CSCC — Annual Report 2014

Nov 13, 2014

Stock Code: 1723

China Steel Chemical Corporation and Subsidiaries Consolidated Financial Statements and Independent Auditor’s Report 2014 and 2013

Address : 25F, No. 88, Chengong 2[nd] Road, Qianzhen District, Kaohsiung City Tel. : (07) 338–3515

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§Table of Contents§

Item I. Cover page II. Table of contents III. AssociatesConsolidated Financial Report Statement IV. Independent Auditor’s Report V. Consolidated Balance Sheet VI. Consolidated Income Statement VII. Consolidated Statement of Retained Earnings VIII. Consolidated Statement of Cash Flow IX. Notes to consolidated financial statements (I) Company background (II) Financial statements approval date and procedures (III) The application of newly published and revised standards and interpretations (IV) Material accounting polices summary (V) Main source of material accounting judgment, estimation, and assumption uncertainty (VI) Main accounting titles description (VII) Related party transactions (VIII) Pledged assets (IX) Material contingent liability and unrecognized contractual commitments (X) Material disaster damage and loss (XI) Material post events (XII) Exchange rate of financial assets and liability in foreign currency (XIII) Supplementary disclosures 1. Material transaction related information 2. Transfer investment business information 3. Mainland China investment information (XIV) Department information	Page	Note to financial statements
	1 2 3 4 5 6~7 8 9~11 12 12 12~21 21~33 33~35 35~65 66~69 – 69 – – 69~70 70~71 70~71 71~72 72~74	I I I I I I I I I II III IV V VI~XXVII XXVIII I XXIX I I XXX XXXI XXXI XXXI XXXII

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Associates Consolidated Financial Report Statement

The companies to be included in the 2014 (from January 1 to December 31, 2014) associates consolidated financial reports in accordance with the “Regulations Governing the Preparation of Associations Consolidated Financial Reports, Associates Consolidated Financial Statements, and Relationship Reports” and the companies to be included in the parent company and subsidiary consolidated financial reports in accordance with International Accounting Standards No. 27 were the same companies. In addition, the relevant information to be disclosed in the associates consolidated financial reports had been disclosed in the aforementioned parent company and subsidiary consolidated financial reports; therefore, the associates consolidated financial reports were not prepared separately.

Please bring attention to this statement.

Company : China Steel Chemical Corporation Responsible person : L.M. Chong

March 20, 2015

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China Steel Chemical Corporation and Subsidiaries Consolidated Balance Sheet

December 31, 2014 and 2013

Unit: NT$ Thousands

Code	Assets		12/31/2014			12/31/2013		% 6 21 2 – – 6 2 4 5 – 5 1 52 4 1 2 16 18 7 – – – – – 48 100	Code	Liabilities and Shareholders’ equity		12/31/2014	% 1 – – 3 4 2 1 11 – 2 2 13 27 6 22 3 26 51 3 ( 2 ) 85 2 87 100		12/31/2013
			Amount	%		Amount						Amount			Amount	%
1100 1110 1125 1147 1150 1170 1180 1200 130X 1460 1476 1479 11XX 1523 1527 1546 1550 1600 1760 1840 1915 1985 1990 1920 15XX 1XXX	Current assets Cash and cash equivalent (Note IV & VI) Financial assets measured at fair value through profit and loss – current (Note IV & VII) Available-for-sale financial assets – current (Note IV & VIII) Bond investment without market price – current (Note IV & X) Notes payable (Note IV & XI) Accounts receivable – net (Note IV, V, & XI) Accounts receivable – related party (Note IV, V, XI, & XXVIII) Other receivables (Note XXVIII) Inventories (Note IV, V, & XII) Held-for-trading noncurrent assets (Note IV, V, XIII, and XVII) Other financial assets – current (Note XIV) Other current assets Total current assets Noncurrent assets Available-for-sale financial assets – noncurrent (Note IV, V, & VIII) Held-to-maturity financial assets – noncurrent (Note IV, V, and IX) Bond investment without market price – noncurrent (Note V & X) Investment under the equity method (Note V & XV) Property, plant, and equipment (Note IV, V, XVI, & XXIX) Investment property (Note IV, V, & XVII) Deferred income tax assets (Note IV & XXIV) Prepaid equipment Long-term prepaid rent (Note XXVIII) Other noncurrent assets (Note XXVIII) Refundable deposit Total noncurrent assets Total assets		$ 1,097,928 1,346,604 220,684 – 7,054 409,411 137,006 386,196 446,627 32,058 233,300 69,362 4,386,230 525,241 108,860 160,597 1,380,634 1,431,399 552,988 42,644 24,409 33,454 36,776 2,467 4,299,469 $ 8,685,699	13 15 2 – – 5 2 4 5 – 3 1 50 6 1 2 16 17 6 1 – – 1 – 50 100		$ 509,436 1,740,695 171,214 9,259 18,825 530,309 177,695 310,845 375,618 – 419,064 48,027 4,310,987 317,062 102,514 134,651 1,341,972 1,469,202 541,020 42,629 8,964 – – 1,281 3,959,295 $ 8,270,282			2100 2120 2170 2180 2200 2230 2300 21XX 2570 2640 25XX 2XXX 3110 3200 3310 3320 3350 3300 3400 3500 31XX 36XX 3XXX	Current liabilities Short-term loan (Note XVIII) Financial liability measured at fair value through profit and loss – current (Note IV & VII) Accounts payable Accounts payable – related party (Note XXVIII) Other payable (Note XIX, XX, & XXVIII) Current income tax liability (Note XXIV) Other current liabilities Total current liabilities Noncurrent liabilities Deferred income tax liability (Note IV, V, & XXIV) Accrued pension liability (Note IV, V, & XX) Total noncurrent liability Total liability Shareholders’ equity Common stock capital (Note XXI) Additional paid-in capital (Note XXI) Retained earnings (Note XXI & XXIV) Legal reserve Special reserve Unappropriated earnings Total retained earnings Other interests (Note XXI) Treasury stock (Note XXI) Total Shareholders’ equity Non-controlling interests (Note XXI) Total shareholders’ equity Total Liabilities and Shareholders’ equity	$ 100,441 – 24,524 256,098 356,036 187,738 30,011 954,848 1,663 133,056 134,719 1,089,567 2,369,044 515,023 1,948,583 242,136 2,215,495 4,406,214 317,045 ( 162,034 ) 7,445,292 150,840 7,596,132 $ 8,685,699			$ 72,157 91 25,299 327,281 322,157 217,376 29,693 994,054 680 128,185 128,865 1,122,919 2,369,044 431,711 1,727,592 242,136 2,223,888 4,193,616 158,815 ( 167,082 ) 6,986,104 161,259 7,147,363 $ 8,270,282		1 – 4 4 3 – 12 – 2 2 14 28 5 21 3 27 51 2 ( 2 ) 84 2 86 100

The notes hereinafter are an integral part of the financial statements.

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China Steel Chemical Corporation and Subsidiaries

Consolidated Income Statement

January 1 ~ December 31, 2014 and 2013

Unit: NT$ Thousands Except for earnings per share in NTD

Code 4000 Operating income (Note IV, VII, XXII, & XXVIII) 5000 Operating cost (Note XII, XX, XXIII, & XXVIII) 5900 Gross profit Operating expense (Note XX, XXIII), & XXVIII) 6100 Marketing expense 6200 Management expense 6300 R&D expense 6000 Total operating expense 6900 Net operating income Non-operating income and expense 7175 Bad debt reversal profit (Note XI) 7190 Other incomes (Note XXIII & XXVIII) 7020 Other profit and loss (Note VII & XXIII) 7060 Associates and joint venture profit share under the equity method (Note IV) 7510 Interest expense 7000 Non-operating income and expense Total (Continuing)		2014				2013
				%		Amount		%
				100 68 32 2 2 1 5 27 – 1 – 1 – 2	$ 8,819,953 6,009,957 2,809,996 152,008 156,367 79,278 387,653 2,422,343 14,638 56,141 24,254 80,682 ( 2,624 ) 173,091			100 68 32 2 2 1 5 27 – 1 – 1 – 2

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(Continued)

(Continued)
Code 7900 Net income before tax 7950 Income tax (Note IV, V, & XXIV) 8200 Net income Other comprehensive income (Note XX, XXI, & XXIV) 8310 Exchange difference from financial statement conversion of foreign operation 8325 Available-for-sale financial assets unrealized valuation profit 8360 Defined benefit plan profit (loss) 8370 Associates and joint venture other comprehensive income share under the equity method 8390 Other comprehensive income related income tax profit (expense) 8300 Other comprehensive income after tax 8500 Total comprehensive income 8600 Net income classification: 8610 Shareholders’ equity 8620 Non-controlling interests 8700 Total comprehensive income classification: 8710 Shareholders’ equity 8720 Non-controlling interests Earnings per share (Note XXV) 9710 Basic 9810 Diluted		2014				2013
		Amount		%		Amount	%
	$ 2,567,847 379,273 2,188,574 23,173 138,948 ( 9,867 ) ( 3,935 ) 1,677 149,996 $ 2,338,570 $ 2,187,189 1,385 $ 2,188,574 $ 2,337,229 1,341 $ 2,338,570 $ 9.50 $ 9.46			29 5 24 – 2 – – – 2 26 25 – 25 26 – 26	$ 2,595,434 374,452 2,220,982 9,378 76,175 4,287 29,757 ( 729 ) 118,868 $ 2,339,850 $ 2,209,911 11,071 $ 2,220,982 $ 2,328,799 11,051 $ 2,339,850 $ 9.60 $ 9.56		29 4 25 – 1 – 1 – 2 27 25 – 25 27 – 27

The notes hereinafter are an integral part of the financial statements.

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China Steel Chemical Corporation and Subsidiaries

Consolidated Statement of Retained Earnings

January 1 ~ December 31, 2014 and 2013

Unit: NT$ Thousands

Code A1 Balance – 1/1/2013 Earnings appropriation and allocation – 2012 (Note XXI) B1 Legal reserve B5 Shareholders’ cash dividend – 74% C7 Change in associates and joint ventur under the equity method D1 Net income - 2013 D3 Other comprehensive income after ta - 2013 D5 Total comprehensive income - 2013 L7 Subsidiary’s disposing parent company’s stock deemed as treasury stock transaction Ml Dividend distributed to subsidiary debited to additional paid-in capital Z1 Balance – 12/31/2013 Earnings appropriation and allocation – 2013 (Note XXI) B1 Legal reserve B5 Shareholder’s cash dividend – 83% O1 Non-controlling interests increase/decrease C7 Change in associates and joint ventur under the equity method D1 Net income - 2014 D3 Other comprehensive income after ta - 2014 D5 Total comprehensive income - 2014 L7 Subsidiary’s disposing parent company’s stock deemed as treasury stock transaction M1 Dividend distributed to subsidiary debited to additional paid-in capital Z1 Balance – 12/31/2014								Shareholde	rs’ Equity										Total $6,354,183 – ( 1,753,093 ) ( 1,753,093 ) 2,803 2,209,911 118,888 2,328,799 3,310 50,102 6,986,104 – ( 1,966,307 ) ( 1,966,307 ) – 672 2,187,189 150,040 2,337,229 31,556 56,038 $7,445,292	Non-controlling interests (Note XXI)		Total equity
		Capital stock		Additional paid-in capital			Retaine	d earnings		Other		equityitems(Note XXI)					Treasurystock
										Exchange difference from financial statement conversion of foreign operation		A fi u	vailable-for-sale nancial assets nrealized profit and loss		Total
		Shares (1,000 shares)	Amount			Legal reserve	Special reserve	Unappropriated earnings	Total
	e x e x	236,904	$ 2,369,044	$ 375,966		$ 1,530,230	$ 242,136	$ 1,962,055 ( 197,362 ) ( 1,753,093 ) ( 1,950,455 ) – 2,209,911 2,377 2,212,288 – – 2,223,888 ( 220,991 ) ( 1,966,307 ) ( 2,187,298 ) – ( 94 ) 2,187,189 ( 8,190 ) 2,178,999 – – $ 2,215,495	$ 3,734,421 – ( 1,753,093 ) ( 1,753,093 ) – 2,209,911 2,377 2,212,288 – – 4,193,616 – ( 1,966,307 ) ( 1,966,307 ) – ( 94) 2,187,189 ( 8,190 ) 2,178,999 – – $4,406,214		($ 19,071 ) – – – – – 16,917 16,917 – – ( 2,154 ) – – – – – – 30,143 30,143 – – $ 27,989		$ 61,375		$ 42,304		($ 167,552 ) – – – – – – – 470 – 167,082 ) – – – – – – – – 5,048 – ( $ 162,034 )			$ 150,208 – – – – 11,071 ( 20 ) 11,051 – – 161,259 – – – ( 11,760 ) – 1,385 ( 44 ) 1,341 – – $ 150,840	$6,504,391 – ( 1,753,093 ) ( 1,753,093 ) 2,803 2,220,982 118,868 2,339,850 3,310 50,102 7,147,363 – ( 1,966,307 ) ( 1,966,307 ) ( 11,760 ) 672 2,188,574 149,996 2,338,570 31,556 56,038 $7,596,132
		– –	– –	– –		197,362 –	– –						– –		– –
		–	–	–		197,362	–						–		–
		–	–	2,803		–	–						–		–
		– –	– –	– –		– –	– –						– 99,594		– 116,511
		–	–	–		–	–						99,594		116,511
		–	–	2,840		–	–						–		–
		–	–	50,102		–	–						–		–
		236,904	2,369,044	431,711		1,727,592	242,136						160,969		158,815
		– –	– –	– –		220,991 –	– –						– –		– –
		–	–	–		220,991	–						–		–
		–	–	–		–	–						–		–
		–	–	766		–	–						–		–
		– –	– –	– –		– –	– –						– 128,087		– 158,230
		–		–		–	–						128,087		158,230
		–	–	26,508		–	–						–		–
		–	–	56,038		–	–						–		–
		236,904	$ 2,369,044	$ 515,023		$ 1,948,583	$ 242,136						$ 289,056		$ 317,045

The notes hereinafter are an integral part of the financial statements.

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China Steel Chemical Corporation and Subsidiaries

Consolidated Statement of Cash Flow

January 1 ~ December 31, 2014 and 2013

China Steel Chemical Corporation and Subsidiaries Consolidated Statement of Cash Flow January 1 ~ December 31, 2014 and 2013
Code 2014 Cash flow from operating activities A10000 Net income before tax $ 2,567,847 A20010 Profits and losses not affecting cash flow A20100 Depreciation expense 282,012 A20200 Amortization expense 4,241 A20300 Bad debt reversal profit – A20400 Net profit of financial assets measured at fair value through profit and loss ( 20,391 ) A20400 Held-for-trading financial instruments net profit ( 11,603 ) A20900 Interest expense 2,797 A21200 Interest income ( 17,898 ) A21300 Dividend income ( 25,268 ) A22300 Associates and joint venture profit share under the equity method ( 111,109 ) A22500 Property, plant, and equipment disposal and obsolescence loss 1,394 A23100 Investmentdisposal profit ( 34,305 ) A23700 Inventory loss in valuation and obsolescence 19,104 A30000 Change in operating assets and liabilities - net A31110 Held-for-trading financial assets ( 84,779 ) A31130 Notes receivable 11,771 A31150 Accounts receivable 124,908 A31160 Accounts receivable – related party 40,689 A31180 Other receivables ( 66,059 ) A31200 Inventories ( 89,525 ) A31240 Other current assets ( 21,822 ) A32150 Accounts payable ( 775 ) A32160 Accounts payable – related party ( 71,183 ) A32180 Other payables 31,373 A32230 Other current liabilities 318 A32240 Accrued pension liabilities ( 4,996 ) A33000 Cash inflow from operating activities 2,526,741 A33500 Income tax paid ( 406,266 ) AAAA Net cash inflow from operating activities 2,120,475 (Continuing)	Unit: NT$ Thousands 2013
	$ 2,595,434 234,167 – ( 14,638 ) ( 11,056 ) ( 29,043 ) 2,624 ( 25,473 ) ( 10,799 ) ( 89,671 ) 1,214 ( 1,373 ) 32,996 ( 27,884 ) ( 5,615 ) ( 51,923 ) 9,098 2,331 ( 35,122 ) ( 15,786 ) 1,382 25,604 37,190 4,176 ( 19,186 ) 2,608,647 ( 298,181 ) 2,310,466

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(Continued) Code Cash flow from investing activities B00100 Acquisition of financial assets measured at fair value through profit and loss designated at initial recognition B00200 Proceeds from disposal of financial assets measured at fair value through profit and loss designated at initial recognition B00300 Acquisition of available-for-sale financial assets B00400 Proceeds from the disposal of available-for-sale financial assets B00500 De-capitalization of available-for-sale financial assets and refund of stock capital liquidation B00600 Acquisition of bond investment without market price B00700 Proceeds from the disposal of bond investment without market price B00900 Acquisition of held-to-maturity financial assets B01000 Proceeds from the disposal of held-to-maturity financial assets B02700 Acquisition of property, plant, and equipment B02800 Disposal of the property, plant, and equipment B03700 Increase of refundable deposit B04100 Increase of other receivables B06600 Decrease of other financial assets B06700 Increase of other noncurrent assets B07300 Increase of other current assets B07300 Increase of long-term prepaid rent B07400 Decrease of other prepayments B07500 Interest received B07600 Associate dividend received B07600 Other dividends received BBBB Net cash inflow (outflow) from investing activities Cash flow from financing activities C00100 Increase of short-term loans C00200 Decrease of short-term loans C00500 Increase of short-term bills payable C00600 Decrease of short-term bills payable C05000 Disposal of Treasury stock C04500 Distribution of cash dividend C05600 Interest paid C05800 Decrease of non-controlling interests CCCC Net cash outflow from financing activities DDDD Exchange rate effect on cash and cash equivalent (Continuing)	2014 ( $ 4,162,095 ) 4,677,239 ( 120,200 ) 65,310 1,499 ( 39,155 ) 24,861 – – ( 305,011 ) 3,208 ( 1,186 ) ( 9,942 ) 185,764 ( 37,009 ) – ( 38,221 ) 3,000 18,548 66,812 25,268 358,690 4,996,585 ) ( 4,968,301 ) 195,100 ( 195,100 ) 31,556 ( 1,910,364 ) ( 2,519 ) ( 11,760 ) ( 1,864,803 ) ( 25,870 )	2013
		( $ 3,650,499 ) 3,125,456 ( 77,175 ) – 5,049 ( 14,488 ) 29,446 ( 101,465 ) 131,698 ( 179,585 ) – ( 641 ) ( 300,000 ) 301,036 – ( 3,000 ) – – 26,254 67,011 10,799 ( 630,104 ) 4,658,896 ( 4,676,662 ) 20,000 ( 20,000 ) 3,310 ( 1,703,006 ) ( 2,607 ) – ( 1,720,069 ) 5,030

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(Continued) Code EEEE Increase (decrease) of Cash and cash equivalent E00100 Cash and cash equivalent balance - beginning E00200 Cash and cash equivalent balance - ending		2014 $ 588,492 509,436 $ 1,097,928	2013
			( $ 34,677 ) 544,113 $ 509,436

The notes hereinafter are an integral part of the financial statements.

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China Steel Chemical Corporation and Subsidiaries

Notes to Consolidated Financial Statements

January 1 ~ December 31, 2014 and 2013

(Unit in NT$ Thousands, unless otherwise stated)

I. Company background

China Steel Chemical Corporation (hereinafter referred to as “the Company”) was invested and incorporated mainly by China Steel Corporation (China Steel, the controlling parent company of the China Steel Chemical Corporation with 29% shareholding as of December 31, 2014 and 2013) and other institutional shareholders in February 1989 and began operation in May 1993, mainly engaged in the production, processing, and sales of coal tar distillation products, Naphtha products, and coke products; also, the trade of the related upstream and downstream products.

The Company has been authorized to have stock shares traded publicly on Taiwan Stock Exchange since November 1998.

The consolidated financial statements are prepared in New Taiwan Dollar, the functional currency of the Company.

II. Financial statements approval date and procedures

The consolidated financial statements were resolved for publication by the Board of Directors on March 20, 2015.

III. The application of newly published and revised standards and interpretations

• (I) The Regulations Governing the Preparation of Financial Reports by Security Firms not yet effective and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), International Financial Reporting Interpretations Committee (IFRIC), and Standards Interpretation Committee (SIC) 2013 edition approved by the Financial Supervisory Commission

According to the FSC Certificate Shen Zi No. 1030029342 Letter and FSC Certified Shen Zi No. 1030010325 Letter published by the Financial Supervisory Commission (the “FSC”), the Company and its subsidiaries have been subject to the IFRS, IAS, IFRIC, and SIC (hereinafter “IFRSs”) 2013 edition published by International Accounting Standards Board (IASB) and authorized by the FSC and the amendments of the Regulations Governing the Preparation of Financial Reports by Security Firms since the year of 2015.

Newly published / amended / revised standards and interpretations IASB effective date (Note) IFRS Amendment “IFRS Improvements vs. IAS 39 Amendment January 1, 2009 or January 1, (2009)” 2010

(Continuing)

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(Continued)

d)
Newly published / amended / revised standards and interpretations	IASB effective date(Note)
IAS39 Amendment “Embedded Derivatives” ”IFRS Improvements (2010)” ”2009 ~ 2011 Annual Improvements” IFRS 7 Amendment “Exposure - Financial assets and financial liabilities offset” IFRS 7 Amendment “Exposure -Financial assets transfer” IFRS 10 “Consolidated Financial Statements” IFRS 11 “Joint Agreements” IFRS 12 “Disclosure of Interests in other Entities” IFRS 10, IFRS 11, and IFRS 12 Amendment “Consolidatedfinancial statements, joint agreements, and disclosure of interests in other individuals: Transitional Guidelines” IFRS 10, IFRS 12, and IAS 27 Amendment “Investment entity” IFRS 13 “Fair value measurement” IAS 1 Amendment “Presentation of other comprehensive income items” IAS 12 Amendment “Deferred income tax:Underlying assets recovery” IAS 19 Amendment “Employee Benefits” IAS 28 Amendment “Investment in associates and joint venture” IAS 32 Amendment “Financial assets and financial liabilities offset” IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine”	Valid starting from the period afterJune 30, 2009 July 1, 2010 or January 1, 2011 January 1, 2013 January 1, 2013 July 1, 2011 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2014 January 1, 2013 July 1, 2012 January 1, 2012 January 1, 2013 January 1, 2013 January 1, 2014 January 1, 2013

Note: Unless otherwise noted, the newly published / amended / revised standards and interpretations referred to above are valid starting from the period after the respective date.

Except for the instructions below, the application of the IFRSs 2013 edition and related amendments of the Regulations Governing the Preparation of Financial Reports by Securities Firms would not cause significant changes to the accounting policies of the Company and its subsidiaries:

1. IFRS 10 “Consolidated Financial Statements”

IFRS 10 will replace IAS 27 “Consolidated and Separate Financial Statements” and will replace SIC 12 “Consolidation: Special purpose entities.” The Company and its subsidiaries consider the control over other entities to determine whether to have them included in the consolidated financial statements. When the Company and its subsidiaries are (i) having power over the investee, (ii) exposing to risk or having rights to the changes in returns by engaging in the investees’ operation, and (iii) using power over the investee to affect the amount of returns, the Company and its subsidiaries are with control over the investee. In addition, whether investor has control over the investee under a relatively complicated situation, new standards provide more guidance.

2. IFRS 12 “Disclosure of Interests in other Entities”

IFRS 12, the equity of the subsidiaries, joint agreement, associates, and structured entity that is not included in the consolidated financial statements should be disclosed.

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3. IFRS 13 “Fair value measurement”

IFRS 13 provides a guideline on the measurement of fair value. The definition of fair value, establishment of a fair value measurement structure, and the disclosure of fair value measurement are stated in IFRS 13. In addition, the disclosures are more extensively defined in IFRS 13 than the current guidelines, for example, current guidelines require only the financial instruments measured at fair value to be disclosed in accordance with the fair value three-tier disclosures. According to IFRS 13, all assets and liabilities subject to the guideline must be with the aforementioned disclosure provided.

IFRS 13 measurement requirement has been applied by deferral since 2015.

4. IAS 1 Amendment “Presentation of other comprehensive income items”

According to IAS 1 Amendment, other comprehensive income items shall be classified by nature and grouped as (1) items not being reclassified to profit and loss and (2) items may be subsequently reclassified to profit and loss. The related income tax should be also grouped on the same basis. The aforementioned mandatory grouping requirement is not in effect before implementing the amendment referred to above.

The Company and its subsidiaries will apply the aforementioned amendments retroactively since the year of 2015. The items not being reclassified to profit or loss include the actuarial profit and loss from the measurement of the defined benefit plan. The items that may be reclassified to profit or loss subsequently include exchange differences from the conversion of financial statements of foreign operation, available-for-sale financial assets unrealized profit (loss), and other comprehensive income share of the associated companies under the equity method (except for the measurement amount of the defined benefit plan). However, these amendments do not affect net income of the year, other comprehensive income after tax of the year, and total comprehensive income of the year.

5. IAS 19 Amendment “Employee Benefits”

The “net interest” will replace the interest costs and the expected returns on plan assets before adopting IAS 19 Amendment; also, net interest is determined by having net defined benefit liability (asset) multiplied by the discount rate. The amended IAS 19 in addition to changing the expression of defined benefit cost requires a wider range of presentation.

In addition, the definition of short-term employee benefits is revised in this amendment. The definition of short-term employee benefits is modified as “the entire employees benefits (except for the benefit of the resigned employees) will be paid to employees in full within 12 months at the end of the service reporting period.” However, this revision does not affect the expression of vacation payable as current liabilities in the consolidated balance sheet.

The Company and its subsidiaries in the preparation of the 2015 consolidated financial statements will choose not to disclose the defined benefit obligation sensitivity analysis of the 2014 comparative period when subject to IAS 19 Amendment for the first time in 2015. The impact of adopting IAS 19 Amendment for the first time on the current year is as follows:

follows:
Assets, Liabilities, and Shareholders’ Equity effect		Book amount		IAS 19 adjustment	Adjusted book amount
		$ 1,341,972 $ 129,229 $ 4,193,616		$ – $ – $ –	$ 1,341,972 $ 129,229 $ 4,193,616
1/1/2014 Investment under the equity method Accrued pension liabilities Retained earnings

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12/31/2014
Investment under the equity method	$	1,380,634 ( $	296 ) $	1,380,338
Accrued pension liabilities	$	134,172 $	– $	134,172
Retained earnings	$	4,406,214 ( $	296 ) $	4,405,918
Comprehensive income effect - 2014
Operating expense	$	445,586 $	146 $	445,732
Associates and joint venture profit share under
the equity method	$	99,222 $	36 $	99,258
Income tax expense	$	379,273 ( $	25 ) $	379,248
Net income	$	2,188,574 ( $	85 ) $	2,188,489
Items not being reclassified to profit and loss
Defined benefit plan measurement
amount	( $	9,867 ) $	146 ( $	9,721 )
Associates and joint venture other
comprehensive income share under the
equity method	( $	3,935 ) ( $	332 ) ( $	4,267 )
Income tax profit of items not being
reclassified to profit and loss	$	1,677 ( $	25 ) $	1,652
Other comprehensive income after tax	$	149,996 ( $	211 ) $	149,785
Total comprehensive income	$	2,338,570 ( $	296 ) $	2,338,274

6. ”2009 ~ 2011 Annual Improvements”

The 2009~2011 annual improvements include the amendment of IFRS 1 “The first-time adoption of IFRSs,” IAS 1 “Presentation of Financial Statements,” IAS 16 “Property, Plant, and Equipment,” IAS 32 “Financial Instruments: Presentation,” and IAS 34 “Interim financial reporting.”

IAS 1 Amendment states that in the retroactively adopting accounting policy, retroactively preparing financial statements, or retroactively reclassifying items on the financial statements, and the foregoing matters having significant impact on the beginning of the previous period balance sheet, the Company and its subsidiaries should present the beginning of the previous period balance sheet, but without providing the notes of the previous period.

IAS 16 Amendment states that the spare parts, spare equipment, and maintenance equipment in conformity with the property, plant and equipment definition should be recognized in accordance with IAS 16. In addition, the remaining items that do not meet the property, plant, and equipment definition are recognized as inventories.

IAS 32 Amendment states that the income tax of the transaction costs allocated to the shareholders and equity transaction is to be processed in accordance with IAS 12 “Income Tax.”

IAS 34 Amendment states that if the total liability measurement amount of the department is regularly provided to the decision-maker of the Company and its subsidiaries and if there is material difference between the prior period financial statements and the measurement amount disclosed by the reporting department, the measurement amount should be disclosed in the interim financial statements.

The first-time adoption of the amended Regulations Governing the Preparation of Financial Reports by Securities Firms in 2015 and IFRSs 2013 edition are expected to have

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no significant impact on the Consolidated Balance Sheet as of January 1, 2014.

1. The recognition and measurement of the financial liability designated to be measured at fair value through profit and loss

According to the amended Regulations Governing the Preparation of Financial Reports by Securities Firms, for the financial liability designated to be measured at fair value through profit and loss, the change in fair value arising from the change in credit risk is recognized in other comprehensive income and it will not be reclassified subsequently to profit and loss; also, the remaining amount of the change in the fair value of liabilities is reported in profit and loss. However, if the aforementioned accounting treatment causes or worsens improper accounting ratio, the profit and loss of the liabilities will be reported in profit and loss entirely.

• (II) IFRSs published by IASB but not yet approved by the FSC

The Company and its subsidiaries are not subject to the following IFRSs that are published by IASB but not yet approved by the FSC. The following IFRSs are not yet approved by the FSC up to the publication date of the consolidated financial statements.

Newly published / amended / revised standards and interpretations

IASB effective date(Note 1)

”2010~2012 Annual improvements” ”2011~2013 Annual improvements” ”2012~2014 Annual improvements” IFRS 9 “Financial Instruments” IFRS 9 and IFRS 7 Amendment “Mandatory effective date and transitional disclosure” IFRS 10 and IAS 28 Amendment“Assets sales or input between investors and their associates or joint venture” IFRS 10, IFRS 12, and IFRS 28 Amendment “Investment entity: Application of the exceptions in the consolidated financial statements” IFRS 11Amendment “Acquisitions of Interests in Joint Operations” IFRS 14 “Regulatory deferral account” IFRS 15 “Revenue from contracts with customers” IAS 1 Amendment “Disclosure plan” IAS 16 and IAS 38 Amendment “Clarification of acceptable methods of depreciation and amortization” IAS 16 and IAS 41 Amendment “Agriculture: Plantation” IAS 19 Amendment “Defined benefit plans: Employee appropriation” IAS 36 Amendment “Non-financial assetsrecoverable amount disclosure” IAS 39 Amendment “Derivatives contract replacement and hedge accounting continuity” IFRIC 21 “Taxation”

July 1, 2014 (Note 2) July 1, 2014 January 1, 2016 (Note 4) January 1, 2018 January 1, 2018 January 1, 2016 (Note 3) January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2017 January 1, 2016 January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2014 January 1, 2014 January 1, 2014

Note 1: Unless otherwise stated, the aforementioned newly published / amended / revised standards and interpretations are valid starting from the period after the respective effective date.

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• Note 2: The share-based payment transaction with a grant date after July 1, 2014 is subject to IFRS 2 Amendment. The corporate merger with a merger date after July 1, 2014 is subject to IFRS 3 Amendment. IFRS 13 Amendment is effective immediately. The remaining amendments are valid starting from the period after July 1, 2014.

• Note 3: It is applicable by deferral to all transactions starting from the period after January 1, 2016.

• Note 4: In addition to IFRS 5 Amendment subject to deferral application, the remaining amendments are valid starting from the period after January 1, 2016.

Except for the following instructions, the application of the aforementioned newly published / amended / revised standards and interpretations will not cause significant changes to the accounting policies of the Company and its subsidiaries:

1. IFRS 9 “Financial instruments”

The recognition and measurement of financial assets

In terms of financial assets, the subsequent measurement of all financial assets within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” is measured at the amortized cost or fair value. The classification of financial assets according to IFRS 9 is as follows:

For the debt instrument invested by the Company and its subsidiaries, if its contractual cash flow is exclusive for the payment of principal and interest on the outstanding principal amount, the classification and measurement is as follows:

• (1) The financial assets that are held for the purpose of collecting contractual cash flows are measured at the amortized cost. The interest income of such financial assets is subsequently recognized in profit and loss in accordance with the effective interest rate and is with impairment assessed continuously and recognized in profit and loss.

• (2) The financial assets that are held for the purpose of collecting contractual cash flows and selling financial assets are measured at fair value through other comprehensive income. The interest income of such financial assets is subsequently recognized in profit and loss in accordance with the effective interest rate and is with impairment assessed continuously and recognized in profit and loss along with exchange profit and loss. The changes in other fair values are recognized in other comprehensive income. When such financial assets are de-recognized or reclassified, the changes in fair value accumulated in other comprehensive income should be reclassified to profit and loss.

The financial assets not subject to the conditions referred to above invested by the Company and its subsidiaries are measured at fair value; also, changes in fair value are recognized in profit and loss. However, the Company and its subsidiaries may choose to have the not-held-for-trading equity investments designated at the original recognition to be measured at fair value through other comprehensive income. The dividend income of such financial assets is recognized in profit and loss; also, other related profits and losses are recognized in other comprehensive income without the need of subsequently assessing impairments; moreover, the changes in the fair value accumulated in other comprehensive income will not be reclassified to profit and loss.

Impairments of financial assets

According to IFRS 9, adopts “expected credit loss model” to recognize the impairments of financial assets. The financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive income mandatorily, rent receivables, and the contractual assets or loan commitment and financial guarantee contracts arising from IFRS 15 “Revenue from contracts with customers” are with allowance for credit losses recognized. If the credit risk of the aforementioned financial assets has not significantly increased since the original recognition, its allowance for credit losses is measured in

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accordance with the expected credit loss within 12 months. If the credit risk of the aforementioned financial assets has significantly increased since the original recognition with high risk, its allowance for credit losses is measured in accordance with the expected credit losses within the remaining duration. However, the allowance for credit losses of the accounts receivable excluding significant financial composition should be measured in accordance with the expected credit loss of the duration.

In addition, for the financial assets with credit impairment at the time of recognition, the Company and its subsidiaries have the effective interest rate after credit adjustment calculated with the expected credit loss at the time of original recognition considered. The subsequent allowance for credit losses is measured in accordance with the cumulative changes in the subsequent expected credit losses.

1. IAS 36 Amendment “Non-financial assets recoverable amount disclosure”

IASB has amended the disclosure requirement of IAS 36 “Impairment of Assets” at the time of publishing IFRS 13 “Fair Value Measurement,” requiring the Company and its subsidiaries to additionally disclose the recoverable amount of each asset or cash-generating unit in each reporting period. IAS 36 Amendment is to clarify that the Company and its subsidiaries need to disclose such recoverable amount only when recognizing or reversing impairment loss. In addition, if the recoverable amount is measured at the fair value derived from the present value method net of the cost of disposal, the Company and its subsidiaries need to disclose the discount rate adopted.

3. 2010~2012 Annual improvements

IFRS 8 Amendment is to clarify that if the Company and its subsidiaries have the operating divisions with similar economic characteristics disclosed comprehensively, the judgments made by the management in accordance with the summarized standards should be disclosed in the consolidated financial statements. In addition, IFRS 8 Amendment is to clarify that the adjustment information regarding the total assets of the reporting department consolidated to the total corporate assets should be disclosed only when the Company and its subsidiaries have department assets information provided to the major decision-maker periodically.

IFRS 13 Amendment is to clarify that after the application of IFRS 13, if the short-term accounts receivable and payable without interest rates defined are not significantly affected by the discount, they can still be measured in accordance with the original invoice amount.

IAS 24 Amendment “Disclosure of Related Party” is to clarify that the management entity providing services to the management of the Company and its subsidiaries is a related party of the Company and its subsidiaries. The paid and payable amount of the reporting entity arising from the services provided by the management entity to the senior management should be disclosed, but do not have to disclose the composition of the remuneration.

4. 2011~2013 Annual improvements

IFRS 13 Amendment is to adjust the exception (that is the “combination exception”) of the financial assets and financial liabilities measured at fair value on a net amount basis in order to clarify the scope of the exception including all contracts subject to the requirements of IAS 39 or IFRS 9, even if the contract does not comply with the definition of financial assets or financial liabilities in IAS 32 “Financial Instruments: Presentation.”

5. IAS 16 Amendment “Clarification of acceptable methods of depreciation and amortization”

Enterprises should adopt appropriate depreciation method to reflect the expected consumption of future economic benefits of the property, plant, and equipment.

IAS 16 Amendment “Property, Plant, and Equipment” is to clarify that income is not an appropriate basis for measuring the depreciation expense of property, plant, and equipment;

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also, the Amendment does not provide a justification for the exception of basing depreciation expense appropriation on income.

The aforementioned amendments can be applied by deferral starting from the period after the effective date and can be applied ahead of the schedule.

6. IFRS 15 “Revenue from contracts with customers”

IFRS 15 is to stipulate the principle of recognition for the revenue generated from the contracts signed with customers; also, IFRS 15 will replace IAS 18 “Revenue,” IAS 11 “Construction Contracts,” and related interpretations.

The Company and its subsidiaries have revenue recognized in accordance with the following steps when subject to IFRS 15:

• (1) Identifying contracts with customers;

• (2) Identifying the performance obligations in the contract;

• (3) Determining transaction price;

• (4) Amortizing transaction price to each performance obligation in the contract; and

• (5) Recognizing revenue upon fulfilling performance obligations;

When IFRS 15 is valid, the Company and its subsidiaries may choose to have it applied retroactively to the comparing period or to have the first-time adoption cumulative effect recognized in the first-time application date.

7. 2012~2014 annual improvements

IFRS 7 Amendment provides additional guidance to clarify whether the service contracts are continuously applicable to the transferred financial assets

8. IAS 1 Amendment “Disclosure Plan”

IAS 1 Amendment states that the consolidated financial report is to disclose material information; also, material information different in nature or function should be disclosed separately and may not be disclosed comprehensively with non-material information in order to enhance the understandability of the consolidated financial statements.

In addition, IAS 1 Amendment clarifies that the Company and its subsidiaries should consider the understandability and comparability of the consolidated financial statements in order to have notes prepared systematically.

In addition to the impacts referred to above, as of the date the consolidated financial statements published, the Company and its subsidiaries continue to evaluate the impact of other amended standards and interpretations on the financial position and financial performance. In addition, the relevant impacts will be disclosed upon the completion of the assessment.

(IV) Material accounting polices summary

(I) Statement of compliance

The consolidated financial statements are prepared pursuant to the Regulations Governing the Preparation of Financial Reports by Securities Firms and the IFRSs recognized by the FSC.

(II) Preparation basis

Except for the financial instruments measured at fair value, the consolidated financial statements are prepared in accordance with the historical cost basis. The historical cost is based on the fair value of the considerations paid for the assets acquired.

• (III) Classification of assets and liabilities as current and noncurrent standards

Current assets include:

1. Mainly held-for-trading assets;

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3. Assets expected to be realized within 12 months after the balance sheet date; and

4. Cash and cash equivalents (but excluding the cash and cash equivalent contributed for exchange or liquidation within 12 months after the balance sheet date);

Current liabilities include:

1. Mainly held-for-trading liabilities;

2. Liabilities expected to be liquidated within 12 months after the balance sheet date, and

3. Liabilities that cannot be with the liquidation deadline deferred for at least 12 months after the balance sheet date unconditionally;

Assets and liabilities other than those current assets or current liabilities referred to above are classified as noncurrent assets and noncurrent liabilities.

• (IV) Consolidation basis

• Consolidated financial statements preparation principle

The consolidated financial statements include the financial statements of the Company and business entities (subsidiaries) controlled by the Company.

The financial statements of the subsidiaries have been adjusted to make its accounting policies consistent with the accounting policies of the Company.

The transactions between business entities, account balances, incomes, and expenses have been fully written-off while preparing the consolidated financial statements.

Amortizing total comprehensive income to non-controlling interests

Total comprehensive income of the subsidiaries is attributed to the shareholders’ equity of the Company and non-controlling interests, even if the non-controlling interests thus ended up with losses.

1. The subsidiaries included in the consolidated financial statements

The main business entities of the consolidated financial statements:

Investingcompany	Subsidiaries	Nature of business	Shareholdingratio	Shareholdingratio
			12/31/2014	12/31/2013
The Company Ever Wealthy International Co., Ltd. China Steel Chemical Material Technology Company	Ever Wealthy International Co., Ltd. (Ever Wealthy) Ever Glory International Co., Ltd. (EGI) Ever Glory Investment Co. (Ever Glory) China Steel Chemical Material Technology Company (CSCMTC) ChangzhouChina Steel Chemical Material Technology Company (Changzhou CCSCMTC)	General investment business International trade General investment business General investment business Processing and sale of mesophase carbon microspheres Products	100 100 51 100 100	100 100 51 100 100

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(V) Foreign currency

Each business entity when preparing financial statements should have the transactions that are completed in a currency (foreign currency) other than the functional currency converted to the functional currency in accordance with the exchange rate on the transaction date.

Monetary items in foreign currency should be converted in accordance with the closing exchange rate at each balance sheet date. Exchange differences arising from monetary items settlement or conversion should be recognized in profit and loss of the year.

The non-monetary items in foreign currency measured at fair value are converted in accordance with the exchange rate on the fair value determination date; also, exchange differences resulted is recognized in profit and loss of the year. However, for the changes in fair value recognized in other comprehensive income, the exchange differences resulted is recognized in other comprehensive loss.

The non-monetary items in foreign currency measured at the historical cost are converted in accordance with the exchange rate on the transaction day without re-converting.

The assets and liabilities of the foreign operations of the Company and its subsidiaries should be converted to New Taiwan Dollar in accordance with the exchange rate on each Balance Sheet date when preparing the consolidated financial statements. The income, expense, and loss items are converted in accordance with the average exchange rate of the year and the exchange differences resulted are booked in the other comprehensive income (and attributable to the Company’s shareholders’ equity and non-controlling interests).

(VI) Accounts receivable factoring

Accounts receivable is deemed as factored when complying with all the following conditions:

1. The ownership of accounts receivable has been isolated from the Company; in other words, the Company no longer controls it.

2. The assignee of each accounts receivable is entitled to have the accounts receivable pledged or exchanged; also, there is no restriction on accounts receivable assignee in exercising pledge or exchange rights, resulting in non-insignificant interests to the Company.

3. The Company does not apply any of the two methods below to have accounts receivable controlled effectively:

4. (1) An agreement that gives the Company the rights and obligations to repurchase or redeem accounts receivables prior to the expiry date;

5. (2) The ability to demand the owner to return specific assets unilaterally;

The difference between the proceeds received for the accounts receivables factored and the book amount is recognized loss and booked in the current operating expense or loss.

(VII) Inventories

Inventories include raw materials, substances, work-in-process goods, finished goods, and merchandise. Inventory is valued at the lower of cost or net realizable value. The comparison of cost and net realizable value, except for the same type of inventories, is on an itemized base. Net realizable value refers to the estimated selling price under normal circumstances net of the estimated cost needed till the completion of the construction and the estimated cost needed for completing the sale. The cost of inventory is calculated in accordance with the weighted average method.

(VIII) Investment in associated companies

Associated companies refer to the companies substantially influenced by the Company and its subsidiaries but not a subsidiary of the Company or a joint venture.

The Company and its subsidiaries adopt the equity method for the investment in the

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associated companies. Under the equity method, the associated companies were originally recognized at cost; also, the book amount after the acquisition date fluctuates along with the associated company’s profit and loss and other comprehensive income share of the Company and its subsidiaries and the distribution of profits. In addition, changes in the equity of the associated companies / changes in the associated company’s interests of the Company and its subsidiaries are recognized proportionally to shareholding ratio.

If the Company and its subsidiaries failed to subscribe the new shares issued by the associated companies proportionally to the shareholding ratio, resulting changes in shareholding ratio and thus causing the net worth of the invested equity increased or decreased, the increase or decrease amount is adjusted to the additional paid-in capital and the investment is under the equity method. If the failure of subscribing or acquiring stock shares proportionally to the shareholding ratio causing the ownership in the associated company’s equity reduced, the amount recognized in other comprehensive income related to the associated company should be reclassified proportionally to the reduction ratio. In addition, the basis of the accounting treatment is same as the basis for the related assets or liabilities disposed directly by the associated company. If the aforementioned adjustment is debited to additional paid-in capital while the additional paid-in capital derived from the investment under the equity method is with insufficient balance, the difference is debited to retained earnings.

When the associated company’s loss share of the Company and its subsidiaries equals or exceeds its interest in the associated company (including the book amount of the investment in the associated company under the equity method and other long-term equity of associated company’s net investment essentially belong to the Company and its subsidiaries), stop recognizing loss further. The Company and its subsidiaries recognize additional losses and liabilities within the scope of the statutory obligations occurred, constructive obligations occurred, or advanced payments made on behalf of the associated company.

The company and its subsidiaries in assessing impairments have the overall investment book amount (including goodwill) deemed as a single asset comparing the recoverable amount and the book amount for impairment testing; also, the recognized impairment loss is an integral part of the investment book amount. Any reversed impairment loss is recognized within the scope of the recoverable amount increased subsequently.

The Company and its subsidiaries at the date losing significant influence have the residual investment in the associated company measured at fair value. The difference between the fair value and any disposal proceeds of the residual investment and the investment book amount at the date losing significant influence is recognized in the profit and loss of the year. In addition, the accounting treatment for all of the amounts related to the associated company recognized in other comprehensive income is same as the accounting treatment for the related assets or liabilities directly disposed by the associated company.

The profit and loss derived from the downstream, upstream, and side-stream transactions between the Company and its subsidiaries and the associated company is recognized in the consolidated financial statements within the scope of the associated company’s equity irrelevant with the Company and its subsidiaries.

(IX) Property, plant, and equipment

Property, plant, and equipment are recognized at cost and measured subsequently at cost net of accumulated depreciation.

The property, plant, and equipment in construction is recognized at cost, which includes professional service fees and loan cost in compliance with the conditions for capitalization. Such assets upon completion and fulfilling the intended use will be classified to the appropriate category of property, plant, and equipment with the appropriation of depreciation initiated.

Proprietary land is without any depreciation appropriated.

Property, plant, and equipment are with depreciation appropriated in accordance with the

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straight-line method. Depreciation is appropriated separately for each significant part of the property, plant, and equipment. The Company and its subsidiaries will have the estimated durable life, residual value, and depreciation method reviewed at least once at each balance sheet date. The effect of changes in accounting estimates is processed with a deferral method.

The profit or loss amount derived from the derecognized property, plant, and equipment is the difference between the net disposal proceeds and the book amount of the assets, which will be recognized in the profit and loss of the year.

(X) Investment property

Investment property is held for the purpose of earning rent income or capital appreciation or both.

Investment property is measured at cost (including transaction cost) originally and then measured subsequently at the cost net of accumulated depreciation and accumulated impairment loss. The Company and its subsidiaries have depreciation appropriated in accordance with the straight-line method.

The profit or loss amount derived from the derecognized investment property is the difference between the net disposal proceeds and the book amount of the assets, which will be recognized in the profit and loss of the year.

(XI) Impairments of tangible assets

The Company and its subsidiaries at each balance sheet date assess whether there is any indication that tangible assets may have suffered from impairments. If there is any indication of impairment occurred, the recoverable amount of the asset is estimated. If the recoverable amount of individual asset cannot be estimated, the Company and its subsidiaries estimate the recoverable amount of the cash-generating unit that the asset belongs to. If the common assets can be amortized to each cash-generating unit in accordance with a consistent and reasonable basis, it is to be amortized to each cash-generating unit, on the contrary, it will be amortized to the smallest cash-generating unit in accordance with a consistent and reasonable basis.

Recoverable amount is the higher of the fair value net of the cost of sale or its value in use. If the recoverable amount of an individual asset or cash-generating unit falls below the book amount, the book amount of the asset or cash-generating unit is adjusted down to its recoverable amount.

When the impairment loss in reversed subsequently, the book amount of the asset or cash-generating unit is adjusted up to the amended recoverable amount, but the adjusted-up book amount may not exceed the book amount (after depreciation) of the asset or cash-generating unit before recognizing impairment loss in prior year. The reversal amount of the impairment loss is recognized in profit and loss.

(XII) Available-for-sale noncurrent assets

The noncurrent assets with the book amount expected to be recovered through sale transaction rather than through continued use are classified as available-for-sale. The complying noncurrent assets must be available for immediate sale in the current state, and the sale must be highly probable. When the appropriate levels of management commits to sell such asset and this sale transaction is expected to be completed within one year from the date of classification, under the circumstance, the sale will be deemed as highly probable.

The available-for-sale noncurrent assets are measured at the book amount or fair value net of selling cost whichever is lower; also, stop appropriating depreciation for such assets.

(XIII) Financial instruments

Financial assets and financial liabilities are recognized in the consolidated balance sheet when the Company and its subsidiaries become a party to the financial instrument contract.

If financial assets or financial liabilities are not measured at fair value through profit and loss

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at the original recognition, they are measured at fair value plus the transaction costs directly attributable to the acquisition or issuance of financial assets or financial liabilities. The transaction costs directly attributable to the acquisition or issuance of financial assets or financial liabilities measured at fair value through profit and loss is immediately recognized as profit and loss.

1. Financial assets

Conventional transaction of financial assets is recognized and derecognized in accordance with the trade date accounting.

(1) Type of measurement

The type of financial assets held by the Company and its subsidiaries include financial assets measured at fair value through profit and loss, available-for-sale financial assets, held-to-maturity investments, and loans and receivables.

• A. Financial assets measured at fair value through profit and loss

Financial assets measured at fair value through profit and loss include held-for-trading financial assets and financial assets designated to be measured at fair value through profit and loss.

The Company and its subsidiaries in the following circumstances have financial assets designated at the original recognition to be measured at fair value through profit and loss:

• a. Such designation can help eliminate or materially reduce measurement or recognition inconsistency; or

• b. The performance management and evaluation of financial assets, financial liabilities, or both, according to written risk management or investment strategy, is managed and assessed on the base of fair value; also, the Company and its subsidiaries provide the investment portfolio information to the management internally on the base of fair value; or

• c. Designate the overall mixed (combined) contract containing one or multiple embedded derivatives.

Financial assets measured at fair value through profit and loss are measured at fair value and the profit or loss (including any dividend or interest arising from the financial asset) arising from the measurement is recognized in the profit and loss.

B. Available-for-sale financial assets

The available-for-sale financial assets are non-derivative financial assets designated as available-for-sale, or the financial assets not classified as loans and receivables, held-to-maturity investment, or financial assets measured at fair value through profit and loss.

The available-for-sale financial assets are measured at fair value. The changes in the book amount of the available-for-sale monetary financial assets attributable to foreign currency exchange gains and losses and dividends from available-for-sale equity investments are recognized in profit and loss. The changes in the book amount of other available-for-sale financial assets are recognized in other comprehensive income, which is reclassified to profit and loss when investment is disposed or impairment is confirmed.

The dividend from available-for-sale equity investments is recognized when the rights to collection of the Company and its subsidiaries established.

• C. Held-to-maturity investments

The structured bond and corporate bond with maturity date invested by the Company and its subsidiaries; also, the Company and its subsidiaries intend to and

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capable of holding such structured bond and corporate bond to maturity, are classified as held-to-maturity investments.

Held-to-maturity financial assets after original recognition are measured at the amortized cost after deducting any impairment loss in accordance with the effective interest method.

D. Loans and receivables

Loans and receivables [including cash and cash equivalents, notes receivable and accounts receivable (including the related party), other accounts receivables, bonds investment without market price, refundable deposits, and other financial assets] are measured at the amortized cost after deducting any impairment loss in accordance with the effective interest method, except for the insignificant interest of the short-term receivables recognized.

Cash equivalents include the time deposits and commercial paper with high liquidity, readily convertible into cash, and small risk of changes in value within three months from the acquisition date and it is used to fulfill short-term cash commitment.

(2) Impairment of financial assets

Except for the financial assets measured at fair value through profit and loss, the Company and its subsidiaries at each balance sheet date assess whether there is objective evidence to indicate impairments of other financial assets. When there is objective evidence indicates the future cash flows of financial assets with impairment expected due to the occurrence of one or multiple events after the original recognition of the financial assets, there is impairment occurred to such financial assets.

For financial assets recognized at amortized cost, such as, accounts receivable, if such asset is without objective evidence of impairment after individual assessment, a collective assessment of impairments should be initiated. The collective objective evidence of impairments for receivables may include the experience of collection of the Company and its subsidiaries as well as the observable changes in national or regional economic situation related to receivable arrears.

The impairment loss of the financial assets that are booked at amortized cost is the difference between the book amount of the assets and the present value of future cash flows discounted at the original effective interest rate of the financial asset.

If the impairment loss of the financial assets that are booked at the amortized cost in the subsequent period is reduced; also, such impairment loss reduction is objectively determined to be related to an event occurred after the recognition, the previously recognized impairment loss will be directly or by adjusting the allowance account reversed and recognized in profit and loss. However, the reversal transaction may not cause the book amount of financial assets exceeding the amortized cost before recognizing impairment.

The fair value of available-for-sale equity investments below cost and the significant or permanent fair value decline is objective evidence indicating the occurrence of impairment.

The objective evidence of impairment for other financial assets may include the significant financial difficulties of issuer or debtor, breach of contract (for example, delay in the payment of interest or principal or non-payment), the bankruptcy of debtor, other highly possible financial reorganization, or the disappearing active market of financial assets due to financial difficulties.

Upon the occurrence of impairment to the available-for-sale financial asset, the cumulative loss amount recognized in other comprehensive income should be reclassified to profit and loss.

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The impairment loss of the available-for-sale equity instruments that is recognized in profit and loss may not be reversed through profit and loss. The reversal amount of fair value after recognizing impairment loss should be recognized in other comprehensive income.

The impairment loss of all financial assets is directly deducted from the book amount of the financial assets; however, the book amount of account receivable is adjusted down through the allowance account.

• (3) De-recognition of financial assets

The Company and its subsidiaries will have financial assets derecognized only when the contractual rights from the cash flows of the financial assets failed, or the financial assets have been transferred and almost all the risks and compensations of the asset ownership have been transferred to other companies.

When a financial asset in its entirety is derecognized, the difference between the book amount and the sum of the considerations collected plus any cumulative profit or loss recognized in other comprehensive income is recognized in profit and loss.

2. Equity instruments

The equity instruments issued by the Company and its subsidiaries are classified as equity in accordance with the definition of equity instruments.

The equity instruments issued by the Company and its subsidiaries are recognized at the acquisition price net of the direct issuance cost.

The recollection of the Company’s equity instrument is recognized and derecognized in the equity account. The purchase, sale, issuance, or cancellation of the Company’s equity instrument is not recognized in profit and loss.

1. Financial liabilities

2. (1) Subsequent measurement

Except for the following practices, all financial liabilities are measured at amortized cost in accordance with the effective interest method:

Financial liabilities measured at fair value through profit and loss

Financial liabilities measured at fair value through profit and loss are held-for-trading financial liabilities.

Financial liabilities measured at fair value through profit and loss are measured at fair value and the profit or loss arising from the measurement is recognized in profit and loss. Please refer to Note XXVII for the determination of fair value.

• (2) De-recognition of financial liabilities

While derecognizing financial liabilities, the difference between book amount and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit and loss.

4. Derivatives

Derivatives agreement signed by the Company and its subsidiaries including forward foreign exchange contract is to manage the exchange risk of the Company and its subsidiaries.

Derivatives are recognized at fair value originally at the time of signing the derivatives agreement and are measured subsequently at fair value at each balance sheet date; also, the profit and loss derived from subsequent measurement is directly booked in profit and loss. The derivative instrument with a positive fair value is classified as financial asset; the derivative with a negative value is classified as financial liability.

• (XIV) Treasury stock

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The Company’s stock shares held by its subsidiaries are reclassified as Treasury stock from the investment under the equity method and measured at the acquisition cost.

(XV) Recognition of revenues

Revenue is measured in accordance with the fair value of the consideration received or receivable after deducting the estimated customer returns, discounts, and other similar discount. The amount of sales return is based on past experience and other relevant factors reasonably estimated.

Sales of goods

Sales revenue is recognized when goods are delivered and legal title to the goods is transferred, usually, it is when the goods of domestic sales are delivered or when the sale conditions of exports in a contract are fulfilled.

For processing on order, the significant risks of the ownership of the processed products and compensations have not yet been transferred; therefore, the delivery of raw material is not processed as sales.

Providing labor services

Labor service income is recognized at the time service provided.

(XVI) Post-employment benefits

Defined contribution plan is to have the appropriated pension amount recognized as annual expense during the employment period.

For the defined benefit plan, the cost of providing benefits is undergoing an actuarial evaluation with the projected unit credit method. The actuarial gains and losses arising from the defined benefit obligations are recognized in other comprehensive income immediately upon occurrence.

Accrued pension liability is the present value of the defined benefit obligations after deducting the fair value of the plan assets. The assets arising from such computation shall not exceed the cumulative unrecognized prior period service cost, plus the present value of the refundable plan fund and deductible future fund appropriation.

The reduction or liquidation of the defined benefit plan is with the profit and loss arising from such reduction or liquidation recognized.

(XVII) Income tax

Income tax expense equals to the sum of the current income tax and deferred income tax.

1. Current income tax

The additional 10% tax levied on the unappropriated earnings in accordance with the Income Tax Law is booked as income tax expense of the year when shareholders’ meeting is convened.

The adjustment of the income tax payable of previous years is booked as current income

tax.

2. Deferred income tax

Deferred income tax is recognized in accordance with the temporary differences arising from the book amount of assets and liabilities in the consolidated financial statements and the tax base for calculating taxable income. Deferred income tax liabilities are generally recognized according to all taxable temporary differences, while deferred income tax assets are recognized when there is likely to have taxable income for the income tax credit arising from the deductible temporary differences.

Taxable temporary differences related to the investment in subsidiaries and associated

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companies are recognized in deferred tax liabilities, unless the Company and its subsidiaries can control the timing of the temporary differences reversal and such temporary differences are unlikely to be reversed in the near future. Deferred income tax assets arising from the deductible temporary differences related to such investments and interests are recognized when there is likely having sufficient taxable income to realize the benefits of temporary differences and within the scope of the expected reversal in the near future.

The book amount of deferred income tax assets is to be reviewed at each balance sheet date; also, the book amount of those no longer with sufficient taxable income to recover all or part of the assets should be adjusted down. Those not formerly recognized as deferred income tax assets are to be reviewed at each balance sheet date; also, the book amount of those likely to generate sufficient taxable income in the future to recover all or part of the assets should be adjusted up.

Deferred income tax assets and liabilities are measured in accordance with tax rate in the period when the expected tax liability is settled or the asset is realized. Such tax rate is based on the legislated or substantive legislated tax rate and tax law at the balance sheet date. The measurement of deferred income tax liabilities and assets reflects the tax consequences arising from the book amount of assets and liabilities expected to be recovered or settled at the balance sheet date.

3. Current and deferred income tax of the year

Current and deferred income taxes are recognized in profit and loss; however, current and deferred income tax related to the items recognized in other comprehensive income or directly included in equity is recognized in other comprehensive income or directly in equity.

(V) Main source of material accounting judgment, estimation, and assumption uncertainty

At the time of adopting accounting policy, for those relevant information that cannot be retrieved easily from other sources, the management of the Company and its subsidiaries must base on historical experience and other crucial factors to make judgments, estimations, and assumptions. Actual results may differ from those estimates made.

The management will continue to review the estimates and basic assumptions. If the amendment of estimates affects only the current period, it is recognized in the period of amendment made. If the amendment of accounting estimates affects both the current period and future periods, it will be recognized in the current and future periods.

(I) Held-to-maturity financial assets

The management of the Company and its subsidiaries have the held-to-maturity financial assets reviewed in accordance with the capital maintenance and liquidity requirements; also, has confirmed the positive intent and capability of the Company and its subsidiaries in holding such assets to the maturity date.

(II) Income tax

Since the fund is expected to be used for expanding foreign operation in the future and will not be remitted inward soon, the Company did not have the earnings of NT$296,006 thousand and NT$290,485 thousand recognized as deferred income tax liabilities as of December 31, 2014 and 2013, respectively. The realization of deferred income tax liabilities mainly depends on the scale of operation expansion in the future. If the actual investment amount in the future is less than the expected investment amount, a significant income tax reversal is expected and such reversal amount will be recognized in profit and loss upon occurrence. The unrecognized deferred income tax liability related to the invested subsidiaries amounted to NT$50,321 thousand and NT$49,382 thousand as of December 31, 2014 and 2013, respectively.

• (III) Estimated impairment of accounts receivable

• 27 -

When there is objective evidence of impairments, the Company and its subsidiaries shall consider the estimate of future cash flows. The amount of impairment loss is measured in accordance with the difference between the book amount of the assets and the present value of future cash flow (excluding the future credit losses that have not yet occurred) discounted at the original effective interest rate of the financial assets. If the actual cash flow in future is less than expected, a material impairment loss is expected.

(IV) Fair value of financial instruments

As described in Note XXVII, the management of the Company and its subsidiaries exercise judgment to select adequate evaluation techniques for assessing the offer of financial instruments with market price. The Company and subsidiary adopt the common evaluation techniques of market participants; also, the assumption on derivative financial instruments is based on market price and is adjusted according to the characteristics of the instruments. Debt instruments are estimated in accordance with the cash flow discount approach; also, the assumption is based on the observable market prices or interest rates (if applicable). The fair value of the Emerging or unlisted equity instruments is estimated in accordance with the invested company’s financial position and operating results analysis, the recent trading price, the quotation of the same equity instruments without market price, and the quotation of similar instruments with market price. The detailed assumptions of the evaluation techniques are disclosed in Note XXVII. The management of the Company and its subsidiaries believes that the selected evaluation techniques and assumptions can appropriately help determine the fair value of financial instruments.

(V) Inventory evaluation

The net realizable value of inventory is the selling price estimated in the normal course of business after deducting the estimated cost needed to complete the project and the estimated cost needed to complete the sale of the project. Such estimates are evaluated in accordance with the current market conditions and historical sales of similar products. Market changes may materially affect the results of these estimates.

(VI) Useful life of property, plant, and equipment and investment property

The estimated useful life of property, plant, and equipment and investment property is with the consideration of the extent of use, obsolescence of technology and commerce, and laws or similar restrictions of the asset; therefore, material changes are expected.

(VII) Tangible asset impairment assessment

The Company and its subsidiaries rely on subjective judgments to assess asset impairment; also, based on the pattern of use and characteristics of the industry to determine specific asset group’s independent cash flows assets, years of useful life, and possible future income and expenses. Any changes in estimates arising from the changes in economic conditions or corporate strategy are likely to bring significant changes in the future.

(VIII) Recognition of defined benefit plan

The pension expenses and accrued pension liabilities of the defined benefit plan are with actuarial evaluations conducted in accordance with the projected unit credit method. The adopted actuarial assumptions include discount rate, employee turnover rate, and estimated long-term average salary rate. If such estimates are affected by the changes in market and economic conditions, the recognized expenses and liabilities amount could be affected significantly.

VI. Cash and cash equivalent

ash and cash equivalent
Cash on hand and revolving fund Bank checks and demand deposits Cash equivalent	12/31/2014 $ 331 439,912	12/31/2013
		$ 331 269,760

• 28 -

Bank time deposits with the original maturity date due in three months or less Commercial paper	158,250 499,435 $ 1,097,928	139,610 99,735
		$ 509,436

The market interest rate range of bank deposits and cash equivalents at the balance sheet date is as follows:

follows:
Bank demand deposits(%) Bank time deposits(%) Commercial paper(%)	12/31/2014	12/31/2013
	0.02~0.17 0.7 0.5~0.64	0.02~0.17 0.35~0.94 0.60

VII. Financial instruments measured at fair value through profit and loss - Current

Financial assets measured at fair value through profit and loss Non-derivative financial assets Fund beneficiary certificates Credit linked note Domestic listed stock Convertible bonds Held-for-tradingfinancial assets Non-derivative financial assets Fund beneficiary certificates Domestic listed stock Credit linked note Held-for-tradingfinancial liabilities Derivative financial liabilities Forward foreign exchange contracts		12/31/2014 $ 753,478 72,601 29,769 – 855,848 255,288 235,468 – 490,756 $ 1,346,604 $ –		12/31/2013
				$ 1,177,859 118,270 39,441 10,660 1,346,230 230,983 143,429 20,053 394,465 $ 1,740,695 $ 91

The purpose of the Company’s engaging in forward exchange transactions is mainly to hedge the risk of accounts receivable in foreign currency arising from the change in exchange rate. The foreign exchange contracts do not meet the conditions of effective hedging; therefore, hedging accounting is not applicable. The outstanding forward foreign exchange contracts at the balance sheet date are as follows:

Currency Maturity date Contract amount (NT$ Thousands) 12/31/2013 Pre-sell forward exchange USD against NTD 01.15.2014 USD2,000/NTD59,794

• 29 -

The consolidated net income of financial instruments with changes in fair value recognized in profit and loss by the Company and its subsidiaries in 2014 and 2013 is as follows:

Net income from changesin fair value Interest income		2014 $ 28,131 3,863 $ 31,994		2013
				$ 35,124 4,975 $ 40,099

Consolidated net income of the aforementioned financial instruments is booked as follows:

VIII.	Operating income Other non-operatingprofit and loss Available-for-sale financial assets Current		2014 $ 11,443 20,551 $ 31,994 12/31/2014 $ 220,684 $ 440,981 84,260 $ 525,241			2013
						$ 29,576 10,523 $ 40,099 12/31/2013
						$ 171,214 $ 295,678 21,384 $ 317,062
	Domestic investment Listed stock Noncurrent
	Domestic investment Emerging stock Unlisted (Non-OTC) stock

IX. Held-to-maturity financial assets

eld-to-maturity financial assets
Noncurrent Foreign investment Structured bonds	12/31/2014 $108,860	12/31/2013
		$102,514

• (I) The investment in foreign structured bond by the Company and its subsidiaries at the balance sheet date is as follows:

date is as follows:
Investment face amount (US$ Thousands) Coupon rate (%) Averagematurity date		12/31/2014 $ 3,440 7~9 11~14 years	12/31/2013
			$ 3,440 7~9 12~15 years

• (II) The Company and its subsidiaries starting from the year of 2012 has the structured bond investment disposed gradually after the issuing firms having them redeemed early, and since the disposal amount is insignificant and cannot be controlled by the Company and its subsidiaries; it does not affect its being classified continuously as held-to-maturity financial assets. The cumulative amount of the disposition in the first three years by the Company and its subsidiaries amounted to NT$87,861 thousand (US$2,770 thousand) and NT$110,100 thousand (US$3,670

• 30 -

thousand) as of December 31, 2014 and 2013, respectively; also, the cumulative amount of disposition accounted for 28% and 39% of the held-to-maturity investment amount.

X. Bond investment without market price

ond investment without market price
Current Corporate bonds -Ping An Insurance Company of China(IX) Noncurrent Subordinated bonds - Taiwan Business Bank (I) Subordinated bonds - Sunny Bank (II) Subordinated bonds -AN Z Bank(III) Corporate Bond – Shimao Property Holdings Ltd. (IV) Corporate bond – Vneshtorgbank (V) Corporate bond - GAZPROM BANK (VI) Corporate bond - Russian Agricultural Bank (VII) Corporate bond – Road King Infrastructure Limited (VIII)		12/31/2014 $ – $ 100,000 20,000 4,270 – 10,083 6,457 9,604 10,183 $ 160,597		12/31/2013
		$		$ 9,259 $ 100,000 20,000 – 14,651 – – – – $ 134,651
		$
		$

• (I) The Company and its subsidiaries had purchased subordinated financial bond without maturity date for NT$100,000 thousand from Taiwan Business Bank in October 2009, which could be redeemed by the counterparty after it had been issued for seven years at an annual interest rate of 2.66%.

• (II) The Company’s subsidiaries had purchased subordinated financial bond for NT$20,000 thousand from Sunny Bank in April 2010 with a maturity date in April 2017 and an annual interest rate of 3.25% and 3.21% on December 31, 2014 and 2013, respectively.

• (III) The Company’s subsidiaries had purchased subordinated bond for US$135 thousand from AN Z Bank in July 2014 with a maturity date in December 2021 and an annual interest rate of 0.5128%.

• (IV) The Company’s subsidiaries had purchased corporate bond for US$492 thousand from Shimao Property Holdings Ltd. in February 2013 with a maturity date in January 2020 and an annual interest rate of 6.625%.

• (V) The Company’s subsidiaries had purchased corporate bond for RMB 1,980 thousand from Vneshtorgbank in March 2014 with a maturity date in October 2015 and an annual interest rate of 4.5%.

• (VI) The Company’s subsidiaries had purchased corporate bond for US$204 thousand from GAZPROM BANK in June 2014 with a maturity date in December 2023 and an annual interest rate of 7.496%.

• (VII) The Company’s subsidiaries had purchase corporate bond for RMB 1,886 thousand from Russian Agricultural Bank in October 2014 with a maturity date in December 2023 and an annual interest rate of 3.6%.

• (VIII) The Company’s subsidiaries had purchased corporate bond for RMB 2,000 thousand from Road King Infrastructure Limited in December 2014 with a maturity date in December 2023 and an annual interest rate of 6%.

• 31 -

• (IX) The Company’s subsidiaries had purchased corporate bond for RMB 2,010 thousand from Ping An Insurance Company of China in June 2011 with a maturity date in June 2014 and an annual interest rate of 2.25%.

XI. Notes receivable and accounts receivables – net (including the related party)

Note receivable arising from business operation Accounts receivable		12/31/2014 $ 7,054 $ 546,417	12/31/2013
			$ 18,825 $ 708,004

The Company and its subsidiaries have granted an average period of 30 days ~ 90 days for credit sales of goods. The Company and its subsidiaries have allowance for bad debt assessed by referring to the doubtful account aging analysis, historical experience, and the current financial situation of the client and any change in the client’s credit quality in order to estimate the non-performing loan amount.

The delinquent accounts receivable of the Company and its subsidiaries without any allowance for bad debt appropriated on December 31, 2014 and 2013 is illustrated as follows. There is not any collateral or other credit enhancement protection taken for such accounts receivable since the credit quality is without a major change and the collectability is not in doubt.

		12/31/2014	12/31/2013	12/31/2013
Under 30 days	$	11,995	$	802
31 days ~ 60 days		6,274		2,916
	$	18,269	$	3,718

The aforementioned account aging analysis is based on the number of days overdue. Change in allowance for bad debt in 2014 and 2013 is as follows:

Balance - beginning Less: Annual reversal Balance - ending		2014 $ – – $ –		2013
				$ 14,638 14,638 $ –

The accounts receivables factoring by the Company is summarized as follows:

Counterparty	Annual transfer amount	Annual cash received	Advanced amount atyearend	Annual interest rate of advanced amount(%)	Credit line
Shanghai Commercial & Savings Bank	$ 13,293	$ –	$ –	–	US$420 thousand

The credit line referred to above can be used in a revolving manner.

According to the credit transfer contract, the losses arising from commercial disputes (such as, sales returns or allowances, etc.) are to be paid for by the Company; also, the losses due to credit risk are to be paid for by the Bank.

XII. Inventories

Finished goods

12/31/2014 $ 290,589	12/31/2013
	$ 240,224

• 32 -

Work-in-process goods Raw material Substances Instruments	93,460 15,781 41,075 5,722 $ 446,627	85,646 19,746 30,002 –
		$ 375,618

The allowance for loss in valuation and obsolescence of inventory amounted to NT$70,579 thousand and NT$74,393 thousand as of December 31, 2014 and 2013, respectively.

The cost of goods sold related to inventory amounted to NT$6,030,226 thousand and NT$5,959,374 thousand in 2014 and 2013, respectively, which included inventory loss in valuation and obsolescence amounted to NT$19,104 thousand and NT$ 32,996 thousand, respectively.

XIII. Available-for-sale noncurrent assets – 12/31/2014

Available-for-sale noncurrent assets–12/31/2014
Available-for-sale property, plant, and equipment Accumulated depreciation Available-for-sale land	Amount
	$ 13,719 ( 13,719 ) – 32,058 $ 32,058

The Company expects to have investment property disposed in the next two months. The said land was originally for business lease and is now expected to be sold to the sister company. When the land is classified as available-for-sale noncurrent asset, there is not any impairment loss to be recognized.

XIV. Other financial assets - current

Other financial assets-current
Time deposits with the original maturity date exceeding three months Annual interest rate (%)		12/31/2014 $233,300 1.13~1.36	12/31/2013
			$419,064 1.13~2.85

XV. Investment under the equity method

The Company and its subsidiaries have had investments in the associated companies under the equity method as follows:

equity method as follows:
Listed(OTC)Company		12/31/2014			12/31/2013
		Amount	Shareholding ratio(%)		Amount	Shareholding ratio(%)
		$ 275,204 109,752 66,775 451,731 532,774 104,694 81,149	6 8 1 9 5 5		$ 257,304 106,620 67,880 431,804 522,766 102,098 86,243	6 9 1 9 5 5
CHC Resources Corporation (CHC) ThinTech Materials Technology Co., Ltd. (TTMC) China Steel Structure Co., Ltd. (CSSC) Unlisted(Non-OTC)Company
Yun Hung Investment Company United Steel International Development Co. Chi-Hung Venture Capital Investment

• 33 -

Company CSC Group Himag Magnetic Corporation Shang Yang Venture Capital Company Gao Rui Investment Company Hong Chuan Investment Company Shen-Li-Dar Investment Company Ding-Dar Investment Company Li-Chin-Long Investment Company Taian Biotechnology Company	71,270 26 39,907 6 27,179 40 18,641 45 17,460 35 17,181 30 14,585 35 4,063 5 928,903 $ 1,380,634	65,413 26 37,732 6 26,355 40 18,537 45 16,883 35 16,405 30 14,502 35 3,234 5 910,168 $ 1,341,972

The shares of the invested companies referred to above held by the Company and its subsidiaries plus the shareholdings of the parent company, China Steel Corporation, and the sister companies exceeds 20%; therefore, it is evaluated in accordance with the equity method.

The market price of the equity investment of the listed (OTC) companies calculated in accordance with the stock closing price at the balance sheet date is as follows:

The shares of the invested companies referred to above held by the Company and its subsidiaries plus the shareholdings of the parent company, China Steel Corporation, and the sister companies exceeds 20%; therefore, it is evaluated in accordance with the equity method. The market price of the equity investment of the listed (OTC) companies calculated in accordance with the stock closing priceat the balance sheet date is as follows:	The shares of the invested companies referred to above held by the Company and its subsidiaries plus the shareholdings of the parent company, China Steel Corporation, and the sister companies exceeds 20%; therefore, it is evaluated in accordance with the equity method. The market price of the equity investment of the listed (OTC) companies calculated in accordance with the stock closing priceat the balance sheet date is as follows:	The shares of the invested companies referred to above held by the Company and its subsidiaries plus the shareholdings of the parent company, China Steel Corporation, and the sister companies exceeds 20%; therefore, it is evaluated in accordance with the equity method. The market price of the equity investment of the listed (OTC) companies calculated in accordance with the stock closing priceat the balance sheet date is as follows:	mpany and its subsidiaries and the sister companies od. es calculated in accordance	mpany and its subsidiaries and the sister companies od. es calculated in accordance	mpany and its subsidiaries and the sister companies od. es calculated in accordance	mpany and its subsidiaries and the sister companies od. es calculated in accordance
Company 12/31/2014 12/31/2013 CHC Resources $962,603 $832,891 TTMC 146,874 178,697 China Steel Structure Co., Ltd. 71,787 91,554 Theaggregated financial information of the Company and its subsidiaries and associated companies is as follows: 12/31/2014 12/31/2013 Total assets $34,456,604 $34,298,667 Total liabilities $13,245,484 $13,492,664 2014 2013 Annual operating income $ 28,840,907 $ 30,458,063 Current net income $ 1,729,312 $ 1,638,500 Current other comprehensive income (loss) ( $ 109,293 ) $ 524,959 Associated company’s profit (loss) under the equity method $ 126,882 $ 130,448			12/31/2013
						$34,298,667 $13,492,664 2013
		$ 28,840,907 $ 1,729,312 ( $ 109,293 ) $ 126,882				$ 30,458,063 $ 1,638,500 $ 524,959 $ 130,448

The aggregated financial information of the Company and its subsidiaries and associated companies is as follows:

The aforementioned investments under the equity method and the profit and loss and comprehensive income share of the Company and its subsidiaries are calculated in accordance with the audited financial statements of the same period.

XVI. Property, plant, and equipment

2014

2014
Cost	Land	Houses and buildings	Machinery equipment	Transportation equipment	Miscellaneous equipment	Construction inprogress	Total
	$ 104,724 – – ( 44,026 ) –	$ 428,720 – – ( 29,198 ) –	$ 3,155,639 202,457 ( 21,725 ) – 2,192	$ 82,364 10,800 ( 1,575 ) – 49	$ 73,861 7,670 ( 996 ) – 79	$ 99,762 70,962 – – –	$ 3,945,070 291,889 ( 24,296 ) ( 73,224 ) 2,320
Balance – 1/1/2014 Addition Disposal Reclassification Exchange difference - net

• 34 -

Balance – 12/31/2014 Accumulated depreciation		$ 60,698 $ – – – – – $ – $ 60,698 Land		$399,522 $ 198,756 20,996 – ( 29,198 ) – $190,554 $208,968 Houses and buildings	$3,338,563 $ 2,181,573 242,600 ( 17,363 ) – 1,362 $2,408,172 $ 930,391 Machinery equipment	$3,338,563 $ 2,181,573 242,600 ( 17,363 ) – 1,362 $2,408,172 $ 930,391 Machinery equipment	$ 91,638 $ 45,471 11,854 ( 1,380 ) – 8 $ 55,953 $ 35,685 Transportation equipment	$ 80,614 $ 50,068 6,562 ( 951 ) – 2 $ 55,681 $ 24,933 Miscellaneous equipment $ 68,287 6,203 ( 629 ) $ 73,861 $ 44,791 5,887 ( 610 ) $ 50,068 $ 23,793	$ 170,724 $ – – – – – $ – $ 170,724 Construction inprogress	$4,141,759 $ 2,475,868 282,012 ( 19,694 ) ( 29,198 ) 1,372 $2,710,360 $1,431,399 Total
Balance – 1/1/2014 Depreciation Disposal Reclassification Exchange difference - net Balance 12/31/2014 Net amount – 12/31/2014 2013 Cost
		$ 104,724 – – $104,724 $ – – – $ – $104,724		$ 370,205 58,515 – $ 428,720 $ 179,865 18,891 – $ 198,756 $ 229,964	( (	$ 2,808,461 361,418 14,240 ) $3,155,639 $ 1,996,838 197,784 13,049 ) $2,181,573 $ 974,066	$ 76,986 6,315 ( 937 ) $ 82,364 $ 34,799 11,605 ( 933 ) $ 45,471 $ 36,893		$ 280,009 ( 180,247 ) – $ 99,762 $ – – – $ – $ 99,762	$ 3,708,672 252,204 ( 15,806 ) $3,945,070 $ 2,256,293 234,167 ( 14,592 ) $2,475,868 $1,469,202
Balance – 1/1/2013 Addition Disposal Balance – 12/31/2013 Accumulated depreciation
Balance – 1/1/2013 Depreciation Disposal Balance – 12/31/2013 Net amount – 12/31/2013

The Company has the depreciation of the property, plant, and equipment appropriated in accordance with the straight-line method and the respective years of useful life as follows:

Houses and buildings

Main structure of the house Ancillary equipment of the house (Continuing)

10~50 years 5~25 years

• 35 -

(Continued)

inued)
Machinery equipment
Power machinery equipment	3~15 years
Test and examination equipment	3~5 years
Computer equipment	3~10 years
Transportation equipment
Transportation equipment	3~5 years
Telecommunication equipment	3~10 years
Miscellaneous equipment
Firefighting equipment	5~8 years
Air-conditioning and water and electricity facilities	3~10 years
Monitoring, operating, and other equipment	3~10 years

XVII Investment property

XVII Investment property	Investment property
2014 Cost Balance – 1/1/2014 Transferred fromproperty, plant, and equipment Reclassified to available-for-sale noncurrent assets Balance – 12/31/2014 Accumulated depreciation & depletion Balance – 1/1/2014 Transferred fromproperty, plant, and equipment Reclassified to available-for-sale noncurrent assets Balance – 12/31/2014 Net amount – 12/31/2014 2013 Cost Balance – 1/1/2013 Disposal Balance – 12/31/2013 (Continuing)	2014 Cost	Land $ 549,845 44,026 ( 32,058 ) $ 561,813 $ 8,825 – – $ 8,825 $ 552,988 Land $ 549,845 – $ 549,845	House and building		Total
			$ 32,186 29,198 ( 13,719 ) $ 47,665 $ 32,186 29,198 ( 13,719 ) $ 47,665 $ – House and building		$ 582,031 73,224 ( 45,777 ) $ 609,478 $ 41,011 29,198 ( 13,719 ) $ 56,490 $ 552,988 Total
	Balance – 1/1/2014 Transferred fromproperty, plant, and equipment Reclassified to available-for-sale noncurrent assets Balance – 12/31/2014 Accumulated depreciation & depletion
	Balance – 1/1/2014 Transferred fromproperty, plant, and equipment Reclassified to available-for-sale noncurrent assets Balance – 12/31/2014 Net amount – 12/31/2014 2013 Cost
			(	$ 36,931 4,745 ) $ 32,186	(	$ 586,776 4,745 ) $ 582,031

• 36 -

(Continued)

inued)
				House and
		Land			building		Total
Accumulated depreciation and depletion
Balance – 1/1/2013	$	8,825		$	36,931	$	45,756
Disposal		–	(		4,745 ) (		4,745 )
Balance – 12/31/2013	$	8,825		$	32,186	$	41,011
Net amount – 12/31/2013	$	541,020		$	–	$	541,020

The Company has the depreciation of the invested property of house and building appropriated in accordance with the straight line method and the useful life of 20~50 years.

The unrelated independent Real Estate Appraisers evaluated the investment property in December and March 2013, respectively. Such evaluation is conducted by referring to the market price of similar properties comparison method and income method; also, the fair value was NT$796,377 thousand and NT$832,981 thousand on December 31, 2014 and 2013, respectively.

The investment property is proprietary interest of the Company and its subsidiaries.

Please refer to Note XXVIII for the lease transactions conducted with the related party.

XVIII Loans

Short-term loans

Short-term loans
Unsecured loans Letter of credit loans	12/31/2014 $100,441	12/31/2013
		$ 72,157

Interest rate of letter of credit loan was 1.33% ~ 1.56% and 1.15% ~ 1.5% on December 31, 2014 and 2013, respectively.

XIX Other payables

Other payables
Employee bonus and directors and supervisors remuneration payable Salaries and incentives payable Repair materials fee payable Equipment payable Dividend payable Others (mainly freight, commission, and insurance expense)		12/31/2014 $ 125,509 113,232 44,700 7,900 4,336 60,359 $ 356,036		12/31/2013
				$ 125,509 99,161 34,118 5,577 4,431 53,361 $ 322,157

XX Post-employment benefit plan

(I) Defined contribution plan

The Company is subject to the pension system of the “Labor Pension Act” that is a defined contribution plan managed by the government, according to the plan an amount equivalent to 6% of employee’s monthly salary is deposited in the personal account with the Bureau of Labor Insurance.

• 37 -

(II) Defined benefit plan

Some employees of the Company apply the pension system of the “Labor Standards Law” that is a defined benefit plan. Employee pension is paid in accordance with the years of service and the average salary six-month prior to the approved retirement. The Company has an amount equivalent to 12% of the monthly salary of employees appropriated as employee’s retirement fund, which is deposited in the designated account with Bank of Taiwan through Labor Pension Reserve Committee. The Bureau of Labor Funds, Ministry of Labor has the plan assets invested in domestic (foreign) equity securities, bonds, bank deposits, etc. through discretionary operation and consignment, but according to the Regulations Governing Labor Pension Fund Safekeeping and Utilization, for the use of labor pension fund, the annual lowest income distribution may not be less than the income calculated in accordance with the local bank’s 2-year time deposit interest rate.

The qualified actuary calculates the present value of the Company’s plan assets and benefit obligations.

The main assumptions of an actuarial evaluation on the measurement date are as follows:

Discount rate (%) Expected rate of return on plan assets (%) Expected salary increase rate(%)	12/31/2014 1.875 2 3	12/31/2013
		1.875 2 3

The profit and loss amount of the defined benefit plans is recognized as follows:

			2014		2013	2013
Current service cost		$	6,134		$	6,708
Interest cost			4,469			3,877
Expected return on plan assets	(		2,337 )	(		1,814 )
		$	8,266		$	8,771
Operating cost		$	5,202		$	7,789
Operating expense			3,064			982
		$	8,266		$	8,771

The Company had recognized actuarial losses of NT$8,190 thousand and actuarial profit of NT$3,558 thousand in 2014 and 2013 in other comprehensive income, respectively. The actuarial profit was recognized in retained earnings (through other comprehensive income) for an amount of NT$2,356 thousand and NT$10,546 thousand as of December 31, 2014 and 2013, respectively.

The Company’s obligations arising from the defined benefit plan is included in the consolidated balance sheet as follows:

President value of the defined benefits obligation appropriated Fair value of plan assets Accrued pension liabilities Current (booked in other payables) Noncurrent	12/31/2014 $ 245,022 ( 110,850 ) $ 134,172 $ 1,116 133,056	12/31/2013
		$ 238,322 ( 109,093 ) $ 129,229 $ 1,044 128,185

• 38 -

$ 134,172 $ 129,229

Changes in the defined benefit obligations are as follows:

Defined benefit obligations - beginning Current service cost Interest cost Actuarial loss (profit) Benefits paid Defined benefit obligations - ending	2014 $ 238,322 6,134 4,469 9,878 ( 13,781 ) $ 245,022	2013
		$ 242,534 6,708 3,877 ( 5,004 ) ( 9,793 ) $ 238,322

Changes in the present value of plan assets are as follows:

Fair value of plan assets - beginning Expected return on plan assets Actuarial profit (loss) Appropriation amount of employer Benefits paid Fair value of plan assets - ending	2014 $ 109,093 2,337 11 13,190 ( 13,781 ) $ 110,850	2013 $ 90,876 1,814 ( 717 ) 17,120 – $ 109,093

The actual annual return on plan assets amounted to NT$ 2,348 thousand and NT$1,097 thousand in 2014 and 2013, respectively.

The fair value ratio of the main plan assets at the balance sheet date is based on the fund assets allocation information published by the Bureau of Labor Funds, Ministry of Labor as follows:

follows:
Cash equivalent Equity instrument Debt instrument	12/31/2014 19 53 28 100	12/31/2013
			23 45 32 100

The Company chose to disclose the historical information of experience adjustment in accordance with the deferred amount in each accounting period starting from the conversion date:

Present value of defined benefit obligations Fair value of plan assets Appropriation deficit Planliabilities experience adjustment Planassets experience adjustment		12/31/2014 12/31/2013 12/31/2012 $ 245,022 $ 238,322 $ 242,534 $ 110,850 $ 109,093 $ 90,876 $ 134,172 $ 129,229 $ 151,658 $ 9,878 ( $ 756 ) ( $ 9,381 ) $ 11 ( $ 717 ) ( $ 962 )	12/31/2012	1/1/2012
				$ 250,763 $ 79,237 $ 171,526 $ – $ –

The Company intends to appropriate defined benefit for an amount of NT$13,781 thousand and NT$15,541 thousand within one year after December 31, 2014 and 2013, respectively.

• 39 -

XXI Equity

(I) Common stock capital

y ommon stock capital
Rated number of shares (thousand shares) Rated capital stock Number of shares issued and proceeds collected (Thousand shares) Capital stock issued		12/31/2014 300,000 $ 3,000,000 236,904 $ 2,369,044		12/31/2013
				300,000 $ 3,000,000 236,904 $ 2,369,044

The issued common stock share at NT$10 Par is entitled to one voting right per share and dividend.

(II) Addition paid-in capital

dividend. Addition paid-in capital
Applied to make up loss, distribute cash, or replenish capital stock (Note) Stock issued with premium Treasury stock trading Inapplicablefor any purpose Changes in net equity of associated company under the equity method		12/31/2014 $ 218 509,996 4,809 $ 515,023		12/31/2013
				$ 218 427,450 4,043 $ 431,711

Note: Such additional paid-in capital can be applied to make up losses; also, when the Company has no loss, it can be applied to distribute cash or replenish capital stock; however, the replenishment amount of capital stock is limited to certain percentage of the paid-in capital.

The issuance of stock with premium referred to the offering of Treasury stock to the employees of the subsidiaries in 2009 by the parent company, China Steel Corporation; also, the Company recognized compensation cost and additional paid-in capital for NT$161 thousand. In addition, the parent company, China Steel Corporation, had arranged cash capitalization in July 2011 with 10% stock share reserved for employee’s subscription (including the employees of the subsidiaries) in accordance with the Company Law; also, the Company recognized compensation cost and additional paid-in capital for NT$57 thousand, respectively.

(III) Retained earnings and dividend policy

Annual earnings (if any loss, it refers to the balance after making up all losses) are distributed in accordance with the Articles of Association as follows:

1. Appropriate 10% of the earnings as legal reserve.

2. Special reserve is appropriated in accordance with the operating needs, laws, and regulations of the year.

3. The balance of earnings is distributed in accordance with the resolution reached in the shareholders’ meeting; also, 1% of the earnings are for the remuneration to directors and supervisors and 5% of the earnings are for the bonus to employees.

The Company is currently in a growing industry environment and the Company intends to

• 40 -

take advantage of the economic environment to seek for a sustainable operation. The Company’s dividend policy is to focus on dividend stability and growth by referring to future operating conditions; also, the Company should have not less than 50% of the distributable earnings, if any, distributed, of which, cash dividend may not be less than 50% of the amount distributed.

The aforementioned distributions should be admitted in the shareholders’ meeting of the following year and presented in the current financial statements.

The estimated employee bonus payable amounted to NT$104,591 thousand in 2014 and 2013, respectively; also, the estimated remuneration to directors and supervisors amounted to NT$20,918 thousand, respectively. The aforementioned employee bonuses and remuneration to directors and supervisors was based on the 5% and 1% of the potential distribution amount according to the experience. At the end of the fiscal year, if there are changes in the distribution amount resolved by the Board of Directors before the publication of the consolidated financial statements, such changes should be adjusted to the originally appropriated annual expenses. If there are changes in the distribution amount after the publication of the consolidated financial statements, it is to be processed as changes in accounting estimates and adjusted for bookkeeping in the following year. If it is resolved in the shareholders’ meeting to have stock dividend distributed as employee bonus, the number of stock bonus share is determined by having the distribution amount divided by the fair value of the stock. The fair value of stock share refers to the closing price on the day before the shareholder resolution date with the ex-dividend effect included for calculation.

The Company has special reserve appropriated and reversed in accordance with FSC Certificate Far.Tzi No. 1010012865 Letter, FSC Certificate Far.Tzi No. 1010047490 Letter, and the “Special Reserves Q&A after Adopting IFRSs.” The subsequently reversed amount of the debit balance of other shareholders’ equity can be distributed accordingly.

The Company may have legal reserve appropriated until it is equivalent to the amount of paid-in capital. Legal reserve can be used to make up losses. If the Company has no loss, the portion of the legal reserve exceeding 25% of the total paid-in capital can be applied to replenish capital stock and distribute cash.

For the distribution of unappropriated earnings, except for the shareholders who are not a resident of the ROC, all shareholders are entitled to the shareholder tax credit that is calculated in accordance with the tax credit rate on the dividend distribution date.

The Company had general shareholders’ meeting held on June 17, 2014 and June 10, 2013 with the 2013 and 2012 annual earnings distribution, employee bonuses, and remuneration to directors and supervisors resolved as follows:

Legal reserve Cash dividend		Dividendper share of earnings distribution(NT$)	Dividendper share of earnings distribution(NT$)	Dividendper share of earnings distribution(NT$)	Dividendper share of earnings distribution(NT$)	Dividendper share of earnings distribution(NT$)	Dividendper share of earnings distribution(NT$)
		2013		2012 $ 197,362 1,753,093 $ 1,950,455		2013	2012
		$ 220,991 1,966,307 $ 2,187,298				$ 8.3	$ 7.4

The Company had general shareholders’ meeting held on June 17, 2014 and June 10, 2013 with the employee bonuses and remuneration to directors and supervisors resolved. In addition, the employee bonuses and remuneration to directors and supervisors are recognized in the consolidated financial statements as follows:

as follows:
2013	2012
Employee bonus Remuneration to directors and supervisors	Employee bonus Remuneration to directors and supervisors

• 41 -

Distribution amount resolved in
shareholders’ meeting	$	104,591 $	20,918 $	93,250 $	18,650
Amountrecognized in each annual
financial statements		104,591	20,918	91,989	18,398
Differences	$	– $	– $	1,261 $	252

These differences referred to above had been adjusted to the 2013 profit and loss.

The Company had the 2012 annual earnings distribution, employee bonus, and remuneration to directors and supervisors distributed according to the 2012 financial statements that were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Firms and generally accepted accounting principle of the Republic of China before amendment.

The Board of Directors of the Company had proposed the 2014 earnings distribution and dividend per share on March 20, 2015 as follows:

dividend per share on March 20,	2015	as follows:
Legal reserve Cash dividend		Earnings distribution $ 218,719 1,966,307 $ 2,185,026	Dividendper share(NT$) $ 8.3

The proposed 2014 annual earnings distribution, employee bonus, and compensation to directors and supervisors is yet to be resolved in the shareholders’ meeting scheduled on June 12, 2015.

Please visit Taiwan Stock Exchange “MOPS” to check the information regarding the earnings distribution, employee bonus, and compensation to directors and supervisors proposed by the Company’s Board of Directors and resolved in the shareholders’ meeting.

• (IV) Other equity items

• Exchange difference arising from the conversion of the financial statements of foreign operation

operation
Balance - beginning Exchange difference arising from the conversionof the net assets of foreign operating Exchange difference share of the associated company under the equity method Balance - ending	2014 ( $ 2,154 ) 23,173 6,970 $ 27,989	2013
		( $ 19,071 ) 9,378 7,539 ( $ 2,154 )

1. Unrealized profit and loss of the available-for-sale financial assets

Balance - beginning Unrealized profit and loss of the available-for-sale financial assets Unrealized profit and loss share of the available-for-sale financial assets of the associated company under the equity method Balance - ending	2014 $ 160,969 138,992 ( 10,905) $ 289,056		2013
			$ 61,375 76,195 23,399 $ 160,969

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(V) Non-controlling interests

Non-controlling interests
Balance - beginning Attributable to non-controlling interests share Net income Unrealized profit and loss of the available-for-sale financial assets Subsidiary’s dividend distribution Balance - ending	2014 $ 161,259 1,385 ( 44 ) ( 11,760 ) $ 150,840	2013
		$ 150,208 11,071 ( 20 ) – $ 161,259

(VI) Treasury stock

Ever Wealthy International Co., Ltd., the subsidiary, held the Company’s stock shares for investing and financial purpose; therefore, it was process in accordance with the accounting for Treasury stock. The Company’s stock shares held by Ever Wealthy International Co., Ltd. is disclosed as follows (Unit: Thousand shares).

2014

2014
Beginning	of theyear	Sales duringtheyear					Yearend
Shares 6,752 2013 Beginning	Book value	Shares	Book value	Selling price	Shares		Book value	Marketprice
	$ 167,082 of theyear				6,548		$ 162,034 Yearend	$ 1,014,868
Shares 6,771	Book value	Shares	Book value	Selling price	Shares		Book value	Marketprice
	$ 167,552	19	$ 470	$ –	6,752		$ 167,082	$ 1,107,252

Ever Wealthy International Co., Ltd., the subsidiary, sold the Company’s stock shares for an amount of NT$31,556 thousand and NT$3,310 thousand in 2014 and 2013, respectively.

The Company’s stock shares held by the subsidiary is deemed as treasury stock for process, which is entitled to the rights same as shareholders except for not eligible to participate in the cash capitalization of the Company and voting.

XXII Operating income

Operating income
Sales income Labor service income Dividend income Profit from financial assets sold Net income from held-for-trading financial assets (Note VII) Net income (loss) from financial assets measured at fair value through profit and loss (Note VII) Profit share from associated company and joint venture under the equity method	2014 $ 8,749,635 75,518 22,065 33,754 11,512 ( 69 ) 11,887 $ 8,904,302		2013
			$ 8,693,896 78,086 9,406 – 28,956 620 8,989 $ 8,819,953

XXIII Net income before tax

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Net income before tax includes the following items:

(I) Other income

ther income
Rent income (Note XXVIII) Dividend income Interest income Bank deposit and other financial assets (time deposit) Bond investment without market price Held-to-maturity financial assets Lending of funds (Note XXVIII) Rent imputed interest Others		2014 $ 15,442 3,203 5,973 4,951 5,047 1,922 5 17,898 13,216 $ 49,759		2013
				$ 12,889 1,393 10,293 6,113 8,354 709 4 25,473 16,386 $ 56,141

(II) Other profits and losses

(II) Other profits and losses
Foreign exchange profit - net (Continuing)	2014 $ 21,518	2013
		$ 13,572

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(Continued)

d)
Losses from the disposal of property, plant, and equipment Profit from the disposal of investment Profit from the financial assets measured at fair value through profit and loss (Note VII) Profit from the valuation of the held-for-trading financial liabilities Other losses	2014 ( $ 1,394 ) 551 20,460 91 ( 518 ) $ 40,708	2013
		( $ 1,214 ) 1,373 10,436 87 – $ 24,254

The net foreign exchange profit referred to above includes:

Total foreign exchange profit Total foreign exchange loss Net exchange profit	2014 $ 29,346 ( 7,828 ) $ 21,518	2013
		$ 19,146 ( 5,574 ) $ 13,572

(III) Depreciation and amortization

Depreciation and amortization
Property, plant, and equipment Long-term prepaid rent Depreciation summarized by function Operating cost Operating expense Amortization summarized by function Operating expense		2014 $ 282,012 4,241 $ 286,253 $ 265,674 16,338 $ 282,012 $ 4,241		2013
				$ 234,167 – $ 234,167 $ 222,639 11,528 $ 234,167 $ –

(IV) Employee benefit expense

Employee benefit expense
Short-term employee benefit Salary Labor and health insurance Others		2014 $ 442,192 15,502 17,586 475,280		2013
				$ 406,126 14,402 14,887 435,415

(Continuing)

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(Continued)

d)
Post-employment welfare (Note XX) Defined contribution plan Defined benefit plan Summarized by function Operating cost Operating expense		2014 $ 3,256 8,266 11,522 $ 486,802 $ 261,455 225,347 $ 486,802		2013
				$ 2,677 8,771 11,448 $ 446,863 $ 241,179 205,684 $ 446,863

XXIV Income tax

(I) Income tax recognized in profit and loss

Income tax expenses include the following:

			2014			2013
Current income tax
Tax accrued in current year		$	371,058		$	374,380
Tax adjustment of prior periods			2,925	(		7,040 )
Unappropriated earnings
additional tax levy			2,645			2,914
Deferred income tax
Tax accrued in current year			919			3,897
Tax adjustment of prior periods			1,726			301
		$	379,273		$	374,452
Adjustment of accounting incomeand current income tax expense as follows:
			2014			2013
Net income before tax		$	2,567,847	$		2,595,434
Income tax expense of net income
before tax calculated according to the
statutory tax rate		$	451,873	$		447,668
Income tax effect of the adjusted items
Income tax exemption	(		37,000 )	(		43,000 )
Net income to be deducted from
thetaxable income	(		45,085 )	(		29,283 )
(Continuing)

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(Continued)

d)
Basic tax payable difference Unappropriated earnings additional tax levy Prior period income tax adjusted to current income tax Income tax expense recognized in profit and loss	2014 $ 2,189 2,645 4,651 $ 379,273	2013
		$ 1,481 2,914 ( 5,328 ) $ 374,452

The Company and its subsidiaries are subject to the 17% tax rate applicable to the business entities defined according to the Income Tax Law of the Republic of China. The subsidiaries in China are subject to 25% tax rate. The tax amount accrued in each district is to be calculated in accordance with the respectively applicable tax rate.

Since the earnings distribution to be resolved in the 2015 shareholders’ meeting is with uncertainty, the potential income tax arising from the unappropriated earnings with additional 10% income tax levied cannot be determined reliably.

• (II) Income tax expense (profit) recognized in other comprehensive income

2014 Recognized in other comprehensive income Actuarial profit and loss of defined benefit plan ( $ 1,677 ) Current income tax assets and liabilities 12/31/2014 Current income tax liabilities Income tax payable $187,738	2013
	$ 729 12/31/2013
	$217,376

(III) Current income tax assets and liabilities

(IV) Deferred income tax assets and liabilities

Changes in deferred income tax assets and liabilities are as follows:

2014

2014
Deferred income tax assets	Balance - beginning	Recognized in profit and loss	Recognized in other comprehensive income	Balance - ending
	$ 21,969 12,647	( $ 837 ) ( 648 )	$ 1,677 –	$ 22,809 11,999
Temporary difference Defined benefit plan Inventory loss in valuation

(Continuing)

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(Continued)

d)
Depreciation book-tax difference Net investment loss of foreign operation Deferred income tax liabilities		Balance - beginning	Recognized in profit and loss	Recognized in other comprehensive income			Balance - ending
		$ 8,013 – $ 42,629 $ 680 Balance - beginning	( $ 829 ) 652 ( $ 1,662 ) $ 983 Recognized in profit and loss ( $ 3,084 ) 1,544 264 ( 4,160 ) ( $ 5,436 ) ( $ 1,918 ) 680 ( $ 1,238 )	$ – – $ 1,677 $ – Recognized in other comprehensive income		$	7,184 652 42,644 1,663 Balance - ending
						$
						$
Temporary difference Unrealized exchange profit - net 2013 Deferred income tax assets
		$ 25,782 11,103 7,749 4,160 $ 48,794 $ 1,918 – $ 1,918		( $ 729 ) – – – ( $ 729 ) $ – – $ –		$	21,969 12,647 8,013 – 42,629 $ – 680
Temporary difference Defined benefit plan Inventory loss in valuation Depreciation book-tax difference Others Deferred income tax liabilities
						$
Temporary difference Net investment profit of foreign operation Unrealized exchange profit - net
							$ 680

• (V) The total temporary differences of the investment-related unrecognized deferred income tax liabilities

The taxable temporary difference that is related to the invested subsidiaries and not yet recognized as deferred income tax liabilities amounted to NT$296,006 thousand and NT$290,485 thousand on December 31, 2014 and 2013, respectively.

• (VI) Income Tax Integration

Income Tax Integration
Unappropriated earnings Unappropriated earnings after 1998	12/31/2014 $ 2,215,495	12/31/2013
		$ 2,223,888

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Shareholder tax credit account balance $ 204,245 $ 191,222

2014 (estimated) 2013 (actual) Tax credit ratio of earnings distribution (%) 17.73 18.63

(VII) Tax audit

The tax return filed up to the year of 2010 by the Company, the tax return filed up to the year of 2012 by Ever Wealthy International Co., Ltd., the subsidiary, and the tax return filed up to the year of 2013 by Ever Glory Investment Co., the subsidiary, had been audited and approved by the tax agency.

XXV Earnings per share

The earnings and weighted average common stock shares for the calculation of earnings per share are as follows:

Net income

Net income
Net income attributable to the Company’s shareholders Stock shares The weighted average common stockshares issued Less: The Company’s stock shares held by subsidiaries transferred to Treasury stock The weighted average common stock shares for the calculation of basic earnings per share Add: Potential common stock shares with dilution effect – employee bonus The weighted average common stock shares for the calculation of diluted earnings per share			2014 $2,187,189 2014 236,904 6,748 230,156 973 231,129		2013 $2,209,911 Unit: In Thousands shares 2013 236,904 6,767 230,137 962 231,099

The Company may have employee bonus distributed in the form of stock dividend or cash dividend. While calculating diluted earnings per share, assume that stock dividend is distributed as employee bonus and such potential common shares with dilution effect should be included in the weighted average shares in circulation in order to calculate the diluted earnings per share. The dilution effect of such potential common stock shares should be considered continuously when calculating diluted earnings per share before the stock dividend to employees resolved in the shareholders’ meeting in the following year.

XXVI Capital risk management

The capital management of the Company and its subsidiaries is for effective use of capital and ensuring a smooth operation by having the debt and equity balance optimized. The overall strategy of the Company and its subsidiaries was without any change made in 2014. The capital structure of the

• 49 -

Company and its subsidiaries is composed of net liabilities and equity without the need of complying with other external capital requirements. The Company and its subsidiaries have capital structure reviewed on a quarterly basis, including the consideration of capital costs and related risks. Currently, the equity in the capital structure is far greater than liabilities and it will be used to pay for dividend or debt; also, added with the investment in financial instruments to improve the Company’s profits and to manage the capital structure.

XXVII Financial instruments

• (I) Information of air value

• Financial assets not measured at fair value

Except for the following items, the management of the Company and its subsidiaries believes that the book amount of financial assets not measured at fair value is close to its fair value:

value:
Financial assets Held-to-maturity financial assets	12/31/2014		12/31/2013
	Book value $ 108,860	Fair value	Book value	Fair value
		$ 90,968	$ 102,514	$ 84,290

1. The measurement of fair value recognized in the consolidated balance sheet

The fair value measurement of financial assets and financial liabilities of the Company and its subsidiaries is classified into Level 1 to Level 3 pursuant to the extent of observation.

• (1) Level 1 fair value measurement refers to a public offer (unadjusted) in an active market for the identical assets or liabilities.

• (2) Level 2 fair value measurement refers to a public offer other than the one in Level 1. The fair value is deducted directly (price) or indirectly (deducted from the price) from the observable input value of the respective assets or liabilities.

• (3) Level 3 fair value measurement refers to the evaluation technique. The fair value is deducted from the non-observable input value (unobservable input values) of the respective assets or liabilities.

12/31/2014		Level 1		Level 2		Level3		Total
		$ 1,008,766 265,237 – $1,274,003 $ 220,684 – – $ 220,684		$ – – 72,601 $ 72,601 $ – – – $ –		$ – – – $ – $ – 440,981 84,260 $ 525,241		$ 1,008,766 265,237 72,601 $1,346,604 $ 220,684 440,981 84,260 $ 745,925
Financial assets measured at fair value through profit and loss Fund beneficiary certificate Domestic listed stock Credit linked note Available-for-sale financial assets Domestic listed stock Emerging stock Domestic unlisted (Non-OTC) stock

• 50 -

12/31/2013 Financial assets measured at fair value through profit and loss Fund beneficiary certificate Domestic listed stock Convertible corporate bond Credit linked note Available-for-sale financial assets Domestic listed stock Emerging stock Domestic unlisted (Non-OTC) stock Financial liabilities measured at fair value through profit and loss Forward exchange contract	$ 1,408,842 182,870 – – $1,591,712 $ 171,214 – – $ 171,214 $ –	$ – – 10,660 138,323 $ 148,983 $ – – – $ – $ 91	$ – – – – $ – $ – 295,678 21,384 $ 317,062 $ –	$ 1,408,842 182,870 10,660 138,323 $1,740,695 $ 171,214 295,678 21,384 $ 488,276 $ 91

Level 1 and Level 2 fair value measurement inter-transfer had not occurred in 2014 and 2013.

1. Adjustment of the financial assets with Level 3 fair value measurement

Balance - beginning Recognized in other comprehensive income (loss) Addition Disposal Transferred out of Level 3 Balance - ending	Available-for-sale financial assets	Available-for-sale financial assets
	Without market price available	Investments in equity instruments
	2014	2013
	$ 317,062 185,832 57,600 ( 35,253 ) – $ 525,241	$ 203,908 56,505 77,175 ( 4,666 ) ( 15,860 ) $ 317,062

All profits or losses recognized in other comprehensive income are related to the unquoted equity instruments at the balance sheet date and are recognized in the available-for-sale financial assets unrealized profit and loss under other equity account.

1. The evaluation techniques and assumptions used for fair value measurement

The fair value of financial assets and financial liabilities is determined in the following manners:

• (1) The fair value of financial assets and financial liabilities with standard terms and conditions and traded in an active market is determined by referring to the market price (including fund beneficiary certificates and stock shares of listed companies). If market price is not available for reference, the fair value is estimated in accordance with the

• 51 -

evaluation method. The estimates and assumptions used in the evaluation method for the credit linked notes, convertible corporate bonds, and held-to-maturity financial assets of the Company and its subsidiaries are consistent with the estimates and assumptions used by market participants in pricing financial instruments.

• (2) The fair value of the derivatives with market price is the respective market price. The evaluation method is adopted when there is no market price available for reference. The derivatives of the forward foreign exchange pre-sold by the Company are without market price available for reference; therefore, the evaluation method is adopted. The estimates and assumptions used in the evaluation method of the Company are consistent with the estimates and assumptions used by market participants in pricing financial instruments. In addition, the Company has acquired such information from financial institutions.

• (3) The stock without market price measured at fair value is included in the consolidated financial statements. The fair value of unlisted (Non-OTC) stock is estimated by referring to the most recent net value or transaction price of the invested company. If Emerging stock is with market price available, adjust liquidity risk discount with the closing price at the balance sheet date to be deemed as the fair value.

(II) Types of financial instruments

Types of financial instruments
Financial assets Measured at fair value through profit and loss Held-for-trading financial assets Designated to be measured at fair value through profit and loss Available-for-sale financial assets (including noncurrent) Held-to-maturity investment (including noncurrent) Loans and receivables (Note 1) Financial liabilities Measured at fair value through profit and loss Held-for-trading financial liabilities Measured at amortized cost (Note 2)	12/31/2014 $ 490,756 855,848 745,925 108,860 2,433,959 – 737,099	12/31/2013
		$ 394,465 1,346,230 488,276 102,514 2,111,365 91 746,894

• Note 1: The balance amount of loans and receivables, including cash and cash equivalents, other financial assets, bond investment without market price, notes receivable, accounts receivable (including related party), other receivables, and refundable deposits, is measured at amortized cost.

• Note 2: The balance amount of financial liabilities, including short-term loans, accounts payable (including related party), and other payables, is measured at amortized cost.

• (III) Financial risk management purpose and policy

The major financial instruments of the Company and its subsidiaries include equity and bond investments, accounts receivable, accounts payable and short-term loans. The financial management department is to provide services to each business unit, to plan and coordinate entering domestic and international financial markets to operate, and to monitor and manage the financial risk related to the operation of the Company and its subsidiaries in accordance with the

• 52 -

internal risk report that is based on the risk exposure analysis with the risk degree and broadness. Such risks include market risk (including exchange rate risk, interest rate risk, and other price risks), credit risk, and liquidity risk.

The Company and its subsidiaries avoid risk exposure through derivative financial instruments to mitigate the impact of those risks. The use of derivative financial instruments is regulates by the policies approved by the Board of Directors of the Company and its subsidiaries, which includes exchange rate risk, interest rate risk, credit risk, and the use of derivative financial instruments and non-derivative financial instruments; also, the written investment principles of residual liquidity. Internal auditors continue to review the compliance of policies and limit of risk exposure. The Company and its subsidiaries did not conduct any financial instruments (including derivative financial instruments) transaction for investment purpose.

1. Market risk

The main financial risks of the Company and its subsidiaries arising from operating activities include foreign exchange rate risk and interest rate risk. The Company and its subsidiaries have not had the market risk exposure of financial instruments and the management and measurement methods for such risk exposure changed.

(1) Exchange rate risk

The non-functional currency denominated transactions conducted by the Company and its subsidiaries are with exchange rate risk exposure resulted. The Company and its subsidiaries have nearly 34% of the operating income denominated in non-functional currencies that is within the scope of the Company’s policy for the management of exchange rate risk exposure; also, utilize forward foreign exchange contracts to manage risk or mitigate exchange rate risk exposure with the future receivables and payables denominated in the same currency.

Please refer to Note XXX for the book amount of the monetary assets and monetary liabilities of the Company and its subsidiaries denominated in non-functional currencies at the balance sheet date.

The book amount of the derivative financial liabilities with exchange rate risk exposure of the Company and its subsidiaries amounted to NT$91 thousand as of December 31, 2013.

Sensitivity analysis

The Company and its subsidiaries are mainly affected by the fluctuations of USD and RMB exchange rate. The sensitivity analysis for the exchange rate of the related foreign currencies against NTD (functional currency) increased or decreased by 3% is detailed as follows. The 3% threshold represents the reasonable assessment of the scope of change in foreign exchange rate of the Company and its subsidiaries.

The sensitivity analysis includes only the outstanding foreign monetary items at each balance sheet date. Scenario 1 in the following table indicates the profit and loss of the Company and its subsidiaries when the functional currency against the USD and RMB appreciated by 3%. Scenario 2 in the following table indicates the profit and loss of the Company and its subsidiaries when the functional currency against the USD and RMB depreciated by 3%.

Profit and loss in Scenario 1 Profit and loss in Scenario 2	USD effect(Note)	USD effect(Note)	RMB effect(Note)	RMB effect(Note)
	2014	2013	2014	2013
	( $ 12,893 ) 12,893	( $ 4,887 ) 4,887	( $ 2,370 ) 2,370	( $ 1,179 ) 1,179

• 53 -

• Note: It is mainly derived from the cash and cash equivalents, receivables, bond investment without market price, short-term loans, payables, and other payables denominated in foreign currency without cash flow hedging arranged at each balance sheet date by the Company and its subsidiaries.

The exchange rate sensitivity of the Company and its subsidiaries in 2014 was increased mainly due to the increase of USD and RMB assets. The management believes that the sensitivity analysis is not representative of the inherent risk of exchange rate since the foreign currency risk exposure at balance sheet date does not reflect the interim risk exposure; also, the sales denominated in USD will be affected by customer orders and shipping schedules; furthermore, the RMB exchange rate will vary depending on the assets investment position.

(2) Interest rate risk

The loans of the Company and its subsidiaries are mainly short-term loans with an interest rate based on the NTD market interest rates, since the loan term is limited to six months; therefore, the interest rate sensitivity is low. In addition, the cash and cash equivalent of the Company and its subsidiaries is much greater than liabilities and bank loan can be settled at any time; therefore, interest rate risk has little impact on the Company and its subsidiaries.

The book amount of the financial assets and financial liabilities with interest rate risk exposure at the balance sheet date of the Company and its subsidiaries is as follows:

With fair value interest rate risk Financial assets With cash flow interest rate risk Financial assets Financial liabilities	12/31/2014 $790,985 787,101 100,441	12/31/2013
		$ 603,459 594,873 72,157

(3) Other price risk

The Company and its subsidiaries have had equity price risk exposure arising from the investments in listed companies, fund beneficiary certificates, and Emerging equity; also, risk is managed by holding investment portfolio with different risks and asset allocation. The equity price of the Company and its subsidiaries is primarily concentrated on the stock and fund market of Taiwan and it is evaluated by the industry in accordance with the closing price of the equity securities and net fund asset value on a monthly basis.

Sensitivity analysis

The following sensitivity analysis is performed in accordance with the equity price risk exposure at the balance sheet date. Considering the market price fluctuation of the Company’s main investment targets, the fluctuation range of 6% is the base for the sensitivity analysis of equity securities.

If equity price rose/fell 6% and equity securities investment position amounted to NT$1,494,687 thousand as of December 31, 2014, the net profit and loss before tax measured at fair value through profit and loss and the fair value of the held-for-trading financial instruments will be increased/decreased by NT$76,440 thousand; also, other equity will be increased/decreased by NT$13,241 thousand due to the fair value of the available-for-sale financial instruments. If the equity securities investment position amounted to NT$1,762,926 thousand as of December 31, 2013, the net profit and loss

• 54 -

before tax measured at fair value through profit and loss and the fair value of the held-for-trading financial instruments will be increased/decreased by NT$95,503 thousand; also, other equity will be increased/decreased by NT$10,273 thousand due to the fair value of the available-for-sale financial instruments.

2. Credit risk

Credit risk refers to the financial losses of the Company and its subsidiaries arising from the default or bankruptcy of the counterparty. The maximum risk comes from the delinquent accounts receivables of the customers. The main customers of the Company and its subsidiaries are with good credit; also, a credit rating company is commissioned annually to investigate the credit status of the customers with a credit report issued. The business unit bases on the credit report to have customers classified with credit line granted. In addition, the credit rating company will have the customer credit status composed into a weekly report for the reference of the business units, if necessary; the customers will be requested to provide collaterals or to pay cash for each transaction. The business units through external credit investigation and industry visitation control and understand the credit status of customers. The Company and its subsidiaries have not experienced any bad debt in the past five years; therefore, the credit risk is insignificant.

The notes receivables and accounts receivables of the customers with high credit risk of the Customer and its subsidiaries are as follows:

Customer A Customer B Customer C Customer D Customer F		12/31/2014 $ 127,634 72,071 66,816 39,156 – $ 305,677		12/31/2013
				$ 166,576 86,629 82,806 99,847 58,184 $ 494,042

3. Liquidity risk

The Company and its subsidiaries have supported business operation through management and maintaining sufficient position of cash equivalent or easily realizable financial instruments. In addition, sign a credit contract with financial institutions to maintain appropriate amount in order to support the business operation of the Company.

The equity in the capital structure of the Company and its subsidiaries is far greater than the liabilities; also, cash and cash equivalent is sufficient to repay bank loans and the banking facilities of the Company and its subsidiaries; also, the bank credit line and remaining credit amount is sufficient; therefore, there is not any liquidity risk.

Bank loan is an important source of liquidity to the Company and its subsidiaries. The unused short-term bank loans of the Company and its subsidiaries amounted to NT$3,993,754 thousand and NT$4,111,003 thousand as of December 31, 2014 and 2013, respectively.

XXVIII Related party transactions

The transactions conducted between the Company and its subsidiaries with related party are as follows:

(I) Operating income

ws: perating income
Account	Type of relatedparty	2014 $ 17,043 18,741	2013
Sales income	Parent company Sister company		$ 16,725 15,622

• 55 -

Other related party Labor service income Parent company	1,880,608 1,708,699 $ 1,916,392 $ 1,741,046 $ 75,518 $ 76,248

(II) Purchase
Type of relatedparty		2014		2013
Parent company	$	3,029,393	$	3,114,827
Sister company		1,177,775		1,147,723
	$	4,207,168	$	4,262,550

The Company and the parent company had a purchase contract for Naphtha products and coal tar signed in March 2013 and July 2010, respectively. In addition, the Company and the sister company had a purchased contract for Naphtha products and coal tar signed in May 2008 for a period of 5 years; also, the contract will be extended automatically for five years each time upon maturity if there is not any objection raised by either party. The price of coal tar purchase is based on the parent company’s purchase cost of coal, oil price, and monthly exchange rate. The purchase price of Naphtha products is mainly based on the benzene price of CPC Corporation, Taiwan. The purchases referred to above are paid with a letter of credit at sight issued; also, for any price adjustment according to market price, it will be settled separately. Some sales to the parent company and sister company will be charged at the cost plus additional percentage; also, the sales to other related party is charged in accordance with the agreed pricing formula. The sales and purchases referred to above of the Company, except for the labor service income from the parent company, are without similar transactions for comparison; also, are not significantly different from regular trading.

In addition, the Company had signed a contract with the parent company in January 2008 for fine coke processing for a period of five-year; also, the contract will be extended automatically for 5-year each time upon maturity if there is not any objection raised by either party.

(III) Accounts receivable from related party (excluding lending of fund to the related party)

Account	Type of relatedparty	12/31/2014 $ 8,249 1,123	12/31/2013
Accounts receivable	Parent company Sister company		$ 8,936 2,183

(Continuing)

• 56 -

(Continued)

Account	Type of relatedparty Other related party Parent company Sister company		12/31/2014		12/31/2013
Other receivables			$ 127,634 $ 137,006 $ 69,601 995 $ 70,596		$ 166,576 $ 177,695 $ 4,937 997 $ 5,934

The outstanding receivable from related party is without collateral collected. The receivables from related party are without any bad debt realized and booked in 2014 and 2013.

(IV) Payables to related party

Payables to related party
Account	Type of relatedparty Parent company Sister company Parent company Sister company		12/31/2014		12/31/2013
Accounts payable Other payables			$ 255,415 683 $ 256,098 $ 14,558 5,224 $ 19,782		$ 327,262 19 $ 327,281 $ 13,498 6,910 $ 20,408

The outstanding payables to related party are without any collateral collected.

(V) Long-term prepaid rent

Long-term prepaid rent
Type of relatedparty Sister company	12/31/2014 $ 33,454	12/31/2013
		$ –

The subsidiary prepaid plant rent to the sister company for a contract period of 45 years (ending in January 2059) and the annual rent amounted to NT$3,798 thousand in 2014.

(VI) Lending of fund to related party (book in “Other receivables”)

Type of relatedparty Parent company	12/31/2014 $300,000	12/31/2013
		$300,000

The Company provides short-term loans to the parent company; also, the loan interest rate is calculated in accordance with the purchase of short-term time deposit denominated in the same currency from general financial institutions within 30-day from the interest accrual date or the repurchase interest rate in a secondary money market. The lending of fund to the parent company was unsecured loan with an interest income of NT$1,675 thousand and NT$709 thousand generated in 2014 and 2013, respectively.

(VII) Other related party transactions

1. Leased land and factories

The Company has leased the current factory land from the parent company with three contracts signed. The annual rent amount is calculated according to 3% of the announced total present value or 6% of the announced total land value. The three contracts are signed for a period of 5 years (ending in December 2015), 5 years (ending in December 2017), and 10 years (ending in June 2019), respectively. Rent is to be paid once every six-month; also,

• 57 -

the annual rent expense was NT$12,647 thousand and NT$11,222 thousand in 2014 and 2013, respectively.

The Company has leased the coke plant from the parent company for a period up to December 2017 with the rent paid once every six-month; also, the annual rent expense was NT$2,452 thousand and NT$2,513 thousand in 2014 and 2013, respectively.

The Company and sister company have signed a land and warehouse lease contract for a period up to August 2017; also, the annual rent expense was NT$1,441 thousand in 2014 and 2013, respectively.

The Company and other non-related party have no similar transactions available for comparison.

2. Leased office building

The Company has leased office buildings and office from the parent company for a period up to October and December 2016, respectively; also, the annual rent expense was NT$6,228 thousand and NT$2,000 thousand, in 2014 and 2013, respectively. The Company and other non-related party have no similar transactions available for comparison.

3. Rent income

As described in Annex XVII, the Company and the parent company have signed a land lease contract (located in Shout-Kong District, Kaohsiung City) with the rent advanced once every six-month and for a period up to December 2015. The annual rental income (included in non-operating income - other income) was NT$10,430 thousand and NT$8,940 thousand in 2014 and 2013, respectively. In addition, the Company and China Steel Structure Co., Ltd. have signed a land and housing equipment rental contract with the rent advanced once every six-month. The annual rental income (included in non-operating income - other income) was NT$2,700 thousand in 2014 and 2013, respectively.

4. Public fluid and reservoir

The Company’s factory located inside the parent company’s plant; also, the primary energy needed for production is supplied by the parent company. The Company is to pay the parent company on a monthly basis for public fluid and reservoir rent, including electricity, wastewater treatment, waste gas treatment, consumption of steam, and coke ovens, in accordance with the market price or with the cost plus percentage. The expenses referred to above amounted to NT$470,984 thousand and NT$440,440 thousand in 2014 and 2013, respectively. The Company and other non-related party have no similar transactions available for comparison.

1. Technical service fees

The Company commissions the parent company to provide technical services, including Isotropic graphite block material, Ultracapacitor activated carbon electrode development, and the assessment of soft asphalt applied to fuel. The fees for technical services amounted to NT$10,000 thousand in 2014 and 2013, respectively.

6. The right-to-use of equipment

The Company has acquired the right-to-use of the reservoir for a price of NT$25,000 thousand agreed and signed by both parties (included in other noncurrent assets); also, the fee was paid in full as of December 31, 2014.

(VIII) Reward to the management

I) Reward to themanagement
Type of relatedparty Short-term employee benefits Post-employment benefits	12/312014 $ 56,514 427	12/31/2013
		$ 64,189 1,209

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$ 56,941 $ 65,398

The remuneration to the directors and the management is determined by the Remuneration Committee in accordance with the personal performance evaluation and market trends.

XXIX Significant contingent liabilities and unrecognized contractual commitments

• The Company had had the following significant commitments and contingencies as of December

• 31, 2014:

• (I) The unused balance of the letter of credit issued by the Company for the purchase of raw materials and commodities amounted to NT$641,469 thousand.

• (II) The fixed assets construction contract was signed for an amount of NT$183,216 thousand and with the construction-in-progress amounted to NT$121,053 thousand.

XXX Exchange rate of financial assets and financial liabilities in foreign currency

The financial assets and liabilities in foreign currency of the Company and its subsidiaries are as follows:

Unit: Foreign currency in Thousands / NT$ Thousands

12/31/2014	Foreign currency	Exchange rate	Book amount (NTD)
	$ 14,403 419 8,335 7,178 53,841 34,492 293 949 4,796 1,270 7,991 29,040 601	31.65 (USD：NTD) 6.215 (USD：RMB) 0.1609 (RMB：USD) 5.092 (RMB：NTD) 0.2646 (Japanese yen：USD) 0.0316 (NTD：USD) 31.65 (USD：NTD) 6.215 (USD：RMB) 29.805 (USD：NTD) 6.0606 (USD：RMB) 0.165 (RMB：USD) 0.0336 (NTD：USD) 29.805 (USD：NTD)	$ 455,858 13,248 42,441 36,549 14,246 34,492 9,288 30,043 142,947 37,852 39,309 29,040 17,915
Financial assets Monetary items USD USD RMB RMB Japanese yen Non-monetary items NTD Financial liabilities Monetary items USD USD 12/31/2013
Financial assets Monetary items USD USD RMB Non-monetary items NTD Financial liabilities Monetary items USD

XXXI Supplementary disclosures

• (I) Significant transactions and (II) Reinvestment business information

• Lending of fund: Attachment I

• Making of endorsement: None

• Marketable securities held at yearend: Attachment II

• Cumulative purchase or sale of the same marketable security for an amount more than NT$300 million or more than 20% of the paid-in capital: Attachment III

• 59 -

• The acquisition of real property for an amount more than NT$300 million or more than 20% of the paid-in capital: None

• The disposal of real property for an amount more than NT$300 million or more than 20% of the paid-in capital: None

• The purchase and sale conducted with the related party for an amount more than NT$100 million or more than 20% of the paid-in capital: Attachment IV

• The receivable from the related party for an amount more than NT$100 million or more than 20% of the paid-in capital: Attachment V

• Derivatives transaction: None

• Others: The business relationship and material transactions and transaction amount conducted between the parent company and its subsidiaries and between the subsidiaries: Attachment VI

• Information related to the invested company: Attachment VII

• (III) China Investment Information

• Name of the invested company in Mainland China, major business operation, paid-in capital, investment method, funds inward and outward remittance, shareholding ratio, current profit and loss and investment profit and loss recognized, book amount of investment at yearend, and investment gains and losses remitted inward and limit of investment in Mainland China: Attachment VIII

• The following significant transactions occurred with the invested company in Mainland China directly or indirectly by the third region, and the price, payment terms, and unrealized gains and losses:

  • (1) Purchase amount and percentage and the related accounts payable balance and percentage at yearend: The Company had made purchase from Changzhou China Steel Chemical Material Technology Company, the subsidiary, for an amount of NT$4,344 thousand (accounted for 0.09% of the consolidated purchase) in 2014; the transaction price is equivalent to the practice with the non-related party; also, a prepayment policy is applied without any significant unrealized gains and losses. The accounts payable had been paid in full as of December 31, 2014; also, the transaction referred to above had been written-off at the time of preparing the consolidated financial statements.

  • (2) Sale amount and percentage and the related accounts receivable balance and percentage at yearend: The Company had made sales to Changzhou China Steel Chemical Material Technology Company, the subsidiary, for an amount of NT$25,880 thousand (accounted for 0.29% of the net consolidated operating income) in 2014; the transaction price is equivalent to the practice with the non-related party; also, a payment term of OA/180days (open account) without any significant unrealized gains and losses. The accounts receivable for an amount of NT$26,858 thousand (accounted for 5% of the consolidated accounts receivable) was to be collected as of December 31, 2014 and the transaction referred to above had been written-off at the time of preparing the consolidated financial statements.

  • (3) Property transaction amount and the profit and loss amount resulted: The Company had the machinery equipment sold to Changzhou China Steel Chemical Material Technology Company, the subsidiary, according to the book amount for NT$3,011 thousand without any significant unrealized gains and losses. The other receivables for an amount of NT$3,011 thousand (accounted for 0.78% of the consolidated other receivables) was to be collected as of December 31, 2014 and the transaction referred to above had been written-off at the time of preparing the consolidated financial statements.

• 60 -

• (4) Arrange notes endorsement, guarantee, or collateral with the invested company in Mainland China directly or indirectly through the business in a third region: None

• (5) Arrange the lending of funds with the invested company in Mainland China directly or indirectly through the business in a third region: None

• (6) Other transactions that significantly affect the current profit or loss or financial position: None

XXXII Department Information

The information is provided to the decision-maker of operation for the allocation of resources and assessment of department performance, focusing on the type of every payment made or labor service provided. The reporting departments of the Company and subsidiary are as follows:

• (I) China Steel Chemical Corporation (CSCC) / Changzhou China Steel Chemical Material Technology Company (CCSCMTC) - Production and marketing of chemical products

• (II) EGI – Trade of chemical products.

• (III) Ever Wealthy International Co., Ltd. / Ever Glory Investment Co. / China Steel Chemical Material Technology Company (CSCMTC) - Investments

The accounting policies of the operating departments referred to above are same as the significant accounting policies summarized in Note IV.

• (I) Department income and operating results, department’s total assets and liabilities, and other department information

The Company and its subsidiaries have the reporting departments analyzed as follows:

2014		CSCC / CCSCMTC		EGI		Ever Wealthy / Ever Glory / CSCMTC	Adjustment and written-off		Consolidation
	$ 8,360,720 484,369 $ 8,845,089 $ 2,302,091 7,604 167,358 29,934 ( 2,713 ) 43,774 2,548,048 ( 374,170 ) $ 2,173,878 $ 7,993,526 762,657 $ 8,756/183 $ 2,379,688		$ 461,664 – $ 461,664 $ 321 7,487 – 881 – ( 3,066 ) 5,623 – $ 5,623 $ 775,615 2,922 $ 778,537 $ 793		$ 81,918 67,907 $ 149,825 $ 147,041 2,807 – 3,223 ( 84 ) – 152,987 ( 5,103 ) $ 147,884 $ 50,812 61,625 $ 112,437 $ 92,651		$ – ( 552,276 ) ( $ 552,276 ) ( $ 68,498 ) – ( 68,136 ) ( 2,177 ) – – ( 138,811 ) – ( $ 138,811 ) $ – ( 827,204 ) ( $ 827,204 ) ( $ 50,789 )	$ 8,904,302 – $ 8,904,302 $ 2,380,955 17,898 99,222 31,861 ( 2,797 ) 40,708 2,567,847 ( 379,273 ) $ 2,188,574 $ 8,819,953 – $ 8,819,953 $ 2,422,343
Income from customers other thanthe Company and subsidiaries Incomefrom the Company and subsidiaries Total income Department interest Interest income Profit share from associated company and joint venture under the equity method Other income Interest expense Other profit and loss Consolidated net income before tax Income tax expense Consolidated net income 2013
Income from customers other thanthe Company and subsidiaries Incomefrom the Company and subsidiaries Total income Department interest
									$ 8,819,953
									$ 2,422,343

• 61 -

25,473

2,662

Interest income

11,428

11,383

–

(Continuing)

• 62 -

(Continued)

d)
Bad debt reversal profit Associated companies and joint ventures profit share under the equity method Other income Interest expense Other profit and loss Consolidated net income before tax Income tax expense Consolidated net income	CSCC / CCSCMTC	EGI	Ever Wealthy / Ever Glory / CSCMTC	Adjustment and written-off	Consolidation
	$ 14,638 126,022 30,382 ( 2,301 ) 21,467 2,581,324 ( 371,413 ) $ 2,209,911	$ – – 373 ( 298 ) 2,787 15,038 – $ 15,038	$ – – 2,065 ( 25 ) – 97,353 ( 3,039 ) $ 94,314	$ – ( 45,340 ) ( 2,152 ) – – ( 98,281 ) – ( $ 98,281 )	$ 14,638 80,682 30,668 ( 2,624 ) 24,254 2,595,434 ( 374,452 ) $ 2,220,982

Department interests refers to the profits earned by each department, excluding the administrative cost of the headquarters to be amortized and remuneration to directors and supervisors, rent income, interest income, loss from the disposal of property, plant, and equipment, profit from the disposal of investment, net foreign currency exchange benefits, financial instruments gains and losses in valuation, interest expense and income tax expenses, etc. This measurement amount is provided to the decision-maker of operation for allocating resources to each department and assessing its performance.

For the purpose of monitoring department performance and allocating resources to each department:

1. All assets, except for the associated companies under the equity method, other financial assets, and current and deferred income tax assets, are amortized to the reporting sectors. The common assets of the reporting department are amortized proportionally to the income generated by each reporting department.

2. All liabilities, except for the loans and deferred income tax liabilities are amortized to the reporting departments. The common liabilities of the reporting departments are amortized proportionally to the assets of each reporting department.

(II) Total assets and liabilities of each department

Department assets Chemicals department Production and sales Trading Investment department Department liabilities Chemicals department Production and sale Trading Investment department		12/31/2014 $ 5,751,630 434,502 2,499,567 $ 8,685,699 $ 1,069,699 15,420 4,448 $ 1,089,567		12/31/2013
				$ 6,585,088 438,649 1,246,545 $ 8,270,282 $ 1,104,954 15,623 2,342 $ 1,122,919

(III) The main products and labor services income

• 63 -

The main products and labor services income of the Company and its subsidiary is analyzed as follows:

as follows:
		2014		2013
Chemical product production and sale
income	$	8,252,744	$	7,902,994
Trading income		496,891		790,902
Labor service income		75,518		78,086
Investment income		79,149		47,971
	$	8,904,302	$	8,819,953

(IV) Information by region

The Company and subsidiaries are operating business mainly in Taiwan and Mainland China.

The income of the Company and its subsidiaries generated from external customers is classified by the origin of country; also, noncurrent assets are classified by the origin of the assets as follows:

				Noncurrent assets	Noncurrent assets
		Income generated from	external
		customers
		2014	2013	12/31/2014	12/31/2013
Taiwan	$	5,911,049 $	5,748,382 $	2,007,402 $	2,020,467
Australia		641,105	844,022	–	–
Others		2,352,148	2,227,549	74,091	–
	$	8,904,302 $	8,819,953 $	2,081,493 $	2,020,467

Noncurrent assets exclude financial instruments, investments under the equity method, and deferred income tax assets.

(V) Main customer information

The income from individual external customer accounted for more than 10% of the consolidated operating income of the Company and its subsidiaries in 2014 and 2013 was from CSCC (Chemicals Department). The main customers are as follows:

Company A Company B Company C Company D		2014	Percentage of operating income (%) 21 11 11 7 50		2013
		Amount			Amount	Percentage of operating income (%)
		$ 1,880,608 994,135 927,703 640,909 $ 4,443,355			$ 1,708,699 758,477 948,376 844,022 $ 4,259,574		19 9 11 10 49

• 64 -

CHINA STEEL CHEMICAL CORPORATION (CSCC) and Subsidiaries

Lending of Funds

January 1 ~ December 31, 2014

Attachment I

Unit: NT$ Thousands, unless otherwise stated

No.	LendingCompany	Borrower	Account	Relatedparty	Current highest balance amount	Yearend balance	Actual credit amount implemented	Interest rate interval (%)	Nature of lending of funds	Transaction amount	Reason for needing short-term loans	Appropriation of allowance for bad debt	Collateral	Collateral	Lending of fund limit for each individual	Maximum lending of fund
													Title	Value
0 1	The Company Ever Wealthy International Co., Ltd.	China Steel Corporation ChangzhouChina Steel Chemical Material Technology Company	Other receivables Other receivables	Yes Yes	$ 300,000 34,500 (RMB 6,900 thousand )	$ 300,000 34,500 (RMB 6,900 thousand )	$ 300,000 29/154 (RMB 6,000 thousand ) (Note 4)	0.57~0.69 0.88	Note 1 Note 1	$ – –	Working capital Working capital	$ – –	None None	$ – –	$ 744,529 (Note 2) 221,204 (Note 3)	$ 1,489,058 (Note 2) 442,407 (Note 3)

Note 1: it is necessary to arrange short-term loans. Note 2: According to the Procedures for Lending of Funds by the Company, the total loan amount and lending of fund to individual is limited to 20% and 10% of the net value of the Company, respectively. Note 3: According to the Procedures for Lending of Funds by the subsidiaries, the total loan amount and lending of fund to individual is limited to 20% and 10% of the net value of the subsidiaries, respectively. Note 4: The amount had been written-off at the time of preparing the consolidated financial statements.

• 65 -

China Steel Chemical Corporation (CSCC) and Subsidiaries

Marketable Securities Held at Yearend

December 31, 2014

Attachment II

Unit: NT$ Thousands, unless otherwise stated

HoldingCompany	Type and name of marketable securities	Relationship with marketable securities issuer	Account			Yearend	Yearend		Remark
				Shares or units		Book amount	Shareholding ratio	Market price or net equity
The Company	Common stock China Development Financial Holding Corporation Beneficiary certificate Shinkong Lucky Star Money Market Fund PineBridge Taiwan Money Market Securities Investment Trust Fund Prudential Financial Money Market Fund SinoPac Money Market Fund JIH SUN Money Market Fund PineBridge Emerging Market Asia-Pacific Strategic Bond Fund Shin Kong Global ETF Fund Taishin Emerging Markets Bond Fund JIH SUN Global Emerging Bond Fund Prudential Bond Fund PineBridge Global Multi-Strategy High Yield Bond Fund FSITC Global High Yield Bond Fund TCB Fund of Emerging Markets Bond Taishin RMB Money Market Fund		Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value throughprofit and loss - current	132,000 9,069,321 2,964,434 6,167,655 3,658,769 12,167,993 1,000,000 1,000,000 1,000,000 2,893,025 1,855,804 1,562,879 886,776 1,913,217 300,000		$ 1,333 $ 138,160 40,007 95,721 50,079 176,920 10,376 9,830 9,835 30,113 19,945 19,501 9,354 19,532 15,497		$ 1,333 $ 138,160 40,007 95,721 50,079 176,920 10,376 9,830 9,835 30,113 19,945 19,501 9,354 19,532 15,497

(Continuing)

• 66 -

(Continued)

HoldingCompany	Type and name of marketable securities	Relationship with marketable securities issuer	Account			Yearend	Yearend		Remark
				Shares or units		Book amount	Shareholding ratio	Market price or net equity
Ever Wealthy International Co., Ltd.	Yuanta China High Yield Dim Sum Bond Fund ING Global High Yield Bond Fund Prudential Financial Asia Bond Cathay Emerging China Bond Structured instruments Yuanta Securities – Pan Jit 7thlinked notes Yuanta Securities – AGV 3rdlinked notes Yuanta Securities – Apexbio 1stlinked notes Preferred stock China Steel Corporation Common stock ADIMMUNE Corporation Asia Pacific Telecom China Steel Corporation Financial bond Taiwan Business Bank Subordinated Debt Common stock Taiwan Business Bank Taiwan Cogeneration Corporation Ta Chen Stainless Pipe Co., Ltd. Bank of Kaohsiung	Parent company Parent company	Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Bond investment without market price - noncurrent Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value throughprofit and loss - current	300,000 959,877 928,031 966,950 229,000 1,498,747 1,000,000 2,556,915 1,065,114 84,145 414,480 677,528		$ 15,411 9,738 10,202 10,389 $ 690,610 $ 17,044 38,101 17,456 $ 72,601 $ 9,549 45,412 17,450 67,247 $ 139,658 $ 50,000 $ 9,788 2,062 8,621 6,132		$ 15,411 9,738 10,202 10,389 $ 690,610 $ 17,044 38,101 17,456 $ 72,601 $ 9,549 45,412 17,450 67,247 $ 139,658 $ 5,000 $ 9,788 2,062 8,621 6,132

(Continuing)

• 67 -

(Continued)

(Continued)
HoldingCompany	Type and name of marketable securities	Relationship with marketable securities issuer	Account			Yearend				Remark
				Shares or units		Book amount	Shareholding ratio	Market price or net equity
	Hua Nan Financial Holding Company Mega Financial Holding Company Beneficiary Certificate Yuanta S&P GSCI Gold ER Futures ETF Prudential Financial Money Market Fund Concord Dream Futures Trust Fund Union Emerging Asia Bond Fund Allianz Global Investors All Seasons Return Fund of Bond Funds Shin Kong Multi‐Return Fund of Funds Cathay Taiwan Money Market Common stock CCSC China Steel Corporation Asia Pacific Telecom Common stock TA CHEN International Steel Corp. Huasheng Venture Capital Company Zu-Kao Engineering Company Lianshensun Venture Capital Company E-ONE MOLI ENERGY CORP. Yung Loong Engineering Corp. National Kaohsiung First University of Science and Technology Entrepreneurship Asia Hepato Gene Co. KaiYi Technology Industrial Company Hong Kong Forefront Company	Parent company Ultimate parent company	Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - noncurrent Available-for-sale financial assets - noncurrent Available Available Available-for-sale financial assets - noncurrent Available-for-sale financial assets - noncurrent Available-for-sale financial assets - noncurrent Available-for-sale financial assets - noncurrent Available-for-sale financial assets - noncurrent Available-for-sale financial assets - noncurrent	3,310,200 500,000 2,000,000 2,509,226 1,000,000 1,000,000 693,568 1,000,000 1,622,212 6,547,537 2,226,265 500,000 17,762,500 1,349,460 1,476,892 450,000 40,463 1,540,000 300,000 200,000 275,000 665		$ 58,756 12,225 $ 97,584 $ 24,660 38,943 10,052 10,676 9,996 10,630 19,885 $ 124,842 $ 1,014,868 58,551 8,725 $ 1,082,144 $ 422,650 14,868 18,135 6,332 196 60,060 3,000 – – – $ 525,241	3 2 7 1 – 4 9 2 18 –		$ 58,756 12,225 $ 97,584 $ 24,660 38,943 10,052 10,676 9,996 10,630 19,885 $ 124,842 $ 1,014,868 58,551 8,725 $ 1,082,144 $ 422,650 14,868 18,135 6,332 196 60,060 3,000 – – – $ 525,241	Note 4 Note 3 Note 1 Note 1 Note 1 Note 2 Note 1 Note 1 Full appropriation for impairment loss Full appropriation for impairment loss Full appropriation for impairment loss

(Continuing)

• 68 -

(Continued)

HoldingCompany	Type and name of marketable securities	Relationship with marketable securities issuer	Account			Yearend	Yearend		Remark
				Shares or units		Book amount	Shareholding ratio	Market price or net equity
Ever Glory International Co., Ltd. Ever Glory Investment Co.	Financial bond Taiwan Business Bank Subordinated Debt Sunny Bank Subordinated Debt Common stock Taiwan Cooperative Bank Taiwan Life Insurance Co., Ltd. Beneficiary certificate INVESTCO US SENIOR LOAN FUND ING(L) Renta Asian Bond Fund Structured instruments Industrial Bank Co. —Hybrid Dual Range Accrual Note (Underlying AUD / US) Industrial Bank Co.—Hybrid Dual Range Accrual Note (Underlying JPY / US) Industrial Bank Co.–Hybrid Dual Range Accrual Note (Underlying EUR / US) Financial bond Russian Agricultural Bank Bond Vneshtorgbank Corporate Bond GAZPROM BANK Corporate Bond Australia and New Zealand Banking Group Bond Road King Infrastructure Limited Corporate Bond Common stock NANTEX Industry Co., Ltd.		Bond investment without market price - noncurrent Bond investment without market price - noncurrent Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Held-to-maturity financial assets - noncurrent Held-to-maturity financial assets - noncurrent Held-to-maturity financial assets - noncurrent Bond investment without market price - noncurrent Bond investment without market price - noncurrent Bond investment without market price - noncurrent Bond investment without market price - noncurrent Bond investment without market price - noncurrent Financial assets measured at fair value throughprofit and loss - current	1,671,036 63,909 10,253 2,000 20,000 2,000 2,000 2,000,000 791,700		$ 50,000 20,000 $ 70,000 $ 27,238 1,198 $ 28,436 $ 47,254 15,614 $ 62,868 $ 47,380 46,051 15,429 $ 108,860 $ 9,604 10,083 6,457 4,270 10,183 $ 40,597 $ 12,747		$ 50,000 20,000 $ 70,000 $ 27,238 1,198 $ 28,436 $ 47,254 15,614 $ 62,868 $ 40,553 36,878 13,537 $ 90,968 $ 9,604 10,083 6,457 4,270 10,183 $ 40,597 $ 12,747

(Continuing)

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(Continued)

HoldingCompany	Type and name of marketable securities	Relationship with marketable securities issuer	Account			Yearend	Yearend		Remark
				Shares or units		Book amount	Shareholding ratio	Market price or net equity
	Taishin Financial Holding Co, Ltd. China Bills Finance Corporation RECHI PRECISION CO., LTD. Mega Financial Holding Company Les enphants Co., Ltd. Cathay Financial Holdings Co., Ltd. Taiwan Styrene Monomer Corporation Shin Kong Financial Holding Co., Ltd. Beneficiary certificate Hua Nan Kirin Money Market Fund Hua Nan Phoenix Money Market Fund Common stock China Steel Corporation	Ultimate parent company	Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Available-for-sale financial assets - current	1,116,640 1,000,000 169,300 1,500,000 600,000 425,000 525,000 2,108,467 5,972,543 3,754,341 522,826		$ 14,572 11,250 5,824 36,675 10,620 19,954 7,245 18,997 $ 137,884 $ 70,370 60,076 $ 130,446 $ 13,750		$ 14,572 11,250 5,824 36,675 10,620 19,954 7,245 18,997 $ 137,884 $ 70,370 60,076 $ 130,446 $ 13,750

Note 1: It is based on the most recent net equity unaudited by a CPA.

Note 2: It is based on the net value after adjusting the liquidity discount in accordance with Emerging price at the end of December 2014. Note 3: It is based on the price in the appraisal report issued by an external expert.

Note 4: It has been written-off at the time of preparing the consolidated financial statements.

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China Steel Chemical Corporation (CSCC) and Subsidiaries

Cumulative purchase or sale of the same marketable security for an amount more than NT$300 million or more than 20% of the paid-in capital January 1 ~ December 31, 2014

Attachment III

Unit: NT$ Thousands, unless otherwise stated

Buyer or Seller	Type and name of marketable securities	Account	Counterparty	Relationship	Beginningof theyear	Beginningof theyear	Purchase(Note)	Purchase(Note)			Sale		Yearend	Yearend	Remark
					Shares	Amount	Shares	Amount	Shares	Selling price	Book cost	Disposal profit (loss)	Shares	Amount
The Company	JIH SUN Money Market Fund Shinkong Lucky Star Money Market Fund Mirae Asset Solomon Money Market Fund Prudential Financial Money Market Fund JF (Taiwan) First Money Market Fund Hua Nan Phoenix Money Market Fund Union Money Market Fund	Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current Financial assets measured at fair value through profit and loss - current			7,275,372 4,624,430 4,057,355 6,477,523 6,742,521 – –	$ 105,177 70,066 50,021 100,057 100,063 – –	24,121,174 20,048,737 20,224,787 19,050,708 16,804,916 25,680,578 27,062,426	$ 350,079 304,972 249,979 295,075 249,937 410,000 350,000	19,228,553 15,603,847 24,282,142 19,360,576 23,547,437 25,680,578 27,062,462	$ 279,000 237,163 300,571 300,000 350,456 410,512 350,482	$ 278,336 236,878 300,000 299,411 350,000 410,000 350,000	$ 664 285 571 589 456 512 482	12,167,993 9,069,320 6,167,655 – – –	$ 176,920 138,160 95,721 – – –

Note: The purchase amount of the year includes proceeds and profit and loss in valuation.

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China Steel Chemical Corporation (CSCC) and Subsidiaries

The purchase and sale conducted with the related party for an amount more than NT$100 million or more than 20% of the paid-in capital

January 1 ~ December 2014

Attachment IV

Unit: NT$ Thousands, unless otherwise stated

Buyer(Seller)	Counterparty	Relationship		Transaction	Transaction	Transaction	The reasons for the trade terms different from regular transactions	The reasons for the trade terms different from regular transactions	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Remark
									Balance	Percentage of notes and accounts receivable (payable)
			Purchase(Sale)	Amount	Percentage of total purchase (sale) (%)	Creditperiod
							Unitprice	Creditperiod
The Company Ever Glory International Co., Ltd.	China Steel Corporation China Synthetic Rubber Corporation Ever Glory International Co., Ltd. Dragon Steel Corporation. The Company	Parent company Other related party Subsidiary Sister company Parent company	Purchase Sale Sale Purchase Purchase	$ 3,029,393 ( 1,880,608 ) ( 458,489 ) 1,169,188 458,489	63 ( 22 ) ( 5 ) 24 99	Letter of Credit at sight Monthly open account Monthly open account Letter of Credit at sigh Monthly open account	Note 1 Note 1 – Note 1 –	Note 1 Note 1 – Note 1 –	( $ 255,415 ) 127,634 25,667 – ( 25,667 )	( 91 ) 23 5 – ( 100 )	Note 2 Note 2

Note 1: Please refer to Note XXVIII.

Note 2: It has been written-off at the time of preparing the consolidated financial statements.

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China Steel Chemical Corporation (CSCC) and Subsidiaries

The receivable from the related party for an amount more than NT$100 million or more than 20% of the paid-in capital

December 31, 2014

Attachment V

Unit: NT$ Thousands, unless otherwise stated

Accounts receivables booked	Counterparty	Relationship	Receivables from related party	Turnover rate	Delinquent receivables from relatedparty	Delinquent receivables from relatedparty	Collection of delinquent receivables	Amount of allowance for bad debt
					Amount	Process
The Company	China Synthetic Rubber Corporation China Steel Corporation	Other related party Parent company	$ 127,634 366,644 (Note)	12.78 (Note)	$ – –	– –	$ 127,634 366,644	$ – –

Note: It is the lending of fund, loan interest, and raw materials spread.

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China Steel Chemical Corporation (CSCC) and Subsidiaries

The business relationship and material transactions conducted between the parent company and its subsidiaries

January 1 ~ December 31, 2014

Attachment VI

Unit: NT$ Thousands, unless otherwise stated

Attachment VI				Unit: NT$ Thousands, unless otherwise stated	Unit: NT$ Thousands, unless otherwise stated	Unit: NT$ Thousands, unless otherwise stated	Unit: NT$ Thousands, unless otherwise stated
No.	Trader	Counterparty	Relationshipwith Trader	Transaction
				Account	Amount	Sales term	Percentage of consolidated operating income or total assets (%)
0	The Company	Ever Glory International Co., Ltd. ChangzhouChina Steel Chemical Material Technology Company	Parent company v. subsidiary Parent company v. subsidiary	Sales Sales	$ 458,489 25,880	Cost plus percentage Cost plus percentage	5 –

• 74 -

China Steel Chemical Corporation (CSCC) and Subsidiaries

Information related to the invested company

January 1 ~ December 31, 2014

Attachment VII

Unit: NT$ Thousands, unless otherwise stated

InvestingCompany	Invested Company	Location	Main business operation	Original investment amount	Original investment amount	Held at Yearend	Held at Yearend	Held at Yearend	Held at Yearend	Current profit (loss) of the invested company	Current investment profit (loss) recognized	Remark
				12/31/2014	12/31/2013	Shares	Ratio (%)	Book amount
The Company Ever Wealthy International Co., Ltd.	Ever Glory International Cov Ltd. Ever Wealthy International Co., Ltd. Himag Magnetic Corporation Li Qinglong Investment Company Gao Rui Investment Company Shang Yang Venture Capital Company CHC RESOURCES CORPORATION TAIAN TECHNOLOGIES CORPORATION Yun Hung Investment Company Chi HongVenture Capital Company United Steel International Development Co. China Steel Structure Co., Ltd. (CSSC) Hong Chuan Investment Company Shenlida Investment Company PROTOP TECHNOLOGY CO., LTD. TTMC HIMAG China Steel Structure Co., Ltd. (CSSC) Ever Glory Investment Co. China Steel Chemical Material Technology Company (CSCMTC)	British Cayman Islands Kaohsiung City Pingtung County Kaohsiung City Kaohsiung City Kaohsiung City Kaohsiung City Taipei City Kaohsiung City Taipei City British Virgin Islands(BVI) Kaohsiung City Kaohsiung City Kaohsiung City Kaohsiung City Kaohsiung City Pingtung County Kaohsiung City Kaohsiung City Samoa	International trade General investment business Magnetic core and magnetic powder production and sales General investment business General investment business General investment business Blast furnace cement and slag production and sales and industrial waste treatment Biotechnology services General investment business General investment business General investment business Steel structure design, production, and sales General investment business General investment business General investment business Target and bimetallic tube sales Magnetic core and magnetic powder production and sales Steel structure design, production, and sales General investment business General investment business	$ 39,920 300,083 47,950 7,000 15,070 23,520 91,338 2,295 450,000 50,000 68,838 13,675 9,000 8,400 10,495 45,987 33,015 56,667 153,000 79,572	$ 39,920 300,083 47,950 7,000 15,070 23,520 91,338 2,295 450,000 50,000 68,838 13,675 9,000 8,400 10,495 45,987 33,015 56,667 153,000 37,190	1,300,000 104,574,982 1,801,002 700,000 1,196,000 2,352,000 13,653,947 222,400 59,339,570 5,000,000 2,450,000 600,069 900,000 840,000 897,000 6,119,748 1,320,609 2,000,896 15,300,000 2,656,000	100 100 15 35 40 6 6 5 9 5 5 – 45 35 30 8 11 1 51 100		$ 393,416 1,428,206 41,117 14,585 27,179 39,907 275,204 4,063 532,774 81,149 104,694 13,524 $ 2,955,818 $ 18,641 17,460 17,181 109,752 30,153 53,250 156,997 69,222 $ 472,656	$ 5,623 145,058 49,888 1,033 9,026 44,667 1,032,58 2 33,142 151,601 137,472 ( 19,260 ) 255,683 961 3,104 5,365 24,571 49,888 255,683 2,825 ( 13,311 )	$ 5,623 62,513 7,484 362 3,610 2,866 62,383 1,657 13,947 7,109 ( 963 ) 767 $ 167,358 $ 432 1,087 1,610 1,795 5,488 1,475 1,441 ( 13,311 ) $ 17	Subsidiary (Note) Subsidiary (Note) Subsidiary (Note) Subsidiary (Note)

Note: It has been written-off at the time of preparing the consolidated financial statements.

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China Steel Chemical Corporation (CSCC) and Subsidiaries

Investment in Mainland China

January 1 ~ December 31, 2014

Attachment VIII

Unit: NT$ Thousands, unless otherwise stated

Invested Company in Mainland China	Main business operation	Main business operation	Paid-in capital	Investment method	Cumulative investment amount remitted outward from Taiwan at the beginning of the year(Note 1)	Cumulative investment amount remitted outward from Taiwan at the beginning of the year(Note 1)	Investment amount remitted outward or inward of theyear	Investment amount remitted outward or inward of theyear	Cumulative investment amount remitted outward from Taiwan at yearend (Note 1)	Current profit and loss of invested company	Shareholding ratio of direct or indirect investment – ending (%)	Current investment profit (loss)recognized	Investment book amount at yearend	Investment profit remitted inward at the end of the year
							Outward remittance	Inward remittance
Ningbo Huayang Aluminum Ltd. ChangzhouChina Steel Chemical Material Technology Company	Manufacturing, processing, and developing new alloy materials and selling self-manufactured products Processing and sale of mesophase carbon microspheres Products		US$49,000 thousand US$2,656 thousand	Investment in Mainland China with remittance via third region Investment in Mainland China with remittance via third region	$ ( 77,543 US$2,450 thousand ) ) 39,752 (US$1,256 thousand )		$ – 44,310 (US$1,400 thousand )	$ – –	$ ( 77,543 US$2,450 thousand ) 84,062 ( US$2,656 thousand )	( $ 16,412 ) ( 13,311 )	5 100	( $ 821 ) ( 13,311 ) (Note 3)	$ 103,309 69,222 (Note 3)	$ – –
Cumulative investment amount remitted outward to Mainland China from Taiwan at the end of the year (Note 1			Investment amount approved by the Investment Commission, MOEA (Note 1)			Investment in Mainland China subject to the investment limits set by the Investment Commission, MOEA(Note 2)
$161,605 (US$5,106 thousand)			$161,605 (US$5,106 thousand)			$4,467,175

Note 1: The USD referred to above was converted to NTD in accordance with the exchange rate of NT$31.65 as of December 31, 2014.

Note 2: The investment limit amount is calculated in accordance with the “Investment or Technical Cooperation in Mainland China Review Principle” of the Investment Commission, MOEA dated 08.29.2008 as follows: Equity $7,445,292 x 60% = $4,467,175.

Note 3: It has been written-off at the time of preparing the consolidated financial statements.

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