Taiwan Shin Kong Security Co., Ltd. And its subsidiaries ... · And its subsidiaries. Consolidated Financial Statement and Auditors’ Report . ... Financial Statements by CPA”

Taiwan Shin Kong Security Co., Ltd. And its subsidiaries

Consolidated Financial Statement and Auditors’ Report

2012 and 2011

Address: No.128, Xing’ai Rd., Neihu Dist., Taipei City

Tel. No.: (02) 27968888

Stock No: 9925

2

§ CONTENTS §

ITEM PAGE NO.

NO. OF NOTES TO FINANCIAL

STATEMENT I. COVER PAGE 1 - II. CONTENTS 2 - III. DECLARATION FOR CONSOLIDATED

FINANCIAL STATEMENTS OF AFFILIATED COMPANIES

3 -

IV. AUDITORS’ REPORT 4 - V. CONSOLIDATED BALANCE SHEET 5 - VI. CONSOLIDATED STATEMENT OF INCOME 6~7 - VII. CONSOLIDATED STATEMENT OF CHANGES IN

SHAREHOLDERS’ EQUITY 8 -

VIII. CONSOLIDATED STATEMENT OF CASH FLOW 9~10 - IX. NOTES TO CONSOLIDATED FINANCIAL

STATEMENT

(I) HISTORY, BUSINESS, AND CONSOLIDATION POLICY

11~19 I

(II) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

19~27 II

(III) REASONS AND EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES

28 III

(IV) WRITTEN-OFF SIGNIFICANT TRANSACTIONS BETWEEN THE PARENT COMPANY AND SUBSIDIARIES

59, 101~123 XXXI

(V) EXPLANATION OF IMPORTANT ACCOUNTING TITLES

28~51 IV~XXVI

(VI) TRANSACTIONS-RELATED PARTY 51~55 XXVII (VII) PLEDGED ASSETS 55 XXVIII (VIII) SIGNIFICANT COMMITMENTS AND

CONTINGENCE 56~57 XXIX

(IX) LOSS OF MATERIAL DISASTER - - (X) SIGNIFICANT SUBSEQUENT EVENTS - - (XI) OTHERS 62~75 XXXIV~XXXV (XII) NOTED DISCLOSURES

1. INFORMATION RELATED TO MATERIAL TRANSACTIONS

57, 76~85 XXX

2. INFORMATION RELATED TO REINVESTED ENTERPRISES

58, 86~99 XXX

3. INFORMATION ABOUT INVESTMENT IN MAINLAND CHINA

59, 100 XXX

4. THE BUSINESS RELATIONSHIP AND SIGNIFICANT TRANSACTIONS BETWEEN THE PARENT COMPANY AND SUBSIDIARIES

59, 101~123 XXXI

(XIII) FINANCIAL INFORMATION OF OPERATING SEGMENTS

60~62 XXXIII

3

DECLARATION

The companies to be included by the Company in the consolidated financial statement of

affiliated enterprises in 2012 (Jan. 1, 2012- Dec. 31, 2012) pursuant to the Criteria

Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated

Financial Statements of Affiliated Enterprises are the same as those to be included into the

consolidated financial statement of the parent company and subsidiaries pursuant to the Statements

of Financial Accounting Standards No. 7. Further, the related information to be disclosed in the

consolidated financial statement of affiliated enterprises has been disclosed in the said consolidated

financial statement of parent company and subsidiaries. Accordingly, it is not necessary for the

Company to prepare the consolidated financial statement of affiliated enterprises separately.

Declared by:

Taiwan Shin Kong Security Co., Ltd. and Subsidiaries

Responsible person: Lee Feng-Yau

March, 27, 2013

4

Auditors’ report To: Taiwan Shin Kong Security Co., Ltd.

We have audited the accompanying consolidated balance sheets of Taiwan Shin Kong Security

Co., Ltd. (the “Company) and its subsidiaries as of December 31, 2012 and 2011 and the related

consolidated statements of income, changes in shareholders’ equity and cash flows for the years

then ended. These consolidated financial statements are the responsibility of the management. Our

responsibility is to express an opinion on the consolidated financial statements based on our audits.

We have conducted our audit in accordance with the “Guidelines Governing the Audit of

Financial Statements by CPA” and generally accepted auditing principles. Those standards require

that we plan and perform the audits 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, based on our audits, the consolidated financial statements as described in the

first paragraph above present fairly, in all material respects, the financial position of SKS as of

December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then

ended, in conformity with the Guidelines Governing the Preparation of Financial Reports by

Securities Issuers and generally accepted accounting principles in the Republic of China.

Deloitte & Touche CPA Yu S u-Huan

CPA: Y.H. Lin

SFC’s written approval No: Tai-tsai-cheng-(6) No. 0920123784

Financial Supervisory Commission, Executive Yuan’s written approval No.: Jin-kwong-cheng-(6) No.: 0940161384

March, 27, 2013

5

SKS and its subsidiaries Notes to Consolidated Financial Statement

Consolidated Balance Sheet

December 31, 2012 and 2011

Unit: NTD1,000

December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011 Code Assets Amount % Amount % Code Liabilities and shareholders’ equity Amount % Amount %

Current assets Current liabilities 1100

Cash and cash equivalents (Notes II & IV) $ 4,072,203 34 $ 4,181,096 36 2100 Short-term loan (Notes XIV, XXVII and

XXVIII) $ 1,650,000 14 $ 1,930,000 17 1310 Financial assets with changes in fair value

recognized as income and expense – current (Notes II, V and XXVI)

2110 Short-term notes and bills payable (Note XV) 609,656 5 449,693 4

213,771 2 141,801 1 2120 Notes payable (Note XXVII) 81,477 1 97,345 1 1320 Available-for-sale financial assets – current

(Note II, VI and XXVI)

2140 Accounts payable (Note XXVII) 205,122 2 217,628 2

1,754,972 15 1,519,888 13 2160 Income tax payable (Notes II and XXIII) 119,388 1 147,548 1 1120 Notes receivable (net) (Notes II, VII and XXVII) 152,176 1 157,918 1 2170 Expenses payable (Note XXVII) 697,873 6 606,591 5 1140 Accounts receivable (net) (Notes II, VIII and

XXVII) 412,246 4 394,160 3 2224 Equipment accounts payable (Note XXVII) 27,338 - 53,657 - 1160 Other accounts receivable (Note XXVII) 37,262 - 46,931 1 2228 Other payables 76,344 1 68,226 1 1200 Inventories (Note II) 158,030 1 186,002 2 2260 Advance receipts (Note XXVII) 777,873 6 803,470 7 1260

Prepayments (Note XXVII) 61,649 1 61,435 1 2272 Long-term borrowings – current portion (Note

XVI) 1,340 - 1,932 - 1286 Deferred income tax assets-current (Notes II and

XXIII) 42,884 - 38,221 - 2273 Rental payable-current portion (Note XVII) - - 3,361 - 1298 Other current assets 22,790 - 21,261 - 2298 Other current liabilities 50,202 - 45,283 11XX

- Total current assets 6,927,983 58 6,748,713 58 21XX Total current liabilities 4,296,613 36 4,424,734

38

Investment (Note II, IX, X, XI, XXVI, and XXVIII) Long-term liability 1480 Financial assets carried at cost - noncurrent 1,155,888 10 1,189,577 10 2420 Long-term loan (Note XVI) 10,412 - 19,319 - 1421 Long-term investment based on equity method 16,319 - 17,343 - 2446 Rental payable (Note XVII) - - 783 1423

- Real estate investment (net) 1,158,093 10 1,169,578 10 24XX Total long-term liability 10,412 - 20,102

14XX -

Total investment 2,330,300 20 2,376,498 20 Other liabilities Fixed assets (Notes II, XII and XXVIII) 2810 Accrued pension liability (Notes II and XVIII) 433,541 4 397,060 3 Cost 2820 Deposit received（Notes XIX and XXVII） 277,106 2 300,088 1501

3 Land 855,601 7 791,425 7 28XX Total other liabilities 710,647 6 697,148

1521 6

House and building 628,812 6 604,234 5 1531 Machinery & equipment 3,118,263 26 2,873,818 25 2XXX Total liabilities 5,017,672 42 5,141,984 1551

44 Transportation equipment 372,120 3 367,661 3

1561 Office equipment 222,925 2 320,078 3

Shareholders’ equity of parent company (Notes II and XX)

1681 Other equipment 148,652 1 151,422 1 3110 Capital stock 3,798,545 32 3,798,545 33 15X1 5,346,373 45 5,108,638 44 3211 Additional paid-in capital-stock premium 146,302 1 146,302 1 15X9 Less: Cumulative depreciation ( 2,917,926 ) ( 25 ) ( 2,816,052 ) ( 24 ) Retained earnings 1672 prepaid equipment amount 10,390 - 15,210 - 3310 Legal reserve 1,122,895 9 1,033,297 9 15XX Total fixed assets 2,438,837 20 2,307,796 20 3320 Special reserve 951,278 8 354,446 3 3350 Unappropriated earnings 1,423,428 12 1,787,415 15 Other assets (Notes II, VIII, XIII, XVIII, XXIII,

XXVII and XXVIII) Other items

3420 Cumulative translation adjustment ( 15,465 ) - ( 7,939 ) - 1800 Assets leased to others 1,816 - 949 - 3430 Net loss not recognized as pension cost ( 115,191 ) ( 1 ) ( 101,096 ) ( 1 ) 1820

Refundable deposit 58,216 1 60,217 1 3450 Unrealized (loss) profit of financial

instruments ( 781,983 ) ( 7 ) ( 842,243 ) ( 7 ) 1830 Deferred expenses 53,736 - 56,480 - 3480 Treasury stocks- 3,219 thousand shares for

2012 and 2011

1846 Long-term rental receivable 10,606 - - - ( 34,070 ) - ( 34,070 ) 1860

-

Deferred income tax assets-non-current 67,015 1 64,338 1 Total shareholders’ equity of parent

company 6,495,739 54 6,134,657 53 1887 Restricted assets-non-current 52,538 - 49,563 - 1888 Other assets-others 12,630 - 13,262 - 3610 Minority interest 440,266 4 401,175 18XX

3 Total other assets 256,557 2 244,809 2

3XXX Total shareholders’ equity 6,936,005 58 6,535,832

56

1XXX Total assets $ 11,953,677 100 $ 11,677,816 100 Total liabilities and shareholders’ equity $ 11,953,677 100 $ 11,677,816 100

Notes to the consolidated financial statements constitute a part of these financial statements. Chairman: Lee Feng-Yau Manager: Lin Po-Fong Company Accountant: Weng Tsung-Hsien

6

SKS and its subsidiaries Notes to Consolidated Financial Statement Consolidated statement of income

Year ended December 31, 2012 and 2011

Unit: NTD1,000, except for EPS (NT$) 2012 2011

Code Amount % Amount % 4100 Operating revenue-net (Notes XXI

and XXVII)

$6,850,812 100 $6,598,736 100 5000 Operating cost (Notes XXII, XXIV

and XXVII)

( 4,364,619 ) ( 64 ) ( 4,155,092 ) ( 63

)

5910 Gross income from operations 2,486,193 36 2,443,644 37 Operating expenses (Notes XXIV

and XXVII)

6200 General and administrative

expenses

( 1,439,492 ) ( 21 ) ( 1,419,015 ) ( 21

)

6900 Net operating profit 1,046,701 15 1,024,629

16

Non-operating revenue 7110 Interest revenue 4,932 - 3,976 - 7121 Investment income recognized

based on equity method (Note X)

2,619 - 1,874 - 7122 Dividend income 143,476 2 121,535 2 7310 Gain on financial asset

valuation

21,050 1 - - 7130 Gain on disposal of fixed

assets

278 - 2,266 - 7140 Gain on disposal of

investment

15,425 - 47,544 - 7160 Gain in exchange - - 11 - 7210 Rental income (Notes XI &

XXVII)

17,178 - 4,336 - 7480 Sundry income 80,705 1 114,584 7100

2 Total non-operating

income and gains

285,663 4 296,126

4

Non-operating expenses and losses 7510 Interest expenses (Note

XXVII)

( 31,380 ) - ( 30,225 ) - 7640 Loss of financial assets in

valuation

- - ( 42,061 ) ( 1 ) 7522 Other investment loss (Note

VIX)

( 36,475 ) ( 1 ) ( 19,605 ) - 7530 Loss on disposal of fixed

assets

( 4,925 ) - ( 1,234 ) - (To be continued)

7

(Continued)

2012 2011 Code Amount % Amount % 7560 Loss in exchange ( 39 ) - - - 7880 Miscellaneous expenses ( 20,961 ) - ( 40,610 ) ( 17500

) Total non-operating

expenses and losses

( 93,780 ) ( 1 ) ( 133,735 ) ( 2

)

7900 Income before tax 1,238,584 18 1,187,020 18 8110 Income tax expenses (Notes II and

XXIII)

( 205,131 ) ( 3 ) ( 229,170 ) ( 3

)

9600 Consolidated gross income $1,033,453 15 $ 957,850 15 Vested in: 9601 Shareholders of parent

company

$ 968,196 14 $ 895,977 14 9602 Minority interest 65,257 1 61,873

1 $1,033,453 15 $ 957,850 15

Code Before tax After tax Before tax After tax EPS (Note XXV) 9750 Basic consolidated

earnings per share – parent company

$ 2.90 $ 2.56 $ 2.79 $ 2.37 9850 Diluted consolidated

earnings per share – parent company

$ 2.90 $ 2.56 $ 2.78 $ 2.37

Notes to the consolidated financial statements constitute a part of these financial statements.

Chairman: Lee Feng-Yau Manager: Lin Po-Fong Company Accountant: Weng Tsung-Hsien

8


Consolidated statement of changes in shareholders’ equity


Unit: NTD1,000

Other items Retained earnings

Net loss not recognized as pension cost

Unrealized (loss) profit of financial

instruments

Capital stock Additional paid-in

capital Legal reserve Special reserve Unappropriated

earnings

Cumulative translation adjustment Treasury stocks Minority interest

Total shareholders’ equity

Balance- January 1, 2012 $ 3,798,545 $ 146,302 $ 952,690 $ 514,784 $ 1,457,460 ( $ 15,237 ) ( $ 81,131 ) ( $ 258,078 ) ( $ 34,070 ) $ 398,767 $ 6,880,032 Distribution of earnings in 2010

Legal reserve - - 80,607 - ( 80,607 ) - - - - - - Special reserve - - - ( 160,338 ) 160,338 - - - - - - Cash dividend - - - - ( 645,753 ) - - - - - ( 645,753 )

Consolidated net income of 2011 - - - - 895,977 - - - - 61,873 957,850 Unrealized profit (loss) of Available-for-sale

financial assets - - - - - - - ( 584,165 ) - 62,420 ( 521,745 )

Change of translation adjustment - - - - - 7,298 - - - 6,376 13,674 Change in minority interest - - - - - - - - - ( 128,261 ) ( 128,261 ) Changes in net loss not recognized pension

cost - - - - - - ( 19,965 ) - - - ( 19,965

)

Balance - December 31, 2011 3,798,545 146,302 1,033,297 354,446 1,787,415 ( 7,939 ) ( 101,096 ) ( 842,243 ) ( 34,070 ) 401,175 6,535,832 Distribution of earnings in 2011

Legal reserve - - 89,598 - ( 89,598 ) - - - - - - Special reserve - - - 596,832 ( 596,832 ) - - - - - - Cash dividend - - - - ( 645,753 ) - - - - - ( 645,753 )

Consolidated net income of 2012 - - - - 968,196 - - - - 65,257 1,033,453 Unrealized profit (loss) of Available-for-sale

financial assets - - - - - - - 60,260 - ( 2,883 ) 57,377

Change of translation adjustment - - - - - ( 7,526 ) - - - ( 2,743 ) ( 10,269 ) Change in minority interest - - - - - - - - - ( 20,540 ) ( 20,540 ) Changes in net loss not recognized pension

cost - - - - - - ( 14,095 ) - - - ( 14,095

)

Balance - December 31, 2012 $ 3,798,545 $ 146,302 $ 1,122,895 $ 951,278 $ 1,423,428 ( $ 15,465 ) ( $ 115,191 ) ( $ 781,983 ) ( $ 34,070 ) $ 440,266 $ 6,936,005



9


Consolidated statement of cash flow


Unit: NTD1,000

2012 2011 Cash flow from operating activities

Consolidated gross income $ 1,033,453 $ 957,850 Depreciation 299,088 300,750 Amortization 24,948 30,009 Provision for bad debts 6,533 3,491 Loss on inventory devaluation and obsolescence - 341 Investment income recognized based on equity method

( 2,619 ) ( 1,874 )

Loss (gain) on disposal of fixed assets, net 4,647 ( 1,032 ) Disposals of fixed assets transferred to cost 21,923 18,196 Depreciation on real estate investments (presented as a deduction to rental income)

11,485 11,485

Gain on disposal of investment ( 15,425 ) ( 47,544 ) Loss (income) of financial assets in valuation ( 21,050 ) 42,061 Investment loss recognized based on cost method 36,475 19,605 Deferred income tax ( 7,340 ) ( 1,736 ) Net change in operating assets and liabilities

Held-for-trading financial assets ( 50,920 ) 14,713 Notes receivable 5,655 9,090 Accounts receivable ( 35,138 ) ( 18,991 ) Other accounts receivable 9,669 ( 13,457 ) Inventories 27,972 ( 34,028 ) Prepayments ( 214 ) ( 3,334 ) Other current assets ( 1,529 ) 21,509 Notes payable ( 15,868 ) 16,012 Accounts payable ( 12,506 ) 59,155 Income tax payable ( 28,160 ) ( 5,328 ) Expenses payable 91,282 ( 27,213 ) Other payables 8,118 11,268 Receipt in advance ( 25,597 ) 33,658 Other current liabilities 775 ( 24,231 ) Accrued pension liabilities 22,386 Net cash inflow from operating activities

17,900 1,388,043

1,388,325

Cash flow from investing activities

Acquisition of available-for-sale financial assets ( 627,982 ) ( 741,364 ) Proceeds from the disposal of available-for-sale financial assets

481,466 507,075

Financial assets carried at cost ( 15,000 ) ( 14,996 ) Return of capital from capital reduction of financial assets carried at cost

12,214 42,675

Proceeds for acquisition of long-term investments under equity method

( 1,140 ) ( 1,140 )

(To be continued)

10

(Continued) 2012 2011

Procurement of fixed assets ( 509,687 ) ( 388,945 ) Proceeds form disposal of fixed assets 3,654 2,799 Increase in restricted assets ( 2,975 ) ( 9,975 ) Increase in deferred expenses ( 15,355 ) ( 15,608 ) Decrease (increase) in refundable deposit 2,001 ( 4,655 ) Increase in Other assets ( 235 ) ( 6,362

Net cash outflow from investing activities )

( 673,039 ) ( 630,496

)

Cash flow from financing activities Decrease in short-term loan ( 280,000 ) ( 561,000 ) Increase in short-term notes payable 159,963 449,693 Long-term loan paid ( 9,499 ) ( 1,932 ) Decrease in deposit received ( 22,982 ) ( 68,962 ) Cash dividend paid ( 645,753 ) ( 645,753 ) Increase (decrease) in change in minority interest

( 25,626 )

Net cash outflow from financing activities 68,796

( 823,897 ) ( 759,158

)

Increase (decrease) in cash and cash equivalents in the current period

( 108,893 ) ( 1,329 )

Balance of cash and cash equivalents-beginning 4,181,096

4,182,425

Balance of cash and cash equivalents-end $ 4,072,203 $ 4,181,096 Supplementary disclosure of cash flow information

Interest paid in the current period (exclusive of capitalized interest)

$ 31,775 $ 30,303

Income tax paid $ 276,632 $ 240,149 Investing and financing activities not affecting cash flow, or having only partial cash income and expenses

Increase in fixed assets $ 583,451 $ 501,454 Decrease (increase) in payables for purchase of fixed assets

26,319 ( 25,705 )

Fixed assets transferred as inventories ( 93,234 ) ( 86,804 ) Fixed assets transferred as deferred charges ( 6,849 )

Cash payment for purchase of fixed assets -

$ 509,687 $ 388,945



11


Notes to consolidated financial statement

2012 and 2011

(Expressed in Thousand New Taiwan Dollars unless specified otherwise)

I. History, business, and consolidation policy

(I) Taiwan Shin Kong Security Co., Ltd. (referred to as “SKS” hereinafter) was

incorporated in January 1980 in Taipei City and with 21 branches and 73 offices

setup throughout the years. The Company is primarily engaged in the design, sale,

lease, installation, maintenance, repairing and inspection of natural calamity, theft

and fire resistant facilities, and the import/export related to the said products, as well

as operation and investment of the relevant business.

History and operations

SKS’s stocks have been traded on TSE since December 1995.

With the resolution from the board of directors meeting dated August 28, 2012,

Shin Kong Security Company Ltd. (SKS) has been merged with Shin Kong Aerotech

International Co., Ltd. by way of acquisition, with SKS as the surviving company.

After merger, all rights and obligations of Shin Kong Aerotech International Co., Ltd.

will be undertaken by SKS. The merger has been approved by the relevant authority

and the registration has been completed in October 2012.

The number of Shin Kong Security’s employees as of December 31, 2012 and

2011 totaled 1,906 and 1,893 people respectively.

(II) Yi Kong Security Company Limited (referred to as “YKS” hereinafter), the

subsidiary of SKS, was incorporated in March 1995. It is primarily engaged in the

design, installation and maintenance of natural calamity, theft and fire resistant

facilities, and theft, fire and natural calamity resistant in offices, business places,

factory buildings and warehouses.

The number of Yi Kong Security’s employees as of December 31, 2012 and

2011 totaled 3,577 and 3,652 people respectively.

Its parent company is SKS whose shareholdings in it are 69%.

(III) The subsidiary, Taiwan Security Co., Ltd. (hereinafter referred to as “Taiwan

Security”), was incorporated in April 1999 and with the business operation initiated

in June 1999. It is primarily engaged in transportation and security maintenance of

cash or other precious articles.

12

The number of Taiwan Security’s employees as of December 31, 2012 and 2011

totaled 1,084 and 1,019 people respectively.

Its parent company is SKS whose shareholdings in it are 99.58%.

(IV) The subsidiary, Shin-Po Investment Co., Ltd (hereinafter referred to as “Shin-Po

Investment”), was incorporated in June 1998. It is primarily engaged in the general

investment.

The number of Shin-Po’s employees as of December 31, 2012 and 2011 totaled

0 person respectively.

Its parent company and ultimate parent company is YKS whose shareholdings

are 23.61% and SKS whose shareholdings in it are 76.38%, respectively.

(V) The subsidiary, Yi Kong Building Management Service Co., Ltd. (hereinafter

referred to as “Yi Kong Building Management”), was incorporated in November

1998 and with the business operation initiated in July 1999. It is primarily engaged in

the administrative service of apartment buildings.

The number of Yi Kong Building Management Service Co., Ltd.’s employees as

of December 31, 2012 and 2011 totaled 0 person respectively.

Its parent company and ultimate parent company is YKS whose shareholdings

are 3.90%, Shinkong Optical Networking Co., Ltd. whose shareholdings in it are 8%,

eTech Pro Co., Ltd. whose shareholdings in it are 8% and SKS whose shares in it are

80%.

(VI) eTech Pro Co., Ltd. (referred to as “eTech” hereinafter), the subsidiary of SKS, was

incorporated in September 1999 and with business operation initiated in December

1999. It is primarily engaged in the management of parking lots, installation of

computer equipment, wholesale of electronic materials, wholesale of office machines

& equipment, wholesale and retail of information software.

The number of eTech’s employees as of December 31, 2012 and 2011 totaled 21

person respectively.

Its parent company and ultimate parent company are Yi Kong Building

Management whose shareholdings in it are 49% and SKS whose shareholdings in it

are 49%, respectively.

(VII) Shin Kong Aerotech International Co., Ltd. (referred to as “SKAI” hereinafter), the

subsidiary of SKS, was incorporated in July 2000 and with business operation

initiated in October 2000. It is primarily engaged in telecommunication engineering,

installation of computer equipment, manufacture of aviators and spare parts thereof,

13

automatic controlling equipment engineering, wholesale and retail of information

software.

Shin Kong Aerotech Co., Ltd. has merged with SKS on September 30, 2012,

with SKS as the surviving company.

The number of Shin Kong Aerotech’s employees as of December 31, 2011

totaled 16 persons.

As at 31 December 2011, its parent company and ultimate parent company are

eTech whose shareholdings in it are 1.33% and SKS whose shareholdings in it are

97.07%, respectively.

(VIII) Subsidiary Shinsoft Co., Ltd. (referred to as “Shinsoft” hereinafter) was incorporated

in November 2000 and with business operation initiated in April 2001. It is primarily

engaged in the management of parking lots, installation of computer equipment,

wholesale of electronic materials, wholesale of office machines & equipment,

wholesale and retail of information software. On 1 May 2009, the company acquired

Shin Kong Integration Associates Network Tech Co., Ltd. and renamed Shinsoft

Co., Ltd. Shin Kong Integration Associates Network Tech Co., Ltd. exchanged every

one of its share for 0.65 shares in Shinsoft information technoldy Co., Ltd.

The number of Shinsoft’s employees as of December 31, 2012 and 2011 totaled

61 and 52 people respectively.

Shinsoft’s parent companies and the ultimate parent company are Shin-Po

Investment Co., Ltd., which has a 36.33% shareholding, eTech, which has a 6.05%

shareholding, and Shin Kong Security, which has a 57.43% shareholding.

(IX) Shincluster Electronics Co., Ltd. (referred to as “Shincluster” hereinafter), the

subsidiary of SKS, was incorporated in April 2000 and with business operation

initiated in August 2000. It is primarily engaged in data processing and electronic

information supply, fire fighting and safety equipment retailing and installation,

electronics retailing, telecommunications equipment installation engineering, and

information software service and retailing.

The number of Shincluster Electronics’s employees as of December 31, 2012

and 2011 totaled 24 and 22 people respectively.

Its parent company and ultimate parent company are Shincluster Electronics

whose shareholdings in it are 19% and SKS whose shareholdings in it are 19%,

respectively.

14

(X) Subsidiary New Light International Co., Ltd. (referred to as “New Light

International” hereinafter) was incorporated in July 2005. Its primary business

activities involved real estate leasing, management, and consultation.

The number of New Light International’s employees as of December 31, 2012

and 2011 totaled 9 and 10 people respectively.


Management, Shin-Po Investment and Shin Kong Security, which have a 15%, 15%

and 19% shareholding, respectively.

(XI) Subsidiary Shin-Po International Co., Ltd. (referred to as “Shin-Po International”

hereinafter) was incorporated at Samoa in December 2001. It is primarily engaged in

overseas holding business.

The number of Shin-Po International’s employees as of December 31, 2012 and

2011 totaled 0 person respectively.

Its parent company and also ultimate parent company is SKS whose

shareholdings in it are 100%.

(XII) Thai-SK Security International Co., Ltd. (referred to as “Thai-SK” hereinafter), the

subsidiary of SKS, was incorporated on September 14, 2007 for security business.

The number of Thai-SK Security International’s employees as of December 31,

2012 and 2011 totaled 26 and 23 people respectively.

Its parent company and ultimate parent company are Shincluster Electronics, Yi

Kong Security and Shin Kong Security, which have a 4.59%, 4.59% and 24.08%

shareholding, respectively.

(XIII) Subsidiary Shin Kong (Thai) Security International Co., Ltd. (referred to as

“SK-Thai” hereinafter) was incorporated on February 8, 2010 and is mainly engaged

in the security business.

The number of SK-Thai’s employees as of December 31, 2012 and 2011 totaled

139 and 154 people respectively.

Thai-SK Security International Co., Ltd.’s parent company and ultimate parent

company are Thai-SK whose shareholding is 9% and SKS whose shareholding in it

is 40%, respectively.

(XIV) Shinkong Optical Networking Co., Ltd. (referred to as “Shinkong

Optical” hereinafter), the subsidiary of SKS’s subsidiary, was incorporated in

January 2000 and with business operation initiated in August 2000. It is primarily

engaged in installation engineering of instruments and meters, fire protection safety

equipment engineering, automatic controlling equipment engineering, installation

15

engineering of telecommunication controlling RF facilities and installation of

computer equipment.

The number of Shinkong Optical Networking’s employees as of December 31,


Its parent company and ultimate parent company are Shin-Po Investment whose

shareholdings in it are 99.63% and SKS.

(XV) Shinkong Technology Co., Ltd. (referred to as “Shinkong Technology” hereinafter),

the subsidiary of SKS’s subsidiary, was incorporated in October 2007 and with

business operation initiated in November 2007. It is primarily engaged in installation

of computer equipment, telecommunication material wholesaling,

telecommunication material retailing, telecommunication engineering, controlling

RF facilities and installation, and telecommunication agency.

The number of Shin Kong Telecommunications’ employees as of December 31,

2012 and 2011 totaled 0 person respectively.

Its parent company and ultimate parent company are Shin-Po Investment whose

shareholdings in it are 100% and SKS.

(XVI) Shin Kong Overseas Enterprise Co., Ltd. (referred to as “SKOE” hereinafter), the

subsidiary of SKS’s subsidiary, was incorporated in December 2001 in Samoa. It is

primarily engaged in overseas holding business.

The number of Shin Kong Overseas Enterprise’s employees as of December 31,


Its parent company and also ultimate parent company are Shin-Po International

whose shareholdings in it are 100% and SKS.

(XVII) SHIN-TOW OVERSEAS HOLDING CO., LTD. (referred to as “Shin-Tow”

hereinafter), the subsidiary of SKS’s subsidiary, was incorporated in August 2004 in

Samoa. It is primarily engaged in overseas holding business.

The number of Shin-Tow Oversea’s employees as of December 31, 2012 and

2011 totaled 0 person respectively.

Its parent company and also ultimate parent company are Shin-Po Investment


(XVIII) SHIN-PO INVESTMENT OVERSEAS ENTERPRISE CO., LTD. (referred to as

“Shin-Po” hereinafter), the subsidiary of SKS’s subsidiary, was incorporated in

August 2004 in Samoa. It is primarily engaged in overseas holding business.

The number of Shin-Po Investment Oversea’s employees as of December 31,


16

Its parent company and also ultimate parent company are Shin-Tow Overseas


(XIX) Shincluster International Limited (referred to as”Shincluster” hereinafter), the

subsidiary of SKS’s subsidiary, was incorporated in October 2002. It is primarily

engaged in overseas holding business.

The number of Shincluster International’ employees as of December 31, 2012

and 2011 totaled 0 person respectively.

Its parent company and ultimate parent company are Shincluster Electronics


(XX) Shanghai Shin Kong Security Prevention Technology Co., Ltd. (referred to as

“Shanghai Shin Kong” hereinafter), the subsidiary of SKS’s subsidiary, was

incorporated in March 2005. It is primarily engaged in design of public safety

prevention technology engineering and construction thereof.

The number of Shanghai Shin Kong Security’ employees as of December 31,


Its parent company and ultimate parent company are Shincluster

International Limited whose shareholdings in it are 5.25%, SHIN-PO

INVESTMENT OVERSEAS ENTERPRISE CO., LTD. whose shareholdings in it

are 79%, and SKS.

(XXI) Shanghai Shin Kong Property Management Ltd. (referred to as “Shanghai

SK Property” hereinafter), the subsidiary of SKS’s subsidiary, was incorporated in

July 2005. It is primarily engaged in the management of properties.

The number of Shanghai Shin Kong Property Management’s employees as of

December 31, 2012 and 2011 totaled 398 and 407 people respectively.

Its parent company and ultimate parent company are Shin-Po Investment

Overseas whose shareholdings in it are 86.57% and SKS.

(XII) Beijing Yi Kong Property Management Ltd. (referred to as “Beijing Yi Kong”

hereinafter), the subsidiary of SKS’s subsidiary, was incorporated in September 2006

for property management and related consulting service business. Its main business

activities were property management and consultation.

The number of Beijing Yi Kong Property Management’s employees as of

December 31, 2012 and 2011 totaled 256 and 255 people respectively.

Its parent company and ultimate parent company are SHIN-PO INVESTMENT

OVERSEAS ENTERPRISE CO., LTD. whose shareholdings in it are 70% and SKS.

17

(XXIII) Xiamen Shin-Po Property Service Co., Ltd. (referred to as “Ximen Property”

hereinafter), the subsidiary of SKS’s subsidiary, was incorporated in November 2008.

It is primarily engaged in the management of properties.

The number of Xiamen Shin-Po Property Service’s employees as of December

31, 2012 and 2011 totaled 253 and 223 people respectively.


OVERSEAS ENTERPRISE CO., LTD. whose shareholdings in it are 100% and

SKS.

(XXIV) Ximen Shin-Po Ximen Shin-Po Security Equipment Ltd. (referred to as “Ximen

Security” hereinafter), the subsidiary of SKS’s subsidiary, was incorporated in

August 2010. Its main business activities were the sale of security equipment and

personal protection tools etc.

The number of Xiamen Shin-Po Security Equipment’ employees as of

December 31, 2012 and 2011 totaled 0 person respectively.

Its parent company and ultimate parent company are Xiamen Shin-Po Property

Service whose shareholdings in it are 100% and SKS.

(XXV) Taiwan Artificial Intelligent Robots Co., Ltd., the subsidiary of SKS, was

incorporated in October 2008 for machinery equipment business. Its main business

activities were the manufacturing of machinery equipment.

The number of Taiwan Robots’ employees as of December 31, 2012 and 2011

totaled 0 person respectively.

Its parent company is SKS whose shareholdings in it are 100%.

(XXVI) The subsidiary - Yi-Kong Housekeeping Service Co., Ltd. (Yi-Kong Housekeeping)

was incorporated in October 2011. Its main business activities were building

sanitation.

The number of Yi Kong Housekeeping Service's employees as of December 31,



Management, Shin-Po Investment and Shin Kong Security, which have a 70% and

30% shareholding, respectively.

(XXVII) The subsidiary - Chengdu Yi Kong Property Management Ltd.. (referred to as

“Chengdu Yi Kong” hereinafter) was incorporated in December 2012. It is primarily

engaged in the management of properties.

The number of Chengdu Yi Kong’s employees as of December 31, 2012 totaled

10 persons.

18


OVERSEAS ENTERPRISE CO., LTD. whose shareholdings in it are 70% and SKS.

(I) All investees to which the company exercised controlling interests in 2012 and 2011

were included in the consolidated financial statement. The details are as follows:

Consolidation policy

December 31, 2012 December 31, 2011 SKS YKS

SKS YKS

Taiwan Security Taiwan Security Shin-Po Investment Shin-Po Investment Yi Kong Building Management Yi Kong Building Management eTech eTech Shin Kong Aerotech International

Co., Ltd. (merged with Taiwan Shin Kong Security Co., Ltd. on September 30, 2012)

Shin Kong Aerotech

Shinsoft Co., Ltd Shinsoft Co., Ltd Shincluster Electronics Shincluster Electronics New Light International − Shin-Po International Shin-Po International Thai-SK Security International

Co., Ltd. Thai-SK Security International Co., Ltd.

Shin Kong (Thai) Security International Co., Ltd.


Shinkong Optical Shinkong Optical Shinkong Technology Co., Ltd. Shinkong Technology Co., Ltd. Shin Kong Overseas Enterprise Shin Kong Overseas Enterprise Shin-Tow Overseas Shin-Tow Overseas Shin-Tow Investment Overseas Shin-Tow Investment Overseas Shincluster International Shincluster International

− Tianjin Shincluster Technology limited (it was liquidated in November 2011)

Shanghai Shin Kong Security Shanghai Shin Kong Security Shanghai Shin Kong Property

Management Shanghai Shin Kong Property

Management Beijing Yi Kong Property

Management Ltd. Beijing Yi Kong Property

Management Ltd. Xiamen Shin-Po Property Service

Co., Ltd. Xiamen Shin-Po Property Service

Co., Ltd. Xiamen Shin-Po Security

Equipment Ltd. Xiamen Shin-Po Security Equipment Ltd.

Taiwan Artificial Intelligent Robots Co., Ltd.


Chengdu Yi Kong Property Management Ltd.(New establishment in December 2012)

−

Yi Kong Housekeeping Service Co., Ltd.

Yi Kong Housekeeping Service Co., Ltd. (New establishment in October 2011)

19

(II) With the exception of Shin-Po International, Thai-SK Security International Co., Ltd,

Shin Kong (Thai) Security. International Co., Ltd, Shinkong Technology, SKOE,

Shin-Tow, Shin-Po Investment Overseas, Shincluster International, Shanghai Shin

Kong, ShanGhai SK Property, Beijing Yi Kong, Xiamen Property, Xiamen Security,

Taiwan Robots, Yi-Kong Housekeeping and Chengdu Yi Kong, which were reported

based on unaudited figures, all other subsidiaries under the consolidated entity were

reported based on audited financial statements for the corresponding period. As at

December 31, 2012 and 2011, the abovementioned subsidiaries represented assets

totaling $231.738 million (or 1.95%) and 224.644 million (or 1.92%), and liabilities

totaling $36.968 million (or 0.74%) and 33.674 million (or 0.65%), respectively. For

the years 2012 and 2011, they generated $259.880 million (3.95%) and $210.311

million (3.19%) in net revenues, and produced a after-tax net profit of $11,074,000

and a net loss of $598,000, respectively. However, the management believed that the

aforementioned financial statements not audited by CPAs would not cause significant

effects.

(III) The internal transactions between the business entities in the consolidated financial

statements were deleted.

II.

These consolidated financial statements were prepared in accordance with the Guidelines

Governing the Preparation of Financial Reports by Securities Issuers and generally accepted

accounting principle. Summary of significant accounting policies as follows:

Summary of significant accounting policies

(I) Transaction in foreign currencies and translation of financial statement dominated in

foreign currency:

For the currency translation of the financial statements of overseas subsidiaries,

all assets and liabilities accounts are to be translated according to the spot exchange

rate on the Balance Sheet date. In terms of Shareholders’ Equity, it is to be translated

according to the historical exchange rate. Dividend is to be translated according to

the exchange rate on the announcement date. Income Statement is to be translated

according to the weighted average exchange rate. Exchange difference is booked in

the “Cumulative translation adjustment” account and is debited or credited to

Shareholders’ Equity. It is to be consolidated to Income Statement once the overseas

subsidiary is sold or liquidated.

The assets, liabilities, income and expense in foreign currency produced by

transactions of non-derivatives are recorded in New Taiwan dollars at the exchange

rates prevailing on transaction dates. The exchange difference produced by actual

20

settlement of assets and liabilities denominated in foreign currencies is credited to or

charged against current income.

The assets and liabilities in foreign currency should be adjusted according to the

spot exchange rate on the Balance Sheet Date and any resulting difference is credited

to or charged against current income.

Balance sheet date balances of the non-monetary assets and liabilities (for

example, equity products) in foreign currency that are valued at the fair value should

be adjusted according to the spot exchange rate on the Balance Sheet date. Any

resulting exchange difference is included in earnings for the periods, except for

differences of which gains and losses are recognized directly under equity. The

non-monetary assets and liabilities in foreign currency that are measured at cost

should be measured at the historical exchange rate on the transaction date.

For long-term investments in foreign entities treated by equity method, the

shareholders’ equity derived from the translation of financial statements denominated

in the foreign currency of investees is the basis. The exchange difference is recorded

as cumulative translation adjustment, the adjustment item of shareholders’ equity.

(II) Accounting estimates

When preparing financial statements in accordance with the aforementioned

rules and principles, the company was required to use reasonable estimates to state

the amount of bad debt provisions, inventory devaluation, fixed asset depreciation,

income tax, pension, employees' bonuses, and directors' and supervisors'

remuneration etc. Because these estimates involved subjective judgments, the actual

result may differ from what was estimated.

(III) Standards in differentiating current and non-current assets and liabilities

Current assets include cash and cash equivalent; also, assets that can be cashed

in within one year from the Balance Sheet date. Fixed assets and assets other than

current assets are classified as noncurrent assets. Current liabilities are to be

liquidated within one year from the Balance Sheet date. Liabilities other than current

liabilities are noncurrent liabilities.

(IV) Cash equivalents

Cash equivalent is promissory note, bank acceptance, and repurchase

agreements due in three month; therefore, the book value is similar to the fair value.

(V) Financial instruments at fair value through profit or loss

Financial statements with changes in fair value recognized as income and

expense include available-for-sale financial assets and available-for-sale financial

21

liabilities; also, financial assets originally valued at the fair value and with changes in

fair value recognized as income and expense.

Fair value of financial statements with changes in fair value recognized as

income and expense are estimated on the basis of fair value in initial recognition and

the acquisition cost is expensed. Cash dividends received after the investment is

made (including those received in the initial year of investment) are treated as current

period income. When a financial instrument is derecognized, the difference between

the proceeds or amount received from disposal of the instrument and the carrying

value is credited to or charged against current income.

Derivatives that are not in conformity with hedge accounting are classified into

the category of available-for-sale financial assets and available-for-sale financial

liabilities. Derivatives with positive value are classified as financial assets; also,

derivatives with negative value are classified as available-for-sale liabilities.

Basis of fair value: Listed (OTC) securities are based on the closing price on

balance sheet date; also, the fair value of listed (OTC) securities is estimated if there

is no open quotation in the centralized market for reference.

(VI) Available-for-sale financial assets

Available-for-sale financial assets are evaluated on the basis of fair value in

initial recognition plus the acquisition cost. Available-for-sale financial assets are

evaluated on the basis of fair value continuously thereafter; also, any change in the

value is recognized as adjustments to shareholders’ equity. Cumulative gain or loss of

the available-for-sale financial assets should be recorded as income or expense on the

disposition date. The acquisition and disposition of financial assets in accordance

with general trade practice is processed in accordance with the trade date accounting.

The bookkeeping and disposition of financial assets available for sales; also, the

fair value of financial assets available for sales are similar to the financial

instruments that are with the change of fair value booked in Income Statement.

Cash dividend is recognized as income on the ex-dividend date; however, the

cash dividend distributed according to the net income before investment is deducted

from investment cost. The stock dividends are not stated as investment income but

noted as an increase in shares. Cost per share is recalculated according to the total

shares after the increase. Any difference between the initial carrying amount of a debt

security and its amount on maturity is amortized and then recognized as earnings

using the effective interest method.

22

If an available-for-sale financial asset is determined to be impaired, a loss is

recognized. The decrease of impairment loss in the future period of the

available-for-sale financial asset is recognized as an adjustment to shareholder’s

equity. If the decrease of impairment loss of available-for-sale debt securities is

related to the events occurring after recognizing the impairment loss, it is to be

reversed and booked in the Income Statement.

(VII) Financial assets carried at cost

Investment in equity products of which the fair value can not be measured

includes unlisted/non-OTC stock and emerging stock and is evaluated based on the

cost originally recognized. The accounting treatment for dividends is same as the

accounting treatment for available-for-sale financial assets. Impairment loss must be

recognized with the support of objective evidence and the impairment loss cannot be

reversed.

(VIII) Estimating impairments on accounts receivable

The Consolidated Company assess all accounts receivable for signs of

impairment on each balance sheet date. If there is objective evidence to suggest that

the estimated future cash flow may have been impaired due to single or multiple

events after the receivables have been recognized, then the amount is deemed

impaired. Objective evidence may include:

1. The debtor encountering serious financial distress; or

2. Overdue accounts receivable; or

3. The debtor being likely to undergo bankruptcy or financial restructuring.

For certain accounts receivable that show no signs of impairment on a

standalone basis, impairment shall be assessed further on an aggregate basis.

Evidence of impairments to accounts receivables on an aggregate basis may include

the company's past collection experience, delayed payments in a particular group of

receivables, and nationwide or regional developments that may contribute to the

default of accounts receivables.

The amount of impairment is the difference between the asset's book value and

the amount of expected future cash flows discounted at the effective interest rate at

the time of initiation (reflecting collaterals or guarantees). The book value of

accounts receivable is reduced using valuation allowance. When receivables are

deemed unrecoverable, the book value is charged against valuation allowance. Any

amounts collected after the account has been charged are recorded as credit items to

23

the valuation allowance account. Changes in the book value of the valuation

allowance account are recognized as bad debts.

(IX) Asset Impairment

If the book value of assets (mainly referring to fixed assets, assets leased to

others, deferred expense, real estate investment and long-term equity investment

under equity method) is expected with significant impairment judging from the

collectability of value, the amount of impairment loss should be recognized. Where

the collectable amount of the assets recovers some day, the amount is then reversed

against balances of accumulated impairment losses. However, loss reversal should

not be more than the carrying amount (net of depreciation or amortization) had the

impairment loss not been recognized.

For long-term equity investment over which the Company has significant

influence but no control, the book value of an individual long-term equity investment

(including goodwill) is compared to its collectable amount in order to calculate the

impairment loss of such investment.

(X) Inventories

Inventories refer to the work-in-progress amount invested in materials and

construction of the project for installation of the security systems for customers,

which is stated based on the actual investment cost.

(XI) Long-term investment under Equity method

For investees where the consolidated company holds more than 20% of the

shares with voting rights, or the Company can exert a significant influence over such

investees, the equity method shall be used for valuation.

Upon acquisition of stock equity or first-time adoption of the equity method,

investment cost is subject to an initial analysis. The excess of the investment cost

over the fair value of the identifiable net asset value is stated as goodwill. Goodwill

is no longer amortized. If the identifiable fair value of net assets exceeds the

investment cost, the difference shall be decreased proportionally according to the fair

values of noncurrent assets (except for the financial assets, disposable assets,

deferred income tax assets, prepaid pension, or other pension payment not valued

under Equity Method). If there is still a difference, it shall be stated as extraordinary

gain/loss.

The profits generated from the clockwise trade between the invested company

under the equity method and SKS and subsidiaries are written off proportionally to

the shareholdings. If the invested company is wholly owned of SKS, the said profits

24

are to be written off entirely. The profits generated from the counterclockwise trade

between the invested company under the equity method and SKS and subsidiaries are

written off proportionally to the shareholdings.

Where the new shares issued by investees are not subscribed for subject to the

shareholding percentage, which consequently results in changes in the percentage of

investment and increases or decreases in the net equity invested, the additional

paid-in capital and long-term investment shall be adjusted in accordance with the

increases or decreases. If the said adjustment should be debited to the additional

paid-in capital and the balance of additional paid-in capital generated from long-term

investment is insufficient, the difference thereof shall be debited to retained earnings.

Net income or net loss of the Company’s equity in investees under equity method is

recognized using the treasury stock method if there are reciprocal holdings between

investors and investees. The investment income recognized based on the shares

reciprocally held between subsidiaries shall be based on convention. The parent

company’s stock shares held by subsidiaries are processed as treasury stocks.

Dividends distributed to the Company’s subsidiaries are credited to the “investment

gain” account and with the Additional paid-in capital – treasury stock adjusted

accordingly.

Should an investee accounted using the equity method result in a negative book

value due to losses incurred, the extent of investment losses recognized by the

consolidated entity is limited only to the amount invested and lent to the investee,

unless the consolidated entity has the intention provide ongoing support or if the

investee's losses are considered short-term in nature with sufficient evidence of

turning profitable in the near future.

(XII) Fixed assets

Fixed assets are stated at costs less accumulated depreciation. The interest borne

by the sums disbursed for a fixed asset during its purchase period was capitalized and

included as the cost of the fixed assets. Major updates and improvements are treated

as capital expenditures. Routine repair and maintenance expenditures are expensed

during the year of incursion.

The consolidated companies’ fixed assets are depreciated in the following

manners:

1. Spare security material: Spare security materials are those not yet

installed; therefore, it is stated at acquisition cost based on the weighted

25

average method. Upon installation and transfer to security equipment, the

depreciation of such materials shall be commenced.

2. Security equipment: Security equipment means the machinery installed

for the security system users and is booked under the “Machinery

equipment” account and is depreciated based on the average method over

the estimated useful lives.

3. Telecommunication equipment: It means interest of lease on special

phone lines, which is to be amortized over five years on a straight-line

basis.

4. Other fixed assets: Other fixed assets are depreciated based on the

average method plus one additional year for salvage value. Fixed assets

that remain in service at the end of useful lives shall be depreciated

continuously in accordance with the remaining useful lives.

Apart from those stated above, depreciation is calculated using the straight line

method over the following useful lives: buildings - 5 ~ 55 years, machinery

equipment - 3 ~ 5 years, transport equipment - 3 ~ 5 years, office equipment - 3 ~ 5

years, other equipment - 3 ~ 5 years.

Fixed assets that remain in service at the end of useful years shall be depreciated

continuously in accordance with the remaining useful lives. The depreciation of the

revaluation increments of assets is provided on a straight-line basis over remaining

useful lives estimated at the time of revaluation.

Upon sale or disposal of fixed assets, the related cost and accumulated

depreciations, accumulated impairment, and unrealized revaluation increments shall

be written off from the book. Any related gain or loss from the disposal of assets is

treated as non-operating income or expense in the year.

(XIII) Deferred expenses

Installation and maintenance, telephone piping construction and software

equipment project are amortized over five years on a straight-line basis.

(XIV) Accounting of leasing business

The lease that complies with the requirements for leasehold of assets treats the

cost of assets leased to others and implied interest as rental receivable. The implied

interest is stated as unrealized interest income and transferred to lease interest

income based on the interest method.

(XV) Pension fund

26

Under the defined benefit plan, pension costs will be recognized based on

actuarial calculations. Under the defined contribution plan, the Company recognizes

the amounts contributed to the employees’ individual pension accounts during the

employees’ service periods as pension costs in the current year.

When the defined benefit plan is reduced or paid off, the reduced or paid off

income shall be stated as the net pension cost in the current period.

Yi Kong Building Management, Shin-Po International Limited, Shin Kong

Overseas Enterprise Co., Ltd., Shin-Tow Overseas Holding Co., Ltd., Shin-Po

Investment Overseas Enterprise Co., Ltd., Shincluster International Limited, Xaimen

Shin-Po Security Equipment Ltd., Yi Kong Housekeeping Service and Taiwan

Artificial Intelligent Robots Co., Ltd. of SKS and subsidiaries are without official

employees on the payroll; therefore, pension has not be appropriated in accordance

with the actuary method. Shin-Po Investment Overseas Enterprise Co., Ltd,

eTech Pro Co., Ltd, Shinsoft Co., Ltd., New Light International, Shinkong Optical,

Shinkong Technology, Shanghai Shin Kong Security Prevention Technology

Co., Ltd., Shanghai Shin Kong, Beijing Yi Kong, Xiamen Property, Chengdu Yi

Kong, Thai-SK Security International Co., Ltd, and Shin Kong (Thai) Security.

International Co., Ltd are still at the early stages of their development and therefore

has not established any employee pension schemes. As a result, no pension

contributions were made using the actuarial method.

(XVI) Income tax

Income tax is amortized over inter-period and intra-period. The income tax

effect from the deduction of temporary difference and available income tax credit

recognized as deferred income tax assets. Assess the possibility of realization for

deferred income tax assets with allowance for valuation recognized. The income tax

effect from the temporary difference of taxable income recognized as deferred

income tax liability. Deferred income tax assets or liabilities are classified into the

category of current or noncurrent in accordance with the nature of the related

liabilities and assets. Irrelevant assets or liabilities are classified into the category of

current or noncurrent in accordance with the expected turnover period.

Adjustment of the prior years’ income tax is added to current income tax

expense in the year the adjustment is made.

The 10% additional income tax levied on unappropriated earnings calculated

according to the income tax law of Taiwan is stated as the income tax expenses in the

year of the resolution made by the shareholders’ meeting.

27

(XVII) Treasury stocks

When SKS and subsidiaries call the outstanding stock shares as Treasury stocks,

the cost paid is debited to the “Treasury Stock” of the Shareholder’s Equity.

Parent’s shares held by subsidiaries are reclassified as Treasury Stock from

long-term investment and stated at the book value shown in subsidiaries’ opening

“investment in parent company” balance, in their 2002 financial statements.

(XVIII) Income recognition

The Company recognizes revenues when the earnings process is complete and is

realized or realizable. The sale of goods or provision of service will not be

recognized as revenue until it complies with the relevant requirements.

Sales income were assessed at fair value based on the price agreed between the

consolidated entity and its buyer (after commercial discounts and quantity discounts).

Sales income that are collectible within one year are not discounted at the effective

interest rate, for their fair values are virtually indifferent from their maturity values,

and that they occur frequently.

28

III. Reasons and effects of changes in accounting principles

The consolidated entity has adopted the newly revised Statement of Financial

Accounting Standards No. 34 - "Accounting for financial instruments" since 1 Jan 2011. The

revisions involved: (1) Subjecting impairments on rental receivables under the governance of

the reporting standard; (2) Changing accounting practices on insurance contracts; (3)

Subjecting loans and receivables under the governance of the reporting standard; (4)

Establishing rules of impairment for financial assets carried at cost after amortization, if

lending terms have been changed due to financial distress; and (5) The borrower's accounting

practices if the borrowing terms have been changed due to financial distress. These changes in

accounting policies produced no impacts to the 2011 consolidated financial statements.

Accounting for financial instruments

IV. Cash and cash equivalent

s

December 31, 2012 December 31, 2011 Cash on hand and petty cash $ 2,878,806 $ 2,892,305 Bank’s notes and current deposit 1,117,982 1,135,819 Bank time deposit 75,415

152,972 $ 4,072,203 $ 4,181,096

V. Financial assets with changes in fair value recognized as income and expense - curren

t

December 31, 2012 December 31, 2011 TSEC/GTSM listed shares $ 213,771 $ 141,801

VI. Available-for-sale financial assets − curren

t

December 31, 2012 December 31, 2011 TSEC/GTSM listed shares $ 1,599,736 $ 1,269,664 Beneficiary certificates of fund 155,236

250,224 $ 1,754,972 $ 1,519,888

29

VII. Notes receivable

December 31, 2012 December 31, 2011 Notes receivable-non-related parties

$ 152,144

$ 157,848

Notes receivable-related party 384 335 Less: Allowance for bad debt ( 352 ) ( 265

) $ 152,176 $ 157,918

VIII.

Accounts receivable

December 31, 2012 December 31, 2011 Accounts receivable- non-related parties

$338,376

$ 322,837

Accounts receivable-related parties

75,359 75,522

Rental receivable 3,989 - Less: Unrealized interest income ( 409 ) - Allowance for bad debt ( 5,069 ) ( 4,199

) $ 412,246 $ 394,160

Allowance for bad debt of the Company is illustrated as follows: 2012 2011 Notes

receivable Accounts receivable

Collections demand

Notes receivable

Accounts receivable

Collections demand

Balance − beginning of year

$ 265

$ 4,199 $ 11,379 $ 313

$ 10,897 $ 4,433

Plus: Appropriated bad debt expense of the year

13 6,520 -

- 1,331 2,160

Reclassification of the year 74 ( 3,918 ) 3,844 ( 48 ) ( 6,427 ) 6,475 Less: Written-off of the year

- ( 1,732 )

- - ( 1,602 ) ( 1,689

Balance − end of year

)

$ 352 $ 5,069 $ 15,223 $ 265 $ 4,199 $ 11,379

Collections are booked in “Other assets” account.

30

IX.

Financial assets carried at cost - noncurrent December 31, 2012 December 31, 2011

Amount Equity

(%) Amount Equity

(%) For SKS:

Domestic non-TSEC/non-GTSM listed shares

Lien-An Service Co., Ltd. $ 4,750 19.00 $ 4,750 19.00 First International Telecom Corp. - 4.18 - 3.93 Jhong Jing Technology Co., Ltd. 2,162 0.36 2,162 0.36 WK Technology Fund V Limited 20,000 1.11 20,000 1.11 Li Yu Venture Capital Co., Ltd. 1,774 1.19 2,157 1.19 Industrial Bank of Taiwan 150,000 0.65 150,000 0.65 Taiwan Fuhbic Corporation 5,591 4.30 5,591 4.30 WK Technology Fund VII Limited 43,850 2.66 43,850 2.66 FuYu Venture Capital Fund Co., Ltd. 19,508 3.70 27,094 3.70 Loyo Travel Co., Ltd. 250 1.39 250 1.39 Cyun He Venture Capital Co., Ltd. 12,302 2.50 14,052 2.50 Kun Ji Venture Capital Co., Ltd. 10,000 2.00 10,000 2.00 IBT Venture Co., Ltd. 3,909 1.86 3,909 1.86 Shin Kong Chao Feng Co., Ltd. 15,000 2.00 15,000 2.00 Geniron.com Inc. 6,100 5.30 6,100 5.30 Kaohsiung Rapid Transit Corporation 11,050 0.50 30,000 0.50 Shin Kong Mitsukoshi Department Store Co., Ltd. 298,036 3.91 298,036 3.91 Taishin Securities Investment Trust Co., Ltd. 28,788 8.00 28,788 8.00 Shin-Shen-Er Venture Capital 47,500 3.23 50,000 3.23 Yen-Din Venture Capital 50,000 2.08 50,000 2.08 Hundure Technology Co., Ltd. 10,720 9.73 10,720 9.73 Asia Pacific Telecom Group 92,484 0.74 92,484 0.74 Great Taipei Broadband Co., Ltd. 55,390 9.67 66,275 9.67 Gyu-Kaku Co., Ltd. 3,000 5.00 3,000 5.00 Pac-Link Bioventures Capital Investment Corp. 22,050 3.00 22,050 3.00 VIBO Telecom Inc. 724 0.01 2,100 0.01 914,938 958,368 Foreign non-public/non-OTC listed shares Budworth Investments Limited 17,153 5.00 17,153 5.00 COM2B., CO. 7,068 2.78 7,068 2.78

24,221 24,221 939,159 982,589

(To be continued)

31

(Continued)

December 31, 2012 December 31, 2011

Amount Equity

(%) Amount Equity

(%) For YKS:

Non-public/non-OTC listed shares Lien-An Service Co., Ltd. $ 50 0.20 $ 50 0.20 Shin Shou Building Management Service Co., Ltd. 4,140 1.00 4,140 1.00 Shin Kong Mitsukoshi Department Store Co., Ltd. 86,880 1.20 86,880 1.20 Great Taipei Broadband Co., Ltd. 53,550 6.00 53,550 6.00 First International Telecom Corp. - 1.39 - 1.39

144,620 144,620 For Shin-Po Investment:

Non-public/non-OTC listed shares Leeco Corporation - 1.06 - 1.06 Chien Hsiang Security Service Co., Ltd. 30,000 8.85 30,000 8.85 INFG Co., Ltd. - 4.26 - 4.26 Geniron.com Inc. 3,135 2.48 3,135 2.48 Hundure Technology Co., Ltd. 9,300 9.00 9,300 9.00 Jade Pacific Corporation - 0.57 - 0.57 Triple Domain Vision Co., Ltd. 3,242 5.94 4,995 6.19 Lifeplus Co., Ltd. 15,000 12.66 -

60,677 47,430 For Shinsoft Co., Ltd:

Domestic non-TSEC/non-GTSM listed shares

First International Telecom Corp. - 0.25 - 0.25 Geniron.com Inc. 4,937 4.13 4,937 4.13 Triple Domain Vision Co., Ltd. 6,495 11.90 10,001 12.40

11,432 14,938 For Shin Kong Aerotech:

Domestic non-TSEC/non-GTSM listed companies

Teamsharp Space Tech Inc. - - - 1.29 First International Telecom Corp. - - - 0.25

- - $ 1,155,888 $ 1,189,577

The aforementioned stocks are without an open quotation in the centralized market and

without fair value available for validation; therefore, it is valued at cost.

The investment loss of the aforementioned financial assets carried at cost is illustrated as

follows:

2012 2011 Li Yu Venture Capital Co., Ltd. $ 6 $ 363 VIBO Telecom Inc. 1,376 - WK Technology Fund VII Limited - 6,150 Citron Network, Inc. - 1,694

(To be continued)

32

(Continued)

2012 2011 Cyun He Venture Capital Co., Ltd. $ - $ 3,448 Pac-Link Bioventures Capital Investment Corp. - 7,950 Great Taipei Broadband Co., Ltd. 10,885 - Kaohsiung Rapid Transit Corporation 18,950 - Triple Domain Vision Co., Ltd. 5,258

- $ 36,475 $ 19,605

Li Yu Venture Capital Co., Ltd. and VIBO Telecom Inc. both have capital reductions to

balance retained losses, therefore capital reduction losses have been recorded. After

evaluation, the Greater Taipei Broadband Communications Co., Ltd., Kaoshiung Rapid

Transit Corp. and Triple Domain Vision were found to have reductions in investment value,

and the chances of recovery are very unlikely, therefore provisions for losses in value were

booked in 2012.

X.

Long-term investment under Equity method

December 31, 2012 December 31, 2011

Book value Equity

(%) Book value Equity

(%) Non-public/non-OTC companies

Shenzhen Shen Po Public Security Network Ltd. $ 15,927 36.00 $ 16,287 36.00 Taiwan Ritan Co., Ltd. 392 30.00 1,056 30.00

$ 16,319 $ 17,343

Gain (loss) on investment under Equity Method:

2012 2011 Shenzhen Shen Po Public Security Network Ltd. $ 4,423 $ 1,958 Taiwan Ritan Co., Ltd. ( 1,804 ) ( 84

) $ 2,619 $ 1,874

33

XI.

Investment in real estate 2012

Premises in Nangang

Software Park Jian Bei Building & Land Premises in Taipei Neihu

Technology Park

Land House &

equipment Land House &


equipment Total Cost

Balance − beginning of year $ 117,134 $ 191,634 $ 502,189 $ 514,907 $ 69,682 $ 55,040 $ 1,450,586 Increase in the year - - - - - - - Disposition in the year - - - - - - Balance − end of year

-

117,134 191,634 502,189 514,907 69,682 55,040 1,450,586

Cumulative depreciation Balance − beginning of year - 41,772 - 231,504 - 7,732 281,008 Depreciation - 3,758 - 6,746 - 981 Balance − end of year

11,485

- 45,530 - 238,250 - 8,713 Balance - net

292,493 $ 117,134 $ 146,104 $ 502,189 $ 276,657 $ 69,682 $ 46,327 $ 1,158,093

2011

Premises in Nangang

Software Park Jian Bei Building & Land Premises in Taipei Neihu

Technology Park

Land House &



equipment Total Cost


$ 117,134

$ 191,634 $ 502,189 $ 514,907

$ 69,682 $ 55,040 $ 1,450,586

Increase in the year

- - - - - - -

Disposition in the year

- - - - - -

Balance − end of year

-

117,134 191,634 502,189 514,907 69,682 55,040 1,450,586

Cumulative depreciation


- 38,014 - 224,758 - 6,751 269,523

Depreciation - 3,758 - 6,746 - 981 Balance − end of year

11,485 - 41,772 - 231,504 - 7,732

Balance - net

281,008

$ 117,134 $ 149,862 $ 502,189 $ 283,403 $ 69,682 $ 47,308 $ 1,169,578

The aforementioned land leases in 2012:

Lessee Object Rent calculation &

collection

Total rental receivable in the next five years

Hung Cheng Wen, etc.

Nankong Software Park land, Jian Bei Building land, and Neihu Technology Park land

Rent is charged on a monthly basis or annual basis according to the lease agreement signed

$ 210,652

The aforementioned land leases in 2011:

Lessee Object Rent calculation &

collection

Total rental receivable in the next five years

First International Telecom Corp., etc.

Nankong Software Park land, Jian Bei Building land, and Neihu Technology Park land

Rent is charged on a monthly basis or annual basis according to the lease agreement signed

$ 220,058

Please refer to Note XXVIII for the real property mortgaged.

34

XII.

Fixed assets

December 31, 2012 December 31, 2011 Cumulative depreciation House and building $ 126,054 $ 114,570 Machinery & equipment 2,298,126 2,072,061 Transportation equipment 224,613 254,890 Office equipment 132,805 232,507 Other equipment 136,328

142,024 $ 2,917,926 $ 2,816,052

The said fixed assets do not have the interest capitalization. Please refer to Note XXVIII

for the fixed assets mortgaged.

XIII.

(I) Long-term rental receivable

Other assets

December 31, 2012 December 31, 2011 Long-term rental receivable- Non-related parties

$ 11,105

$ - Less: Unrealized interest income

( 499 )

-

$ 10,606 $ -

The consolidated companies have entered into the contract with RT-MART

International Ltd. as of January 2012 to provide the ATM service. The details are as

follows:

December 31, 2012

Object Determination and collection of rental Rental receivable

Lease contract for automated equipment

Total contract amount: $18,439 thousand Period: January 1, 2012 ~ March 31, 2017 Implied interest rate: around 3.00% Collection: three months constitute one

installment; collectable in 21 installments based on the interest method

(II) Collections demand

December 31, 2012 December 31, 2011 Collection demand $ 15,223 $ 11,379 Less: Allowance for bad debt ( 15,223 ) ( 11,379

) $ - $ -

35

XIV.

Short-term loan

December 31, 2012 December 31, 2011 Amount Interest rate Amount Interest rate

Secured loans from banks

$1,650,000 0.77~1.78 $1,930,000 0.77~1.68

As of December 31, 2012 and 2011, the Company issued guarantee notes for

$2,000,000 thousand and $1,800,000 thousand respectively.

XV. Short-term notes payable December 31, 2012 December 31, 2011

Guarantee institution Amount

Interest rate Amount

Interest rate

Promissory notes payable

International Bills Finance Corporation

$ 100,000 1.428 $ 100,000 0.87

Mega Bills Corporation

60,000 1.488 150,000 1.25

China Bills Finance Corporation

200,000 1.438 150,000 0.77

Dah Chung Bills Finance Corporation

50,000 1.408 50,000 0.93

Grand Bills Finance Corporation.

100,000 1.400 - -

Union Bills Finance Corporation.

100,000 1.440 - -

610,000 450,000 Less: Discount of

short-term notes and bills payable

( 344 ) ( 307 )

$ 609,656 $ 449,693

XVI.

Long-term loan

December 31, 2012 December 31, 2011 Amount Interest rate Amount Interest rate

Hua Nan Commercial Bank $ 11,752 1.81~2.05 $ 21,251 1.46~1.81 Less: Long-term

liability-current portion ( 1,340 ) ( 1,932 )

$ 10,412 $ 19,319

The loan shall be repaid in the following manners pursuant to the contract:

Bank Original amount

of loan Duration Repayment and interest Hua Nan Commercial Bank

$30,000 2007.12.19~ 2022.12.19

Principal is paid monthly since January 19, 2008 for an amount of NT$167 thousand; interest is also paid monthly.

36

XVII.

Lessor

Rental payable

Object December 31,

2012 December 31,

2011 ORIX Taiwan Corporation Transportation

equipment $ - $ 2,975

HOTAI LEASING CORPORATION

Transportation equipment

- 1,169

Less: Rental payable-current portion

- ( 3,361

)

$ - $ 783 Breakdown of rental payable is as follows:

Nature

December 31, 2012

Object Contents Rental payable


Total amount: $185,846 thousand NTD

Loan term: June 25, 2003～September 25, 2012 Interest rate interval: 5.00%～7.65% Repayment terms: Repaid per month as one

installment, in 60 installments based on interest method

Nature

December 31, 2011

Object Contents Rental payable


Total amount: $185,846 thousand NTD

Loan term: June 25, 2003~September 25, 2012 Interest rate interval: 5.00%~7.65% Repayment terms: Repaid per month as one

installment, in 60 installments based on interest method

XVIII.

(I) For SKS:

Employees’ pension fund

A pension plan to which the “Labor Pension Act” is applied is a defined

contribution pension plan. The Company has been funding the plan at 6% of an

employee’s monthly salary and deposited in the personal designated pension account

with Bureau of Labor Insurance. Pension costs recognized in 2012 and 2011 totaled

$44,550 thousand and $36,843 thousand, respectively.

A pension plan to which the “Labor Standard Law” is applied is a defined

benefit pension plan. The pension benefits a participant receives are determined

based on an employee’s number of years of service and average compensation for the

six-month period prior to retirement. SKS has been funding the plan monthly at 2%

of total salaries and wages to Labor Pension Fund Supervisory Committee. The

pension fund is deposited in a designated account in the name of the Committee with

37

Bank of Taiwan. Pension costs recognized in 2012 and 2011 totaled $34,271

thousand and $29,205 thousand, respectively.

Information related to pension funds under the defined benefit pension plan is

disclosed as follows:

1. Components of net pension cost:

2012 2011 Service cost $ 15,588 $ 14,609 Interest cost 8,987 7,914 Expected return of pension fund assets

( 2,558 )

( 2,468 )

Amortization of transitional net benefit obligation

( 438 )

( 438 )

Amortization of gain (loss) on pension fund

12,692

9,588

$ 34,271 $ 29,205 2. Contribution of pension fund and adjustment of stated accrued pension liability:

December 31, 2012 December 31, 2011 Benefit obligation

Vested benefit obligation ( $ 163,835 ) ( $ 131,973 ) Non-vested benefit obligation ( 248,665 ) ( 239,852Cumulative benefit obligation

) ( 412,500 ) ( 371,825 )

Future effects of increase in salary ( 74,945 ) ( 77,545Projected benefit obligation

) ( 487,445 ) ( 449,370 )

Fair value of pension fund assets 125,470 Funded status

122,538 ( 361,975 ) ( 326,832 )

Unrecognized transitional net benefit obligation ( 3,852 ) ( 4,289 ) Unamortized balance of gain or loss on pension fund 195,607 184,550 Supplemented accrued pension liability ( 116,811 ) ( 102,716Accrued pension liabilities

) ( $ 287,031 ) ( $ 249,287 )

Vested benefit ( $ 194,417 ) ( $ 157,987 )

3. Actuarial assumptions:

December 31, 2012 December 31, 2011 Discount rate 1.875% 2.00% Increase rate of future salary 2.000% 2.25% Expected rate of return on

pension fund assets 1.875% 2.00%

2012 2011 4. Amount contributed to pension

fund $ 10,623 $ 10,816 5. Amount paid with pension fund $ 8,903 $ 7,304

38

(II) For YKS:









six-month period prior to retirement. Yi Kong Security Company Limited made

monthly pension contributions equivalent to 2% of employees' gross salaries to

the Labors' Pension Supervisory Committee. These sums are deposited into the

dedicated accounts kept under the Bank of Taiwan in the committee's name. Pension

costs recognized in 2012 and 2011 totaled $880 thousand and $1,874 thousand,

respectively.




2012 2011 Service cost $ 7,859 $ 8,457 Interest cost 4,081 4,044 Expected return of pension fund assets

( 3,140 )

( 3,151 )


-

-


( 7,920

) ( 7,476

)

$ 880 $ 1,874 2. Contribution of pension fund and adjustment of stated accrued pension liability:

December 31,

2012 December 31,

2011 Benefit obligation

Vested benefit obligation ( $ 64,349 ) ( $ 55,770 ) Non-vested benefit obligation ( 104,703 ) ( 116,441Cumulative benefit obligation

) ( 169,052 ) ( 172,211 )

Future effects of increase in salary ( 29,593 ) ( 31,864Projected benefit obligation

) ( 198,645 ) ( 204,075 )

Fair value of pension fund assets 140,399 Funded status

155,906 ( 58,246 ) ( 48,169 )

Unamortized balance of gain or loss on pension fund ( 88,199 ) ( 99,604Accrued pension liabilities

) ( $ 146,445 ) ( $ 147,773 )

Vested benefit ( $ 74,278 ) ( $ 64,761 )

39




2012 2011 4. Amount contributed to

pension fund $ 2,207 $ 2,363 5. Amount paid with pension

fund $ 16,324 $ 4,714

(III) For Taiwan Security:









six-month period prior to retirement. Taiwan Security has been funding the plan

monthly at 2% of total salaries and wages to Labor Pension Fund Supervisory

Committee. The pension fund is deposited in a designated account in the name of the

Committee with Bank of Taiwan. Pension costs recognized in 2012 and 2011 totaled





2012 2011 Service cost $ 2,238 $ 2,119 Interest cost 901 812 Expected return of pension fund assets

( 915 ) ( 864 )


192

81

$ 2,416 $ 2,148

40

2. Contribution of pension fund and adjustment of stated accrued pension liability:

December 31, 2012 December 31, 2011 Benefit obligation

Vested benefit obligation ( $ 3,075 ) $ - Non-vested benefit obligation ( 37,105 ) ( 35,012Cumulative benefit obligation

)

( 40,180 ) ( 35,012 ) Future effects of increase in salary ( 10,876 ) ( 10,062

Projected benefit obligation )

( 51,056 ) ( 45,074 ) Fair value of pension fund assets 46,202 Funded status

44,681 ( 4,854 ) ( 393 )

Unrecognized transitional net benefit obligation - - Unamortized balance of gain or loss on pension fund 11,495 Prepaid pension (booked in the “Other assets” account)

7,382

$ 6,641 $ 6,989 Vested benefit ( $ 3,364 ) $ -





fund $ 2,069 $ 2,226 5. Amount paid with pension

fund

$ 985 $ -

(IV) For Shincluster Electronics:

According to the “Labor Pension Act,” a pension system is a pension

appropriation plan with an amount equivalent to 6% of monthly salary appropriated

and deposited in the personal pension account with Bureau of Labor

Insurance. Pension costs recognized in 2012 and 2011 totaled $563 thousand and

$520 thousand, respectively.


benefit pension plan. The employees’ pension fund was based on their seniority and

the average regular salary (units) for the latest six months prior to the date of

41

approval for their retirement. Shincluster Electronics Co., Ltd has been funding the

plan monthly at 2% of total salaries and wages to Labor Pension Fund Supervisory

Committee. The pension fund is deposited in a designated account in the name of the

Committee with Bank of Taiwan. Pension costs recognized in 2012 and 2011 totaled

$35 thousand and $22 thousand, respectively.




2012 2011 Service cost $ - $ - Interest cost ( 15 ) ( 12 ) Expected return of pension fund assets

12 12


5 5

Amortization of pension income ( 37 ) ( 27

) ( $ 35 ) ( $ 22 )

2. Contribution of pension fund and adjustment of stated accrued pension liability:

December 31,

2012 December 31,

2011 Benefit obligation

Vested benefit obligation ( $ 300 ) ( $ 216 ) Non-vested benefit obligation ( 435 ) ( 367Cumulative benefit obligation

) ( 735 ) ( 583 )

Future effects of increase in salary ( 189 ) ( 163Projected benefit obligation

) ( 924 ) ( 746 )

Fair value of pension fund assets 670 Funded status

609 ( 254 ) ( 137 )

Unamortized balance of service cost in previous period - - Unrecognized transitional net benefit obligation ( 63 ) ( 69 ) Unamortized balance of gain or loss on pension fund 654 523 Supplemented accrued pension liability ( 402 ) (Accrued pension liabilities) Prepaid pension

-

( $ 65 ) $ 317 Vested benefit ( $ 354 ) ( $ 260 )


December 31, 2012 December 31, 2011 Discount rate 1.875% 2.00% Increase rate of future salary 2.000% 2.00% Expected rate of return on pension

fund assets 1.875% 2.00%

42


fund $ 55 $ 55 5. Amount paid with pension fund $ - $ -

XIX.

Deposit received

December 31, 2012 December 31, 2011 Deposit of security subscribers $ 134,460 $ 142,909 Deposit of exclusive line subscribers 140,305 154,194 Others 2,341

2,985 $ 277,106 $ 300,088

The security deposit of subscribers is the bond paid for the security agreement and

on-site service agreement signed by SKS and security subscribers. Deposit of exclusive line is

collected from line subscribers for the bond paid to the telecom company.

XX. Shareholders’ equity

As of December 31, 2012 and 2011, the authorized capital of SKS was $4,500,000

thousand respectively at NT$10 par value each and the shares authorized were 4,500,000

thousand shares respectively. As of December 31, 2012, the paid-in capital was NT$3,798,545

thousand with 379,855 thousand common shares.

Common shares

The premium in excess of the par value of issued shares included in the capital reserve

(including ordinary shares issued at a price above par value, premium from converting

company bonds and treasury stock trading, etc.) as well as received gifts in capital reserves

can be applied to balance losses and when there is no losses in the company, they can be

applied to cash dividend distributions or balancing of share capital. Although when applied to

balance share capital, the amount is limited to a certain ratio of the paid-up capital per year.

Additional paid-in capital from long-term equity investment cannot be applied for any

purpose.

Additional paid-in capital

According to the Articles of Incorporation of SKS, the earnings of annual final account,

if any, should be use to pay tax, make up any accumulated deficit, appropriate 10% thereof as

legal reserve, and reserve a certain proportion as special reserve. If there is still any reminder,

it should be appropriated by 5% as remuneration to directors and supervisor and no less than

1% as bonus to employees. Remainder thereafter should be determined by the annual general

shareholders’ meeting based on the proposal made by the Board of Directors.

Earning distribution and dividend policy

43

SKS is engaged in security technology and in the growth phase. In the future, the

Company will continue to upgrade the security-related technology and develop towards the

high-tech area. In consideration of sustainable operation and stable expansion of capital and

also the rate of return on shareholders’ investment, the distribution of dividend is proposed by

the Board of Directors based on a minimum cash dividend percentage of 15% and submitted

to the general shareholders’ meeting for resolution.

For the years ended 2012 and 2011, estimated amounts of employee bonus payable

amounted to $13,651 thousand and $3,145 thousand respectively; and estimated amounts of

remuneration due to directors and supervisors amounted to $45,502 thousand and $10,485

thousand respectively. The aforementioned bonus to employees and remuneration to directors

and supervisors were calculated based on 1.5% and 5% of net income (net of bonus to

employees and remuneration to directors and supervisors) respectively. If the amount to be

distributed which is resolved by the Board of Directors is significantly changed after the year

end, the adjustment in change is originally stated as current expense. If the amount is still

changed on the resolution date of shareholders’ meeting, it will be recognized in the year

when the shareholders make resolution in accordance with accounting for change in

accounting estimates. If the shareholders’ meeting resolves to distribute stocks as bonus to

employees, the number of stock bonus is determined by the amount of bonus to be distributed

dividing by the fair value of the stock, where the fair value of the stock refers to the closing

price at the day prior to the resolution date of the shareholders' meeting (in consideration of

ex-post effect of ex-dividend and ex-right).

SKS is to have special reserve appropriated according to the debit of shareholder’s equity

(including unrealized appraisal increment, unrealized gain and loss of financial instrument,

net loss of unrecognized pension cost, and translation adjustment) lawfully while distributing

retained earnings. For the difference of the market price and book value of stock shares held

by the subsidiaries, special reserve is to be appropriated proportionally to the shareholdings. A

decrease in deduction of shareholders’ equity thereafter, if any, can be revered from special

reserve to unappropriated earnings.

The legal reserve should be contributed until its balance reaches the company’s total

paid-in capital stock. Legal earnings reserve can be appropriated to cover previous losses.

When there are no losses in the company, the portion of Legal earning reserves exceeding

25% of the total paid-up capital not only can be applied to balance share capital, but also can

be distributed in cash.

44

Other than the shareholders who do not reside in the territory of the R.O.C., any

shareholders may be granted the shareholders’ deductible tax calculated at the tax deduction

rate prevailing on the date of dividend distribution.

Shin Kong Security Co., Ltd. held its annual general meetings on June 22, 2012 and June

24, 2011 to resolve the appropriation of 2011 and 2010 earnings in the following manner:

Earnings distribution EPS (NTD) 2011 2010 2011 2010 Legal reserve $ 89,598 $ 80,607 $ - $ - Special reserve 596,832 ( 160,338 ) - - Cash dividend 645,753 645,753 1.7

1.7 $ 1,332,183 $ 566,022 $ 1.7 $ 1.7

The general shareholders’ meeting of SKS, held on June 22, 2012 and June 24, 2011,

passed the following bonus to employees and remuneration to directors and supervisors for

2011 and 2010, respectively:

2011 2010 Cash bonus Stock bonus Cash bonus Stock bonus

Bonus to employees $ 3,145 $ - $ 13,299 $ - Remuneration to directors/supervisors

10,485 - 44,330 -

2011 2010

Bonus to employees

Remuneration to directors/ supervisors

Bonus to employees

Remuneration to directors/ supervisors

Distribution amount resolved by the general shareholders’ meeting

$ 3,145 $ 10,485 $ 13,299 $ 44,330 Amounts recognized on financial statements for each year

( 3,145 ) ( 10,485 ) ( 13,299 ) ( 44,330

) $ - $ - $ - $ -

There is no difference between the distribution amounts and amounts recognized on

financial statements for each year in respects of bonus to employees and remuneration to

directors and supervisors.

The appropriation of 2012 earnings and dividends proposed during the board of directors

meeting dated March 27, 2013 are as follows:

Earnings distribution

EPS (NTD)

Legal reserve $ 96,820 $ - Special reserve ( 38,639 ) - Cash dividend 683,738 1.8

The appropriation of 2012 earnings, employees' bonuses, and directors'/supervisors'

remuneration are subject to approval during the annual general meeting scheduled to be held

on June 20, 2013.

45

The proposals approved by SKS’s Board of Directors and allocation of retained earnings

resolved by the shareholders’ meetings may be viewed at the “M.O.P.S.” of TSEC.

Changes in unrealized gain or loss on financial instruments for the years ended 2012 and

2011 are as follows:

Unrealized gain or loss on financial instruments

Available-for-sale

financial assets 2012

Balance − beginning of year ( $ 842,243 ) Debited/credited to shareholder’s equity directly 75,127 Transferred to Income Statement ( 14,867Balance − end of year

) ( $ 781,983 )

2011

Balance − beginning of year ( $ 258,078 ) Debited/credited to shareholder’s equity directly ( 536,621 ) Transferred to Income Statement ( 47,544Balance − end of year

) ( $ 842,243 )

(I) Changes in treasury stocks held by Shin Kong Security as of December 31, 2012 and

2011 are as follows:

Treasury stocks

Unit: 1,000 shares 2012

Cause

Number of shares-beginning of year

Increase in the year Decrease

Number of shares-end of

year Subsidiaries’ holding parent

company’s stock constitutes parent company’s withdrawal of the stock issued by it 3,219 - - 3,219

2011

Cause

Number of shares-beginning of year

Increase in the year Decrease

Number of shares-end of

year Subsidiaries’ holding parent

company’s stock constitutes parent company’s withdrawal of the stock issued by it 3,219 - - 3,219

(II) SKS’s Treasury stock may not be pledged in accordance with the Security and

Exchange Law; moreover, it is without the privilege of dividend and voting right.

The stock shares of SKS held by the subsidiaries are processed as Treasury Stock and

46

entitled to the rights vested in shareholders except for the privilege of cash

capitalization and voting right.

(III) The stock shares of Shin Kong Security held by the subsidiaries are as follows:

1. As of December 31, 2012 and 2011, information related to shares of SKS held

by subsidiaries is as follows:

Unit: 1,000 shares/ thousand

December 31, 2012 Name of subsidiary Shares Book value Market price

YKS 3,219 $ 112,669 $ 112,669

December 31, 2011 Name of subsidiary Shares Book value Market price

YKS 3,219 $ 86,916 $ 86,916

2. On December 31, 2012, Shin Kong Security recognized $3,219 thousand as

treasury stocks proportionally to the 69% shareholding of SKS in Yi Kong

Security Co., Ltd. for the balance of $112,669 thousand which was the carrying

value of $63,292 thousand of 49,377 thousand shares of Shin Kong Security

held by Yi Kong Security Co., Ltd. less an adjustment in valuation of $34,070

thousand on December 31, 2012.

3. On December 31, 2011, Shin Kong Security recognized $34,070 thousand as

treasury stocks proportionally to the 69% shareholding of SKS in Yi Kong

Security Co., Ltd. for the balance of $49,377 thousand which was the carrying

value of $86,916 thousand of 3,219 thousand shares of Shin Kong Security held

by Yi Kong Security Co., Ltd. less an adjustment in valuation of $37,539

thousand on December 31, 2011.

XXI. Operating revenu

e

2012 2011 Electronic service revenue $ 2,959,068 $ 2,881,668 On-site service revenue 1,284,544 968,877 Permanent security revenue 1,742,231 1,717,987 Others 879,090

1,047,070 6,864,933 6,615,602

Sales discounts and returns ( 14,121 ) ( 16,866Operating revenue-net

) $ 6,850,812 $ 6,598,736

47

XXII.

Operating cost

2012 2011 Electronic service cost $ 1,052,501 $ 1,014,496 On-site service cost 1,008,355 767,644 Permanent security cost 1,450,777 1,495,574 Others 852,986

877,378 $ 4,364,619 $ 4,155,092

XXIII.

For SKS:

Income tax

(I) Income tax payable calculated based on income before income tax at the statutory tax

rate (17%) and reconciliation thereof are illustrated as follows:

2012 2011 Income tax payable calculated based on income before income tax rate at the statutory tax rate $ 186,285 $ 178,836 Income tax effect from reconciliation

Permanent difference Gain on disposal of investment ( 1,234 ) ( 2,032 ) Investment income recognized based on equity method ( 48,197 ) ( 35,047 ) Investment loss recognized based on cost method 5,307 - Cash dividend exempted from tax ( 16,037 ) ( 13,766 ) Others 1,784 ( 3,458

)

( 58,377 ) ( 54,303Temporary difference

)

Off-balance sheet installation cost deferral and amortization 864 ( 271 ) Investment loss recognized under equity method 4 931 Difference in recognition of pension fund 4,020 3,126 Others 110

149

4,998 3,935 Add 10% surtax on unappropriated earnings - Income tax for the year

24,005 132,906 152,473

Deferred income tax Temporary difference ( 4,962 ) ( 3,763 )

Income tax adjustment for previous year ( 344 )

7,290 $ 127,600 $ 156,000

48

(II) Composition of deferred income tax assets:

December 31, 2012 December 31, 2011 1. Deferred income tax

assets-current: Allowance for bad debt in excess $ 25 ( $ 49 ) Off-balance sheet installation cost deferral

13,429 12,902

Investment loss evaluated based on equity method

16,856 16,852

Loss of liquidation of reinvestment

2,816

2,816

$ 33,126 $ 32,521 2. Deferred income tax

assets-non-current:

Off-balance sheet installation cost deferral

$ 6,883 $ 6,546

Pension fund in excess 19,968 15,948 Cumulative translation adjustment 2,843

1,970 $ 29,694 $ 24,464

(III) The company’s income tax filing audited by tax administration up to 2010.

(IV) Imputation tax system and related information:

December 31, 2012 December 31, 2011 Unappropriated retained earnings - before 1997

$ 64,817 $ 64,817

Unappropriated retained earnings – 1998 and after

1,358,611

1,722,598

$ 1,423,428 $ 1,787,415

*As of December 31, 2012 and 2011, balances of shareholder deductible tax

account amounted to $135,963 thousand and $345,960 thousand, respectively.

Imputation credit ratios applied for earnings distribution for 2012 and 2011 are

18.89% (projected) and 29.48% respectively.

According to Income Tax Law, for the distribution of retained earnings in 1998

and thereafter, the tax credit to be distributed to the domestic shareholders of SKS is

based on the tax credit rate in the dividend distribution date. Since the tax credit

distributed to shareholders is based on the Shareholder’s tax credit account balance in

the dividend distribution date, SKS expects the tax credit rate applicable to 2012

retained earnings distributed could be different from the actual tax credit rate

distributed to shareholders.

49

(V) The company’s income tax expense (income), income tax payable (refund), and

deferred income tax assets: 2012 2011

Income tax expense (income)

Income tax payable

(refundable) Income tax

Deferred income tax

Assets

Income tax expense (income)

Income tax payable

(refundable) Income tax

Deferred income tax

Assets SKS $ 127,600 $ 68,675 $ 62,820 $ 156,000 $ 95,632 $ 56,985 YKS 24,200 12,945 29,253 31,000 18,849 28,636 Taiwan Security 27,000 23,580 3,937 11,000 10,728 2,151 Shin-Po Investment 2,500 101 8,489 8,400 6,897 10,917 Yi Kong Building

Management 3,100 1,161 53 4,200 2,228 58 eTech 950 798 681 1,000 624 680 Shin Kong Aerotech - - - 4,300 3,101 2 Shinsoft Co., Ltd 7,700 6,620 1,192 5,900 3,507 34 Shincluster Electronics 1,570 939 3,467 1,840 1,629 3,089 New Light International 3,957 - - 3,597 2,164 - Shinkong Optical 1,800 1,273 7 900 882 7 Shinkong Technology

Co., Ltd. 1,000 1,000 - Shanghai Shin

Kong Property Management 3,016 1,560 - 1,033 996 -

Beijing Yi Kong Property Management Ltd. - 272 - - 172 -

Xiamen Shin-Po Property Service Co., Ltd. 738 456 - - 139 -

Chengdu Yi Kong - 8 - Taiwan Artificial

Intelligent Robots Co., Ltd. - - - - -

-

$ 205,131 119,388 $ 109,899 $ 229,170 $ 102,559 Income tax refundable $ - $ - Income tax payable $ 119,388 $ 147,548

XXIV.

Personnel, depreciation and amortization expenses 2012 2011

Classified as operating

cost

Classified as operating expense Total

Classified as operating cost

Classified as operating expense Total

Personnel Salary $ 2,338,280 $ 695,457 $ 3,033,737 $ 2,230,912 $ 635,543 $ 2,866,455 Pension fund 91,864 80,142 172,006 74,720 72,092 146,812 Employees’ insurance

194,357 96,359 290,716 166,232 91,413 257,645

Other personnel expenses

120,845 29,133 149,978 118,072 27,357

145,429

$ 2,745,346 $ 901,091 $ 3,646,437 $ 2,589,936 $ 826,405 $ 3,416,341 Depreciation $ 255,293 $ 43,795 $ 299,088 $ 250,861 $ 49,889 $ 300,750 Amortization 227 24,721 24,948 231 29,778 30,009

XXV.

Unit: NTD

Earnings Per Share

2012 2011 Before tax After tax Before tax After tax Basic consolidated earnings per share

Consolidated net income – shareholders of parent company $ 2.90 $ 2.56 $ 2.79 $ 2.37

Diluted consolidated earnings per share

Consolidated net income – shareholders of parent company $ 2.90 $ 2.56 $ 2.78 $ 2.37

50

Denominator and numerator of the equation used for calculating Earnings Per Share is

as follows: Amount (Numerator) Shares (Denominator) EPS(NT$)

Before tax After tax (Thousand shares) Before tax After tax 2012

Consolidated net income – shareholders of parent company $ 1,095,796 $ 968,196 Basic consolidated earnings per share

Net income for common stock shareholders $ 1,095,796 $ 968,196 377,633 $ 2.90 $ 2.56

Potential impact of common stock with dilution

Bonus to employees - - 450 Diluted consolidated earnings per share

Net income and potential impact of common stock for common stock shareholders $ 1,095,796 $ 968,196 378,083 $ 2.90 $ 2.56

2011

Consolidated net income – shareholders of parent company $ 1,051,977 $ 895,977 Basic consolidated earnings per share

Net income for common stock shareholders $ 1,051,977 $ 895,977 377,633 $ 2.79 $ 2.37

Potential impact of common stock with dilution

Bonus to employees - - 117 Diluted consolidated earnings per share

Net income and potential impact of common stock for common stock shareholders $ 1,051,977 $ 895,977 377,750 $ 2.78 $ 2.37

For the computation of earnings per share, the bonus to employee is assumed to be

with stock dividend distributed; also, the weighted average outstanding shares are included

in the common stock with dilution for computing the diluted EPS. While computing the

diluted EPS, the outstanding shares are based on the closing price of common stock on the

balance sheet date. The impact of common stock with dilution is considered while

computing the diluted EPS prior to the distribution of bonus to employees that will be

resolved in the shareholder’s meeting in next year.

XXVI. Disclosure of financial instruments:

(I) Information on fair value are summarized as follows:

The book value and the estimated fair value of financial products in the merged

company as of December 31, 2012 and 2011, are the same, except for the following

items:

December 31, 2012 December 31, 2011 Assets Book value Fair value Book value Fair value

Financial assets carried at cost - noncurrent

$ 1,155,888 $ - $ 1,189,577 $ -

51

(II) The consolidated companies apply the following methods and assumptions for the

valuation of fair value of financial products :

1. The fair value of short-term financial instrument is valued in accordance with

the book value on the balance sheet since it is with a short due date; therefore, it

is reasonable to have its fair value assessed in accordance with the book value.

This method is applicable to cash and cash equivalent, receivables, payables,

and short-term bank loans.

2. Since financial instruments at fair value through profit and loss and

available-for-sale financial assets are quoted in open markets, their market

prices resembled their fair values.

3. Financial assets carried at cost are investments in unlisted companies’ stocks,

which have no open quotation in the centralized market and no fair value

available for validation that can be obtained with the reasonable cost method;

therefore, fair value is not illustrated.

4. The fair value of long-term debt is based on the discount value of the expected

cash flow. The discount rate shall be the interest rate of long-term loans under

similar conditions (close maturity date) acquired by the consolidated companies.

(III) The fair value of financial assets within the merged company according to open

quotations from an active market and estimated according to valuation methods are:

Amount derived from open

quotations Amount estimated from valuation

methods

Assets December 31,

2012 December 31,

2011 December 31,

2012 December 31,

2011 Financial assets with changes in fair value recognized as income and expense - current $ 213,771 $ 141,801 $ - $ - Available-for-sale financial assets − current 1,754,972 1,519,888 - -

(IV) The consolidated recognized changes in the fair value of available-for-sale assets as

adjustments to shareholders' equity. The amounts recognized in 2012 and 2011 were

$75,127 thousand and $(536,621) thousand, respectively.

XXVII.

(I) Related parties’ names and affiliation

Transactions-related party

Related parties’ names Affiliation Shin Shou Building Management Service Co., Ltd.

The company is an institutional director of the merged company.

Shin Kong Wu Ho-Su Memorial Hospital

Substantial related party

Wang Tian Wool Textile Co., Ltd. Substantial related party Shin Kong Construction & Development Co., Ltd.


(To be continued)

52

(Continued)

Related parties’ names Affiliation Prince Motors Co., Ltd. Substantial related party Taiwan Shin Kong Enterprise Co., Ltd.


Dong Sian Investment Co., Ltd. Substantial related party Shin Kong Mitsukoshi Department Store Co., Ltd.


Shin Hai Gas Corporation Substantial related party Wel Tec Co., Ltd. The consolidated company’s corporate

supervisor Nietzsche Enterprise Co., Ltd. The consolidated company’s corporate

shareholders AECL Group The consolidated company’s corporate

shareholders Taishin International Bank Co., Ltd. Its Chairman is the representative of the

Company’s corporate director. Taishin Financial Holding Co., Ltd. Its Chairman is the representative of the

Company’s corporate director. Shinkong Spinning Co., Ltd. The same group member Great Taipei Gas Corporation The same group member Shin Kong Travel Service Co., Ltd. Its Chairman is the representative of the

Company’s corporate director. Shin Kong Financial Holding Co., Ltd.

Its supervisor is the Company’s Chairman

Lien-An Service Co., Ltd. Its Chairman is the Company’s Chairman. SKS Foundation for Arts and Culture Its director is the Company’s Chairman. SKS community care welfare foundation

Its director is the Company’s Chairman.

Shenzhen Shen Po Public Security Network Ltd.

The investee’s subsidiary evaluated based on equity method

Shenzhen Shen Po Property Management Co., Ltd.

The investee’s subsidiary evaluated based on equity method

Shin Kong Life Insurance Co., Ltd. Its supervisor is the Company’s Chairman Shinkong Insurance Co., Ltd. The same group member Shin Kong Commercial Bank Co., Ltd.

The same group member

Taiwan Ritan Co., Ltd. The investee evaluated based on equity method

Shinkong Investment Trust Co., Ltd. The same group member

(II) Significant transactions with related party

1. Operating revenue

2012 2011

Related parties’ names Amount Percentage

(%) Amount Percentage

(%) Lien-An Service Co., Ltd. $ 265,133 4 $ 216,398 3 Shin Kong Commercial Bank Co., Ltd.

139,605 2 149,988 2

Taishin International Bank Co., Ltd., etc.

405,738 6 387,506 6

53

The said transaction terms and conditions are not materially different from

the general customers’ transaction terms and conditions.

2. Operating cost 2012 2011

Related parties’

names Contents Amount Percentage


(%) Other cost Lien-An Service

Co., Ltd. Cash delivery

and cost of goods sold

$ 36,345 1 $ 33,839 1

sales costs Wel Tec Co., Ltd.

sales costs 120,313 3 117,289 3

Nietzsche Enterprise Co., Ltd., etc.

sales costs 46,198 1 56,383 1

3. Operating expenses 2012 2011



(%) Insurance premium

Shin Kong Life Insurance Co., Ltd., etc.

$ 6,462 - $ 5,280 -

Advertisement expense


739 - 739 -

Commission expense

Shin Kong Bank, etc. 305 - 319 -

Other expenses Shin Kong Life Insurance

Co., Ltd., etc. - - 92 -

4. Rental expenses Related parties’

names Object Lease term Leased area

occupied Rental Monthly rental

(pre-tax) Rental

expenses 2012: Shin Kong Life Insurance Co., Ltd., etc.

Jhong Shan Road, Banciao City, etc.

2012.01.01~ 2012.12.31

About 8508.41 m2

Subject to negotiation

$ 1,282 $ 15,484

2011: Shin Kong Life Insurance Co., Ltd., etc.

Jhong Shan Road, Banciao City, etc.

2011.01.01~ 2011.12.31

About 8508.41 m2

Subject to negotiation

1,302 15,500

5. Rental revenue 2012 2011

Related parties’ names Leased object Amount % Amount % Shin Kong Commercial Bank Co., Ltd.

Jian Bei Building, etc. $ 66 - $ 141 -

Great Taipei Gas Corporation

Jian Bei Building, etc. 80 - 95 -

Taishin International Bank Co., Ltd.

Rental for ATM, etc. 144 - 108 -

Taiwan Ritan Co., Ltd. Navigator Building 3F 201 - 91 -

6. Interest expenses 2012 2011



(%) Taishin International Bank Co., Ltd.

$ 42

- $ 10

-

Shin Kong Bank, etc. 197 - 11 -

54

7. Transactions of material credit and liability December 31, 2012 December 31, 2011

Related parties’ names Contents Amount Percentage


(%) Notes receivable

Taiwan Shin Kong Enterprise Co., Ltd. etc.

Cleaning expenses, etc.

$ 384 - $ 335 -

Accounts receivable


Service fees, etc. 29,986 8 31,097 8

Lien-An Service Co., Ltd.

Service fee 41,718 11 41,718 11

Shin Kong Commercial Bank Co., Ltd.

Rent 3,655 1 2,707 1

Other accounts receivable

Lien-An Service Co., Ltd.

Others 87 - 84 -

Prepayments Shinkong Insurance Co., Ltd. , etc

Insurance premium and rental, etc.

9,909 16 11,353 18

Refundable deposit


Deposit for lease, etc.

4,323 7 4,327 7

Short-term loan Taishin International Bank Co., Ltd.

Mortgage loan - - 350,000 18

Notes payable Shin Kong Life Insurance Co., Ltd., etc.

Rental, etc. 22,741 28 30,282 31

Accounts payable

Wel Tec Co., Ltd. Payment of goods

9,505 6 18,361 8

Expenses payable


Other expenses, etc. 261 - 719 -

Equipment accounts payable

Taiwan Ritan Co., Ltd. equipment amount - - 232 -

Receipt in advance


Service fees and payment of goods

11,230 1 12,193 2

Deposit received

Taishin International Bank Co., Ltd., etc.

Deposit for exclusive lines, etc

4,230 2 4,302 1

8. Property transaction

Properties purchased from related parties in 2012 and 2011 are as follows:

2012 2011 Related parties’ names Asset category

Amount (before tax)

Amount (before tax)

Taiwan Ritan Co., Ltd.

Backup security materials

$ 15,299 $ 518

9. Endorsement and guarantee

Please refer to Table 1 and 7 for information on endorsement and guarantee

made by the Consolidated Company for related parties as of December 31,

2012.

10. Other transactions

(1) Yi Kong Security Co., Ltd. was commissioned by Shin Kong Construction

& Development Co., Ltd. to manage its parking lot in 2012 and 2011 and

collected monthly rentals from users on behalf of Shin Kong Construction

& Development Co., Ltd. (stated as “Collection”). Yi Kong Security

charged each user a management fee of $450 (stated as “Permanent

security revenue”).

55

(2) Yi Kong Building Management Service Co., Ltd. leased a parking lot from

Shin Kong Asset Management Co., Ltd. in 2012 and 2011 for the parking

lot lease business. The monthly rental (pre-tax) amounted to $1,659

thousand, stated as a deduction of “Miscellaneous income” (Rental

income).

(3) Yi Kong Building Management Service Co., Ltd. leased a parking lot from

Shin Kong Wu Ho-Su Memorial Hospital in 2012 and 2011 for the parking

lot lease business. The monthly rental (pre-tax) amounted to $520 thousand,

stated as a deduction of “Miscellaneous income” (Rental income).

(4) Yi Kong Security Leased a parking lot from Great Taipei Gas Corporation

in 2012 and 2011 for the parking lot lease business. The monthly rental

(pre-tax) was $742 thousand, stated as a deduction of “Miscellaneous

income” (Rental income).

(5) Yi Kong Building Management Service Co., Ltd. was contracted to cleanse

the building of Great Taipei Gas Corporation in 2012 and 2011 and the

monthly charge amounted to $677 thousand (pre-tax), stated as

“Miscellaneous income” after deducting relevant costs therefrom.

(III) Information on the remuneration to directors, supervisors, and the management of the

Consolidated Company

2012 2011 Salary $ 25,049 $ 22,851 Rewards 6,488 4,921 Allowance 2,639 2,365 Professional service charges 1,674 3,379 Bonus 134

11,385 $ 35,984 $ 44,901

XXVIII.

Pledged assets

December 31, 2012 December 31, 2011 Fixed assets−Land $ 63,572 $ 63,572

−Building 31,574 32,815 Investment in real estate−Land 195,030 195,030

−Building 107,469 110,085 Other assets−Restricted assets (certificate of deposit)

52,538

49,563

$ 450,183 $ 451,065

56

XXIX.

Significant Commitments and contingence of the Consolidated Company as of

December 31, 2012 are as follows:

Significant commitments and contingence

(I) SKS:

1. Guaranteed notes paid: Guaranteed notes issued for undertaking engineering for

an amount of $24,500 thousand.

2. Guaranteed notes received: Guaranteed notes received for guaranteeing

engineering for an amount of $23,781 thousand.

3. SKS’ on-site service business is for the delivery and safety of cash and

valuables in accordance with the security agreement and on-site service

agreement signed by SKS and security subscribers. SKS is fully responsible for

the on-site service loss resulted from the fraud, conspiracy, negligence, and

dishonest or delivers. Further, SKS shall also be liable for the damages caused

due to the following circumstances pursuant to the Civil Code:

(1) The loss and damage of the delivery object, or delay in delivery

(Civil Law No. 634 first paragraph), (2) The loss and damage of the delivery

object with visible flaw that is rejected by the shipper (Civil Law No. 635), (3)

The loss and damage of the delivery object, or delay in delivery at the fault of

the shipper’s employees or contractors (Civil Law No. 636), (4) The loss and

damage of the cash, marketable security, jewelry, and valuables that are with the

nature and value of the delivery object declared by consigner at the time of

consignment (Civil Law No. 639.1), and (5) Shipper has committed any of the

acts stated in Civil Law No. 633, 650, and 651, or, other acts that are

detrimental to the prompt delivery or the safety of the delivery object, or, has

failed to exercise proper care and action protecting the interest of the consigner

(Civil Law 641).

As of December 31, 2012, consigned on-site service for an amount of

$5,833,574 thousand and one bag of convertible deposits in transit were not

listed in the balance sheets of SKS.

57

The insurance, of which SKS and Taiwan Security are the co-insured, for

the on-site service (including transportation and replacement of cash in ATM)

on Dec. 31, 2012 is specified as follows:

Type Contents Insurance Amount 1. Cash-transit Route:

Taiwan Province, Kaohsiung City, Taipei City

Insurance amount per accident: 100,000 thousand NTD Insurance amount in the duration of insurance: $300,000 thousand

2. Cash on hand Nine treasuries in Hsinchu City and Taichung City

1,888,000 thousand NTD(insurance amount accruing progressively per day in the case of holidays)

3. Cash on hand Treasury in Taipei City

1,281,000 thousand NTD(insurance amount accruing progressively per day in the case of holidays)

4. Fidelity insurance

On-duty escorts and drivers of cash transportation vehicles

Insurance amount per employee: 10,000 thousand NTD Insurance amount per accident: 10,000 thousand NTD Cumulative maximum indemnity in the duration of insurance: 100,000 thousand NTD(Deductible per accident: 10,000 thousand NTD)

(II) For YKS:

The guarantee notes issued by YKS on Dec. 31, 2012 for the lease of parking lot

of Chi Mei Medical Center total 3,080 thousand NTD.

(III) For Yi Kong Building Management:

Yi Kong Building Management had guaranteed notes issued for an amount of

NT$5,983 thousand for undertaking the cleaning business on December 31, 2012.

(IV) For Shinkong Optical:

As at December 31 2012, Shinkong Optical had NT$580 thousand of

guaranteed notes outstanding as performance bonds for its contracted jobs.

XXX.

(I) Information related to material transactions:

Noted disclosures

No. Item Remarks

1 Fund lent to others N/A 2 Endorsement and guarantee made for others Table 1 3 Marketable securities-end Table 2 4 Cumulative amount of the same marketable security

purchased or sold reaching 100 million NTD or more than 20% of the paid-in capital

Table 3

5 Amount on acquisition of real estate reaching $100 million or more than 20% of the paid-in capital

N/A

58

6 Amount on disposal of real estate reaching $100 million or more than 20% of the paid-in capital

N/A

7 Purchase/sale amount of transactions with related parties reaching $100 million or more than 20% of the paid-in capital

Table 4

8 Accounts receivable-related party reaching $100 million or more than 20% of the paid-in capital

N/A

9 Transactions of derivatives N/A

(II) Information related to reinvested enterprises

No. Item Remarks

1 Information related to the investees, such as names and locations, etc.

Table 5, 6

2 Fund lent to others N/A 3 Endorsement and guarantee made for others Table 7 4 Marketable securities held – end of year Table 8 5 Cumulative amount of the same marketable security

purchased or sold reaching $100 million or more than 20% of the paid-in capital

Table 9

6 Acquisition amount of real estate reaching $100 million or more than 20% of the paid-in capital

N/A

7 Amount on disposal of real estate reaching $100 million or more than 20% of the paid-in capital

N/A


Table 10


N/A

10 Transactions of derivatives N/A

59

(III) Information on the investment in Mainland China:

No. Item Remarks

1 Information about investees in Mainland China, such as names and business lines, etc.

Table XI

2 Direct, or indirect via the enterprise in 3rd territory, major transactions between the investees in the Mainland China and the Company

N/A

3 Direct, or indirect via the enterprise in 3rd territory, endorsement, guarantee or provision of collateral made between the investees in the Mainland China and the Company

N/A

4 Direct, or indirect via the enterprise in 3rd territory, financing between the investees in the Mainland China and the Company

N/A

5 Other transactions that produce material effects to the income or financial condition in the current period

N/A

XXXI. Business relationship and significant transactions between the parent company and

subsidiaries

XXXII.

: Please refer to Table 12.

Information to be disclosed in consolidated financial statements of affiliates in accordance

with the Securities & Futures Institute’s Letter (88) Tai-tsai-cheng-(6) No. 0139

No.

8

Item Remarks

1 Subsidiaries Note I

2 Changes in the subsidiaries that are included in the related party’s consolidated financial statements Note I

3 Changes in the subsidiaries that are excluded from the related party’s consolidated financial statements N/A

4 Subsidiaries’ adjustment and processing manners in the fiscal year different from those of controlling companies N/A

5 Special business risk of overseas subsidiaries N/A 6 Affiliates’ earning distribution subject to laws or contracts Note XX

7 Method to amortize consolidated loan (credit) and deadline thereof N/A

8 Matters to be disclosed separately: (1) Closed transactions Table XII (2) Status of financing N/A (3) Endorsement and guarantee Table I, VII (4) Derivatives N/A (5) Material contingent events Note XXIX (6) Significant subsequent events N/A (7) Held notes and marketable securities Table II, VIII 9 Others N/A

60

XXXIII.

Information that is provided to the decision maker for resource allocation and

performance evaluation purposes, with emphasis on the types of products or services

delivered. According to Statement of Financial Accounting Standards No. 41 - "Disclosure

of segment information", the following segments were subjected to reporting:

Financial information of operating segments

Electronic services - offering electronic security

Cash delivery services - offering cash escorts

Stationed services - offering stationed security guards

Others - others

(I) Segment income and performance

The company's income and business performance from continuing operations,

reported by segments, are as follows: Segment income Segment profit/loss 2012 2011 2012 2011

Electronic services $ 2,946,612 $ 2,871,354 $ 557,378 $ 619,432 Cash delivery services 1,284,544 968,877 164,652 96,281 Stationed services 1,742,231 1,717,987 89,877 151,523 Others 877,425 1,040,518 279,846 Total from continuing operations

202,293 $ 6,850,812 $ 6,598,736 1,091,753

Investment gains recognized using the equity method

1,069,529

2,619 1,874 Dividend income 143,476 121,535 Rental revenue 17,178 4,336 Interest revenue 4,932 3,976 Gain (loss) on disposal of

fixed assets (net) ( 4,587 ) 1,032

Gain on disposal of investment

15,425 47,544

Gain (loss) on currency exchange

( 39 ) 11

Income (loss) of financial assets in valuation

21,050 ( 42,061 )

Other investment loss ( 36,475 ) ( 19,605 ) Headquarter's

administration costs & directors' remuneration

( 45,052 ) ( 44,900 ) Interest expenses ( 31,380) ( 30,225) Sundry income (net) 59,684 Pre-tax net profit

(continuing operations)

73,974 $ 1,238,584 $ 1,187,020

All reported income above arose due to transactions with external customers.

Inter-department sales in 2012 and 2011 have been fully eliminated.

Segment gain refer to the profits made by each segments. It does not include

allocations of headquarter's administration costs or directors' remuneration,

61

investment gains/losses recognized using the equity method, gains/losses on disposal

of long-term equity investments, rental income, interest income, gains/losses on fixed

asset disposal, gains/losses on investment disposal, gains/losses on exchange,

gains/losses on valuation of financial instruments, interest expenses, and income tax

expenses. These amounts are reported to the decision maker for allocating segment

resources and evaluating segment performance.

(II) Segment assets

December 31, 2012 December 31, 2011 Segment assets

Electronic services $ 3,019,464 $ 2,730,492 Cash delivery services 3,276,271 3,198,484 Stationed services 577,887 688,273 Others 781,012 Total segment assets

1,022,380 7,654,634

Financial assets with changes in fair value recognized as income and expense - current

7,639,629

213,771 141,801 Available-for-sale financial

assets − current

1,754,972 1,519,888 Financial assets carried at cost -

noncurrent

1,155,888 1,189,577 Long-term investment under

Equity method

16,319 17,343 Real estate investment (net) 1,158,093 Total other assets

1,169,578 4,299,043

Total assets 4,038,187

$ 11,953,677 $ 11,677,816

For the purpose of supervising segment performance and resource allocation:

Except for long term equity investments accounted using the equity method,

other financial assets, and current and deferred income tax assets, all other assets

were allocated to the various reporting segments. Goodwill has been allocated to

various reporting segments. Assets shared among reporting segments were allocated

based on the amount of revenues generated.

(III) Income from main products and services

The consolidated entity's income from major products and services has been

classified by segments; please refer to the segment income disclosure.

62

(IV) Information by geographic region

In 2012 and 2011, foreign operations within the consolidated entity did not

account for more than 10% of total revenues or assets.

(V) Information about key customers

The Consolidated Company is primarily engaged in the provision of security

services to general businesses and individuals. No single customer accounted for

10% or more of sales revenue for the years ended December 31, 2012 and 2011.

XXXIV. Exchange rate information on foreign currency assets and liabilities

(I) The Company’s financial assets and liabilities in foreign currencies with

significant influence are summarized as follows:

Unit: $ ,000 in respective foreign currencies / NTD ,000 December 31, 2012 December 31, 2011 Foreign

currency exchange

rate NTD Foreign currency

exchange rate NTD

Long-term investment under Equity method USD $ 548 29.04 $ 15,927 $ 538 30.28 $ 16,287

(II) Merged

1. The consolidated company of Shin Kong Security Co., has resolved in a board

of directors meeting, dated August 28th

2. The merged Shin Kong Aerotech Co., Ltd. was founded in July 2000, with main

business in the areas of telecommunications engineering, computer equipment

installations, aviation devices and other parts manufacturing.

2012, to merge with Shin Kong

Aerotech Co., Ltd. The consolidated company of SKS held 100% shares in the

Shin Kong Aerotech Co., Ltd., and the board of directors resolved to proceed

with a simple merger.

3. The acquisition contract of this merger does not contain acquisition prices, share

subscription rights or undertaking, nor material asset disposal decisions as a

result of the acquisition.

4. The merger basis date is September 30, 2012, and the accounting treatment is in

accordance with the Financial Accounting Standard No.25 “Business

Combinations”.

5. Profit and loss consolidation period and pro forma supplement information for

operating results.

Starting September 30th 2012, the operating results of Shin Kong Aerotech

Co., Ltd. is consolidated into the profit and loss statements of Shin Kong

Security Co. The pro forma consolidated Profit and loss statement for the year

63

2012 assumes the operating results of Shin Kong Aerotech Co., Ltd. from

January 1, 2012 has been included in the merged company of Shin Kong

Security Co. For a compilation of comparative profit and loss statement, it also

assumes that the companies are already merged at the beginning of the previous

financial year for comparison, regarding pro forma consolidated profit and loss

statement as follows:

2012 2011 Amount % Amount %

Operating revenue $ 3,899,147 100 $ 3,760,671 100 Operating cost ( 2,007,096 ) ( 51 ) ( 1,887,223 ) ( 50Gross income from

operations

) 1,892,051 49 1,873,448 50

Operating expenses ( 1,225,175 ) ( 31 ) ( 1,177,983 ) ( 31Net operating profit

) 666,876 18 695,465 19

Non-operating revenue 473,069 12 414,959 11 Non-operating

expenses and losses ( 40,566 ) ( 1 ) ( 53,751 ) ( 1

Income before tax

)

1,099,379 29 1,056,673 29 Income tax expense ( 131,000 ) ( 3 ) ( 160,300 ) ( 4Net income

) $ 968,379 26 $ 896,373 25

Before tax Af t er t ax Before tax Af t er t ax Pro forma earnings per

share Basic EPS $ 2.91 $ 2.56 $ 2.80 $ 2.37 Diluted earnings

per share

$ 2.91 $ 2.56 $ 2.80 $ 2.37

XXXV.

The consolidated entity has complied with Notice Jin-Guan-Cheng-Shen-0990004943

issued by the Financial Supervisory Commission (FSC) on 2 February 2010, by making the

following disclosures regarding its future adoption of International Consolidated Financial

Reporting Standards (IFRS) in the 2012 financial statements:

Disclosures relating to future adoption of IFRS

(I) The “IFRSs adoption roadmap for domestic enterprises”, announced by the Financial

Supervisory Commission R.O.C. on May 14, 2009 requires publicly listed companies

and merged companies to compile financial statements according to the Regulations

Governing the Preparation of Financial Reports by Securities Issuers and

International Financial Reporting Standards, International Accounting Standards,

explanations and published explanations (IFRSs). In complying with the above

amendment, the merged company has also established a project team and set out a

plan to adopt IFRSs. The plan is managed by vice president Huang Chun-Ming. Key

points to the plan, projected completion schedule and current status is detailed below:

64

Plan contents Executor Current progress

1. Assemble a project team Finance Department Completed 2. Establish an IFRSs adoption plan Finance Department Completed 3. Identifying differences between the current

accounting policies and IFRSs Finance Department Completed

4. Defining the IFRSs consolidated entity Finance Department Completed 5. Evaluating the impacts of exemptions and

options made available in IFRS 1 - "First-Time Adoption of IFRS"

Finance Department Completed

6. Evaluating the necessary adjustments to the information system

IT Department Completed

7. Evaluating the necessary adjustments to internal control

Audit Department Completed

8. Determining IFRSs-compliant accounting policies


9. Choosing the proper exemptions and options made available in IFRS 1 - "First-Time Adoption of IFRS"


10. Completing the opening IFRSs-compliant statement of financial position


11. Completing IFRSs-compliant comparative financial statements for 2012

Finance Department Currently in progress

12. Completing adjustments to internal control (including financial reporting procedures and information systems)

Audit Department Finance Department

IT Department

Completed

(II) The consolidated entity has identified the following possible differences between the

current accounting policies and IFRSs:

1. Adjustment on balance sheet items as of January 1, 2012.

Generally Accepted

Accounting Principles

Affected amount IFRSs Remarks

Assets Cash and cash

equivalents $ 4,181,096 ( $ 124,564 ) $ 4,056,532 Note XXXV (II)6.(1)

Other financial assets-current

- 124,564 124,564 Note XXXV (II)6.(1)

Deferred income tax assets-current

38,221 ( 38,221 ) - Note XXXV (II)6.(2)

Fixed assets, net 2,292,586 731,565 3,024,151 Note XXXV (II)6.(3) Note XXXV (II)6.(4) Note XXXV (II)6.(14)

prepaid equipment amount

15,210 ( 15,210 ) - Note XXXV (II)6.(5)


1,189,577 ( 818,724 ) 370,853 Note XXXV (II)6.(6)

Real Estate investment 1,169,578 ( 703,549 ) 466,029 Note XXXV (II)6.(3) Intangible Assets - 28,499 28,499 Note XXXV (II)6.(4) Available-for-sale

financial assets - non-current

- 2,230,772 2,230,772 Note XXXV (II)6.(6)

Assets leased to others 949 ( 949 ) - Note XXXV (II)6.(14) (To be continued)

65

(Continued)

Generally Accepted

Accounting Principles

Affected amount IFRSs Remarks

Deferred expenses $ 56,480 ( $ 56,480 ) $ - Note XXXV (II)6.(4) Deferred income tax

assets-non-current 64,338 67,223 131,561 Note XXXV (II)6.(2)

Note XXXV (II)6.(9) Note XXXV (II)6.(10) Note XXXV (II)6.(12)

Other assets-others 13,262 8,818 22,080 Note XXXV (II)6.(4) Note XXXV (II)6.(5) Note XXXV (II)6.(10)

Liabilities Income tax payable 147,548 ( 147,548 ) - Note XXXV (II)6.(7) Income tax liabilities for

the year - 147,548 147,548 Note XXXV (II)6.(7)

Expenses payable 606,591 ( 606,591 ) - Note XXXV (II)6.(8) Other payables 68,226 665,293 733,519 Note XXXV (II)6.(8)

Note XXXV (II)6.(9) Accrued pension

liabilities 397,060 10,648 407,708 Note XXXV (II)6.(10)

Equity Cumulative translation

adjustment ( 7,939 ) 7,939 - Note XXXV (II)6.(11)


( 101,096 ) 101,096 - Note XXXV (II)6.(10)

Unrealized (loss) profit of financial instruments / Unrealized (loss) profit of Available-for-sale financial assets

( 842,243 ) 1,315,732 473,489 Note XXXV (II)6.(6)

Treasury stocks ( 34,070 ) ( 5,451 ) ( 39,521 ) Note XXXV (II)6.(13) Retained earnings 1,787,415 ( 165,471 ) 1,621,944 Note XXXV (II)6.(9)

Note XXXV (II)6.(10) Note XXXV (II)6.(12) Note XXXV (II)6.(13)

Minority interest 401,175 110,549 511,724 Note XXXV (II)6.(9) Note XXXV (II)6.(10) Note XXXV (II)6.(12) Note XXXV (II)6.(6)

66

2. Adjustment on balance sheet items as of December 31, 2012.

Generally Accepted

Accounting Principles Affected amount IFRSs Remarks

Assets Cash and cash

equivalents $ 4,072,203 ( $ 29,111 ) $ 4,043,092 Note XXXV (II)6.(1)

Other financial assets-current

- 29,111 29,111 Note XXXV (II)6.(1)

Deferred income tax assets-current

42,884 ( 42,884 ) - Note XXXV (II)6.(2)

Fixed assets, net 2,428,447 728,865 3,157,312 Note XXXV (II)6.(3) Note XXXV (II)6.(4) Note XXXV (II)6.(14)

prepaid equipment amount

10,390 ( 10,390 ) - Note XXXV (II)6.(5)

Financial assets carried at cost

1,155,888 ( 801,303 ) 354,585 Note XXXV (II)6.(6)

Real Estate investment 1,158,093 ( 698,108 ) 459,985 Note XXXV (II)6.(3) Intangible Assets - 22,736 22,736 Note XXXV (II)6.(4) Available-for-sale

financial assets - non-current

- 2,283,371 2,283,371 Note XXXV (II)6.(6)

Assets leased to others 1,816 ( 1,816 ) - Note XXXV (II)6.(14) Deferred expenses 53,736 ( 53,736 ) - Note XXXV (II)6.(4) Deferred income tax

assets-non-current 67,015 85,995 153,010 Note XXXV (II)6.(2)

Note XXXV (II)6.(9) Note XXXV (II)6.(10) Note XXXV (II)6.(11) Note XXXV (II)6.(12)

Other assets-others 12,630 5,808 18,438 Note XXXV (II)6.(4) Note XXXV (II)6.(5) Note XXXV (II)6.(10)

Liabilities Income tax payable 119,388 ( 119,388 ) - Note XXXV (II)6.(7) Income tax liabilities for

the year - 119,388 119,388 Note XXXV (II)6.(7)

Expenses payable 697,873 ( 697,873 ) - Note XXXV (II)6.(8) Other payables 76,344 798,106 874,450 Note XXXV (II)6.(8)

Note XXXV (II)6.(9) Accrued pension

liabilities 433,541 27,116 460,657 Note XXXV (II)6.(10)

Other long term employee benefit liability

- 11,560 11,560 Note XXXV (II)6.(11)

Equity Cumulative translation

adjustment ( 15,465) 7,939 ( 7,526 ) Note XXXV (II)6.(12)


( 115,191) 115,191 - Note XXXV (II)6.(10)

Unrealized (loss) profit of financial instruments / Unrealized (loss) profit of Available-for-sale financial assets

( 781,983 ) 1,385,752 603,769 Note XXXV (II)6.(6)

Treasury stocks ( 34,070 ) ( 5,451 ) ( 39,521 ) Note XXXV (II)6.(13) Retained earnings 1,423,428 ( 224,601 ) 1,198,827 Note XXXV (II)6.(9)

Note XXXV (II)6.(10) Note XXXV (II)6.(11) Note XXXV (II)6.(12) Note XXXV (II)6.(13)

Minority interest 440,266 100,799 541,065 Note XXXV (II)6.(9) Note XXXV (II)6.(10) Note XXXV (II)6.(12) Note XXXV (II)6.(6)

67

3. Adjustment on 2012 comprehensive income statement items

Generally Accepted

Accounting Principles Affected amount IFRSs Remarks

Operating revenue $ 6,850,812 $ 28,663 $ 6,879,475 Note XXXV (II)6.(16) Operating cost ( 4,364,619 ) ( 11,485 ) ( 4,376,104 ) Note XXXV (II)6.(16) Gross income from

operations 2,486,193 2,503,371

Operating expenses ( 1,439,492 ) ( 51,422 ) ( 1,490,914 ) Note XXXV (II)6.(9) Note XXXV (II)6.(10) Note XXXV (II)6.(11) Note XXXV (II)6.(15) Note XXXV (II)6.(16) Net operating profit 1,046,701 1,012,457 Other income and

expenses 191,883 ( 12,321 ) 179,562 Note XXXV (II)6.(16)

Income before tax 1,238,584 1,192,019 Income tax expense ( 205,131 ) 7,917 ( 197,214 ) Note XXXV (II)6.(9) Note XXXV (II)6.(10) Note XXXV (II)6.(11) Note XXXV (II)6.(15) Income after tax $ 1,033,453 994,805 Other comprehensive

income

Exchange variance from converting financial statements of overseas operations units.

( 10,269 )

Unrealized profit of Available-for-sale financial assets

127,397

Actuarial gains or losses on defined benefit

( 36,424 ) Note XXXV (II)6.(10), (15)

Income tax relating to the composition of other comprehensive income

7,065 Note XXXV (II)6.(10), (15)

Total comprehensive income for the period

$ 1,082,574

4. Special earnings reserve booked on conversion date

According to the requirement on notice number

Jin-Guan-Zheng-Fa-zi-1010012865 dated April 6, 2012 issued by the Financial

Supervisory Commission, when adopting IFRSs for the first time, the portion of

unrealized revaluation increase and accumulated conversion adjustment (gains)

which has been transferred to retained earnings due to selecting applicable IFRS

No. 1 exemption items, shall provision the same amount into special earnings

reserve; but when the increase in retained earnings arising out of adopting

IFRSs for the first time on conversion date is not enough for provisioning, then

only the amount of increase in retained earnings arising out of the conversion

needs to be provisioned. On subsequent utilization, disposal or reclassification

of assets, the ratio of original provisioning into special earnings reserves can be

reversed for earnings distribution. The accumulated conversion adjustment

transferred into retained earnings of the consolidated company is 7,939

thousand NTD, therefore no special earnings reserve provision is required.

68

5. International Financial Reporting Standards No. 1 Exemption options.

IFRS 1 “First-time Adoption of International Financial Reporting

Standards” explains the procedures to be followed when corporations adopt the

IFRSs as the basis for compiling financial statements for the first time.

According to the standard, consolidated companies shall establish accounting

policies under the IFRSs with retrospective effectiveness on opening balance

sheet as of January 1, 2012, but the standards provide certain exemption options

for retrospective applicable principles. Key exemption options adopted by the

consolidated company are detailed as follows:

The consolidated company elects to transfer all unrecognized accumulated

actuarial gains and losses relating to employee benefit plans into retained

earnings on the IFRS’s date.

Employee benefits

The consolidated company elects to define the exchange difference on

converting financial statements of overseas operating unit as zero on the IFRS’s

date, and record it in retained earnings on the date.

Accumulated exchange differences

6. Notes on material adjustments from converting to IFRS’s

The consolidated entity has identified the following possible differences

between the current accounting policies and IFRSs:

(1) Term deposits with maturity in excess of 3 months.

Under R.O.C. GAAP, term deposits which can be cancelled without

losing principal amount is listed under cash items.

After converting to the IFRSs, term deposits with maturity in excess

of 3 months are generally not classified as cash or cash equivalent. Since

the deposit does not have open quote from an active market, and it has a

fixed or definite amount receivable, therefore deposits with terms in excess

of 3 months are classified as other financial assets.

Till December 31, 2012 and January 1, 2012, the amount of term

deposits of the consolidated company reclassified into other financial asset

are 29,111 thousand NTD and 124,564 thousand NTD, respectively.

(2) Deferred income tax assets

According to GAAP, valuation allowances are provided on deferred

income tax assets after assessing their reversibility. After adopting IFRSs,

only income tax benefits that are "highly likely" realized can be recognized

69

as deferred income tax assets; the valuation allowance will no longer be

used.

According to GAAP, deferred income tax assets or liabilities are

allocated into current and non-current portions that correspond with the

source assets and liabilities from which they arise. Deferred taxes that do

not relate to any particular assets or liabilities are allocated into current and

non-current portions based on their expected time to reversal. After

adopting IFRSs, all deferred income tax assets and liabilities are classified

as non-current items.

Till December 31, 2012 and January 1, 2012, the amount of deferred

income tax asset – current of the consolidated company reclassified into

non-current asset is 42,884 thousand NTD and 38,221 thousand NTD,

respectively.

(3) Real Estate investment

Under ROC GAAP, real estate provided for rental in operations is

classified as non-current asset / other assets.

After converting to the IFRSs, real estate held by the owner for the

purpose of earning rental income or capital gains or both are classified as

real estate investment.

Till December 31, 2012 and January 1, 2012, the amount of real estate

investment of the consolidated company reclassified into fixed asset is

698,108 thousand NTD and 703,549 thousand NTD, respectively.

(4) Deferred expenses

Under ROC GAAP, deferred expenses are classified as other assets.

After converting to the IFRS’s, deferred expenses shall be reclassified

into real estate, plant and equipment, intangible assets, prepaid expenses

and long term prepaid expenses according to their nature.


expenses of the consolidated company reclassified into fixed asset are



expenses of the consolidated company reclassified into intangible asset are


70


expenses of the consolidated company reclassified into prepaid expenses

are 2,059 thousand NTD and 914 thousand NTD, respectively.

(5) prepaid equipment amount

Under ROC GAAP, prepayments for purchasing of equipment shall be

booked as prepayment for equipment under fixed asset items.

After converting to the IFRS’s, prepayments for the purchase of

equipment are generally booked as prepayment and classified as

non-current assets.

Till December 31, 2012 and January 1, 2012, the amount of

prepayment for equipment of the consolidated company reclassified into

prepayments under non-current items are 10,390 thousand NTD and

15,210 thousand NTD, respectively.

(6) Financial assets carried at cost

According to the current Regulations Governing the Preparation of

Financial Reports by Securities Issuers, holdings of shares not publicly

listed on the stock exchange or the GreTai Securities market, shall be

booked as financial assets valued at cost. After converting to the IFRSs,

equity tool investments of certain financial assets specified as available for

sale and financial asset evaluated at fair value without ‘being specified as

through profit and loss, shall be classified as financial assets available for

sale, and evaluated at fair value. Till December 31, 2012 and January 1,

2012, the amount of financial assets valued at cost of the consolidated

company reclassified into financial assets available for sale – non-current

are 801,303 thousand NTD and 818,724 thousand NTD, respectively.

Financial assets available for sale – non-current increased adjustment

1,482,068 thousand NTD and 1,412,048 thousand NTD, respectively.

Unrealized gains and losses on financial assets available for sale increased

1,385,752 thousand NTD and 1,315,732 thousand NTD, respectively.

Minority shareholding increased 96,316 thousand NTD.

(7) Presentation of Income Tax Payable

Under ROC GAAP, Income Tax Payable is booked as a current

liability item. After converting to the IFRS’s, Income Tax Payable shall be

reclassified into current period income tax liability.

71

Till December 31, 2012 and January 1, 2012, the amount of income

tax payables of the consolidated company reclassified into current period

income tax liability are 119,388 thousand NTD and 147,548 thousand NTD,

respectively.

(8) Presentation of expenses payable

Under ROC GAAP, Expenses payable shall be booked under current

liabilities After converting to the IFRSs, expenses payable shall be

reclassified ínto other payables

Till December 31, 2012 and January 1, 2012, the amount of expenses

payable of the consolidated company reclassified into other payables are


(9) Employee benefit – short term accumulative leaves with pay

The accounting treatment for short-term paid leaves was not explicitly

mandated in GAAP, and the common practice was to record an accounting

entry at the time the leave entitlement is granted.

After adopting IFRSs, paid leaves need to be recognized as expenses

whenever employees offer their services that will earn them the entitlement

to take leaves in the future.

Till December 31, 2012 and January 1, 2012, the consolidated

company has increased other receivables by 100,233 thousand NTD and

58,702 thousand NTD, respectively, due to the accounting treatment of

short term accumulative leaves with pay; deferred income tax assets are

increased by 17,040 thousand NTD and 9,979 thousand NTD, respectively.

Minority shareholding decreased by 15,386 thousand NTD and 8,843

thousand NTD, respectively. Further, financial year 2012 salary expenses

were increased by 41,531 thousand NTD, and income tax expense reduced

by 7,061 thousand NTD

(10) Employee benefit – actuarial gains and losses on defined benefit pension

plan

Under ROC GAAP, when adopting Financial Accounting Standard No.

18, “Accounting for Pensions” for the first time, the unrecognized

temporary net payment obligations incurred shall be amortized into net

pension cost using the straight line method according to the average service

years remaining of employees expected to receive pension. After

converting to the IFRS’s, since the transitional requirements of

72

International accounting standards No.19 – employee benefits are not

applicable, all unrecognized transitional net payment obligations related

amount shall be fully recognized and adjusted into retained earnings.

Under ROC GAAP, Actuarial gains and losses use the buffer zone

method to amortize under profit and loss items according to the average

remaining service years of employees expected to receive pension. After

converting to the IFRS,s, in compliance with the requirements of IAS 19 –

Employee benefits, the actuarial gains and losses of defined benefit plans is

elected to be recognized under other comprehensive income, and included

into retained earnings under equity movement statement and will not be

reclassified into gains and losses in subsequent periods.


company converting to the IFRS,s, in compliance with the requirements of

IAS 19 – Employee benefits and converting to the IFRS 1 “First-time

Adoption of International Financial Reporting Standards” has

increased Pension liability by 27,116 thousand NTD and 10,648 thousand

NTD; prepaid pension expenses reduced by 6,641 thousand NTD and

7,306 thousand NTD, respectively; unrecognized net loss in pension cost

reduced by 115,191 thousand NTD and 101,096 thousand NTD; deferred

income tax asset increased by 25,321 thousand NTD and 20,238 thousand

NTD; minority shareholding increased by 19,764 thousand NTD and

22,971 thousand NTD, respectively in accordance with the requirements of

IAS 19 – Employee benefits to redo actuary on defined benefit plan, and in

compliance with IFRS 1 – First time adopting IFRS Further, the pension

cost for financial year 2012 is reduced by 6,526 thousand NTD and income

tax expenses is increased by 1,109 thousand NTD; defined benefit plan

actuarial gains and losses adjustments to comprehensive losses with

increases of 36,424 thousand NTD and income tax impact adjustment

reduced by 6,192 thousand NTD.

(11) Employee benefit – Other long term employee benefit

Under ROC GAAP, there is no specific requirement on other long

term employee benefits, and is usually booked when actual payment is

made.

After converting to the IFRS’s, other long term employee benefits

shall provide actuarial valuation on prior period service cost and actuarial

73

gains and losses according to IAS 19 – employee benefits, and

immediately recognized with no application of buffer zones.

Till December 31, 2012, the consolidated company has increased

other long term employee benefits liability by 11,560 thousand NTD due to

the accounting treatment of other long term employee benefits; deferred

income tax assets increased by 1,965 thousand NTD. Further, the salary

expenses for financial year 2012 is increased by 11,560 thousand NTD and

income tax expenses reduced by 1,965 thousand NTD.

(12) Accumulated conversion adjustments / Overseas operating unit functional

currency

Under the ROC GAAP, the indicators used in deciding the functional

currency are based on comprehensive study.

After converting to the IFRS’s, IAS 21 – impact of exchange

fluctuation is required when deciding functional currency, the key

indicators shall be considered first and then supported by the secondary

indicators on the decision of functional currency.


company has reduced deferred income tax assets – non-current by 1,215

thousand NTD in both; accumulated conversion adjustment increased by

7,939 thousand NTD in both due to changes in functional currency.

Minority shareholding increased by 105 thousand NTD in both years.

(13) Treasury stock trading

Under ROC GAAP, where a subsidiary company shareholding in its

parent company is treated as treasury stock, when applying FAS 30 –

Accounting for Treasury Stocks for the first time, the book value of parent

company share investment in the subsidiary company account of 2002 is

used as the basis for booking, and this amount may not be equal to the

original investment cost.

Since converting to IFRSs, treasury stock shall be deducted from

equity according to the original acquisition cost, therefore balances relating

to treasury stocks within equity movement statement shall be retroactively

adjusted.


company has adjusted treasury stocks down by 5,451 thousand NTD in

both.

74

(14) Reclassification of assets on lease

Under ROC GAAP, Assets on lease are recorded under other asset

items. After converting to IFRSs, assets on lease shall be recorded as fixed

assets according to their characteristics.

Till December 31, 2012 and January 1, 2012, reclassification of assets

on lease into fixed assets amounts to 1,816 thousand NTD and 949

thousand NTD, respectively.

(15) Notes on adjustments to the consolidated comprehensive income

statement.

Since converting to the IFRS’s, the consolidated company has

adjusted up 53,091 thousand NTD to salary expenses within operating

expenses according to the nature of business transactions; adjusted down

pension cost by 6,526 thousand NTD; income tax expense adjusted down

7,917 thousand NTD; benefit plan actuarial losses 36, 424 thousand NTD

and income tax impact adjustment down 6,192 thousand NTD.

(16) Reclassification of rental income and gains from disposal of fixed assets

The consolidated company has compiled consolidated income

statement according the Regulations Governing the Preparation of

Financial Reports by Securities Issuers, its operating benefit only includes

operating income, operating cost and operating expenses. Since converting

to IFRS, rental income, depreciation of assets on lease, disposal of real

estate, plant and equipment and net income on intangible assets and

equipment depreciation losses are reclassified to other operating income

and expenses and included in operating income. Till December 31, 2012,

the consolidated company has reclassified rental income and depreciation

of assets on lease into other operating income and other operating costs

with the amounts of 28,663 thousand NTD and 11,484 thousand NTD,

respectively. Net losses on disposal of fixed assets (including losses from

theft) is classified into operating cost with the amount of 4,857 thousand

NTD.

(III) The consolidated entity has performed the above evaluations based on the 2010

IFRSs, translated by the Accounting Research and Development Foundation of the

R.O.C. and published by the FSC, and the Regulations Governing the Preparation of

Financial Reports by Securities Issuers revised by the FSC on 22 December 2011.

The above evaluated results may differ from the final outcome due to other directives

75

promulgated by the competent authority in relation to IFRSs, or changes to other

regulations in line with the IFRSs.

76

Table 1. Endorsement and guarantee made for others

Unit: NTD1,000

No. Endorsed/guaranteed by

Counterpart Limit of

endorsement/guarantee on particular enterprise

Maximum balance of

endorsement / guarantee made

during the current period

Balance of endorsement /

guarantee at end of the period

Endorsement/guarantee secured

by company assets

Proportion of total endorsement/guara

ntee to the net worth as stated in the most recent

financial statement(%)

Maximum limit of

endorsement/guarantee

Name Affiliation

0 Taiwan Shin Kong Security Co., Ltd.

Taiwan Security Co., Ltd. Investee evaluated based on equity method

$ 759,709 $ 600,000 $ 600,000

$ - 9.24 $1,899,273

Note: (1) Limits to endorsement and guarantee are conducted by subsidiaries in accordance with Articles 36 and 38 of Securities Transaction Law, regulations of (86) Tai-Tsai-Cheng (VI) No. 00669

dated February 12, 1997 of Securities and Futures Commission, Ministry of Finance and operation procedures for endorsement and guarantee approved by the general shareholders’ meeting:

The total amount of endorsement and guarantee provided by the Company for outside parties and the limit to endorsement and guarantee provided for a single entity are 50% and 20% of the

paid-in capital, respectively.

(2) In accordance with above-mentioned regulations, the upper limit to endorsement and guarantee provided by the Company for outside parties for 2011 was paid-in capital 3,798,545×50%＝

1,899,273, and the limit to endorsement and guarantee provided for a single entity was paid-in capital 3,798,545×20%=759,709.

(3) The amount drawn during the current period was $600 million.

77

Table 2. Marketable securities:

Unit: NTD1,000

Holder Type and name Affiliation to the issuer Account title End of year

Remarks Share(s) Book value Equity (%) Market price / net worth

TSEC/GTSM listed shares Shin-Po Investment

Co., Ltd. Taiwan Secom Co., Ltd. N/A Fair value change

recognized as income / expense

23,638 $ 1,532 - $ 1,532

Shin Hai Gas Corporation N/A 〃 772,282 31,586 0.50 31,586 Great Taipei Gas Corporation The Company is its corporate

director. 〃 1,322,726 27,711 0.26 27,711

Shinkong Synthetic Fibers Corporation

N/A 〃 395,375 3,839 0.02 3,839

Ambassador Hotel Co., Ltd. N/A 〃 500,000 15,775 0.19 15,775 Taishin Financial Holding

Co., Ltd. N/A 〃 475,663 5,494 0.01 5,494

First Financial Holding Co., Ltd. N/A 〃 400,089 8,852 - 8,852 Shihlin Electric Co., Ltd. The Company is its corporate

director. 〃 131,000 4,716 - 4,716

Chunghwa Telecom Co., Ltd. N/A 〃 66,824 6,315 - 6,315 HTC Corporation N/A 〃 28,787 8,650 - 8,650 Cathay Holdings N/A 〃 52,500 1,654 - 1,654 Shinkong Spinning Co., Ltd. N/A 〃 2,423,000 - 97,647 97,647 $ 213,771 $ 213,771 TSEC/GTSM listed shares Taiwan Shin Kong

Security Co., Ltd. Great Taipei Gas Corporation The same group member Available-for-sale

financial assets − current

4,394,000 $ 92,054 0.85 $ 92,054

Taishin Financial Holding Co., Ltd.

Its Chairman is the representative of the Company’s corporate director.

〃 282,048 3,258 - 3,258

Shin Kong Financial Holding Co., Ltd.

Its supervisor is the Company’s Chairman.

〃 55,340,043 453,235 0.66 453,235

Shin Hai Gas Corporation The same group member 〃 199,619 8,164 0.14 8,164 Cosmo Bank, Taiwan N/A 〃 127,210 1,254 0.01 1,254 Shinkong Synthetic Fibers

Corporation The same group member 〃 9,426,931 91,536 0.52 91,536

(To be continued)

78

(Continued)



Shinkong Spinning Co., Ltd. The same group member Available-for-sale financial assets − current

1,871,000 $ 75,401 0.62 $ 75,401

SinoPac Holding Co., Ltd. N/A 〃 338,838 4,219 - 4,219 Creative Sensor Inc. N/A 〃 322,461 4,789 0.25 4,789 Huanan Financial Holding

Co., Ltd. N/A 〃 123,362 2,072 - 2,072

Shihlin Electric Co., Ltd. N/A 〃 500,000 18,000 0.10 18,000 Taiwan Secom Co., Ltd. N/A 〃 38,000 2,462 0.01 2,462 MasterLink Securities

Corporation N/A 〃 6,172,000 56,906 0.40 56,906

Shin-Po Investment Co., Ltd.


N/A 〃 20,620,000 168,877 - 168,877

HIWIN TECHNOLOGIES CORP

N/A 〃 42,630 9,080 - 9,080

Yulon Motors Co., Ltd. N/A 〃 80,000 4,400 - 4,400 Yi Kong Security Company Limited

United Micro Electronics N/A 〃 230,693 2,699 - 2,699 Cybertan Technology Inc. N/A 〃 32,552 812 0.01 812

SinoPac Holding Co., Ltd. N/A 〃 308,332 3,839 - 3,839 Shin Kong Financial Holding

Co., Ltd. Its supervisor is the Company’s Chairman

〃 29,250,190 239,559 0.35 239,559

Jih Sun Financial Holding Co., Ltd.

N/A 〃 397,835 3,298 0.01 3,298


N/A 〃 2,623,365 25,473 0.14 25,473

Great Taipei Gas Corporation N/A 〃 4,530,000 94,904 0.88 94,904 Shinkong Spinning Co., Ltd. N/A 〃 3,000,000 120,900 1.00 120,900 MasterLink Securities

Corporation N/A 〃 6,319,000 58,261 0.41 58,261

HTC Corporation N/A 〃 8,000 2,404 - 2,404 Ambassador Hotel Co., Ltd. N/A 〃 100,000 3,155 - 3,155 (To be continued)

79

(Continued)



Taiwan Security Co., Ltd.


Its supervisor is the Company’s Chairman

Available-for-sale financial assets − current

225,087 $ 2,089 - $ 2,089

Shin Hai Gas Corporation N/A 〃 37,497 1,534 0.01 1,534 Great Taipei Gas Corporation N/A 〃 28,068 588 0.03 588 eTech Pro Co., Ltd.

Taiwan Secom Co., Ltd. N/A 〃 254,000 16,459 - 16,459 Great Taipei Gas Corporation N/A 〃 957,000 20,049 - 20,049

Shinsoft Co., Ltd.

Shinkong Insurance Co., Ltd. N/A 〃 70,000 1,393 - 1,393 Taishin Financial Holding Co., Ltd.

N/A 〃 194,108 2,242 - 2,242

Taiwan Secom Co., Ltd. N/A 〃 60,000 3,888 - 3,888 Shin Hai Gas Corporation N/A 〃 11,797 - 482 482 1,599,736 1,599,736 Beneficiary certificates of fund Taiwan Shin Kong Security Co., Ltd.

Shinkong Chi-Shin Fund N/A 〃 1,992,614.04 $ 30,006 $ 30,006 Hsin Kong diverse compound income combination fund.

N/A 〃 1,000,000 9,930 9,930

Taishin 1699 currency market fund

N/A 〃 2,285,453.10 30,006 30,006

Taishin Rogers global asset fund N/A 〃 500,000 5,115 5,115 Cathay strategic high yield

securities fund N/A 〃 300,000 3,000 3,000

Yi Kong Security Company Limited

Shin Kong Conventional Industries Fund

N/A 〃 1,000,000 8,540 - 8,540

Shinkong Taiwan Fortune Fund N/A 〃 291,493 5,093 - 5,093 Shinkong Chi-Shin Fund N/A 〃 1,350,772 20,340 - 20,340 Shin Kong Cross Strait Selective

Fund N/A 〃 1,000,000 9,540 - 9,540

SKIT Asia Equity Fund N/A 〃 162,665 3,572 - 3,572 Shin Kong flexible increment

100 fund N/A 〃 400,000 3,824 - 3,824

Shin Kong diverse composite income fund

N/A 〃 600,000 5,958 - 5,958

(To be continued)

80

(Continued)



eTech Pro Co., Ltd. Shinkong Chi-Shin Fund N/A Available-for-sale financial assets − current

815,785.67 $ 12,285 - $ 12,285

Shinkong Optical Networking Co., Ltd.

Taishin 1699 Bond Fund N/A 〃 611,407 - 8,027 8,027

155,236 155,236 $ 1,754,972 $ 1,754,972

Non-public/non-OTC listed shares Shin Kong Overseas

Enterprise Co., Ltd.


Investee evaluated based on equity method

Long-term investment based on equity method

1,800,000 $ 15,927 36.00 $ 15,927


Taiwan Ritan Co., Ltd. Investee evaluated based on equity method

〃 228,000

392 30.00

392

$ 16,319 $ 16,319 Domestic non-TSEC/non-GTSM listed shares

Taiwan Shin Kong Security Co., Ltd.

Lien-An Service Co., Ltd. Its Chairman is the Company’s Chairman.


475,000 $ 4,750 19.00 $ 6,474

First International Telecom Corp. The Company is its corporate director.

〃 18,792,268 - 4.18 -

Jhong Jing Technology Co., Ltd. N/A 〃 216,189 2,162 0.36 2,354 WK Technology Fund V Limited N/A 〃 2,000,000 20,000 1.11 15,600 Li Yu Venture Capital Co., Ltd. N/A 〃 213,724 1,774 1.19 1,701 Industrial Bank of Taiwan N/A 〃 15,577,154 150,000 0.65 174,153 Taiwan Fuhbic Corporation N/A 〃 559,119 5,591 4.30 6,363 WK Technology Fund

VII Limited N/A 〃 5,000,000 43,850 2.66 38,150

Asia Pacific Telecom Group The Company is its corporate director.

〃 24,145,000 92,484 0.74 258,834

FuYu Venture Capital Fund Co., Ltd.

The Company is its corporate director.

〃 1,950,750 19,508 3.70 23,116

(To be continued)

81

(Continued)



Citron Network Inc. N/A Financial assets carried at cost - noncurrent

564,706 $ - 4.71 $ -

Cyun He Venture Capital Co., Ltd.

N/A 〃 1,575,000 12,302 2.50 14,459

Kun Ji Venture Capital Co., Ltd. N/A 〃 2,000,000 10,000 2.00 17,920 IBT Venture Co., Ltd. The Company is its corporate

director. 〃 390,863 3,909 1.86 5,746

Shin Kong Chao Feng Co., Ltd. N/A 〃 180,000 15,000 2.00 10,703 Geniron.com Inc. The Company is its corporate

director. 〃 1,219,999 6,100 5.30 7,064

Kaohsiung Rapid Transit Corporation

N/A 〃 5,000,000 11,050 0.50 7,550

Shin Kong Mitsukoshi Department Store Co., Ltd.

N/A 〃 44,232,309 298,036 3.91 1,174,368

Taishin Securities Investment Trust Co., Ltd.

N/A 〃 2,398,987 28,788 8.00 27,181

Great Taipei Broadband Co., Ltd.

The Company is its corporate director.

〃 14,500,000 55,390 9.67 55,390

Loyo Travel Co., Ltd. N/A 〃 25,000 250 1.39 365 Gyu-Kaku Co., Ltd. N/A 〃 300,000 3,000 5.00 2,610 Pac-Link Bioventures Capital

Investment Corp. N/A 〃 3,000,000 22,050 3.00 25,830

VIBO Telecom Inc. N/A 〃 72,349 724 0.01 425 Shin-Shen-Er Venture Capital N/A 〃 4,750,000 47,500 3.23 50,968 Yen-Din Venture Capital N/A 〃 5,000,000 50,000 2.08 45,700 Hundure Technology Co., Ltd. The Company is its corporate

director. 〃 670,000 9.73 10,720 13,125

914,938 1,986,149 Foreign non-public/non-OTC listed

shares

Budworth Investments Limited N/A 〃 1,175,000 17,153 5.00 24,793 COM2B., CO. N/A 〃 1,250,000 2.78 7,068 3,650 24,221 28,443 939,159 2,014,592 (To be continued)

82

(Continued)



Non-public/non-OTC listed shares Shin-Po Investment

Co., Ltd. Chien Hsiang Security Service Co., Ltd.

N/A Financial assets carried at cost - noncurrent

2,743,648 $ 30,000 8.85 $ 24,556

Geniron.com Inc. N/A 〃 570,000 3,135 2.48 3,329 Leeco Corporation N/A 〃 267,713 - 1.06 -

Hundure Technology Co., Ltd. N/A 〃 620,000 9,300 9.00 11,544 Jade Pacific Corporation N/A 〃 3,466 - 0.57 - INFG Co., Ltd. N/A 〃 306,540 - 4.26 - Triple Domain Vision Co., Ltd. N/A 〃 437,000 3,242 5.94 3,741 Lifeplus Co., Ltd. N/A 1,500,000 12.66 15,000 - 60,677 43,170 Yi Kong Security

Company Limited Lien-An Service Co., Ltd. Its Chairman is the

Company’s Chairman. 〃 5,000 50 0.20 70


N/A 〃 13,439,236 86,880 1.20 353,855

Shin Shou Building Management Service Co., Ltd.

N/A 〃 430,000 4,140 1.00 4,140

First International Telecom Corp. N/A 〃 5,555,000 - 1.39 - Great Taipei Broadband Co., Ltd. N/A 〃 9,000,000 6.00 53,550 34,200 144,620 392,195 Shinsoft Co., Ltd.

First International Telecom Corp. N/A 〃 1,111,000 - 0.25 - Geniron.com Inc. N/A 〃 950,000 4,937 4.13 4,937 Triple Domain Vision Co., Ltd. N/A 〃 875,000 11.90 6,495 6,495

$ 1,155,888 $ 2,461,749 Domestic non-TSEC/non-GTSM listed shares


Shin-Po Investment Co., Ltd. Investee evaluated based on equity method


44,147,649 $ 577,030 76.38 $ 577,030 Note



〃 20,800,395 770,956 69.00 770,956 Note

(To be continued)

83

(Continued)



Taiwan Security Co., Ltd. Investee evaluated based on equity method


31,882,586 $ 739,077 99.58 $ 739,077 Note

Yi Kong Building Management Service Co., Ltd


〃 4,000,000 145,223 80.00 145,223 Note

eTech Pro Co., Ltd. Investee evaluated based on equity method

〃 3,430,000 61,631 49.00 61,631 Note

Shin Kong Aerotech International Co., Ltd.


〃 Note

Shinsoft Co., Ltd. Investee evaluated based on equity method

〃 3,986,817 110,697 57.43 110,697 Note

Shincluster Electronics Co., Ltd. Investee evaluated based on equity method

〃 848,160 10,716 19.00 10,716 Note

New Light International Co., Ltd.


〃 950000 12,369 19.00 12,369



〃 100,000 100.00 902 Note 902

2,428,601 2,428,601 Foreign non-public/non-OTC

listed shares

Shin-Po International Limited Investee evaluated based on equity method

〃 480,000 19,771 100.00 19,771 Note

Thai-Sk Security International Co., Ltd.


〃 1,135 11,493 52.06 11,493 Note



〃 16,000 40.00 2,352 Note 2,352

33,616 33,616 $ 2,462,217 $ 2,462,217

Note: The merged business entities have been written off entirely.

84

Table 3. Cumulative amount of the same marketable security purchased or sold reaching $100 million or more than 20% of the paid-in capital

Unit: NTD1,000

Purchased and sold companies Type and name Account title Counterpart Affiliation

Beginning of year Purchased Sold End of year

Share(s) Amount Share(s) Amount Share(s) Selling price Book cost Disposal gain or loss Share(s) Amount


Shinkong Spinning Co., Ltd.

Available-for-sale financial products - current

- - 1,492,000 $ 53,801 3,661,000 $ 151,140 3,282,000 $ 133,233 $ 130,525 $ 2,708 1,871,000 $ 75,401 (note)

Note: includes 985 thousand NTD gain from valuation.

85

Table 4. Purchase/sale amount of transactions with related parties reaching 100 million NTD or more than 20% of the paid-in capital:

Unit: NTD1,000

Supplier (customer) Counterpart Affiliation

Status Distinctive terms and

conditions of trade and the reasons

Notes/accounts receivable (payable)

Remarks Purchase

(sale) Amount

Percentage in total purchase (sale) amount

%

Duration Unit price Duration Balance

Percentage in total

accounts/notes receivable

(payable) % Taiwan Shin Kong Security Co., Ltd.


Invested company valued with Equity method

Fees for installation

$ 219,138 11 Same as the general

customers’

Subject to the contract

Same as the general

customers’

( $ 23,626 ) 16 Note


〃 Fees for on-site service

346,997 17 〃〃〃 ( 49,059 ) 32 Note


86

Table 5. Information related to investees where the Company can exercise significant influence: Unit: NTD1,000

Investor Investee Address Principal business Original investment cost Holdings at end of year Net income of

investee

Recognized investment

Income Remarks End of the

current period End of the

previous period Share(s) Percentage (%) Book value



5F, No. 128, Xing Ai Rd., Taipei City

General investment business

$ 441,476 $ 441,476 44,147,649 76.38 $ 577,030 $ 63,794 $ 48,726 Investee evaluated based on equity method


1F, No. 19-6, San Chung Rd., Taipei City

Design, installation and maintenance of disaster, theft and fire-resistant devices, and the business related to security defense such as theft, fire and disaster prevention in offices, business places, factories and warehouses.

27,600 27,600 20,800,395 69.00 770,956 126,591 87,347 Investee evaluated based on equity method


B1, No. 126, Section 1, Chien Kuo North Road, Taipei City

Transportation and security maintenance of cash or other precious articles




Management of apartment buildings


eTech Pro Co., Ltd. 1F, No. 128, Xing Ai Rd., Taipei City

Installation and transaction of computer equipment and electronic information software




GPS for vehicles - 43,680 - - - 11,093 10,909 Investee evaluated based on equity method

Shinsoft Co., Ltd. 3F., No.128, Xinhu 2nd Rd., Taipei City

Information software service


Shincluster Electronics Co., Ltd.

14F, No. 951, Chung Cheng Rd., Chung Ho Dist, New Taipei City

Manufacture and transaction of security facilities

5,700 5,700 848,160 19.00 10,716 5,447 958 Investee evaluated based on equity method



Machinery equipment production

1,000 1,000 100,000 100.00 902 ( 47 ) ( 47 ) Investee evaluated based on equity method


14F., No.123, Sec. 2, Nanjing E. Rd., Taipei City

Consultant of lease and management of real estates

9,500 9,500 950,000 19.00 12,369 16,273 3,092 Investee evaluated based on equity method

Shin-Po International Limited

Samoa Offshore holding company

16,742 16,742 480,000 100.00 19,771 4,873 4,873 Investee evaluated based on equity method

Thai-SK Security International Co., Ltd.

Thailand Security business 56,491 56,491 1,135 52.06 11,493 ( 10,711 ) ( 5,576 ) Investee evaluated based on equity method


Thailand Security business 1,598 1,598 16,000 40.00 2,352 1,709 683 Investee evaluated based on equity method


87

Table 6. Information related to investees where the reinvested company can exercise significant influence:

1. Shin-Po Investment Co., Ltd.

Unit: (USD/ NT$1,000)


investee








Performance of security machine project

$ 15,940 $ 15,940 1,594,000 99.63 $ 31,539 $ 10,026 $ 9,989 Note 1


Information software service

29,620 29,620 2,522,437 36.33 70,026 24,843 9,025 Note 1

SHIN-TOW OVERSEAS HOLDING CO., LTD.


79,625 ( USD 3,503,500 )

79,625 ( USD 3,503,500 )

3,503,500 100.00 111,292 9,366 ( USD 317,422 )

9,366 ( USD 317,422 )

Note 2



Consultant of lease and management of real estates

15,075 15,075 750,000 15.00 16,947 16,273 2,441 Note 1

Shin Kong Telecommunications Co., Ltd.


Internet communication service

10,000 10,000 1,000,000 100.00 14,881 6,608 6,608 Note 2

Yi Kong House Keeping Service Co., Ltd

5F, No. 126, Section 1, Chien Kuo North Road, Taipei City

Building sanitation service

3,000 3,000 300,000 30.00 2,575 ( 1,398 ) ( 419 ) Note 2

Taiwan Ritan Co., Ltd.


Fire safety equipment inspection service

2,280 1,140 228,000 30.00 392 ( 6,027 ) ( 1,804 ) Note 2

Note 1: The said investees recognize their investment income according to the financial statements audited by CPA.

Note 2: The said investees recognize their investment income according to the financial statements not audited by CPA.

2. SHIN-TOW OVERSEAS HOLDING CO., LTD



investee






SHIN-PO INVESTMENT OVERSEAS ENTERPRISE CO., LTD.


USD$3,493,500 ( NTD 76,696 )

USD$3,493,500 ( NTD 76,696 )

3,493,500 100.00 USD$ 3,830,989.66 ( NTD111,252 )

USD$ 318,635.44 ( NTD 9,423 )

USD$ 318,635.44 ( NTD 9,423 )

Note

Note: The said investee recognized its investment income according to the financial statements not audited by CPA.

88

3. SHIN-PO INVESTMENT OVERSEAS ENTERPRISE CO., LTD.



investee Recognized

investment Income Remarks End of the current period

End of the previous period Share(s) Percentage

(%) Book value

SHIN-PO INVESTMENT OVERSEAS ENTERPRISE CO., LTD.

Shanghai Shin Kong Security Prevention Technology Co., Ltd.

Room 717, 7/F, No.11, Lane 4666, Gonghexin Road, Minbei Zone, Shanghai

Design and construction of public security prevention technology project

USD$ 351,000 ( NTD 11,210 )

USD$ 351,000 ( NTD 11,210 )

351,000 87.75 USD$ 199,234 ( NTD 5,786 )

( USD$ 12,149 ) ( NTD -359 )

( USD$ 10,661 ) ( NTD -315 )

Note

Shanghai Shin Kong Property Management Ltd.

Room 208, 2/F, No.600, Pingshun Road, Minbei Zone, Shanghai

Property management USD$ 580,000 ( NTD 18,803 )

USD$ 580,000 ( NTD 18,803 )

580,000 86.57 USD$ 1,146,418 ( NTD 33,292 )

USD$ 311,019 ( NTD 9,198 )

USD$ 269,249 ( NTD 7,963 )

Note

Beijing Yi Kong Property Management Ltd.

Rm. 209, 1F, No. 18, Bai-Tzi-Wong Road, Chaio-Yung District, Beijing City


USD$ 420,000 ( NTD 13,600 )

420,000 70.00 USD$ 249,282 ( NTD 7,239 )

USD$ 30,667 ) ( NTD -907 )

USD$ 21,467 ( NTD -635 )

Note

Xiamen Shin-Po Property Service Co., Ltd.

Unit 16, 7F, Jimei Institute Soho, Jimei District, Xiamen City


USD$ 300,000 ( NTD 9,146 )

300,000 100.00 USD$ 383,085 ( NTD 11,125 )

USD$ 62,285 ( NTD 1,842 )

USD$ 62,285 ( NTD 1,842 )

Note

Chengdu Yi Kong Property Management Ltd.

No.28, 20/F, Suo'er International Building, No.130, Ring Road(W. Section 1), Wuhou District, Chengdu


- -

210,000 70.00 USD$ 209,524 ( NTD 6,085 )

( USD$ 3,480 ) ( NTD -103 )

( USD$ 2,436 ) ( NTD -72 )

Note


4. Xiamen Shin-Po Property Service Co., Ltd.

Unit: RMB/ NT$1,000


investee Recognized



(%) Book value

Xiamen Shin-Po Property Service Co., Ltd.

Xiamen Shin-Po Security Equipment Ltd.

Room 305, No. 152-1, Tsendong Rd., Jimei District, Xiamen City

Sale of security equipment and material, and personal self-defense equipment

$ 100,000 ( NTD 467 )

$ 100,000 ( NTD 467 )

100,000 100 $ 92,405 ( NTD 427 )

( $ 7,594 ) ( NTD -48 )

( $ 7,594 ) ( NTD -48 )

Note


5. Yi Kong Security Company Limited

Unit: THB/NTD ,000


investee Recognized



(%) Book value




Cleaning of residences and buildings

$ 1,950 $ 1,950 195,000 3.90 $ 7,080 $ 19,648 $ 766 Note 1



General investment business

112,843 112,843 13,644,351 23.61 178,367 63,794 15,061 Note 1

Thai-SK Security International Co. Ltd.

Thailand Security business 4,910 ( THB 5,000,000 )

4,910 ( THB 5,000,000 )

100 4.59 1,016 ( THB 1,065,837 )

( 10,711 ) ( THB -11,204,355 )

( 491 ) ( THB -513,961 )

Note 2

Note 1: The said investees recognize their investment income according to the financial statements audited by CPA.

Note 2: The said investees recognize their investment income according to the financial statements not audited by CPA.

89

6. Yi Kong Building Management Service Co., Ltd

Unit: NTD1,000


investee


Income Remarks End of the current

period End of the



eTech Pro Co., Ltd. 1F, No. 128, Xing Ai Rd., Taipei City Management of parking lots, installation of computer equipment, wholesale of electronic materials, wholesale of office machines and equipment, wholesale and retail of information software, etc.

$ 34,300 $ 34,300 3,430,000 49.00 $ 61,401 $ 8,815 $ 4,319 Note 1



Consultant of lease and management of real estate

15,075 15,075 750,000 15.00 16,947 16,273 2,441 Note 1



Building sanitation service 7,000 7,000 700,000 70.00 6,008 ( 1,398 ) ( 978 ) Note 2

Note 1: The said investee recognizes its investment income according to the financial statements audited by CPA.

Note 2: Figures relating to the above investees were based on unaudited financial statements.

7. eTech Pro Co., Ltd.

Unit: NTD1,000


investee


Income Remarks End of the current

period End of the


eTech Pro Co., Ltd. Shincluster Electronics Co., Ltd.

14F, No. 951, Chung Cheng Rd., Chung Ho Dist, New Taipei City

Manufacture and transaction of security machines

$ 5,700 $ 5,700 848,160 19.00 $ 10,716 $ 5,447 $ 952 Note


Information software service 3,500 3,500 420,000 6.05 11,661 24,843 1,503 Note


5F, No. 128, Xing Ai Rd., Taipei City GPS for vehicles - 600 - - - 11,093 54 Note




4,640 4,640 400,000 8.00 14,330 19,578 1,566 Note

Note: The said investees recognize their investment income according to the financial statements that are not audited by CPA.

8. Shincluster Electronics Co., Ltd.

Unit: USD/THB/NT$ Thousand


investee Recognized



(%) Book value


Shincluster International Limited


$ 11,442 ( USD 331,000 )

$ 11,442 ( USD 331,000 )

331,000 100.00 $ 595 ( USD 20,510 )

( $ 48 ) ( USD -1,637 )

( $ 48 ) ( USD -1,637 )

Note


Thailand Security business 4,995 ( THB 5,000,000 )

4,995 ( THB 5,000,000 )

100 4.59 1,013 ( THB 1,062,049 )

( 10,711 ) ( THB -11,201,579 )

( 491 ) ( THB -513,834 )

Note


9. Shincluster International Limited



investee Recognized



(%) Book value


Shanghai Shin Kong Security Prevention Technology Co., Ltd.

Room 717, 7/F, No.11, Lane 4666, Gonghexin Road, Minbei Zone, Shanghai

Design and performance of public security prevention technology project

USD$ 21,000 ( NTD 675 )

USD$ 21,000 ( NTD 675 )

- 5.25 USD$ 11,920 ( NTD 346 )

( USD$ 12,150 ) ( NTD -359)

( USD$ 637 ) ( NTD -19 )

Note

Note: The aforementioned companies had investment gain and loss recognized in accordance with the financial statements not audited by CPAs.

90

10. Thai-SK Security International Co., Ltd. Unit: (THB/ NT$1,000)


investee Recognized



(%) Book value



Thailand Security THB 360,000 ( NTD 351 )

THB 360,000 ( NTD 351 )

36,000 9.00 THB 553,151 ( NTD 527 )

THB 922,200 ( NTD 882 )

THB 82,998 ( NTD 79 )

Note


11. Shin-Po International Limited



investee Recognized



(%) Book value


Shin Kong Overseas Enterprise Co., Ltd.


USD$ 465,000 ( NTD 15,057 )

USD$ 465,000 ( NTD 15,057 )

465,000 100.00 USD$ 677,593 ( NTD 19,677 )

USD$ 166,388 ( NTD 4,921 )

USD$ 166,388 ( NTD 4,921 )

Note


12. Shin Kong Overseas Enterprise Co., Ltd.



investee Recognized



(%) Book value

Shin Kong Overseas Enterprise Co., Ltd.


5-7F, Kangfa Building, Si Siang Avenue, Baoan District, Shenzhen

Machinery security service and transaction of security facilities

USD$ 449,034 ( NTD 15,523 )

USD$ 449,034 ( NTD 15,523 )

1,800,000 36.00 USD$ 548,445 ( NTD 15,927 )

USD$ 416,785 ( NTD 12,326 )

USD$ 150,043 ( NTD 4,423 )

Note


13. Shenzhen Shen Po Public Security Network Ltd.

Unit: RMB/ NT$1,000


investee Recognized



(%) Book value


Shenzhen Shen Po Property Management Co., Ltd.

5-7F, Kangfa Building, Si Siang Avenue, Baoan District, Shenzhen

Property management $ 2,700,000 ( NTD 11,418 )

$ 2,700,000 ( NTD 11,418 )

- 90.00 $ 3,869,768 ( NTD 17,879 )

( $ 679,766 ) ( NTD -3,185 )

( $ 611,789 ) ( NTD -2,866 )

Note


14. Shinkong Optical Networking Co., Ltd.

Unit: NTD1,000


investee Recognized



(%) Book value





$ 4,640 $ 4,640 400,000 8.00 $ 14,522 $ 19,578 $ 1,566 Note

Note 1: The said investee recognizes its investment income according to the financial statements audited by CPA.

91

Table 7. Endorsement and guarantee made by reinvested companies for others:

Unit: NTD1,000

No. Endorsed/guaranteed by

Counterpart Limit of endorsement/gua

rantee on particular enterprise

Maximum balance of

endorsement / guarantee made

during the current period

Balance of endorsement /

guarantee at end of the period

Endorsement/guarantee secured by company assets

Proportion of total endorsement/guarantee to the net worth as stated in the most

recent financial statement(%)

Maximum limit of

endorsement/guarantee

Name Affiliation

4 Taiwan Security Co., Ltd. Taiwan Shin Kong Security Co., Ltd.

Investee evaluating the Company based on equity method

$ 160,079 $ 151,967 $ 151,967 $ - $ 256,126

Note: 1. Limit of endorsement/guarantee was processed by reinvested companies in accordance with regulations stipulated in Article 36 and 38 of Securities Exchange Act and Letter of Tai-tsai-cheng-(6) No.

00669 of Securities and Futures Bureau, Ministry of Finance, dated February 12, 1997, and with procedures for endorsement/guarantee approved by shareholders of reinvested companies.

2. According to the said regulations, the maximum limit of endorsement/guarantee to be made by Taiwan Security Co., Ltd. externally is $256,126 thousand = paid-in capital $320,158 thousand × 80%, and

the Limit of endorsement/guarantee on particular enterprise is $160,079 thousand = paid-in capital $320,158 thousand × 50%.

92

Table 8. Marketable securities held by reinvested companies:

Unit: NTD1,000

Holder Type and name Affiliation to the issuer Account title

End of year Remarks Share(s) Book value Equity (%) Market price /

net worth Shin-Po Investment Co., Ltd.

TSEC/GTSM listed shares

Taiwan Secom Co., Ltd. N/A Fair value change recognized as income / expense

23,638 $ 1,532 - $ 1,532

Shin Hai Gas Corporation N/A 〃 772,282 31,586 0.50 31,586 Great Taipei Gas Corporation The Company is its

corporate director. 〃 1,322,726 27,711 0.26 27,711


N/A 〃 395,375 3,839 0.02 3,839

Ambassador Hotel Co., Ltd. N/A 〃 500,000 15,775 0.19 15,775 Taishin Financial Holding

Co., Ltd. N/A 〃 475,663 5,494 0.01 5,494

First Financial Holding Co., Ltd.

N/A 〃 500,089 8,852 - 8,852

Shihlin Electric Co., Ltd. The Company is its corporate director.

〃 131,000 4,716 - 4,716

Chunghwa Telecom Co., Ltd. N/A 〃 66,824 6,315 - 6,315 HTC Corporation N/A 〃 28,787 8,650 - 8,650 Cathay Holdings N/A 〃 52,500 1,654 - 1,654 Shinkong Spinning Co., Ltd. N/A 〃 2,423,000 - 97,647 97,647 $ 213,771 $ 213,771 Shin Kong Financial Holding

Co., Ltd. N/A Available-for-sale

financial assets − current

20,620,000 $ 168,878 - $ 168,878

HIWIN TECHNOLOGIES CORP

N/A 〃 42,630 9,080 - 9,080

Yulon Motors Co., Ltd. N/A 〃 80,000 - 4,400 4,400 $ 182,358 $ 182,358

(To be continued)

93

(Continued)




Non-public/non-OTC listed shares Shinkong Optical Networking Co., Ltd.



1,594,000 $ 31,539 99.63 $ 31,539 Note

Shinsoft Co., Ltd. Investee evaluated based on equity method

〃 2,522,437 70,026 36.33 70,026 Note



〃 3,503,500 111,292 100.00 111,292 Note



〃 1,000,000 14,881 100.00 14,881 Note



〃 750,000 16,947 15.00 16,947 Note

Taiwan Ritan Co., Ltd. Investee evaluated based on equity method

〃 228,000 392 30.00 392



〃 300,000 30.00 2,575 Note 2,575

$ 247,652 $ 247,652 Taiwan Security Co., Ltd. Controlled by the same

parent company Financial assets carried at cost - noncurrent

67,260 $ 500 0.21 $ 1,445 Note

eTech Pro Co., Ltd. Controlled by the same parent company

〃 135,000 1,350 1.93 2,318 Note


〃〃 89,280 600 2.00 1,080 Note

Chien Hsiang Security Service Co., Ltd.

N/A 〃 2,743,648 30,000 8.85 24,556

Geniron.com Inc. N/A 〃 570,000 3,135 2.48 3,329 Leeco Corporation N/A 〃 267,713 - 1.06 - Hundure Technology Co., Ltd. N/A 〃 620,000 9,300 9.00 11,544 Jade Pacific Corporation N/A 〃 3,466 - 0.57 - INFG Co., Ltd. N/A 〃 306,540 - 4.26 - Triple Domain Vision Co., Ltd. N/A 〃 437,000 3,242 5.94 3,741 Lifeplus Co., Ltd. N/A 〃 1,500,000 12.66 15,000 - 〃 $ 63,127 $ 47,013 (To be continued)

94

(Continued)




TSEC/GTSM listed shares Taiwan Shin Kong Security Co., Ltd.



3,219,108 $ 112,669 0.85 $ 112,669 Note

United Micro Electronics N/A 〃 230,693 2,699 - 2,699 Cybertan Technology Inc. N/A 〃 32,552 812 0.01 812 SinoPac Holding Co., Ltd. N/A 〃 308,332 3,839 - 3,839 Shin Kong Financial Holding


〃 29,250,190 239,559 0.35 239,559

Jih Sun Financial Holding Co., Ltd.

N/A 〃 397,835 3,298 0.01 3,298


N/A 〃 2,623,365 25,473 0.14 25,473

Great Taipei Gas Corporation N/A 〃 4,530,000 94,904 0.88 94,904 Shinkong Spinning Co., Ltd. N/A 〃 3,000,000 120,900 1.00 120,900 MasterLink Securities

Corporation N/A 6,319,000 58,261 0.41 58,261

HTC Corporation N/A 〃 8,000 2,404 - 2,404 Ambassador Hotel Co., Ltd. N/A 〃 100,000 - 3,155 3,155 667,973 667,973 Beneficiary certificates of fund Shin Kong Conventional

Industries Fund N/A Available-for-sale

financial assets − current 1,000,000 8,540 - 8,540

Shinkong Taiwan Fortune Fund N/A 〃 291,493 5,093 - 5,093 Shinkong Chi-Shin Fund N/A 〃 1,350,772 20,340 - 20,340 Shin Kong Cross Strait

Selective Fund N/A 〃 1,000,000 9,540 - 9,540

SKIT Asia Equity Fund N/A 〃 162,665 3,572 - 3,572 Shin Kong flexible increment

100 fund N/A 〃 400,000 3,824 - 3,824

Shin Kong diverse composite income fund

N/A 〃 600,000 - 5,958 5,958

56,867 56,867 $ 724,840 $ 724,840 (To be continued)

95

(Continued)



Non-public/non-OTC listed shares Shin-Po Investment Co., Ltd. Controlled by the same

parent company Long-term investment under Equity method

13,644,351 $ 178,367 23.61 $ 178,367 Note


Controlled by the same parent company


195,000 7,080 3.90 7,080 Note



〃 100 1,016 ( THB 1,065,837

4.59

)

1,016 ( THB 1,065,837

Note

) $ 186,463 $ 186,463 Yi Kong Security Company Limited

Lien-An Service Co., Ltd. Its Chairman is the Company’s Chairman.


5,000 $ 50 0.20 $ 70

Taiwan Security Co., Ltd. Controlled by the same parent company

〃 60,534 450 0.19 1,300 Note


N/A 〃 13,439,236 86,880 1.20 353,855

Shin Shou Building Management Service Co., Ltd.

N/A 〃 430,000 4,140 1.00 4,140

First International Telecom Corp.

N/A 〃 5,555,000 - 1.39 -

Great Taipei Broadband Co., Ltd.

N/A 〃 9,000,000 6.00 53,550 34,200

$ 145,070 $ 393,565 SKS TSEC/GTSM listed shares Shin Kong Financial Holding



255,087 $ 2,089 - $ 2,089

Shin Hai Gas Corporation N/A 〃 37,497 1,534 0.01 1,534 Great Taipei Gas Corporation N/A 〃 28,068 0.03 588 588

$ 4,211 $ 4,211 Yi Kong Building Management Service Co., Ltd

Non-public/non-OTC listed shares eTech Pro Co., Ltd. Controlled by the same

parent company Long-term investment under Equity method

3,430,000 $ 61,401 49.00 $ 61,401 Note



〃 750,000 16,947 15.00 16,947 Note



〃 700,000 70.00 6,008 Note 6,008

$ 84,356 $ 84,356 (To be continued)

96

(Continued)

Holder Type and name Affiliation to the issuer Account title

End of year Remarks Share(s) Book value Equity (%) Market price /

net worth eTech Pro Co., Ltd. Non-public/non-OTC listed shares Shincluster Electronics

Co., Ltd. Investee evaluated based on equity method


848,160 $ 10,716 19.00 $ 10,716 Note

Shinsoft Co., Ltd. Controlled by the same parent company

〃 420,000 11,661 6.05 11,661 Note



〃 400,000 8.00 14,330 Note 14,330

$ 36,707 $ 36,707 TSEC/GTSM listed shares Taiwan Secom Co., Ltd. N/A Available-for-sale

financial assets − current 254,000 $ 16,459 - $ 16,459

Great Taipei Gas Corporation N/A 〃 957,000 - 20,049 20,049 36,508 36,508 Beneficiary certificates of fund Shinkong Chi-Shin Fund N/A Available-for-sale

financial assets − current 815,785.67 - 12,285 12,285

$ 48,793 $ 48,793 Shinkong Optical Networking Co., Ltd.

Non-public/non-OTC listed shares




400,000 $ 14,522 8.00 $ 14,522 Note

Beneficiary certificates of fund Taishin 1699 Bond Fund N/A Available-for-sale

financial assets − current 611,407 $ 8,027 - $ 8,027


Non-public/non-OTC listed shares Shin Kong Overseas Enterprise Co., Ltd.



465,000 $ 677,593 ( USD 19,677 )

100.00 $ 677,593 ( USD 19,677 )

Note

(To be continued)

97

(Continued)




Non-public/non-OTC listed shares




331,000 $ 595 ( USD 20,510 )

100.00 $ 595 ( USD 20,510 )

Note


〃〃 100 1,013 ( THB 1,062,049

4.59

)

1,013 ( THB 1,062,049

Note

) $ 1,608 $ 1,608 Shinsoft Co., Ltd. TSEC/GTSM listed ordinary

shares

Shinkong Insurance Co., Ltd. N/A Available-for-sale financial assets − current

70,000 $ 1,393 - $ 1,393

Taishin Financial Holding Co., Ltd.

N/A 〃 194,108 2,242 - 2,242

Taiwan Secom Co., Ltd. N/A 〃 60,000 3,888 - 3,888 Shin Hai Gas Corporation N/A 〃 11,797 - 482 482 $ 8,005 $ 8,005 Non-public/non-OTC listed shares First International Telecom

Corp. N/A Financial assets carried at

cost - noncurrent 1,111,000 $ - 0.25 $ -

Geniron.com Inc. N/A 〃 950,000 4,937 4.13 4,937 Triple Domain Vision Co., Ltd. N/A 〃 875,000 11.90 6,495 6,495 $ 11,432 $ 11,432 Thai-SK Security International Co., Ltd.

Non-public/non-OTC listed shares Shin Kong (Thai) Security International Co., Ltd.



36,000 $ 580 ( THB 553,152 )

9.00 $ 580 ( THB 553,152 )

Note

Note: The merged business entities.

98

Table 9. Cumulative amount of the same marketable security purchased or sold reaching $100 million or more than 20% of the paid-in capital

Unit: NTD1,000

Purchased and sold companies Type and name Account title Counterpart Affiliation

Beginning of year Purchased Sold End of year

Share(s) Amount Share(s) Amount Share(s) Selling price Book cost Disposal gain or loss Share(s) Amount


Shinkong Spinning Co., Ltd.

Held-for-trading financial assets

- - 1,219,000 $ 39,618 2,924,000 $ 118,656 1,720,000 $ 71,074 $ 71,074 $ - 2,423,000 $ 97,647 (Note 1)


Available-for-sale financial products - current

- - 3,800,000 41,650 18,000,000 133,390 1,180,000 9,578 9,475 103 20,620,000 168,878 (Note 2)



〃 - - 11,250,190 96,527 18,000,000 133,364 - - - - 29,250,190 239,559 (Note 3)

Note 1: includes 10,447 thousand NTD gain from valuation.

Note 2: includes 3,313 thousand NTD gain from valuation

Note 3: includes 9,668 thousand NTD gain from valuation.

99

Table 10 The purchase and sales between the wholly owned invested company and related party reaching 100 million NTD or more than 20% of the paid-in capital:

Unit: NTD1,000

Supplier (customer) Counterpart Affiliation

Status Distinctive terms and

conditions of trade and the reasons

Notes/accounts receivable (payable)

Remarks Purchase

(sale) Amount

Percentage in total purchase (sale) amount

%

Duration Unit price Duration Balance

Percentage in total

accounts/notes receivable

(payable) % Shinkong Optical Networking Co., Ltd.



Installation revenue

$ 219,138 86 Same as the general customers’

Subject to the contract

Same as the general customers’

$ 23,626 77 Note


〃〃 On-site service revenue

346,997 33 〃〃〃 49,059 37 Note

Lien-An Service

Co., Ltd. Substantial related party On-site

service revenue

216,398 21 〃〃〃 41,718 32




Permanent security revenue

132,628 8 〃〃〃 - - Note



Investor accounting the company using the equity method

Cleaning management

cost

132,628 46 〃〃〃 - - Note


100

Table 11. Information on the investment in Mainland China:

1. Name of invested company in China, principal business, paid-in capital, mode of investment, outward/inward remittance of fund, shareholding percentage, investment income, book value of investment and investment income repatriated to Taiwan:

Unit: NTD1,000/ USD

Name of invested company in China Principal business Paid-in capital Mode of

investment

Cumulative investment

amount outward remitted from

Taiwan - beginning of the

period

Proportion of direct or indirect holdings Cumulative

investment amount outward

remitted from Taiwan - end of

the period

Shareholdings of the

Company’s direct or indirect investment (%)


Income

Book value of investment at

ending

Investment income

repatriated to Taiwan as of the

end of the period

Outward remitted Repatriated


Machinery security service and transaction of security facilities

(RMB 5,000,000)

(II) NTD 15,523 ( USD 449,034 )

$ - $ - NTD 15,523 ( USD 449,034 )

36.00 NTD 4,423 ( USD 150,043 )

(II) -

NTD 15,927 ( USD 548,445 )

$ -

Note1: Ways of investment are classified into the following four types:

(I) To invest in Mainland China companies through remittance from a third area.

(II) To invest in Mainland China companies through a company invested and established in a third area.

(III) To invest in Mainland China companies through reinvesting in an existing company in a third area.

(IV) To invest in Mainland China companies directly.

(V) Other ways.

Note 2: For the field of recognized investment Income:

(I) Please mark out if there has no investment gain or loss yet because the investment is still under planning.

(II) The basis of recognition of investment income is classified into following three types, which should be marked out.

1. Financial statements audited by an international accounting firm which cooperates with China Accounting Firm.

2. Financial statements audited by the CPAs who audit the parent company in Taiwan.

3. Others.

2. Limit of investment in Mainland China: Unit: NTD1,000/ USD

Accumulated investments outward remitted from Taiwan at Ending Investment amount approved by Investment Commission, MOEA Limit of investment amount required by Investment Commission, MOEA

NTD$15,523 thousand ( USD 449,034 )

NTD$15,523 thousand ( USD 449,034 )

NTD3,897,443 thousand ( USD 134,209 ) ( Exchange rate 1:29.04 )

Note: According to the “Criteria Governing Examination of Investment or Technology Cooperation in the territory of Mainland China” required by the official letter under Chin-Tou-Sheng Tze No. 09004624840 dated

November 20, 2001, the accumulated investments in Mainland China or limited investment amount shall be the higher of 60% of the net worth or NTD80,000 thousand.

3. Major transactions between the investees in the Mainland China and the Company occurring directly or indirectly via an enterprise in 3rd area: None

101

Table 12. Business relationship and significant transactions between parent company and subsidiaries:

Unit: NTD1,000

No. (Note 1) Name of trader Trading counterpart

Affiliation to trader

(Note 2)

Transaction

Title Amount Trading conditions

Percentage in consolidated total revenue or total

assets (Note 3)

2012 0 Taiwan Shin Kong

Security Co., Ltd. Yi Kong Security Company Limited

1 Operating revenue $ 5,237 subject to the price agreed by both parties

-

Operating cost 30,547 not materially different from the general customers’

-

Accounts payable 2,061 〃 - Rental revenue 4,528 〃 - Accounts receivable 5 〃 - Deposit received 764 without interest - Miscellaneous expenses 47 subject to the price

agreed by both parties -

Interest expense 10 〃 - Taiwan Security Co., Ltd. 1 Rental revenue 20,469 〃 - Operating cost 346,997 not materially different

from the general customers’

5

Deposit received 3 without interest - Operating expenses 3,121 subject to the price


Operating revenue 12,638 〃 - Advance charge 811 〃 - Sundry income 6,675 〃 - Receipt in advance 326 not materially different


-

Other accounts receivable 2,822 〃 - Accounts receivable 1,595 〃 -

(To be continued)

102

(Continued)



(Note 2)

Transaction



assets (Note 3)


Taiwan Security Co., Ltd. 1 Accounts payable $ 49,275 not materially different from the general customers’

-


2,817 〃 -


1 Operating expenses 10,861 subject to the price agreed by both parties

-

Operating revenue 140 〃 - Expenses payable 950 not materially different from

the general customers’ -

Receipt in advance 33 subject to the price agreed by both parties

-


1 Operating cost 43,534 〃 -

Operating revenue 205 subject to the price agreed by both parties

-

Accounts payable 15,214 not materially different from the general customers’

-


6,623 〃 -

Operating expenses 319 subject to the price agreed by both parties

-

Deposit received 12 without interest - Shinkong Optical Networking

Co., Ltd. 1 Operating cost 219,138 not materially different from

the general customers’ 3


-

Rental revenue 670 〃 - other revenue 3 〃 - Accounts payable 23,572 not materially different from


Expenses payable 58 〃 - Operating expenses 134 subject to the price agreed by

both parties -

(To be continued)

103

(Continued)

No. (Note 1) Name of trader Trading counterpart Affiliation to trader

(Note 2)

Transaction



assets (Note 3)

Interest expense $ 2 〃 - Other expenses 686 〃 - Deposit received 130 without interest - Receipt in advance 7 subject to the price



eTech Pro Co., Ltd. 1 Expenses payable 5,097 not materially different from the general customers’

-


268 〃 -

Operating expenses 28,364 subject to the price agreed by both parties

-

Rental revenue 2,678 〃 - Interest expense 7 〃 - Deposit received 9 without interest - Shin Kong Aerotech

International Co., Ltd. 1 Operating expenses 168 subject to the price


Rental revenue 91 〃 - Operating cost 6,117 not materially different


-

Sundry income 7,351 subject to the price agreed by both parties

-


Shinsoft Co., Ltd. 1 Operating revenue 1,651 subject to the price agreed by both parties

-

Rental revenue 1,885 〃 - Sundry income 3 〃 - Operating expenses 6,673 〃 - Receipt in advance 40 not materially different


-

(To be continued)

104

(Continued)


(Note 2)

Transaction



assets (Note 3)

Accounts payable $ 7,923 〃 - Expenses payable 703 〃 - Equipment accounts

payable 14,337 〃 -

Accounts receivable 42 〃 - Deposit received 1,070 without interest - Operating cost 93,082 not materially different


1

Interest expense 5 subject to the price agreed by both parties

-


1 Rental revenue 242 〃 -

Sundry income 189 〃 - Interest expense 1 〃 - Operating expenses 183 〃 - Operating revenue 27 〃 - Operating cost 21,721 〃 - Accounts payable 603 not materially different


-

Deposit received 9 without interest - 0 Taiwan Shin Kong

Security Co., Ltd. Taiwan Artificial Intelligent Robots Co., Ltd.

1 Rental revenue 36 subject to the price agreed by both parties

-

Deposit received 9 without interest - Shin-Po Investment

Co., Ltd. 1 Rental revenue 27 subject to the price


Deposit received 9 without interest - (To be continued)

105

(Continued)


(Note 2)

Transaction



assets (Note 3)

1 Yi Kong Security Company Limited


2 Operating revenue $ 34,923 not materially different from the general customers’

1

Operating cost 1,175 〃 - Accounts receivable 2,061 〃 - Notes payable 59 〃 - Operating expenses 1,329 subject to the price


Refundable deposit 777 without interest - Yi Kong Building

Management Service Co., Ltd

3 Operating revenue 158,615 subject to the price agreed by both parties

2

eTech Pro Co., Ltd. 3 Operating expenses 2 〃 - Taiwan Security Co., Ltd. 3 Operating revenue 2,271 〃 - Accounts receivable 197 not materially different


-

Shinsoft Co., Ltd. 3 Operating expenses 341 subject to the price agreed by both parties

-


3 Operating expenses 6 〃 -



5

Rental revenue 1,124 〃 - Sundry income 282 〃 - Prepayments 317 〃 - Receipt in advance 811 〃 - Expenses payable 2,097 〃 -

(To be continued)

106

(Continued)


(Note 2)

Transaction



assets (Note 3)

Operating cost $ 7,655 〃 - Operating expenses 24,259 〃 - Accounts receivable 49,202 not materially different from


Notes receivable 188 〃 - Other accounts

receivable 4,030 〃 -

Miscellaneous expenses

599 subject to the price agreed by both parties

-

Refundable deposit 3 without interest - Yi Kong Security

Company Limited 3 Operating expenses 2,271 subject to the price agreed by

both parties -

eTech Pro Co., Ltd. 3 Operating expenses 2,011 subject to the price agreed by both parties

-

Operating cost 493 〃 - Prepayments 50 〃 - Equipment accounts

payable 237 not materially different from


2 Taiwan Security Co., Ltd. Shin Kong Aerotech International Co., Ltd.

3 Operating expenses 780 subject to the price agreed by both parties

-

Operating cost 396 not materially different from the general customers’

-

Shinsoft Co., Ltd. 3 Operating expenses 129 〃 - 3 Yi Kong Building

Management Service Co., Ltd


2 Operating revenue 10,861 〃 -

2 Accounts receivable 950 〃 - Yi Kong Security

Company Limited 3 Operating cost 158,608 not materially different from


(To be continued)

107

(Continued)


(Note 2)

Transaction



assets (Note 3)

4 eTech Pro Co., Ltd. Taiwan Shin Kong Security Co., Ltd.


-

Operating expenses 2,678 〃 - Accounts receivable 5,362 not materially different


-


4 〃 -

Refundable deposit 9 without interest - 4 eTech Pro Co., Ltd. Yi Kong Security

Company Limited 3 Operating revenue 2 subject to the price


Taiwan Security Co., Ltd. 3 Operating revenue 3,195 〃 - Shinsoft Co., Ltd. 3 Operating revenue 140 〃 - Operating expenses 140 〃 Accounts receivable 30 not materially different



3 Operating revenue 25 subject to the price agreed by both parties

-



payment of goods received in advance

48 not materially different from the general customers’

-

5 Shin Kong Aerotech International Co., Ltd.



-


-


-

Other expenses 3 〃 - (To be continued)

108

(Continued)



(Note 2)

Transaction


Percentage in consolidated

total revenue or total assets

(Note 3) 5 Shin Kong Aerotech

International Co., Ltd. Taiwan Security Co., Ltd. 3 Operating revenue $ 1,172 subject to the price agreed by

both parties -

eTech Pro Co., Ltd. 3 Other expenses 3 〃 - Yi Kong Security

Company Limited 3 Operating revenue 4 〃 -

Shincluster Electronics Co., Ltd. 3 Other expenses 2 〃 - 6 Shinsoft Co., Ltd. Taiwan Shin Kong Security

Co., Ltd. 2 Operating revenue 272,192 〃 -

Operating expenses 1,934 〃 - 6 Shinsoft Co., Ltd. Taiwan Shin Kong Security

Co., Ltd. 1 Accounts payable 42 not materially different from


Accounts receivable 21,423 〃 - Operating cost 1,344 〃 - payment of goods

received in advance 884 〃 -

Refundable deposit 1,055 without interest - Yi Kong Security



325 subject to the price agreed by both parties


3 Operating revenue 131 not materially different from the general customers’

-

eTech Pro Co., Ltd. 3 payment of goods received in advance


Accounts payable 30 〃 - payment of goods



-

Operating expenses 140 〃 - Shincluster Electronics Co., Ltd. 3 Operating revenue 7 〃 - Taiwan Security Co., Ltd. 3 Operating revenue 5 〃 -

(To be continued)

109

(Continued)


(Note 2)

Transaction



assets (Note 3)

6 Shinsoft Co., Ltd. Shin Kong Telecommunications Co., Ltd.

3 Operating revenue $ 21 subject to the price agreed by both parties

-



-

7 Shincluster Electronics Co., Ltd.



-

Operating expenses 3 〃 - Accounts receivable 21,837 not materially different from


Other Prepaid Expenses

6 〃 -

Refundable deposit 12 without interest - Shinkong Optical

Networking Co., Ltd. 3 Operating revenue 39 subject to the price agreed by

both parties -

8 Shinkong Optical Networking Co., Ltd.


2 Operating revenue 220,542 〃 3

Interest revenue subject to the price agreed by both parties

-

Operating expenses 750 〃 - 8 Shinkong Optical

Networking Co., Ltd. Taiwan Shin Kong Security Co., Ltd.

2 Accounts receivable 23,629 not materially different from the general customers’

-

Refundable deposit 130 without interest - Shinsoft Co., Ltd. 3 Operating cost 54 not materially different from



-


3 Operating cost 39 not materially different from the general customers’

-

(To be continued)

110

(Continued)


(Note 2)

Transaction



assets (Note 3)

9 Shin Kong Telecommunications Co., Ltd.



-


-

Rental revenue 21,278 subject to the price agreed by both parties

-

Interest revenue 1 〃 - Accounts receivable 603 not materially different from


Operating expenses 35 〃 - Miscellaneous

expenses 206 〃 -

Refundable deposit 9 without interest - Shinsoft Co., Ltd. 3 Operating cost 21 not materially different from


Yi Kong Building Management Service Co., Ltd.


-



-


3 Receipt in advance 249 〃 -

Refundable deposit 60 without interest - Shincluster Electronics

Co., Ltd. 3 Operating expenses 1 subject to the price agreed by

both parties -

10 Taiwan Artificial Intelligent Robots Co., Ltd.


2 Rental expenses 36 subject to the price agreed by both parties

-

Refundable deposit 9 without interest - 11 Shin-Po Investment

Co., Ltd. Taiwan Shin Kong Security Co., Ltd.

2 Rental expenses 36 subject to the price agreed by both parties

-

Refundable deposit 9 without interest - (To be continued)

111

(Continued)


(Note 2)

Transaction



assets (Note 3)

2011 0 Taiwan Shin Kong

Security Co., Ltd. Yi Kong Security Company Limited


-


-

Accounts payable 4,866 〃 - Rental revenue 4,407 〃 - Deposit received 770 without interest - Sundry income 190 subject to the price


Interest expense 8 〃 - Taiwan Security Co., Ltd. 1 Rental revenue 14,468 〃 - Operating cost 304,935 not materially different


5

Deposit received 111 without interest - Operating expenses 3,063 subject to the price


Operating revenue 6,766 〃 - Prepayments 853 〃 - Sundry income 9,294 〃 -

(To be continued)

112

(Continued)


(Note 2)

Transaction



assets (Note 3)


Receipt in advance $ 305 not materially different from the general customers’

-


2,702 〃 -

Accounts receivable 538 〃 - Taiwan Security Co., Ltd. 1 Accounts payable 44,889 not materially different from



1 Operating expenses 10,865 subject to the price agreed by both parties

-

Operating revenue 186 〃 - Expenses payable 955 not materially different from



1 Operating cost 32,866 〃 -


-

Accounts payable 17,807 not materially different from the general customers’

-


10,805 〃 -


-

Deposit received 12 without interest - Shinkong Optical

Networking Co., Ltd. 1 Operating cost 220,922 not materially different from



-

Rental revenue 635 〃 - Accounts payable 24,110 not materially different from


Expenses payable 4 〃 - (To be continued)

113

(Continued)


(Note 2)

Transaction



assets (Note 3)


Operating expenses $ 95 subject to the price agreed by both parties

-

Interest expense 1 〃 - Deposit received 121 without interest - eTech Pro Co., Ltd. 1 Expenses payable 5,096 not materially different from



266 〃 -


-

Rental revenue 2,676 〃 - Sundry income 18 〃 - Rental expenses 6,000 〃 - Interest expense 5 〃 - Deposit received 9 without interest - Shin Kong Aerotech

International Co., Ltd. 1 Operating revenue 4 subject to the price agreed by

both parties -

Operating expenses 221 〃 - Rental revenue 2,815 〃 - Accounts payable 4,068 not materially different from


Expenses payable 19 〃 - Equipment accounts

payable 1,208 〃 -

Prepayments 2,652 〃 - Accounts receivable 2,623 〃 - Operating cost 9,336 〃 - Sundry income 1,726 subject to the price agreed by

both parties -

Interest expense 1 〃 - Deposit received 82 without interest -

(To be continued)

114

(Continued)


(Note 2)

Transaction



assets (Note 3)


Shinsoft Co., Ltd. 1 Operating revenue $ 9,361 subject to the price agreed by both parties

-

Rental revenue 897 〃 - Sundry income 331 〃 - Operating expenses 6,543 〃 - Prepayments 898 not materially different


-

Accounts payable 7,768 〃 - Expenses payable 318 〃 - Equipment accounts

payable 12,693 〃 -

Accounts receivable 301 〃 - Deposit received 251 without interest - Operating cost 75,349 not materially different


1

Interest expense 2 subject to the price agreed by both parties

-


1 Rental revenue 322 〃 -

Sundry income 30 〃 - Operating expenses 102 〃 - Operating cost 8,463 〃 - Accounts payable 1,265 not materially different


-


1,489 〃 -

Deposit received 43 without interest - (To be continued)

115

(Continued)


(Note 2)

Transaction



assets (Note 3)



1 Rental revenue $ 36 subject to the price agreed by both parties

-

Operating expenses 930 〃 - Notes receivable 317 not materially different


-

Deposit received 9 without interest - 1 Yi Kong Security

Company Limited Taiwan Shin Kong Security Co., Ltd.

2 Operating revenue 39,974 not materially different from the general customers’

1

Operating cost 1,795 〃 - Accounts receivable 4,866 〃 - Operating expenses 2,971 subject to the price


Refundable deposit 770 without interest - Rental expenses 3,880 subject to the price




eTech Pro Co., Ltd. 3 Operating expenses 68 〃 - Taiwan Security Co., Ltd. 3 Operating revenue 2,256 〃 - Sundry income 22 〃 - Accounts receivable 394 not materially different


-


-


3 Operating expenses 6 〃 -

(To be continued)

116

(Continued)


(Note 2)

Transaction



assets (Note 3)



5

Rental revenue 1,031 〃 - Sundry income 1,235 〃 - Prepayments 305 〃 - Receipt in advance 853 〃 - Earnings receivable 27,637 〃 - Expenses payable 3,240 〃 - Operating cost 10,181 〃 - Operating expenses 3,453 〃 - Accounts receivable 15,758 not materially different


-


1,494 〃 -

Rental expenses 12,884 〃 - Miscellaneous

expenses 4,010 subject to the price


Refundable deposit 111 without interest - Yi Kong Security

Company Limited 3 Operating expenses 2,278 subject to the price


Notes payable 197 not materially different from the general customers’

-

Accounts payable 197 〃 - eTech Pro Co., Ltd. 3 Operating expenses 737 subject to the price


Operating cost 144 〃 - (To be continued)

117

(Continued)


(Note 2)

Transaction



assets (Note 3)

2 Taiwan Security Co., Ltd. Shin Kong Aerotech International Co., Ltd.

3 Operating expenses $ 987 subject to the price agreed by both parties

-


-

Notes payable 69 〃 - Accounts payable 140 〃 - Shinsoft Co., Ltd. 3 Operating expenses 15 〃 - Operating cost 3 〃 -

3 Yi Kong Building Management Service Co., Ltd



Operating expenses 186 〃 - 2 Accounts receivable 955 〃 - Yi Kong Security

Company Limited 3 Operating cost 132,628 not materially different


2

4 eTech Pro Co., Ltd. Taiwan Shin Kong Security Co., Ltd.


-

Operating expenses 535 〃 - Rental expenses 2,159 〃 - Accounts receivable 5,358 not materially different


-


4 〃 -


-

Interest revenue 5 〃 - Refundable deposit 9 without interest -

(To be continued)

118

(Continued)


(Note 2)

Transaction



assets (Note 3)

4 eTech Pro Co., Ltd. Yi Kong Security Company Limited


-

Taiwan Security Co., Ltd. 3 Operating revenue 881 〃 - Shinsoft Co., Ltd. 3 Expenses payable 1 not materially different


-



-

Accounts receivable 30 not materially different from the general customers’

-

Operating expenses 90 〃 - Operating revenue 334 subject to the price






-




-


-


-

Sundry income 75 〃 - Interest revenue 1 〃 - Rental expenses 247 〃 - Refundable deposit 82 without interest -

(To be continued)

119

(Continued)


(Note 2)

Transaction



assets (Note 3)



2 Accounts receivable $ 5,295 not materially different from the general customers’

-

Accounts payable 2,623 〃 - Receipt in advance 2,652 〃 - Taiwan Security Co., Ltd. 3 Operating revenue 1,091 subject to the price


Sundry income 6 〃 - Accounts receivable 209 not materially different


-


-

eTech Pro Co., Ltd. 3 Operating expenses 97 〃 - Operating cost 1,784 not materially different


-

Prepayments 48 〃 - Yi Kong Security



3 Operating expenses 2 subject to the price agreed by both parties

-

Accounts payable 2 not materially different from the general customers’

-

6 Shinsoft Co., Ltd. Taiwan Shin Kong Security Co., Ltd.


-

Operating expenses 185 〃 - (To be continued)

120

(Continued)


(Note 2)

Transaction



assets (Note 3)

6 Shinsoft Co., Ltd. Taiwan Shin Kong Security Co., Ltd.

1 Accounts payable $ 301 not materially different from the general customers’

-

Accounts receivable 22,073 〃 - Operating revenue 81,892 subject to the price agreed by

both parties -

Operating cost 9,507 〃 - payment of goods


Refundable deposit 251 without interest - Interest revenue 2 subject to the price agreed by

both parties -

Operating expenses 185 〃 - Rental expenses 897 〃 - Yi Kong Security



3 Operating revenue 73 not materially different from the general customers’

-

eTech Pro Co., Ltd. 3 Expenses payable 30 〃 - Accounts receivable 1 〃 - Operating revenue 90 subject to the price agreed by

both parties -

Operating expenses 334 〃 - Shin Kong Aerotech

International Co., Ltd. 3 Operating revenue 42 subject to the price agreed by

both parties -


3 Operating cost 22 〃 -

Taiwan Security Co., Ltd. 3 Operating revenue 18 not materially different from the general customers’

-

Accounts receivable - 〃 - Operating revenue 52 subject to the price agreed by

both parties -

(To be continued)

121

(Continued)


(Note 2)

Transaction



assets (Note 3)

6 Shinsoft Co., Ltd. Shin Kong Telecommunications Co., Ltd.

3 Accounts receivable $ 46 not materially different from the general customers’

-

7 Shincluster Electronics Co., Ltd.



-

Operating expenses 67 〃 - Accounts receivable 28,612 not materially different


-

Refundable deposit 12 without interest - Shinsoft Co., Ltd. 3 Operating revenue 22 subject to the price


eTech Pro Co., Ltd. 3 Operating expenses 3 〃 - Shin Kong Aerotech

International Co., Ltd. 3 Operating revenue 2 〃 -

Accounts receivable 2 not materially different from the general customers’

-



-





-

Interest revenue 1 subject to the price agreed by both parties

-

Operating expenses 59 〃 - Rental expenses 609 〃 -

(To be continued)

122

(Continued)


(Note 2)

Transaction



assets (Note 3)



2 Accounts receivable $ 24,113 not materially different from the general customers’

-

Refundable deposit 121 without interest - Shinsoft Co., Ltd. 3 Operating revenue 1 subject to the price


3 Operating cost 9 〃 - Operating expenses 64 〃 - Shincluster Electronics

Co., Ltd. 3 Operating cost 93 not materially different


-

9 Shin Kong Telecommunications Co., Ltd.




-

Accounts receivable 2,754 not materially different from the general customers’

-

Operating expenses 117 〃 - Miscellaneous

expenses 235 〃 -

Refundable deposit 43 without interest - Shinsoft Co., Ltd. 3 Operating cost 44 not materially different


-


-

Accounts payable 46 not materially different from the general customers’

-

(To be continued)

123

(Continued)


(Note 2)

Transaction



assets (Note 3)

10 Taiwan Artificial Intelligent Robots Co., Ltd.


2 Rental expenses $ 36 subject to the price agreed by both parties

-

Operating revenue 930 〃 - Notes payable 317 not materially different


-

Refundable deposit 9 without interest - -

Note 1: The information about transactions between parent company and subsidiaries shall be numbered and noted in the following manner in the box of numbers:

1. 0 is for the Parent Company.

2. Subsidiaries are numbered from number 1.

Note 2: The relationship with the trade party is classified into three categories as follows:

1. Parent Company to subsidiaries.

2. Subsidiaries to Parent Company.

3. Subsidiaries to subsidiaries.

Note 3: For computing the ratio of trade amount to total sales revenue or total assets, if it is for asset and liability account, the computation is based on the ratio of

ending balance to total consolidated assets; however, if it is for income and expense account, the computation is based on the ratio of interim cumulative

amount to total consolidated revenue.

Documents

Taiwan Shin Kong Security Co., Ltd. And its subsidiaries ... · And its subsidiaries. Consolidated Financial Statement and Auditors’ Report . ... Financial Statements by CPA”