Annual Report 2020 CONTINENTAL HOLDINGS CORPORATION

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Annual Report 2020 CONTINENTAL HOLDINGS CORPORATION TSE : 3703 Printed on April 3, 2021 CONTINENTAL HOLDINGS CORPORATION Annual Report 2020 ( Translation) Taiwan Stock Exchange Market Observation Post System: mops.twse.com.tw CHC website: www.Continental-holdings.com CHC Spokesperson Name: Kris Lin (Asst. Manager) Tel:(02)3701-2000 Email:[email protected] CHC Deputy Spokesperson Name: Emily Liu (Vice President) Tel:(02)3701-2000 Email:[email protected] Continental Holdings Corporation Address: No. 95 Dun Hua S. Road, Sec 2, Taipei, Taiwan Tel: (02)3701-2000 Website: http:// www. Continental-holdings.com Members of Continental Holdings Corporation Continental Engineering Corporation Address: No. 95 Dun Hua S. Road, Sec 2, Taipei, Taiwan Tel: (02)3701-1000 Website: http://www.continental-engineering.com Continental Development Corporation Address: No. 95 Dun Hua S. Road, Sec 2, Taipei, Taiwan Tel: (02)3701-3000 Website: https://www.continental-propertydevelopment.com HDEC Corporation Address: No. 95 Dun Hua S. Road, Sec 2, Taipei, Taiwan Tel: (02)3701-5000 Website: http:// www.hdec-corp.com Common Share Transfer Agent and Registrar Company: The Transfer Agency Department of Taishin Bank Address: B1F., No. 96, Sec. 1, Jianguo N. Rd., Taipei City ,Taiwan, R.O.C. Tel: 02-2504-8125 Website: http://www.taishinbank.com.tw Certified Public Accountants Auditors: Chung-Che Chen, Ti- Nuan, Chien Auditors Company: KPMG Address: 68F, No. 7, Xinyi Rd., Taipei City, Taiwan, R.O.C. Website: http://www.kpmg.com.tw Tel: 02-8101-6666 Public listings and securities trading in overseas stock exchanges: None Note: The English version is a translation of Chinese version. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail. Contents 04 Letter to shareholders 05 Company Overview 05 Founding and History 09 Key Subsidiaries and History 09 Organiztion System 09 CHC Org chart 10 Major Business Units and Functions 12 Board Members and Management Team 12 Information Regarding Board Members 16 Information Regarding Management Team 18 Remuneration to Directors, CEO and Vice Presidents 20 Total remuneration, as a percentage of net income stated, paid by the Company and by each other company included in the consolidated financial statements during the past two fiscal years to Directors, supervisors, and executives above the grade of vice president 21 Corporate Governance Operations 21 Board of Directors Operations 22 Audit Committee operations 25 Taiwan Corporate Governance Implementation as Required by Taiwan Financial Supervisory Commission 33 Compensation Committee Members’ Professional Qualifications and Independence Analysis 33 Compensation Committee Meeting Status 35 Social Responsibility Implementation Status as Required by the Taiwan Financial Supervisory Commission 40 Taiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory Commission 42 Corporate Governance Guidelines, Regulations, and methods to access those information 42 Other Important Information for Further Understanding Implementation Status of Corporate Governance 43 Internal Control System Execution Status 44 Details of penalties, major faults, and improvement measures against the Corporation or internal staffs due to violations of legal requirements, or carried out by the Corporation against its own staffs due to violations of internal control regulations during the past year and as of Publication date of the Annual Report 44 Major Resolutions of Shareholders’ Meetings and the Board of Directors during current year and up to the publication date of the annual report 45 Major Issues of Record or Written Statements Made by Any Director Dissenting to Important Resolutions Passed by the Board of Directors during 2020 and as of the Date of this Annual Report 01 45 Resignation or Dismissal of Chairman, President, and Heads of Accounting, Finance, Internal Audit, Corporate Governance Officer and R&D during 2019 and as of the Date of thisAnnual Report 46 Information on CPA Professional Fees 46 Replacement of CPA 47 CHC’s Chairman, Chief Executive Officer, and Managers in Charge of Its Finance and Accounting Operations Did Not Hold Any Positions within TSMC’s Independent Audit Firm or Its Affiliates in the Most Recent Year 48 Net Change in Shareholding by Directors, Management and Shareholders with 10% Shareholdings or More 49 Relationship among the Top Ten Shareholders 50 The total number of shares and total equity stake held in any single enterprise by the company, its directors, supervisors, managers, and any companies controlled either directly or indirectly by the Company 50 Capital Overview 50 Capital and Shares 50 Capitalization 50 Status of Shareholders 51 Distribution Profile of Share Ownership 51 Major Shareholders 52 Market Price, Net Worth, Earnings, and Dividends per Share 52 Dividend Policy and Distribution of Earnings 53 Impact to 2020 Business Performance and EPS Resulting from Stock Dividend Distribution 53 Remuneration to Directors and Compensation to Employees 53 Buyback of Common Stock 54 Corporate bond operations 54 Preferred Shares 54 Issuance of Global Depositary Receipts 54 Status of Employee Stock Option Plan 54 Status of New Share Issuance in Connection with Mergers and Acquisitions 54 Financing Plans and Implementation 55 Operational Highlights 55 Business activities 55 Business areas 57 Industry Overview 60 Overview of Technology and R&D 60 Long and Short-term Business Development Plans 63 Market and Sales Overview 63 Market Analysis 65 Production Procedures of Main Products 02 66 Supply Status of Main Materials 66 Major customers in 2019 and 2020 68 Production in 2019 and 2020 68 Sales in 2019 and 2020 69 Employee Information 69 Environmental Protection Expenditure 70 Labor relations 73 Workplace Safety 75 Material Contracts 79 Financial Information 79 Condensed Balance Sheet and Statement of Comprehensive Income 82 Financial Analysis 85 Audit Committee’s Review Report 87 Independent Auditors’ Report 151 Parent Company Only Financial Statements Independent Auditors’ Report 189 The Impact of financial difficulties in the Company and its affiliates on the Company's financial situation 190 Review of Financial Conditions, Financial Performance 190 Financial Status 191 Financial Performance 191 Cash Flow, and Impact of Recent Years Major Capital Expenditures 192 Impact Posed by Material Capital Expenditure to Finance/Business in the Most Recent Year 192 The investment policy for the most recent year, major causes for profits or losses thereof, corrective measures, and investment plans in the next year 193 Analysis of Risk Management 195 Other important Matters 196 Special items to be included 196 Summary of affiliated companies 205 Private Placement Securities in 2020 and as of the Date of this Annual Report 205 Information on Shares Held or Sold by Subsidiaries in 2020 and the Date of this Annual Report 205 the Necessary Supplement 205 Any Events in 2020 and as of the Date of this Annual Report that Had Material Impacts on Shareholders’ Interests or Securities Prices as Stated in Item 3 Paragraph 2 of Article 36 of Securities and Exchange Law of Taiwan 03 Letter to shareholders Continental Holdings Corp. (CHC), despite faced with the industry environment and society impacted by COVID-19 pandemic in 2020, saw all three main businesses of Civil & Building Construction, Real Estate Development, and Environmental Project Development with significant increase in net operating profit thanks to the efforts of all employees and the support from business partners. CHC’s consolidated revenues of NT$21,689 million was slightly lower than the 2019 result of NT$22,665 million but consolidated gross margin was 15.2%, better than the 2019 result of 12.1%; operating profit was NT$1,762 million, up 33% from 2019. Net profit after tax reached NT$1,539 million in 2020 for an EPS of NT$1.87. This represented a significant increase from the previous year where net profit after tax was NT$97 million and EPS was NT$0.12. The Civil & Building Construction business has now accumulated a solid volume of backlog to meet revenue growth targets for the next few years. Major public sector projects now under construction include: “Taoyuan MRT Green Line GC01 Contract”, “Taoyuan MRT Green Line GC03 Contract”, and “Construction of Public Housing at Nangang Depot Site in Nangang District, Taipei City.” Future focus include railroad, high-class housing, and commercial building construction projects. We also continue evaluating the development of new markets, leveraging our core abilities and solid credentials in construction in order to expand new sectors of growth. For the Real Estate Development business, “La Bella Vita” has been completed and started to settle in 2020. Presale projects “Drawing the Dream Life”, “Timeless and Modern Expression”, “Tianjin Street Project” and “Arranging New Asia Bay” all saw strong interests from market in 2020, and are expected to drive profit growth upon their completion in the future. In 2021, the Real Estate Development business is planning to launch four new residential projects, and the iconic project “Bountiful Journey” is also scheduled for completion in the second half of the year. Overseas developments in San Francisco, U.S.A and Kuala Lumpur, Malaysia, are expected to be completed in 2021 as well. The Environmental Project Development business was awarded with “Tongluo Science Park Wastewater Treatment Plant Phase II EPC Project” and “Tainan City Anping Reclaimed Water Plant New Construction
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