Prince Housing & Development Corporation. Agenda Handbook for Regular Shareholders Meeting 2017

Transcription

1 Stock code: 2511 Prince Housing & Development Corporation Agenda Handbook for Regular Shareholders Meeting 2017 Date scheduled for regular shareholders meeting: June 22, 2017 (Tuesday), at 9:00 a.m. Venue to convene the regular shareholders meeting: No. 261 Nanmen Road, Tainan City (The Conference Hall on 1F of the Labor Recreational Center)

2 Table of Contents One. Procedures of the Meeting... 1 Two. Agenda... 2 I. Issues to be Reported... 3 II. Issues to be Acknowledged... 6 III. Issues to be Discussed... 7 IV. Extraordinary Motions... 7 Three. Attachments I Business Report... 8 II. Audit Committee Inspection Report III. IV. Accountant Audit Report and 2016 Consolidated Financial Statements Report Accountant Audit Report and 2016 Individual Financial Statements Report V Annual Surplus Distribution Report VI. VII. Four. Appendix The Company's Asset Acquisition or Disposal Processing Procedures Amended Text Comparison Table The Company's Articles of Incorporation Amendment Text Comparison Table I. The Company s Rules of Procedure for Shareholders Meeting II. The Company s Articles of Incorporation, Original III. The Shareholding Status of the Company s Directors and Supervisors IV. The Effects that the Present Bonus Share Grants have on the Company's Business Performance, Earnings Per Share (EPS), and Investment Return Ratio to Shareholders... 67

3 Prince Housing & Development Corporation Procedures to Convene the Regular Shareholders Meeting 2017 Call the Meeting to Order The Chairperson Takes the Position Opening Statement by the Chairperson Issues to be Reported Issues to be Acknowledgment Issues to be Discussed Extraordinary Motions Adjournment of Meeting 1

4 Prince Housing & Development Corporation Agenda of Regular Shareholders Meeting 2017 I. Time: June 22, 2017 (Thursday) at 9 AM II. III. IV. Location: No. 261 Nanmen Road, Tainan City, i.e., the Conference Hall on 1F of the Labor Recreational Center Call the Meeting to Order by the Chairperson (with a report of the number of shares represented by present shareholders) Opening Statement by the Chairperson V. Issues to be Reported VI. VII. VIII. IX. (I) The Company s Business Report, (II) (III) Report by the Audit Committee in the Inspection of the Company s Final Account, Report of the Aggregated Total of Endorsements/Guarantees Granted by the Company, (IV) Report of the Capital Loans made by the Company to Others, (V) (VI) Report of the Status Quo Corporate Bonds Issued by the Company. The 2016 Remuneration to Employees, Directors, and Supervisors Report. (VII) Report of Other Issues Concerned. Issues to be Acknowledged (I) (II) The Company s 2016 Business Report and Financial Statements are proposed for acknowledgment The Company s 2016 Earnings Allocation is proposed for acknowledgment Issues to be Discussed (I) (II) Amendment of the Company s Procedures for Handling Acquisition and Disposal of Assets is proposed for Referendum Amendment of the Company s Articles of Incorporation is proposed for Referendum Extraordinary Motions Adjournment of the Meeting 2

5 Issues to be Reported I. Please Review the Company s Business Report, 2016 Description: Attached please find the 2016 Business Report. Please read page 8, Attachment 1, of this manual. II. Please Review the Report by the Audit Committee in the Inspection of the Company s Final Account, Description: Attached please find the Audit Committee Inspection Report. Please read page 10, Attachment 2, of this manual. III. Report of the Aggregated Total of Endorsements/Guarantees Granted by the Company, 2016: As of December 31, 2016, the endorsements/guarantees granted by the Company to the invested company are enumerated below and hereby submitted for information: Unit: NT$1,000 Targets of Endorsements/ Guarantees Amounts of Endorsements/ Guarantees at End of the Term Amounts of Endorsements/ Guarantees Actually Disbursed Ta Chen Construction & Engineering Corp. The Splendor Hospitality International Co., Ltd. 1,900, ,000,000 1,682,206 Prince Real Estate Co., Ltd. 2,500, ,000 IV. Report of the Capital Loans made by the Company to Others, 2016: As of December 31, 2016, the loaning of funds granted by the Company are enumerated below and hereby submitted for information. V. Report of the Status Quo Corporate Bonds Issued by the Company: (I) As officially resolved in the Board of Directors meeting convened on 3

6 (II) (III) March 26, 2012, the Company shall issue the first secured domestic common corporate bonds for 2012 in the aggregate total of NT$2 billion for which the Financial Supervisory Commission has already approved for raising with Letter Chin-Kuan-Cheng-Fa-Zi dated July 2, The Company already completed the raising process in full on July 12, As officially resolved in the Board of Directors meeting convened on March 15, 2013, the Company shall issue the first secured common corporate bonds 2013 in the aggregate total of NT$2.5 billion for which the Financial Supervisory Commission already approved for raising with Letter Chin-Kuan-Cheng-Fa-Zi dated October 15, The Company already completed the raising process in full on November 21, As officially resolved in the Board of Directors meeting convened on March 22, 2017, the Company shall issue the first secured common corporate bonds 2017 in the aggregate total of NT$5 billion that may be issued all at once or in installments with the issuance period of 5 years. The objective is to improve the financial system, enrich the working capital, and repay the previous raised ordinary corporate bonds. VI. The 2016 Remuneration to Employees, Directors, and Supervisors Report: (I) (II) (III) Undertaken pursuant to Article 32 of the Articles of Incorporation. As recommended by the 3rd Remuneration Committee Meeting for Session 3 and adopted by the 5th Board of Directors Meeting for Session 15; an amount of NT$63,217,514 (3%) in cash was appropriated as remuneration to directors and supervisors. The 5th Board of Directors Meeting for Session 15 has passed a resolution to adopt the decision of the 6th Board of Directors Meeting for Session 14 to appropriate the amount of NT$185,821,180 (less than 10% of the annual net revenue) as employee performance incentive and bonus. VII. Report of Other Issues Concerned: 1. Information relevant to the proposals made by shareholders who hold over 1% of the total shares issued by the Company. Descriptions: As expressly provided for in Article of the Company Act, shareholders who hold over 1% of the total shares issued by the Company may propose for the convening of a 4

7 regular shareholders meeting. The Company could have entertained such proposals posed by the shareholders from April 17, 2017 to April 26, During the aforementioned time frame, the Company did not receive any such proposal from any shareholder. 5

8 Issues to be Acknowledged Issue 1: The Company s 2016 Business Report and Financial Statements are herewith duly submitted for acknowledgment (Proposed by the Board of Directors). Descriptions: The Company s 2016 final account documents had been duly resolved by the 15th Board of Directors Meeting for Session 5 in 2017, subsequently duly audited by the Supervisors, and are hereby duly submitted for acknowledgment. Decision resolved: (Please reference page 8 for Attachment 1 of this manual as well as pages 11~37 for Attachments 3 and 4.) Issue 2: The Company s 2016 Earnings Allocation is proposed for acknowledgment Descriptions: 1. The Company s 2016 final account documents had been duly resolved in the 15th Board of Directors Meeting for Session 5 in 2017, audit by the Supervisors has been completed, and are hereby duly submitted for acknowledgment. Decision resolved: 2. It is proposed that NT$1.0 shall be allocated as the dividend in cash per share. In the event that the ratio of dividend to shareholders is changed as a result of the Company s repurchase of its shares, transfer, conversion or revocation of treasury stocks, or capital increase through cash injection that can affect the number of the issued and outstanding shares. The Board of Directors is authorized with full power to take actions and to make adjustment as appropriate. 3. For more details, please refer to the Company s Allocation of Earnings, (Please refer to page 38, Attachment 5, of this manual.) 6

9 Issues to be Discussed Issue 1: The amendment comparison text of the Company s Procedures for Handling Acquisition and Disposal of Assets is attached at pages 39~46 as Attachment 6 of this manual and hereby submitted for resolution (Proposed by the Board of Directors). Decision resolved: Issue 2: The amendment comparison text of the Company s Articles of Incorporation is attached at page 47 as Attachment 7 of this manual and hereby submitted for resolution (Proposed by the Board of Directors). Decision resolved: Extraordinary Motions Adjournment of Meeting 7

10 Business Report I. Report on the Business Performance in the Preceding Fiscal Year 8 Attachment 1 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 crossstrait 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. 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.

11 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. 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: Cheng, Kao-Hui Executive Manager: Hsieh, Ming-Fan Head Accountant: Tai, Ta-Chang 9

12 Submitted for Approval Prince Housing & Development Corporation Audit Committee Inspection Report Attachment 2 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 2017 Regular Shareholders Meeting Prince Housing & Development Corporation Audit Committee Convener Qian Dai May 4,

13 Accountant Audit Report To: Prince Housing & Development Corporation: Audit Opinion Attachment 3 (2017) Financial Report No The audit of the Consolidated Asset Balance Sheet for 2016 and dated December 31, 2015 as well as the Consolidated Comprehensive Income Statement, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement, and Consolidated Financial Statements for 2016 and from January 1, 2015 to December (including the summary of major accounting policies) for Prince Housing & Development Corporation and its subsidiaries (hereafter Prince Group ) has been completed by this accountant. In the opinion of this accountant and in accordance with this accountant's inspection results as well as the inspection results from other accountants (please reference the Other Section), all major aspects of the aforesaid Consolidated Financial Statements are formulated in compliance of the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the guidelines, interpretation, and explanations announced by the International Financial Reporting Standards and the International Accounting Standards recognized by the Financial Supervisory Commission; and are sufficient to present the consolidated financial status of Prince Group for 2016 and December 31, 2015 as well as the Consolidated Financial Performance and Consolidated Cash Flow for 2016 and from January 1, 2015 to December 31, Basis for the Audit Opinion This accountant has implemented the audit operations pursuant to the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants as well as the generally accepted auditing standards of R.O.C. This Accountant will further explain the liabilities under these criteria in the Responsibility section of the Accountant Consolidated Financial Statements Audit Report. This accountant is an independent auditor of his accounting firm and is subject to the code of professional ethics of R.O.C. for accountants who have maintained detached and independent from Prince Group and fulfilled other responsibilities provided by the code. According to this accountant's inspection results as well as the inspection results from other accountants, this accountant believes that sufficient and appropriate audit evidence has been obtained to serve as the basis for expressing the opinion of this audit. 11

14 Key Audit Items The key audit items refer to the most important audit matters for the 2016 Consolidated Financial Statements of Prince Group under the professional judgment of this accountant. Such items are expressed throughout the overall audit of the Consolidated Financial Statement and the process of formulating the audit opinion. This accountant does not express an independent opinions regarding these matters. Real Estate Revenue Recognition Time Frame Item Description Please refer to Note 4 (30) of the Consolidated Financial Statements for the accounting policy on sales revenue, and refer to Note 6 (26) of the Consolidated Financial Statements for the accounting items. In 2016, the real estate sales revenues of Prince Group were NT$5,274,930,000; accounting for 43.74% of the consolidated operating revenue. Real estate sales revenues of Prince Group were recognized during transaction completion and actual housing transfer as carry forward costs as well as gains and losses. Because the real estate sales subjects for Prince Group are scattered, the process for the various departments of the Group to transmit the housing transfer and escrow related information generally involves numerous people and often causes the revenue recognition time frame to become inappropriate when it gets closer to the end of the financial reporting period. Therefore, this accountant will treat the housing sales revenue recognition time frame as one of the key audit items this year. Response Audit Procedures This accountant has implemented the primary response procedures for the key audit items mentioned above as follows: 1. Understand and evaluate the internal control procedures adopted as the real estate sales revenue recognition by the management level and test whether the real estate sales revenue recognition time frame is effectively executed, including inspection of the correctness of the dates of the transfer, the escrow related files, and the account entry points. 2. This accountant has also conducted the real estate sales transaction execution cut-off test for a certain period before and after the end near the financial reporting period including verifying land transcripts, housing ownership and client's signature for housing transfer consent, and other relevant evidentiary documents to ensure that the real estate sales revenues have been recorded in the appropriate period. 12

15 Recognition of Construction Revenues-Degree of Completion Assessment Item Description Please refer to Note 4 (13) and (30) of the Consolidated Financial Statements for the accounting policy related to the construction contracts and revenue recognition, and refer to Note 6 (26) of the Consolidated Financial Statements for the accounting items. In 2016, the real estate construction revenues of Prince Group were NT$2,781,948,000; accounting for 23.07% of the consolidated operating revenue. Prince Group provides real estate construction related services and recognizes the construction revenue based on the degree of completion during the construction contract period. The degree of completion is calculated based on the ratio of the cost already incurred for each project contract as of the end of the financial reporting period against the estimated cost of the project contract. The aforementioned total cost is based on the construction budget schedule according to the owner's design blueprints taking into consideration the added or subtracted projects caused by changes in the scope of the construction as well as the costs for the subcontracts and material fees based on the market fluctuations. Because the items that constitute the total costs mentioned above are complex and often involve subjective judgments, there is a high degree of uncertainty and the total cost estimation will affect the recognition of the degree of completion and the construction revenue. Therefore, this accountant will regard the degree of completion assessment adopted by Prince Group to recognize the construction revenues as one of this year's key audit items. Response Audit Procedures This accountant has implemented the primary response procedures for the key audit items mentioned above as follows: 1. Understand Prince Group's operation and industrial characteristics, assess the rationality of the international operation procedures adopted to estimate the total construction project costs, verify the owner's design drawings and calculation units as well as the procedure for material cost investments as part of the construction costs in order to evaluate the consistency of the estimation method. 2. Assess and test the internal control procedures that can affect the estimated total cost changes, including verification of the evidentiary documents on the increase or decrease of construction projects and larger-priced construction projects for the period. 3. Conduct field investigation with supervisors and other appropriate personnel for construction cases that are still being implemented at the end of the period. 4. Obtain the construction project profit and loss details for the relevant evidentiary verification procedures, including the sampling inspection of the costs that have already been incurred for 13

16 the current period with the appropriate evidence, sampling inspection of the evidentiary documents for the added or subtracted construction projects, and new sampling inspection for the calculation of the construction completion ratio. Other Matters Mentioned in Audits by other Accountants Some of the investments that adopt the equity method by Prince Group's subsidiaries included in the consolidated financial statements have not been audited by this accountant and were inspected by other accountants. Therefore, the opinions issued by this accountant regarding to the amounts listed in such company financial reports from the Consolidated Financial Statements mentioned above are based on the audit report from other accountants. The assets (including investment using the equity method) for 2016 and December 31, 2015 mentioned above were NT$1,497,276,000 and NT$1,843,945,000; which accounted for 2.92% and 3.38% of the total assets, respectively. The net operating incomes for 2016 and from January 1, 2015 to December 31, 2015 were NT$599,445,000 and NT$534,463,000; which accounted for 4.97% and 3.32% of the consolidated net operating income, respectively. The consolidated gains and losses recognized from the investments using the equity method for 2016 and from January 1, 2015 to December 31, 2015 mentioned above were NT$44,904,000 and NT$(71,792,000); which accounted for 3.62% and (3.28%) of the total consolidated gains and losses, respectively. Other Matters Individual Financial Report Prince Housing & Development Corporation had already formulated the Independent Financial Statements for 2016 and 2015, and the unqualified audit reports issued by this accountant regarding the Statements are attached herein for reference. The Responsibilities of the Management Level and Governance Units for the Consolidated Financial Statements The responsibilities of the management level is to comply with the Regulations Governing the Preparation of the Financial Reports by Securities Issuers as well as the guidelines, interpretation, and explanations announced by the International Financial Reporting Standards and International Accounting Standards recognized as effective by the Financial Supervisory Commission during the preparation of the Consolidated Financial Statements; maintain the necessary internal control mechanism related to the formulation of the Consolidated Financial Statements; and ensure that the Consolidated Financial Statements do not contain significant false statements that can lead to fraud or error. The responsibilities of the management level during the formulation of the Consolidated Financial Statements include evaluating Prince Group's ability to continue its operations, disclosure of the relevant matters, and adopt the accounting basis for continual operation unless the management level intends to liquidate Prince Group, stop its operations, or there is no other option except to liquidate Prince Group or stop its operations. 14

17 The Governance Units (including the Audit Committee) of Prince Group have the responsibility to supervise the financial reporting process. Accountant's Responsibilities during the Audit of the Consolidated Financial Statements The purpose of the Consolidated Financial Statements audit by this accountant is to determine whether it is reasonable to believe that there is any significant false presentation, fraud, or error as a whole and issue an audit report. Reasonable reliability means a high degree of reliability except forsignificant false representations in the Consolidated Financial Statements whereby detection cannot be guaranteed based on the auditing efforts under the generally accepted auditing standards of R.O.C. False representations may lead to fraud or error. The false representation is considered as significant if its individual or total amounts can reasonably be expected to affect the economic decisions made by the users of the Consolidated Financial Statements. This accountant shall also use professional judgment and maintain professional suspicion when conducting the audit under the generally accepted auditing standards of R.O.C. This accountant shall perform the following tasks: 1. Identify the risks of significant false representations that may lead to fraud or error for the Consolidated Financial Statements; design and implement appropriate countermeasures for the risks found; and acquire sufficient and appropriate audit evidence as the basis for the audit opinion. Because fraud may involve conspiracy, forgery, deliberate omission, false statement, or internal control sidestepping; the risks of not detecting significant misrepresentations leading to fraud is higher than the risks of attributing the misrepresentations to the wrong people. 2. The accountant must acquire the necessary understanding of the organization's internal control unit being audited in order to design the appropriate audit procedure under the circumstances. The objective is not to express an opinion on the effectiveness of the internal control unit for the Prince Group. 3. Evaluate the appropriateness of the accounting policies adopted by the management level and the rationality of its accounting estimates as well as the relevant disclosures. 4. Make a conclusion regarding to the appropriateness for the management level to continue to adopt the existing accounting basis and determine whether there is any significant doubts or major uncertainties regarding to Prince Group's ability to continue its operations. If this accountant believes that such circumstances or conditions contain significant uncertainties, the accountant shall remind the users of the Consolidated Financial Statements be cautious of the relevant disclosures of the Consolidated Financial Statements in the audit report or revise the audit opinion of such disclosure is inappropriate. The conclusion of this accountant shall 15

18 be based on the audit evidence acquired as of the date of this audit report. However, future events or circumstances may lead the Prince Group to no longer have the ability to continue to operate. 5. Evaluate the overall representation, structure, and content of the Consolidated Financial Statements (including the relevant notes) and determine whether the Consolidated Financial Statements have sufficiently expressed the relevant transactions and events. 6. Acquire sufficient and appropriate audit evidence for the financial information of individuals formed within the Prince Group and issue an opinion regarding to the Consolidated Financial Statements. This accountant is responsible for the guidance, supervision, and enforcement of the Prince Group audit case and forming an audit opinion of Prince Group. The communication items between this accountant and the governance unit include the scope and time frame of the audit scheduled as well as any major audit findings (including significant internal control negligences identified during the auditing process). This accountant has provided the statement of independence to the governance unit regarding how the accountants of this accounting firm who are subject to independence detachment have complied with the accountant's professional code of ethics of R.O.C. and communicated with the governing unit regarding to issues that may be considered as having the ability to influence the independence of accountants and other matters (including the relevant protective measures). This accountant has decided the key audit items for the 2016 Consolidated Financial Statements of Prince Group based on the items communicated with the governance unit. This accountant has described such items in the audit report. Unless the law has banned the disclosure of specific items or under rare circumstances, this accountant has decided not to communicate the specific items in the audit report. Therefore, it is reasonable to expect the negative impact created from this communication to be greater than the enhancement of the public's interests. PwC Taiwan Accountant Jian-Zhi Wu Yi-Zhang Lin 16

19 Financial Supervisory Commission Approval No.: JGZSZ Formerly the Treasury Securities Regulatory Commission Approval File No.: (1990)TCZ(1)37504 March 22,

20 Prince Housing & Development Corporation and its Subsidiaries Consolidated Asset Balance Sheet 2016 and December 31, 2015 Unit: NT$1,000 Current Assets December 31, 2016 December 31, 2015 Asset Note Amount % Amount % 1100 Cash and Cash Equivalents 6 (1) $ 4,648,915 9 $ 3,800, Financial Asset at Fair Value based on Profit and Loss- Current 6 (2) & 8 664, , Bills Receivable Net Amount 6 (3) 102, , Accounts Receivable Net Amount 6 (4) 822, ,861, Receivable Accounts- Stakeholders Net Amount 1190 Receivable Construction Contract Fund 7 6 (5) 22, , ,058, ,347, Other Receivable Funds 21,466-69, X Inventory 6 (6) & 8 22,270, ,209, Prepayments 222, , Other Financial Assets-Current 8 925, ,973, Other Current Assets-Other 6 (7) 299, , XX Total Current Assets 31,059, ,959, Noncurrent Assets 1510 Financial Asset at Fair Value based on Profit and Loss- Noncurrent 1523 Financial Assets Ready for Sale- Noncurrent 1543 Monetary Assets Measured by Cost-Noncurrent 1550 Investment using the Equity Method 1600 Real Estate, Factory, and Equipment 1760 Investment Type Real Estate Net Amount 6 (2) & 8 6 (8) & 8 6 (9) & 8 6 (10) & 8 6 (11) & 8 6 (12) & 8 78,253-77,992-1,212, ,564, , , ,029, ,244, ,513, ,742, ,957, ,043, Intangible Assets 6 (13) 2,240, ,302, Deferred Tax Assets 6 (31) 104, , Security Fund Withdraw 7 & 9 567, , Other Financial Assets- Noncurrent 8 564, , Other Noncurrent Assets-Other 78,857-80,214-15XX Total Noncurrent Assets 20,225, ,516, XXX Total Assets $ 51,284, $ 54,475, (Continued Next Page) 18

21 Prince Housing & Development Corporation and its Subsidiaries Consolidated Asset Balance Sheet 2016 and December 31, 2015 Unit: NT$1,000 December 31, 2016 December 31, 2015 Liabilities and Equity Note Amount % Amount % Current Liabilities 2100 Short-term Borrowings 6 (14) & 8 $ 2,275,659 5 $ 2,626, Payable Short-term Bills 6 (15) & 8 489, ,059, Bills Payable 57,872-26, Accounts Payable 2,961, ,198, Payable Construction Contract 6 (5) Fund 223, , Other Payable Funds 1,155, ,357, Other Payable Funds- 7 Stakeholders 701, , Current Income Tax Liabilities 185,206-96, Advance Payment 6 (16) 1,387, ,875, Long-term liabilities due within 6 (17) (18) & 8 one (1) year or one business cycle 3,322, , Other Current Liabilities-Other 50,716-20,647-21XX Total Current Liabilities 12,812, ,410, Noncurrent Liabilities 2530 Corporate Bonds 6 (17) 2,500, ,500, Long-term Loans 6 (18) & 8 9,797, ,019, Debt Preparation-Noncurrent 6 (19) 75,207-84, Deferred Income Tax Liabilities 6 (31) 345, , Long-term Payable Bills and 7 Funds 711, ,385, Confirmed Net Welfare Liabilities 6 (20) -Noncurrent 91, , Security Fund Deposit 135, , Other Noncurrent Liabilities- 6 (10) Other 189, ,527-25XX Total Noncurrent Liabilities 13,845, ,890, XXX Total Liabilities 26,657, ,301, Interests Belonging to the Owners of the Parent Company Capital Shares 3110 Ordinary Share Capital 6 (21) 16,233, ,233, Capital Reserve 6 (22) 3200 Capital Reserve 2,260, ,260,513 4 Retained Earnings 6 (23) (31) 3310 Statutory Surplus Reserve 1,644, ,420, Undistributed Surplus 3,101, ,508,400 6 Other Interests 6 (24) 3400 Other Interests 1,058, ,409, Treasury Stock 6 (21) ( 1,003 ) - ( 1,003 ) - 31XX Total Interests Belonging to the Owners of the Parent Company 24,296, ,831, XX Non-controlling Interests 330, , XXX Total Interests 24,627, ,174, Significant, Liable, and Unidentified Contract Commitments 9 3X2X Total Liabilities and Equity $ 51,284, $ 54,475, Please refer to the accompanying notes of the Consolidated Financial Statements and the audit report file by Accounts Jian-Zhi Wu and Yi- Zhang Lin of PwC Taiwan on March 22, Chairman: Cheng, Kao-Hui Executive Manager: Hsieh, Ming-Fan Head Accountant: Tai, Ta-Chang 19

22 Prince Housing & Development Corporation and its Subsidiaries Consolidated Comprehensive Income Statement 2016 and from January 1, 2015 to December 31, 2015 Unit: NT$1,000 (Earnings Per Share is in NT$1.0) Item Note Amount % Amount % 4000 Operating Income 6 (26) & 7 $ 12,060, $ 16,108, Operating Costs 6 (6) (30) ( 8,124,458 ) ( 67) ( 10,933,346) ( 68) 5900 Operating Margin 3,935, ,175, Operating Expenses 6 (30) & Marketing Expenses ( 466,748 ) ( 4) ( 669,420) ( 4) 6200 Management Expenses ( 1,955,363 ) ( 16) ( 2,054,341) ( 13) 6000 Total Operating Expenses ( 2,422,111 ) ( 20) ( 2,723,761) ( 17) 6900 Operating Interest 1,513, ,451, Non-operating Income and Expenditure 7010 Other Incomes 6 (27) 301, , Other Benefits and Losses 6 (2) (28) 214, , Financial Costs 6 (6) (29) ( 243,079 ) ( 2) ( 335,166) ( 2) 7060 Parts of Profits or Losses from the Affiliated Enterprises and Joint Venture Recognized via the Equity Method 6 (10) 119, , Total Non-operating Income and Expenditure 391, , Pre-tax Net Profit 1,905, ,521, Income Tax Expense 6(31) ( 306,469 ) ( 3) ( 288,092) ( 2) 8200 Net Profit for the Period $ 1,599, $ 2,233, (Continued Next Page) 20

23 Prince Housing & Development Corporation and its Subsidiaries Consolidated Comprehensive Income Statement 2016 and from January 1, 2015 to December 31, 2015 Unit: NT$1,000 (Earnings Per Share is in NT$1.0) Item Note Amount % Amount % Other Comprehensive Profits or Losses Items Not Reclassified as Profits or Losses 8311 Re-measurement Number of 6 (20) the Confirmed Welfare Plan ($ 8,112 ) - ($ 12,909) Parts of Profits or Losses from the Affiliated Enterprises and Joint Venture Recognized via the Equity Method-Items Not Reclassified as a Profits or Losses ( 1,484) Income Tax Related to Items 6(31) that may be Reclassified Total Amount for Items Not Reclassified as Profits or Losses ( 7,136 ) - ( 14,393) - Items that may Subsequently be Reclassified as Profits or Losses: 8361 Exchange Differences based on Financial Statements Calculated by Foreign Operators ( 1,754 ) Unrealized Profits or Losses of the Financial Assets Prepared 6 (8) to be Sold ( 349,085 ) ( 3) ( 27,126) Total Amount for Items that may Subsequently be Reclassified as Profits or Losses ( 350,839 ) ( 3) ( 27,110) Other Comprehensive Profits or Losses (Net Amount) ($ 357,975 ) ( 3) ($ 41,503) Total Consolidated Profits or Losses for the Current Period $ 1,241, $ 2,192, Net profits (losses) attributable to: 8610 Parent Company Owners $ 1,609, $ 2,237, Non-controlling Interests ( 9,974 ) - ( 4,232) - $ 1,599, $ 2,233, Total consolidated gains and losses attributable to: 8710 Parent Company Owners $ 1,251, $ 2,196, Non-controlling Interests ( 9,974 ) - ( 4,232 ) - $ 1,241, $ 2,192, Earnings Per Share 6 (32) 9750 Basic $ 0.99 $ Diluted $ 0.98 $ 1.36 Please refer to the accompanying notes of the Consolidated Financial Statements and the audit report file by Accounts Jian-Zhi Wu and Yi-Zhang Lin of PwC Taiwan on March 22, Chairman: Cheng, Kao-Hui Executive Manager: Hsieh, Ming-Fan Head Accountant: Tai, Ta-Chang 21

24 Prince Housing & Development Corporation and its Subsidiaries Consolidated Statement of Changes in Equity 2016 and from January 1, 2015 to December 31, 2015 Unit: NT$1,000 Note Ordinary Share Capital Capital Reserve Interests Belonging to the Owners of the Parent Company Retained Earnings Other Interests Foreign Operating Organizations Exchange Differences Calculated based on Undistributed Financial Surplus Statements Statutory Surplus Reserve Surplus Prepared Sales Funds Unrealized Financial Assets Current Profits or Losses Treasury Stock Total Noncontrolling Interests Total Amount of Equity 2015 Balances as of January 1, 2015 $ 16,623,418 $ 1,929,793 $ 1,180,924 $ 2,854,738 $ 1,690 $ 1,434,529 ($ 60,440 ) $ 23,964,652 $ 346,292 $ 24,310, Earnings Assignment and Distribution: Statutory Surplus Reserve ,872 ( 239,872 ) Cash Dividends 6 (23) ( 1,329,873 ) ( 1,329,873 ) - ( 1,329,873 ) 2015 Annual Net Profit 6 (32) ,237, ,237,800 ( 4,232 ) 2,233, Other Comprehensive Profits or Losses 6 (8) (20) (24) ( 14,393 ) 16 ( 27,126 ) - ( 41,503 ) - ( 41,503 ) Treasury Stock Transactions 6 (21) (22) ( 390,157 ) 330, , Non-controlling Interest Changes ,435 1,435 Balances as of December 31, 2015 $ 16,233,261 $ 2,260,513 $ 1,420,796 $ 3,508,400 $ 1,706 $ 1,407,403 ( $ 1,003 ) $ 24,831,076 $ 343,495 $ 25,174, Balances as of January 1, 2016 $ 16,233,261 $ 2,260,513 $ 1,420,796 $ 3,508,400 $ 1,706 $ 1,407,403 ( $ 1,003 ) $ 24,831,076 $ 343,495 $ 25,174, Earnings Assignment and Distribution: Statutory Surplus Reserve ,780 ( 223,780 ) Cash Dividends 6 (23) ( 1,785,659 ) ( 1,785,659 ) - ( 1,785,659 ) 2016 Net Profit 6 (32) ,609, ,609,189 ( 9,974 ) 1,599, Other Comprehensive Profits or Losses 6 (8) (20) (24) ( 7,136 ) ( 1,754 ) ( 349,085 ) - ( 357,975 ) - ( 357,975 ) Non-controlling Interest Changes ( 2,859 ) ( 2,859 ) Balances as of December 31, 2016 $ 16,233,261 $ 2,260,513 $ 1,644,576 $ 3,101,014 ( $ 48 ) $ 1,058,318 ( $ 1,003 ) $ 24,296,631 $ 330,662 $ 24,627,293 Please refer to the accompanying notes of the Consolidated Financial Statements and the audit report file by Accounts Jian-Zhi Wu and Yi-Zhang Lin of PwC Taiwan on March 22, Chairman: Cheng, Kao-Hui Executive Manager: Hsieh, Ming-Fan Head Accountant: Tai, Ta-Chang 22

25 Prince Housing & Development Corporation and its Subsidiaries Consolidated Cash Flow Statement 2016 and from January 1, 2015 to December 31, 2015 Unit: NT$1,000 Note Cash Flow from Operating Activities Pre-tax Net Profit for this Period $ 1,905,684 $ 2,521,660 Adjusted Items Revenue Expense Items Net Loss of Financial Assets (Interests) Measured 6 (2) (28) by Financial Asset at Fair Value 15,349 ( 79,305 ) Bad Debt Costs Transfered into Income 6(3) - ( 196 ) Bad Debt Costs Listed 6(4) Written-off of Unrecoverable Funds 6 (3) (4) ( 344 ) ( 3,171 ) Parts of Profits from the Affiliated Enterprises and 6 (10) Joint Venture Recognized via the Equity Method ( 119,118 ) ( 11,610 ) Losses from Disposition or Scrapping of Real Estate, Factory, or Equipment 2,438 2,833 Losses from Disposal of Investment Type Real Estate (Interests) ( 909 ) 4,278 Real Estate, Factory, and Equipment Transfer Cost Amount Depreciation Expenses 6 (30) 373, ,071 Amortization Expenses 6 (13) (30) 62,123 61,844 Interest Expenses 6 (29) 241, ,965 Interest Income 6 (27) ( 10,033 ) ( 8,896 ) Dividend Income 6 (27) ( 118,461 ) ( 169,518 ) Unrealized Foreign Exchange Losses (Interest) 7,185 ( 14,676 ) Changes in Assets/Liabilities Related to Business Activities Changes in Net Asset Related to Business Activities Financial Asset at Fair Value based on Profit and Loss-Current ( 200,000 ) ( 162,335 ) Bills Receivable 33,235 13,378 Accounts Receivable 1,038,969 3,496,680 Receivable Accounts-Stakeholders 405,986 11,783 Receivable Construction Contract Fund 289,208 ( 392,068 ) Other Receivable Funds 47, ,741 Inventory ( 60,964 ) ( 1,346,494 ) Prepayments 88, ,206 Other Current Assets-Other 42, ,932 Other Noncurrent Assets-Other 1,357 3,263 Changes in Net Liabilities Related to Business Activities Bills Payable 31,173 4,672 Accounts Payable ( 1,236,994 ) ( 63,401 ) Payable Construction Contract Fund ( 282,355 ) 154,478 Other Payable Funds ( 194,117 ) 260,236 Other Payable Funds-Stakeholders ( 86,365 ) ( 24,996 ) Advance Payment ( 488,007 ) ( 1,161,673 ) Other Current Liabilities-Other 30,069 ( 92,660 ) Debt Preparation-Noncurrent ( 9,310 ) 2,797 Long-term Payable Bills and Funds ( 10,907 ) ( 9,928 ) Confirmed Net Welfare Liabilities-Noncurrent ( 57,518 ) ( 2,709 ) Other Noncurrent Liabilities-Other ( 17,986 ) ( 95 ) Cash Inflows Generated from Operations 1,723,585 4,199,316 Interests Received 10,033 9,989 Dividends Received 356, ,558 Interests Paid ( 249,419 ) ( 331,385 ) Income Tax Paid ( 285,535 ) ( 395,077 ) Net Cash Inflow from Operating Activities 1,555,545 3,693,401 (Continued Next Page) 23

26 Prince Housing & Development Corporation and its Subsidiaries Consolidated Cash Flow Statement 2016 and from January 1, 2015 to December 31, 2015 Unit: NT$1,000 Note Cash Flows from Investment Activities Other Financial Assets-Current Reduction $ 1,047,784 $ 799,254 Financial Assets Ready for Sale-Noncurrent Capital Reduction Fund Return 1,577 - Financial Assets Ready for Sale-Noncurrent Reduction 1,607 31,473 Financial Assets Reduction Return Funds Measured by Cost 9,729 - Investment Reduction Returned Funds using the Equity Method 90,022 56,808 Real Estate, Factory, and Equipment Obtained 6 (11) ( 61,479 ) ( 58,695 ) Disposition Price of Real Estate, Factory, and Equipment Investment Type Real Estate Net Amount Obtained 6 (12) - ( 1,084 ) Disposal of Investment Type Real Estate Prices 1,554 4,518 Increase of Intangible Assets 6(13) ( 516 ) ( 1,372 ) Security Fund Withdraw Reduction (Increase) 59,605 ( 90,207 ) Other Financial Assets-Noncurrent Reduction 273,817 73,958 Net Cash Inflow from Investment Activities 1,424, ,717 Cash Flows from Fund Raising Activities Decrease of Short-term Borrowings ( 350,714 ) ( 679,211 ) Decrease of Payable Short-term Bills ( 570,117 ) ( 1,043,456 ) Long-term Loan Repayment ( 10,875,088 ) ( 4,959,670 ) Long-term Loan Borrowing 11,500,557 5,194,003 Reduction of Long-term Payable Bills and Funds ( 45,091 ) ( 61,339 ) Security Fund Deposit Decrease ( 369 ) ( 828 ) Issuance of Cash Dividends 6 (23) ( 1,785,659 ) ( 1,329,873 ) Non-controlling Interest Changes ( 2,859 ) 1,435 Net Cash Outflow from Fund Raising Activities ( 2,129,340 ) ( 2,878,939 ) Consolidated Exchange Rate Impacts ( 2,530 ) 5,766 Amounts of Cash and Cash Equivalents Increased for this Period 848,164 1,634,945 Cash and Cash Equivalent Balance at the Beginning of the Period 3,800,751 2,165,806 Cash and Cash Equivalent Balance at the End of the Period $ 4,648,915 $ 3,800,751 Please refer to the accompanying notes of the Consolidated Financial Statements and the audit report file by Accounts Jian-Zhi Wu and Yi-Zhang Lin of PwC Taiwan on March 22, Chairman: Cheng, Kao-Hui Executive Manager: Hsieh, Ming-Fan Head Accountant: Tai, Ta-Chang 24

27 Accountant Audit Report To: Prince Housing & Development Corporation: Audit Opinion Attachment 4 (2017) Financial Report No The audit of the Individual Balance Sheets for 2016 and dated December 31, 2015 as well as the Individual Income Statements, Individual Equity Change Tables, Individual Cash Flow Statements, and Individual Financial Statements for 2016 and from January 1, 2015 to December 31, 2015 (including the summary of major accounting policies) for Prince Housing & Development Corporation (Prince Co.) has been completed by this accountant. In the opinion of this accountant and in accordance with this accountant's inspection results as well as the inspection results from other accountants (please reference the Other Section), all major aspects of the aforesaid Individual Financial Statements are formulated in compliance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and are sufficient to present the individual financial status of Prince Co. for 2016 and December 31, 2015 as well as the Individual Financial Performance and Individual Cash Flow for 2016 and from January 1, 2015 to December 31, Basis for the Audit Opinion This accountant has implemented the audit operations pursuant to the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants as well as the generally accepted auditing standards of R.O.C. This accountant has further explained the liabilities of accounting under these criteria in the Responsibility sections of the Individual Financial Statements Audit Report issued by the accountant. This accountant is an independent auditor of this accounting firm, and is subject to the code of professional ethics of R.O.C. for accountants who have maintained detached and independent from Prince Co. and fulfilled other responsibilities provided by the code. According to this accountant's inspection results as well as the inspection results from other accountants, this accountant believes that sufficient and appropriate audit evidence has been obtained to serve as the basis for expressing the opinion of this audit. Key Audit Items The key audit items refer to the most important audit matters for the 2016 Individual Financial Statements of Prince Co. under the professional judgment of this accountant. Such items are expressed throughout the overall audit of the Individual Financial Statements and the process of formulating the audit opinion. This accountant does not express an independent opinion regarding these matters. 25

28 Real Estate Revenue Recognition Time Frame Item Description Please refer to Note 4 (29) of the Individual Financial Statements for the accounting policy on sales revenue, and refer to Note 6 (25) of the Individual Financial Statements for the accounting items. In 2016, the real estate sales revenues of Prince Co. were NT$5,274,930,000; accounting for 87.85% of the operating income. Real estate sales revenues of Prince Co. were recognized during transaction completion and actual housing transfer as carry forward costs as well as gains and losses. Because the real estate sales subjects for Prince Co. are scattered, the process for the various departments of the Company to transmit the housing transfer and escrow related information generally involves numerous people and often cause the income recognition time frame to become inappropriate when it is close to the end of the financial reporting period. Therefore, this accountant will treat the housing sales revenue recognition time frame as one of the key audit items this year. Response Audit Procedures This accountant has implemented the primary response procedures for the key audit items mentioned above as follows: 1. Understand and evaluate the internal control procedures adopted the real estate sales revenue recognition by the management level and test whether the real estate sales revenue recognition time frame is effectively executed, including inspecting the correctness of the dates of the transfer and escrow related files and the account entry point. 2. This accountant has also conducted the real estate sales transaction execution cut-off test for a certain period before and after the end near the financial reporting period including verifying land transcripts, housing ownership and client's signature for housing transfer consent, and other relevant evidentiary documents to ensure that the real estate sales revenues have been recorded in the appropriate period. Investment Using the Equity Method-Construction Revenue Recognized from the Subsidiary Ta Chen Construction & Engineering Corp. of the Subsidiary Chengshi Investment Holdings Co., Ltd. - Evaluation on the Degree of Completion Item Description Please refer to Note 4 (13) of the Individual Financial Statements for the accounting policy related to the investments adopted using the equity method, and refer to Note 6 (9) of the Individual Financial Statements for the accounting items. Ta Chen Construction & Engineering Corp. is a key subsidiary of Prince Co. owned by 26