TAIWAN LAND DEVELOPMENT CORPORATION - 台灣 …€¦ · · 2015-12-01Chinese version or any differences in the interpretation of the two versions, ... on a test basis, ... financial

TAIWAN LAND DEVELOPMENT

CORPORATION

NON-CONSOLIDATED FINANCIAL STATEMENTS

AND REPORT OF INDEPENDENT ACCOUNTANTS

DECEMBER 31, 2014 AND 2013

------------------------------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanyingfinancial statements have been translated into English from the original Chinese version prepared and used inthe Republic of China. In the event of any discrepancy between the English version and the originalChinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’report and financial statements shall prevail.

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REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Stockholders of Taiwan Land Development Corporation

We have audited the accompanying non-consolidated balance sheets of Taiwan Land Development

Corporation as of December 31, 2014, December 31, 2013 and January 1, 2013, and the related

non-consolidated statements of comprehensive income, of changes in equity and of cash flows for the

years ended December 31, 2014 and 2013. These financial statements are the responsibility of the

Company’s management. Our responsibility is to express an opinion on these financial statements

based on our audits.

We conducted our audits in accordance with the “Regulations Governing the Auditing and Attestation

of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in

the Republic of China. Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement. An

audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the

financial statements. An audit also includes assessing the accounting principles used and significant

estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the

financial position of Taiwan Land Development Corporation as of December 31, 2014, December 31,

2013 and January 1, 2013, and their financial performance and cash flows for the years ended

December 31, 2014 and 2013 in conformity with the “Rules Governing the Preparation of Financial

Statements by Securities Issuers”, and the International Financial Reporting Standards, International

Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial

Supervisory Commission.

Taiwan Land Development Corporation has been consigned to develop the industrial parks since the

period it was government-operated. According to the consignment contract, the Company should pay

all the development costs in advance, with the payments to be reimbursed when the land is sold. The

land development receivables increased by $2,501,637 thousand, the collection of land development

receivables amounted to $2,640,385 thousand for the year ended December 31, 2014, and the

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uncollected balance of land development receivables was $4,527,990 thousand as of December 31,

2014. The Company’s management has implemented operational policies as disclosed in Note 12(1),

and negotiated to collect the payments on behalf of the government (the consignor) earlier.

As described in Notes 4(21), 6(6) and 12(2) in the financial statements, Taiwan Land Development

Corporation has changed its accounting policy whereby investment properties are measured at fair

value starting from 2014. The properties listed in the 2013 financial statements were reclassified based

on the purpose of use. Accordingly, the accounting policy was retrospectively applied and items

affected in the financial statements of prior years were adjusted and reconciled.

March 3, 2015

Taipei, Taiwan

Republic of China-------------------------------------------------------------------------------------------------------------------------------------------------The accompanying non-consolidated financial statements are not intended to present the financial position and results ofoperations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions otherthan the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of suchfinancial statements may differ from those generally accepted in countries and jurisdictions other than the Republic ofChina. Accordingly, the accompanying non-consolidated financial statements and report of independent accountants are notintended for use by those who are not informed about the accounting principles or auditing standards generally accepted inthe Republic of China, and their applications in practice.As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liabilityfor the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from thetranslation.

TAIWAN LAND DEVELOPMENT CORPORATIONNON-CONSOLIDATED BALANCE SHEETS(Expressed in thousands of New Taiwan dollars)

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December 31, 2014(adjusted)


January 1, 2013Assets Notes AMOUNT % AMOUNT % AMOUNT %

Current assets

Cash and cash equivalents 6(1) $ 3,377,796 14 $ 2,557,024 13 $ 1,998,095 10

Notes receivable, net - - 1,160 - 680 -

Accounts receivable, net 38 - 4 - 118 -

Other receivables 6(2) and 8 4,530,103 19 4,668,845 24 7,260,370 38

Other receivables - related parties 7 651,609 3 1,031,506 6 300,742 2

Current income tax assets 167 - 931 - 317 -

Inventories 6(3) and 8 509,914 2 496,956 3 1,199,236 6

Prepayments 26,491 - 108,535 1 107,274 1

Other current assets 8 394,888 1 829,325 4 545,378 3

Total current assets 9,491,006 39 9,694,286 51 11,412,210 60

Non-current assets

Investments accounted for using

equity method

6(4)

8,211,894 34 4,171,479 22 3,066,344 16

Property, plant and equipment 6(5)(7) and

8 510,776 2 494,101 2 498,624 2

Investment property - net 6(6) and 8 5,032,844 21 3,837,492 20 3,291,530 17

Other non-current assets 6(8) and 8 989,381 4 958,437 5 895,048 5

Total non-current assets 14,744,895 61 9,461,509 49 7,751,546 40

Total assets $ 24,235,901 100 $ 19,155,795 100 $ 19,163,756 100

(Continued)

TAIWAN LAND DEVELOPMENT CORPORATIONNON-CONSOLIDATED BALANCE SHEETS(Expressed in thousands of New Taiwan dollars)

The accompanying notes are an integral part of these non-consolidated financial statements.See report of independent accountants dated March 3, 2015.

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January 1, 2013Liabilities and Equity Notes AMOUNT % AMOUNT % AMOUNT %

Current liabilities

Short-term borrowings 6(9) $ 700,000 3 $ 700,000 4 $ - -

Short-term notes and bills payable 6(10) 185,702 1 185,888 1 73,482 -

Notes payable 765 - 1,469 - 10,742 -

Accounts payable 1,768 - 5,510 - 13,002 -

Accounts payable - related parties 7 - - - - 43,737 -

Other payables 6(11) 3,010,623 12 2,328,452 12 1,278,042 7

Other payables - related parties 7 19,364 - 77,162 - 85,888 -

Current income tax liabilities 15,818 - 14,739 - 13,652 -

Other current liabilities 6(12)(13) 3,830,374 16 4,964,092 26 9,527,929 50

Total current liabilities 7,764,414 32 8,277,312 43 11,046,474 57

Non-current liabilities

Corporate bonds payable 6(14) 500,000 2 - - - -

Deferred income tax liabilities 6(26) 162,134 1 128,977 1 83,701 1

Other non-current liabilities 7 74,739 - 66,895 - 69,562 -

Total non-current liabilities 736,873 3 195,872 1 153,263 1

Total liabilities 8,501,287 35 8,473,184 44 11,199,737 58

Equity

Share capital 6(17)

Share capital - common stock 6,791,103 28 6,553,003 34 6,553,003 34

Capital surplus 6(18)

Capital surplus 324,608 1 328,633 2 318,975 2

Retained earnings 6(19)

Legal reserve 230,157 1 145,841 1 128,647 1

Special reserve 1,403,462 6 1,233,727 6 1,233,727 6

Unappropriated retained earnings 7,418,817 31 2,796,971 15 313,203 2

Other equity interest

Other equity interest 6,738 - 4,985 - 1,813 -

Treasury stocks 6(17) ( 440,271)( 2)( 380,549)( 2)( 585,349)( 3)

Total equity 15,734,614 65 10,682,611 56 7,964,019 42

Commitments and contingent

liabilities

6(2)(13)

and 9

Significant events after the balance

sheet date

11

Total liabilities and equity $ 24,235,901 100 $ 19,155,795 100 $ 19,163,756 100

TAIWAN LAND DEVELOPMENT CORPORATIONNON-CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Expressed in thousands of New Taiwan dollars, except for earnings per share amount)


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Year ended December 312014 2013 (adjusted)

Items Notes AMOUNT % AMOUNT %

Sales revenue 6(2)(20) $ 1,724,939 100 $ 2,487,207 100

Operating costs 6(3)(24) and 7 ( 5,350) - ( 999,046)( 40)

Net operating margin 1,719,589 100 1,488,161 60

Operating expenses 6(24) and 7

Selling expenses ( 278,028)( 16)( 254,901)( 10)

General and administrative expenses ( 231,600)( 14)( 187,585)( 8)

Total operating expenses ( 509,628)( 30)( 442,486)( 18)

Operating profit 1,209,961 70 1,045,675 42

Non-operating income and expenses

Other income 6(21) and 7 43,018 2 24,905 1

Other gains and losses 6(22) 471,384 27 211,859 9

Finance costs 6(23) ( 8,505) - - -

Share of profit of associates and joint

ventures accounted for using equity

method

6(4)

3,630,962 211 1,279,274 51

Total non-operating income and

expenses 4,136,859 240 1,516,038 61

Profit before income tax 5,346,820 310 2,561,713 103

Income tax expense 6(26) ( 34,655)( 2)( 60,751)( 2)

Profit for the year $ 5,312,165 308 $ 2,500,962 101

Other comprehensive income

Financial statements translation

differences of foreign operations $ 1,753 - $ 3,172 -

Total comprehensive income for the

year $ 5,313,918 308 $ 2,504,134 101

Basic earnings per share (in dollars) 6(27)

Basic earnings per share $ 8.13 $ 3.87

Diluted earnings per share $ 8.12 $ 3.86

TAIWAN LAND DEVELOPMENT CORPORATIONNON-CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of New Taiwan dollars)

Retained Earnings

NotesShare capital -common stock

Total capital surplus,additional paid-in

capital Legal reserve Special reserve

Total unappropriatedretained earnings

(accumulateddeficit)

Financial statementstranslation

differences offoreign operations Treasury stocks Total equity


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For the year ended December 31, 2013 (adjusted)

Balance at January 1, 2013 $ 6,553,003 $ 318,975 $ 128,647 $ - $ 313,203 $ 1,813 ($ 585,349 ) $ 6,730,292

Effect of retrospective application of change inaccounting policy

4(21)- - - 1,233,727 - - - 1,233,727

Adjusted balance at January 1, 2013 6,553,003 318,975 128,647 1,233,727 313,203 1,813 ( 585,349 ) 7,964,019

Appropriation and distribution of retained earnings: 6(19)

Legal reserve appropriated - - 17,194 - ( 17,194 ) - - -

Treasury shares sold to employees 6(17)(18) - 9,658 - - - - 204,800 214,458

Net income for 2013 - - - - 2,500,962 - - 2,500,962

Change in cumulative translation adjustments - - - - - 3,172 - 3,172

Balance at December 31, 2013 $ 6,553,003 $ 328,633 $ 145,841 $ 1,233,727 $ 2,796,971 $ 4,985 ($ 380,549 ) $ 10,682,611

For the year ended December 31, 2014

Balance at January 1, 2014 after adjustments $ 6,553,003 $ 328,633 $ 145,841 $ 1,233,727 $ 2,796,971 $ 4,985 ($ 380,549 ) $ 10,682,611

Appropriation and distribution of retained earnings: 6(19)

Legal reserve appropriated - - 84,316 - ( 84,316 ) - - -

Special reserve appropriated - - - 169,735 ( 169,735 ) - - -

Cash dividends of ordinary shares - - - - ( 124,648 ) - - ( 124,648 )

Stock dividends of ordinary shares 311,620 - - - ( 311,620 ) - - -

Purchase of treasury shares 6(17) - - - - - - ( 377,352 ) ( 377,352 )

Treasury shares sold to employees 6(17)(18) - 7,791 - - - - 232,294 240,085

Retirement of treasury shares 6(17)(18) ( 73,520 ) ( 11,816 ) - - - - 85,336 -

Net income for 2014 - - - - 5,312,165 - - 5,312,165

Change in cumulative translation adjustments - - - - - 1,753 - 1,753

Balance at December 31, 2014 $ 6,791,103 $ 324,608 $ 230,157 $ 1,403,462 $ 7,418,817 $ 6,738 ($ 440,271 ) $ 15,734,614

TAIWAN LAND DEVELOPMENT CORPORATIONNON-CONSOLIDATED STATEMENTS OF CASH FLOWS


For the years ended December 31Notes 2014 2013

adjusted

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CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax for the year $ 5,346,820 $ 2,561,713Adjustments to reconcile net income to net cash provided by

operating activitiesIncome and expenses having no effect on cash flows

Provosion (reversal of allowance) for inventoryobsolescence and market price decline

6(3)2,660 ( 57,049 )

Depreciation 6(5) 12,635 11,285Interest expense 6(23) 8,505 -Reversal of interest expense - ( 3,356 )Interest income 6(21) ( 27,941 ) ( 15,636 )(Reversal) impairment loss on non-financial assets 6(7) ( 16,385 ) 18,872Dividends received from investments accounted for

using the equity method - 1,177Share of profit of assoiates accounted for using equity

method6(4)

( 3,630,962 ) ( 1,279,274 )Loss on disposal of property, plant and equipment 6(5) 9 -Loss on disposal of investment properties 455 -Adjustment of fair value of investment properties 6(22) ( 473,054 ) ( 239,430 )Treasury shares transfer to employees' increase

retention of employees' salary expense 15,494 17,533Changes in assets/liabilities relating to operating activities

Net changes in assets relating to operating activitiesAccounts receivable, net ( 34 ) 114Notes receivable, net 1,160 ( 480 )Other receivables 138,742 2,591,286Inventories ( 15,618 ) 745,907Prepayments 82,044 ( 1,261 )Other non-current assets 33,899 24,050

Net changes in liabilities relating to operating activitiesNotes payable ( 704 ) ( 9,273 )Accounts payable ( 3,742 ) ( 7,492 )Accounts payable - related parties - ( 43,737 )Other payables 851,167 1,265,023Other payables to related parties 9,961 ( 76,485 )Other current liability ( 633,717 ) ( 1,045,553 )

Cash generated from operations 1,701,394 4,457,934Interest received 27,838 15,111Interest paid ( 160,389 ) ( 211,257 )Income taxes paid ( 16,767 ) ( 15,002 )

Net cash provided by operating activities 1,552,076 4,246,786

(Continued)

TAIWAN LAND DEVELOPMENT CORPORATIONNON-CONSOLIDATED STATEMENTS OF CASH FLOWS


For the years ended December 31Notes 2014 2013

adjusted


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CASH FLOWS FROM INVESTING ACTIVITIES

Increase in other receivables - related parties ($ 200,000 ) ($ 550,000 )

Decrease (increase) in other assets - current 434,437 ( 283,947 )

Acquisition of investments accounted for using equity

method ( 5,100 ) ( 300,000 )

Proceeds from disposal of investments accounted for using

equity method

6(28)

180,000 270,000

Proceeds from capital reduction of investments accounted

for using equity method - 29,000

Acquisition of property, plant and equipment 6(5) ( 12,934 ) ( 12,211 )

Acquisition of investment properties 6(28) ( 804,108 ) ( 238,773 )

Proceeds from disposal of investment properties 13,596 -

Increase in prepayments for business facilities ( 14,099 ) -

Increase in other non-current assets ( 50,744 ) ( 87,439 )

Net cash used in investing activities ( 458,952 ) ( 1,173,370 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from short-term loans 700,000 700,000

Repayment of short-term loans ( 700,000 ) -

Decrease (increase) in short-term notes and bills payable ( 187 ) 112,406

Proceeds from long-term debt - 239,000

Repayment of long-term debt ( 500,000 ) ( 3,757,284 )

Proceeds from issuance of bonds 6(14) 500,000 -

Decrease in guarantee deposit received 7,844 ( 2,667 )

Cash dividends paid 6(19) ( 124,648 ) -

Payments to acquire treasury shares 6(17) ( 377,352 ) -

Treasury shares sold to employees 6(17) 221,991 194,058

Net cash used in financing activities ( 272,352 ) ( 2,514,487 )

Increase in cash and cash equivalents 820,772 558,929

Cash and cash equivalents at beginning of year 2,557,024 1,998,095

Cash and cash equivalents at end of year $ 3,377,796 $ 2,557,024

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TAIWAN LAND DEVELOPMENT CORPORATION

NOTES TO THE NON-CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(Expressed in thousands of New Taiwan Dollars, except as otherwise indicated)

1. HISTORY AND ORGANIZATION

Taiwan Land Development Corporation (the “Company”) was established on June 30, 1964 as a

government-operated company and the principal business was land development. In July 1972, the

Company was renamed as “Taiwan Trust and Development Corporation” and its principal business

became financial services and land development. The Company became a listed company in January

1999 after privatization.

To comply with the government’s “Second Financial Reformation Policy” and the rules of Trust

Enterprise Act, the Company sold its trust department through a public bidding in August 2005.

Consequently, the Company became a professional land development company from a financial

institution with the approval of the Financial Supervisory Commission on September 13, 2005. The

stockholders subsequently resolved to change the company name back to its original name “Taiwan

Land Development Corporation” on December 14, 2005 with the principal business of land

development and urban renewal development. The Company changed its type of industry in the

Taiwan Stock Exchange to Building Material and Construction after March 2006.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These non- consolidated financial statements were authorized for issuance by the Board of Directors on

February 25, 2015.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting

Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

Please refer to Note 4(21) for details.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Company

According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued on April 3, 2014,

commencing 2015, companies with shares listed on the TWSE or traded on the Taipei Exchange or

Emerging Stock Market shall adopt the 2013 version of IFRS (not including IFRS 9, ‘Financial

instruments’) as endorsed by the FSC and the "Regulations Governing the Preparation of Financial

Reports by Securities Issuers" effective January 1, 2015 (collectively referred herein as the “2013

version of IFRSs”) in preparing the non-consolidated financial statements. The related new

standards, interpretations and amendments are listed below:

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Based on the Company’s assessment, the adoption of the 2013 version of IFRS has no significant

impact on the non-consolidated financial statements of the Company, except the following:

A. IAS 1, ‘Presentation of financial statements’

The amendment requires entities to separate items presented in OCI classified by nature into two

Effective Date byInternational Accounting

Standards Board

Limited exemption from comparative IFRS 7 disclosures for

first-time adopters (amendments to IFRS 1)

July 1, 2010

Severe hyperinflation and removal of fixed dates for first-time

adopters (amendments to IFRS 1)

July 1, 2011

Government loans (amendments to IFRS 1) January 1, 2013

Disclosures－Transfers of financial assets (amendments to IFRS

7)

July 1, 2011

Disclosures－Offsetting financial assets and financial liabilities

(amendments to IFRS 7)

January 1, 2013

IFRS 10, ‘Consolidated financial statements’ January 1, 2013 (Investment

entities: January 1, 2014)IFRS 11, ‘Joint arrangements’ January 1, 2013

IFRS 12, ‘Disclosure of interests in other entities’ January 1, 2013

IFRS 13, ‘Fair value measurement’ January 1, 2013

Presentation of items of other comprehensive income

(amendments to IAS 1)

July 1, 2012

Deferred tax: recovery of underlying assets (amendments to IAS

12)

January 1, 2012

IAS 19 (revised), ‘Employee benefits’ January 1, 2013

IAS 27, ‘Separate financial statements’ (as amended in 2011) January 1, 2013

IAS 28, ‘Investments in associates and joint ventures’ (as

amended in 2011)

January 1, 2013

Offsetting financial assets and financial liabilities (amendments

to IAS 32)

January 1, 2014

IFRIC 20, ‘Stripping costs in the production phase of a surface

mine’

January 1, 2013

Improvements to IFRSs 2010 January 1, 2011

Improvements to IFRSs 2009－2011 January 1, 2013

New Standards, Interpretations and Amendments

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groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently

when specific conditions are met. If the items are presented before tax then the tax related to

each of the two groups of OCI items (those that might be reclassified and those that will not be

reclassified) must be shown separately. Accordingly, the Company will adjust its presentation of

the statement of comprehensive income.

B. IFRS 12, ‘Disclosure of interests in other entities’

The standard integrates the disclosure requirements for subsidiaries, joint arrangements,

associates and unconsolidated structured entities. Also, the Company will disclose additional

information about its interests in consolidated entities and unconsolidated entities accordingly.

C. IFRS 13, ‘Fair value measurement’

The standard defines fair value as the price that would be received to sell an asset or paid to

transfer a liability in an orderly transaction between market participants at the measurement date.

The standard sets out a framework for measuring fair value using the assumptions that market

participants would use when pricing the asset or liability; for non-financial assets, fair value is

determined based on the highest and best use of the asset. Also, the standard requires disclosures

about fair value measurements. Based on the Company’s assessment, the adoption of the

standard has no significant impact on its consolidated financial statements, and the Company

will disclose additional information about fair value measurements accordingly.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the 2013

version of IFRS as endorsed by the FSC:

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The Company is assessing the potential impact of the new standards, interpretations and

amendments above. The impact on the financial statements will be disclosed when the assessment is

complete.

Effective Date byInternational Accounting

Standards Board

IFRS 9, ‘Financial instruments' January 1, 2018

Sale or contribution of assets between an investor and its

associate or joint venture (amendments to IFRS 10 and IAS 28)

January 1, 2016

Investment entities: applying the consolidation exception

(amendments to IFRS 10, IFRS 12 and IAS 28)

January 1, 2016

Accounting for acquisition of interests in joint operations

(amendments to IFRS 11)

January 1, 2016

IFRS 14, 'Regulatory deferral accounts' January 1, 2016

IFRS 15, ‘Revenue from contracts with customers' January 1, 2017

Disclosure Initiative (amendments to IAS 1) January 1, 2016

Clarification of acceptable methods of depreciation and

amortization (amendments to IAS 16 and IAS 38)

January 1, 2016

Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016

Defined benefit plans: employee contributions (amendments to

IAS 19R)

July 1, 2014

Equity method in separate financial statements (amendments to

IAS 27)

January 1, 2016

Recoverable amount disclosures for non-financial assets


January 1, 2014

Novation of derivatives and continuation of hedge accounting


January 1, 2014

IFRIC 21, ‘Levies’ January 1, 2014

Improvements to IFRSs 2010-2012 July 1, 2014

Improvements to IFRSs 2011-2013 July 1, 2014

Improvements to IFRSs 2012-2014 January 1, 2016

New Standards, Interpretations and Amendments

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these non-consolidated financial

statements are set out below. These policies have been consistently applied to all the periods presented,

unless otherwise stated.

(1) Compliance statement

The non-consolidated financial statements of the Company have been prepared in accordance with

the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the

International Financial Reporting Standards, International Accounting Standards, IFRIC

Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the

“IFRSs”).

(2) Basis of preparation

A. Except for the following items, the non-consolidated financial statements have been prepared

under the historical cost convention:

(a) Financial assets and financial liabilities at fair value through profit or loss.

(b) Investment property is subsequently measured at fair value.

B. The preparation of financial statements in compliance with IFRSs requires the use of certain

critical accounting estimates. It also requires management to exercise its judgment in the process

of applying the Company’s accounting policies. The areas involving a higher degree of judgment

or complexity, or areas where assumptions and estimates are significant to the non-consolidated

financial statements are disclosed in Note 5.

(3) Classification of current and non-current items

The Company classifies assets and liabilities relating to the construction department as current and

non-current by its operating cycle (which is normally longer than one year). The following are the

classification criteria for other departments:

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are

classified as non-current assets:

(a) Assets arising from operating activities that are expected to be realised, or are intended to be

sold or consumed within the normal operating cycle;

(b) Assets held mainly for trading purposes;

(c) Assets that are expected to be realised within twelve months from the balance sheet date;

(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are

to be exchanged or used to pay off liabilities more than twelve months after the balance sheet

date.

B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise

they are classified as non-current liabilities:

(a) Liabilities that are expected to be paid off within the normal operating cycle;

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(b) Liabilities arising mainly from trading activities;

(c) Liabilities that are to be paid off within twelve months from the balance sheet date;

(d) Liabilities for which the repayment date cannot be extended unconditionally to more than

twelve months after the balance sheet date. Terms of a liability that could, at the option of the

counterparty, result in its settlement by the issue of equity instruments do not affect its

classification.

(4) Accounts receivable

Accounts receivables are created by the entity by selling goods or providing services to customers

in the ordinary course of business. Accounts receivable are initially recognised at fair value and

subsequently measured at amortised cost using the effective interest method, less provision for

impairment. However, short-term accounts receivable without bearing interest are subsequently

measured at initial invoice amount as the effect of discounting is immaterial.

(5) Consigned land development business

A. The government organizations consign land development business to the Company, and the

Company is also in charge of marketing the development in some cases.

B. During the consignment period, the Company, as a consignee, pays on behalf of consignors for

compensation fees of land collection, construction costs, supervision costs and inspection costs,

etc. Consignors compute interest payable on cost paid by the Company. When conducting

consigned land development business, including industrial parks, land restructuring and land

repurchase, costs are recognized pursuant to the agreements in each consignment contract and

contracts with contractors. When the proceeds from sale of land exceed the cost, in accordance

with Act 47 of Act for Industrial Innovation, developing organizations can make an agreement

on receiving certain portion of profit with the commission organizations. In the case of industrial

parks development, the Company recognizes service income based on sales rate and progress of

construction, when meeting all the following criteria:

(a) Costs attributed to the contract can be reasonably confirmed.

(b) Except for the collectible costs, other contract costs can be reasonably estimated.

(c) The collectability of service income can be reasonably confirmed.

C. Development costs are debited to the account “Land Development Receivables”, and receipts

from buyers are credited to the account “Other current liabilities – deposit for sale of industrial

park received in advance”, which are then offset with land development receivables when buyers

settle the last payment.

(6) Impairment of financial assets

A. The Company assesses at each balance sheet date whether there is objective evidence that a

financial asset or a group of financial assets is impaired as a result of one or more events that

occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events)

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has an impact on the estimated future cash flows of the financial asset or group of financial

assets that can be reliably estimated.

B. The criteria that the Company uses to determine whether there is objective evidence of

impairment loss is as follows:

(a) Significant financial difficulty of the issuer or debtor; or

(b) A breach of contract, such as a default or delinquency in interest or principal payments.

C. As the Company has assessed that there is objective evidence that the financial assets measured

at amortized cost are impaired, the amount of the impairment loss is measured as the difference

between the asset’s carrying amount and the present value of estimated future cash flows

discounted at the financial asset’s original effective interest rate, and is recognized in profit or

loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease

can be related objectively to an event occurring after the impairment loss was recognized, the

previously recognized impairment loss is reversed through profit or loss to the extent that the

carrying amount of the asset does not exceed its amortized cost that would have been at the date

of reversal had the impairment loss not been recognized previously. Impairment loss is

recognized and reversed by adjusting the carrying amount of the asset through the use of an

impairment allowance account.

(7) Inventories

A. Except for land development agency, the Company’s inventories are land for construction,

construction in progress and land and buildings for sale.

B. Development costs are stated at cost, and qualified interest costs incurred during construction

are capitalized. Inventories are transferred to construction costs on ratio-of-area method or

ratio-of-selling-price method consistently. Inventories are transferred to property for self-use

when they are for self-use. Inventories that are leased to others under operating leases are

transferred to investment property.

C. Buildings and land held for sale, construction in progress and land held for construction site are

evaluated at the lower of cost or net realisable value, and the individual item approach is used

in the comparison of cost and net realisable value.

D. Inventories are stated at the lower of cost and net realisable value. Cost is determined using the

weighted-average method. The item by item approach is used in applying the lower of cost and

net realisable value.

(8) Investments accounted for using equity method

A. Subsidiaries refer to the entities (including special purpose entities) that the Company has

control over their financial and operating policies and own more than 50% of voting shares

directly or indirectly. The Company evaluates investments in subsidiaries accounted for using

equity method in these non-consolidated financial statements.

~16~

B. Unrealised profit (loss) occurred from the transactions between the Company and subsidiaries

have been offset. The accounting policies of the subsidiaries have been adjusted to be

consistent with the Company’s accounting policies.

C. The Company’s share of its subsidiaries’ post-acquisition profits or losses is recognised in

profit or loss, and its share of post-acquisition movements in other comprehensive income is

recognised in other comprehensive income. When the Company’s share of losses in a

subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise

losses proportionate to its ownership.

D. If changes in shareholdings in subsidiaries do not result in loss of control (transaction with

non-controlling interest), transactions shall be considered as equity transactions, which are

transactions between owners. Difference of adjustment of non-controlling interest and fair

value of consideration paid or received is recognised in equity.

E. Pursuant to the “Rules Governing the Preparation of Financial Statements by Securities

Issuers,” profit (loss) of the current period and other comprehensive income in the

non-consolidated financial statements shall equal to the amount attributable to owners of the

parent in the consolidated financial statements. Owners’ equity in the non-consolidated

financial statements shall equal to equity attributable to owners of the parent in the

consolidated financial statements.

(9) Property, plant and equipment

A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during

the construction period are capitalized.

B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,

as appropriate, only when it is probable that future economic benefits associated with the item

will flow to the Company and the cost of the item can be measured reliably. The carrying

amount of the replaced part is derecognised. All other repairs and maintenance are charged to

profit or loss during the financial period in which they are incurred.

C. Land is not depreciated. Other property, plant and equipment apply cost model and are

depreciated using the straight-line method to allocate their cost over their estimated useful lives.

Each part of an item of property, plant, and equipment was a cost that is significant in relation

to the total cost must be depreciated separately.

D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if

appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful

lives differ from previous estimates or the patterns of consumption of the assets’ future

economic benefits embodied in the assets have changed significantly, any change is accounted

for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting

Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant

and equipment are as follows:

~17~

(10) Investment property

A. Investment property is property held to earn rent or increase value or for both (including

property under construction for the purpose). Investment property also includes land whose

purpose of use has not yet been decided and is thus considered as capital appreciation.

Investment property is transferred to property for self-use when it is for self-use. Investment

property is transferred to inventory when it is held-for-sale.

B. An investment property is stated initially at its cost and measured subsequently using the fair

value model. A gain or loss arising from a change in the fair value of investment property is

recognised in profit or loss.

(11) Impairment of non-financial assets

The Company assesses at each balance sheet date the recoverable amounts of those assets where

there is an indication that they are impaired. An impairment loss is recognised for the amount by

which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the

higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons

for recognizing impairment loss for an asset in prior years no longer exist or diminish, the

impairment loss is reversed. The increased carrying amount due to reversal should not be more

than what the depreciated or amortised historical cost would have been if the impairment had not

been recognised.

(12) Borrowings

A. Borrowings are recognised initially at fair value, net of transaction costs incurred.

Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net

of transaction costs) and the redemption value is recognised in profit or loss over the period of

the borrowings using the effective interest method.

B. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan

to the extent that it is probable that some or all of the facility will be drawn down. In this case,

the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is

probable that some or all of the facility will be drawn down, the fee is capitalized as a

pre-payment for liquidity services and amortised over the period of the facility to which it

relates.

Buildings 55 yearsTransportation equipment 8~10 yearsUtility equipment 5~6 yearsLeasehold assets 5 yearsOther equipment 4~10 yearsLeasehold improvements 5 years

~18~

(13) Notes and accounts payable

Notes and accounts payable are obligations to pay for goods or services that have been acquired in

the ordinary course of business from suppliers. They are recognised initially at fair value and

subsequently measured at amortised cost using the effective interest method. However, short-term

accounts payable without bearing interest are subsequently measured at initial invoice amount as

the effect of discounting is immaterial.

(14) Bonds payable

Ordinary corporate bonds issued by the Company are initially recognised at fair value, net of

transaction costs incurred. Ordinary corporate bonds are subsequently stated at amortised cost; any

difference between the proceeds (net of transaction costs) and the redemption value is accounted

for as the premium or discount on bonds payable and presented as an addition to or deduction from

bonds payable, which is amortised in profit or loss as an adjustment to the ‘finance costs’ over the

period of bond circulation using the effective interest method.

(15) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits

expected to be paid in respect of service rendered by employees in a period and should be

recognised as expenses in that period when the employees render service.

B. Pensions

For defined contribution plans, the contributions are recognised as pension expenses when they

are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a

cash refund or a reduction in the future payments.

C. Employees’ bonus and directors’ and supervisors’ remuneration

Employees’ bonus and directors’ and supervisors’ remuneration are recognised as expenses and

liabilities, provided that such recognition is required under legal obligation or constructive

obligation and those amounts can be reliably estimated. However, if the accrued amounts for

employees’ bonus and directors’ and supervisors’ remuneration are different from the actual

distributed amounts as resolved by the stockholders at their stockholders’ meeting subsequently,

the differences should be recognised based on the accounting for changes in estimates. The

Company calculates the number of shares of employees’ stock bonus based on the fair value

per share at the previous day of the stockholders’ meeting held in the year following the

financial reporting year, and after taking into account the effects of ex-rights and ex-dividends.

(16) Employee share-based payment

For the equity-settled share-based payment arrangements, the employee services received are

measured at the fair value of the equity instruments granted at the grant date, and are recognised as

compensation cost over the vesting period, with a corresponding adjustment to equity. The fair

~19~

value of the equity instruments granted shall reflect the impact of market vesting conditions and

non-market vesting conditions. Compensation cost is subject to adjustment based on the service

conditions that are expected to be satisfied and the estimates of the number of equity instruments

that are expected to vest under the non-market vesting conditions at each balance sheet date. And

ultimately, the amount of compensation cost recognised is based on the number of equity

instruments that eventually vest.

(17) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit

or loss, except to the extent that it relates to items recognised in other comprehensive income or

items recognised directly in equity, in which cases the tax is recognised in other comprehensive

income or equity.

B. The current income tax expense is calculated on the basis of the tax laws enacted or

substantively enacted at the balance sheet date in the countries where the Company and its

subsidiaries operate and generate taxable income. Management periodically evaluates positions

taken in tax returns with respect to situations in accordance with applicable tax regulations. It

establishes provisions where appropriate based on the amounts expected to be paid to the tax

authorities. An additional 10% tax is levied on the unappropriated retained earnings and is

recorded as income tax expense in the year the stockholders resolve to retain the earnings.

C. Deferred income tax is recognised, using the balance sheet liability method, on temporary

differences arising between the tax bases of assets and liabilities and their carrying amounts in

the consolidated balance sheet. However, the deferred income tax is not accounted for if it

arises from initial recognition of goodwill or of an asset or liability in a transaction other than a

business combination that at the time of the transaction affects neither accounting nor taxable

profit or loss. Deferred income tax is provided on temporary differences arising on

investments in subsidiaries, except where the timing of the reversal of the temporary difference

is controlled by the Company and it is probable that the temporary difference will not reverse

in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that

have been enacted or substantially enacted by the balance sheet date and are expected to apply

when the related deferred income tax asset is realised or the deferred income tax liability is

settled.

D. Deferred income tax assets are recognised only to the extent that it is probable that future

taxable profit will be available against which the temporary differences can be utilised. At

each balance sheet date, unrecognised and recognised deferred income tax assets are

reassessed.

(18) Treasury shares

Where the Company repurchases the Company’s equity share capital that has been issued, the

consideration paid, including any directly attributable incremental costs (net of income taxes) is

deducted from equity attributable to the Company’s equity holders. Where such shares are

~20~

subsequently reissued, the difference between their book value and any consideration received, net

of any directly attributable incremental transaction costs and the related income tax effects, is

included in equity attributable to the Company’s equity holders.

(19) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are

approved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock

dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares

on the effective date of new shares issuance.

(20) Revenue recognition

A. Construction revenues

The Company’s activities involve developing and investing in fixed assets and mainly focus on

developing and selling residential and enterprise buildings. As the customer have limited ability

to influence the design or the customer can make little changes to basic design, the sale of

residential and enterprise buildings is considered as sale of goods. Revenue should be

recognised when the Company has delivered the goods to the customer, significant risks and

rewards of ownership have been transferred to the customer, the Company retains neither

continuing managerial involvement to the degree usually associated with ownership nor

effective control over the goods sold, the amount of sales revenue can be measured reliably and

it is probable that the future economic benefits associated with the transaction will flow to the

entity.

B. Sales of services

The Company serves as an agent of land development on behalf of government organizations

and is responsible to sell partial development projects. Sales of services are recognised at the

percentage of completion when the following conditions are met:

(a) Amount of sales revenue can be measured reliably;

(b) It is probable that the future economic benefits associated with the transaction will flow to

the entity;

(c) Percentage of completion of transactions at the end of reporting period can be measured

reliably;

(d) Costs incurred and will incur to complete the transaction can be measured reliably.

Please refer to Note 4(5) for related revenue recognised.

(21) Changes in accounting policies

Starting from January 1, 2014, the Company changed its accounting policy whereby investment

property shall be measured using the fair value model subsequently. By applying the new

accounting policy, the Company would be able to provide more relevant information about its

investment property. The Company adopted this accounting policy retrospectively, and the effect

~21~

of adoption on prior periods is shown in the tables below.

As the investment property is measured at fair value and retained earnings increased, the same

amount shall be accrued as special reserve and may not be appropriated. If the net increment fair

value of investment property subsequently decreases or is disposed, special reserve shall be

reversed and be appropriated as earnings.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these non-consolidated financial statements requires management to make critical

judgements in applying the Company’s accounting policies and make critical assumptions and

estimates concerning future events. Assumptions and estimates may differ from the actual results and

are continually evaluated and adjusted based on historical experience and other factors. Such

assumptions and estimates have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year; and the related information is addressed

below:

Measurement of investment property

As investment property is measured at fair value, the Company must determine the net fair value of

investment property such as land and buildings on balance sheet date using experts’ judgements and

estimates. The Company must adjust costs to fair value based on the valuation reports by experts. Such

December 31, 2014 December 31, 2013 January 1, 2013

Increase in investments accounted

for using equity method $ 6,329,151 $ 2,303,126 $ 836,299

Increase in investment property $ 1,187,279 $ 701,520 $ 465,261

Increase in deferred tax liabilities $ 129,154 $ 113,109 $ 67,833

Increase in retained earnings $ 7,387,276 $ 2,891,537 $ 1,233,727

2014 2013

Decrease in depreciation charges $ 8,647 $ 2,393

Increase (decrease) in reversal of impairment

loss $ 4,058 ($ 5,564)

Increase in share of profit of subsidiaries' associates

and joint ventures accounted for using equity

method, net $ 4,026,025 $ 1,466,827

Increase in valuation gain on fair value of

investment property $ 473,054 $ 239,430

Increase in income tax expense ($ 16,045) ($ 45,276)

Increase in net income $ 4,495,739 $ 1,657,810

Increase in basic earnings per share (in dollars) $ 6.88 $ 2.56

Increase in diluted earnings per share (in dollars) $ 6.87 $ 2.56

For the years ended December 31,

~22~

assessment of investment property is principally based on the demand for the products within the

specified period in the future, trading trends of buildings and experts’ judgements and estimates, and

may influence the measurement of fair value. Therefore, there might be material changes to the

evaluation.

As of December 31, 2014, the Company has recognised investment property of $5,032,844.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash

A. The Company transacts with a variety of financial institutions all with high credit quality to

disperse credit risk, so it expects that the probability of counterparty default is remote. The

Company’s maximum exposure to credit risk at balance sheet date is the carrying amount of all

cash.

B. The Company has appropriately reclassified the cash provided for collateral, and the information

on pledged assets is provided in Note 8.

(2) Other receivables


Cash on hand and petty cash

(revolving funds)

$ 1,155 $ 1,055 $ 1,047

Checking accounts and

demand deposits 3,376,641 2,555,969 1,997,048

Total $ 3,377,796 $ 2,557,024 $ 1,998,095


Land development

receivables – net

4,527,990$ 4,666,738$ 7,257,952$

Other receivables 2,113 2,107 2,418

Total 4,530,103$ 4,668,845$ 7,260,370$

~23~

A. The details on land development receivables were as follows:

Accumulated

service income at

December2014 2013 31, 2014 Consignors

Kuang Hua Lohas

Creative Park

$ 3,312,403 $ 3,114,665 $ 724,101 Hualien County

GovernmentTaichung Industrial

Park Technology

Building

- 35,031 172,512 Taichung City

Government

831,057 1,085,821 1,431,426 Kaohsiung CityGovernment

Taichung Port

Warehouse Park

17,432 9,211 176,632 Export

Processing

Zone, MOEA

Taichung City 1st

Precision Machinery

Innovation

Technology Park

- 250,021 2,667,206 Taichung City

Government

Taichung City 2nd

Precision Machinery

Innovation

Technology Park

- - 427,839 Taichung City

Government

Taichung City, Feng

Chou High-Tech

Industrial Park

253,049 57,940 10,294 Taichung City

Government

Taichung City, Wen-

Shan Industrial Park

33,682 33,682 - Taichung City

GovernmentTaichung Aviation

Industrial Park and

Astronavigation 80,367 80,367 -

Taichung City

Government

$ 4,527,990 $ 4,666,738 $ 5,610,010

December 31,

Kaohsiung Kangshan

Benzhou Industrial

Park

~24~

Accumulated

service income at

DecemberJanuary 1, 2013 31, 2013 Consignors

Kuang Hua Lohas Creative Park $ 2,851,633 $ 691,917 Hualien County

GovernmentTaichung Industrial Park Technology

Building

35,605 155,629 Taichung City

GovernmentKaohsiung Kangshan Benzhou

Industrial Park

2,437,364 1,400,752 Kaohsiung City

GovernmentTaichung Port Warehouse Park 9,130 176,632 Export Processing

Zone, MOEATaichung City 1st Precision

Machinery Innovation Technology

Park

- 1,198,219 Taichung City

Government

Taichung City 2nd Precision

Machinery Innovation Technology

Park

1,770,304 279,564 Taichung City

Government

Taichung City, Feng Chou High-Tech

Industrial Park

39,868 - Taichung City

GovernmentTaichung City, Wen-Shan Industrial

Park

33,681 - Taichung City

GovernmentTaichung Aviation Industrial Park

and Astronavigation 80,367 -Taichung City

Government$ 7,257,952 $ 3,902,713

~25~

B. The movements on land development receivables for the year ended December 31, 2014 are asfollows:

The movements on land development receivables for the year ended December 31, 2013 are as

follows:

Beginning Ending

Items balances Additions Collections balances

Kuang Hua Lohas Creative Park 3,114,665$ 197,738$ -$ 3,312,403$

Kaohsiung Kangshan Benzhou

Industrial Park

1,085,821 77,271 332,035)( 831,057

Taichung City 1st Precision

Machinery Innovation

Technology Park

250,021 1,666,683 1,916,704)( -



Technology Park

- 339,099 339,099)( -

Taichung Industrial Park

Technology Building

35,031 17,516 52,547)( -

Taichung City, Feng Chou High

-Tech Industrial Park

57,940 195,109 - 253,049

Taichung Port Warehouse Park 9,211 8,221 - 17,432

Others 114,049 - - 114,049

4,666,738$ 2,501,637$ 2,640,385)($ 4,527,990$

Beginning Ending

Items balances Additions Collections balances

Kuang Hua Lohas Creative Park 2,851,633$ 263,032$ -$ 3,114,665$

Kaohsiung Kangshan Benzhou

Industrial Park

2,437,364 115,129 1,466,672)( 1,085,821

Taichung City 1st Precision


Technology Park

- 523,681 273,660)( 250,021



Technology Park

1,770,304 614,962 2,385,266)( -

Taichung Industrial Park

Technology Building

35,605 5,706 6,280)( 35,031

Taichung City, Feng Chou High

-Tech Industrial Park

39,868 18,072 - 57,940

Taichung Port Warehouse Park 9,130 81 - 9,211

Others 114,048 1 - 114,049

7,257,952$ 1,540,664$ 4,131,878)($ 4,666,738$

~26~

C. For the years ended December 31, 2014 and 2013, interests paid on behalf of consignors

recognised as deduction of interest expense were $150,485 and $200,695, respectively.

D. In June 2012, the Company signed a contract with the Taichung City Government to plan,

develop, rent and sell land in the Feng Chou High-Tech Industrial Park. The period of

development is from June 7, 2012 to June 6, 2018, and the total development cost is estimated at

$5,600,000.

E. The reasons for the Company not providing reserve allowance for uncollectible accounts are as

follows:

(a) The debtors of the land development receivables are government organisations, and the

possibility of non-payment is remote.

(b) According to the development contracts, proceeds from the sale and rental of the land are to

be used first to repay the land development receivables. In addition, the Company can also

claim for any related subsidies offered by the government to repay the development costs.

Therefore, there is no significant doubt or uncertainty on the collectability of the land

development receivables.

(c) The government is the subject of the development and also the owner of the land. Hence, the

collectability of the development costs is not associated with the market values of the land.

The inspected costs and prices are greater than costs already incurred and the land was sold

on inspected prices and the proceeds were all collected. When settling the industrial park

revenues and costs, in revenue-above-cost cases, the difference should be handed over to the

industrial parks development and management fund. Otherwise, the Company would be

compensated by the fund according to the “Act for Industrial Innovation.”

F. The Company’s other receivables that were neither past due nor impaired were fully performing

in line with the credit standards prescribed based on counterparties’ industrial characteristics,

scale of business and profitability.

G. As of December 31, 2014, December 31, 2013 and January 1, 2013, the Company did not hold

other receivables that were past due but not impaired.

H. Please refer to Note 8 for the details of pledged land development receivables.

~27~

(3) Inventories

A. The details of the Company’s inventories are as follows:

B. Related loss (gain) on inventory:

Due to the change in real estate market recovery, the Company recognized “loss on (reversal of

allowance for) inventory obsolescence and market price decline” amounting to $2,660 and

($57,049) for the years ended December 31, 2014 and 2013, respectively, which were in

accordance with appraisal reports issued by independent appraisers.

C. No interest expense was capitalized for the years ended December 31, 2014 and 2013.

D. Please refer to Note 8 for the details of pledged inventories at December 31, 2014, December 31,

2013 and January 1, 2013.


Land 327,308$ 316,675$ 1,093,063$

Building 186,259 185,057 201,560

Construction in progress 17,734 13,924 5,021

Merchandise inventory 19,209 19,214 19,217

Restaurant supplies 154 175 195

550,664 535,045 1,319,056

Less: allowance for price

decline 40,750)( 38,089)( 119,820)(

509,914$ 496,956$ 1,199,236$

2014 2013

Land cost 797$ 1,030,383$

Building cost 408 20,852

Other operating costs 506 514

2,660 57,049)(

4,371$ 994,700$


Loss on (reversal of allowance for) inventory

obsolescence and market price decline

~28~

(4) Investments accounted for using equity method

A. For the related information about subsidiaries, please refer to Note 4(3) of consolidated financial

statements in 2014.

B. The Company has capitalized its loans to invest in Taiwan Innovation Development Corporation,

amounting to $400,000 in November 2014.

C. The Board of Directors’ committee approved a resolution to establish Taiwan Midtown

Development Corporation, with the issuance of 3 million shares of common stock with par

value of NT$10 (dollars) per share in October 2012. Taiwan Midtown Development Corporation

has reduced its capital and remitted back the amount of $29,000 in May 2013.

D. The Board of Directors has resolved that the Company and Hwawei International Innovation

Co., Ltd, to jointly establish Taiwan LanYang Development Corporation in August 2014. The

investment amount was $5,100 and the Company acquired 51% of the equity interest.

E. The Company has invested total cash of $300,000 in Taiwan Commerce Development

Corporation in May and August 2013, and has sold all its shares to Taiwan Innovation

Development Corporation (TIDC) in December 2013. Details are provided in Note 7(1)d(ii).

2014 2013

At January 1 4,171,479$ 3,066,344$Addition of investments accounted for using the

equity method405,100 300,000

Disposal of investments accounted for using the

equity method- 450,000)(

Share of profit or loss of investments accounted

for using the equity method3,630,962 1,279,274

Earnings distribution of investments accounted

for using the equity method- 1,177)(

Proceeds from capital reduction of investments

accounted for using equity method- 29,000)(

Changes in capital surplus 2,600 2,866

Changes in other equity items 1,753 3,172

At December 31 8,211,894$ 4,171,479$


Taiwan Innovation Development

Corporation8,205,372$ 4,169,777$ 2,898,014$

Hsinchu Hill Garden Corporation 735 797 857

Taiwan Midtown Development

Corporation844 905 29,963

Taiwan LanYang Development

Corporation4,943 - -

Taiwan Commerce Development

Corporation - - 137,510

8,211,894$ 4,171,479$ 3,066,344$

~29~

(5) Property, plant and equipment

Transportation Utility Leasehold Other Leasehold

Land Buildings equipment equipment assets equipment improvements Total

At January 1, 2014

Cost 308,895$ 197,309$ 4,483$ 5,377$ 2,770$ 9,307$ 27,299$ 555,440$

Accumulated depreciation

and impairment 18,872)( 15,107)( 2,846)( 4,296)( 1,270)( 2,567)( 16,381)( 61,339)(

290,023$ 182,202$ 1,637$ 1,081$ 1,500$ 6,740$ 10,918$ 494,101$

2014

Opening net book amount 290,023$ 182,202$ 1,637$ 1,081$ 1,500$ 6,740$ 10,918$ 494,101$

Additions - - 7,112 2,121 3,500 201 - 12,934

Disposals - - - 9)( - - - 9)(

Transfers - - - 1,385 1,385)( - - -

Depreciation charge - 3,523)( 810)( 883)( 480)( 1,479)( 5,460)( 12,635)(

Reversal of impairment loss 16,385 - - - - - - 16,385

Closing net book amount 306,408$ 178,679$ 7,939$ 3,695$ 3,135$ 5,462$ 5,458$ 510,776$

At December 31, 2014

Cost 308,895$ 197,309$ 11,558$ 8,774$ 3,500$ 9,474$ 27,299$ 566,809$


and impairment 2,487)( 18,630)( 3,619)( 5,079)( 365)( 4,012)( 21,841)( 56,033)(

306,408$ 178,679$ 7,939$ 3,695$ 3,135$ 5,462$ 5,458$ 510,776$

~30~

A. There is no capitalisation of interest on property, plant and equipment for the years ended December 31, 2014 and 2013.

B. Impairment information about the property, plant and equipment is provided in Note 6(7).

C. Information about the property, plant and equipment that were pledged to others as collateral is provided in Note 8.

Transportation Utility Leasehold Other Leasehold Construction in

Land Buildings equipment equipment assets equipment improvements progress Total

At January 1, 2013

Cost 295,208$ 169,710$ 4,483$ 4,985$ 2,770$ 3,605$ 27,299$ 21,700$ 529,760$


and impairment - 11,864)( 2,224)( 3,864)( 808)( 1,455)( 10,921)( - 31,136)(

295,208$ 157,846$ 2,259$ 1,121$ 1,962$ 2,150$ 16,378$ 21,700$ 498,624$

2013Opening net book amount 295,208$ 157,846$ 2,259$ 1,121$ 1,962$ 2,150$ 16,378$ 21,700$ 498,624$

Additions - 5,771 - 392 - 5,702 - 346 12,211

Transfers 13,687 21,782 - - - - - 22,046)( 13,423

Depreciation charge - 3,197)( 622)( 432)( 462)( 1,112)( 5,460)( - 11,285)(

Impairment loss 18,872)( - - - - - - - 18,872)(

Closing net book amount 290,023$ 182,202$ 1,637$ 1,081$ 1,500$ 6,740$ 10,918$ -$ 494,101$

At December 31, 2013

Cost 308,895$ 197,309$ 4,483$ 5,377$ 2,770$ 9,307$ 27,299$ -$ 555,440$


and impairment 18,872)( 15,107)( 2,846)( 4,296)( 1,270)( 2,567)( 16,381)( - 61,339)(

290,023$ 182,202$ 1,637$ 1,081$ 1,500$ 6,740$ 10,918$ -$ 494,101$

~31~

(6) Investment property

A. Rental income from the lease of the investment property and direct operating

expenses arising from the investment property are shown below:

B. Fair value basis of investment property

The Company’s investment property is mainly located in Ji’an Township in

Hualien County, Xinpu Township in Hsinchu County and Beitun Dist. in

Taichung City. The investment properties are still under development and are

mainly built as hotels and shopping centres for collecting rents. Rent is calculated

at a fixed amount plus a certain percentage of the lessee’s sales. The related

assumptions as of December 31, 2014 and 2013 are as follows:

December 31, 2014

(a) The location and valuation method of the Company’s investment property:

(b) Commercial zone 5 is analysed based on discounted cash flow of income

approach, which is to use the object’s future discounted cash flow to analyse

net profit and ending balance for each reporting period, and further estimate

the price of the object using an appropriate discount rate. The object is

expected to generate net cash inflow annually for the next 10 years after

completion. The net cash inflow is discounted annually at an appropriate

discount rate and equals the total of the present value.

2014 2013

At January 1 3,837,492$ 3,291,530$

Additions - from subsequent expenditures 736,349 306,532

Disposals 14,051)( -

Adjustment of fair value 473,054 239,430

At December 31 5,032,844$ 3,837,492$

2104 2103

Rental income from the lease of the

investment property $ 3,685 $ 3,575

Direct operating expenses arising from the

investment property that generated rental

income in the period

Direct operating expenses arising from the

investment property that did not generate

rental income in the period


$ 4,367 $ 2,740

$ 2,487 $ 6,780

Object Location Valuation method

Ji'an commercial zone 5 Ji’an Township, Hualien County Income approach

Hsinchu Hsipu Xinpu Township, Hsinchu

County

Land development analysis

Taichung Dakeng Beitun Dist., Taichung City Land development analysis

~32~

i. The future cash inflow of Ji'an commercial zone 5 is mainly hotel rental

revenue and shopping centre rental revenue. Assessment of revenue is as

follows:

ii. Future cash outflow

a. Operating costs

Expendable expenses and direct expenses are operating costs. Hotel and

shopping centre rental revenue is estimated to constitute 30% and 15%

of the rental revenue, respectively. The rental revenue is calculated at a

steady state.

b. Operating expenses

Operating expenses are personnel expenses, administrative expenses,

repairs and maintenance expenses, utility expenses, promotion expenses,

cleaning expenses, afforestation and taxes which are necessary for and

directly related to operations.

c. Substantial replacement allowance (including beginning cost of

construction sales and interior design)

iii. Discount rates are based on the interest rate for a two-year small amount

time deposit offered by the Directorate General of the Postal Remittances

and Savings Bank plus 3 quarters (currently 2.125%). Risk premium is

determined based on liquidity, risk, value increment and the difficulty of

management. As of December 31, 2014, Ji'an commercial zone 5 adopted

a discount rate of 3.43%.

iv. As of December 31, 2014, the fair value of the investment property of Ji'an

commercial zone 5 is based on the valuation report by Lin Chin-Sheng

from Excellence International Real Estate Appraiser Firm, and the

valuation date was December 1, 2014.

(d) The land under development in Xinpu Township, Hsinchu County and Beitun

Dist., Taichung City cannot be measured using the income approach and thus

is measured using land development analysis, which takes into consideration

of legal usage, land use intensity and changes in land use efficiency arising

from development and improvements, to estimate the total selling price after

development or construction, and less direct costs, indirect costs, capital

Operating revenue Estimated rent Local or similar objects

Hotel rental revenue (per

dollar/per room/daily)

$8,500~$14,500 Slightly higher than the

estimated rent

Shopping centre rental revenue

(per dollar/per level ground/

monthly)

$1,140~$3,000 Approximate to the

estimated rent

~33~

interest and profit rate to reach to the land development price breakdown

before development or construction. The investment property measured using

land development analysis is mainly for construction of buildings under 5

floors:

December 31, 2013

(a) The location and valuation method of the Company’s investment property:

(b) Commercial zone 5 is analysed based on discounted cash flow of income

approach, which is to use the object’s future discounted cash flow to analyse

net profit and ending balance for each reporting period, and further estimate

the price of the object using an appropriate discount rate. The object is

expected to generate net cash inflow annually for the next 10 years after

completion. The net cash inflow is discounted annually at an appropriate

discount rate and equals the total of the present value.

i. The Future cash inflow of Ji'an commercial zone 5 is mainly hotel rental

revenue and shopping centre rental revenue. Assessment of revenue is as

follows:

ii. Cash outflow of commercial zone 5 is estimated as expendable expenses

and salary expenses which constitute 35% and 30% of the operating

revenue, respectively, and along with administrative expenses, repairs and

maintenance expenses, utility expenses, promotion expenses and taxes

Hsinchu Hsipu Taichung Dakeng

Estimated total sales $1,951,829 $2,360,065

Profit margin 25% 15%

Capital interest comprehensive ratio 1.04% 2.20%

Appraisal Valuation firm Excellence International

Real Estate Appraiser

Firm

Leader-Crown

International Real

Estate Appraiser Affairs

Appraiser Valuer Lin, Chin-Sheng Chen, Yueh-Ling

Valuation date December 1, 2014 December 1, 2014

Object Location Valuation method

Ji'an commercial zone 5 Ji’an Township, Hualien County Income approach

Hsinchu Hsipu Xinpu Township, Hsinchu County Land development analysis

Taichung Dakeng Beitun Dist., Taichung City Land development analysis

Operating revenue Estimated rent Local or similar objects

Hotel rental revenue (per dollar/

per room/daily)

$3,000 Slightly higher than the

estimated rentShopping centre rental revenue

(per dollar/per level ground/

monthly)

$6,500~$17,000 Slightly higher than the

estimated rent

~34~

which are necessary for and directly related to operations.

iii. Discount rates of Commercial zone 5 are based on the interest rate for a

two-year small amount time deposit offered by the Directorate General of

the Postal Remittances and Savings Bank plus 3 quarters (currently

2.125%). Risk premium is determined based on liquidity, risk, value

increment and the difficulty of management. As of December 31, 2013, the

discount rate was 5.16%.

iv. As of December 31, 2013, the fair value of investment property is based

on the valuation report by Huang, Ching Sheng from CCIS Real Estate

Joint Appraisers Firm, and the valuation date was December 31, 2013.

(d) The land under development in Xinpu Township, Hsinchu County and Beitun

Dist., Taichung City cannot be measured using the income approach and thus

is measured using land development analysis, which takes into consideration

of legal usage, land use intensity and changes in land use efficiency arising

from development and improvements, to estimate the total selling price after

development or construction, and less direct costs, indirect costs, capital

interest and profit rate to reach to the land development price breakdown

before development or construction. The investment property measured using

land development analysis is mainly for construction of buildings under 5

floors:

C. There is no capitalisation of interest on investment property for the years ended

December 31, 2014 and 2013.

D. Information about the investment property that was pledged to others as collateral

is provided in Note 8.

E. Please refer to Note 7 for the details of property transactions with related parties.

Hsinchu Hsipu Taichung Dakeng

Estimated total sales $1,825,337 $2,321,355

Profit margin 25% 15%

Capital interest comprehensive 1.04% 2.04%

Appraisal firm Excellence International

Real Estate Appraiser

Firm

Leader-Crown

International Real

Estate Appraiser Affairs

Appraiser Lin, Chin-Sheng Chen, Yueh-Ling

Valuation date December 31, 2013 January 8, 2014

~35~

(7) Impairment of non-financial assets

The Company recognized reversal of impairment loss for the year ended December

31, 2014 amounting to $16,385 and impairment loss for the year ended December 31,

2013 amounting $18,872. Details of such (gain) loss are as follows:

Due to the change in real estate market recovery, the Company recognized “(reversal

of allowance for) loss on impairment of non-financial assets”, which were in

accordance with appraisal reports issued by independent appraisers.

(8) Other non-current assets

A. The Company sold the research building of South Environmental Protection

Technology Park in Kangshan Industrial Park to Kaohsiung City Government in

2004. According to the contract, Kaohsiung City Government should pay by

installment for 30 years, and the Company recognised discounted receivable and

interest expense accordingly. After renegotiation in 2008, the Kaohsiung City

Recognised in Recognised in other

profit or loss comprehensive income

Reversal of impairment loss－property, plant

and equipment

16,385)($ -$

Impairment loss－property, plant and

equipment - -

16,385)($ -$

Recognised in Recognised in other

profit or loss comprehensive income

Reversal of impairment loss－property, plant

and equipment

-$ -$

Impairment loss－property, plant and

equipment 18,872 -

18,872$ -$

Year ended December 31, 2014

Year ended December 31, 2013


Overdue receivables 21,652$ 21,692$ 23,187$

Long-term receivables for

selling land417,176 417,176 451,511

Prepayment for land in

Hsinchu County311,590 293,895 285,291

Long-term prepaid

expenses48,544 57,509 80,929

Other financial assets - - 160

Refundable deposits 6,234 8,771 4,454

Long-term prepaid rents 145,569 145,569 45,689

Prepayment for

equipment14,099 - -

Others 24,517 13,825 3,827

989,381$ 958,437$ 895,048$

~36~

Government agreed that the Company take the uncollected receivables plus

interest as uncollected land development receivables in accordance with the land

development contract of Kangshan Industrial Park. In accordance with

Jing-Gong-Zi Letter No.10135463200 issued by Kaohsiung City Government on

December 6, 2012. Furthermore, the settlement of Kangshan Industrial Park

development business was accepted by the Kaohsiung City Government in

accordance with the development contract and the “Act for Industrial

Innovation”.

B. The Company acquired land nos. 105, 106, 237~239, 259, 260, 262, 265, 267,

268, 279~284, 287, 287-1, 436, 442, 444, 454~459 and 466 in Hsipu Town,

Hsinchu County for development. This acquisition was conducted using the

Company Chairman’s name, as agricultural land is not allowed to be acquired by

any corporate entity based on the Agricultural Development Act. The land is

pledged to the Company and the Chairman also signed the letter of commitment

to secure the Company’s ownership.

C. The Company has signed contracts of superficies on land nos. 744-47, 744-48,

and 744-49 in Xintou, Jinhu Township, Jinmen County with Northern Region

Branch, National Property Administration, MOF for a duration of 50 years in

December 2012 and July 2013, respectively. The Company has paid royalty of

$45,689 and $99,880 in full when the contract was signed, and was recorded as

long-term prepaid rent.

(9) Short-term borrowings

Please refer to Note 8 for the details of pledged assets.

(10) Short-term notes and bills payable

Please refer to Note 8 for the details of pledged assets.


Bank loans

King’s Town Bank secured

loans 700,000$ 700,000$ -$

Interest rate 3.305% 3.08% -


Commercial paper payable –

International Bills

37,000$ 37,000$ 74,000$

Commercial paper payable –

Taiwan Cooperative Bills 150,000 150,000 -

187,000 187,000 74,000

Less: discount on commercial

paper payable 1,298)( 1,112)( 518)(

185,702$ 185,888$ 73,482$

Interest rate 2.788%~2.888% 2.788%~2.888% 2.838%

~37~

(11) Other payables

(12) Other current liabilities

(13) Long-term borrowings


Rent payable for land

development57,655$ 79,849$ 83,527$

Accrual for industrial zone

construction 2,082,173 1,359,377 501,330Remaining funds for

industrial zone 478,961 561,821 562,535

Accrued expenses 75,515 47,674 45,898Payables for industrial zone

construction 315,893 268,170 81,331

Other payables - other 426 11,561 3,421

3,010,623$ 2,328,452$ 1,278,042$


Deposit for sale of industrial

park received in advance

38,323$ 574,910$ 1,315,087$

Long-term liabilities-current

portion

3,589,000 4,089,000 7,607,284

Others 203,051 300,182 605,558

3,830,374$ 4,964,092$ 9,527,929$

Type of loans . Interest rate range Contract duration December 31, 2014

2012.06.25~ -$

2015.06.25

2011.11.16~ -

2015.11.29

2013.05.22~ 239,000

2016.05.22

2012.08.31~

2017.08.30 3,350,000

3,589,000

Less: current portion 3,589,000)(

-$

Syndicated loans provided by

Mega Bank and others

2.974%~3.295%

Yuanta Commercial Bank 2.970%

Mega Bank 3.100%

Tsaotun Township Farmers’

Association in Nantou County

3.295%

~38~

A. To develop Taichung City 1st Precision Machinery Innovation Technology Park,

the Company signed a loan contract of $1,000,000 with Yuanta Bank in 2006.

The unused credit line amounted to $800,000 as of December 31, 2014.

B. To develop land of Hsinpu town, Hsinchu County, the Company signed a loan

contract of $700,000 with King’s Town Bank in 2011. Above loans were

transferred to short-term loans on May 24, 2013. The company signed a new

loan contract for a period of one year on May 8, 2014.

C. To develop Taichung City 2nd Precision Machinery Innovation Technology Park,

the Company signed a loan contract of $2,500,000 with Mega International

Commercial Bank (Mega bank) in September 2011. The unused credit line

amounted to $840,000 as of December 31, 2014. According to the contract’s

provisions, the Company must maintain certain financial ratios (based on

financial reports, audited or reviewed by an accountant) inspected at least once

every half year. If not, the Company would be required to pay the penalties

monthly until the date of improvement.

D. The Company has applied for credit line of $239,000 with the Agricultural Bank

of Taiwan (the host organizer) and Tsaotun Township Farmers’ Association in

Nantou County (the co-host and manage organizer) for turnover of construction.

The credit line has been fully utilised as of December 31, 2014. The principal

Type of loans . Interest rate range Contract duration December 31, 2013

2012.06.25~ -$

2015.06.25

2011.11.16~ -

2015.11.29

2013.05.22~ 239,000

2016.05.22

2012.08.31~

2017.08.30 3,850,000

4,089,000

Less: current portion 4,089,000)(

-$



2.974%~3.295%


Mega Bank 3.100%

Tsaotun Township Farmers’

Association in Nantou County

3.170%

Type of loans . Interest rate range Contract duration January 1, 2013

2012.06.25~ 736,000$

2015.06.25

2011.05.24~ 700,000

2013.05.23

2011.11.16~ 1,071,284

2015.11.29

2012.08.31~

2017.08.30 5,100,000

7,607,284

7,607,284)(

-$



2.974%~3.295%

Less: current portion


King's Town Bank 3.080%

Mega Bank 3.100%

~39~

will be repaid in full at maturity.

E. To develop business and improve the financial structure, the Company signed a

long-term syndicated loan contract to obtain a credit line of $5,300,000 with

Mega Bank and 16 other banks on August 14, 2012, including credit line A for

$4,800,000 and credit line B for $500,000. Credit line A was used to pay off the

syndicated loan mentioned above, and credit line B was used for working capital.

Only credit line B is revolving. The credit line has been fully utilised as of

December 31, 2014. According to the contract’s provisions, the Company must

maintain certain financial ratios inspected at least once every half year. If not,

the Company would be required to pay the penalties monthly until the date of

improvement. The loan was successively repaid at the agreed upon debt service

ratio starting from August 2013 and $1,200,000 is repaid at maturity.

F. Please refer to Notes 7 and 8 for the details of pledged assets.

(14) Corporate bonds payable

The Company issued $500,000, 1.36%, 1st domestic secured ordinary corporate

bonds, as approved by the regulatory authority. The bonds mature 3 years from the

issue date (April 25, 2014 ~ April 25, 2017) and will be redeemed in cash at face

value at the maturity date. The bonds were listed on the Taipei Exchange on April

25, 2014.

(15) Pensions

A. Effective July 1, 2005, the Company established a funded defined contribution

pension plan (the “New Plan”) under the Labor Pension Act. Employees have

the option to be covered under the New Plan. Under the New Plan, the Company

contributes monthly an amount based on 6% of the employees’ monthly salaries

and wages to the employees’ individual pension accounts at the Bureau of Labor

Insurance. The benefits accrued are portable when the employment is

terminated.

B. The pension costs under the defined contribution pension plan for the years

ended December 31, 2014 and 2013 were $3,952 and $3,808, respectively.


Corporate bonds payable 500,000$ -$ -$

~40~

(16) Share-based payment

A. For the years ended December 31, 2014 and 2013, the Company’s share-based

payment arrangements were as follows:

B. Details of the share-based payment arrangements are as follows:

C. The weighted-average stock price of stock options at exercise dates for the years

ended December 31, 2014 and 2013 was $11.95 and $11.75 (in dollars),

respectively.

D. Three is no stock option was outstanding as of December 31, 2014, December

31, 2013 and January 1, 2013.

E. Expenses incurred on share-based payment transactions are shown below:

(17) Share capital

A. As of December 31, 2014, the authorised common stock was $8,000,000 with

par value of NT$10 (dollars) per share, and the outstanding common stock was

$6,791,103 (679,110 thousand shares).

Quantity granted Vesting

(in thousand shares) conditions

Treasury stock transferred to

employees

2013.04.30 20,000 Vested immediately

Treasury stock transferred to

employees

2014.08.21 21,560 Vested immediately

Type of arrangement Grant date

No. of

Weighted-

average

exercise price No. of

Weighted-

average

exercise price

options (in dollars) options (in dollars)

Options outstanding at

beginning of the period

Options granted 21,560 11.11 20,000 10.73

Options exercised ( 20,060) 11.11 ( 18,140) 10.73

Options expired ( 1,500) - ( 1,860) -

Options outstanding at end

of the period

Options exercisable at end

of the period

2014 2013

- $ - - $ -

- - - -

- - - -

2014 2013

Equity-settled $ 18,094 $ 20,400

~41~

Movements in the number of the Company’s ordinary shares outstanding are as

follows:

B. Treasury stocks

(a) Reason for share reacquisition and movements in the number of the

Company’s treasury stocks are as follows:

(b) The Company has bought back its shares for the 8th, 9th and 10th time

totaling to 24,452 thousand shares in the amount of $269,797 based on the

Board of Directors’ resolution in 2014. In 2014, the Board of Directors has

resolved to buyback the Company’s shares for the 11th time. As of December

31, 2014, the Company has bought back 9,600 thousand shares which

amounted to $107,555. The 11th time of buyback was completed on January

25, 2015, and 14,500 thousand shares totaling $163,244 were bought back.

(c) Pursuant to the R.O.C. Securities and Exchange Law, the number of shares

bought back as treasury stock should not exceed 10% of the number of the

Company’s issued and outstanding shares and the amount bought back

should not exceed the sum of retained earnings, paid-in capital in excess of

par value and realised capital reserve.

(d) Pursuant to the R.O.C. Securities and Exchange Law, treasury stocks should

not be pledged as collateral and is not entitled to dividends before it is

reissued to the employees.

2014 2013

At January 1 623,240 605,100

Earnings transferred to capital increase 31,162 -

Treasury stock purchased by employees 20,060 18,140

Shares retired 34,052)( -

At December 31 640,410 623,240

Unit: In thousands of shares

Reason for reacquisition Beginning Additions Disposal Ending

Protect shareholders'

interests

- 34,052 7,352)( 26,700

To be reissued to

employees32,060 - 20,060)( 12,000

32,060 34,052 27,412)( 38,700

Reason for reacquisition Beginning Additions Disposal Ending

To be reissued to

employees50,200 - 18,140)( 32,060

Unit: In thousands of shares



~42~

(e) Pursuant to the R.O.C. Securities and Exchange Law, treasury stocks should

be reissued to the employees within three years and shares not reissued

within the three-year period are to be retired. Treasury shares to enhance the

Company’s credit rating and the stockholders’ equity should be retired

within six months of acquisition. On September 25, 2014, the Board of

Directors has resolved to retire of 7,352 thousand treasury shares amounting

to $85,336.

(f) In 2014 and 2013, the Board of Directors has resolved to transfer the shares

to employees from the 4th, 5th and 7th time treasury share buyback

amounting to 21,560 thousand shares along with 4th time treasury share

buyback amounting to 20 million shares, respectively. For the years ended

December 31, 2014 and 2013, the amount of shares purchased by employees

was 20,060 thousand and 18,140 thousand shares amounting to $221,991 and

$194,058, respectively.

(g) On January 26, 2015, the Board of Directors has resolved to execute

buyback of treasury shares from January 27 to March 26, 2015 to protect the

Company’s credit and shareholders’ interest. The maximum buyback amount

is 20 million shares and the price range is NT$10.5 to NT$12 (dollars) per

share. During February 2015, the amount of shares bought back was 8,050

thousand amounting to $91,858.

(h) On February 25, 2015, the Board of Directors has resolved to retire treasury

shares of 17,100 thousand shares amounting to $184,461 and the capital

reduction date was set to be effective on March 3, 2015. The resolution of 6th

time buyback of treasury shares of 10,500 thousand shares for transfer to

employees will be effective on March 9, 2015.

~43~

(18) Capital surplus

Pursuant to the R.O.C. Company Law, capital reserve arising from paid-in capital in

excess of par value on issuance of common stocks and donations can be used to

cover accumulated deficit or to issue new stocks or cash to shareholders in

proportion to their share ownership, provided that the Company has no accumulated

deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount

of capital reserve to be capitalized mentioned above should not exceed 10% of the

paid-in capital each year. Capital reserve should not be used to cover accumulated

deficit unless the legal reserve is insufficient.

(19) Retained earnings

A. Under the Company's Articles of Incorporation, the current year's earnings, if

any, shall first be used to pay all taxes and offset prior years’ operating losses

and then 10% of the remaining amount shall be set aside as legal reserve. Bonus

distributed to the employees and remuneration paid to the directors and

supervisors should account for 1% ~ 8% and 1% ~2%, respectively, of the total

distributed amount. The remainder shall be considered with the industry

environment and needs for future business or investee with other related factors

that is to be proposed by the Board of Directors and resolved by the stockholders

for no appropriation or appropriation of no less than 50% for the year.

Employees’ bonus and directors’ and supervisors’ remuneration are authorised at

the Board of Directors’ meeting in accordance with the aforementioned rules and

with chronological orders.

Share Treasury stock Employee stock

premium transactions options Total

At January 1 $ 287,185 $ 7,761 $ 33,687 $ 328,633

Retirement of treasury stock ( 11,816) - - ( 11,816)Employee stock options

issued - - 18,094 18,094Treasury shares purchased by

employees - 6,756 ( 17,059) ( 10,303)

At December 31 $ 275,369 $ 14,517 $ 34,722 $ 324,608

Share Treasury stock Employee stock

premium transactions options Total

At January 1 $ 287,185 $ - $ 31,790 $ 318,975Employee stock options

issued - - 20,400 20,400Treasury shares purchased by

employees - 7,761 ( 18,503) ( 10,742)

At December 31 $ 287,185 $ 7,761 $ 33,687 $ 328,633

2014

2013

~44~

B. Except for covering accumulated deficit or issuing new stocks or cash to

shareholders in proportion to their share ownership, the legal reserve shall not be

used for any other purpose. The use of legal reserve for the issuance of stocks or

cash to shareholders in proportion to their share ownership is permitted,

provided that the balance of the reserve exceeds 25% of the Company’s paid-in

capital.

C. In accordance with the Financial Supervisory Commission, Securities and

Futures Bureau, No. 1030006415 correspondence, as the investment property is

measured at fair value, the Company shall accrue and reverse special reserve

accordingly.

D. The appropriations of 2013 and 2012 earnings had been resolved at the

stockholders’meeting on June 24, 2014 and June 17, 2013, respectively. Details

are summarized below:

E. The amounts of employees’ bonus and directors and supervisors’ remuneration

accrued for 2014 and approved to be allocated at the stockholders’ meeting for

2013 are as follows:

Employees’ bonus and directors’ and supervisors’ remuneration for 2013 as

resolved by the stockholders was $5,891 and $5,891, respectively. The

difference of $3,394 between the amount recognised in the 2013 financial

statements had been adjusted in the 2014 income statement. The employees’

bonus and directors’ and supervisors’ remuneration for 2014 were accrued based

on profit after tax for the year, as well as legal reserve and others. The basic

accrual is within the percentage stated in the Company's Articles of

Incorporation (1% of employees’ bonus and directors’ and supervisors’

remuneration for 2014 and 2013).

Dividends

per share

Dividends

per shareAmount (In dollars) Amount (In dollars)

Legal reserve 84,316$ 17,194$

Special reserve 169,735 -

Cash dividends 124,648 0.2$ - -$

Stock dividends 311,620 0.5 - -

690,319$ 0.7$ 17,194$ -

2013 2012

2014 2013

Employees' bonus 7,692$ 5,891$

Directors' and supervisors' remuneration 7,692 5,891

15,384$ 11,782$

~45~

F. Information about the appropriation of employees’ bonus and directors’ and

supervisors’ remuneration by the Company as proposed by the Board of

Directors and resolved by the stockholders will be posted in the “Market

Observation Post System” at the website of the Taiwan Stock Exchange.

(20) Operating revenue

(21) Other income

(22) Other gains and losses

(23) Finance costs

2014 2013

Service income 1,718,328$ 1,028,079$

Construction revenue 1,298 1,453,948

Other operating revenues 5,313 5,180

1,724,939$ 2,487,207$


2014 2013

Interest income from bank deposits 6,559$ 4,381$

Other interest income 21,382 11,255

Other non-operating income 15,077 9,269

43,018$ 24,905$


2014 2013

Impairment loss (gain on reversal of) on

property, plant and equipment16,385$ 18,872)($

Gain on fair value adjustment of investment

property 473,054 239,430

Service expenses 16,865)( 8,264)(

Other non-operating losses 1,190)( 435)(

471,384$ 211,859$


2014 2013

Interest expense:

Bank loans 148,439$ 195,467$

Commercial paper 5,665 5,173

Bonds payable 4,676 -

Others 210 55

Less: Interest reimbursement for industrial zones 150,485)( 200,695)(

Finance cost 8,505$ -$


~46~

(24) Expenses by nature

Note：In order to promote Taiwan brands, the Company has donated $3,500 to

Branding Taiwan Association. There is no other commitment.

(25) Employee benefit expense

As of December 31, 2014 and 2013, the Company had approximately 90 employees,

respectively.

(26) Income tax

A. Components of income tax expense:

2014 2013

Employee benefit expense 152,865$ 149,056$

Depreciation 12,635 11,285

Rent expense 30,666 29,667

Advertisement expense 13,979 29,723

Entertainment expense 39,329 33,479

Donation expense 10,758 4,505

Taxes 7,897 29,516

Commission expense - 27,914

Service expense 156,502 54,701

General and administrative expenses 11,109 11,909

Construction costs 3,865 994,186

Other operating costs 1,485 4,860

Other expenses 73,888 60,731

514,978$ 1,441,532$


2014 2013

Wages and salaries 137,909$ 135,122$

Labour and health insurance fees 6,716 6,059

Pension costs 3,952 3,808

Other personnel expenses 4,288 4,067

152,865$ 149,056$


2014 2013

Current tax:

Current tax on profits for the period 1,498$ 15,475$

Adjustments in respect of prior years - -

Total current tax 1,498 15,475

Deferred tax:

Origination and reversal of temporary

differences 33,157 45,276

Income tax expense 34,655$ 60,751$


~47~

B. Reconciliation between income tax expense and accounting profit

C. Expiration dates of unused net operating loss carryfoward and amounts of

unrecognised deferred tax assets are as follows:

2014 2013

Tax calculated based on profit before tax

and statutory tax rate908,959$ 435,491$

Temporary difference not recognised as

deferred tax assets 19,990)( 61,648)(Taxable loss not recognised as deferred

tax assets 170,839)( 71,196)(Additional 10% tax on undistributed

earnings 15,283 15,475Effect from different tax rates on temporary

differences 84,698)( 44,916)(Expenses disallowed and tax exempt

income by tax regulation 614,060)( 212,455)(

Tax expense 34,655$ 60,751$


Amount filed/ Unrecognised

Year incurred assessed Unused amount deferred tax assets Usable until year

2011 Assessed 874,741$ 874,741$ 2021

2012 Filed 130,195 130,195 2022

1,004,936$ 1,004,936$

Amount filed/ Unrecognised

Year incurred assessed Unused amount deferred tax assets Usable until year

2004 Assessed 65,027$ 65,027$ 2014

2008 Assessed 44,018 44,018 2018

2010 Assessed 324,961 324,961 2020

2011 Filed 966,278 966,278 2021

2012 Accrued 25,039 25,039 2022

1,425,323$ 1,425,323$

December 31, 2013

January 1, 2013

~48~

D. The amounts of deductible temporary differences that are not recognised asdeferred tax assets are as follows:

E. As of December 31, 2014, December 31, 2013 and January 1, 2013, the amount

of deferred tax liabilities was $162,134, $128,977 and $83,701, respectively.

The land value increment tax originally applied to the Company’s Trust

department in accordance with ‘Enterprise Merger and Acquisition Act’ was

transferred to JihSun Bank. As of December 31, 2014, December 31, 2013 and

January 1, 2013, the increment tax amounting to $15,868 will be paid when the

land will be transferred again, and the tax related accrual arising from the fair

value of the other investment property was $146,266, $113,109 and $67,833,

respectively.

F. As of December 31, 2014, the Company’s income tax returns through 2012 have

been assessed and approved by the Tax Authority.

G Unappropriated retained earnings:

As the Company’s investment property is measured at fair value, the

shareholders are expected to propose the accrual of special reserve of

$5,462,568 in 2015.


Deductible temporary

differences

Allowance for sales return 11,228$ 15,509$ 20,999$

Temporary difference on

service income26,601 43,473 96,656

Allowance for price decline

on inventories7,832 4,825 8,148

Unrealised impairment loss 423 2,750 2,402

Others 483 - -

46,567$ 66,557$ 128,205$


Earnings generated in and

before 1997

-$ -$ -$

Earnings generated in and

after 1998a.Unappropriated earnings

assessed with 10%

income tax

448,842 296,009 143,948

b.Unappropriated earnings

not yet assessed with

10% income tax 6,969,975 2,500,962 169,255

7,418,817$ 2,796,971$ 313,203$

~49~

(27) Earnings per share


Balance of the imputation

credit account 37,162$ 20,396$ 5,550$

Creditable tax rate 0.50% 0.73% 1.77%

Weighted average

number of ordinary

shares outstanding Earnings per share

Amount after tax (shares in thousands) (in dollars)

Basic earnings per share

Profit attributable to

ordinary shareholders

of the parent

5,312,165$ 653,254 8.13$

Diluted earnings per share

Assumed conversion of all

dilutive potential ordinary

sharesEmployees’ bonus - 742



of the parent plus

assumed conversion

of all dilutive potential

ordinary shares 5,312,165$ 653,996 8.12$

Weighted average

number of ordinary

shares outstanding Earnings per share

Amount after tax (shares in thousands) (in dollars)

Basic earnings per share



of the parent

2,500,962$ 646,997 3.87$

Diluted earnings per share

Assumed conversion of all

dilutive potential ordinary

sharesEmployees’ bonus - 776



of the parent plus

assumed conversion

of all dilutive potential

ordinary shares 2,500,962$ 647,773 3.86$



~50~

(28) Non-cash transaction

A. Investing activities with partial cash payments:

B. Investing activities with partial cash receipts:

C. Investing activities without cash payments or receipts:

7. RELATED PARTY TRANSACTIONS

(1) Significant related party transactions

A. Purchases of services

The total price of the contract is decided by bilateral negotiation. The payment

term is based on service-providing schedule as provided by the contract.

B. Accounts payable

The above payables represent payables for construction services.

C. Other payables

The above payables represent payables for marketing services and property

transactions.

2014 2013

Purchase of investment property 736,349$ 306,532$

Add: opening balance of other accounts

payable67,759 -

Less: ending balance of other accounts

payable- 67,759)(

Cash paid during the year 804,108$ 238,773$


2014 2013

Disposal of long-term equity investments -$ 450,000$

Add: opening balance of other receivables 180,000 -

Less: ending balance of other receivables - 180,000)(

Cash paid during the year 180,000$ 270,000$


2014 2013

Capitalisation of loans into subsidiaries 400,000$ -$


2014 2013

Subsidiaries 55,910$ 39,776$



Subsidiaries -$ -$ 43,737$


Subsidiaries 19,364$ 77,162$ 85,888$

~51~

D. Property transactions

(a)The Company has signed contracts with TIDC in December 2014 andDecember 2013, respectively, for the acquisition of three tracts of two shortsections numbered 145~147 in Guanghua St., Ji’an Township, Hualien County,amounting to $547,342, and five tracts of two short sections numbered134~138 in Guanghua St., Ji’an Township, Hualien County, amounting to$338,795, which are dedicated to Guanghua LOHAS Creative Parkdevelopment (recognised as “investment property”). The title of land has allbeen transferred in December 2014.

(b)The Company has sold 45 million shares in Taiwan Commerce DevelopmentCorporation (recognised as investment accounted for using equity method),which amounted to $450,000, to TIDC. As of December 31, 2013, the amountnot received was $180,000 and was fully received in 2014.

(c)In October 2009, the Company signed a contract to sell the land located inHualien, Kuang Hua Lohas Creative Park with TIDC. The selling priceamounting to $570,128 is based on an appraisal report issued by independentappraisers. As of December 31, 2011, the Company had received $342,532and recognised it as “receipts in advance”. In March 2012, the Companysigned a supplementary contract with TIDC because the Board of Directors’committee approved a resolution to raise the selling price to $626,000, whichis based on an appraisal report of 2011, received all payments, and recognised“construction revenue” of $626,000. The gain on sale of land amounting to$53,333 was recorded as “deferred credit－gain between related parties”

because TIDC has not yet sold the land to third party.E. Loans to related parties:

(a)Other receivables

(b)Interest revenue

Loans to related parties are short-term financing for related parties’ capitalneeds, and carried an interest at 3.3% per annum for the years endedDecember 31, 2014 and 2013.

F. Endorsements and guarantees:(a) Endorsements and guarantees provided by related parties:

(b) Endorsements and guarantees provided to related parties:

As of December 31, 2014, December 31, 2013 and January 1, 2013, the

amount of endorsement/ guarantee that the Company has provided was


Subsidiaries 651,609$ 851,506$ 300,742$

2014 2013

Subsidiaries 21,100$ 11,206$



Key management of the

Company (Note) $ 4,476,000 $ 5,816,000 $ 7,785,284

Subsidiaries 86,074 86,074 -

$ 4,562,074 $ 5,902,074 $ 7,785,284

~52~

$2,100,000, $0 and $0, respectively.

H. Others

Please refer to Note 6(24).

(2) Key management compensation

8. PLEDGED ASSETS

2014 2013

Salaries and other short-term employee

benefits$ 37,055 $ 29,333

Termination benefits 213 216

$ 37,268 $ 29,549


Pledged asset 2014 2013 Purpose

Other current assets

- Demand deposits 83,484$ 515,015$ Long-term borrowings compensation account

- Demand deposits 16,981 16,956 Land compensation fee account

- Demand deposits 159,114 159,114 Guarantee for development projects

- Time deposits128,767 128,572

Guarantee for development projects and

long-term borrowings

388,346 819,657

Other non-current assets

- Refundable deposits 6,234 8,771 Guarantee for projects and leases

- Land in Hsinchu 285,327 285,327 Guarantee for short-term borrowings

291,561 294,098

Other receivables

- Land development

receivables

4,143,460 4,485,538 Long-term borrowings

Inventories 302,447 292,785 Guarantee for long-term and short-term

borrowings and short-term bills payable

Investment property 3,400,845 2,351,830 Guarantee for long-term borrowings and

short-term bills payable

- Land and buildings 364,187 366,967 Guarantee for short-term borrowings

8,890,846$ 8,610,875$

December 31,

Property, plant and equipment

~53~

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

Commitments

As of December 31, 2014, December 31, 2013 and January 1, 2013, except for

commitments mentioned in Notes 6(2) and (13), the Company’s aggregate

commitments under the consignments for construction and services were $1,090,806,

$1,246,799 and $1,247,004, respectively.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

Please refer to Notes 6(17) B(g) and B(h) for the related information.

12. OTHERS

(1) Operational policies

To improve the condition of significant amount of uncollected land development

receivables, the Company consolidated its loans from several financial institutions

into a 7-year long-term syndicated loan contract with a credit line of $16,500,000 in

August 2005. After paying back loans over the years, the debt balance was

considerably reduced. In order to expand business, the Company had signed a

5-year long-term syndicated loan contract with a credit line of $5,300,000 in August,

2012. The new syndicated loan was used to pay off the previous syndicated loan,

Pledged asset January 1, 2013 Purpose

Other current assets

- Demand deposits 187,590$ Long-term borrowings compensation account

- Demand deposits 16,930 Land compensation fee account

- Demand deposits 159,114 Guarantee for development projects

- Time deposits 172,852Guarantee for development projects and

long-term borrowings

536,486

- Time deposits 160 Guarantee for projects

- Refundable deposits 4,454 Guarantee for projects and leases

- Land in Hsinchu 285,291 Guarantee for short-term borrowings

289,905

Other receivables

- Land development

receivables

7,094,905 Guarantee for long-term borrowings and


Inventories 1,036,071 Guarantee for long-term and short-term

borrowings and short-term bills payable

Investment property 910,791 Guarantee for long-term borrowings and


- Land and buildings 369,748 Guarantee for short-term borrowings

10,237,906$

Other non-current assets

Property, plant and equipment

~54~

and maintain sufficient working capital.

As of December 31, 2014, the syndicated loan amounted to $4,975,000. Since 2009,

the Company has declared stock dividends for 3 consecutive years since the period

of privatization, and completed its capital increase by $1,770,000 in October 2011.

This indicates that the Company has the potential of maintaining a long-term stable

profit margin to support the operations of the Company.

The Company is committed to a diversified land development and value innovation

integrated to providing a high-quality lifestyle. The Company tries to infuse new

value into the land with ubiquitous technology and green energy technology.

A. Core values of sustainable enterprise:

Employing cultural creativity and technological innovation as the core values,

the Company infuses the land with new value, creating a unique brand image,

communicating our corporate philosophy and committing to the construction of

high-quality LOHAS spaces for living.

B. Local culturally creative city:

Integrate local lifestyle, environment and creativity to develop products with

characteristics and cultural elements to realize the new face of each piece of

land.

C. Smart green building with new technology

In response to the trend for low carbon footprint taking into consideration human

needs, the Company employs advanced smart technologies to create endless

possibilities and develop intelligent, ubiquitous and innovative technologies.

D. Specialization within the Company

Pursuit of overall rationalization of the Company and further enhancement of

enterprise synergy through interaction and cooperation of all employees within

the Company.

E. Ideal opportunity for Cross-Strait cooperation

Maximise the effects of soft power, build increased competitiveness, and

recommend and share the experience of successful land development models

and cultural creative technology across the Strait.

F. Develop land activation strategies

To enable diversification of land utilization, introduce culturally creative, leisure

and tourism, healthcare and beauty industries to stimulate investment, increase

productivity and provide employment opportunities, thus driving the growth and

development of local communities.

~55~

G. The Company has combined the industrial zone with local uniqueness for

innovation and increasing value and to further speed up the disposal of unleased

and unsold land and collection for payments on behalf of others.

(2) Retrospective application in financial statements

The Company has reclassified property based on its purpose of use in the 2013

financial statements and retrospectively adjusted the amount at January 1, 2013. The

effect in the 2014 non-consolidated financial statements as a result of the

retrospective adjustment is as follows:

(3) Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s

ability to continue as a going concern in order to provide returns for shareholders

and to maintain an optimal capital structure to reduce the cost of capital. In order to

maintain or adjust the capital structure, the Company may adjust the amount of

dividends paid to shareholders, return capital to shareholders, issue new shares or

sell assets to reduce debt. The Company monitors capital on the basis of the gearing

ratio. This ratio is calculated as net debt divided by total capital. Net debt is

calculated as total borrowings (including ‘current and non-current borrowings’ as

shown in the non-consolidated balance sheet) less cash. Total capital is calculated

as ‘equity’ as shown in the non-consolidated balance sheet plus net debt.

During 2014, the Company’s strategy, which was unchanged from 2013, was to

maintain the gearing ratio under 50%. The gearing ratios at December 31, 2014,

December 31, 2013 and January 1, 2013 were as follows:

(4) Financial instruments

A. Fair value information of financial instruments

The carrying amount of financial instruments not measured at amortized cost

(including notes receivable, accounts receivable, other receivables, long-term

accounts receivable, other financial assets, refundable deposits, short-term

borrowings, short-term notes and bills payable, notes payable, accounts payable,

other payables, long-term borrowings and guarantee deposits received) is

After adjustment Before adjustment Effect

January 1, 2013

Inventory $ 1,199,236 $ 3,476,812 ($ 2,277,576)

Investment property $ 2,826,269 $ 548,693 $ 2,277,576


Total borrowings 4,974,702$ 4,974,888$ 7,680,766$

Less: cash 3,377,796)( 2,557,024)( 1,998,095)(

Net debt 1,596,906 2,417,864 5,682,671

Total equity 15,734,614 10,682,611 7,964,019

Total capital 17,331,520$ 13,100,475$ 13,646,690$

Gearing ratio 9.21% 18.46% 41.64%

~56~

approximate to their fair value.

B. Financial risk management policies

The Company’s activities expose it to a variety of financial risks: market risk

(including foreign exchange risk, interest rate risk and price risk), credit risk and

liquidity risk. The Company’s overall risk management programme focuses on

the unpredictability of financial markets and seeks to minimise potential adverse

effects on the Company’s financial position and financial performance.

(5) Significant financial risks and degrees of financial risks

A. Credit risk

Credit risk refers to the risk of financial loss to the Company arising from

default by the clients on the contract obligations. According to the Company’s

credit policy, each local entity in the Company is responsible for managing and

analysing the credit risk for each of their new clients before standard payment

and delivery terms and conditions are offered. Internal risk control assesses the

credit quality of the customers, taking into account their financial position, past

experience and other factors. The counterparties are government organisations of

all cities and counties with high credit quality, thus, there is no critical credit

risk.

B. Liquidity risk

Cash flow forecasting is performed in the operating entities of the Company and

aggregated by Company treasury. Company treasury monitors rolling forecasts

of the Company’s liquidity requirements to ensure it has sufficient cash to meet

operational needs while maintaining sufficient headroom on its undrawn

committed borrowing facilities at all times so that the Company does not breach

borrowing limits or covenants on any of its borrowing facilities. Such

forecasting takes into consideration the Company’s debt financing plans,

covenant compliance, compliance with internal balance sheet ratio targets and

external regulatory or legal requirements.

~57~

Financial liabilities:

December 31, 2014 Less than 1 year Over 1 year Book value

Short-term borrowings 723,135$ -$ 723,135$

Short-term notes and bills

payable190,953 - 190,953

Notes payable 765 - 765

Accounts payable 1,768 - 1,768

Other payables 2,531,662 478,961 3,010,623

Bonds payable 6,800 509,067 515,867

Long-term borrowings

(including current portion)378,653 3,511,577 3,890,230

December 31, 2013 Less than 1 year Over 1 year Book value



payable191,139 - 191,139

Notes payable 1,469 - 1,469


Other payables 1,766,631 561,821 2,328,452


(including current portion)132,829 4,433,739 4,566,568

January 1, 2013 Less than 1 year Over 1 year Book value



payable10,742 - 10,742


Other payables 715,507 562,535 1,278,042


(including current portion)1,214,492 7,330,005 8,544,497

~58~

13. SUPPLEMENTARY DISCLOSURES

(1)Significant transactions information

A.Loans to others:

Note 1:The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

(1)Parent company is ‘0’.

(2)The subsidiaries are numbered in order starting from ‘1’.

Note 2: The number represents the nature of loans as follows:

(1)Business relationship is ‘0’.

(2)Short-term financing is ‘1’.

Note 3: Limit on loans granted is described as follows:

(1)The limited amount for a single party shall not exceed 20% of the Company's stockholders' equity and not exceed 40% of Taiwan Innovation Development Corp’s stockholders’ equity.

(2)The total limited amount shall not exceed 50% of the Company's stockholders' equity and not exceed 40% of Taiwan Innovation Development Corp’s stockholders’ equity.

0 The Company Taiwan

Innovation

Development

Corp.

Other

receivables-

related parties

Yes 1,400,000$ 800,000$ 650,000$ 3.3% 2 -$ Working

capital

-$ None -$ 3,146,923$ 7,867,307$

0 The Company Taiwan

Commerce

Development

Corp.

Other

receivables-

related parties

Yes 600,000 350,000 - 3.3% 2 - Working

capital

- None - 3,146,923 7,867,307

1 Taiwan

Innovation

Development

Corp.

Taiwan

Commerce

Development

Corp.

Other

receivables -

related parties

Yes 300,000 300,000 - 3.8% 2 - Working

capital

- None - 3,282,149 3,282,149

1 Taiwan

Innovation

Development

Corp.

Taiwan

Envirotech

Development

Corp.

Other

receivables -

related parties

Yes 30,000 30,000 30,000 3.8% 2 - Working

capital

- None - 3,282,149 3,282,149

Reason for

short-term

financing

No.

(Note 1) Creditor Borrower

General ledger

account

Is a

related

party

Maximum

outstanding

balance during

the year ended

December 31,

2014

Balance at

December 31,

2014

Actual

amount

drawn down

Interest

rate

Nature of

loan

(Note 2)

Amount of

transactions

with the

borrower

Allowance

for doubtful

accounts

CollateralLimit on loans

granted to a

single party

(Note 3)

Ceiling on

total loans

granted

(Note 3) FcotnoteItem Value

~59~

B.Provision of endorsements and guarantees to others:

Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:

(1)The Company is ‘0’.


Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following six categories:

(1)Having business relationship.

(2)The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/ guarantor subsidiary.

(3)The endorser/guarantor parent company and its subsidiaries jointly own more than 50% voting shares of the endorsed/guaranteed company.

(4)The endorsed/guaranteed parent company directly or indirectly owns more than 50% voting shares of the endorser/guarantor subsidiary.

(5)Mutual guarantee of the trade as required by the construction contract.

(6)Due to joint venture, each shareholder provides endorsements/guarantees to the endorsed/guaranteed company in proportion to its ownership.

Note 3: The limit of guarantee for a single party shall not exceed 40% of the company's stockholders' equity.

Company

name

Relationship

with the

endorser/

guarantor

(Note 2)

0 The Company

and Taiwan

Innovation

Development

Corp.

Taiwan

Commerce

Development

Corp.

2 6,293,846$ 2,100,000$ 2,100,000$ 1,560,000$ -$ 9.91 6,293,846$ Y N N

1 Taiwan

Innovation

Development

Corp.

Taiwan

Commerce

Development

Corp.

2 3,282,149 650,000 50,000 50,000 - 0.61 3,282,149 Y N N

1 Taiwan

Innovation

Development

Corp.

The Company 4 3,282,149 86,074 86,074 86,074 86,074 1.05 3,282,149 N Y N

Outstanding

endorsement/

guarantee

amount at

December 31,

2014

Number

(Note 1)

Endorser/

guarantor

Party being

endorsed/guaranteedLimit on

endorsements/

guarantees

provided for a

single party

（Note 3）

Maximum

outstanding

endorsement/

guarantee

amount as of

December 31,

2014

Provision of

endorsements/

guarantees to

the party in

Mainland

China Factnote

Actual

amount

drawn down

Amount of

endorsements/

guarantees

secured with

collateral

Ratio of

accumulated

endorsement/

guarantee

amount to net

asset value of

the endorser/

guarantor

company

Ceiling on

total amount

of

endorsements/

guarantees

provided (Note 3)

Provision of

endorsements/

guarantees by

parent

company to

subsidiary

Provision of

endorsements/

guarantees by

subsidiary to

parent

company

~60~

C.Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures):

D.Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital:

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities.

Note 2: Fill in the columns the counterparty and relationship if securities are accounted for under the equity method; otherwise leave the columns blank.

Note 3: Aggregate purchases and sales amounts should be calculated separately at their market values to verify whether they individually reach NT$300 million or 20% of paid-in capital or more.

Note 4: Paid-in capital referred to herein is the paid-in capital of parent company. In the case that shares were issued with no par value or a par value other than NT$10 per share, the 20 % of paid-incapital shall be replaced by 10% of equity attributable to owners of the parent in the calculation.

Number of

shares

Book value Ownership

(%) Fair value

Taiwan Innovation

Development Corp.

Hwatai Bank Co., Ltd, 2010

first phase of the first priority

financial bonds N/A

Financial assets at fair

value through profit or

loss - current 4 (units) 4,000$ - 4,000$

FootnoteSecurities held by Marketable securities

Relationship with the

securities issuer

General

ledger account

As of December 31, 2014

Number of

shares

(in thousands)

Amount

Number of

shares

(in thousands)

Amount

Number of

shares

(in thousands)

Selling price Book valueGain (loss)

on disposal

Number of

shares

(in thousands)

Amount

The

Company

Taiwan

Innovation

Development

Corp. -

common stock

Investment

accounted for

under the

equity method

Taiwan

Innovation

Development

Corp.

Subsidiary 220,000 $ 2,200,000 40,000 $ 400,000 - $ - $ - $ - 260,000 $ 2,600,000

Addition (Note 3) Disposal (Note 3)Balance as at

December 31, 2014

Investor

Marketable

securities

(Note 1)

General

ledger

account

Counterparty

(Note 2)

Relationship

with

the investor

(Note 2)

Balance as at

January 1, 2014

~61~

E.Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more:

F.Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

G.Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more: None.

H.Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more:

I.Derivative financial instruments undertaken during the year ended December 31, 2014: None.

Original owner

who sold the

real

estate to the

counterparty

Relationship

between the

original owner

and the

acquirer

Date of the

original

transaction

Amount

The Company Land of two

short sections

in Guanghua

St., Ji’an

Township,

Hualien

County

2014.11.25 547,342$ Paid in full Taiwan

Innovation

Development

Corp.

Subsidiary Industrial

Development

Bureau,

Ministry of

Economic

Affairs

- January 3,

2013

103,995$ Appraisal

report

Development None

CounterpartyReal estate

acquired by

Real estate

acquired

Date of the

event

Transaction

amount

Status of

payment

Relationship

with the

counterparty

If the counterparty is a related party, information as to the last

transaction of the real estate is disclosed below: Basis or

reference

used in

setting the

price

Reason for

acquisition of

real estate

and status of

the real estate

Other

commitments

Amount Action taken

The Company Taiwan Innovation

Development

Corporation

Subsidiary 651,609$ - -$ - -$ -$

Amount collected

subsequent to the

balance sheet date

Allowance for

doubtful accountsCreditor Counterparty

Relationship with

the counterparty

Balance as at

December 31, 2014Turnover rate

Overdue receivables

~62~

J. Significant inter-company transactions during the year ended December 31, 2014:

Transaction amount not reaching 1% of total non-consolidated assets or revenue is not disclosed.

Note 1:The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

(1)Parent company is ‘0’.


Note 2: Relationship between transaction company and counterparty is classified into the following three categories:

(1)Parent company to subsidiary.

(2)Subsidiary to parent company.

(3)Subsidiary to subsidiary.

Note 3: Regarding percentage of transaction amount to non-consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to non-consolidated total assetsfor balance sheet accounts and based on accumulated transaction amount for the period to non-consolidated total operating revenues for income statement accounts.

Note 4:The above transactions were based on agreements with the counterparties.

Note 5:Based on the sales rate and progress of construction in contract.

General ledger account AmountTransaction

terms

Percentage of

non-consolidated total

operating revenues or

total assets

(Note 3)

0 Taiwan Land Development Corp. Taiwan Innovation Development Corp. 1 Other receivables 651,609$ Note 4 2.69%

2 Taiwan Envirotech Development Corp. Taiwan Commerce Development Corp. 3 Accounts receivable 322,797 Note 5 1.33%

2 Taiwan Envirotech Development Corp. Taiwan Commerce Development Corp. 3 Construction revenue 603,208 Note 5 34.97%

1 Taiwan Innovation Development Corp. Taiwan Land Development Corp. 2 Service revenue 45,887 Note 4 2.66%

2 Taiwan Commerce Development Corp. Wind Lion Plaza Corp. 3 Rental revenue 28,865 Note 4 1.67%

0 Taiwan Land Development Corp. Taiwan Commerce Development Corp. 3Endorsements and

guarantees1,560,000 Not applicable 6.44%

1 Taiwan Innovation Development Corp. Taiwan Commerce Development Corp. 3Endorsements and

guarantees1,610,000 Not applicable 6.64%

Number

(Note 1)Company name Counterparty

Relationship

(Note 2)

Transaction

~63~

(2)Information on investees (not including investees in Mainland China)

Investor Investee Location

Balance

as at December

31, 2014

Balance

as at December

31, 2013

Number of shares

(in thousands) Ownership (%) Book value

Net income (loss)

of the investee for

the year ended

December 31,

2014

Investment

income

(loss) recognised

by the Company

for the year ended

December 31,

2014 Footnote

The Company Taiwan Innovation

Development Corp.

Taiwan Metropolis renewal

conformity service

2,600,000$ 2,200,000$ 260,000 100 8,205,372$ 3,631,242$ 3,631,242$ Subsidiary

The Company Hsinchu Hill Garden

Corp.

Taiwan Development of

Hsinpu, Hsinchu

1,000 1,000 100 100 735 62)( 62)( Subsidiary

The Company Taiwan Midtown

Development Corp.


Taichung

1,000 1,000 100 100 844 61)( 61)( Subsidiary

The Company Taiwan LanYang

Development

Corporation


Yilan

5,100 - 510 51 4,943 307)( 157)( Subsidiary

Taiwan

Innovation

Development

Corp.

Taiwan Commerce

Development Corp.

Taiwan Kinmen BOT project 1,300,000 1,135,000 130,000 100 2,328,737 501,234 501,234 Indirectly-

owned

subsidiary

Taiwan

Innovation

Development

Corp.

Taiwan Envirotech

Development Corp.

Taiwan Construction and

Technology

30,000 30,000 3,000 100 53,271 13,466 13,466 Indirectly-

owned

subsidiary

Taiwan

Innovation

Development

Corp.

Taiwan City

Development Corp.

Taiwan City renewal

integration

1,000 1,000 100 100 727 95)( 95)( Indirectly-

owned

subsidiary

Taiwan

Innovation

Development

Corp.

Hualien Culture

Clubhouse Corp.


Hualien

30,000 1,000 3,000 100 45,935 16,423 16,423 Indirectly-

owned

subsidiary

Taiwan

Innovation

Development

Corp.

Hualien Ocean Forum

Corp.


Hualien

1,000 1,000 100 100 450 62)( 62)( Indirectly-

owned

subsidiary

Main business

activies

Initial investment amount Shares held as at December 31, 2014

~64~

Investor Investee Location

Balance

as at December

31, 2014

Balance

as at December

31, 2013

Number of shares

(in thousands) Ownership (%) Book value

Net income (loss)

of the investee for

the year ended

December 31,

2014

Investment

income

(loss) recognised

by the Company

for the year ended

December 31,

2014 Footnote

Main business

activies

Initial investment amount Shares held as at December 31, 2014

Taiwan

Innovation

Development

Corp.

Nanguowoo Corp. Taiwan International trade 10,000$ 10,000$ 1,000 100 8,497$ 431)($ 431)($ Indirectly-

owned

subsidiary

Taiwan

Innovation

Development

Corp.

Wind Lion Plaza Corp. Taiwan General merchandise

retail

150,000 1,000 15,000 100 59,887 90,086)( 90,086)( Indirectly-

owned

subsidiary

Taiwan

Innovation

Development

Corp.

Taiwan Talent

Development Corp.

Taiwan Human capital

cultivation

3,000 3,000 300 100 514 2,563)( 2,563)( Indirectly-

owned

subsidiary

Taiwan

Innovation

Development

Corp.

Dufry TCDC Ltd. Taiwan Management of duty

free shops

29,400 - 2,940 49 26,121 6,691)( 3,279)( Indirectly-

owned

subsidiary

Taiwan

Innovation

Development

Corp.

Taiwan Wind Lion

travel service Corp.

Taiwan Travel agency related

business

10,000 - 1,000 100 9,936 64)( 64)( Indirectly-

owned

subsidiary

Taiwan

Innovation

Development

Corp.

Kinmen Forum Corp. Taiwan Hotel management

and

conference and

exhibition business

3,000 - 300 100 3,000 - - Indirectly-

owned

subsidiary

~65~

(3)Information on investments in Mainland China

A.Basic information:

Note: The financial statements that are audited and attested by R.O.C. parent company’s CPA.

B.Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas: None.

14. SEGMENT INFORMATION

Not applicable.

Remitted to

Mainland

China

Remitted back to

Taiwan

Taikai Xiamen

Trading Corp.

Trading

Business

$ 61,172

(US$2,100

thousand

dollars)

Direct

investment

$ 61,172

(US$2,100

thousand

dollars)

-$ -$ $ 61,172

(US$2,100

thousand

dollars)

6,457)($ 100 6,457)($ 51,567$ -$

Accumulated

amount of

investment

income

remitted back

to Taiwan as

of December

31, 2014

Investee in Mainland

China

Main

business

activities

Paid-in

capital

Investment

method

Accumulated

amount of

remittance from

Taiwan to

Mainland China

as of January 1,

2014

Amount remitted from Taiwan to

Mainland China/Amount remitted

back to Taiwan for the year ended

December 31, 2014

Accumulated

amount of

remittance from

Taiwan to

Mainland China

as of December

31, 2014

Net income of

investee as of

December 31,

2014

Ownership

held by the

Company

(direct or

indirect)

Investment

income (loss)

recognized by

the Company

for the year

ended

December 31,

2014 (Note)

Book value of

investments in

Mainland China

as of December

31, 2014

Company name

Accumulated amount of remittance

from Taiwan

to Mainland China

as of December 31, 2014

Investment amount approved by the

Investment

Commission of the Ministry of

Economic Affairs

(MOEA)

Ceiling on investments in Mainland

China

imposed by the Investment

Commission of MOEA

Taikai Xiamen

Trading Corp.

$ 61,172

(US$2,100 thousand dollars)

$ 63,762

(US$2,190 thousand dollars)9,440,768$

Documents

TAIWAN LAND DEVELOPMENT CORPORATION - 台灣 …€¦ · · 2015-12-01Chinese version or any differences in the interpretation of the two versions, ... on a test basis, ... financial