Stock Code: 2208
CSBC CORPORATION, TAIWAN.
2018 Annual Report
Notice to readers
This English-version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English and Chinese versions, the Chinese version shall prevail.
Taiwan Stock Exchange Market Observation Post System: http://newmops.twse.com.tw CSBC Annual Report is available at : http://www.csbcnet.com.tw/Service/Investor Printed on 06 10, 2019
Spokesperson Headquarters and Plant Name: Chou, Chih-MingL Headquarters Title: Vice President Address: No. 3, Jhonggang Rd. Tel: 886-7-8059888 Siaogang Dist. Kaohsiung 81234, E-mail: Taiwan (R.O.C.) [email protected] Tel: 886-7-8059888
Deputy Spokesperson Plant-1 Name: Chen, Hui-Shan Address: No. 3, Jhonggang Rd. Title: Vice President Siaogang Dist. Kaohsiung 81234, Tel: 886-7-8059888 Taiwan (R.O.C.) E-mail: Tel: 886-7-8059888 [email protected] Plant-2 Stock Transfer Agent Address: No. 224, Ho-1 Rd. Ho-Ping Fubon Securities Co., Ltd. Island. Keelung 20203, Taiwan (R.O.C.) Address:169 Section 4 Jen Ai Rd. Tel: 886-2-24631021 Taipei 10686 Taiwan (R.O.C.) Tel: 886-2-23611300 Website: http//www.fbs.com.tw
Auditors PricewaterhouseCoopers Taiwan Auditors: Wang, Guo-Hua, Wu, Chien-Chih. Address: 22F, 95 Minzu 2nd Rd. Kaohsiung, 80048 Taiwan (R.O.C.) Tel.: 886-7-2373116 Website: http//www.pwc.tw
Corporate Website http://www. Csbcnet.com.tw
Contents
I. Letter to Shareholders ...... 3 II. Company Profile 2.1 Date of Incorporation ...... 6 2.2 Company History ...... 6 III. Corporate Governance Report 3.1 Organization ...... 7 3.2 Directors, Supervisors and Management Team ...... 8 3.3 Implementation of Corporate Governance ...... 29 3.4 Information Regarding the Company’s Audit Fee and Independence ...... 76 3.5 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders ...... 77 3.6 Relationship among the Top Ten Shareholders ...... 79 3.7 Ownership of Shares in Affiliated Enterprises ...... 80 IV. Capital Overview 4.1 Capital and Shares ...... 81 4.2 Bonds ...... 85 4.3 Global Depository Receipts ...... 85 4.4 Employee Stock Options ...... 85 4.5 Status of New Shares Issuance in Connection with Mergers and Acquisitions ...... 85 4.6 Financing Plans and Implementation ...... 85 V. Operational Highlights 5.1 Business Activities ...... 86 5.2 Market and Sales Overview ...... 95 5.3 Human Resources ...... 102 5.4 Environmental Protection Expenditure ...... 102 5.5 Labor Relations...... 103 5.6 Important Contracts ...... 104 VI. Financial Information 6.1 Five-Year Financial Summary ...... 110 6.2 Five-Year Financial Analysis ...... 110 6.3 Supervisors’ /Audit Committee’s Report in the Most Recent Year ...... 114 6.4 Financial Statements for the Years Ended December 31, 2016 and 2015…………………………… 116 6.5 Consolidated Financial Statements for the Years Ended December 31, 2016 and 2015…………………………………………………………………………………………………………………..……….116 VII. Review of Financial Conditions, Operating Results, and Risk Management 7.1 Analysis of Financial Status ...... 117 7.2 Analysis of Operation Results ...... 118 7.3 Analysis of Cash Flow ...... 118 7.4 The impact of the recent major capital expenditure on the financial business ...... 120 7.5 Financial impact on the Company for the year ...... 121 7.6 Analysis of Risk Management ...... 121
1 VIII. Special Disclosure 8.1 Summary of Affiliated Companies ...... 128 8.2 Private Placement Securities in the Most Recent Years ...... 130 8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years ...... 131
2 I. Letter to Shareholders
Dear Shareholders,
First of all, I would like to thank you for your continuing support throughout the year. CSBC has responded to the changing business climate by adopting an aggressive stance in strengthening our competitiveness. Total consolidated revenue for 2018 was NT$13,012,326 thousands, a 20.68% decrease compared with NT$16,404,344 thousands in 2017. Net loss decreased to NT$3,100,085 thousands, compared with 2017 net loss of NT$5,883,199 thousands.
The results of our operating performance in 2018 and business plan for 2019 are illustrated as follows:
Operating Performance in 2018
1. Consolidated financial results Unit: NT$ thousands Percent Change 2018 2017 （%） Net sales 13,012,326 16,404,344 -20.68% Gross profit(loss) -2,593,864 -5,721,888 54.67% Operating -3,417,597 -6,228,965 45.13% income(loss) Pre-tax income(loss) -3,338,941 -6,353,042 47.44% Net income(loss) -3,100,085 -5,883,199 47.31% Net sales amounted to NT$13,012,326 thousands and gross loss came in at NT$2,593,864 thousands in 2018. Net loss decreased by more than 47.31% from 2017.
2. The description of Orderbook (1) The orderbook of CSBC As of the end of December, 2018 we had 18 merchant-ship orders (18 in Kaohsiung) and 23 official-ship orders (5 in Kaohsiung plus 18 in Keelung). The orderbook in Kaohsiung factory is already planned to delivery in September of 2025, and that in the Keelung factory is in October of 2023. And in October of 2018 CSBC signed 60 underwater pin-piles of offshore wind power. (2) Ship deliveried There are 8 vessels in Kaohsiung factory (one semi-submersible vessel and seven 2,800TEU container vessels) and one is in Keelung factory (1,800 TEU container vessel).
3 3. Research and development status In 2018, CSBC invested a total of NT$117,000 thousands in R&D for the ship researches as well as the development of new products. Having successfully 17 developed projects in 2018, it goes into application for CSBC. CSBC is committed to investing in long-term growth by delivering continuous innovations.
4. Major investment status In 2018, CSBC invested a total of NT$40.32 billions in major investments including the replacement of GOC& LLC-6, the enhancement of capacity of the RS31 area of the pier, the construction of 140-meter barge, multi-purpose steel production line.
Business Plan for 2019
According to journal reports, the shipping and shipbuilding market in 2019 will gradually balance between supply and demand, and the data of various indicators are tending to be optimistic and conservative.
The production volume in 2019 is 244,873 CGT, which is about 36.2% higher than in 2018. CSBC will follow the national shipbuilding policy and actively strive for the IDS business and the patrol frigate business; CSBC is expected to undertake the business of offshore wind farm turnkey project and anti-corrosion engineering, in addition to the barge and underwater basic structure business.
In the 2019 Annual Outlook Meeting, CSBC formulates the EP10 plan, and develops the company's nine major foci under the belief "inheriting shipbuilding, guarding the ocean" and principles "turning losses into profits, profiting new businesses, and reengineering". The nine foci are as below：
1. Improve production and administrative efficiency 2. Adher to CKP-81 3. Strengthen to add profit and reducing cost 4. On-time production of offshore structure 5. Contract for offshore engineering business 6. Contract and execution of repaired ship business 7. Complete the project of investment plan 8. The adjustment of organization and plant planning 9. Completion Inheritance and human resource CSBC continues to upgrade productivity, profit & performance. Therefore, we expect to achieve goals.
4 Finally, CSBC is moving towards stable operation and taking the three major businesses of merchant ship, military naval ship and offshore wind power, and using relevant measures to promoting operational performance. It is expected to create more core competitiveness and expand overall benefit. Let CSBC be the sustainable enterprise and create maximum value for shareholders.
Sincerely yours,
Chairman President CHENG,WEN-LON TSENG,KUO-CHENG
5 II Company Profile 2.1 Date of Incorporation: November 07, 1973 2.2 Company History
Year Milestones 1973 In July, "China Shipbuilding Company" has established, in November to obtain approval to set up registration. 1974 January, "China Shipbuilding Company" started construction in Kaohsiung, and in May 31, 1976 to complete the construction. 1977 In July, the "China Shipbuilding Company" has changed to "state-owned". In December, it completed the construction of Taiwan's first 440,000 DWT super-large tanker, the Bo Ma Endeavor. 1978 In January, "China Shipbuilding Corporation" and "Taiwan Shipbuilding Company" were merged and reorganized to operate as "China Shipbuilding Company" with Taipei Office, Kaohsiung Plant and Keelung Plant. In July, it completed the construction of Taiwan's second 445,000 DWT super-large tanker, the "Bo Ma Enterprise". 1996 In January, Taipei company officially moved to Kaohsiung, Kaohsiung factory office and Kaohsiung. 2000 In line with the business development and the need for privatization, the Company and Kaohsiung General Plant from May 1 of the same year, staff and business mergers. 2008 April 1, the Securities and Exchange Bureau approved the first time for the company to apply for public offering of shares declaration. July 30 to complete the application to the Stock Exchange listed delivery. December 22 The Company listed and completed the privatization. 2010 January 14 by the Republic of China annual top ten enterprises Golden Torch Award. 2013 On November 29, he was awarded the "2013 Taiwan Enterprise Sustainability Award" - "Taiwan Top50 Enterprise Sustainability Report Award" manufacturing excellence. 2015 On October 30, he was awarded the "12th National Brand Yushan Award" - "Outstanding Enterprise" National Award; December 21 was awarded the "24th Taiwan Excellence Award." 2016 .November 20, 2016 was awarded the "Taiwan Enterprise Sustainability Report Award" traditional manufacturing silver medal; December 23, 2016 was awarded the "Sustainable Governance Practice Award." .Achieved "2016 TIPS basic verification" and the 18th outstanding enterprise Jinfeng Award: Ten outstanding innovation research and development. 2017 ▓Awarded the 18th Outstanding Enterprise Golden Summit Award: Top Ten Outstanding Innovation R&D. ▓Pass the 106-year TIPS Class A verification login certificate. 2018 The 27th Taiwan Excellence Award and the Bay Boutique Gold Award. 6 I. Corporate Governance Report 3.1 Organization 3.1.1 Organizational Chart
Note：Issued by the Management Office at 1086650336 on March 20, 2019.
3.1.2 Major Corporate Functions：Please refer to page 11 of the Chinese annual
7 3.2 Directors, Supervisors and Management Team 3.2.1 Directors and Supervisors 3.2.1.1 The 16th Directors 04 15, 2019 Executives, Directors Spouse & Shareholding or Supervisors who Nationality/ Date Shareholding Current Date Term Minor by Nominee Other are spouses or Title Country of Name First when Elected Shareholding Experience（Education） Elected (Years) Shareholding Arrangement Position within two degrees Origin Elected of kinship Shares ％ Shares ％ Shares ％ Shares ％ Title Name Relation CHENG, .Deputy Mayor, Kaohsiung City WEN-LON Government Republic of 06 23, 11 30, 249,612 33.5 105,070 28.1 Chairman of Chairman － － － － .Chairman of CSBC, Taiwan － － － China (Ministry of 2016 3 2007 CSBC, Taiwan Economic Affairs ,540 7% ,366 7% (Ph.D., University of Representative) Washington, USA)
TSENG, .Vice President of CSBC KUO-CHENG President of Republic of (Ministry of 08 01, 08 01, 249,612 33.5 105,070 28.1 (Master, Department of Director － － － － CSBC, － － － Economic Affairs 3 China 2017 2017 ,540 7% ,366 7% Shipbuilding Engineering, Taiwan Representative) National Taiwan University )
8 .Hechun Technical College President, Head of the National Department of Industrial Kaohsiung Engineering and Management, University of Huang, Kaohsiung University of Science and Republic of Ying-Fang 09 23, 09 23, 249,612 33.5 105,070 28.1 Applied Science and Technology Director － － － － － － － (Ministry of 3 Industrial China 2016 2016 ,540 7% ,366 7% Technology, Director of the Economic Affairs Engineering Representative) School of Nestle, Kaohsiung University of Applied Science and and Technology Management (University of Pearce, UK professor ) Counselor .Central Region Branch, adjunct Wu,Wen-Kuei Director (Notes 1) National Property Republic of 11 26, 11 26, 105,070 28.1 105,070 28.1 of Office the Director － － － － Administration Director － － － (Ministry of 3 Zhongxing China 2018 2018 ,366 7% ,366 7% Economic Affairs (Master of Department of New Village Representative) Earth Sciences, NCKU) Revitalization Project Deputy Lu,Wen-Tsan .Section chief of the Industrial Director of (Notes 2) Development Bureau (MOEA) the Republic of 11 26, 11 26, 105,070 28.1 105,070 28.1 Director (Ministry of － － － － (Master of International Industrial － － － China 2018 3 2018 Economic Affairs ,366 7% ,366 7% Economics, University of Developme Representative) Wyoming ) nt Bureau (MOEA) .Supervisor, Director and Managing Director, CSBC Labor Chairman of HUANG, JIH-CHIN Union Employees’ Republic of (Ministry of 06 23, 06 23, 249,612 33.5 105,070 28.1 Director － － － － (Graduated from Sheet Metal Welfare － － － China Economic Affairs 2016 3 2010 ,366 7% Representative) ,540 7% Department, National Tainan Committee, Industrial High School CSBC )
9 .Senior Technician, Keelung Chairman, LAN, SYU-CING Yard, CSBC Republic of (Ministry of 06 23, 11 11, 249,612 33.5 105,070 28.1 CSBC Director － － － － (Department of Navigation, － － － Economic Affairs 3 Keelung Yard China 2016 2005 ,540 7% ,366 7% Representative) National Keelung Maritime Labor Union Vocational High School) CPC Republic of (Corporation, 06 23, 07 30, 47,030, 6.33 23,777, 5.31 Director 3 － － － － － － － － － China Taiwan 2016 2009 687 % 487 % Representative) HWANG, .Assistant Vice President of Vice Republic of CHIEN-CHIH(Note 3) 7 1, 7 1, 18,414,6 7,751,3 2.08 China Steel Corporation President of Director 3 2.48% － － － － － － － China (China Steel 2018 2018 41 46 % (Bachelor of China Steel Representative) Economics,Tunghai University) Corporation Republic of Yue-Li Investment 06 23, 02 13, 5,246,3 0.71 2,652,4 0.59 Director 3 － － － － － － － － － China Corporation 2016 2009 36 % 11 % .Chairman, Industrial Labor Union, CSBC; Chairman, Employees’ Welfare Technician of HOU, DE-LONG Committee, CSBC; Chairman, CSBC; Republic of (Kaohsiung City 06 23, 06.04, 0.06 0.09 Kaohsiung City Confederation Representativ Director Representative of 3 460,804 411,438 － － － － － － － China Industrial Labor 2016 2007 % % of Trade Union ( Department e of Industrial Union of CSBC) of Electric Engineering, Labor Union, Kaohsiung Municipal CSBC Kaohsiung Industrial High School ) .Chairman of CSBC Corporation, Taiwan Staff Technician of HSIEH, KUO-JUNG CSBC; Welfare Committee Republic of (Kaohsiung City 06 23, 07 01, 0.09 0.09 Representativ Director Representative of 3 660,804 411,438 － － － － (Graduated from Department － － － China 2016 2014 % % e of Industrial Industrial Labor of Marine Engineering, Union of CSBC) Labor Union, Kaohsiung Institute of Marine CSBC Technology )
10 .Professor of Taiwan University Department of Engineering .Chun Yu Science and Marine Independent Republic of Independent 06 23, 06 23, Works & Director 3 0 0 0 0 － － － － Engineering － － － Director China LIN, HUI-JENG 2016 2016 Co.,Ltd. (Ph.D,Shipbuilding Engineering Chairman Institute, National Taiwan University) .Securities and futures management committee of the Professor, Independent Republic of Independent 06 23, 06 23, Ministry of Finance National Sun Director 3 0 0 0 0 － － － － － － － Director China LIEU, DER-MING 2016 2016 (.Ph.D.in Institute of Yat-sen Economics, Ohio State University University, USA) Notes:1.The former retired,and new president was appointed by the board of directors at November 26,2018. 2.The former retired,and new president was appointed by the board of directors at November 26,2018. 3.The former job changed,and new president was appointed by the board of directors at July 1,2018. 4.The tenure of the 16th Board of Directors is from June 23, 2016 to June 22, 2019.
11 ◆ Major shareholders of the institutional shareholders Feb. 1, 2019 Name of Institutional Stockholder Major Stockholder CPC Corporation, Taiwan Ministry of Economic Affairs 100% Ministry of Economic Affairs 20.00% Employee’s Stock Trust of China Steel Corporation 4.22% Transglory Investment Corporation 1.62% Vanguard Emerging Markets Stock Index Fund 1.19% China Steel Corporation Vanguard Total International Stock Index Fund 1.13% (Note) Winning Investment Corporation 1.01% Labor Insurance Fund 0.97% Norges Bank Investment Management 0.94% Public Service Pension Fund 0.94% Fubon Life Insurance Co., Ltd 0.85% Yue-Li Investment U-Ming Marine Transport Corporation 68.18% Corporation U-Ming Marine Transport (Singapore) Private Limited 31.82% Note 1: China Steel Corporation compiled the list of major stockholders on Dec. 31. 2018. Note 2: Yue-Li Investment Corporation compiled the list of major stockholders on Dec. 31. 2018.
◆ Major shareholders of the Company’s major institutional shareholders Dec. 31, 2018 Name of Institutional Shareholders Major Stockholder China Steel Express Corporation 49.89% Transglory Investment Chung Hung Steel Corporation 40.91% Corporation (Note1) China Steel Chemical Corporation 9.20% Gains Investment Corporation 49.00% Winning Investment Maruichi Steel Tube Ltd. 42.00% Corporation (Note1) Transglory Investment Corporation 9.00% Fubon Life Insurance Co., Fubon Financial Holding Co., Ltd. 100% Ltd (Note1) Asia Cement Corporation 39.25% Cathay life insurance co. ltd 4.66% U-Ming Marine Transport Fubon Life Insurance Co., Ltd 2.33% Corporation (Note 2) Management Board of the Public Service Pension Fund 1.96% Nan Shan Life Insurance Co., Ltd. 1.71% Yuan Ding Investment Corp. 1.05%
12 Name of Institutional Shareholders Major Stockholder Ding shen Investment Corp. 1.04% Vanguard Emerging Markets Stock Index Fund, A Series 1.03% Of Vanguard International Equity Index Funds Yu-yuan Investment Corp. 0.94% Asia Investment Corp. 0.92% U-Ming Marine Transport U-Ming Marine Transport Corporation 99.99% (Singapore) Private Limited Note1: China Steel Corporation compiled the list of major stockholders on August 1, 2017. Note2: U-Ming Marine Transport Corporation compiled the list of major stockholders on July 8, 2018.
13 Professional qualifications and independence analysis of directors and supervisors 04 15, 2019 Meet One of the Following Professional Qualification Requirements, Together Independence Criteria(Note) with at Least Five Years Work Experience An Instructor or A Judge, Public Have Work Experience in the Higher Position in a Prosecutor, Attorney, Areas of Commerce, Law, Number of Department of Certified Public Finance, or Accounting, or Other Public Commerce, Law, Accountant, or Other Otherwise Necessary for the Companies in Criteria Finance, Accounting, Professional or Technical Business of the Company Which the or Other Academic Specialist Who has Individual is Name Department Related Passed a National 1 2345678910Concurrently to the Business Examination and been Serving as an Needs of the Awarded a Certificate in Independent Company in a Public a Profession Necessary Director or Private Junior for the Business of the College, College or Company University Ministryof Economic Affairs Representative: V V V - - V V V V V V V - - CHENG, WEN-LON Ministry of Economic Affairs Representative: - - - - - V V V V V V V - - TSENG, KUO-CHENG Ministry of Economic Affairs Representative: - - - V - V V V V V V V - - Wu,Wen-Kuei Ministry of Economic Affairs Representative: - V - V - V V V V V V V - - Lu,Wen-Tsan Ministry of Economic Affairs Representative: V - V V - V V V V V V V - 2 Huang, Ying-Fang nistry of Economic Affairs Representative: - - - - - V V V V V V V - - HUANG, JIH-CHIN
14 Ministry of Economic Affairs Representative: - - - - - V V V V V V V - - LAN, SYU-CING CPC Corporation, Taiwan ------China Steel Representative - - V V - V V - - V V V - - HWANG, CHIEN-CHIH Yue-Li Investment ------Corporation Kaohsiung City Representative of Industrial - - - - - V V V V V V V - - Labor Union of CSBC HOU, DE-LONG Kaohsiung City Representative of Industrial - - - - - V V V V V V V - - Labor Union of CSBC HSIEH, KUO-JUNG Independent Director V V V V V V V V V V V V V - LIN, HUI-JENG Independent Director V - V V V V V V V V V V V 1 LIEU, DER-MING
Note: Please tick the corresponding boxes that apply to the directors or supervisors 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. Not applicable 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 third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or
15 business relationship with the Company. 7. Not a professional individual who is 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. These restrictions do not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx“. 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.
16
3.2.2 Management Team 03,08,2019 Unit：Share
Managers who are Managers Shareholding Spouse & Minor Spouses or Within obtain Shareholding by Nominee Shareholding Two Degrees of employee Nationality Arrangement Date Experience Kinship stock Title /Country Name gender Other Position Effective （Education） option of Origin Titl certificate Shares ％ Shares ％ Shares ％ Name Relation e
1.Master degree Director of Ship － － － － 2.Director of and Ocean Department of Industries R&D TSENG, Design Center Executive R.O.C male 08/01/2017 0.01179% 0 0 0 0 Vice President KUO-CHENG 55,787 3.Senior Vice President 4.Executive Vice President 1.Bachelor Director and － － － － degree President of 2.General CSBC Coating Executive CHANG, Manager of Solutions Co., R.O.C male 06/01/2014 56,216 0.01189% 0 0 0 0 Vice President CHIEH-TE Hull Works Ltd 3.Senior Vice committee of President CR classification society 1.College degree None － － － － 2. Deputy General Manager of Outfitting Executive WEI, R.O.C male 03/23/2017 0.00162% 0 0 0 0 Works Vice President CHENG-TZU 7,662 3.General Manager of Outfitting Works
17 1.Master degree Director of CR － － － － 2.Deputy Director classification of Department society of Design Executive CHOU, 3.Director of Vice President R.O.C male 08/02/2017 0.01824% 10,110 0.00214% 0 0 CHIH-MING 86,291 Department of Sales 4. Director of Department of Design 1.College degree None － － － － 2.General Manager of Executive CHEN, Ship Repair Vice President R.O.C HUI-SHAN male 03/18/2019 7,358 0.00156% 0 0 0 0 Works 3. Department of Quality Assurance Director 1. Bachelor None － － － － degree 2.Undergraduate of Massachusetts Institute of Technology Secretary YEN, R.O.C male 000 03. Section General KAI-MING 10/01/2018 11,858 0.00251% Manager of Department of Design 4. Section Manager of Department of Planning
18 1.Bachelor None － － － － degree 2.Deputy Audit Office LIU, Director of Auditor R.O.C male 12/01/2013 7,000 0.00148% 0 0 0 0 General CHUNG-HE Department of Human Resources and Administration 1. Bachelor None － － － － degree 2. Section Manager of Department of YUAN, Department of Sales R.O.C male 000 0 KUO-LUNG 03/18/2019 0 0 Sales Director 3. Deputy Director of Department of Sales 1.Master degree None － － － － 2. Section Manager of Department of YEN, Department of Design R.O.C male 03/18/2019 16,000 0.00338% 12,000 0.00254% 0 0 Design Director CHUN-MUN 3. Deputy Director of Department of Sales 1.Master degree None － － － － Department of WU, 2.Deputy Director Material R.O.C male 09/01/2016 30,000 0.00634% 0 0 0 0 Director HUI-TSAI of Department of Material 1.Master degree None － － － － 2.Deputy Director of Department Department of LEE, of Planning Planning R.O.C male 03/23/2017 26,345 0.00557% 000 03.Deputy Director Director YEN-CHIANG of Department of Human Resources and Administration
19 1.Bachelor None － － － － degree Innovation 2.Deputy Director and Research of Department WANG, Center Chief R.O.C male 03/18/2019 0.00363% 000 0of Planning FU-YING 17,178 Executive 3. Director of Officer department of Information Technology 1.Bachelor None － － － － degree 2.Shop Master of Hull Works General KAO, Outfitting R.O.C male 08/13/2018 0 0 000 0Works Manager CHIEN-I 3.Deputy General
Manager of Outfitting Works 1.Master degree None － － － － 2.Deputy General Outfitting Manager of Works YU, R.O.C male 000 0Hull Works General MAO-HUA 08/13/2018 15,000 0.00317% 3.Director of Manager Department of Planning 1.College degree None － － － － Ship Repair 2.Deputy General Works LU, R.O.C male 11/11/2015 7,000 0.00148% 000 0Manager of General FENG-WEN Ship Repair Manager Works 1. Master degree － － － － 2. Engineer of Department Department of Information Information HWANG, Technology R.O.C male 000 0 Technology FUN-SUANG 03/18/2019 6,932 0.00147% 3. Section None Director Manager of Department Information Technology
20 1.Bachelor － － － － degree 2. Shop Master of Ship Repair Department of Works 3.Section Quality WANG, R.O.C male 03/18/2019 7,144 0.00151% 000 0Manager of None Assurance CHIEN-SHENG Director Department of Quality Assurance 4.Director of Department of Material 1.Bachelor Director of － － － － degree Taiwan Internati 2.Deputy General onal Department of Manager of Windpower Human Hull Works Training Corp. CHIANG, Resources and R.O.C CHIH-WEN male 03/23/2017 40,000 0.00846% 000 03.Deputy Administration Director of Director Department of Human Resources and Administration 1.Bachelor None － － － － degree Department of 2.President Finance and HSIEH, R.O.C Female 12/01/2013 5,838 0.00123% 0 0 0 0 enterprise Accounting LING-LING China Holding Director Company Chief Financial Officer
21 － － － － Head of 1.Bachelor Accounting degree 2. Senior Officer Department of Accounting (Deputy R.O.C YANG,CHIEN-AN Female 12/01/2018 9,761 0.00206% 000 0Department None Director of 3. Section Department of Manager of Finance and Accounting Accounting ) Department 1.Bachelor None － － － － degree 2.Deputy General Department of Manager of Occupational YEN, Machinery Safety and R.O.C male 11/06/2017 14,085 0.00298% 000 0 CHIH-MING Works Health 3. General Director Manager of Machinery Works 1.Bachelor None － － － － Department of degree Environmental HOU, 2.Shop Master of Protection and R.O.C male 01/01/2017 14,679 0.00310% 000 0Hull Works Public Utilities YA-WEN 3.Deputy General Director Manager of Hull Works 1. Bachelor Director of Blue － － － － Keelung Yard TANG, degree Ace corporation General R.O.C JUNG- male 08/10/2016 000 0 21,357 0.00452% 2. Project Manager KUEI Manager
22 3.2.3 Remuneration of Directors, President, and Vice President ◆Remuneration of Directors
Unit: NT$ thousands
Remuneration Relevant Remuneration Received by Directors Who are Also Employees
Ratio of Ratio of Total Total Remuneration Compensation (A+B+C+D) (A+B+C+D+E+F+G) to Net Income (%) Salary, Bonuses, and Severance Pay (F) Profit to Net Income (%) Compensation Base Compensation Severance Pay (B) Bonus Allowances (D) Allowances (E) Sharing- Employee Bonus (G) Paid to Title Name (A) To Directors (C) Directors from an Invested The All The All The All The All The All The All The All companies The company All companies The All Company company companies company companies company companies company companies company companies compan companies company in the in the consolidated company companies in the in the in the in the in the y in the consolidated financial statements in the consolidate consolidate consolidate consolidate consolidate consolidate financial Cash Stock Cash Stock consolidate d financial d financial d financial d financial d financial d financial statements d financial statements statements statements statements statements statements statements
Ministry of Economic Affairs 82% None Chairman Representative 2,460 2,556 0 0 0 0 0 0 -0.079% -0.082% 0 0 0 0 0 0 0 0 -0.079% -0.0 CHENG, WEN-LON
Ministry of Economic Affairs None Director Representative 125 125 0 0 0 0 0 0 -0.004% -0.004% 0 0 0 0 0 0 0 0 -0.004% -0.004% CHEN, YUNG-TSUNG
Ministry of Economic Affairs None Director Representative 0 0 0 0 0 0 0 0 0 0 2,023 2,023 0 0 0 0 0 0 -0.065% -0.065% TSENG, KUO-CHENG
Ministry of Economic Affairs % None Director Representative 12 12 0 0 0 0 0 0 -0.0004% -0.0004% 0 0 0 0 0 0 0 0 -0.0004% -0.0004 LU, WEN-TSAN
Ministry of Economic Affairs None Director Representative 113 113 0 0 0 0 0 0 -0.004% -0.004% 0 0 0 0 0 0 0 0 -0.004% -0.004% FANG, MING-CHUNG
23 Ministry of Economic Affairs None Director Representative 113 113 0 0 0 0 0 0 -0.004% -0.004% 0 0 0 0 0 0 0 0 -0.004% -0.004% Huang, Ying-Fang
Ministry of Economic Director Affairs 12 12 0 0 0 0 0 0 -0.0004% -0.0004% 0 0 0 0 0 0 0 0 -0.0004% -0.0004% None Representative WU,WEN-GUEI
Ministry of Economic Affairs None Director Representative 0 0 0 0 0 0 0 0 0 0 1,146 1,146 0 0 0 0 0 0 -0.037% -0.037% HUANG, JIH-CHIN
Ministry of Economic Affairs Director Representative 0 0 0 0 0 0 0 0 0 0 1,166 1,166 0 0 0 0 0 0 -0.038% -0.038% None LAN, SYU-CING
CPC Director Corporation, 125 125 0 0 0 0 0 0 -0.004% -0.004% 0 0 0 0 0 0 0 0 -0.004% -0.004% None Taiwan
Yue-Li Director Investment 125 125 0 0 0 0 0 0 -0.004% -0.004% 0 0 0 0 0 0 0 0 -0.004% -0.004% None Corporation
China Steel Corporation Director Representative 62 62 0 0 0 0 0 0 -0.002% -0.002% 0 0 0 0 0 0 0 0 -0.002% -0.002% None Lee, Xin-Min
China Steel Corporation Director Representative 62 62 0 0 0 0 0 0 -0.002% -0.002% 0 0 0 0 0 0 0 0 -0.002% -0.002% None HUNG, JIAN-JR
24 Kaohsiung City Representative of Industrial 0.040% None Director Labor Union of 125 125 0 0 0 0 0 0 -0.004% -0.004% 1,102 1,102 0 0 0 0 0 0 -0.040% - CSBC HOU, DE-LONG
Kaohsiung City Representative of Industrial Director Labor Union of 125 125 0 0 0 0 0 0 -0.004% -0.004% 1,160 1,160 0 0 0 0 0 0 -0.041% -0.041% None CSBC HSIEH, KUO-JUNG
Independen LIEU, None t Director DER-MING 720 720 0 0 0 0 0 0 -0.023% -0.023% 0 0 0 0 0 0 0 0 -0.023% -0.023%
Independen FU, t Director HO-CHUNG 720 720 0 0 0 0 0 0 -0.023% -0.023% 0 0 0 0 0 0 0 0 -0.023% -0.023% None
Independen LIN, None t Director HUI-JENG 720 720 0 0 0 0 0 0 -0.023% -0.023% 0 0 0 0 0 0 0 0 -0.023% -0.023%
Note：Please refer to page 29 of the Chinese annual report.
25 ◆Remuneration of the President and Vice President Unit: NT$ thousands Salary(A) Severance Pay (B) Bonuses and Profit Sharing- Employee Bonus (D) Ratio of total Allowances (C) compensation (A+B+C+D) to net Compen income (%) sation Paid to The Companie The Companies The Compani The company Companies in the The Companies Presiden Title Name company s in the company in the company es in the consolidated company in the ts from an consolidat consolidat consolid financial statements consolidate Invested ed ed ated Cash Stock Cash Stock d Compan financial financial financial financial y statement statements stateme statements s nts TSENG,KUO-CH President 2,023 2,023 0 0 0 0 0 0 0 0 -0.065% -0.065% None ENG Executive CHANG,CHIEH- 1,645 1,645 0 0 263 263 0 0 0 0 -0.062% -0.062% None Vice President TE Executive WEI,CHENG-TZ 1,580 1,580 0 0 256 256 0 0 0 0 -0.059% -0.059% None Vice President U LIN,FOUNG- Executive TANG 1,616 1,616 0 0 256 256 0 0 0 0 -0.060% -0.060% None Vice President (02/28/ 2019 retirement) Executive CHOU,CHIH- 1,599 1,599 0 0 256 256 0 0 0 0 -0.060% -0.060% None Vice President MING
Note：Please refer to page 28 of the Chinese annual report.
26 3.2.4 Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents and Vice Presidents A. The ratio of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the two most recent fiscal years to directors, presidents and vice presidents of the Company, to the net income.
Ratio of total remuneration paid to directors, presidents and Executive vice presidents to net income (%) Year Companies in the consolidated The company financial statements 2017 -0.38% -0.39% 2018 -0.63% -0.64%
B. The policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance. The Remuneration Committee assists the Board in discharging its responsibilities relating to the Company’s compensation and benefits policies, plans and programs, and the evaluation of the directors’ and executives’ compensation. The compensation to directors and other key management personnel were determined by the Remuneration Committee of the Company in accordance with the individual performance and the market trends. The compensation is measured based on the employee’s personal achievements, contribution made to the business operation, and the market averages. It has a positive correlation with the performance of the Company's business. In 2018, due to annual losses, the chairman and president reduced their salary by 20%, and there was no performance bonus, year-end, performance appraisal bonus. The remuneration of the chairman and president was related to the business performance or surplus.
C. Performance evaluation of directors, president and vice presidents: 1. Performance appraisal of the directors of the company: Setting out the rules for Performance Evaluation of the Board of Directors of the Company and the performance evaluation standards of directors. 2. Performance evaluation standards and assessment procedures of vice Executive presidents and financial accounting manager , according to "the company's practitioners annual assessment and bonus implementation rules ".
27 3. The president performance appraisal: Setting out the “The rule of salary of the chairman and president, and performance evaluation of the president”, approved by the March 15, 2019 board of directors. Performance evaluation of the president included president’s performance evaluation criteria, evaluation procedures and performance bonuses. The president’s performance evaluation criteria include short-term financial performance indicators and long-term performance indicators. Short-term financial performance indicators include operating income achievement rate, gross profit achievement rate, and after-tax profit and loss achievement rate. And other three, long-term performance indicators include business and institutional change performance, R & D innovation performance, future business growth performance, corporate social responsibility execution performance, etc.
28 3.3 Implementation of Corporate Governance 3.3.1 Board of Directors A total of 9 (A) meetings of the Board of Directors were held in the previous period. The attendance of director and supervisor were as follows: Attendan Attendanc ce in By e Rate Title Name Person Proxy (%)【Ｂ/ Remarks (B) Ａ】 Ministryof Economic Affairs Chairman Representative 9 0 100.00 - CHENG, WEN-LON Ministryof Economic Affairs Director Representative 9 0 100.00 - TSENG, KUO-CHENG
Ministryof HUANG, The M O E A appointed Mr. Economic 6 2 66.67 Wu,Wen-Kuei to take over Director YING-FANG Affairs as director at Representative Wu,Wen-Kuei 1 0 11.11 2018.11.26 Ministryof FANG, The M O E A appointed Mr. Economic Affairs 8 0 88.89 Lu,Wen-Tsan to take over Director MING-CHUNG Representative Lu,Wen-Tsan as director at 1 0 11.11 2018.11.26 Ministryof Economic Affairs The M O E A appointed Mr. Representative HUANG,YING-FANG to take Director 9 0 100.00 CHEN, YUNG-TSUNG over as director at 2019.1.28 Ministryof Economic Affairs Director Representative 9 0 100.00 - HUANG, JIH-CHIN Ministryof Economic Affairs Director Representative 9 0 100.00 - LAN, SYU-CING CPC Corporation, Taiwan Director Representative 7 2 77.78 -
LEE XIN-MIN 2 3 22.22 The China Steel Representative China Steel Director appointed Mr. HWANG, Representative HWANG, 3 1 33.33 CHIEN-CHIH to take over CHIEN-CHIH as director at 2018.7.1 Director YUE-LI Investment Corporation 4 5 44.44 - Kaohsiung City Representative of Industrial Director 9 0 100.00 - Labor Union of CSBC HOU, DE-LONG Kaohsiung City Representative of Industrial Director 9 0 100.00 - Labor Union of CSBC HSIEH, KUO-JUNG
Independent LIN, HUI-JENG 9 0 100.00 - director
29 Independent FU, HO-CHUNG 8 1 88.89 - director
Independent LIEU, DER-MING 7 2 77.78 - director Other mentionable items: 1.If there are the circumstances referred to in Article 14-5 of the Securities and Exchange Act and resolutions which were not approved by the Audit Committee but were approved by two thirds or more of all directors, 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: (1)Matters referred to in Article 14-3 of the Securities and Exchange Act: Please refer to the Page 34 of the Annual Report. (2)Other matters involving objections or expressed reservations by independent directors that were recorded or stated in writing that require a resolution by the board of directors:None 2.If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: 2019.03.15. The Board of Directors: approval of revised and rename "Specification for Chairman and General Manager's reward and General Manager Performance Evaluation", and President Tseng, Kuo-Cheng avoided attendance according to the law. 3.Measures taken to strengthen the functionality of the board: The Board of Directors has established an Audit Committee and a Remuneration Committee to assist the board in carrying out its various duties.
3.3.2 Audit Committee A total of 5 (A) Audit Committee meetings were held in the previous period. The attendance of the independent directors was as follows: Attendan Attendance ce in By Title Name Rate (%)【Ｂ/ Remarks Person Proxy Ａ】 (B) 2016.06.23 The 16th Independent LIN, independent director of the 5 0 100.00 director HUI-JENG Company is elected by the shareholders' meeting. 2016.06.23 The 16th Independent FU, independent director of the 5 0 100.00 director HO-CHUNG Company is elected by the shareholders' meeting. 2016.06.23 The 16th Independent LIEU, independent director of the 4 1 80.00 director DER-MING Company is elected by the shareholders' meeting. 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: (1)Matters referred to in Article 14-5 of the Securities and Exchange Act:
30 Board Major Item Audit Comapny response Board Meeting meeting Committee Resolutions Date Resolutions 03.23, The 2017 All attendance Submit to Board All attendance 2018 Financial member of Audit meeting review on member of board (The 5 Statements and Committee 2018/3/23. meeting agreed to session of Consolidated agreed to pass pass the case. 11) Financial the case on Statements 2018.3.16. The 2017 All attendance Submit to Board All attendance Statement of member of Audit meeting review on member of board Internal Committee 2018/3/23. meeting agreed to Control agreed to pass pass the case. Systems. the case on 2018.3.16. The 2018 All attendance Submit to Board All attendance financial member of Audit meeting review on member of board statements(in Committee 2018/3/23. meeting agreed to clude agreed to pass pass the case consolidated the case on financial 2018.3.16 and statements) suggest and filing accountant returns assist the assessed and company's more certified by active PwC Taiwan. financial planning. 05.11. The All attendance Submit to Board All attendance 2018 investment member of Audit meeting review on member of board (The 13 project about Committee 2018/5/11. meeting agreed to session of building a agreed to pass pass the case. 16) 140 meters the case on barge. 2018.5.4. 08.10. The 2018 Q2 All attendance Submit to Board All attendance 2018 Consolidated member of Audit meeting review on member of board (The 16 Financial Committee 2018/8/10 meeting knowed session of Statements. agreed to pass 16) the case on 2018.8.3. cash to All attendance Submit to Board All attendance increase the member of Audit meeting review on member of board capital of Committee 2018/8/10. meeting agreed to new shares agreed to pass pass the case. issued in the case on 2018. 2018.8.3. 09.12.2018 More than half All attendance Submit to Board All attendance (The 17 of the capital member of Audit meeting review on member of board session of loss report. Committee 2018/9/12. meeting agreed to 16 extra- agreed to pass pass the case. ordinary) the case on 2018.9.12. The company All attendance Submit to Board All attendance joint venture member of Audit meeting review on member of board with GeoSea Committee 2018/9/12. meeting agreed to to form CDWE. agreed to pass pass the case. the case on
31 2018.9.12.
The All attendance Submit to Board All attendance Multi-purpos member of Audit meeting review on member of board e steel Committee 2018/9/12. meeting agreed to structure agreed to pass pass the case. production the case on line plan at 2018.9.12. Kaohsiung Yard. 11.09.2018 Did not All attendance Submit to Board All attendance (The 18 continue the member of Audit meeting review on member of board session of remaining Committee 2018/11/19. meeting agreed to 16) amount of new agreed to pass pass the case. common shares the case on of private 2018.11.6. placement. The job All attendance Submit to Board All attendance transfer of member of Audit meeting review on member of board Accounting Committee 2018/11/19. meeting agreed to department agreed to pass pass the case. first-level the case on supervisor. 2018.11.6. (2) Other matters which were not approved by the Audit Committee but were approved by two-thirds or more of all directors:None. 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:None. 3. Communications between the independent directors, the Company's chief internal auditor and CPAs (e.g. the items, methods and results of audits of corporate finance or operations, etc.) Date Way Object Item Result 1.Statement of Internal Agreed to submit a Control System for statement on the 2017. internal control AuGeneral Audit 2.2017 annual financial system for 2017. audit 03.16.2018 Committee report and Visa meetings consolidated accountant financial report. 3.Internal audit business report. 1.Review the consolidated AuGeneral Audit financial statements audit 05.04.2018 Committee for the first quarter Visa meetings of 2018. accountant 2.Internal audit business report. 1.Review the AuGeneral Audit consolidated audit 08.03.2018 Committee financial statements Visa meetings for the second accountant quarter of 2018.
32 2.Internal audit business report.
1.Review the consolidated AuGeneral Audit financial statements audit 11.06.2018 Committee for the third quarter Visa meetings of 2018. accountant 2.Internal audit business report.
33 3.3.3 Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”.
Implementation Status 1 Deviations from “the Corporate Governance Best-Practice Evaluation Item Yes No Abstract Illustration Principles for TWSE/TPEx Listed Companies” and Reasons 1. Does the company establish and disclose the v CSBC has Codex on Corporate Governance and Reference to the listing and OTC Corporate Governance Best-Practice Principles has been disclosed on the CSBC website and the Code of Corporate Governance based on “Corporate Governance Best-Practice Public Information Observatory. Practice and CSBC Principles for TWSE/TPEx Listed Companies”? website http: // www. Csbcnet.com.tw investor characteristics. and investor relations area. 2. Shareholding structure & shareholders’ rights (1) Does the company establish an internal V On CSBC website , there is “Investor Area” Reference to the listing and OTC operating procedure to deal with shareholders’ (http://www.csbcnet.com.tw/Service/Investor). Code of Corporate Governance suggestions, doubts, disputes and litigations, It discloses the hotline and email address to Practice and CSBC and implement based on the procedure? provide all the investors to contact with us. We characteristics. established an internal operating procedure to manage this area.
(2) Does the company possess the list of its major V CSBC can collect the updated information of Reference to the listing and OTC shareholders as well as the ultimate owners of major shareholders and the list of ultimate Code of Corporate Governance those shares? owners of those shares. Practice and CSBC characteristics.
34 Implementation Status 1 Deviations from “the Corporate Governance Best-Practice Evaluation Item Yes No Abstract Illustration Principles for TWSE/TPEx Listed Companies” and Reasons (3) Does the company establish and execute the risk V CSBC has set up specific management points and Reference to the listing and OTC management and firewall system within its operating procedures for the financial and Code of Corporate Governance conglomerate structure? business-related operating methods of the Practice and CSBC related enterprise companies and implemented characteristics. them. In addition, in order to implement a comprehensive risk control of subsidiaries, set the "subsidiary supervision and management points" of the internal control mechanism standards.
(4) Does the company establish internal rules V To protect shareholders’ rights and fairly treat Reference to the listing and OTC against insiders trading with undisclosed Code of Corporate Governance shareholders, CSBC has established “Directions information? Practice and CSBC Governing the Processing of Material characteristics. Information and Prevention of Insider Trading” to forbid insiders trading on undisclosed information. The Company has also strongly advocated these rules in order to prevent any violations. website: （http://www.csbcnet.com.tw/ Service /Investor/Corporate Governance/Internal Regulations.htm）
35 Implementation Status 1 Deviations from “the Corporate Governance Best-Practice Evaluation Item Yes No Abstract Illustration Principles for TWSE/TPEx Listed Companies” and Reasons 3. Composition and Responsibilities of the Board of Directors (1) Does the Board develop and implement a V ▓The company has a multi-pronged policy for Reference to the listing and OTC diversified policy for the composition of its directors in the Corporate Governance Code. Code of Corporate Governance members? ▓The nominated directors and independent Practice and CSBC directors have included a wide range of characteristics. backgrounds such as production, management, science and technology, finance and society.
(2) Does the company voluntarily establish other V CSBC sets the Salary Remuneration Committee Reference to the listing and OTC functional committees in addition to the and the Audit Committee according to law Code of Corporate Governance Remuneration Committee and the Audit Practice and CSBC Committee? characteristics.
(3) Does the company establish a standard to V CSBC established the "Board Performance Reference to the listing and OTC measure the performance of the Board, and Evaluation Method" in 2011. The performance Code of Corporate Governance implement it annually? evaluation was conducted on a regular basis Practice and CSBC from 2012 onwards. In addition to being a characteristics. reference for the management of the business information and resources, it was also used as a reference for the directors' , And the results of the evaluation from 2016 onwards announced on the company's external website http://www.csbcnet.com.tw / Service / Investor
36 Implementation Status 1 Deviations from “the Corporate Governance Best-Practice Evaluation Item Yes No Abstract Illustration Principles for TWSE/TPEx Listed Companies” and Reasons / Corporate Governance.
(4) Does the company regularly evaluate the V Company’s managment departments assess the Reference to the listing and OTC independence of CPAs? independence of CAP annually. The results had Code of Corporate Governance been reported to The Audit Committee on Practice and CSBC 2018.03.16 and to The Board of Directors on characteristics. 2018.03.23, and passed. With departments’ assessment, two CPAs, Wang, Guo-Hua, and Wu, Chien-Chih, from The PriceWaterHouseCoopers, meet the standards of independence evaluation (Note 1). Both are capable of being our company’s certified accountants. The Firm has issued the independence declaration as well. 4. Whether the company has set up corporate V ▓The company's planning office is a corporate Reference to the listing and OTC governance special/part-time units or personnel governance unit, and designated personnel are Code of Corporate Governance responsible for corporate governance related responsible for corporate governance related Practice and CSBC matters. matters, such as company registration and characteristics. change registration and corporate governance evaluation. ▓The board of directors and shareholders' meeting matters shall be handled by the secretary's office of the board of directors, and the managerial department shall cooperate with
37 Implementation Status 1 Deviations from “the Corporate Governance Best-Practice Evaluation Item Yes No Abstract Illustration Principles for TWSE/TPEx Listed Companies” and Reasons them. ▓At this stage, the company's top executive responsible for promoting corporate governance is the director of the board of directors.
5. Whether the company has established a channel of V On CSBC website, there is “Stakeholder Reference to the listing and OTC communication with interested parties and set up Area”(http://www.csbcnet.com.tw/Service/Inter Code of Corporate Governance stakeholder areas on the company's website and estedArea.htm) And CSR area (website: http:// Practice and CSBC properly respond to important corporate social www2 .csbcnet.com.tw/csr/). characteristics. responsibility issues that are of interest to It sorts the topics for each stakeholder to stakeholders? collect the information they want. It also provides the hotline and email address for various interested parties to contact with us. 6. Does the company appoint a professional V CSBC designates Fubon Securities Co., Ltd. to Reference to the listing and OTC shareholder service agency to deal with deal with shareholder affairs. Code of Corporate Governance shareholder affairs? Practice and CSBC characteristics. 7. Information Disclosure (1) Does the company have a corporate website to V CSBC has set up a Chinese website Reference to the listing and OTC disclose both financial standings and the status Code of Corporate Governance (http://www.csbcnet.com.tw/) to disclose of corporate governance? Practice and CSBC information regarding the Company’s financials, characteristics. business and corporate governance status.
38 Implementation Status 1 Deviations from “the Corporate Governance Best-Practice Evaluation Item Yes No Abstract Illustration Principles for TWSE/TPEx Listed Companies” and Reasons
(2) Does the company have other information ▓There is also English website(http://www. Reference to the listing and OTC disclosure channels (e.g. building an English website, appointing designated people to V csbcnet.com.tw/English/ ). Code of Corporate Governance handle information collection and disclosure, ▓CSBC has established a spokesman system to Practice and CSBC creating a spokesman system, webcasting handle information disclosure. characteristics. investor conferences)? ▓CSBC was invited to attend the investor conference by KGI Security. The relevant information can be look up on our website: http://www.csbcnet.com.tw/Service/Investor /StockInformation.htm
39 Note1：The assessment standards of accounts’ independence. Does it violate Assessment Assessing Items Factors affecting accountants’ independence independence? result yes no 1. Independence is (1) Having a direct or material indirect interests in the Company. (such as acquire and none ˇ influenced by hold shares, stocks, corporate bonds, loan or other securities.) self-interest threat (2) Having financing or guarantee behavior with Company, Company’s director, or none ˇ independent director. (3) Having a significant close business relationship with Company, Company’s none ˇ director, independent director, or managers. (4) Entering into a potential employment negotiations with the Company. none ˇ
(5) Entering into a contingent fee arrangement relating to an audit engagement. none ˇ 2. Independence is (1) A member of the assurance team being, or having been a director, or independent none ˇ influenced by director, or employed in a position to exert significant influence over the subject self-review threat matter of the engagement within the last two years. (2) The non-assurance service which performed by the firm that would affects directly none ˇ a material item of the assurance engagement. 3. Independence is (1) The firm promoting or brokering shares or other securities issued by the Company. none ˇ influenced by (2) Besides legally permitted businesses, a professional accountant acting as an none ˇ advocacy threat advocate on behalf of the Company in litigation or disputes with third parties. 4. The effect on (1) A member of the engagement team having a close or immediate family member none ˇ independence of who is a director, independent director, or officer of the Company or an employee familiarity of the Company who is in a position to exert significant influence over the subject matter of the engagement.
40 Does it violate Assessment Assessing Items Factors affecting accountants’ independence independence? result yes no (2) A former partner within one year of disassociating from the firm joins the none ˇ Company as a director, independent director, or officer or is in a key position to exert significant influence over the subject matter of the engagement. (3) A professional accountant accepting gifts or preferential treatment from none ˇ Company, the Company’s director, independent director, officer or major stockholder. 5. Independence is (1) A member of the audit engagement team being informed by a partner of the firm none ˇ influenced by that a planned promotion will not occur unless the member agrees with intimidation threat Company’s inappropriate accounting treatment. (2) A firm being pressured to reduce inappropriately fees, in order to compel the firm none ˇ to reduce the extent of work performed. 6. Period evaluation (1) Does the same accountant performed more than seven years? none ˇ
41 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)? (1) Status of employee rights and employee wellness: A. For the benefit of employees, CSBC has signed a group agreement with the trade unions on August 17, 2015, including trade union activities, working hours, salary, bonus, welfare, safety and health, labor relations, human development, retirement Pensions and other working conditions, and in accordance with labor laws and regulations, the provisions of the rules of work and the management requirements, the contents of the staff rights and obligations and welfare items, and regular review to safeguard the rights and interests of employees. B. CSBC provide considerable welfare measures, in addition to labor insurance, health insurance, and for staff mutual assistance insurance, the other for employees to insure 5 million group accident insurance, foreign travel safety insurance, employee health checks, and cultural and recreational, Activities and other subsidies, the current labor relations are quite harmonious. (2) Employee Concern: CSBC express its concern for the sincere condolences of the practitioners who has hospitalized due to illness or injury. CSBC has set “Practitioner’s injury and illness condolence clause " and sent Consolation money to the hospital practitioner colleagues at the Spring Festival, Dragon Boat Festival, the Mid-Autumn Festival. (3) Investor Relations: CSBC has set up a spokesperson to communicate with investors. CSBC website to set up the Investors area service website to expose corporate governance, financial information, shareholder information, contacts and product-related information to provide investors with timely service information. Website: http: // www. Csbcnet.com. Tw. (4) Supplier Relationships: CSBC suppliers has managed by the Supplier management activity benchmark and the Material Supplier selection benchmark. There are long-term supply contracts for good suppliers, and suppliers can match the needs of the company's production and marketing , And to maintain long-term relationship, and the quality of good supply, as the supplier of environmental protection, safety and health issues have been in the "supplier management benchmark" and "material supplier selection benchmark" norms.
42 (5) Stakeholders rights: CSBC has set up a Spokesman system. There is also a “Stakeholder Area” on the website (http://www.csbcnet.com.tw/Service/InterestedArea.htm). It sorts the topics for each stakeholder to collect the information they want. It also provides the hotline and email address for various interested parties to contact with us. (6) CSBC for the directors to purchase liability insurance situation: CSBC has purchased liability insurance for the directors, insured US$3 million, and submitted 3/23/2018 the 16th eighth board report.
43 (7) Directors and managers and staff training records:
A. Director about corporate governance training
Study period Title Name Training hours Sponsoring Organization Course From To Law follow seminar of insider equity Ministry of Economic 3H 07/30/2018 07/30/2018 Securities & Futures Institute transaction of listed and unlisted Chairman Affairs Representative companies. CHENG,WEN-LON Taiwan Corporate 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Governance Association Taiwan Corporate 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Ministry of Economic Governance Association Director Affairs Representative Law follow seminar of insider equity Accounting Research and TSENG,KUO-CHENG 3H 08/03/2018 08/03/2018 transaction of listed and unlisted Development Foundation companies. Law follow seminar of insider equity Ministry of Economic 3H 07/20/2018 07/20/2018 Securities & Futures Institute transaction of listed and unlisted Director Affairs Representative companies. FANG,MING-CHUNG Taiwan Corporate 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Governance Association Law follow seminar of insider equity 3H 07/24/2018 07/24/2018 Securities & Futures Institute transaction of listed and unlisted Ministry of Economic companies. Director Affairs Representative Taiwan Academy of Banking 3H 03/14/2018 03/14/2018 Corporate governance lecture hall. CHEN,YUNG-TSUNG and Finance 3H Taiwan Corporate 08/10/2018 08/10/2018 Latest Company law amendment analysis. Governance Association
44 Ministry of Economic Accounting Research and IFRS16 leasing accounting under the internal Director Affairs Representative 6H 08/20/2018 08/20/2018 Development Foundation control practice HUANG, YING-FANG Ministry of Economic Taiwan Corporate Director Affairs Representative 3H 08/10/2018 08/10/2018 Corporate governance lecture hall. Governance Association HUANG,JIH-CHIN Taiwan Academy of Banking Ministry of Economic 3H 04/11/2018 04/11/2018 Corporate governance lecture hall. and Finance Director Affairs Representative Taiwan Corporate LAN,SYU-CING 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Governance Association Law follow seminar of insider equity CPC Corporation, 3H 07/13/2018 07/13/2018 Securities & Futures Institute transaction of listed and unlisted Taiwan Director companies. Representative Taiwan Corporate YIN,LING-YING 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Governance Association
Yue-Li Investment Taiwan Corporate 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Corporation Governance Association Director Representative Taiwan Academy of Banking Board operation practice and corporate WANG,SHU-JI 3H 07/24/2018 07/24/2018 and Finance governance
Insider equity trading seminar for listed China Steel 3H 08/03/2018 08/03/2018 Securities & Futures Institute and unlisted (cabinet) companies Corporation Director Representative Taiwan Corporate HUNG,JIAN-JR 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Governance Association
45 Kaohsiung City Representative of Taiwan Corporate Director Industrial Labor Union 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Governance Association of CSBC HOU,DE-LONG Kaohsiung City Representative of Taiwan Corporate Director Industrial Labor Union 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Governance Association of CSBC HSIEH,KUO-JUNG Taiwan Corporate 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Independent Governance Association LIN,HUI-JENG Director Insider equity trading seminar for listed 3H 07/20/2018 07/20/2018 Securities & Futures Institute and unlisted (cabinet) companies Taiwan Corporate 3H 08/10/2018 08/10/2018 Latest Company law amendment analysis. Independent Governance Association FU,HO-CHUNG Director Insider equity trading seminar for listed 3H 07/20/2018 07/20/2018 Securities & Futures Institute and unlisted (cabinet) companies Taiwan Corporate Global and cross-strait anti-tax avoidance 3H 05/15/2018 05/15/2018 Independent Governance Association policies and measures LIEU,DER-MING Director Taiwan Corporate Latest revision trend and analysis of 3H 08/13/2018 08/13/2018 Governance Association company law
46 B. Managers about corporate governance training Study period Title Name Training hours Sponsoring Organization Course From To Seminar to promote the adoption of the 4H 11/19/2018 11/19/2018 Taiwan Stock Exchange International Financial Reporting Guidelines Head of IFRS16 Seminar Accounting Department Seminar to promote the adoption of the 4H 03/5/2018 03/5/2018 Taiwan Stock Exchange International Financial Reporting Guidelines (Deputy Director YANG,CHING-AN of Department of Seminar of 2018 for the thing that the head 4H 02/27/2018 02/27/2018 PwC Taiwan Finance and of financial and account should be know Accounting ) The impact and response of the company 4H 08/10/2018 08/10/2018 PwC Taiwan law amendment The Correlation between the Whistleblower Protection System and the Prevention of 3H 08/17/2018 08/17/2018 Financial Crimes from the Perspective of Corporate Governance 3H 08/17/2018 08/17/2018 The latest labor law practice analysis Audit Office LIU,CHUNG-HE Securities & Futures Institute Auditor General The focus of the investment business and 3H 11/05/2018 11/05/2018 the supervision of the subsidiaries by internal control The operation and functions of the directors 3H 11/05/2018 11/05/2018 and functional committees of publicly issued companies SU,CHEN-AN Head of (12/01/2018 Accounting Research and Continuing education to the head of Accounting 12H 07/12/2018 07/13/2018 retirement) Development Foundation account of issuer firm. Department
Deputy Director Professional Training Center Of Department WANG,SHU-CHING 18H 06/11/2018 06/13/2018 of Ministry of Economic Seminar for Labor law of Material Affairs
47 C.staff training records: We have established CSBC Academy to perform employee training function, total actual training fee was NT$ 31,409,000 in 2018,and training hours as follow:
Number of training Training hours Item Male Female Male Female High level manager training 194 18 1,326 127 Intermediate manager training 269 15 2,411 80 Engineering and management personnel training 1,128 251 8,124 1,524 Technical personnel training 4,339 13 32,515 30 Total 5,930 297 44,376 1,761 Technical apprentice training 41 0 367 0 Industry-school Corporation student training 92 0 30,048 0 Contractor training 3,246 556 11,459 2,054
D. With the financial information transparent relevant personnel to obtain the relevant authority to indicate the relevant circumstances: (A).One employee of the audit office of CSBC has obtained the internal auditor's certificate of the internal auditing association of the ROC. (B). One employee of accounting department of CSBC has obtained the certificate of Accountant professional.
48 3.3.4 Composition, Responsibilities and Operations of the Remuneration Committee
CSBC has established the Remuneration Committee's Organizational Rules in accordance with the provisions of Article 14 of the Securities Exchange Act and the Measures for the Listing of the Stock Exchange or the Administration of the Salary and Remuneration of the Companies in the Securities and Futures Businesses promulgated by the Executive Yuan Financial Supervision and Management Commission The Remuneration Committee is composed of three independent directors whose terms of reference are the policies, systems, standards and structure for the purpose of formulating and regularly reviewing the performance and remuneration of directors and managers. Three remuneration committees were held on March 16, 2018, August 3, 2018, and November 1, 2018. FU, HO-CHUNG member Resigned on January 1,2019。On March 15, 2019, the board of directors passed the associate professor Chen, Hongz-hong of Kaohsiung University of Science and Technology as a Remuneration committee.(Term of member from March 15, 2019 to June 22, 2019)。 A. Professional Qualifications and Independence Analysis of Remuneration Committee Members
Meets One of the Following Professional Qualification Requirements, Criteria Independence Criteria (Note) Together with at Least Five Years’ Work Experience
An instructor or A judge, public prosecutor, Has work Number of
higher position in a attorney, Certified Public experience in the Other Public
department of Accountant, or other areas of commerce, Companies in
commerce, law, professional or technical law, finance, or Which the
finance, accounting, specialist who has passed a accounting, or Individual is Remarks Title or other academic national examination and otherwise necessary Concurrently 12 3456 7 8 department related to been awarded a certificate for the business of Serving as an
the business needs of in a profession necessary the Company Remuneration
the Company in a for the business of the Committee
public or private Company Member
junior college, college Name or university Independent LIEU, DER-MING ˇ - ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ 1 The third session Director convener Independent LIN, ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ None The third session Director HUI-JENG member Independent FU, HO-CHUNG ˇ - ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ None The hird session
49 Director member. Resigned on January 1,2019。 The hird session member.( Term of member from March 15, 2019 to June 22, 2019) On March 15, 2019, the board of CHEN, directors passed the other ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ None HONG-ZHONG - associate professor Chen, Hong-zhong of Kaohsiung University of Science and Technology as a Remuneration committee.
50 B. Attendance of Members at Remuneration Committee Meetings There are 3 members in the Remuneration Committee. The total of 3 (A) Remuneration Committee meetings were held in recent year(2018). The attendance record of the Remuneration Committee members was as follows:
Attendance Attendance Rate Title Name By Proxy Remarks in Person(B) (%)【Ｂ/Ａ】 The third session convener Convener LIEU, DER-MING 3 0 100% (August 9, 2016 to June 22, 2019) Committee The Third session member LIN, HUI-JENG 3 0 100% Member (August 9, 2016 to June 22, 2019) Committee The Third session member Member FU, HO-CHUNG 3 0 100% (August 9, 2016 to June 22, 2019) Resigned on January 1,2019。 Other mentionable items: 1. If the board of directors declines to adopt or modifies a recommendation of the remuneration committee, it should specify the date of the meeting, session, content of the motion, resolution by the board of directors, and the Company’s response to the remuneration committee’s opinion (eg., the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified): None. 2. Resolutions of the remuneration committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the date of the meeting, session, content of the motion, all members’ opinions and the response to members’ opinion should be specified: None.
51 3.3.5 Fulfillment of Corporate Social Responsibility
Implementation Status 1 Deviations from the Corporate Social Responsibility Evaluation Item Best-Practice Principles for Yes No Abstract Explanation 2 TWSE/TPEx Listed Companies and Reasons 1. Corporate governance implementation (1) The Company has established the Corporate Social Based on the Corporate Social (1) Has the Company established its corporate social √ Responsibility Policy and the Principles of Corporate Responsibility Best-Practice responsibility policy or system and reviewed the Social Responsibility, which have been reviewed and Principles for TWSE/TPEx Listed results of implementation? adopted by the board. In terms of the system, the Companies and company (2) Does the Company organize educational training √ Company has established the Corporate Social characteristics on corporate social responsibility on a regular Responsibility Committee, which convenes two basis? regular meetings each year to review the fulfillment of (3) Has the Company established an exclusively (or √ corporate social responsibility and implementation of concurrently) dedicated unit that consists of corporate governance by the Company. first-line managers authorized by the board to be in (2) Every year, the company dispatches staff to Based on the Corporate Social charge of promoting corporate social responsibility participate in CSR-related seminars or seminars. When Responsibility Best-Practice and reporting the promotion status to the board? necessary, it also conducts a special report on Principles for TWSE/TPEx Listed (4) Has the Company established a reasonable √ corporate social responsibility to members of the Companies and company remuneration policy, integrated the employee “Corporate Social Responsibility Committee”. characteristics performance appraisal system with its corporate social responsibility policy, and set up a clear and (3) The Department of Planning serves as the Based on the Corporate Social effective reward and discipline system? dedicated unit of the Company to be in charge of Responsibility Best-Practice establishing a corporate social responsibility policy Principles for TWSE/TPEx Listed and promoting a corporate social responsibility Companies and company system. So far, the Corporate Social Responsibility characteristics Policy and the Principles of Corporate Social Responsibility have been established in accordance with the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies, and reviewed and adopted by the board, to serve as the
52 Implementation Status 1 Deviations from the Corporate Social Responsibility Evaluation Item Best-Practice Principles for Yes No Abstract Explanation 2 TWSE/TPEx Listed Companies and Reasons basis for such promotion and implementation, And report to the board of directors. (4) For the remuneration policy of the Company, such Based on the Corporate Social factors as the working conditions, professional Responsibility Best-Practice knowledge and skills, difficulty of work, and Principles for TWSE/TPEx Listed responsibilities constitute the relative value criteria for Companies and company evaluating each position. Moreover, a pay scale (or characteristics points) is created to calculate the basic remuneration for each position. These measures are to ensure the reasonableness and fairness of jobs in the organization. Through such measures together with merit bonuses, performance bonuses, employee bonuses, and other remuneration schemes, the Company strives to motivate employees to increase productivity, guarantee a good quality of life and employment for employees, and fulfill its social responsibility in conjunction with the corporate social responsibility policy. The Company has established the Directions Governing Annual Employee Appraisals and Bonus Pays for conducting appraisals at the end of each year, and the Directions Governing Rewards and Punishments for Employees for rewarding and imposing punishments on employees.
53 Implementation Status 1 Deviations from the Corporate Social Responsibility Evaluation Item Best-Practice Principles for Yes No Abstract Explanation 2 TWSE/TPEx Listed Companies and Reasons 2. Sustainable environment development (I) The Company is committed to improving the (1) Does the Company endeavor to utilize various √ utilization efficiency of various resources, investing in Based on the Corporate Social resources more efficiently and use renewable energy-saving and high-efficiency equipment, and is Responsibility Best-Practice materials which have low impact on the committed to the control of oil, water, air kinetic Principles for TWSE/TPEx Listed environment? energy and electrical energy use, and for waste sorting Companies and company (2) Has the Company established an environmental √ and waste (sewage) water recycling treatment. Reuse, characteristics management system that is appropriate to the the implementation of the CSR area (website: characteristics of the industry? http://www2.csbcnet.com.tw/csr/), CSR Report (3) Does the Company monitor the impact of climate √ 2.1/2.2/2.4. change on its operations, conduct greenhouse gas inspections, and develop strategies for energy (2) The company has passed the ISO/CNS 14001 Based on the Corporate Social conservation, carbon reduction, and greenhouse environmental management system, and the special Responsibility Best-Practice gas reduction? unit is the public office, which comprehensively Principles for TWSE/TPEx Listed manages the environmental quality and maintenance Companies and company of waste, air pollution and waste, sewage. characteristics
(3) The company has established “standard operating Based on the Corporate Social standards for extreme weather response” to respond Responsibility Best-Practice to the impact of extreme weather caused by climate Principles for TWSE/TPEx Listed change. In addition, the company conducted a Companies and company voluntary greenhouse gas inventory, conducted a characteristics 106-year greenhouse gas inventory in 107 years, and logged on the EPD website and public information observatory. In 108 years, the results of the 107 annual greenhouse gas inventory were checked and will be registered on the EPD website. The results of the greenhouse gas inventory survey for the past two years were disclosed at the public information
54 Implementation Status 1 Deviations from the Corporate Social Responsibility Evaluation Item Best-Practice Principles for Yes No Abstract Explanation 2 TWSE/TPEx Listed Companies and Reasons observatory and provided for consultation by interested parties.
3. Preserving public welfare (1) Has the Company established appropriate √ (1) The Company complies with labor-related Based on the Corporate Social management policies and procedures according to regulations, places importance on the internationally Responsibility Best-Practice relevant regulations and the International Bill of accepted principles for fundamental labor rights, and Principles for TWSE/TPEx Listed Human Rights? has entered into a collective agreement with the Companies and company (2) Has the Company set up an employee grievance √ corporate labor union. Moreover, the Company has characteristics mechanism or channel to handle complaints in an established work rules and various management appropriate manner? regulations which explicitly stipulate the rights, (3) Does the Company provide a healthy and safe work √ obligations, and benefits of employees in accordance environment and organize training on health and with labor-related laws and regulations, and has safety for its employees on a regular basis? established a corporate labor union and convened (4) Does the Company provide a communication meetings with employees in accordance with the law channel with employees on a regular basis, as well √ to sufficiently protect the legal rights and interests of as reasonably inform employees of any changes in employees. The recruitment, selection, promotion, operations that may have a significant impact on pay, holidays, pension, and other benefits of them? employees of both genders not only conform to the (5) Does the Company provide its employees with regulations and the principle of equality, but even go effective career competency development and √ beyond the requirements and standards. The basic training programs? salary and remuneration for female employees are the (6) Has the Company established any consumer same as those for male Employees in spite of the protection policies and complaint procedures √ differences in gender, duties, and place of work. regarding its research, development, Besides, female employees are entitled to menstrual procurement, production, operation, and service leave as well as maternity and parental leave for processes? unlimited times and periods.
55 Implementation Status 1 Deviations from the Corporate Social Responsibility Evaluation Item Best-Practice Principles for Yes No Abstract Explanation 2 TWSE/TPEx Listed Companies and Reasons (7) Does the Company market and label its products (2) In addition to the Guidelines for Handling Based on the Corporate Social and services according to relevant regulations and √ Complaints of Employees and the Organizational Rules Responsibility Best-Practice international standards? for the Employee Complaint Handling Committee, the Principles for TWSE/TPEx Listed (8) Does the Company evaluate the records of Company has set up a grievance committee to handle Companies and company suppliers’ impact on the environment and society √ employee complaints. The grievance committee characteristics before starting a business with such suppliers? consists of five employer representatives and two (9) Do the contracts between the Company and its employee representatives, totaling seven members. major suppliers include termination or dissolution √ When necessary, the grievance committee may clauses which come into force once the suppliers request the complainants or their supervisors and breach the Company’s corporate social other personnel related to the complaint cases to responsibility policy and cause a significant impact attend meetings and provide explanations in order to on the environment and society? handle the complaints in an appropriate manner. The Company has also established the Guidelines for Sexual Harassment Prevention, Complaint Investigation, and Imposition of Punishment and set up a complaint review committee. Consisting of seven to fifteen members, the complaint review committee is responsible for handling sexual harassment complaints. (3) The collective agreement of the Company Based on the Corporate Social Responsibility Best-Practice stipulates matters concerning safety and health, as Principles for TWSE/TPEx Listed follows, in accordance with labor regulations to offer Companies and company its employees a healthy and safe work environment: characteristics A. Conducting general physical examinations for its
employees on a regular basis and physical
examinations for the personnel who work in special
56 Implementation Status 1 Deviations from the Corporate Social Responsibility Evaluation Item Best-Practice Principles for Yes No Abstract Explanation 2 TWSE/TPEx Listed Companies and Reasons environments on an annual basis;
B. Establishing clinics and employing qualified medical
personnel to provide medical advice and treatment to employees and their spouses and other immediate family members; C. Organizing professional training and safety and
health training for its employees;
D. Providing safety equipment and protective gear and regularly inspecting such equipment and gear to ensure the safety of employees at work;
E. Establishing the Occupational Safety and Health
Committee and the Department of Occupational Safety and Health to carry out management tasks regarding the safety and health of employees; F. Proposing remedies at meetings of the Occupational Safety and Health Committee or meetings with employees in the event that the workplace and production equipment affect the health and safety of employees. (4) The Company provides the following
communication channels with employees on a regular basis: A. Convening regular meetings with employees as a
57 Implementation Status 1 Deviations from the Corporate Social Responsibility Evaluation Item Best-Practice Principles for Yes No Abstract Explanation 2 TWSE/TPEx Listed Companies and Reasons common communication channel between
employers and employees;
B. Requesting the participation of top-level managers and department heads in the meetings of member representatives of the corporate labor union, in order to facilitate communication with employees; C. Appointing four employees as directors of the Company to take part in decision making and operation of the board of directors. (5)To develop effective career competency Based on the Corporate Social Responsibility Best-Practice development and training programs for its employees, Principles for TWSE/TPEx Listed the Company design the Competency Development Companies and company and Management System for employees . The characteristics Company have finished the Competency model for
forman, intermediate manager, engineering and
management personnel. And also have established
"Job Description, " Information System Management
Mode in 2017", " The eHRD Human Resource Planning
in 2018". Fully develop the "Human Resource
Development Management Model" based on
competency functions. Gradually enhance company
human resources management.
(6) The Company has developed a spokesman system, Based on the Corporate Social set up an independent director mailbox, and Responsibility Best-Practice established consumer protection policies and Principles for TWSE/TPEx Listed
58 Implementation Status 1 Deviations from the Corporate Social Responsibility Evaluation Item Best-Practice Principles for Yes No Abstract Explanation 2 TWSE/TPEx Listed Companies and Reasons complaints procedures regarding its research, Companies and company development, procurement, production, operation, characteristics and service processes.
(7) The Company markets its products and services Based on the Corporate Social according to relevant regulations of the Republic of Responsibility Best-Practice China and international standards. Principles for TWSE/TPEx Listed Companies and company characteristics
(8) The Company evaluates all suppliers and makes Based on the Corporate Social sure that they do not have records of causing major Responsibility Best-Practice impact on the environment and society before starting Principles for TWSE/TPEx Listed a business with them. Companies and company characteristics
(9) The Company evaluates all suppliers to make sure Based on the Corporate Social that they do not have records of causing major impact Responsibility Best-Practice on the environment and society, and enters into a Principles for TWSE/TPEx Listed supply agreement which contains clauses that allow Companies and company termination or dissolution of the agreement at any characteristics time with them before starting a business with them.
4. Enhancing information disclosure CSBC discloses Financial Report, Annual General Based on the Corporate Social (1) Does the Company disclose relevant and reliable √ shareholders’ Meeting Handbook, CSR Report, etc. in Responsibility Best-Practice information regarding its corporate social Annual Report and on the website.(Website: http:// Principles for TWSE/TPEx Listed responsibility on its website and the Market www.csbcnet.com.tw/ Service/Investor) Companies and company Observation Post System? characteristics
59 Implementation Status 1 Deviations from the Corporate Social Responsibility Evaluation Item Best-Practice Principles for Yes No Abstract Explanation 2 TWSE/TPEx Listed Companies and Reasons
5. If the Company has established its 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 Company has established the Principles of Corporate Social Responsibility based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies for implementation purposes. 6. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices: ▲See below for more details. 7. A clear statement shall be made if the corporate social responsibility reports of the Company have passed the verification standards set by relevant certification bodies: CSBC 2018 Corporate Social Responsibility Report has not been verified by a third party, but meets the requirements of the GRI Standards core options, as well as the AA1000 guarantee Standard type 1 medium guarantee rating. Notes: The Company strives to promote (1) environmental protection, energy conservation, and carbon reduction (2) social and community
services (3) safety and health activities and (4) industry-academia collaboration and talent training. While taking into consideration
the operating profits, the Company places equal emphasis on social benefits and fulfills its corporate social responsibility based on
the philosophy “giving back to society”. The descriptions of the mechanisms and measures adopted for the four major activities
mentioned above and their implementation status are as follows:
(1) Environmental protection, energy conservation, and carbon reduction: See “2. Sustainable environment development” in the
table above.
60 (2) Social and community services:
The Company is committed to social and community engagement. Having established the Directions Governing the Use and
Review of Neighborhood Service Funds, the Company prepares a budget on an annual basis to engage in neighborhood services. In
2018, the Company spent a total of $1,542,000 on sponsoring neighborhood activities (including sports and recreational activities
of different agencies and schools, activities for village and community residents, the Salvation Ceremonies for the Ghost Festival,
volunteer meet-ups, energy conservation and environmental protection events, and club activities) in the Siaogang area in
Kaohsiung and on Hoping Island in Keelung ($1,152,000 for the Kaohsiung Yard and $390,000 for the Keelung Yard). For the major
cultural and social care activities conducted in 2018, please refer to Page 00 of the Chinese version of the Annual Report.
(3) Safety and health activities:
All levels of the company have a strong determination to maintain occupational safety and health. The labor safety and
hygiene department is set as a dedicated unit to supervise the company's safety and health work. All safety and sanitation
engineers and safety personnel are assigned to each site to perform on-site safety and health. jobs. On the internal website,
websites such as "Occupational Disaster Notification," "Safety Bulletin," and "Work Safety Propaganda Information" have been
established for employees to read and use, thereby enhancing employees' awareness, experience and resilience of IGS.
In order to prevent occupational safety accidents, provide a friendly working environment, and ensure the safety of
employees and contractors, the company has successively introduced the occupational safety and health management system
61 since 1996, and obtained international certification of OHSAS 18001 occupational safety and health management system in 1997.
Obtained DNV charter certificate. In the following year, the TOSHMS Taiwan Occupational Safety and Health Management
System was internationally verified and the DNV charter certificate was obtained. Since then, the company's occupational safety
and health management work has been officially and systematically progressed toward systematic management. Since then,
Taiwan Shipbuilding Company has passed the OHSAS 18001 and CNS 15506:2011 (formerly TOSHMS) occupational safety and
health management system certification audits in 2017 years and obtained BV charter certificates.
(4) Industry-academia collaboration and talent training:
1. Training for talent in engineering and management
The Company attracts and engages young talent through work study programs conducted with schools and
industry-academia collaboration projects, so as to continuously achieve innovation and advancement. To cultivate and recruit
talents in the shipbuilding-related fields and attract outstanding students who are interested to the shipbuilding industry, the
Company offers scholarships to students currently enrolled in the master’s programs in naval architecture, marine engineering,
electrical engineering, ocean engineering, shipping and transportation management, transportation science, and other related
fields at the Taiwan University, Cheng Kung University, Taiwan Ocean University, Kaohsiung University of Science and Technology,
SUN Yat-Sen University, National Defense University Institute of Technology..
In 2018, the Company selected 20 students enrolled in the master’s programs in vessel or marine-related fields through a
62 screening process and awarded each of them with NT$60,000 per semester, as a way to encourage students to strive for progress and engage in research and development. These awardees are obligated to work for the Company after graduation, and the period of their service must not be shorter than the period during which they receive the scholarships.
2. Training for talent in technology
To develop and improve technologies and enhance the expertise of employees, Four classes of industry-school cooperation in 2018:
(1) Industry-university cooperation shipbuilding special class: Cooperation with Kaohsiung City Zhongzheng Senior
Vocational Industrial School and National Kaohsiung University of Science and Technology, 34 students with special classes entered the factory on May 1, 2018, 11 people were engaged in drawing practice and 23 people were engaged in cold work practice.
(2) Ship Electrical and Mechanical Engineering and Wind Power Industry Course: Cooperation with National Kaohsiung
University of Science and Technology. There are 13 students in special classes entered the factory on August 1, 2018. All of them will be practice until July 30, 2019.
(3) 1+3 industry-school Cooperation program: Cooperation with Hechun Institute of Technology. Six students entered the factory on August 27, 2018, and all the students for electric welding practice will be conducted until June 30, 2021.
(4) Cooperation with the Department of Occupational Safety and Health of Fuying University of Science and Technology: 20
63 students entered the factory on June 11, 2018, and practiced such as electrician, fitter, and refrigeration control, and will be practice until June 30, 2022.
3. Training for talent in marine technology
To cultivate talents in shipbuilding, the Company works with the Taiwan University, Cheng Kung University, Taiwan Ocean
University, and Kaohsiung Marine University and offers the practical training program, Emerging Marine Affluent, to students of relevant departments during winter and summer vacations. The Intermediate Level Emerging Marine Affluent Program lasts four weeks, while the Advanced Level Emerging Marine Affluent Program lasts four weeks. In 2018, 34 students participated in the intermediate level program, and 11 students in the advanced level program, at the yards.
64 3.3.6 Ethical Corporate Management
Implementation Status 1 Deviations from “the Ethical Corporate Management Evaluation Item Yes No Abstract Illustration Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons 1. Establishment of ethical corporate management policies and programs (1) Does the company declare its ethical corporate V (1)We have established Code of Ethics to declare Reference to the listing management policies and procedures in its ethical corporate management policies,and and OTC Code of Ethical guidelines and external documents, as well as also established Code of Ethics and Conduct Corporate Practice and the commitment from its board to implement for Directors and First-Level or Higher CSBC characteristics. the policies? Management, Code of Ethics for Employees of CSB, Procedures for Ethical Management and Guidelines for Conduct .The query website is available at: http://www.csbcnet.com.tw Investor Zone.
(2) Does the company establish policies to prevent V (2) We have established Procedures for Ethical Reference to the listing unethical conduct with clear statements Management and Guidelines for Conduct to and OTC Code of Ethical regarding relevant procedures, guidelines of prevent unethical conduct with clear Corporate Practice and conduct, punishment for violation, rules of statements regarding relevant procedures, CSBC characteristics. appeal, and the commitment to implement the guidelines of conduct, punishment for policies? violation, rules of appeal, and the
65 commitment to implement the policies. The query website is available at: http://www.csbcnet.com.tw Investor Zone.
(3) Does the company establish appropriate V (3)We have established Code of Ethics to prevent Reference to the listing precautions against high-potential unethical against the following: and OTC Code of Ethical conducts or listed activities stated in Article 2, (I) Offer and acceptance of bribery. Corporate Practice and Paragraph 7 of the Ethical Corporate (II) Provision of illegal political donations. CSBC characteristics. Management Best-Practice Principles for (III)Improper charitable donation or sponsor TWSE/TPEx Listed Companies? ship. (IV) Provision or acceptance of unreasonabl e gift, entertainment or other undue i nterests. (V)Infringement of business secrets, tradema rk, patents, copyrights, and other intell ectual property rights. (VI) Engagement in unfair competition. (VII) Direct or indirect harm to the rights, health, and safety of consumers or oth er stakeholders during the research an d development, procurement, productio n, provision or sale of products and se rvices. 2. Fulfill operations integrity policy (1)Does the company evaluate business partners’ (1)We holds annual business meetings, conveying Reference to the listing ethical records and include ethics-related V our integrity requirements to all our business and OTC Code of Ethical clauses in business contracts? partners. In addition, an ethic-related clause is Corporate Practice and
66 included in every business contract. CSBC characteristics.
(2)Does the company establish an exclusively (or (2)To perfect the management of ethical Reference to the listing concurrently) dedicated unit supervised by the operation, Organized by the Management and OTC Code of Ethical Board to be in charge of corporate integrity? Department , the following units shall be Corporate Practice and handled according to their rights and CSBC characteristics. responsibilities, and shall be reported to the Board of Directors by the Audit Office for supervision and reporting: (I) Planning Department:
1. Help incorporate ethics and moral
value into the Company’s business
strategy.
2. Recommend on the adjustment of
internal organization and
responsibilities; establish mutual supervision, check and balance mechanism for business activities with relatively higher risk of unethical behaviors in the Company’s scope of business. (II) Legal Affairs Office: In coordination with the laws, ensure the effective execution of the Precautionary Solutions for ethical management and the relevant standard operating procedures in each solution.
67 (III) Dept. of Human Resources and Admini- stration: 1. Set down the “Ethical Management Operating Procedures and Behavioral Guidelines” (including the Precautionary Solutions and the reporting system, whistleblower (reporter) protection procedures and behavioral guidelines). 2. Promotion and coordination of the ethical management policy publicity and training. (IV) Audit Office: 1. Accept reports and undertake reporter (3)Does the company establish policies to prevent protection affairs, ensuring the conflicts of interest and provide appropriate effective execution. communication channels, and implement it? 2. Assist the board of directors and the management in investigating and evaluating the effective operation of the precautionary measures established for the practical implementation of ethical management, and conduct regular (4)Has the company established effective systems compliance assessment on the relevant for both accounting and internal control to business workflows and compile facilitate ethical corporate management, and V reports on that.
are they audited by either internal auditors or CPAs on a regular basis?
68 (5)Does the company regularly hold internal and (3) We have established Code of Ethics , Code of Reference to the listing external educational trainings on operational Ethics and Conduct for Directors , First-Level or and OTC Code of Ethical integrity? Higher Management, Code of Ethics for Corporate Practice and
Employees of CSB, Procedures for Ethical CSBC characteristics.
Management and Guidelines for Conduct , to
prevent conflicts of interest and provide V appropriate communication channels, and
implement it.
(4)We have established accounting and internal Reference to the listing
control systems to ensure integrity in our and OTC Code of Ethical V operations. Corporate Practice and CSBC characteristics.
(5) For new employees, training on ethical rules, Reference to the listing conflicts of interest, business morals, and all and OTC Code of Ethical other related subjects are carried out during Corporate Practice and their first week of work.Employees are required CSBC characteristics. to receive integrity training .
3. Operation of the integrity channel (1)Does the company establish both a V (1)We have established various reporting channels Reference to the listing reward/punishment system and an integrity so that employees and relevant people can and OTC Code of Ethical hotline? Can the accused be reached by an report improper business behaviors through the Corporate Practice and appropriate person for follow-up? system. After a confidential investigation, CSBC characteristics. anyone who violates the regulations on
69 operational integrity will be punished according to the Company’s regulations on reward and punishment. In cases of illegal conduct, legal actions will be taken as well.
(2)Does the company establish standard v (2)We have establish Procedures for Ethical Reference to the listing operating procedures for confidential reporting Management and Guidelines for Conduct and OTC Code of Ethical on investigating accusation cases? authorized by the Board which could be applied Corporate Practice and on any confidential investigations . CSBC characteristics.
(3)Does the company provide proper v (3) We have establish Code of Ethics ,Procedures Reference to the listing whistleblower protection? for Ethical Management and Guidelines for and OTC Code of Ethical Conduct to take whistleblower protection Corporate Practice and seriously since the core purpose is protection CSBC characteristics. from unlawful reprisal for diligent employees who step forward to identify potential wrongdoing. We has a dedicated hotline for whistleblower protection whether first-line managers and the Board if necessary, can directly review and determine appropriate actions against reprisal of complaints.
4. Strengthening information disclosure (1) Does the company disclose its ethical corporate v (1) We have established Code of Ethics , Code of Reference to the listing management policies and the results of its Ethics and Conduct for Directors , First-Level or and OTC Code of Ethical implementation on the company’s website and Higher Management, Code of Ethics for Corporate Practice and MOPS? Employees of CSB, Procedures for Ethical CSBC characteristics. Management and Guidelines for Conduct have
70 been posted on the Company’s Chinese / English website and MOPS. 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. 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). (a) To implement the basics of ethical corporate management policies, We operate under the Company Act, Securities and Exchange Act, Businesses Entity Accounting Act, related regulations for TWSE/TPEx-Listed Companies, and other laws and decrees concerning business transactions. (b) For more detailed information, please refer to the Company’s official website: //www.csbcnet.com.tw Investor Zone..
71 3.3.7 Corporate Governance Guidelines and Regulations Please refer to the Company’s website at http://www.csbcnet.com.tw /English/ServiceEng/InvestorEng.htm. 3.3.8 Other Important Information Regarding Corporate Governance：None 3.3.9 Internal Control Systems Please refer to page 65 of the Chinese annual report. 3.3.10 Major Resolutions of Shareholders’ Meeting and Board Meetings
Item Date Major resolutions shareholders 28,Jun,2018 1. Recognizes that the number of affirmative rights meeting in the business report and financial report for the year of 2017 , the pro-weight equity accounted for 98.99% of the voting rights of the attending shareholders, which was passed in the case.Report of the public information observatory on the stock exchange on March 28, 2018. 2. Recognizing the profit and loss appropriation for the year of 2017, the pro-weight equity accounted for 98.92% of the voting rights of the share -holders attending the meeting. The case was passed as approved, No dividends were paid and the declaration was completed on June 28, 2018. Temporary 09,Nov,2018 1. Report of one-half of the amount of paid-up meeting of capital and inquired. shareholders 2. Improve the business plan 2018 annual situation report and inquired. Board meeting 05,04,2018 1.Approval of the record date of the capital (extraordinary) reduction. 2.Approval of the record date of the capital increase、shares、price、applicants & other related issues. Board meeting 05,11,2018 1.Approval of the proposal for 2017 Deficit Compensation. 2.Approval of updating the contents of the 2018 shareholders' meeting. 3.Approval of the investment project about building a 140 meters barge . 4.Approval of some revisions about the Purchasing operations of CSBC CORPORATION,TAIWAN. 5.Approval of the general manager Cheng-Tzu Wei of of CSBC Coating Solutions Co., Ltd. to hold a concurrent post as a director of BLUE ACE. 6.Approval of that Chen Chiou-Wen promoted
72 from special assistant to the vice general manager of CSBC Coating Solutions Co., Ltd. 7.Approval of the organization abolition about Machinery factory. 8.Approved the units and duties change of vice president LIN,FOUNG-TANG & other 3 people.
Board meeting 05,11,2018 1.Approve that the price determination of the first (extraordinary) private placement was uncompleted. 2.Approval of the record date of the capital increase、shares、price、applicants & other related issues. Board meeting 05,25,2018 1.Approval of in 2018, after the expiration of the (extraordinary) payment of the private equity common stock, the actual private equity and paid-up shares. Board meeting 08,10,2018 1.Approved cash to increase the capital of new shares issued in 2018. 2.Approval the Directions of employees use cash to increase share subscription specifications. 3.Approval the Directions of Receivables and notes receivables for the assessment of bad debts and overdue collections. 4.Approved the job transfer of eight first-level supervisor. Board meeting 09.12.2018 1.Consent for more than half of the capital loss (extraordinary) report. 2.Approval of 2018 strengthen operational planed situation report. 3.Approval of held 2018 extraordinary shareholders' meeting on 2018/11/9. 4.Approval of joint venture with GeoSea to form CDWE. 5.For Improve the Multi-purpose steel structure production line plan at Kaohsiung Yard. Board meeting 11.09.2018 1.Approval of the Company's 2019 Annual Operating Plan. 2.Approval of "2019 Annual Audit Plan". 3.Approval of research day labor employ standard. 4.To approve did not continue the remaining amount of new common shares of private placement. 5.Aproved to revised "Work Rules". 6.Approved of revised "Directions for trust stock subsidy". 7.Approval of revised "Organizational Highlights". 8.Approved the job transfer of 4 first-level
73 supervisor. 9.Aproved to cancellation of NT$811 million quota provided to Fuhai Company. Board meeting 12.17.2018 1.Approved the 2018 Capital increase and issue of (extraordinary) shares New stock price and related matters. 2.Approval of Executive Vice President Chieh-Te Chang to hold a concurrent post as a President of CSBC Coating Solutions Co., Ltd. Board meeting 03.15.2019 1.Approval of the 2018 Financial Statements and Consolidated Financial Statements. 2.Approval of the 2017 Business report. 3.Approved 2017 not to issue reward(bonuses) for directors and employees because the company has no Pre-tax benefits. 4.Consent for more than half of the capital loss report. 5.Approval of the proposal for 2017 Deficit Compensation. 6.Approved the endorsement guarantee for Fuhai offshore wind farm exceeds the limit was improved. 7.Approval of amendment to the ”Procedures for Acquisition or Disposal of Assets”. 8.Approval of election of 15 directors for 17 th (including 3 independent directors) at the 2019 annual meeting of shareholders. 9.Approval of held 2019 annual meeting of shareholders on 2019/6/26. 10.Approval of announcement to accept the written proposal of the shareholder. 11.Approval of the 2017 Statement of Internal Control Systems. 12.Approval of the 2019 financial statements(include consolidated financial statements) and hire PwC Taiwan to process tax declaration visa. 13.The first quarter of 2019 accountants of Governing Auditing and Certification of Financial Statement be changed from Wang,kuo-hua and Wu,chien-chih to Wang,kuo-hua and Tien,chung-yu. 14.For Improve the TP production line plan at Kaohsiung Yard. 15.Approval of revised "Specification for re-investment operations" and "Specification for supervision and management of subsidiaries".
74 16.Approval of revised the "Corporate Governance principles". 17.Approval of revised the "Specification for Related person transaction". 18.Approval of increase and revision the Chinese and English "Corporate social responsibility policy". 19.Approval of revised and rename "Specification for Chairman and General Manager's reward and General Manager Performance Evaluation". 20.Approval of formulate "Handling standard operating procedures required by directors". 21.Approved LANJIE CO., LTD director is still served by TANG,JUNG-KUEI. 22.Approval of hire Hongzhong Chen associate professo serve the company's Third session Remuneration committee member. 23.Approved the job transfer of Lin,Foung-Tang and Chen,Hui-Shan. 24.Approved the job transfer of twelve first-level supervisor. 25.Approval of revised "Organizational Highlights".
3.3.11 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors：None
75 3.3.12 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D.
02/28/2019 Reasons for Date of Date of Title Name Resignation or Appointment Termination Dismissal Heads of Accounting SU,CHEN-AN 12/01/2013 11/30/2018 Retirement department Heads of R&D LIU,CHWAN- CHANG 01/01/2017 02/28/2019 Retirement department
3.4 Information Regarding the Company’s Audit Fee and Independence
3.4.1 Audit Fee 莊玥嬛
Accounting Firm Name of CPA Period Covered by CPA’s Audit Remarks
Wang, Guo-Hua/ PriceWaterHouseCoopers 2018.01.01~2018.12.31 - Wu, Chien-Chih
Note: If the Company has changed CPA or Accounting Firm during the current fiscal year, the company shall report the information regarding the audit period covered by each CPA and the replacement reason. Unit: NT$ thousands
Non-audit Fee Period Accounting Name of Audit System Covered by Remarks Firm CPA Fee of Company Human Others Subtotal Design Registration Resource CPA’s Audit Wang, 2018.1.1~ Register PriceWater Guo-Hua 2018.12.31 the 1,800 - 60 - 260 320 HouseCoopers Wu, capital Chien-Chih reduction 3.4.2 Replacement of CPA: Not Applicable. 莊玥嬛 3.4.3 Audit Independence 莊玥嬛 CSBC Chairman, Chief Executive Officer, Chief Financial Officer, and managers in charge of its finance and accounting operations did not hold any positions in the Company’s independent auditing firm or its affiliates during 2018.
76 3.5 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders Unit: Shares As of Mar. 31, 2019 2018 (Note 1) (Note 7) Title Name Pledged Pledged Holding Holding Holding Holding Increase Increase Increase Increase (Decrease) (Decrease) (Decrease) (Decrease) Director Ministry of Economic Affairs (144,542,174) 00 0 Representative Cheng, Wen-Lon (57,935) 0 8,911 0 Director Ministry of Economic Affairs (144,542,174) 00 0 Representative Chen, Yung-Tsung(Note 6) 000 0 Representative Huang, Ying-Fang(Note 6) 000 0 Director Ministry of Economic Affairs (144,542,174) 00 0 Representative Huang, Ying-Fang(Note 2) 000 0 Representative Lu,Wen-Tsan(Note 2) 000 0 Director Ministry of Economic Affairs (144,542,174) 00 0 Representative Fang, Ming-Chung(Note 2) 000 0 Representative Wu,Wen-Kuei(Note 2) 000 0 Director Ministry of Economic Affairs (144,542,174) 00 0 Representative Tseng,Kuo-Cheng (55,935) 0 15,128 0 Director Ministry of Economic Affairs (144,542,174) 00 0 Representative Huang, Jih-Chin (52,392) 0 20,631 0 Director Ministry of Economic Affairs (144,542,174) 00 0 Representative Lan, Syu-Cing 0 0 16,514 0 Director CPC Corporation, Taiwan (27,233,879) 0 3,980,679 0 Representative Yin, Ling- Ying 000 0 Director China Steel Representative (10,663,295) 00 0 Representative Lee Xin-Min(Note 3) 000 0 Representative Hwang, Chien-Chih (Note 3) 000 0
Director Yue-Li Investment Corporation (3,037,975) 0 444,050 0
Kaohsiung City Representative Director of Industrial Labor Union of (471,246) 0 85,442 0 CSBC Representative Hou, De-Long (10,289) 0 11,275 0 Kaohsiung City Representative Director of Industrial Labor Union of (471,246) 0 85,442 0 CSBC Representative Hsieh, Kuo-Jung (162,139) 0 33,815 0 Independent Lin, Hui-Jeng 000 0 Director
77 As of Mar. 31, 2019 2018 (Note 1) (Note 7) Title Name Pledged Pledged Holding Holding Holding Holding Increase Increase Increase Increase (Decrease) (Decrease) (Decrease) (Decrease) Independent Fu, Ho-Chung(Note 5) 000 0 Director Independent Lieu, Der-Ming 000 0 Director Chairman of the board of Cheng, Wen-Lon (57,935) 0 8,911 0 directors Manager Tseng,Kuo-Cheng (55,935) 0 15,128 0 Manager Chang,Chieh-Te (59,453) 0 13,000 0 Manager Lin,Foung-Tang (Note 8) 005,000 0 Manager Chen,Hui-Shan (Note 9) --0 0 Manager Wei,Cheng-Tzu 007,662 0 Manager Chou, Chih-Ming (81,090) 0 27,346 0 Manager Hsieh,Ling-Ling 0 0 5,838 0 Manager Su,Chen-An(Note 4) 000 0 Manager Yang,Ching-An(Note4) 009,761 0 Major Ministry of Economic Affairs 000 0 shareholder Note 1：Capital reduction in 2018. Note 2：On 2018/11/26, Ministry of Economic Affairs reappointed the representatives. Note 3：On 2018/07/01, CSC Corporation reappointed the representatives. Note 4：On 2018/11/30, the Accounting manager, Su, Chen-An, was retired. On 2018/12/01, the Accounting manager, Yang,Ching-An, assumed the position. Note 5：2019/01/01, the Independent Director was resigned. Note 6：2019/01/28, Ministry of Economic Affairs reappointed the representatives. Note 7：Capital increase in 2019. Note 8：2019/02/28, the manager was retired. Note 9: 2019/03/18, the manager was assumed the position. 3.5.1 Shares Trading with Related Parties: None 3.5.2 Shares Pledge with Related Parties: None
3.6 Relationship among the Top Ten Shareholders Spouse’s/ Name and Relationship Between the Shareholding Re minor’s Company’s Top Ten Shareholders, or Name Current Shareholding by Nominee ma Shareholdin Spouses or Relatives Within Two Arrangement rks g Degrees Shares % Shares % Shares % Name Relationship Ministry of Economic 1. CPC Corporation, 1. Holding 100% 105,070,366 22.21% 0 0 0 0 Affairs Taiwan shares of CPC
78 Spouse’s/ Name and Relationship Between the Shareholding Re minor’s Company’s Top Ten Shareholders, or Name Current Shareholding by Nominee ma Shareholdin Spouses or Relatives Within Two Arrangement rks g Degrees Shares % Shares % Shares % Name Relationship 2. China Steel 2. The major Corporation shareholder of 3. Yao-Hwa Co.,Ltd CSC. Management 3. The major Commission shareholder of Yao-Hwa. Ministry of Yao-Hwa Co.,Ltd Ministry of Economic Affairs 36,032,305 7.62% 0 0 0 0 Management Commission Economic Affairs is the major shareholder. Representative: The shareholder doesn’t provide. Chuan-Neng Lin National Development 36,032,305 7.62% 0 0 0 0 None None Fund, Executive Yuan Representative: The shareholder doesn’t provide. Chen, Mei-Ling Yuanta Commercial Bank 30,586,059 6.47% 0 0 0 0 None None Trust Account National Defense Industrial 25,000,000 5.29% 0 0 0 0 None None Development Foundation Representative: The shareholder doesn’t provide. Yen, De-Fa Ministry of Ministry of Economic Affairs CPC Corporation, Taiwan 47,030,687 6.33% 0 0 0 0 Economic Affairs is the only shareholder. Responsible person: The shareholder doesn’t provide. Ou, Jia-Ruey Ministry of Ministry of Economic Affairs China Steel Corporation 18,414,641 2.48% 0 0 0 0 Economic Affairs is the major shareholder. Responsible person: The shareholder doesn’t provide. Weng, Chao-Dong Bank SinoPac as Custodian for Triorient Investments 4,000,000 0.85% 0 0 0 0 None None Limited Investment Account JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total 3,294,881 0.70% 0 0 0 0 None None International Stock Index Fund, a series of Vanguard Star Funds VANGUARD EMERGING MARKETS STOCK INDEX FUND, A SERIES OF 2,834,540 0.60% 0 0 0 0 None None VANGUARD INTERNATIONAL EQUITY INDEX FUNDS 3.7 Ownership of Shares in Affiliated Enterprises Date：12/31/2018
79 directors, supervisors, Comprehensive CSBC managers, directly or indirectly investment controlled by the Company Name of Subsidiary
No. of shares held Stockholding (%) No. of shares held Stockholding (%) No. of shares held Stockholding (%)
CSBC Coating 8,750,000 70% 0 0% 8,750,000 70% Solution Corporation Blue Ocean Wind Power Engineering USD7,000 70% 0 0% USD7,000 70% (H.K.) Ltd. Blue Ace
Corporation 1,750,000 70% 0 0% 1,750,000 70% TOWSC 400,000 40% 0 0% 400,000 40%
Fuhai Wind Farm 15,000,000 37.97% 0 0% 15,000,000 37.97% Corporation Taiwan International Windpower 1,200,000 12% 0 0 1,200,000 12% Training Corporation
Note: The company uses long-term equity investment method。
80 IV.Capital Overview 4.1 Capital and Shares 4.1.1 Source of Capital A. Issued Shares Authorized Capital Paid-in Capital Remark Par Year Value Amount(NT$ Amount(NT$ Capital Increased (NT$) Shares Shares Sources of Capital by Assets Other Other thousands) thousands) than Cash 1976 10 220,000 2,200,000 220,000 2,200,000 cash capital increase None - 2,200,000 1977 10 320,003 3,200,032 320,003 3,200,032 cash capital increase None - 1,000,032 1978 10 428,510 4,285,108 428,510 4,285,108 cash capital increase None - 1,085,076 1979 10 561,507 5,615,075 561,507 5,615,075 cash capital increase None - 1,329,967 1980 10 679,174 6,791,740 679,174 6,791,740 cash capital increase None - 1,176,665 1981 10 809,174 8,091,740 809,174 8,091,740 cash capital increase None - 1,300,000 1982 10 826,174 8,261,740 826,174 8,261,740 cash capital increase None - 170,000 1983 10 866,174 8,661,740 866,174 8,661,740 cash capital increase None - 400,000 1984 10 929,174 9,291,740 929,174 9,291,740 cash capital increase None - 630,000 1985 10 979,174 9,791,740 979,174 9,791,740 cash capital increase None - 500,000 1986 10 1,029,174 10,291,740 1,029,174 10,291,740 cash capital increase None - 500,000 1987 10 1,055,174 10,551,740 1,055,174 10,551,740 cash capital increase None - 260,000 1988 10 1,105,174 11,051,740 1,105,174 11,051,740 cash capital increase None - 500,000 1989 10 1,280,174 12,801,740 1,280,174 12,801,740 cash capital increase None - 1,750,000 1990 10 1,695,233 16,952,335 1,695,233 16,952,335 cash capital increase None - 4,150,595 1998 10 1,113,900 11,138,997 1,113,900 11,138,997 capital reduction 5,813,338 None - 2003 10 1,113,900 11,138,997 1,113,900 11,138,997 cash capital increase None 5,000,000 capital reduction 5,000,000 2007 10 1,113,900 11,138,997 666,133 6,661,326 capital reduction 4,477,671 None
2009 10 1,113,900 11,138,997 672,793 6,727,939 capitalization of retained None earnings 66,613 2010 10 1,113,900 11,138,997 721,908 7,219,079 capitalization of retained None earnings 491,140 2012 10 1,113,900 11,138,997 743,565 7,435,652 capitalization of retained None earnings 216,572 2018 10 1,113,900 11,138,997 372,991 3,729,917 capital reduction None 4,305,734 cash capital increase 600,000 2019 10 1,113,900 11,138,997 472,991 4,729,917 cash capital increase None 1,000,000
81 B. Type of Stock Authorized Capital Share Type Remarks Issued Shares Un-issued Shares Total Shares Common Stock 472,991,749 640,907,968 1,113,899,717 －
4.1.2 Status of Shareholders Feb. 1, 2019 Foreign Government Financial Other Juridical Domestic Item Institutions & Total Agencies Institutions Persons Natural Persons Natural Persons Number of Shareholders 2 2 67 50,896 106 51,073 Shareholding (shares) 141,102,671 31,000 132,823,075 179,816,561 19,218,442 472,991,749
Percentage 29.83% 0.01% 28.08% 38.02% 4.06% 100.00%
4.1.3 Shareholding Distribution Status A. Common Shares Feb. 1, 2019 Class of Shareholding Number of Shareholding Percentage (Unit: Share) Shareholders (Shares) 1- 999 20,474 7,178,001 1.518 1,000- 5,000 24,119 49,197,038 9.133 5,001- 10,000 3,480 24,108,968 5.097 10,001- 15,000 1,090 13,247,956 2.801 15,001- 20,000 481 8,360,869 1.768 20,001- 30,000 570 13,765,532 2.910 30,001- 40,000 252 8,700,475 1.839 40,001- 50,000 169 7,510,027 1.588 50,001- 100,000 250 17,035,414 3.602 100,001- 200,000 96 13,336,722 2.820 200,001- 400,000 45 11,666,083 2.466 400,001- 600,000 17 8,215,351 1.737 600,001- 800,000 6 4,105,672 0.868 800,001- 1,000,000 4 3,624,005 0.766 1,000,001 or over 20 288,939,636 61.088 Total 51,073 472,991,749 100.000%
B. Preferred Shares：None
82 4.1.4 List of Major Shareholders Feb. 1, 2019 Shareholding Shareholder's Name Shares % Ministry of Economic Affairs 105,070,366 22.21% Yao-Hwa Co.,Ltd Management Commission 36,032,305 7.62% National Development Fund, Executive Yuan 36,032,305 7.62% Yuanta Commercial Bank Trust Account 30,586,059 6.47% National Defense Industrial Development Foundation 25,000,000 5.29% CPC Corporation, Taiwan 23,777,487 5.03% China Steel Corporation 7,751,346 1.64% Bank SinoPac as Custodian for Triorient Investments Limited 4,000,000 0.85% Investment Account JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard 3,294,881 0.70% Total International Stock Index Fund, a series of Vanguard Star Funds VANGUARD EMERGING MARKETS STOCK INDEX FUND, A SERIES OF 2,834,540 0.60% VANGUARD INTERNATIONAL EQUITY INDEX FUNDS
83 4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share Unit: NT$ / thousand shares 01/01/2019- Items 2017 2018 03/31/2019 Market Price per Share Highest Market Price 16.05 42.90 30.60 Lowest Market Price 10.90 11.30 23.40 Average Market Price 12.85 23.15 27.38 Net Worth per Share Before Distribution 8.52 15.93 16.70 After Distribution 8.52 15.93 16.70 Earnings per Share Weighted Average Shares 312,992 349,322 439,662 Diluted Earnings Per Share(Note5) (18.79) (8.87) (0.67) Dividends per Share Cash Dividends 0.00 Note4 - Stock Dividends y Dividends from Retained Earnings 0.00 Note4 - y Dividends from Capital Surplus 0.00 Note4 - Accumulated Undistributed Dividends 0.00 0.00 0.00 Return on Investment Price / Earnings Ratio (Note 1) (0.69) (2.76) (39.80) Price / Dividend Ratio (Note 2) - Note4 - Cash Dividend Yield Rate (Note 3) 0.00 Note4 - 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: The loss offsetting proposal of 2018 hasn’t been resolved by Annual General Shareholders’ Meeting. Note5: The weighted average number of shares outstanding used for the loss per share computation was adjusted retroactively for the record date of capital reduction on May 10, 2018. Therefore, the loss per share was based on the outstanding share after the reduction.
84 4.1.6 Dividend Policy and Implementation Status A. Dividend Policy If the Company has earnings in the current fiscal year after annual audit, it shall first pay the profit-seeking enterprise income tax and cover its accumulated losses in previous years. If there is a balance, the Company shall set aside 10% as legal reserves. However, the provision does not apply when the legal reserves have reached the total amount of capital. Moreover, a special reserve shall be set aside in accordance with Article 41 of the Securities and Exchange Act. If there is still a balance, the Board of Directors shall propose an allocation plan in the shareholders’ meeting for resolution before allocation. Considering the business environment and growth of the Company, the Company may allocate 10% or more of the distributable earnings referred to in the preceding Paragraph as dividends and bonuses depending on the Company’s future demand for funds and its long-term financial planning, and satisfying shareholders’ demand for cash. Cash dividends shall not be less than 10% of the total dividends. B. Proposed Distribution of Dividend It would not distribute dividend of 2018, and it will be discuss at the Annual General Shareholders’ Meeting. 4.1.7 Employee Bonus and Directors' Remuneration A. Information Relating to Employee Bonus and Directors’Remuneration in the Articles of Incorporation. The company charter prescribes the following for the employee bonus and Remuneration for directors : (a)1% ~ 5% as a bonus for employees; (b)Not exceeding 1% as Remuneration for directors ; B. The Estimated Basis for Calculating the Employee Bonus and Directors’ Remuneration No Employee Bonus and Directors’ Remuneration for 2018 because of no retained earnings before tax. C. Profit Distribution for Employee Bonus and Directors’ Remuneration for 2018 Approved in Board of Directors Meeting No Employee Bonus and Directors’ Remuneration for 2018 Approved in Board of Directors Meeting because of no retained earnings before tax. 4.1.8 Buyback of Treasury Stock：None 4.2 Bonds：None 4.3 Global Depository Receipts：None 4.4 Employee Stock Options：None 4.5 Status of New Shares Issuance in Connection with Mergers and Acquisitions： None
85 4.6 Financing Plans and Implementation ： The private placement of common shares is approved by Extraordinary Shareholders’ Meeting of Dec. 21, 2017. Please refer to p.145 . The Board of Director of Aug. 10, 2018 resolved the capital increase. The price collection completed on Jan. 31, 2019. It was offering 100,000 thousand shares and NTD2,252 million dollars. It was used to enrich working capital in the first quarter of 2019. V. Operational Highlights 5.1 Business Activities 5.1.1 Business Scope A. Main areas of business operations Customers are mainly distributed in Europe, Asia and Africa and the Americas region. B. Revenue distribution Unit：NT$ One hundred million Major Divisions Total Sales in Year 2018 (%) of Total Sales Domestic 65.52 50.36 Export 64.60 49.64 Total 130.12 100.00
C. Main products Unit：NT$ thousands Major Products Total Sales in Year 2018 (%) of Total Sales Commercial ships 10,355,714 79.58 Military ships 1,465,670 11.26 Commercial and military ship 976,476 7.51 maintenance Machinery manufacturing 85,605 0.66 Other business projects 128,861 0.99 Total 13,012,326 100.00
D. New products development Submarine design and construction, Naval or coast guard surface ship design and construction, marine engineering, business ships, offshore wind power components assembly and installation and operation and maintenance, marine engineering, rail vehicles, underwater welding, painting and corrosion.
86 5.1.2 Industry Overview A. Macroeconomic Environment ▓ABS analysis that shipbuilding demand will gradually increase from 2018 .
Source：ABS World Shipping & Shipbuilding Outlook, Spring 2018 ▓With regard to the number of newbuildings or deadweight tonnage, the focus of the global shipbuilding industry is still in Asia. At present, the world shipbuilding market presents the situation in China, Japan and South Korea. As of the end of 2017, the number of orders for ships in the Three Kingdoms countries has reached 93% of the world total in modified gross tonnage (CGT), and it holds the world. Most of the shipbuilding market orders. In 2017, China’s handheld orders, new ship orders, and shipbuilding completions all surpassed South Korea, becoming the world's largest shipbuilding nation for the first time. In order to occupy a small shipbuilding market, Japan and South Korea, the major shipbuilding industry countries, have demonstrated their technological superiority and foreign expansion strategy. They have competed with China for the market, especially in terms of green ship technology. B. Current Status and Future Development of CSBC ▓Faced with the global shipbuilding market competition, Taiwan Ships' new challenges in the future include (1) lowering costs, strengthening operational constitution, (2) manpower optimization, technological heritage, (3) adjusting product structure, and developing new business (4) accelerating product development and innovation ( 5) Innovate the business model and develop business. In response to these new challenges, the company has developed relevant strategies in 2013, and has established the “Senior Five-Year Plan”
87 (abbreviated as 168 scheme), actively promoting overall reduction of costs by 25%, and rejuvenation and optimization of personnel. And accelerate technological heritage to fully enhance the company's strengths and competitiveness. As of 2017, the total cost of implementing CGT per unit decreased by 12% compared with 2012, and the non-commercial ship revenue reached 8.34%. ▓In 2017, the Company continued to promote its diversification operation strategy, formulate an upgrade and transformation plan, conduct a rolling review of the revised upgrade and transformation plan, and set the working philosophy and working guidelines, mastered the nine major work priorities, and actively oriented towards diversified operations to achieve constructive excellence. The goal of the Ocean Group is moving forward. ▓In the year of 2007, the company has set a total of 45 projects for upgrading and transformation projects. As of January, the target achievement rate is 86.66%. It also aims to improve operations and turn profitability into profits. At the same time, it sets a throttling plan, with a total target value of 7.94 Billion for 106 to 107 years., as of January, the target achievement rate was 37.52%. The annual upgrade and transformation plan and the thrift program all provide board tracking and control. ▓Looking at the recovery of the global economy at least until 2020, the economy of the shipbuilding industry is not optimistic. However, in the future, under the guidance of the upgrade and transformation program, the company will actively target 1) the merchant ship industry, 2) the shipbuilding industry, and 3) diversification of offshore wind power operations to reduce the risk of product concentration and shipbuilding operations, with each block accounting for three One-third of the total revenue, the goal of building an excellent marine business group is moving forward. In the past, the company has laid a good foundation. In the future, we expect to pursue better operating performance, continue to pursue growth, and create new innovations under the business philosophy of “integrity, innovation, growth” and the core values of “commitment, safety, teamwork, and service”. In order to create the best interests of the company, employees and shareholders as a whole.
88 C. Relationship with Up-, Middle- and Downstream Companies Shipbuilding industry, the middle and lower reaches of the supply of many manufacturers, shipbuilding supply chain construction and efficiency of the relationship between shipbuilding industry competitiveness, all the upper supply of shipbuilding plate, the middle of the ship main equipment (host, auxiliary, etc.) and paint and downstream East of the end user. CSBC has various types of ships independent design, installation, manufacturing capacity and a professional ship R & D design talent, and the upper, middle and lower reaches of the supply of manufacturers and owners to maintain good relations of supply and marketing to ensure product quality and delivery. In the middle and upper reaches of the supply chain manufacturers supply chain building, CSBC has strict supplier evaluation system, and to diversify supply sources, in order to establish a complete supply chain system. On the downstream owners of services, in addition to timely delivery to meet the owner's demand, pay more attention to the use of the product after-sales service and satisfaction. To ensure product quality and delivery, shipbuilding industry, the middle and lower reaches of the relationship between the closely related, any link problems will affect the downstream owners of services. D. Product Trends and Competition (1) Product Trends At present, the shipbuilding market in the world has formed a variety of ship types such as oil tankers, bulk carriers, container ships, special ships, and offshore engineering equipment ships. In 2017, the number of ship transactions, tankers, bulk carriers, container ships, and offshore projects (Offshore The proportions of Structure) were 32.46%, 32.61%, 18.24% and 8.96% respectively. Compared to the shipbuilding market in 2016, the growth of oil tankers was 14.13%, the bulk wheel recession was 18.53%, the container ships grew 24.21%, and special ships and offshore engineering equipment. The ship is down 3.45%.
89 (2) Product Competition By analyzing the strategic development of the major shipbuilding countries by competition strategy, the Republic of Korea, through the economic scale, technology, management and related peripheral industry support, achieved various competitive advantages of low-cost shipbuilding, and gradually increased the proportion of products such as LNG and Offshore. In the past, Japan had made a difference in its strategy to maintain its competitive edge through the change of industrial structure (strategic alliance, merger or division of labor) and specialization (each shipyard focused on a certain type of ship), while cost leadership and professional differentiation . Continental Shipyard is currently in a low labor cost to gain a competitive advantage in the future through capacity expansion, equipment upgrades, technology improvement and efficiency improvement, cost leadership strategy development. Western European countries are still professional differentiation strategy, in the passenger ships, special ships firmly in the lead. CSBC are mainly container ship professional shipyards, and timely according to market demand with the bulk cargo ship or tanker business. Considering the critical success factors of container ships, it is compared with Japan, Korea and mainland China shipyards. Overall, CSBC has advantages in quality, design and specification, material cost is mainly imported, and the industry scale is small. Bargaining power is weak, more Habitat disadvantage. 5.1.3 Research and Development A. Research and Development Expenses in the Past Three Years Unit：Thousand (NTD)
Year 2016 2017 2018 Item
R&D funding(A) 102,196 126,676 117,013
Company turnover(B) 15,747,699 16,404,344 13,012,326
(A)／(B)% 0.65% 0.77% 0.90%
90 B. Education distribution of R&D personnel. The department unit responsible for research and development is「Innovation and Research Center, IRC」in CSBC. And the「Department of Design」and「Submarine Development Center, SDCC」(dissolved on Mar. 18, 2019) are responsible for research and development of the ship. And another major work that develops maritime engineering technology is the "CSBC-DEME Wind Engineering" (established on Feb. 26, 2019) and the "Dept. of Ship Management" (established on Mar. 18, 2019). The R&D personnel education distribution as follows. Statistics as of December 31, 2018 Year Item 2015 2016 2017 2018
Doctor 5 6 8 8 Education Master 68 79 77 79 distribution Bachelor 49 42 34 58 Others 17 17 12 13 Total 139 144 131 158 Average working years 17.61 14.42 14.63 13.18
5.1.4 Long-term and Short-term Development A. Long-term Development a. Strengthen corporate governance system and make full use of corporate social responsibility In order to enhance the company’s performance in the capital market and the transparency of the company’s operations, the company’s corporate governance aspects such as safeguarding shareholders’ rights, treating shareholders equally, strengthening the structure and operation of the board, enhancing information transparency, and implementing corporate social responsibility Accepted the "Corporate Governance Review", the evaluation results are listed as 6% to 20% of the company. In order to expose the company’s management and achievements in promoting corporate social responsibility, the company publishes its “Corporate Social Responsibility Report” every year, and establishes a “Corporate Social Responsibility Zone” on the company’s website to provide interested parties with access and understanding. Continuously optimize the corporate governance system and make good use of corporate social responsibility.
91 b. Implementing transformation programs, diversification The company has set 1) the merchant ship business, 2) the national shipbuilding company, 3) offshore wind power for the diversification of the operating spindle and upgrading and transformation strategy targets, diversification aims to reduce the company's product concentration shipbuilding, because the global shipping and shipbuilding market by the global economy Business cycle operational risks. The Company's diversification upgrade has been launched since the year of 2017. Both internal organization, manpower and management systems will continue to be reviewed and built. Compared with the plan, each will contribute 1/3 of the target, and the three most-versatile operation spindles are the core technologies of the company's shipbuilding industry. In the future, the company will continue to plow on these three major operation spindles, aiming to build a marine industry with competitive advantages. The group aims to move forward. c. Inheritance of knowledge and technology, building human resources The aging of human resources, technological heritage, and the development of talent for the development of new businesses are challenges and issues that the company can't avoid and need to face. In response to the challenges and issues, the company established " CSBC Academy " in October of 2017 to continue training and training. To recruit talents, we must actively prepare various talents for the development of the company’s business and prepare and develop more sources of funds. The mission is to pass on the core technologies of shipbuilding and offshore industry, nurture shipbuilding and marine industry talents, and build quality cooperation between industry and academia. Talent cultivation model, development of high-efficiency digital and field environment learning environment. In the long-term goal, and " CSBC Academy " will also provide a consulting platform for talent cultivation, cultivation and technical exchanges in the company’s diversified management industry chain, and play a key role in implementing the government’s localization policy for industrial development.
92 B. Short-term Development a. Actively strive for new business orders, turn losses into profits, and create profit The merchant ship industry will actively strive for a number of businesses including domestic and foreign merchant ships and official ships. At the same time, both Statecraft and Offshore Wind Power will be new businesses the company will actively strive for, in order to win state-owned and off-shore wind power new business, The company has made adjustments in its organization and set up 「 Submarine Development Center, SDCC 」 (dissolved on Mar. 18, 2019), "CSBC-DEME Wind Engineering" (established on Feb. 26, 2019), "Dept. of Ship Management" (established on Mar. 18, 2019) and " CSBC Academy " , respectively to coordinate the company's limited resources and establish a new research and development center to integrate R&D strategies, develop new business development, and develop and develop core technologies. It will help sustain the growth of the business and create profits. b. Strengthen capacity control and reduce costs The international shipping business is still in a sluggish state, which seriously affects the shipbuilding market. The low shipping prices, together with the large fluctuations in the exchange rate and raw material prices, and the backwardness of the project, caused losses in the operation in the past two years. Except for external uncontrollable factors, the progress of the project has been delayed. Control measures have been adopted to ensure that the subsequent construction of new vessels can be delivered on time and on schedule. In addition, in order to increase productivity, the company is currently carrying out 800 tons of large crane investment cases and has strengthened the carrying capacity of Pier 2. For the relevant project investment plan, please refer to Chapter 3 for a description of the major capital expenditures. At the same time, the company will continue to promote the throttling program. , Reduce overhead costs, and in the period of improving production efficiency and equipment renewal, comprehensively reduce operating costs to create profits. c. Continuously carry out internal transformation of the company to enhance competitiveness According to the upgrade and transformation plan, the company has set 1) the merchant ship business, 2) the national shipbuilding company, 3) offshore wind power to be the main axis of the diversified operation, and the internal organization of the company has been adjusted at the same time, establishing a new research and development center, a potential launch center, and offshore
93 engineering. The Center and the Taiwan Shipbuilding Institute actively promoted the upgrading of transformation programs. The management system was also reviewed and revised at the same time. The employees were regularly assessed, combined with annual assessments, performance-based rewards were eliminated, and a corporate culture of equal importance and efficiency was created. The establishment of the Taiwan Shipbuilding Academy will shoulder the responsibility of human cultivation, development, and inheritance. At the same time, it will also combine production and academic cooperation to effectively enhance the company's R&D energy and core competitiveness. This will enable the company to become a competitive ocean organization. d. Improve design energy and accelerate new ship development In response to the development trend of energy saving and carbon reduction in the world, the company is committed to environmental protection, economy, energy conservation, and safety principles, developing energy-efficient ships, and developing new ship types in response to the needs of the shipbuilding market to meet customer needs and create customer value. The company has been in operation since 2005. Launched Energy Saving Plan (ES) and reached energy saving target of 30%. Energy-saving design results also include energy-saving boat pods (with high sea state adaptability), energy-saving ball pods (saving fuel consumption by 12%), and energy-saving rudder (Energy-saving 2 to 4% horsepower), vortex generator (designed for a patent to reduce propeller excitation force, humming sound and vibration, saving 1% horsepower), and currently launches SODO (Simba optimal ship design and operation technology) The service policy of the innovative design brand and the development of the smart ship of the 4IntShip all-ship network planning brand, in order to enhance the design energy, the company also cooperated with industry and universities, and actively recruited design talents to the various university departments to invest in new ship types. Design and development in order to strengthen the competitive advantage and competitiveness of the company in the highly competitive international shipbuilding market.
94 5.2 Market and Sales Overview 5.2.1 Market Analysis
A. Sales (Service) Region Unit；NT$ One hundred million Major Divisions Total Sales in Year 2018 (%) of Total Sales Domestic 65.52 50.36 Export 64.60 49.64 Total 130.12 100.00
B. Market Share (%) of Major Product Categories in the Last Two Years The CSBC market is positioned as a container specialist shipyard. If it does not divide the ship type and analyzes the delivery volume of a single shipyard, the company accounts for approximately 1.00% of the total global delivery volume (in terms of CGT). Taiwan Shipbuilding Company's market share in the past five years Year 2014 2015 2016 2017 2018 Cont.CGT 43.90 39.50 13.00 25.20 28.60 Csbc CGT 339,187.00 354,339.00 238,834.00 282,638.00 282,638.00 market share 0.77% 0.90% 1.84% 1.21% 0.99%
▓If the container wheel statistics, the company's container wheel holding orders in 2018 ranked 18th in the world.
C. Market Analysis of Major Product Categories Looking at the overview of the shipping and shipbuilding market in 2018, although the overall situation of the global shipping market is still not improving, the global container shipping volume continues to maintain a slight increase. The supply and demand relationship in the global container shipping market has improved, and the market conditions will generally stabilize. situation. In addition, due to factors such as environmental factors, the expansion of the Panama Canal and the aging of small and medium-sized container ships, it will be beneficial to the new shipbuilding market of container ships to a certain extent. The "polarization" characteristics of the new ship demand in the global container ship market will become more prominent in the future. Among them, feeder container ships, new Panamax container ships and super large container ships will continue to be the main demand in the future market. As for the basic supply and demand of the bulk cargo ship market, there is no obvious imbalance, which makes the new ship cost support. However, the BDI index is weak in recent years. Unless there is a clear lease or a very attractive ship price, most shipowners are still interested in new shipbuilding With the tightening of the financing environment, the US-China trade war,
95 and the UK's “hard Brexit” risks continue to ferment, according to analysts, the shipping market in 2019 is still in a weak state, risks and uncertainties will continue to increase, the world still Looking at how Sino-US trade will develop, the industry is very cautious in deploying ships, and it also makes it difficult for the industry to make forward-looking analysis of supply and demand in the face of fluctuating shipping market. According to the forecast and analysis of Alphaliner, Clarksons and Drewry, the global container shipping market demand growth rate is 3.8%, 4.1% and 4.1% in 2019, and the capacity growth rate is 3.5%, 2.9% and 2.6%. The demand growth will be higher than the capacity growth. Market demand is expected to gradually increase, and ships with high eco-efficiency are expected to gain more favor. The development of green fleet will promote the increase in the number of shipbreaking. D. Favorable and Unfavorable Factors in the Long Term ●Favorable Factors a. Container ship growth and stability, the company's annual business needs only a dozen, relatively stable source of business. b. Can focus on operating customer relationships, such as Evergreen, Yangming, Wanhai are based Container ship-based, and the list of the world's top 19 business list. c. Focus on container ship design, quality, cost, delivery, service at all levels Improve and enhance the competitiveness of container ships. ●Unfavorable Factors a. Container ships into the low threshold, the mainland shipyard capacity and energy capacity of the container ship will be rapidly upgrading, resulting in market prices fall. b. Product over-concentration, reduced ability to respond. c. Raw material prices, a substantial increase in production costs. d. Shipbuilding grass-roots technical labor shortage, rising wage costs. 5.2.2 Production Procedures of Main Products A. Major Products and Their Main Uses a. Container ship: The container carries the container to carry. b. Bulk ship: grain, ore, coal carrying. c. Tankers: crude oil and petroleum products to carry. d. Special Boat: semi-submersible load, cement, cold storage, floating dock. e. Official ships: the Coast Guard patrol operations, logistics ships and the official mission of the ship.
96 f. Naval ships: the Navy operations, logistics ships and the mission of the ship. g. Offshore wind power：wind power. B. Major Products and Their Production Processes
Signing → Design → Lofting → Cutting → Bending → Initial Combination → Large Combination →
Launching → Painting and Finishing → Delivery → Post-sale Service 5.2.3 Supply Status of Main Materials
Main raw materials / equipment Suppliers Host HYUNDAI、DIESEL UNITED、MITSUI、 HITACHI、KHI、STX、CMD、MITSUBISHI、 YUCHI、HSD、MAN、MTU generator YANMAR、STX ENGINE、DAIHATSU、 HYUNDAI、WARTSILA、HSD、CUMMINS、 ACD、CATERPILLAR Steel plate CSC, POSCO
97 5.2.4 Major Suppliers and Clients A. Major Suppliers in the Last Two Calendar Years 莊玥嬛 Unit: NT$ thousands
2017 2018 2019(As of March 31)
Relation Relation Relation Item Company Company Company Amount Percent with Amount Percent with Amount Percent with Name Name Name Issuer Issuer Issuer
HITACHI China China
ZOSEN Steel Corporate Steel Corporate 1 1,964,957 18.99 - 2,165,572 29.15 567,596 35.90 CORPORA Corporati director - Corporati director
TION on on
China
Steel Corporate 2 1,240,118 11.98 Others 5,264,509 70.85 - Others 1,013,531 64.10 - Corporati director - on
3 Others 7,144,498 69.03 - -
Net Total Net Total Net Total 10,349,573 100.00 7,430,081 100.00 1,581,127 100.00 Supplies Supplies Supplies
Note: Major suppliers refer to those commanding 10%-plus share of annual order volume.
98 B. Major Clients in the Last Two Calendar Years Unit: NT$ thousands 2017 2018 2019(As of March 31) Relatio Relation Relation Item Company n Company Percen Company Amount Percent Amount with Amount Percent with Name with Name t Name Issuer Issuer Issuer EVERGREEN GPO China Subsidiary MARINE EMERALD Steel of 1 CORP. 8,525,296 51.97 - LIMITED 4,877,783 37.49 - Express 1,456,144 45.91 Corporate (TAIWAN) Corporatio director LTD. n GPO GRACE China Steel Subsidiary GPO LIMITED Express of GRACE 2 2,624,566 16.00 - 2,147,665 16.50 438,606 13.83 - Corporation Corporate LIMITED director T.S. Lines EVERGREEN Ministry Co., LTD. MARINE of 3 2,225,076 13.56 - CORP. 2,084,899 16.02 - National 399,750 12.61 - (TAIWAN) Defense, LTD. R.O.C Ministry of PREVALENCE National HOLDING 4 Others 3,029,406 18.47 - 1,518,452 11.67 - 322,101 10.47 Defense, LIMITED R.O.C 5 Others 2,383,527 18.32 - Others 544,876 17.18 - Net Sales 16,404,344 100.00 Net Sales 13,012,326 100.00 Net Sales 3,171,477 100.00 Note: Major clients refer to those commanding 10%-plus share of annual order volume.
99 5.2.5 Production in the Last Two Years 莊玥嬛
Unit: NT$ thousands
2017 2018 Year Unit Output
Quantity Amount Quantity Amount
Major Products
Revenues from construction of ships and CGT vessels 282,638 20,665,971 200,278 13,375,089
Revenues from construction of naval ships DISP - 243,005 838 1,513,329
Revenues from machine manufacturing MT 732 186,407 47,708 -70,711
Service revenue 989,881 659,280
Other revenue 40,968 129,203
Total 22,126,232 15,606,190
100 5.2.6 Shipments and Sales in the Last Two Years 莊玥嬛
Unit: NT$ thousands
2017 2018 Year Unit Shipments & Sales
Quantity Amount Quantity Amount
Major Products
Revenues from construction of ships and CGT vessels 282,638 15,036,967 200,278 10,355,714
Revenues from construction of naval ships DISP - 222,148 838 1,465,670
Revenues from machine manufacturing MT 732 31,482 47,708 85,605
Service revenue 1,075,447 976,476
Other revenue 38,300 128,861
Total 15,747,699 13,012,326
101 5.3 Human Resources
Year 2017 2018 February 28, 2019
Management 171 personnel 168 171 Numb Engineering 580 704 693 er of personnel Technical 2,113 Emplo personnel 2,235 2,138 yees Service personnel 4 4 4 Total 2,987 3,017 2,981 Average Age 47.8 47.1 47 Average Years of Service 7.3(note) 7.8(note) 7.8(note) Ph.D. 12 12 12 Masters 267 329 330 Educat Bachelor’s Degree 738 852 850 ion Senior High School 500 500 486 Below Senior High 1,470 1,324 1,303 School
Total 2,987 3,017 2,981
Note: Average Years of Service of employees was after privatization.
5.4 Environmental Protection Expenditure 5.4.1 Total Losses and Penalties The loss or penalty caused by environmental pollution during the latest year and up to the printing date of this annual report: CSBC was sentenced to pay a fine of six thousand NTD after violating the Art. 31.1.(2) of Waste Disposal Act and 2.4 thousand NTD after violating the Art. 27.2 of Waste Disposal Act. We have not only strengthened the professional skill training and awareness of environmental protection, but also demanded the construction unit to set up oil barrier during the construction period.
102 5.4.2 Countermeasures CSBC takes the following measures to protect the environment: (1) Prevention of water pollution: in order to keep from pollution, CSBC’s wastewater is collected from recycling pipes, purified by wastewater treatment plants, and released into the water. The effluent water quality must conform with the water quality standard to obey the government regulations. (2) Prevention of stationary pollution source: CSBC’s air control equipment is RTO system (Regenerative Thermal Oxidizer system), which can preheat the inflow gas by captured heat and increase the removal efficiency of air pollutants. 5.5 Labor Relations Please refer to page 119 of the Chinese annual report.
103 5.6 Important Contracts
Counterparty Period Major Contents Restrictions
Properties: merchant shipbuilding contract YANGMING 2018.08.15~2021.05.15 2,800TEU Container Vessel MARINE (N6122) None TRANSPORT CORP. YANGMING 2018.08.15~2021.02.15 2,800TEU Container Vessel MARINE (N6121) None TRANSPORT CORP. YANGMING 2018.08.15~2021.01.15 2,800TEU Container Vessel MARINE (N6120) None TRANSPORT CORP. YANGMING 2018.08.15~2020.12.15 2,800TEU Container Vessel MARINE (N6119) None TRANSPORT CORP. YANGMING 2018.08.15~2020.11.15 2,800TEU Container Vessel MARINE (N6118) None TRANSPORT CORP. YANGMING 2018.08.15~2020.09.15 2,800TEU Container Vessel MARINE (N6117) None TRANSPORT CORP. YANGMING 2018.08.15~2020.08.15 2,800TEU Container Vessel MARINE (N6116) None TRANSPORT CORP. YANGMING 2018.08.15~2020.07.15 2,800TEU Container Vessel MARINE (N6115) None TRANSPORT CORP. YANGMING 2018.08.15~2020.06.15 2,800TEU Container Vessel MARINE (N6114) None TRANSPORT CORP. YANGMING 2018.08.15~2020.05.15 2,800TEU Container Vessel MARINE (N6113) None TRANSPORT CORP. PREVALENCE 2018.03.26~2019.12.15 1,800TEU Container Vessel None HOLDING LIMITED (N6112) PREVALENCE 2018.03.26~2019.10.15 1,800TEU Container Vessel None HOLDING LIMITED (N6111) GREENCOMPASS 2,800TEU Class Container MARINE S. A. 2015.08.10~2018.01.31 Vessel (N6071) None EVERGREEN MARINE CORP. 2015.08.10~2018.02.28 2,800TEU Class Container None (TAIWAN) LTD. Vessel (N6072) GREENCOMPASS 2,800TEU Class Container MARINE S. A. 2015.08.10~2018.02.28 Vessel (N6073) None EVERGREEN MARINE CORP. 2015.08.10~2018.03.31 2,800TEU Class Container None (TAIWAN) LTD. Vessel (N6074) China Steel 2018.01.16~2020.01.31 208,000 DWT Bulk None Express Carrier(N6108) Corporation China Steel 2018.01.16~2020.03.31 208,000 DWT Bulk None Express Carrier(N6109)
104 Corporation
China Steel 2017.08.17~2019.07.31 208,000 DWT Bulk None Express Carrier(N6099) Corporation China Steel 2017.08.17~2019.09.30 208,000 DWT Bulk None Express Carrier(N6100) Corporation 65,000 DWT None GPO Sapphire Semi-submersible Deck Cargo 2014.10.06~2019.05.15 Limited Carrier/Heavy Lift Carrier (N6059) 65,000 DWT None GPO Emerald Semi-submersible Deck Cargo 2014.10.06~2019.08.15 Limited Carrier/Heavy Lift Carrier (N6060)
Properties: official vessels and naval construction contract Ministry of Science and Technology, 2016.11.02-2019.02.15 500 gross tonnage class None ROC research vessel(N2088) Ministry of Science and Technology, 2016.11.02-2019.03.29 500 gross tonnage class None ROC research vessel(N2089) Ministry of Science and Technology, 2016.11.02-2019.06.14 1000 gross tonnage class None ROC research vessel(N2090) Ministry of Indigenous Defense National 2016.12.22-2019.12.23 Submarine Planning and None Defence,ROC Design(N6098) Ministry of New Type Amphibious National 2018.04.14-2022.04.13 Landing Platform Dock None Defence,ROC (N6103) Fleet Branch, Coast Guard Administration, 2018.07.14~2020.04.30 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2139) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2020.07.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2140) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2020.10.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2141) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2021.01.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2142) Council Fleet Branch, Coast Guard 2018.07.14~2021.04.30 100 Tonnage Class Patrol And None Administration, Rescue Boat(N2143) 105 Ocean Affairs Council Fleet Branch, Coast Guard Administration, 2018.07.14~2021.07.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2144) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2021.10.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2145) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2022.01.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2146) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2022.04.30 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2147) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2022.07.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2148) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2022.10.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2149) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2023.01.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2150) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2023.04.30 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2151) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2023.07.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2152) Council Fleet Branch, Coast Guard Administration, 2018.07.14~2023.10.31 100 Tonnage Class Patrol And None Ocean Affairs Rescue Boat(N2153) Council Fleet Branch, Coast Guard Administration, 2018.07.18~2020.12.31 4000 Tonnage Class Frigate None Ocean Affairs (N6154) Council Fleet Branch, 4000 Tonnage Class Frigate Coast Guard 2018.07.18~2021.11.30 (N6155) None 106 Administration, Ocean Affairs Council Fleet Branch, Coast Guard Administration, 2018.07.18~2023.10.31 4000 Tonnage Class Frigate None Ocean Affairs (N6156) Council Fleet Branch, Coast Guard Administration, 2018.07.18~2025.09.30 4000 Tonnage Class Frigate None Ocean Affairs (N6157) Council Ministry of Indigenous Defanse National 2019.05.03-2025.11.03 Submarine prototype vessel None Defence,ROC (N6168) Fleet Branch, Coast Guard Administration, 2019.05.03~2021.12.31 1000 Tonnage Class Frigate None Ocean Affairs (N2169) Council Fleet Branch, Coast Guard Administration, 2019.05.03~2023.10.31 1000 Tonnage Class Frigate None Ocean Affairs (N2170) Council Fleet Branch, Coast Guard Administration, 2019.05.03~2024.10.31 1000 Tonnage Class Frigate None Ocean Affairs (N2171) Council Fleet Branch, Coast Guard Administration, 2019.05.03~2025.10.31 1000 Tonnage Class Frigate None Ocean Affairs (N2172) Council Fleet Branch, Coast Guard Administration, 2019.05.03~2026.10.31 1000 Tonnage Class Frigate None Ocean Affairs (N2173) Council Fleet Branch, Coast Guard Administration, 2019.05.03~2027.10.31 1000 Tonnage Class Frigate None Ocean Affairs (N2174) Council Industry: Engineering Contract
Longmen nuclear four plan Owner - TPC No. 1, No. 2 nuclear island Customer - New area plant structure enclosing Asia Cons- truction 1998.09.10~2017.03.31 enclosures and a block body N-STAMP Company steel structure and other projects Longmen nuclear four plan of the first and second turbines Owner - TPC 1998.09.10~2017.12.31 generator and auxiliary None equipment installation works
107 Owner - Fuhai Wind Power Offshore Wind Turbine Company 2014.04.01~2018.12.31 Transport and Installation None Preparatory Office Guppy class submarine Ministry of pressure hull part of the National 2016.12.08-2018.05.31 repair and other 12 None Defence,ROC commissions Properties: Long-term lease
Taiwan International Port 2006.01.01-2025.12.31 Land leasing None Corporation, Ltd. Kaohsiung Branch Taiwan International Port 2017.01.01-2021.12.31 90/91 wharf leasing None Corporation, Ltd. Kaohsiung Branch National Property 2011.10.01-2019.12.31 Land leasing×6 None Administration Taiwan International Port Land leasing×5；Building 2008.01.01-2027.12.31 None Corporation, Ltd. leasing×23 Keelung Branch Long-term Borrowing
Long-term borrowing NTD 2 Bank of Taiwan 2017.06.22-2022.06.22 None billion. The grace period is 2.5 years. After expiration of the grace Taiwan Business Long-term borrowing NTD period, the 2018.03.12-2023.03.12 Bank 700 million. principal is divided into 5 install -ments ( 6 months per installment) Long-term borrowing NTD JihSun Bank 2017.07.20-2020.07.20 None 200 million. Taishin 2017.06.22-2020.06.22 FRCP NTD 500 million. None International Bank Daily minimum amount of International Bills credit must 2017.06.22-2021.06.22 FRCP NTD 500 million. Finance Corp. reach more than 70% in the first 3 years.
108 Daily minimum amount of China Bills Finance credit must 2017.09.26-2021.09.26 FRCP NTD 500 million. Corp. reach more than 70% in the first 3 years. Daily minimum amount of credit must Mega Bills Finance 2017.09.26-2021.09.26 FRCP NTD 500 million. reach more Corp., Ltd. than 350 million in the first 3 years. Daily minimum amount of China Bills Finance credit must 2017.10.27-2021.10.27 FRCP NTD 500 million. Corp. reach more than 70% in the first 3 years. Taishin 2017.12.15-2020.12.15 FRCP NTD 300 million. None International Bank Daily minimum amount of credit must Mega Bills Finance 2017.12.15-2021.12.15 FRCP NTD 200 million. reach more Corp., Ltd. than 140 million in the first 3 years. Daily minimum amount of credit must Mega Bills Finance 2017.12.15-2021.12.15 FRCP NTD 300 million. reach more Corp., Ltd. than 210 million in the first 3 years.
109 VI. Financial Information 6.1 Five-Year Financial Summary 6.1.1 Condensed Balance Sheet A. Condensed Consolidated Balance Sheet – Based on IFRS 莊玥嬛 Unit: NT$ thousands Year Financial Summary for The Last Five Years As of March 31, Item 2014 2015 2016 2017 2018 2019
Current assets 17,420,313 11,745,033 15,557,809 10,088,688 10,416,166 12,448,973 Held-to-maturity financial － － － － － assets-noncurrent 99,000 Investments accounted for 3,907 3,051 166,616 1,645 10,992 60,373 using equity method Property, Plant and Equipment 11,126,753 10,999,508 10,709,596 10,563,764 10,581,323 10,695,261 Intangible assets 38,910 36,945 28,847 23,010 14,611 14,913
Other assets 1,116,507 955,029 1,208,074 1,606,286 1,803,339 5,777,100
Total assets 29,805,390 23,739,566 27,670,942 22,283,393 22,826,431 28,996,620 Before 13,443,979 6,928,795 13,127,490 7,982,566 8,783,614 9,276,385 Current distribution liabilities After 13,819,540 7,304,908 13,127,490 7,982,566 － － distribution Non-current liabilities 2,603,327 2,946,399 2,313,794 7,921,743 8,057,263 11,775,154 Before distribution 16,047,306 9,875,194 15,441,284 15,904,309 16,840,877 21,051,539 Total liabilities After 16,422,867 10,251,307 15,441,284 15,904,309 － － distribution Equity attributable to 13,707,901 13,813,337 12,182,663 6,335,415 5,941,758 7,900,882 shareholders of the parent
Capital stock 7,435,652 7,435,652 7,435,652 7,435,652 3,729,918 4,729,918
Capital surplus 1,965 1,965 1,965 1,965 2,005,515 3,257,515 Before 6,270,284 6,375,720 4,745,046 -1,102,202 206,325 -86,551 Retained distribution earnings After － － distribution 5,898,501 6,003,938 4,745,046 -1,102,202 Other equity interest － － － － － －
Treasury stock － － － － － －
Non-controlling interest 50,183 51,035 46,995 43,669 43,796 44,199 Before 13,758,084 13,864,372 12,229,658 6,379,084 5,985,554 7,945,081 distribution Total equity After － － distribution 13,382,523 13,488,259 12,229,658 6,379,084 110 B. Condensed Non-consolidated Balance Sheet – Based on IFRS 莊玥嬛 Unit: NT$ thousands Year Financial Summary for The Last Five Years
Item 2014 2015 2016 2017 2018
Current assets 17,217,134 11,512,244 15,385,437 9,944,905 10,230,698 Held-to-maturity financial － － － － assets-noncurrent 99,000 Investments accounted for 121,001 122,133 276,272 103,540 113,184 using equity method Property, Plant and Equipment 11,103,343 10,992,866 10,707,945 10,562,578 10,578,045 Intangible assets 38,519 36,783 28,761 22,968 14,583
Other assets 1,130,558 949,532 1,203,651 1,601,626 1,800,294
Total assets 29,709,555 23,613,558 27,602,066 22,235,617 22,736,804 Before 13,424,860 6,872,565 13,116,484 7,982,400 8,742,822 Current distribution liabilities After － distribution 13,796,643 7,244,347 13,116,484 7,982,400 Non-current liabilities 3,321,237 2,576,794 2,927,656 2,302,919 8,052,224 Before distribution 16,001,654 9,800,221 15,419,403 15,900,202 16,795,046 Total liabilities After 16,373,437 10,172,003 15,419,403 15,900,202 － distribution
Capital stock 7,435,652 7,435,652 7,435,652 7,435,652 3,729,918
Capital surplus 1,965 1,965 1,965 1,965 2,005,515 Before 6,270,284 6,375,720 4,745,046 -1,102,202 206,325 Retained distribution earnings After － distribution 5,898,501 6,003,938 4,745,046 -1,102,202 Other equity interest － － － － －
Treasury stock － － － － － Before 13,707,901 13,813,337 12,182,663 6,335,415 5,941,758 distribution Total equity After － distribution 13,336,118 13,441,555 12,182,663 6,335,415
111 6.1.2 Condensed Statement of Comprehensive Income/Condensed Statement of Income A. Condensed Consolidated Statement of Comprehensive Income – Based on IFRS Unit: NT$ thousands
Year Financial Summary for The Last Five Years As of March 2014 2015 2016 2017 2018 31, 2019 Item Operating revenue 25,497,653 21,457,696 15,747,699 16,404,344 13,012,326 3,171,477 Gross profit(loss) 1,017,057 994,444 -1,060,228 -5,721,888 -2,593,864 -162,461 Income(loss) from operations 506,354 436,634 -1,565,030 -6,228,965 -3,417,597 -278,976 Non-operating income and 23,161 142,391 29,628 -124,077 78,656 -13,431 expenses Income(loss) before tax 529,515 579,025 -1,535,402 -6,353,042 -3,338,941 -292,407 Net income (Loss) 454,378 472,784 -1,286,809 -5,883,199 -3,100,084 -292,473 Other comprehensive income 17,237 9,065 28,208 32,870 103,004 － (income after tax) Total comprehensive 471,615 481,849 -1,258,601 -5,850,329 -2,997,080 -292,473 income(loss) Net income(loss) attributable 450,782 468,154 -1,287,100 -5,880,118 -3,100,211 -292,876 to shareholders of the parent Net income attributable to 3,596 4,630 291 -3,081 127 403 non-controlling interest Comprehensive income(loss) 468,019 477,219 -1,258,892 -5,847,248 -2,997,207 -292,876 attributable to Shareholders of the parent Comprehensive income 3,596 4,630 291 -3,081 127 403 attributable to non-controlling interest Earnings per share (Note) 1.44 1.50 -4.11 -18.79 -8.87 -0.67 Note：The weighted average number of shares outstanding used for the loss per share computation was adjusted retroactively for the record date of the reduction on May 10, 2018.
112 B. Condensed Non-consolidated Statement of Comprehensive Income – Based on IFRS 莊玥嬛 Unit: NT$ thousands Year Financial Summary for The Last Five Years
2014 2015 2016 2017 2018 Item Operating revenue 25,377,982 21,398,829 15,739,331 16,381,651 12,891,628 Gross profit(loss) 994,765 967,014 -1,071,215 -5,725,052 -2,607,221 Income(loss) from operations 493,996 426,248 -1,5674,067 -6,219,268 -3,416,643 Non-operating income and 29,588 144,997 27,943 -128,797 78,072 expenses Income(loss) before tax 523,584 571,245 -1,536,124 -6,348,065 -3,338,571 Net income (Loss) 450,782 468,154 -1,287,100 -5,880,118 -3,100,211 Other comprehensive income 17,237 9,065 28,208 32,870 103,004 (income after tax) Total comprehensive 468,019 477,219 -1,258,892 -5,847,248 -2,997,207 income(loss) Earnings per share(Note) 1.44 1.50 -4.11 -18.79 - 8.87 Note：The weighted average number of shares outstanding used for the loss per share computation was adjusted retroactively for the record date of the reduction on May 10, 2018.
6.1.3 Auditors’ Opinions from 2012 to 2016
Year Accounting Firm Auditors’ Opinion 2014 Pricewaterhouse Coopers Unqualified 2015 Pricewaterhouse Coopers Unqualified 2016 Pricewaterhouse Coopers Unqualified 2017 Pricewaterhouse Coopers Unqualified 2018 Pricewaterhouse Coopers Unqualified
113 6.2 Five-Year Financial Analysis 莊玥嬛 A. Consolidated Financial Analysis – Based on IFRS 莊玥嬛
Year Financial Analysis for the Last Five Years As of March Item 2014 2015 2016 2017 2018 31, 2019 Debt Ratio 53.84 41.60 55.80 71.37 73.78 72.60 Financial Ratio of long-term capital to structure (%) property, plant and 147.05 152.83 135.80 135.38 132.71 184.38 equipment Current ratio 129.58 169.51 118.51 126.38 118.59 134.20 Solvency (%) Quick ratio 6.30 18.69 7.99 22.73 13.04 11.91 Interest earned ratio (times) 18.56 23.69 -22.20 -73.06 -39.81 -8.33 Accounts receivable turnover 15.14 9.89 10.59 (times) 90.43 64.20 29.24 Average collection period 4.04 5.69 12.48 24.11 36.91 34.47 Inventory turnover (times) 10.04 8.46 4.69 6.23 8.37 8.47 Operating Accounts payable turnover 15.81 12.31 11.82 performance (times) 15.32 14.59 12.90 Average days in sales 36.35 43.14 77.83 58.59 43.61 43.09 Property, plant and 1.54 1.23 1.19 equipment turnover (times) 2.37 1.94 1.45 Total assets turnover (times) 0.91 0.80 0.61 0.66 0.58 0.49 Return on total assets (%) 1.71 1.85 -4.79 -23.27 -13.45 -1.03 Return on stockholders' -63.23 -50.14 -4.20 equity (%) 3.31 3.42 -9.86 Pre-tax income to paid-in Profitability 7.12 7.79 -20.65 -85.44 -89.52 -6.18 capital (%) Profit ratio (%) 1.78 2.20 -8.17 -35.86 -23.82 -9.22 Earnings per share -18.79 -8.87 -0.67 (NT$)(Note) 1.44 1.50 -4.11 Cash flow ratio (%) ─ 74.92 ─ ─ ─ ─ Cash flow Cash flow adequacy ratio (%) ─ ─ 138.25 80.01 89.19 110.33 Cash reinvestment ratio (%) -1.20 14.85 -1.27 ─ ─ ─ Operating leverage 8.32 5.67 ─ ─ ─ ─ Leverage Financial leverage 1.06 1.06 0.96 0.99 0.98 0.90 Note：The weighted average number of shares outstanding used for the loss per share computation was adjusted retroactively for the record date of the reduction on May 10, 2018.
114 B. Non-consolidated Financial Analysis – Based on IFRS 莊玥嬛
Year Financial Analysis for the Past Five Years Item 2014 2015 2016 2017 2018 Debt Ratio Financial 53.86 41.50 55.86 71.51 73.87 Ratio of long-term capital to structure (%) fixed assets 146.66 152.29 135.28 134.94 132.29 Current ratio 128.25 167.51 117.30 124.59 117.02 Solvency (%) Quick ratio 4.89 15.46 6.70 20.96 11.72 Interest earned ratio (times) 18.36 23.39 -22.21 -73.01 -39.81 Accounts receivable turnover (times) 120.41 85.54 30.90 15.29 9.91 Average collection period 3.03 4.27 11.81 23.87 36.83
Inventory turnover (times) 10.00 8.45 4.69 6.22 8.32 Operating Accounts payable turnover performance (times) 15.45 14.87 13.16 15.80 12.37 Average days in sales 36.50 43.20 77.83 58.68 43.87 Fixed assets turnover (times) 2.37 1.94 1.45 1.54 1.22 Total assets turnover (times) 0.91 0.80 0.61 0.66 0.57 Return on total assets (%) 1.70 1.84 -4.81 -23.31 -13.50 Return on stockholders' equity (%) 3.30 3.40 -9.90 -63.51 -50.50 Pre-tax income to paid-in Profitability capital (%) 7.04 7.68 -20.66 -85.37 -89.51 Profit ratio (%) 1.78 2.19 -8.18 -35.89 -24.05 Earnings per share (NT$)(Note) 1.44 1.50 -4.11 -18.79 -8.87 ─ Cash flow ratio (%) 73.80 ─ ─ ─ Cash flow adequacy ratio ─ ─ 137.29 78.61 87.73 Cash flow (%) Cash reinvestment ratio (%) -1.18 14.55 -1.22 ─ ─ Operating leverage ─ ─ ─ Leverage 8.44 5.72 Financial leverage 1.07 1.06 0.96 0.99 0.98 Note：The weighted average number of shares outstanding used for the loss per share computation was adjusted retroactively for the record date of the reduction on May 10, 2018.
115 6.3 Supervisors’ /Audit Committee’s Report in the Most Recent Year
Audit Committee's Review report
This proposal is the presentation by the Board of Directors of the Company's 2018 Business Report, Financial Statements, and the Deficit Compensation Proposal. Of these items, the Financial Statements have been audited by external auditors of PricewaterhouseCoopers(PwC) Taiwan, and an opinion and report have been issued on the Financial Statements.The aforementioned proposal regarding Business Report, Financial Statements, and the Deficit Compensation Proposal have been reviewed and determined to be correct and accurate by the Audit Committee. Per the regulations in Article 14-5 of Securities and Exchange Act and Article 219 of the Company Act, we hereby submit this report. To: 2019 General Shareholders' Meeting of CSBC Corporation.
CSBC CORPORATION,TAIWAN
Audit Committee Convenor: LIEU, DER-MING
March 15, 2019
6.4 Financial Statements for the Years Ended December 31, 2018 and 2017, and Independent Auditors Report.
Please refer to page APPENDIX 2 of the Chinese annual report.
6.5 Consolidated Financial Statements for the Years Ended December 31, 2018
and 2017.
As Appendix 1.
116 VII. Review of Financial Conditions, Financial Performance, and Risk Management. 7.1 Analysis of Financial Status 莊玥嬛 Unit: NT$ thousands Year Difference 2018 2017 Item Amount %
Current Assets 10,416,166 10,088,688 327,478 3.25 Funds & Long-term 10,992 1,645 9,347 568.21 investments Fixed Assets 10,581,323 10,563,764 17,559 0.17 Intangible assets 14,611 23,010 -8,399 -36.50 Other Assets 1,803,339 1,606,286 197,053 12.27
Total Assets 22,826,431 22,283,393 543,038 2.44
Current Liabilities 8,783,614 7,982,566 801,048 10.03
Long-term Liabilities 8,057,263 7,921,743 135,520 1.71
Total Liabilities 16,840,877 15,904,309 936,568 5.89
Capital stock 3,729,918 7,435,652 -3,705,734 -49.84
Capital surplus 2,005,515 1,965 2,003,550 101961.83
Retained Earnings 206,325 -1,102,202 1,308,527 -118.72 Non-controlling interest 43,796 43,669 127 0.29 Total Stockholders' Equity 5,985,554 6,379,084 -393,530 -6.17
117
7.2 Analysis of Operation Results Unit: NT$ thousands
Year Difference 2018 2017 Item Amount %
Gross Sales 13,012,326 16,404,344 -3,392,018 -20.68 Cost of Sales 15,606,190 22,126,232 -6,520,042 -29.47 Gross Profit(loss) -2,593,864 -5,721,888 3,128,024 -54.67 Operating Expenses 823,733 507,077 316,656 62.45 Operating Income(loss) -3,417,597 -6,228,965 2,811,368 -45.13 Non-operating Income and Expenses 78,656 -124,077 202,733 -163.39 Income(loss) Before Tax -3,338,941 -6,353,042 3,014,101 -47.44 Tax Benefit (Expense) -238,857 -469,843 230,986 -49.16 -3,100,084 -5,883,199 2,783,115 -47.31 Net income(loss) Other comprehensive income 103,004 32,870 70,134 213.37 (income after tax) Total comprehensive income(loss) -2,997,080 -5,850,329 2,853,249 -48.77
7.3 Analysis of Cash Flow 7.3.1 Cash Flow Analysis for the Current Year Unit: NT$ thousands Cash and Cash Net Cash Equivalents, Flow from Cash Cash Surplus Leverage of Cash Deficit Beginning of Operating Outflow (Deficit) Year Activities (3) (1)+(2)-(3) Financing Investment Plans (1) (2) Plans 137,942 4,992,543 5,040,099 90,386 0 0 Analysis of change in cash flow in the current year: The main change is about the operating activities, depreciation, fixed assets improvements, and long-term loan.
118 7.3.2 Remedy for Cash Deficit and Liquidity Analysis 莊玥嬛/翁季筠 Year Item 2018 2017 Variance (%)
Cash Flow Ratio (%) -- - Cash Flow Adequacy Ratio (%) 89.19 80.01 11.47 Cash Reinvestment Ratio (%) -- - Analysis of financial ratio change: Increase in Cash Flow Adequacy Ratio (%) is mainly due to decrease in Cash dividends.
7.3.3 Cash Flow Analysis for the Coming Year：None 莊玥嬛/翁季筠
119 7.4 The impact of the recent major capital expenditure on the financial business In 2018, the budget of Real estate, plant and equipment was NT$846,577 thousands, the actual investment was NT$566,916 thousands，the annual budget implementation rate of 66.97%. 7.4.1 Real estate, plant and equipment of project investment plan Unit: NT$ thousands Plan Investment Investment Investment name project of project of project of replacing two newbuilding upgrading Goliath cranes LLC-50 tons loading in Kaohsiung level luffing capability of Plant crane in RS31 area in # 2 Kaohsiung Plant pier in Kaohsiung Plant property New investment: New investment: New investment: Enhance Enhance Upgrade the Shipbuilding shipbuilding loading capability and capability and capability of Efficiency of efficiency of RS31 area of Kaohsiung Plant Hull Work of Kaohsiung Plant Kaohsiung Plant in # 2 pier to 30 tons / m2 Plan March 2017 ~ March 2017 ~ November 2017 period September 2020 April 2019 ~ December 2020 Investment 2,500 million 215 million 137 million yuan yuan yuan
Plan Investment Investment name project of project of muti-purpose newbuilding of steel structure 140 meter production line Barge in Kaohsiung Plant property New investment: New investment: Settling up the Settling up the capability of capability of steel structure Oceanographic for engineering Oceanographic engineering in Kaohsiung Plant Plan July 2018 ~ May 2018 ~ period September 2019 March 2019 Investment 679 million 500 million yuan yuan 7.4.2 General investment plans for real estate, plant and equipment in 2018 Major Items: 1.The new building of Contractor Tool Room building(Qun-ying Building). 2.HPE computing Servers *3 sets 4. SHINSHO SEGARC automatic vertical welding machine(left and right) *2sets.
120 7.4.3 Financial impact on the Company for the year: No significant effect. 7.5 Financial impact on the Company for the year: No significant effect. 7.6 Analysis of Risk Management 7.6.1 Effects of Changes in Interest Rates and Foreign Exchange Rates on Corporate Finance, and Future Response Measures (1) Interest rate The loss from interest in 2018 was an amount equivalent to 0.48% of total operating income. CSBC will continue to carefully monitor interest rate movements and make use of capital markets financing instruments to ensure that our financing costs are at a comparatively low level. (2) Foreign exchange rates The gain from foreign exchange transactions in 2018 was an amount equivalent to 0.44% of total operating income. CSBC has a clear operating strategy and risk control procedure to respond to changes in the spot exchange rate, stays in close contact with financial institutions, and adjusts its foreign exchange strategy to minimize the risk of exchange rate accordingly. 7.6.2 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 A. CSBC did not engage in high-risk or high-leveraged investments, and lending to others. B. Derivative transactions follow CSBC’s “Directions for Asset Acquisition or Disposal”. As of Dec. 31, 2018, the forward foreign exchange contract amount is NT$0 million and unrecognized net gain is NT$280 thousands. C. The transactions and procedures related to endorsement are based on CSBC’s “Guidelines Governing Management of Endorsement or Guarantee for Others”. As of Dec. 31, 2018, the balance of endorsement is NT$0 dollars.
121 7.6.3 Future Research & Development Projects and Corresponding Budget A. R&D plan progress (as of March 31, 2018)
Reenter the R&D Finish The main factor of R&D plan cost Progress date (Thousand) success Development of shaft calculation and analysis software that meets the 1. Study on ice practical requirements and the strengthening international laws of shaft of a propulsive 15% 2,031 20181231 design, strengthening of the shafting theoretical basis of shaft design system (3/3) engineers, enhancement of the shaft design quality, and facilitation of shaft design automation procedures. 2. Study on To accomplish AWS D3.6 Underwater Class “A” welds a Welding semi-automatic gas metal arc Defects, welding (GMAW) or Corrosion and flux-cored arc welding 15% 2,800 20181231 Improvement (FCAW), process with a of Offshore transparent and movable, Wind Turbine local-dry enclosure would be Foundation an effective approach to (3/3) develop. 3. Study on 1. Qualified materials and Application of welding materials is hard to HSLA - 80 obtain. 25% 1,500 20181231 Steel Plate 2. High welding skill Welding requirements. Process (2/2) 3. Rigorous welding process. 4. Offshore Wind Farm Marine The actual marine engineering Warranty 35% 2,950 20181231 operations required. Survey Training (2/2) 5. The Study of Marine Construction Step-by-step, by learning how Technologies the successful foreign design 19% 4,770 20181231 and Design of construction machinery cases Construction was achieved. Appliances (2/3) The schedule matching of the selected key plan design 6. Study on the drawings and the 3D model method and construction, and the solid processes of modeling group being solid modeling immediately updated the 41% 873 20181231 of selected modification situation of key Key Plan plan design drawings are the design two important factors that drawings would have apparent influence on the achievement and benefit of the key plan solid modeling
122 process.
7. Study and Analysis on Sufficient information for 27% 1,050 20181231 Shipbuilding Shipbuilding Market. Market (107) 8. The Study and 1. Grasp the vessel requirement Development for the future market. of Potential 25% 40,530 20181231 2. Overall analysis for design Vessel Projects and business loading. (107) 9. The development International situation will of new affect the resource of 20% 10,970 20181231 warship and equipment and technical government assistance. ship (107) 10. Economic Study Of The To provide credibility with the Project of policy doctrine for the 16% 964 20181231 Building company to expand business Indigenous ship business. Naval Vessels 11. A Study on Effectiveness Analysis and The establishment of the Dynamic 22% 1,688 20181231 company’s vibration isolation Characteristics elements design energy. of Vibration Isolation Elements 12. Estimation of 1. Basing on the design the propellers capacity and business needs, and applying to the real ships. appendages 16% 960 20181231 2. Cooperating with ship owner performance to realize the real ship in real sea conditions. conditions 13. Study of 3D Print & 3D Measure 1. Shrinkage of 3D Print Technologies Product. Application in 2. Strength of 3D Print Bell Mouth 13% 680 20181231 product. module 3. Make-up of 3D Print Fabrication Product. and Outward Measure Methods 14. The To research into regulations of development underwater and build the of underwater system of underwater noise noise 19% 2,654 20181231 measurement and analysis that measurement shall be a basis for ship's and analysis underwater noise development. system
123 1. Complete the vibration 15. The compensator torque for exploratory application to hull vibration study for hull 20% 1,488 20181231 response. vibration 2. Discussion the vibration Compensator compensator design and manufacture method. 16. Study on Reduction of Welding Angular Distortion 1. To improve welding angular Correction distortion analysis and Requirements control techniques. 21% 1,500 20181231 and 2. To enhance R&D and Development maintenance capabilities for of essensial facilities. Corresponding Technologies and Facilities(1/2) 17. The Study of Geotechnical Design and The Experience of Foreign Steps from 30% 1,200 20181231 Piling Analysis and Geotechnical Engineering Project. Campaign to the Installation The company could use the intelligence information of 18. Patented patented shipbuilding Technology technology invested by Intelligence competitor to plan the Analysis of 16% 1,110 20181231 offensive and defensive market Shipbuilding tactics. And avoid resources Technology in wasting by introducing the Competitive patent analysis before the Countries technology development program application. 19. Trial Making a real bogie frame to manufacturing verify the flow of design is plan for key 20% 1,160 20181231 correct or not, it will help components of CSBC to approach the key rolling factor of bogie frame design. stock(1/2) This project includes smart 20. Study on ship design, digital Smart Ship transformation in Technology 33% 18,520 20181231 manufacturing and unified and management system to Application(1/ promote smart technology in 2) ship design.
B. R&D plans and estimated expenses in the future. CSBC’s Research and development plans can be divided into self-research, coop -erative research and commissioned research in 2018. There are 7 plans belonging to self-research, 12 plans belonging to cooperative research, and one belong
124 commissioned research. Totally are 20 plans for research and development and expect to spend NTD149 million in CSBC. 7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales CSBC usually has a high degree of attention and proper ability to respond to the development of domestic and foreign political and economic situation and the legal changes. In recent years and as of the date of publication, important policies and legal changes at home and abroad have not had a significant impact on the Company's financial business. 7.6.5 Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales ▓In addition to participating in foreign shipbuilding technical seminars or annual meetings, shipbuilding and shipping exhibitions, CSBC has also organized seminars through the domestic shipbuilding industry consortium, the Joint Ship Design Center, and related surveying societies, schools and research institutes, Obtaining industry information and grasping recent market news to innovate the design of ships to meet the needs of the airlines, in addition to increase the company's profits, but also to enhance the development of shipbuilding and management technology. ▓ The company proposes the following response measures for the risks of communications security: (a) Personnel confidentiality control: The company has relevant operational benchmarks for information operations, and The joint-level capital security audit operation, capital security drills and training strengthen the concept of security protection for all employees. (b) Computer room control; access control system and monitoring system in important fields and computer rooms in the company System, and with the regular inspection of security personnel to reduce important information equipment and facilities The risk of being destroyed. (c) Data protection: relevant server, personal computer, file and data inventory in the company All have account and permission control mechanisms, and DRM copyright for confidential files. Management systems enhance data protection against unauthorized access and
125 leakage of confidential information; Regular data backup operations to strengthen data protection to prevent natural disasters and man-made disasters The data was destroyed. (d) Information operation control: PCs are equipped with asset management systems to control computer peripherals. Access, a firewall in the network part is divided into different areas according to the operation function Domain, in the hacker virus defense against computer network endpoints, gateways and mail account management Other applications have anti-virus systems to monitor and block malicious programs and attacks. 7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures CSBC in the industry's image has always been good, listed on December 22, 2008 listed, the company each year to accept the stock exchange corporate governance system assessment, evaluation results as 6% to 20% blue chip companies, the company's corporate image has a positive 7.6.7 Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans： None 7.6.8 Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans：None
126 7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration The main suppliers of steel products in the steel company focused on the steel, mainly in the steel company for the company's long supply of marine steel suppliers, the supply is good, and the steel near the company, steel plate through the company's steel plate storage, The only domestic can provide marine steel company, with the company to develop the required marine steel plate, so the main purchase of steel suppliers have focused on the phenomenon. As for the sales customers focus, mainly due to the company's market positioning in the container round, the order to the container wheel-based, as the container round order with the same boat composed of fleet characteristics, that is, each order to undertake 5 to 10 ships, and the company In order to reduce production costs, increase profits, but also a single design a large number of orders for the business direction, so a single year easy to focus on customer phenomenon. Future sales continue to move towards diversification in order to avoid possible operational risks. 7.6.10 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 7.6.11 Effects of, Risks Relating to and Response to the Changes in Management Rights： CSBC on December 22, 2008 to complete the listing and privatization of shares, to July 13, 2016 government agencies holding about 33.57% stake, the remaining shares scattered, there is no centralized fiscal situation, and listed companies based on legal norms Business, not because of the privatization of the company have a significant impact and risk. 7.6.12 Litigation or Non-litigation Matters (1) Major ongoing lawsuits, non-lawsuits or administrative lawsuit: None. (2) Major ongoing lawsuits, non-lawsuits or administrative lawsuits caused by directors, supervisors or shareholders with over 10% shareholdings: None. 7.6.13 Other Major Risks：None
127 VIII. Special Disclosure 8.1 Summary of Affiliated Companies A.Subsidiaries Relationship
CSBC
CCSC
Blue Ocean Wind Power Blue Ace
Engineering (H.K.) Ltd. Corporation
B.Subsidiaries Profile
Name of Date of Address Paid-In Capital Business Area Subsidiary Incorporation No.3, Jhonggang Rd., Ship Painting Siaogang District, NT$125,000 Engineering & Steel CCSC 2010.09.13 Kaohsiung City 81234, thousand Structure Painting Taiwan (R.O.C.) Engineering Blue Ocean Engineering RM 2401,24/F 101 KING’S Wind Power consultants & 2014.07.11 RD FORTRESS HILL HONG US$10,000 Engineering mechanical KONG (H.K.) Ltd. installation No.224, He 1st Rd., Metal processing, Blue Ace Zhongzheng Dist., NT$30,000 painting engineering 2016.07.28 Corporation Keelung City 202, Taiwan thousand & manpower (R.O.C.) dispatch
C.Operation Performance of Subsidiaries 2018.12.31, NT$ thousand
Name of paid-in Total Total Net Revenu Operatio Net EPS Subsidiary capital Assets Liabilities Worth e n Profit income
CCSC 125,000 191,973 45,922 146,051 120,361 (3,491) 487 0.04
Blue Ocean Wind Power Engineering 300 1,424 1,130 294 0 (112) 164 5.47 (H.K.) Ltd. Blue Ace Corporation 25,000 31,128 5, 605 25,524 66,559 1,473 1,224 0.49
128
D.Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year
CCSC was established on September 13, 2010. In the year of 2018, net income of CCSC after the year is NT$424 thousands. In that, CSBC recognizes NT$297 thousands of investment interest due to CSBC holds 70% of CCSC shares. TOWSC was established on September 10, 2014, the main business is from operation and maintenance of offshore wind farm. In the year of 2018, net income of TOWSC after the year is NT$ -5,566thousands. In that, CSBC recognizes NT$ -1,645 thousands of investment interest due to CSBC holds 40% of TOWSC shares. The negative profit was caused by the delay of Fuhai offshore wind farm construction. Fuhai was established on June 30, 2015, and CSBC holds 37.97% of Fuhai shares. The main business is from power generation which was caused by offshore wind. In the year of 2018, net income of Fuhai after the year is NT$ -41,163 thousands. The negative profit was caused by the delay of Fuhai offshore wind farm construction. Taiwan International Windpower Training Corporation (TIWTC) was established on May 17, 2018. In the year of 2018, net income of TIWTC after the year is NT$-8,396 thousands. In that, CSBC recognizes NT$-1,008 thousands of investment interest due to CSBC holds 12% of TIWTC shares. CSBC will continue to strengthen its investment management in the coming year to enhance its investment income, and will also continue to invest in the development of the related industries beyond the core of the shipbuilding industry.
129 8.2 Private Placement Securities in the Most Recent Years:
Item Private placement of common shares of 2018 Type of private Common shares placement sexurity The date and amount The total amount of private placement of common share approved by approved by Extraordinary Shareholdings’ Meeting of Dec. 21, 2017 is within 200 million Shareholdings’ shares. The first timeestimated private placement is within 100 million Meeting shares. The criteria and the 1. According to “Directions for Public Companies Conducting Private reasonableness for Placements of Securities”, the reference price shall be the higher of the determination of the following two calculations: price. a. The simple average closing price of the common shares of the TWSE listed or TPEx listed company for either the 1, 3, or 5 business days before the price determination date, after adjustment for any distribution of stock dividends, cash dividends or capital reduction. b. The simple average closing price of the common shares of the TWSE listed or TPEx listed company for the 30 business days before the price determination date, after adjustment for any distribution of stock dividends, cash dividends, or capital reduction. The price per share fixed for privately placed common shares would be not lower than 80 percent of the reference price. 2.As above, The simple average closing price for the 30 business days before May 11,2018, after adjustment for capital reduction is reference price, NT$52.62. The price per share for private placement of common share is NT$42.10 ,equal to 80% of the reference price. It's conformed to the resolution of Extraordinary Shareholders' Meeting. The method for In accordance with Article 43-6 of the Securities and Exchange Act. selecting the specific persons In the reasons for the Considering the timeliness, convenience and issuance costs, the company necessity for conduct the private placement of common shares. conducting the private placement The date of the price May 25, 2018 has been paid up in full
130 Placee Placee Qualification Shares Relationship with the company National Article 43-6, Development paragraph 1, Government Fund, Executive subparagraph 2 of 30,000,000 relations Yuan the Securities and Exchange Act Yao-Hwa Co.,Ltd Article 43-6, Management paragraph 1, Government Commission subparagraph 2 of 30,000,000 relations the Securities and Exchange Act The Board of Directors resolved the price per share for private placement of common share is NT$42.10 and the number of privately placed shares is 82,000,000 shares. At the expiration of price collection, the actual shares privately placed is 60,000,000 shares and the actual price collection amount is NTD2,526,000,000.The Board of Directors has resolved that the plan of private placement is still practicable and the first private placement is taken as completion of price collection. The deficiency of price collection is to grant a loan to meet the demand of working capital. The actual private NT$42.10 per share. placement price The discrepancy between actual The actual private placement price NT$42.10 is 80% of the reference price private price and NT$52.62. reference price Any effect of the private placement on The Securities and Exchange Act regulates the qualification of placee, 3-year shareholder equity limit of transference, so there is certain protection on shareholder equity. The status of To enrich working capital and refund the short-term loan. utilization of the funds and the plan implementation progress The realization of plan After capital increase, it would improve the financial structure, business benefits operation and development, and benefit to the shareholders’ equity.
8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years：None
131 Appendixl