PHD — Annual Report 2015

Dec 23, 2015

PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY NON-CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS December 31, 2015 AND 2014

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

PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

	December 31, 2015 Assets Notes AMOUNT				December 31, 2014	%
Current assets				%	AMOUNT
Cash and cash equivalents	6(1)	\$	2,156,890	5	\$ 1,169,212	2
Notes receivable, net	6(3)		111,588	-	141,251	-
Accounts receivable, net	6(4) and 7		826,784	2	4,546,888	10
Other receivables			1,718	-	3,563	-
Other receivables - related parties	7		61,738	-	1,985	-
Inventories, net	5(2), 6(5), 7 and 8		21,312,926	46	19,349,876	41
Prepayments			224,827	-	300,918	1
Other financial assets - current	8		1,754,990	4	2,592,218	6
Other current assets	6(6)		297,551	1	507,245	1
Total current assets			26,749,012	58	28,613,156	61
Non-current assets
Financial assets at fair value through profit	6(2) and 8
or loss - non-current			77,992	-	77,547	-
Available-for-sale financial assets -	6(7) and 8
non-current			1,542,392	3	1,582,655	4
Financial assets carried at cost -	6(8) and 8
non-current			887,529	2	876,043	2
Investments accounted for under equity	6(9) and 8
method			5,776,478	13	4,382,070	10
Property, plant and equipment, net	6(10) and 8		596,757	1	590,726	1
Investment property - net	6(11) and 8		6,059,652	13	6,092,180	13
Intangible assets	6(12)		2,300,439	5	2,361,692	5
Refundable deposits	9		493,499	1	414,632	1
Other financial assets - non-current	8		732,638	2	521,166	1
Other non-current assets	7 and 8		636,640	2	1,102,418	2
Total non-current assets			19,104,016	42	18,001,129	39
Total assets		\$	45,853,028	100	\$ 46,614,285	100

(Continued)

PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

			December 31, 2015 AMOUNT % AMOUNT		December 31, 2014
Liabilities and Equity	Notes						% 6 4 - 5 1 2 - - 6 5 - 29 10 10 -
Current liabilities
Short-term borrowings	6(13) and 8	\$	2,264,874	5	\$	2,945,584
Short-term notes and bills payable	6(14) and 8		1,469,031	3		1,968,082
Notes payable			11,094	-		10,375
Accounts payable			2,348,723	5		2,350,078
Accounts payable - related parties	7		334,393	1		398,718
Other payables			755,605	2		707,048
Other payables - related parties	7		117,450	-		-
Current income tax liabilities	6(31)		73,174	-		81,079
Receipts in advance	6(15)		1,634,255	4		2,921,247
Long-term liabilities, current portion	6(17) and 8		362,870	1		2,061,470
Other current liabilities			4,668	-		38,361
Total current liabilities			9,376,137	21		13,482,042
Non-current liabilities
Bonds payable	6(16)		4,500,000	10		4,500,000
Long-term borrowings	6(17) and 8		6,298,156	14		4,367,629
Provisions for liabilities - non-current	6(18)		84,517	-		81,720
Net defined benefit liability - non-current	6(19)		106,714	-		89,596	-
Guarantee deposits received			127,471	-		128,646	-
Other non-current liabilities	6(9)		528,957	1		-	-
Total non-current liabilities			11,645,815	25		9,167,591	20
Total liabilities			21,021,952	46		22,649,633	49
Equity
Share capital
Common stock	6(21)		16,233,261	35		16,623,418	36
Capital surplus	6(20)(22)
Capital surplus			2,260,513	5		1,929,793	4
Retained earnings	6(21)(23)(31)
Legal reserve			1,420,796	3		1,180,924	2
Unappropriated retained earnings			3,508,400	8		2,854,738	6
Other equity interest	6(24)
Other equity interest			1,409,109	3		1,436,219	3
Treasury stocks	6(21)	(	1,003)	-	(	60,440)	-
Total equity			24,831,076	54		23,964,652	51
Total liabilities and equity		\$	45,853,028	100	\$	46,614,285	100

The accompanying notes are an integral part of these parent company only financial statements. See report of independent accountants dated March 23, 2016.

PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31

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

				Year ended December 31
			2015		2014
Items	Notes		AMOUNT	%	AMOUNT	%
Operating revenue	6(26) and 7	\$	8,763,040	100 \$	10,892,210	100
Operating costs	6(5)(12)(30) and 7 (		5,631,118) (	64) (	7,316,468) (	67)
Gross profit			3,131,922	36	3,575,742	33
Operating expenses	6(30)
Selling expenses		(	518,199) (	6) (	505,719) (	5)
General and administrative expenses		(	1,007,708) (	12) (	1,083,154) (	10)
Total operating expenses		(	1,525,907) (	18) (	1,588,873) (	15)
Operating profit			1,606,015	18	1,986,869	18
Non-operating income and expenses
Other income	6(27)		268,286	3	361,016	3
Other gains and losses Finance costs	6(2)(28) 6(5)(29) and 7 (		13,485 283,713) (	- 3) (	7,913 276,462) (	- 2)
Share of profit of subsidiaries,associates	6(9)
and joint ventures accounted for using
equity method, net			842,977	10	421,552	4
Total non-operating revenue and
expenses			841,035	10	514,019	5
Profit before income tax			2,447,050	28	2,500,888	23
Income tax expense	6(31)	(	209,250) (	2) (	102,170) (	1)
Profit for the year		\$	2,237,800	26 \$	2,398,718	22
Other comprehensive income
Components of other comprehensive loss
that will not be reclassified to profit or loss
Actuarial loss on defined benefit plan	6(19)	( \$	16,062)	- ( \$	4,706)	-
Share of other comprehensive income of
subsidiaries, associates and joint ventures
accounted for under equity method,
components of other comprehensive income that will not be reclassified to
profit or loss			1,669	-	950	-
Components of other comprehensive
loss that will not be reclassified to
profit or loss		(	14,393)	- (	3,756)	-
Components of other comprehensive loss
that will be reclassified to profit or loss
Other comprehensive loss, before tax,	6(7)
available-for-sale financial assets		(	39,276) (	1) (	557,180) (	5)
Share of other comprehensive income
(loss) of subsidiaries, associates and joint
ventures accounted for under equity
method, components of other comprehensive income that will not be
reclassified to profit or loss			12,166	- (	6,212)	-
Components of other comprehensive
loss that will be reclassified to profit
or loss		(	27,110) (	1) (	563,392) (	5)
Other comprehensive loss for the year		( \$	41,503) (	1) ( \$	567,148) (	5)
Total comprehensive income for the year		\$	2,196,297	25 \$	1,831,570	17
Earnings per Share (in dollars)	6(32)
Basic earnings per share		\$		1.38 \$		1.51
Diluted earnings per share		\$		1.36 \$		1.51
Assuming the Company treated the stocks held by a subsidiary as long-term investments rather than treasury stock, the pro forma
information is as follows:
Net income		\$		2,177,326 \$		2,229,435
Earnings per Share (in dollars)
Basic earnings per share		\$		1.34 \$		1.37

The accompanying notes are an integral part of these parent company only financial statements. See report of independent accountants dated March 23, 2016.

PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31 (Expressed in thousands of New Taiwan dollars)

				Retained Earnings				Other equity interest
	Notes	Share capital - common stock	Capital surplus	Legal reserve		Unappropriated retained earnings		Exchange differences arising on translation of foreign operations		Unrealized gain or loss on available-for-sal e financial assets	Treasury	stocks	Total
2014
Balance at January 1, 2014		\$ 13,139,241	\$ 521,293	\$ 1,022,243	\$	1,586,811	(\$	859 )		\$ 2,000,470	(\$	60,440 )	\$ 18,208,759
Distribution of 2013 earnings (Note 1) Legal reserve	6(23)	-	-	158,681	(	158,681 )		-		-		-	-
Cash dividends		-	-	-	(	484,177 )		-		-		-	( 484,177 )
Stock dividends		484,177	-	-	(	484,177 )		-		-		-	-
Profit for the year	6(32)	-	-	-		2,398,718		-		-		-	2,398,718
Other comprehensive (loss) income for the year	6(7)(19)(24)	-	-	-	(	3,756 )		2,549	(	565,941 )		-	( 567,148 )
Share-based payment transactions	6(20)(22)	-	73,500	-		-		-		-		-	73,500
Cash capital increase	6(21)(22)	3,000,000	1,335,000	-		-		-		-		-	4,335,000
Balance at December 31, 2014		\$ 16,623,418	\$ 1,929,793	\$ 1,180,924	\$	2,854,738		\$ 1,690	\$	1,434,529	(\$	60,440 )	\$ 23,964,652
2015
Balance at January 1, 2015		\$ 16,623,418	\$ 1,929,793	\$ 1,180,924	\$	2,854,738		\$ 1,690	\$	1,434,529	(\$	60,440 )	\$ 23,964,652
Distribution of 2014 earnings (Note 2)	6(23)
Legal reserve		-	-	239,872	(	239,872 )		-		-		-	-
Cash dividends		-	-	-	(	1,329,873 )		-		-		-	( 1,329,873 )
Profit for the year	6(32)	-	-	-		2,237,800		-		-		-	2,237,800
Other comprehensive (loss) income for the year	6(7)(19)(24)	-	-	-	(	14,393 )		16	(	27,126 )		-	( 41,503 )
Treasury stock transactions	6(21)(22)	( 390,157 )	330,720	-		-		-		-		59,437	-
Balance at December 31, 2015		\$ 16,233,261	\$ 2,260,513	\$ 1,420,796	\$	3,508,400		\$ 1,706	\$	1,407,403	(\$	1,003 )	\$ 24,831,076

Note 1: Employees' bonus of \$29,753 and directors' and supervisors' remuneration of \$44,629 have been deducted from the parent company only statement of comprehensive income. The differences, employees' bonus of \$1,191 and directors' and supervisors' remuneration of \$1,785, with the amounts approved at the stockholders' meeting for appropriation were recognised in the 2014 parent company only statement of comprehensive income.

Note 2: Employees' bonus of \$43,177 and directors' and supervisors' remuneration of \$64,765 have been deducted from the parent company only statement of comprehensive income. There is no difference with the amounts approved at the stockholders' meeting for appropriation.

The accompanying notes are an integral part of these parent company only financial statements.

See report of independent accountants dated March 23, 2016.

PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31
(Expressed in thousands of New Taiwan dollars)

	Notes		2015		2014
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax		\$	2,447,050	\$	2,500,888
Adjustments
Adjustments to reconcile profit (loss)
Share-based compensation cost	6(20)		-		73,500
Gain on financial assets at fair value through profit or	6(2)(28)
loss		(	445 )	(	447 )
Provision for bad debts expense transferred to revenue	6(3)		-	(	1,078 )
Write-off of uncollectible accounts	6(3)(4)	(	3,350 )	(	2,094 )
Share of profit of subsidiaries, associates and joint	6(9)
ventures accounted for under equity method		(	842,977 )	(	421,552 )
Loss on disposal of property, plant and equipment	6(28)		4,307		732
Depreciation	6(30)		113,475		117,069
Amortization	6(12)(30)		61,253		61,253
Interest expense	6(29)		283,713		276,462
Interest income	6(27)	(	7,572 )	(	12,267 )
Dividend income	6(27)	(	134,112 )	(	209,456 )
Impairment loss on financial assets	6(7)(28)		-		11,814
Gain on disposal of long-term investments		(	469 )		-
Gain on unrealised foreign exchange		(	14,676 )	(	22,704 )
Changes in operating assets and liabilities
Changes in operating assets
Notes receivable			29,859	(	42,049 )
Accounts receivable Other receivables			3,723,258 1,574	(	1,625,425 ) 33,103
Other receivables - related parties		(	59,753 )	(	1,985 )
Inventories		(	1,899,997 )	(	3,045,859 )
Prepayments			76,091		37,632
Other current assets			209,694		201,290
Other non-current assets			340,669		7,150
Changes in operating liabilities
Notes payable			719	(	2,754 )
Accounts payable		(	1,355 )		282,447
Accounts payable - related parties		(	64,325 )		34,017
Other payables			48,993		76,173
Other payables - related parties			117,450		-
Receipts in advance		(	1,286,992 )	(	120,872 )
Other current liabilities		(	33,693 )	(	37,820 )
Provisions for liabilities - non-current			2,797		2,649
Net defined benefit liability - non-current			1,056	(	2,712 )
Cash inflow (outflow) generated from operations			3,112,242	(	1,832,895 )
Interest received			7,843		12,448
Cash dividends received			270,977		231,057
Interest paid		(	284,149 )	(	274,700 )
Income tax paid		(	217,155 )	(	63,443 )
Net cash flows from (used in) operating activities			2,889,758	(	1,927,533 )

(Continued)

PRINCE HOUSING & DEVELOPMENT CORP. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)		Notes 2015			2014
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in other financial assets - current		\$	837,228	\$	489,531
Return of share capital from available-for-sale financial
assets - non-current			-		25,000
Decrease in available-for-sale financial assets - non-current			3,173		-
Increase in investments accounted for under equity method		(	200,000 )		-
Return of share capital from investments accounted for
under equity method			14,286		20,117
Proceeds from disposal of investment accounted for under
equity method			-		451
Acquisition of cash from consolidation			41,683		-
Acquisition of property, plant and equipment	6(10)	(	33,747 )	(	10,371 )
Proceeds from disposal of property, plant and equipment			4,518		429
(Increase) decrease in deposits out		(	78,867 )		11,191
Increase in other financial assets - non-current		(	211,472 )	(	389,069 )
Net cash flows from investing activities			376,802		147,279
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings		(	680,710 )	(	511,416 )
(Decrease) increase in short-term notes and bills payable		(	499,051 )		563,896
Repayment of long-term borrowings		(	4,872,170 )	(	6,747,377 )
Proceeds from of long-term borrowings			5,104,097		4,419,350
Decrease in guarantee deposits received		(	1,175 )	(	7,748 )
Cash dividends paid	6(23)	(	1,329,873 )	(	484,177 )
Proceeds from cash capital increase	6(21)		-		4,335,000
Net cash flows (used in) from financing activities		(	2,278,882 )		1,567,528
Net increase (decrease) in cash and cash equivalents			987,678	(	212,726 )
Cash and cash equivalents at beginning of year			1,169,212		1,381,938
Cash and cash equivalents at end of year		\$	2,156,890	\$	1,169,212

The accompanying notes are an integral part of these parent company only financial statements. See report of independent accountants dated March 23, 2016.

PRINCE HOUSING & DEVELOPMENT CORP. NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

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

1. HISTORY AND ORGANIZATION

Prince Housing & Development Corp. (the "Company") was established in September 1973, under the Company Act and other related regulations. The Company is primarily engaged in the construction, leasing and sale of public housing, commercial building, tourism/recreation place (children's playground, water park, etc.) and parking lot/parking tower, and leasing and sale of real estate. The common shares of the Company have been listed on the Taiwan Stock Exchange since April 1991.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE PARENT COMPANY ONLY FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These parent company only financial statements were authorized for issuance by the Board of Directors on March 23, 2016.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards ("IFRSs") as endorsed by the Financial Supervisory Commission ("FSC")

According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued by FSC on April 3, 2014, commencing 2015, companies with shares listed on the TWSE or traded on the Taipei Exchange or Emerging Stock Market shall adopt the 2013 version of IFRS (not including IFRS 9, 'Financial instruments') as endorsed by the FSC and Regulations Governing the Preparation of Financial Reports by Securities Issuers effective January 1, 2015 (collectively referred herein as the "2013 version of IFRSs") in preparing the parent company only financial statements. The impact of adopting the 2013 version of IFRSs is listed below:

A. IAS 19 (revised), 'Employee benefits'

The revised standard makes amendments that net interest amount, calculated by applying the discount rate to the net defined benefit asset or liability, replaces the finance charge and expected return on plan assets. The revised standard eliminates the accounting policy choice that the actuarial gains and losses could be recognized based on corridor approach or recognized in profit or loss. The revised standard requires that the actuarial gains and losses can only be recognized immediately in other comprehensive income when incurred. Past service cost will be recognized immediately in the period incurred and will no longer be amortized using straight-line basis over the average period until the benefits become vested. An entity is required to recognize termination benefits at the earlier of when the entity can no longer withdraw an offer of those benefits and when it recognizes any related restructuring costs, rather than when the entity is demonstrably committed to a termination. Based on the Company's assessment, the

adoption of the standard has no significant impact on its parent company only financial statements, and the Company has disclosed additional information about defined benefit plans accordingly.

B. IAS 1, 'Presentation of financial statements'

The amendment requires entities to separate items presented in OCI classified by nature into two groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently when specific conditions are met. If the items are presented before tax then the tax related to each of the two groups of OCI items (those that might be reclassified and those that will not be reclassified) must be shown separately. Accordingly, the Company has adjusted its presentation of the statement of comprehensive income.

C. IFRS 12, 'Disclosure of interests in other entities'

The standard integrates the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. Also, the Company has disclosed additional information about its interests in consolidated entities and unconsolidated entities accordingly.

D. IFRS 13, 'Fair value measurement'

The standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard sets out a framework for measuring fair value from market participants' perspective, and requires disclosures about fair value measurements. For non-financial assets only, fair value is determined based on the highest and best use of the asset. Based on the Company's assessment, the adoption of the standard has no significant impact on its parent company only financial statements, and the Company has disclosed additional information about fair value measurements accordingly.

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

None.

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

New standards, interpretations and amendments issued by IASB but not yet included in the 2013 version of IFRSs as endorsed by the FSC:

	Effective date by International
New Standards, Interpretations and Amendments	Accounting Standards Board
IFRS 9, 'Financial instruments'	January 1, 2018
Sale of contribution of assets between an investor and its associate or joint venture	To be determined by
(amendments to IFRS 10 and IAS 28)	International Accounting
	Standards Board
Investment Entities: Applying the Consolidation Exception	January 1, 2016
(IFRS 10, IFRS 12 and IAS 28)

New Standards, Interpretations and Amendments	Accounting Standards Board
Accounting for acquisition of interests in joint operations (amendments to IFRS 11)	January 1, 2016
IFRS 14, 'Regulatory deferral accounts'	January 1, 2016
IFRS 15, 'Revenue from contracts with customers'	January 1, 2018
IFRS 16, 'Leases'	January 1, 2019
Disclosure initiative (amendments to IAS 1)	January 1, 2016
Disclosure initiative (amendments to IAS 7)	January 1, 2017
Recognition of deferred tax assets for unrealised losses (amendments to IAS 12)	January 1, 2017
Clarification of acceptable methods of depreciation and amortization (amendments to IAS 16 and IAS 38)	January 1, 2016
Agriculture: bearer plants (amendments to IAS 16 and IAS 41)	January 1, 2016
Defined benefit plans: employee contributions (amendments to IAS 19R)	July 1, 2014
Equity method in separate financial statements (amendments to IAS 27)	January 1, 2016
Recoverable amount disclosures for non-financial assets (amendments to IAS 36)	January 1, 2014
Novation of derivatives and continuation of hedge accounting (amendments to IAS 39)	January 1, 2014
IFRIC 21, 'Levies'	January 1, 2014
Improvements to IFRSs 2010-2012	July 1, 2014
Improvements to IFRSs 2011-2013	July 1, 2014
Improvements to IFRSs 2012-2014	January 1, 2016

The Company is assessing the potential impact of the new standards, interpretations and amendments above. The impact will be disclosed when the assessment is complete.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these parent company only financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

These parent company only financial statements are prepared by the Company in accordance with the "Rules Governing the Preparation of Financial Statements by Securities Issuers".

• (2) Basis of preparation
• A.Except for the following items, these parent company only financial statements have been prepared under the historical cost convention:
  • (a)Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

(b)Available-for-sale financial assets measured at fair value.

(c)Liabilities on cash-settled share-based payment arrangements measured at fair value.

• (d)Defined benefit liabilities recognised based on the net amount of pension fund assets less unrecognised actuarial gains and present value of defined benefit obligation.
• B.The preparation of financial statements in compliance with the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the "IFRSs") requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

(3) Foreign currency translation

The parent company only financial statements are presented in New Taiwan dollars, which is the Company's functional and presentation currency.

• A. Foreign currency transactions and balances
• (a)Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.
• (b)Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.
• (c)Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
• (d)All foreign exchange gains and losses are presented in the statement of comprehensive income within 'other gains and losses'.
• B. Translation of foreign operations
• (a)The operating results and financial position of all the Company entities, associates and jointly controlled entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
  • i. Assets and liabilities for each balance sheet presented are translated at the closing exchange

rate at the date of that balance sheet;

• ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
• iii. All resulting exchange differences are recognised in other comprehensive income.
• (b) When the foreign operation partially disposed of or sold is an associate or jointly controlled entity, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even when the Company still retains partial interest in the former foreign associate or jointly controlled entity after losing significant influence over the former foreign associate, or losing joint control of the former jointly controlled entity, such transactions should be accounted for as disposal of all interest in these foreign operations.
• (c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, if the Company retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.
• (4) Classification of current and non-current items
• A. If assets and liabilities are related to the construction business, they are classified as current or non-current according to their operating cycle; if they are not related to the construction business, they are classified by annual basis.
• B. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
  • (a)Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;
  • (b)Assets held mainly for trading purposes;
  • (c)Assets that are expected to be realised within twelve months from the balance sheet date;
  • (d)Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.
• C. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
  • (a)Liabilities that are expected to be paid off within the normal operating cycle;
  • (b)Liabilities arising mainly from trading activities;
  • (c)Liabilities that are to be paid off within twelve months from the balance sheet date;
  • (d)Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the

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

(5) Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits mature within 3 months and bonds with call back options meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

• (6) Financial assets at fair value through profit or loss
• A. Financial assets at fair value through profit or loss are financial assets held for trading. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term.
• B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.
• C. Financial assets at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in profit or loss.

(7) Available-for-sale financial assets

• A. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories.
• B. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using trade date accounting.
• C. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in 'financial assets measured at cost'.
• (8) Receivables

Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(9) Impairment of financial assets

• A. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
• B. The criteria that the Company uses to determine whether there is objective evidence of an impairment loss is as follows:
• (a)Significant financial difficulty of the issuer or debtor;
• (b)A breach of contract, such as a default or delinquency in interest or principal payments;
• (c)The disappearance of an active market for that financial asset because of financial difficulties;
• (d)It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
• (e)Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;
• (f)Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered; or a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
• C. When the Company assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:
  • (a)Financial assets measured at amortised cost

The amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(b)Financial assets measured at cost

The amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently. Impairment loss is recognised by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(c)Available-for-sale financial assets

The amount of the impairment loss is measured as the difference between the asset's acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, and is reclassified from 'other comprehensive income' to 'profit or loss'. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognised, then such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(10) Derecognition of financial assets

The Company derecognises a financial asset when one of the following conditions is met:

A.The contractual rights to receive the cash flows from the financial asset expire.

• B.The contractual rights to receive cash flows of the financial asset have been transferred and the Company has transferred substantially all risks and rewards of ownership of the financial asset.
• C.The contractual rights to receive cash flows of the financial asset have been transferred; however, the Company has not retained control of the financial asset.

(11) Inventories

Inventories including"land held for construction", "construction in progress", and "buildings and land held for sale" are stated at cost and evaluated at the lower of cost or net realisable value at the end of period. The individual item approach is used in the comparison of cost and net realisable value. The calculation of net realisable value is based on the estimated selling price in the normal course of business, net of estimated costs of completion and related adjusted selling expenses. The interest costs related to construction in progress are capitalised during the construction.

(12) Construction contracts

In accordance with IFRIC 15, 'Agreements for the Construction of Real Estate', if the buyer is able to specify the major structural elements of the design of the real estate before construction begins and/or specify major structural changes once construction is in progress, the construction contract meets the definition of construction contract and criteria in IAS 11, 'Construction

Contracts'. In accordance with IAS 18, 'Revenue', the Company recognises sales revenue for contracts of pre-sell of buildings that do not meet the definition of construction contract. For transactions that meet the definition of construction contract, the Company recognises contract revenue in accordance with IAS 11.

(13) Investments accounted for using equity method / subsidiaries, associates

• A.Subsidiaries refer to the entities (including special purpose entities) that the Company has control over their financial and operating policies and own more than 50% of voting shares directly or indirectly. The Company evaluates investments in subsidiaries accounted under equity method in these parent company only financial statements.
• B.Unrealised profit (loss) arising from the transactions between the Company and subsidiaries have been offset. The accounting policies of the subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.
• C.The Company's share of its subsidiaries' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company's share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise losses proportionate to its ownership.
• D.If changes in shareholdings in subsidiaries do not result to a loss on control (transaction with non-controlling interest), transactions shall be considered as equity transactions, which are transactions between owners. Difference of adjustment of non-controlling interest and fair value of consideration paid or received is recognised in equity.
• E.When the Company loses its control in a subsidiary, the Company revalues the remaining investment in the prior subsidiary at fair value, and recognises the difference between fair value and book value in the profit or loss for the period. The accounting treatment on the previously recognised amount related to the subsidiary in other comprehensive income is the same as the basis if the Company directly disposes related assets or liabilities, which means if the Company has recognised gain or loss in other comprehensive income, the Company should reclassify the gain or loss on disposal of related assets or liabilities to profit or loss; and when the Company loses control in the subsidiary, the gain or loss should be reclassified from equity to profit or loss.
• F. Associates are all entities over which the Company has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.
• G.The Company's share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company's share of losses in an associate

equals or exceeds its interest in the associate, the Company does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

• H. When changes in an associate's equity are not recognised in profit or loss or other comprehensive income of the associate and such changes do not affect the Company's ownership percentage of the associate, the Company recognises the Company's share of change in equity of the associate in 'capital surplus' in proportion to its ownership.
• I. Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the Company's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Company.
• J. In the case that an associate issues new shares and the Company does not subscribe or acquire new shares proportionately, which results in a change in the Company's ownership percentage of the associate but maintains significant influence on the associate, then 'capital surplus' and 'investments accounted for under the equity method' shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Company's ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.
• K.Upon loss of significant influence over an associate, the Company remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognised in profit or loss.
• L.When the Company disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.
• M.When the Company disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss. If it retains significant influence over this associate, the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss proportionately.
• N.Pursuant to the "Regulations Governing the Preparation of Financial Reports by Securities

Issuers," profit (loss) of the current period and other comprehensive income in the parent company only financial statements shall equal to the amount attributable to owners of the parent in the financial statements prepared with basis for consolidation. Owners' equity in the parent company only financial statements shall equal to equity attributable to owners of the parent in the financial statements prepared with basis for consolidation.

• (14) Property, plant and equipment
• A.Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.
• B.Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
• C.Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.
• D.The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets' residual values and useful lives differ from previous estimates or the patterns of consumption of the assets' future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, 'Accounting Policies, Changes in Accounting Estimates and Errors', from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

Buildings	50 ~ 60 years
Computer and communication equipment	5 years
Transportation equipment	5 years
Office equipment	5 ~ 10 years
Leasehold improvements	5 years
Other equipment	5 years

(15) Operating leases (lessor/ lessee)

Rental income from operating leases (excluding any benefits provided to lessee) or payments for operating leases (excluding any benefits received from lessor) are recognised as profit or loss for the period over the leasing period on a straight line basis.

(16) Investment property

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

model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 44 ~ 60 years.

(17) Intangible assets

Intangible assets consist of service concession, which are stated at acquisition cost and amortised on a straight line basis over its useful life of 44 years.

(18) Impairment of non-financial assets

The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognising impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

• (19) Borrowings
• A.Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
• B.Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawdedown, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
• (20) Notes and accounts payable

Notes and accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. However, short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(21) Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability specified in the contract is discharged or cancelled or expires.

(22) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

(23) Financial liabilities

Bonds payable

Ordinary corporate bonds issued by the Company are initially recognised at fair value, net of transaction costs incurred. Ordinary corporate bonds are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is accounted for as the premium or discount on bonds payable and presented as an addition to or deduction from bonds payable, which is amortised in profit or loss as an adjustment to the 'finance costs' over the period of bond circulation using the effective interest method.

(24) Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognised as interest expense. Provisions are not recognised for future operating losses.

(25) Employee benefits

A.Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

B.Pensions

(a)Defined contribution plan

For defined contribution plan, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

(b)Defined benefit plan

i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior periods. The liability recognised in the balance sheet in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit net

obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Company uses interest rates of government bonds (at the balance sheet date) instead.

• ii.Remeasurement arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.
• iii.Pasts service costs are recognised immediately in profit or loss.
• C.Employees' compensation and directors' and supervisors' remuneration

Employees' compensation and directors' and supervisors' remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequent

tly actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

(26) Employee share-based payment

For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

• (27) Income tax
• A.The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.
• B.The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is

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

• C.Deferred income tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the parent company only balance sheet. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
• D. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.
• E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.
• F. A deferred tax asset shall be recognised for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.
• (28) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.

(29) Dividends

Dividends are recorded in the Company's financial statements in the period in which they are approved by the Company's shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary share on the effective date of new shares issuance.

(30) Revenue recognition

A.Sales of goods

The Company handles entrusted construction, sale and lease of public housings and business buildings. Revenue arising from the sales of goods is recognised when the Company has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied. For pre-selling of housing that the Company has entrusted to construction companies to build, as stated in Note 4(12), sales revenue is recognised in accordance with IAS 18, 'Revenue'. Thus, the Company has carried over costs and recognised profit or loss when it completes transfer of title and settlement of housing. Only when housing was actually settled (or only when ownership was transferred) before balance sheet date, and related risk return was transferred would sales revenue be recognised.

B. Service concession revenue

Please refer to Note 4(31) for service concession contracts provided by the Company.

• (31) Service concession arrangements
• A.The Company contracted with National Taiwan University (grantor) to provide construction of the government's infrastructure assets for public services and operate those assets for Chang Hsing St. Campus for 44 years and 6 months, and for Shui Yuan Campus for 44 years and 4 months after construction is completed. When the term of operating period expires, the underlying infrastructure assets will be transferred to National Taiwan University without consideration. The Company allocates the fair value of the consideration received or receivable in respect of the service concession arrangement between construction services and operating services provided based on their relative fair values, and recognises such allocated amounts as revenues in accordance with IAS 11, 'Construction Contracts', and IAS 18, 'Revenue', respectively.
• B.Costs incurred on provision of construction services or upgrading services under a service concession arrangement are accounted for in accordance with IAS 11, 'Construction Contracts'.
• C.The consideration received or receivable from the grantor in respect of the service concession arrangement is recognised at its fair value. Such considerations are recognised as a financial asset or an intangible asset based on how the considerations from the grantor to the operator are made as specified in the arrangement.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company's accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The above information is addressed below:

(1) Critical judgements in applying the Company's accounting policies

A. Financial assets—impairment of equity investments

The Company follows the guidance of IAS 39 to determine whether a financial asset—equity investment is impaired. This determination requires significant judgement. In making this judgement, the Company evaluates, among other factors, the duration and extent to which the fair value of an equity investment is less than its cost and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

If the decline of the fair value of an individual equity investment below cost was considered significant or prolonged, the Company would suffer an additional loss in its financial statements, being the transfer of the accumulated fair value adjustments recognised in other comprehensive income on the impaired available-for-sale financial assets to profit or loss or being the recognition of the impairment loss on the impaired financial assets measured at cost in profit or loss.

B. Investment property

The Company uses a portion of the property for its own use and another portion to earn rentals or for capital appreciation. When these portions cannot be sold separately and cannot be leased out separately under a finance lease, the property is classified as investment property only if the own-use portion accounts for an insignificant portion of the property.

(2) Critical accounting estimates and assumptions

Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Company must determine the net realisable value of inventories on balance sheet date using judgements and estimates. If the Company assessed that the net realisable value of inventories on balance sheet date was lower than the cost, the Company would write down the cost of inventories to the net realisable value.

As of December 31, 2015, the carrying amount of inventories was \$21,312,926.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

	December 31, 2015		December 31, 2014
Cash:
Cash on hand and revolving funds	\$	2,548	\$	3,397
Checking accounts and demand deposits		1,954,342		1,165,815
		1,956,890		1,169,212
Cash equivalents:
Repurchase bonds		200,000		-
	\$	2,156,890	\$	1,169,212

A. The Company transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. The repurchase bonds held by the Company has high liquidity, so they were classified as cash equivalents.
• C. Details of the Company's cash and cash equivalents pledged to others as collateral are provided in Note 8.

(2) Financial assets at fair value through profit or loss

Items	December 31, 2015		December 31, 2014
Non-current items:
Financial assets held for trading
Benficiary certificates	\$ 76,000	\$	76,000
Financial assets held for trading
valuation adjustments	1,992		1,547
	\$ 77,992	\$	77,547

A. The Company recognized net gain of \$445 and \$447 for the years ended December 31, 2015 and 2014, respectively.

• B.Details of the Company's financial assets at fair value through profit or loss pledged to others as collateral are provided in Note 8.
• (3) Notes receivable, net

		December 31, 2015	December 31, 2014
Notes receivable	\$	111,932 \$	141,791
Less: Allowance for doubtful accounts	(	344) (	540)
	\$	111,588 \$	141,251

A. The Company's notes receivable that were neither past due nor impaired were fully performing in line with the credit standards prescribed based on counterparties' industrial characteristics, scale of business and profitability.

B. Movement analysis of financial assets the were impaired (allowance for doubtful accounts of notes receivable) is as follows:

	Years ended December 31
		2015	2014
At January 1	\$	540 \$	3,703
Reversal of impairment		- (	1,078)
Write-offs duuring the year	(	196) (	2,085)
At December 31	\$	344 \$	540

C. The Company does not hold any collateral as security.

(4) Accounts receivable, net

		December 31, 2015	December 31, 2014
Accounts receivable	\$	830,527	\$	4,553,785
Less: Allowance for doubtful accounts	(	3,743)	(	6,897)
	\$	826,784	\$	4,546,888

A.The Company's accounts receivable that were neither past due nor impaired were fully performing in line with the credit standards prescribed based on counterparties' industrial characteristics, scale of business and profitability. Accounts receivable are classified into 2 categories:

(a) Sale of real estate: collection of customers' loans from banks.

(b) Receivables from travel department: mainly from credit card payments.

B.The ageing analysis of accounts receivable that were past due but not impaired is as follows:

	December 31, 2015 December 31, 2014
Up to 60 days	\$		- \$	-
61 to 120 days			-	-
121 to 180 days		63		15
Over 180 days		1,085		1,066
	\$	1,148	\$	1,081

The above ageing analysis was based on past due date.

C.Movement analysis of financial assets that were impaired (allowance for doubtful accounts of accounts receivable) is as follows:

		Years ended December 31,
		2015	2014
At January 1	\$	6,897 \$	6,906
Write-offs during the year	(	3,154) (	9)
At December 31	\$	3,743 \$	6,897

The Company analyses based on any changes to credit quality in accounts receivable of individual customers from the initial grant date until the financial period-end, historical experience and current financial condition, to estimate the amount that may not be recovered.

D. The Company does not hold any collateral as security.

(5) Inventories

	December 31, 2015
				Allowance for
		Cost		valuation loss		Book value
Land held for construction site	\$	11,833,606	(\$	65,372)		\$ 11,768,234
Construction in progress		2,457,025			-	2,457,025
Buildings and land held for sale		5,963,865	(	49,432)		5,914,433
Prepayment for land		223,700			-	223,700
Prepayment for buildings and
land		947,991			-	947,991
Merchandise		1,543		-		1,543
	\$	21,427,730	(\$	114,804)	\$	21,312,926
				December 31, 2014
				Allowance for
		Cost		valuation loss		Book value
Land held for construction site	\$	10,347,996	(\$	65,372)		\$ 10,282,624
Construction in progress		2,407,057			-	2,407,057
Buildings and land held for sale		4,428,753	(	51,446)		4,377,307
Prepayment for land		1,770,640			-	1,770,640
Prepayment for buildings and
land		510,880			-	510,880
Merchandise		1,368		-		1,368
	\$	19,466,694	(\$	116,818)	\$	19,349,876

• A.The cost of inventories recognised as expense for the years ended December 31, 2015 and 2014 was \$5,631,118 and \$7,316,468, respectively, including the amount of \$2,014 and \$21,758, respectively that the Company wrote down from cost to net realisable value accounted for as cost of goods sold.
• B. Details of the Company's inventories pledged to others as collateral are provided in Note 8.
• C.The interest capitalized as cost of inventory is as follows:

		Years ended December 31,
		2015		2014
	Interest paid before capitalization	\$ 424,018	\$		456,925
	Interest capitalized	\$ 140,305	\$		180,463
	Annual interest rate used for capitalization	2.51%-3.20%			2.52%-3.25%
D.	Details of significant inventories:
	(a)Buildings and land in progress
	Taipei branch	December 31, 2015			December 31, 2014
	Prince Yun Ding (XinZhuang Fuduxin)	\$ 1,736,845		\$	1,501,814
	Ling Ko Dist. Li Shing Section No. 1209, etc.	1,376,328			1,322,911
	Prince Fu III (Taoyuan Qing Sun Section No. 446)	1,131,432			971,180
	Prince W (New Taipei City Shing Jheng Section No. 883, etc.)	962,064			945,978
	Bali Dist Chung Chang Section No. 2222 and 211-1, etc.	685,665			-
	Jhong Li City Shuang Ling Section No. 1449, etc.	328,796			297,100
	Prince Hua Wei (Shilin Dist. Zhishan Section No. 602, etc.)	106,680			48,855
	Prince Fu II (Taoyuan Qing Xi Section No. 462)		-		1,230,016
	Others			-	30

6,327,810\$ 6,317,884\$

Taichung branch	December 31, 2015		December 31, 2014
Ping Hsin Section No. 694, etc.	\$ 862,840	\$	858,448
Prince Yu Ding (Hui Li Section No. 195)	707,080		620,697
The Cloud Century (Kao An Section No. 12-16, etc.)	698,401		294,659
Chaotun Section No. 755, etc.	250,571		249,147
Jin Shuei Dist. Wu Show Section No. 1037, No. 1038, No. 1040, etc.	195,947		195,758
Hsinfuliao Section No. 1096, No. 1098, No. 1108, etc.	159,160		-
Chin Fon Gin (Tu Ku Section No. 8-2, etc.)		-	575,092
Hai Yan (Tai Huo Section No. 29)		-	489,564
The Cloud Century A (Kao An Section No. 12-12)		-	403,567
Others	21,900		7,909
	\$ 2,895,899	\$	3,694,841
Tainan branch
Jin Hua Section No. 1361	\$ 688,190	\$	687,232
Prince Feng Yun (Hsin Ying Section No. 841-9)	564,433		485,101
Jum Fon Huei (Yu Ming Section No. 681-8)	266,825		183,812
Shan Chain Section No. 939, etc.	148,499		-
Chin An Section No. 296, No. 297, etc.	95,703		-
Bei An Lot No. 56-10, etc.		-	62,073
Flower Bo Five (Hou Guan Section No. 34, No. 34-1, etc.)		-	51,010
Others	3,524		7,364
	\$ 1,767,174	\$	1,476,592
Kaohsiung branch
Ren Wu New Hougang West Section No .42, etc. (Prince Cloud B)	\$ 378,865	\$	3,736
Ren Wu New Hougang West Section No. 52, etc. (Prince Cloud D)	416,940		-
Ren Wu New Hougang West Section No. 88 experimental house	73,050		-
Nanzi Subsection No. 158	28,177		-
	\$ 897,032	\$	3,736
Total buildings and land in progress	\$ 11,887,915	\$	11,493,053

(b)Land held for construction site

Taipei branch	December 31, 2015		December 31, 2014
Zhong Li Pu Ren Lot No. 720, etc.	\$ 140,156	\$	140,156
Others	5,978		6,274
	\$ 146,134	\$	146,430
Taichung branch
Song Quan Lot No. 164, etc.	\$ 176,296	\$	176,296
Wu Feng Lot No. 365~ 855, etc.	175,661		175,661
Tu Ku Section No. 9-7, etc.	55,167		-
Song Chang Lot No. 557, etc.	19,912		19,912
Hong Long Zub Section No. 133-004	19,513		19,513
Xi Zhou Lot No. 112-54, etc.	11,941		11,941
Others	20,446		24,134
	\$ 478,936	\$	427,457
Tainan branch
Shan Zhong Lot No. 1468, 1475 & 1476, etc.	\$ 234,699	\$	234,699
Xue Zhong Lot No. 679, etc.	50,798		50,798
Yong Kang Ding An Lot No. 879, etc.	28,610		28,610
Bei An Section No. 54-3, etc.	15,344		15,344
Chin An Section No. 373, etc.	15,139		15,139
Bao An Lot No. 882, etc.	10,325		10,325
Ren Wu New Hougang West Section No. 69, No.70 etc.		-	112,876
Shan Chia Section No. 939, etc.		-	108,111
Chin An Section No. 297, etc.		-	78,928
Others	14,550		19,360
	\$ 369,465	\$	674,190
Kaohsiung branch
Ren Wu New Hougang West Section No. 53, etc.	\$ 986,221	\$	-
Ren Wu New Hougang West Section No. 30 & 52-74	408,037		-
Da Hua Lot No. 434 & 436	13,923		13,923
	\$ 1,408,181	\$	13,923
Total land held for construction site	\$ 2,402,716	\$	1,262,000

(c)Buildings and land held for sale

Taipei branch		December 31, 2015		December 31, 2014
Prince Tanmei	\$	2,270,855	\$	2,458,201
Prince Fu II		641,311		-
Taipei Shinyi		106,741		178,874
Prince Dragon House III		42,432		42,432
Prince Da Din		12,446		12,657
Prince Guo Boa		5,738		5,738
Prince Central Park			-	56,530
Others		546		546
	\$	3,080,069	\$	2,754,978
Taichung branch
Chin Fon Gin	\$	516,970	\$	-
The Cloud Century A		452,895		-
Hai Yan		64,657		-
Prince Fu		39,528		67,815
Jing Yun Sian		13,418		458,590
The Cloud Century B			-	441,774
The Cloud Century C	-			374,356
Others		10,889		10,889
	\$	1,098,357	\$	1,353,424
Tainan branch
Flower Bo Five	\$	1,625,272	\$	-
Tun Sha Building III		28,376		28,376
Jun Chan LV Prince Golden Age		19,725 19,572		19,725 19,572
Prince WIN-I Mansion			-	61,350
Prince WIN-W Swite (A)			-	10,439
Prince Dragon Others		2,188	-	1,081 11,961
	\$	1,695,133	\$	152,504
Kaohsiung branch
Prince Hua Yang	\$	79,875	\$	156,111
Prince Dai Din		10,431		11,736
	\$	90,306	\$	167,847
Total buildings and land held for sale	\$	5,963,865	\$	4,428,753

(d) Prepayment for land

Taipei branch	December 31, 2015		December 31, 2014
Bail Dist. Chung Chang Section No. 222	\$	-	\$	66,260
Taichung branch
Chaotun Township HsinFuLiao Section No. 1097, etc.	\$	-	\$	16,000
Tainan branch
Ren Wu New Hougang West Section No. 20, etc.	\$	223,700	\$	-
Ren Wu Dist. Xia Hai Lot No. 978, etc.			-	1,685,715
Others		-		2,665
	\$	223,700	\$	1,688,380
Total prepayment for land	\$	223,700	\$	1,770,640
(e) Prepayment for buildings and land
		December 31, 2015		December 31, 2014
Taisugar Kao An Section	\$	651,397	\$	252,098
Taisugar Nanzi Section		258,794		62,940
Prince Yun Ding		37,800		37,800
Taisugar He Guan Section		-		158,042
	\$	947,991	\$	510,880

After the land consolidation, abovementioned Ren Wu Dist. Xia Hai Lot No. 978, etc. became New Hougang West Section No. 20~144-1, etc.

(6) Other current assets

Items	December 31, 2015	December 31, 2014
Deferred sales commission	\$ 297,551	\$ 507,245
(7) Available-for-sale financial assets
Items	December 31, 2015	December 31, 2014
Non-current items:
Listed ( TSE and OTC ) stocks	\$ 106,684	\$ 109,857
Emerging stocks	-	558
Unlisted stocks	29,594	26,850
	136,278	137,265
Valuation adjustment of available-for-sale financial
assets	1,406,114	1,445,390
	\$ 1,542,392	\$ 1,582,655

A. The Company recognised \$27,126 and \$565,941 in other comprehensive loss for fair value change for the years ended December 31, 2015 and 2014, respectively.

• B. The fair value of the Company's certain available-for-sale financial assets declined significantly below its initial investment cost. Therefore, the Company recognised impairment loss of \$11,814 for the year ended December 31, 2014, including the amount of \$11,814 that was transferred from equity to profit or loss.
• C. Details of the Company's available-for-sale financial assets pledged to others as collateral are provided in Note 8.
• (8) Financial assets measured at cost

Items	December 31, 2015		December 31, 2014
Non-current items:
Unlisted stocks	\$	887,529	\$	876,043

• A.Based on the Company's intention, its investment in President Energy Development Ltd. and President International Development Corp. should be classified as 'available-for-sale financial assets'. However, as President Energy Development Ltd. and President International Development Corp. stocks are not traded in an active market, and no sufficient industry information of companies similar to President Energy Development Ltd. and President International Development Corp. can be obtained, the fair value of the investment in President Energy Development Ltd. and President International Development Corp. stocks cannot be measured reliably. Accordingly, the Company classified those stocks as 'financial assets measured at cost'.
• B.Details of the Company's financial assets measured at cost pledged to others as collateral are provided in Note 8.

(9) Investments accounted for under the equity method

A. Details of investments accounted for under the equity method are set forth below:

		December 31, 2015		December 31, 2014
Name of subsidiaries and associates	Carrying amount	Percentage of Carrying ownership	amount	Percentage of ownership
Prince Real Estate Co., Ltd.(Note 1)	\$ 1,497,188	99.65%	\$	- -
Uni-President Development Corp.	1,365,037	30.00%	1,311,431	30.00%
Cheng-shi Investment Holdings Co., Ltd.	904,767	100.00%	463,520	100.00%
Time Square International Hotel	488,834	100.00%	360,569	100.00%
Prince Housing Investment Co., Ltd.	408,008	100.00%	345,454	100.00%
The Splendor Hotel Taichung	338,669	50.00%	345,108	50.00%
Geng-Ding Co., Ltd.	326,189	30.00%	326,959	30.00%
Prince Property Management Consulting Co., Ltd.	270,318	100.00%	257,096	100.00%
Ming-Da Enterprise Co., Ltd.	166,887	20.00%	151,132	20.00%
Jin Yi Xing Plywood Co., Ltd. (Note 1,2)	-	99.65%	673,989	99.65%
Dong-Feng Enterprises Co., Ltd. (Note 2)	-	100.00%	73,589	100.00%
Others (individually less than 2%)	10,581	-	73,223	-
	\$ 5,776,478		\$ 4,382,070

Note 1:A newly established company arising from land division of Jin Yi Xing Plywood Co., Ltd. on September 1, 2015.

Note 2:As of December 31, 2015, the book value of the Company's investment in Jin Yi Xing Plywood Co., Ltd. and Dong-Feng Enterprises Co., Ltd. was (\$503,466) and (\$25,491), respectively, which was below zero. Thus, the investments were transferred to other non-current liabilities at \$528,957.

B.Subsidiaries

Please refer to Note 4(3) of the Company's consolidated financial statements for the subsidiaries' information.

C.Associates

a. The summarized financial information of the associates that are material to the Company is as follows:

Balance sheet

		Uni President Development Corp.
	December 31, 2015			December 31, 2014
Current assets	\$	315,715	\$	1,157,049
Non-current assets		9,622,107		9,209,813
Current liabilities	(	3,627,239) (		2,898,391)
Non-current liabilities	(	1,760,396)	(	3,097,036)
Total net assets	\$	4,550,187	\$	4,371,435
Share in associate's net assets	\$	1,365,037	\$	1,311,431
Statements of comprehensive income
		Uni President Development Corp.
		2015		2014

\$ 1,066,653	\$ 1,073,558
\$ 221,365	\$ 226,607
\$ 221,365	\$ 226,607

b. The carrying amount of the Company's interests in all individually immaterial associates and the Company's share of the operating results are summarized below:

As of December 31, 2015 and 2014, the carrying amount of the Company's individually immaterial associates amounted to \$493,076 and \$478,091, respectively.

	Years ended December 31,
	2015	2014
Profit for the year from continuing operations	\$ 276,233	\$ 203,338
Total comprehensive income	\$ 276,233	\$ 203,338

D. Share of profit of associates and joint ventures accounted for using equity method was \$842,977

and \$421,552 for the years ended December 31, 2015 and 2014, respectively.

E. The investment income of certain investees for the years ended December 31, 2015 and 2014 accounted for under the equity method was based on their financial statements for the corresponding periods, which were audited by other auditors. The investment (loss) income recognized for these investees for the years ended December 31, 2015 and 2014 was (\$27,182) and \$13,657, respectively. As of December 31, 2015 and 2014, investment balance accounted for under the equity method in these investees were \$979,024 and \$1,016,089, respectively.

The investees whose financial statements were audited by other auditors for the years ended December 31, 2015 and 2014 were as follows:

Prince Property Management Consulting Co., Ltd., Geng-Ding Co., Ltd., Prince Housing Investment Co., Ltd., Dong-Feng Enterprises Co., Ltd., Early Success Investments Ltd. (Note 1) and Bio Sun Technology Co., Ltd. (Note 2).

• Note 1: On December 14, 2015, Early Success Investments Limited has been liquidated, and thus did not issue financial statements audited by independent accountants for the year ended December 31, 2015.
• Note 2: Bio Sun Technology Co., Ltd. has ceased operations since 2014, and thus did not issue financial statements audited by independent accountants for the years ended December 31, 2015 and 2014.
• F. Details of the Company's investments accounted for under equity method pledged to others as collateral are provided in Note 8.

				(10) Property, plant and equipment

A. Details of book values are as follows:

	December 31, 2015			December 31, 2014
Land	\$	191,884	\$	191,884
Buildings		310,533		318,692
Computer and communication equipment		14,340		17,909
Transportation equipment		4,397		3,822
Office equipment		49,493		57,502
Leasehold improvements		25,648		-
Other equipment		462		765
Construction in progress and prepayments
for equipment		-		152
	\$	596,757	\$	590,726

	Year ended December 31, 2015
		Opening net								Closing net
Cost		book amount		Additions		Disposals		Reclassifications		book amount
Land		\$ 191,884		\$		- \$	- \$			- \$ 191,884
Buildings		438,331			-		-		-	438,331
Computer and communication equipment		57,556		1,948			-		-	59,504
Transportation equipment		9,567		1,200			-		-	10,767
Office equipment		171,640		4,219			-		-	175,859
Leasehold improvements		47,000			-		-	26,532		73,532
Other equipment		1,943				- ( 29)			-	1,914
Construction in progress		152		26,380		-	(	26,532)		-
	\$	918,073	\$	33,747	(\$	29)	\$	-	\$	951,791
						Year ended December 31, 2014
		Opening net								Closing net
Cost		book amount		Additions		Disposals		Reclassifications		book amount
Land	\$	122,657	\$		- \$		- \$	69,227	\$	191,884
Buildings		401,309			-		-	37,022		438,331
Computer and communication equipment		51,119		6,437			-		-	57,556
Transportation equipment		9,567		1,000	(	1,000)			-	9,567
Office equipment		168,868		2,782	(	10)			-	171,640
Leasehold improvements		47,000			-		-		-	47,000
Other equipment		1,963		-	(	20)		-		1,943
Construction in progress		-		152		-		-		152
	\$	802,483	\$	10,371	(\$	1,030)	\$	106,249	\$	918,073

B. Changes in property, plant and equipment for the year are as follows:

Year ended December 31, 2015

	Opening net						Closing net
Accumulated depreciation	book amount	Additions	Disposals	Reclassifications			book amount
Buildings	\$ 119,639	\$ 8,159	\$	- \$		- \$	127,798
Computer and communication equipment	39,647	5,517		-		-	45,164
Transportation equipment	5,745	625		-		-	6,370
Office equipment	114,138	12,228		-		-	126,366
Leasehold improvements	47,000	884		-		-	47,884
Other equipment	1,178	274	-		-		1,452
	\$ 327,347	\$ 27,687	\$ -	\$	-	\$	355,034

	Year ended December 31, 2014
	Opening net								Closing net
Accumulated depreciation	book amount		Additions		Disposals		Reclassifications		book amount
Buildings	\$ 111,460	\$	8,179	\$		- \$		- \$	119,639
Computer and communication equipment	34,313		5,334			-		-	39,647
Transportation equipment	5,596		720	(	571)			-	5,745
Office equipment	98,223		15,916	(		1)		-	114,138
Leasehold improvements	47,000			-		-		-	47,000
Other equipment	903		275		-		-		1,178
	\$ 297,495	\$	30,424	(\$	572)	\$	-	\$	327,347

C. Details of the Company's property, plant and equipment pledged to others as collateral are provided in Note 8.

(11) Investment property

A. Details of book values are as follows:

	December 31, 2015	December 31, 2014
Land	\$ 265,550	\$ 203,494
Leased assets-land	2,567,486	2,567,621
Leased assets-buildings	3,226,616	3,321,065
	\$ 6,059,652	\$ 6,092,180

B. Changes in investment property for the year are as follows:

		Year ended December 31, 2015
Cost	Opening net book amount		Additions	Disposals	Reclassifications		Closing net book amount
Land	\$	203,494 \$	- \$	- \$	62,056		\$ 265,550
Leased assets-land	2,567,621		- (	135)		-	2,567,486
Leased assets-buildings	3,977,875		- (	10,337)	-		3,967,538
	\$ 6,748,990	\$	- (\$	10,472) \$	62,056	\$	6,800,574
				Year ended December 31, 2014
	Opening net						Closing net
Cost	book amount		Additions	Disposals	Reclassifications		book amount
Land	\$	203,494 \$	- \$	- \$			- \$ 203,494
Leased assets-land	3,179,810		-	- (	612,189)		2,567,621
Leased assets-buildings	3,989,216		- (	8,440) (	2,901)		3,977,875
	\$ 7,372,520	\$	- (\$	8,440) (\$	615,090)	\$	6,748,990

			Year ended December 31, 2015
	Opening net				Closing net
Accumulated depreciation	book amount	Additions	Disposals	Reclassifications	book amount
Leased assets-buildings	\$ 656,810	\$ 85,788	(\$ 1,676)	\$ -	\$ 740,922
			Year ended December 31, 2014
	Opening net				Closing net
Accumulated depreciation	book amount	Additions	Disposals	Reclassifications	book amount
Leased assets-buildings	\$ 578,291	\$ 86,645	(\$ 7,737)	(\$ 389)	\$ 656,810

C. Rental income from the lease of the investment property and direct operating expenses arising from the investment property are shown below:

	Years ended December 31,
	2015	2014
Rental revenue from the lease of the investment property	\$ 294,612	\$ 299,476
Direct operating expenses arising from the investment property that generated rental
income in the period	\$ 157,872	\$ 165,200
Direct operating expenses arising from the investment property that did not generate
rental income in the period	\$ -	\$ -

D. As of December 31, 2015 and 2014, the fair value of the investment property held by the Company was \$12,948,124 and \$12,952,561, respectively. The Company's management estimated the fair value based on market evidence on transaction price of similar property and assessed value.

E. Information about the investment property that was pledged to others as collateral is provided in Note 8.

(12) Intangible assets

A.Details of book values are as follows:

	December 31, 2015	December 31, 2014
Service concession	\$ 2,300,439	\$ 2,361,692

B.Changes in intangible assets for the year are as follows:

			Year ended December 31, 2015
	Opening net				Closing net
Cost	book amount	Additions	Disposals	Reclassifications	book amount
Service concession	\$ 2,868,372	\$ -	\$ -	\$ -	\$ 2,868,372

			Year ended December 31, 2014
Cost	Opening net book amount	Additions	Disposals	Reclassifications	Closing net book amount
Service concession	\$ 2,868,372	\$ -	\$ -	\$ -	\$ 2,868,372
			Year ended December 31, 2015
	Opening net				Closing net
Accumulated Amortisation	book amount	Additions	Disposals	Reclassifications	book amount
Service concession	\$ 506,680	\$ 61,253	\$ -	\$ -	\$ 567,933
			Year ended December 31, 2014
	Opening net				Closing net
Accumulated Amortisation	book amount	Additions	Disposals	Reclassifications	book amount
Service concession	\$ 445,427	\$ 61,253	\$ -	\$ -	\$ 506,680

C.Details of amortisation on intangible assets are as follows:

	For the years ended December 31,
		2015		2014
Operating costs-amortization expenses	\$	61,253	\$	61,253
(13) Short-term borrowings
		December 31, 2015		December 31, 2014
Secured borrowings	\$	505,000	\$	1,580,000
Unsecured borrowings		1,759,874		1,365,584
	\$	2,264,874	\$	2,945,584
Interest rate range		1.92%~2.51%		1.95%~2.51%
For details of pledged assets, please refer to Note 8.
(14) Short-term notes payable
		December 31, 2015		December 31, 2014
Commercial papers	\$	1,469,600	\$	1,970,000
Less: Unamortized discount	(	569)	(	1,918)
	\$	1,469,031	\$	1,968,082
Interest rate range		0.55%~1.25%		0.79%~1.20%

A.The above commercial papers were issued by banks and bills financial institutions.

B. For details of pledged assets, please refer to Note 8.

(15) Receipts in advance

Item	December 31, 2015	December 31, 2014
Advance real estate receipts	\$ 1,475,394	\$ 2,728,482
Advance rent	158,054	192,055
Other advance receipts	807	710
	\$ 1,634,255	\$ 2,921,247

(16) Bonds payable

	December 31, 2015	December 31, 2014
2012 1st secured ordinary bonds payable	\$ 2,000,000	\$ 2,000,000
2013 1st secured ordinary bonds payable	2,500,000	2,500,000
	\$ 4,500,000	\$ 4,500,000

• A. The Company issued secured ordinary bonds payable in July 2012. The significant terms of the bonds are as follows:
• (a)Total issue amount: \$2,000,000
• (b)Issue price: At par value of \$100 per bond
• (c)Coupon rate: 1.33%
• (d)Terms of interest repayment: The bonds interest is calculated on simple rate every year starting July 2012 based on the coupon rate.
• (e)Repayment term: The bonds are repaid upon the maturity of the bonds.
• (f)Period: 5 years, from July 12, 2012 to July 12, 2017
• (g)The way of security: The bonds are secured by Bank of Taiwan.
• (h)Guarantee Bank: The bonds are guaranteed by Mega International Commercial Bank.
• B. The Company issued secured ordinary bonds payable in November 2013. The significant terms of the bonds are as follows:
• (a)Total issue amount: \$2,500,000
• (b)Issue price: At par value of \$100 per bond
• (c)Coupon rate: 1.55%
• (d)Terms of interest repayment: The bonds interest is calculated on simple rate every year starting November 2013 based on the coupon rate.
• (e)Repayment term: The bonds are repaid upon the maturity of the bonds.
• (f)Period: 5 years, from November 21, 2013 to November 21, 2018
• (g)The way of security: \$1.5 billion and \$1 billion secured by Bank of Taiwan and Agricultural Bank of Taiwan, respectively.
• (h)Guarantee Bank: The bonds are guaranteed by Taipei Fubon Commercial Bank.

(17) Long-term borrowings

December 31, 2015	December 31, 2014
\$ 6,391,026	\$ 6,019,099
270,000	410,000
6,661,026	6,429,099
362,870)	( 2,061,470)
\$ 6,298,156	\$ 4,367,629
2016.06.24~2027.11.02	2015.03.18~2027.11.02
2.16%~3.16%	2.29%~3.16%

A. For details of pledged assets, please refer to Note 8.

B.For details of restrictive covenants, please refer to Note 9.

(18) Provisions-replacement cost

		Years ended December 31,
		2015	2014
At January 1	\$	81,720 \$	79,071
Additions		30,394	27,210
Used	(	27,597) (	24,561)
At December 31	\$	84,517 \$	81,720

(19) Pension

A.(a)The Company has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees' service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees' monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee.

Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company will make contribution for the deficit by next March.

(b)The amounts recognised in the balance sheet are determined as follows:

		December 31, 2015		December 31, 2014
Present value of defined benefit obligations	(\$	111,723)	(\$	93,186)
Fair value of plan assets		5,009		3,590
Net defined benefit liability	(\$	106,714)	(\$	89,596)

(c)Changes in net defined benefit liability are as follows:

		Present value of
		defined benefit		Fair value		Net defined
		obligations		of plan assets		benefit liability
Year ended December 31, 2015
At January 1	(\$	93,186)	\$	3,590	(\$	89,596)
Current service cost	(	522)			- (	522)
Interest (expense) income	(	1,864)		72	(	1,792)
	(	95,572)		3,662	(	91,910)
Remeasurements:
Change in financial assumptions	(	3,526)			- (	3,526)
Experience adjustments	(	12,625)		89	(	12,536)
	(	16,151)		89	(	16,062)
Pension fund contribution		-		1,258		1,258
At December 31	(\$	111,723)	\$	5,009	(\$	106,714)
		Present value of
		defined benefit		Fair value		Net defined
		obligations		of plan assets		benefit liability
Year ended December 31, 2014
At January 1	(\$	94,114)	\$	6,512	(\$	87,602)
Current service cost	(	504)			- (	504)
Interest (expense) income	(	1,895)		144	(	1,751)
	(	96,513)		6,656	(	89,857)
Remeasurements:
Experience adjustments	(	4,706)		-	(	4,706)
Pension fund contribution		-		948		948
Paid pension		8,033	(	4,014)		4,019
At December 31	(\$	93,186)	\$	3,590	(\$	89,596)

(d)The principal actuarial assumptions used were as follows:

	Years ended December 31,
	2015	2014
Discount rate	1.70%	2.00%
Future salary increases	1.50%	1.50%

Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Mortality Table.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

		Discount rate		Future salary increases
		Increase 1%		Decrease 1%		Increase 1%		Decrease 1%
December 31, 2015 Effect on present value of defined benefit obligation	(\$	11,175)	\$	12,970	\$	11,645	(\$	10,299)

The sensitivity analysis above was arrived at based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

• (e)Expected contributions to the defined benefit pension plans of the Company for the year ending December 31, 2016 are \$874.
• B.(a)Effective July 1, 2005, the Company has established a defined contribution pension plan (the "New Plan") under the Labor Pension Act (the "Act"), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees' monthly salaries and wages to the employees' individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.
• (b)The pension costs under the defined contribution pension plan of the Company for the years ended December 31, 2015 and 2014 were \$7,499 and \$8,123, respectively.
• (20) Share-based payment-employee compensation plan
• A. For the year ended December 31, 2015, the Company's share-based payment: None.
• B. For the year ended December 31, 2014, the Company's share-based payment arrangement was as follows:

Type of		Quantity	Contract	Vesting
arrangement	Grant date	granted	period	conditions
Cash capital increase reserved	2014.01.13	30,000	NA	Immediately
for employees		(In thousand shares)

C. The fair value of stock options granted on grant date is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

			Stock price Exercise price Expected					Expected Expected Risk-free Fair price per unit
Arrangement type		Grant date (in dollars)	(in dollars)	volatility	duration	dividend	interest	(in dollars)
Cash capital increase	2014.01.13	\$16.85	\$14.45	23.50%	0.19 year		- 0.40%	\$2.45
reserved for employees				(Note)

Note: Expected volatility is estimated based on the Company's average stock price for the latest year before the grant date.

D. For the year ended Demember 31, 2014, the Company's salary expense arising from share-based payment transactions of cash capital increase reserved for employees pre-emption was \$73,500.

(21) Share capital

A. Movements in the number of the Company's ordinary shares outstanding are as follows: (Units: in thousand shares)

	Years ended December 31
	2015	2014
At January 1	1,622,671	1,274,253
Stock dividends	-	48,418
Capital increase	-	300,000
At December 31	1,622,671	1,622,671

• B. On January 13, 2014, the Board of Directors has resolved to increase capital by \$3,000,000 with a par value of NT\$10. The issuance price is NT\$14.45. The capital increase was approved by the Financial Supervisory Commission and the registration had been completed.
• C. On June 20, 2014, the shareholders have resolved to issue new shares amounting to 48,418 thousand shares using unappropriated retained earnings of \$484,177. The capital increase was approved by the Financial Supervisory Commission and the registration had been completed.
• D. The Company's subsidiaries, Ta-Chen Construction & Engineering Corp. (Ta-Chen) has acquired the Company's shares in an open market to maintain the equity interest of the Company's shareholders. In order to strengthen management through eliminating interlocking shareholding, the Board of Directors of Ta-Chen has resolved to reduce capital of \$435,025 (elimination of 43,502 thousand shares) by returning the Company's shares (of 39,016 thousand shares) to Cheng-Shi Investment Holdings Co., Ltd. (Cheng-Shi Investment), and set the effective capital reduction date as August 5, 2015. Cheng-Shi Investment's Board of Directors has resolved the capital reduction and set the reduction effective on September 21, 2015, and returned shares to the Company. The registration of changes in capital and capital reduction as approved by the competent authority had been completed on November 18, 2015.
• E. As of December 31, 2015, the Company's authorized capital was \$20,000,000 and the paid-in capital was \$16,233,261, with a par value of NT\$10 per share, consisting of 1,623,326 thousand shares of ordinary stock.

F. As of December 31, 2015 and 2014, the Company's subsidiaries - Ta-Chen Construction & Engineering Corp. and Prince Apartment Management Maintain Co., Ltd. held the Company's stocks to maintain equity interest in the Company. The amount of shares held by the subsidiaries was 655 thousand and 39,671 thousand, the average par value was both NT\$1.52 per share, and the fair value was NT\$9.40 and NT\$12.70 per share, respectively.

(22) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

						Captial surplus
	Share premium			Treasury share transaction		Others		Total
2015
At January 1	\$ 1,408,500		\$	514,061		\$	7,232	\$	1,929,793
Treasury share transactions	( 33,058)			363,778			-		330,720
At December 31	\$ 1,375,442		\$	877,839		\$	7,232	\$	2,260,513
	Share premium		transaction	Treasury share		Captial surplus Employee stock options	Others		Total
2014
At January 1 Share-based payment of cash capital	\$	- \$		514,061	\$		- 7,232\$		\$ 521,293
increase reserved for employee pre-emption		-			-	73,500			- 73,500
Cash capital increase	1,408,500			-	(	73,500)		-	1,335,000
At December 31	\$ 1,408,500	\$		514,061	\$	-	7,232\$		\$ 1,929,793

(23) Retained earnings

A.In accordance with the Company's Articles of Incorporation, the Company will take into consideration its future business plans and capital expenditures in determining the amounts of earnings to be retained and to be distributed. In accordance with the Company Law, 10% of the current year's earnings, after payment of all taxes and after offsetting accumulated deficit, shall be set aside as legal reserve until the balance of legal reserve is equal to that of issued share capital. Afterwards, an amount shall be appropriated or reversed as special reserve in accordance with applicable legal or regulatory requirements, along with prior years' accumulated unappropriated retained earnings, and then distribution should be in the following order: stock dividend and bonus to shareholders are 50%~100% of the accumulated

distributable earnings, and cash dividend is at least 30% of the total stock dividend and bonus; the appropriation of earnings is proposed by the Board of Directors and resolved by the shareholders. Employees' bonus includes employees of subsidiaries who satisfy certain conditions and are qualified as the Company's employees.

• B.Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company's paid-in capital.
• C.The Company recognized dividends distributed to owners amounting to \$1,329,873 (\$0.8 (in dollars) per share) and \$968,354 (\$0.6 (in dollars) per share) for the years ended December 31, 2015 and 2014, respectively. On March 23, 2016, the Board of Directors proposed that total dividends for the distribution of earnings for 2015 was \$1,785,659 with \$1.1 (in dollars) per share.
• D.For information relating to employees' compensation (bonuses) and directors' and supervisors' remunerations, please refer to Note 6(30).

(24) Other equity items

		Available-for-sale		Currency		Treasury
		investment		translation		stocks		Total
At January 1, 2015	\$	1,434,529	\$	1,690	(\$	60,440)	\$	1,375,779
Available-for-sale investment:
-Loss at fair value	(	27,126)		-		-	(	27,126)
Treasury stock transactions		-				59,437		59,437
Currency translation differences:
-Group		-		16		-		16
At December 31, 2015	\$	1,407,403	\$	1,706	(\$	1,003)	\$	1,408,090
		Available-for-sale		Currency		Treasury
		investment		translation		stocks		Total
At January 1, 2014	\$	2,000,470	(\$	859)	(\$	60,440)	\$	1,939,171
Available-for-sale investment:
-Loss at fair value	(	565,941)		-		-	(	565,941)
Currency translation differences:
-Group		-		2,549		-		2,549
At December 31, 2014	\$	1,434,529	\$	1,690	(\$	60,440)	\$	1,375,779

(25) Maturity analysis of assets and liabilities

The construction related assets and liabilities are classified as current and non-current based on the operating cycle. Related recognized amount expected to be recovered or repaid within or after 12 months from the balance sheet date is as follows:

	Within 12 months	Over 12 months		Total
December 31, 2015
Assets
Notes receivable, net	\$ 37,603	\$ 671	\$	38,274
Accounts receivable, net	854,336	3,722		858,058
Inventories	8,904,870	12,406,513		21,311,383
	\$ 9,796,809	\$ 12,410,906	\$	22,207,715
Liabilities
Notes payable	\$ 11,094	\$	- \$	11,094
Accounts payable	2,016,244	596,364		2,612,608
(including related parties)
	\$ 2,027,338	\$ 596,364	\$	2,623,702
	Within 12 months	Over 12 months		Total
December 31, 2014
Assets
Notes receivable, net	\$ 123,188	\$ 247	\$	123,435
Accounts receivable, net	4,536,347	6,876		4,543,223
Inventories	7,105,888	12,242,620		19,348,508
	\$ 11,765,423	\$ 12,249,743	\$	24,015,166
Liabilities
Notes payable	\$ 10,375	\$	- \$	10,375
Accounts payable	1,677,564	1,002,592		2,680,156
(including related parties)	\$ 1,687,939	\$ 1,002,592	\$	2,690,531
(26) Operating revenue
		Years ended December 31,
		2015		2014
Construction revenues	\$	8,030,232	\$	10,148,543
Rental revenues		356,161		369,454
Service concession revenue
-Operating service revenue		373,279		370,142
Other revenues		3,368		4,071

8,763,040\$ 10,892,210\$

(27) Other income

	Years ended December 31,
	2015	2014
Interest income Dividend income Others	\$ 7,572	\$ 12,267
	134,112	209,456
	126,602	139,293
	\$ 268,286	\$ 361,016

(28) Other gains and losses

		Years ended December 31,
		2015	2014
Net currency exchange gain	\$	14,676 \$	22,704
Net gain on financial assets at fair value
through profit or loss		445	447
Loss on disposal of property, plant and equipment
(including investment property)	(	4,307) (	732)
Impairment loss on financial assets		- (	11,814)
Others		2,671 (	2,692)
	\$	13,485 \$	7,913

(29) Finance costs

	Years ended December 31, 2015 2014 \$ 91,341 \$
Interest expense: Bank borrowings Commercial paper Ordinary bond
				82,580
		30,373		39,537
		123,953		126,138
Endorsement and guarantee		36,345		27,289
Others		1,701		918
	\$	283,713	\$	276,462

(30) Expenses by nature

			Year ended December 31, 2015
	Operating costs		Operating expenses	Total
Employee benefit expense
Wages and salaries	\$ 1,351	\$	484,465	\$ 485,816
Labor and health insurance fees		-	17,208	17,208
Pension costs		-	9,813	9,813
Other employee benefit expense	-		29,336	29,336
	\$ 1,351	\$	540,822	\$ 542,173
Depreciation	\$ 85,788	\$	27,687	\$ 113,475
Amortization	\$ 61,253	\$	-	\$ 61,253

			Year ended December 31, 2014
	Operating costs		Operating expenses	Total
Employee benefit expense
Wages and salaries	\$ 2,242	\$	572,942	\$ 575,184
Labor and health insurance fees		-	19,740	19,740
Pension costs		-	10,378	10,378
Other employee benefit expense	-		28,901	28,901
	\$ 2,242	\$	631,961	\$ 634,203
Depreciation	\$ 86,645	\$	30,424	\$ 117,069
Amortization	\$ 61,253	\$	-	\$ 61,253

A. According to the Articles of Incorporation of the Company, when distributing earnings, the Company shall distribute bonus to the employees and pay remuneration to the directors and supervisors that account for at least 2% and 3%, respectively, of the total distributed amount.

However, in accordance with the Company Act amended on May 20, 2015, a company shall distribute employee remuneration, based on the current year's profit condition, in a fixed amount of a proportion of profits. If a company has accumulated deficit, earnings should be channeled to cover losses. Aforementioned employee remuneration could be paid by cash or stocks. Specifics of the compensation are to be determined in a board meeting that registers two-thirds of directors in attendance, and the resolution must receive support from half of participating members. The resolution should be reported to the shareholders at the shareholders' meeting. Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive aforementioned stock or cash may be specified in the Articles of Incorporation. The Board of Directors of the Company has approved the amended Articles of Incorporation of the Company on March 23, 2016. According to the amended articles, a ratio of profit of the current year distributable, after covering accumulated losses, shall be distributed as employees' compensation and directors' and supervisors' remuneration. The ratio shall not be lower than

2% for employees' compensation and shall not be higher than 3% for directors' and supervisors' remuneration. The amended articles will be resolved in the shareholders' meeting in 2016.

B. For the years ended December 31, 2015 and 2014, employees' compensation (bonus) was accrued at \$244,705 and \$43,177, respectively; while directors' and supervisors' remuneration was accrued at \$83,250 and \$64,765, respectively. The aforementioned amounts were recognized in salary expenses.

The employees' compensation and supervisors' and directors' remuneration were accrued based on the percentage as prescribed in the Company's Articles of Incorporation of profit of current year distributable for the year ended December 31, 2015. The distributed amounts resolved by the Board of Directors were in agreement with the accrued amounts. The employees' remuneration will be distributed in the form of cash.

The expenses recognised for 2014 were accrued based on the net income for 2014 and the percentage of 2% and 3% for employees and directors/supervisors, respectively, taking into account other factors such as legal reserve. Where the accrued amounts for employees' bonus and directors' and supervisors' remuneration are different from the actual distributed amounts as resolved by the stockholders at their stockholders' meeting subsequently, the differences are accounted for as changes in estimates. Employees' bonus and directors' and supervisors' remuneration for 2014 as resolved by the shareholders during their meeting were in agreement with those amounts recognised in profit or loss for 2014.

Information about the appropriation of employees' compensation (bonus) and directors' and supervisors' remuneration by the Company as proposed by the Board of Directors and resolved by the stockholders will be posted in the "Market Observation Post System" at the website of the Taiwan Stock Exchange.'

(31) Income tax

• A. Income tax expense
• (a) Components of income tax expense:

			Years ended December 31,
		2015	2014
Current tax:
Current tax on profits for the year	(\$	23,311) (\$	12,407)
Additional 10% tax on undistributed earnings		82,522	45,978
Under (over) provision of prior period's income tax		11,785 (	1,619)
Land value increment tax recognized in income
tax for the year		138,254	70,218
Total current tax		209,250	102,170
Deferred tax:
Origination and reversal of temporary differences		-	-
Income tax expense	\$	209,250	\$ 102,170

(b) Reconciliation between income tax expense and accounting profit:

				Years ended December 31,
		2015		2014
Tax calculated based on profit before tax and statutory tax rate	\$	415,999	\$	425,151
Effects recognized from adjustments under tax regulations	(	380,099) (		403,988)
Additional 10% tax on undistributed earnings		82,522		45,978
Effect from investment tax credits	(	59,211) (		33,570)
Prior year income tax under (over) estimation		11,785 (		1,619)
Land value increment tax		138,254		70,218
Income tax expense	\$	209,250	\$	102,170

B. According to Act for Promotion of Private Participation in Infrastructure Projects, details of the Company's investment tax credits and unrecognized deferred tax assets are as follows:

December 31, 2015
Qualifying items Investment	\$	Unused tax credits 21,578	\$	Unrecognised deferred tax assets 21,578	Tax credit of investment usable until 2016
		December 31, 2014
Qualifying items		Unused tax credits		Unrecognised deferred tax assets	Tax credit of investment usable until
Investment	\$	77,883	\$	77,883	2016

• C.The Company participated in 'National Taiwan University Chang Hsing and Shui Yuan BOT Dorms', which was handled and assessed as major infrastructure by the Ministry of Education. Thus, in accordance with 'Regulations Governing Application for Exemption in from Profit-seeking Enterprise Income Tax by Private Institutions Participating in Public Infrastructure Projects', the Company is entitled to the income tax exemption for 5 consecutive years (ends in December 2014).
• D. As of December 31, 2015, the Company's income tax returns through 2013 have been assessed and approved by the Tax Authority

E. Unappropriated retained earnings:

December 31, 2015 December 31, 2014

Earnings generated in and after 1998 3,508,400\$ 2,854,738\$

F. As of December 31, 2015 and 2014, the balance of the imputation tax credit account was \$53,573 and \$9,524, respectively. The creditable tax rate was 1.81% for 2014 and is estimated to be 3.19% for 2015. The tax credits to be allocated to the stockholders are calculated based on the balance of the imputation tax credit account on the day of distribution of dividends. Therefore, the creditable tax rate applicable to the stockholders for the appropriation of earnings generated in and after 1998 shall be adjusted to take into account the tax credits that might incur under the income tax laws up to the distribution date of dividends or earnings.

(32) Earnings per share

	Year ended December 31, 2015
			Weighted average
			number of ordinary	Earnings
			shares outstanding	per share
Basic earnings per share		Amount after tax	(shares in thousands)	(in dollars)
Profit attributable to ordinary shareholders	\$	2,237,800	1,622,671	\$ 1.38
Diluted earnings per share
Profit attributable to ordinary shareholders	\$	2,237,800	1,622,671
Assumed conversion of all dilutive
potential ordinary shares
Employees'compensations		-	27,220
Profit attributable to ordinary shareholders
plus assumed conversion of all dilutive
potential ordinary shares	\$	2,237,800	1,649,891	\$ 1.36

			Year ended December 31, 2014
			Weighted average
			number of ordinary	Earnings
			shares outstanding	per share
Basic earnings per share		Amount after tax	(shares in thousands)	(in dollars)
	Profit attributable to ordinary shareholders	\$ 2,398,718	1,586,268	\$ 1.51
Diluted earnings per share
	Profit attributable to ordinary shareholders	\$ 2,398,718	1,586,268
	Assumed conversion of all dilutive
potential ordinary shares
Employees' bonus		-	3,510
	Profit attributable to ordinary shareholders
	plus assumed conversion of all dilutive
potential ordinary shares		\$ 2,398,718	1,589,778	\$ 1.51

(33) Non-cash transactions

Investing and financing activities with no cash flow effects:

		For the years ended December 31,
	2015	2014
1.Investment property reclassified to land held for	\$	\$
construction site	-	612,189
2.Investment property reclassified to buildings and	\$	\$
land held for sale	-	2,512
3.Buildings and land held for sale reclassified to	\$	\$
property, plant and equipment	-	106,249
4.Land held for construction site reclassfied to	\$	\$
investment property	62,056	-
5.Available-for-sale financial assets – non-current,	\$	\$
acquired from combinations	2,186	-
6.Financial assets measured at cost – non-current,	\$	\$
acquired from combinations	11,486	-

7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and their relationship with the Company

Names of related parties	Relationship with the Company
Cheng-Shi Investment Holdings Co., Ltd. (CSIHC)	The Company's subsidiary
Prince Property Management Consulting Co., Ltd. (PPMCC)	The Company's subsidiary
Dong-Feng Enterprises Co., Ltd.	The Company's subsidiary
Time Square International Co., Ltd.	The Company's subsidiary
Prince Industrial Co., Ltd.	The Company's subsidiary
Prince Real Estate Co., Ltd. (Prince Real Estate)	The Company's subsidiary
Jin Yi Xing Plywood Co., Ltd. (Jin Yi Xing)	The Company's subsidiary
The Splendor Hotel Taichung (The Splendor)	The Company's subsidiary
Ta-Chen Construction & Engineering Corp. (Ta-Chen Construction & Engineering)	The subsidiary of CSIHC
Prince Utility Co., Ltd. (Prince Utility)	The subsidiary of CSIHC
Cheng-Shi Construction Co., Ltd. (Cheng-Shi Construction)	The subsidiary of CSIHC
Prince Security Co., Ltd. (Prince Security)	The subsidiary of PPMCC
Prince Apartment Management Maintain Co., Ltd. (Prince Apartment)	The subsidiary of PPMCC
Uni-President Development Corp.	The Company's associates
Tainan Spinning Co., Ltd.	The Company's other related party
President Chain Store Corporation	The Company's other related party
Chen Kao-Hui	The Company's Chairman
Hsieh, Ming-Fan	The Company's General Manager

For other related parties over which the Company exercises significant influence but with which the Company had no material transaction, please refer to Note 13 for related information.

(2) Significant related party transactions and balances

A.Sales of goods

(a)Rental income:

	Years ended December 31, 2015 2014 47,334 \$ 46,206 3,115 1,630
- Other related parties	\$
- Subsidiaries
	\$ 50,449 \$ 47,836

Rent is determined by mutual agreements and is collected monthly.

B.Purchases

(a) Details of the Company's subcontracting to related parties and its purchases from related parties for the years ended December 31, 2015 and 2014 are as follows:

	Years ended December 31,
		2015	2014
Construction subcontracting:
-Subsidiaries	\$	1,275,486	\$	1,254,029
Purchases of services:
-Subsidiaries		10,828		28,126
Purchases of goods:
-Subsidiaries		13,232		14,837
Land held for construction site:
-Subsidiaries (Note)		829,021		-
	\$	2,128,567	\$	1,296,992

Note:On August 3, 2015, the Company purchased the land of Ren Wu New Hougang West Section No. 52, etc. from Jin Yi Xing. The total purchase amount was \$829,021 and obligation receivable was used to offset partial payment.

The Company subcontracted building construction and utilities engineering to related parties, Ta-Chen Construction Company, Prince Utility Company and Chen-Shi Construction Company. Under those subcontracts, acceptance would be done according to the progress of the construction and engineering; payments would be made based on agreed-upon terms of the two parties. Purchases from related parties, Prince Security Company, BioSun Technology Company and Prince Apartment, are based on negotiated terms because the related purchase transactions are unique and not available from third parties.

• (b)As of December 31, 2015 and 2014, unsettled construction contracts that were signed by the Company and Chen-Shi Construction Company totaled \$1,709,505 and \$1,623,540, respectively; payments already made for those contracts amounted to \$232,839 and \$315,971, respectively; and future payments required under those contracts amounted to \$1,476,666 and \$1,307,569, respectively.
• (c)As of December 31, 2015 and 2014, unsettled construction contracts that were signed by the Company and Ta-Chen Construction Company totaled \$259,621 and \$745,320, respectively; payments already made for those contracts amounted to \$121,373 and \$20,770, respectively; and future payments required under those contracts amounted to \$138,248 and \$724,550, respectively.
• (d)As of December 31, 2015 and 2014, unsettled construction contracts that were signed by the Company and Prince Utility Company totaled \$489,411 and \$575,521, respectively; payments already made for those contracts amounted to \$24,500 and \$78,750, respectively; and future

payments required under those contracts amounted to \$464,911 and \$496,771, respectively. C.Prepayment for land purchases (included in "Inventories")

	December 31, 2015		December 31, 2014
Subsidaries	\$	- \$	260,727

• D.Other assets
• (a) On June 20, 2006, the Company and China Metal Products Co., Ltd. ("A party") jointly signed a creditor's rights transfer contract with Amida Trustlink Assets Management Co., Ltd. ("B party"). Under the contract, the Company and A party should pay \$2,100,000 each (totaling \$4,200,000) to jointly acquire whole creditor's rights of mortgages, security interests and other dependent claims (collectively referred herein as the creditor's rights) on the Splendor Hotel Taichung Building, and each bears 50% rights and obligations of this acquisition; when all creditor's rights of this object turn into property rights, the Company and A party should pay B party totaling \$1,000,000 as the cost and reward of B party for it is entrusted with the task to help turn the creditor's rights as stated above into property rights, but any excess cost over \$1,000,000 if incurred on this task shall be borne by B party on its own; the Company should pay B party \$300,000 before June 30, 2006, and the Company and A party should jointly issue a promissory note of \$1,800,000 to B party on the signing date; payment should be done before July 15, 2006. The title to the creditor's rights as stated above had been transferred to the Company and A party on August 2, 2006. The acquisition price of the creditor's rights amounted to \$5,200,000, which the Company and A party bear 50% of the price each. The Company had paid its share. Furthermore, the Company and A party jointly established the Splendor Hotel Taichung and \$450,000 invested in the share capital was drawn down from the abovementioned price of the creditor's rights.
• (b) The Company and China Metal Products Co., Ltd. jointly established The Splendor Hotel Taichung ("A party") by contributing 50% of the investment each. On November 1, 2006, A party signed a certain assets transfer contract with The Splendor Hotel Chunggang ("B party"). Under the contract, A party should pay B party for employees' services, goods purchases and taxes. The above payments of \$352,310 required of A party were made from the share capital of its initial establishment.

The Company's creditor's rights above amounting to \$2,375,000 were originally receivable from B party. After B party and A party signed a certain assets transfer contract in December, 2006, the creditor's right to the above receivables were transferred to A party. And A party repaid \$1,800,000 to the Company in June 2007. As of December 31, 2015 and 2014, the Company's creditor's rights receivable from A party both amounted to \$575,000.

(c) Details of the Company's capital investment in The Splendor Hotel Taichung in the past are as follows:

2006	\$ 225,000
2008	105,000
2009	615,000
2010	30,000
Total	\$ 975,000

• (d) On January 16, 2007, the Company acquired 99.65% ownership in Jin Yi Xing by cash. As of December 31, 2015 and 2014, the Company's creditor's rights receivable from Jin Yi Xing amounted to \$0 and \$465,778, respectively.
• (e) As of December 31, 2015, the Company paid for the construction of Prince Cloud and received the payment for pre-sale of Prince Cloud on behalf of Prince Real Estate Co., Ltd. which amounted to \$60,680 (shown as other receivables – related parties) and \$117,450 (shown as other payables – related parties), respectively.
• E. Accounts payable

	December 31, 2015
Subsidiaries	\$ 334,393	\$	398,718
F. Rent expense

	Years ended December 31,
	2015	2014
\$	29,349	\$ 24,868

• G. The information on endorsement and guarantees and financial support commitment among related parties is described in Note 9(1).
• H. Certain short and long-term borrowings of the Company were guaranteed by its Chairman and General Manager.
• (3) Key management compensation

	Years ended December 31,
		2015		2014
Salaries and other short-term employee benefits	\$	140,260	\$	150,972
Termination benefits		-		-
Post-employment benefits		-		-
Other long-term benefits		-		-
Share-based payments		-		35,403
	\$	140,260	\$	186,375

8. PLEDGED ASSETS

The Company's assets pledged as collateral are as follows:

Pledged asset	December 31, 2015	December 31, 2014	Purpose
Demand deposits, certificate of deposit and checking deposit (shown as "other financial assets - current" and "other financial assets - non-current")	\$ 2,487,628	\$ 3,113,384	To obtain a higher credit for client, performance guarantee, construction performance guarantee, short-term and long-term borrowings.
Financial assets at fair value through profit or loss	77,992		77,547 Long-term borrowings
Land held for construction	6,974,863		4,762,059 Short-term borrowings, notes and bills payable and long-term borrowings
Construction in progress	2,133,843		1,918,634 Short-term borrowings, notes and bills payable and long-term borrowings
Available-for-sale financial assets	1,028,798		1,033,280 Short-term borrowings, notes and bills payable
Financial assets carried at cost	575,426		575,426 Short-term borrowings, notes and bills payable
Investments accounted for under equity method	1,582,560		1,120,379 Short-term borrowings, notes and bills payable
Land	91,782		91,782 Short-term borrowings, notes and bills payable and long-term borrowings
Buildings	217,972		227,274 Short-term borrowings, notes and bills payable and long-term borrowings
Investment property	4,012,058		4,772,476 Short-term borrowings, notes and bills payable and long-term borrowings
Other miscellaneous assets (shown as "Other non
current assets-others")	575,000		1,047,928 Long-term borrowings
	\$ 19,757,922	\$ 18,740,169

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

(1)Summary of endorsements and guarantees and financial support commitments is as follows:

A. Summary of endorsements and guarantees provided by the Company to subsidiaries is as follows:

	December 31, 2015		December 31, 2014
	Total		Total
	endorsement	Amount	endorsement	Amount
Name of company	amount	drawn	amount	drawn
The Splendor Hotel Taichung	\$ 2,000,000	\$ 1,708,520	\$ 2,000,000	\$ 1,773,973
Ta-Chen Construction & Engineering Corp.	1,900,000	-	1,900,000	160,256
	\$ 3,900,000	\$ 1,708,520	\$ 3,900,000	\$ 1,934,229

B. Summary of endorsements and guarantees provided by subsidiaries to the Company is as follows:

		December 31, 2015				December 31, 2014
		Total			Total
		endorsement		Amount	endorsement	Amount
Name of company	amount drawn		amount	drawn
Prince Real Estate Co., Ltd.	\$	2,500,000	\$	2,086,198	\$	- \$ -
Dong-Feng Enterprises Co., Ltd.		1,810,889		1,810,889	1,810,889	1,810,889
Ta-Chen Construction & Engineering Corp.		927,889		-	927,889	-
Prince Utility Co., Ltd.		900,000		638,763	900,000	638,763
Jin Yi Xing Plywood Co., Ltd.		-		-	2,500,000	2,086,198
	\$	6,138,778	\$	4,535,850	\$ 6,138,778	\$ 4,535,850

C. The accumulated operating losses of the subsidiary, The Splendor Hotel, had exceeded 50% of

its paid-in capital and its current liabilities were greater than current assets. The Company was committed to give the Splendor Hotel financial support for its continuing operations for one year from the date of the financial support letter.

(2) Capital expenditures contracted for at the balance sheet date but not yet incurred are as follows:

	December 31, 2015		December 31, 2014
Property, plant and equipment	\$	952	\$	322,248

• (3) According to the sale contracts, the Company should provide warranty on the house structure and major facilities for one year from the handover day for the houses it sold. However, any damage to the houses caused by disasters, additions to the houses made by the buyers, or events that are not attributed to the Company is not included in the scope of warranty.
• (4) Information on the commitments of the Company relating to financial support to related parties is described in Note 7(2).
• (5) On March 17, 2005, the Company ("A party") signed a contract with National Taiwan University ("B party") relating to the construction and operation of dormitories on Chang-Hsing St. and Shui-Yuan Campus. The major terms of the contract are as follows:
• A. Under the contract, B party should be responsible for acquiring the ownership or land-use right for this project, and let A party use the land; A party must complete the construction within 3 years from the registration of the superficies, and may operate the dormitories for 44 years, collect dormitory rentals and use fees of other facilities from students, and should return the related assets to B party on the expiry of the contract.
• B. A party should give B party a performance guarantee of \$60,000 for the construction on the signing date and \$30,000 for operations before the start of operation. As of December 31, 2015 and 2014, A party had provided performance guarantee with a guarantee letter issued by the bank, both amounting to \$30,000.
• C. A party should pay B party land rentals from the registration of the superficies, according to the terms of the contract, and pay B party operating royalties from the third year of the operation, based on 0.5% of dormitory rentals and use fees of other facilities collected from students.

• D. Terms of restrictions for A party:

  • (a)The ratio of A party's own capital utilized in this project to total construction cost of this project should be at least 30%;
  • (b)During the operation period, the ratio of shareholders' equity to total assets should be at least 25%; and current ratio (current assets/current liabilities) should be at least 100%;
  • (c) All rights acquired by A party under the contract, except for other conditions specified in the contract and approved by B party, should not be transferred, leased, registered as a liability/obligation or become an executed object of civil litigation.

• (6) On May 10, 2005, the Company ("A party") signed a contract with National Cheng Kung University ("B party") relating to the construction and operation of student dormitories and alumni hall. The major terms of the contract are as follows:

• A. Under the contract, B party should be responsible for acquiring the ownership or land-use right for this project, and let A party use the land by way of registration of the superficies; A party must obtain the user license within 3 years after the signing date, and may operate the student dormitories and motorcycle parking lots for 35 years from the start of operations and collect dormitory rentals and use fees of other facilities from students for 50 years from the start of construction, and should return the related assets to B party on the expiry of the contract.
• B. A party should give B party performance guarantee of \$50,000 for this project on the signing date, which will be returned in installment according to the contractual terms. As of December 31, 2015 and 2014, A party had provided performance guarantee with a guarantee letter issued by the bank, both amounting to \$20,000.
• C. During the operation period, A party should pay B party dormitory operating royalties based on 2% of annual operating revenue of the dormitories and auxiliary facilities operating royalties based on 4% of annual operating revenue of the auxiliary facilities. A party should pay such operating royalties for prior year before the end of June every year. Further, according to the superficies contract signed by the two parties, A party should pay B party land rentals from the registration of superficies.
• D. All rights acquired by A party under the contract, except for other conditions specified in the contract and approved by B party, should not be transferred, leased, registered as a liability/obligation or become an executed object of civil litigation.

• (7)The Company signed a syndicated loan contract with 7 banks Mega International Commercial Bank as the lead bank for a credit line of \$2.16 billion. The syndicated loans include long-term (secured) loans and guarantee payments receivable (secured), which are used to fund the construction of dormitories in Changxing St. Campus and Shuiyuan Campus of National Taiwan University. During the loan period, the Company should maintain financial commitments such as current ratio, liability ratio and interest coverage; those financial ratios/restrictions shall be reviewed at least once every year, based on the Company's audited annual parent company only financial statements. If the Company violates the above financial commitments, it shall improve its financial position by capital increase or other ways before the end of October of the following year from the year of violation; it would not be regarded as a default if the managing bank confirms that its financial position has improved completely. In case of violation, interest on the loans would be charged at the loan rate specified in the contract plus additional 0.25% per annum from the notification date of the managing bank to the completion date of financial improvement or to the date the Company gains the relief from the consortium for its violation.

• (8)The Company signed a loan contract with Mega International Commercial Bank for a credit line of \$785 million. The loans include long-term (secured) loans and guarantee payments receivable (secured), which are used to fund the construction of student dormitories and alumnus hall of National Cheng Kung University. During the loan period, the Company should maintain financial commitments such as current ratio, liability ratio and interest coverage; those financial ratios/restrictions shall be reviewed at least once every year. Current ratio and liability ratio shall be reviewed based on the Company's audited annual parent company only financial statements, and interest coverage based on the Company's revenue and expenditure table for the related project. If the Company violates the above financial commitments, it shall improve its financial position by capital increase or other ways before the end of October of the following year from the year of violation; it would not be regarded as a default if the bank confirms that its financial position has improved completely. In case of violation, interest on the loans would be charged at the loan rate specified in the contract plus additional 0.25% per annum from the notification date of the bank to the completion date of financial improvement or to the date the Company obtains a waiver from the bank for its violation.

• (9) The Company signed a syndicated loan contract with 10 banks Bank of Taiwan Co., Ltd. as the lead bank for a credit line of \$2 billion. The syndicated loans are medium-term (secured) loans, and are used for residential building construction cooperated by the Company and Taiwan Sugar Corporation ("TSC") on Guo--An Sec., Xitun District, Taichung City. Furthermore, the Company shall repay in full for the balance of unpaid principal on maturity date. However, when the buildings in the case are completed and sold or when handling buyer's household debt, borrower should repay the balance of used and unpaid principal for the syndicated loans with 70% of selling consideration.
• (10)The Company signed a syndicated loan contract with 3 financial institutions Mega International Commercial Bank as the lead bank for a credit line of \$1.06 billion. The syndicated loans include medium-term (secured) loans and commercial paper guarantees, which were used for the purchase of 4 tracts of PingHsin Sections No. 694, 706, 708 and 709 in Taiping Dist., Taichung City and construction payment of residential buildings. Furthermore, the Company shall repay in full the balance of unpaid principal on maturity date.
• (11)On May 18, 2007, the Company signed a contract with Taiwan Sugar Corporation ("TSC") in relation to cooperative construction of houses. According to the contract, TSC shall provide Lot No. 12-12, Guo-An Sec., Xitun District, Taichung City; the Company shall provide funding for those projects and repurchase houses and land allocated to TSC amounting to \$1,810,889 and shall bear all improvement fees of houses, public facilities and land, selling expenses, and other expenses or contributed expenses required under the decrees. The Company shall not ask for any compensation for price fluctuations or other reasons. Further, under the contract, the Company shall give TSC performance guarantee amounting to \$181,090 on the signing date, which will be returned in installments according to the contractual terms. The Company had provided performance guarantee with a guarantee letter of the bank as follows:

	December 31, 2015	December 31, 2014
Lot No. 12-12, and No. 601-1 Guo-An Sec.,
Xitun District, Taichung City	\$ 181,090	\$	181,090

(12) On January 20, February 10 and December 27, 2014, the Company signed a contract with Taiwan Sugar Corporation ("TSC") in relation to cooperative construction of houses. According to the contracts, TSC shall provide Taichung City Koan An Section No. 591-1, Tainan City Hou Guan Section No. 34 and Nanzi Dist., Kaohsiung City Nanzi 1st section No. 158, etc; the Company shall provide funding for those projects and repurchase houses and land allocated to TSC amounting to \$638,763, \$830,889 and \$1,255,300, respectively, and shall bear all improvement fees of houses, public facilities and land, selling expenses, and other expenses or contributed expenses required under the decrees. The Company shall not ask for any compensation for price fluctuations or other reasons. Further, under the contract, the Company shall give TSC performance guarantee amounting to \$63,880, \$83,080 and \$125,540, respectively, on the signing date, which will be returned in installments according to the contractual terms. The Company had provided such performance guarantee with guarantee letter of the bank as follows:

	December 31, 2015	December 31,2014
Taichung City Koan An Section No. 591-1	\$ 63,880	\$	63,880
Tainan City Hou Guan Section No. 34	\$ 83,100	\$	83,100
Nanzi Dist., Kaohsiung City Nanzi 1st
section No. 158, etc.	\$ 125,600	\$	-

(13) The Company signed an agreement with Mr. Fang Tsai-Yuan and World Vision United Co., Ltd. on March 5, 2012 and July 17, 2012, respectively, for joint construction of houses. Under those agreements, Mr. Fang Tsai-Yuan and World Vision United Co., Ltd., the owners of land, shall provide the land located at Nos. 572 and 602, Sec. Zhi-Shan 1, Shilin District, Taipei City, respectively, and the Company is responsible for the construction; the houses built would be allocated to both parties based on the specified proportion. In addition, the Company shall give performance bond in the amount of \$350,000 and \$19,570 to Mr. Fang Tsai-Yuan and World Vision United Co., Ltd., respectively, which would be returned to the Company in installments. As of December 31, 2015 and 2014. Balance of the performance bonds were as follows:

	December 31, 2015	December 31, 2014
Nos. 602, Sec. Zhi-Shan 1, Shilin District, Taipei City	\$ 350,000	\$	350,000
Nos. 572, Sec. Zhi-Shan 1, Shilin District, Taipei City	\$ 19,570	\$	19,570

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE None.

12. OTHERS

(1) Capital management

The Company's capital management is to ensure it has sufficient financial resource and operating plans to meet operational capital for future needs, capital expenditures, obligation repayment and dividend distribution. The Company adjusts borrowing amount in accordance with construction progress and capital needed for operations.

(2) Financial instruments

A. Fair value information of financial instruments

The carrying amount of cash and cash equivalents and financial instruments measured at amortised cost (including notes and accounts receivable, other receivables, refundable deposits short-term borrowings, short-term notes and bills payable, notes and accounts payable, other payables, corporate bonds payable, long-term borrowings and guarantee deposits received) are approximate to their fair values. Furthermore, the Company's management believes the carrying amounts of financial assets and liabilities not measured at fair value are approximate to their fair value or their fair value cannot be reliably measured. Thus, the carrying amount is the estimated fair value. The fair value information of financial instruments measured at fair value is provided in Note 12(3).

• B. Financial risk management policies
• (a) The Company's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial position and financial performance.
• (b) Risk management is carried out by a treasury department (Company's finance & accounting division) under policies approved by the Board of Directors. The Company's finance & accounting division evaluates and hedges financial risks in close cooperation with the Company's operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
• C. Significant financial risks and degrees of financial risks
• (a) Market risk

Foreign exchange risk

The Company operates internationally and the currencies primarily used are NTD and USD. Foreign exchange risk arises from recognized assets and liabilities and net investments in foreign operations. Management has set up a policy to require the Company to manage its foreign exchange risk against its functional currency. The Company is required to manage its entire foreign exchange risk exposure with the Company treasury. Foreign exchange risk

does not have significant impact to the Company.

Interest rate risk

The Company's interest rate risk arises from short-term and long-term borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. The Company's borrowings at variable rate were denominated in the NTD. If interest rates on borrowings had been 0.1% basis point higher/lower with all other variables held constant, pre-tax profit for the years ended December 31, 2015 and 2014 would have been \$8,926 and \$9,375 lower/higher, respectively.

Price risk

The Company has investments in equity instruments, and the prices would change due to the change of the future value of investee companies. However, the Company has set a stop-loss point and it was assessed that the Company was not exposed to significant price risk. If the prices of these equity securities had increased/decreased by 10% with all other variables held constant, pre-tax profit for the years ended December 31, 2015 and 2014 would have increased/decreased by \$7,600, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by \$13,808 and \$13,727, respectively, as a result of gains/losses on equity securities classified as available-for-sale.

(b) Credit risk

i.Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. Credit risk arises from cash and deposits with banks and financial institutions, including outstanding receivables.

• ii.The Company's receivables, which are the receivables from preselling of housing before completing construction and transferring the title, are installments received from customers of pre-construction real estate. Therefore, it was assessed that the Company was not exposed to significant credit risk from receivables.
• iii. For the years ended December 31, 2015 and 2014, the management does not expect any significant losses from non-performance by these counterparties.
• (c) Liquidity risk
• i. Cash flow forecasting is performed in the operating entities of the Company and aggregated by the Company's finance & accounting division. The Company's finance & accounting division monitors rolling forecasts of the Company's liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times.
• ii.The table below analyses the Company's non-derivative financial liabilities into relevant

maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

		December 31, 2015
		Between 1 to 3 years	Over 3 years
\$	2,300,197	\$	- \$ -
	1,469,600		- -
	11,094		- -
	2,086,752	596,364	-
	873,055		- -
	71,941	20,138	35,393
	65,350	2,104,100	2,500,000
	373,334	3,190,480	3,995,400
		December 31, 2014
	Within 1 year	Between 1 to 3 years	Over 3 years
\$	2,975,206	\$	- \$ -
	1,970,000		- -
	10,375		- -
	1,746,204	1,002,592	-
	707,048		- -
	89,882	7,111	31,653
	65,350	2,119,617	2,535,521
			Within 1 year

(3) Fair value estimation

• A. Details of the fair value of the Company's financial assets and financial liabilities not measured at fair value are provided in Note 12(2)A. Details of the fair value of the Company's investment property measured at cost are provided in Note 6(11).
• B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company's investment in listed stocks and beneficiary certificates is

included in Level 1.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
• Level 3: Unobservable inputs for the asset or liability. The fair value of the Company's investment in equity investment without active market is included in Level 3.
• C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2015 and 2014, is as follows:

December 31, 2015	Level 1	Level 2		Level 3		Total
Assets:
Recurring fair value measurements
Financial assets at fair value through
profit or loss
Equity securities	\$ 77,992	\$	- \$		- \$	77,992
Available-for-sale financial assets
Equity securities	1,349,835	-		192,557		1,542,392
	\$ 1,427,827	\$ -	\$	192,557	\$	1,620,384
December 31, 2014	Level 1	Level 2		Level 3		Total
Assets:
Recurring fair value measurements
Financial assets at fair value through
profit or loss
Equity securities	\$ 77,547	\$	- \$		- \$	77,547
Available-for-sale financial assets
Equity securities	1,310,004	-		272,651		1,582,655
	\$ 1,387,551	\$ -	\$	272,651	\$	1,660,202

D. The methods and assumptions the Company used to measure fair value are as follows:

(a) The instruments the Company used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

	Listed shares	Open-end fund
Market quoted price	Closing preice	Net asset value

• (b) The Company takes into account adjustments for credit risks to measure the fair value of financial and non-financial instruments to reflect credit risk of the counterparty and the Company's credit quality.
• E. For the years ended December 31, 2015 and 2014, there was no transfer between Level 1 and Level 2.

F. The following chart is the movement of Level 3 for the years ended December 31, 2015 and 2014:

		2015	2014
At January 1	\$	272,651 \$	267,633
Proceeds from capital reduction		- (	25,000)
(Loss) gain recognised in other comprehensive
income (Note)	(	80,094)	30,018
At December 31	\$	192,557 \$	272,651

Note: Recorded as unrealised valuation gain or loss of available-for-sale financial assets.

• G. For the years ended December 31, 2015 and 2014, there was no transfer into or out from Level 3.
• H. Finance and Accounting department is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently assessing valuation results and making any other necessary adjustments to the fair value.
• I. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

	Fair value at December 31, 2015		Valuation Significant technique unobservable input		Range	Relationship of inputs
					(weighted average)	to fair value
Non-derivative equity
Unlisted shares	\$	192,557	Net asset value	Net asset value	N/A	The higher the net
						asset value, the higher
						the fair value

J. The Company has carefully assessed the valuation models and assumptions used to measure fair value; therefore, the fair value measurement is reasonable. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorized within Level 3 if the inputs used to valuation models have changed:

				December 31, 2015
				Recognised in profit or loss			Recognised in other comprehensive income
	Imput	Change	Favourable change		Unfavourable change		Favourable change		Unfavourable change
Financial assets Equity instruments	\$ 29,594	±1%	\$	- \$		- \$	296 (\$		296)

							December 31, 2015
							Recognised in other
				Recognised in profit or loss			comprehensive income
				Favourable Unfavourable			Favourable	Unfavourable
	Imput	Change	change		change		change	change
Financial assets
Equity instruments	\$ 27,408	±1%	\$	-	\$	- \$	274 (\$	274)

13. SUPPLEMENTARY DISCLOSURES

• (1) Significant transactions information
• A. Loans to others: Please refer to table 1.
• B. Provision of endorsements and guarantees to others: Please refer to table 2.
• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3.
• D. Acquisition or sale of the same security with the accumulated cost exceeding \$300 million or 20% of the Company's paid-in capital: None.
• E. Acquisition of real estate reaching \$300 million or 20% of paid-in capital or more: Please refer to table 4.
• F. Disposal of real estate reaching \$300 million or 20% of paid-in capital or more: None.
• G. Purchases or sales of goods from or to related parties reaching \$100 million or 20% of paid-in capital or more: Please refer to table 5.
• H. Receivables from related parties reaching \$100 million or 20% of paid-in capital or more: Please refer to table 6.
• I. Trading in derivative instruments undertaken during the reporting periods: None.
• J. Significant inter-company transactions during the reporting periods: Please refer to table 7.
• (2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 8.

• (3) Information on investments in Mainland China None.
• 1. SEGMENT INFORMATION

Not applicable.