,100 in Ta-Chen received the above payment of $195,000 from Evergreen on June 30, 2015 and the case was closed. (18) Certain construction contracts undertaken by subsidiary, Ta-Chen Construction & Engineering Corp., specify that default penalty shall be computed according to the contractual terms if the construction is not completed within the prescribed period. (19) On October 9, 2013, the subsidiary, the Splendor Hotel Taichung, signed a syndicated loan contract with 5 financial institutions, including Taiwan Cooperative Bank, etc., in the amount of $3.3 million, with Prince Housing & Development Corp. and China Metal Products Co., Ltd. as guarantors. Under the contract, the subsidiary promised its tangible net equity shall not be negative and current ratio, liability ratio, tangible net equity and interest coverage of Prince Housing & Development Corp. and China Metal Products Co., Ltd. shall conform to certain criteria as specified in the contract. If the Splendor Hotel Taichung violates above financial commitments, the managing bank has the right to take the following actions, including but not limited, according to the contract or the resolution of majority of the consortium: 1) request the subsidiary to stop drawing down all or part of the loans; 2) cancel all or part of the credit line of the contract which has not been drawn down yet; 3) announce that all outstanding principal, interest and other accrued expenses payable to the consortium in relation to the loan contract should mature immediately; 4) inform the managing bank of the demand for subsidiary s payment of the promissory note acquired under the loan contract; 5) inform the managing bank to exercise creditor s right of mortgage; 6) exercise contract transfer right, or other rights given by the laws, the loan contract or other relevant documents; 7) take other actions as resolved by the majority of the consortium. 10. SIGNIFICANT DISASTER LOSS None. 11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE None. 12. OTHERS (1) Capital management The Group s capital management is to ensure it has sufficient financial resource and operating plans to meet operational capital for future needs, capital expenditure, obligation repayment and dividend distribution. The Group adjusts borrowing amount in accordance with construction progress and capital needed for operations. (2) Financial instruments A. Fair value information of financial instruments The carrying amount of cash and cash equivalents and financial instruments measured at amortized cost (including notes and accounts receivable, other receivables, other financial assets, refundable deposits, short-term borrowings, short-term notes and bills payable, notes and accounts payable, other payables, corporate bonds payable, long-term borrowings, longterm notes and accounts payable and guarantee deposits received) are approximate to their fair values. Furthermore, the Group s management believes the carrying amounts of financial assets 152 Prince Housing & Development Corp. 153

79 and liabilities not measured at fair value are approximate to their fair value or their fair value cannot be reliably measured. Thus, the carrying amount is the estimated fair value. The fair value information of financial instruments measured at fair value is provided in Note 12(3). B. Financial risk management policies (a) The Group s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group s financial position and financial performance. (b) Risk management is carried out by a central treasury department (Group's finance & accounting division) under policies approved by the Board of Directors. Group's finance & accounting division evaluates and hedges financial risks in close cooperation with the Group s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. C. Significant financial risks and degrees of financial risks (a) Market risk Foreign exchange risk The Group operates internationally and the currencies primarily used are NTD and USD. Foreign exchange risk arises from recognized assets and liabilities and net investments in foreign operations. Management has set up a policy to require the Group entities to manage their foreign exchange risk against their functional currency. The Group entities are required to manage their entire foreign exchange risk exposure with the Group finance & accounting division. Foreign exchange risk does not have significant impact to the Group. Interest rate risk The Group s interest rate risk arises from short-term and long-term borrowings (not including commercial paper). Borrowings issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group s borrowings at variable rate were denominated in the NTD. If interest rates on borrowings had been 0.1% basis point higher/lower with all other variables held constant, pre-tax profit for the years ended December 31, 2016 and 2015 would have been $11,058 and $12,532 lower/higher, respectively. Price risk The Group has investments in equity instruments, and the prices would change due to the change of the future value of investee companies. However, the Group has set a stop-loss point and it was assessed that the Group was not exposed to significant price risk. If the prices of these equity securities had increased/decreased by 10% with all other variables held constant, pre-tax profit for the years ended December 31, 2016 and 2015 would have increased/decreased by $74,052 and $54,052, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by $16,129 and $16,641, respectively, as a result of gains/ losses on equity securities classified as available-for-sale. (b) Credit risk i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. Credit risk arises from cash and deposits with banks and financial institutions, including outstanding receivables. ii. The Group s receivables, which are the receivables from pre-selling of housing before completing construction and transferring the title, are installments received from customers of pre-construction real estate. Therefore, it was assessed that the Group was not exposed to significant credit risk from receivables. iii. For the years ended December 31, 2016 and 2015, the management does not expect any significant losses from non-performance by these counterparties. (c) Liquidity risk i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group s finance & accounting division. Group's finance & accounting division monitors rolling forecasts of the Group s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times. ii. The table below analyses the Group s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Non-derivative financial liabilities: Within 1 year Between 1 to 3 years Over 3 years Short-term borrowings $ 2,299,706 $ - $ - Short-term notes and bills payable 490, Notes payable 46,409-11,463 Accounts payable 1,489,691 1,414,964 57,268 Other payables (including related parties) December 31, ,844,918 10,752 1,822 Guarantee deposits received 67,418 38,858 29,074 Bonds payable (including current portion) 2,065,350 2,538,750 - Long-term borrowings (including current portion) 1,343,764 7,450,870 2,989,561 Long-term notes and accounts payable - 711, Prince Housing & Development Corp. 155

80 Non-derivative financial liabilities: Within 1 year Between 1 to 3 years Over 3 years Short-term borrowings $ 2,659,883 $ - $ - Short-term notes and bills payable 1,060, Notes payable 26, Accounts payable 2,668, , ,364 Other payables (including related parties) 1,520,467 5, Guarantee deposits received 72,591 27,678 35,450 Bonds payable 65,350 2,104,100 2,500,000 Long-term borrowings (including current portion) Long-term notes and accounts payable December 31, ,551 3,489,212 7,448, , ,880 (3) Fair value information (3) Fair value information A. Details of the fair value of the Group s financial assets and financial liabilities not measured at fair value are provided in Note 12(2)A. Details of the fair value of the Group s investment property measured at cost are provided in Note 6(12). B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group s investment in listed stocks and beneficiary certificates is included in Level 1. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability. The fair value of the Group s investment in equity investment without active market is included in Level 3. C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2016 and 2015 is as follows: December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Recurring fair value measurements Financial assets at fair value through profit or loss Equity securities $ 742,404 $ - $ - $ 742,404 Available-for-sale financial assets Equity securities 1,045, ,775 1,212,673 $ 1,788,302 $ - $ 166,775 $ 1,955,077 December 31, 2015 Level 1 Level 2 Level 3 Total Assets: Recurring fair value measurements Financial assets at fair value through profit or loss Equity securities $ 557,753 $ - $ - $ 557,753 Available-for-sale financial assets Equity securities 1,364, ,146 1,564,942 $ 1,922,549 $ - $ 200,146 $ 2,122,695 D.The methods and assumptions the Group used to measure fair value are as follows: D. The methods and assumptions the Group used to measure fair value are as follows: The instruments the Group used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics: Listed shares Open-end fund Market quoted price Closing price Net asset value E. For the years ended December 31, 2016 and 2015, there was no transfer between Level 1 and E. For the years ended December 31, 2016 and 2015, there was no transfer between Level 1 and Level 2. F. The following chart is the movement of Level 3 for the years ended December 31, 2016 and 2015: Non-derivative equity Non-derivative equity instrumentsinstruments At January 1 $ 200,146 $ 276,597 Loss recognised in other comprehensive income (Note) ( 31,794) ( 76,451) Proceeds from capital reduction ( 1,577) - December 31 $ 166,775 $ 200,146 Note: Recorded as as unrealised valuation valuation gain gain or or loss loss of of available-for-sale financial financial assets. assets. G. For the years ended December 31, 2016 and 2015, there was no transfer into or out from Level Prince Housing & Development Corp. 157

81 H. Finance and Accounting segment is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently assessing valuation results and making any other necessary adjustments to the fair value. I. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement: value measurement: Fair value at December 31, 2016 Valuation technique Non-derivative equity Unlisted shares $ 166,775 Net asset value Fair value at December 31, 2015 Valuation technique Non-derivative equity Unlisted shares $ 200,146 Net asset value Significant unobservable input Net asset value Range (weighted average) Relationship of inputs to fair value J. The Group has carefully assessed the valuation models and assumptions used to measure fair value; J. The Group has carefully assessed the valuation models and assumptions used to measure fair value; therefore, the fair value measurement is reasonable. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorized within Level 3 if the inputs used to valuation models have changed: Input Change 13. SUPPLEMENTARY DISCLOSURES Favourable change Significant unobservable input Net asset value Unfavourable change N/A Range (weighted average) N/A The higher the net asset value, the higher the fair value Relationship of inputs to fair value The higher the net asset value, the higher the fair value Favourable change Unfavourable change Financial assets Equity instruments 44,584 ±1% $ - $ - $ 446 ($ 446) Input Change Recognised in profit or loss Recognised in profit or loss Favourable change December 31, 2016 December 31, 2015 Unfavourable change Recognised in other comprehensive income Recognised in other comprehensive income Favourable change Unfavourable change Financial assets Equity instruments 46,161 ±1% $ - $ - $ 462 ($ 462) 13. SUPPLEMENTARY DISCLOSURES (1) Significant transactions information A. Loans to others: Please refer to table 1. B. Provision of endorsements and guarantees to others: Please refer to table 2. C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3. D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company s paid-in capital: Please refer to table 4. E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: Please refer to table 5. F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: Please refer to table 6. G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 7. H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 8. I. Trading in derivative instruments undertaken during the reporting periods: None. J. Significant inter-company transactions during the reporting periods: Please refer to table 9. (2) Information on investees Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 10. (3) Information on investments in Mainland China None. 14. SEGMENT INFORMATION (1) General information Management has determined the reportable operating segments based on the reports reviewed by the Chief Operating Decision-Maker that are used to make strategic decisions. The Group s corporate composition, basis for segmentation, and basis for measurement of segment s information had no significant changes for the period. The Chief Operating Decision-Maker considers the business from a product perspective. (2) Measurement of segment information The Chief Operating Decision-Maker assesses the performance of the operating segments based on the profit (loss) before taxes. This measurement basis excludes the effects of non-recurring revenues/ expenditures from the operating segments. Accounting policies of operating segments are the same as the summary of significant accounting policies in Note 4 to the consolidated financial statements. (3) Information about segment profit or loss and assets The segment information provided to the Chief Operating Decision-Maker for the reportable segments is as follows: 158 Prince Housing & Development Corp. 159

82 segments is as follows: Year ended December 31, 2016 Write-off and Item Construction Hotel Others Adjustment Total External operating revenue-net $ 8,056,878 $ 3,228,875 $ 774,549 $ - $ 12,060,302 Internal operating revenue-net 1,122,241-51,948 ( 1,174,189) - Total segment revenue 9,179,119 3,228, ,497 12,060,302 Costs and expenses ( 8,451,912) ( 2,790,489) ( 647,397) 1,343,229 ( 10,546,569) Segment income 727, , ,100 1,513,733 Other income 665,887 5,930 45,129 ( 415,810) 301,136 Other gains and losses ( 169,324) ( 1,163) 1, , ,776 Finance costs ( 208,489) ( 58,487) ( 4,130) 28,027 ( 243,079) Share of profit of associates and joint ventures accounted for under equity method 559,388-23,539 ( 463,809) 119,118 Profit from continuing operations before tax 1,574, , ,030 1,905,684 Income tax expense ( 262,525) ( 37,033) ( 6,911) ( 306,469) (4) Reconciliation for segment income (loss) and assets The revenue from external parties, segment income and segment assets reported to the Chief Operating Decision-Maker are measured in a manner consistent with the revenue, profit before taxes, and total assets in the financial statements. Information on adjusted consolidated total profit (loss), reportable segment profit after taxes and total assets, and reconciliation for reportable segment assets for this period is provided in Note 14(3). (5) Information on products and services The Chief Operating Decision-Maker considers the business from a product type perspective. Information about products is provided in Notes 6(26) and 14(3). (6) Geographical information The Group operates mainly in Taiwan and it has no external customer revenue from other regions. (7) Major customer information For the years ended December 31, 2016 and 2015, there was no major customer. Net income for the year $ 1,312,144 $ 347,633 $ 238,119 $ 1,599,215 Segment assets $ 46,542,938 $ 7,302,370 $ 2,372,255 ($ 4,932,719) $ 51,284,844 (4) Reconciliation for segment income (loss) and assets Year ended December 31, 2015 Write-off and Item Construction Hotel Others Adjustment Total External operating revenue-net $ 11,578,873 $ 3,447,203 $ 1,082,430 $ - $ 16,108,506 Internal operating revenue-net 1,262, ,033 ( 2,147,673) - Total segment revenue 12,841,513 3,447,203 1,967,463 16,108,506 Costs and expenses ( 11,394,730) ( 2,943,106) ( 1,049,533) 1,730,262 ( 13,657,107) Segment income 1,446, , ,930 2,451,399 Other income 328,161 8, ,599 ( 463,908) 336,933 Other gains and losses ( 9,595) ( 2,326) ( 20,955) 89,760 56,884 Finance costs ( 308,054) ( 63,615) ( 373) 36,876 ( 335,166) Share of profit (loss) of associates and joint ventures accounted for under equity method 842,977 - ( 99,611) ( 731,756) 11,610 Profit from continuing operations before tax 2,300, ,237 1,261,590 2,521,660 Income tax expense ( 210,276) ( 47,380) ( 27,619) ( 2,817) ( 288,092) Net income for the year $ 2,089,996 $ 398,857 $ 1,233,971 $ 2,233,568 Segment assets $ 49,716,149 $ 7,461,278 $ 2,670,001 ($ 5,371,517) $ 54,475, Prince Housing & Development Corp. 161

83 Prince Housing & Development Corp. and Subsidiaries Loans to others Year ended December 31, 2016 Table 1 Expressed in thousands of NTD (Except as otherwise indicated) No. (Note 1) Creditor Borrower 0 Prince Housing & Development Corp. Ta-Chen Construction & Engineering Corp. General ledger account Other receivables - related parties Is a related party Maximum outstanding balance during the year ended December 31, 2016 Balance at December 31, 2016 Actual amount drawn down Interest rate Nature of loan Y $ 200,000 $ - $ Short-term financing Amount of transactions with the borrower Reason for short-term financing $ - Additional operating capital Allowance for doubtful accounts Collateral Item Value Limit on loans granted to a single party Ceiling on total loans granted Note $ - None $ - $ 500,000 $ 9,718,652 Note 2 1 Prince Security Co., Ltd. Prince Property Management Consulting Co., Ltd Other receivables - related parties Y 15,000 15,000 11, Short-term financing - Additional operating capital - None - 30,000 85,181 Note 3 2 Time Square International Co., Ltd. Prince Housing & Development Corp. Other receivables - related parties Y 200, Short-term financing - Additional operating capital - None - 138, ,891 Note 4 Note 1: The numbers filled in for the loans provided by the Company or subsidiaries are as follows: (1) The Company is 0. (2) The subsidiaries are numbered in order starting from 1. Note 2: Limit on loans granted to a single party and ceiling on total loans granted as prescribed in the Company's "Procedures for Provision of Loans" are as follows: A. Ceiling on total loans to others: 40% of the Company's net worth. B. Limit on loans to a single party: (a) Nature of the loan is related to business transactions: Limit to a single party is NT$1.5 billion or the amount of business transactions between the creditor and borrower in the current year. (b) Nature of loan is for short-term financing: Limit on loans to a single party is NT$500 million. Note 3: Limit on loans granted to a single party and ceiling on total loans granted as prescribed in Prince Security Co., Ltd.'s "Procedures for Provision of Loans" are as follows: A. Limit on total loans to others: 40% of the Company's net worth. B. Limit on loans to a single party: (a) Nature of the loan is related to business transactions: Limit to a single party is NT$20 million or the amount of business transactions between the creditor and borrower in the current year. (b) Nature of loan is for short-term financing: Limit on loans to a single party is NT$30 million. Note 4: Limit on loans granted to a single party and ceiling on total loans granted as prescribed in Time Square International Co., Ltd.'s "Procedures for Provision of Loans" are as follows: A. Limit on total loans to others: 30% of the Company's net worth. B. Limit on loans to a single party: (a) Nature of the loan is related to business transactions: Limit to a single party is the amount of business transactions between the creditor and borrower in the current year. (b) Nature of loan is for short-term financing: Limit on loans to a single party is 30% of the Company's net worth. Prince Housing & Development Corp. and Subsidiaries Provision of endorsements and guarantees to others Year ended December 31, 2016 Table 2 Expressed in thousands of NTD (Except as otherwise indicated) Party being endorsed/guaranteed Number (Note 1) Endorser/ guarantor 0 Prince Housing & Development Corp. Company name Ta-Chen Construction & Engineering Corp. Relationship with the endorser/ guarantor (Note 2) Limit on endorsements/ guarantees provided for a single party Maximum outstanding endorsement/ guarantee amount as of December 31, 2016 Outstanding endorsement/ guarantee amount at December 31, 2016 Actual amount drawn down Amount of endorsements/ guarantees secured with collateral Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company Ceiling on total amount of endorsements/ guarantees provided Provision of endorsements/ guarantees by parent company to subsidiary Provision of endorsements/ guarantees by subsidiary to parent company Provision of endorsements/ guarantees to the party in Mainland China Footnote 3 $ 4,859,326 $ 1,900,000 $ 1,900,000 $ - $ - 8% $ 12,148,316 Y N N Note 3 0 Prince Housing & Development Corp. Prince Real Estate Co., Ltd. 2 4,859,326 2,500,000 2,500, ,000-10% 12,148,316 Y N N Note 3 0 Prince Housing & Development Corp. The Splendor Hotel Taichung 6 4,859,326 2,000,000 2,000,000 1,682,206-8% 12,148,316 Y N N Note 3 1 Dong-Feng Enterprises Co., Ltd. Prince Housing & Development Corp. 4 2,000,000 1,810, ,000,000 N Y N Note 4 2 Prince Utility Co., Ltd. Prince Housing & Development Corp. 4 1,000, , , , % 2,000,000 N Y N Note 5 3 Prince Real Estate Co., Ltd. Prince Housing & Development Corp. 4 2,500,000 2,500,000 2,500,000 2,035, % 5,000,000 N Y N Note 6 4 Ta-Chen Construction & Engineering Corp. Prince Housing & Development Corp. 4 1,500, , , % 3,000,000 N Y N Note 7 5 Prince Apartment Management Maintain Co., Ltd. Prince Security Co., Ltd. 3 20,000 20,000 20,000 10,000-27% 50,000 N N N Note 8 6 Prince Property Management Consulting Co., Ltd. Prince Security Co., Ltd. 2 56,000 56,000 56,000 10,000-19% 120,000 N N N Note 9 Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows: (1) The Company is 0. (2) The subsidiaries are numbered in order starting from 1. The same company will have the same number. Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following six categories: (1) Having business relationship. (2) The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/guaranteed subsidiary. (3) The endorser/guarantor parent company and its subsidiaries jointly own more than 50% voting shares of the endorsed/guaranteed company. (4) The endorsed/guaranteed parent company directly or indirectly owns more than 50% voting shares of the endorser/guarantor subsidiary. (5) Mutual guarantee of the trade as required by the construction contract. (6) Due to joint venture, each shareholder provides endorsements/guarantees to the endorsed/guaranteed company in proportion to its ownership. Note 3:In accordance with the Group s related regulations, the limit on endorsements and guarantees for any single entity is 20% of the Company s net worth based on the latest financial statements and the limit on accumulated amount of transactions of endorsements and guarantees is 50% of the Company s net worth based on the latest financial statements. Note 4: In accordance with Dong-Feng Enterprises Co., Ltd.'s related regulations, the limit of endorsements and guarantees for any single entity is $2,000,000; the total accumulated amount is $4,000,000. Note 5: In accordance with Prince Utility Co., Ltd.'s related regulations, the limit of endorsements and guarantees for any single entity is $1,000,000; the total accumulated amount is $2,000,000. Note 6: In accordance with Prince Real Estate Co., Ltd.'s related regulations, the limit of endorsements and guarantees for any single entity is $2,500,000; the total accumulated amount is $5,000,000. Note 7: In accordance with Ta-Chen Construction & Engineering Corp.'s related regulations, the limit of endorsements and guarantees for any single entity is $1,500,000; the total accumulated amount is $3,000,000. Note 8: In accordance with Prince Apartment Management Maintain Co., Ltd.'s related regulations, the limit of endorsements and guarantees for any single entity is $20,000; the total accumulated amount is $50,000. Note 9: In accordance with Prince Property Management Consulting Co., Ltd.'s related regulation, the limit of endorsements and guarantees for any single entity is $56,000; the total accumulated amount is $120, Prince Housing & Development Corp. 163

84 Prince Housing & Development Corp. and Subsidiaries Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2016 Table 3 Expressed in thousands of NTD (Except as otherwise indicated) As of December 31, 2016 Marketable Securities held by securities Name of investee companies Relationship with the securities issuer General ledger account Number of shares Book value Ownership (%) Fair value Footnote Prince Housing & Development Corp. Stock Nantex Industry Co., Ltd. None Available-for sale financial assets - non-current 6,861,668 $ 149,927 Note 1 $ Listed company, Note 3 Stock ScinoPharm Taiwan, Ltd. None Available-for sale financial assets - non-current 22,698, ,278 Note Listed company, Note 4 Stock Simplo Technology Co., Ltd. None Available-for sale financial assets - non-current 127,249 11,822 Note OTC company Stock Universal Venture Capital Investment Corp. None Available-for sale financial assets - non-current 1,400,000 13,570 Note Stock Grand Bills Finance Corp. None Available-for sale financial assets - non-current 48, Note Stock Chipwell Tech. Corp. None Available-for sale financial assets - non-current 344,488 1,681 Note Stock Nanmat Technology Co., Ltd. None Available-for sale financial assets - non-current 1,318,851 18,257 Note Stock Southern Science Joint Development. None Available-for sale financial assets - non-current 10, , , Stock Changing Information Technology Co., Ltd. None Available-for sale financial assets - non-current 119,075 1,608 Note Stock Formosoft International Co., Ltd. None Available-for sale financial assets - non-current 35, Note Stock President Energy Development Corp. None Financial assets measured at cost - non-current 1,380,000 36, Stock President International Development Corp. None Financial assets measured at cost - non-current 87,745, , Note 5 Stock Jia-Cheng Venture Capital Investment Co., Ltd. None Financial assets measured at cost - non-current 759,024 - Note 1 Note 2 Stock Jia-Hua Venture Capital Investment Co., Ltd. None Financial assets measured at cost - non-current 1,211, Note 2 Stock Ever-Move Technology Co., Ltd. None Financial assets measured at cost - non-current 3,076 - Note 1 Note 2 Stock Chuang-Jing Technology Co., Ltd. None Financial assets measured at cost - non-current 12,645 - Note 1 Note 2 Stock Bao-Mao Technology Co., Ltd. None Financial assets measured at cost - non-current 27,933 - Note 1 Note 2 Stock Jie-Lun Technology Co., Ltd. None Financial assets measured at cost - non-current 17,280 - Note 1 Note 2 Stock Quan-Mao Technology Co., Ltd. None Financial assets measured at cost - non-current 341, Note 2 Stock Wei-Jun Technology Co., Ltd. None Financial assets measured at cost - non-current 1,846 - Note 1 Note 2 Stock Chieh-Cheng Technology Co., Ltd. None Financial assets measured at cost - non-current 41,343 - Note 1 Note 2 Fund Mega Diamond Money Market Fund None Financial assets at fair value through profit or loss - non-current 6,301,406 78, Note 6 Fund UPAMC James Bond Money Market None Financial assets at fair value through profit or loss - current 6,040, , Fund Yuanta Wan Tai Money Market None Financial assets at fair value through profit or loss - current 6,663, , Fund Jih Sun Money Market Fund None Financial assets at fair value through profit or loss - current 6,817, , Repurchase MEGA BILLS FINANCE CO., LTD. None Cash equivalents-repurchase bonds - 150, Repurchase International Bills Finance Corp. None Cash equivalents-repurchase bonds - 150, Repurchase China Bills Finance Corp. None Cash equivalents-repurchase bonds - 200, Prince Ta-Chen Investment Co., Ltd. (N Stock Jia-Cheng Venture Capital Investment Co., Ltd. None Financial assets at fair value through profit or loss - non-current 290, Stock Chieh-Cheng Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 41, Stock AIRWAVETECHNOLOGIES,INC. None Financial assets at fair value through profit or loss - non-current 300, Stock Ever-Move Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 79, Stock Bao-Mao Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 960, Stock Integrated Solutions Technology, Inc. None Financial assets at fair value through profit or loss - non-current 71, Stock Goyatek Technology, Inc. None Financial assets at fair value through profit or loss - non-current 18, Stock Quan-Mao Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 9, Stock Jie-Lun Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 6, Stock Chuang-Jing Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 4, Stock Wei-Jun Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current Stock Jia-Hua Venture Capital Investment Co., Ltd. None Financial assets at fair value through profit or loss - non-current 479, Ta-Chen Construction & Engineering Stock Nantex Industry Co., Ltd. None Financial assets at fair value through profit or loss - current 12,088, ,132 Note Note 7 Stock Chipwell Tech. Corp. None Available-for sale financial assets - non-current 349,990 1,708 Note Stock Nanmat Technology Co., Ltd. None Available-for sale financial assets - non-current 1,479,086 20, Repurchase China Bills Finance Corp. None Cash equivalents-repurchase bonds - 115, Repurchase International Bills Finance Corp. None Cash equivalents-repurchase bonds - 110, Repurchase MEGA BILLS FINANCE CO., LTD. None Cash equivalents-repurchase bonds - 75, Prince Utility Co., Ltd. Repurchase International Bills Finance Corp. None Cash equivalents-repurchase bonds - 20, Repurchase China Bills Finance Corp. None Cash equivalents-repurchase bonds - 20, Repurchase MEGA BILLS FINANCE CO., LTD. None Cash equivalents-repurchase bonds - 20, Prince Housing Investment Co., Ltd. Stock Tou Itsu Investments Inc. None Available-for sale financial assets - non-current USD 1.00 As of December 31, 2016 Marketable Securities held by securities Name of investee companies Relationship with the securities issuer General ledger account Number of shares Book value Ownership (%) Fair value Footnote Prince Apartment Management Stock Prince Housing & Development Corp. Parent company Available-for sale financial assets - non-current 655,424 $ 6,882 Note 1 $ Stock Tainan Spinning Co., Ltd. None Available-for sale financial assets - non-current 122,201 1,491 Note Dong-Feng Enterprises Co., Ltd. Stock Nantex Industry Co., Ltd. None Available-for sale financial assets - non-current 176,220 3,850 Note Stock Sung Gang Asset Management Co., Ltd. None Available-for sale financial assets - non-current 47,968 1,511 Note Prince Security Co., Ltd. Stock Nanmat Technology Co., Ltd. None Available-for sale financial assets - non-current 197,211 1,600 Note Cheng-Shi Construction Co., Ltd. Fund UPAMC James Bond Money Market None Financial assets at fair value through profit or loss - current 6,040, , Repurchase International Bills Finance Corp. None Cash equivalents-repurchase bonds - 40, Repurchase MEGA BILLS FINANCE CO., LTD. None Cash equivalents-repurchase bonds - 40, Note 1: Percentage of Company s ownership is less than 5%. Note 2: We have not received the financial statements from management. Thus the net value cannot be measured. Note 3: 4,088 thousand shares of outstanding common stock were used as collateral for loan. Note 4: 17,276 thousand shares of outstanding common stock were used as collateral for loan. Note 5: 60,000 thousand shares of outstanding common stock were used as collateral for loan. Note 6: 6,301 thousand units of outstanding common stock were used as collateral for loan. Note 7: 10,000 thousand shares of outstanding common stock were used as collateral for loan. Note 8: Prince Ta-Chen Investment Co., Ltd. was merged into Prince Housing & Development Corp. in May 2015 and Prince Ta-Chen Investment Co., Ltd. was dissolved after the merger. The securities held by the company has not been registered for the changes of shareholders yet. 164 Prince Housing & Development Corp. 165

85 Prince Housing & Development Corp. and Subsidiaries Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company's paid-in capital Year ended December 31, 2016 Table 4 Expressed in thousands of NTD (Except as otherwise indicated) Investor Prince Real Estate Co., Ltd. Prince Real Estate Co., Ltd. Prince Real Estate Co., Ltd. Prince Real Estate Co., Ltd. Marketable securities (Note 1) UPAMC James Bond Money Market Yuanta Wan Tai Money Market Jih Sun Money Market Fund Jih Sun Money Market Fund General ledger account Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Counterparty (Note 2) Relationship with the investor (Note 2) Balance as at January 1, 2016 Addition (Note 3) shares Amount shares Amount shares Selling price Book value disposal shares Amount $ - 24,183,754 $ 400,000 ( 18,143,429) $ 300,059 ($ 300,000) $ 59 6,040,325 $ 100, ,370, ,152 ( 97,706,932) 730,285 ( 730,152) 133 6,663, , ,142, ,000 ( 14,324,457) 210,036 ( 210,000) 36 6,817, , ,678, ,000 8,052, ,910 ( 21,731,247) 318,261 ( 317,910) Disposal (Note 3) Balance as at December 31, 2016 Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities. Note 2: Fill in the columns the counterparty and relationship if securities are accounted for under the equity method; otherwise leave the columns blank. Note 3: Aggregate purchases and sales amounts should be calculated separately at their market values to verify whether they individually reach NT$300 million or 20% of paid-in capital or more. Note 4: Paid-in capital referred to herein is the paid-in capital of parent company. In the case that shares were issued with no par value or a par value other than NT$10 per share, the 20 % of paid-in capital shall be replaced by 10% of equity attributable to owners of the parent in the calculation. Prince Housing & Development Corp. and Subsidiaries Acquisition of real estate reaching $300 million or 20% of paid-in capital or more Year ended December 31, 2016 Table 5 Expressed in thousands of NTD (Except as otherwise indicated) Real estate acquired by Real estate acquired Date of the event Prince Housing & Development Corp. Prince Housing & Development Corp. Ren Wu Dist. Xia Hai Lot No. 978, etc. 2013/06/14 (Note 1) Nanzi subsection No. 158,etc. 2014/11/07 (Note 3) Transaction amount Status of payment Counterparty Note 2 $ 1,115,071 Redevelopment zone of Xia Hai Term, Renwu District, Kaohsiung City $ 1,255, ,651 Taiwan Sugar Corporation Relationship with the counterparty If the counterparty is a related party, information as to the last transaction of the real estate is disclosed below owner who between the original Amount Basis or reference used in setting the price Reason for acquisition of real estate and status of the real estate Third party $ - Note 2 For operating use Third party Market value For operating use Other commitments None None Note 1: The transfer of title took place on settlement date. Note 2: In order to purchase 67.13% of areas from the north side of the offset-expenditure land in the redevelopment zone, the transaction amount was the expected price including compensation for demolition to all land owners of north side of the offset-expenditure land, compensation for demolition to owners of parkland to be (67.13%), construction expenses in all regions (67.13%) and interests arising from re-planning committee's borrowing from the Group to pay aforementioned expenses. Note 3: November 7, 2014 was the signing date of the contract. The Company paid $535,857 for the current period. As of December 31, 2016, the Company has already paid $794, Prince Housing & Development Corp. 167

86 Company Name Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more Year ended December 31, 2016 Table 6 Expressed in thousands of NTD (Except as otherwise indicated) Real estate disposed by Real estate Transaction date or date of the event Date of acquisition Book value Disposal amount Status of collection of proceeds Gain (loss) on disposal Counterparty Relationship with the seller Basis or reference used in setting the price Other commitments The Company Xinyi Dist., Taipei 2016/01/25 (Note 1) 2012/11/30 (Note 2) $ 106,742 $ 356,366 $ 356,366 $ 249,624 Third party None For operating use Market value None Reason for disposal Note 1: Contract date Note 2: Completion date Prince Housing & Development Corp. and Subsidiaries Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more Year ended December 31, 2016 Table 7 Expressed in thousands of NTD Purchaser/seller Counterparty Prince Housing & Development Corp. Relationship with the counterparty Differences in transaction (Except as otherwise indicated) terms compared to third party Transaction transactions Notes/accounts receivable (payable) Purchases Amount Percentage of total Credit term Unit price Credit term Balance Percentage of Footnote Cheng-Shi Construction Co., Ltd. Subsidiary Purchases $ 605,366 13% Payments were paid in accordance with the contract terms It is reasonable compared to the normal tradings It is reasonable compared to the normal tradings ($ 2,380) (0%) Prince Housing & Development Corp. Prince Utility Co., Ltd. Subsidiary Purchases 300,288 7% Payments were paid in accordance with the contract terms It is reasonable compared to the normal tradings It is reasonable compared to the normal tradings - - Cheng-Shi Construction Co., Ltd. Ming-Da Enterprise Co., Ltd. Affiliated company (Sales) ( 122,680) (1%) Payments were paid in accordance with the contract terms It is reasonable compared to the normal tradings It is reasonable compared to the normal tradings 2,660 0% 168 Prince Housing & Development Corp. 169

87 Table 8 Prince Housing & Development Corp. and Subsidiaries Receivables from related parties reaching $100 million or 20% of paid-in capital or more December 31, 2016 Expressed in thousands of NTD (Except as otherwise indicated) Creditor Counterparty Relationship with the counterparty Prince Housing & Development Corp. The Splender Hotel Taichung Subsidiary Other assets - obligation receivable $ Balance as at December 31, 2016 Turnover rate 575,000 Overdue receivables Amount Action taken Amount collected subsequent to the balance sheet date Allowance for doubtful accounts - $ - - $ - $ - Prince Housing & Development Corp. and Subsidiaries Significant inter-company transactions during the reporting periods Year ended December 31, 2016 Table 9 Expressed in thousands of NTD (Except as otherwise indicated) Transaction Number Company name Counterparty Relationship General ledger account Amount Transaction terms Percentage of consolidated total operating revenues or total assets 0 Prince Housing & Development Corp. Ta-Chen Construction & Engineering Corp. The Company to the consolidated subsidiaries Construction in progress $ 180, % 0 Prince Housing & Development Corp. Prince Utility Co., Ltd. The Company to the consolidated subsidiaries Purchases 300,288 Based on mutual agreements 2.49% 0 Prince Housing & Development Corp. Prince Utility Co., Ltd. The Company to the consolidated subsidiaries Construction in progress 233, % 0 Prince Housing & Development Corp. Cheng-Shi Construction Co., Ltd. The Company to the consolidated subsidiaries Purchases 605,366 Based on mutual agreements 5.02% 0 Prince Housing & Development Corp. Cheng-Shi Construction Co., Ltd. The Company to the consolidated subsidiaries Construction in progress 493, % 0 Prince Housing & Development Corp. The Splender Hotel Taichung The Company to the consolidated subsidiaries 0 Prince Housing & Development Corp. The Splender Hotel Taichung The Company to the consolidated subsidiaries 0 Prince Housing & Development Corp. Prince Real Estate Co., Ltd. The Company to the consolidated subsidiaries 1 Prince Utility Co., Ltd. Prince Housing & Development Corp. The consolidated subsidiaries to the Company 2 Prince Real Estate Co., Ltd. Prince Housing & Development Corp. The consolidated subsidiaries to the Company Endorsement and guarantee Other assets - obligation receivables Endorsement and guarantee Endorsement and guarantee Endorsement and guarantee 1,682, , , ,763 2,035,309 In accordance with endorsement and guarantee procedures 3.28% Creditor's rights purchase contract 1.12% In accordance with endorsement and guarantee procedures 1.52% In accordance with endorsement and guarantee procedures 1.25% In accordance with endorsement and guarantee procedures 3.97% Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1) Parent company is 0. (2) The subsidiaries are numbered in order starting from 1. Note 2: Relationship between transaction company and counterparty is classified into the following three categories: (1) Parent company to subsidiary. (2) Subsidiary to parent company. (3) Subsidiary to subsidiary. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts. Note 4: The table only discloses transaction amounts of NT$100 million or more. 170 Prince Housing & Development Corp. 171

88 Prince Housing & Development Corp. and Subsidiaries Information on investees Year ended December 31, 2016 Table 10 Expressed in thousands of NTD (Except as otherwise indicated) Net profit (loss) of Investment income Initial investment amount Shares held as at December 31, 2016 the investee for the (loss) recognised by Year ended the Company for the Main business Investor Investee Location activities Balance as at December 31, 2016 Balance as at December 31, 2015 Number of shares Ownership Book value December 31, 2016 Year ended December 31, 2016 Footnote Prince Housing & Development Corp. Cheng-Shi Investment Holdings Co., Ltd. Taiwan General investment $ 1,146,925 $ 1,146,925 97,504, % $ 1,007,834 $ 71,747 $ 94,653 Notes 1 and 2 Prince Property Management Consulting Co., Ltd. Taiwan Management and consulting 181, ,000 17,146, % 282,007 12,820 13,979 Notes 1 and 2 Geng-Ding Co., Ltd. Taiwan Hotels and catering 120, ,000 18,000,000 30% 320,555 69,824 20,950 Note 4 Prince Housing Investment Co., Ltd. British Virgin Islands Overseas investment 140, , % 446,709 45,885 45,885 Note 2 BioSun Technology Co., Ltd. Taiwan Anti-mildew's import and export - 1, ( 16) ( 16) Note 2 and 9 Dong-Feng Enterprises Co., Ltd. Taiwan Housebuilders and sales 746, ,431 4,300, % ( 151,839) 3,736 3,736 Notes 2 and 8 Uni-President Development Corp. Taiwan Leasing of buildings 1,080,000 1,080, ,000,000 30% 1,229, ,048 42,933 Note 5 The Splender Hotel Taichung Taiwan Hotels and catering 975, ,000 97,500,000 50% 328,715 ( 19,908) ( 9,954) Note 2 Time Square International Co., Ltd. Taiwan Hotels and catering 600, ,000 73,830, % 462, , ,136 Note 2 Jin Yi Xing Plywood Co., Ltd. Taiwan Manufacture of plywoods 165, ,410 3,938, % ( 361,186) ( 157) 142,279 Notes 2 Ming-Da Enterprise Co., Ltd. Taiwan Real estate trading 37, , ,000 20% 75, ,444 31,696 Note 10 Prince Industrial Co., Ltd. Taiwan Development of public housing and building 10,000 10,000 1,000, % 9,526 ( 47) ( 47) Note 2 Prince Real Estate Co., Ltd. Taiwan Real estate trading and leasing 470, ,784 11,208, % 1,210,130 ( 5,504) ( 6,842) Notes 1 and 2 Cheng-Shi Investment Holdings Co., Ltd Ta-Chen Construction & Engineering Corp. Taiwan Construction 856, ,566 90,497, % 720,876 35,262 - Notes 2 and 3 Prince Utility Co., Ltd. Taiwan Electricity water pipe 56,025 56,025 3,070, % 122,866 17,703 - Notes 2 and 3 Table 10, Page 1 Net profit (loss) of Investment income Initial investment amount Shares held as at December 31, 2016 the investee for the (loss) recognised by Year ended the Company for the Main business Investor Investee Location activities Balance as at December 31, 2016 Balance as at December 31, 2015 Number of shares Ownership Book value December 31, 2016 Year ended December 31, 2016 Footnote Cheng-Shi Investment Holdings Co., Ltd Cheng-Shi Construction Co., Ltd. Taiwan Construction $ 208,027 $ 208,027 20,100, % $ 294,767 $ 16,211 $ - Notes 2 and 3 Ta-Chen Construction & Engineering Corp. Prince Housing Investment Co., Ltd. Ta-Chen International (Brunei) Corp. Brunei Overseas investment PPG Investment Inc. U.S.A Overseas investment - 9, Notes 2, 3 and 7 56,945 56, % 12,974 ( 1,645) - Note 3 Queen Holdings Ltd. British Virgin Islands Overseas investment 122, ,034 2, % 390,856 70,315 - Note 3 Prince Property Management Consulting Co., Ltd. Prince Apartment Management Maintain Co., Ltd. Taiwan Management of apartments 67,853 67,853 3,000, % 73,542 2,639 - Notes 2 and 3 Prince Security Co., Ltd. Taiwan Security 159, ,611 13,172, % 212,952 12,317 - Notes 2 and 3 Dong-Feng Enterprises Co., Ltd. Ta-Chen International (Brunei) Corp. Amida Trustlink Assets Management Co., Ltd. Ta Chen Construction & Engineering (Vietnam) Corp. Taiwan Development of public housing and 305, ,480 21,644, % ( 137,346) ( 725) - Note 3 Vietnam Construction - 9, Notes 2, 3 and 6 Note 1: The difference between the income (loss) of the investee and the investment income (loss) of the investee recognised by the Company is the investment income (loss) of the investee recognised by the Company in proportion to the share ownership and unrealised gain (loss) from elimination of inter-company transactions. Note 2: Subsidiary. Note 3: The amount has been included in the profit (loss) of the Company s investee accounted using equity method and has been recognised as gain (loss) on investment. Note 4: Provided 12,000 thousand shares as collateral. Note 5: Provided 108,000 thousand shares as collateral. Note 6: Ta Chen Construction & Engineering (Vietnam) Corp. has completed liquidation process in May Note 7: Ta-Chen International (Brunei) Corp. has completed liquidation process in August Note 8: Dong-Feng Enterprises Co., Ltd. decreased its capital by $130,000 in April 2016 and the amount of issued shares eliminated was 13,000 thousand shares. Note 9: BioSun Technology Co., Ltd. has completed liquidation process in September Note 10: Ming-Da Enterprise Co., Ltd. has reducted capital $459,112 in December 2016, has eliminated 45,911 thousand shares issued. 172 Prince Housing & Development Corp. 173

89 PRINCE HOUSING & DEVELOPMENT CORP. REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE PARENT COMPANY ONLY FINANCIAL PWCR To the Board of Directors and Shareholders of Prince Housing & Development Corp. STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2016 AND 2015 Opinion We have audited the accompanying balance sheets of Prince Housing & Development Corp. (the Company ) as at December 31, 2016 and 2015, and the related statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, based on our audits and the report of other independent accountants (please refer to the other matter section of our report ), the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparations of Financial Reports by Securities Issuers. Basis for opinion We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the Code ), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained and the report of other independent accountants are sufficient and appropriate to provide a basis for our opinion. Key audit matters For the convenience of readers and for information purpose only, the auditors report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors report and financial statements shall prevail. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters. 174 Prince Housing & Development Corp. 175

90 The accuracy of building and land sales revenue recognition timing Description Please refer to Note 4(29) for accounting policies on sales revenue, and Note 6(25) for details. For the year ended December 31, 2016, building and land sales revenue amounted to NT$ 5,274,930 thousand, representing % of operating revenue. The Company recognises building and land sales revenue and profit or loss when transferring ownership and handing over the property. Since the Company has diverse customers, the information delivery and recording process between segments in the Company usually involved manual work, and thus may result in inappropriate timing of revenue recognition around the balance sheet date. Considering that the building and land sales revenue form most of the Company s operating revenue, we identified the accuracy of building and land sales revenue recognition timing as a key audit matter. How our audit addressed the matter We performed the following audit procedures on the above key audit matter: A. We obtained an understanding and assessed the reasonableness of internal controls on building and land sales revenue, and tested whether the process of building and land sales revenue recognition timing had been executed effectively, including verifying documents related to the date of ownership transfer and property handover and the accuracy of recognition timing; and B. We performed cut-off test on building and land transactions around the end of the reporting period, including verifying land registration, house ownership certificate and customer signed receipts for handing over of property to confirm the building and land sales revenue recognition timing was adequate. Investments accounted for under equity method- Ta-Chen Construction & Engineering Corp., which was held through subsidiary, Cheng-Shi Investment Holdings Co., Ltd.- recognition of construction revenue- the stage of completion estimate Description Please refer to Note 4(13) for accounting policies on investments accounted for under equity method, and Note 6(9) for details. Ta-Chen Construction & Engineering Corp., which was held by the Company through subsidiary, Cheng- Shi Investment Holdings Co., Ltd., was recognised as a significant company since the financial performance of Ta-Chen Construction & Engineering Corp. had a material effect on the Company s financial statements. Ta-Chen Construction & Engineering Corp. provided property construction related services. During the duration of a contract, the recognition of revenue is based on the stage of completion of a contract. The stage of completion is determined by reference to the contract costs incurred to date and the proportion that contract costs incurred for work performed to date compared to the estimated total contract costs. Aforementioned estimated total contract costs were based on contract budget details compiled by owner s design drawing, considering the changes in construction scale caused by additional or less work, and the price fluctuations in the recent market to estimate the contract work, overhead and relevant costs. As the complexity of aforementioned total cost usually involves subjective judgment and contains a high degree of uncertainty, and the estimate of total cost affects the stage of completion and the recognition of construction revenue, thus we consider the reasonableness of the stage of completion which was applied on construction revenue recognition as above mentioned as a key audit matter. How our audit addressed the matter We performed the following audit procedures on the above key audit matter: A. We obtained an understanding of the nature of business and industry of Ta-Chen Construction & Engineering Corp. and assessed the reasonableness of internal process of estimating total construction cost, including the unit of calculation of owner s design drawing, the procedure of estimating each construction cost and overhead, and the consistency of applying the estimation method; B. We assessed and tested the internal controls which would affect the changes of estimated total cost of Ta-Chen Construction & Engineering Corp., including verifying the evidence of additional or less work and constructions. C. We inspected the constructing site accompanied by the supervisor and other appropriate staff of Ta- Chen Construction & Engineering Corp. at the end of the reporting period to assess the reasonableness of the stage of completion method result. D. We obtained Ta-Chen Construction & Engineering Corp s details of construction profit or loss and performed substantive procedures, including randomly checking the incurred cost of current period with the appropriate evidence, and additional or less work with the supporting documents, and recalculated the stage of completion. Other matter Scope of the Audit We did not audit the financial statements of investments recognized under the equity method that are included in the financial statements. Aforementioned investments accounted for under equity method of NT$ 897,432 thousand and NT$ 979,024 thousand as at December 31, 2016 and 2015, constituted 2.06% and 2.14% of total assets; comprehensive income of aforementioned company of NT$ 82,591 thousand and NT$ (10,924) thousand for the years then ended, constituted 6.60% and (0.50%) of total comprehensive income, respectively. Those financial statements were audited by other independent accountants whose report thereon have been furnished to us, and our opinion expressed herein is based solely on the audit reports of the other independent accountants. Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparations of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance, including audit committee, are responsible for overseeing the Company s financial reporting process. 176 Prince Housing & Development Corp. 177

91 Auditor s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: A. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. D. Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Company to cease to continue as a going concern. E. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion. Wu Chien-Chih For and on behalf of PricewaterhouseCoopers, Taiwan March 22, 2017 Lin Yi-Chang The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 178 Prince Housing & Development Corp. 179

92 December 31, 2016 December 31, 2015 Assets Notes AMOUNT % AMOUNT % Current assets Cash and cash equivalents 6(1) Current financial assets at fair value 6(2) through profit or loss Notes receivable, net 6(3) Accounts receivable, net 6(4) Other receivables Other receivables - related parties 7 Inventories, net 6(5), 7 and 8 Prepayments Other financial assets - current 8 Other current assets 6(6) Total current assets Non-current assets Financial assets at fair value through profit or loss - non-current Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent Investments accounted for under equity PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars) 6(2) and 8 6(7) and 8 6(8) and 8 6(9) and 8 (Continued) method Property, plant and equipment, net 6(10) and 8 Investment property, net 6(11) and 8 Intangible assets, net 6(12) Refundable deposits 9 Other financial assets - non-current 8 Other non-current assets 7 and 8 Total non-current assets Total assets PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars) December 31, 2016 Liabilities and Equity Notes AMOUNT % December 31, 2015 AMOUNT % Current liabilities Short-term borrowings 6(13) and 8 Short-term notes and bills payable 6(14) and 8 Notes payable Accounts payable Accounts payable - related parties 7 Other payables Other payables - related parties 7 Current income tax liabilities 6(30) Receipts in advance 6(15) Long-term liabilities, current portion 6(16)(17) and 8 Other current liabilities Total current Liabilities Non-current liabilities Bonds payable 6(16) Long-term borrowings 6(17) and 8 Provisions for liabilities - non-current 6(18) Net defined benefit liabilities - non-current 6(19) Guarantee deposits received Other non-current liabilities 6(9) Total non-current liabilities Total Liabilities Equity Share capital Common stock 6(20) Capital surplus 6(21) Capital surplus Retained earnings 6(22)(30) Legal reserve Unappropriated retained earnings Other equity interest 6(23) Other equity interest Treasury stocks 6(20) Total equity Total liabilities and equity The accompanying notes are an integral part of these financial statements. See report of independent accountants dated March 22, Prince Housing & Development Corp. 181

93 RINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars, except for earnings per share amounts) Years ended December Items Notes AMOUNT % AMOUNT % Operating revenue 6(25) and 7 Operating costs 6(5)(12)(29) and 7 Gross profit Operating expenses 6(29) and 7 Selling expenses General & administrative expenses Total operating expenses Operating profit Non-operating income and expenses Other income 6(26) Other gains and losses 6(2)(27) Finance costs 6(5)(28) and 7 Share of profit of associates and joint ventures 6(9) accounted for under equity method, net Total non-operating income and expenses Profit before income tax Income tax expense 6(30) Profit for the year Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss Actuarial losses on defined benefit plans 6(19) Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss Other comprehensive income, before tax, 6(7) available-for-sale financial assets Total Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss Other comprehensive loss for the year Total comprehensive income for the year Earnings per share (in dollars) 6(31) Basic earnings per share Diluted earnings per share Assuming the Company treated the stocks held by a subsidiary as long-term investments rather than treasury stock, the pro forma information is as follows: Net income Earnings per share (in dollars) Basic earnings per share The accompanying notes are an integral part of these financial statements. See report of independent accountants dated March 22, PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY YEARS ENDED DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars) Retained Earnings Other equity interest Unrealized gain or loss on available-forsale financial assets Treasury stocks Total Exchange diferences arising on translation of foreign operations Unappropriated retained earnings Share capital - common stock Capital surplus Legal reserve Notes Year ended December 31, 2015 Balance at January 1, 2015 Distribution of 2014 earnings (Note 1) Legal reserve Cash dividends 6(22) Profit for the year 6(31) Other comprehensive income (loss) for 6(7)(19)(23) the year Treasury stock transactions 6(20)(21) Balance at December 31, 2015 Year ended December 31, 2016 Balance at January 1, 2016 Distribution of 2015 earnings (Note 2) Legal reserve Cash dividends 6(22) Profit for the year 6(31) Other comprehensive loss for the year 6(7)(19)(23) Balance at December 31, 2016 Note 1: Employees bonus of $43,177 and directors and supervisors remuneration of $64,765 have been deducted from the parent company only statement of comprehensive income. There is no difference with the amounts approved at the stockholders' meeting for appropriation. Note 2: Employees bonus of $244,705 and directors and supervisors remuneration of $83,250 have been deducted from the parent company only statement of comprehensive income. There is no difference with the amounts approved at the stockholders' meeting for appropriation. The accompanying notes are an integral part of these financial statements. See report of independent accountants dated March 22, The accompanying notes are an integral part of these financial statements. See report of independent accountants ~11~ dated March 22, Prince Housing & Development Corp. 183

94 PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars) Years ended December 31 Notes CASH FLOWS FROM OPERATING ACTITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) Gain on financial assets at fair value through profit or loss 6(2)(27) Provision for bad debts expense transferred to revenue 6(3) Write-off of uncollectible accounts 6(3)(4) Share of profit of associates and joint ventures accounted 6(9) for under equity method Loss on disposal of property, plant and equipment 6(27) Depreciation 6(29) Amortization 6(12)(29) Interest expense 6(28) Interest income 6(26) Dividend income 6(26) Gain on disposal of investments accounted for using equity method Gain (loss) on unrealised foreign exchange Changes in operating assets and liabilities Changes in operating assets Current financial assets at fair value through profit or loss Notes receivable Accounts receivable Other receivables Other receivables - related parties Inventories Prepayments Other current assets Other non-current assets Changes in operating liabilities Notes payable Accounts payable Accounts payable - related parties Other payables Other payables - related parties Receipts in advance Other current liabilities Provisions for liabilities - non-current Net defined benefit liabilities - non-current Cash inflow generated from operations Imterest received Cash dividend received Interest paid Income tax paid Net cash flows from operating activities PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2016 AND 2015 (Expressed in thousands of New Taiwan dollars) CASH FLOWS FROM INVESTING ACTITIES Years ended December 31 Notes Decrease in other financial assets - current Return of share capital from available-for-sale financial assets - non-current Decrease in available-for-sale financial assets - non-current Proceeds from capital reduction of financial assets at cost Increase in investments accounted for under the equity method Return of share capital from investments accounted for under equity method Proceeds from disposal of investments accounted for using equity method Acquisition of cash from consolidation Acquisition of property, plant and equipment 6(10) Proceeds from disposal of property, plant and equipment Decrease (increase) in refundable deposits Decrease (increase) in other financial assets - non-current Net cash flows from investing activities CASH FLOWS FROM FINANCING ACTITIES Decrease in short-term borrowings Decrease in short-term notes and bills payable Repayment of long-term borrowings Proceeds from long-term borrowings Increase (decrease) in guarantee deposits received Cash dividends paid 6(22) Net cash flows used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (Continued) The accompanying notes are an integral part of these financial statements. See report of independent accountants dated March 22, Prince Housing & Development Corp. 185

95 PRINCE HOUSING & DEVELOPMENT CORP. NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED) 1. HISTORY AND ORGANIZATION Prince Housing & Development Corp. (the Company ) was established in September 1973, under the Company Act and other related regulations. The Company is primarily engaged in the construction, leasing and sale of public housing, commercial building, tourism/recreation place (children s playground, water park, etc.) and parking lot/parking tower, and leasing and sale of real estate. The common shares of the Company have been listed on the Taiwan Stock Exchange since April THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE PARENT COMPANY ONLY FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION These parent company olny financial statements were authorized for issuance by the Board of Directors on March 22, APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards ( IFRS ) as endorsed by the Financial Supervisory Commission ( FSC ) None. (2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Company New standards, interpretatons and amendments endorsed by the FSC effective from 2017 are as follows: Effective date by International New Standards, Interpretations and Amendments Accounting Standards Board Investment entities: Applying the consolidation exception January 1, 2016 (amendments to IFRS 10, IFRS 12 and IAS 28) Accounting for acquisition of interests in joint operations January 1, 2016 (amendments to IFRS 11) IFRS 14, Regulatory deferral accounts January 1, 2016 Disclosure initiative (amendments to IAS 1) January 1, 2016 Clarification of acceptable methods of depreciation and amortization January 1, 2016 (amendments to IAS 16 and IAS 38) Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016 Defined benefit plans: employee contributions (amendments to IAS 19R) July 1, 2014 Equity method in separate financial statements (amendments to IAS 27) January 1, 2016 Recoverable amount disclosures for non-financial assets (amendments to IAS 36) January 1, 2014 Novation of derivatives and continuation of hedge accounting January 1, 2014 (amendments to IAS New 39) Standards, Interpretations and Amendm IFRIC 21, Levies Improvements to IFRSs Accounting Standards Board January 1, 2014 July 1, 2014 Improvements to IFRSs Improvements to IFRSs July 1, 2014 January 1, 2016 The above standards and interpretations have no significant impact to the Company s financial condition and operating result based on the Company s assessment. (3) IFRSs issued by IASB but not yet endorsed by the FSC New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs endorsed by the FSC effective from 2017 are as follows: Effective date by International New Standards, Interpretations and Amendments Accounting Standards Board Classification and measurement of share-based payment transactions (amendments to IFRS 2) January 1, 2018 Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts January 1, 2018 (amendments to IFRS 4) IFRS 9, Financial instruments January 1, 2018 Sale of contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28) To be determined by International Accounting Standards Board IFRS 15, Revenue from contracts with customers January 1, 2018 Clarifications to IFRS 15, Revenue from contracts with customers January 1, 2018 (amendments to IFRS 15) IFRS 16, Leases January 1, 2019 Disclosure initiative (amendments to IAS 7) January 1, 2017 Recognition of deferred tax assets for unrealised losses January 1, 2017 (amendments to IAS 12) Transfers of investment property (amendments to IAS 40) January 1, 2018 IFRIC 22, 'Foreign currency transactions and advance consideration January 1, 2018 Annual improvements to IFRSs cycle-amendments to IFRS 1, 'First-time adoption of International Financial Reporting Standards' Annual improvements to IFRSs cycle-amendments to IFRS 12, 'Disclosure of interests in other entities' Annual improvements to IFRSs cycle-amendments to IAS 28, 'Investments in associates and joint ventures' January 1, 2018 January 1, 2017 January 1, 2018 Except Except for the for following, the following, the above the above standards standards interpretations and interpretations have have no significant no significant impact impact to the to the Company s financial condition and operating result based on the Company s assessment. The quantitative impact will be disclosed when the assessment is complete. A. IFRS 9, Financial instruments (a) Classification of debt instruments is driven by the entity s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading. (b) The impairment losses of debt instruments are assessed using an expected credit loss approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of 186 Prince Housing & Development Corp. 187

96 net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component. B. IFRS 15, Revenue from contracts with customers IFRS 15, Revenue from contracts with customers replaces IAS 11 Construction contracts, IAS 18 Revenue and relevant interpretations. According to IFRS 15, revenue is recognized when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: Step 1: Identify contracts with customer. Step 2: Identify separate performance obligations in the contract(s). Step 3: Determine the transaction price. Step 4: Allocate the transaction price. Step 5: Recognise revenue when the performance obligation is satisfied. Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. C. IFRS 16, Leases IFRS 16, Leases, replaces IAS 17, Leases and related interpretations and SICs. The standard requires lessees to recognise a 'right-of-use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors. D. Amendments to IAS 40, Transfers of investment property The amendment clarified that to transfer to, or from, investment properties there must be a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A change in management s intentions, in isolation, does not provide evidence of the change in use. In addition, the amendments added examples for the evidence of a change in use. The examples include assets under construction or development (not completed properties) transfer from investment property to owner-occupied property at commencement of development with a view to owner-occupation and transfer from inventories to investment property at inception of an operating lease to another party. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these parent company only financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. (1) Compliance statement These parent company only financial statements are prepared by the Company in accordance with the Rules Governing the Preparation of Financial Statements by Securities Issuers. (2) Basis of preparation A. Except for the following items, these parent company only financial statements have been prepared under the historical cost convention: (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. (b) Available-for-sale financial assets measured at fair value. (c) Defined benefit liabilities recognized based on the net amount of pension fund assets less unrecognized actuarial gains and present value of defined benefit obligation. B. The preparation of financial statements in conformity with the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC ( collectively referred herein as the IFRSs ) requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5. (3) Foreign currency translation The parent company only financial statements are presented in New Taiwan dollars, which is the Company s functional and presentation currency. A. Foreign currency transactions and balances (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise. (b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss. (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions. (d) All foreign exchange gains and losses are presented in the statement of comprehensive income within other gains and losses. B. Translation of foreign operations (a) The operating results and financial position of all the Company entities, associates and jointly controlled entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet; ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and 188 Prince Housing & Development Corp. 189

97 iii. All resulting exchange differences are recognized in other comprehensive income. (b) When the foreign operation partially disposed of or sold is an associate or jointly controlled entity, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even when the Company still retains partial interest in the former foreign associate or jointly controlled entity after losing significant influence over the former foreign associate, or losing joint control of the former jointly controlled entity, such transactions should be accounted for as disposal of all interest in these foreign operations. (c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, if the Company retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation. (4) Classification of current and non-current items A. If assets and liabilities are related to the construction business, they are classified as current or non-current according to their operating cycle; if they are not related to the construction business, they are classified by annual basis. B. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets: (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle; (b) Assets held mainly for trading purposes; (c) Assets that are expected to be realised within twelve months from the balance sheet date; (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date. C. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities: (a) Liabilities that are expected to be settled within the normal operating cycle; (b) Liabilities arising mainly from trading activities; (c) Liabilities that are to be settled within twelve months from the balance sheet date; (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. (5) Cash equivalents Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits mature within three months and bonds with call back options meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents. (6) Financial assets at fair value through profit or loss A. Financial assets at fair value through profit or loss are financial assets held for trading. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognised using trade date accounting. C. Financial assets at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in profit or loss. (7) Available-for-sale financial assets A. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. B. On a regular way purchase or sale basis, available-for-sale financial assets are recognized and derecognised using trade date accounting. C. Available-for-sale financial assets are initially recognized at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in financial assets measured at cost. (8) Receivables Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognized at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial. (9) Impairment of financial assets A. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. B. The criteria that the Company uses to determine whether there is objective evidence of an impairment loss is as follows: (a) Significant financial difficulty of the issuer or debtor; (b) A breach of contract, such as a default or delinquency in interest or principal payments; (c) The disappearance of an active market for that financial asset because of financial difficulties; (d) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; (e) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the company, including adverse changes in the payment status of borrowers in the company or national or local economic conditions that correlate with defaults on the assets in the company; (f) Information about significant changes with an adverse effect that have taken place in the 190 Prince Housing & Development Corp. 191

98 technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered; (g) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost. C. When the Company assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets: (a) Financial assets measured at amortised cost The amount of the impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate, and is recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognized previously. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account. (b) Financial assets measured at cost The amount of the impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognized in profit or loss. Impairment loss recognized for this category shall not be reversed subsequently. Impairment loss is recognized by adjusting the carrying amount of the asset through the use of an impairment allowance account. (c) Available-for-sale financial assets The amount of the impairment loss is measured as the difference between the asset s acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss, and is reclassified from other comprehensive income to profit or loss. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognized, then such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognized in profit or loss shall not be reversed through profit or loss. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account. (10) Derecognition of financial assets The Company derecognises a financial asset when one of the following conditions is met: A. The contractual rights to receive the cash flows from the financial asset expire. B. The contractual rights to receive cash flows of the financial asset have been transferred and the Company has transferred substantially all risks and rewards of ownership of the financial asset. C. The contractual rights to receive cash flows of the financial asset have been transferred; however, the Company has not retained control of the financial asset. (11) Inventories Inventories including land held for construction, construction in progress, and buildings and land held for sale are stated at cost and evaluated at the lower of cost or net realisable value at the end of period. The individual item approach is used in the comparison of cost and net realisable value. The calculation of net realisable value is based on the estimated selling price in the normal course of business, net of estimated costs of completion and related adjusted selling expenses. The interest costs related to construction in progress are capitalised during the construction. (12) Construction contracts In accordance with IFRIC 15, Agreements for the Construction of Real Estate, if the buyer is able to specify the major structural elements of the design of the real estate before construction begins and/or specify major structural changes once construction is in progress, the construction contract meets the definition of construction contract and criteria in IAS 11, Construction Contracts. In accordance with IAS 18, Revenue, the Company recognises sales revenue for contracts of presale of buildings that do not meet the definition of construction contract. For transactions that meet the definition of construction contract, the Company recognises contract revenue in accordance with IAS 11. (13) Investments accounted for using equity method / subsidiaries, associates A. Subsidiaries are all entities (including structured entities) controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. B. Unrealised profit (loss) arising from the transactions between the Company and subsidiaries have been offset. The accounting policies of the subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company. C. The Company s share of its subsidiaries post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Company s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise losses proportionate to its ownership. D. If changes in shareholdings in subsidiaries do not result to a loss on control (transaction with non-controlling interest), transactions shall be considered as equity transactions, which are transactions between owners. Difference of adjustment of non-controlling interest and fair value of consideration paid or received is recognized in equity. E. When the Company loses its control in a subsidiary, the Company revalues the remaining investment in the prior subsidiary at fair value, that fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture, and recognises the difference between fair value and book value in the profit or loss for the period. The accounting treatment on the previously recognized amount related to the subsidiary in other comprehensive income is the same as the basis if the Company directly disposes related assets or liabilities, which means if the Company has recognized gain or loss in other comprehensive income, the Company should reclassify the gain or loss on disposal of related assets or liabilities to profit or loss; and when the Company loses control in the subsidiary, the gain or loss should be reclassified from equity to profit or loss. F. Associates are all entities over which the Company has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or 192 Prince Housing & Development Corp. 193

99 indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognized at cost. G. The Company s share of its associates post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Company s share of losses in an associate equals or exceeds its interest in the associate, the Company does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. H. When changes in an associate s equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Company s ownership percentage of the associate, the Company recognises the Company s share of change in equity of the associate in capital surplus in proportion to its ownership. I. Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the Company s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Company. J. In the case that an associate issues new shares and the Company does not subscribe or acquire new shares proportionately, which results in a change in the Company s ownership percentage of the associate but maintains significant influence on the associate, then capital surplus and investments accounted for under the equity method shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Company s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of. K. Upon loss of significant influence over an associate, the Company remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognized in profit or loss. L. When the Company disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach. M. When the Company disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognized as capital surplus in relation to the associate are transferred to profit or loss. If it retains significant influence over this associate, then the amounts previously recognized as capital surplus in relation to the associate are transferred to profit or loss proportionately. N. Pursuant to the Regulations Governing the Preparation of Financial Reports by Securities Issuers, profit (loss) of the current period and other comprehensive income in the parent company only financial statements shall equal to the amount attributable to owners of the parent in the financial statements prepared with basis for consolidation. Owners equity in the parent company only financial statements shall equal to equity attributable to owners of the parent in the financial statements prepared with basis for consolidation. (14) Property, plant and equipment A. P roperty, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised. B. Subsequent costs are included in the asset s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately. D. The assets residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets residual values and useful lives differ from previous estimates or the patterns of consumption of the assets future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, from the date of the change. The estimated useful lives of property, plant and equipment are as follows: Buildings 50 ~ 60 years Computer and commumication equipment 5 years Transportation equipment 5 years Office equipment 5 ~ 10 years Leasehold improvements 5 years Other equipment 5 years (15) Operating leases (lessor/ lessee) Rental income from operating leases (excluding any benefits provided to lessee) or payments for operating leases (excluding any benefits received from lessor) are recognized as profit or loss for the period over the leasing period on a straight line basis. (16) Investment property An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 44 ~ 60 years. (17) Intangible assets Intangible assets consist of service concession, which are stated at acquisition cost and amortised on a straight line basis over its useful life of 44 years. (18) Impairment of non-financial assets The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognising impairment loss for an asset in prior years no longer 194 Prince Housing & Development Corp. 195

100 exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised. (19) Borrowings A. Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method. B. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawdedown, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. (20) Notes and accounts payable Notes and accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method. However, short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial. (21) Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability specified in the contract is discharged or cancelled or expires. (22) Offsetting financial instruments Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. (23) Financial liabilities Bonds payable Ordinary corporate bonds issued by the Company are initially recognized at fair value, net of transaction costs incurred. Ordinary corporate bonds are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is accounted for as the premium or discount on bonds payable and presented as an addition to or deduction from bonds payable, which is amortised in profit or loss as an adjustment to the finance costs over the period of bond circulation using the effective interest method. (24) Provisions Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognized as interest expense. Provisions are not recognized for future operating losses. (25) Employee benefits A. Short-term employee benefits Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognized as expenses in that period when the employees render service. B. Pensions (a) Defined contribution plan For defined contribution plan, the contributions are recognized as pension expenses when they are due on an accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund or a reduction in the future payments. (b) Defined benefit plan i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior periods. The liability recognized in the balance sheet in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit net obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of highquality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Company uses interest rates of government bonds (at the balance sheet date) instead. ii. Actuarial gains and losses arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise. iii. Past service costs are recognized immediately in profit or loss. C. Employees compensation and directors and supervisors remuneration Employees compensation and directors and supervisors remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution. (26) Income tax A. The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity. B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings. 196 Prince Housing & Development Corp. 197

101 C. Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the non-consolidated balance sheet. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. D. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognized deferred income tax assets are reassessed. E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously. F. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised. (27) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds. (28) Dividends Dividends are recorded in the Company s financial statements in the period in which they are approved by the Company s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary share on the effective date of new shares issuance. (29) Revenue recognition A. Sales of goods The Company handles entrusted construction, sale and lease of public housings and business buildings. Revenue arising from the sales of goods should be recognized when the Company has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied. For preselling of housing that the Company has entrusted to construction companies to build, as stated in Note 4(12), sales revenue is recognized in accordance with IAS 18, Revenue. Thus, the Company has carried over costs and recognized profit or loss when it completes transfer of title and settlement of housing. Only when housing was actually settled (or only when ownership was transferred) before balance sheet date, and related risk return was transferred would sales revenue be recognized. B. Service concession revenue Please refer to Note 4(30) for service concession contracts provided by the Company. (30) Service concession arrangements A. The Company was contracted by National Taiwan University (grantor) to provide construction for the government s infrastructure assets for public services and operate those assets for Chang Hsing St. Campus for 44 years and 6 months, and for Shui Yuan Campus for 44 years and 4 months after construction is completed. When the term of operating period expires, the underlying infrastructure assets will be transferred to National Taiwan University without consideration. The Company allocates the fair value of the consideration received or receivable in respect of the service concession arrangement between construction services and operating services provided based on their relative fair values, and recognises such allocated amounts as revenues in accordance with IAS 11, Construction Contracts, and IAS 18, Revenue, respectively. B. Costs incurred on provision of construction services or upgrading services under a service concession arrangement are accounted for in accordance with IAS 11, Construction Contracts. C. The consideration received or receivable from the grantor in respect of the service concession arrangement is recognized at its fair value. Such considerations are recognized as a financial asset or an intangible asset based on how the considerations from the grantor to the operator are made as specified in the arrangement. 5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The above information is addressed below: (1) Critical judgements in applying the Company s accounting policies A. Financial assets impairment of equity investments The Company follows the guidance of IAS 39 to determine whether a financial asset equity investment is impaired. This determination requires significant judgement. In making this judgement, the Company evaluates, among other factors, the duration and extent to which the fair value of an equity investment is less than its cost and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow. If the decline of the fair value of an individual equity investment below cost was considered significant or prolonged, the Company would suffer an additional loss in its financial statements, being the transfer of the accumulated fair value adjustments recognized in other comprehensive 198 Prince Housing & Development Corp. 199

102 income on the impaired available-for-sale financial assets to profit or loss or being the recognition of the impairment loss on the impaired financial assets measured at cost in profit or loss. B. Investment property The Company uses a portion of the property for its own use and another portion to earn rentals or for capital appreciation. When these portions cannot be sold separately and cannot be leased out separately under a finance lease, the property is classified as investment property only if the own-use portion accounts for an insignificant portion of the property. (2) Critical accounting eatimates and assumptions No assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 6. DETAILS OF SIGNIFICANT ACCOUNTS (1) Cash and cash equivalents December 31, 2016 December 31, 2015 Cash on hand and revolving funds $ 2,382 $ 2,548 Checking accounts and demand deposits 2,354,383 1,954,342 Repurchase bonds 500, ,000 $ 2,856,845 $ 2,156,890 A. The Company transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote. B. The repurchase bonds held by the Company has high liquidity, so they were classified as cash equivalents. (2) Financial assets at fair value through profit or loss Items December 31, 2016 December 31, 2015 Current items: Financial assets held for trading Beneficiary certificates $ 300,000 $ - Non-current items: Financial assets held for trading Beneficiary certificates $ 76,000 $ 76,000 Financial assets held for trading valuation adjustments 2,253 1,992 $ 78,253 $ 77,992 A. The Company recognized net gain of $384 and $445 for the years ended December 31, 2016 and 2015, respectively. B. Details of the Company s financial assets and liabilities at fair value through profit or loss pledged to others as collateral are provided in Note 8. (3) Notes receivable, net December 31, 2016 December 31, 2015 Notes receivable $ 88,801 $ 111,932 Less: Allowance for doubtful accounts - ( 344) $ 88,801 $ 111,588 A. The Company s notes receivable that were neither past due nor impaired were fully performing in line with the credit standards prescribed based on counterparties industrial characteristics, scale of business and profitability. B. Movement analysis of financial assets that were impaired (allowance for doubtful accounts of notes receivable) is as follows: Years ended December At January 1 $ 344 $ 540 Reversal of impairment - - Write-offs uncollectible accounts ( 344) ( 196) At December 31 $ - $ 344 C. The Company does not hold any collateral as security. (4) Accounts receivable, net December 31, 2016 December 31, 2015 Accounts receivable $ 89,992 $ 830,527 Less: Allowance for doubtful accounts ( 3,743) ( 3,743) $ 86,249 $ 826,784 A. The Company s accounts receivable that were neither past due nor impaired were fully performing in line with the credit standards prescribed based on counterparties industrial characteristics, scale of business and profitability. Accounts receivable are classified into 2 categories: (a) Sale of real estate: collection of customers loans from banks. (b) Receivables from travel department: mainly from credit card payments. B. The ageing analysis of accounts receivable that were past due but not impaired is as follows: December 31, 2016 December 31, 2015 Up to 60 days $ - $ - 61 to 120 days to 180 days - 63 Over 181 days 1,117 1,085 $ 1,117 $ 1,148 The above is analysed based on number of days overdue. 200 Prince Housing & Development Corp. 201

103 C. Movement analysis of financial assets that were impaired (allowance for doubtful accounts of accounts receivable) is as follows: Years ended December 31, At January 1 $ 3,743 $ 6,897 Write-ofs during the period - ( 3,154) At December 31 $ 3,743 $ 3,743 The Company analyses based on any changes to credit quality in accounts receivable of individual customers from the initial grant date until the financial period-end, historical experience and current financial condition, to estimate the amount that may not be recovered. D. The Company does not hold any collateral as security. (5) Inventories December 31, 2016 Allowance for Cost valuation loss Book value Land held for construction site $ 11,490,725 ($ 65,372) $ 11,425,353 Construction in progress 3,890,666-3,890,666 Buildings and land held for sale 5,023,731 ( 49,229) 4,974,502 Prepayment for land 132, ,652 Prepayment for buildings and land 954, ,027 Merchandise 1,453-1,453 $ 21,493,254 ($ 114,601) $ 21,378,653 December 31, 2015 Allowance for Cost valuation loss Book value Land held for construction site $ 11,833,606 ($ 65,372) $ 11,768,234 Construction in progress 2,457,025-2,457,025 Buildings and land held for sale 5,963,865 ( 49,432) 5,914,433 Prepayment for land 223, ,700 Prepayment for buildings and land 947, ,991 Merchandise 1,543-1,543 $ 21,427,730 ($ 114,804) $ 21,312,926 Years ended December 31, Interest paid before capitalization $ 384,261 $ 424,018 Interest capitalized $ 181,888 $ 140,305 Annual interest rate used for capitalization 2.04%-3.16% 2.51%-3.20% D. Details of significant inventories: (a) Buildings and land in progress Taipei branch December 31, 2016 December 31, 2015 Prince HsinYi (XinZhuang Fuduxin) $ 2,022,377 $ 1,736,845 Ling Ko Dist. Li Shing Section No. 1209, etc. 1,515,855 1,376,328 Prince Fu III (Taoyuan Qing Sun Section No. 446) 1,438,248 1,131,432 Prince W (New Taipei City Shing Jheng Section No. 883, etc.) 950, ,064 Bali Dist Chung Chang Section No and 211-1, etc. 686, ,665 Jhong Li City Shuang Ling Section No. 1449, etc. 447, ,796 Prince Hua Wei (Shilin Dist. Zhishan Section No. 602, etc.) 269, ,680 $ 7,330,585 $ 6,327,810 Taichung branch December 31, 2016 December 31, 2015 Ping Hsin Section No. 694, etc. $ 897,690 $ 862,840 Prince Yu Ding (Hui Li Section No. 195) 855, ,080 Prince County(Chaotun Section No. 755, etc.) 320, ,571 Jin Shuei Dist. Wu Show Section No. 1037, No. 1038, No. 1040, etc. 206, ,947 Hsinfuliao Section No. 1096, No.1907, No. 1098, No. 1108, etc. 184, ,160 W Epoch(Kao an Section No ) 139,576 21,893 The Cloud Century (Kao An Section No , etc.) - 698,401 Others 7 7 $ 2,604,119 $ 2,895,899 Tainan branch December 31, 2016 December 31, 2015 Jin Hua Section No $ 688,200 $ 688,190 Prince Feng Yun (Hsin Ying Section No ) 665, ,433 Prince Jum Fon Huei (Yu Ming Section No ) 375, ,825 Chin An Section No. 296, No. 297, etc. 156,124 95,703 Shan Chia Section No. 939, etc. 152, ,499 Others 3,524 3,524 $ 2,040,944 $ 1,767,174 A. The cost of of inventories recognized as as expense for for the the years ended December 31, 31, and and was $3,739,186 and $5,631,118, respectively, including the amount of $203 and $2,014, respectively that the Company wrote down from cost to net realisable value accounted for as cost of goods sold. B. Details of the Company s inventories pledged to others as collateral are provided in Note 8. C. The interest capitalized as cost of inventory is as follows: 202 Prince Housing & Development Corp. 203

104 Kaohsiung branch December 31, 2016 December 31, 2015 Prince Cloud B (Ren Wu New Hougang West Section No.42, etc.) $ 379,133 $ 378,865 Prince Cloud C townhouse (Ren Wu New Hougang West Section No.69, etc.) 265,807 - Prince Cloud C apartment (Ren Wu New Hougang West Section No etc.) 161,013 - Prince Yun (Nanzi subsection No. 158) 125,629 28,177 Ren Wu New Hougang West Section No. 88 experimental house 72,929 73,050 Prince Cloud E (Ren Wu New Hougang West Section No. 90 etc.) 4 - Prince Cloud D (Ren Wu New Hougang West Section No.52, etc.) - 416,940 (b)land held for construction site (b) (b)land Land held held for for construction construction site site $ 1,004, ,032 Total buildings and land in progress $ 12,980,163 $ 11,887,915 Taipei branch December 31, 2016 December 31, 2015 Zhong Li Pu Ren Lot No. 720, etc. $ 140,156 $ 140,156 Others 5,978 5,978 $ 146,134 $ 146,134 Taichung branch December 31, 2016 December 31, 2015 Song Quan Lot No. 164, etc. $ 176,296 $ 176,296 Wu Feng Lot No. 365~ 855, etc. 175, ,661 Tu Ku Section No. 9-7, etc. 55,167 55,167 Song Chang Lot No. 557, etc. 19,912 19,912 Hong Long Zub Section No ,513 19,513 Xi Zhou Lot No , etc. 11,941 11,941 Others 18,780 20,446 $ 477,270 $ 478,936 Tainan branch December 31, 2016 December 31, 2015 Shan Zhong Lot No. 1468, 1475 & 1476, etc. $ 234,699 $ 234,699 Xue Zhong Lot No. 679, etc. 50,798 50,798 Yong Kang Ding An Lot No. 879, etc. 28,610 28,610 Bei An Section No. 54-3, etc. 15,344 15,344 Chin An Section No , etc. 15,139 15,139 Bao An Lot No. 882, etc. 10,325 10,325 Others 14,550 14,550 $ 369,465 $ 369,465 Kaohsiung branch December 31, 2016 December 31, 2015 Ren Wu New Hougang West Section No. 53, etc. $ 987,079 $ 986,221 Ren Wu New Hougang West Section No. 30 & , ,037 Da Hua Lot No. 434 & ,923 13,923 $ 1,408,359 $ 1,408,181 Total land held for construction site $ 2,401,228 $ 2,402,716 Kaohsiung branch December 31, 2016 December 31, 2015 (c) (c)buildings and and land land held held for sale for sale Financial Information $ Ren Wu New Hougang West Section No. 53, etc. $ 987, ,221 Ren Wu New Hougang West Section No. 30 & , ,037 Da Hua Lot No. 434 & ,923 13,923 $ 1,408,359 $ 1,408,181 Total land held for construction site $ 2,401,228 $ 2,402,716 Taipei branch December 31, 2016 December 31, 2015 Prince Tanmei $ 2,270,855 $ 2,270,855 Prince Fu II 287, ,311 Prince Dragon House III 42,432 42,432 Prince Da Din 12,446 12,446 Prince Guo Boa 5,738 5,738 Taipei Shinyi - 106,741 Others $ 2,619,752 $ 3,080,069 Taichung branch December 31, 2016 December 31, 2015 Chin Fon Gin $ 403,492 $ 516,970 The Cloud Century Special A 292,529 - Prince Fu 27,417 39,528 Jing Yun Sian 13,418 13,418 The Cloud Century A - 452,895 Hai Yan - 64,657 Others 10,889 10,889 $ 747,745 $ 1,098,357 Tainan branch December 31, 2016 December 31, 2015 Flower Bo Five $ 1,273,009 $ 1,625,272 Tun Sha Building III 28,376 28,376 Jun Chan LV 19,725 19,725 Prince Golden Age 19,572 19,572 Others 2,188 2,188 $ 1,342,870 $ 1,695,133 Kaohsiung branch December 31, 2016 December 31, 2015 Prince Cloud D $ 222,345 $ - Prince Hua Yang 81,242 79,875 Prince Dai Din 9,777 10,431 $ 313,364 $ 90,306 Total buildings and land held for sale $ 5,023,731 $ 5,963,865 (d) Prepayment for land (d) Prepayment for land (d) Prepayment for land Tainan branch December 31, 2016 December 31, 2015 Tainan branch December 31, 2016 December 31, 2015 Ren Wu New Hougang West Section No. 20, etc. 132, ,700 Ren Wu New Hougang West Section No. 20, etc. $ 132,652 $ 223,700 (e) Prepayment for buildings and land (e) Prepayment for for buildings buildings and land land December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 Taisugar Nanzi Section 786, ,794 Taisugar Nanzi Section $ 786,213 $ 258,794 Taisugar Kao An Section 95, ,397 Taisugar Kao An Section 95, ,397 Prince HsinYi (XinZhuang Fuduxin) 72,000 37,800 Prince HsinYi (XinZhuang Fuduxin) 72,000 37, , ,991 $ 954,027 $ 947,991 (6) Other current assets (6) Other current assets Items December 31, 2016 December 31, Items Prince December Housing 31, & 2016 Development December Corp. 31, Deferred sales commission 246, ,551 Deferred sales commission $ 246,014 $ 297,551 (7) Available-for-sale financial assets (7) Available-for-sale financial assets

105 (6) Other current assets Items December 31, 2016 December 31, 2015 Deferred sales commission $ 246,014 $ 297,551 (7) Available-for-sale financial assets (7) Available-for-sale financial assets Non-current items: Items December 31, 2016 December 31, 2015 Listed ( TSE and OTC ) stocks $ 104,033 $ 106,684 Unlisted stocks 29,234 29, , ,278 Valuation adjustment of available-for-sale financial assets 1,048,756 1,406,114 $ 1,182,023 $ 1,542,392 A. The Company recognized $355,139 and,276 $39,276 in other comprehensive income for fair value change and reclassified ($2,219) and $0 from equity to profit or loss for the years ended December 31, 2016 and 2015, respectively. B. Details of the Company s available-for-sale financial assets pledged to others as collateral are provided in Note 8. (8) Financial assets measured at cost Items December 31, 2016 December 31, 2015 Non-current items: Unlisted stocks $ 877,800 $ 887,529 A. Based on the Company s intention, its investment in President Energy Development Ltd. and President International Development Corp. should be classified as available-for-sale financial assets. However, as President Energy Development Ltd. and President International Development Corp. stocks are not traded in an active market, and no sufficient industry information of companies similar to President Energy Development Ltd. and President International Development Corp. can be obtained, the fair value of the investment in President Energy Development Ltd. and President International Development Corp. stocks cannot be measured reliably. Thus, the Company classified those stocks as financial assets measured at cost. B. Details of the Company s financial assets measured at cost pledged to others as collateral are provided in Note 8. (9) Investments accounted for under the equity method A. Details of investments accounted for under the equity method are set forth below: December 31, 2016 December 31, 2015 Carrying Percentage of Carrying Percentage of Name of subsidiaries and associates amount ownership amount ownership Uni-President Development Corp. $ 1,229, % $ 1,365, % Prince Real Estate Co., Ltd. (Note 1) 1,210, % 1,497, % Cheng-shi Investment Holdings Co., Ltd. 1,007, % 904, % Time Square International Hotel 462, % 488, % Prince Housing Investment Co., Ltd. 446, % 408, % The Splendor Hotel Taichung 328, % 338, % Geng-Ding Co., Ltd. 320, % 326, % Prince Property Management Consulting Co., Ltd. 282, % 270, % Ming-Da Enterprise Co., Ltd. 75, % 166, % Jin Yi Xing Plywood Co., Ltd. (Notes 1,2) % % Dong-Feng Enterprises Co., Ltd. (Note 2) % % Others (individually less than 2%) 9,526-10,581 - $ 5,373,556 $ 5,776,478 Note 1 A newly established company arising from land division of Jin Yi Xing Plywood Co., Ltd. on September 1, Note 2 As of December 31, 2016 and 2015, the book value of the Company s investment in Jin Yi Xing Plywood Co., Ltd. and Dong-Feng Enterprises Co., Ltd. were ($361,186) and ($151,839), and ($503,466) and ($25,491), respectively, which was below zero. Thus, the investments were transferred to other non-current liabilities at $513,025 and $528,957, respectively. B. Subsidiaries Please refer to Note 4(3) of the Company s consolidated financial statements for the subsidiaries information. C. Associates a. The summarized financial information of the associates that are material to the Company is as follows: Balance sheet December 31, 2016 December 31, 2015 Current assets $ 265,427 $ 373,344 Non-current assets 9,127,538 9,564,478 Current liabilities ( 3,319,592) ( 3,627,239) Non-current liabilities ( 1,974,139) ( 1,760,396) Total net assets $ 4,099,234 $ 4,550,187 Share in associate's net assets $ 1,229,770 $ 1,365,037 Statements of comprehensive income Uni President Development Corp. Uni President Development Corp Revenue Prince $ Housing 981,167 & Development $ Corp. 1,066, Profit for the year from continuing operations $ 143,048 $ 221,365 Total comprehensive income $ 143,048 $ 221,365

106 Statements of comprehensive income Uni President Development Corp Revenue $ 981,167 $ 1,066,653 Profit for the year from continuing operations $ 143,048 $ 221,365 Total comprehensive income $ 143,048 $ 221,365 b. The carrying amount of the Company s interests in all individually immaterial associates and the Company s share of the operating results are summarized below: As of December 31, 2016 and 2015, the carrying amount of the Company s individually immaterial associates amounted to $395,896 and $493,076, respectively. Years ended December 31, Profit for the period from continuing operations $ 242,267 $ 276,233 Other comprehensive income- net of tax 1,396 - Total comprehensive income $ 243,663 $ 276,233 D. The Company s share of profit of subsidiaries, associates and joint ventures accounted for using equity method for the years ended December 31, 2016 and 2015 was $559,388 and $842,977, respectively. E. The investment income of certain investees for the years ended December 31, 2016 and 2015 accounted for under the equity method was based on their financial statements for the corresponding periods, which were audited by other independent accountants. The investment (loss) income recognized for these investees for the years ended December 31, 2016 and 2015 was $84,550 and ($27,182), respectively. As of December 31, 2016 and 2015, investment balance accounted for under the equity method in these investees were $897,432 and $979,024, respectively. The investees whose financial statements were audited by other independent accountants for the years ended December 31, 2016 and 2015 were as follows: Prince Property Management Consulting Co., Ltd., Geng-Ding Co., Ltd., Prince Housing Investment Co., Ltd. and Dong-Feng Enterprises Co., Ltd. F. Details of the Company s investments accounted for under equity method pledged to others as collateral are provided in Note 8. (10) Property, plant and equipment A. Details of book values are as follows: December 31, 2016 December 31, 2015 Land $ 191,884 $ 191,884 Buildings 302, ,533 Computer and communication equipment 9,748 14,340 Transportation equipment 3,303 4,397 Office equipment 40,143 49,493 Leasehold improvements 24,323 25,648 Other equipment $ 572,089 $ 596,757 B. B. Changes Changes in in property, property, plant plant and and equipment equipment for for the the year year are are as as follows: follows: Opening net Year ended December 31, 2016 Closing net Cost book amount Additions Disposals Reclassifications book amount Land $ 191,884 $ - $ - $ - $ 191,884 Buildings 438, ,331 Computer and communication equipment 59, ,989 Transportation equipment 10,767 - ( 1,000) - 9,767 Office equipment 175,859 2, ,475 Leasehold improvements 73, ,532 Other equipment 1,914 - ( 2) - 1,912 $ 951,791 $ 3,101 ($ 1,002) $ - $ 953,890 Opening net Closing net Cost book amount Additions Disposals Reclassifications book amount Land $ 191,884 $ - $ - $ - $ 191,884 Buildings 438, ,331 Computer and communication equipment Year ended December 31, ,556 1, ,504 Transportation equipment 9,567 1, ,767 Office equipment 171,640 4, ,859 Leasehold improvements 47, ,532 73,532 Other equipment 1,943 - ( 29) - 1,914 Construction in progress ,380 - ( 26,532) - $ 918,073 $ 33,747 ($ 29) $ - $ 951, Prince Housing & Development Corp. 209

107 Opening net Closing net Accumulated depreciation book amount Additions Disposals Reclassifications book amount Land $ 127,798 $ 8,159 $ - $ - $ 135,957 Computer and communication equipment Year ended December 31, ,164 5, ,241 Transportation equipment 6, ( 806) - 6,464 Office equipment 126,366 11, ,332 Leasehold improvemnets 47,884 1, ,209 Other equipment 1, ,598 $ 355,034 $ 27,573 ($ 806) $ - $ 381,801 Opening net Closing net Accumulated depreciation book amount Additions Disposals Reclassifications book amount Buildings $ 119,639 $ 8,159 $ - $ - $ 127,798 Computer and communication equipment Year ended December 31, ,647 5, ,164 Transportation equipment 5, ,370 Office equipment 114,138 12, ,366 Leasehold improvements 47, ,884 Other equipment 1, ,452 $ 327,347 $ 27,687 $ - $ - $ 355,034 C. Details of the Company s property, plant and equipment pledged to others as collateral are provided in Note 8. (11) Investment property A. Details of book values are as follows: December 31, 2016 December 31, 2015 Land $ 265,550 $ 265,550 Leased assets-land 2,567,429 2,567,486 Leased assets-buildings 3,137,449 3,226,616 $ 5,970,428 $ 6,059,652 B. Changes in investment property for the year are as follows: B. Changes in investment property for the year are as follows: Opening net Year ended December 31, 2016 Closing net Cost book amount Additions Disposals Reclassifications book amount Land $ 265,550 $ - $ - $ - $ 265,550 Leased assets-land 2,567,486 - ( 57) - 2,567,429 Leased assets-buildings 3,967,538 - ( 4,352) - 3,963,186 $ 6,800,574 $ - ($ 4,409) $ - $ 6,796,165 Opening net Year ended December 31, 2015 Closing net Cost book amount Additions Disposals Reclassifications book amount Land $ 203,494 $ - $ - $ 62,056 $ 265,550 Leased assets-land 2,567,621 - ( 135) - 2,567,486 Leased assets-buildings 3,977,875 - ( 10,337) - 3,967,538 $ 6,748,990 $ - ($ 10,472) $ 62,056 $ 6,800,574 Opening net Year ended December 31, 2016 Closing net Accumulated depreciation book amount Additions Disposals Reclassifications book amount Leased assets-buildings $ 740,922 $ 85,604 ($ 789) $ - $ 825,737 Opening net Year ended December 31, 2015 Closing net Accumulated depreciation book amount Additions Disposals Reclassifications book amount Leased assets-buildings $ 656,810 $ 85,788 ($ 1,676) $ - $ 740,922 C. Rental income from the lease of the investment property and direct operating expenses arising from the investment property are shown below: Years ended December 31, Rental revenue from the lease of the investment property $ 294,260 $ 294,612 Direct operating expenses arising from the investment property that generated rental income in the period $ 156,000 $ 157,872 Direct operating expenses arising from the investment property that did not generate rental income in the period $ - $ - D. As of December 31, 2016 and 2015, the fair value of the investment property held by the Company was $12,886,955 and $12,948,124, respectively. The Company s management estimated the fair value based on market evidence on transaction price of similar property and assessed value. E. Information about the investment property that was pledged to others as collateral is provided in E. Information about the investment property that was pledged to others as collateral is provided in Note 8. Note 8. (12) Intangible assets 210 A. Details of book values are as follows: Prince Housing & Development Corp. 211 December 31, 2016 December 31, 2015

108 December 31, 2016 December 31, 2015 Secured borrowings $ 80,000 $ 505,000 Unsecured borrowings 2,135,659 Financial Information 1,759,874 $ 2,215,659 $ 2,264,874 Interest rate range 1.53%~2.06% 1.92%~2.51% (12) Intangible assets A. Details of book values are as follows: Opening net Year ended December 31, 2016 Closing net Cost book amount Additions Disposals Reclassifications book amount Service concession $ 2,868,372 $ - $ - $ - $ 2,868,372 Opening net Year ended December 31, 2015 Closing net Cost book amount Additions Disposals Reclassifications book amount Service concession $ 2,868,372 $ - $ - $ - $ 2,868,372 Opening net Year ended December 31, 2016 Closing net Accumulated Amortisation book amount Additions Disposals Reclassifications book amount Service concession $ 567,933 $ 61,252 $ - $ - $ 629,185 Opening net C. Details of amortisation on intangible assets are as follows: C. C. Details Details of of amortisation amortisation on on intangible intangible assets assets are are as as follows: follows: December 31, 2016 December 31, 2015 Service concession $ 2,239,187 $ 2,300,439 B. Changes in intangible assets for the year are as follows: Year ended December 31, 2015 Closing net Accumulated Amortisation book Opening amount net Additions Disposals Reclassifications book Closing amount net Service Accumulated concession Amortisation $ book 506,680 amount $ Additions 61,253 $ Disposals- $ Reclassifications- $ book 567,933 amount Service concession $ 506,680 $ 61,253 $ - $ - $ 567,933 For the years ended December 31, For the years ended December 31, Operating costs-amortization expenses Operating costs-amortization expenses $ $ 61,252 $ 61,252 $ 61,253 61,253 (13) (13) Short-term borrowings For details of pledged assets, please refer to Note 8. (14) Short-term notes payable Year ended December 31, 2015 December 31, 2016 December 31, 2015 Secured borrowings $ 80,000 $ 505,000 Unsecured borrowings 2,135,659 1,759,874 $ 2,215,659 $ 2,264,874 Interest rate range 1.53%~2.06% 1.92%~2.51% December 31, 2016 December 31, 2015 Commercial papers $ 340,000 $ 880,000 Less: Unamortised discount ( 306) ( 126) $ 339,694 $ 879,874 Interest rate range 0.58%~1.02% 0.55%~0.94% For details of pledged assets, please refer to Note 8. (14) (14) Short-term notes notes payable December 31, 2016 December 31, 2015 Commercial papers $ 340,000 $ 880,000 Less: Unamortised discount ( 306) ( 126) $ 339,694 $ 879,874 Interest rate range 0.58%~1.02% 0.55%~0.94% A. A.The above commercial papers were issued by banks and bills financial institutions. B. B. For For details of of pledged assets, please refer to to Note (15) (15) Receipts Receipts in in advance advance Item December 31, 2016 December 31, 2015 Advance real estate receipts $ 880,026 $ 1,475,394 Advance rent 132, ,054 Other advance receipts $ 1,013,366 $ 1,634,255 (16) Bonds payable (16) Bonds payable December 31, 2016 December 31, st secured ordinary bonds payable $ 2,000,000 $ 2,000, st secured ordinary bonds payable 2,500,000 2,500,000 4,500,000 4,500,000 Less: Current portion ( 2,000,000) - $ 2,500,000 $ 4,500,000 A. A. The The Company issued secured ordinary bonds payable in in July The significant terms of of the bonds bonds are are as as follows: (a) Total issue amount: $2,000,000 (a)total issue amount: $2,000,000 (b) Issue price: At par value of $100 per bond (c) (b)issue Coupon price: rate: At 1.33% par value of $100 per bond (d) (c)coupon Terms of rate: interest 1.33% repayment: The bonds interest is calculated on simple rate every year (d)terms starting of July interest 2012 repayment: based on the The coupon bonds rate. interest is calculated on simple rate every year starting (e) Repayment July 2012 based term: on The the bonds coupon are rate. repaid upon the maturity of the bonds. (f) Period: 5 years, from July 12, 2012 to July 12, 2017 (e)repayment term: The bonds are repaid upon the maturity of the bonds. (g) The way of security: The bonds are secured by Bank of Taiwan. (h) (f)period: Guarantee 5 years, Bank: from The July bonds 12, are 2012 guaranteed to July 12, by 2017 Mega International Commercial Bank. B. (g)the Company way of issued security: secured The bonds ordinary are bonds secured payable by Bank in of November Taiwan The significant terms of (h)guarantee the bonds are Bank: as follows: The bonds are guaranteed by Mega International Commercial Bank. (a) Total issue amount: $2,500,000 B. The Company issued secured ordinary bonds payable in November The significant terms (b) Issue price: At par value of $100 per bond of the bonds are as follows: (c) Coupon rate: 1.55% (d) (a)total Terms issue of interest amount: repayment: $2,500,000 The bonds interest is calculated on simple rate every year (b)issue starting price: November At par value 2013 based of $100 on per the bond coupon rate. (c)coupon rate: 1.55% 212 A.The above commercial papers were issued by banks and bills financial institutions. (d)terms of interest repayment: The bonds interest Prince is calculated Housing on & simple Development rate every year Corp. starting 213 B. For details of pledged assets, please refer to Note 8. November 2013 based on the coupon rate. (15) Receipts in advance (e)repayment term: The bonds are repaid upon the maturity of the bonds.

109 (e) Repayment term: The bonds are repaid upon the maturity of the bonds. (f) Period: 5 years, from November 21, 2013 to November 21, 2018 (g) The way of security: $1.5 billion and $1 billion secured by Bank of Taiwan and Agricultural Bank of Taiwan, respectively. (h) Guarantee Bank: The bonds are guaranteed by Taipei Fubon Commercial Bank. (17) Long-term borrowings December 31, 2016 December 31, 2015 Secured bank borrowings $ 5,550,034 $ 6,391,026 Unsecured bank borrowings 100, ,000 5,650,034 6,661,026 Less: Current portion ( 1,176,015) ( 362,870) 4,474,019 6,298,156 Commercial paper 2,339, ,600 Less: Unamortised discount ( 2,260) ( 443) $ 6,811,359 $ 6,887,313 Range of maturity dates ~ ~ Range of interest rates 0.55%~2.70% 1.25%~3.16% A. For details of restrictive covenants, please refer to Note 9. A. For details of restrictive covenants, please refer to Note 9. B. The Company and financial institutions entered into a contract for a syndicated borrowing. The Company shall redraw revolving credit line to issue abovementioned commercial paper during the credit term. For the related information, please refer to Note 9(9) and 9(11). C. For details of pledged assets, please refer to Note 8. (18) Provisions-replacement cost Years ended December 31, At January 1 $ 84,517 $ 81,720 Additions 33,470 30,394 Used ( 42,780) ( 27,597) At December 31 $ 75,207 $ 84,517 (19) Pension A. (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement next year, the Company will make contributions to cover the deficit by next March. (b) The amounts recognized in the balance sheet are determined as follows: December 31, 2016 December 31, 2015 Present value of defined benefit obligations ($ 118,729) ($ 111,723) Fair value of plan assets 49,876 5,009 Net defined benefit liability ($ 68,853) ($ 106,714) (c) (c) Changes Changes in in net net defined defined benefit benefit liability liability are are as follows: as follows: Present value of defined benefit Fair value Net defined obligations of plan assets benefit liability Year ended December 31, 2016 Balance at January 1 ($ 111,723) $ 5,009 ($ 106,714) Current service cost ( 645) - ( 645) Interest (expense) income ( 1,899) 85 ( 1,814) ( 114,267) 5,094 ( 109,173) Remeasurements: Change in financial assumptions ( 3,512) - ( 3,512) Experience adjustments ( 5,738) ( 42) ( 5,780) ( 9,250) ( 42) ( 9,292) Pension fund contribution - 44,824 44,824 Paid pension 4,788-4,788 Balance at December 31 ($ 118,729) $ 49,876 ($ 68,853) Present value of defined benefit Fair value Net defined obligations of plan assets benefit liability Year ended December 31, 2015 Balance at January 1 ($ 93,186) $ 3,590 ($ 89,596) Current service cost ( 522) - ( 522) Interest (expense) income ( 1,864) 72 ( 1,792) ( 95,572) 3,662 ( 91,910) Remeasurements: Change in financial assumptions ( 3,526) - ( 3,526) Experience adjustments ( 12,625) 89 ( 12,536) ( 16,151) 89 ( 16,062) Pension fund contribution - 1,258 1,258 Balance at December 31 ($ 111,723) $ 5,009 ($ 106,714) (d) The principal actuarial assumptions used were as follows: 214 Prince Housing & Development Corp. Years ended December 31, Discount rate 1.40% 1.70%

110 (d) The principal actuarial assumptions used were as follows: Years ended December 31, Discount rate 1.40% 1.70% Future salary increases 1.50% 1.50% Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Mortality Table. Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows: Discount rate Future salary increases Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25% December 31, 2016 Effect on present value of defined benefit obligation ($ 2,937) $ 3,044 $ 2,734 ($ 2,655) Discount rate Future salary increases Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25% December 31, 2015 Effect on present value of defined benefit obligation ($ 2,794) $ 3,243 $ 2,911 ($ 2,575) The sensitivity analysis above is based on other conditions that are unchanged but only one assumption is changed. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same. (e) Expected contributions to the defined benefit pension plans of the Company for the year ending December 31, 2017 amounts to $764. (f) As of December 31, 2016, the weighted average duration of that retirement plan is 11 years. B. (a) Effective July 1, 2005, the Company has established a defined contribution pension plan (the New Plan ) under the Labor Pension Act (the Act ), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees monthly salaries and wages to the employees individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. (b) The pension costs under the defined contribution pension plan of the Company for the years ended December 31, 2016 and 2015 were $7,624 and $7,499, respectively. (20) Share capital A. Movements in the number of the Company s ordinary shares outstanding are as follows: (Units: in thousand shares) Years ended December Shares at January 1 and December 31 1,622,671 1,622,671 B. The Company s subsidiaries, Ta-Chen Construction & Engineering Corp. (Ta-Chen) has acquired the Company s shares in an open market to maintain the equity interest of the Company s shareholders. In order to strengthen management through eliminating interlocking shareholding, the Board of Directors of Ta-Chen has resolved to reduce capital of $435,025 (elimination of 43,502 thousand shares) by returning the Company s shares (of 39,016 thousand shares) to Cheng-Shi Investment Holdings Co., Ltd. (Cheng-Shi Investment), and set the effective capital reduction date as August 5, Cheng-Shi Investment s Board of Directors has resolved the capital reduction and set the reduction effective on September 21, 2015, and returned shares to the Company. The registration of changes in capital and capital reduction as approved by the competent authority had been completed on November 18, C. As of December 31, 2016, the Company s authorized capital was $20,000,000 and the paid-in capital was $16,233,261, with a par value of NT$10 per share, consisting of 1,623,326 thousand shares of ordinary stock. D. As of December 31, 2016 and 2015, the Company s subsidiary, Prince Apartment Management Maintain Co., Ltd. held the Company s stocks for maintaining equity interest in the Company. The amount of shares held by the subsidiaries was 655 thousand, the average par value was both NT$1.52 per share, and the fair value was NT$10.50 and NT$9.40 per share, respectively. (21) Capital surplus Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient. Share Treasury share Capital surplus 2016 premium transaction Others Total Balances as of January 1 and December 31 $ 1,375,442 $ 877,839 $ 7,232 $ 2,260,513 Capital surplus Share Treasury share 2015 premium transaction Others Total Balance at January 1 $ 1,408,500 $ 514,061 $ 7,232 $ 1,929,793 Treasury share transactions ( 33,058) 363, ,720 Balance at December 31 $ 1,375,442 $ 877,839 $ 7,232 $ 2,260,513 (22) Retained earnings (22) Retained earnings A. In accordance with the Company s Articles of Incorporation, the Company will take into consideration its future business plans and capital expenditures in determining the amounts of earnings to be retained and to be distributed. In accordance with the Company Law, 10% of the current year s earnings, after payment of all taxes and after offsetting accumulated deficit, shall be set aside as legal reserve until the balance of legal reserve is equal to that of issued share capital. Afterwards, an amount shall be appropriated or reversed as special reserve in accordance with applicable legal or regulatory requirements, along with prior years accumulated 216 Prince Housing & Development Corp. 217

111 unappropriated retained earnings, and then distribution should be in the following order: stock dividend and bonus to shareholders are 50%~100% of the accumulated distributable earnings, and cash dividend is at least 30% of the total stock dividend and bonus; the appropriation of earnings is proposed by the Board of Directors and resolved by the shareholders. B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company s paid-in capital. C. The Company recognized dividends distributed to owners amounting to $1,785,659 ($1.1 (in dollars) per share) and $1,329,873 ($0.8 (in dollars) per share) for the years ended December 31, 2016 and 2015, respectively. On March 22, 2017, the Board of Directors proposed that total dividends for the distribution of earnings for 2016 was $1,623,326 at $1.0 (in dollars) per share. (23) Other equity items Available-for-sale Currency investment translation Total At January 1, 2016 $ 1,407,403 $ 1,706 $ 1,409,109 Available-for-sale investment: -Loss at fair value ( 349,085) - ( 349,085) Currency translation differences: -Group - ( 1,754) ( 1,754) At December 31, 2016 $ 1,058,318 ($ 48) $ 1,058,270 Available-for-sale Currency investment translation Total At January 1, 2015 $ 1,434,529 $ 1,690 $ 1,436,219 Available-for-sale investment: -Loss at fair value ( 27,126) - ( 27,126) Currency translation differences: -Group At December 31, 2015 $ 1,407,403 $ 1,706 $ 1,409,109 (24) Maturity analysis of assets and liabilities The construction related assets and liabilities are classified as current and non-current based on the operating cycle. Related recognized amount expected to be recovered or repaid within or after 12 months from the balance sheet date is as follows: Within 12 months Over 12 months Total December 31, 2016 Assets Notes receivable, net $ 26,027 $ 16,930 $ 42,957 Accounts receivable, net 79,952 3,722 83,674 Inventories 9,290,432 12,086,768 21,377,200 $ 9,396,411 $ 12,107,420 $ 21,503,831 Liabilities Notes payable $ 15,052 $ - $ 15,052 Accounts payable 745, ,229 1,423,801 (including related parties) $ 760,624 $ 678,229 $ 1,438,853 Within 12 months Over 12 months Total December 31, 2015 Assets Notes receivable, net $ 37,603 $ 671 $ 38,274 Accounts receivable, net 820,177 3, ,899 Inventories 8,904,870 12,406,513 21,311,383 $ 9,762,650 $ 12,410,906 $ 22,173,556 Liabilities Notes payable $ 11,094 $ - $ 11,094 Accounts payable 2,016, ,364 2,612,608 (including related parties) $ 2,027,338 $ 596,364 $ 2,623,702 (25) Operating revenue Years ended December 31, Construction revenues $ 5,274,930 $ 8,030,232 Rental revenues 353, ,161 Service concession revenue -Operating service revenue 372, ,279 Other revenues 3,143 3,368 $ 6,004,370 $ 8,763,040 Years ended December 31, Interest income $ 7,287 $ 7, Dividend income Prince Housing & 93,755 Development Corp. 134, Others 131,935 98,048 $ 232,977 $ 239,732

112 (26) Other income Years ended December 31, Interest income $ 7,287 $ 7,572 Dividend income 93, ,112 Others 131,935 98,048 (27) Other gains and losses $ 232,977 $ 239,732 Years ended December 31, Net currency exchange (losses) gain ($ 7,185) $ 14,676 Net gain on financial assets at fair value through profit or loss Loss on disposal of property, plant and equipment (including investment property) ( 1,473) ( 4,307) Others 255,010 31,225 (28) Finance costs $ 246,736 $ 42,039 Years ended December 31, Interest expense: Bank borrowings $ 25,660 $ 91,341 Commercial paper 30,084 30,373 Ordinary bond 120, ,953 Endorsement and guarantee 24,208 36,345 Others 1,476 1,701 (29) Expenses by nature $ 202,374 $ 283,713 Year ended December 31, 2016 Operating costs Operating expenses Total Employee benefit expense Wages and salaries $ 1,136 $ 417,054 $ 418,190 Labor and health insurance fees - 22,279 22,279 Pension costs - 10,083 10,083 Other employee benefit expense - 22,392 22,392 $ 1,136 $ 471,808 $ 472,944 Depreciation $ 85,604 $ 27,573 $ 113,177 Amortisation $ 61,252 $ - $ 61,252 Year ended December 31, 2015 Operating costs Operating expenses Total Employee benefit expense Wages and salaries $ 1,351 $ 484,465 $ 485,816 Labor and health insurance fees - 17,208 17,208 Pension costs - 9,813 9,813 Other employee benefit expense - 29,336 29,336 $ 1,351 $ 540,822 $ 542,173 Depreciation $ 85,788 $ 27,687 $ 113,475 Amortisation $ 61,253 $ - $ 61,253 A. According A. According to the to the Articles Articles of Incorporation of Incorporation of of the the Company, Company, the the ratio ratio of of distributable distributable profit profit of of the current year shall not be lower than 2% for employees compensation and shall not be higher than 3% for directors and supervisors remuneration. If a company has accumulated deficit, earnings should be channeled to cover losses. Employees compensation will be distributed in the form of cash or shares and includes employees of subsidiaries who satisfy certain conditions and are qualified. Aforementioned distributable profit of the current year is profit before tax of the current year before deduction of employees compensation and directors and supervisors remuneration. B. For the years ended December 31, 2016 and 2015, employees compensation was accrued at $185,821 and $244,705, respectively; while directors and supervisors remuneration was accrued at $63,218 and $83,250, respectively. The aforementioned amounts were recognized in salary expenses. The employees compensation and supervisors and directors remuneration were accrued based on the percentage as prescribed in the Company s Articles of Incorporation of distributable profit of current year for the year ended December 31, The distributed amounts resolved by the Board of Directors were in agreement with the accrued amounts. The employees compensation will be distributed in the form of cash. Employees compensation and directors and supervisors remuneration for 2015 as resolved by the shareholders during their meeting were in agreement with those amounts recognised in profit or loss for Information about employees compensation and directors and supervisors remuneration of the Company as resolved at the meeting of Board of Directors will be posted in the Market Observation Post System at the website of the Taiwan Stock Exchange. 220 Prince Housing & Development Corp. 221

113 (30) Income tax A. Income tax expense (a) Components of income tax expense: Current tax: Current tax on profits for the year Deferred tax: (b) Reconciliation between income tax expense and accounting profit: (b) Reconciliation between income tax expense and accounting profit: Years ended December 31, $ 147,978 ($ 23,311) Additional 10% tax on undistributed earnings 21,397 82,522 Piror year income tax (overestimation) underestimation ( 2,535) 11,785 Land value increment tax recognized in income tax for the year 82, ,254 Total current tax 249, ,250 Origination and reversal of temporary differences - - Income tax expense $ 249,023 $ 209,250 Years ended December 31, Tax calculated based on profit before tax and $ 315,896 $ 415,999 statutory tax rate Effect recognized from adjustments under tax ( 143,805) ( 380,099) regulations Additional 10% tax on undistributed earnings 21,397 82,522 Effect from investment tax credits ( 24,113) ( 59,211) Prior year income tax (overestimation) underestimation ( 2,535) 11,785 Land value increment tax 82, ,254 Income tax expense $ 249,023 $ 209,250 B. B. According According to to the the Act Act for for Promotion Promotion of of Private Private Participation Participation in in Infrastructure Infrastructure Projects, Projects, details details of of the amount the Company is entitled as investment tax credits and unrecognized deferred tax assets are as follows: The Company did not have any investment tax credit nor unrecognised deferred tax assets for the year ended December 31, December 31, 2015 Unrecognised Qualifying items Unused tax credits deferred tax assets Expiry year Investment $ 24,113 $ 24, C. C. As As of of December December 31, 31, 2016, 2016, the the Company s Company s income income tax tax returns returns through through have have been been assessed assessed and approved by the Tax Authority D. Unappropriated retained earnings: December 31, 2016 December 31, 2015 Earnings generated in and after 1998 $ 3,101,014 $ 3,508,400 E. As of December 31, 2016 and 2015, the balance of the imputation tax credit account was $83,807 and $53,573, respectively. The creditable tax rate was 4.74% for 2015 and is estimated to be 8.15% for The tax credits to be allocated to the stockholders are calculated based on the balance of the imputation tax credit account on the day of distribution of dividends. Therefore, the creditable tax rate applicable to the stockholders for the appropriation of earnings generated in and after 1998 shall be adjusted to take into account the tax credits that might incur under the income tax laws up to the distribution date of dividends or earnings. (31) Earnings per share Year ended December 31, 2016 Weighted average number of ordinary Earnings shares outstanding per share Amount after tax (shares in thousands) (in dollars) Basic earnings per share Profit attributable to ordinary shareholders $ 1,609,189 1,622,671 $ 0.99 Diluted earnings per share Profit attributable to ordinary shareholders $ 1,609,189 1,622,671 Assumed conversion of all dilutive potential ordinary shares Employees compensation - 19,768 Profit attributable to ordinary shareholders plus assumed conversion of all dilutive potential ordinary shares $ 1,609,189 1,642,439 $ 0.98 Year ended December 31, 2015 Weighted average number of ordinary Earnings shares outstanding per share Amount after tax (shares in thousands) (in dollars) Basic earnings per share Profit attributable to ordinary shareholders $ 2,237,800 1,622,671 $ 1.38 Diluted earnings per share Profit attributable to ordinary shareholders $ 2,237,800 1,622,671 Assumed conversion of all dilutive potential ordinary shares Employees compensation - 27,220 Profit attributable to ordinary shareholders plus assumed conversion of all dilutive potential ordinary shares $ 2,237,800 1,649,891 $ 1.36 (32) Non-cash transactions 222 Prince Housing & Development Corp. 223

114 (32) Non-cash transactions Investing and financing activities with no cash flow effects: 1.Land held for construction site reclassfied to investment property 2.Available-for-sale financial assets non-current, acquired from business combinations 3.Financial assets measured at cost non-current, acquired from business combinations 7. RELATED PARTY TRANSACTIONS 7. RELATED PARTY TRANSACTIONS (1) Names of related parties and their relationship with the Company Names of related parties Cheng-Shi Investment Holdings Co., Ltd. (CSIHC) Prince Property Management Consulting Co., Ltd. (PPMCC) Dong-Feng Enterprises Co., Ltd. Time Square International Co., Ltd. Prince Industrial Co., Ltd. Prince Real Estate Co., Ltd. (Prince Real Estate) Jin Yi Xing Plywood Co., Ltd. (Jin Yi Xing) The Splendor Hotel Taichung (The Splendor) Ta-Chen Construction & Engineering Corp. (Ta-Chen Construction & Engineering) Prince Utility Co., Ltd. (Prince Utility) Cheng-Shi Construction Co., Ltd. (Cheng-Shi Construction) Prince Security Co., Ltd. (Prince Security) Prince Apartment Management Maintain Co., Ltd. (Prince Apartment) Uni-President Development Corp. Tainan Spinning Co., Ltd. President Chain Store Corporation Chen Kao-Hui Hsieh, Ming-Fan Years ended December 31, $ - $ 62,056 $ - $ 2,186 $ - $ 11,486 Relationship with the Company The Company s subsidiary The Company s subsidiary The Company s subsidiary The Company s subsidiary The Company s subsidiary The Company s subsidiary The Company s subsidiary The Company s subsidiary The subsidiary of CSIHC The subsidiary of CSIHC The subsidiary of CSIHC The subsidiary of PPMCC The subsidiary of PPMCC The Company s associates The Company s other related party The Company s other related party The Company s Chairman The Company s General Manager For For other other related related parties parties over over which which the the Company Company exercises exercises significant significant influence influence but but with with which which the the Company had no material transaction, please refer to Note 13 for related information. (2) Significant related party transactions and balances A. Sales (a) Rental income: Years ended December 31, Other related parties $ 47,775 $ 47,334 - Subsidiaries 3,045 3,115 $ 50,820 $ 50,449 Rent Rent is is determined determined by by mutual mutual agreements agreements and and is is collected collected monthly. monthly. B. Purchases (a) Details of the Company s subcontracting to related parties and its purchases from related parties for the years ended December 31, 2016 and 2015 are as follows: Years ended December 31, Construction subcontracting: -Subsidiaries $ 962,976 $ 1,275,486 Purchases of services: -Subsidiaries 15,846 10,828 Purchases of goods: -Subsidiaries 12,074 13,232 Land held for construction site: -Subsidiaries (Note) - 829,021 $ 990,896 $ 2,128,567 Note: On August 3, 2015, the Company purchased the land of Ren Wu New Hougang West Section No. 52, etc. from Jin Yi Xing. The total purchase amount was $829,021 and obligation receivable was used to offset partial payment. The Company subcontracted building construction and utilities engineering to related parties, Ta-Chen Construction Company and Prince Utility Company and Chen-Shi Construction Company. Under those subcontracts, acceptance would be done according to the progress of the construction and engineering; payments would be made based on agreed-upon terms of the two parties. Purchases from related parties, Prince Security Company, Prince Apartment and Chen-shi, Construction Company, are based on negotiated terms because the related purchase transactions are unique and not available from third parties. (b )As of December 31, 2016 and 2015, unsettled construction contracts that were signed by the Company and Chen-Shi Construction Company totaled $2,232,449 and $1,709,505, respectively; payments already made for those contracts amounted to $493,139 and $232,839, respectively; and future payments required under those contracts amounted to $1,739,310 and $1,476,666, respectively. (c) As of December 31, 2016 and 2015, unsettled construction contracts that were signed by the Company and Ta-Chen Construction Company both totaled to $259,621; payments already made for those contracts amounted to $180,123 and $121,373, respectively; and future payments required under those contracts amounted to $79,498 and $138,248, respectively. 224 Prince Housing & Development Corp. 225

115 (d) As of December 31, 2016 and 2015, unsettled construction contracts that were signed by the Company and Prince Utility Company totaled $1,240,645 and $489,411, respectively; payments already made for those contracts amounted to $233,970 and $24,500, respectively; and future payments required under those contracts amounted to $1,006,675 and $464,911, respectively. C. Other assets (a) On June 20, 2006, the Company and China Metal Products Co., Ltd. ( A party ) jointly signed a creditor s rights transfer contract with Amida Trustlink Assets Management Co., Ltd. ( B party ). Under the contract, the Company and A party should pay $2,100,000 each (totaling $4,200,000) to jointly acquire whole creditor s rights of mortgages, security interests and other dependent claims (collectively referred herein as the creditor s rights) on the Splendor Hotel Taichung Building, and each bears 50% rights and obligations of this acquisition; when all creditor s rights of this object turn into property rights, the Company and A party should pay B party totaling $1,000,000 as the cost and reward of B party for it is entrusted with the task to help turn the creditor s rights as stated above into property rights, but any excess cost over $1,000,000 if incurred on this task shall be borne by B party on its own; the Company should pay B party $300,000 before June 30, 2006, and the Company and A party should jointly issue a promissory note of $1,800,000 to B party on the signing date; payment should be done before July 15, The title to the creditor s rights as stated above had been transferred to the Company and A party on August 2, The acquisition price of the creditor s rights amounted to $5,200,000, which the Company and A party bear 50% of the price each. The Company had paid its share. Furthermore, the Company and A party jointly established the Splendor Hotel Taichung and $450,000 invested in the share capital was drawn down from the abovementioned price of the creditor s rights. (b) The Company and China Metal Products Co., Ltd. jointly established The Splendor Hotel Taichung ( A party ) by contributing 50% of the investment each. On November 1, 2006, A party signed a certain assets transfer contract with The Splendor Hotel Chunggang ( B party ). Under the contract, A party should pay B party for employees services, goods purchases and taxes. The above payments of $352,310 required of A party were made from the share capital of its initial establishment. The Company s creditor s rights above amounting to $2,375,000 were originally receivable from B party. After B party and A party signed a certain assets transfer contract in December, 2006, the creditor s right to the above receivables were transferred to A party. And A party repaid $1,800,000 to the Company in June As of December 31, 2016 and 2015, the Company s creditor s rights receivable from A party both amounted to $575,000. (c) Details of the Company s capital investment in The Splendor Hotel Taichung in the past are as follows: 2006 $ 225, , , $ 30, ,000 (d) As of December 31, 2015, the Company paid for the construction of Prince Cloud and received the payment for pre-sale of Prince Cloud on behalf of Prince Real Estate Co., Ltd. which amounted to $60,680 (shown as other receivables - related parties) and $117,450 (shown as other payables related parties), respectively. No such transaction occurred as of December 31, D. Accounts payable December 31, 2016 December 31, 2015 Subsidiaries $ 5,948 $ 334,393 E. Rent expense E. Rent expense Years ended December 31, Associates $ 32,138 $ 29,349 F. The information on endorsement, guarantees and financial support commitments among related parties are described in Note 9(1). G. Certain short and long-term borrowings of the Company were guaranteed by its Chairman and General Manager. (3) Key management compensation Years ended December 31, Salaries and other short-term employee benefits $ 100,723 $ 140,260 Termination benefits - - Post-employment benefits - - Other long-term benefits - - Share-based payments - - $ 100,723 $ 140, PLEDGED ASSETS The Company s assets pledged as collateral are as follows: Pledged asset December 31, 2016 December 31, 2015 Purpose Demand deposits, certificate of deposit and $ 1,033,201 $ 2,487,628 To obtain a higher credit for client, performance checking deposit (shown as "other financial guarantee, construction performance guarantee, assets - current" and "other financial assets - short-term and long-term borrowings. non-current") Financial assets at fair value through profit or loss 78,253 77,992 Long-term borrowings Land held for construction 7,808,509 6,974,863 Short-term borrowings, notes and bills payable and long-term borrowings Construction in progress 2,803,892 2,133,843 Short-term borrowings, notes and bills payable and long-term borrowings Buildings as held for sale 2,270,855 - Issued long-term notes and bills Available-for-sale financial assets 757,036 1,028,798 Short-term borrowings, notes and bills payable Financial assets carried at cost 575, ,426 Short-term borrowings, notes and bills payable Investments accounted for under equity method 1,443,473 1,582,560 Short-term borrowings, notes and bills payable Land 91,782 91,782 Short-term borrowings, notes and bills payable and long-term borrowings Buildings and structures 215, ,972 Short-term borrowings, notes and bills payable and long-term borrowings Investment property 3,816,598 4,012,058 Short-term borrowings, notes and bills payable and long-term borrowings $ 20,894,536 $ 19,182, Prince Housing & Development Corp. 227

116 9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS (1) Summary of endorsements and guarantees and financial support commitments is as follows: A. Summary of endorsements and guarantees provided by the Company to subsidiaries is as follows: December 31, 2016 December 31, 2015 Total Total endorsement Amount endorsement Amount Name of company amount drawn amount drawn The Splendor Hotel Taichung $ 2,000,000 $ 1,682,206 $ 2,000,000 $ 1,708,520 Prince Real Estate Co., Ltd. 2,500, , Ta-Chen Construction & Engineering Corp. 1,900,000-1,900,000 - $ 6,400,000 $ 2,462,206 $ 3,900,000 $ 1,708,520 B. Summary of endorsements and guarantees provided by subsidiaries to the Company is as follows: December 31, 2016 December 31, 2015 Total Total endorsement Amount endorsement Amount Name of company amount drawn amount drawn Prince Real Estate Co., Ltd. $ 2,500,000 $ 2,035,309 $ 2,500,000 $ 2,086,198 Ta-Chen Construction & Engineering Corp. 927, ,889 - Prince Utility Co., Ltd. 900, , , ,763 Dong-Feng Enterprises Co., Ltd ,810,889 1,810,889 $ 4,327,889 $ 2,674,072 $ 6,138,778 $ 4,535,850 C. The accumulated operating losses of the subsidiary, The Splendor Hotel, had exceeded 50% of C. The accumulated operating losses of the subsidiary, The Splendor Hotel, had exceeded 50% of its paid-in capital and its current liabilities were greater than current assets. The Company was committed to give the Splendor Hotel financial support for its continuing operations for one year from the date of the financial support letter. (2) According to the sale contracts, the Company should provide warranty on the house structure and major facilities for one year from the handover day for the houses it sold. However, any damage to the houses caused by disasters, additions to the houses made by the buyers, or events that are not attributed to the Company is not included in the scope of warranty. (3) Information on the commitments of the Company relating to financial support to related parties is described in Note 7(2). (4) On March 17, 2005, the Company ( A party ) signed a contract with National Taiwan University ( B party ) relating to the construction and operation of dormitories on Chang-Hsing St. and Shui-Yuan Campus. The major terms of the contract are as follows: A. Under the contract, B party should be responsible for acquiring the ownership or land-use right for this project, and let A party use the land; A party must complete the construction within 3 years from the registration of the superficies, and may operate the dormitories for 44 years, collect dormitory rentals and use fees of other facilities from students, and should return the related assets to B party on the expiry of the contract. B. A party should give B party a performance guarantee of $60,000 for the construction on the signing date and $30,000 for operations before the start of operation. As of December 31, 2016 and 2015, A party had provided performance guarantee with a guarantee letter issued by the bank, both amounting to $30,000. C. A party should pay B party land rentals from the registration of the superficies, according to the terms of the contract, and pay B party operating royalties from the third year of the operation, based on 0.5% of dormitory rentals and use fees of other facilities collected from students. D. Terms of restrictions for A party: (a) The ratio of A party s own capital utilized in this project to total construction cost of this project should be at least 30%; (b) During the operation period, the ratio of shareholders equity to total assets should be at least 25%; and current ratio (current assets/current liabilities) should be at least 100%; (c) All rights acquired by A party under the contract, except for other conditions specified in the contract and approved by B party, should not be transferred, leased, registered as a liability/ obligation or become an executed object of civil litigation. (5) On May 10, 2005, the Company ( A party ) signed a contract with National Cheng Kung University ( B party ) relating to the construction and operation of student dormitories and alumni hall. The major terms of the contract are as follows: A. Under the contract, B party should be responsible for acquiring the ownership or land-use right for this project, and let A party use the land by way of registration of the superficies; A party must obtain the user license within 3 years after the signing date, and may operate the student dormitories and motorcycle parking lots for 35 years from the start of operations and collect dormitory rentals and use fees of other facilities from students for 50 years from the start of construction, and should return the related assets to B party on the expiry of the contract. B. A party should give B party performance guarantee of $50,000 for this project on the signing date, which will be returned in installment according to the contractual terms. As of December 31, 2016 and 2015, A party had provided performance guarantee with a guarantee letter issued by the bank, both amounting to $20,000. C. During the operation period, A party should pay B party dormitory operating royalties based on 2% of annual operating revenue of the dormitories and auxiliary facilities operating royalties based on 4% of annual operating revenue of the auxiliary facilities. A party should pay such operating royalties for prior year before the end of June every year. Further, according to the superficies contract signed by the two parties, A party should pay B party land rentals from the registration of superficies. D. All rights acquired by A party under the contract, except for other conditions specified in the contract and approved by B party, should not be transferred, leased, registered as a liability/ obligation or become an executed object of civil litigation. (6) The Company signed a syndicated loan contract with 7 banks - Mega International Commercial Bank as the lead bank for a credit line of $2.16 billion. The syndicated loans include long-term (secured) loans and guarantee payments receivable (secured), which are used to fund the construction of dormitories in Changxing St. Campus and Shuiyuan Campus of National Taiwan University. During the loan period, the Company should maintain financial commitments such as current ratio, liability ratio and interest coverage; those financial ratios/restrictions shall be reviewed at least once every year, based on the Company s audited annual parent company only financial statements. If the Company violates the above financial commitments, it shall improve its financial position by capital 228 Prince Housing & Development Corp. 229

117 increase or other ways before the end of October of the following year from the year of violation; it would not be regarded as a default if the managing bank confirms that its financial position has improved completely. In case of violation, interest on the loans would be charged at the loan rate specified in the contract plus additional 0.25% per annum from the notification date of the managing bank to the completion date of financial improvement or to the date the Company gains the relief from the consortium for its violation. (7) The Company signed a loan contract with Mega International Commercial Bank for a credit line of $785 million. The loans include long-term (secured) loans and guarantee payments receivable (secured), which are used to fund the construction of student dormitories and alumnus hall of National Cheng Kung University. During the loan period, the Company should maintain financial commitments such as current ratio, liability ratio and interest coverage; those financial ratios/ restrictions shall be reviewed at least once every year. Current ratio and liability ratio shall be reviewed based on the Company s audited annual non-consolidated financial statements, and interest coverage based on the Company s revenue and expenditure table for the related project. If the Company violates the above financial commitments, it shall improve its financial position by capital increase or other ways before the end of October of the following year from the year of violation; it would not be regarded as a default if the bank confirms that its financial position has improved completely. In case of violation, interest on the loans would be charged at the loan rate specified in the contract plus additional 0.25% per annum from the notification date of the bank to the completion date of financial improvement or to the date the Company obtains a waiver from the bank for its violation. (8) The Company signed a syndicated loan contract with 10 banks - Bank of Taiwan Co., Ltd. as the lead bank for a credit line of $2 billion. The syndicated loans are medium-term (secured) loans, and are used for residential building construction cooperated by the Company and Taiwan Sugar Corporation ( TSC ) on Guo--An Sec., Xitun District, Taichung City. Furthermore, the Company shall repay in full for the balance of unpaid principal on maturity date. However, when the buildings in the case are completed and sold or when handling buyer s household debt, borrower should repay the balance of used and unpaid principal for the syndicated loans with 70% of selling consideration. Aforementioned case was completed and settled in advance in January (9) The Company signed a syndicated loan contract with 3 financial institutions - Mega International Commercial Bank as the lead bank for a credit line of $1.06 billion. The syndicated loans include medium-term (secured) loans and commercial paper guarantees, which are used as the fund for purchase of 4 tracts of PingHsin Sections No. 694, 706, 708 and 709 in Taiping Dist., Taichung City and construction payment of residential buildings. Furthermore, the Company shall repay in full for the balance of unpaid principal on maturity date. (10) The Company signed a syndicated loan contract with 6 financial institutions - CTBC Bank Co., Ltd. as the lead bank for a credit line of $2.1 billion. The syndicated loans include medium-term (secured) commercial paper guarantees with the office building in Tanmei as collateral, provided working capital to the Company. The duration of commercial paper should be 90 days, however, commercial paper issued within the duration should have the same maturity date with issued commercial papers. It could be redrawn during the credit period and the Company shall repay in full for the balance of unpaid principal on maturity date. (11) The Company signed a syndicated loan contract with 3 banks - Bank of Taiwan Co., Ltd. as the lead bank for a credit line of $3.045 billion. The syndicated loans include medium-term (secured) guarantee payments receivable and medium-term (secured) commercial paper guarantees. Bank of Taiwan Co., Ltd. and the Agricultural Bank of Taiwan lent medium-term (secured) guarantee payments receivable of $2,545 million which are used as guarantee for issuing corporate bonds. Prudential Securities lent medium-term (secured) commercial paper guarantees of $500 million which are used for repayment of financial institutions and to improve the financial structure. Depending on the individual credit line, the Company should renew the contract with the securities annually and sign guarantee letters such as guarantee of commercial paper or purchase contract. In addition, no matter whether the bondholders receive the payment or not, the banks guarantee responsibility will be released after the debtor returns the payables to the agency. (12) On May 18, 2007, the Company signed a contract with Taiwan Sugar Corporation ( TSC ) in relation to cooperative construction of houses. According to the contract, TSC shall provide Lot No , Guo-An Sec., Xitun District, Taichung City; the Company shall provide funding for those projects and repurchase houses and land allocated to TSC amounting to $1,810,889 and shall bear all improvement fees of houses, public facilities and land, selling expenses, and other expenses or contributed expenses required under the decrees. The Company shall not ask for any compensation for price fluctuations or other reasons. Further, under the contract, the Company shall give TSC performance guarantee amounting to $181,090 on the signing date, which will be returned in installments according to the contractual terms. The Company had provided performance guarantee with a guarantee letter of the bank as follows: provided performance guarantee with a guarantee letter of the bank as follows: December 31, 2016 December 31, 2015 Lot No and No Guo-An Sec., Xitun District, Taichung City (Note) $ - $ 181,090 Note: The case obtained the license of use in August 2016, the guarantee has been returned in the Note: The case obtained the license of use in August 2016, the guarantee has been returned in the same month. (13) On January 20, February 10 and December 27, 2014, the Company signed a contract with Taiwan Sugar Corporation ( TSC ) in relation to cooperative construction of houses. According to the contracts, TSC shall provide Taichung City Koan An Section No , Tainan City Hou Guan Section No. 34 and Nanzi Dist., Kaohsiung City Nanzi 1st section No. 158, etc; the Company shall provide funding for those projects and repurchase houses and land allocated to TSC amounting to $638,763, $830,889 and $1,255,300, respectively, and shall bear all improvement fees of houses, public facilities and land, selling expenses, and other expenses or contributed expenses required under the decrees. The Company shall not ask for any compensation for price fluctuations or other reasons. Further, under the contract, the Company shall give TSC performance guarantee amounting to $63,880, $83,080 and $125,540, respectively, on the signing date, which will be returned in installments according to the contractual terms. The Company had provided such performance guarantee with guarantee letter of the bank as follows: December 31, 2016 December 31, 2015 Taichung City Koan An Section No $ 63,880 $ 63,880 Tainan City Hou Guan Section No. 34 (Note) $ - $ 83,100 Nanzi Dist., Kaohsiung City Nanzi 1st section No. 158, etc. $ 125,540 $ 125,600 Note: The The case case was was completed completed in in November November 2015, 2015, the the guarantee guarantee has been has been returned returned in February in February Prince Housing & Development Corp. 231

118 (14) The Company signed an agreement with Mr. Fang Tsai-Yuan and World Vision United Co., Ltd. on March 5, 2012 and July 17, 2012, respectively, for joint construction of houses. Under those agreements, Mr. Fang Tsai-Yuan and World Vision United Co., Ltd., the owners of land, shall provide the land located at Nos. 572 and 602, Sec. Zhi-Shan 1, Shilin District, Taipei City, respectively, and the Company is responsible for the construction; the houses built would be allocated to both parties based on the specified proportion. In addition, the Company shall give performance bond in the amount of $350,000 and $19,570 to Mr. Fang Tsai-Yuan and World Vision United Co., Ltd., respectively, which would be returned to the Company in installments. As of December 31, 2016 and 2015, balance of the performance bonds were as follows: 2015, balance of the performance bonds were as follows: December 31, 2016 December 31, 2015 Nos. 602, Sec. Zhi-Shan 1, Shilin District, $ 350,000 $ 350,000 Taipei City Nos. 572, Sec. Zhi-Shan 1, Shilin District, Taipei City 10. SIGNIFICANT DISASTER LOSS None. 11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE None. 12. OTHERS $ 19,570 $ 19,570 (1) Capital management The Company s capital management is to ensure it has sufficient financial resource and operating plans to meet operational capital for future needs, capital expenditures, obligation repayment and dividend distribution. The Company adjusts borrowing amount in accordance with construction progress and capital needed for operations. (2) Financial instruments A. Fair value information of financial instruments The carrying amount of cash and cash equivalents and financial instruments measured at amortised cost (including notes and accounts receivable, other receivables, other current financial assets, refundable deposits short-term borrowings, short-term notes and bills payable, notes and accounts payable, other payables, corporate bonds payable, long-term borrowings and guarantee deposits received) are approximate to their fair values. Furthermore, the Company s management believes the carrying amounts of financial assets and liabilities not measured at fair value are approximate to their fair value or their fair value cannot be reliably measured. Thus, the carrying amount is the estimated fair value. The fair value information of financial instruments measured at fair value is provided in Note 12(3). B. Financial risk management policies (a) The Company s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company s financial position and financial performance. (b) Risk management is carried out by a treasury department (Company's finance & accounting division) under policies approved by the Board of Directors. The Company's finance & accounting division evaluates and hedges financial risks in close cooperation with the Company s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. C. Significant financial risks and degrees of financial risks (a) Market risk Foreign exchange risk The Company operates internationally and the currencies primarily used are NTD and USD. Foreign exchange risk arises from recognized assets and liabilities and net investments in foreign operations. Management has set up a policy to require the Company to manage its foreign exchange risk against its functional currency. The Company is required to manage its entire foreign exchange risk exposure with the Company treasury. Foreign exchange risk does not have significant impact to the Company. Interest rate risk The Company s interest rate risk arises from short-term and long-term borrowings (not including commercial paper). Borrowings issued at variable rates expose the Company to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. The Company s borrowings at variable rate were denominated in the NTD. If interest rates on borrowings had been 0.1% basis point higher/lower with all other variables held constant, pre-tax profit for the years ended December 31, 2016 and 2015 would have been $7,866 and $8,926 lower/higher, respectively. Price risk The Company has investments in equity instruments, and the prices would change due to the change of the future value of investee companies. However, the Company has set a stoploss point and it was assessed that the Company was not exposed to significant price risk. If the prices of these equity securities had increased/decreased by 10% with all other variables held constant, pre-tax profit for the years ended December 31, 2016 and 2015 would have increased/decreased by $37,600 and $7,600, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by $13,327 and $13,628 respectively, as a result of gains/ losses on equity securities classified as available-for-sale. (b) Credit risk i. Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. Credit risk arises from cash and deposits with banks and financial institutions, including outstanding receivables. ii. The Company s receivables, which are the receivables from preselling of housing before completing construction and transferring the title, are installments received from customers of pre-construction real estate. Therefore, it was assessed that the Company was not exposed to significant credit risk from receivables. iii. For the years ended December 31, 2016 and 2015, the management does not expect any 232 Prince Housing & Development Corp. 233

119 significant losses from non-performance by these counterparties. (c) Liquidity risk i. Cash flow forecasting is performed in the operating entities of the Company and aggregated by the Company s finance & accounting division. The Company's finance & accounting division monitors rolling forecasts of the Company s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times. ii. The table below analyses the Company s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Non-derivative financial liabilities: Within 1 year December 31, 2016 Between 1 to 3 years Over 3 years Short-term borrowings $ 2,239,654 $ - $ - Short-term notes and bills payable 340, Notes payable 15, Accounts payable (including related party) 817, ,228 - Other payables (including related party) 672, Guarantee deposits received 67,150 31,651 29,018 Bonds payable 2,065,350 2,538,750 - Long-term borrowings (including current portion) 1,194,401 4,402,930 2,989,561 Non-derivative financial liabilities: Within 1 year December 31, 2015 Between 1 to 3 years Over 3 years Short-term borrowings $ 2,300,197 $ - $ - Short-term notes and bills payable 880, Notes payable 11, Accounts payable (including related party) 2,086, ,364 - Other payables (including related party) 873, Guarantee deposits received 71,941 20,138 35,393 Bonds payable 65,350 2,104,100 2,500,000 Long-term borrowings (including current portion) 373,334 3,780,080 3,995,400 (3) Fair value estimation A. Details of the fair value of the Company s financial assets and financial liabilities not measured at fair value are provided in Note 12(2)A. Details of the fair value of the Company s investment property measured at cost are provided in Note 6(11). B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company s investment in listed stocks and beneficiary certificates is included in Level 1. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability. The fair value of the Company s investment in equity investment without active market is included in Level 3. C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2016 and 2015, is as follows: December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Recurring fair value measurements Financial assets at fair value through profit or loss Equity securities $ 378,253 $ - $ - $ 378,253 Available-for-sale financial assets Equity securities 1,039, ,996 1,182,023 $ 1,417,280 $ - $ 142,996 $ 1,560,276 December 31, 2015 Level 1 Level 2 Level 3 Total Assets: Recurring fair value measurements Financial assets at fair value through profit or loss Equity securities $ 77,992 $ - $ - $ 77,992 Available-for-sale financial assets Equity securities 1,349, ,557 1,542,392 $ 1,427,827 $ - $ 192,557 $ 1,620,384 D. The methods and assumptions the Company used to measure fair value are as follows: D. The methods and assumptions the Company used to measure fair value are as follows: The instruments the Company used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics: Listed shares Open-end fund Market quoted price Closing preice Net asset value E. For the years ended December 31, 2016 and 2015, there was no transfer between Level 1 and Level 2. F. The following chart is the movement of Level 3 for the years ended December 31, 2016 and 2015: 234 Prince Housing & Development Corp. 235

120 Non-derivative equity instruments At January 1 $ 192,557 $ 272,651 Losses recognised in other comprehensive income (Note) ( 47,984) ( 80,094) Proceeds from capital reduction ( 1,577) - At December 31 $ 142,996 $ 192,557 Note: Recorded as unrealised valuation gain or loss of available-for-sale financial assets. G. For the years ended December 31, 2016 and 2015, there was no transfer into or out from Level 3. H. Finance and Accounting department is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently assessing valuation results and making any other necessary adjustments to the fair value. I. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement: Fair value at Valuation Significant Range Relationship of inputs December 31, 2016 technique unobservable input (weighted average) to fair value Non-derivative equity Unlisted shares $ 142,996 Net asset value Net asset value N/A The higher the net asset value, the higher the fair value Fair value at Valuation Significant Range Relationship of inputs December 31, 2015 technique unobservable input (weighted average) to fair value Non-derivative equity Unlisted shares $ 192,557 Net asset value Net asset value N/A The higher the net asset value, the higher the fair value J. The Company has carefully assessed the valuation models and assumptions used to measure fair value; therefore, the fair value measurement is reasonable. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorized within Level 3 if the inputs used to valuation models have changed: December 31, 2016 Recognised in other Recognised in profit or loss comprehensive income Favourable Unfavourable Favourable Unfavourable Imput Change change change change change Financial assets Equity instruments $ 29,234 $ - $ - $ 292 ($ 292) December 31, 2015 Recognised in other Recognised in profit or loss comprehensive income Favourable Unfavourable Favourable Unfavourable Imput Change change change change change Financial assets Equity instruments $ 29,594 $ - $ - $ 296 ($ 296) 13. SUPPLEMENTARY DISCLOSURES (1) Significant transactions information A. Loans to others: Please refer to table 1. B. Provision of endorsements and guarantees to others: Please refer to table 2. C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3. D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company s paid-in capital: Please refer to table 4. E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: Please refer to table 5. F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: Please refer to table 6. G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 7. H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 8. I. Trading in derivative instruments undertaken during the reporting periods: None. J. Significant inter-company transactions during the reporting periods: Please refer to table 9. (2) Information on investees Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 10. (3) Information on investments in Mainland China None. 14. SEGMENT INFORMATION Not applicable. 236 Prince Housing & Development Corp. 237

121 Prince Housing & Development Corp. and Subsidiaries Loans to others Year ended December 31, 2016 Table 1 Expressed in thousands of NTD (Except as otherwise indicated) Maximum Amount of Allowance Is a outstanding balance Balance at transactions Reason for for Limit on loans No. (Note 1) Creditor Borrower General ledger account related party during the year ended December 31, 2016 December 31, 2016 Actual amount drawn down Nature of Interest rate loan with the borrower short-term financing doubtful accounts Collateral Item Value granted to a single party Ceiling on total loans granted Note 0 Prince Housing & Development Corp. Ta-Chen Construction & Engineering Corp. Other receivables - related parties Y $ 200,000 $ - $ Short-term financing $ - Additional operating capital $ - None $ - $ 500,000 $ 9,718,652 Note 2 1 Prince Security Co., Ltd. Prince Property Management Consulting Co., Ltd Other receivables - related parties Y 15,000 15,000 11, Short-term financing - Additional operating capital - None - 30,000 85,181 Note 3 2 Time Square International Co., Ltd. Prince Housing & Development Corp. Other receivables - related parties Y 200, Short-term financing - Additional operating capital - None - 138, ,891 Note 4 Note 1: The numbers filled in for the loans provided by the Company or subsidiaries are as follows: (1) The Company is 0. (2) The subsidiaries are numbered in order starting from 1. Note 2: Limit on loans granted to a single party and ceiling on total loans granted as prescribed in the Company's "Procedures for Provision of Loans" are as follows: A. Ceiling on total loans to others: 40% of the Company's net worth. B. Limit on loans to a single party: (a) Nature of the loan is related to business transactions: Limit to a single party is NT$1.5 billion or the amount of business transactions between the creditor and borrower in the current year. (b) Nature of loan is for short-term financing: Limit on loans to a single party is NT$500 million. Note 3: Limit on loans granted to a single party and ceiling on total loans granted as prescribed in Prince Security Co., Ltd.'s "Procedures for Provision of Loans" are as follows: A. Limit on total loans to others: 40% of the Company's net worth. B. Limit on loans to a single party: (a) Nature of the loan is related to business transactions: Limit to a single party is NT$20 million or the amount of business transactions between the creditor and borrower in the current year. (b) Nature of loan is for short-term financing: Limit on loans to a single party is NT$30 million. Note 4: Limit on loans granted to a single party and ceiling on total loans granted as prescribed in Time Square International Co., Ltd.'s "Procedures for Provision of Loans" are as follows: A. Limit on total loans to others: 30% of the Company's net worth. B. Limit on loans to a single party: (a) Nature of the loan is related to business transactions: Limit to a single party is the amount of business transactions between the creditor and borrower in the current year. (b) Nature of loan is for short-term financing: Limit on loans to a single party is 30% of the Company's net worth. Prince Housing & Development Corp. and Subsidiaries Provision of endorsements and guarantees to others Year ended December 31, 2016 Table 2 Expressed in thousands of NTD (Except as otherwise indicated) Party being endorsed/guaranteed Outstanding Number (Note 1) Endorser/ guarantor Relationship with the endorser/ guarantor Company name (Note 2) Limit on endorsements/ guarantees provided for a single party Maximum outstanding endorsement/ guarantee amount as of December 31, 2016 endorsement/ guarantee amount at December 31, 2016 Actual amount drawn down Amount of endorsements/ guarantees secured with collateral Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company Ceiling on total amount of endorsements/ guarantees provided Provision of endorsements/ guarantees by parent company to subsidiary Provision of endorsements/ guarantees by subsidiary to parent company Provision of endorsements/ guarantees to the party in Mainland China Footnote 0 Prince Housing & Development Corp. Ta-Chen Construction & Engineering Corp. 3 $ 4,859,326 $ 1,900,000 $ 1,900,000 $ - $ - 8% $ 12,148,316 Y N N Note 3 0 Prince Housing & Development Corp. Prince Real Estate Co., Ltd. 2 4,859,326 2,500,000 2,500, ,000-10% 12,148,316 Y N N Note 3 0 Prince Housing & Development Corp. The Splendor Hotel Taichung 6 4,859,326 2,000,000 2,000,000 1,682,206-8% 12,148,316 Y N N Note 3 1 Dong-Feng Enterprises Co., Ltd. Prince Housing & Development Corp. 4 2,000,000 1,810, ,000,000 N Y N Note 4 2 Prince Utility Co., Ltd. Prince Housing & Development Corp. 4 1,000, , , , % 2,000,000 N Y N Note 5 3 Prince Real Estate Co., Ltd. Prince Housing & Development Corp. 4 2,500,000 2,500,000 2,500,000 2,035, % 5,000,000 N Y N Note 6 4 Ta-Chen Construction & Engineering Corp. Prince Housing & Development Corp. 4 1,500, , , % 3,000,000 N Y N Note 7 5 Prince Apartment Management Maintain Co., Ltd. Prince Security Co., Ltd. 3 20,000 20,000 20,000 10,000-27% 50,000 N N N Note 8 6 Prince Property Management Consulting Co., Ltd. Prince Security Co., Ltd. 2 56,000 56,000 56,000 10,000-19% 120,000 N N N Note 9 Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows: (1) The Company is 0. (2) The subsidiaries are numbered in order starting from 1. The same company will have the same number. Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following six categories: (1) Having business relationship. (2) The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/guaranteed subsidiary. (3) The endorser/guarantor parent company and its subsidiaries jointly own more than 50% voting shares of the endorsed/guaranteed company. (4) The endorsed/guaranteed parent company directly or indirectly owns more than 50% voting shares of the endorser/guarantor subsidiary. (5) Mutual guarantee of the trade as required by the construction contract. (6) Due to joint venture, each shareholder provides endorsements/guarantees to the endorsed/guaranteed company in proportion to its ownership. Note 3:In accordance with the Group s related regulations, the limit on endorsements and guarantees for any single entity is 20% of the Company s net worth based on the latest financial statements and the limit on accumulated amount of transactions of endorsements and guarantees is 50% of the Company s net worth based on the latest financial statements. Note 4: In accordance with Dong-Feng Enterprises Co., Ltd.'s related regulations, the limit of endorsements and guarantees for any single entity is $2,000,000; the total accumulated amount is $4,000,000. Note 5: In accordance with Prince Utility Co., Ltd.'s related regulations, the limit of endorsements and guarantees for any single entity is $1,000,000; the total accumulated amount is $2,000,000. Note 6: In accordance with Prince Real Estate Co., Ltd.'s related regulations, the limit of endorsements and guarantees for any single entity is $2,500,000; the total accumulated amount is $5,000,000. Note 7: In accordance with Ta-Chen Construction & Engineering Corp.'s related regulations, the limit of endorsements and guarantees for any single entity is $1,500,000; the total accumulated amount is $3,000,000. Note 8: In accordance with Prince Apartment Management Maintain Co., Ltd.'s related regulations, the limit of endorsements and guarantees for any single entity is $20,000; the total accumulated amount is $50,000. Note 9: In accordance with Prince Property Management Consulting Co., Ltd.'s related regulation, the limit of endorsements and guarantees for any single entity is $56,000; the total accumulated amount is $120, Prince Housing & Development Corp. 239

122 Prince Housing & Development Corp. and Subsidiaries Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2016 Table 3 Expressed in thousands of NTD (Except as otherwise indicated) As of December 31, 2016 Marketable Securities held by securities Name of investee companies Relationship with the securities issuer General ledger account Number of shares Book value Ownership (%) Fair value Footnote Prince Housing & Development Corp. Stock Nantex Industry Co., Ltd. None Available-for sale financial assets - non-current 6,861,668 $ 149,927 Note 1 $ Listed company, Note 3 Stock ScinoPharm Taiwan, Ltd. None Available-for sale financial assets - non-current 22,698, ,278 Note Listed company, Note 4 Stock Simplo Technology Co., Ltd. None Available-for sale financial assets - non-current 127,249 11,822 Note OTC company Stock Universal Venture Capital Investment Corp. None Available-for sale financial assets - non-current 1,400,000 13,570 Note Stock Grand Bills Finance Corp. None Available-for sale financial assets - non-current 48, Note Stock Chipwell Tech. Corp. None Available-for sale financial assets - non-current 344,488 1,681 Note Stock Nanmat Technology Co., Ltd. None Available-for sale financial assets - non-current 1,318,851 18,257 Note Stock Southern Science Joint Development. None Available-for sale financial assets - non-current 10, , , Stock Changing Information Technology Co., Ltd. None Available-for sale financial assets - non-current 119,075 1,608 Note Stock Formosoft International Co., Ltd. None Available-for sale financial assets - non-current 35, Note Stock President Energy Development Corp. None Financial assets measured at cost - non-current 1,380,000 36, Stock President International Development Corp. None Financial assets measured at cost - non-current 87,745, , Note 5 Stock Jia-Cheng Venture Capital Investment Co., Ltd. None Financial assets measured at cost - non-current 759,024 - Note 1 Note 2 Stock Jia-Hua Venture Capital Investment Co., Ltd. None Financial assets measured at cost - non-current 1,211, Note 2 Stock Ever-Move Technology Co., Ltd. None Financial assets measured at cost - non-current 3,076 - Note 1 Note 2 Stock Chuang-Jing Technology Co., Ltd. None Financial assets measured at cost - non-current 12,645 - Note 1 Note 2 Stock Bao-Mao Technology Co., Ltd. None Financial assets measured at cost - non-current 27,933 - Note 1 Note 2 Stock Jie-Lun Technology Co., Ltd. None Financial assets measured at cost - non-current 17,280 - Note 1 Note 2 Stock Quan-Mao Technology Co., Ltd. None Financial assets measured at cost - non-current 341, Note 2 Stock Wei-Jun Technology Co., Ltd. None Financial assets measured at cost - non-current 1,846 - Note 1 Note 2 Stock Chieh-Cheng Technology Co., Ltd. None Financial assets measured at cost - non-current 41,343 - Note 1 Note 2 Fund Mega Diamond Money Market Fund None Financial assets at fair value through profit or loss - non-current 6,301,406 78, Note 6 Fund UPAMC James Bond Money Market None Financial assets at fair value through profit or loss - current 6,040, , Fund Yuanta Wan Tai Money Market None Financial assets at fair value through profit or loss - current 6,663, , Fund Jih Sun Money Market Fund None Financial assets at fair value through profit or loss - current 6,817, , Repurchase MEGA BILLS FINANCE CO., LTD. None Cash equivalents-repurchase bonds - 150, Repurchase International Bills Finance Corp. None Cash equivalents-repurchase bonds - 150, Repurchase China Bills Finance Corp. None Cash equivalents-repurchase bonds - 200, Prince Ta-Chen Investment Co., Ltd. (Not Stock Jia-Cheng Venture Capital Investment Co., Ltd. None Financial assets at fair value through profit or loss - non-current 290, Stock Chieh-Cheng Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 41, Stock AIRWAVETECHNOLOGIES,INC. None Financial assets at fair value through profit or loss - non-current 300, Stock Ever-Move Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 79, Stock Bao-Mao Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 960, Stock Integrated Solutions Technology, Inc. None Financial assets at fair value through profit or loss - non-current 71, Stock Goyatek Technology, Inc. None Financial assets at fair value through profit or loss - non-current 18, Stock Quan-Mao Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 9, Stock Jie-Lun Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 6, Stock Chuang-Jing Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current 4, Stock Wei-Jun Technology Co., Ltd. None Financial assets at fair value through profit or loss - non-current Stock Jia-Hua Venture Capital Investment Co., Ltd. None Financial assets at fair value through profit or loss - non-current 479, Ta-Chen Construction & Engineering Stock Nantex Industry Co., Ltd. None Financial assets at fair value through profit or loss - current 12,088, ,132 Note Note 7 Stock Chipwell Tech. Corp. None Available-for sale financial assets - non-current 349,990 1,708 Note Stock Nanmat Technology Co., Ltd. None Available-for sale financial assets - non-current 1,479,086 20, Repurchase China Bills Finance Corp. None Cash equivalents-repurchase bonds - 115, Repurchase International Bills Finance Corp. None Cash equivalents-repurchase bonds - 110, Repurchase MEGA BILLS FINANCE CO., LTD. None Cash equivalents-repurchase bonds - 75, Prince Utility Co., Ltd. Repurchase International Bills Finance Corp. None Cash equivalents-repurchase bonds - 20, Repurchase China Bills Finance Corp. None Cash equivalents-repurchase bonds - 20, Repurchase MEGA BILLS FINANCE CO., LTD. None Cash equivalents-repurchase bonds - 20, Prince Housing Investment Co., Ltd. Stock Tou Itsu Investments Inc. None Available-for sale financial assets - non-current USD 1.00 As of December 31, 2016 Marketable Securities held by securities Name of investee companies Relationship with the securities issuer General ledger account Number of shares Book value Ownership (%) Fair value Footnote Prince Apartment Management Stock Prince Housing & Development Corp. Parent company Available-for sale financial assets - non-current 655,424 $ 6,882 Note 1 $ Stock Tainan Spinning Co., Ltd. None Available-for sale financial assets - non-current 122,201 1,491 Note Dong-Feng Enterprises Co., Ltd. Stock Nantex Industry Co., Ltd. None Available-for sale financial assets - non-current 176,220 3,850 Note Stock Sung Gang Asset Management Co., Ltd. None Available-for sale financial assets - non-current 47,968 1,511 Note Prince Security Co., Ltd. Stock Nanmat Technology Co., Ltd. None Available-for sale financial assets - non-current 197,211 1,600 Note Cheng-Shi Construction Co., Ltd. Fund UPAMC James Bond Money Market None Financial assets at fair value through profit or loss - current 6,040, , Repurchase International Bills Finance Corp. None Cash equivalents-repurchase bonds - 40, Repurchase MEGA BILLS FINANCE CO., LTD. None Cash equivalents-repurchase bonds - 40, Note 1: Percentage of Company s ownership is less than 5%. Note 2: We have not received the financial statements from management. Thus the net value cannot be measured. Note 3: 4,088 thousand shares of outstanding common stock were used as collateral for loan. Note 4: 17,276 thousand shares of outstanding common stock were used as collateral for loan. Note 5: 60,000 thousand shares of outstanding common stock were used as collateral for loan. Note 6: 6,301 thousand units of outstanding common stock were used as collateral for loan. Note 7: 10,000 thousand shares of outstanding common stock were used as collateral for loan. Note 8: Prince Ta-Chen Investment Co., Ltd. was merged into Prince Housing & Development Corp. in May 2015 and Prince Ta-Chen Investment Co., Ltd. was dissolved after the merger. The securities held by the company has not been registered for the changes of shareholders yet. 240 Prince Housing & Development Corp. 241

123 Prince Housing & Development Corp. and Subsidiaries Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company's paid-in capital Year ended December 31, 2016 Table 4 Expressed in thousands of NTD (Except as otherwise indicated) Marketable securities General Counterparty Relationship with the investor Balance as at January 1, 2016 Investor (Note 1) ledger account (Note 2) (Note 2) Number of Amount Number of Amount Number of Selling price Book value Gain (loss) on Number of Amount Addition (Note 3) Disposal (Note 3) Balance as at December 31, 2016 Prince Real Estate Co., Ltd. Prince Real Estate Co., Ltd. Prince Real Estate Co., Ltd. Prince Real Estate Co., Ltd. UPAMC James Bond Money Market Yuanta Wan Tai Money Market Jih Sun Money Market Fund Jih Sun Money Market Fund Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current $ - 24,183,754 $ 400,000 ( 18,143,429) $ 300,059 ($ 300,000) $ 59 6,040,325 $ 100, ,370, ,152 ( 97,706,932) 730,285 ( 730,152) 133 6,663, , ,142, ,000 ( 14,324,457) 210,036 ( 210,000) 36 6,817, , ,678, ,000 8,052, ,910 ( 21,731,247) 318,261 ( 317,910) Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities. Note 2: Fill in the columns the counterparty and relationship if securities are accounted for under the equity method; otherwise leave the columns blank. Note 3: Aggregate purchases and sales amounts should be calculated separately at their market values to verify whether they individually reach NT$300 million or 20% of paid-in capital or more. Note 4: Paid-in capital referred to herein is the paid-in capital of parent company. In the case that shares were issued with no par value or a par value other than NT$10 per share, the 20 % of paid-in capital shall be replaced by 10% of equity attributable to owners of the parent in the calculation. Prince Housing & Development Corp. and Subsidiaries Acquisition of real estate reaching $300 million or 20% of paid-in capital or more Year ended December 31, 2016 Table 5 Expressed in thousands of NTD (Except as otherwise indicated) Reason for acquisition of Relationship Real estate Transaction Status of with the If the counterparty is a related party, information as to the last transaction of the real estate is disclosed below Basis or reference used in setting the real estate and status of the real Other acquired by Real estate acquired Date of the event amount payment Counterparty counterparty Original Relationship Date of the Amount price estate commitments Prince Housing & Development Corp. Prince Housing & Development Corp. Ren Wu Dist. Xia Hai Lot No. 978, etc. 2013/06/14 (Note 1) Nanzi subsection No. 158,etc. 2014/11/07 (Note 3) Note 2 $ 1,115,071 Redevelopment zone of Xia Hai Term, Renwu District, Kaohsiung City $ 1,255, ,651 Taiwan Sugar Corporation Third party $ - Note 2 For operating use None Third party Market value For operating use None Note 1: The transfer of title took place on settlement date. Note 2: In order to purchase 67.13% of areas from the north side of the offset-expenditure land in the redevelopment zone, the transaction amount was the expected price including compensation for demolition to all land owners of north side of the offset-expenditure land, compensation for demolition to owners of parkland to be (67.13%), construction expenses in all regions (67.13%) and interests arising from re-planning committee's borrowing from the Group to pay aforementioned expenses. Note 3: November 7, 2014 was the signing date of the contract. The Company paid $535,857 for the current period. As of December 31, 2016, the Company has already paid $794, Prince Housing & Development Corp. 243

124 Company Name Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more Year ended December 31, 2016 Table 6 Expressed in thousands of NTD (Except as otherwise indicated) Real estate Transaction date or date Status of collection of Gain (loss) Relationship with Basis or reference used in disposed by Real estate of the event Date of acquisition Book value Disposal amount proceeds on disposal Counterparty the seller Reason for disposal setting the price Other commitments The Company Xinyi Dist., Taipei 2016/01/25 (Note 1) 2012/11/30 (Note 2) $ 106,742 $ 356,366 $ 356,366 $ 249,624 Third party None For operating use Market value None Note 1: Contract date Note 2: Completion date Prince Housing & Development Corp. and Subsidiaries Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more Year ended December 31, 2016 Table 7 Expressed in thousands of NTD Differences in transaction terms compared to third party (Except as otherwise indicated) Relationship with the Transaction transactions Notes/accounts receivable (payable) Purchaser/seller Counterparty counterparty Purchases (sales) Amount purchases (sales) Credit term Unit price Credit term Balance total notes/accounts Footnote Prince Housing & Development Corp. Cheng-Shi Construction Co., Ltd. Subsidiary Purchases $ 605,366 13% Payments were paid in accordance with the contract terms It is reasonable compared to the normal tradings It is reasonable compared to the normal tradings ($ 2,380) (0%) Prince Housing & Development Corp. Prince Utility Co., Ltd. Subsidiary Purchases 300,288 7% Payments were paid in accordance with the contract terms It is reasonable compared to the normal tradings It is reasonable compared to the normal tradings - - Cheng-Shi Construction Co., Ltd. Ming-Da Enterprise Co., Ltd. Affiliated company (Sales) ( 122,680) (1%) Payments were paid in accordance with the contract terms It is reasonable compared to the normal tradings It is reasonable compared to the normal tradings 2,660 0% 244 Prince Housing & Development Corp. 245

125 Table 8 Prince Housing & Development Corp. and Subsidiaries Receivables from related parties reaching $100 million or 20% of paid-in capital or more December 31, 2016 Expressed in thousands of NTD (Except as otherwise indicated) Amount collected Relationship with Balance as at Overdue receivables subsequent to the Allowance for Creditor Counterparty the counterparty December 31, 2016 Turnover rate Amount Action taken balance sheet date doubtful accounts Prince Housing & Development Corp. The Splender Hotel Taichung Subsidiary Other assets - obligation receivable $ 575,000 - $ - - $ - $ - Prince Housing & Development Corp. and Subsidiaries Significant inter-company transactions during the reporting periods Year ended December 31, 2016 Table 9 Expressed in thousands of NTD (Except as otherwise indicated) Transaction Percentage of consolidated total operating revenues or Number Company name Counterparty Relationship General ledger account Amount Transaction terms total assets 0 Prince Housing & Development Corp. Ta-Chen Construction & Engineering Corp. The Company to the consolidated subsidiaries Construction in progress $ 180, % 0 Prince Housing & Development Corp. Prince Utility Co., Ltd. The Company to the consolidated subsidiaries Purchases 300,288 Based on mutual agreements 2.49% 0 Prince Housing & Development Corp. Prince Utility Co., Ltd. The Company to the consolidated subsidiaries Construction in progress 233, % 0 Prince Housing & Development Corp. Cheng-Shi Construction Co., Ltd. The Company to the consolidated subsidiaries Purchases 605,366 Based on mutual agreements 5.02% 0 Prince Housing & Development Corp. Cheng-Shi Construction Co., Ltd. The Company to the consolidated subsidiaries Construction in progress 493, % 0 Prince Housing & Development Corp. The Splender Hotel Taichung The Company to the consolidated subsidiaries 0 Prince Housing & Development Corp. The Splender Hotel Taichung The Company to the consolidated subsidiaries 0 Prince Housing & Development Corp. Prince Real Estate Co., Ltd. The Company to the consolidated subsidiaries 1 Prince Utility Co., Ltd. Prince Housing & Development Corp. The consolidated subsidiaries to the Company 2 Prince Real Estate Co., Ltd. Prince Housing & Development Corp. The consolidated subsidiaries to the Company Endorsement and guarantee Other assets - obligation receivables Endorsement and guarantee Endorsement and guarantee Endorsement and guarantee 1,682, , , ,763 2,035,309 In accordance with endorsement and guarantee procedures 3.28% Creditor's rights purchase contract 1.12% In accordance with endorsement and guarantee procedures 1.52% In accordance with endorsement and guarantee procedures 1.25% In accordance with endorsement and guarantee procedures 3.97% Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1) Parent company is 0. (2) The subsidiaries are numbered in order starting from 1. Note 2: Relationship between transaction company and counterparty is classified into the following three categories: (1) Parent company to subsidiary. (2) Subsidiary to parent company. (3) Subsidiary to subsidiary. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts. Note 4: The table only discloses transaction amounts of NT$100 million or more. 246 Prince Housing & Development Corp. 247

126 Prince Housing & Development Corp. and Subsidiaries Information on investees Year ended December 31, 2016 Table 10 Expressed in thousands of NTD (Except as otherwise indicated) Net profit (loss) of Investment income Initial investment amount Shares held as at December 31, 2016 the investee for the (loss) recognised by Year ended the Company for the Main business Investor Investee Location activities Balance as at December 31, 2016 Balance as at December 31, 2015 Number of shares Ownership Book value December 31, 2016 Year ended December 31, 2016 Footnote Prince Housing & Development Corp. Cheng-Shi Investment Holdings Co., Ltd. Taiwan General investment $ 1,146,925 $ 1,146,925 97,504, % $ 1,007,834 $ 71,747 $ 94,653 Notes 1 and 2 Prince Property Management Consulting Co., Ltd. Taiwan Management and consulting 181, ,000 17,146, % 282,007 12,820 13,979 Notes 1 and 2 Geng-Ding Co., Ltd. Taiwan Hotels and catering 120, ,000 18,000,000 30% 320,555 69,824 20,950 Note 4 Prince Housing Investment Co., Ltd. British Virgin Islands Overseas investment 140, , % 446,709 45,885 45,885 Note 2 BioSun Technology Co., Ltd. Taiwan Anti-mildew's import and export - 1, ( 16) ( 16) Note 2 and 9 Dong-Feng Enterprises Co., Ltd. Taiwan Housebuilders and sales 746, ,431 4,300, % ( 151,839) 3,736 3,736 Notes 2 and 8 Uni-President Development Corp. Taiwan Leasing of buildings 1,080,000 1,080, ,000,000 30% 1,229, ,048 42,933 Note 5 The Splender Hotel Taichung Taiwan Hotels and catering 975, ,000 97,500,000 50% 328,715 ( 19,908) ( 9,954) Note 2 Time Square International Co., Ltd. Taiwan Hotels and catering 600, ,000 73,830, % 462, , ,136 Note 2 Jin Yi Xing Plywood Co., Ltd. Taiwan Manufacture of plywoods 165, ,410 3,938, % ( 361,186) ( 157) 142,279 Notes 2 Ming-Da Enterprise Co., Ltd. Taiwan Real estate trading 37, , ,000 20% 75, ,444 31,696 Note 10 Prince Industrial Co., Ltd. Taiwan Development of public housing and building 10,000 10,000 1,000, % 9,526 ( 47) ( 47) Note 2 Prince Real Estate Co., Ltd. Taiwan Real estate trading and leasing 470, ,784 11,208, % 1,210,130 ( 5,504) ( 6,842) Notes 1 and 2 Cheng-Shi Investment Holdings Co., Ltd Ta-Chen Construction & Engineering Corp. Taiwan Construction 856, ,566 90,497, % 720,876 35,262 - Notes 2 and 3 Prince Utility Co., Ltd. Taiwan Electricity water pipe 56,025 56,025 3,070, % 122,866 17,703 - Notes 2 and 3 Net profit (loss) of Investment income Initial investment amount Shares held as at December 31, 2016 the investee for the (loss) recognised by Year ended the Company for the Main business Investor Investee Location activities Balance as at December 31, 2016 Balance as at December 31, 2015 Number of shares Ownership Book value December 31, 2016 Year ended December 31, 2016 Footnote Cheng-Shi Investment Holdings Co., Ltd Cheng-Shi Construction Co., Ltd. Taiwan Construction $ 208,027 $ 208,027 20,100, % $ 294,767 $ 16,211 $ - Notes 2 and 3 Ta-Chen Construction & Engineering Corp. Prince Housing Investment Co., Ltd. Ta-Chen International (Brunei) Corp. Brunei Overseas investment PPG Investment Inc. U.S.A Overseas investment - 9, Notes 2, 3 and 7 56,945 56, % 12,974 ( 1,645) - Note 3 Queen Holdings Ltd. British Virgin Islands Overseas investment 122, ,034 2, % 390,856 70,315 - Note 3 Prince Property Management Consulting Co., Ltd. Prince Apartment Management Maintain Co., Ltd. Taiwan Management of apartments 67,853 67,853 3,000, % 73,542 2,639 - Notes 2 and 3 Prince Security Co., Ltd. Taiwan Security 159, ,611 13,172, % 212,952 12,317 - Notes 2 and 3 Dong-Feng Enterprises Co., Ltd. Ta-Chen International (Brunei) Corp. Amida Trustlink Assets Management Co., Ltd. Ta Chen Construction & Engineering (Vietnam) Corp. Taiwan Development of public housing and 305, ,480 21,644, % ( 137,346) ( 725) - Note 3 Vietnam Construction - 9, Notes 2, 3 and 6 Note 1: The difference between the income (loss) of the investee and the investment income (loss) of the investee recognised by the Company is the investment income (loss) of the investee recognised by the Company in proportion to the share ownership and unrealised gain (loss) from elimination of inter-company transactions. Note 2: Subsidiary. Note 3: The amount has been included in the profit (loss) of the Company s investee accounted using equity method and has been recognised as gain (loss) on investment. Note 4: Provided 12,000 thousand shares as collateral. Note 5: Provided 108,000 thousand shares as collateral. Note 6: Ta Chen Construction & Engineering (Vietnam) Corp. has completed liquidation process in May Note 7: Ta-Chen International (Brunei) Corp. has completed liquidation process in August Note 8: Dong-Feng Enterprises Co., Ltd. decreased its capital by $130,000 in April 2016 and the amount of issued shares eliminated was 13,000 thousand shares. Note 9: BioSun Technology Co., Ltd. has completed liquidation process in September Note 10: Ming-Da Enterprise Co., Ltd. has reducted capital $459,112 in December 2016, has eliminated 45,911 thousand shares issued. 6.6 Financial Difficulties The Company should disclose the financial impact to the Company and its affiliated companies have incurred any financial or cash flow difficulties from Jan. 1, 2016 through until May 20, 2017 None. 248 Prince Housing & Development Corp. 249

127 Review of Financial Conditions, Operating Results, and Risk Management I I. Review of Financial Conditions, Operating Results, and Risk Management Chapter I 7.1 Analysis of Financial Status $NTD Thousands Annual Report 2016 Year Difference Item Amount % Note Current Assets 31,059,275 32,959,394 (1,900,119) Financial Assets-non current 2,168,726 2,530,463 (361,737) Equity Method Investment 2,029,496 2,244,485 (214,989) Fixed Assets 6,513,554 6,742,932 (229,378) Investment Property 5,957,293 6,043,827 (86,534) Intangible Assets 2,240,916 2,302,523 (61,607) Other Assets 1,315,584 1,652,287 (336,703) Total Assets 51,284,844 54,475,911 (3,191,067) Current Liabilities 12,812,003 12,410, , Long-term Liabilities 12,297,068 14,519,911 (2,222,843) Other Liabilities 1,548,480 2,370,827 (822,347) Total Liabilities 26,657,551 29,301,340 (2,643,789) Capital stock 16,233,261 16,233, Capital surplus 2,260,513 2,260, Retained Earnings 4,745,590 4,929,196 (183,606) Other Equity 1,058,270 1,409,109 (350,839) Treasury Stock (1,003) (1,003) Minority Equity 330, ,495 (12,833) Total Stockholders' Equity 24,627,293 25,174,571 (547,278) Review of Financial Conditions, Operating Results, and Risk Management 250 Prince Housing & Development Corp. 251

128 Review of Financial Conditions, Operating Results, and Risk Management I 7.2 Analysis of Operating Results Item Year $NTD Thousands Difference Amount % Sales 12,183,759 16,255,019 (4,071,263) Less: Sales Returns (123,454) (146,513) (23,059) Net Sales 12,060,302 16,108,506 (4,048,204) Cost of Sales (8,124,458) (10,933,346) (2,808,888) Gross Profit 3,935,844 5,175,160 (1,239,316) Operating Expenses (2,422,111) (2,723,761) (301,650) Operating Income 1,513,733 2,451,399 (937,666) Other Income 301, ,933 (35,797) Other Income and Loss 214,776 56, , Financial Cost (243,079) (335,166) (92,087) Share of profit of subsidiaries, associates and joint ventures accounted for under equity 119,118 11, , method Profit before income tax 1,905,684 2,521,660 (615,976) Tax Benefit (Expense) (306,469) (288,092) 18, Net Income 1,599,215 2,233,568 (634,353) Analysis of Cash Flow Cash Flow Analysis for the Current Year Cash and Cash Equivalents, Beginning of Year (1) Net Cash Flow from Operating Activities (2) Cash Outflow (3) Cash Surplus (Deficit) (1)+(2)-(3) Leverage of Cash Deficit Investment Plans Financing Plans 3,800,751 1,555,545 (707,381) 4,648,915 None None Cash flow in 2016: 1. Cash outflow from operating activities: $1,555, Cash inflow from investing activities: $1,424, Cash inflow from financing activities: ($2,129,340) Remedy for Cash Deficit and Liquidity Analysis Item Year Variance (%) Cash Flow Ratio (%) Cash Flow Adequacy Ratio (%) Cash Reinvestment Ratio (%) N/A 7.35 N/A * Net cash outflow from operating income in 2015, therefore comparison is not applicable Cash Flow Analysis for the Current Year Cash and Cash Equivalents, Beginning of Year (1) Net Cash Flow from Operating Activities (2) 7.4 Major Capital Expenditure Items: Major capital expenditure occurred recent years is coming from cash flow from operating activities and capital issuance by cash. 7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the Investment Plans for the Coming Year: Share of profits of investment under equity recognized 2016 is NT $119,118 thousand. In the future, there is no foresee major investment next year. 7.6 Analysis of Risk Management Cash Outflow (3) Cash Surplus (Deficit) (1)+(2)-(3) Leverage of Cash Deficit Investment Plans Financing Plans 4,648, ,770 (1,104,608) 4,261,077 None None Cash flow in 2015: 1. Cash inflow from operating activities: Completion of current construction in progress. 2. Cash outflow from investing activities: No major estimated investment. 3. Cash outflow from financing activities: Loan repayment and payment of cash dividend Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance, and Future Response Measures (1) Interest rate In the future, the company will carefully monitor interest rate movements and adopt proper hedging strategies and other capital markets financing instruments to ensure that our financing 252 Prince Housing & Development Corp. 253

129 Review of Financial Conditions, Operating Results, and Risk Management I costs are at a comparatively low level. (2) Foreign exchange rates None. (3) Inflation Our strategy for inflation impact is joint procurement to achieve best cost control Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions The company did not engage in any high-risk or high-leveraged investments. The transactions and procedures related to lending and endorsement are based on the Company s Procedures of Lending and Procedures of Endorsement Guarantee Future Research & Development Projects and Corresponding Budget None Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales Prince always pays close attention to any changes in local and foreign policies and makes appropriate amendments to our systems when necessary. During 2014 and as of the date of publication of this annual report, changes in related laws had impacted the investors willing to purchase. Prince has now broadened our business to income-producing property to balance the wave in local and foreign policies Effects of and Response to Changes in Technology and in Industry Relating to Corporate Finance and Sales None The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company s Response Measures None Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans None Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans None Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration None Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10% None Effects of, Risks Relating to and Response to Changes in Control over the Company None Litigation or Non-litigation Matters This case according to the land purchase agreement signed on 2007/10/26, term 2 second statement. The total estimated sales of this target NTD 340 million, both partied agree after six months getting usable license, to finalize the exact total sales, if the sales is over the estimated sales amount, then use the premium (exclude the sales tax) deduct the interest paid by the land load. The 40% of the remaining amount should be the increment of the transaction. The total amount we should pay is NTD 102,049,670 and starting from 2012/5/31 and 2017/02/09, the interest should pay upon 5% of annual interest of NTD 84,988,302 and NTD 17,061, Other Major Risks None. 7.7 Other major matters: None. 254 Prince Housing & Development Corp. 255

130 Special Disclosure II Chapter II Annual Report 2016 Special Disclosure II. Special Disclosure 8.1 Summary of Affiliated Enterprises Consolidated Operating Reports of Affiliated Enterprises 1. Affiliated Enterprises (1) Organizational Structure of Affiliated Enterprises Ta Chen Contstuction & Engineering Corp. 100% Cheng-Shi Investment Holding Co., Ltd 100% Chen-Shi Construciton Co., Ltd 100% 100% Prince Industrial, Corp. Prince Utility Co., Ltd. 100% Jin-Yi-Xing plywood Co., Ltd 99.65% Prince Housing Investment Co., Ltd 100% Dong-Feng Enterprises Co., Ltd 100% The Splendor Hotel Taichung 50% Prince Housing& Development Corp. Time Square International Co., Ltd Prince Security Co., Ltd 100% Prince Property Management 100% 100% Consulting Co. 100% Prince Apartment Management Maintain Co., Ltd Prince Real Estate Co.,Ltd % 256 Prince Housing & Development Corp. 257

131 Special Disclosure II (2) Basic Information of Affiliated Enterprises Name of Corporation Prince Housing& Development Corp. Date of Establishment Address Capital Major Business/Production Items 8F., No.398, Sec. 1, Zhonghua E. Rd., East Dist., Tainan City $16,623,418 Unit NT $ thousands Build public housing, commercial buildings, parking lot, parking tower and sale and rent Cheng-Shi Investment Holding Co., Ltd F., No.30, Zhongzheng S. Rd., Yongkang Dist., Tainan City 975,048 Investment Ta-Chen Construction & Engineering Corp F., No.30, Zhongzheng S. Rd., Yongkang Dist., Tainan City 904,975 Architecture design and construction Cheng-Shi Construction Co., Ltd F., No.30, Zhongzheng S. Rd., Yongkang Dist., Tainan City 201,000 Construction industry Prince Utility Co., Ltd F., No.30, Zhongzheng S. Rd., Yongkang Dist., Tainan City 30,700 Electric power and water supply pipeline setup Prince Property Management Consulting Co F., No.30, Zhongzheng S. Rd., Yongkang Dist., Tainan City 171,466 Management the leasing of residential and commercial building and real estate Prince Security Co., Ltd F., No.30, Zhongzheng S. Rd., Yongkang Dist., Tainan City 131,726 Security service Prince Apartment Management Maintain Co., Ltd F., No.30, Zhongzheng S. Rd., Yongkang Dist., Tainan City 30,000 Apartment management and maintain service Time Square International Co., Ltd No.10, Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei City 738,000 Hotel The Splendor Hotel Taichung No.1049, Jianxing Rd., West Dist., Taichung City 1,950,000 Tourist Hotel Dong-Feng Enterprises Co., Ltd Prince Housing Investment Co., Ltd F., No.30, Zhongzheng S. Rd., Yongkang Dist., Tainan City Citco Building Wickhams Cay. P. O Box 622, Road Town, Tortol, British Virgin Islands 43,000 Investment of cultured fish, water pond, architecture and cement industries 140,413 Overseas investments Name of Corporation Date of Establishment Jin-Yi-Xing Plywood Co., Ltd Address Capital Major Business/Production Items 18F., No.30, Zhongzheng S. Rd., Yongkang Dist., Tainan City 39,520 Particle board manufacture Prince Real Estate Co F., No.398, Sec. 1, Zhonghua E. Rd., East Dist., Tainan City 112,480 Real estate trading and plywood manufacturing Prince Industrial Corp F., No.11, Songgao Rd., Xinyi Dist., Taipei City 10,000 Development of residential and business buildings (3) Data of Common Shareholders of Treared-as Controlled Companies and Affiliates: None (4) Business of Prince Housing& Development Corp. and its Affiliated Enterprises (i) The business of Prince Housing& Development Co. covers: construction, power and water supply pipeline setup, real estate appraisal and agent, overseas investments, recreation and entertainment management, R&D of making medicine with biotechnology and export/import fungicide, apartment management and maintain service, security service, hotel, and particle board manufacture etc. (ii) Business with relationship among affiliated enterprises as following: Our projects are consigned to Ta-Chen Construction & Engineering Corporation, Cheng-Shi Construction Co., Ltd. and Prince Utility Co., Ltd. For saving cost, parts of residual houses were consigned to Prince Real estate Agent Co., Ltd. to sell. To supply after-sell services, parts of buildings were consigned to Prince Apartment Management Maintain Co., Ltd. and Prince Security Co., Ltd. 258 Prince Housing & Development Corp. 259

132 Special Disclosure II (5) Directors, Supervisors, and President of Affiliated enterprises Name of Corporation Title Name or Representative Prince Housing& Development Corp. Prince Housing& Development Corp. Shareholding Shares % Chairman Joyful Inv. Co., Ltd. 28,136, % Chairman (Joyful Rep.) Kao-Huei Cheng 9,854, % Vice Chairman Uni-President Enterprises Corp. 162,743, % Vice Chairman (Uni-Prisedent Rep.) Chih-Hsien Lo - - Director Chao-Mei Wu Tseng 39,023, % Director Uni-President Enterprises Corp. 162,743, % Director (Uni-Prisedent Rep.) Tsung-Ping Wu - - Director Taipo Inv. Co., Ltd. 83,740, % Director (Taipo Rep.) Ping-Chih Wu 12,888, % Director Young Yuan Inv. Co., Ltd. 14,969, % Director (Young Yuan Rep.) Chung-Ho Wu 5,209, % Director Taipo Inv. Co., Ltd. 83,740, % Director (Taipo Rep.) Chien-Te Wu 9,656, % Director Hung Yao Inv. Co., Ltd. 2,346, % Director (Hung Yao Rep.) Shih-Hung Chuang 1,687, % Director Po-Yi Hou 13,701, % Director Yu Peng Inv. Co., Ltd. 669, % Director (Yu Peng Rep.) Po-Ming Hou 22,923, % Director Cheng Long Inv. Co., Ltd. 25,882, % Director (Cheng Long Rep.) Ying-Chih Chuang 310, % Director Kao Chyuan Inv. Corp. 48,237, % Director(Kao Chyuan Rep.) Hsiu-Ling Kao 425, % Independent Director Chian Tai - - Independent Director Ho-Yi Hung - - Independent Director Sheng-Tsai Hsu - - Name of Corporation Title Name or Representative Cheng-Shi Investment Holding Co. Ta-Chen Construction & Engineering Corp Cheng-Shi Construction Corp. Prince Utility Co., Ltd Shareholding Shares % Director and Supervisor Prince Housing & Development Corp. 97,504, % Chairman (Prince Rep.) Kao-Huei Cheng - - Director (Prince Rep.) Chih-Hsien Lo - - Director (Prince Rep.) Ming-Fan Xie - - Director (Prince Rep.) Bo-Ming, Hou - - Director (Prince Rep.) Zhong-Ho, Wu - - Supervisor(Prince Rep.) June Chen Kao - - Chairman/Supervisor Cheng-Shi Investment Holding Co % Director( Cheng-Shi Rep.) Mo Chun Hou - - Director(Cheng-Shi Rep.) Jun-Liang Lin - - Director(Cheng-Shi Rep.) June Chen Kao - - Supervisor( Cheng-Shi Rep.) Yi Chun Su - - Director and Supervisor Cheng-Shi Investment Holding Co. 20,100, % Chairman (Cheng-Shi Investment Rep.) Ming-Fan Xie - - Director (Cheng-Shi Investment Rep.) Chun-Long Chie - - Director (Cheng-Shi Investment Rep.) Xiao-Yu Jiang - - Supervisor (Cheng-Shi Investment Rep.) Da-Chang Dai - - Chairman/Supervisor Cheng-Shi Investment Holding Co. 3,070, % Chairman( Cheng-Shi Rep.) Ming-Fan Xie - - Director( Cheng-Shi Rep.) Kun-Bo Yeh - - Director( Cheng-Shi Rep.) Jian-Ying Wu - - Director( Cheng-Shi Rep.) Wen-Zhen Qiu - - Supervisor( Prince Rep.) Jun-Liang Lin Prince Housing & Development Corp. 261

133 Special Disclosure II Name of Corporation Title Name or Representative Prince Property Management Consulting Co. Prince Security Co. Ltd. Prince Apartment Management Maintain Co., Ltd Shareholding Shares % Chairman/Supervisor Prince Housing & Development Corp. 17,146, % Chairman( Prince Property Rep.) Ming-Fan Xie - - Director( Prince Property Rep.) Kao-Huei Cheng - - Director( Prince Property Rep.) Chih-Hsien Lo - - Director( Prince Property Rep.) Po-Ming Hou - - Director( Prince Property Rep.) Zhong-Jan, Wu - - Supervisor ( Prince Property Rep.) June Chen Kao - - Director and Supervisor Prince Property Management Consulting 13,172, % Chairman (Prince Property Rep.) Ming-Fan Xie - - Director(Prince Propery Rep.) Xiao-Yu Jiang - - Director(Prince Propery Rep.) Wen-Zhen Qiu - - Director(Prince Propery Rep.) Jian-Ying Wu - - Director(Prince Propery Rep.) Ying-Jie Zhuang - - Director(Prince Propery Rep.) Jun-Liang Lin - - Director(Prince Propery Rep.) June Chen Kao - - Supervisor(Prince Propery Rep.) Da-Chang Dai - - Director and Supervisor Prince Property Management Consulting 3,000, % Chairman (Prince Rep.) Ming-Fan Xie - - Director (Prince Rep.) June Chen Kao - - Director (Prince Rep.) Ying-Jie Zhuang - - Director (Prince Rep.) Kun-Bo Yeh - - Director (Prince Rep.) Wen-Zhen Qiu - - Director(Prince Propery Rep.) Jian-Ying Wu - - Supervisor(Prince Rep.) Da-Chang Dai - - Name of Corporation Title Name or Representative Times Square International Hotel Splendor Hotel Shareholding Shares % Director and Supervisor Prince Housing & Development Corp. 73,830, % Chairman (Prince Rep.) Kao-Huei Cheng - - Vice Chairman (Prince Rep.) Chih-Hsien Lo - - Director (Prince Rep.) Zhao-Mei Wu Zeng - - Director (Prince Rep.) Hisu Lin Kao - - Director (Prince Rep.) Bo-Ming, Hou - - Director (Prince Rep.) Bo-Yi Hou - - Director (Prince Rep.) Chung-Ho Wu - - Director (Prince Rep.) Ying-Chih Chuang - - Director (Prince Rep.) Chien-Te Wu - - Director (Prince Rep.) Ping-Chih Wu - - Director (Prince Rep.) Shih-Hung Chuang - - Director (Prince Rep.) Tsung-Ping Wu - - Supervisor (Prince Rep.) Jing-Shin Chen - - Vice Chairman/Director Prince Housing & Development Corp. 97,500, % Vice Chairman (Prince Rep.) Ming-Fan Xie - - Director (Prince Rep.) Gin Hsin Chen - - Director (Prince Rep.) Yi Chun Su - - Supervisor (Prince Rep.) Jing-Ying Wu - - Supervisor (Prince Rep.) Gin Yi Lin - - Director China Metal Products Co. Ltd. 97,500, % Chairman (China Metal Rep.) Huai-Chen Chen - - Director (China Metal Rep.) Sheng-Wei Mai - - Director (Chine Metal Rep.) Jun-Lin Chai Prince Housing & Development Corp. 263

134 Special Disclosure II Name of Corporation Title Name or Representative Don-Fung Corp. Prince Housing Investment Co., Ltd Chin-I-Shin PlywoodCorp. BioSun Technology Co., Ltd Prince Real Estate Co. Shareholding Shares % Director and Supervisor Prince Housing & Development Corp. 4,300, % Chairman (Prince Rep.) Kao-Huei Cheng - - Director (Prince Rep.) Ming-Fan Xie - - Director (Prince Rep.) Yi Chun Su - - Supervisor (Prince Rep.) Da-Chang Dai - - Director Prince Housing& Development Corp % Chairman( Prince Rep.) Kao-Huei Cheng - - Director and Supervisor Prince Housing & Development Corp. 3,938, % Chairman (Prince Rep.) Da-Chang Dai - - Director (Prince Rep.) De-Sheng Zheng - - Director (Prince Rep.) Tian-Long Lu - - Supervisor (Prince Rep.) Bao-Zhu Guo - - Chairman/Supervisor Prince Housing & Development Corp. 100, % Chairman( Prince Rep.) Ming-Fan Xie - - Director and Supervisor Prince Housing & Development Corp. 11,208, % Chairman (Prince Rep.) Kao-Huei Cheng - - Director (Prince Rep.) Chih-Hsien Lo - - Director (Prince Rep.) Bo-Ming, Hou - - Director (Prince Rep.) Chung-Ho Wu - - Director (Prince Rep.) Tsung-Ping Wu - - Director (Prince Rep.) Ming-Fan Xie - - Director (Prince Rep.) June Chen Kao - - Director (Prince Rep.) Ying-Jie Zhuang - - Supervisor Jing-Shin Chen - - Shareholding Name of Corporation Title Name or Representative Shares % Supervisor Chen-Yang Lin - - Prince Industrial Corp. Director and Supervisor Prince Housing & Development Corp. 1,000, % Chairman (Prince Rep.) Kao-Huei Cheng - - Director (Prince Rep.) Chih-Hsien Lo - - Director (Prince Rep.) Ming-Fan Xie - - Director (Prince Rep.) Bo-Ming, Hou - - Director (Prince Rep.) Zhong-Ho, Wu - - Supervisor(Prince Rep.) June Chen Kao - - Director (Da-Chen Rep.) Rong-Tian Chang Prince Housing & Development Corp. 265

135 Special Disclosure II 2. Affiliates Operations Overview Company Name Capital Prince Housing & Development Corp. Cheng-Shi Investment Holding Co. Ta Chen Construction & Engineering Corp. Cheng-Shi Construction Corp Prince Water and Electricity Corp. Prince Property Management Consulting Co. Total assets Total liabilities Equity Operating Revenue Operating Income Net Income (After tax) EPS (After tax) 16,233,261 43,520,451 19,223,820 24,296,631 6,004,370 1,021,485 1,609, ,048 1,169,699 30,154 1,139, , ,975 2,114,721 1,393, ,875 2,785,802 57,885 35, , , , , ,360 6,252 16, , , , , ,240 10,534 17, , ,930 23, ,003 82, , Prince Security Group 131, ,551 56, , ,945 14,032 12, Prince Apartment management and maintenance corp. Time Square International Hotel 30,000 95,718 22,176 73, ,081 1,125 2, ,300 1,459, , ,970 1,950, , , Splendor Hotel 1,950,000 5,842,838 5,189, , ,216 38,642-19, Don-Fung Corp. 43,000 44, , , Prince Housing Investments Corp. Chin-I-Shin Plywood Corp. Unit NT $ thousands 140, , , , , ,520 6, , Prince Real Estate Co. 112,480 1,445, ,186 1,085, ,946-5, Prince Industrial Corp. 10,000 9, , Affiliates consolidated financial statements Please refer to the page Reports on relations between:none 8.2 Information of private offered securities:none 8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years: Unit NT $ thousands Amount loaned to the subsidiary Endorsement amount made for the subsidiary Mortgage Shareholdings & amount in the most recent year Investment gain (loss) Shares and amount disposed of Shares and amount acquired Date of acquisition or disposition Shareholding ratio of the company Fund source Stock capital collected Name of subsidiary ,424 0 shares None $6, % None Operating Capital $30,000 (Note) Prince Apartment management and maintenance corp. 8.4 Other Necessary Supplement: None 8.5 Any matter may affect shareholders equity or price of securities until this report be printed: None 266 Prince Housing & Development Corp. 267

136 PRINCE HOUSING & DEVELOPMENT CORP. Kao-Huei, Cheng, Chairman 268

137