CTCI Annual ReportX(1)S(xdn3toz13u31fq552uq2... · Years until the Annual Report being published...

Stock Code: 9933

CTCI CORPORATION

2013 Annual Report

Taiwan Stock Exchange Market Observation Post System: http://newmops.twse.com.tw Printed on April 30, 2014

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vveerrssiioonn aanndd CChhiinneessee vveerrssiioonn,, tthhee CChhiinneessee vveerrssiioonn sshhaallll pprreevvaaiill.. Spokesperson Name: P. C. Chen Title: Executive Vice President Tel: 886-2-2833-9999 ext. 10099 E-mail: [email protected] Deputy Spokesperson Name: Patrick Lin Title: Chief Financial Officer Tel: 886-2-2833-9999 ext. 16015 E-mail: [email protected] Headquarters and Branches Headquarters Address: 89, Sec. 6, Zhongshan North Rd., Taipei, Taiwan Tel: 886-2- 2833-9999 Branch CTCI CORPORATION ABU DHABI BRANCH Address: Shaikh Sultan Bin Srour Al Dhaheri Building, Al Salam Street, Abu Dhabi Tel: 971-26711572 CTCI CORPORATION ITALY BRANCH Address: Via G. Carducci, 1221013 Gallarate(VA), Italy Tel: 39- 0331 771026 CTCI CORPORATION QATAR BRANCH Address: Office No.6 , 1st Floor, Al-Emadi Business Centre, C-Ring Road, Doha City,State of Qatar. P.O Box: 30261 Tel: (+974) 4451-7383 Stock Transfer Agent KGI Securities Co. Ltd. Address: 5th Fl., 2, Sec. 1, Chung Ching South Rd., Taipei, Taiwan Website: http://www.kgieworld.com.tw/ Tel: 886-2-2389-2999 Auditors PriceWaterHouseCoopers Auditors: Shyh-Rong Ueng, Huei-Shyang Wang Address: 27th Fl., 333, Sec. 1, Keelung Rd., Taipei, Taiwan Website: http://www.pwc.com/tw Tel.: 886-2-2729-6666 Corporate Website http://www.ctci.com.tw

mailto:[email protected]

mailto:[email protected]

Contents I. Letter to Shareholders ........................................................................................................ 1

II. Company Profile 2.1 Date of Incorporation .................................................................................................................. 4 2.2 Company History .......................................................................................................................... 4

III. Corporate Governance Report 3.1 Organization ................................................................................................................................. 5 3.2 Directors, Supervisors and Management Team .......................................................................... 9 3.3 Implementation of Corporate Governance ............................................................................... 26 3.4 Public Expenses of CPA .............................................................................................................. 67 3.5 Information for change of CPA .................................................................................................. 67 3.6 The Company's Chairman, President and Managers Responsible for Finance or

Accounting who have Held a Post in the CPA Office or its Affiliated within the Latest Year .... 67 3.7 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders ......... 68 3.8 Information Disclosing the Relationship between any of the Company’s Top Ten

Shareholders .............................................................................................................................. 70 3.9 Shareholdings of the Company Directors, Supervisors, Managements, and Direct and

Indirect Investments of the Company in Affiliated Companies ................................................. 71 IV. Capital Overview 4.1 Capital and Shares ...................................................................................................................... 72 4.2 Issuance of Corporate Bonds ..................................................................................................... 76 4.3 Preferred Shares ........................................................................................................................ 76 4.4 Issuance of Depository Receipt .................................................................................................. 76 4.5 Employee Stock Options ............................................................................................................ 77 4.6 New Restricted Employee Shares .............................................................................................. 79 4.7 Status of New Shares Issuance in Connection with Mergers and Acquisitions ......................... 79 4.8 Financing Plans and Implementation ......................................................................................... 79 V. Operational Highlights 5.1 Business Activities ...................................................................................................................... 80 5.2 Market and Sales Overview ....................................................................................................... 87 5.3 Human Resources ...................................................................................................................... 92 5.4 Environmental Protection Expenditure ..................................................................................... 94 5.5 Labor Relations........................................................................................................................... 94 5.6 Important Contracts ................................................................................................................. 101 VI. Financial Information 6.1 Five-Year Financial Summary ................................................................................................... 102 6.2 Five-Year Financial Analysis ..................................................................................................... 110 6.3 Supervisors’ Report in the Most Recent Year .......................................................................... 116 6.4 Financial Statements for the Years Ended December 31, 2013 and 2012, and

Independent Auditors’ Report ................................................................................................. 119 6.5 Consolidated Financial Statements for the Years Ended December 31, 2013 and 2012,

and Independent Auditors’ Report .......................................................................................... 249 6.6 Impact of the Financial Distress Occurred to the Company and Affiliates in the Recent

Years until the Annual Report being published ....................................................................... 397

VII. Review of Financial Conditions, Financial Performance, and Risk Management 7.1 Analysis of Financial Status ...................................................................................................... 397 7.2 Analysis of Financial Performance ........................................................................................... 399 7.3 Analysis of Cash Flow ............................................................................................................... 399 7.4 Major Capital Expenditure Items ............................................................................................. 400 7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans

and the Investment Plans for the Coming Year ....................................................................... 400 7.6 Analysis of Risk Management .................................................................................................. 400 7.7 Other ........................................................................................................................................ 406 VIII. Special Disclosure 8.1 Summary of Affiliated Companies ........................................................................................... 407 8.2 Private Placement Securities in the Most Recent Years .......................................................... 429 8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years .. 429 8.4 Other Supplementary Information .......................................................................................... 432

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I. Letter to Shareholders Dear Shareholders, Friends and Colleagues, Owing to every colleague’s efforts and dedication, we had won glorious victories in project bidding both at home and abroad during the past year. This demonstrated that CTCI’s strength is not only well recognized by clients in the global market but has continued to sustain its leading status in Taiwan. I would hereby like to report the 2013 business review, the 2014 strategic plan and the blueprint for CTCI Group as follows: 2013 Business Review Operation Results

The consolidated sales revenue for 2013 amounted to NT$52.2 billion, decreased by NT$ 8.3 billion or a 13.71 % drop compared to that of 2012. The consolidated operating expenses were NT$1.85 billion, while the consolidated non-operating income was NT$144.13 million. As a result, the consolidated net income was reported at NT$1.64 billion, a decrease of NT$803.55 million over 2013. The earnings per share (EPS) stood at NT$2.22, decreased by NT$1.17 from NT$3.39 a year earlier. Since large-scale power plant projects in our contract backlog requires longer construction period in execution, hence the extended revenue recognition and reduced income. While the execution of projects in the global market signifies more complexity and difficulty in accessing resources, rendering the rise of costs in manpower, equipments and materials, which further impacts on the overall profits. From this day onwards, we hope to improve on the operation status with the joint efforts of all staff members.

Business Achievement By the end of 2013, our contract amount reached NT$66.9 billion, while backlog of contract is up to NT$163.5 billion. Major new contracts include Tung Hsiao 2,600 MW Combined Cycle Power Plant Project from Taipower, Laffan Refinery Phase 2 Project in Qatar, Small Power Producer Project from Thai Oil, OPTC Kuan-Yin 1520 KTA Line 3 PTA Plant Project, Chimei Zhenjiang 40 KTA SSBR Project, KFPC 30 KTA HSBC Project, and APC Lin-Yuan Plant 50 KTA EVA Project.

Innovation and R&D In 2013, CTCI’s Innovation R&D Center continued its efforts to improve the information integration/management for project execution, the breadth and depth of technologies, and the development of automation design. Regarding the Project Intelligent Board (PIB) which has been implemented to many major projects, we have completed the engineering part. The construction, procurement, and pre-commissioning parts will be the next step in PIB development so that we can control and manage the related information in the whole project life cycle. Meanwhile, for the mobilized information at construction site, we have studied using mobile devices to improve the supervisors’ management efficiency, and a pilot test has been conducted. We will pursue with the additional functions and apply it to more projects in the near future. For the equipment/material purchase and control, we have developed a Procurement Management System (PMS-3) which includes 7 modules: Authority Management, Role Management, Inspection Module, Performance Analysis, Payment System, Shipping, and Project Status Control. They will be widely implemented in the coming year to enhance the procurement efficiency. Moreover, we have established piping surplus materials management system and the material control of instrument secondary cable length for design/construction, which can reduce the waste of materials and increase our cost competitiveness. In terms of technology expertise, we have established a management flow chart of Risk Based Inspection (RBI) and damage mechanism, and completed the research of a column design method of biaxial-bending square concrete-filled steel tube, hot box design for skirt supported vertical vessel at high temperature, the spherical vessel design system, the application of Variable-Frequency Drive (VFD) on motor, the modularization for construction, applied research on

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such technology and collection of the related information. Regarding the work automation, we continue developing rule based P&ID and Revit BIM 3D applications, and have also completed the automatic material take-off for instrument secondary cable length, piping design man-hour estimation system, insulation/painting work quantity calculation program, and a generation program for drawing with section-view dimension of underground cables and conduits. All of which greatly enhanced the quality, speed, and accuracy in EPC project execution.

2014 Outlook Looking ahead to 2014, we shall challenge ourselves for more growth and for the establishment of CTCI brand in the creation of our own blue ocean strategies while continuously perform excellent professional work which results in satisfied customers and employees proud of a job well done. Domestic

Aside from hydrocarbon projects from CPC Corporation, we also have many business opportunities with respect to power plants, MRT, steel works, air pollution prevention, water & waste water processing.

Overseas With respect to the Southeast Asia Market, aside from vying for projects related to refinery or petrochemical projects in Malaysia, we are focusing on investment programs by the PTT Group of Thailand both locally and in Vietnam; other business opportunities involve LNG receiving terminals to address the issue of gas shortage in Philippines and investment projects of the state-owned oil and gas company PT Pertamina in Indonesia under the 2017 Strategic Development Plan. In addition, we also foresee bright prospects in the fields of power plants, biomass power plants, urban waste-to-energy (WtE) plants, industrial WtE plants, air pollution prevention, power supply for metro trains and railway trackwork. As for Saudi Arabia, the key investments will be the upstream development such as oil field, gas field and Performance Chemicals. In Qatar, a number of newly built large-scale petrochemical plants will soon call for bids. And Kuwait and Oman will be where we shall explore new opportunities for refinery and petrochemical business in the future.

Subsidiaries In respect of business expansion for 2014, besides being more sensitive to the changing market, we will explore diversified and multi-dimensional development of our businesses. Jingding Engineering & Construction Co., Ltd. is advancing with stable and steady steps in Mainland China, showing commendable performances both in project implementation and operational revenues. While for Myanmar bordered by Thailand, with local government accelerating its liberalization policies, foreign manufacturers are attracted to actively enter this area. Taking advantage of its geographical location, CTCI Thailand can position itself as the base to enter Myanmar market. Southern Asia is another region requiring uninterrupted attention. In the future, we hope to sign cooperation agreement with Indian government and gradually extend the Group’s incinerator business to help resolving the predicament of waste disposal issues faced by the developing countries. Our Group subsidiaries can also expand new overseas business lines while meeting the demand. Regarding the future businesses for domestic subsidiaries, KD Holding Corporation will focus on developing new industries, such as reproduction of fuels from sludge recycling and plastic bottle recycling. By utilizing technologies of Taiwanese companies as the basis, combined with CTCI Corporation’s integrated experience of internationalization and the relevant expertise of local business partners, we have leveraged the best resources available to enter the global market. Advanced Control & Systems Inc. will continue to employ smart energy-saving technologies to further increase competiveness of the industries; under the current development direction, in addition to keeping on providing domestic factories with energy saving strategies and services, it also hopes to expand overseas business by following the internationalization policy of CTCI

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Corporation. Moving on to CTCI Machinery Corporation (CTCIM), with multiple developments on EPC project execution, CTCIM will expand its scope of business to developing new products. Resources Engineering Services Inc. will continue to work on land and real estate development. Furthermore, with the existing EPC capabilities, E&C Engineering Corporation will combine intelligence development to reinforce competitiveness and seek cooperation opportunities with foreign biomass technology providers to develop green energy industries.

Strategy and Blueprint Even that the business strategy prevents us from engaging in the price war of low profits and high risk and thus we witnessed a decline of business in 2013 after having consecutive years of steady growth; as the outcome points out, our decision has proven correct. Nevertheless, the decline in revenues and profit for the past year does present a vital warning to us: we must pursue enhancement of competitive edge with continuous innovation to locate our blue ocean amid the red ocean. Engineering companies are facing large scale shift when dealing with the environmental factors. CTCI must be tough to take up the challenge. For one thing, we must proactively explore new work procedures and innovative business mode to enhance our competitive edge and provide better products and service to clients; for another, we should start to explore the fields with less competition and higher profits. Although these are territories unfamiliar to us with unknown risks and high entry threshold, it is necessary that we do so to enhance our core capabilities so as to enter the blue ocean and in the meantime, using vertical integration to extend our service scope both towards upstream and downstream in the supply chain. In term of upstream developing, we need to take a step forward to enter the realm of basic design in addition to our current service scope that starts from detailed design. While for developing downward, we could take a step further to provide plant maintenance services to project owners beyond the current scope of construction and commissioning. Human capital is the deciding factor for our success whatever expanding business horizontally or vertically of our capabilities in project executions. Talent is the most important asset of CTCI, and all changes would only happen when the core competencies of our colleagues are enhanced. To meet the challenge of our opponents, everyone must be committed to upgrading soft power besides constantly enhancing one’s specialized expertise.

With constant engagement in self-challenge, CTCI has expanded business outside of Taiwan and into the international arena as an engineering company able to compete against other well-known enterprises in the global market. This is indeed the achievement solidified by the joint efforts of our working partners. However, the biggest enemy is never from the outside world. With huge potential in the global market yet to be explored, every single player has equal opportunities. Thus, we must challenge ourselves with the ambition and courage to outperform and bear in mind that there is no limit set for our growth. Let’s pursue innovation and make “Mission Impossible” into “Mission I’m possible” to create infinite possibilities for CTCI Group.

Sincerely,

John T. Yu Chairman & CEO

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II. Company Profile 2.1 Date of Incorporation: April 6, 1979 2.2 Company History

Year Milestones

2013/05 In terms of the overall ranking in the Top 650 Service Enterprises by CommonWealth Magazine 2013, CTCI ranked as 28th, and retained Top 1 spot in the contractor sector for years in a row. It also ranked as 26th in Top 50 Most Profitable Companies (net profit after tax).

2013/07 CTCI and its subsidiaries, Advanced Control & Systems Inc. and KD Holding Corporation ranked as "Grade A++" in the "2012 Information Disclosure and Transparency Rankings System".

2013/08 CTCI received “Green Growth Award” from BSI and listed 16th among Top 50 of the “Excellence in Corporate Social Responsibilities Award” for the group of large enterprises (with annual turnover exceeding NT$10 billion) by the CommonWealth Magazine.

2013/08 CTCI group ranked the 106th among “The Top 225 International Design Firms”, the 109th among “The Top 250 International Contractors”, the 140th among “The Top 150 Global Design Firms”, and the 137th among “The Top 250 Global Contractors” in the 2013 ENR Rankings.

2013/09 Consortium of CTCI Corporation, Mitsubishi Heavy Industries, LTD. and Mitsubishi Corporation won 2,600 MW Tung Hsiao Combined Cycle Power Plant Project from Taiwan Power Company.

2013/10 CTCI recognized as “Taiwan's Most Admired Company”, 2013 by CommonWealth Magazine.

2013/10 CTCI won the 2013 MOEA “Public Construction Excellent Quality Award” for CPC No. 6 Naphtha Cracker Project.

2013/11 CTCI recognized with the Services Industry Outstanding Award for the "Taiwan TOP 50 Corporate Sustainability Reporting Award" by the Taiwan Institute for Sustainable Energy.

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III. Corporate Governance Report 3.1 Organization 3.1.1 Organization Chart

2014.1.1

Chairman

Management Strategy Committee

President

Auditing Dept.

Board of Directors

SECRETARIAT OF THE BOARD

Infrastructure, Environment & Power Business Operations

(IEPBO)

Business DevelopmentDivision

Power & EnvironmentResources Division

Infrastructure Division Infrastructure

Dept. I

Infrastructure

Dept. II

Infrastructure Dept. Ⅲ

Power & EnvironmentResources Dept. Ⅰ

Power & EnvironmentResources Dept. Ⅱ

Power & EnvironmentResources Dept. Ⅲ

Vice ChairmanDevelopment Strategy

Committee

Executive ManagementOffice (EMO)

Administration & PRDivision

Corporate Administration Dept.

Human ResourcesDept.

Administration & General Services Dept.

Legal Affairs Dept

Investment

Relation Office

F /A & IR Division

Finance Dept.

Accounting Dept.

Hydrocarbon Business Operations (HBO)

Marketing & SalesDivision

Marketing & Sales

Dept. II

Marketing & Sales

Dept. III

Project Division Ⅰ

Marketing & Sales

Dept. IV

Marketing & Sales

Dept. I

Project Division Ⅱ

Proposal & Estimating

Division

Technology

Development Division

Project Division Ⅲ

Project Service

Division

Proposal Dept.

Estimating Dept.

EPC Operations(EPCO)

Engineering Division

Procurement Division

Construction Division

Civil & Building Engineering Dept

Mechanical & Equipment Engineering Dept

Instrumentation & Control System Engineering Dept.

Piping EngineeringDept.

Electrical Engineering Dept.

Subsidiaries Procurement Management Dept.

Construction Logistics Dept.

Construction Operation

Dept.

Project Engineering Manager Dept.

Logistics

Dept.

Subcontracting

Dept.

Purchasing Dept.

Project Procurement Management Dept.

Environment & ResourcesBusiness Operations

(ERBO)

KD Holding Corp.

Administration Center

Sino EnvironmentalServices Corp.

Leading Energy Corp.

HD ResourcesManagement Corp.

Fortune Energy Corp.

Innovation R&D Center

IT Division

QHSE Division

Overseas Subsidiaries

Domestic Subsidiaries

China Regional

Representative

IT Dept. I

IT Dept. II

HSE ManagementDept.

Quality Management

Dept.

Plant Maintenance Business Operations (PMBO)

Marketing & SalesDepartment

Maintenance Department

ReliabilityDepartment

Process TechnologyDivision Process Engineering

Dept.

Plant CommissioningDept.

Project Service

Division

Technology

Development

Division

Project Control Dept.

Estimating Dept.

Strategy and Business Development Dept.

Engineering Management

Division

Legal Affairs Division

Project SiteAdministration Dept.

Planning &HR

Division

LNG Project Division

Auditing Committee

Corporate Governance Committee

Remuneration Committee

QHSE & CSRCommittee

Contract Management Dept

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3.1.2 Operations and functions of the various departments

Department Operations & Functions

Immediate Board of Directors

Secretariat of The Board

Responsible for conducting the operations related to the boards of directors, shareholders meetings, commissions and employee stock warrant, stock affairs and M.O.P.S matters of the various member companies

Auditing Office Responsible for inspecting and reviewing defects in the internal control systems for the Company and its subsidiaries’ business continuity, providing timely recommendations for improvements to reasonably ensure the sustained operating effectiveness of the systems

Immediate President

QHSE Division Responsible for establishing the Company’s quality management system, guiding various projects to establish the quality activity documents, leading the quality auditing operation of various permanent departments and projects, and researching various corrective actions against quality

IT Division Responsible for defining the company’s information policy, planning and promoting the information systems, supervising the information dept. affairs of various affiliates

Innovation R&D Center

Responsible for developing new products, innovating procedures and developing new operating technology

Executive Management Office (EMO)

Legal Dept. Responsible for settling disputes, litigation, arbitration, non-litigation

Contract Management Dept.

Responsible for contract reviewing

Investment Relation Office

Responsible for liaising with shareholders, corporate investors and the media, and providing investors with timely and correct information about the company’s operation

Corporate Administration Dept.

Responsible for auditing the project cost, releasing commodity price information and helping the cost-related system development

Finance Dept. Responsible for supporting the project’s achievement of financial objectives, planning and executing important financial tasks and controlling the project risk to increase the company’s earnings

Accounting Dept. Responsible for verifying the company’s income, providing the actual accounting information in a timely manner, and well-founding various financial management systems

Strategy and Business Development Dept.

Responsible for group strategy and developing new business

Human Resources Dept.

Responsible for researching and drafting the strategies about selection, training, reservation and employment of talents throughout the company, planning promotional programs and setting objectives

Administration & General Services Dept.

Responsible for the general affairs about the office SHE and property management, supervising preparation of CTCI monthly journals and the company’s various promotional materials, managing internal and external customers, communicating with the media, public relations and supervising the sponsorship

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Project Site Administration Dept.

Responsible for the administrative general affairs of overseas and domestic construction project sites to ensure the operation of administrative management at the site

Hydrocarbon Business Operations (HBO)

Marketing & Sales Division

Responsible for developing the market, collecting business information, establishing cooperative relations, striving for bidding and winning opportunities, analyzing competitors’ status, planning strategic alliances, preparing qualification proposals and reviewing & suggesting tender documentation, participating in tender opening, negotiating for contracts and maintaining after-sales service

Project Division I Responsible for executing various projects in Taiwan and Mainland China

Project Division II Responsible for executing various projects in South East Asia and India

Project Division III Responsible for executing various projects in the Middle East

LNG Project Division

Responsible for developing and integrating LNG projects related business

Project Service Division

Responsible for controlling the various information about refining and petro-chemical projects, and achieving the objectives together with the projects

Proposal & Estimating Division

Responsible for defining the quotation strategies and work plans, organizing the quotation taskforce, drafting the project execution strategies and development execution plan, executing the project risk assessment, preparing technical and business tender documentation, clarifying and negotiating after tender submission, and preparing case closure report of the quotation

Technology Development Division

Responsible for collecting refining and petro-chemical production process technical information, providing technical advice, assisting projects/business to seek jobs, assisting the project planning test run taskforce of the Business Dept., executing the test run to complete projects as scheduled

Infrastructure, Environment & Power Business Operations (IEPBO)

Business Development Division

Responsible for developing the market, collecting business information, establishing cooperative relations, striving for bidding and winning opportunities, analyzing competitors’ status, planning strategic alliances, preparing qualification proposals and reviewing & suggesting tender documentation, participating in tender opening, negotiating for contracts and maintaining after-sale service

Infrastructure Division

Responsible for executing the projects and developing the business about MRT, HSR, light rail, steel plant, air separation plant, desulfuration and De-NOx

Power & Environment Resources Division

Responsible for executing the projects and developing the business about gas power plants, cogeneration plants, coal-fired power plants, incinerators, sewage and pure water treatment plants, water recycling and seawater desalination plants

Project Service Division

Responsible for controlling the various information about infrastructure and energy & environment projects, and achieving the objectives together with the projects

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Technology Development Division

Responsible for collecting infrastructure and energy & environment production process technical information, providing technical advice, assisting projects/business to seek jobs, assisting the project planning test run taskforce of the Business Dept., executing the test run to complete projects as scheduled

EPC Operations Engineering Management Division

Responsible for executing quality, HSE and cost control of project engineering management

Engineering Division

Responsible for coordinating and integrating the human resources, quotation, execution of projects, and multi-departmental technology of various design departments, and planning and executing the training programs for various projects

Procurement Division

Responsible for the procurement, inspection and transportation business, and supervising and confirming the quality/SHE requirements about all of the procurement documents

Construction Division

Responsible for supporting interaction of various business divisions and subsidiaries, and supervising the compliance of various quotations and project site operations with the company’s requirement

Process Technology Division

Responsible for Hydrocarbon and Infrastructure, Environment & Power project process design and commission

Plant Maintenance Business Operations

Responsible for hydrocarbon plants maintenance business

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3.2 Directors, Supervisors and Management Team 3.2.1 Directors and Supervisors

April 30th

, 2014

Title Name Date

Elected Term

(Years)

Date First

Elected (Rep. of juridical person)

Shareholding when Elected

Current Shareholding

(Rep. of juridical person)

Spouse & Minor

Shareholding

Shareholding by Nominee

Arrangement Experience (Education)

Other Position

Executives, Directors or Supervisors who

are spouses or within two degrees

of kinship

Shares % Shares % Shares % Shares % Title Name Relation

Chairman

John T. Yu (Rep. of GRQ Investment

Corporation)

Jun. 22, 2011

3

Feb. 8, 2002

(Feb. 9, 1999)

912,170 0.12 912,170

(2,881,471) 0.12

(0.38) 0 0 0 0

-PMD 61, Harvard Business School, USA -B.S., Electrical Engineering, National Taiwan University -Senior Vice President, CTCI Corporation -Executive Vice President, CTCI Corporation -President, CTCI Corporation

Note 1 - - -

Vice Chairman

John H. Lin (Rep. of Innovest

Investment Corporation)

Jun. 22, 2011

3

Feb. 8, 2002

(Jun. 25, 2002)

344,436 0.05 344,436

(497,355) 0.05

(0.07) 0 0 0 0

-MBA, EMBA Program in International Business Management, National Taiwan University -B.S., Mechanical Engineering, National Cheng Kung University -Vice President, CTCI Corporation -Senior Vice President, CTCI Corporation - Executive Vice President, CTCI Corporation - President, CTCI Corporation

Note2 - - -

Managing Director

Quintin Wu Jun. 22,

2011 3

Jun. 23, 2006

0 0 0 0 0 0 0 0 -Chairman, USI Corporation Note 3 - - -

Director Leslie Koo Jun. 22,

2011 3

Jun. 14, 2005

0 0 0 0 0 0 0 0

-MBA, Wharton School, University of Pennsylvania -Chairman, Synpac Pharmaceuticals Ltd. -Chairman, KG Telecommunications Co., Ltd.

-Chairman & President, Taiwan Cement Corporation -Chairman, Ho-Ping Power Company -Chairman, China Synthetic Rubber Corp. -Chairman, Synpac Inc.

- - -

10

Director Yancey Hai Jun. 22,

2011 3

Feb. 8, 2002

0 0 0 0 0 0 0 0

-MA, the University of Texas at Dallas -Country Manager, G.E. Capital -Vice President, Citibank, Taipei Branch -CEO, Delta Electronics Foundation

-Chairman, Delta Electronics Inc. -Director, Delta Networks, Inc.

- - -

Director Chih-Sen Lin

(Rep. of CTCI Foundation)

Jun. 22, 2011

3

Apr. 6, 1979

(Jun. 3, 2003)

60,862,051 8.11 60,862,051

(0) 8.11

(0) 0 0 0 0

-M.S., Institute of Natural Resources Management, National Taipei University -Director, Industrial Development Bureau, Ministry of Economic Affairs -CEO, CTCI Foundation

-Chairman, Taiwan Green Productivity Foundation

- - -

Director Chin-Ling Ma


Jun. 22, 2011

3

Apr. 6, 1979

(Jun. 23, 2006)

60,862,051 8.11 60,862,051

(5,778) 8.11

(0.00) 0 0 0 0

-B.S., National Chung Hsing University

-Accounting Officer, CTCI Foundation

- - -

Director

Hsuan-Chin Chou

(Rep. of Asia Crown Limited)

Jun. 22, 2011

3

Jun. 23, 2006

(Jun. 23, 2006)

540 0.00 540 (0)

0.00 (0)

0 0 0 0

-MBA, Harvard Business School -BA, University of Pennsylvania

-Managing Director, Morgan Stanley Asia Limited

- - -

Director

Takao Kamiji (Rep. of Crown

Asia 2 Investment Limited)

Jun. 22, 2011

3

Jun. 22, 2011

(Sep. 6, 2011)

500 0.00 500 (0)

0.00 (0)

0 0 0 0 B.S., Faculty of Economics, Seikei University, Japan

Executive Vice President and Operations Director, Infrastructure Project Operations

- - -

Supervisor Bing Shen Jun. 22,

2011 3

Apr. 10, 1999

0 0 0 0 0 0 0 0

-MBA, Harvard Business School -Executive Director, Morgan Stanley Group -Executive Vice President, China Development Industrial Bank -President, CDIB & Partners Investment Holding Corp.

-Independent Director, Far Eastern International Bank -Independent Director, Far Eastern New Century Corporation

- - -

11

Supervisor Jackson Hu Jun. 22,

2011 3

Jun. 22, 2011

0 0 0 0 0 0 0 0

-Ph. D., University of Illinois at Urbana-Champaign -MBA, Santa Clara University -Senior Vice President, S3,Inc. -President and CEO, SiRF Technology, Inc. -Chairman &CEO, UMC

-Chairman and CEO, NeoEnergy Microelectronics, Inc. -Director, AtopTech Inc.

- - -

Supervisor

David Liu (Rep. of Gintech

Energy Corporation)

Jun. 22, 2011

3

Jun. 22, 2011

(Jun. 22, 2011)

1,098,000 0.15 3,003,000

(0) 0.40

(0) 0 0 0 0

-MBA, Southern Illinois University Carbondale -Supervisor, Sino-American Silicon Products Inc. -CFO, FORD Lio Ho Motor Co., Ltd. + VP of Mazda & Jaguar Taiwan -Secretary General, CPMA Chinese Management Association -Lecturer, National Taipei University

Vice President, Gintech Energy Corporation

- - -

Note1: Chairman, CTCI Corporation / Chairman, CTCI Overseas Corp., Ltd. / Director, Advanced Control & Systems Inc. / Director, GRQ Investment Corporation / Director, Jing Ding Engineering & Construction Co., Ltd. / Director, Pan Asia Corporation / Director, TSC Venture Capital Corporation / Director, Gintech Energy Corporation / Director, Utech Solar Co., Ltd. / Director, Taiwan Cement Co., Ltd. / Supervisor, China Steel Chemical Corporation

Note2:

Vice Chairman, CTCI Corporation / Chairman, KD Holding Corporation / Chairman, CTCI (Thailand) Co., Ltd. / Chairman, CINDA Engineering & Construction Pvt., Ltd. / Deputy Chairman, CTCI Overseas Corp., Ltd. /

Director, CTCI Machinery Corporation / Director, E&C Engineering Corporation / Director, CIMAS Engineering Co., Ltd. / Director, Shang Ding Engineering & Construction Co., Ltd. /

Director, G.D. Development Corporation / Chairman, Universal Engineering (BVI) Corporation / Director, Superiority (Thailand) Co., Ltd. / Chairman, CTCI Singapore Pte. Ltd.

Note3: -Chairman, USI Corporation, China General Plastics Corp., Taita Chemical Co., Ltd, Asia Polymer Corporation, Union Polymer International Investment Corporation, Acme Electronics Corporation, USI Optronics

Corporation, Swanson Plastics Corporation, Swanson Technologies Corporation, Chong Loong Trading Co. Ltd., USIFE Investment Co., Ltd., CGPC Polymer Corporation, APC Investment Corporation, Taiwan United Venture Capital Corp., USI Management Consulting Corp., Taiwan United Venture Management Corporation, Thintec Materials Corporation, Acme Electronics (Cayman) Corp.

-Director, Taiwan VCM Corporation, China General Terminal & Distribution Company, USI (Hong Kong) Company Limited, National Datacomm Corporation, Swanlake Traders Ltd., USI International Corporation, Acme Components (Malaysia) Sdn. Bhd., Forever Young Co., Ltd., Curtana Company Limited, Swanson Plastics (Singapore) Pte. Ltd., Swanson Plastics (Malaysia) Sdn. Bhd., Swanson International Limited, Swanson Plastics (India) Private Limited, Swanson Plastics (Nantong) Co., Ltd., Swanson Plastics (Kunshan) Co., Ltd., Golden Amber Enterprises Ltd., ACME Electronics (BVI) Corporation, ACME Electronics (Kunshan) Co., Ltd., ACME Electronics (Guangzhou) Co., Ltd., Forum Pacific Trading Ltd., Taita (BVI) Holding Co., Ltd., APC (BVI) Holding Co., Ltd., CGPC (BVI) Holding Co., Ltd., CGPC America Corporation, China General Plastics (Hong Kong) Ltd., Krystal Star International Corporation, A.S. Holdings (UK) Limited, ASK-Swanson (Kunshan) Company Limited, Universal Semiconductor Corporation, Acme Ferrite Products Sdn. Bhd., Acme Magnetic Products Sdn. Bhd., Swanson Plastics (Tianjin) Co., Ltd., USI Education Foundation, USIM Corporation Sdn. Bhd., Cypress Epoch Limited, Ever Conquest Global Limited, Ever Victory Global Limited, Dynamic Ever Investments Ltd., USIG (Shanghai) Co., Ltd.

-President, Union Polymer International Investment Corporation, USI Management Consulting Corp. -CEO, USI Corporation, Asia Polymer Corporation, China General Plastics Corp., Taita Chemical Company Limited., Acme Electronics Corporation, USI Optronics Corporation -Executive Supervisors, Chinese National Federation of Industries

12

Major shareholders of the institutional shareholders April 30

th, 2014

Name of institutional shareholders Major shareholders of the institutional shareholders

GRQ Investment Corporation CTCI Corporation (100%)

Innovest Investment Corporation CTCI Corporation (100%)

CTCI Foundation N/A

Asia Crown Limited MSPEA Crown Holding Limited (100%)

Crown Asia 2 Investment Limited Chiyoda Corporation (100%)

Gintech Energy Corporation

Zhong-Wei Investment Corporation (3.73%), Management Board of Public Service Pension Fund (1.72%), Tong Shun Steel Co., Ltd. (1.42%), Tong Shun Investment Corporation (1.40%), Chien Shun Steel Co., Ltd. (1.07%), Barclays Capital Securities Limited-Barclays Capital Securities Limited SBL/PB(MTA) (0.92%), BankTaiwan Life Insurance Co., Ltd. (0.90%), Welsons International Investment Co., Ltd. (0.75%), Witty Corporation (0.74%), Pan, Wen-Hui (0.66%)

Major shareholders of the major shareholders that are juridical persons

April 30th

, 2014

Name of juridical persons Major shareholders of the juridical persons

CTCI Corporation

Chiyoda Corporation (9.32%), CTCI Foundation(8.11%), Chinatrust Commercial Bank Trust(7.08%), Fubon Life Insurance Co., Ltd. (6.32%), Government of Singapore(4.26%), JPMorgan Chase Bank N.A. Taipei Branch in custody for Emerging Markets Growth Fund, Inc.(2.86%), USI Corporation(2.02%), Asia Polymer Corporation(1.93%), Shin Kong Life Insurance Co., Ltd. (1.69%), China Development Industrial Bank(1.68%)

MSPEA Crown Holding Limited Morgan Stanley Private Equity Holdings (Cayman) Limited (100%)

Chiyoda Corporation

Mitsubishi Corp. (33.39%), The Master Trust Bank of Japan, Ltd. (Trust A/C) (6.16%), Japan Trustee Services Bank, Ltd.(Trust A/C) (5.7%), The Bank of Tokyo-Mitsubishi UFJ, Ltd. (3.47%), The Mitsubishi UFJ Trust & Banking Corp. (2.67%), BNP Paribas Securities (Japan) Limited (1.35%), Trust & Custody Services Bank, Ltd. (1.08%), State Street Bank and Trust Company(Trust A/C 505225) (0.99%), Meiji Yasuda Life Insurance Company (0.87%), The Bank of New York Mellon SANV 10 (0.82%)

Zhong-Wei Investment Corporation Pan, Wen-Yan (25%), Pan, Wen-Hua (25%), Pan, Wen-Fang (25%), Pan, Wen-Hui (25%)

Tong Shun Investment Corporation Wang, Pi-Jhang (30.62%), Wang, Jian-Jhih (8.82%)

Chien Shun Steel Co., Ltd. Tong Shun Investment Corporation (87.50%)

BankTaiwan Life Insurance Co., Ltd. Taiwan Financial Holding Co., Ltd. (100%)

Witty Corporation Witty Investment corporation (44.68%), Liu, Dong-Yuan (23.54%), Liu Zhang, Su-E (15.89%)

13

Professional qualifications and independence analysis of directors and supervisors April 30

th, 2014

Criteria Name

Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience

Independence Criteria(Note) Number of

Other Public Companies in

Which the Individual is

Concurrently Serving as an Independent

Director

An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University

A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company

Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company

1 2 3 4 5 6 7 8 9 10

John T. Yu - - V V V V V V 0

John H. Lin - - V V V V V V 0

Quintin Wu - - V V V V V V V V V V 0

Leslie Koo - - V V V V V V V V V V 0

Yancey Hai - - V V V V V V V V V V 0

Chih-Sen Lin - - V V V V V V V V 0

Chin-Ling Ma - - V V V V V V V V 0

Hsuan-Chin Chou - - V V V V V V V V V 0

Takao Kamiji - - V V V V V V V V 0

Bing Shen - - V V V V V V V V V V 2

Jackson Hu - - V V V V V V V V V V 0

David Liu V - V V V V V V V V V 0

1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the Company, its

parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate

amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares

ranking in the top five in holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business relationship with the

Company. 7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal,

financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, provided that this restriction does not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies Whose Stock is Listed on the TWSE or Traded on the GTSM.

8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company. 9. Not been a person of any conditions defined in Article 30 of the Company Law. 10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

14

3.2.2 Management Team April 30

th, 2014

Title Name Date

Effective Shareholding

Spouse & Minor Shareholding


Arrangement Experience(Education) Other Position

Managers who are Spouses or Within

Two Degrees of Kinship

Shares % Shares % Shares % Title Name Relation

President Andy Sheu

Jun. 23, 2009

525,781 0.07 1,966 0.00 0 0

-MBA, EMBA Program in International Business Management, National Taiwan University -B.S., Power Mechanical Engineering, National Tsing-Hua University -Managing Director, CTCI (Thailand) Co., Ltd. -Vice President, CTCI Corporation -Senior Vice President, CTCI Corporation -Executive Vice President, CTCI Corporation

-Director, KD Holding Corporation -Chairman, CTCI Overseas (BVI) Corporation -Director, CTCI Overseas Corp., Ltd. -Chairman, CTAS Corporation -Vice Chairman, CIMAS Engineering Co., Ltd. -Director, CTCI (Thailand) Co., Ltd. -Director, CTCI Arabia Ltd.

- - -

Executive Vice

President P. C. Chen

Oct. 28 , 2005

407,675 0.05 0 0 0 0

-MBA, EMBA Program in Finance, National Taiwan University -Master in Management, Asian Institute of Management, the Philippines -B.S., Mechanical Engineering, Chung-Yuan Christian University -Vice President, CTCI Corporation -Senior Vice President, CTCI Corporation

-Chairman, CTCI Engineering & Construction Sdn. Bhd. -Director, Pan Asia Corporation -Director, CTCI Chemicals Corporation -Director, Zhuhai Chung Ding Chemical Corporation -Supervisor, Gintech Energy Corporation

- - -

Executive Vice

President

Mark W. H. Yang

Jan. 1 , 2010

446,232 0.06 205 0.00 0 0

-MBA, Global EMBA of National Chengchi University -Mechanical Engineering, National Taipei Institute of Technology -Vice President, CTCI Corporation -Senior Vice President, CTCI Corporation

-Chairman, GRQ Investment Corporation -Director, Jingding Engineering &Construction Co., Ltd. -Director, CTCI (Thailand) Co., Ltd. -Director, CTCI Overseas (BVI) Corporation

- - -

15

Executive Vice

President

Michael Yang

Jan. 1 , 2013

368,347 0.05 0 0 0 0

-EMBA, Business Administration, National Taiwan University of Science and Technology -M.S., Mechanical Engineering, National Taiwan University -B.S., Mechanical engineering, Tatung University -Vice President, CTCI Corporation -Senior Vice President, CTCI Corporation

-Chairman, Innovest Investment Corporation -Director, Resources Engineering Services Inc. -Director, CTCI Chemicals Corporation -Director, Pan Asia Corporation -Director, Metro Consulting Service Corporation

- - -

Executive Vice

President

M. H. Wang

Jan. 1 , 2013

152,181 0.02 4,500 0.00 0 0

-MBA, Chulalongkorn University, Thailand -B.S., Civil Engineering, Feng-Chia University -Vice President, CTCI Corporation -Senior Vice President, CTCI Corporation -Deputy Managing Director, CTCI (Thailand) Co., Ltd. -Managing Director, CTCI (Thailand) Co., Ltd

-Chairman, CTCI Arabia Ltd. -Director, CTCI (Thailand) Co., Ltd. -Director, CTAS Corporation -Director, CTCI Overseas (BVI) Corporation

- - -

Senior Vice

President

Tien-Nan Pan

Jan. 1 , 2005

418,863 0.06 0 0 0 0

-MBA, EMBA Program in Finance, National Taiwan University -B.S., Business Administration, National Taiwan University -Vice President, CTCI Corporation

-Director, Innovest Investment Corporation

- - -

Senior Vice

President

Ching-Lin Hsu

Jan. 1 , 2012

532,949 0.07 360 0.00 0 0

-B.S., Mechanical Engineering, Tam-Kang University -President, Jingding Engineering & Construction Co., Ltd. -Senior General Manager, CTCI Corporation

-Chairman, Jingding Engineering & Construction Co., Ltd.

- - -

Senior Vice

President

Andrew Tsai

Jan. 1 , 2013

214,575 0.03 0 0 0 0

-Ph.D., Business Administration, Macau University of Science and Technology -M.S., Business Administration, Macau University of Science and Technology -Executives Program, Graduate School of Business Administration, NCCU -B.S., Feng Chia University -President, E&C Engineering Corporation -Chairman, Shang Ding Engineering & Construction Co., Ltd.

-Supervisor, Resources Engineering Services Inc. -Supervisor, Level Biotechnology Inc.

- - -

16

Senior Vice

President

Ming-Cheng Hsiao

Jan. 3 , 2013

12,000 0.00 0 0 0 0

-MBA, EMBA Program in Accounting, National Taiwan University -Ph.D., Chemical Engineering, National Tsin Hua University -M.S., Chemical Engineering, National Tsin Hua University -B.S., Chemical Engineering Tamkang University

-Supervisor, KD Holding Corporation -Director, Unisurpass Technology Co.,Ltd -Director, Unimighty Co., Ltd.

- - -

Senior Vice

President Brad Chen

Jul. 1 , 2013

10,000 0.00 0 0 0 0

-EMBA, Executive Master of Business Administration, National Central University -B.S. Mechanical Engineering, TamKang University -General Manager, Inner Mongolia Dongyuan Science and Technology Co., Ltd. -Senior Vice President, Oriental Petrochemical (Shanghai) Corp.

None - - -

Vice President

Teh-Ming Tao

Jan. 1 , 2006

218,564 0.03 0 0 0 0

-Ph.D., Chemical Engineering, TAMU, USA -M.S., Chemical Engineering, TAMU, USA -B.S., Chemistry, National Tsing-Hua University, Taiwan -Senior Research Engineer, Dowell Schlumberger (USA) SR-RE -CEO, CTCI Foundation -Project Manager, CTCI Foundation -Director, Industrial Safety and Health, CPC Corporation

-Supervisor, CTCI Chemicals Corporation

- - -

Vice President

C. F. Chiou

Jan. 1 , 2007

231,401 0.03 0 0 0 0

-M.S., Chemical Engineering, National Cheng Kung University -B.S., Chemical Engineering, National Central University, Taiwan -Senior General Manager, CTCI Corporation

-Supervisor, Innovest Investment Corporation

- - -

Vice President

Kai Lee Jan. 1 , 2009

215,750 0.03 0 0 0 0

-B.S., Chemical Engineering, Tunghai University -Senior General Manager, CTCI Corporation

-Director, Sino Environmental Services Corporation

- - -

17

Vice President

Bo-Wen Liu

Jan. 1 , 2009

298,049 0.04 0 0 0 0

-Ph.D., Environmental Engineering, National Sun Yat-sen University -M.S., Civil Engineering, University of Delaware, USA -B.S., Environmental Engineering, National Chung Hsing University -Managing Director, Shang Ding Engineering & Construction Co., Ltd. -Senior General Manager, CTCI Corporation

-Director, Innovest Investment Corporation

- - -

Vice President

Steve Jean

Jan. 1 , 2011

124,168 0.02 1,000 0.00 0 0

-M.S., Mechanical Engineering, National Central University -B.S., Civil Engineering , National Taipei Institute of Technology -General Director, CIMAS Engineering Co., Ltd.

-Director, GRQ Investment Corporation

- - -

Vice President

Chen-San Hu

Jun. 22 , 2011

328,616 0.04 50,000 0.01 0 0

-B.S., Department of Naval Architecture, National Kaohsiung Marine University -Senior General Manager, CTCI Corporation

-Director, Pan Asia Corporation - - -

Vice President

Jung-Yu Han

Jan. 1 , 2013

177,104 0.02 0 0 0 0

-B.S., National Taipei University of Technology -Senior General Manager, CTCI Corporation

-Supervisor, HD Resource Management Corporation

- - -

Vice President

Pao-Yao Pan

Jan. 1 , 2013

280,128 0.04 4,000 0.00 0 0

-M.S., Management, National Sun Yat-sen University -B.S., Mechanical Engineering, Tatung University -Senior General Manager, CTCI Corporation

-Director, E&C Engineering Corporation

- - -

Vice President

Po-Chien Wang

Jan. 1 , 2013

89,144 0.01 0 0 0 0

-LL.M., Legal Studies, University of Illinois Springfield -LL.B., Department of Law, Soochow University -Senior General Manager, CTCI Corporation

-Director, Fortune Energy Corporation

- - -

Vice President

M. G. Lee Jan. 1 , 2013

70,029 0.01 0 0 0 0

-M.S., Management, National Taiwan University of Science and Technology -B.S., Ming Chi University of Technology -Senior General Manager, CTCI Corporation

-Director, CTCI Engineering & Construction Sdn. Bhd.

- - -

18

Vice President

Ching-Hsiang Tseng

Jan. 1 , 2014

215,404 0.03 5,000 0.00 0 0

-B.S., Civil Engineering, National Cheng Kung University -Senior General Manager, CTCI Corporation

- Director, Resources Engineering Services Inc.

- - -

Vice President

Shen-Peng Liao

Apr. 1 , 2014

5,500 0.00 0 0 0 0

-M.S., Mechanical Engineering, National Taiwan University of Science and Technology -Mechanical Engineering, St. John's University of Technology -Executive Vice President, JDEC Corporation

- Director, Jingding Engineering & Construction Co., Ltd.

- - -

Vice President

Tsai-Ming Wang

Apr. 1 , 2014

16,024 0.00 355 0.00 0 0

-B.S., Mechanical Engineering, Tamkang University -Chemical Engineering, National Taipei Institute of Technology -Senior General Manager, CTCI Corporation

- Director, CTCI Arabia Ltd. - - -

Vice President

Min-Li Lee Apr. 1 , 2014

85,906 0.01 0 0 0 0

-M.S., Chemical Engineering, National Central University -B.S., Chemical Engineering, Chung-Yuan Christian University -Senior General Manager, CTCI Corporation

- Chairman, CIPEC Construction, Inc. - Chairman, ACCURACY International, Inc.

- - -

Vice President

Yu-Jen Chen

Apr. 1 , 2014

29,849 0.00 0 0 0 0

-M.S., Mechanical Engineering, National Chiao Tung University -B.S., Mechanical Engineering, National Chiao Tung University -Senior General Manager, CTCI Corporation

- Director, Sino Environmental Services Corporation

- - -

Vice President

Jing-Shing Wu

Apr. 1 , 2014

127,962 0.02 0 0 0 0

-Executive Master of Business Administration, National Sun Yat-Sen University -Chemical Engineering, National Taipei University of Technology -Senior General Manager, CTCI Corporation

-Supervisor, GRQ Investment Corporation

- - -

19

Vice President

& CFO Patrick Lin

Mar. 28, 2007

262,280 0.03 0 0 0 0

-MBA, EMBA Program in Finance, National Taiwan University -MBA, University of Massachusetts-Boston, USA -B.S., Business Administration, Tamkang University -Director, Financial Division, Coretronic Corporation -Manager, Financial Division, Powerchip Technology Corporation -Director, Societe Generale Corporate & Investment Banking

-Director, Shang Ding Engineering & Construction Co., Ltd. -Director, SINOGAL - Waste Services Co., Ltd. - Supervisor, Yuan Ding Resources Management Corp. -President, GRQ Investment Corporation -President, Innovest Investment Corporation

- - -

Accounting Officer

SH Lin Jun. 13,

2008 143,649 0.02 0 0 0 0

-EMBA, National Chengchi University -B.S., Accounting, Soochow University - Manager, CTCI Corporation

-Supervisor, Sino Environmental Services Corporation -Supervisor, G.D. Development Corporation

- - -

20

3.2.3 Remuneration of Directors, Supervisors, President, and Vice President Remuneration of Directors

December 31st, 2013; Unit: NT$ thousands; thousand shares

Title Name

Remuneration Ratio of total remuneration

(A+B+C+D) to net income (%)

Relevant remuneration received by directors who are also employees Ratio of total compensation

(A+B+C+D+E+F+G) to net

income(%)

Compensation paid to

directors from an invested

company other than the

company’s subsidiary

Base Compensation(A) Pension Fund(B)

Remuneration paid from distribution of

earnings (C) Allowances(D) Salary, Bonuses,

and Allowances (E) Pension Fund(F) Profit Sharing- Employee Bonus (G)

Exercisable Employee Stock

Options (H)

New Restricted Employee Shares

(I)

CTCI All

Consolidated Entities

CTCI All


CTCI All


CTCI All


CTCI All


CTCI All


CTCI All


CTCI All

Consolidated Entities CTCI

All Consolidated

Entities CTCI

All Consolidated

Entities CTCI

All Consolidated

Entities Cash Stock Cash Stock

Chairman (Note 1)

John T. Yu (Rep. of

GRQ Investment

Corporation)

4,000 4,472 0 0 11,400 11,400 10,296 11,733 1.57 1.68 20,652 23,532 1,780 1,780 769 0 769 0 6,894 6,894 0 0 2.98 3.27 0

Vice Chairman (Note 1)


Investment Corporation)

Managing Director Quintin Wu

Director Leslie Koo

Director Yancey Hai

Director Chih-Sen Lin (Rep. of CTCI Foundation)

Director

Chin-Ling Ma


Director

Hsuan-Chin Chou

(Rep. of Asia Crown

Limited)

Director

Takao Kamiji (Rep. of

Crown Asia 2

Investment Limited)

Note 1: NT$ 1,780 thousands are allocated to the pension plan in 2013.

21

Bracket

Name of Directors

Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)

CTCI All Consolidated

Entities CTCI

All Consolidated Entities

Under NT$ 2,000,000

Quintin Wu Leslie Koo

Chin-Ling Ma Hsuan-Chin Chou

Takao Kamiji



Takao Kamiji



Takao Kamiji



Takao Kamiji

NT$2,000,000 ~ NT$5,000,000 John H. Lin Yancey Hai

Chih-Sen Lin

Yancey Hai Chih-Sen Lin



NT$5,000,000 ~ NT$10,000,000 John T. Yu John T. Yu John H. Lin

NT$10,000,000 ~ NT$15,000,000

NT$15,000,000 ~ NT$30,000,000 John T. Yu John H. Lin

John T. Yu John H. Lin

NT$30,000,000 ~ NT$50,000,000

NT$50,000,000 ~ NT$100,000,000

Over NT$100,000,000

Total

22

Remuneration of Supervisors December 31

st, 2013 Unit: NT$ thousands

Title Name

Remuneration Ratio of total remuneration (A+B+C) to net income (%)

Compensation paid to supervisors from

an invested company other

than the Company’s subsidiary

Base Compensation(A) Remuneration paid from

distribution of earnings(B)

Allowances(C)

CTCI All


CTCI All


CTCI All


CTCI All


Supervisor Bing Shen

1,700 1,700 3,600 3,600 540 540 0.36 0.36 0 Supervisor Jackson Hu

Supervisor David Liu

(Rep. of Gintech Energy Corporation)

Bracket

Name of Supervisors

Total of (A+B+C)

CTCI All Consolidated Entities

Under NT$ 2,000,000 David Liu David Liu

NT$2,000,000 ~ NT$5,000,000 Bing Shen/ Jackson Hu Bing Shen/ Jackson Hu

NT$5,000,000 ~ NT$10,000,000

NT$10,000,000 ~ NT$15,000,000

NT$15,000,000 ~ NT$30,000,000

NT$30,000,000 ~ NT$50,000,000

NT$50,000,000 ~ NT$100,000,000

Over NT$100,000,000

Total

23

Compensation of President and Executive Vice President December 31

st, 2013; Unit: NT$ thousands; thousand shares

Title Name

Salary(A) Pension Fund (B) Bonuses and

Allowances (C) Profit Sharing- Employee

Bonus (D)

Ratio of total compensation

(A+B+C+D) to net income (%)

Exercisable Employee Stock

Options

New Restricted Employee Shares

Compensation paid to the

president and executive vice president from

an invested company

other than the company’s subsidiary

CTCI All


CTCI All


CTCI All


CTCI All

Consolidated Entities CTCI

All Consolidated

Entities CTCI

All Consolidated

Entities CTCI

All Consolidated

Entities Cash Stock Cash Stock

President Andy Sheu

18,914 20,354 4,755 4,755 20,243 20,243 1,008 0 1,008 0 2.74 2.82 5,633 5,633 0 0 0 Executive Vice

President

P. C. Chen

Mark W. H. Yang

Michael Yang

M. H. Wang

Note : NT$ 4,755 thousand are allocated to the pension plan in 2013.

Bracket Name of President and Executive Vice President

CTCI All Consolidated Entities

Under NT$ 2,000,000

NT$2,000,000 ~ NT$5,000,000

NT$5,000,000 ~ NT$10,000,000 Mark W. H. Yang/ Michael Yang/ M. H. Wang Mark W. H. Yang/ Michael Yang/ M. H. Wang

NT$10,000,000 ~ NT$15,000,000 Andy Sheu/ P. C. Chen Andy Sheu/ P. C. Chen

NT$15,000,000 ~ NT$30,000,000

NT$30,000,000 ~ NT$50,000,000

NT$50,000,000 ~ NT$100,000,000

Over NT$100,000,000

Total

24

December 31

st, 2013; Unit: NT$ thousands

Title Name

Employee Bonus - in Stock

(Fair Market Value)

Employee Bonus - in Cash

Total Ratio of Total

Amount to Net Income (%)

Executive Officers

Chairman John T. Yu

0 3,639 3,639 0.22

Vice Chairman John H. Lin

President Andy Sheu

Executive Vice President P. C. Chen

Executive Vice President Mark W. H. Yang

Executive Vice President Michael Yang

Executive Vice President M. H. Wang

Senior Vice President Tien-Nan Pan

Senior Vice President Ching-Lin Hsu

Senior Vice President Andrew Tsai

Senior Vice President Ming-Cheng Hsiao

Senior Vice President Brad Chen

Vice President Teh-Ming Tao

Vice President C. F. Chiou

Vice President Kai Lee

Vice President Bo-Wen Liu

Vice President Steve Jean

Vice President Chen-San Hu

Vice President Jung-Yu Han

Vice President Pao-Yao Pan

Vice President Po-Chien Wang

Vice President M. G. Lee

Vice President & CFO Patrick Lin

Accounting Officer SH Lin

25

3.2.4 Comparison of Remuneration for Directors, Supervisors, Presidents and Executive Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents and Executive Vice Presidents

Unit: NT$ thousands

Year Title

2012 2013

CTCI All Consolidated Entities CTCI All Consolidated Entities

Total remuneration

Ratio to net income (%)

Total remuneration


Total remuneration


Total remuneration


Directors

79,952 3.34 86,372 3.61 99,656 6.07 105,885 6.45 Supervisors

Presidents and Executive Vice President

Note：Compared to last year, overall remuneration has increased due to the addition of two executive vice presidents in 2013.

A. The compensation of Directors and Supervisors

Directors and Supervisors are merely paid traveling allowance, Directors/Supervisors remuneration and Committee remuneration annually. No other items are paid. Therefore, the compensation of each year keeps steady and the total amount paid is less than 3% of the annual net income after income tax. The traveling allowance is stipulated with reference to other public listed companies and companies within the similar industry field. The remuneration is stipulated per the section of profit allocation in Articles of Incorporation. The remuneration of Directors/Supervisors who hold concurrent positions in the affiliates is stipulated under the same standard.

B. The compensation of the President and Executive Vice Presidents The annual compensation includes payroll, awards, bonus and Directors’/Supervisors’ fee. Payroll is stipulated with the approval of the Personnel Committee, Remuneration Committee and the Board of Directors referring to the Company operation, budgeted increase rate and personal key performance. The overall incremental rates for the recent years are around 3%. Awards are stipulated with the approval of the Personnel Committee, Remuneration Committee and the Board of Directors referring to the Company operation, budget and personal key performance. The award of the recent years is similar. Bonus is stipulated per the section of profit allocation in Article of Incorporation. The total amount of bonus is distributed in proportion to the overall payroll, which corresponds to the bonus distribution of all the other employees. The Directors’/Supervisors’ fee (applicable to all affiliates) is at a fixed number with reference to the average level of the companies within the similar industry field.

C. Future risks association The standard, structure and system of the compensation of Directors, Supervisors, President and Executive Vice Presidents are subject to future risk factors and will not encourage Directors, Supervisors, President and Executive Vice Presidents to risk danger in desperation for pursuit of rewards in order to avoid the Company loss suffering even after the compensation payment.

26

3.3 Implementation of Corporate Governance 3.3.1 Board of Directors A total of 7 meetings of the board of directors were held in the previous period, Directors’ and Supervisors’ attendance was as follows: (As of March 31, 2014)

Title Name Attendance

in Person By

Proxy Attendance

rate (%) Remarks

Chairman John T. Yu

(Rep. of GRQ Investment Corporation)

7 0 100

Vice Chairman


Investment Corporation) 7 0 100

Managing Director

Quintin Wu 5 2 71.43

Director Yancey Hai 6 1 85.71

Director Leslie Koo 1 5 14.29

Director Chih-Sen Lin

(Rep. of CTCI Foundation) 7 0 100

Director Chin-Ling Ma

(Rep. of CTCI Foundation) 6 0 75

Director Takao Kamiji

(Rep. of Crown Asia 2 Investment Limited)

5 2 71.43

Director Hsuan-Chin Chou

(Rep. of Asia Crown Limited) 0 0 0

Supervisor Bing Shen 7 0 100

Supervisor Jackson Hu 7 0 100



6 0 85.71

Other mentionable items: 1. If there are the circumstances referred to in Article 14-3 of Securities and Exchange Act and

resolutions of the directors’ meetings objected to by Independent Directors or subject to qualified opinion and recorded or declared in writing, the dates of meetings, sessions, contents of motions, all independents’ opinion and the Company’s response to independent directors’ opinion should be specified: None

2. If there is Directors’ avoidance of motions in conflict of interest, the Directors’ names, contents of motions, causes for avoidance and voting should be specified: (1) Directors’ Names: John T. Yu, John H. Lin

Contents of motion: The 15th meeting of the 12th term Board of Directors (2013.08.13): Approval of the appointment of the Chairperson and Vice Chairperson of the Management Strategy Committee. Causes for avoidance and voting should be specified: Chairman John T. Yu and Vice Chairman John H. Lin recused themselves during discussion of and voting on this item because of the interested party relationship.

(2) Directors’ Names: John T. Yu, John H. Lin Contents of motion: The 15th meeting of the 12th term Board of Directors (2013.08.13): Approval of the prescription to the remuneration of the Chairman and Vice Chairman of the Company. Causes for avoidance and voting should be specified: Chairman John T. Yu and Vice Chairman John H. Lin recused themselves during discussion of and voting on this item because of the interested party relationship.

27

(3) Directors’ Names: John T. Yu Contents of motion: The 17th meeting of the 12th term Board of Directors (2013.12.20): Approval of equity participation on capital injection of Utech Solar Corporation. Causes for avoidance and voting should be specified: Chairman John T. Yu recused himself during discussion of and voting on this item because of the interested party relationship.

(4) Directors’ Names: John T. Yu, John H. Lin Contents of motion: The 17th meeting of the 12th term Board of Directors (2013.12.20): Approval of the remuneration of the management officers of the Company. Causes for avoidance and voting should be specified: Chairman John T. Yu and Vice Chairman John H. Lin recused themselves during discussion of and voting on this item because of the interested party relationship.

(5) Directors’ Names: John T. Yu, John H. Lin Contents of motion: The 17th meeting of the 12th term Board of Directors (2013.12.20): Approval of the amendment to the remuneration of the Chairman and Vice Chairman of the Company. Causes for avoidance and voting should be specified: Chairman John T. Yu and Vice Chairman John H. Lin recused themselves during discussion of and voting on this item because of the interested party relationship.

3. Measures taken to strengthen the functionality of the Board: (1) The Company has set up four functional committees and will also set up the audit committee in

2014. Please refer to the section 3.3.3 “Operations of the Company’s Nomination Committee or other committees of the Board of Directors”.

(2) From 2011, the Company has disclosed the major resolutions of the Board meeting voluntarily on the Company website.

(3) In accordance with the Articles of Association, the Company has purchased D&O insurance for directors and supervisors in order to reduce and diversify major damage risks of the Company and the shareholders.

3.3.2 Audit Committee (Attendance of Supervisors for Board Meeting) A. Audit Committee: None B. Attendance of Supervisors for Board Meetings A total of 7 meetings of the board of directors were held in the previous period, Supervisors’ attendance was as follows:

Title Name Attendance in

Person Attendance rate

(%) Remarks

Supervisor Bing Shen 7 100

Supervisor Jackson Hu 7 100



6 85.71

Other mentionable items: 1. Composition and responsibilities of supervisors:

(1) Communications between supervisors and the Company's employees and shareholders: The Company has disclosed supervisors’ contact information on Market Observation Post System (MOPS), that employees and shareholders have adequate access to the supervisors for communication.

(2) Communications between supervisors and the Company's Internal Auditing manager and CPA (e.g. the items, methods and results of the audits of corporate finance or operations, etc.): A. After having presented the audit and follow-up reports to Chairman, Internal Auditing

manager submits the same reports via e-mail or face to face for review by the supervisors on a

28

monthly basis. Supervisors communicate with Internal Auditing manager by oral discussion or phone or e-mail if they have any comments and there is no further issue after responding by Internal Auditing manager.

B. Internal Auditing manager attends the audit committee meetings and the board of directors meetings and delivers a report on audit operations. All the directors and supervisors have adequate access to how audit performs. The communication channel between supervisors and Internal Auditing manager functions well.

C. The CPAs present audit reports and findings to the members of audit committee and supervisors. CFO, Finance manager, Accounting manager and Internal Auditing manager attend the audit committee meetings and reply to supervisors immediately if they have any questions. The communication channel between supervisors and CPAs functions well.

2. If a supervisor expresses an opinion during a meeting of the Board of Directors, the dates of meetings, sessions, contents of motions, resolutions of the directors’ meetings and the Company’s response to supervisor’s opinion should be specified: None

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3.3.3 Corporate Governance Execution Status and Deviations from “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies”

Item Implementation Status

Deviations from “Corporate Governance Best-Practice

Principles for TWSE/GTSM Listed Companies” and reasons

1. Shareholding Structure & Shareholders’ Rights

(1) Method of handling shareholders’ suggestions or complaints

(2) The Company’s possession of a list of major

shareholders and a list of ultimate owners of these major shareholders

(3) Risk management mechanism and “firewall”

between the Company and its affiliates

(1) The Company has designated Spokesperson system and

Investment Relation Department to handle shareholders’ suggestions or complaints.

(2) The Company, pursuant to Article 25 of the Securities and

Exchange Act, compile and file the report monthly of the changes in the number of shares held by the insiders (including directors, supervisors, managerial officers, and shareholders holding more than 10% of the total shares of the Company) with the Competent Authority.

(3) Pursuant to “Regulations Governing Establishment of Internal

Control Systems by Public Companies”, the Company has established “Procedure of supervision and governance of subsidiaries”. Also, the Company has established relevant procedures between the Company and affiliates which be audited by Auditing Dept. and QHSE Division in order to implement total risk control with respect to subsidiaries.

None The major shareholder indicated in Article 19 refers to those who own 5% or more of the outstanding shares of the Company or the shareholding stake thereof is on the top ten list. When the Company provides shareholder registers in accordance with book closures carried out at the company by the shareholder services agent, the registers indicate the major shareholders controlling the Company. None

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2. Composition and Responsibilities of the Board of Directors

(1) Independent Directors (2) Regular evaluation of CPAs’ independence

(1) The Company has no independent director. There are three

natural person directors on the Board of Directors. The Company has amended the “Articles of Incorporation” regarding the regulation of Independent Directors in 2013 Annual General Meeting of the Shareholders.

(2) The Board of Directors has resolved to approve the “Certified

Public Accountants Performance Appraisal” in December 20 2012, for the thorough implementation of corporate governance, in order to assess the independence and competence of certifying accountants. The Accounting Department will conduct the assessment annually. And the results will be summarized in the form of written report and submitted to the Audit Committee and the Board of Directors after approved by the authorized supervisor by the end of the year. The company proposed the results of assessment of independence and competence in March 2014 to the Audit Committee and the Board of Directors .The CPAs of the PricewaterhouseCoopers, Shyh-Rong Ueng and Huei-Shyang Wang, have met all the criteria in the assessment, and thus, are qualified for the Company’s CPAs.

It plans to elect Independent Directors in 2014 Annual General Meeting of the Shareholders. None

3. Communication channel with stakeholders The stakeholders can communicate with the Company directly as needed.

None

4. Information Disclosure (1) Establishment of a corporate website to

disclose information regarding the Company’s finance, business and corporate governance status

(1) a) The Company has set up a Chinese/English website

(www.ctci.com.tw) to disclose information regarding the Company’s finance and business status and update information

None

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(2) Other information disclosure channels (e.g.,

maintaining an English-language website, appointing responsible people to handle information collection and disclosure, appointing spokespersons, webcasting investors conference)

regularly. b) The Company has disclosed information regarding the

organization and function of Internal Auditing Dept., “Rules Governing Procedure for Making of Endorsements or Guarantees”, “Rules Governing Acquisition and Disposal of Assets” and “Rules Governing Procedure for Loaning of Funds” on the Company website.

(2) a) The Company has set up a Chinese/English website and has

appointed Administration & General Services Dept. to handle information collection and disclosure.

b) The Company has appointed EVP P. C. Chen as the spokesperson, CFO Patrick Lin as deputy spokesperson and they are responsible for speaking to the public. The Company will hold investors conference presentation according to practical needs.

c) The sound recordings and presentations of investor conference have been posted on the Company website. The Company has disclosed finance and business information revealed in inventor conference on the Company website and the Market Observation Post System pursuant to regulations of Taiwan Stock Exchange.

None

5. Operations of the Company’s Nomination Committee, or other committees of the Board of Directors

(1) The Company’s Board of Directors has established “Corporate Governance Committee”, “Audit Committee”, “Quality, Security, Health, Environmental Protection and CSR Committee” and “Remuneration Committee” to complete the supervisory functions of the Board of Directors and to strengthen the management functions of the Board of Directors in order to improve the effectiveness and quality of the decision making. Please refer to “Other Important Information Regarding Corporate

The Company has established a Corporate Governance Committee whose tasks include the function of nomination committee.

32




Governance.” (2) In March 2014, the Company has proposed to amend the “Articles

of Incorporation” that the board will establish an audit committee from the next tem of the Board in lieu of supervisors.

6. If the Company has established corporate governance principles based on “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies”, please describe any discrepancy between the principles and their implementation: The Company has established and implemented in sequence the “Corporate Governance Principles” based on “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies”.

7. Other important information to facilitate better understanding of the Company’s corporate governance practices (e.g., employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors and supervisors): (1) The systems applied by the Company with respect to employees’ interest and right and care for employees comply with the relevant laws and

regulations, which are detailed in the work rules included in the employee manual, including but not limited to, Gender Equality Employment Act, sexual harassment prevention and settlement rules, disaster injuries/sickness indemnity and reimbursement, and marriage/funeral subsidy principles. The measures adopted by the Company include establishment of the nursery room, suggestions box, and sexual harassment prevention hotline, etc. Meanwhile, the Company trusts employees completely and fulfills the employees’ self-help systems.

(2) Directors’ and supervisors’ training records: Please refer to “Other Important Information Regarding Corporate Governance”. (3) Directors and supervisors will attend the board meetings except special reasons and the Company discloses information regarding the attendance of

directors and supervisors on Market Observation Post System. (4) If an interested party relationship exists between any director, or a juristic person the director represents, and any agenda item, and such relationship

is likely to prejudice the interests of the Company, the director will not participate in discussion of or voting on that agenda item, and shall recuse themselves during discussion of and voting on that item.

(5) The Company purchased D&O insurance for its directors and supervisors. (6) The requirements of supplier relationship management in CTCI are very strict. It need to accredited manufacturers from began to contract factories

construction project. And description the scope of work, construction specifications, project schedule, quality inspection and environmental, safety and health management etc. to vendors before quotes, to enable manufacturers to understand the scope of work and responsibilities and obligations of contractual. When signing the contract with vendors, the relevant terms of contract such as amount and payment of contact and the responsibilities, rights, obligations and penalties of two sides are notes in the contract for compliance basis of supplier. Due to the Company is financially soundness, we are receiving the accounts receivable of project on time that according to the contract terms of payment. Moreover, we

33




established the Payment System for vendors to check the payment process on line. CTCI cooperate with supplier in the principle of Integrity and fair and then to implement of complementary, harmony and common prosperity.

(7) “Implementation of risk management policies and risk measuring criteria” Risk management policies: Declarations: A variety of business operation risks might untowardly affect the Company in the accomplishment of operating targets. The efforts to look into and manage the risks will help the Company work out the right countermeasures accordingly, and, in turn, boost performance, assure stable growth and pursue the sustainability. Descriptions: The Company manages risks by means of building up appropriate business risk management system and assign the risk management system a part of the daily routines to assure effective risk management. For such purposes, the Company will: Set up the entrepreneurial risk management system which proves consistent with the Company’s strategies; Define the entire staff members and employees of the Company in their roles, powers and responsibilities in risk management and assure sound

communications with all staff members and employees; Draw up systematized entrepreneurial risk assessment method to check and assure that all risks that would significantly affect the Company are

identified; Assure that all business risk related information is transparent and is transmitted through effective channels; Integrate all potential business risk management related mechanisms into the daily routines. Business risk management is continual and uninterrupted entrepreneurial activities. Awareness and faithful implementation of the business risk management should be the duties and responsibilities of the entire staff members and employees of the Company. All staff members and employees of the Company shall faithfully perform respectively in their duties and responsibilities. The managements of all levels should lead all personnel by personal example by faithfully complying with the requirements under the risk management system. The Company regulates all departments concerned about their risk management performance and requirements exactly in accordance with “Guidelines of Risk Management”. Taking into account the varied control needs of various departments and projects, the Company develops the right documents fitting risk management operation. Further in accordance with the laws and regulations currently prevalent and characteristics of business operation, the Company classifies risks into managerial governance risks, administrative control risks and project implementation risks. In 2013, CTCI Corporation identified a total of 25 significant risk items and worked out a total of 140 risk rectification programs for all risk items. Till the end of 2013, the Company already completed a total of 40 risk rectification programs, with 100 rectification programs continually on-going.

(8) “Exquisite Works Award, Customer Satisfaction” is the standard of CTCI and provides customer assurance. In addition to complying with regulations of international standards (ISO, OHSAS), the Company has regularly designated a third party to authenticate credibility. In addition customer satisfaction is periodically surveyed particularly about Company work for clients being on schedule, within budget and of proper quality meeting environmental standards.

34




8. If the Company has implemented a self corporate governance evaluation or has authorized any other professional organization to conduct such an evaluation, the evaluation results, major deficiencies or suggestions, and improvements are stated as follows: The Company's "corporate governance self-assessment report" was disclosed on "Corporate Governance" under MOPS and the Company's website and the self-assessment results of most items comply with corporate governance norms. Also in 2014, the Company's will set up independent directors and audit committee to re-strengthen the function of the Board.

35

3.3.4 The Remunerate committee’s composition, responsibilities and operation: A. Remuneration Committee members’ information

Identity (Note1)

Criteria Name

Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience

Independence Criteria(Note 2) Number of

Other Public Companies in

Which the Individual is

Concurrently Serving as a member of

Remuneration Committee

Remark (Note 3)

An Instructor or Higher Position in a Department of Commerce,

Law, Finance, Accounting, or Other Academic Department

Related to the Business Needs of the Company in a Public or Private Junior College, College

or University

A Judge, Public Prosecutor, Attorney, Certified Public

Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination

and been Awarded a Certificate in a Profession Necessary for the

Business of the Company

Have Work Experience in the Areas of Commerce,

Law, Finance, or Accounting, or Otherwise

Necessary for the Business of the Company

1 2 3 4 5 6 7 8

Other Sidney Chow - - v v v v v v v v v 4 NO

Other Shean-Bii Chiu v - - v v v v v v v v 3 NO

Director (Note)

Yancey Hai - - v v v v v v v v 0 YES

Note: Mr. Yancey Hai is dismissed on Mach 20, 2014. Note 1: Please fill out director, independent director, or other. Note 2: 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the Company, its parent

company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount

of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking

in the top five in holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business relationship with the Company. 7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal,

financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. 8. Not been a person of any conditions defined in Article 30 of the Company Law. Note 3: Does the member comply with the provision of Article 6, paragraph 5 of the “Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a

Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter” if he/she is a director of the Company.

36

B. The state of operations of the Remuneration Committee a. This committee is comprised of two members is (as of March 31, 2014). b. The term of current committee members is from December 22, 2011 to June 21, 2014:

A total of 4 meetings of the Remuneration Committee were held in the previous period: (as of March 31, 2014)

Title Name Attendance in

Person By Proxy

Attendance rate (%)

Remarks

Convener Sidney Chow 4 0 100

Member Shean-Bii Chiu 4 0 100

Member Yancey Hai 4 0 100 Mr. Hai is

dismissed on Mach 20, 2014.

Other mentionable items: 1. If the board of directors declined to adopt, or modified, a recommendation of the remuneration

committee, the dates of meetings, sessions, contents of motions, resolutions of the Board Meeting and the Company’s response to remuneration committee’ opinion should be specified(If the remuneration passed by the board of directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified): None

2. If there are objections or reservations to any discussion matters or extraordinary motions expressed by any member of the Committee, recorded or provided in written forms, the dates of meetings, sessions, contents of motions, all members’ opinion and the Company’s response to members’ opinion should be specified: None

37

3.3.5 Corporate Social Responsibility (CSR)


Deviations from “Corporate Social Responsibility Best

Practice Principles for TWSE/GTSM Listed

Companies” and reasons

1. Exercising Corporate Governance (1) The Company declares its

corporate social responsibility policy and examines the results of the implementation.

(2) The Company establishes exclusively (or concurrently) dedicated units to be in charge of proposing and enforcing the corporate social responsibility policies.

(3) The Company organizes regular training on business ethics and promotion of matters prescribed in the preceding Article for directors, supervisors and employees, and should incorporate the foregoing into its employee performance appraisal system to establish a clear and effective reward and discipline system.

1. In the end of 2008, CTCI CSR Committee was established, under which three working groups were set up, including the Operational Governance group, Social Concern Group and Supply Chain Relationship Group. The CSR Committee administers the planning, promotion, implementation, data consolidation, review and improvement of the CSR work of CTCI.

2. In November 2009, CTCI established the CSR Promotion and Report Publishing Policy to define the organizational framework, responsibility and authority of the CSR Committee, and to specify the cautions and rules for promoting CSR within CTCI. When setting issues to be promoted within CTCI, these issues are considered in accordance with the AA1000 International Standards, including the concern for stakeholders and impacts on CTCI; and systematic procedures for determining such have been established.

3. In order to highlight the significance of CSR further, CTCI in 2010 incorporated the CSR activities into the “Quality, Health, Safety and Environment Committee” (QHSE Committee) and renamed as the “QHSE & CSR Committee” under the Board of Directors. This move has brought our CSR activities visible to the Board and gaining its full support as well.

4. To address the issue of environmental protection, the original Supply Chain Relationship Group was reorganized into Environmental Protection Group in 2013, demonstrating CTCI’s determination and commitment to the field.

5. Concerning corporate ethics education, CTCI has established the “Corporate Governance Principles,” “Code of Business Conduct and Ethics for the Board of Directors, Supervisors and Managers,” “Employee Code of Ethics and Conduct,” and “Purchasing Personnel Code of Ethics and Conduct.” Additionally, CTCI has been promoting the anticorruption policy out of integrity in order to prevent briberies and corruptions. Relevant courses are arranged in the orientation training given by the Department of Human Resources. In 2013, a total of 233 CTCI employees have received relevant training, and a total of 1,891 employees have completed the relevant training.

None

38





Also, the performance evaluation, reward and penalty policies are specified in Chapter 6 of the CTCI Employee Manual.

6. Trainings received by the Board of Directors and Supervisors: Please refer to “Other Important Information Regarding Corporate Governance.”

2. Fostering a Sustainable Environment

(1) The Company endeavors to utilize all resources more efficiently and uses renewable materials which have a low impact on the environment.

(2) The Company establishes proper environmental management systems based on the characteristics of their industries.

(3) The Company establishes dedicated units or assigns dedicated personnel for environment management to maintain the environment.

(4) The Company monitors the impact of climate change on its operations and should establish company strategies for energy conservation and carbon and greenhouse gas reduction.

1. As a member of the society, CTCI shall spare no pain to save energy and reduce carbon. In terms of engineering, CTCI has been making continual innovation of engineering technologies to reduce energy consumption and reduce pollution. In terms of routine affairs, CTCI urges employees to save energy and resources and emphasize the importance of saving paper, electricity, water and petroleum consumption.

2. In pollution control, we have implemented the oil hydrogenation and desulfurization and nitrogen selective catalytic reduction to significantly reduce pollutant emissions.

3. In paper usage, we continuously urge employees to reduce unnecessary printing. If it is necessary to print, employees are encouraged to print data on both sides of the paper to reduce paper consumption. In 2013, the total paper consumption at the headquarters was 107,958kg, which was increased by 26,368kg (32.3%) when compared with 2012. In 2013, the paper recycling volume was 26,540, at a recycling rate of 24.6%. Major causes for the increased paper consumption in 2013 are demand for paper output in the engineering design and quotations phases for large-scale projects (e.g. Lin Kou 2,400MW Coal-fired Supercritical Power Plant Project). In the year 2014, we will continuously reinforce the appeal for paper conservation with better implementation in double-sided printing and reuse paper which has been printed on one side.

4. In terms of electricity (power) saving, at CTCI headquarters, the total electricity consumption in 2013 was 6,311,179 kWh, with an annual accumulative consumption at 618.48kWh/unit floor area, increased by 2.4% compared with the previous year. Nevertheless, in contrast with the 2013 HSE objective for electricity saving, which was 6,560,737 kWh as requested, the total power consumption in 2013 was conserved by 3.8 %. In 2014, active power-saving measures will be made concerning air-conditioner system and elevators, two major equipments that consumed most electricity.

As CTCI is not a manufacturer, the “recycled material use”

clause is in applicable.

39





5. In water consumption, besides installing a large quantity of water-saving facets, we save water by controlling the water output volume and time and regular inspection of water usage. In 2013, the total water consumption was 21,002m3, with an annual accumulative consumption of 2.06m3/unit floor area, which was increased by 16.3% when compared with that of the previous year. Except for the increased staff number in 2013 (about 2.6 % growth), the augmented water consumption was also caused by the increased number of staff who do exercise during lunch break or after work that associated with more water intake and cleaning up practice that follows. In 2014, except for continuous promotion of water conservation, we would actively seek out effective measures for the related matter.

6. In addition to promoting energy saving concepts, CTCI also supported the Earth Hour activity and turned off all lights in CTCI from 20:30 to 21:30 on 23 March 2013. For one thing, it is an act to restate our support for energy saving and carbon reduction; for another, it is an example to encourage employees to save energy and reduce carbon from small things, in order to do our part to mitigate global warming.

3. Upholding Social Welfare (1) The Company complies with

relevant labor laws and regulations, protects the legal rights and interests of employees, and has in place appropriate management methods and procedures.

(2) The Company provides safe and healthy work environments for its employees, and organizes training on safety and health for its employees on a regular basis.

(3) The Company establishes the

1. At present, there are 3,228 employees in CTCI (new recruits in 2013 were at about 10.04%, totally 324 employees). In appointment and promotion, we have no limit or restriction of any kind or in any form on gender, ethnic origin, political orientation, and religion (belief). Those who are qualified for the post are given equal opportunities to fill the post. The equal rights and obligations of employees are specified in the Employee Handbook and continuously published on the corporate Intranet. In employment age, we strictly follow the regulatory requirements prescribed in the Labor Standard Law. That is to say, no child labor incident has happened or has been reported at CTCI. At CTCI, eliminating sexual harassment and sexual discrimination is a commitment. In order to prevent workplace sexual harassment, apart from specifying the relevant rules in the Employee Handbook and educating employees, we have established a hotline and a dedicated e-mail for employees to report and make suggestions for eliminating sexual harassment. In 2011, the “Sexual Harassment Complaint Handling Committee” was set up. Responsible for the handling of sexual

None

40





mechanism of regular personnel communication as well as notifies major operation change to personnel in a reasonable way.

(4) The Company establishes and discloses policies on consumer rights and interests and provides a clear and effective procedure for accepting consumer complaints.

(5) The Company cooperates with its suppliers to jointly foster a stronger sense of corporate social responsibility.

(6) The Company, through commercial activities, non-cash property endowments, volunteer service or other free professional services, participates in community development and charities events.

harassment cases or probable events, the committee should protect the confidentiality and privacy of the parties involved and set forth the findings within 3 months after the case is raised. The Sexual Harassment Complaint Handling Committee has 7 committee members in total with the chairman being the supervisor of the HR Division. Other committee members are selected from employees in different departments by executive vice president. The proportion of female committee members should not be less than 1/2. In 2013, there was no sexual harassment complaint or any illegal discrimination being raised.

2. Friendly Workplace and Promoting Workplace Health: In recent years, we have been promoting and implementing the behavior-based safety (BBS), and 5S management to arouse the employees’ awareness to personal safety and thereby to develop the organizational safety culture. In 2013, CTCI Health Center was established with health promotion programs offered by registered nurses and physicians aiming to promote workplace health and employee welfare by building up a safe and friendly workplace for employees.

3. To enhance the industrial relation and guarantee rights of the labor, CTCI sets up a “Employment Coordination Meeting” on a quarterly basis in 2010 (i.e., 4 meetings for a year). Important affairs of the quarter are reported or discussed in the meetings. Major issues raised are CTCI business development and the employees’ health, safety, welfare, salary, reward and punishments. The “Employment Coordination Meeting” is composed of 6 management representatives and 6 labor representatives. The executive vice president in the management representatives is the chairman to assign personnel familiar with business operations and labor situations as management representatives. The 6 labor representatives are elected by the constituency (units of business operations) and each term is 3 years. Wherein, supervisors above the rank of senior vice president are not allowed to serve as labor representatives, and female representatives must not be less than one-third of the total labor representatives. In internal communication, we hold “Forum with Executives” each quarter for employees to discuss with higher level supervisors face to face and raise opinions and questions about

41





company operation or management. The forum was firstly held in 2009, and has since attracted 50 to 60 employees each time. During the 2-hour discussion, employees raised questions enthusiastically and feedbacks are directly provided. At the forum, managers can hear the voice of employees, and employees can understand better about company policy and direction. As for basic level employees, CTCI has performed an Organization Climate Survey in 2012 to understand the satisfaction degrees of employees regarding organization system, culture, and supervisor leadership. Anonymous survey is also performed for employees resigned to understand satisfaction degree, through which, we can know better about employees’ opinions about CTCI. Furthermore, higher-level supervisors will also discuss with recruits regularly to understand opinions and ideas of them through face to face communications.

4. Quality is always one of the most important factors affecting the sustainable corporate operations and the biggest CTCI commitment to customers. In order to uphold quality, we have established quality management systems for project management, design, procurement, construction, manufacture, commissioning and maintenance cycles according to the ISO 9001:2008 international standard to ensure the construction outputs to meet the design and specification quality objectives. In 1996, we passed the ISO 9001 accreditation, and it has since been effectively operated.

5. We have also established the Customer Services Feedback Group chaired by the president to conduct the customer satisfaction survey on backlog or projects whose warranty is still valid on a semiannual basis. The Customer Services Feedback Group will discuss and review the survey results, analyze the causes of problems and suggest improvement actions. After being reviewed and approved by the president, these improvement actions will be delivered to the relevant departments for implementation to ensure that project quality conforms to the customer requirements and expectations.

6. We have stringent requirements for suppliers, and only suppliers passing the evaluation are given the opportunity to participate in the project. In order to encourage suppliers to fulfill CSR with due care, we added “CSR” as one of the evaluation items in 2011. This included employee human rights, employee benefits, employee safety, environmental

42





protection and energy conservation, and health management. We also emphasized the importance of ISO 14001:2004 and OHSAS 18001:2007 certifications.

7. We provide a safe part-time job opportunity with educational learning value to the children of disadvantaged labor families. Besides relieving the financial pressure of these families, we broaden their career horizon and accumulate experience for them with our education and training system. In 2013, we offered ten part-time job opportunities. To show concern for the disadvantaged in line with the “People with Disabilities Rights Protection Act,” we hire physically or mentally disabled citizens with working abilities. By the end of 2013, we have hired 28 physically or mentally disabled employees in excess of the regulatory requirements. We also spare no effort to support underrepresented groups. Besides inviting Genesis Social Welfare Foundation and Children Are Us Foundation to join and organize charity sales, we have established long-term cooperation with other social welfare groups. For example, we began cooperation with Syin-Lu Social Warfare Foundation in 2009 to clean the employee dormitory, hoping to provide another suitable job opportunity for the underrepresented group. For this, we were rated in 2011 the third in the “enterprise group” for priority purchase of products from the shelter factories for the disabled by the Department of Labor Affairs, Taipei City Government. In 2011, we began cooperation with Children Are Us Foundation by organizing Charity Bake Sale at the headquarters every two weeks. The event earned tremendous employee support. Employees bought bread from them to let those children feel the extra love and warmth from us.

4. Enhancing Information Disclosure (1) The measures of disclosing

relevant and reliable information relating to their corporate social responsibility.

(2) The Company produces corporate social responsibility reports disclosing the status of their

1. Being one of leading transparent companies, we participated in the “Information Disclosure and Transparency Ranking System” launched by TWSE and GreTai since 2004, and were ranked as a listed company with rather transparent information disclosure. After reformation of the evaluation system in 2006, we were ranked as a Grade A listed company in information disclosure. In 2010 and 2011, an A+ Grade for listed company in information disclosure was issued. Moreover, in 2012 and 2013, we were ranked as an A++ company, the top ranking a company can ever receive. The fact proved our rigor in corporate governance and effort to maintain information transparency.

None

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implementation of the corporate social responsibility policy.

2. CTCI has been proving correct, open and transparent important operational information for investors to make the correct choice. We also assign a spokesperson, organize conference calls, publish periodic reports, and make important announcements over the CTCI website to make active communication with investors. In addition to the corporate website, we also disclose relevant information over the Market Information Post System of the Taiwan Stock Exchange. Since March 2010, the English version of important announcements has been available. We also organize overseas investor conferences for foreign investors or participate in the investor conferences organized by securities companies, in order to improve and increase communication and exchange with overseas corporate investors.

3. In order to communicate with stakeholders and allow them to better understand our way of operation, we began publishing on an annual basis the CTCI CSR Report in 2008 to disclose the information concerning our materiality issues according to the GRI Guideline. We also regularly submit the report to the British Standards Institution (BSI) for verification. In fact, we are the first private business in Taiwan to have our CSR report pass the BSI verification. For more details, please consult Article 7 of this Report.

5. If the Company has established corporate social responsibility principles based on “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies,” please describe any discrepancy between the principles and their implementation: CTCI has fulfilled the three basic principles specified in the AA1000 CSR Standards: inclusivity, materiality and responsiveness, and we have won Type 2, accountability principle and performance information accountability assurance. Additionally, we were ranked by BSI of GRI G4.0 since 2013. The operations show no difference from the principle.

6. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices (e.g., systems and measures that the company has adopted with respect to environmental protection, community participation, contribution to society, service to society, social and public interests, consumer rights and interests, human rights, safety and health, other corporate social responsibilities and activities, and the status of implementation.): (1) Environmental Protection:

To strengthen and carry out environmental protection policies, we reorganized the CSR Committee and set up Environmental Protection Group in the beginning of 2013. Uniting senior staff in engineering project management and experts in related fields, we regulated guiding principles and work procedures for environmental protection with general manager of Innovation R&D Center serving as the group supervisor. The major responsibility of

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Environmental Protection Group is to strengthen and integrate environmental measures and convene meetings to track the execution progress. Moreover, CSR-related works are listed as Key Performance Indicators of each business operation unit of CTCI. With the focus being Green Engineering, CTCI is dedicating efforts to minimize pollution, and lower the impacts made to human health and the environment during the whole Life Cycle of engineering projects, including engineering (E), procurement (P), construction (C), commissioning (K), selection of materials and equipments, and maintaining work after plant turn over to the owners. All the procedures are taken with approaches that are economical and viable and that can realize multi-win situation among CTCI, cooperative partners, stakeholders and the social environment by enhancing the green competitiveness of the industry. To ensure projects undertaken to be environmentally friendlier, we have been engaging in technology R&D and new technology implementation to prevent air pollution, enhance energy efficiency rate (EER), and protect the ecosystem and environment. In air pollution control, the oil hydrodesulfurization technology and SCR deNOx technology are the most commonly used deSOx and deNOx technologies to significantly reduce pollutants emitting into the air. With experience in air pollution control accumulated for more than 22 years, besides applying the hydrodesulfurization technology and SCR deNOx technology, we select deNOx, deSOx, dust removal and wastewater treatment units based on the waste gas cleaning system (WGCS) or air quality control system (AQCS) concepts to reduce pollutant emissions from the off-site waste gas discharge outlet and flue, in order to provide customers with the best package equipment and optimal system operation design to significantly reduce GHG emissions. In terms of energy-saving technology for process industry, super clause process was utilized in sulphur recovery that greatly enhances efficiency and production capabilities. While for alkylation plants, we attained the goal of energy saving by using processing equipment design optimization and selection of high efficiency equipment. In energy-saving rotary machinery technology, high efficiency motors was adopted and matched with inverter variable-frequency drive; as for electrical engineering, high efficiency transformer and lamps were used to lower the energy consumption brought by long time operation. We started up business as a refinery contractor. When oil exhaustion and global warming became critical global issues, we began diversifying our operations; particularly in businesses relating to waste-to-energy. We will expand the scale of operations in this domain every year. While petrochemical is still CTCI’s major business, it is expected that revenue from this domain will decrease by 2020 and gradually replaced by that from waste treatment, incineration plants, solar energy, and air pollution controls . Also, we have started R&D on waste-to-resource technologies, such as reproduction of fuels from sludge recycling and plastic bottle recycling. In recent years, greenhouse gases (GHG) have brought global warming and climate change to the earth. As a citizen of the earth, we have been making hard endeavors to realize energy conservation and carbon reduction. For one thing, we advocate saving energy; for another, we encourage resource reuse, aiming to contribute our part to environmental protection. In terms of expenditures in environmental protection, Environmental & Resources Business Operations (ERBO) proposed four main projects in 2013, including the “green supply chain,” “energy conservation and carbon reduction,” “green consumption,” and “ecological conservation.” The total expense was about NT$330 million. To enforce carbon reduction, we began GHG inventory from the urban incineration plants operated on commission by ERBO.

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At present, of the six plants implementing GHG inventory, three of them have passed the GHG verification (ISO 14064-1), including Shulin, Xindian and Wuri plants. The Integrated Waste Disposal Center at Southern Taiwan Science Park passed the PAS 2050 carbon footprint verification, which was the first waste disposal agency in Taiwan to pass the carbon footprint verification. We reduced pollutant emissions with double efforts: source waste reduction and process waste reduction. Also, we properly monitored and tested the waste gases, wastewater, bottom sludge and fly ash produced in the process. All emission values have complied with the contract specifications. In 2013, the accomplishment rate was 100%. In terms of waste gases, we have installed the waste gas continuous emission monitoring system at all plants to monitor particulates, opacity, HCL, SOx, NOx, CO, and oxygen. We also connected to local environmental protection authority to send data to them at every 6 minutes to ensure information objectivity and transparency and thereby to minimize objections. In terms of wastewater, whether it is discharged from the boiler, the process, washing, daily life, and car washing, it is all recycled and reused on the plants to ensure “zero wastewater discharge.” In odor control, we have adopted the seal-up and negative pressure design for the refuse pit to ensure air flows internally. We have also installed suction fans on top of the pit to carry the odor to the incinerator to promote burning, in order to eliminate odor from leaking into the air. We test the bottom sludge and fly ash every season and every month. After determining they are nontoxic, we will ship the bottom sludge to the processing plant for recycling. Fly ash is packed and filled up at landfill after quality inspection. The overall power generation from incineration plants operated by ERBO of CTCI Group reached 1,124,250.6×1000 kWh,

increased by 6.7 % from 1,053,942.9×1000kWh from 2012; the CO2 emission in 2013 was reduced by 6.2 % compared with that of 2012; hence, we were

awarded the 2013 Energy Saving and Carbon Reduction Action Badge from Environmental Protection Administration. Additionally, the amount of waste disposal of incineration plants operated by ERBO was 2,067,018 tons, a 0.3 % increase than the 2,060,984 tons of 2012. We implemented the green building concept right from the beginning of building the CTCI Headquarters Building. We emphasize environmental greening, site water conservancy, energy saving, water conservation, resource recycling and other designs. Therefore, it is an all-round energy-saving green building. In fact, we won the National Architecture Gold Award for the planning and design and construction of the building. Besides the building itself, greening work was performed for the surroundings. For example, there is a park in front of the building and open space with trees on both sides for employees to enjoy leisure. According to the law, the building coverage rate in this district is 55%. However, we built only 48.9% to voluntarily increase the space for greening. At CTCI, we have preserved the old trees and green space originally standing there. When greening the space, we have specifically planted different kinds of native trees, such as the Formosan ash, Formosan beech, and the Taiwan incense cedar. We also adopted mixed plantation in multiple layers to preserve species diversity.

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Honor Events: Environmental Protection

Awards Description

MOEA Public Construction Excellent Quality Award

CPC No. 6 Naphtha Cracker EPC Work contracted by CTCI not only carried out the following major items, including quality management, progress management, energy saving & carbon reduction, disaster prevention & safety, environmental protection, durability, and innovative technology, but also fulfills the enterprise goals of performing excellent professional work and wining customer satisfaction. Thus, we received the “2013 Public Construction Excellence Award.”

Audit and Evaluation Outstanding Award and Excellence Award from Environmental Protection Administration (EPA)

The refuse incineration plants operated and managed by SESC won a total of five awards, including the Outstanding Award awarded to Hsintien Plant and the Excellence Award for Shulin Plant, Taoyuan Southern Plant, Miaoli Plant, and Tainan Plant. For six consecutive years, Hsintien Plant, while built comparatively earlier, has been awarded the highest honor of the award, which demonstrates its superior performance in equipment maintenance, process quality and power efficiency.

Energy Saving and Carbon Reduction Action Badge from EPA

Houli incineration plant operated and managed by SESC was certified with Supreme Quality Award for the 2013 Energy Saving and Carbon Reduction Action Badge from Environmental Protection Administration (EPA), Executive Yuen after passing document review and on-site assessment.

2013 Outstanding Unit Award of Southern Taiwan Science Park

Tainan Science Park Resource Recycling Center operated and managed by Sino Environmental Services Corporation (SESC) promotes the improvement programs based on environmental safety management system, upholds the principle of quality first, and while focusing on environmental protection and pollution prevention, continues to promote energy conservation and carbon reduction, water saving, and others, and was hence awarded the Outstanding Unit Award for its significant achievement

(2) Community Participation:

CTCI has devoted itself to engineering for over 30 years and has contributed considerably to the society. Recently, upholding the concept of “what is from the society should return to the society,” we took part in many charitable activities to fulfill corporate society responsibilities. After moving into the Shilin headquarters in March 2009, we has been holding CSR activities on an annual basis and invited charity organizations and community residents in Shilin and Tianmu to join us. Since 2011, we started long-term cooperation with Zhishan Cultural and Ecological Garden to hold Shilin Cultural Festival under the supervision of Ministry of Culture and Department of Cultural Affairs, Taipei City Government so as to promote local art activity and protect local environment and maintain a harmonious relationship with the neighborhood. Hopefully, we can foster regional development and improve the relationship between the enterprise and neighboring communities. Take the “The 2013 Shilin International Cultural Festival: Scenic Zhishan” as an

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example, we, for one thing, encouraged the CTCI colleagues to attend charity activities in the clubs basing on personal interests; for another, started the first step to promote culture rooting in local communities. We organized four themes in the activities, including music performance, photography competition, old-photo exhibition and tourist guide for local cultural center. The activity started from August, 2013 and lasted for two months. Besides musical shows, other activities include Zhishan Military Remains Guide Trip and Creative Campaign for Birds Drawing During the cultural festival, representatives from Department of Cultural Affairs, Taipei City Government and Shilin District Head joined the event in person. Local citizens, students and parents also participated in the event enthusiastically. As nearly all activities were fully packed, the whole event attracted about 36,367 audiences with 100 performers and 255 volunteers involved. In the future, we will continue the cooperation plan with Zhishan Cultural and Ecological Garden and combine the issues of environmental protection and energy saving with the activities and promote local culture so as to bring larger CSR effect into play. Honor Events: Community Participation

Award Description

Certificate of Appreciation and receiving of an art piece from the Wild Bird Society of Taipei

To foster regional development and improve the relationship between the enterprise and neighboring communities, we again cooperated with Zhishan Cultural and Ecological Garden to hold the “2013 Shilin International Cultural Festival : Scenic Zhishan,” and was awarded the Certificate of Appreciation and an art piece from its management unit, the Wild Bird Society of Taipei.

Certificate of Appreciation from Shilin District Health Center and Shilin Health Promotion Association

By showing active care for elderly living alone at a year-end activity, we were awarded a certificate of appreciation from Shilin District Health Center and Shilin Health Promotion Association.

(3) Contribution & Service to Society:

Over time we have been actively participating in engineering-related associations and institutes and public construction projects to contribute our engineering expertise and services. To us, it is very important to fulfill CSR by integrating our core expertise and advantages. In 2013, we participated in 54 engineering-related associations and institutes (76 for all subsidiaries and affiliates) and was the chairperson or supervisor of some of them. This way, we could promote the development of these associations and institutes with our professional knowledge and skills and thereby enhance the overall standard of the industry along with competitors. In order to encourage employees to improve related skills by participating in professional groups, we have established a subsidization mechanism. In 2013, we subsidized 652 employees (922 employees for all subsidiaries and affiliates s) to participate in respective professional groups with a total spending of NT$484,303 (NT$672,003 for all subsidiaries and affiliates). Believing that contributing expertise is the best way to requite society, CTCI Thailand (CTCIT) signed Minute of Understanding with IRPC Technological College (IRPCT) in 2013, under which 6-month internship program was offered to 14 students which covers trainings of engineering and construction

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works to fulfill corporate social responsibilities. Also, in collaboration with Tatung University, CTCI opened up courses on multinational engineering management to cultivate talent who are able to meet up challenges in a globalized era with its experiences of undertaking engineering projects. We aggressively participate in public constructions, aiming to enhance national development standard and bring citizens convenient life and transportation with the best construction quality, and thereby effectively accomplish the goal of energy conservation and carbon reduction. In public constructions, we engage in the MRT system, power plant and sewerage works. Although many projects are difficult in engineering, we make continuous breakthroughs and innovations to seek the optimal solutions. As a result, apart from winning approval from the government for engineering quality, we have made excellent contribution to Taiwan and other countries. Take resource recycling plants (or incineration plants) for example, ERBO operates eight incineration plants in Taiwan; each plant site created more than 60 local job opportunities, totally about 500 job opportunities in Taiwan for the employment of operation and maintenance personnel, security guards and janitors. In the annual repair period, these plants offer 60 more additional job opportunities for maintenance personnel. Altogether, we created more than 1,000 job opportunities a year. Honor Events :Social Contribution and Service

Award Description

The Appreciation Trophy from the Chinese Institute of Environmental Engineering

CTCI received the appreciation trophy from the Chinese Institute of Environmental Engineering due to its sponsorship in the Annual Meeting of Chinese Institute of Environmental Engineering.

The Certificate of Appreciation from Tatung University

Over ten executives of CTCI Corporation were awarded a certificate of appreciation from Tatung University for participating as lecturers in the interdisciplinary courses.

11th Golden Thumb Award for Private Participation in Infrastructure Projects

Tainan incineration plant, managed and operated by Sino Environmental Services Corporation (SESC), participated in "the 11th Golden Thumb Award for Private Participation in Infrastructure Projects" held by Ministry of Finance, R.O.C. This award is established to recognize outstanding contributions to promote the participation of private organizations, government agencies and consulting firms, hoping that through private participation in infrastructure projects, combined with private capital, operating efficiency and government authority, it may provide citizens with high quality public construction and services.

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2013 Outstanding Electrical Engineer Award

During his 25 years of service, Chen-Kuo, Huang, assistant chief engineer in CTCI, has engaged in design automation development, electrical design criteria and specifications. Additionally, he is actively involved in developing highly efficient engineering and management tools for the application of significant engineering project both at home and abroad, including hydrocarbon plants, power plants, and transportation systems. With the establishment of local technologies through his effective team leadership, CTCI is now able to undertake projects in power supply system of MRT and power stations long been dominated by foreign firms in turnkey contract. Equipped with the capabilities, CTCI is currently able to compete against other international rivals, such as that in the U.S., Europe, Japan and South Korea, which not only enhances the competitive edge of CTCI but also brings it more business opportunities. Such deeds demonstrated an engineer’s fulfillment of social obligation, and thus the award bestowed upon him duly reflects the recognition.

2013 Enterprise Project Management Benchmarking Award (EPBA) & PMI Taiwan Best Practice on Project Management Award

To recognize local enterprise with the best efforts and achievements in cultivating Project Management Professionals (PMP) as well as project team that has superb performance in project management, PMI Taiwan Chapter organizes the 2013 Enterprise Project Management Benchmarking Award (EPBA) and PMI Taiwan Best Practice on Project Management Award. In terms of the former, CTCI received the honor of golden quality award, while CPC Talin #10 SRU Project of CTCI won PMI Taiwan Best Practice on Project Management Award .

(4) Social and Public Interests:

“To spend what is taken from society in the best interest of society” is a common Taiwanese saying. At CTCI, we have made it a reality, wholeheartedly. We provide a safe part-time job opportunity with learning value to the children of disadvantaged labor families. Besides relieving the financial pressure of these families, we broaden their career horizon and accumulate experience for them with our education and training system. In 2013, we offered ten part-time job opportunities. To show concern for the disadvantaged in line with the “People with Disabilities Rights Protection Act,” we hire physically or mentally disabled citizens with working abilities. By the end of 2013, the physically or mentally disabled employees we have hired amounted to 0.01 % of the total employees, in excess of the regulatory requirements. We also spare no effort to support disadvantaged groups. Besides inviting Genesis Social Welfare Foundation and Children Are Us Foundation to join and organize charity sales, we have established long-term cooperation with other social welfare groups. For example, we began cooperation with Syin-Lu Social Warfare Foundation in 2009 to clean the employee dormitory, hoping to provide another suitable job opportunity for the disadvantaged group. For this, we were rated the third in “enterprise group” for priority purchase of products from the shelter factories for the disabled by the Department of Labor Affairs, Taipei City Government in 2011. In 2011, we began cooperation with Children Are Us Foundation by organizing the Children Are Us Bakery Charity Sales at the headquarters every two weeks. The event earned tremendous employee support. As a result, employees bought bread from them vigorously to let those children feel the extra love and warmth from us. In the future,

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we will continue to organize charity sales and promote products for Children Are Us Foundation. We understand that these disadvantaged children need more than materials. They need job opportunities for them to walk out of their mishap, to grow in interpersonal interactions, and to earn respect and a sense of achievement. Whether it is cleaning work or bread charity sales, we always pay more concern to them voluntarily. As some employees said, “When we can pay, we suddenly discovered that we are that rich!” Information technology advances every day. We need to upgrade hardware and software equipment regularly to ensure computer-aided design (CAD) quality. Therefore, we donate the replaced computer equipment to social charity groups for continuous use in order to reduce environmental burdens and to contribute to education in Taiwan. Over the years, we have donated replaced computer equipment with the assistance of Triple E-Institute (Triple E). After proper maintenance, Triple E delivers the equipment to the charity groups or individuals in need of them. In 2013, we donated a total of 263 PCs, 145 monitors, and 10 printers. We promise that we will continue to participate in social welfare plans to enforce social concern and fulfill CSR. Honor Events : Social Concern

Awards Description

Grade A Certificate of Hiring Sufficient or Excessive Number of Employees with Physical or Mental Disabilities from Taipei City Government

CTCI Group has been carrying out corporate social responsibility and offering job opportunities to persons with physical or mental disabilities and was awarded Grade A Certificate of Hiring Sufficient or Excessive Number of Employees with Physical or Mental Disabilities from the Department of Labor (DOL), Taipei City Government.

Certificate of Appreciation from Taipei Society for Traffic Safety

CTCI received a Certificate of Appreciation from Taipei Society for Traffic Safety for the sponsorship of its annual meeting.

Certificate of Appreciation from Children’s Hearing Foundation

CTCI received a Certificate of Appreciation from Children’s Hearing Foundation for sponsorship of its activities.

Certificate of Appreciation from Triple-E Institute

CTCI received a Certificate of Appreciation from Tripe-E Institute for supporting the second-hand computer recycling activity, “Your old computer, his new hope.”

(5) Consumer Rights and Interests:

Quality is one of the keys to sustainable operations and our most important commitment. We understand that however much cost we have saved and lead-time we have shortened, if we lose the trust of customers and the image and reputation of the corporation is damaged, nothing can compensate these. To ensure and assure quality, we have established the quality management system (QMS) for project management, design, procurement, construction, manufacture, commissioning and maintenance according to the ISO9001 International Standard so as to ensure the results of construction conform to the design and designated quality objectives. In fact, such quality management system already passed the certification in 1996 and has been effectively implemented. At CTCI, the rights and benefits of customers are our prime concern. Based on our project performance worldwide, we

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implemented domestic engineering projects with international ESH and quality standards so as to boost domestic engineering standards. These included the diesel hydrodesulfurization project of CPC, the crude oil conversion project of CPC Talin Plant, the Linyuan Third Naphtha Cracking Plant Upgrade Project, and FPC Mailiao Sixth Naphtha Cracking Plant Project. At CTCI, the “Exquisite Works Award Customer Satisfaction” concept is emphasized. We endeavor to meet all customer requirements and render full responsibility performance in each and every project. We also provide detailed and completed data books requested by customers after project completion. From engineering design to the operating manual of operation machinery, we provide the fullest possible instructions. Also, we value customer privacy. Apart from signing the Non-Disclosure Agreement with customers, we request all project members to follow the non-disclosure terms. The project manager is even requested to sign the Project Non-Disclosure Agreement. In 2013, no infringement of customer privacy of any kind or in any form or loss of customer data was reported. We also set up various channels, including telephone lines, e-mail and fax lines, to facilitate customers to communicate with us. Furthermore, we have discovered, collected, responded to, processed, and collated customer feedback according to the Reinforcement of Customer Service Policy. We have also established the Customer Services Feedback Group chaired by the president to conduct the customer satisfaction survey on backlog or projects whose warranty is still valid on a biannual basis. The Customer Services Feedback Group will discuss and review the survey results, analyze the causes of problems and suggest improvement actions. After being reviewed and approved by the president, these improvement actions will be delivered to the relevant departments for implementation to ensure that project quality conforms to the customer requirements and expectations. In addition to the feedback of external customers, we started the internal customer satisfaction survey in 2009. We also conducted a contrastive study with results in the external customer satisfaction surveys to exactly locate the problems, advantages and disadvantages of the organization and thereby to improve implemental ability and service quality of various work items and to continuously enhance customer satisfaction.

(6) Human Rights: At present, there are 3,228 employees (new recruits in 2013 were at about 10.04%, totally 324 employees). In appointment and promotion, we have no limit or restriction of any kind or in any form on gender, ethnic origin, political orientation, and religion (belief). Those who are qualified for the post are given equal opportunities to fill the post. The equal rights and obligations of employees are specified in the Employee Handbook and continuously published on the corporate Intranet. In employment age, we strictly follow the regulatory requirements prescribed in the Labor Standard Law. That is to say, no child labor incident has happened or has been reported at CTCI. At CTCI, eliminating sexual harassment and sexual discrimination is a commitment. In order to prevent workplace sexual harassment, apart from specifying the relevant rules in the Employee Handbook and educating employees, we have established a hotline and a dedicated e-mail for employees to report and make suggestions for eliminating sexual harassment. In 2011, we further established the Sexual Harassment Complaint Handling Committee to take over any sexual harassment or probable sexual harassment complaints. The Committee keeps all information confidential and conducts investigations without disclosing the parties involved, and renders an investigation report within three months after case acceptance. The Committee has seven members and is chaired by the head of HRD. Other members are selected from employees by the executive vice president in coordination with the department heads. Also, no less than half of the members should

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be female. There was no sexual harassment case reported in 2013. According to the Act of Gender Equality in Employment and the Regulations for Implementing Unpaid Parental Leave for Raising Children announced by the competent authorities, we have established the policy for “unpaid parental leave for raising children” in the Employee Handbook. According to our policy, employees, after working at CTCI for one full year, may apply for the unpaid parental leave for raising children for each child under 3 years of age until he/she is 3 years old; provided that the length of leave should not be longer than two years. In 2013,eleven employees applied for “unpaid parental leave for raising children” (including six female employees and five male employees). At present, we have outsourced the management of the CTCI Building to a professional property management company. In addition to the basic duty training, we have arranged education on human rights for the security guards. In the periodic training, we have also included the Unidentified Person Intrusion Standard Operating Procedure, Civilian Protest Standard Operating Procedure, CPR Administration Procedure, and Etiquette Education. Honor Events : Human Rights Protection

Awards Description

Certificate of Excellent Breastfeeding Room by Department of Health, Taipei City Government

CTCI headquarters building was awarded the Certificate of Excellent Breastfeeding Room by Department of Health, Taipei City Government (Duration: September 2013 to August 2016).

(7) Safety, Health & Environment Management:

The safety and health of employees, sub-contractors and customers and environmental protection are very important to us. Therefore, we have established an HSE management system according to the ISO 14001 and OHSAS 18001 international standards. Also, the president of CTCI proclaimed the organization’s HSE Policy Statement in 2005 and implemented the new management system applicable to the office area at the headquarters to all project construction sites. After passing the HSE management system accreditation the same year, we became the first domestic engineering contractor in Taiwan to pass both the quality and HSE management system certifications. In the end of 2008, we further passed Taiwan Occupational Safety & Health Management System (TOSHMS) certification emphasizing labor participation, procurement safety management, contracting management etc. Since 2012, CNS 15506:2011 Occupational Safety and Health Management System Certificate had been implemented replacing TOSHMS. We have even established the Labor Safety and Health Committee with a total of 26 committee members while 10 of them are labor representatives (38.5%) of members from employees. The committee holds a meeting every three months to review and discuss issues relating to labor safety and health management and communicates the results to all employees. In the engineering design phase for project execution, based on “Hazardous Work Place Review and Inspection Rules” and International Regulations (API, IEC), we conduct safety inspection reviews of work to improve operation safety and quality durability of the entire site. During construction for project, suppliers are requested to comply with the labor safety and health organization and personnel laws in the assembly work site and form a construction site labor safety and health organization to coordinate, communicate and resolve issues relating to labor safety and health of

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subcontractors and vendors. We also follow local laws and regulations when executing projects overseas. The QHSE Division of the headquarters draws up suitable management goals in accordance with the operation situation of the HSE management system every year. The execution progress of the goals set will be measured regularly and reported at the Management Review Meeting every quarter. In that way, the management level can allocate resources and make decisions according to the actual implementation status. Also, the overall HSE performance will be utilized as reference when setting up goals of the next year. With constant editing, we can set more effective goals and enhances the operation of HSE management system. To actually accomplish the annual HSE goals, we adopt various objectives to measure HSE performance at the project sites besides internal auditing. Considering the fact that the HSE performance at the project sites were only evaluated by HSE incident records as well as reward and punishment from external units, while management system, execution condition at the project sites, and corrective actions were not reviewed, the HSE Management Dept. hence formulated and optimized the HSE performance evaluation system for project site in 2013. Hopefully, the effectiveness and objectivity of the evaluation of the project HSE performance will be upgraded. To revise the evaluation indicators for HSE performance, except for consulting existing standards in CTCI and related indicators by Ministry of Labor and Public Construction Commission, we further combined international documents of HSE performance evaluation and examination standards for HSE rewards, and stipulated four major aspects to enhance the overall project HSE evaluation mechanism, including “management system,” “on-site execution,” “evaluation by project owners,” and “governing agencies.” Also, consulting to statistical model, we formulated respective weight of each indicator to enhance the effectiveness and objectivity of the overall evaluation mechanism for project HSE performance. Certifications CTCI has passed: CNS 15506:2011 Occupational Safety and Health Management System Certificate ISO 9001:2008 Quality Management System Certificate OHSAS 18001:2007 HSE Management System Certificate ISO 14001:2004 HSE Management System Certificate Honor Events : Quality, Health, Safety and Environment

Awards Description

Certificate of Appreciation of Saudi Aramco

CTCI was awarded Certificate of Appreciation for excellent HSE performance of IR-II Project in Saudi Arabia.

Zero Accidents Recognition Award and Construction Safety Merit Award by Singapore Land Transport Authority (LTA)

CTCI was awarded Zero Accidents Recognition Award for over 0.25 million accident-free man-hours and Construction Safety Merit Award by for Contract C910A—Trackwork for Downtown Line Stage 3, Singapore from LTA.

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Certificate of Accident Free Man-hours by Industrial Safety &Health Association of the ROC, Taiwan

CTCI Corp. took part in the Accident Free Man-hours activity hosted by Ministry of Labor and was award a Certificate of Accident Free Man-hours by Industrial Safety &Health Association of the ROC, Taiwan (with accumulated 24,265,866 accident free man-hours from Jan. 18, 2007 to May 31, 2013).

Second Prize of Quality, Safety, and Environment by Project and Construction Division, CPC Corporation

CPC Talin No.10 SRU Project won the “2013 Second Prize of Quality, Safety, and Environment” of excellent contractor above NT$ 2 hundred millions at CPC's annual competition.

Prize for Best Institution in the New Taipei City Industrial Safety Award

Shulin Refuse Incineration Plant in New Taipei City operated and managed by Sino Environmental Services Corporation (SESC) had participated in the selection of New Taipei City Industrial Safety Award organized by the Department of Labor Inspection, New Taipei City Government and was recognized with the Prize for Best institution.

Zero Incident Hours by Council of Labor Affairs

Xindian Refuse Incineration Plant operated and managed by SESC reached a zero incident record of 972.1 thousand hours while that of Tainan Science Park Resource Recycling Center exceeded over 601 thousand hours and was therefore awarded the “Zero Incident Hours Certificates” for an accumulated safety record of 7 accident free years issued by Industrial Safety and Health Association of Taiwan commissioned by the Council of Labor Affairs.

Prize of Finalist in Outstanding Public Infrastructure Project and Engineers for Promotion of Labor Safety and Health Management

CPC Talin No.10 SRU Project contracted by CTCI participated in the selection of Outstanding Public Infrastructure Project and Engineers for Promotion of Labor Safety and Health Management, 2013 and obtained the recognition of the Prize of Finalist.

Occupational Safety Management Award

The CPC 6,000CMD Linyuan Plant WWTP MBR EPC Project contracted by CTCI won the award of 2013 Occupational Safety Management hosted by Petrochemical Business Division, CPC Corp.

7. If the products or corporate social responsibility reports have received assurance from external institutions, they should state so below:

In order to communicate with stakeholders and allow them to better understand our way of operation, we began publishing on an annual basis the CTCI Corporate Sustainability Report in 2008 to disclose the information concerning our materiality issues and according to the GRI Guidelines. We also regularly submit the report to the British Standards Institution (BSI) for verification. In fact, we are the first private business in Taiwan to have our CSR report pass the BSI verification. In the G4.0 Guidelines proclaimed in 2014, the GRI advised organizations that they should disclose information more comprehensively and

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more transparently. Upholding the attitude of being responsible and the spirit of information accessibility and transparency, we disclosed corporate information using the G4.0 Guidelines. Also, we passed the AA1000:2008 High Level accreditation from BSI and the GRI G4.0 Guidelines. All these point to one thing: We were a pioneer reporter using the GRI G4.0 Guidelines. In addition, to ensure that stakeholders at home and abroad can better understand the actual CSR activities at CTCI and to connect with the world, contents of this report also correspond to the Ten Principles of the UN Global Compact, the Seven Core Subjects in ISO2600:2010, and the Determination Items of the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies. All these show that the CSR activities and information disclosed in this report are complete and transparent. With the concerted effort of Company’s managers and all employees, we won numerous awards and credits in 2013 to prove our achievements in promoting CSR. Honor Events : Corporate Social Responsibility

Award Description

Taiwan’s Most Admired Company, 2013

Selected from the 2000 major industries, CTCI is awarded the honor of Taiwan’s Most Admired Company in the engineering and construction industry by CommonWealth Magazine. The 2013 survey indicates that the awarded enterprises have superior performance in financial strength and multinationality, while creating high competitive barriers for technologies, innovation, and service quality. The fact that CTCI is able to stand out from the crowd proves that its pace in internalization and operational capabilities are well recognized.

Top 50 for Excellence in Corporate Social Responsibilities by CommonWealth Magazine

CTCI’s accomplishment of CSR activities was also recognized by the CommonWealth Magazine, listed 16th among Top 50 of the Excellence in Corporate Social Responsibilities Award this year for the group of large enterprises (with annual turnover exceeding NT$10 billion). With good performance in the aspects of corporate governance, social participation, and environmental protection, CTCI was able to stand out from various large enterprises and hence was well-recognized in its achievement in corporate sustainability.

Listed among the Top 2000 Enterprises by CommonWealth Magazine and retains Top 1 in the contractor sector

The ranking of Taiwan's 2013 Top 2000 Enterprises was based on the consolidated revenues and profits of the companies for 2012, a survey conducted by CommonWealth Magazine. In terms of the overall ranking in the Top 650 Service Enterprises, CTCI Corporation ranked as 28 this year with the rank furthered improved, and has retained Top 1 in the contractor sector for years in a row.

Green Growth Award from BSI CTCI has taken the initiative to provide credential information on economic, social, and environmental performance to the stakeholders over the past consecutive years. For such an achievement, it was honored with the “2013 Green Growth Award” in the annual meeting of BSI.

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Services Industry Outstanding Award by the Taiwan Institute for Sustainable Energy

CTCI received the Services Industry Outstanding Award for the Taiwan TOP 50 Corporate Sustainability Reporting Award and will continue to improve the transparency of corporate governance, achieve sound financial performance, build reliable quality engineering, and take care of employees to form a harmonious partnership, while focusing on environmental protection and waste reduction of resources.

Ranked as Grade A++ in the Information Disclosure and Transparency Rankings for TSEC-listed and GTSM-listed Companies

The Securities & Futures Institute, entrusted by Taiwan Stock Exchange Corporation and GreTai Securities Market, launched Information Disclosure and Transparency Ranking System (IDTRS) to evaluate the transparency of information for all listed companies in Taiwan since 2003. CTCI has been performing rather well regarding information disclosure, and was awarded Grade A+ in 2010 and 2011, while the top ranking Grade A++ was issued in 2012 and 2013. Such an achievement demonstrates that CTCI’s efforts have been well recognized.

57

3.3.6 The Ethical Corporate Management


Deviations from “Ethical Corporate Management Best Practice

Principles for TWSE/GTSM-Listed Companies” and reasons

1. To Establish good faith management policy and plan

(1) Good faith management policies are clearly specified in company regulations and external documents, and the implementation status of such policies committed by the company’s board of directors and the management.

(2) To Establish plans for guarding against dishonesty, and the implementation status of related SOPs, guidelines, and training courses.

(3) The measures to prevent bribe and illegal frog hair for operation activities with higher risk of dishonesty.

The Company established “Corporate Governance Principles”, “Ethical Corporate Management Best Practice Principles“, “Code of Ethics for Directors and Managers”, “Employee Code of Conduct”, and “Procurement Personnel Code of Conduct”. Directors, supervisors, and managers should obey the “Code of Ethics for Directors and Managers”, when they execute their function. All employees are requested to follow the laws and ethics standard and behavior principles clearly defined in “Employee Code of Conduct”.

None

2. Implementation of good faith management. (1) To avoid trading with counterparties with

records of dishonest behavior, and conclude the good faith clauses in commercial contract.

(2) The operation status of the unit for driving good faith management, and the supervision status of board of directors.

(3) To institute company policies to prevent from interest conflict, and provide a appropriate channel of making related statement.

(4) To set up effective accounting system, internal control system for good faith

The Company concluded the commerce contracts based on mutual trust and good faith management principles.

It is forbidden to have preferential affairs between employee and party. All employees can’t pay or ask for present, entertainment, commission or bribe for the advantage of themselves or third party, when they conduct their work.

The Company set up effective and faultless accounting system and internal control program to manage out of ordinary affairs. The Company also set up a specialized independent audit unit to execute yearly auditing plans and report the audit results to supervisors every month. The audit unit also has to attend the Audit Committee and Board of Directors to report the faults and extraordinary affairs in their internal control inspection, and push related units to take modified measures and trace the results quarterly until they are fully- modified.

None

58


Deviations from “Ethical Corporate Management Best Practice

Principles for TWSE/GTSM-Listed Companies” and reasons

management, and explain the internal auditing operation.

3. The implementation status of setting up impeachment channel, punishment and complaint system for violation of ethical corporate principles.

The Company established a special telephone line and an investigation team for graft and bribe events.

None

4. Information disclosure (1) Disclosure of good faith management

practice and other related information on website set up by the company.

(2) Other methods for disclosure of company information (such as setting up English website, assignment of designated personnel to collect company information and disclose it on website.)

The Company disclosed the related enterprise culture and operation guidelines on its website, and posted ”Corporate Governance Principles” in corporate governance zone under Investor Relations on website.

The contact way to the spokesman assigned by the Company has been disclosed on its website.

None

5. If the company has established its own ethical corporate principles based on “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies”, please describe the difference between operation practice and the ethical corporate principles: According to the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies”, the Company has obtained the approval of the “Ethical Corporate Management Best Practice Principles” (the “Principle”) in the 17th meeting of the 12th term Board of Directors in December 20th, 2013. The all employees, officers and board members should comply with the Principle.

6. Other important information to facilitate understanding of the company’s good faith management implementation.（e.g. To announce the company’s

determination to implement good faith management to business vendors, to invite vendors to participate in related education, and to review and revise the company’s ethical corporate management best practice principles）

The Company strictly observed “Company Act”,” Securities and Exchange Act”, related rules for TWSE/GTSM-Listed Companies and other commerce ordinances to implement the good faith management. Review and revise the Company’s internal management principles including “Corporate Governance Principles”, “Ethical Corporate Management Best Practice Principles“, “Code of Ethics for Directors and Managers”, “Employee Code of Conduct”, and “Procurement Personnel Code of Conduct” based on the development of ethical corporate management principles.

59

3.3.7 Corporate Governance Guidelines and Regulations Please refer to the Company’s website at www.ctci.com.tw

3.3.8 Other Important Information Regarding Corporate Governance A. Operations of the Functional Committees

a. Corporate Governance Committee (1) The key tasks of the Committee are: Plan the composition of the Board of Directors and the functional sub-committees/Review the qualifications of

Independent Directors/Review the plan for management succession/Review the company’s risk management policies and the standards for measuring risks and tracking of the major risk events/Discussion of the effects of the implementation of the company’s corporate governance system.

(2) This Committee is comprised of five members and has convened twenty-five meetings up to now. b. Audit Committee

(1) The key tasks of the Committee are: Review of the Company’s accounting system, financial situation and procedures for external financial reports/Appraisal of the Company’s implementation of internal controls/Inspect the Company’s compliance with laws and regulations/Review the Company’s acquisition or disposal of assets; derivatives trades; loan of capital to others; provision of endorsements or guarantees for others, and merger, spin-off, acquisition or transfer of shareholding, on the issue of whether the same is in compliance with laws, regulations, administrative orders and the Company’s internal regulations/Assess the independence and remuneration of external auditors.

(2) This Committee is comprised of three members and has convened thirty-five meetings up to now. c. Quality, Security, Health, Environmental Protection & CSR Committee

(1) The key tasks of the Committee are: To examine the uniformity of the strategies, laws and regulations concerning the company’s quality and security, health and environmental protection/To evaluate the suitability of the strategies concerning the company’s quality and security, health and environmental protection and to build a standard of measurement/To review the operating procedures and implementation of the company’s quality and security, health and environmental protection procedures/To review incidents of serious violation of quality, security, health and environmental protection standards and subsequent actions.

(2) This Committee is comprised of two members and has convened thirty meetings up to now.

60

B. Training program for directors and supervisors

Title Name Study period

Sponsoring Organization Course Training

hours From To

Chairman John T. Yu 2013/08/13 2013/08/13 Taiwan Corporate Governance Association

Fulfilling the function of independent directors and operation practice of Audit Committee

3.0

Vice Chairman

John H. Lin 2013/08/13 2013/08/13 Taiwan Corporate Governance Association


3.0

Managing Director

Quintin Wu 2013/08/15 2013/08/15 Securities & Futures Institute

Legal liability risks faced by Taiwan business globalization

3.0

Director Yancey Hai 2013/10/28 2013/10/28 Taiwan Corporate Governance Association

Taiwanese Corporate transformative game 3.0

Director Chih-Sen Lin 2013/08/13 2013/08/13 Taiwan Corporate Governance Association


3.0

Director Chin-Ling Ma 2013/08/13 2013/08/13 Taiwan Corporate Governance Association


3.0

Supervisor Bing Shen 2013/08/13 2013/08/13 Taiwan Corporate Governance Association


3.0

Supervisor Jackson Hu 2013/08/13 2013/08/13 Taiwan Corporate Governance Association


3.0

C. Internal Material Information Disclosure Procedure

According to the letter of Financial Supervisory Commission dated March 16th, 2009 and consulting with “Internal Material Information Disclosure Procedure” which is announced by Taiwan Stock Exchange Corporation (TWSE), the Company has obtained the approval of the “Regulations Governing Prevention of Insider Trading” (the “Regulation”) in the 9th meeting of the 11th term Board of Directors in August 28th, 2009. The Regulation is the code of conduct for Directors, Supervisors, Managerial personnel, and the persons regulated under the Regulation and it includes the scope of Internal Material Information, and the laws, regulations, orders that people forenamed should comply with. The Company has provided the Regulation to all Directors and Supervisors, and also disseminates all employees.

61

D. Code of Business Conduct and Ethics for the Board of Directors, Supervisors and Managers

CTCI CORPORATION

Code of Business Conduct and Ethics for the Board of Directors, Supervisors and Managers

Amended on December 19th

, 2007

Article 1 (Objectives & Basis) This Code is formulated and approved by the Board of Directors pursuant to Article 6 of the Company’s Regulations on Corporate Governance in the greatest interest of the Company and for its sustained development, as well as to allow parties with interest in the company understand the ethical and behavioral standards for the Board of Directors, Supervisors and Managers.

Article 2 (Scope) Managers herein shall refer to all officers with the rank of Vice President and above, and Heads of the Finance and Accounting Departments.

Article 3 (Duty of Care) Directors, Supervisors and Managers shall comply with the law and provisions of this Code and shall lead by example in promoting the implementation of this Code and pursuing the highest ethical and behavioral standards. Directors, Supervisors and Managers shall have a duty of care during the performance of their duties; furthermore they shall not harm the rights and interests of the company for the benefit of any specific individual or organization, but shall aim to pursue the Company’s overall interest. All shareholders shall be treated equally during the exercise of their duties by the aforesaid.

Article 4 (Prevention of conflict of interest) Where the motions/issues tabled in the Board of Directors’ meetings are related to the interest of a Director which may pose a risk to the interest of the company, the said Director shall recuse himself from voting; furthermore he shall not represent other Directors in the exercise of their voting rights. Directors, Supervisors and Managers who enter into sale and purchase deals or loans or engage in other legal actions for themselves or on behalf of others should reveal the relevant items and issues and provide explanations to the Audit Committee.

Article 5 (Prohibition of Business Competition) Directors and Supervisors engaging in businesses which are in competition with those of the Company shall give prior report to the Shareholders’ Assembly and obtain approval in accordance with the provisions of the Company Law; Managers engaging in businesses which are in competition with those of the Company shall give prior report to the Board of Directors and obtain prior approval in accordance with the provisions of the Company Law.

Article 6 (Prevention of Personal Benefits) Any information obtained by Directors, Supervisors and Managers during the execution of their duties in relation to procurement, supply, business cooperation, strategic alliance or other business opportunities or other opportunities of profits shall be provided to the company as a matter of priority so as to maintain the interests of the company; the same shall not be used for personal or third-party gains.

Article 7 (Fair Trading) Directors, Supervisors and Managers should treat all counterparties and its workers fairly. They are prohibited from obtaining information through manipulation, non-disclosure and abuse of powers and from making false representations or from undertaking other unfair trading practice to obtain irregular benefits.

62

Article 8 (Insider Trading) Directors, Supervisors and Managers who in the course of work have access to information which may have a serious impact on the Company’s share price, shall maintain strict confidentiality of the said information prior to its public disclosure in accordance with the Securities Trading Act; utilization of the said information for insider trading is strictly prohibited.

Article 9 (Duty of Confidentiality) Directors, Supervisors and Managers who in the course of work have access to confidential information shall maintain the same. Save where the said confidential information has been publicly disclosed or provided on a need-to-know basis in the execution of work, they shall not disclose the said confidential information to anyone or use the same for any non work-related purposes. The duty of confidentiality shall continue to apply after the termination of the service of the Directors, Supervisors and Managers. Information which should be kept confidential includes all staff and customer information, inventions, trade secrets, technical information, product designs, specialized manufacturing knowledge, financial and accounting information, intellectual property rights and other relevant undisclosed information which may be useful to competitors or which may cause harm to the Company or its customers upon the disclosure of the same.

Article 10 (Protection and Appropriate Use of Company Assets) Directors, Supervisors and Managers shall have the duty to protect the Company’s assets and shall ensure the appropriate and lawful use of such assets in the Company’s business to prevent affecting the profitability of the business.

Article 11 (Compliance with the Law) Directors, Supervisors and Mangers shall comply with the law and the relevant Company policies and rules.

Article 12 (Political donations and activities) Directors, Supervisors and Managers shall in every way avoid influencing company staff in respect of political donations, supporting specific political parties and/or candidates or their participation in other political activities.

Article 13 The company should strengthen internal propagation of work ethics and encourage employees to report any cases of violations and the person(s) involved. The identity of the reporter shall be protected and kept confidential by the company to prevent any possible threats.

Article 14 (Violations) Directors, Supervisors and Managers shall refer all violations to the Corporate Governance Committee for its deliberation; incidents of severe violations shall be submitted to the Board of Directors for its deliberations. The persons concerned may make representations and appeals to the Company’s Corporate Governance Committee.

Article 15 (Procedures for waiver) Directors, Supervisors and Managers may be exempted from being subjected to the regulations as stated herein, if they have valid reasons, subject to the review of the same by the Audit committee and subsequent approval by the Board.

Article 16 (Implementation and Disclosure Methods) This Code will be implemented after deliberations by the Corporate Governance Committee and resolution of the Board of Directors. It shall be forwarded to the Supervisors for filing and tabled at the Shareholders’ Assembly. Information on this Code shall be disclosed in the Company’s Annual Reports, prospectus and M.O.P.S. The same shall apply for revisions.

63

3.3.9 Internal Control System A. Statement of Internal Control System

64

B. Where a CPA has been hired to carry out a special audit of the internal control system, furnish the CPA audit report: None

3.3.10 In Recent Years until the Annual Report being Published, Violation of Internal Control Policies

by Employees：None

3.3.11 Major Resolutions of Shareholders’ Meeting and Board Meetings A. Major resolutions of Shareholders’ Meeting of Year 2013

Date Resolutions of Shareholders’ Meeting Action Arisen

2013.06.28

1. Adoption of the 2012 business report and financial statements.

The resolution has been made and implemented.

2. Adoption of the distribution of 2012 profits.

The ex-dividend date was on August 4th, 2013, and cash dividend was paid on August 23rd, 2013. In accordance with the total amount of common shares outstanding, the cash dividend per share had been adjusted to NT$ 2.8354347 actually.

3. Approval of the Amendment to the “Articles of Incorporation”.

The Company operates in accordance with the revision of the “Articles of Incorporation”.

4. Approval of the amendment to the “Rules Governing Procedure for Making of Endorsements or Guarantees”.

The Company operates in accordance with the revision of the “Rules Governing Procedure for Making of Endorsements or Guarantees”.

5. Approval of the amendment to the “Rules Governing Procedure for Loaning of Funds”.

The Company operates in accordance with the revision of the “Rules Governing Procedure for Loaning of Funds”.

6. Approval of the amendment to the "The Procedure for Acquisition and Disposition of Assets".

The Company operates in accordance with the revision of the “The Procedure for Acquisition and Disposition of Assets”.

B. Major resolutions of the Board Meeting in recent years until the annual report being published: 2013.03.28 Approval of the 2012 business report and financial statements.

Approval of the distribution plan of 2012 earnings. Approval of ”Statement of Internal Control System for the year 2012 “. Approval of the amendment to the “Articles of Incorporation”. Approval of the amendment to the “The Procedure for Acquisition and Disposition of

Assets”. Approval of the amendment to the “Internal Audit Systems”. Approval of the convening of the 2013 Annual General Meeting. Approval on funds lending to the subsidiaries by the Company. Approval of the Registration of a Branch in France. Approval of shares disposing of the subsidiary. Approval of the amendment to the Company’s “Procedure for Performance Assessment

and Remuneration Standard of the directors, supervisors and management officers”.

Approval of modification of the paid-in capital.

65

2013.05.10 Report for Change of CINDA Share Transfer. Consolidated financial reports as of March 31, 2013. Approval of amendment to the “Articles of Incorporation” of the Company. Approval of modification of the paid-in capital.

2013.06.28 Approval of the record date for common share dividend.

Approval of the employment of new management officer. Approval of the release non-competition restriction on new managerial officers of the

Company. Approval of equity participation in capital injection of a solar industry.

2013.08.13 Consolidated financial reports as of June 30, 2013.

Updated status of the investment of a solar industry. Approval of modification of the paid-in capital. Approval on funds lending to the subsidiaries by the Company. Approval of amendment to the “Management Strategy Committee Charter” of the

Company. Approval of the amendment to the Company’s “Procedure for Performance Assessment

and Remuneration Standard of the directors, supervisors and management officers”.

Approval of the appointment of the Chairperson and Vice Chairperson of the Management Strategy Committee.

Approval of the prescription to the remuneration of the Chairman and Vice Chairman of the Company.

2013.11.13 Consolidated financial reports as of September 30, 2013.

Updated status of the solar industry. Approval of equity participation in cash injection of the Subsidiary. Approval on funds lending to the subsidiaries by the Company. Approval of the amendment to the Company’s “Internal Control Systems”. Approval of modification of the paid-in capital.

2013.12.20 Updated status of the solar industry.

Approval of the budget of Year 2014. Approval of the Year 2014 Audit Plan. Approval on funds lending to the subsidiaries by the Company. Approval of equity participation on capital injection of the wafers Solar Factory. Approval of the adjustment of managerial officers. Approval of the release non-competition restriction on new managerial officers of the

Company. Approval of adoption the “Ethical Corporate Management Best Practice Principles” Approval of adoption the “Corporate Social Responsibility Best Practice Principles”. Approval of the remuneration of the management officers of the Company. Approval of the amendment to the remuneration of the Chairman and Vice Chairman of

the Company. 2014.03.28 Approval of the 2013 business report and financial statements.

Approval of the distribution plan of 2013 earnings. Approval of ”Statement of Internal Control System for the year 2013 “. Approval of amendment to the “Articles of Incorporation” and “Rules Governing the

Election of Directors and Supervisors“ of the Company.

66

Approval of amendment to the “Rules Governing Procedure for Making of Endorsements or Guarantees”, “Rules Governing Procedure For Loaning Of Funds” and “The Procedure for Acquisition and Disposition of Assets” of the Company.

Approval of the amendment to the “Internal Audit Systems”. Approval of the election of board directors for the 13th term. Approval of the removing the non-competition restrictions on board directors

newly-elected. Approval of the convening of the 2014 Annual General Meeting. Approval of nomination of independent director candidates for the 13th term. Approval of adjustment of the organization of the functional committees and

amendment to the internal rules. Approval of amendment to the remuneration of the directors and related procedure of

the Company. Approval on funds lending to the subsidiaries by the Company. Approval of equity participation in cash injection of the Subsidiary. Approval the establishment of a Joint Venture company in Malaysia. Approval of the adjustment of managerial officers of the Company. Approval of the release non-competition restriction on new managerial officers of the

Company. Approval of modification of the paid-in capital.

3.3.12 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to

Important Resolutions Passed by the Board of Directors None

3.3.13 A Summary of Resignations and Dismissals of the Company's Chairman, General Manager,

Principal Accounting Officer, Principal Financial Officer, Chief Internal Auditor, and Principal Research and Development Officer None

67

3.4 Professional fee of CPA 3.4.1 Information of CPA

Accounting Firm Name of CPA Audit Period Note

PriceWaterHouseCoopers Shyh-Rong Ueng Huei-Shyang Wang 2013.01.01-2013.12.31 -

3.4.2 Scale of professional fee of CPA Unit: NT$ thousands

Item Amount (NTD)

Audit Fee Non-audit Fee Total

1 Less than 2,000

2 2,000 ~ 4,000 (inclusive of 2,000)

3 4,000 ~ 6,000 (inclusive of 4,000) 5,628 2,696 8,324

4 6,000 ~ 8,000 (inclusive of 6,000)

5 8,000 ~ 10,000 (inclusive of 8,000)

6 More than 10,000 (inclusive of 10,000)

Unit: NT$ thousands

Accounting Firm Name of CPA Audit Fee

Non-audit Fee

Audit Period Note System Design

Registration Human

Resource Other

(Note1) Total

PriceWaterHouseCoopers Shyh-Rong Ueng

5,628 617 212 0 1,867 2,696 2013.01.01~2013.12.31

Note 1 Huei-Shyang Wang 2013.01.01~2013.12.31

Note 1: The (other) professional fees except audit fee include: transfer-pricing report NT$680 thousand, corporation income tax filing NT$637 thousand, translation fee of financial reports NT$550 thousand.

Note 2: In the event that the CPA firm is changed and the audit fees paid by the company in the concurrent year are lower than the preceding year: None Note 3: In the event that the audit fees paid by the company are reduced by 15% compared to the preceding year: None 3.5 Information on replacement of CPA : None 3.6 The Company's Chairman, President and Managers Responsible for Finance or Accounting who have Held a Post in the CPA Office or its Affiliated

within the Latest Year : None

68

3.7 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders Unit: Share

Title Name

2013 As of April 30, 2014

Holding Increase

(Decrease)

Pledged Holding Increase

(Decrease)

Holding Increase

(Decrease)

Pledged Holding Increase

(Decrease)

Chairman

GRQ Investment Corporation

0 0 0 0

Representative: John T. Yu

1,442,250 0 889,500 0

Vice Chairman

Innovest Investment Corporation

0 0 0 0

Representative: John H. Lin

98,500 0 (870,000) 0

Managing Director Quintin Wu 0 0 0 0

Director Yancey Hai 0 0 0 0

Director Leslie Koo 0 0 0 0

Director CTCI Foundation 0 0 0 0

Representative: Chih-Sen Lin

0 0 0 0

Director CTCI Foundation 0 0 0 0

Representative: Chin-Ling Ma

0 0 0 0

Director Asia Crown Limited 0 0 0 0

Representative: Hsuan-Chin Chou

0 0 0 0

Director

Crown Asia 2 Investment Limited

0 0 0 0

Representative: Takao Kamiji

0 0 0 0

Supervisor Bing Shen 0 0 0 0

Supervisor Jackson Hu 0 0 0 0

Supervisor

Gintech Energy Corporation

52,000 0 3,000 0

Representative: David Liu

0 0 0 0

Managerial Officers John T. Yu 1,442,250 0 889,500 0

Managerial Officers John H. Lin 98,500 0 (870,000) 0

Managerial Officers Andy Sheu 600,250 0 (520,000) 0

Managerial Officers P. C. Chen (788,000) 0 93,000 0

Managerial Officers Mark W. H. Yang 147,000 0 0 0

Managerial Officers Michael Yang 17,750 0 163,250 0

Managerial Officers M. H. Wang 43,750 0 33,000 0

Managerial Officers Tien-Nan Pan 100,000 0 61,000 0

Managerial Officers Ching-Lin Hsu 113,250 0 97,000 0

Managerial Officers Andrew Tsai 54,825 0 159,750 0

Managerial Officers Ming-Cheng Hsiao 6,000 0 6,000 0

Managerial Officers Brad Chen Note1 0 0 10,000 0

Managerial Officers Teh-Ming Tao 5,000 0 0 0

69

Managerial Officers C. F. Chiou 3,000 0 0 0

Managerial Officers Kai Lee 61,500 0 51,250 0

Managerial Officers Bo-Wen Liu (33,000) 0 69,250 0

Managerial Officers Steve Jean 39,198 0 7,220 0

Managerial Officers Chen-San Hu 32,750 0 0 0

Managerial Officers Jung-Yu Han 82,104 0 0 0

Managerial Officers Pao-Yao Pan 250,128 0 17,000 0

Managerial Officers Po-Chien Wang 44,803 0 17,500 0

Managerial Officers M. G. Lee 20,814 0 10,000 0

Managerial Officers Ching-Hsiang Tseng Note2 0 0 145,444 0

Managerial Officers Shen-Peng Liao Note3 0 0 0 0

Managerial Officers Tsai-Ming Wang Note3 0 0 0 0

Managerial Officers Min-Li Lee Note3 0 0 0 0

Managerial Officers Yu-Jen Chen Note3 0 0 0 0

Managerial Officers Jing-Shing Wu Note3 0 0 33,000 0

Managerial Officers & CFO

Patrick Lin 34,500 0 75,250 0

Accounting Officer SH Lin 12,250 0 8,500 0

Note1: On Board on July 1, 2013 Note2: On Board on January 1, 2014 Note3: On Board on April 1, 2014 3.7.1 Shares Trading with Related Parties

None

3.7.2 Shares Pledge with Related Parties None

70

3.8 Information Disclosing the Relationship between any of the Company’s Top Ten Shareholders

Name Shareholding

Spouse & Minor


Arrangement

The relationship between any of the Company’s Top Ten Shareholders

Remarks

Shares % Shares % Shares % Name Relation

Chiyoda Corporation

69,994,000 9.32 0 0 0 0 None None

CTCI Foundation 60,862,051 8.11 0 0 0 0 None None

Chinatrust Commercial Bank Trust

53,170,706 7.08 0 0 0 0 None None

Fubon Life Insurance Co., Ltd.

47,467,000 6.32 0 0 0 0 None None

Chairman: Peng-Yuan Cheng

0 0 0 0 0 0 None None

Government of Singapore

31,946,562 4.26 0 0 0 0 None None

JPMorgan Chase Bank N.A. Taipei Branch in custody for Emerging Markets Growth Fund, Inc.

21,435,000 2.86 0 0 0 0 None None

USI Corporation 15,180,656 2.02 0 0 0 0 Asia

Polymer Corporation

Subordinate company of

USI Corporation’s

subsidiary

Chairman: Quintin Wu

0 0 0 0 0 0 Asia

Polymer Corporation

Chairman of Asia Polymer Corporation

Asia Polymer Corporation

14,496,107 1.93 0 0 0 0 USI

Corporation

Parent company of

Asia Polymer Corporation’s shareholder

Chairman: Quintin Wu

0 0 0 0 0 0 USI

Corporation

Chairman of USI

Corporation

Shin Kong Life Insurance Co., Ltd.

12,724,000 1.69 0 0 0 0 None None

Chairman: Tung-Chin Wu

0 0 0 0 0 0 None None

China Development Industrial Bank

12,605,000 1.68 0 0 0 0 None None

Chairman: Mu-Tsai Chen

0 0 0 0 0 0 None None

71

3.9 Shareholdings of the Company Directors, Supervisors, Managements, and Direct and Indirect Investments of the Company in Affiliated Companies

As of April 30, 2014

Affiliated Company

Investment of the Company

Directors, Supervisors,

Managements Direct and Indirect

Investment of the Company

Total Investment

Share % Share % Share %

E&C Engineering Corporation 59,099,624 97.09 111,083 0.18 59,209,707 97.27

Resources Engineering Services Inc.

16,765,048 93.14 1,000 0.01 16,766,048 93.15

Advanced Control & Systems Inc. 11,444,842 49.58 356,380 1.54 11,801,222 51.12

GRQ Investment Corporation 169,000,000 100.00 0 0.00 169,000,000 100.00

Innovest Investment Corporation 10,000,000 100.00 0 0.00 10,000,000 100.00

KD Holding Corporation 38,457,105 59.99 322,156 0.50 38,779,861 60.49

CTCI (Thailand) Co., Ltd. 1,249,500 49.00 1,300,500 51.00 2,550,000 100.00

CTCI Overseas (BVI) Corporation 6,740,000 100.00 0 0.00 6,740,000 100.00

CTCI Engineering & Construction Sdn. Bhd.

450,000 60.00 300,000 40.00 750,000 100.00

CTCI Arabia Ltd. 500 50.00 500 50.00 1,000 100.00

CTCI Machinery Corporation 12,100,000 100.00 0 0.00 12,100,000 100.00

SINOGAL - Waste Services Co., Ltd. *0 30.00 *0 30.00 0 60.00

CTAS Corporation 100,000 100.00 0 0.00 100,000 100.00

Pan Asia Corporation 37,530,631 34.27 0 0.00 37,530,631 34.27

Core Pacific City Co., Ltd. 36,000,000 2.26 0 0.00 36,000,000 2.26

CDIB & Partners Investment Holding Corp.

27,000,000 2.48 0 0.00 27,000,000 2.48

HENG KENG Corporation 20,000 0.34 0 0.00 20,000 0.34

Metro Consulting Service Corp. 300,000 6.00 0 0.00 300,000 6.00

CTCI Singapore Pte., Ltd. 5,100,000 100.00 0 0.00 5,100,000 100.00

Utech Solar Co., Ltd. 31,920,000 14.51 0 0.00 31,920,000 14.51

CTCI & Partners Co., Ltd. 2,000,000 40.00 3,000,000 60.00 5,000,000 100.00

*SINOGAL - Waste Services Co., Ltd. doesn’t issue any stock related certificates.

72

IV. Capital Overview 4.1 Capital and Shares 4.1.1 Source of Capital A. Issued Shares


Year /Month

Par Value (NT$)

Authorized Capital Paid-in Capital Remark

Shares Amount

(NT$) Shares

Amount (NT$)

Sources of Capital

Capital Increased by Assets Other

than Cash

Other

2013.04 10 900,000,000 9,000,000,000 734,995,923 7,349,959,230 ESOP None Note 1

2013.05 10 900,000,000 9,000,000,000 738,436,123 7,384,361,230 ESOP None Note 2

2013.09 10 900,000,000 9,000,000,000 738,891,873 7,388,918,730 ESOP None Note 3

2013.12 10 900,000,000 9,000,000,000 746,664,276 7,466,642,760 ESOP None Note 4

2014.04 10 900,000,000 9,000,000,000 747,434,298 7,474,342,980 ESOP None Note 5

Note 1: 2013.04.12 MOEA Ruling Ref.No. 10201066330 Note 2: 2013.05.31 MOEA Ruling Ref.No. 10201099790 Note 3: 2013.09.02 MOEA Ruling Ref.No. 10201178700 Note 4: 2013.12.09 MOEA Ruling Ref.No. 10201244750 Note 5: 2014.04.17 MOEA Ruling Ref.No. 10301067740

B. Type of Stock

Share Type Authorized Capital

Remarks Issued Shares Un-issued Shares Total Shares

Common Share 747,434,298 152,565,702 900,000,000 Listed stock

4.1.2 Status of Shareholders


Item Government

Agencies Financial

Institutions

Other Juridical Person

Domestic Natural Persons

Foreign Institutions &

Natural Persons

Total

Number of Shareholders

0 50 82 21,202 409 21,743

Shareholding (shares)

0 159,103,353 127,231,357 96,771,351 367,600,237 750,706,298

Percentage (%)

0.00 21.19 16.95 12.89 48.97 100.00

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4.1.3 Shareholding Distribution Status Common Shares (The par value for each share is NT$10)


Class of Shareholding (Unit : Share)

Number of Shareholders

Shareholding (Shares) Percentage (%)

1 ~ 999 9,739 2,276,888 0.30

1,000 ~ 5,000 8,289 17,880,217 2.38

5,001 ~ 10,000 1,666 12,391,273 1.65

10,001 ~ 15,000 560 6,850,098 0.91

15,001 ~ 20,000 317 5,682,775 0.76

20,001 ~ 30,000 322 7,918,544 1.05

30,001 ~ 40,000 173 6,031,733 0.80

40,001 ~ 50,000 95 4,298,154 0.57

50,001 ~ 100,000 211 14,713,029 1.96

100,001 ~ 200,000 116 15,978,865 2.13

200,001 ~ 400,000 91 27,016,590 3.60

400,001 ~ 600,000 39 18,954,747 2.52

600,001 ~ 800,000 30 20,415,830 2.72

800,001 ~ 1,000,000 20 17,925,262 2.39

1,000,001 or over 75 572,372,293 76.26

Total 21,743 750,706,298 100.00

4.1.4 List of Major Shareholders


Shareholder's Name Shareholding

Shares Percentage

(%)

Chiyoda Corporation 69,994,000 9.32

CTCI Foundation 60,862,051 8.11

Chinatrust Commercial Bank Trust 53,170,706 7.08

Fubon Life Insurance Co., Ltd. 47,467,000 6.32

Government of Singapore 31,946,562 4.26

JPMorgan Chase Bank N.A. Taipei Branch in custody for Emerging Markets Growth Fund, Inc.

21,435,000 2.86

USI Corporation 15,180,656 2.02

Asia Polymer Corporation 14,496,107 1.93

Shin Kong Life Insurance Co., Ltd. 12,724,000 1.69

China Development Industrial Bank 12,605,000 1.68

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4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

Item 2013 2012 As of March 31, 2014

Market Price per Share

Highest Market Price 65.50 69.50 48.50

Lowest Market Price 42.30 40.00 39.70

Average Market Price 54.53 54.23 43.12

Net Worth per Share

Before Distribution 22.27 21.22 22.61

After Distribution 20.25 18.30 NA

Earnings per Share

Weighted Average Shares 739,610,959 720,660,123 746,915,831

Diluted Earnings Per Share 2.22 3.32 0.51

Dividends per Share

Cash Dividends 2.00 2.84 NA

Stock Dividends

Dividends from Retained Earnings 0 0 0

Dividends from Capital Surplus 0 0 0

Accumulated Undistributed Dividends 0 0 0

Return on Investment

Price / Earnings Ratio 24.56 16.33 21.14

Price / Dividend Ratio 27.27 19.10 0

Cash Dividend Yield Rate 0.04 0.05 0 Note 1: The Board of Directors has approved the 2013 earnings distribution and has not been

resolved by the Shareholder’s Resolution in 2013 Note2: Financial Report was reviewed by CPA in march 31, 2014 Note3: Information was under GAAP of 2012, and others were under IFRS of 2013 and March

31,2014. 4.1.6 Dividend Policy and Implementation Status A. Dividend Policies under Articles of Incorporation

The Company is at a stage of steady growth in the corporate cycle. In order to meet the capital expenditure requirements and the mid-term/long-term financial planning and the financial stability of the Company, and in order to become an international engineering and construction company and to actively participate in the investment and operation of BOT projects such as incineration plants and power plants, the Company plans to distribute the cumulative allocable profit according to the following percentage pursuant to the shareholders’ resolutions as follows: (1) Employee bonus: 2% of the profit for the current year or more (2) Directors’ and supervisors’ remuneration: limited to 2% of the profit for the current year. (3) Shareholders’ bonuses: the remainder of cumulative allocable profit minus the amount under

item (1) and (2), if any, shall be listed as shareholders’ bonuses. (4) The amount of shareholders’ bonuses shall not be less than 50% of cumulative allocable profit

of the Company; in particular cash dividend shall not be less than 20%. B. Proposed Distribution of Dividend

a. Cash dividend: NT$2.00 per share b. Employee bonus in cash: NT$92.722 million c. Directors’ and Supervisors’ remuneration: NT$15 million

75

C. The Company adopts a dividend policy of high earnings appropriation rate, and stipulates that at least 80% of total attributable earnings should be appropriated as dividends. In recent years, the Company distributes all of its dividends in the form of cash. Historical information about dividends distribution is available on the Company’s website.

4.1.7 Impact of Stock Dividend Distribution on Business Performance, EPS and Return on

Investment: Not Applicable. 4.1.8 Employee Bonus and Directors' and Supervisors' Remuneration A. Information Relating to Employee Bonus and Directors’ and Supervisors’ Remuneration in the

Articles of Incorporation a. Employee bonus: 2% of the profit for the current year or more b. Directors’ and Supervisors’ remuneration: limited to 2% of the profit for the current year

B. The estimation basis on Bonuses to Employees and remuneration to Directors and Supervisors, the

calculating basis on the number of shares for share bonus and accounting treatment for the differences between the actual distributing amounts and estimations: Estimation of employee bonus and Directors/Supervisors compensation is based on prior experience and is recognized as current expenses. In case of a significant change (per Article 6 of Securities and Exchange Act Enforcement Rules, the amount is over NT$10,000 thousand while reaching 1% of audited net operating revenue or 5% of paid-in capital), the expense shall be adjusted accordingly in the year where the employee bonus was recorded. When the change is not significant, it shall be recorded in the following year as change in accounting estimation. If the amount remains variable at the date of Shareholders’ meeting in the following year, it shall be recorded in the following year as change in accounting estimation.

C. Profit Distribution of Year 2013 Approved in Board of Directors Meeting for Employee Bonus and

Directors’ and Supervisors’ Remuneration a. Recommended Distribution of Directors’ and Supervisors’ Remuneration is NT$ 15 million, and

Employee Bonus in cash is NT$92.722 million. b. Ratio of Recommended Employee Stock Bonus to Capitalization of Earnings: N/A c. Recounted EPS after Recommended Distribution of Employee Bonus and Directors’ and

Supervisors’ Remuneration: NT$2.22 per share d. Earnings per share with consideration of the proposed employee bonus and warrants:

employee bonus is distributed via cash, so earnings per share is not changed. D. Information of 2012 Earnings Set Aside to Employee Bonus and Directors’ and Supervisors’

Remuneration: Unit: NT$

Actual Distribution A

Recognized Estimated Amount B

Variance C=A-B

Bonuses for Employees (Cash) 132,406,496 132,406,496 0

Remuneration for Directors and Supervisors (Cash)

15,000,000 15,000,000 0

The actual amount of distribution of employee bonus and Directors’/Supervisors’ compensation in 2012 is based on Shareholders’ Resolution and corresponds to actual reserve.

76

E. The Information of Top Ten Recipients of Employee Bonuses in 2012:

Name Title Amount(NT$)

John T. Yu Chairman

2,257,854

John H. Lin Vice Chairman

Andy Sheu President

P. C. Chen Executive Vice President

Mark W. H. Yang Executive Vice President

Michael Yang Executive Vice President

Tien-Nan Pan Senior Vice President

Ching-Lin Hsu Senior Vice President

Patrick Lin Vice President

Teh-Ming Tao Vice President

4.1.9 Buyback of Treasury Stock None 4.2 Issuance of Corporate Bonds None 4.3 Preferred Shares None 4.4 Issuance of Depository Receipt None

77

4.5 Employee Stock Options In order to attract and maintain the talents for the development of CTCI Group, motivate employees’ will of long-term employment, and consolidate staffs’ centripetal force , the Company had approved to issue the Employee Stock Option Plans for four times on Sep. 10,2007, Aug. 22, 2008, Jun. 18, 2009, and Jun. 9, 2010. In total, there are 80,000 units issued. Each unit represents 1,000 common shares of the Company, and the exercise price for the shares is the market closing price of Company's common shares on the day the options are granted.

4.5.1 Issuance of Employee Stock Options As of April 30, 2014

Type of Stock Option 1st Tranche (Expired on 2013/9/27)

2nd Tranche 3rd Tranche 4th Tranche

Effective Date by Regulatory Agency

2007/09/10 2008/08/22 2009/06/18 2010/06/09

Issue date 2007/09/28 2008/08/27 2009/07/08 2010/06/18

Units issued 16,000 units 21,000 units 21,000 units 22,000 units

Option shares to be issued as a percentage of outstanding shares

(%)

2.17 2.84 2.84 2.98

Duration

The duration for options is 6 years, during which employees may not transfer, pledge, or gift their options except to heirs. Upon the expiration of the grant period, unexercised options are deemed forfeited and the subscribers may no longer claim right to exercise the option and purchase those shares.

Conversion measures issue new share

Conditional conversion periods and percentages

Subscribers may exercise their options by the following schedule and proportion: The availability period The ceiling of option exercisable (accumulate)

Regular Reward Less than 2 years 0% 0% In 2 years after the grant 50% 25% In 3 years after the grant 75% 50% In 4 years after the grant 100% 100%

Converted shares 15,157,500

Shares 19,700,250

Shares 17,312,750

Shares 11,010,950

Shares

Exercised amount NT$268,600,950 NT$317,511,282 NT$393,891,348 NT$300,789,064

Number of shares yet to be converted

0 Shares 1,299,750 Shares 3,687,250 Shares 10,989,050

Shares

Adjusted exercise price for those who have yet to exercise their rights

N/A NT$14.6 NT$21.5 NT$26.0

Unexercised shares as a percentage of total

issued shares (%) 0 0.17 0.49 1.46

Impact on possible dilution of

shareholdings Dilution to Shareholders’ Equity is limited.

78

4.5.2 List of Executives Receiving Employee Stock Options and the Top 10 Employees As of April 30, 2014

Title Name No. of Option Shares

Option Shares as a

Percentage of Shares issued

(%)

Exercised Unexercised

No. of Shares

Converted

Strike Price (NT$)

Amount (NT$

thousands)

Converted Shares as a


(%)

No. of Shares Converted

Strike Price (NT$)

Amount (NT$

thousands)

Converted Shares as a


(%)

President Andy SheuNote

2,247,000 0.30 1,379,500

1st

: NT$10.7-

13.5

2nd

: NT$14.6-

15.4

3rd

: NT$21.5-

22.6

4th

: NT$26.0-

27.3

26,964 0.18 867,500

2nd

: NT$14.6

3

rd:

NT$21.5

4th

: NT$26.0

22,238 0.12

Executive Vice President P. C. ChenNote

1,899,000 0.26 1,139,000 20,343 0.15 760,000 19,879 0.10

Executive Vice President Mark W. H. YangNote

953,000 0.13 375,500 7,025 0.05 577,500 15,477 0.08

Executive Vice President Michael YangNote

388,000 0.05 326,250 6,440 0.04 61,750 1,686 0.01

Executive Vice President M. H. Wang 146,000 0.02 101,000 2,295 0.01 45,000 1,229 0.01

Management Officers John T. Yu 4,082,000 0.55 3,490,000 70,342 0.46 592,000 16,162 0.08

Management Officers John H. Lin 2,812,000 0.38 1,996,000 35,945 0.27 816,000 22,277 0.11

Senior Vice President Tien-Nan PanNote

535,000 0.07 279,000 4,361 0.04 256,000 6,383 0.03

Senior Vice President Ching-Lin HsuNote

426,000 0.06 380,750 7,315 0.05 45,250 1,235 0.01

Senior Vice President Andrew TsaiNote

324,000 0.04 278,750 5,659 0.04 45,250 1,235 0.01

Vice President C. F. ChiouNote

334,000 0.05 137,000 2,197 0.02 197,000 4,203 0.03

Vice President Bo-Wen Liu 252,000 0.03 207,000 4,508 0.03 45,000 1,229 0.01

Vice President Kai Lee 244,000 0.03 181,500 3,923 0.02 62,500 1,706 0.01

Vice President Teh-Ming TaoNote

417,000 0.06 259,500 4,792 0.03 157,500 3,654 0.02

Vice President & CFO Patrick LinNote

317,000 0.04 224,000 4,148 0.03 93,000 2,539 0.01

Vice President Steve Jean 78,000 0.01 68,500 1,405 0.01 9,500 259 0.00

Vice President Chen-San Hu 109,000 0.01 89,500 1,752 0.01 19,500 485 0.00

Vice President Jung-Yu Han 109,000 0.01 99,500 1,977 0.01 9,500 259 0.00

Vice President Pao-Yao Pan 110,000 0.01 100,500 2,003 0.01 9,500 259 0.00

Vice President Po-Chien Wang 71,000 0.01 62,000 1,269 0.01 9,000 246 0.00

Vice President M. G. Lee 25,000 0.00 2,000 47 0.00 23,000 619 0.00

Vice President Ching-Hsiang Tseng 106,000 0.01 96,500 1,904 0.01 9,500 259 0.00

Vice President Jing-Shing Wu 107,000 0.01 97,500 1,911 0.01 9,500 259 0.00

Vice President Tsai-Ming Wang 110,000 0.01 77,000 1,398 0.01 33,000 854 0.00

Vice President Shen-Peng Liao 108,000 0.01 98,500 1,932 0.01 9,500 259 0.00

Vice President Yu-Jen Chen 76,000 0.01 38,750 819 0.01 37,250 819 0.00

Vice President Min-Li Lee 101,000 0.01 91,750 1,823 0.01 9,250 253 0.00

Accounting Officer SH Lin 74,000 0.01 59,000 1,281 0.01% 15,000 406 0.00

Note: the employee of the Top 10 holding Employee Stock Options

79

4.6 Status of New Restricted Employee Shares None

4.7 Status of New Shares Issuance in Connection with Mergers and Acquisitions None

4.8 Financing Plans and Implementation None

80

V. Operational Highlights 5.1 Business Activities 5.1.1 Business Scope A. Main areas of business operations

a. Hydrocarbon: Gas Processing, Petroleum Refining, Petrochemical, Chemical, Terminal, Polysilicon.

b. Infrastructure, Environment & Power: Infrastructure, Transportation & Communication, Power, Steel & Nonferrous, Brewery & Winery, Environmental Protection, Incineration & Energy Recovery, Water & Waste Water, Air Pollution Control.

c. Environmental Resources: Investment and Development, O&M/Management of Incineration Plants, O&M/Management of Infrastructure, Resources Collection/Recycling/Management, Renewable Energy, Renewal and Upgrade of Mechatronics System.

d. Plant Maintenance Service: Maintenance Strategy, Maintenance Planning, Plant Inspection, Maintenance Execution, Asset integrity Management.

B. Revenue distribution

Unit；NT$ thousands

Major Divisions Total Sales in Year 2013 (%) of total sales

Engineering 48,392,841 92.67

Environment 3,395,698 6.5

General Trade 132,307 0.25

Others 301,112 0.58

Total 52,221,958 100.00

C. Main Services:

The main services of the Company include feasibility study & planning, project management, engineering, procurement, fabrication, construction, plant commissioning, QA & HSE, operation & maintenance, and information technology.

D. New products development: Not Applicable 5.1.2 Industry Overview A. Macro Business Outlook:

Overview the global economic situation in 2014, based on the latest International Monetary Fund

(IMF) report, the global economy has started to recover since the 2nd half year of 2013 and expects to have a further improvement in 2014 and 2015.The global economic growth rate is estimated to achieve 3.7% in 2014 and 3.9% in 2015.The main reason of the economic growth will be driven by the developed countries. The strong demands of these developed counties will support the economic growth for those emerging and developing countries. However, the downside risks are still exist, such as the interest rate of emerging markets rise more than market expects will result pressure to the asset prices or massive debt defaults in China. According to data compiled by the International Monetary Fund (IMF), the overall economic growth rate in 2013 was 3.0%, with 1.3% in advanced countries, and 4.7% in emerging markets. The IMF predicts that the global economic growth rate will increase to 3.5% in 2013, with 2.2% in developed countries, and 5.1% for emerging and developing countries. The Company is engaged in the engineering, procurement and construction (“EPC”) industry, which is closely tied to the overall economic conditions of our target markets. Many projects are initiated by government investments or consumption demands arising from the private sector. Therefore, the economic growth potential of our target markets is a good indicator of potential business opportunities in those areas. The

81

following table is our predictions of the economic growth rates in our major markets, and we can find economy growth are improving in major markets including Taiwan, Malaysia, Thailand, Vietnam, India and Saudi Arabia. The estimated growth rates of 2014 in these countries are expect to outperform than 2013.Most of the growth rate in the targeted markets also expect to outperform than average of the global. China, Indonesia, Qatar, Thailand and Vietnam are estimated to grow more than 5%. Overall, there are abundant business opportunities in those target markets of the Company. The Company will maintain the progressive and cautious mindset to participate the bidding.

Forecast of Economic Growth Rate

Country 2013 2014

Global 3.0% 3.7%

Taiwan 2.2% 3.8%

China 7.7% 7.5%

Hong Kong 3.0% 4.4%

Singapore 3.5% 3.4%

Indonesia 5.3% 5.5%

Malaysia 4.7% 4.9%

Thailand 3.1% 5.2%

Vietnam 5.3% 5.4%

India 4.4% 5.4%

Untied States 1.9% 2.8%

Mexico 1.2% 3.0%

Brazil 2.3% 2.3%

Saudi Arabia 3.6% 4.4%

United Arab Emirates 4.0% 3.9%

Qatar 5.1% 5.0%

Kuwait 0.8% 2.6% Sources: IMF and Taiwan’s Council for Economic Planning and Development

B. Market Overview and Future Development: The Company is mainly engaged in the field of engineering design, procurement and construction. As a professional EPC lump sum turn-key provider, the Company is the only player in Taiwan with a paid-in capital over NT$7 billion out of more than 770 companies registered with the Chinese Association of Engineering Consultants. The Company is listed in Taiwan Stock Exchange particularly focusing on petrochemical-related projects. Being the leader in Taiwan market, the Company is capable to bid project with single contract amount up to USD 1 billion without any partner.

C. The EPC Industry:

Major clients of the Company are either state-owned or private conglomerate in different countries in areas of refinery, petrochemical, general chemical, utility, infrastructure, environmental protection, steel manufacturing, incinerator, storage, and pharmaceutical. The EPC project is a professional-based integration, which requires an intensive engineers’ capability in completion timely and efficiently as required by the clients. More specifically, the Company’s services include feasibility study, engineering, procurement services, equipment supply, construction management, and commissioning services.

82

D. Market Trend and Competition:

a. The Trend (1) Large Projects

Given a trend of incessant businesses expansion overtime, requirements from client are getting more complicated than ever. In order to minimize the risks associated with large projects and reduce the transaction cost, clients turn to be reluctant to award specific sub-project to different contractor and prefer EPC contractors instead.

(2) Turnkey Solution Clients’ requirements today request not only engineering design, procurement and construction, but advance planning, project financing, operation management … etc. low cost and high quality. It’s undoubtedly a challenge to EPC contractors.

(3) Increasing BOT project in Public Sector In the public sector, Taiwan government is trying to boost economic growth by boosting infrastructure investment. In order to reduce the government financing burden and encourage private sector to get involved in public infrastructure investment, it’s becoming popular to announce BOT (Build-Operate-Transfer) project for public sector projects. In the future, we will also introduce BOT model to emerging markets’ clients. As Taiwan joined the World Trade Organization and signed government purchase agreements with other countries, the domestic market in Taiwan is now available to foreign construction companies on an equal basis. Taiwanese engineering companies aim business potentials in emerging markets overseas via collaboration with other engineering firms worldwide, and strengthening the capability in finance and legal resources to cope with the ever-changing environment.

(4) Technical Innovation Technical innovation becomes increasingly important to viability of EPC contractors. Generating value-added solution to satisfy clients’ demand is a key challenge to engineering firms worldwide.

b. Competition There are around 16 EPC competitors globally, mainly in South Korea, Japan and Europe. The Company chiefly competes against Korean and Japanese in overseas markets. The Company takes advantage of Taiwan geographically where is closing to areas of South East Asia and China. Rigid Competition from South Korea and Japan remains unchanged, particularly in the Middle East region. The Company plans to bid projects selectively in that region.

Suppliers(Materials、

Equipments and

Construction)

Downstream

CTCI

Midstream

Client

(Owner)

Upstream

Engineering

diagrams,

Construction

procedures and

standards,

Construction

management

Requirement and

Specification

Completion of

construction or

installation

Completion

Certificate

83

5.1.3 Research and Development Overview A. Research and Development Expenses in Past Three Years

Item/Year 2011 2012 Note 2013 Note 2014/3/31Note

Operating Revenue 56,279,714 60,522,162 52,221,958 12,125,362

R&D Expense 129,729 114,687 107,525 23,176

R&D Expense as percentage of Operating Revenue (%)

0.23 0.19 0.21 0.19

Note: Consolidated Financial Statements were under IFRS of 2012, 2013, and the 1st quarter of 2014 B. Research and Development Projects Completed in Recent Years and Successful Technology or

Products Developed in Past Two Years

a. RD Projects Completed in Recent Years:

Item 2012 Projects 2013 Projects

1 Real-time Intelligent Engineering Project Information Technology Research and Development

The Research of Turnkey Project Tag Information Management System

2 The Critical Tag Control Research and Development in An EPC Turnkey project Lifecycle

The Research of Turnkey Project Benchmarking Information Warehousing Technology

3 The Research and Development of Turnover Information Management and Data-mining Application

The Application Research of The Intelligent Turnover Information Management Platform

4 The Research and Development of Engineering Estimation and Cost Control Technology for Turnkey Projects

The Research of The Risk Based Inspection and Corrosion Monitoring System Planning and Design

5 Equipment and Pipe Corrosion Monitoring Application

The utility Consumption Database and Estimation Procedure Establishment of Each Kind of Plant and Equipment Packages

6 The Integration and Application of Engineering Material Management and CWP

Flare Load Reduction

7 P&ID Automation Technology Development for Petrochemical Plants

P&ID Rule-based Automatic Design Application and Development

8 The Energy Saving and Emission Reduction Application in Process Design

New Civil & Building Engineering Spec Research and Application

9 Civil and Building Engineering Pre-cast Technology Research

BIM Technology Research and Deepening Application

10 The Energy saving and CO2 Reduction Technology Research in HVAC

The Research of A Biaxial-bending Square Concrete-filled Steel Tube Column Analysis & Design Method Development

11 Civil and Building BIM Technology Integration Application Research

Equipment Project Operation Management System

12 Equipment Engineering Information Integration and Cloud Computing Application

Pressure Vessel Design Technology Development

13 Pressure Vessel Design Information Integration and Availability Estimation

Spherical Tank Design Development

14 The Application Energy Saving and Emission Reduction in Equipment Design

Information Data integration and Management System Development

15 Silo Design System Development 3D Visualization Technology Research for Instrument Hook-up Design

16 Instrumentation Piping and Wiring Routing Design Automation Technology Development

Piping Design Guideline updating

84

Item 2012 Projects 2013 Projects

17 Instrumentation Biding Material Estimation System Development

Piping 3D Design information Platform Application Development

18 New Instrumentation technology Research and Application

The Automatic Material Take-off of Piping Rainwater and Sewage System during Proposal Stage and New System Development

19 Piping Design Spec Data Integration Electrical CAD/CAE and IT Technology Application Research

20 Fire Fighting 3D Modularization Piping Design Technology Development

The Integration Application Technology Research of Electrical SPEL and Power System Design

21 Piping Design Information Integration and New Operation Workflow System Development

Electrical ETAP and Power Cable Safety Electric Current Calculation and Selection

22 Electrical CAD/CAE and IT Technology Research

The Application Research of the Construction Modular Unit and Modular Construction

23 Power Plant Transformer No Load Tap Changer Optimization Analysis Calculation Research and Development

24 Electrical Energy Saving Technology Research and Development

25 Electrical SPEL and Power System Design Technology Research and Development

26 The Application of EDR (Electrodialysis Reversal) for Desalination of Wastewater Reclamation

b. Successful Technology or Products Developed in Past Two Years

Only the most important technology or products are listed below due to there are approximate 30 projects in a year.

Year RD Achievements

2012 1. Pre-cast Concrete Method and Its Related Technology Research and Application 2. Concrete-Filled Tube Structure Analysis Research and Application 3. SPPID & SPI and SPPID & SP3D Integration Application Development 4. Silo Design System Development 5. 3D Model 2nd Cable Tray Route Space Generation Development 6. Automatic SP3D OrthoGen Layout Labeling Development 7. SP3D Water Spray System Piping Design Automation Development 8. Automatic SP3D Circle Ladder Platform Modeling Development 9. Instrument Sizing Program Development – orifice plate, control valve, safety

valve 10. Automatic Material Take-off Program Development for Fire-Fighting Foam

System 11. Motor Local Control Station Location Checking Program Development 12. Rule-based Pipe Shoe Design Quality Checking Development 13. Automatic Electrical One-line Diagram Generation Development 14. Power Plant Transformer No Load Tap Changer Optimization Application 15. Applying CWP to Instrument and Electrical Material Management 16. The Application of EDR (Electrodialysis Reversal) for Desalination of Wastewater

Reclamation

85

2013 1. Mobile Device APP Development 2. The SP3D Function Development for Pipeline Across the Floor Opening of A

Equipment Platform 3. SP3D I&CS Off-line Instruments Automatic Location Labeling, Updating

Operation and JB Installation Location Checking 4. Inconsistent Information Checking and Automatic Updating for Each Kind of

Layout Instrument Location, JB Location, Signal Type 5. SPI Rule-based Development 6. Line List Self-check Program Development 7. Automatic Electrical Lamp Arrangement under Pipe Rack 8. The Cross Dimension Calculation and Drawing Program Development of

Underground Conduit Way 9. The Integration of SP3D and Analysis Software PVElite 及 CAESAR II

10. The Automatic Material Take-off Program Development for Rainwater and Sewage Collection System

11. Fire Heater Development 12. SmartPlant Engineering Integrity Application Development 13. The Research of The Risk Based Inspection (RBI) and Corrosion Monitoring

System (CMS) Planning and Design 14. Civil Isolation and Seismic Analysis Technology Research 15. The Research of A Biaxial-bending Square Concrete-filled Steel Tube Column

Analysis & Design Method Development 16. Spherical Tank Design System Development 17. ETAP-Cable Ampacity and Sizing Model Program Implementation

C. 2014 RD Direction and Major Technology Development a. 2014 RD Direction is to

(1) Develop mobile App technology to increase the application of Electronic at job site (2) Develop visualization engineering technology information to enhance project control capability (3) Build SPPID Engineering Integrity to promote P&ID design quality (4) Develop expertise technology application to strengthen core design capability (5) Integrate engineering information among disciplines to improve design automation (6) Establish the seamless integration procedure between commissioning and EPCK to make a

smooth handover for the project b. Major Technology developments are as follows:

(1) Mobile device APP development Assist engineers at any time, any place to query the latest engineering data of document, material and maintenance resume rapidly by combining mobile device with Barcode, QR code and RFID

(2) Visualization engineering technology information development ‧ Offer 3D model that can connect to engineering technology information and let user query

engineering document from 3D model ‧ Using oriented-Tag to integrate hot spotting technology and develop information interface

to maintain related information and document during E, P, C, K stage (3) Build SPPID Engineering Integrity to develop rule-based automatic design (4) New expertise technology

‧ The research of using quantitative risk assessment (QRA) to improve process safety ‧ Amine absorber design research and application ‧ Structure in line with the economic design of the new specification of ‧ Connect design of steel tube columns and beams ‧ Tank design program enhancement development ‧ Industrial instrument wireless control technology application ‧ MRT main substation harmonic filter optimization design application

86

(5) Information integration among disciplines ‧ The research of EPC turnkey engineering design information integration and handover

technology ‧ I&CS underground wiring layout automatic design development ‧ Establishing piping module design database for unit equipment ‧ Automatic piping material take-off development during quotation stage ‧ Parametric pipe rack generation program development ‧ Automatic SP3D instrument fire proof area creating development ‧ Automatic material take-off technology development of electrical lighting design

(6) Seamless integration procedure between commissioning and EPCK ‧ Establish commissioning expert system ‧ Set up Startup Flawless procedure

D. Current Project or New Product Being in process Refer to Section 7.6.3 for current RD project list

5.1.4 Short & Long Term Development Plans A. Short Term Goals:

a. Engage in overseas projects aggressively and range into tier one engineering firms in the world. The Middle East region keeps a promising outlook for petrochemical contracts in the future. Several mega projects are expected for sure. The Company continues to bid such projects aggressively with scrupulosity and wish to stand firmly in this territory.

b. Become one of the major player utility market. After awarded the Lin Kou and Talin Power Plants, the Company won the renovation project of the Tung Hsiao renewal power plant project and Thai Oil power plant project. According to a planned schedule of Taiwan Power Company, several power plant renovation projects will be released in the coming years. As the economy growing south-east Asia, power demand also increases simultaneously; potential power plants projects is foreseen recently in Malaysia, India, Vietnam and Thailand. The Company will be bidding power plant projects aggressively.

B. Long Term Goals a. Emerging Markets

Looking forward, to expand market share in the international petrochemical market is still one of the Company’s primary goals, and extend to emerging markets in north Africa, east Europe, Commonwealth of Independent States and south America from the regions of south-east Asia and middle-east. The Company also devoted to share successful experiences in non-hydrocarbon projects such as power plants, public transportation and incinerator to overseas markets, form China, south-east Asia and middle-east to rest of the world.

b. New Techniques and New Areas The Company is planning to invest in new areas such as carbon-reducing techniques and alternative energy sources to complement our existing lines of services. These new businesses will contribute increasingly to the Company’s profitability and growth potential.

In all, the Company aims: to become one of the top 30 engineering companies in the world, and to create an esteemed brand name for the Taiwanese engineering consulting service industry.

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5.2 Market and Sales Overview 5.2.1 Market Analysis The Company signed contracts amounted NT$40.136 billion, while CTCI Group signed of NT$66.924 billion totally in 2013. A. Sales Analysis by Major Services:

a. By Area

Taiwan 65%

Middle East 16%

China 6%

India 5%

Malaysia 4%

Thailand 2%

Other 2%

Total 100%

b. By Industry

Refinery/Petrochemical 42%

Power 32%

Incineration 7%

Infrastructure 5%

Storage and Terminal 4%

Other 4%

Steel 3%

Hi-Tech 2%

Environment 1%

Total 100%

B. Market Share

The Company has ranked No.1 in the domestic EPC market in Taiwan for years. Common Wealth Magazine has placed the Company as No.1 in the top 650 service company survey within the engineering service provider category since 2005. On the global scene, the Company is well recognized by the U.S. Magazine Engineering News-Record in its annual rankings. For the year 2013, the Company is ranked No.106 in ENR’s Top 225 International Design Firms Rankings, No.109 in ENR’s Top 250 International Contractors Rankings, and No.137 in ENR’s Top 250 Global Contractors Rankings.

C. Industry Trend Overview

a. Short Term Market Trend The global economic has been recovered in 2014 comparing to 2013. The advanced countries and emerging counties have the same path of recovery. The Middle East region still releases many mega petrochemical projects since the 4th quarter of 2012 while countries in the Southeast Asia region release many National projects. The Company predicts such project investments in advanced and emerging countries will continue in 2013. Our views on the global market are briefed as following: (1) Taiwan

We expect the government to maintain its policy on expanding domestic consumption, from which we target local projects as one of priorities in the coming years. Domestic power demand is increasing with economic growth, so the Taiwan Power Company begins to execute renewal and expansion plans for many fire power plants approaching to their service life in

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northern, middle and southern Taiwan to satisfy the demand. Our targets is the one major fire power plant reconstruction and expansion project with surroundings plans, which will be started within this year. Besides, for hydrocarbon projects, there are many new CPC refinery projects, LNG receiving terminal projects and other private-owned petrochemical plants expansion projects for us to strive for. For infrastructure projects, the Company is seeking to bid power supply and track work projects of mass rapid transportation (MRT) system, sewerage projects and ext.

(2) South East Asia and India Malaysian National oil Company, the PETRONAS, has started an integrated refinery and petrochemical industry in May 2012, and new refineries and naphtha cracking plants businesses will be the our major targets. Besides, they also plan to build LNG receiving terminals in Johor and Perak to fulfill the increasing demand of power generation. India has begun its 12th National Development Plan in 2012, and several oil refineries, petrochemical plants and LNG receiving terminals and Re-gas facilities projects are expected to announce. Indonesian National oil Company, the PERTAMINA, plans to increase the total refinery capability from 1 million barrels currently to 1.5 million barrels regarding to its strategic development plan of 2017,and related joint venture projects of petrochemical and refinery plants with private companies, which has so many potential opportunities in this region. The major opportunities in Thailand are mega power plants, small private-owned gas power plants, bio-fuel power plants, and municipal waste incineration power plants. The Company will seek for other business of combined-cycle power plants as well. PTT Group of Thailand will launch improving and expansion plans of its refinery and petrochemical plants, aiming to improve current process and increase the added-value of the products. The major opportunities in Vietnam will be the steel plants projects invested by Taiwanese companies, municipal water treatment plants, municipal waste incineration power plant and coal-fired power plants. Beside, the Company will also seek the coal-fired power plants subcontracting opportunities from renowned international EPC companies. Many new petrochemical projects will be available in Singapore along with several large infrastructure projects, including power supply and track work projects of MRT System and LNG receiving terminal projects.

(3) China For both communications between straits increasing and the global economy recovering continuously, many Taiwanese companies are investing in downstream petrochemical product plants in China, such as potential petrochemical and refinery project in Gulei Peninsula which has been approved by Taiwanese government. The Company’s primary goal now is to strength the capabilities of its subsidiaries in both Shanghai and Beijing in order to obtain upcoming projects of Taiwanese petrochemical companies. Besides the petrochemical industry, benefited by the twelfth five-year economy plan of China, new opportunities are derived from the environmental protection, industrial wastewater treatment, and the metropolis refuse incineration markets. The Company plans to collaborate with local partners for such booming sectors. Moreover, there are also waste incineration power plant revamping opportunities in Macau.

(4) Middle East and North Africa Qatar, Saudi Arabia and UAE remain as target markets of the Company within the region. We are working on several EPC projects in Qatar and Saudi Arabia. Having build-up our experience in the region, we continue to be active for petrochemical EPC project bidding in the other countries of Middle East, such as Kuwait, Omen, Bahrain. In addition to the petrochemical industry, more bidding opportunities are available in the fields of power, desalination, waste water treatment, and MRT Systems…etc, while the competition is still intensive. Moreover, the Company will increase marketing efforts in North Africa. The national oil company of Algeria is planning to build more refineries plants. Libya is also assessing to build new refinery plants in response of the post-war needs. The Company will continue to track the relevant trends and developments.

http://en.wikipedia.org/wiki/Indonesia

http://en.wikipedia.org/wiki/Government-owned

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(5) USA Due to the promising shale gas development in US, there are many companies plan to do more investment. The company will keep collecting relevant information and select proper bidding opportunities.

b. Long Term Market Trend

The Company expects that refinery business would be promising in the coming few years. Emerging markets such as China, Indonesia, Vietnam, India, and Malaysia also contribute to this upward trend as their economy grows and creates new demands. As the notion of conserving energy is gaining momentum around the world, industries related to alternative energy and environmental protection are set to become mainstream in the years to come. Accordingly, the Company is trying to be more involved into new techniques and new areas such as LNG, alternative energy and other energy conservation items.

D. Competitive Advantage

CTCI Corporation has been existed in the industry for more than 30 years. However, facing competition from engineering firms around the globe, it is becoming increasingly crucial to utilize resources available on a global basis. That’s why the Company is setting up subsidiaries throughout Asia, in places like Beijing, Shanghai, Bangkok, and Hanoi, to develop more engineering talents at competitive costs. The Company also established a subsidiary in India in 2008 to assist the group to execute the numerous projects currently in progress. Looking ahead, the Company is on course to expand in more places such as Singapore to maintain its competitive advantages it has enjoyed to this date. In all, facing with stiffening competition, the Company is constantly trying to sustain efficient solutions by strengthening our global logistic network to lower down procurement costs, and strengthening capabilities in project management and risk control as well.

F. Advantages and Disadvantages for Long-Term Development & Corresponding Strategies

a. Advantages (1) Domestic market is recovering

Taiwan government continues to push ahead for a new national development plan. CPC and Taipower continue execution their plans for renewal and expansion plans which provide stable source of domestic opportunities. Taiwanese petrochemical companies still invest in new capacity expansion in China; it is another potential business of the Company too.

(2) Bidding for mega projects with professional capabilities. The Company is now the only engineering Company in Taiwan to be able to carry out projects with amount up to USD 1 billion without any partner. The Company has valuable experience in teamed up with foreign partners for project both for local and overseas for EPC project. Also by collaborating with these international firms, The Company has established itself in the global market place for future opportunities overseas.

(3) Entering into Overseas Markets with Strategic Partners. With our successful strategic alliances, the Company now has world-class patented processes and techniques at its disposal. These advantages will not only serve existing projects, but they can also be utilized globally such as China, Thailand, Vietnam, Malaysia, and the Middle East. The Company will integrate all the available resources to expand globally.

(4) Strengthening Competiveness through Global Resources Management The Company’s subsidiaries in China (Beijing & Shanghai), Thailand, and Vietnam and India have contributed significantly to the projects carried out in Taiwan. The engineers in these subsidiaries have also gained invaluable experiences throughout the process. These subsidiaries will continue to serve the Company favorably in the years to come with low cost and work efficiency advantages. The Company established a subsidiary in Singapore in 2011 to continue its global expansion.

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b. Disadvantages & Corresponding Strategies

Item Corresponding Strategies

Severe competition from Korean competitors

The Company plans to do the following to increase its chances of winning projects: Strengthening cost control and project management capabilities Technical Improvement: Continuous process re-engineering and

innovation through the newly-established R&D center Human Resources Development: Global expansion by integrating

local talents

Fluctuations in commodity prices

The Company has adopted the following internal control mechanisms to deal with commodity price fluctuations: Shortening design timeframe, better control of procurement supply

quantities and shipment schedule. Multiple hedging mechanisms to reduce the associated risks to the

minimum. Purchasing commodity swaps to lock-in the prices of basic materials required such as copper and nickel.

Arranging long-term supply contracts with suppliers. Enhancing relationships with major equipment manufacturers.

Difficulties in executing overseas projects

The Company has established a risk management committee to monitor and control all the relevant risks at both the project and the corporate levels.

Better integration of local resources and cost control for higher efficiency.

5.2.2 The Company’s Main Services Purposes and Service Sequences

The Company’s main services are EPC and consulting-oriented, including all sorts of professional services such as feasibility study, design, equipment supply, equipment fabrication, construction services, construction management, commissioning, and maintenance. A. Main Services and Purposes

a. Refinery/Petrochemical: For the manufacturing of oil-related and petrochemical products. b. Utilities: Nuclear power plant, natural-gas power plant, coal-fired power plant, and

combined-cycle power plant. c. Infrastructure: MRT system, high speed railway…etc. d. Environmental: Incinerators operation and maintenance, waste management, water

treatment, air pollution processing…etc. e. General Industry: Steel manufacturing plant, storage and docking facilities f. High tech and bio-related: electronic plant, pharmaceutical plant…etc.

B. Service Sequences: Feasibility study and initial design → Engineering → Procurement →Construction → Construction Management → Commissioning → Service and Maintenance

5.2.3 Major Materials Used and Supply Status:

A. Commodities: specially-formed steel, steel plates, steel rods, cement, various pipes and accessories, electricity cables, and special paints. These materials are sourced by qualified suppliers in the region close to the project job sites.

B. Equipments: reactor, storage tank, heat exchanger, heat boiler…etc. These major equipments are supplied by specialized companies throughout the world.

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5.2.4 Major Suppliers and Clients A. Major Clients (each commanding 10%-plus share of annual order volume) Information for the Last

Two Calendar Years Unit：NT$ thousands

Item

2012 2013 As of March 31, 2014

Company Name

Amount % Relation

with Issuer

Company Name

Amount % Relation

with Issuer

Company Name

Amount % Relation

with Issuer

1 CPC 12,088,306 20 None TPC 11,947,476 23 None TPC 4,128,055 34 None

2 Powertec

Energy Corp.

7,584,375 13 None CPC 6,087,036 12 None

Others 40,849,481 67 Others 34,187,446 65 Others 7,997,307 66

Total 60,522,162 100 Total 52,221,958 100 Total 12,125,362 100

B. Major Suppliers Information for the Last Two Calendar Years N/A

5.2.5 Production over the Last Two Years

Unit: NT$ thousands

2013 2012

Engineering 44,945,241 52,576,815

Environment 2,760,233 2,530,215

General Trade 100,407 71,436

Others 199,024 184,217

Total 48,004,905 55,362,683

5.2.6 Shipments and Sales over the Last Two Years

Unit: NT$ thousands

2012 2011

Local Export Local Export

Engineering 38,370,383 10,022,458 41,861,422 15,046,476

Environment 3,357,055 38,643 3,101,990 74,129

General Trade 132,307 0 86,904 0

Others 301,112 0 351,241 0

Total 42,160,857 10,061,101 45,401,557 15,120,605

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5.3 Human Resources 5.3.1 The information about employees employed for the most recent two fiscal years and up to the

date of printing of the annual report

Year 2012 2013 As of March 31, 2014

Number of Employees

Permanent employee 2,575 2,637 2,536

Temporary employee 106 113 127

Total 2,681 2,750 2,663

Average Age 39.6 40.8 40.8

Average service seniority 10.5 10.9 11.0

Number of employees at each level of

educational degree

Doctor 14 16 16

Master 1,114 1,175 1,169

Bachelor 1,471 1,477 1,393

Senior High School 66 66 69

Senior High School below

16 16 16

Certification details of employees whose Jobs are related to the Release of the Company’s Financial Information

Certification Number of Employees

Certified Internal Auditor(CIA) 7

Test of the Enterprise Internal Control Basic Ability 3

Test of the Bank Internal Control Basic Ability 1

Certified Securities Investment Analyst(CSIA) 1

The Accountant of R.O.C. 1

5.3.2 Work Environment and Occupational Safety and Health A. HSE Policy

CTCI’s HSE Policy Statements are set forth below: ‧ Insist Safety as the first priority; ‧ Implement risk management mechanism; ‧ Comply with applicable legal requirements and regulations; ‧ Engage in staff trainings and advance participation; ‧ Improve HSE management system continuously. CTCI Corporation is always dedicated to creating and maintaining a sound working condition of health, safety, and environment protection (HSE). CTCI regards HSE as the priority among all of our activities. We implement risk management mechanism, while prevention of occupational injuries and diseases as well as the environmental protection remains our highest concern among others. All of the projects related to planning, engineering design, procurement, construction and commissioning must be carried out in conformance with governments HSE legislations and the requirement specified in the contracts with customers is our commitment. To improve personnel and collaborators’ knowledge on safety, health and environment protection, CTCI regularly held HSE training programs and often support HSE related activities and conferences, which personnel and collaborators are encouraged to participate actively. Moreover, CTCI spare no efforts on continuous improvement of each HSE activity to make sure the applicability and effectiveness of HSE management system.

B. HSE Organization The Board of Directors of CTCI Corporation set up the QHSE & CSR Committee, responsible for the review and supervision of the strategies and management issues concerning the company’s quality and Safety, health, environmental protection and CSR. To ensure a safe and healthy environment provided by CTCI Corporation to our employees, also to

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ensure the project execution do not harm our environment, the company established HSE Management Department. CTCI also set up QHSE division. Under the direction of the group president, and the QHSE division, the HSE Management Department is in charge of the promotion of corporate-level HSE activities, internal auditing, monitor HSE performance of the corporation, and ensure the performance of HSE management work of every project activities.

C. HSE Management System HSE has been continuously updating the latest version of international guidelines. Following CTCI acquired ISO 14001 Environment Management System Certificate and OHSAS 18001 Occupational Health & Safety Management System Certificate in year 2006, also acquired a TOSHMS (Taiwan Occupational Safety and Health Management System) Certificate in year 2009,it also passed the "TOSHMS Performance Approval Program" in year 2010. In 2010 it gained the verification of performance efficiency approval, and in 2012 was approved with CNS 15506:2011. To achieve continuous improvement of HSE management system, CTCI regularly review HSE performances, propose practical corrective actions and put into action, and annually revise the HSE objectives, to lower potential risk on safety, health and environment. Moreover, CTCI emphasizes concerns on safety management, incident prevention, energy conservation, and health promotion.

D. Operation of HSE Management System

The operation of HSE management system followed the P-D-C-A process, scopes includes engineering design, procurement, construction, commissioning, emergency response, and office etc.

E. Statistic of Occupational Incidents CTCI is an international engineering corporation which abides by the requirements and practices on international projects, in accordance with the United State of Labor Department Occupational Safety and Health Administration (OSHA) by using the statistics of TRCR, Disabling Injury or DARTIR occupational injury statistics of proclamation. The root cause analysis (RCA) is conducted by the company, based on the high-frequency items of occupational events and the unit involved. Meanwhile, investigations are made and analyzed in order to develop corrective and preventive and effective actions. Meanwhile items that are inter-departmental or recurring are documented, monitored and controlled.

Note1: Traffic incident are not included in the statistic number Note2: The United State of Labor Department Occupational Safety and Health Administration (OSHA)

Note3: Total recordable case rate ,TRCR＝

Note4: Days away from work, days of restricted work activity or job transfer incidence rate,

DARTIR=

0.03 0.05

0.04

0.06 0.05

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

2009 2010 2011 2012 2013

Tota

l H

ou

rsW

ork

ed

Year

CTCI Total Recordable Case Rate (TRCR) Chart

Total Hours Worked TRCR

00.01

0.020.01

0.03

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

2009 2010 2011 2012 2013

Tota

l H

ou

rsW

ork

ed

Year

CTCI Days away/Resricted or Job Transfer Incident Rate(DARTIR) Chart

Total Hours Worked DARTIR

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F. Awards To recognize its achievements in HSE, CTCI Corporation in 2013 received several awards from government authorities and clients. These are listed as follows: a. 24 Million Man-hours without Lost Time Incident Medal for CTCI head office rewarding from

Ministry of Labor, Executive Yuan, R.O.C. (Taiwan). b. Talin SRU project received the 2013 Excellent Performance on Safety, Environment Protection,

Construction Quality Award, standing out of contractors with more than NT$ 200 million contracts.

c. Talin SRU project received the nomination of the 2013 Excellence of Promotion on Labor Safety and Health award for public construction and personnel.

d. Linyuan water reclamation project reached level A evaluation on the safety audit by the State-owned enterprise committee of Ministry of Economic.

e. Linyuan water reclamation project received the excellence award on Sub-contractor Safety Management Evaluation form CPC petro-chemistry business division.

f. Qatar project received 3 Million Man-hours without Lost Time Incident Award from client.

5.4 Environmental Protection Expenditure CTCI Corporation is in the industry of engineering service, which that the workplace including the Headquarters building and job sites. Described respectively as following: 1. Headquarters building: Mostly office works, no polluting events happened ever an. To dedicate

to energy saving for environment protection, the indoor lighting lamps change to LED tubes.

2. Job sites: Located in industrial zone in most cases, no influence to nearby residents is always the top demand. During construction process, all sub-contractors are requested to execute the environmental protection measures like waste management or any other to eliminate impacts on air, water, and soil to comply with regulations. No improper records happened before.

5.5 Relations between labor and employer 5.5.1 Employee benefit plans, continuing education, training, retirement systems, and the status of their

implementation, and the status of labor-management agreements and measures for preserving employees' rights and interests

A. Employees’ benefits a. Labor insurance

(1) The Company’s employees are enrolled in the labor insurance program pursuant to laws. (2) The labor insurance premium includes the premium of the insurance against ordinary incident

and occupational disaster. 70% of the insurance premium for ordinary incident will be borne by the Company, 20% thereof borne by the insured, 10% thereof borne by the government. The insurance premium for occupational disaster will be borne by the Company in full.

b. National health insurance (1) The Company’s employees and their dependents are enrolled in the national health insurance

program pursuant to laws. (2) The payable national health insurance premium shall be subject to the government’s relevant

requirements. c. Group insurance

(1) The Company’s employees are entitled to the additional group insurance purchased by the Company from the life insurance company externally.

(2) The Company’s employees will be enrolled in the group insurance program immediately on the hiring date. The group insurance covers life insurance and accidental injury insurance, which will be borne by the Company in full.

(3) The Company’s employees and their dependents may select the medical care insurance programs at their sole discretion, and 60% of the insurance premium will be borne by the Company.

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d. Annual bonus The Company will allocate the incentive bonus subject to the annual operation overview, and will grant the bonus with respect to individual performance, attendance record and seniority in accordance with the relevant operating procedure.

e. Workers’ Welfare Commission The Company establishes the Workers’ Welfare Commission pursuant to laws, and allocates the welfare fund periodically. The colleagues may elect the commission members openly, and organize tours and club activities and give birthday coupons and festival gifts, subsidies and consolation money periodically.

f. Incentive payment for shareholding trust To support the employees’ shareholding committee incorporated by employees and encourage employees to save funds and hold the Company’s shares permanently, the Company specially agrees that the colleagues who have served more than one year and been enrolled in the employees’ shareholding committee may be granted the incentive payment on a pro rata basis subject to the fund allocated on a monthly basis.

B. Top Management advanced studies:

a. EMBA:

Title Name Course Name Status

President Andy Sheu EMBA, National Taiwan University, Taiwan Graduated

in 2008

Executive Vice President

P. C. Chen EMBA, National Taiwan University, Taiwan Graduated

in 2007


Mark W. H. Yang

EMBA, National Chengchi University, Taiwan Graduated

in 2011


M. H. Wang EMBA, Chulalongkorn University, Thailand Graduated

in 2009


Michael Yang EMBA, National Taiwan University of Science and Technology, Taiwan

Graduated in 2008

Senior Vice President

Andrew Tsai

EMBA, Macau University of Science and Technology

Graduated in 2008

Doctor of Business Administration, Macau University of Science and Technology

Graduated in 2013


Tien-Nan Pan EMBA, National Taiwan University, Taiwan Graduated

in 2009

Vice President & CFO

Patrick Lin EMBA, National Taiwan University, Taiwan Graduated

in 2013

Vice President Steve Jean EMBA, National Chengchi University, Taiwan Graduated

in 2013

Vice President Jung-Yu Han Enrolled in EMBA, National Chengchi University, Taiwan from 2009/6

Ongoing

Vice President Pao-Yao Pan EMBA, National Sun Yat-sen University Graduated

in 2010

Vice Presiden M. G. Lee EMBA, National Taiwan University of Science and Technology

Graduated in 2008

Accounting Officer

SH Lin EMBA, National Chengchi University Graduated

in 2008

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b. Top Management program:

Title Name Course Name Status


Andrew Tsai

National ChengChi University Business Executive Program

During the period of Sep. 2005 to Apr. 2008

Executive Management Training Program, National Taiwan University, Taiwan

During the period of Mar. to June 2013


Tien-Nan Pan




Ming-Cheng Hsiao


During the period of Apr. to Jul. 2013

Vice President

Teh-Ming Tao

Participated in Advanced Seminar on General Management of National Taiwan University, Taiwan

During the period of Feb. 2009 to Jul. 2009

Top Management Training Course by National Taiwan University, Taiwan


Vice President

Jung-Yu Han

Participated in Advanced Executive Program for Senior Manager of National Taiwan University, Taiwan

During the period of Nov. 2005 to Jun. 2006



Vice President

Bo-Wen Liu


During the period of Dec. 2008 to Aug. 2009


During the period of Sep. 2009 to Mar. 2010



Vice President

Steve Jean


During the period of Dec. 2008 to Aug. 2009


During the period of Sep. 2009 to Mar. 2010



Vice President

C. F. Chiou



Vice President

Pao-Yao Pan



Vice President

Chen-San Hu



Vice President

M. G. Lee Top Management Training Course by National Taiwan University, Taiwan


Vice President & CFO

Patrick Lin





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Accounting Officer

SH Lin





c. Training program about Corporate Governance:

Title Name Date Sponsoring

Organization Course Hours

President Andy Sheu 2013/08/13 Taiwan Corporate Governance Association


3

Executive Vice

President

Mark W. H. Yang

2013/08/13 Taiwan Corporate Governance Association


3

Executive Vice

President M. H. Wang 2013/08/13

Taiwan Corporate Governance Association


3


Ming-Cheng Hsiao



3

Vice President

& CFO Patrick Lin 2013/08/13

Taiwan Corporate Governance Association


3

Accounting Officer

SH Lin 2013/08/13 Taiwan Corporate Governance Association


3

Chief Auditor

Shu-Chu Hung



3

C. Employees’ training:

The Company establishes the workers’ training system in accordance with the Company’s view, mission and long-term business objectives, and plans the training development blueprint for various professional areas and job ranks. In addition to enhancing the workers’ professional ability, the Company also works hard to train their multi-departmental integration professional ability. The training programs include traditional lecturing courses, and also OJT, Lesson & Learnt, e-Learning and knowledge database in order to upgrade the employees’ knowledge about the know-how and skill, language, computer, management and leadership. As of June 2010, the Company started to perform the Mentor & Mentee (M&M) plan with respect to new employees in order to assist new employees to adapt to the enterprise culture and rapidly acquire the professional attitude and ability required by independent operation through structured (professional guidance) and non-structured (environmental adaption) one-on-one instruction. The training management applies the omnibus training management system, GTS (Global Training System), to enhance the e-Learning function and

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enable colleagues around the world to learn the expertise synchronously, and hopes to fulfill the workers’ training systems and development blueprint effectively through the strong control mechanism. The Company’s personnel committee will recommend excellent colleagues to take on-the-job advanced studies in domestic and foreign colleges/universities on a yearly basis, and will offer them the chance to co-work with staff of foreign engineering companies on a non-scheduled basis, so as to upgrade their expertise and solidify their international competitive ability. The employees’ training costs will be NT$19,410,000 approximately per year. The average training hours will be more than 97 hours per person/year (267,284 hours/2,750 persons). The various training hours and costs are specified as following:

Type Number of class Total number of

attendees Total hours (hour) Total costs (NT$)

Orientation training 78 679 79,525 8,475

Competence training 1,886 38,179 162,733 6,008,115

Management training 46 718 19,847 11,814,177

General knowledge training 78 157 4,987 1,382,706

Self-development training 18 29 192 195,564

Total 2,106 39,762 267,284 $19,409,037

a. Orientation training: Including the introduction to the overview, work rules and QHSE management regulations of the Company, Orientation, and Mentor & Mentee (M&M) plan;

b. Competence training: The various departments conduct the specialty training programs by instructing the employees and offering the employees with the chance to practice subject to the nature of work, the Company’s business needs or requirements under contracts and laws, and have employees participate in the actual operation adequately to upgrade their competence;

c. Management training: HR Dept. arranges the management programs subject to the Company’s status and development needs, and makes the programs available to the various departments’ management.

d. General knowledge training: The employees’ specialty training committee plans general knowledge training programs together with relevant units in accordance with the employees’ training policy, objective and strategy, and make the programs available to the whole employees;

e. Self-development training: Including English comprehension training arranged in order to upgrade the colleagues’ international language ability, and on-the-job advanced studies in domestic and foreign colleges/universities to advance employees’ competence; The operations related to the employees’ training programs shall be conducted in accordance with the “CTCI Employee Training Management Procedure” and “CTCI Employee's Professional Competency Assessment and Management Procedure”.

D. Retirement system and implementation thereof:

The Company enforces the workers' retirement rules pursuant to the Labor Standard Law and allocates the pension reserve on a monthly basis. The rules are outlined as following: a. All of the Company’s employees shall comply with the rights and obligations defined in the

workers’ retirement rules. b. The Company allocated the pension reserve equivalent to 5% of the total salary on a monthly basis

before the end of September 2002, and 6.5% thereof after October 2002. The pension reserve will be deposited to the exclusive account maintained at the Bank of Taiwan. As of July 2005, the Company has executed the new system according to the employees’ will and choice, and allocated the pension fund according to the Labor Pension Act.

c. Payment of pension fund: The Company paid the pension fund pursuant to the Labor Standard Act or Labor Pension Act pursuant to laws subject to the employees’ choice as of July 1, 2005.

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E. Other important agreements: a. The Company is engaged in the engineering service and possesses qualified personnel, a definite

management philosophy, and a well-founded management system. In addition to the ordinary organization and system, the communication channels also include employees’ forums and labor and employer meetings held on a scheduled or non-scheduled basis, and installation of a suggestions box, so as to establish common consensus and a harmonious relationship between the employees and employer through the various channels.

b. The Company is engaged in the business where the Labor Standard Law may apply and, therefore, it shall operate in accordance with the Labor Standard Law.

c. Written undertaking for non-disclosure, non-competition and intellectual property right To secure the going concern, protect the group members’ interest and complete the corporate governance, the Company amends the “written undertaking for non-disclosure and copyright & patent right” to the “written undertaking for non-disclosure, non-competition and intellectual property right” and hopes that all employees may comply with the undertaking. All employees of CTCI and its domestic affiliates and overseas companies have already signed the undertaking.

5.5.2 Loss suffered by the Company due to dispute between labor and employer in the most recent fiscal

years The Company is used to valuing the employees’ benefits and calling a labor and employer meeting and welfare committee meeting on a quarterly basis, and also installs the suggestions box to make a two-way communication channel available to employees. Therefore, the relationship between labor and employer is harmonious and no dispute over labor has arisen in the past. No material loss or punishment has been suffered by the Company due to dispute between labor and employer in the past three years. In the future, the Company will continue to adhere to the same principle and solidify the relationship between labor and employer further.

5.5.3 Employee Code of Ethics and Conduct

1. Objective This Code of Ethics and Conduct is established according to the resolutions made by the board of directors to provide a reference for employees to behave themselves and to let interested parties understand the ethical standards and code of conduct that CTCI employees shall follow when carrying out their duties. All CTCI employees shall read this Code carefully, understand it, and carry it out.

2. Scope Employee under this Code shall mean all CTCI employees. Where there are independent codes of ethics and codes of conduct established for directors, supervisors, and managers, the directors, supervisors, and managers of CTCI shall follow such codes.

3. Principle of Good Faith When carrying out their duties, employees shall pay attention to team spirit and disregard ego-centrism. Employees shall follow the principle of good faith and maintain an aggressive, serious, and responsible attitude.

4. Principle of Equality Under no circumstances shall employee discriminate and reject others in any form as a result of differences in gender, race, religions and beliefs, political party, aptitude, position, nationality, or age.

5. Work Environment Employees shall maintain a healthy and safe work environment together. No act of sexual harassment, violence or intimidation of any form or in any manner is allowed.

6. Refusal of Conflict of Interest and Opportunities for Personal Benefits CTCI employees are responsible to maintain and increase the profits legally gained by the organization and shall avoid: (1) opportunities to gain personal benefits or the benefits of a third party using the

organizational property, information and/or benefits of their duties; and (2) competition with the organization.

100

7. Fair Trade (1) Employees shall treat customers fairly and shall avoid concessions in trades with the

interested party. (2) When carrying out their duties, employees shall not request, ask for in return, deliver or

accept gifts, treatments, kickbacks or bribes in any form or engage in other act of pursuing unjust enrichment for the benefit of themselves or a third party; except for gifts or treatments as part of the social custom or those approved by the organization.

8. Internal Transaction Employees shall keep absolutely confidential information that may critically influence the stock transaction price of the organization they acknowledge or hold from work according to the Stock Exchange Act prior to the disclosure made by the organization. Employees shall also not engage in internal transaction with such information.

9. Non-disclosure Responsibility Employees shall respect the privacy of one another and shall not spread rumors or libel others. Either in service or after the termination of employment, employees shall carefully handle sensitive information obtained from work and shall not disclose such information to a third party or for use other than in work, except when such information is disclosed by the organization or for the purpose of carrying out one’s duty. Sensitive information specified in the foregoing paragraph shall include personnel and customer data, inventions, trade secrets, technical data, product design, manufacturing know-how, financial and accounting data, and intellectual properties of the organization, as well as unpublished information that can be used by competitors or damage the organization or its customers after disclosure.

10. Correct Documentation, Records and Reports Employees shall ensure the correctness and integrity of documentation and data of any kind processed by them and shall retain them properly.

11. Protection and Suitable Use of Organizational Property When carrying out their duties, employees shall avoid intercepting, interference, damage and/or intrusion of the organization data, information systems and network equipment to ensure the confidentiality, integrity and availability of organizational information.

12. Political Donation and Activity Under no circumstances shall employees influence other employees to make political donations, support specific political parties or candidates, or participate in any political activities. Employees shall also avoid any political activities during office hours and in the workplace.

13. Copyright Employees shall respect laws and regulations concerning intellectual property rights. Illegal use or duplication of copyrighted intellectual property is prohibited, including books, magazines and/or software.

14. Encouragement of Reporting Crimes or Offences of This Code of Conduct Supervisors shall reinforce the ethical education for employees and encourage them to report any crime or offence of this code of conduct in a signed report at any time. The organization shall keep confidential the identity and protect any informants to protect them against threat or retaliation.

15. Procedure of Exemption Employees may be exempted from particular items in this code of conduct with proper reason approved by the audit committee and the board of directors meeting.

16. Implementation This Code and its revisions shall be implemented after being reviewed by the audit committee and passed by the board of directors meeting. It shall be disclosed in the annual report, shareholder’s report, and the Market Observation Post System.

101

5.6 Important Contracts

Agreement Counterparty Period Major Contents Restrictions

EC Kraton Formosa Polymers Corporation

2013/11/01~ 2015/10/01

KFPC 40 KTA HSBC Project, E+C

According to contract content stipulation

C Oriental Petrochemical (Taiwan) Co., Ltd.

2013/12/01~ 2015/07/01

OPTC Kuan-Yin 1,520KTA Line 3 PTA Plant, C


EP Taiwan Advanced Materials Corporation

2013/11/01~ 2014/07/31

TAMC TaLin Isoprene (C5) Project, Eps


EPC Far Eastern Union Petrochemical (Yangzhou) Ltd.,

2013/01/16~ 2014/04/01

FEUPY Ethylene Storage Tank and Receiving Terimal Project, EPC, China


EP Zhenjiang Chimei Chemical Co., Ltd.)

2013/04/01~ 2014/04/30

Chimei Zhenjiang SSBR Project, EPs, China


PC Zhenjiang Chimei Chemical Co., Ltd.)

2013/11/01~ 2015/01/25

Chimei Zhenjiang SSBR Project, P+C, China


EPC Lucite International (China) Chemical Industry Co.,Ltd

2013/06/17~ 2014/12/25

Lucite MMA Expansion Project, EPC, China


Engineering China Prosperity (Jiangyin) Petrochemical Co., Ltd

2013/06/17~ 2014/10/18

Hanbang PTA Project, E, China


Engineering M&G Resins USA LLC 2013/09/10~ 2014/09/30

M&G IPTA Project, E, USA According to contract content stipulation

EPC Laffan Refinery Company 2

2013/04/08~ 2016/07/08

Laffan Condensate Refinery Phase 2 (LR-2) Project, EPC, Qatar


EPC Taiwan Power Company 2013/09/03~ 2020/12/31

Tunghsiao Combined Cycle Power Plant Project


EPC China Steel Corporation India Pvt. Ltd.

2013/07/01~ 2014/06/30

CSC India ACL Plant Mechanical and Electrical Equipment Project, EPC


EPC Thai Oil Public Company Limited

2013/12/02~ 2016/05/01

Thai Oil Small Power Producer Project


102

VI. Financial Information

6.1 Condensed Financial Statement for the Recent 5 Years

6.1.1 Condensed Consolidated Balance Sheet - International Financial Reporting Standards

Unit: NT$ thousands

Year

Item

Five-Year Financial Summary As of March 31, 2014 2009 2010 2011 2012 2013

Current Assets N/A N/A N/A 39,644,718 35,132,199 39,699,782

Property, Plant and Equipment

N/A N/A N/A 7,288,315 7,150,831 7,073,597

Intangible Assets N/A N/A N/A 106,859 114,766 96,211

Other Assets N/A N/A N/A 6,750,308 6,439,502 6,505,946

Total Assets N/A N/A N/A 53,790,200 48,837,298 53,375,536

Current Liabilities

Before distribution

N/A N/A N/A 28,679,088 23,657,670 27,598,678

After distribution

N/A N/A N/A 30,781,491 (Note 2) (Note 2)

Non-current Liabilities N/A N/A N/A 6,546,811 6,234,139 6,316,266

Total Liabilities

Before distribution

N/A N/A N/A 35,225,899 29,891,809 33,914,944

After distribution

N/A N/A N/A 37,328,302 (Note 2) (Note 2)

Equity Attributable to Shareholders of The Parent

N/A N/A N/A 16,408,354 16,472,113 16,889,649

Capital Stock N/A N/A N/A 7,349,960 7,474,343 7,497,450

Capital Surplus N/A N/A N/A 2,757,865 3,070,085 3,087,527

Retained Earnings

Before distribution

N/A N/A N/A 6,170,655 5,709,982 6,093,991

After distribution

N/A N/A N/A 4,068,252 (Note 2) (Note 2)

Other Equities N/A N/A N/A 141,709 229,538 222,516

Treasury Stocks N/A N/A N/A (11,835) (11,835) (11,835)

Non-controlling Interests

N/A N/A N/A 2,155,947 2,473,376 2,570,943

Total Equity

Before distribution

N/A N/A N/A 18,564,301 18,945,489 19,460,592

After distribution

N/A N/A N/A 16,461,898 (Note 2) (Note 2)

Note1: Condensed Consolidated Balance Sheets were under GAAP during 2009 to 2011, hence not applicable.

Note2: The post-distribution numbers are based on the Shareholder’s Resolution in the following year Note3: The 2013 earnings distribution has not been resolved by the Shareholder’s Meeting, hence not

applicable

103

Condensed Balance Sheet - International Financial Reporting Standards

Unit: NT$ thousands

Year

Item

Five-Year Financial Summary

2009 2010 2011 2012 2013

Current Assets N/A N/A N/A 24,682,142 21,723,839

Property, Plant and Equipment

N/A N/A N/A 564,432 534,442

Intangible Assets N/A N/A N/A 92,630 99,555

Other Assets N/A N/A N/A 11,528,008 11,390,271

Total Assets N/A N/A N/A 36,867,212 33,748,107

Current Liabilities

Before distribution

N/A N/A N/A 18,250,272 14,278,377

After distribution

N/A N/A N/A 20,352,675 (Note 2)

Non-current Liabilities N/A N/A N/A 2,208,586 2,997,617

Total Liabilities

Before distribution

N/A N/A N/A 20,458,858 17,275,994

After distribution

N/A N/A N/A 22,561,261 (Note 2)

Equity Attributable to Shareholders of The Parent

N/A N/A N/A 16,408,354 16,472,113

Capital Stock N/A N/A N/A 7,349,960 7,474,343

Capital Surplus N/A N/A N/A 2,757,865 3,070,085

Retained Earnings

Before distribution

N/A N/A N/A 6,170,655 5,709,982

After distribution

N/A N/A N/A 4,068,252 (Note 2)

Other Equities N/A N/A N/A 141,709 229,538

Treasury Stocks N/A N/A N/A (11,835) (11,835)

Non-controlling Interests N/A N/A N/A 0 0

Total Equity

Before distribution

N/A N/A N/A 16,408,354 16,472,113

After distribution

N/A N/A N/A 14,305,951 (Note 2)

Note1: Condensed Consolidated Balance Sheets were under GAAP during 2009 to 2011, hence not applicable.

Note2: The post-distribution numbers are based on the Shareholder’s Resolution in the following year

Note3: The 2013 earnings distribution has not been resolved by the Shareholder’s Meeting, hence not applicable

104

Condensed Consolidated Income Statement - International Financial Reporting Standards

Unit: NT$ thousands

Year Item


Operating Revenues N/A N/A N/A 60,522,162 52,221,958 12,125,362

Gross Profit N/A N/A N/A 5,159,479 4,217,053 935,573

Operating Income N/A N/A N/A 3,237,648 2,365,775 569,868

Non-Operating Income & Expenses

N/A N/A N/A 215,739 144,135 15,846

Income Before Income Tax

N/A N/A N/A 3,453,387 2,509,910 585,714

Net Income from continuing operations

N/A N/A N/A 2,850,215 2,035,776 481,037

Net Income(Loss) N/A N/A N/A 2,850,215 2,035,776 481,037

Other Comprehensive Income (Income after tax)

N/A N/A N/A (24,852) 86,584 (8,488)

Total Comprehensive Income

N/A N/A N/A 2,825,363 2,122,360 472,549

Net Income Attributable to Shareholders of The Parent

N/A N/A N/A 2,445,282 1,641,730 384,009

Net Income Attributable to Non-controlling Interests

N/A N/A N/A 404,933 394,046 97,028

Total Comprehensive Income (Loss) Attributable to Shareholders of the Parent

N/A N/A N/A 2,438,974 1,729,559 376,987

Total Comprehensive Income (Loss) Attributable to Non-controlling Interests

N/A N/A N/A 386,389 392,801 95,562

Earnings Per Share (NT$)

N/A N/A N/A 3.39 2.22 0.51

Note1: Condensed Consolidated Income Statements were under GAAP during 2009 to 2011, hence not applicable.

105

Condensed Income Statement - International Financial Reporting Standards

Unit: NT$ thousands

Year Item


2009 2010 2011 2012 2013

Operating Revenues N/A N/A N/A 34,824,383 31,446,326

Gross Profit N/A N/A N/A 2,356,663 2,169,180

Operating Income N/A N/A N/A 1,303,017 1,129,995

Non-Operating Income & Expenses

N/A N/A N/A 1,406,827 657,006

Income Before Income Tax N/A N/A N/A 2,709,844 1,787,001

Net Income from continuing operations

N/A N/A N/A 2,445,282 1,641,730

Net Income(Loss) N/A N/A N/A 2,445,282 1,641,730

Other Comprehensive Income (Income after tax)

N/A N/A N/A (6,308) 87,829

Total Comprehensive Income

N/A N/A N/A 2,438,974 1,729,559

Net Income Attributable to Shareholders of The Parent

N/A N/A N/A - -

Net Income Attributable to Non-controlling Interests

N/A N/A N/A - -

Total Comprehensive Income (Loss) Attributable to Shareholders of the Parent

N/A N/A N/A - -

Total Comprehensive Income (Loss) Attributable to Non-controlling Interests

N/A N/A N/A - -

Earnings Per Share (NT$) N/A N/A N/A 3.39 2.22

Note1: Condensed Income Statements were under GAAP during 2009 to 2011, hence not applicable.

106

6.1.2 Condensed Consolidated Balance Sheet - ROC GAAP

Unit: NT$ thousands

Year

Item


2009 2010 2011 2012 2013

Current assets 31,002,664 36,707,321 39,093,410 39,698,734 N/A

Funds and Investments 1,092,611 1,212,696 1,424,355 1,274,120 N/A

Fixed assets 10,783,191 10,729,213 10,691,671 10,508,302 N/A

Intangible Assets 179,063 192,324 190,905 194,496 N/A

Other assets 468,320 549,315 459,212 466,861 N/A

Total assets 43,525,849 49,390,869 51,859,553 52,142,513 N/A

Current liabilities

Before distribution

23,334,045 28,269,364 29,160,780 28,433,813 N/A

After distribution

24,928,335 29,967,124 31,156,211 30,536,216 N/A

Long-term liabilities 6,728,965 5,414,737 4,920,695 4,255,113 N/A

Other liabilities 1,269,129 1,506,571 1,980,962 2,277,652 N/A

Total liabilities

Before distribution

31,332,139 35,190,672 36,062,437 34,966,578 N/A

After distribution

32,926,429 36,888,432 38,057,868 37,068,981 N/A

Capital stock 6,594,303 6,986,667 7,126,540 7,349,960 N/A

Capital Reserves 1,141,622 2,119,809 2,565,458 2,955,935 N/A

Retained Earnings

Before distribution

3,616,458 3,973,722 4,538,695 4,935,700 N/A

After distribution

2,022,168 2,275,962 2,543,264 2,833,297 N/A

Unrealized gain or loss on financial instruments

141,085 163,296 148,017 183,088 N/A

Cumulative translation adjustments

128,095 43,226 133,625 92,246 N/A

Unrecognized pension cost (365,522) (393,687) (338,227) (212,565) N/A

Treasury stock (28,754) (11,835) (11,835) (11,835) N/A

Total stockholders' equity of parent company

Before distribution

11,227,287 12,881,198 14,162,273 15,292,529 N/A

After distribution

9,632,997 11,183,438 12,166,842 13,190,126 N/A

Minority interest 966,423 1,318,999 1,634,843 1,883,406 N/A

Total Shareholders’ Equity

Before distribution

12,193,710 14,200,197 15,797,116 17,175,935 N/A

After distribution

10,599,420 12,502,437 13,801,685 15,073,532 N/A

Note1: The post-distribution numbers are based on the Shareholder’s Resolution in the following year.

Note2: Condensed Consolidated Balance Sheet was under IFRS of 2013, hence not applicable.

107

Condensed Balance Sheet - ROC GAAP

Unit: NT$ thousands

Year

Item


2009 2010 2011 2012 2013

Current assets 19,640,697 22,814,160 25,380,199 24,988,128 N/A

Funds and Investments 6,818,058 7,344,435 8,164,176 8,720,265 N/A

Fixed assets 505,448 475,159 458,645 404,883 N/A

Intangible Assets 50,070 65,290 91,753 92,630 N/A

Other assets 452,972 456,238 430,328 1,313,123 N/A

Total assets 27,467,245 31,155,282 34,525,101 35,519,029 N/A

Current liabilities

Before distribution

14,424,250 17,015,873 18,719,196 18,250,272 N/A

After distribution

16,018,540 18,713,633 20,714,627 20,352,675 N/A

Long-term liabilities 718,918 - - - N/A

Other liabilities 1,096,790 1,258,211 1,643,632 1,976,228 N/A

Total liabilities

Before distribution

16,239,958 18,274,084 20,362,828 20,226,500 N/A

After distribution

17,834,248 19,971,844 22,358,259 22,328,903 N/A

Capital stock 6,594,303 6,986,667 7,126,540 7,349,960 N/A

Capital Reserves 1,141,622 2,119,809 2,565,458 2,955,935 N/A

Retained Earnings

Before distribution

3,616,458 3,973,722 4,538,695 4,935,700 N/A

After distribution

2,022,168 2,275,962 2,543,264 2,833,297 N/A

Unrealized gain or loss on financial instruments

141,085 163,296 148,017 183,088 N/A

Cumulative translation adjustments

128,095 43,226 133,625 92,246 N/A

Unrecognized pension cost (365,522) (393,687) (338,227) (212,565) N/A

Treasury stock (28,754) (11,835) (11,835) (11,835) N/A

Total Shareholders’ Equity

Before distribution

11,227,287 12,881,198 14,162,273 15,292,529 N/A

After distribution

9,632,997 11,183,438 12,166,842 13,190,126 N/A

Note1: The post-distribution numbers are based on the Shareholder’s Resolution in the following

year. Note2: Condensed Balance Sheet was under IFRS of 2013, hence not applicable.

108

Condensed Consolidated Income Statement - ROC GAAP

Unit: NT$ thousands

Year Item


2009 2010 2011 2012 2013

Operating revenues 47,098,344 51,877,937 56,279,714 60,738,850 N/A

Gross profit 3,668,338 4,289,870 4,655,171 5,116,066 N/A

Operating income 2,029,571 2,411,735 2,780,166 3,154,153 N/A

Non-operating income 618,056 550,807 676,436 468,172 N/A

Non-operating expenses 291,261 225,193 184,826 252,908 N/A

Income from continuing operations before income tax

2,356,366 2,737,349 3,271,776 3,369,417 N/A

Income from operations of continued segments - after tax

1,844,666 2,217,747 2,612,656 2,780,419 N/A

Income from discontinued departments

- - - - N/A

Extraordinary gain or loss - - - - N/A

Cumulative effect of accounting principle changes

- - - - N/A

Equity holders of the Company 1,692,133 1,961,259 2,262,733 2,392,436 N/A

Minority interest 152,533 256,488 349,923 387,983 N/A

Earnings Per Share (NT$) 2.65 2.91 3.22 3.32 N/A

Note1: Condensed Consolidated Income Statement was under IFRS of 2013, hence not applicable.

109

Condensed Income Statement - ROC GAAP

Unit: NT$ thousands

Year Item


2009 2010 2011 2012 2013

Operating revenues 23,077,672 27,426,236 33,000,979 34,824,383 N/A

Gross profit 1,373,153 1,870,265 2,114,201 2,356,663 N/A

Operating income 408,550 775,731 1,111,933 1,264,354 N/A

Non-operating income 1,599,357 1,421,442 1,501,392 1,548,955 N/A

Non-operating expenses 105,602 97,574 66,164 162,884 N/A

Income from continuing operations before income tax

1,902,305 2,099,599 2,547,161 2,650,425 N/A

Income from operations of continued segments - after tax

1,692,133 1,961,259 2,262,733 2,392,436 N/A

Income from discontinued departments

- - - - N/A

Extraordinary gain or loss - - - - N/A

Cumulative effect of accounting principle changes

- - - - N/A

Net income 1,692,133 1,961,259 2,262,733 2,392,436 N/A

Earnings Per Share (NT$) 2.65 2.91 3.22 3.32 N/A

Note1: Condensed Income Statement was under IFRS of 2013, hence not applicable.

6.1.3 Auditors’ Opinions in Past Five Years:

CPA Firm/Year 2009 2010 2011 2012 2013

PriceWaterhouseCoopers Eric Wu Eric Wu

Huei-Shyang Wang

Shyh-Rong Ueng

Shyh-Rong Ueng

James Tsai James Tsai Shyh-Rong

Ueng Huei-Shyang

Wang Huei-Shyang

Wang

Auditing Opinion modified

unqualified opinion

modified unqualified

opinion


opinion


opinion


opinion

110

6.2 Financial Analysis for the Recent 5 Years

6.2.1 Consolidated Financial Ratio Analysis -International Financial Reporting Standards

Year Item


Financial Structure

(%)

Debt to Asset Ratio N/A N/A N/A 65.49 61.21 63.54

Long-term Funds to Properties, Plants and Equipment Ratio

N/A N/A N/A 308.32 311.04 321.16

Liquidity (%)

Current ratio N/A N/A N/A 138.24 148.50 143.85

Quick ratio N/A N/A N/A 125.54 135.43 132.25

Interest Coverage Ratio

N/A N/A N/A 36.32 24.65 34.33

Operating Performance

Accounts Receivable Turnover (times)

N/A N/A N/A 13.05 8.83 5.86

Average Collection Period (days)

N/A N/A N/A 27.96 41.33 62.28

Inventory Turnover (times)

N/A N/A N/A N/A N/A N/A

Accounts Payable Turnover (times)

N/A N/A N/A 4.92 3.93 3.33

Average Inventory Turnover Period (Days)

N/A N/A N/A N/A N/A N/A

Properties, Plant and Equipment Turnover (times)

N/A N/A N/A 8.30 7.30 6.86

Total Assets Turnover (times)

N/A N/A N/A 1.13 1.07 0.91

Profitability

Return on Assets (%) N/A N/A N/A 4.71 3.37 3.12

Return on Equity (%) N/A N/A N/A 15.40 9.99 9.21

Income before tax to Capital Ratio (%)

N/A N/A N/A 46.99 33.58 31.25

Net Margin (%) N/A N/A N/A 4.04 3.14 3.17

Earnings per share (NT$)

N/A N/A N/A 3.39 2.22

0.51

Cash flow

Cash flow Ratio (%) N/A N/A N/A 6.43 (13.54) 10.16

Cash flow adequacy Ratio (%)

N/A N/A N/A 173.39 112.88

131.26

Cash reinvestment Ratio (%)

N/A N/A N/A (1.92) (13.15)

10.62

Leverage Operating leverage N/A N/A N/A 4.10 5.24 5.32

Financial leverage N/A N/A N/A 1.03 1.05 1.03

Note1: Consolidated Financial Ratio Analysis was under GAAP during 2009 to 2011, hence not applicable.

111

Financial Ratio Analysis -International Financial Reporting Standards

Year Item


2009 2010 2011 2012 2013

Financial Structure (%)

Debt to Asset Ratio N/A N/A N/A 55.49 51.19

Long-term Funds to Properties, Plants and Equipment Ratio

N/A N/A N/A 4,052.62 4,378.37

Liquidity (%)

Current ratio N/A N/A N/A 135.24 152.15

Quick ratio N/A N/A N/A 122.38 137.83

Interest Coverage Ratio N/A N/A N/A N/A N/A



N/A N/A N/A 13.82 9.39

Average Collection Period (days)

N/A N/A N/A 26.42 38.88

Inventory Turnover (times) N/A N/A N/A N/A N/A


N/A N/A N/A 4.23 3.28


N/A N/A N/A N/A N/A

Properties, Plant and Equipment Turnover (times)

N/A N/A N/A 86.01 83.59

Total Assets Turnover (times)

N/A N/A N/A 0.94 0.93

Profitability

Return on Assets (%) N/A N/A N/A 6.73 4.65

Return on Equity (%) N/A N/A N/A 15.40 9.99

Income before tax to Capital Ratio (%)

N/A N/A N/A 36.87 23.91

Net Margin (%) N/A N/A N/A 7.02 5.22

Earnings per share (NT$) N/A N/A N/A 3.39 2.22

Cash flow

Cash flow Ratio (%) N/A N/A N/A (5.68) (20.37)

Cash flow adequacy Ratio (%)

N/A N/A N/A 188.63 98.99

Cash reinvestment Ratio (%)

N/A N/A N/A (17.22) (26.80)

Leverage Operating leverage N/A N/A N/A 4.74 5.27

Financial leverage N/A N/A N/A 1.00 1.00

Note1: Financial Ratio Analysis was under GAAP during 2009 to 2011, hence not applicable.

112

The formulas for the above table:

1. Financial Structure

(1) Debts to Assets Ratio = Total Liabilities / Total Assets

(2) Long-term Funds to Properties, Plants and Equipment Ratio = (Total Shareholders' Equity plus Noncurrent Liabilities) / Net of Properties, Plants and Equipment

2. Liquidity

(1) Current Ratio = Current Assets / Current Liabilities

(2) Quick Ratio = (Current Assets - inventory - Prepaid Expense) / Current Liabilities

(3) Interest Coverage Ratio = (Net Income before Income Tax and Interest Expenses) / Interest Expense

3. Operating Performance

(1) Account Receivable Turnover = Net Sales / Average Accounts Receivable

(2) Average Collection Period = 365/ Accounts Receivable Turnover

(3) Inventory Turnover = Costs of Goods Sold / Average Inventory

(4) Accounts Payable Turnover = Costs of Goods Sold / Average Accounts Payable

(5) Average Inventory Turnover Period = 365 / Inventory Turnover

(6) Properties, Plant and Equipment Turnover = Net Sales / Average of Net Properties, Plants and Equipment.

(7) Total Assets Turnover Ratio = Net Sales / Average of Total Assets

4. Profitability Analysis

(1) Return on Assets =[Net Income +Interest Expense×(1-Tax Rate)] / Average Total Assets

(2) Return on Equity =Net Income / Average Shareholders' Equity

(3) Net Margin = Net Income / Net Sales

(4) Earnings per Share = (Net Income Attribute to Controlling Interest - Preferred Stock Dividend) / Weighed-average Number of Outstanding Shares

5. Cash Flow

(1) Cash Flow Ratio = Cash Flows from Operating Activities / Current Liabilities

(2) Cash Flow adequacy Ratio = Net Cash Flow from Operating Activities for the past 5 years / (Capital Expenditure + Increase in Inventory + Cash Dividends) for the past 5 years

(3) Cash Reinvestment Ratio = (Net Cash Flow from Operating Activities - Cash Dividends) / (Gross Properties, Plants and Equipment + Long-term Investment + Other Noncurrent Assets + Working Capital)

6. Leverage Ratio

(1) Operating Leverage = (Net Sales - Variable Operating Costs and Expenses) / Operating Income

(2) Financial Leverage = Operating Income / (Operating Income-Interest Expenses)

113

6.2.2 Consolidated Financial Ratio Analysis - ROC GAAP

Year Item

Financial analysis in the past five years

2009 2010 2011 2012 2013

Financial structure (%)

Debt to Asset Ratio 71.99 71.25 69.54 67.06 N/A

Long-term Funds to Fixed Assets Ratio

166.52 182.82 193.78 203.94 N/A

Liquidity (%)

Current ratio 132.86 129.85 134.06 139.62 N/A

Quick ratio 111.20 119.61 121.07 125.82 N/A

Interest Coverage Ratio 57.21 24.24 34.20 34.99 N/A



10.36 11.07 12.50 13.73 N/A

Average Collection Period (days) 35.23 32.97 29.20 26.58 N/A



6.20 4.76 4.25 4.94 N/A


N/A N/A N/A N/A N/A

Fixed Assets Turnover (times) 4.37 4.84 5.26 5.78 N/A

Total Assets Turnover (times) 1.08 1.05 1.09 1.16 N/A

Profitability

Return on Assets (%) 4.38 4.43 4.63 4.76 N/A

Return on Stockholders' Equity (%)

16.01 16.27 16.73 16.24 N/A

Ratio to issued capital (%)

Operating Income 30.78 34.70 39.01 42.91 N/A

Pre-tax Income 35.73 39.39 45.91 45.84 N/A

Net Margin (%) 3.59 3.78 4.02 3.94 N/A

Earnings per share (NT$) 2.65 2.91 3.22 3.32 N/A

Cash flow

Cash flow Ratio (%) 27.19 30.80 12.96 3.18 N/A

Cash flow adequacy Ratio (%) 78.28 137.32 147.11 162.95 N/A

Cash reinvestment Ratio (%) 23.34 33.73 8.14 (4.03) N/A

Leverage Operating leverage 4.91 4.52 4.40 4.13 N/A

Financial leverage 1.11 1.05 1.04 1.03 N/A

Note1: Consolidated Financial Ratio Analysis was under IFRS of 2013, hence not applicable.

114

Financial Ratio Analysis - ROC GAAP

Year Item

Financial analysis in the past five years

2009 2010 2011 2012 2013

Financial structure (%)

Debt to Asset Ratio 59.12 58.65 58.98 56.95 N/A

Long-term Funds to Fixed Assets Ratio

2,363.49 2,710.92 3,087.85 3,777.02 N/A

Liquidity (%)

Current ratio 136.16 134.08 135.58 136.92 N/A

Quick ratio 116.04 124.49 125.31 122.71 N/A

Interest Coverage Ratio 57.21 202.98 11,172.76 N/A N/A



19.47 13.09 11.08 13.82 N/A

Average Collection Period (days) 18.74 27.89 32.95 26.41 N/A



5.97 4.91 4.56 4.23 N/A


N/A N/A N/A N/A N/A

Fixed Assets Turnover (times) 45.66 57.72 71.95 86.01 N/A

Total Assets Turnover (times) 0.84 0.88 0.96 0.98 N/A

Profitability

Return on Assets (%) 6.97 6.72 6.89 6.83 N/A

Return on Stockholders' Equity (%)

16.01 16.27 16.73 16.24 N/A

Ratio to issued capital (%)

Operating Income 6.20 11.10 15.6 17.20 N/A

Pre-tax Income 28.97 30.05 35.74 36.06 N/A

Net Margin (%) 7.33 7.15 6.86 6.87 N/A

Earnings per share (NT$) 2.65 2.91 3.22 3.32 N/A

Cash flow

Cash flow Ratio (%) 24.71 39.26 16.65 (5.49) N/A

Cash flow adequacy Ratio (%) 116.6 213.13 210.91 187.69 N/A

Cash reinvestment Ratio (%) 17.45 35.12 8.78 (17.02) N/A

Leverage Operating leverage 11.20 6.62 5.42 4.88 N/A

Financial leverage 1.09 1.01 1.00 1.00 N/A

Note1: Financial Ratio Analysis was under IFRS of 2013, hence not applicable.

115

The formulas for the above table:

1. Financial Structure

(1) Debts to Assets Ratio = Total Liabilities / Total Assets

(2) Long-term Funds to Fixed Assets Ratio = (Total Shareholders' Equity plus Long-term Liabilities) / Net Fixed Assets

2. Liquidity

(1) Current Ratio = Current Assets / Current Liabilities

(2) Quick Ratio = (Current Assets - inventory - Prepaid Expense) / Current Liabilities

(3) Interest Coverage Ratio = (Net Income before Income Tax and Interest Expenses) / Interest Expense

3. Operating Performance

(1) Account Receivable Turnover = Net Sales / Average Receivables (including accounts and notes receivable)

(2) Average Collection Period = 365/ Accounts Receivable Turnover

(3) Inventory Turnover = Costs of Goods Sold / Average Inventory

(4) Accounts Payable Turnover = Costs of Goods Sold / Average Payables (including accounts and notes payable)

(5) Average Inventory Turnover Period = 365 / Inventory Turnover

(6) Fixed Assets Turnover = Net Sales / Net Fixed Assets

(7) Total Assets Turnover = Net Sales / Total Assets

4. Profitability Analysis

(1) Return on Assets =[Net Income +Interest Expense×(1-Tax Rate)] / Average Total Assets

(2) Return on Shareholders' Equity =Net Income / Average Shareholders' Equity

(3) Net Margin = Net Income / Net Sales

(4) Earnings per Share = (Net Income - Preferred Stock Dividend) / Weighed-average Number of Outstanding Shares.

5. Cash Flow

(1) Cash Flow Ratio = Cash Flows from Operating Activities / Current Liabilities

(2) Cash Flow adequacy Ratio = Net Cash Flow from Operating Activities for the past 5 years / (Capital Expenditure + Increase in Inventory + Cash Dividends) for the past 5 years

(3) Cash reinvestment Ratio = (Net Cash Flow from Operating Activities - Cash Dividends) / (Gross Fixed Assets + Long-term Investment + Other Assets + Working Capital)

6. Leverage Ratio

(1) Operating Leverage = (Net Sales - Variable Operating Costs and Expenses) / Operating Income

(2) Financial Leverage = Operating Income / (Operating Income-Interest Expenses)

116

6.3 Supervisors’ Review Report in the Most Recent Year

119

CTCI CORPORATION

FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT

ACCOUNTANTS

DECEMBER 31, 2013 AND 2012

----------------------------------------------------------------------------------------------------------------------------- ------- 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.

6.4 Financial Statements for the Years Ended December 31, 2013 and 2012, and Independent Auditors’ Report

CTCI CORPORATION BALANCE SHEETS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

122

December 31, 2013 December 31, 2012 January 1, 2012 Assets Notes AMOUNT % AMOUNT % AMOUNT %

Current assets

1100 Cash and cash equivalents 6(1) $ 4,685,629 14 $ 9,436,323 26 $ 12,233,579 34

1110 Financial assets at fair value

through profit or loss - current

6(2)

463,231 1 920,150 2 1,947,816 5

1125 Available-for-sale financial

assets - current

6(3)

370,594 1 407,280 1 360,731 1

1150 Notes receivable, net 6(5) 3,202,568 10 - - - -

1170 Accounts receivable, net 6(5) 1,130,606 3 1,871,705 5 2,374,250 7

1180 Accounts receivable - related

parties

7

285,310 1 209,798 1 585,676 2

1190 Receivables from customers on

construction contracts

6(6)

5,906,355 18 7,243,592 20 3,514,854 10

1200 Other receivables 40,900 - 58,899 - 56,096 -

1210 Other receivables - related

parties

7

2,802,721 8 1,980,253 5 1,819,008 5

1220 Current income tax assets 6(24) 120,067 - - - - -

130X Inventories - - 1,265 - 8,942 -

1410 Prepayments 6(7) 2,043,470 6 2,347,013 6 1,759,569 5

1470 Other current assets 672,388 2 205,864 1 182,265 -

11XX Current Assets 21,723,839 64 24,682,142 67 24,842,786 69

Non-current assets

1543 Financial assets measured at

cost - non-current

6(4)

572,877 2 654,000 2 733,000 2

1550 Investments accounted for

under equity method

6(8)

9,635,377 29 9,124,763 25 8,479,971 24

1600 Property, plant and equipment 6(9) 376,216 1 404,883 1 458,663 1

1760 Investment property 6(10) 158,226 1 159,549 - 160,872 1

1780 Intangible assets 99,555 - 92,630 - 91,753 -

1840 Deferred income tax assets 6(24) 395,139 1 534,926 2 383,519 1

1900 Other non-current assets 6(11), 7

and 8 786,878 2 1,214,319 3 652,165 2

15XX Non-current assets 12,024,268 36 12,185,070 33 10,959,943 31

1XXX Total assets $ 33,748,107 100 $ 36,867,212 100 $ 35,802,729 100

(Continued)

CTCI CORPORATION BALANCE SHEETS


The accompanying notes are an integral part of these financial statements. See report of independent accountants dated March 28, 2014.

123

December 31, 2013 December 31, 2012 January 1, 2012 Liabilities and Equity Notes AMOUNT % AMOUNT % AMOUNT % Current liabilities 2120 Financial liabilities at fair value

through profit or loss - current 6(2)

$ 19,503 - $ 2,509 - $ 23,731 - 2150 Notes payable 2,100 - 2,888 - 5,158 - 2170 Accounts payable 6(12) 9,207,734 27 6,930,883 19 6,552,154 18 2180 Accounts payable - related

parties 7

896,032 3 795,790 2 1,064,909 3

2190 Payables to customers on

construction contracts 6(6)

2,674,825 8 8,641,869 23 9,209,029 26 2200 Other payables 6(13) 1,286,278 4 1,439,943 4 1,324,706 4 2220 Other payables - related

parties 7

87,843 - 83,897 - - - 2230 Current income tax liabilities 6(24) - - 271,703 1 213,057 - 2300 Other current liabilities 104,062 - 80,790 - 326,451 1

21XX Current Liabilities 14,278,377 42 18,250,272 49 18,719,195 52

Non-current liabilities 2570 Deferred income tax liabilities 6(23) 246,355 1 280,046 1 231,799 1 2600 Other non-current liabilities 6(14)(15)

and 8 2,751,262 8 1,928,540 5 1,500,821 4

25XX Non-current liabilities 2,997,617 9 2,208,586 6 1,732,620 5

2XXX Total Liabilities 17,275,994 51 20,458,858 55 20,451,815 57

Equity Share capital 6(17) 3110 Common stock 7,474,343 22 7,349,960 20 7,126,540 20

Capital surplus 6(16)(18) 3200 Capital surplus 3,070,085 9 2,757,865 7 2,367,388 6 Retained earnings 3310 Legal reserve 6(19)(24) 2,499,625 8 2,260,381 6 2,034,108 6 3320 Special reserve 778,162 2 834,747 2 965,327 3 3350 Unappropriated retained

earnings

2,432,195 7 3,075,527 9 2,721,369 8

Other equity interest 3400 Other equity interest 229,538 1 141,709 1 148,017 - 3500 Treasury stocks 6(17) ( 11,835 ) - ( 11,835 ) - ( 11,835 ) -

3XXX Total equity 16,472,113 49 16,408,354 45 15,350,914 43

Significant Contigent Liabilities

and Unrecognised Contract

Commitments

9

Significant Events After the

Balance Sheet Date 11

Total liabilities and equity $ 33,748,107 100 $ 36,867,212 100 $ 35,802,729 100

CTCI CORPORATION STATEMENTS OF COMPREHENSIVE INCOME



124

For the years ended December 31 2013 2012

Notes AMOUNT % AMOUNT % 4000 Operating revenue 6(20) and 7 $ 31,446,326 100 $ 34,824,383 100 5000 Operating costs 6(21)(22) and 7 ( 29,279,082 ) ( 93 ) ( 32,469,582 ) ( 93 ) 5900 Net operating margin 2,167,244 7 2,354,801 7 5920 Realized profit on from

sales

1,936 - 1,862 - 5950 Gross profit 2,169,180 7 2,356,663 7 Operating expenses 6(21)(22) and 7 6200 General & administrative

expenses

( 946,609 ) ( 3 ) ( 958,268 ) ( 3 ) 6300 Research and development

expenses

( 92,576 ) - ( 95,378 ) - 6000 Total operating expenses ( 1,039,185 ) ( 3 ) ( 1,053,646 ) ( 3 ) 6900 Operating profit 1,129,995 4 1,303,017 4 Non-operating income and

expenses

7010 Other income 6(23) and 7 147,472 - 166,193 - 7020 Other gains and losses 6(4) ( 29,268 ) - ( 32,410 ) - 7070 Share of profit of associates

and joint ventures accounted for under equity method

538,802 2 1,273,044 4 7000 Total non-operating

income and expenses

657,006 2 1,406,827 4 7900 Profit before income tax 1,787,001 6 2,709,844 8 7950 Income tax expense 6(24) ( 145,271 ) ( 1 ) ( 264,562 ) ( 1 ) 8200 Profit for the year $ 1,641,730 5 $ 2,445,282 7 Other comprehensive income 8310 Cumulative translation

differences of foreign operations

48,557 1 ( 41,379 ) - 8325 Unrealized gain on valuation

of available-for-sale financial assets

20,141 - 16,540 - 8380 Total share of other

comprehensive income of associates and joint ventures accounted for using equity method

19,131 - 18,531 - 8300 Other comprehensive income

for the year

87,829 1 ( 6,308 ) - 8500 Total comprehensive income

for the year

$ 1,729,559 6 $ 2,438,974 7

Basic earnings per share 6(25) 9750 Total basic earnings per

share

$ 2.22 $ 3.39

Diluted earnings per share 9850 Total diluted earnings per

share

$ 2.17 $ 3.27

CTCI CORPORATION STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (EXPRESSED IN THOUSANDS OFNEW TAIWAN DOLLARS)

Retained earnings Other equity interest

Notes

Common stock

Capital surplus

Legal reserve

Special reserve

Unappropriated earnings

Cumulated translation


Unrealized gain on valuation of

available-for-sale financial assets

Treasury stocks

Total equity

Note 1: The directors' and supervivors' remuneration of $10,000 and the employees' bonus of $141,907 for the years ended December 31, 2011 has been deducted from the statement of comprehensive income. Note 1: The directors' and supervivors' remuneration of $15,000 and the employees' bonus of $132,407 for the years ended December 31, 2012 has been deducted from the statement of comprehensive income.


125

For the year ended December 31, 2012 Balance at January 1, 2012 $ 7,126,540 $ 2,367,388 $ 2,034,108 $ 965,327 $ 2,721,369 $ - $ 148,017 ( $ 11,835 ) $ 15,350,914 Appropriation of 2011 earnings (Note 1) 6(19) Legal reserve - - 226,273 - ( 226,273 ) - - - - Special reserve - - - ( 130,580 ) 130,580 - - - - Cash dividends - - - - ( 1,995,431 ) - - - ( 1,995,431 ) Difference between proceeds on acquisition of or

disposal of equity interest in a subsidiary and its carrying amount

6(18)

- 34,730 - - - - - - 34,730 Convertible bonds transferred to common stock - ( 6,164 ) - - - - - - ( 6,164 ) Employee stock options granted 6(17) - 116,045 - - - - - - 116,045 Employee stock options exercised 6(17) 223,420 245,866 - - - - - - 469,286 Cumulative translation differences of foreign

operations

- - - - - ( 41,379 ) - - ( 41,379 ) Unrealized gain on valuation of available-for-sale

financial assets 6(3)

- - - - - - 35,071 - 35,071 Profit for 2012 - - - - 2,445,282 - - - 2,445,282 Balance at December 31, 2012 $ 7,349,960 $ 2,757,865 $ 2,260,381 $ 834,747 $ 3,075,527 ( $ 41,379 ) $ 183,088 ( $ 11,835 ) $ 16,408,354 For the year ended December 31, 2013 Balance at January 1, 2013 $ 7,349,960 $ 2,757,865 $ 2,260,381 $ 834,747 $ 3,075,527 ( $ 41,379 ) $ 183,088 ( $ 11,835 ) $ 16,408,354 Appropriation of 2012 earnings (Note 2) 6(19) Legal reserve - - 239,244 - ( 239,244 ) - - - - Special reserve - - - ( 56,585 ) 56,585 - - - - Cash dividends - - - - ( 2,102,403 ) - - - ( 2,102,403 ) Difference between proceeds on acquisition of or

disposal of equity interest in a subsidiary and its carrying amount

6(18)

- 137,924 - - - - - - 137,924 Convertible bonds transferred to common stock - ( 13,099 ) - - - - - - ( 13,099 ) Employee stock options granted 6(17) - 51,772 - - - - - - 51,772 Employee stock options exercised 6(17)(18) 124,383 135,623 - - - - - - 260,006 Cumulative translation differences of foreign

operations

- - - - - 48,557 - - 48,557 Unrealized gain on valuation of available-for-sale

financial assets 6(3)

- - - - - - 39,272 - 39,272 Profit for 2013 - - - - 1,641,730 - - - 1,641,730 Balance at December 31, 2013 $ 7,474,343 $ 3,070,085 $ 2,499,625 $ 778,162 $ 2,432,195 $ 7,178 $ 222,360 ( $ 11,835 ) $ 16,472,113

CTCI CORPORATION STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Notes 2013 2012

126

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax for the year $ 1,787,001 $ 2,709,844 Adjustments to reconcile profit before income tax to net cash

used in operating activities

Income and expenses having no effect on cash flows Impairment losses 81,123 79,000 Depreciation 6(21) 70,854 89,508 Amortization 6(21) 115,187 116,506 Provision for (reversal of ) allowance for doubtful accounts 79,931 ( 9,476 ) Loss (gain) on valuation of financial assets 107,625 ( 111,494 ) Gain on disposal of property, plant and equipment ( 1,701 ) ( 17,863 ) Compensation costs for employee stock options 6(22) 27,038 68,916 Gain on disposal of investments ( 86,273 ) ( 1,095 ) Investment income accounted for under the equity method ( 538,802 ) ( 1,273,044 ) Realized gain from intercompany transactions ( 1,936 ) ( 1,862 ) Dividends income 6(23) ( 27,772 ) ( 28,162 ) Interest income 6(23) ( 66,831 ) ( 79,210 ) Changes in assets/liabilities relating to operating activities Net changes in assets relating to operating activities Financial assets at fair value through profit or loss 521,034 1,236,628 Notes receivable, net ( 3,250,915 ) - Accounts receivable, net 709,514 512,021 Accounts receivable - related parties ( 75,512 ) 375,878 Other receivables 19,261 ( 2,804 ) Other receivables - related parties ( 822,468 ) ( 161,245 ) Receivables from customers on construction contracts 1,337,237 ( 3,728,738 ) Inventories 1,265 7,677 Prepayments 303,543 ( 587,444 ) Deferred income tax assets and liabilities 106,096 ( 103,160 ) Other current assets ( 466,524 ) ( 23,599 ) Other non-current assets 138,685 ( 620,688 ) Net changes in liabilities relating to operating activities Notes payable ( 788 ) ( 2,270 ) Accounts payable 2,276,851 378,729 Accounts payable - related parties 100,242 ( 269,119 ) Payables to customers on construction contracts ( 5,967,044 ) ( 567,160 ) Other payables ( 153,665 ) 115,237 Other payables - related parties 3,946 83,897 Accrued pension labilities 309,466 416,510 Other current liabilities 23,272 ( 245,661 ) Cash used in operations ( 3,341,060 ) ( 1,643,743 ) Interest received 66,867 79,701 Dividends received 796,541 836,659 Income tax paid ( 430,945 ) ( 309,077 ) Net cash used in operating activities ( 2,908,597 ) ( 1,036,460 )

(Continued)

CTCI CORPORATION STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Notes 2013 2012


127

CASH FLOWS FROM INVESTING ACTIVITIES

Decrease in available-for-sale financial assets $ 121,453 $ 5,235

Increase in available-for-sale financial assets - ( 29,229 )

Increase in long-term investment - subsidiaries 6(8) ( 15,755 ) ( 149,350 )

Proceeds from disposal of long-term investments - subsidiaries 12 9,357

Acquisition of property, plant and equipment ( 42,078 ) ( 35,767 )

Proceeds from disposal of property, plant and equipment 2,915 19,225

Increase in computer software cost ( 76,742 ) ( 55,998 )

Decease (increase) in refundable deposits 2,490 ( 5,684 )

Net cash used in investing activities ( 7,705 ) ( 242,211 )

CASH FLOWS FROM FINANCING ACTIVITIES

Increase in deposits received 8,005 7,560

Cash dividends paid ( 2,102,403 ) ( 1,995,431 )

Proceeds from employee stock options exercised 260,006 469,286

Net cash used in financing activities ( 1,834,392 ) ( 1,518,585 )

Decrease in cash and cash equivalents ( 4,750,694 ) ( 2,797,256 )

Cash and cash equivalents at beginning of year 9,436,323 12,233,579

Cash and cash equivalents at end of year $ 4,685,629 $ 9,436,323

128

CTCI CORPORATION NOTES TO THE FINANCIAL STATEMENTS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANIZATION CTCI Corporation (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China on April 6, 1979 and commenced its operations on May 1, 1979. The main business activities of the Company are the design, survey, construction and inspection of various engineering and construction projects, plants, machinery and equipment and environmental protection projects. The Company’s shares have been listed and traded on the Taiwan Stock Exchange since May 1993. As of December 31, 2013, the Company’s total issued and outstanding capital stock was $7,474,343 consisting of 747,434,300 shares at par value of $10 (in dollars) per share, and the Company had approximately 2,770 employees.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE NON-CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION These non-consolidated financial statements were authorized for issuance by the Board of Directors on March 28, 2014.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting

Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”) Not applicable as it is the first-time adoption of IFRSs by the Company this year.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Company IFRS 9, ‘Financial Instruments’: Classification and measurement of financial instruments

A) The International Accounting Standards Board (“IASB”) published IFRS 9, ‘Financial

Instruments’, in November, 2009, which will take effect on January 1, 2013 with early

application permitted. (Through the amendments to IFRS 9 published on November 19, 2013,

the IASB has removed the previous mandatory effective date, but the standard is available for

immediate application). Although the FSC has endorsed IFRS 9, FSC does not permit early

application of IFRS 9 when IFRSs are adopted in R.O.C. in 2013. Instead, enterprises should

apply International Accounting Standard No. 39 (“IAS 39”), ‘Financial Instruments:

Recognition and Measurement’ reissued in 2009.

B) IFRS 9 was issued as the first step to replace IAS 39. IFRS 9 outlines the new classification and

measurement requirements for financial instruments, which might affect the accounting

treatments for financial instruments of the Company.

C) The Company has not evaluated the overall effect of the IFRS 9 adoption. However, based on

preliminary evaluation, it was noted that the IFRS 9 adoption might have an impact on those

instruments classified as ‘available-for-sale financial assets’ held by the Company, as IFRS 9

specifies that the fair value changes in the equity instruments that meet certain criteria may

129

be reported in other comprehensive income, and such amount that has been recognized in

other comprehensive income should not be reclassified to profit or loss when such assets are

derecognized. The Company recognized gain on debt instruments and on equity instruments

amounting to $39,272 and $35,071 respectively, in other comprehensive income for the years

ended December 31, 2013 and 2012.

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

The following are the assessment of new standards, interpretations and amendments issued by IASB but not yet endorsed by the FSC (application of the new standards, interpretations and amendments should follow the regulations of the FSC):

130

New Standards, Interpretations and Amendments Main Amendments Effective Date

Limited exemption from

comparative IFRS 7 disclosures

for first-time adopters

(amendment to IFRS 1)

The amendment provides first-time adopters of

IFRSs with the same transition relief that

existing IFRS preparers received in IFRS 7 , ‘

Financial Instruments : Disclosures’ and exempts

first-time adopters from providing the additional

comparative disclosures.

July 1, 2010

Improvements to IFRSs 2010 Amendments to IFRS 1, IFRS 3, IFRS 7, IAS 1,

IAS 34 and IFRIC 13.

January 1, 2011

IFRS 9 , ‘Financial instruments :

Classification and measurement

of financial liabilities’

IFRS 9 requires gains and losses on financial

liabilities designated at fair value through profit

or loss to be split into the amount of change in

the fair value that is attributable to changes in the

credit risk of the liability, which shall be

presented in other comprehensive income, and

cannot be reclassified to profit or loss when

derecognising the liabilities; and all other

changes in fair value are recognised in profit or

loss. The new guidance allows the recognition of

the full amount of change in the fair value in the

profit or loss only if there is reasonable evidence

showing on initial recognition that the

recognition of changes in the liability's credit risk

in other comprehensive income would create or

enlarge an accounting mismatch (inconsistency)

in profit or loss. (That determination is made at

initial recognition and is not reassessed

subsequently.)

November 19, 2013

(Not mandatory)

Disclosures - transfers of

financial assets (amendment to

IFRS 7)

The amendment enhances qualitative and

quantitative disclosures for all transferred

financial assets that are not derecognised and for

any continuing involvement in transferred assets,

existing at the reporting date.

July 1, 2011

131

New Standards, Interpretationsand Amendments Main Amendments Effective Date

Severe hyperinflation and

removal of fixed dates for first-

time adopters (amendment to

IFRS 1)

When an entity’s date of transition to IFRSs is

on, or after, the functional currency

normalisation date, the entity may elect to

measure all assets and liabilities held before the

functional currency normalisation date at fair

value on the date of transition to IFRSs. First-

time adopters are allowed to apply the

derecognition requirements in IAS 39, 'Financial

instruments:Recognition and measurement',

prospectively from the date of transition to

IFRSs, and they are allowed not to

retrospectively recognize related gains on the

date of transition to IFRSs.

July 1, 2011

Deferred tax: recovery of

underlying assets (amendment

to IAS 12)

The amendment gives a rebuttable presumption

that the carrying amount of investment properties

measured at fair value is recovered entirely by

sale, unless there exists any evidence that could

rebut this presumption. The amendment also

replaces SIC 21, ‘Income taxes—recovery of

revalued non-depreciable assets’.

January 1, 2012

IFRS 10, ‘Consolidated

financial statements’

The standard builds on existing principles by

identifying the concept of control as the

determining factor in whether an entity should be

included within the consolidated financial

statements of the parent company. The standard

provides additional guidance to assist in the

determination of control where it is difficult to

assess.

January 1, 2013

IFRS 11,‘Joint arrangements’ Judgments applied when assessing the types of

joint arrangements-joint operations and joint

ventures, the entity should assess the contractual

rights and obligations instead of the legal form

only. The standard also prohibits the proportional

consolidation for joint ventures.

January 1, 2013

IFRS 12,‘Disclosure of interests

in other entities’

The standard requires the disclosure of interests

in other entities including subsidiaries, joint

arrangements, associates and unconsolidated

structured entities.

January 1, 2013

132


IAS 27,‘Separate financial

statements’ (as amended in 2011)

The standard removes the requirements of

consolidated financial statements from IAS 27

and those requirements are addressed in IFRS 10,

‘Consolidated financial statements’.

January 1, 2013

IAS 28,‘Investments in

associates and joint ventures’(as

amended in 2011)

As consequential amendments resulting from the

issuance of IFRS 11 , ‘Joint arrangements’, IAS

28 (revised) sets out the requirements for the

application of the equity method when

accounting for investments in joint ventures.

January 1, 2013

IFRS 13, ‘Fair value

measurement’

IFRS 13 aims to improve consistency and reduce

complexity by providing a precise definition of

fair value and a single source of fair value

measurement and disclosure requirements for use

across IFRSs. The requirements do not extend

the use of fair value accounting but provide

guidance on how it should be applied where its

use is already required or permitted by other

standards within IFRSs.

January 1, 2013

IAS 19 revised, ‘Employee

benefits’ (as amended in 2011)

The revised standard eliminates corridor

approach and requires actuarial gains and losses

to be recognised immediately in other

comprehensive income. Past service costs will be

recognised immediately in the period incurred.

Net interest expense or income, calculated by

applying the discount rate to the net defined

benefit asset or liability, replace the finance

charge and expected return on plan assets. The

return of plan assets, excluding net interest

expense, is recognised in other comprehensive

income.

January 1, 2013

Presentation of items of other

comprehensive income

(amendment to IAS 1)

The amendment requires profit or loss and other

comprehensive income (OCI) to be presented

separately in the statement of comprehensive

income. Also, the amendment requires entities to

separate items presented in OCI into two groups

based on whether or not they may be recycled to

profit or loss subsequently.

July 1, 2012

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IFRIC 20, ‘Stripping costs in the

production phase of a surface

mine’

Stripping costs that meet certain criteria should

be recognised as the ‘stripping activity asset’. To

the extent that the benefit from the stripping

activity is realised in the form of inventory

produced, the entity shall account for the costs of

that stripping activity in accordance with IAS 2, ‘

Inventories’.

January 1, 2013

Disclosures—Offsetting

financial assets and financial

liabilities (amendment to IFRS

7)

The amendment requires disclosures to include

quantitative information that will enable users of

an entity's financial statements to evaluate the

effect or potential effect of netting arrangements.

January 1, 2013

Offsetting financial assets and

financial liabilities (amendment

to IAS 32)

The amendments clarify the requirements for

offsetting financial instruments on the statement

of financial position: (i) the meaning of 'currently

has a legally enforceable right to set off the

recognised amounts' ; and (ii) that some gross

settlement mechanisms with certain features may

be considered equivalent to net settlement.

January 1, 2014

Government loans (amendment

to IFRS 1)

The amendment provides exception to first-time

adopters to apply the requirements in IFRS 9,

'Financial instruments' , and IAS 20,

'Accounting for government grants and

disclosure of government assistance',

prospectively to government loans that exist at

the date of transition to IFRSs; and first-time

adopters should not recognise the corresponding

benefit of the government loan at a below-market

rate of insterest as a government grant.

January 1, 2013

Improvements to IFRSs 2009-

2011

Amendments to IFRS 1, IAS 1, IAS 16, IAS 32

and IAS 34.

January 1, 2013

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New Standards, Interpretations and Amendments Main Amendments Effective Date

Consolidated financial

statements, joint arrangements

and disclosure of interests in

other entities: Transition

guidance (amendments to IFRS

10, IFRS 11 and IFRS 12)

The amendment clarifies that the date of initial

application is the first day of the annual period in

which IFRS 10, 11 and 12 is adopted.

January 1, 2013

Investment entities

(amendments to IFRS 10, IFRS

12 and IAS 27)

The amendments define ‘Investment Entities’and their

characteristics. The parent company that meets the

definition of investment entities should measure its

subsidiaries using fair value through profit of loss

instead of consolidating them.

January 1, 2014

IFRIC 21 , ‘Levies’ The interpretation addresses the accounting for levies

imposed by governments in accordance with legislation

(other than income tax). A liability to pay a levy shall

be recognised in accordance with IAS 37 , ‘Provisions ,

contingent liabilities and contingent assets’ .

January 1, 2014

Recoverable amount disclosures

for non-financial assets

(amendments to IAS 36)

The amendments remove the requirement to disclose

recoverable amount when a cash generating unit (CGU)

contains goodwill or intangible assets with indefinite

useful lives that were not impaired.

January 1, 2014

Novation of derivatives and

continuation of hedge

accounting (amendments to IAS

39)

The amendment states that the novation of a hedging

instrument would not be considered an expiration or

termination giving rise to the discontinuation of hedge

accounting when the hedging instrument that is being

novated complies with specified criteria.

January 1, 2014

IFRS 9 "Financial assets: hedge

accouting" and admendments to

IFRS 9, IFRS 7 and IAS 39

1. IFRS 9 relaxes the requirements for hedged items

and hedging instruments and removes the bright line of

effectiveness to better align hedge accounting with the

risk management activities of an entity

2. An entity can elect to early adopt the requirement to

recognise the changes in fair value attributable to

changes in an entity's own credit risk from financial

liabilities that are designated under the fair value option

in ‘other comprehensive income’ .

November 19,

2013

(Not mandatory)

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The Company is assessing the potential impact of the new standards and amendments above and has

not yet been able to reliably estimate their impact on the non-consolidated financial statements.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

presented, unless otherwise stated.

(4) Compliance statement

A) This non-consolidated financial statement is the first non-consolidated financial statements

prepared by the Company in accordance with the “Rules Governing the Preparation of

Financial Statements by Securities Issuers”.

B) In the preparation of the non-consolidated balance sheet of January 1, 2012, (the Company’s

date of transition to IFRSs) (“the opening IFRS non-consolidated balance sheet”), the

Company has adjusted the amounts that were reported in the consolidated financial

statements in accordance with previous R.O.C. GAAP. Please refer to Note 15 for the impact

of transitioning from R.O.C. GAAP to the International Financial Reporting Standards,

International Accounting Standards, and Interpretations/bulletins as endorsed by the FSC

(collectively referred herein as the “IFRSs”) on the Company’s financial position, operating

results and cash flows.

(5) Basis of preparation

A) Except for the following items, these non-consolidated financial statements have been

prepared under the historical cost convention:


Services related contributions

from employees or third-party

(admendments to IAS 19)

The amendment allows contributions from employees

or third-party that are linked to service, and do not vary

with the length of employee service, to be deducted

from the cost of benefits earned in the period that the

service is provided. Contributions that are linked to

service, and vary according to the length of employee

service, must be spread over the service period using

the same attribution method that is applied to the

benefits.

July 1, 2014


2012

Amendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS

16, IAS 24 and IAS 38.

July 1, 2014


2013

Amendments to IFRS 1, IFRS 3, IFRS 13 and IAS 40 July 1, 2014

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(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 recognized based on the net amount of pension fund assets plus

unrecognized prior period’s service cost and unrecognized actuarial losses, and less

unrecognized actuarial gains and present value of defined benefit obligation.

B) The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the non-consolidated financial statements are disclosed in Note 5.

(6) Foreign currency translation

Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan Dollars, which is the Company’s functional 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 recognized 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 recognized 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 recognized in profit or loss as part of the fair value gain 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 recognized 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.

B) Translation of foreign operations

(a) The operating results and financial position of all the group 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;

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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 recognized in other comprehensive income.

(b) When a 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.

(7) Classification of current and non-current items

A) As the operating cycle for construction contracts usually exceeds one year, the Company uses the operating cycle (typically 3～4 years) as its criteria for classifying current and non-current

assets and liabilities related to construction contracts. For other assets and liabilities, the criterion is one year.

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 realized, 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 realized 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.

(8) Cash and cash equivalents

A) In the non-consolidated statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less.

B) Cash equivalents refer to short-term highly liquid investments that meet both the following criteria:

(a) Readily convertible to known amount of cash; and

(b) Subject to an insignificant risk of changes in value.

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(9) 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 or financial assets designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

(a) Hybrid (combined) contracts; or

(b) They eliminate or significantly reduce a measurement or recognition inconsistency; or

(c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

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 recognized 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 recognized in profit or loss.

(10) 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 recognized and

derecognized using trade date accounting.

C) Available-for-sale financial assets are initially recognized 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 recognized 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’. (11) 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 recognized at fair value and subsequently measured at amortized 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 effect of discounting is immaterial.

(12) 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

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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 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 Company, for economic or legal reasons relating to the borrower’s financial

difficulty, granted the borrower a concession that a lender would not otherwise consider;

(d) It becomes probable that the borrower will enter bankruptcy or other financial reorganization;

(e) The disappearance of an active market for that financial asset because of financial difficulties;

(f) 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;

(g) 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

(h) 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 amortized 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 recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortized cost that would have been at the date of reversal had the impairment loss not been recognized previously. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset directly.

(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

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current market return rate of similar financial asset, and is recognized in profit or loss. Impairment loss recognized for this category shall not be reversed subsequently. Impairment loss is recognized 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 amortization) and current fair value, less any impairment loss on that financial asset previously recognized 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 recognized, then such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognized in profit or loss shall not be reversed through profit or loss. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(13) Derecognition of financial assets

The Company derecognises a financial asset when the contractual rights to receive the cash flows

from the financial asset expire.

(14) Inventories

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

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

realizable value. Net realizable value is the estimated selling price in the ordinary course of

business, less the estimated cost of completion and applicable variable selling expenses.

(15) Construction contracts

A) IAS 11, ‘Construction Contracts’, defines a construction contract as a contract specifically negotiated for the construction of an asset. If the outcome of a construction contract can be estimated reliably and it is probable that this contract would make a profit, contract revenue should be recognized by reference to the stage of completion of the contract activity, using the percentage-of-completion method of accounting, over the contract term. Contract costs are expensed as incurred. The stage of completion of a contract is measured by the proportion of contract costs incurred for work performed to date to the estimated total costs for the contract. An expected loss where total contract costs will exceed total contract revenue on a construction contract should be recognized as an expense as soon as such loss is probable. If the outcome of a construction contract cannot be estimated reliably, contract revenue should be recognized only to the extent of contract costs incurred that it is probable will be recoverable.

B) Contract revenue should include the revenue arising from variations from the original contract work, claims and incentive payments that are agreed by the customer and can be measured reliably.

C) The excess of the cumulative costs incurred plus recognized profits (less recognized losses)

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over the progress billings on each construction contract is presented as an asset within ‘receivables from customers on construction contracts’. While, the excess of the progress billings over the cumulative costs incurred plus recognized profits (less recognized losses) on each construction contract is presented as a liability within ‘payables to customers on construction contracts’.

(16) Investments accounted for under the equity method / subsidiary and associates

A) Subsidiaries are all entities (including special purpose entities) over which the Company has

the power to govern the financial and operating policies. In general, control is presumed to

exist when the parent owns, directly or indirectly through subsidiaries, more than half of the

voting power of an entity. The Company accounts for investments in subsidiaries under the

equity method in the non-consolidated financial statements.

B) Inter-company transactions, balances and unrealised gains or losses on transactions between

companies and subsidiaries are eliminated. Accounting policies of subsidiaries have been

adjusted where necessary to ensure consistency with the policies adopted by the Company.

C) The Company’s share of its subsidiary’ post-acquisition profits or losses is recognized in profit

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

recognized in other comprehensive income. When the Company’s share of losses in an

associate equals or exceeds its interest in the associate, including any other unsecured

receivables, the Company recognizes losses in ownership interests.

D) 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 recognized at cost.

E) The Company’s share of its associates’ post-acquisition profits or losses is recognized in profit

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

recognized in other comprehensive income. When the Company’s share of losses in an

associate equals or exceeds its interest in the associate, including any other unsecured

receivables, the Company does not recognize further losses, unless it has incurred

statutory/constructive obligations or made payments on behalf of the associate.

F) When changes in an associate’s equity that are not recognized in profit or loss or other

comprehensive income of the associate and such changes not affecting the Company’s

ownership percentage of the associate, the Company recognizes change in ownership interests

in the associate in ‘capital surplus’ in proportion to its ownership.

G) Unrealized gains on transactions between the Company and its associates are eliminated to

the extent of the Company’s interest in the associates. Unrealized losses are also eliminated

unless the transaction provides evidence of an impairment of the asset transferred.

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Accounting policies of associates have been adjusted where necessary to ensure consistency

with the policies adopted by the Company.

H) 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 recognized 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.

I) In accordance with the “Rules Governing the Preparation of Financial Statements by Securities

Issuers, the period’s income and other comprehensive income in the non-consolidated

financial statements should be the same to the allocation amount of the period’s income and

comprehensive income attributable to the owners of the parent company’s in the

non-consolidated financial statements. The owners’ equity in the non-consolidated financial

statements should be the same as the owners’ equity attributable to the owners of the parent

company in the consolidated financial statements.

(17) Property, plant and equipment

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

the construction period are capitalized.

B) Subsequent costs are included in the asset’s carrying amount or recognized 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 derecognized. 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. 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:

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Buildings 35 ~ 50 years

Machinery 3 ~ 10 years

Transportation equipment 3 ~ 10 years

Office equipment 3 ~ 5 years

(18) 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 50 years.

(19) Intangible assets

Computer software is stated at cost and amortized on a straight-line basis over its estimated

useful life of 3 to 5 years.

(20) 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 recognized for the

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

amount is the higher of an asset’s fair value less costs to sell or value in use. when the

circumstances or reasons for recognizing impairment loss for an asset in prior years no longer

exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal

should not be more than what the depreciated or amortised historical cost would have been if

the impairment had not been recognised

(21) 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 recognized initially at fair value and

subsequently measured at amortized cost using the effective interest method. However,

short-term accounts payable without bearing interest are subsequently measured at initial

invoice amount as effect of discounting is immaterial.

(22) Financial liabilities at fair value through profit or loss

A) Financial liabilities at fair value through profit or loss are financial liabilities held for trading or

financial liabilities designated as at fair value through profit or loss on initial recognition.

Financial liabilities are classified in this category of held for trading if acquired principally for

the purpose of repurchasing in the short-term. Derivatives are also categorized as financial

liabilities held for trading unless they are designated as hedges. Financial liabilities that meet

one of the following criteria are designated as at fair value through profit or loss on initial

recognition:

(a)Hybrid (combined) contracts; or

(b)They eliminate or significantly reduce a measurement or recognition inconsistency; or

144

(c)They are managed and their performance is evaluated on a fair value basis, in accordance

with a documented risk management policy.

B) Financial liabilities at fair value through profit or loss are initially recognized at fair value.

Related transaction costs are expensed in profit or loss. These financial liabilities are

subsequently remeasured and stated at fair value, and any changes in the fair value of these

financial liabilities are recognized in profit or loss. Derivative liabilities that are linked to equity

instruments which do not have a quoted market price in an active market and cannot be

measured reliably at fair value, and that must be settled by delivery of such unquoted equity

instruments are presented in ‘financial liabilities measured at cost’, if their fair value cannot be

reliably measured.

(23) 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.

(24) 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 recognized amounts and there is an

intention to settle on a net basis or realize the asset and settle the liability simultaneously.

(25) Financial guarantee contracts

A financial guarantee contract is a contract that requires the Company to make specified

payments to reimburse the holder for a loss it incurs because a specified debtor fails to make

payment when due in accordance with the original or modified terms of a debt instrument. A

financial guarantee contract is initially recognized at its fair value adjusted for transaction costs on

the trade date. After initial recognition, the financial guarantee is measured at the higher of the

initial fair value less cumulative amortization and the best estimate of the amount required to

settle the present obligation on each balance sheet date.

(26) Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into

and are subsequently remeasured at their fair value.

(27) 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

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

B) Pensions

(a)Defined contribution plans

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

they are due on an accrual basis. Prepaid contributions are recognized as an asset to the

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extent of a cash refund or a reduction in the future payments.

(b)Defined benefit plans

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 Group in current period or prior periods. 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 the terms of 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) Actuarial gains and losses arising on defined benefit plans are recognized in profit or

loss using the ‘corridor’ method.

iii) Past service costs are recognized immediately in profit or loss if vested immediately; if

not, the past service costs are amortized on a straight-line basis over the vesting period.

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

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

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

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

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

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

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

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

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

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

(28) 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 recognized is based on the

number of equity instruments that eventually vest.

(29) Income tax

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

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

or items recognized directly in equity, in which cases the tax is recognized in other

comprehensive income or equity.

B) The current income tax charge is calculated on the basis of the tax laws enacted or

146

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 recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. 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 realized or the deferred income tax liability is settled.

D) Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. At each balance sheet date, unrecognized and recognized 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 recognized amounts and there is an intention to settle on a net basis or realize 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 realize 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, employees’ training costs 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.

(30) Share capital A) 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. B) Where the Company repurchases the Company’s equity share capital that has been issued, the

consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(31) 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.

(32) Revenue recognition The Company provides construction services. Revenue from delivering services is recognized under the percentage-of-completion method when the outcome of services provided can be estimated reliably. The stage of completion of a service contract is measured by the proportion of

147

contract costs incurred for services performed as of the financial reporting date to the estimated total costs for the service contract. If the outcome of a service contract cannot be estimated reliably, contract revenue should be recognized only to the extent that contract costs incurred are likely to be recoverable.

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

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

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

concerning future events. Judgements and estimates are continually evaluated and adjusted based

on historical experience and other factors. The above information is addressed below:

Critical accounting estimates and assumptions

The Company makes estimates and assumptions based on the expectation of future events that are

believed to be reasonable under the circumstances at the end of the reporting period. The resulting

accounting estimates might be different from the related actual results. The estimates and

assumptions that have a significant risk of causing a material adjustment to the carrying amounts of

assets and liabilities within the next financial year are addressed below:

A) Realisability of deferred income tax assets

Deferred income tax assets are recognized only to the extent that it is probable that future

taxable profit will be available against which the deductible temporary differences can be

utilized. Assessment of the realisability of deferred income tax assets involves critical

accounting judgements and estimates of the management, including the assumptions of

expected future sales revenue growth rate and profit rate, tax exempt duration, available tax

credits, tax planning, etc. Any variations in global economic environment, industy environment,

and laws and regulations might cause material adjustments to deferred income tax assets. The

Company recognised deferred income tax assets of $395,139 for the year ended December 31,

2013.

B) Financial assets—impairment assessment of financial assets without active market

The Company assesses the impairment of an investment of financial instruments as soon as

there is any indication that it might have been impaired and its carrying amount cannot be

recoverable. The Company assesses the recoverable amounts of financial assets without active

market based on the present value of expected cash dividends receivable from the investee

and future cash flows from the disposal of the investee, with present value of similar financial

instruments at balance sheet date, and analyses the reasonableness of related assumptions.

As of December 31, 2013, the Company recognised financial assets measured at cost, net of

impairment loss, amounting to $572,877.

148

6. DETAILS OF SIGNIFICANT ACCOUNTS (1) Cash and cash equivalents

A) The Company transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote. The Company’s maximum exposure to credit risk at balance sheet date is the carrying amount of all cash and cash equivalents.

B) 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 – current

A) The Company recognized, net (loss)/gain of ($21,351) and $111,494 for the years ended December 31, 2013 and 2012, respectively.

December 31, 2013 December 31, 2012 January 1, 2012

Cash on hand and petty cash 21,637$ 19,780$ 20,488$

Checking accounts and demand deposits 941,740 3,339,217 2,602,028

Time deposits 3,722,252 6,077,326 9,611,063

4,685,629$ 9,436,323$ 12,233,579$

Items December 31, 2013 December 31, 2012 January 1, 2012

Current items:

Financial assets held for trading

Mutual funds 431,674$ 853,206$ 1,926,074$

Non-hedging derivatives 31,086 62,431 30,986

462,760 915,637 1,957,060

Valuation adjustment of financial assets

held for trading471 4,513 9,244)(

Total 463,231$ 920,150$ 1,947,816$

Finacial liablities held for trading

Non-hedging derivatives $ 19,503 $ 2,509 23,731$

149

B) As of December 31, 2013 and 2012, the trading items and contract information of derivatives are as follows:

The Company entered into forward foreign exchange contracts to sell or buy forward foreign exchange to hedge exchange rate risk of import or export proceeds. However, these forward foreign exchange contracts are not adopting the hedging accounting because these do not conform to all the conditions.

Due to the global financial crisis in year 2008, listed (TSE and OTC) stocks amounting to $71,666 which were initially classified as “financial assets at fair value through profit or loss” were reclassified to “available-for-sale financial assets” on July 1, 2008, in accordance with paragraph 50 (c) of IAS 39. The relevant information is set forth below:

Contract Period

Forward exchange contract-buy (1 items) GBP 1,000,000 2013.09.13~2014.09.17

Forward exchange contract-buy (3 items) JPY 400,000,000 2013.11.21~2014.02.25

Forward exchange contract-sell (2 items) SGD 2,000,000 2013.07.18~2014.01.27

Forward exchange contract-buy (5 items) CHF 9,000,000 2013.07.10~2014.09.15

Non-delivery of forward exchange contract-

sell (5 items)

USD 3,775,000 2013.07.22~2015.03.24


buy (1 items)

CHF 1,000,000 2013.10.22~2014.03.03

Foreign exchange swap contract (4 items) USD 29,500,000 2013.09.24~2014.08.12

Commodity swap contract (11 items) USD 18,347,000 2013.04.02~2014.10.02

Contract Period

Forward exchange contract-buy (11 items) EUR 14,500,000 2012.06.26~2013.09.16


Forward exchange contract-buy (1 item) GBP 1,000,000 2012.12.13~2013.06.17



December 31, 2013

Contract Amount

December 31, 2012

Contract Amount

Contract Period


buy (4 items)

EUR 4,500,000 2011.12.28~2.12.03.28


buy (2 items)

GBP 2,000,000 2011.07.28~2012.08.01


Forward exchange contract-buy (1 items) GBP 500,000 2012.12.30~2012.02.03


January 1, 2012

Contract Amount

150

(a) The above reclassified assets which have not yet been disposed of were as follows:

(b) The changes in fair value of the above listed stocks that were recognized in profit or loss and other comprehensive income were $0 and $26,232, respectively, for the year ended December 31, 2013, and were $0 and $14,694, respectively, for year ended December 31, 2012. And the accumulated total changes in fair value of the above listed stocks that were recognized in profit or loss and other comprehensive income before January 1, 2012 were $0 and $25,637, respectively.

(c) If the above listed stocks had not been reclassified to “available-for-sale financial assets” on July 1, 2008, the gain (loss) from change in fair value of those assets should have been recognized for the following periods:


The amounts that the Company recognized profit or loss in other comprehensive income due to the changes in fair value were $39,272 and $35,071 for the years ended December 31, 2013 and 2012, respectively.

(4) Financial assets measured at cost

A) Based on the Company’s intention, its investment in stocks should be classified as available-for-sale financial assets. However, as these investments are not traded in active


Book value/Fair value Book value/Fair value Book value/Fair value

Listed (TSE or OTC)

stocks138,229$ 111,997$ 97,303$

For the year ended

December 31, 2013

For the year ended

December 31, 2012

Listed (TSE or OTC) stocks 26,232$ 14,694$


Current items:

Listed (TSE or OTC)

stocks

196,213$ 263,315$ 246,727$

Valuation adjustment

of available-for-sale

financial assets 174,381 143,965 114,004

370,594$ 407,280$ 360,731$


Non-current items:

Unlisted stocks 946,000$ 946,000$ 946,000$

Accumulated impairment-

financial assets measured

at cost 373,123)( 292,000)( 213,000)(

572,877$ 654,000$ 733,000$

151

markets, the fair value of the investment cannot be measured reliably. The Company classified those stocks as ‘financial assets measured at cost’.

B) As the operating results of investee companies accounted for under the cost method had deteriorated, their net worth has declined significantly. The Company expects that the probability of a recovery in its net worth is remote. As a result, loss on decline in market value of $81,123 and $79,000 were recognized for the years ended December 31, 2013 and 2012, respectively.

C) As of December 31, 2013, December 31, 2012 and January 1, 2012, no financial assets measured at cost held by the Company were pledged to others.

(5) Notes and accounts receivable

(6) Construction in progress

As of December 31, 2013, December 31, 2012, and January 1, 2012, the retainage relating to construction contracts amounted to $0, $0 and $0, respectively; the advances received before the related construction work is performed amounted to $0, $0 and $10,000, respectively.

(7) Prepayments


Notes receivable 3,250,915$ -$ -$

Accounts receivable 1,183,159 1,892,674 2,404,695

Less: Allowance for bad debts 100,900)( 20,969)( 30,445)(

4,333,174$ 1,871,705$ 2,374,250$


Aggregate costs incurred

plus recognised profits

(less recognised losses)

198,894,104$ 185,674,048$ 156,833,429$

Less: progress billings 195,662,574)( 187,072,325)( 162,527,604)(

Net balance sheet position

for construction in progress

3,231,530$ 1,398,277)($ 5,694,175)($

Presented as:

Receivables from customers

on construction contracts

5,906,355$ 7,243,592$ 3,514,854$

Payables to customers on

construction contracts 2,674,825)( 8,641,869)( 9,209,029)(

3,231,530$ 1,398,277)($ 5,694,175)($

December 31, 2013December 31, 2012 January 1, 2012

Prepayments for materials 1,292,652$ 1,862,300$ 1,389,323$

Prepayments for construction in progress 615,522 379,309 200,618

Others 135,296 105,404 169,628

2,043,470$ 2,347,013$ 1,759,569$

152

(8) Investments accounted for under the equity method A) Summarized as follow:

B) For information on the Company’s subsidiaries, please refer to Note 4, (3) in the Company’s

consolidated financial statement for the year ended December 31, 2013. C) Under the equity method, the Company recognised investment income of $111,227 and

$131,248 for the years ended December 31, 2013 and 2012, respectively, from Pan Asia Corp., CTCI Engineering & Construction Co., Ltd., CTCI and Partners Company Limited and CTCI Overseas(BVI) Corp. The amounts are recognised according to the financial statements audited by other independent accountants.

D) The financial information of the Company’s principal associates is summarized below:


Investments under equity method

Subsidiaries

E&C Engineering Corp. 722,012$ 750,208$ 788,580$

Resources Engineering Service Inc. 316,070 398,978 389,046

Advanced Control & System Inc. 262,283 257,427 254,876

GRQ Investments Corp. 2,465,309 2,463,453 2,448,243

Innovest Investment Corp. 132,527 129,771 126,689

KD Holding Corp. 2,428,779 2,259,559 2,099,409

CTCI (Thailand) Co. Ltd. 99,837 102,517 94,513

CTCI Machinery Corp. 266,222 259,189 232,109

CTCI Arabia Ltd. 27,486 15,402

Signogal-waste Services Co. Ltd. 28,740 23,005 17,589

CTCI Singapore PTE. LTD. 173,101 151,970 1,485

CTCI and Partners Company Limited 14,413 - -

CTCI Overseas (BVI) Co. Ltd. 2,141,154 1,768,742 1,496,688

Others 19,623 14,663 23,653

Associates

Pan Asia Corp. 565,307 517,795 491,689

9,635,377$ 9,124,763$ 8,479,971$

Other non-current liabilities

Subsidiaries

CTCI Arabia Ltd. 507,187)($ -$ -$

Assets Liabilities Revenue Profit/(Loss) % interest held

December 31, 2013

Pan Asia Corp. 3,094,303$ 1,422,789$ 5,376,069$ 219,157$ 34.27%

December 31, 2012

Pan Asia Corp. 2,627,877$ 1,116,943$ 4,874,123$ 206,793$ 34.27%

January 1, 2012

Pan Asia Corp. 3,151,088$ 1,716,336$ 34.27%

153


Land Buildings Machinery

Transportation

equipment

Office

equipment

Prepayments

for equipment Others Total

At January 1, 2013

Cost 127,228$ 124,799$ 317,436$ 47,463$ 49,023$ 3,900$ 169,771$ 839,620$

Accumulated

depreciation - 55,948)( 229,598)( 36,598)( 41,472)( - 71,121)( 434,737)(

127,228$ 68,851$ 87,838$ 10,865$ 7,551$ 3,900$ 98,650$ 404,883$

Year ended

December 31, 2013

Opening net book

amount

127,228$ 68,851$ 87,838$ 10,865$ 7,551$ 3,900$ 98,650$ 404,883$

Additions - - 28,676 1,289 685 6,925 4,503 42,078

Disposals - - 40)( 208)( - - 966)( 1,214)(

Depreciation charge - 2,561)( 49,571)( 4,016)( 4,094)( - 9,289)( 69,531)(

Reclassifications - - - 6,000 4,600 10,825)( 225 -

Closing net book

amount 127,228$ 66,290$ 66,903$ 13,930$ 8,742$ -$ 93,123$ 376,216$

At December 31, 2013

Cost 127,228$ 124,799$ 334,122$ 47,282$ 54,308$ -$ 139,057$ 826,796$

Accumulated

depreciation - 58,509)( 267,219)( 33,352)( 45,566)( - 45,934)( 450,580)(

127,228$ 66,290$ 66,903$ 13,930$ 8,742$ -$ 93,123$ 376,216$

154

The Company’s buildings include major building components which are depreciated over 50 years.


Transportation

equipment

Office

equipment

Prepayments


At January 1, 2012

Cost 127,228 $ 124,799 $ 312,280 $ 122,354 $ 49,230 $ - $ 166,400 $ 902,291 $ Accumulated

depreciation - 52,863) ( 198,543) ( 105,359) ( 32,474) ( - 54,389) ( 443,628) (

127,228 $ 71,936 $ 113,737 $ 16,995 $ 16,756 $ - $ 112,011 $ 458,663 $

Year ended

December 31, 2012

Opening net book

amount 127,228 $ 71,936 $ 113,737 $ 16,995 $ 16,756 $ - $ 112,011 $ 458,663 $

Additions - - 26,250 - 61 3,900 5,556 35,767 Disposals - - 42) ( 1,320) ( - - - 1,362) ( Depreciation charge - 3,085) ( 52,107) ( 4,810) ( 9,266) ( - 18,917) ( 88,185) (

Closing net book

amount 127,228 $ 68,851 $ 87,838 $ 10,865 $ 7,551 $ 3,900 $ 98,650 $ 404,883 $


Cost 127,228 $ 124,799 $ 317,436 $ 47,463 $ 49,023 $ 3,900 $ 169,771 $ 839,620 $ Accumulated

depreciation - 55,948) ( 229,598) ( 36,598) ( 41,472) ( - 71,121) ( 434,737) (

127,228 $ 68,851 $ 87,838 $ 10,865 $ 7,551 $ 3,900 $ 98,650 $ 404,883 $

155


Land Buildings Total

At January 1, 2013

Cost 115,692$ 75,983$ 191,675$

Accumulated depreciation - 32,126)( 32,126)(

115,692$ 43,857$ 159,549$

Year ended

December 31, 2013

Opening net book amount 115,692$ 43,857$ 159,549$

Depreciation charge - 1,323)( 1,323)(

Closing net book amount 115,692$ 42,534$ 158,226$

At December 31, 2013 115,692$ 75,983$ 191,675$

Cost - 33,449)( 33,449)(

Accumulated depreciation 115,692$ 42,534$ 158,226$


At January 1, 2012

Cost 115,692$ 75,983$ 191,675$


115,692$ 45,180$ 160,872$

Year ended December 31, 2012




At December 31, 2012 115,692$ 75,983$ 191,675$

Cost - 32,126)( 32,126)(


156

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

B) The fair value of the investment property held by the Company as of December 31, 2013, December 31, 2012 and January 1, 2012 were $747,550, $728,798 and $653,988, respectively, The above fair values are based on the valuation of market trading prices of similar property belonging to close proximities.

(11) Other non-current assets

(12) Accounts payable

(13) Other payables

For the year ended

December 31, 2013

For the year ended

December 31, 2012

Rental revenue from the lease of the

investment property 6,392$ 6,392$

Direct operating expenses arising from the

investment property that generated

rental income in the period 2,131$ 2,131$


investment property that did not

generate rental income in the period -$ -$


Long-term receivables 476,923$ 897,346$ 211$

Restricted bank deposits 57,015 60,745 382,727

Refundable deposits 190,284 192,774 187,090

Others 62,656 63,454 82,137

786,878$ 1,214,319$ 652,165$


Materials payable 7,204,924$ 3,929,566$ 4,088,951$

Sub-contract costs payable 2,002,810 3,001,317 2,463,203

9,207,734$ 6,930,883$ 6,552,154$


Accrued payroll 866,181$ 964,664$ 899,236$

Accrued employee bonuses,

directors' and supervisors'

remuneration 103,815 147,407 151,907

Accrued insurance 50,736 46,805 58,437

Accrued pension 21,951 21,802 18,013

Accrued temporary equipment 75,587 84,569 55,575

Others 168,008 174,696 141,538

1,286,278$ 1,439,943$ 1,324,706$

157

(14) Other non-current liabilities

(15) Pensions

A) Defined benefit pension plan

(a) The Company and its domestic subsidiaries have 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.

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

(c) Changes in present value of funded obligations are as follows:


Accrued pension liabilities 2,110,746$ 1,801,279$ 1,384,769$

Deposits received 45,704 37,699 30,139

Others 594,812 89,562 85,913

2,751,262$ 1,928,540$ 1,500,821$


Present value of funded obligations 3,698,515$ 3,811,904$ 3,723,555$

Fair value of plan assets 1,153,085)( 1,121,797)( 1,181,026)(

2,545,430 2,690,107 2,542,529

Unrecognised prior service cost 434,684)( 888,828)( 1,157,760)(

Net liability in the balance sheet 2,110,746$ 1,801,279$ 1,384,769$

2013 2012

Present value of funded obligations

At January 1 3,811,904$ 3,723,555$

Current service cost 29,715 36,426

Interest expense 57,809 64,691

Actuarial profit and loss 9,048 163,002

Directly paid from book 149,736)( 27,072)(

Benefits paid 60,225)( 148,698)(

At December 31 3,698,515$ 3,811,904$

158

(d) Changes in fair value of plan assets are as follows:

(e) Amounts of expenses recognised in comprehensive income statements are as follows:

Details of cost and expenses recognised in comprehensive income statements are as follows:

(f) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. The constitution of fair value of plan assets as of December 31, 2013 and 2012 is given in the Annual Labor Retirement Fund Utilisation Report published by the government. Expected return on plan assets was a projection of overall return for the obligations period, which was estimated based on historical returns and by reference to the status of Labor Retirement Fund utilisation by the Labor Pension Fund Supervisory Committee and taking into account the effect that the Fund’s minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks.

2013 2012

Fair value of plan assets

At January 1 1,121,797$ 1,181,026$

Expected return on plan assets 16,827 17,715

Actuarial profit and loss 2,223)( 6,625)(

Employer contributions 76,909 78,379

Benefits paid 60,225)( 148,698)(

At December 31 1,153,085$ 1,121,797$

2013 2012

Current service cost 29,715$ 36,426$

Interest cost 57,809 64,691

Expected return on plan assets 16,827)( 17,715)(

Actuarial profit and loss 465,415 438,559

Current pension costs 536,112$ 521,961$

2013 2012

Cost of sales 416,913$ 421,367$

General and administrative expenses 107,594 88,959

Research and development expenses 11,605 11,635

536,112$ 521,961$

159

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

(h) Historical information of experience adjustments was as follows:

(i) Expected contributions to the defined benefit pension plans of the Company within one year from December 31, 2013 amounted to $292,761.

B) Defined contribution pension plan

(a) Effective July 1, 2005, the Company and its domestic subsidiaries have 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 and its domestic subsidiaries contribute 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 defined contribution pension plans of the Company for the years ended December 31, 2013 and 2012 were $111,555 and $105,001, respectively.

(16) Share-based payment-employee compensation

A) As of December 31, 2013 and 2012, the Company’s share-based payment arrangements were as follows:

2013 2012 2011

Discount rate 1.90% 1.50% 1.70%

Future salary increases 3.00% 3.00% 3.00%

Expected return on plant

assets 1.90% 1.50% 1.70%

2013 2012

Present value of defined benefit obligation 3,698,515$ 3,811,904$

Fair value of plan assets 1,153,085)( 1,121,797)(

Surplus/(deficit) in the plan 2,545,430$ 2,690,107$

Experience adjustments on plan liabilities 137,607$ 47,483$

Experience adjustments on plan assets 2,223)($ 6,625)($

Type of arrangement Grant date

Quantity

granted

Contract

period

Vesting

conditions

First plan of employee

stock options

2007.09.28 16,000

units

6 years Service of 2 years

Second plan of employee

stock options

2008.08.27 21,000

units


Third plan of employee

stock options

2009.07.08 21,000

units


Fourth plan of employee

stock options

2010.06.18 22,000

units


160

B) The above employee stock options are set forth below:

(a) Details of the first plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:

As a result of employee stock options exercised based on the exercise price of NT$12.40 and NT$15.28, the outstanding capital stock increase amounted to 1,033,500 shares and 3,285,500 shares and capital surplus-common stock amounted to $2,500 and $17,362 for the years ended December 31, 2013 and 2012, respectively. Each warrant could subscribe to 1,000 shares of common stock.

Weighted-average Weighted-average

No. of exercise price No. of exercise price

Stock options

units (share

in thousands) (in dollars)

units (share


Options outstanding at

beginning of period 1,115.50 NT$13.50 4,436.00 NT$16.30

Options granted - - - -

Distribution of stock

dividends / adjustments

of shares granted for

one unit of option

- - - -

Options waived 82.00)( - 35.00)( -

Options exercised 1,033.50)( NT$12.40 3,285.50)( NT$15.28

Options revoked - - - -

Options outstanding

at end of period - - 1,115.50 NT$13.50

Options exercisable


For the years ended December 31,

2013 2012

161

(b) Details of the second plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:




Stock options

units (share in

thousands) (in dollars)

units (share in








one unit of option

- - - -

Options waived 6.25)( - 65.25)( -



Options outstanding

at end of period 1,071.00 NT$14.60 4,077.695 NT$15.40

Options exercisable



2013 2012

162

(c) Details of the third plan of employee stock options outstanding as of December 31, 2013 and

2012 are set forth below:




Stock options

units (share


units (share








one unit of option

- - - -

Options waived 33.50)( - 133.50)( -



Options outstanding


Options exercisable



2013 2012

163

(d) Details of the fourth plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:


C) The weighted-average stock price of stock options at exercise dates for the years ended December 31, 2013 and 2012 was NT$54.67 and NT$53.87, respectively.



Stock options

units (share in


units (share in








one unit of option

- - - -

Options waived 124.500)( - 209.250)( -



Options outstanding


Options exercisable



2013 2012

164

D) As of December 31, 2013, December 31, 2012 and January 1, 2012, the range of exercise prices of stock options outstanding was NT$14.60～NT$26.00, NT$13.50～NT$27.30, and

NT$16.20～NT$28.60, respectively; the weighted-average remaining contractual period was

as follows:

E) For the stock options granted before January 1, 2008 with compensation cost accounted for using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option-pricing model. The information is as follows:

F) For the stock options granted after January 1, 2008 with compensation cost accounted for using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option-pricing model. The information was as follows:

Type of arrangement December 31, 2013 December 31, 2012 January 1, 2012


stock options- 0.83 years 1.83 years


stock options0.66 years 1.66 years 2.66 years





Type of

arrangement Grant date Stock price

Exercise

price

Expected

price

volatility

rate

Expected

vesting

period

Expected

dividend

yield

rate

Risk free

interest

rate

Fair value

per unit

First plan of

employee stock

options

2007.9.28 NT$ 25.3 NT$ 25.3 37.04% 4.5 years 0% 2.57% NT$ 8.77

Type of

arrangement

Grant

date

Stock

price

Exercise

price

Expected

price

volatility

rate

Expected

vesting

period

Expected

dividend

yield

rate

Risk free

interest

rate

Fair value

per unit

Second plan of

employee stock

options

2008.8.27 NT$ 21.9 NT$ 21.9 36.05% 4.5 years 0% 2.41% NT$ 7.37

Third plan of

employee stock

options

2009.7.08 NT$ 28.9 NT$ 28.9 36.45% 4.5 years 0% 0.94% NT$ 9.13

Fourth plan of

employee stock

options

2010.6.18 NT$ 32.8 NT$ 32.8 36.22% 4.5 years 0% 0.93% NT$ 10.30

165

G) Expenses incurred on share-based payment transactions are shown below:

(17) Share capital

A) As of December 31, 2013 and 2012, the Company’s authorized capital was $9,000,000, (including 800,000 thousand shares reserved for employee stock options), and the paid-in capital was $7,474,343 with a par value of NT$10 per share. All proceeds from shares issued have been collected. Movements in the number of the Company’s ordinary shares outstanding are as follows:

B) Treasury shares

For the year ended For the year ended

December 31, 2013 December 31, 2012

Equity-settled 27,038$ 68,916$

For the year ended

December 31, 2013

For the year ended

December 31, 2012

At January 1 734,995,923 712,653,913

Employee stock options

exercised 12,438,375 22,342,010

At December 31 747,434,298 734,995,923

Name of investors Number of shares Book value

Subsidiary-Sino Environmental Services

Corp.

1,028 $ 10

Subsidiary-Innovest Investment Corp. 344,436 3,241

Subsidiary-GRQ Investment Corp. 912,170 8,584

December 31, 2013



Corp.

1,028 $ 10



December 31, 2012



Corp.

1,028 $ 10



January 1, 2012

166

(18) Capital surplus

A) Pursuant to the R.O.C. Company Law, 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 capitalised 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.

B) Change of Capital surplus is as follows:

C) Please refer to Note 6 (16) for the capital reserve – employee stock options.

(19) Retained earnings

A) In accordance with the Company’s Articles of Incorporation, 10% of the Company’s annual net income, after paying all taxes and dues and deducting losses of prior years, if any, should be set aside as legal reserve, except when the legal reserve is over total assets. Subsequently, when the reduction in equity is reversed, the Company may return the special reserve to

Difference between proceeds on

Treasury share acquisition of disposal of equity interest Employee stock Stock

Share premium transactions in a subsidiary and its carrying amount options options Others Total

At January 1, 2013 2,284,925$ 5,043$ 34,730$ 413,844$ 17,085$ 2,238$ 2,757,865$

Difference between - - - - - -

acquisition of disposal of equity interest

in a subsidiary and its carrying amount 137,924 137,924

Convertible bonds transferred to

common stock

- - - - 13,099)( - 13,099)(

Employee stock options granted - - - 51,772 - - 51,772

Employee stock options exercised 203,544 - - 67,921)( - - 135,623

Employee stock options revoked - - - 676)( - 676 -

At December 31, 2013 2,488,469$ 5,043$ 172,654$ 397,019$ 3,986$ 2,914$ 3,070,085$




At January 1, 2012 1,909,440$ 5,043$ -$ 427,928$ 23,249$ 1,728$ 2,367,388$

Difference between - - - - - -


in a subsidiary and its carrying amount 34,730 34,730


common stock

- - - - 6,164)( - 6,164)(




At December 31, 2012 2,284,925$ 5,043$ 34,730$ 413,844$ 17,085$ 2,238$ 2,757,865$

2013 2012

At January 1 3,075,527$ 2,721,369$

Profit attributable to owners of

the parent

1,641,730 2,445,282

Set aside as legal reserve 239,244)( 226,273)(

Reversal of special reserve 56,585 130,580

Cash dividends 2,102,403)( 1,995,431)(

At December 31 2,432,195$ 3,075,527$

167

undistributed earnings in the current year. The remaining balance and the cumulative undistributed earnings from prior years are called disposable cumulative undistributed earnings. The net income after legal reserve shall be allocated as follows:

(a) At least 2% of the balance as employees’ bonus;

(b) 2% of the balance as remuneration to directors and supervisors; and

(c) After paying employees’ bonus and remuneration to directors and supervisors, the remaining balance may be distributed as stockholders’ dividends.

(d) No less than 50% of the remaining balance and the cumulative undistributed earnings from prior years may be distributed as stockholders’ dividends, of which at least 20% shall be in the form of cash dividends, upon the approval of the stockholders.

B) Legal reserve only can be used to cover the losses and issue new stocks or cash dividends proportionately according to the stock ratio. The latter should be by an amount under 25% of legal reserve exceeding issued and outstanding capital.

C) The new Taiwan imputation tax system requires that any undistributed current earnings derived on or after January 1, 1998 of the Company are subject to an additional 10% corporate income tax if the earnings are not distributed in the following year.

D) Special reserve

(a) In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

(b) The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently. Such amounts are reversed upon disposal or reclassified if the assets are investment property of land, and reversed over the use period if the assets are investment property other than land.

E) The appropriation of 2012 and 2011 earnings had been resolved at the Board of Directors meeting on June 28, 2013 and the stockholders’ meeting on June 27, 2012, respectively. Details are summarized below:

T

Amount

Dividends

per share

(in NT dollars) Amount

Dividends

per share

(in NT dollars)

Legal reserve 239,244$ -$ 226,273$ -$

Reversal of 56,585)( - 130,580)( -

special reserve

Cash dividends 2,102,403 2.85 1,995,431 2.80

Total 2,285,062$ 2.85$ 2,091,124$ 2.80$

2012 2011

168

F) The appropriation of 2013 earnings had been proposed at the Board of Directors’ meeting on March 28, 2014. Details are summarized below:

The appropriation of 2013 earnings had not been resolved at the stockholders’ meeting as of March 28, 2014.

G) On June 28, 2013, the above mentioned 2012 earnings appropriation and capitalization of capital surplus was approved by the Board of Directors with the issue date on August 4, 2013. In addition, due to the exercising of the Company’s employee stock options which would result in a change of outstanding common stock, the Board of Directors amended the dividend ratio from NT$2.85 per share to NT$2.84 per share on July 12, 2013.

H) For the years ended December 31, 2013 and 2012, employees’ bonus was accrued at $88,815 and $132,407, respectively; directors’ and supervisors’ remuneration was accrued at $15,000 and $15,000 respectively. Employees’ bonus and directors’ and supervisors’ remuneration of 2012 as resolved by the stockholders were in agreement with those amounts recognized in the 2012 financial statements.

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

(20) Operating revenue

Amounts

Dividends

per share

(in NT dollars)

Legal reserve 164,173$ -$

Cash dividends 1,747,341 2.33

Total 1,911,514$ 2.33$

2013



Construction contract revenue 30,946,451$ 34,332,249$

Other operating revenue 499,875 492,134

Total 31,446,326$ 34,824,383$

169

(21) Expense by nature

(22) Employee benefit expense

(23) Other income



Materials 14,729,224$ 16,575,427$

Subcontract costs 8,681,107 8,989,969

Employee benefit expense 4,638,529 4,663,139

Temporary equipment 763,236 816,968

Rental expenses 448,602 473,901

Insurance expenses 378,866 293,722

Travel expenses 289,330 302,155

Depreciation charges on property,

plant and equipment 70,854 89,508

Amortisation on intangible assets 115,187 116,506

Others 203,332 1,201,933

Total 30,318,267$ 33,523,228$



Salaries and wages 3,597,453$ 3,643,078$

Employee stock options 27,038 68,916

Labor and health insurance fees 243,249 208,034

Pension costs 647,667 626,962

Other personnel expenses 123,122 116,149

4,638,529$ 4,663,139$



Interest income 66,831$ 79,210$

Rental income 23,498 27,160

Dividend income 27,772 28,162

Others 29,371 31,661

147,472$ 166,193$

170

(24) Income tax

A) Components of income tax expense:

B) Reconciliation of differences between financial income and taxable income:



Tax refundable at the end

of period 120,067)($ -$

Income tax payable at the

end of period - 271,703

Income tax (refundable) payable

at the end of period 120,067)( 271,703

Income tax payable

at the beginning of period - 36,919)(

Current tax on profits for the

period 120,067)( 234,784

Deferred tax:

Net change in deferred income tax

assets and liabilities 106,096 103,160)(

Under (over) provision of prior

year's income tax 33,869)( 25,558)(

Prepaid income tax 193,111 158,496

Income tax expense 145,271$ 264,562$



Net income before tax calculated by

the legal tax rate 303,790$ 460,673$

Permanent differences 116,859)( 148,209)(

Over provision of prior year's income tax 33,869)( 25,558)(

Tax-exempt income 7,762)( 28,269)(

10% tax on unappropriated earnings 10,737 17,161

Reduction of expense for R&D investments 7,670)( 8,377)(

Others 3,096)( 2,859)(


171

C) Amounts of deferred tax assets or liabilities as a result of temporary difference, loss carryforward and investment tax credit are as follows:

January 1

Recognised in

profit or loss December 31

Temporary differences:

Deferred tax assets:

Unrealized construction

loss 202,948$ 192,096)($ 10,852$

Unrealized bad debts 17,170 - 17,170

Short-term paid

absences

(holiday leave) 20,915 391 21,306

Unrealized exchange loss 4,586 393)( 4,193

Unrealized loss on

financial

instruments 510 - 510

Unrealized membership

fees of the golf club 918 - 918

Unrealized labor pension 271,637 52,640 324,277

Others 16,242 329)( 15,913

Subtotal 534,926$ 139,787)($ 395,139$

Deferred tax liabilities:

Unrealized exchange gain 6,135)($ 5,787)($ 11,922)($

Unrealized investment

income from foreign

equity investments 257,151)( 31,259 225,892)(

Others 16,760)( 8,219 8,541)(

Subtotal 280,046)($ 33,691$ 246,355)($

Total 254,880$ 106,096)($ 148,784$

For the year ended December 31, 2013

172

D) As of December 31, 2013, the Company’s income tax returns through 2011 have been

assessed and approved by the Tax Authority.

E) The Company obtained income tax exemption as follows:

January 1

Recognised in



Deferred tax assets:

Unrealized construction

loss 113,861$ 89,087$ 202,948$


Short-term paid

absences

(holiday leave) 21,047 132)( 20,915

Unrealized exchange loss 19,545 14,959)( 4,586

Unrealized loss on

financial

instruments 510 - 510

Unrealized membership

fees of the golf club 918 - 918

Unrealized labor pension 194,845 76,792 271,637

Others 15,623 619 16,242

Subtotal 383,519$ 151,407$ 534,926$

Deferred tax liabilities:

Unrealized exchange gain 31,326)($ 25,191$ 6,135)($

Unrealized investment

income from foreign

equity investments 199,240)( 57,911)( 257,151)(

Others 1,233)( 15,527)( 16,760)(

Subtotal 231,799)($ 48,247)($ 280,046)($

Total 151,720$ 103,160$ 254,880$


Applicable laws 2013 2012

The Company Regulations governing the application of the

incentive for a five- year exemption from profit-

seeking enterprise income tax to the investments

made by enterprise in the manufacturing industry

and the technical service industry between July 1,

2008 and December 31, 2009

2011.01.01~

2015.12.31

45,658$ 166,290$

Period of

tax exemption

Tax exemption amount

for the years ended December 31,

173

F) Unappropriated retained earnings:

As of December 31, 2013, December 31, 2012 and January 1, 2012, the balance of the imputation tax credit account was $284,858, $287,042 and $70,796, respectively. The creditable tax rate was 20.03% for 2012 and is estimated to be 15.34% for 2013.

(25) Earnings per share


Earnings generated in

and before 1997

47,819$ 47,819$ 47,819$

Earnings generated in

and after 1998

2,384,376 3,027,708 2,673,550

Weighted-average

Amount number of ordinary shares Earnings per share

after tax outstanding (share in thousands) (in dollars)

Basic earnings per share

Profit attributable to the

ordinary shareholders

of the parent 1,641,730$ 739,611 2.22$

Diluted earnings per share

Effects of dilutive potential

ordinary shares

Employee bonus - 1,954

Employee stock options - 13,526

Profit attributable to


of the parent plus

assumed conversion

of all dilutive potential

ordinary shares 1,641,730$ 755,091 2.17$


174

(26) Operating leases The Company leases land and buildings under operating lease agreements. These leases have terms expiring between 2007 and 2029.The lease expenses recognised for the years ended December 31, 2013 and 2012 were $448,602 and $473,811, respectively.

The Company’s future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

Weighted-average

Number of ordinary shares Amount

after tax

outstanding (share in

thousands)

Earnings per share

(in dollars)


Profit attributable to the


of the parent 2,445,282$ 720,660 3.39$


Effects of dilutive potential

ordinary shares



Profit attributable to ordinary

shareholders of the parent

plus assumed conversion

of all dilutive potential

ordinary shares 2,445,282$ 747,216 3.27$



Not later than one year 279,302$ 279,302$ 279,302$

Later than one year but not 1,396,510 1,396,510 1,396,510

later than five years

Later than five years 2,589,823 2,869,125 3,148,427

4,265,635$ 4,544,937$ 4,824,239$

175

7. RELATED PARTY TRANSACTIONS

Significant transactions and balances with related parties

(1) Sales of services:

The rate on the construction contracts entered into with related parties are set through negotiation by both parties. The collection terms of 30 days were approximately the same as those with third parties.

(2) Other operating revenue

The rate on the human resource support contracts entered into with related parties are set through negotiation by both parties. The collection terms of 30 days were approximately the same as those with third parties.

(3) Purchases of services:

The rate on the construction contracts entered into with related parties are set through negotiation by both parties. The collection terms of 30 days were approximately the same as those with third parties.

(4) Other operating costs

The rate on the support contracts entered into with related parties are set through negotiation by both parties. The collection terms of 30 days were approximately the same as those with third parties



Subsidiaries 470,792$ 273,613$

Other related parties 27,771 24,186

Entities with significant influence

over the entity 1,795 3,090

500,358$ 300,889$






Subsidiaries 2,271,248$ 1,871,727$

Associates 153,687 -

2,424,935$ 1,871,727$




176

(5) Accounts receivable

(6) Other receivables-related parties (Reclassified from accounts receivable):

As of December 31, 2013, certain accounts receivable from related parties which are not on regular collection terms, was reclassified to “other receivables-related parties” whose aging is from 90 to 360 days.

(7) Other receivables-related parties:

Includes advances to related parties for engineering and business travel.

(8) Loans to related parties:

A) Receivables from related parties

B) Interest income

The loans to subsidiaries are repayable within one year and carry interest at 0.78%~1.00% and 0.81%~1.08% per annum for the years ended December 31, 2013 and 2012, respectively.


Subsidiaries 284,622$ 209,273$ 584,001$

Other related parties - - 165

Entities with significantlt influence

over the entities688 525 1,510

285,310$ 209,798$ 585,676$


Subsidiaries 93,090$ 330,628$ 1,266,962$


Subsidiaries 20,990$ 30,650$ 13,486$

Associates 8 - -

20,998$ 30,650$ 13,486$


Subsidiaries 2,688,633$ 1,618,975$ 538,560$




177

(9) Other non-current assets- related parties (Reclassified from accounts receivable):

As of December 31, 2013, certain accounts receivable from related parties which are not on regular collection terms, was reclassified to “other non-current assets” whose aging is over 360 days


(11) Other payables

Includes advances to CTCI’s customs duty.

(12) Rental income

A) Assets leased to related parties are as follows:

B) Rental income

(13) Rental expense


Subsidiaries 476,213$ 896,877$ -$


Subsidiaries 879,898$ 795,790$ 888,744$

Associates 16,134 - 176,165

896,032$ 795,790$ 1,064,909$


Subsidiaries 87,843$ 83,897$ -$

Leased assets Lessee December 31, 2013 December 31, 2012

Land and buidings Subsidiaries 158,226$ 159,549$


Lessee Rental amount December 31, 2013 December 31, 2012

Subsidiaries-A $265/month/quarterly collection 3,217$ 3,217$

Subsidiaries-B $265/month/quarterly collection 3,175 3,175

Subsidiaries-C $1,456/month/quarterly collection 13,616 17,482

20,008$ 23,874$

Lessor Leased assets Rental amount 2013 2012

Entities with significant Land / Buildings $689/month/semiannual 8,372$ 8,372$

influence over the entity

Subsidiaries-C Land / Buildings

$22,577/month/

monthly payment

Refundable deposit

of $128,300

270,930 270,930

Subsidiaries-D Land / Buildings/Cars$60/month/ half

year payment725 726

280,027$ 280,028$


178

(14) Guarantees for related parties

As of December 31, 2013, December 31, 2012, and January 1, 2012 the Company had used guarantees in the amount of $7,771,979, $13,290,997 and $18,138,024, respectively, for related parties, and guarantees under various construction contracts amounting to $6,855,989, $9,576,549 and $13,999,742, respectively.

(15) Key management compensation

8. PLEDGED ASSETS

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS In addition to those items which have been disclosed in Note 6(10)、(26)、7, the significant contingent liabilities and unrecognised contract commitments of the Compnay as of December 31, 2013 were as follows:

(1) Guarantee A) The Company had outstanding notes payable for security deposits under various

construction projects amounting to $2,007,876. B) The Company had outstanding notes payable for bank financing amounting to

$53,704,594. (2) The Company had unused and outstanding letters of credit of approximately $1,227,094. (3) The Company had outstanding commitments for construction subcontracts amounting to

$11,361,668. (4) The Environmental Protection Bureau of the Kaohsiung Municipal Government (the “EPB”)

filed a civil suit against the Company in 2002 claiming damages in the amount of $61,021 plus 5% of interest due to a revenue loss caused by a power outage during the warranty period of a waste-to-energy plant designed and constructed by the Company. The Company disputed the claim. The Taiwan High Court Kaohsiung Branch rendered a judgement in favor of EPB for the damage claim of $55,856. On the other hand, the Company won the lawsuit for a counterclaim


Subsidiaries 22,387,069$ 27,150,396$ 31,417,995$

2013 2012

Salaries and other short-term 87,755$ 78,423$

employee benefits

Post-employment benefits 1,673 6,829

Share-based payments 8,136 16,559

Other long-term benefits 412 412

97,976$ 102,223$


Pledged assets December 31, 2013 December 31, 2012 January 1, 2012 Purpose

Other non-current assets

Pledged bank deposits 300$ 300$ 272,300$ Guarantee for oil expense, bank

Refundable deposits 190,284 192,774 187,090 Guarantee for oil expense, rent,


190,584$ 193,074$ 459,390$

Book value

179

on EPB for unpaid bonus amounting to $76,662. As a result, the judgement orders EPB to pay the Company $20,806 plus 5% interest starting from the settlement date until October 13, 2006. This case is currently being handled by the Taiwan High Court Kaohsiung Branch for the year ended December 31, 2013 as the second appeal No. 16. As of December 31, 2013, the Company has not paid or recognised any compensation loss. According to the Company’s lawyer, amongst the damages claimed by the civil suit filed by the Environmental Protection Bureau of the Kaohsiung Government (the “EPB”), $55,856 is from the EPB’s damage claim resulting from the defects of CTCI’s generator, which is a responsibility for the completion of the contract, because the EPB’s damage claim has passed the effective period of 1 year set by the Civil Code Article 498 Time of Exclusion Clause or Article 514 Limitation Period Plea), the damage claim had extinguished. As for the counterclaim by CTCI on the EPB for unpaid bonus of $76,662, there was an agreement for speeding up the construction progress by both sides, thus the first instance judgement decided to adopt the same terms.

(5) The Company had a joint procurement project with Mitsubishi Heavy Industries, Ltd. in 1997. The construction was completed on February 19, 2001 and accepted by the Environmental Protection Administration (the “EPA”) on May 16, 2011. According to the contract, the

Company provided warranty deposit amounting to $141,690 on the materials of the equipment. As the Kaohsiung County government, the user of the incineration, had a dispute with the operating manufacturer, the EPB rejected to repay the deposit. The EPA availed of the warranty deposit on February 4, 2010. As a result, the Company had to remit $73,253 to the procurement department of Bank of Taiwan Co., Ltd. Consequently, the Company took action to cancel the deposit of $ 141,690 and filed a lawsuit requiring EPA to repay the $73,253 amount. The EPA indicated that it had repaid $9,299 to the Company in 2010. Therefore, the Company reduced the lawsuit claim to $63,954 plus interest of $117 and damage loss of $2,421.

The case was passed back to the Taiwan High Court after being handled by the Supreme Court, and is currently being handled by the Taiwan High Court for the year ended December 31, 2013. According to the Company’s lawyer, the outcome of the case is still uncertain and it is difficult to estimate any potential gain or loss as a result of the case.

10. SIGNIFICANT DISASTER LOSS None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE Please see Note 4(19)F for detailed information about the appropriation of 2013 earnings that had been resolved at the Board of Directors’ meeting on March 28, 2014.

12. OTHERS

(1) Capital risk management The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current

180

borrowings’ as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the balance sheet. The gearing ratios as of December 31, 2013, December 31, 2012 and January 1, 2012 were as follows:

(2) Financial instruments

A) Fair value information of financial instruments


Total borrowings -$ -$ -$

Total equity 16,472,113$ 16,408,354$ 15,350,914$

Gearing ratio - - -

Book value Fair value

Financial assets:

Cash and cash equivalents 4,685,629$ 4,685,629$

Financial assets at fair value through profit

or loss

463,231 463,231

Available-for-sale financial assets

Equity securities investments 370,594 370,594

Financial assets measured at cost 572,877 -

Notes receivable 3,202,568 3,202,568

Accounts receivable 1,415,916 1,415,916

Other receivables 2,843,621 2,843,621

Other financial assets 724,222 724,222

December 31, 2013


Financial assets:



or loss 920,150 920,150






Other financial assets 1,150,865 1,150,865

December 31, 2012

181


Financial assets:



or loss

1,947,816 1,947,816






Other financial assets 570,028 570,028

January 1, 2012


Financial liabilities:

Financial liabilities at fair value through

profit or loss

Non-hedging derivatives 19,503$ 19,503$

Notes payable 2,100 2,100

Accounts payable 10,103,766 10,103,766

Other payables 1,374,121 1,374,121

Other financial liabilities 45,704 45,704

December 31, 2013




profit or loss

Non-hedging derivatives 2,509$ 2,509$



Other payables 1,523,840 1,523,840


December 31, 2012

182

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 minimise potential adverse effects on the Company’s financial position and financial performance.

(b) Risk management is carried out by a central treasury department (Company treasury) under policies approved by the Board of Directors. Company treasury identifies, evaluates and hedges financial risks in close co-operation 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 i) The Company operates internationally and is exposed to foreign exchange risk

arising from various currency exposures, primarily with respect to the USD and EUR. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

ii) Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The group companies are required to hedge their entire foreign exchange risk exposure with the Company treasury. To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the Company use

forward foreign exchange contracts, transacted with Company treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

iii) The Company has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.

iv) The Company’s businesses involve some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: NTD; other certain




profit or loss

Non-hedging derivatives 23,731 23,731



Other payables 1,324,706 1,324,706


January 1, 2012

183

subsidiaries’ functional currency: USD, RMB, etc.). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

Foreign Currency

Amount

(In Thousands) Exchange Rate Book Value

(Foreign currency:

functional currency)

Financial assets

Monetary items

USD：NTD 151,835 29.85 4,532,275

EUR：NTD 10,641 41.26 439,048

JPY：NTD 498,193 0.29 144,476

GBP：NTD 64 49.45 3,165

THB：NTD 53,875 0.91 49,242

RMB：NTD 303,874 4.94 1,500,530

SEK：NTD 554 4.66 2,582

CHF：NTD 2,099 33.66 70,652

AUD：NTD 3 26.69 80

SGD：NTD 2,365 23.67 55,980

CAD：NTD 71 28.12 1,997

Financial liabilities

Monetary items

USD：NTD 7,259 29.85 216,681

EUR：NTD 1,122 41.26 46,294

JPY：NTD 53,940 0.29 15,384

CHF：NTD 47 33.66 1,582

THB：NTD 2,612 0.91 2,387

SGD：NTD 10 23.67 237

SAR：NTD 286 7.96 2,277

Nonmonetary items

Investments under

equity method

USD：NTD 69,556 29.85 2,076,247

THB：NTD 109,711 0.91 99,837

MOP：NTD 7,810 3.68 28,740

MYR：NTD 1,471 9.10 13,384

SAR：NTD 61,906)( 7.96 492,774)(

SGD：NTD 7,313 23.67 173,101

December 31, 2013

184

Foreign Currency

Amount


(Foreign currency:


Financial assets

Monetary items

USD：NTD 147,845$ 29.03 4,291,940$

EUR：NTD 19,882 38.48 765,059

JPY：NTD 460,074 0.34 156,425

GBP：NTD 1,938 46.82 90,737

THB：NTD 515,138 0.95 489,381

SGD：NTD 991 23.75 23,536

RMB：NTD 24,049 4.66 112,068

CHF：NTD 2,252 31.83 71,681

SEK：NTD 553 4.46 2,466

AUD：NTD 1 30.17 30


Monetary items

EUR：NTD 1,905 38.48 73,304

JPY：NTD 253,640 0.34 86,238

USD：NTD 8,576 29.03 248,961

GBP：NTD 40 46.82 1,873

SGD：NTD 309 23.75 7,339

THB：NTD 8,619 0.95 8,188

SAR：NTD 31 7.74 240

QAR：NTD 73 7.96 581

Nonmonetary items

Investments under

equity method

USD：NTD 61,091 29.03 1,773,471

THB：NTD 107,913 0.95 102,517

MOP：NTD 6,426 3.58 23,005

MYR：NTD 1,496 9.10 13,614

SAR：NTD 3,551 7.74 27,486

SGD：NTD 6,399 23.75 151,970

December 31, 2012

185

Foreign Currency

Amount


(Foreign currency:


Financial assets

Monetary items

USD：NTD 106,325$ 30.26 3,217,395$

EUR：NTD 22,323 39.19 874,838

JPY：NTD 372,894 0.39 145,429

GBP：NTD 37 46.76 1,730

THB：NTD 537,946 0.96 516,428

SGD：NTD 530 23.31 12,354

SEK：NTD 552 4.38 2,418

AUD：NTD 1 30.75 31


Monetary items

EUR：NTD 918 39.19 35,976

GBP：NTD 362 46.76 16,927

USD：NTD 9,150 30.26 276,879

THB：NTD 222 0.96 213

Nonmonetary items

Investments under

equity method

USD：NTD 48,600 30.26 1,470,631

THB：NTD 98,451 0.96 94,513

MOP：NTD 4,716 3.73 17,589

MYR：NTD 1,241 9.17 11,380

SAR：NTD 1,909 8.07 15,402

SGD：NTD 64 23.31 1,485

January 1, 2012

186

v) Analysis of foreign currency market risk arising from significant foreign exchange variation:

Degree of

Variation

Effect on Profit

or Loss

Effect on Other

Comprehensive

Income

(Foreign currency:


Financial assets

Monetary items

USD：NTD 1% 45,323$ -$

EUR：NTD 1% 4,390 -

JPY：NTD 1% 1,445 -

GBP：NTD 1% 32 -

THB：NTD 1% 492 -

RMB：NTD 1% 15,005 -

SEK：NTD 1% 26 -

CHF：NTD 1% 707 -

AUD：NTD 1% 1 -

SGD：NTD 1% 560 -

CAD：NTD 1% 20 -


Monetary items

USD：NTD 1% 2,167 -

EUR：NTD 1% 463 -

JPY：NTD 1% 154 -

CHF：NTD 1% 16 -

THB：NTD 1% 24 -

SGD：NTD 1% 2 -

SAR：NTD 1% 23 -

Nonmonetary items

Investments under

equity method

USD：NTD 1% 20,762 -

THB：NTD 1% 998 -

MOP：NTD 1% 287 -

MYR：NTD 1% 134 -

SAR：NTD 1% 4,928)( -

SGD：NTD 1% 1,731 -

December 31, 2013

Sensitivity Analysis

187

Degree of

Variation

Effect on Profit

or Loss

Effect on Other

Comprehensive

Income

(Foreign currency:


Financial assets

Monetary items

USD：NTD 1% 42,919$ -$

EUR：NTD 1% 7,651 -

JPY：NTD 1% 1,564 -

GBP：NTD 1% 907 -

THB：NTD 1% 4,894 -

SGD：NTD 1% 235 -

RMB：NTD 1% 1,121 -

CHF：NTD 1% 717 -

SEK：NTD 1% 25 -

AUD：NTD 1% - -


Monetary items

EUR：NTD 1% 733 -

JPY：NTD 1% 862 -

USD：NTD 1% 2,490 -

GBP：NTD 1% 19 -

SGD：NTD 1% 73 -

THB：NTD 1% 82 -

SAR：NTD 1% 2 -

QAR：NTD 1% 6 -

Nonmonetary items

Investments under

equity method

USD：NTD 1% 17,735 -

THB：NTD 1% 1,025 -

MOP：NTD 1% 230 -

MYR：NTD 1% 136 -

SAR：NTD 1% 275 -

SGD：NTD 1% 1,520 -

December 31, 2012


188

Price risk

The Company is exposed to equity securities price risk because of investments held by the Company and classified on the balance sheet either as available-for-sale or at fair value through profit or loss. The Company is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.

(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. According to the Company’s credit policy, each local entity in the Company is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as outstanding receivables. For banks and financial institutions, only independently rated parties with an ideal credit rating are accepted.

ii) The credit quality information of financial assets that are neither past due nor impaired is as follows:

Group 1：Government or state- owned enterprise.

Group 2：Listed companies.

Group 3：The company does not belong to group 1 or group 2.

Group 1 Group 2 Group 3

Notes and accounts receivable 85,295$ 99,715$ 1,035,586$

December 31, 2013


Notes and accounts receivable 1,327,382$ 119,004$ 382,552$

December 31, 2012


Notes and accounts receivable 1,129,203$ 55,157$ 1,176,244$

January 1, 2012

189

iii) The ageing analysis of financial assets that were past due but not impaired is as follows:

iv) Movements on the Group provision for impairment of accounts receivable are as follows:

(a) As of December 31, 2013, December 31, 2012 and January 1, 2012, the Company’s accounts receivable that were impaired amounted to $66,705, $20,969 and $30,445, respectively.

(b) Movements on the Company’s provision for impairment of accounts receivable are as follows:

(c) Liquidity risk

i) Cash flow forecasting is performed in the operating entities of the Company and aggregated by Company treasury. Company treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs so that the Company does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Company’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets.

ii) The table below analyses the Company’s non-derivative financial liabilities and net-settled 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 and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.


Accounts receivable

Up to 30 days 580,829$ 42,767$ 868$

31 to 90 days 2,531,749 - 12,778

3,112,578$ 42,767$ 13,646$

2013 2012

At January 1 20,969$ 30,445$

Reversal of impairment 65,926)( 43,364)(

Provision for impairment 145,857 33,888

At December 31 100,900$ 20,969$

Non-derivative financial liabilities:

December 31, 2013 Less than 1 year More than 1 year

Notes payable 2,100$ -$

Accounts payable 10,103,766 -

Other payables 1,374,121 -

190

(d)Cash flow risk from variations of rates

There is no significant cash flow risk from variations of rates since accounts payable are due less than one year.

(3)Fair value estimation

A.The table below analyses financial instruments measured at fair value, by valuation method.

The different levels have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within level 1 that are observable for the

asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3: Inputs for the asset or liability that is not based on observable market data.

The following table presents the Group’s financial assets and liabilities that are measured at fair

value as of December 31, 2013, December 31, 2012 and January 1, 2012.



Notes payable 2,888$ -$




January 1, 2012 Less than 1 year More than 1 year

Notes payable $ 5,158 $ -



Derivative financial

liabilities:

December 31, 2013

Interest rate swaps (net-settled) $ - $ 11,151

Forward exchange contracts 3,423 115

Commodity swap contracts - 4,814

Less than

3 months

Between

3 months

and 1 year

December 31, 2012

Less than

3 months

Between

3 months

and 1 year

Interest rate swaps (net-settled) $ - $ -

Forward exchange contracts 350 81


January 1, 2012

Less than

3 months

Between

3 months

and 1 year


Forward exchange contracts 4,112 -


191

December 31, 2013 Level 1 Level 2 Level 3 Total

Financial assets:

Financial assets at

fair value through

profit or loss

　Mutual funds 432,145$ -$ -$ 432,145$

　Derivative financial

assets

- 31,086 - 31,086

Available-for-sale

financial assets

　Equity securities 370,594 - - 370,594

Total 802,739$ 31,086$ -$ 833,825$


Financial liabilities at

fair value through

profit or loss


liabilities -$ 19,503$ -$ 19,503$


Financial assets:

Financial assets at

fair value through

profit or loss

　Mutual funds 857,719$ -$ -$ 857,719$


assets

- 62,431 - 62,431

Available-for-sale

financial assets


Total 1,264,999$ 62,431$ -$ 1,327,430$



fair value through

profit or loss


liabilities -$ 2,509$ -$ 2,509$

192

B.The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Company is the closing price. These instruments are included in level 1. Instruments included in level 1 comprise primarily equity instruments and debt instruments classified as financial assets/financial liabilities at fair value through profit or loss or available-for-sale financial assets.

C.The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

D.If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

E.Specific valuation techniques used to value financial instruments include:

(a)Quoted market prices or dealer quotes for similar instruments.

(b)The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value.

(c)Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

January 1, 2012 Level 1 Level 2 Level 3 Total

Financial assets:

Financial assets at

fair value through

profit or loss

　Mutual funds 1,916,830$ -$ -$ 1,916,830$


assets

- 30,986 - 30,986

Available-for-sale

financial assets


Total 2,277,561$ 30,986$ -$ 2,308,547$



fair value through

profit or loss


liabilities -$ 23,731$ -$ 23,731$

193

13.SUPPLEMENTARY DISCLOSURES (1) Significant transactions information

A. Loans to others:

196

Note 1: The numbers filled in for the loans provided by the Company or subsidiaries are as follows:

(1) The Company is ‘0’.

(2) The subsidiaries are numbered in order starting from ‘1’.

Note 2: Fill in the name of account in which the loans are recognised, such as receivables-related parties, current account with stockholders, prepayments, temporary payments, etc.

Note 3: Fill in the year-to-date maximum outstanding balance of loans to others as of the reporting period

Note 4:.The numbers filled in for the nature of loans are as follows:

(1) Business association is labeled as “1”

(2) Short-term financing is labeled as “2”.

Note 5: Fill in business association amount when nature of loan belongs to business association.

Note 6: Fill in purpose of loan when nature of loan belongs to short-term financing, for example, repayment of loan, acquisition of equipment, working capital, etc.

Note 7: The calculation and amount on ceiling of loans are as follows:

[The company]

(1) The limit on loans granted to a single party shall not exceed 20% of the Company’s net assets value.

(2) The ceiling on total loans shall not exceed 40% of the Company’s net assets value.

[Domestic subsidiaries and overseas subsidiaries]

(1) The limit on loans granted to a single party by domestic subsidiaries and overseas subsidiaries shall not exceed 10% and 40% of the Company’s net value, respectively.


Note 8: The amounts of funds to be loaned to others which have been approved by the board of directors of a public company in accordance with Article 14, Item 1 of the “Regulations Govering Loaning of Funds and Making of Endorsements/Guarantees by public Companies” should be included in its published balance of loans to others at the end of the reporting period to reveal the risk of loaning the public company bears, even though they have not yet been appropriated. However, this balance should excluded the loans repaid when repayments are done subsequently to reflect the risk adjustment. In addition, if the board of directors of a public company has authorised the chairman to loan funds in instalments or in revolving within certain lines and within one year in accordance with Article 14, Item 2,of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”, the published balance of loans to others at the end of the reporting period should also include these lines of loaning approved by the board of directors, and these lines of loaning should not be excluded from this balance even though the loans are repaid subsequently, for taking into consideration they could be loaned again thereafter.

197

B. Provision of endorsements and guarantees to others:

Number Endorser/

Relationship

with the

endorser/

guarantor

Limit on

endorsements

/guarantees

provided for a

single party

Maximum

outstanding

endorsement/

guarantee

amount during

the year ended

December 31, 2013

Outstanding

endorsement/

guarantee

amount at

December 31,

2013

Actual

amount

drawn down

Amount of

endorsements

/guarantees

secured with

Ratio of accumulated

endorsement/guarantee

amount to net asset

value of the

endorser/guarantor

Ceiling on

total amount

of

endorsements/

guarantees

provided

Provision of

endorsements/

guarantees by

parent

company to

subsidiary

Provision of

endorsements

/guarantees

by subsidiary

to parent

company

Provision of

endorsements/

guarantees to

the party in

Mainland

China

(Note 1) guarantor Company name (Note 2) (Note 3) (Note 4) (Note 5) (Note 6) collateral company (Note 3) （Note 7）（Note 7）（Note 7） Footnote

0 CTCI CTCI

(Thailand)

CO., Ltd.

3 $ 49,416,339 3,869,237$ 2,813,637$ 772,357$ -$ 17.08% $ 98,832,678 Y N N -

0 CTCI CTCI Overseas

Co., Ltd.

3 49,416,339 11,488,683 7,110,062 2,742,959 - 43.16% 98,832,678 Y N N -

0 CTCI Jing Ding

Engineering &

Construction

Co., Ltd.

3 49,416,339 798,892 777,573 145,938 - 4.72% 98,832,678 Y N Y -

0 CTCI CINDA

Engineering &

Construction

Private Limited

3 49,416,339 2,260,533 2,181,179 966,063 - 13.24% 98,832,678 Y N N -

0 CTCI ShangDing

Engineering &

Construction

Co., Ltd.

3 49,416,339 1,574,244 500,823 25,855 - 3.04% 98,832,678 Y N Y -

0 CTCI CTCI Arabia Ltd. 3 49,416,339 6,448,579 6,160,622 2,189,591 - 37.40% 98,832,678 Y N N -

0 CTCI CTCI Singapore

Pte. Ltd.

2 49,416,339 491,689 486,087 71,934 - 2.95% 98,832,678 Y N N -

0 CTCI Advanced

Control &

Information

Technology

Systems Inc.

3 49,416,339 11,824 11,753 - - 0.07% 98,832,678 Y N Y -

0 CTCI CTCI Machinery

Corp.

2 49,416,339 326,908 326,908 292,752 - 1.98% 98,832,678 Y N N -

Party being

endorsed/guaranteed

198

Number Endorser/

Relationship

with the

endorser/

guarantor

Limit on

endorsements

/guarantees

provided for a

single party

Maximum

outstanding

endorsement/

guarantee

amount during

the year ended

December 31, 2013

Outstanding

endorsement/

guarantee

amount at

December 31,

2013

Actual

amount

drawn down

Amount of

endorsements

/guarantees

secured with



amount to net asset

value of the

endorser/guarantor

Ceiling on

total amount

of

endorsements/

guarantees

provided

Provision of

endorsements/

guarantees by

parent

company to

subsidiary

Provision of

endorsements

/guarantees

by subsidiary

to parent

company

Provision of

endorsements/

guarantees to

the party in

Mainland

China


Party being

endorsed/guaranteed

0 CTCI Sinogal-Waste

Services Corp.

6 $ 49,416,339 16,666$ -$ -$ -$ - $ 98,832,678 Y N N -

0 CTCI CIMAS

Engineering Co.,

Ltd.

3 49,416,339 409,200 388,050 - - 2.36% 98,832,678 Y N N -

0 CTCI CTCI Chemical

Corp.

3 49,416,339 41,260 41,260 4,260 - 0.25% 98,832,678 Y N N -

0 CTCI E&C Engineering

Corp.

2 49,416,339 41,260 41,260 1,704 - 0.25% 98,832,678 Y N N -

0 CTCI Universal

Engineering

(BVI) Corporation

3 49,416,339 30,030 29,850 836 - 0.18% 98,832,678 Y N N -

0 CTCI CTCI Malaysia

Sdn. Bhd.

3 49,416,339 1,518,005 1,518,005 557,730 - 9.22% 98,832,678 Y N N -

1 Advanced

Control &

System Inc.

Century Ahead

Ltd.

2 530,144 18,018 17,910 - - 3.38% 1,060,288 Y N N -

2 E&C Engineering

Corp.

Synergy

Engineering

Corporation

2 2,223,775 50,000 50,000 - - 6.75% 4,447,551 N N N -

2 E&C Engineering

Corp.

CTCI Machinery

Corp.

5 2,223,775 1,230,407 1,230,407 1,230,407 - 165.99% 4,447,551 N N N -

2 E&C Engineering

Corp.

Resources

Engineering

Service Inc.

5 2,223,775 28,249 28,080 28,080 - 3.79% 4,447,551 N N N -

2 E&C Engineering

Corp.

ShangDing

Engineering &

Construction

Co., Ltd.

5 2,223,775 276,940 276,940 276,940 - 37.36% 4,447,551 N N Y -

199

Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:



Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following nine categories; fill in the number of category

Number Endorser/

Relationship

with the

endorser/

guarantor

Limit on

endorsements

/guarantees

provided for a

single party

Maximum

outstanding

endorsement/

guarantee

amount during

the year ended

December 31, 2013

Outstanding

endorsement/

guarantee

amount at

December 31,

2013

Actual

amount

drawn down

Amount of

endorsements

/guarantees

secured with



amount to net asset

value of the

endorser/guarantor

Ceiling on

total amount

of

endorsements/

guarantees

provided

Provision of

endorsements/

guarantees by

parent

company to

subsidiary

Provision of

endorsements

/guarantees

by subsidiary

to parent

company

Provision of

endorsements/

guarantees to

the party in

Mainland

China


Party being

endorsed/guaranteed

3 Sino

Environmental

Service Corp.

Sinogal-Waste

Services Corp.

6 $ 1,436,542 16,666$ -$ -$ -$ - 2,154,813$ N N N -

4 CTCI Machinery

Corp.

E&C Engineering

Corp.

5 798,667 404,033 404,033 404,033 - 151.77% 1,597,334 N N N -

4 CTCI Machinery

Corp.

Resources

Engineering

Service Inc.

5 798,667 16,251 9,010 9,010 - 3.38% 1,597,334 N N N -

5 Resources

Engineering

Service Inc.

CTCI Machinery

Corp.

5 1,018,125 629,000 629,000 629,000 - 185.34% 2,036,249 N N N -

5 Resources

Engineering

Service Inc.

CTCI 5 1,018,125 39,600 24,800 24,800 - 7.31% 2,036,249 N Y N -

6 CTCI Chemical

Corp.

Resources

Engineering

Service Inc.

5 507,292 77,422 20,935 20,935 - 12.38% 1,014,584 N N N -

6 CTCI Chemical

Corp.

CTCI Machinery

Corp.

5 507,292 230,473 230,473 230,473 - 136.30% 1,014,584 N N N -

7 ShangDing

Engineering &

Construction

Co., Ltd.

Shanghai XuanLi

Trading Co.,

Ltd.

2 1,554,416 249,249 247,755 24,099 - 47.81% 3,108,832 N N Y -

8 KD Holding Corp. G.D.

Development

Corporation

6 8,010,908 254,853 254,853 142,273 - 6.36% 12,016,362 N N N -

200

each case belongs to:

(1)Having business relationship.

(2)The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/guaranteed subsidiary.

(3)The endorser/guarantor parent company and its subsidiaries jointly own more than 50% voting shares of the endorsed/guaranteed company.

(4)The endorsed/guaranteed parent company directly or indirectly owns more than 50% voting shares of the endorser/guarantor subsidiary.

(5)Mutual guarantee of the trade as required by the construction contract.

(6)Due to joint venture, each shareholder provides endorsements/guarantees to the endorsed/guaranteed company in proportion to its ownership.

Note 3: Fill in limit on endorsements/guarantees provided for a single party and ceiling on total amount of endorsements/guarantees provided as prescribed in the endorser/guarantor company’s “Procedures for Provision of Endorsements and Guarantees”, and state each individual party to which the endorsements/guarantees have been provided and the calculation for ceiling on total amount of endorsements/guarantees provided in the footnote.

[The company]

(1)The limit on endorsements and guarantees granted to a single party shall not exceed 300% of the Company’s net assets value in last financial statement which was reviewed or audited by accountant.

(2)The ceiling on total endorsements and guarantees shall not exceed 600% of the Company’s net assts value in last financial statement which was reviewed or autored by accountant.


(1)The limit on endorsements and guarantees granted to a single party shall not exceed 100% to 300% of the Company’s net assets value in last financial statement which was reviewed or audited by accountant.

(2)The ceiling on total endorsements and guarantees shall not exceed 200% to 600% of the Company’s net assets value in last financial statement which was reviewed or audited by accountant.

Note 4:Fill in the year-to-date maximum outstanding balance of endorsements/guarantees provided as of the reporting period.

Note 5:Once endorsement/guarantee contracts or promissory notes are signed/issued by the endorser/guarantor company to the banks, the endorser/guarantor company bears endorsement/guarantee liabilities. And all other events involve endorsements and guarantees should be included in the balance of outstanding endorsements and guarantees.

Note 6:Fill in the actual amount of endorsements/guarantees used by the endorsed/guaranteed company.

Note 7:Fill in “Y” for those cases of provision of endorsements/guarantees by listed parent company to subsidiary and provision by subsid iary to listed parent company, and provision to the party in Mainland China.

201

C. Holding of marketable securities at the end of the period:

Footnote

Securities held by

Type of

marketable

securities Name of Investee company

General

ledger account

Number of

shares

Book value

(Note 3)

Ownership

(%) Market value (Note 4)

CTCI Fund Manulife Superior Selection

China Fund

N/A Financial assets at fair

value through profit or

loss-current

- 21,844$ - 21,156$ -

CTCI Fund BlackRock Global Allocation

fund, etc.



loss-current

- 59,225 - 60,146 -

CTCI Fund Eastspring Inv Well Pool

Money Market, etc.



loss-current

- 350,605 - 350,843 -

431,674 432,145$

Adjustment 471

432,145$

CTCI Common Stock China Steel Chemical Corp. The Company’s

President is the

supervisor

Available-for-sale

financial assets-current

1,776,916 100,615$ - 293,191$ -

CTCI Common Stock Gintech Energy Corporation. The Company's

President is

the director

Available-for-sale


1,696,499 79,977 - 57,681 -

CTCI Common Stock Hon Hai Precision Ind. Corp.

etc.

- Available-for-sale


- 15,621 - 19,722 -

196,213 370,594$

Adjustment 174,381

370,594$

(Note 1)

Relationship with the

securities issuer

(Note 2)

As of December 31, 2013

202

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


(Note 1)


securities issuer

(Note 2)


CTCI Common Stock Core Pacific City Co., Ltd. The Company is

the director

Financial assets

measured at

cost - non-current

36,000,000 360,000$ 2.26 190,000$ -

CTCI Common Stock Utech Solar Corporation. The Company is

the director

Financial assets

measured at

cost - non-current

24,000,000 330,000 15.00 129,877 -

CTCI Common Stock CDIB & Partners Investment

Hol

The Company is

the director

Financial assets

measured at

cost - non-current

27,000,000 250,000 2.48 250,000 -

CTCI Common Stock Metro Consulting Service

Corp., etc.

- Financial assets

measured at

cost - non-current

- 6,000 - 3,000 -

Less:Accumulated impairment 373,123)( 572,877$

572,877$

Sino Environmental

Services Corp.

Fund Eastspring Investors Well Pool

Money Market Fund

- Financial assets at fair


loss-current

2,708,946 36,000$ - 36,000$ -

Sino Environmental

Services Corp.

Common Stock CTCI Corp. The Company Available-for-sale


1,028 49 - 49 -

Sino Environmental

Services Corp.

Common Stock Taiwan Cement Corp. The president is

the Company's

director

Available-for-sale


438,000 20,265 - 20,265 -

Sino Environmental

Services Corp.

Common Stock Gintech Energy Corporation. The Company's

President is

the director

Available-for-sale


575,000 19,550 - 19,550 -

203

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


(Note 1)


securities issuer

(Note 2)


Advanced Control &

System Inc.


Money Market Fund



loss-current

11,931,558 158,563$ - 158,563$ -

Advanced Control &

System Inc.

Fund Capital Money Market Fund - Financial assets at fair


loss-current

2,823,198 44,500 - 44,500 -

Advanced Control &

System Inc.

Fund Jih Sun Money Market Fund - Financial assets at fair


loss-current

691,735 10,000 - 10,000 -

Advanced Control &

System Inc.

Common Stock Taiwan Cement Corp. - Available-for-sale


825,980 38,202 - 38,202 -

Advanced Control &

System Inc.

Common Stock Gintech Energy Corporation. - Available-for-sale


737,000 25,058 - 25,058 -

E&C Engineering

Corp.

Common Stock Titan Technology Venture

Capital Investment Corp.

- Financial assets

measured at

cost - non-current

31,345 200 2.50 200 -

E&C Engineering

Corp.

Fund Mega Diamond Money

Market Fund



loss-current

4,087,606 50,013 - 50,013 -

Innovest Investment Corp. Common Stock Global Strategic Investment

Inc, etc.

- Financial assets

measured at

cost - non-current

- 2,900 - 2,900 -

204

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


(Note 1)


securities issuer

(Note 2)


Innovest Investment Corp. Common Stock Gintech Energy Corporation. The Company's

President is

the director

Available-for-sale


277,000 9,418$ - 9,418$ -

Innovest Investment Corp. Common Stock CTCI Corp. The Company Available-for-sale

financial assets- non current

344,436 16,636 0.05 16,636 -

GRQ Investment Corp. Common Stock CTCI Corp. The Company Available-for-sale


912,170 44,058 0.12 44,058 -

GRQ Investment Corp. Common Stock Advanced Control &

System Inc.

Subsidiary Available-for-sale


324,417 17,875 1.42 17,875 -

GRQ Investment Corp. Fund Schroder China bond Fund - Financial assets at fair


loss-current

- 12,095 - 12,095 -

GRQ Investment Corp. Common Stock Gintech Energy Corporation. The Company's

President is

the director

Available-for-sale


819,000 27,846 - 27,846 -

CTCI Chemical Corp. Fund Polaris De-Bao Money Market

Fund, etc.



loss-current

663,333 9,036 - 9,036 -

HD Resources

Management Corp.


Market Fund



loss-current

899,000 11,003 - 11,003 -

HD Resources

Management Corp.


the Company's

director

Available-for-sale


435,000 20,133 - 20,133 -

205

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


(Note 1)


securities issuer

(Note 2)


Resources Engineering

Service Inc.


President is

the director

Available-for-sale


872,000 29,648$ - 29,648$ -


Service Inc.

Common Stock Global Strategic Investment - Financial assets

measured at

cost - non-current

700,000 7,000 - 7,000 -

Leading Energy Corp. Fund Taishin Great China Fund - Financial assets at fair


loss-current

500,000 5,140 - 5,140 -

Leading Energy Corp. Fund Capital Money Market Fund - Financial assets at fair


loss-current

1,777,000 28,002 - 28,002 -

Leading Energy Corp. Common Stock Taiwan Cement Corp. The president is

the Company's

director

Available-for-sale


432,280 19,993 - 19,993 -

KD Holding Corp. Common Stock Taiwan Cement Corp. The president is

the Company's

director

Available-for-sale


180,000 8,315 - 8,315 -

KD Holding Corp. Common Stock Gintech Energy Corporation. The Company's

President is

the director

Available-for-sale


462,000 15,708 - 15,708 -

KD Holding Corp. Common Stock TSC Venture Management.

Inc.

- Financial assets

measured at

cost - non-current

270,000 - 5.88 - -

206

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities within the scope of IAS 39 ‘Financial Instruments: Recognition and Measurement.’

Note 2: Leave the column blank if the issuer of marketable securities is non-related party.

Note 3: Fill in the amount after adjusted at fair value and deducted by accumulated impairment for the marketable securities measured at fair value; fill in the acquisition cost or amortised cost deducted by accumulated impairment for the marketable securities not measured at fair value.

Note 4: The number of shares of securities and their amounts pledged as security or pledged for loans and their restrictions on use under some agreements should be stated in the footnote if the securities presented herein have such conditions.

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


(Note 1)


securities issuer

(Note 2)


KD Holding Corp. Common Stock TeamWIN Opto-Electronics

Co., Ltd.

- Financial assets

measured at

cost - non-current

150,000 848$ 2.46 848$ -

Fortune Energy Corp. Fund Capital Money Market Fund - Financial assets at fair


loss-current

634,000 10,000 - 10,000 -

CTCI (Tailand) Co., Ltd. Common Stock CHIYODA (Tailand) Co., Ltd. - Financial assets

measured at

cost - non-current

3,600 328 - 328 -

207

D. Aggregate purchases or sales of the same securities reaching NT$300 million or 20% of paid-in capital or more:

Name of Counter- Relationship

The investee party with the Company Proceeds

Company (Note 1) General ledger accounts (Note 2) (Note 2) Shares Amounts Shares Amounts Shares Amounts Book value on disposal Shares Amounts

CTCI Corp. Eastspring Investors

Well

Pool Money Market

Fund

Financial assets at fair


loss-current

- N/A 11,386,150 $ 149,961 26,673,794 $ 354,000 36,921,679 $ 489,785 $ 488,845 $ 940 1,138,265 $ 15,116

CTCI Corp. Polaris De-Bao

Money Market

Fund



loss-current

- N/A - - 92,411,838 1,082,000 92,411,838 1,083,106 1,082,000 1,106 - -

CTCI Corp. Jih Sun Money

Market Fund



loss-current

- N/A 5,570,720 80,000 78,374,754 1,130,000 74,231,100 1,070,646 1,069,687 959 9,714,374 140,313

CTCI Corp. Taishin 1699

Money Market

Fund



loss-current

- N/A - - 58,502,227 770,000 58,502,227 770,537 770,000 537 - -

CTCI Corp. FSTIC Money

Market Fund



loss-current

- N/A - - 16,838,532 250,000 16,838,532 250,093 250,000 93 - -

CTCI Corp. Capital Money

Market Fund



loss-current

- N/A 15,989,564 250,000 93,492,599 1,470,000 103,452,806 1,627,169 1,625,011 2,158 6,029,357 94,989

CTCI Corp. UPAMC James

Bond Money

Market Fund



loss-current

- N/A 15,434,728 250,000 18,470,219 300,000 33,904,947 550,957 550,000 957 - -

CTCI Corp. Fubon Chi-Hsiang

Money Market

Fund



loss-current

- N/A - - 14,755,743 225,000 14,755,743 225,096 225,000 96 - -

CTCI Corp. Fuh Hwa Money

Market Fund



loss-current

- N/A - - 28,440,244 400,000 28,440,244 400,123 400,000 123 - -

CTCI Corp. Yuanta Wan Tai

Money Market

Fund



loss-current

- N/A - - 54,016,008 798,000 54,016,008 798,453 798,000 453 - -

CTCI Corp. Mega Diamond

Money Market

Fund



loss-current

- N/A - - 36,809,387 450,000 28,616,626 350,000 349,813 187 8,192,761 100,187

CTCI Corp. China Steel

Chemical Corp.

Available-for-sale


- N/A 2,426,916 139,837 - - 650,000 111,555 39,222 72,333 1,776,916 100,615

Disposal (Note 3)

Beginning balance at January 1,2013 Addition (Note 3) Ending balance at December 31,2013

208

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities.

Note 2: Fill in the columns the counterparty and relationship if securities are accounted for under the equity method; otherwise leave the columns blank.

Note 3: Aggregate purchases and sales amounts should be calculated separately at their market values to verify whether they individually reach NT$100 million or 20% of paid-in capital or more.

Note 4: Paid-in capital referred to herein is the paid-in capital of parent company. In the case that shares were issued with no par value or a par value other than NT$10 per share, the 20 % of paid-in capital shall be replaced by 10% of equity attributable to owners of the parent in the calculation.

E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.




Disposal (Note 3)


KD Holding

Corp.

UPAMC James

Bond Money

Market Fund



loss-current

- N/A - $ - 26,521 $ 432,000 26,521 $ 432,191 $ 432,000 $ 191 - $ -

KD Holding

Corp.

Yuanta Wan Tai

Money Market

Fund



loss-current

- N/A 6,502 95,225 20,314 300,000 26,816 396,328 395,225 1,103 - -

Sino

Environmental

Services Corp.

Jih Sun Money

Market Fund



loss-current

- N/A 4,875 70,000 14,501 209,000 19,376 279,330 279,000 330 - -

209

G. Purchases or sales transactions with related parties reaching NT$100 million or 20% of paid-in capital or more:

Purchaser/seller Counterparty

Relationship

with the

counterparty

Purchases

(sales)Amount

Percentage of

total

purchases

(sales)

Credit term Unit price Credit term Balance

Percentage of

total

notes/accounts

receivable

(payable)

Footnote

CTCI Corp. CTCI Overseas(BVI) Corp. and its

subsidiaries

Subsidiary (Sales) 467,380)($ (1%) Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

268,501$ 6% -


subsidiaries

Subsidiary Purchases 347,507 1% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

48,833)( - -

CTCI Corp. SINO Environmental Services Corp. Subsidiary Purchases 342,652 1% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

91,311)( (1%) -

CTCI Corp. Advanced Control & System Inc. Subsidiary Purchases 738,600 3% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

246,131)( 2% -

CTCI Corp. CTCI Machinery Corp. Subsidiary Purchases 235,281 1% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

70,681)( (1%) -

CTCI Corp. CTCI Singapore Pte. Ltd. Subsidiary Purchases 585,838 2% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

- - -

Transaction

Differences in transaction

terms compared to third

party transactions

Notes/accounts

receivable (payable)

210


Relationship

with the

counterparty

Purchases

(sales)Amount

Percentage of

total

purchases

(sales)


Percentage of

total

notes/accounts

receivable

(payable)

Footnote

CTCI Corp. Resources Engineering Service Inc. Subsidiary Purchases 207,014$ 1% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

223,013)( (2%) -

Leading Energy

Corp.

HD Resource Mangement Corp. Subsidiary (Sales) 233,711)( (33%) Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

40,396 55% -

Leading Energy

Corp.

Sino Environmental Service Corp. Subsidiary Purchases 222,778 50% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

48,508)( (93%) -

Sino

Environmental

Service Corp.

CTCI Corp. The Company (Sales) 342,652)( (13%) Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

73,493 17% -

Sino

Environmental

Service Corp.


selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

64,115 15% -

Sino

Environmental

Service Corp.

Leading Energy Corp. Subsidiary (Sales) 222,778)( (9%) Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

48,508 11% -

Transaction



party transactions

Notes/accounts


211

Note 1: If terms of related-party transactions are different from third-party transactions, explain the differences and reasons in the ‘Unit price’ and ‘Credit term’ columns.

Note 2: In case related-party transaction terms involve advance receipts (prepayments) transactions, explain in the footnote the reasons, contractual provisions, related amounts, and differences in types of transactions compared to third-party transactions.



Relationship

with the

counterparty

Purchases

(sales)Amount

Percentage of

total

purchases

(sales)


Percentage of

total

notes/accounts

receivable

(payable)

Footnote

Sino

Environmental

Service Corp.

Fortune Energy Corp. Subsidiary (Sales) 159,514)( (6%) Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

27,593 6% -

Sino

Environmental

Service Corp.

CTCI Chemical Corp. Subsidiary Purchases 122,919 5% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

19,690)( (4%) -

HD Resources

Management

Corp.


selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

64,115)( (61%) -

HD Resources

Management

Corp.

Leading Energy Corp. Subsidiary Purchases 233,711 31% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

40,396)( (38%) -

Fortune Energy

Corp.


selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

27,593)( (99%) -

Transaction



party transactions

Notes/accounts


212

H.Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more:

Note 1：Other accounts receivable arise from lending capital.

Creditor Counterparty

Relationship

with the

counterparty

Balance as at

December 31,

2013 (Note 1)

Turnover

rateAmount

Action

taken

Amount

collected

subsequent to

the

balance sheet

date

CTCI Corp. CTCI Overseas(BVI)

Corp. and its subsidiaries

Subsidiary 286,501$ 0.722 476,213$ Active

Collection

-$ -$

CTCI Corp. CTCI Arabia Ltd. Subsidiary 1,716,375 Note 1 - - - -

CTCI Corp. CTCI Machinery Corp. Subsidiary 770,000 Note 1 - - - -

CTCI Overseas Co., Ltd. Shang Ding Engineering

& Construction Co., Ltd.

Subsidiary 288,948 Note 1 - - - -

Overdue receivables

Allowance for

doubtful

accounts

213

I. Derivative financial instruments：

a) For the year ended December 31, 2013, CTCI Corp. had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $2,786,467. The valuation gain generated from settled and un-settled forward exchange contract was $18,342, which was included in non-operating gain.

b) For the year ended December 31, 2013, CTCI Corp. had entered into swap contracts with a bank to hedge the risk on commitment in foreign currency amounting to $2,312,665. The valuation loss generated from settled and unsettled swap contracts was $23,268, which was included in non-operating loss.

c) For the year ended December 31, 2013, CTCI Corp. had entered into forward commodity contracts with a bank to hedge the risk on fluctuations in price of material and supplies amounting to $2,235,312. The valuation loss generated from settled and un-settled forward commodity contract was $108,532, which was included in non-operating loss.

d) For the year ended December 31, 2013, E&C Engineering Corp. had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $79,608. The valuation gain generated from settled and un-settled forward exchange contract was $228, which was included in non-operating gain.

e) For the year ended December 31, 2013, Universal Engineering Co. had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $61,013. The valuation gain generated from settled and un-settled forward exchange contract was $3,349, which was included in non-operating gain.

f) For the year ended December 31, 2013, CTCI MALYSIA had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $63,262. The valuation gain generated from settled and un-settled forward exchange contract was $506, which was included in non-operating gain.

g) For the year ended December 31, 2013, CTCI Overseas Co., Ltd,. had entered into swap contracts with a bank to hedge the risk on commitment in foreign currency amounting to $215,734. The valuation loss generated from settled and un-settled forward exchange contract was $4,087, which was included in non-operating loss.

h) For the year ended December 31, 2013, CTCI Chemical Corp. had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $198,546. The valuation gain generated from settled and un-settled forward exchange contract was $748, which was included in non-operating gain.

i) For the year ended December 31, 2013, Jing Ding Engineering & Construction Co., Ltd.had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $96,094. The valuation loss generated from settled and un-settled forward exchange contract was $865, which was included in non-operating loss.

214

J. Significant inter–company transcations for the year ended December 31, 2013.

0 CTCI Corp. CTCI Overseas Co., Ltd. 1 Accounts

receivable

$ 268,501 Negotiated by

both parties

0.55%

0 "CTCI Overseas (BVI)

Corp. and its subsidiaries1 Sales revenue 467,380 " 0.89%

1 Advanced Control & System Inc. CTCI Corp. 2 " 738,600 " 1.50%

2 CTCI Machinery Corp. " 2 " 235,281 " 0.59%

3 CTCI Singapore Pte. Ltd. " 2 " 585,838 " 1.34%

4 CTCI Overseas Co., Ltd. " 2 " 347,507 " 0.85%

5 Sino Environmental Services Corp. HD Resource Management Corp. 3 " 380,318 " 10.00%

5 " CTCI Corp. 2 " 342,652 "

5 " Leading Energy Corp. 3 " 222,778 " 6.00%

5 " Fortune Energy Corp. 3 " 159,514 " 4.00%

6 Leading Energy Corp. HD Resource Management Corp. 3 " 233,711 " 6.00%

7 Resources Engineering Service Inc. CTCI Corp. 2 " 207,014 " 0.42%

8 CTCI Chemicals Corp. Sino Environmental Services Corp. 2 " 122,919 "

0 CTCI Corp. CTCI Arabia Ltd. 1Other

receivables1,716,375 " 3.51%

" " CTCI Machinery Corp. 1 " 770,000 " 1.58%

4CTCI Overseas Co., Ltd. Shang Ding Engineering &

Construction Co., Ltd.3 " 288,948 " 0.59%

Number

(Note 1)Company name Counterparty

Relationship

(Note 2)

Transaction

General ledger

accountAmount

Transaction

terms

Percentage of

consolidated total

operating revenues

or total assets

(Note 3)

215

0 CTCI Corp.CTCI Overseas (BVI)

Corp. and its subsidiaries1

Partial

construction

billings

$ 24,172,014Negotiated by

both parties49.49%

1 Advanced Control & System Inc. CTCI Corp. 2 " 3,715,987 " 7.61%

" "CTCI Overseas (BVI)

Corp. and its subsidiaries3 " 764,259 " 1.56%

2 CTCI Machinery Corp. CTCI Corp. 2 " 1,988,476 " 4.07%

7 Resources Engineering Service Inc. " 2 " 160,505 " 0.33%



Long-term

receivable476,213 " 0.98%

0 CTCI Corp. GRQ Investment Corp. 1Refundable

deposits128,300 Not applicable Not applicable

0 CTCI Corp. CTCI (Thailand) Co., Ltd. 1 Guarantee 2,813,637 " "

0 " CTCI Overseas Co., Ltd. 1 " 7,110,062 " "

0 "Jing Ding Engineering &

Construction Co., Ltd.1 " 777,573 " "

0 "CINDA Engineering & Construction

Private Limited1 " 2,181,179 " "

0 "Shang Ding Engineering &


0 " CTCI Arabia Ltd. 1 " 6,160,622 " "

0 " CTCI Singapore Pte. Ltd. 1 " 486,087 " "

0 " CTCI Machinery Corp. 1 " 326,908 " "

0 " CIMAS Engineering Co., Ltd. 1 " 385,060 " "

0 " CTCI Malaysia Sdn. Bhd. 1 " 1,518,005 " "

Number


Relationship

(Note 2)

Transaction

General ledger

accountAmount

Transaction

terms

Percentage of

consolidated total

operating revenues

or total assets

(Note 3)

216

Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

(1) Parent company is ‘0’.


Note 2: Relationship between transaction company and counterparty is classified into the following three categories;

(1) Parent company to subsidiary.

(2) Subsidiary to parent company.

(3) Subsidiary to subsidiary.

Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to

consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for

income statement accounts.

Note 4: The Company may decide to disclose or not to disclose transaction details in this table based on the Materiality Principle.

2 CTCI Machinery Corp. E&C Engineering Corp. 3 Guarantee 404,033 Not applicable Not applicable

7 Resources Engineering Service Inc. CTCI Machinery Corp. 3 " 629,000 " "

8 CTCI Chemicals Corp. " 3 " 230,473 " "

9Shang Ding Engineering &

Construction Co., Ltd.Shanghai XuanLi Trading Co., Ltd. 3 " 247,755 " "

10 KD Holding Corp. G. D. Development Corp. 3 " 254,853 " "

11 E&C Engineering Corp. CTCI Machinery Corp. 3 " 1,230,407 " "



Number


Relationship

(Note 2)

Transaction

General ledger

accountAmount

Transaction

terms

Percentage of

consolidated total

operating revenues

or total assets

(Note 3)

217

(2) Information on investees

Main

Investor Investee Location

business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value

CTCI E&C

Engineering

Corp.

Taiwan Design, management,

and building of nuclear

power, thermal power,

fire pumped storage

power generation and

others related to

engineering.

$ 456,251 $ 456,251 59,098,624 97.09 $ 722,012 $ 11,013 $ 10,690

CTCI Resources

Engineering

Service Inc.

Taiwan Mining of geology, sea oil

and gas, marbal and

rare；planning, design,

monitor of civil, traffic

environment and various

mechanical and

electrical equipment.

15,957 15,957 16,765,048 93.14 316,070 26,298 24,492

CTCI Advanced

Control &

System Inc.

Taiwan Systems planning, design,

integration, and

engineering for various

IT systems etc.

44,409 44,409 11,444,842 49.80 262,283 98,354 49,255

CTCI GRQ Investment

Corp.

Taiwan General investment. 1,690,000 1,690,000 169,000,000 100.00 2,465,309 83,107 83,107

CTCI Innovest

Investment Corp.

Taiwan General investment. 100,000 100,000 10,000,000 100.00 132,527 12,740 12,740

CTCI KD Holding

Corp.

Taiwan General investment. 938,889 938,889 38,457,105 60.67 2,428,779 620,318 384,941

CTCI CTCI (Thailand)

Co., Ltd.

Thailand Design and building of

petrochemical plant.

116,894 116,894 1,249,500 49.00 99,837 2,382 1,167

Shares held as at December 31, 2013

Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income

(loss) recognised by

the Company for the

year ended

December 31, 2013

218

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

CTCI CTCI Machinery

Corp.

Taiwan Secondary processing

of steel, piping, heat

treatment, manufacture

of pollution control

equipment and non-

destructive testing etc.

$ 120,000 $ 120,000 12,100,000 100.00 $ 266,222 $ 82,347 $ 82,347

CTCI CTCI Arabia Ltd. Arabia Construction and

maintenance of refinery,

storage tanks and

hemical plant.

23,312 23,312 500 50.00 ( 507,187) ( 1,065,085) ( 532,542)

CTCI Sinogal-Waste

Services Corp.

Macao Management of waste

recycling site and

maintenance of related

mechanical and

equipment etc.

4,958 4,958 - 30.00 28,740 62,017 18,659

CTCI CTCI Singapore

Pte. Ltd.

Singapore Investment and planning

of related engineering.

152,254 152,254 5,100,000 100.00 173,101 21,716 21,716

CTCI CTCI and Partners

Company

Limited

Arabia Construction and


storage

tanks and chemical

plant.

15,755 - - 40.00 14,413 ( 2,977) ( 1,191)

CTCI CTCI Overseas

(BVI) Corp.

BVI Investment and planning


308,554 308,554 6,740,000 100.00 2,141,154 303,500 303,500

219

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

CTCI CTCI Engineering

& Construction

Sdn. Bhd., etc.

Taiwan Wholesale and retail of

information software;

computer equipment

installation and

information processing

etc.

$ - $ - - - $ 19,623 $ 7,114 $ 4,816

CTCI Pan Asia Corp. Taiwan Input of foreign labors

and technologies,

technical cooperation

with foreign

construction

business, and

construction of

engineering

construction etc.

71,543 71,543 37,530,631 34.27 565,307 219,157 75,105

$ 9,128,190 $ 538,802

GRQ

Investment

Corp.

CTCI Chemical

Corp.

Taiwan Manufacture wholesale,

and retail of industrial

chemicals.

13,522 13,522 480,661 6.77 11,583 45,446 3,077

GRQ

Investment

Corp.

KD Holding

Corp.

Taiwan General investment. 11,270 11,270 243,918 0.38 15,228 620,318 2,357

220

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

GRQ

Investment

Corp.

Resources

Engineering

Service Inc.


and gas, marbal and




mechanical and electrical

equipment.

$ 23 $ 23 1,000 0.01 $ 35 $ 26,298 $ 3

Innovest

Investment

Corp.

CTCI Chemical

Corp.

Taiwan Manufacture, wholesale,


chemicals.

32,153 32,153 1,657,207 23.34 39,932 45,446 10,607

Innovest

Investment

Corp.

KD Holding

Corp.

Taiwan General investment. 1,374 1,374 32,132 0.05 2,004 620,318 310

Innovest

Investment

Corp.

E&C

Engineering

Corp.



power,thermal power,

fire pumped storage


others related to

engineering.

11 - 1,000 - 12 11,013 -

Sino

Environmental

Services Corp.

CTCI Chemical

Corp.



chemicals.

24,851 24,851 1,910,241 26.90 45,495 45,446 12,227

Sino

Environmental

Services Corp.

Leading Energy

Corp.

Taiwan Environmental service of

waste disposal device

installation, steam power

cogeneration etc.

17,600 17,600 1,760,000 2.00 33,137 232,836 4,657

221

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

Sino

Environmental

Services Corp.

Sinogal-Waste

Services Corp.


recycling site and


mechanical and

equipment etc.

$ 4,964 $ 4,964 - 30.00 $ 28,739 $ 62,017 $ 18,659

Sino

Environmental

Services Corp.

Fortune Energy

Corp.




cogeneration etc.

13 - 1,000 0.01 13 180,638 -

Sino

Environmental

Services Corp.

G.D. Development

Company

Taiwan Energy technology service

and related components

manufacturing.

8 - 1,000 0.01 8 2,826 -

HD Resources

Management

Corp.

Sino

Environmental

Services Corp.

Taiwan Management of waste

recycling site and


mechanical and

equipment etc.

53 - 1,000 0.01 25 292,166 -

HD Resources

Management

Corp.

Yuan Ding

Resources

Management

Corp.

Taiwan waste service, waste clear

other environmental

service,

and environmental pollution

service etc.

400 - 400,000 40.00 369 ( 78) ( 31)

CTCI Chemical

Corp.

Chung Ding

Chemical Corp.

Samoa Manufacture participation

and sale of chemicals

etc.

45,084 45,084 1,400,000 100.00 69,784 1,500 1,500

222

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

KD Holding

Corp.

HD Resources

Management

Corp.

Taiwan International trade and

environmental service of

waste disposal,

equipment installation

and mechanical

installation etc.

$ 20,000 $ 20,000 2,000,000 100.00 $ 71,246 $ 21,004 $ 21,004

KD Holding

Corp.

Leading Energy

Corp.




cogeneration etc.

993,485 993,485 86,240,000 98.00 1,623,721 232,836 228,179

KD Holding

Corp.

Sino

Environmental

Services Corp.


recycling site and


mechanical and

equipment etc.

339,921 339,982 14,065,936 93.15 672,846 292,166 272,190

KD Holding

Corp.

Fortune Energy

Corp.




cogeneration etc.

1,012,483 1,012,500 56,249,000 75.00 968,605 180,638 135,478

KD Holding

Corp.

G.D. Development

Company



manufacturing.

95,500 50,000 9,549,000 49.99 91,019 2,826 1,413

KD Holding

Corp.

Yuan Ding

Resources

Management

Corp.


other environmental

service,


service etc.

600 - 600,000 60.00 553 ( 78) ( 47)

223

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

CTCI Overseas

(BVI) Corp.

CTCI Overseas

Co., Ltd.

Hong Kong Investment and planning


$ 276,815 $ 276,815 6,740,000 100.00 $ 1,957,953 $ 238,651 $ 238,651

CTCI Overseas

Co., Ltd.

CTCI Arabia Ltd. Arabia Construction and


storage

tanks and chemical

plant.

22,610 22,610 500 50.00 ( 507,250) ( 1,065,085) ( 532,543)

CTCI Overseas

Co., Ltd.

Universal (BVI)

Engineering

Corp.



1,694 1,694 50,000 100.00 218,049 3,596 3,596

CTCI Overseas

Co., Ltd.

CIPEC

Construction Inc.

Philippines Construction and


storage

tanks and chemical plant.

663 663 10,000 40.00 564 ( 2,175) ( 870)

CTCI Overseas

Co., Ltd.

CIMAS

Engineering

Corp.

Vietnam Chemical, petrochemical,

feasibility study &

planning, engineering

design, procurement &

fabrication, erection,

construction &

commissioning.

26,330 26,330 - 50.00 49,159 2,692 1,346

CTCI Overseas

Co., Ltd.

CTCI Engineering

& Construction

Sdn. Bhd.

Malaysia Design, survey,

construction and

inspection of various

engineering and

construction projects.

2,879 2,879 300,000 40.00 8,923 5,744 2,298

224

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

CTCI Overseas

Co., Ltd.

CTCI and Partners

Company

Limited


maintenance of

refinery, storage

tanks and chemical

plant.

$ 25,585 $ 25,585 3,000,000 60.00 $ 21,622 ($ 2,977) ($ 1,786)

CTCI Overseas

Co., Ltd.

CINDA

Engineering &

Construction

Private Limited

India Chemical, petrochemical,

feasibility atudy &




construction &

commissioning.

31,022 31,022 8,000,000 100.00 190,201 44,741 44,741

Universal (BVI)

Engineering

Corp.

Superiority

(Thailand) Co.,

Ltd.

Thailand Investment and building of

related engineering.

151 151 2,156 100.00 ( 30,312) 401 401

Superiority

(Thailand) Co.,

Ltd.

CTCI Thailand

Co., Ltd.

Thailand Design and planting of


12,628 12,628 1,300,500 51.00 27,295 2,382 1,215

Advanced

Control &

System Inc.

Century Ahead

Ltd.

Samoa Professional investment

company.

25,097 25,097 750,000 100.00 16,109 1,298 1,298

Century Ahead

Ltd.

Advance Control

& Information

Technologies

Ltd.

China Computer technology

services.

23,679 23,679 - 100.00 14,789 1,293 1,293

225

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

E&C

Engineering

Corp.

Synergy

Engineering

Corp.

BVI Design and planning of

engineering projects.

$ 3,159 $ 3,159 100,000 100.00 $ 26,653 $ 832 $ 832

E&C

Engineering

Corp.

CTCI Chemical

Corp.



chemicals.

7,354 7,354 656,360 9.24 16,396 45,446 4,199

Shang Ding

Engineering &

Construction

Co., Ltd.

Shanghai XuanLi

Trading Corp.

China General trade. 23,748 23,748 - 100.00 37,064 10,589 10,589

Resources

Engineering

Services Inc.

CTCI Chemical

Corp.



chemicals.

7,354 7,354 656,360 9.24 15,089 45,446 4,199

CTCI Singapore

Pte. Ltd.

TECA

Engineering

Pte. Ltd.

Singapore Design and planning of


2,969 2,969 125,000 25.00 670 ( 5,379) ( 1,345)

226

(3) Information on investments in Mainland China

A) The related information of investment in Mainland China is as follows:

Remitted

to Mainland

China

Remitted

back to Taiwan

Jing Ding

Engineering &

Construction Co.,

Ltd.

Design, survey, construction

and inspection of various

engineering and construction

projects, plants, machinery

and equipment, and

environmental protection

projects.

$ 342,115 2 $ 313,998 $ - -$ $ 313,998 $ 281,060 100.00 281,060$ 1,338,397$ $ 3,302 Note 3

Shang Ding

Engineering &

Construction Co.,

Ltd.

Design, survey, construction and

inspection of various engineering

and construction projects.

592,787 2 534,974 - - 534,974 (140,871) 99.44 (140,082) 498,110 23,530 "

Zhuhai Chung

Ding Chemical

Corp.

Trading of chemical materials 46,218 2 46,218 - - 46,218 1,326 75.49 1,001 42,334 - Note 4

Advanced Control

& Information

Technologies

Ltd.

Computer technology services 22,215 2 22,215 - - 22,215 1,293 49.80 644 7,365 - Note 5

GranSino

Environmental

Technology Co.,

Ltd.

Consultation and development of

sanitation technology, maintenance

of environmental pollution disposal

equipment, management of

construction, and retail business,

etc.

22,193 1 10,874 - - 10,874 (4,282) 27.69 1,186)( 10,176 1,567 -

Xiang Ding

Environment

Consultant

(shanghai) Co., Ltd.

Technical development, advisory

and service in environmental field;

environmental pollution control

equipment and related parts

wholesale, import and export, etc.

4,147 1 - 4,147 - 4,147 102 56.92 58 2,476 - -

Amount remitted fromTaiwan to

Mainland China/Amount remitted

back to Taiwan for the year ended

December 31, 2013

Investee in

Mainland

China

Main business activitiesPaid-in

capital

Investment

method

（Note ）

Accumulated amount

of remittance from

Taiwan to Mainland

China of January 1,

2013

Footnote

Accumulated

amount

of remittance from

Taiwan to Mainland

China as of

December 31, 2013

Net income of

investee as of

December 31,2013

Ownership held by

the Company

(direct or indirect)

Investment income

(loss) recognised

by the Company

for the year ended

December 31, 2013

Book value of

investments in

Mainland China

as of December

31, 2013

Accumulated amount

of investment income

remitted back to

Taiwan as of

December 31, 2013

227

Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:

(1)Directly invest in a company in Mainland China.

(2)Through investing in an existing company in the third area, which then invested in the investee in Mainland China.

(3)Others.

Note 2: In the ‘Investment income (loss) recognised by the Company for the year ended December 31, 2013’ column:

(1)It should be indicated if the investee was still in the incorporation arrangements and had not yet any profit during this period.

(2)Indicate the basis for investment income (loss) recognition in the number of one of the following three categories:

A.The financial statements that are audited and attested by international accounting firm which has cooperative relationship with accounting firm in R.O.C.

B.The financial statements that are audited by R.O.C. parent company’s CPA.

C.Others.

Note 3: Invested by CTCI Overseas Co., Ltd.

Note 4: Invested by Chung Ding Chemical Corp.

Note 5: Invested by Century Ahead Ltd.

Company name

Accumulated amount of

remittance from Taiwan to

Mainland China

as of December 31, 2013

Investment amount approved by

the Investment Commission of

the Ministry of Economic

Affairs (MOEA)

Ceiling on investments in

Mainland China imposed by


MOEA

CTCI 932,426$ 1,003,668$ 9,883,268$

228

B) Significant transactions conducted with investee in Mainland China directly or indirectly through other companies in third areas.

% % %

Maximum balance

during the year ended

December 31, 2013

Balance at

December

31, 2013

Interest

rate

Interest during

the year ended

December 31,

2013

2.00 - 13.97 - - - - -

0.20 - 1.96 - - - - -

Investee in Mainland

China

Sales (Purchases)Property

transactions

Accounts receivable

(payable)

Provision of

endorsements

/guarantees or

collaterals

Others

Amount Amount

Balance at

December

31, 2013

Balance at

December

31, 2013

Purpose

Financing

-

GranSino Environmental

Technology Co., Ltd.38,643$ - 41,646$ - -

Xiang Ding

Environment Consultant


5,831 - 5,831 -

229

14. INITIAL APPLICATION OF IFRSs

These non-consolidated financial statements are the first financial statements prepared by the Company in accordance with the IFRSs. The Company has adjusted the amounts as appropriate that are reported in the previous R.O.C. GAAP financial statements to those amounts that should be presented under IFRSs in the preparation of the opening IFRS balance sheet. Information about exemptions elected by the Company, exceptions to the retrospective application of IFRSs in relation to initial application of IFRSs, and how it affects the Company’s financial position, operating results and cash flows in transition from R.O.C. GAAP to the IFRSs is set out below:

(1) Exemptions elected by the Group

A)Business combination

For business combinations that occurred before the transition date, the Company decided not to adopt retroactively the rules in accordance with IFRS 3, “Business Combination.”

B) Share- based payment transactions

For all grants of equity instruments and the settled liabilities arising from share-based payments before the transition date, the Company decided not to adopt retroactively the rules in accordance with IFRS 2, “Share- based Payment.”

C) Deemed cost

The Company elected to measure an item of investment property at the date of transition to IFRSs at its fair value and use that fair value as its deemed cost at that date.

D)Cumulative translation differences

The cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRSs. After the translation, exchange differences will be measured in accordance with IAS 21, “The Effects of Changes in Foreign Exchange Rates.”

E) Borrowing costs

The Company applied the transitional provisions set out in paragraphs 27 and 28 of IAS 23, as revised in 2007 from the transition date.

F) Employee benefits

The Company has elected to recognise all cumulative actuarial gains and losses relating to all employee benefit plans in ‘retained earnings’ at the transition date, and to disclose the information of present value of defined benefit obligation, fair value of plan assets, gain or loss on plan assets and experience adjustments under the requirements of paragraph 120A (P), IAS 19, ‘Employee Benefits’, based on their prospective amounts for financial periods from the transition date.

(2) Requirement to reconcile from R.O.C. GAAP to IFRSs at the time of initial application

IFRS 1 requires that an entity should prepare reconciliations for equity, comprehensive income and cash flows for the comparative periods. Reconciliations for equity and comprehensive income for the comparative periods as to transition from R.O.C. GAAP to IFRSs is shown below:

230

A)Reconciliation for equity on January 1, 2012:

R.O.C

Effect of

transition

from R.O.C.

GAAP GAAP to IFRSs IFRSs Remark

Other financial assets - current $ 382,727 ($ 382,727) - (4)

Deferred income tax assets

-current154,686 154,686)( - (6)

Investments accounted for

under equity method7,431,176 1,048,795 8,479,971 (1)(2)(3)

Other financial assets - non current - 382,727 382,727 (4)

Investment property - 160,890 160,890 (5)

Leased assets 160,890 160,890)( - (5)

Deferred charges 82,137 82,137)( - (11)


- non current- 383,519 383,519 (6)

Others 26,313,485 82,137 26,395,622 (11)

Total assets 34,525,101$ 1,277,628$ 35,802,729$

Accrued pension liabilities 1,495,512$ 110,743)($ 1,384,769$ (1)

Deferred income tax liabilities

- non current32,069 199,730 231,799 (6)

Others 18,835,247 - 18,835,247

Total liabilities 20,362,828 88,987 20,451,815

Capital surplus-long term

investments198,070 198,070)( - (7)

Special reserve 187,164 778,163 965,327 (9)

Unappropriated earnings 2,317,423 403,946 2,721,369 (1)(2)(3)

(7)(8)(9)

Cumulative translation

adjustments133,625 133,625)( - (8)

Unrecognised pension cost 338,227)( 338,227 - (1)

Others 11,664,218 - 11,664,218

Total stockholders' equity 14,162,273 1,188,641 15,350,914

Total liabilities and

stockholders' equity34,525,101$ 1,277,628$ 35,802,729$

231

B) Reconciliation for equity on December 31, 2012:

R.O.C

Effect of

transition

from R.O.C.

GAAP GAAP to IFRSs IFRSs Remark

Other financial assets - current $ 60,445 ($ 60,445) -$ (4)


-current245,541 245,541)( - (6)


under equity method8,065,965 1,058,798 9,124,763 (1)(2)(3)(10)

Other financial assets - non current 300 60,445 60,745 (4)

Investment property - 159,549 159,549 (5)

Leased assets 159,549 159,549)( - (5)

Deferred charges 63,454 63,454)( - (11)

Other non-current assets - 63,454 63,454 (11)


- non current- 534,926 534,926 (1)(6)

Others 26,923,775 - 26,923,775

Total assets 35,519,029$ 1,348,183$ 36,867,212$

Accrued pension liabilities 1,835,777$ 34,498)($ 1,801,279$ (1)


- non current13,190 266,856 280,046 (1)(6)

Others 18,377,533 - 18,377,533

Total liabilities 20,226,500 232,358 20,458,858


investments232,800 232,800)( -

(7)

Capital surplus-difference

between proceeds on

acquisition of or disposal of

equity interest in a subsidiary

and its carrying amount

- 34,730 34,730 (7)

Special reserve 56,584 778,163 834,747 (9)

Unappropriated earnings 2,618,735 456,792 3,075,527 (1)(2)(3)

(7)(8)(9)(10)


adjustments

92,246 133,625)( 41,379)( (8)

Unrecognised pension cost 212,565)( 212,565 - (1)

Others 12,504,729 - 12,504,729

Total stockholders' equity 15,292,529 1,115,825 16,408,354


stockholders' equity35,519,029$ 1,348,183$ 36,867,212$

232

C) Reconciliation for comprehensive income for the year ended December 31, 2012:

R.O.C

GAAP

Effect of transition

from R.O.C.

GAAP to IFRSs IFRSs Remark

Operating revenue 34,824,383$ -$ 34,824,383$

Operating costs 32,469,582)( - 32,469,582)(

Gross profit 2,354,801 - 2,354,801

Realized gain from

intercompany transactions1,862 - 1,862

2,356,663 - 2,356,663

Operating expense

General & administrative

expenses 996,931)( 38,663 958,268)( (1)

Research and

development expenses 95,378)( - 95,378)(

Operating profit 1,264,354 38,663 1,303,017

Non-operating revenue and

expenses

Other income 166,193 - 166,193

Other gains and losses 32,410)( - 32,410)(

Share of profit of associates

and joint ventures

accounted for under

equity method 1,252,288 20,756 1,273,044

(1)(2)(3)

(10)

Profit before income tax 2,650,425 59,419 2,709,844

Income tax expense 257,989)( 6,573)( 264,562)( (1)

Profit for the period from

continuing operations 2,392,436$ 52,846$ 2,445,282$

Other comprehensive income

Exchange difference on

translation of foreign

financial statements - 41,379)( 41,379)(

Unrealized gain (loss) on

valuation of available-

for-sale financial assets - 16,540 16,540

Total share of other

comprehensive income of

associate and joint ventures

accounted for using equity

method - 18,531 18,531

Total comprehensive income

for the year 2,392,436$ 28,007$ 2,438,974$

233

The reasons for reconciliation are as follows: 1) The discount rate used to calculate pensions shall be determined with reference to the factors

specified in R.O.C. SFAS 18, paragraph 23. However, IAS 19, “Employee Benefits”, requires an entity to determine the rate used to discount employee benefits with reference to market yields on high quality corporate bonds that match the currency at the end day of the reporting period and duration of its pension plan; when there is no deep market in corporate bonds, an entity is required to use market yields on government bonds (at the end day of the reporting period) instead. In accordance with current accounting standards in R.O.C., net periodic pension costs are recognised using a corridor approach. In accordance with IAS 19 “Employee Benefits”, the Company can elect to use a corridor approach or to recognise all cumulative actuarial gains and losses at the date of transition to IFRSs. In accordance with current accounting standards in R.O.C. the excess of the accumulated benefits obligation over the fair value of the pension plan (fund) assets at the balance sheet date is the minimum amount of pension liability that is required to be recognised on the balance sheet (“minimum pension liability”). However, IAS 19, “Employee Benefits”, has no regulation regarding the minimum pension liability. The abovementioned differences between R.O.C. GAAP and IFRSs resulted in a increase in long-term investments accounted for under the equity method by $23,602, deferred income tax assets - non-current by $29,103, and decrease in unrecognised pension cost by $338,227, accrued pension liabilities by $110,743 and retained earnings by $174,779 at the date of transition. The abovementioned difference between R.O.C. and IFRSs resulted in an increase in deferred income tax liabilities - non-current by $6,574, accrued pension liabilities by $76,245, income tax expense by $6,573, gains from investments by $8,626, unrecognised pension cost by $125,662, and decrease in operating expenses by $38,663, long-term investments accounted for under the equity method by $2,127, the effect of abovementioned increase in unappropriated earnings by $40,716 for the year ended December 31, 2012.

2) The Company contracted with the government to provide construction of the government’s infrastructure assets for public services and operate those assets for 50 years after construction is completed. When the term of operating period expired, the underlying infrastructure assets will be transferred to the government without consideration. The current accounting standards in R.O.C. regulate that costs incurred in the construction shall be recognized as acquisition costs of fixed assets and amortized over the operating period. In accordance with IFRIC 12, “Service Concession Arrangements“, construction service and operating service concession arrangement shall be allocated to construction services and operating services based on their relative fair value, and the operator subsequently recognizes and measures revenue in accordance with IAS 11, “Construction Contracts” and IAS 18, “Revenue”, respectively, for the services it performs. The fair value is determined based on the way the grantor pays considerations to the operator specified in the agreement, and recognised as intangible assets or financial assets. The abovementioned difference between R.O.C. GAAP and IFRSs resulted in an increase in long-term investments accounted for under the equity method by $380,655 and retained earnings by $380,655 at the date of transition. The abovementioned difference between R.O.C. and IFRSs resulted in an increase in a long-term investments accounted for under the equity method by $15,157 and gains from

234

investments by $15,157, the effect of abovementioned increase in retained earnings by $15,157 for the year ended December 31, 2012.

3) In accordance with the exemption under IFRS 1, “First-time Adoption of International Financial Reporting Standards” and “Rules Governing the Preparation of Financial Statements by Securities Issuers”, that the Company will apply in 2013, for an item of investment property which was recognised as property, plant and equipment and revaluated in accordance with R.O.C GAAP before transition date, the Company elected to measure it using its fair value at the date of transition to IFRSs and use that fair value as its deemed cost at that date. The abovementioned difference between R.O.C. GAAP and IFRSs resulted in an increase in long-term investments accounted for under the equity method by $644,538 and retained earnings by $644,538 at the date of transition. The abovementioned difference between R.O.C. and IFRSs resulted in an decrease in long-term investments accounted for under the equity method by $2,807 and gains from investments by $2,807 for the year ended December 31, 2012. The abovementioned difference also resulted in the decrease in retained earnings by $2,807 for the year ended December 31, 2012.

4) In accordance with IAS 19, the Company has no other financial assets-current accounts, thus the Company decreased other financial assets-current by $382,727 and increased other financial assets-non-current by $382,727 on the date of transition. The abovementioned difference between R.O.C. and IFRSs resulted in an increase of other financial assets-current by $322,282 and decrease of other financial assets-non-current by $322,282 for the year ended December 31, 2012.

5) In accordance with current accounting standards in R.O.C., the Company’s property that is leased to others is presented under the ‘Other assets’ account. In accordance with IAS 16, “Property, Plant and Equipment”, property that meets the nature of the transaction is classified and accounted for as ‘Property, plant and equipment’. The abovementioned difference between R.O.C. GAAP and IFRSs resulted in an increase in property, plant and equipment by $160,890 and decrease in leased assets by $160,890 at the date of transition. In addition, the Company increased leased assets by $1,341 and decreased investment property for the year ended December 31, 2012.

6) In accordance with current accounting standards in R.O.C., a deferred tax asset or liability should, according to the classification of its related assets or liability, be classified as current or noncurrent. However, a deferred tax asset or liability that is not related to an asset or liability for financial reporting, should be classified as current or noncurrent according to the expected time period to realise or settle a deferred tax assets or liability. However, under IAS 1, “Presentation of Financial Statements”, an entity should not classify a deferred tax asset or liability as current. In addition, according to IAS 12. 74(a) and 75, when legally enforceable right to off-set current tax assets against current income tax liabilities exist, deferred income tax assets can be off-set against deferred income tax liabilities. However, the legally enforceable right cannot be executed by the entities under Taiwan tax regulations. In accordance with IAS 12, “Income Taxes”, a deferred tax asset should be recognised if, and only if, it is considered highly probable that it will be realised. Therefore, that will result in an increase in deferred income tax assets - non-current by $354,416, and deferred income tax liabilities by $199,730, and decrease in deferred income tax assets - current by $154,686 at the date of transition. In addition, this also resulted in an increase of deferred income tax assets-non-current by $151,407, and deferred income tax liabilities- non-current by $60,552 and a decrease in

235

deferred income tax assets- current by $90,855 for the year ended December 31, 2012. 7) In accordance with current accounting standards in R.O.C., when an investee company issues

new stocks, the shareholders’ share ratio changes as a result of acquiring the stock proportionately according to the share ratio. If equity capital of the investment company increase or decrease due to the abovementioned transaction, the amount of increase or decrease in equity capital is accounted for as capital reserve. However, in accordance with “Rules Governing the Preparation of Financial Statements by Securities Issuers” that the Company will apply in 2013, the capital surplus – long-term investment should be deemed to be zero at the date of transition to IFRSs. That will result in a decrease in capital surplus – long-term investment by $198,070, and increase in retained earnings by $198,070 at the date of transition. As the investee companies remain controlled for the year ended December 31, 2012, the capital surplus - long-term investment of $34,730 is reclassified to capital surplus – difference between proceeds on acquisition of or disposal of equity interest in a subsidiary and its carrying amount.

8) Pursuant to current accounting standards in R.O.C., as the Company is not a foreign company, it does not need to determine its functional currency. However, after transition to IFRSs, each of the Group’s entities (including the parent company) included in the consolidated financial statements should determine its functional currency. The cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRSs. Therefore, that will result in a decrease in cumulative translation adjustment by $133,625, and an increase in unappropriated earnings by $133,625 at the date of transition.

9) Pursuant to the regulations of Jin-Guan-Zheng-Fa-Zi Order No. 1010012865 of the Financial Supervisory Commission, when a public company adopts IFRSs for the first-time, the amount from the unrealised incremental value from revaluation and cumulative translation adjustment adjusted to unappropriated earnings arising from exemptions elected in accordance with IFRS 1 should have the same amount of legal reserve set aside. The Company will recognise legal reserve amounting to $778,163 due to the effect of exemption on unappropriated earnings at the date of transition.

10)The Company recognized short-term paid absence (holiday leave) adjustments of the investee companies according to its percentage of shareholdings. This resulted in the decrease in long-term equity investments accounted for under the equity method by $220, and gain on investments by $220 for the year ended of December 31, 2012. The effect of the abovementioned resulted in the decrease in unappropriated earnings by $220 for the year ended December 31, 2012.

11) In accordance with current accounting standards in R.O.C., the Company’s computer software that is leased to others is presented in “Deferred charges” account. However, under IFRS, this is classified and accounted for as “Other non-current assets”. As a result, deferred charges are reclassified to other non-current assets amounting to $82,137 at the date of transition. In addition, this also resulted in a decrease in deferred charges by $18,683 and a decrease in non-current assets for the year ended December 31, 2012.

D) Major adjustments to the statement of cash flows for the year ended December 31, 2012: 1)The transition from R.O.C. GAAP to IFRSs has no effect on the Company’s cash flows reported. 2)The reconciliation between R.O.C. GAAP and IFRSs has no net effect on the Company’s cash

flows reported.

249

CTCI CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF

INDEPENDENT ACCOUNTANTS


----------------------------------------------------------------------------------------------------------------------------- ------- 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.

6.5 Consolidated Financial Statements for the Years Ended December 31, 2013 and 2012,

and Independent Auditors’ Report

CTCI CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS


252

December 31, 2013 December 31, 2012 January 1, 2012 Assets Notes AMOUNT % AMOUNT % AMOUNT %

Current assets

1100 Cash and cash equivalents 6(1) $ 9,327,026 19 $ 15,189,317 28 $ 16,771,059 31

1110 Financial assets at fair value

through profit or loss - current

6(2)

843,215 2 1,801,728 3 3,647,468 7

1125 Available-for-sale financial

assets - current

6(3)

604,730 1 674,582 1 566,701 1

1150 Notes receivable, net 6(5) 3,244,527 7 9,747 - 23,715 -

1170 Accounts receivable, net 6(5) 4,367,870 9 4,186,221 8 5,036,688 10

1180 Accounts receivable - related

parties

7

4,136 - 18,546 - 1,675 -

1190 Receivables from customers on


6(6)

12,372,269 25 13,328,195 25 7,966,486 15

1200 Other receivables 175,433 1 226,817 1 466,940 1

1210 Other receivables - related

parties

7

67,235 - 51,873 - 26 -

1220 Current income tax assets 163,728 - - - - -

130X Inventories 89,661 - 72,823 - 226,216 -

1410 Prepayments 6(7) 3,002,991 6 3,567,304 7 3,385,185 6

1470 Other current assets 8 869,378 2 517,565 1 1,031,767 2

11XX Current Assets 35,132,199 72 39,644,718 74 39,123,926 73

Non-current assets

1543 Financial assets measured at

cost - non-current

6(4)

584,153 1 677,220 1 768,285 1

1550 Investments accounted for

under equity method

6(8)

675,002 1 580,899 1 538,584 1

1600 Property, plant and equipment 6(9) and 8 7,150,831 15 7,288,315 13 7,248,317 14

1760 Investment property 6(10) and 8 833,141 2 838,925 2 845,000 2

1780 Intangible assets 114,766 - 106,859 - 108,041 -

1840 Deferred income tax assets 6(27) 449,881 1 572,918 1 399,989 1

1900 Other non-current assets 6(11)(16)

and 8 3,897,325 8 4,080,346 8 4,388,282 8

15XX Non-current assets 13,705,099 28 14,145,482 26 14,296,498 27

1XXX Total assets

$ 48,837,298

10

0 $ 53,790,200 100 $ 53,420,424 100

(Continued)

CTCI CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS


The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated March 28, 2014.

253

December 31, 2013 December 31, 2012 January 1, 2012 Liabilities and Equity Notes AMOUNT % AMOUNT % AMOUNT % Current liabilities 2100 Short-term borrowings 6(12) $ 991,965 2 $ 852,873 2 $ 632,142 1 2120 Financial liabilities at fair value

through profit or loss - current 6(2)

20,061 - 6,800 - 24,462 - 2150 Notes payable 5,518 - 6,156 - 7,492 - 2170 Accounts payable 6(13) 13,348,156 27 11,062,305 20 11,269,911 21 2180 Accounts payable - related

parties 7

16,134 - - - 176,165 - 2190 Payables to customers on

construction contracts 6(6)

5,427,224 11 12,428,747 23 13,249,333 25 2200 Other payables 6(14) 2,688,807 6 2,790,568 5 2,494,500 5 2230 Current income tax liabilities 172,416 - 462,869 1 365,918 1 2300 Other current liabilities 6(15)(16) 987,389 2 1,068,770 2 828,200 2 21XX Current Liabilities 23,657,670 48 28,679,088 53 29,048,123 55 Non-current liabilities 2530 Bonds payable 6(15) - - - - 407,282 1 2540 Long-term borrowings 6(16) 3,296,297 7 3,906,782 7 4,513,413 8 2570 Deferred income tax liabilities 6(27) 422,653 1 432,482 1 366,379 1 2600 Other non-current liabilities 6(17)(18) 2,515,189 5 2,207,547 4 1,800,052 3 25XX Non-current liabilities 6,234,139 13 6,546,811 12 7,087,126 13 2XXX Total Liabilities 29,891,809 61 35,225,899 65 36,135,249 68 Equity attributable to owners of

parent

Share capital 6(20) 3110 Common stock 7,474,343 15 7,349,960 14 7,126,540 13 Capital surplus 6(19)(21) 3200 Capital surplus 3,070,085 6 2,757,865 5 2,367,388 5 Retained earnings 6(22)(27) 3310 Legal reserve 2,499,625 5 2,260,381 4 2,034,108 4 3320 Special reserve 778,162 2 834,747 2 965,327 2 3350 Unappropriated retained

earnings

2,432,195 5 3,075,527 6 2,721,369 5 Other equity interest 3400 Other equity interest 229,538 1 141,709 - 148,017 - 3500 Treasury stocks 6(20) ( 11,835 ) - ( 11,835 ) - ( 11,835 ) - 31XX Equity attributable to

owners of the parent

16,472,113 34 16,408,354 31 15,350,914 29 36XX Non-controlling interest 2,473,376 5 2,155,947 4 1,934,261 3 3XXX Total equity 18,945,489 39 18,564,301 35 17,285,175 32 Significant Contingent Liabilities

and Unrecognised Contract

Commitments

9

Significant Events After the

Balance Sheet Date 11

Total liabilities and equity $ 48,837,298 100 $ 53,790,200 100 $ 53,420,424 100

CTCI CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT EARNINGS PER SHARE AMOUNTS)

The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated March 28, 2014.

254

For the years ended December 31 2013 2012

Notes AMOUNT % AMOUNT % 4000 Operating revenue 6(23) and 7 $ 52,221,958 100 $ 60,522,162 100 5000 Operating costs 6(24)(25) and 7 ( 48,004,905 ) ( 92 ) ( 55,362,683 ) ( 92 ) 5900 Gross Profit 4,217,053 8 5,159,479 8 Operating expenses 6(24)(25) 6200 General & administrative

expenses

( 1,743,753 ) ( 3 ) ( 1,807,144 ) ( 3 ) 6300 Research and development

expenses

( 107,525 ) - ( 114,687 ) - 6000 Total operating expenses ( 1,851,278 ) ( 3 ) ( 1,921,831 ) ( 3 ) 6900 Operating income 2,365,775 5 3,237,648 5 Non-operating income and

expenses

7010 Other income 6(26) 175,479 - 247,538 1 7020 Other gains and losses 6(4) 723 - ( 11,223 ) - 7050 Finance costs ( 106,126 ) - ( 97,765 ) - 7060 Share of profit of associates

and joint ventures accounted for under equity method

6(8)

74,059 - 77,189 - 7000 Total non-operating

income and expenses

144,135 - 215,739 1 7900 Profit before income tax 2,509,910 5 3,453,387 6 7950 Income tax expense 6(27) ( 474,134 ) ( 1 ) ( 603,172 ) ( 1 ) 8200 Profit for the year $ 2,035,776 4 $ 2,850,215 5 Other comprehensive income 8310 Cumulative translation


34,668 - ( 55,909 ) - 8325 Unrealized gain on valuation

of available-for-sale financial assets

51,916 - 31,057 - 8300 Total other comprehensive

income for the year

86,584 - ( 24,852 ) - 8500 Total comprehensive income

for the year

$ 2,122,360 4 $ 2,825,363 5

Profit attributable to: 8610 Owners of the parent $ 1,641,730 3 $ 2,445,282 4

8620 Non-controlling interest $ 394,046 1 $ 404,933 1

Comprehensive income attributable to:

8710 Owners of the parent $ 1,729,559 3 $ 2,438,974 4

8720 Non-controlling interest $ 392,801 1 $ 386,389 1

Basic earnings per share 6(28) 9750 Total basic earnings per

share

$ 2.22 $ 3.39

Diluted earnings per share 6(28) 9850 Total diluted earnings per

share

$ 2.17 $ 3.27

CTCI CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


Equity attributable to owners of the parent Retained earnings Other equity interest

Notes

Common stock

Capital surplus

Legal reserve

Special reserve

Unappropriated earnings


differences of foreign

operations

Unrealized gain or loss on valuation of

available-for- sale financial

assets

Treasury stocks

Total

Non-controlling interest

Total equity

The accompanying notes are an integral part of these consolidated financial statements.

See report of independent accountants dated March 28, 2014.

255

For the year ended December 31, 2012 Balance at January 1, 2012 $ 7,126,540 $ 2,367,388 $ 2,034,108 $ 965,327 $ 2,721,369 $ - $ 148,017 ( $ 11,835 ) $ 15,350,914 $ 1,934,261 $ 17,285,175 Appropriation of 2011 earnings 6(22) Legal reserve - - 226,273 - ( 226,273 ) - - - - - - Special reserve - - - ( 130,580 ) 130,580 - - - - - - Cash dividends - - - - ( 1,995,431 ) - - - ( 1,995,431 ) ( 320,306 ) ( 2,315,737 ) Profit for the year - - - - 2,445,282 - - - 2,445,282 404,933 2,850,215 Difference between proceeds on

acquisition for disposal of equity interest in a subsidiary and its carrying amount

6(21)

- 34,730 - - - - - - 34,730 138,017 172,747 Convertible bonds transferred to common

stock

- ( 6,164 ) - - - - - - ( 6,164 ) - ( 6,164 ) Employee stock options granted 6(21) - 116,045 - - - - - - 116,045 17,586 133,631 Employee stock options exercised 6(21) 223,420 245,866 - - - - - - 469,286 - 469,286 Cumulative translation differences of

foreign operations

- - - - - ( 41,379 ) - - ( 41,379 ) ( 14,530 ) ( 55,909 ) Unrealized gain on valuation of


- - - - - - 35,071 - 35,071 ( 4,014 ) 31,057 Balance at December 31, 2012 $ 7,349,960 $ 2,757,865 $ 2,260,381 $ 834,747 $ 3,075,527 ( $ 41,379 ) $ 183,088 ( $ 11,835 ) $ 16,408,354 $ 2,155,947 $ 18,564,301 For the year ended December 31, 2013 Balance at January 1, 2013 $ 7,349,960 $ 2,757,865 $ 2,260,381 $ 834,747 $ 3,075,527 ( $ 41,379 ) $ 183,088 ( $ 11,835 ) $ 16,408,354 $ 2,155,947 $ 18,564,301 Appropriation of 2012 earnings 6(22) Legal reserve - - 239,244 - ( 239,244 ) - - - - - - Special reserve - - - ( 56,585 ) 56,585 - - - - - - Cash dividends - - - - ( 2,102,403 ) - - - ( 2,102,403 ) ( 344,869 ) ( 2,447,272 ) Profit for the year - - - - 1,641,730 - - - 1,641,730 394,046 2,035,776 Difference between proceeds on

acquisition for disposal of equity interest in a subsidiary and its carrying amount

6(21)

- 137,924 - - - - - - 137,924 256,355 394,279 Convertible bonds transferred to common

stock

- ( 13,099 ) - - - - - - ( 13,099 ) - ( 13,099 ) Employee stock options granted 6(21) - 51,772 - - - - - - 51,772 13,142 64,914 Employee stock options exercised 6(21) 124,383 135,623 - - - - - - 260,006 - 260,006 Cumulative translation differences of

foreign operations

- - - - - 48,557 - - 48,557 ( 13,889 ) 34,668 Unrealized gain on valuation of


- - - - - - 39,272 - 39,272 12,644 51,916 Balance at December 31, 2013 $ 7,474,343 $ 3,070,085 $ 2,499,625 $ 778,162 $ 2,432,195 $ 7,178 $ 222,360 ( $ 11,835 ) $ 16,472,113 $ 2,473,376 $ 18,945,489


CONSOLIDATED STATEMENTS OF CASH FLOWS



Notes 2013 2012

256

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax for the year $ 2,509,910 $ 3,453,387 Adjustments to reconcile profit before income tax to net cash (used in)

provided by operating activities

Income and expenses having no effect on cash flows Loss (gain) on valuation of financial assets 6(2) 17,331 ( 119,017 ) Gain on disposal of investments ( 93,263 ) ( 1,191 ) Gain on disposal of property, plant and equipment ( 3,813 ) ( 21,485 ) Share of profits of associates and joint ventures accounted for under

equity menthod 6(8)

( 74,059 ) ( 77,189 ) Depreciation 6(24) 353,326 380,739 Amortization 6(24) 137,598 143,385 Bad debts expense (reversal of allowance for doubtful accounts) 77,933 ( 7,440 ) Interest income 6(26) ( 77,754 ) ( 115,805 ) Dividends income 6(26) ( 40,075 ) ( 41,819 ) Interest expense 106,126 97,765 Impairment losses 6(4) 82,536 79,000 Compensation costs for employee stock options 6(25) 70,878 123,188 Discount on convertible bonds recognized as interest expense 2,789 5,212 Other (income) loss ( 1,981 ) 945 Changes in assets/liabilities relating to operating activities Net changes in assets relating to operating activities Financial assets at fair value through profit or loss 864,044 1,865,723 Notes receivable, net ( 3,234,780 ) 13,968 Acounts receivable, net ( 259,582 ) 857,907 Accounts receivable - related parties 14,410 ( 16,871 ) Receivables from customers on construction contracts 955,926 ( 5,361,709 ) Other receivables 48,762 422,832 Other receivables - related parties ( 15,362 ) ( 51,847 ) Inventories ( 16,838 ) 153,393 Prepayments 564,313 ( 182,119 ) Other current assets ( 351,813 ) 514,202 Deferred income tax assets and liabilities 113,208 ( 106,826 ) Other non-current assets 213,616 485,164 Net changes in liabilities relating to operating activities Notes payable ( 638 ) ( 1,336 ) Accounts payable 2,285,851 ( 207,606 ) Accounts payable - related parties 16,134 ( 176,165 ) Payables to customers on construction contracts ( 7,001,523 ) ( 820,586 ) Other payables 101,761 475,441 Other current liabilities ( 81,381 ) 240,570 Other non-current liabilities 336,359 416,430 Cash (used in) provided by operations ( 2,380,051 ) 2,420,240 Interest received 80,429 124,045 Dividends received 48,203 46,091 Interest paid ( 120,807 ) ( 102,943 ) Income tax paid ( 830,938 ) ( 643,170 ) Net cash (used in) provided by operating activities ( 3,203,164 ) 1,844,263

(Continued)


CONSOLIDATED STATEMENTS OF CASH FLOWS



Notes 2013 2012

The accompanying notes are an integral part of these consolidated financial statements.

See report of independent accountants dated March 28, 2014.

257

CASH FLOWS FROM INVESTING ACTIVITIES

Increase in available-for-sale financial assets ( $ 28,146 ) ( $ 129,294 )

Decrease in available-for-sale financial assets 159,601 30,266

Proceeds from disposal of investee company 12,497 11,116

Increase in investments accounted for under the equity method - ( 13,842 )

Acquisition of property, plant and equipment 6(9) ( 166,824 ) ( 451,816 )

Proceeds from disposal of property, plant and equipment 10,656 36,125

Increase in intangible assets ( 76,742 ) ( 63,904 )

Decrease (increase) in refundable deposits 32,426 ( 29,113 )

Increase in other non-current assets ( 41,494 ) ( 45,388 )

Net cash used in investing activities ( 98,026 ) ( 655,850 )

CASH FLOWS FROM FINANCING ACTIVITIES

Increase in short-term borrowings 139,092 220,731

Repayment of long-term borrowings ( 590,776 ) ( 855,476 )

Decrease in deposits received (recognized in other liabilities) ( 2,077 ) ( 4,928 )

Increase in long-term borrowings - ( 341,140 )

Proceeds from employee stock options exercised 339,932 526,395

Cash dividends paid ( 2,447,272 ) ( 2,315,737 )

Net cash used in financing activities ( 2,561,101 ) ( 2,770,155 )

Decrease in cash and cash equivalents ( 5,862,291 ) ( 1,581,742 )

Cash and cash equivalents at beginning of year 15,189,317 16,771,059

Cash and cash equivalents at end of year $ 9,327,026 $ 15,189,317

258


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANIZATION

CTCI Corporation (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China on April 6, 1979 and commenced its operations on May 1, 1979. The main business activities of the Company are the design, survey, construction and inspection of various engineering and construction projects, plants, machinery and equipment and environmental protection projects. The Company’s shares have been listed and traded on the Taiwan Stock Exchange since May 1993. For the year ended December 31, 2013, the Company’s total issued and outstanding capital stock was $7,474,343, and the Company and its subsidiaries (collectively referred herein as the “Group”) have approximately 7,410 employees.

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

PROCEDURES FOR AUTHORIZATION

The consolidated financial statements were authorized for issuance by the Board of Directors on March 28, 2014.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

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

Not applicable as it is the first-time adoption of IFRSs by the Group this year.

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

the Group

A) The International Accounting Standards Board (“IASB”) published IFRS 9, ‘Financial Instruments’, in November, 2009, which will take effect on January 1, 2013 with early application permitted. (Through the admendments to IFRS 9 published on November 19, 2013 the IASB has removed the previous mandatory effective date, but the standard is available for immediate application). Although the FSC has endorsed IFRS 9, FSC does not permit early application of IFRS 9 when IFRSs are adopted in R.O.C. in 2013. Instead, enterprises should apply International Accounting Standard No. 39 (“IAS 39”), ‘Financial Instruments: Recognition and Measurement’ reissued in 2009.

B) IFRS 9 was issued as the first step to replace IAS 39. IFRS 9 outlines the new classification and measurement requirements for financial instruments, which might affect the accounting treatments for financial instruments of the Group.

C) The Group has not yet evaluated the overall effect of the IFRS 9 adoption. However, based on preliminary evaluation, it was noted that the IFRS 9 adoption might have an impact on those instruments classified as ‘available-for-sale financial assets’ held by the Group, as IFRS 9

259

specifies that the fair value changes in the equity instruments that meet certain criteria may be reported in other comprehensive income, and such amount that has been recognized in other comprehensive income should not be reclassified to profit or loss when such assets are derecognized. The Group recognized gain on debt instruments and on equity instruments amounting to $51,916 and $31,057, respectively, in other comprehensive income for the years ended December 31, 2013 and 2012.

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

The following are the assessment of new standards, interpretations and amendments issued by IASB but not yet endorsed by the FSC (application of the new standards, interpretations and amendments should follow the regulations of the FSC):


Limited exemption from

comparative IFRS 7 disclosures

for first-time adopters

(amendment to IFRS 1)

The amendment provides first-time adopters of

IFRSs with the same transition relief that

existing IFRS preparers received in IFRS 7, ‘

Financial Instruments: Disclosures’ and exempts

first-time adopters from providing the additional

comparative disclosures.

July 1, 2010

Improvements to IFRSs 2010 Amendments to IFRS 1, IFRS 3, IFRS 7, IAS 1,

IAS 34 and IFRIC 13.

January 1, 2011

IFRS 9, ‘Financial instruments:

Classification and measurement

of financial liabilities’

IFRS 9 requires gains and losses on financial

liabilities designated at fair value through profit

or loss to be split into the amount of change in

the fair value that is attributable to changes in the

credit risk of the liability, which shall be

presented in other comprehensive income, and

cannot be reclassified to profit or loss when

derecognising the liabilities; and all other

changes in fair value are recognised in profit or

loss. The new guidance allows the recognition of

the full amount of change in the fair value in the

profit or loss only if there is reasonable evidence

showing on initial recognition that the

recognition of changes in the liability's credit risk

in other comprehensive income would create or

enlarge an accounting mismatch (inconsistency)

in profit or loss. (That determination is made at

initial recognition and is not reassessed

subsequently.)

November 19,

2013

(Not Mandatory)

260


Disclosures - transfers of

financial assets (amendment to

IFRS 7)

The amendment enhances qualitative and

quantitative disclosures for all transferred

financial assets that are not derecognised and for

any continuing involvement in transferred assets,

existing at the reporting date.

July 1, 2011

Severe hyperinflation and

removal of fixed dates for first-

time adopters (amendment to

IFRS 1)

When an entity’s date of transition to IFRSs is

on, or after, the functional currency

normalisation date, the entity may elect to

measure all assets and liabilities held before the

functional currency normalisation date at fair

value on the date of transition to IFRSs. First-

time adopters are allowed to apply the

derecognition requirements in IAS 39, 'Financial

instruments:Recognition and measurement',

prospectively from the date of transition to

IFRSs, and they are allowed not to

retrospectively recognize related gains on the

date of transition to IFRSs.

July 1, 2011

Deferred tax: recovery of

underlying assets (amendment

to IAS 12)

The amendment gives a rebuttable presumption

that the carrying amount of investment properties

measured at fair value is recovered entirely by

sale, unless there exists any evidence that could

rebut this presumption. The amendment also

replaces SIC 21, ‘Income taxes—recovery of

revalued non-depreciable assets’.

January 1, 2012

IFRS 10, ‘Consolidated

financial statements’

The standard builds on existing principles by

identifying the concept of control as the

determining factor in whether an entity should be

included within the consolidated financial

statements of the parent company. The standard

provides additional guidance to assist in the

determination of control where it is difficult to

assess.

January 1, 2013

IFRS 11,‘Joint arrangements’ Judgments applied when assessing the types of

joint arrangements-joint operations and joint

ventures, the entity should assess the contractual

rights and obligations instead of the legal form

only. The standard also prohibits the proportional

consolidation for joint ventures.

January 1, 2013

261


IFRS 12,‘Disclosure of interests

in other entities’

The standard requires the disclosure of interests

in other entities including subsidiaries, joint

arrangements, associates and unconsolidated

structured entities.

January 1, 2013

IAS 27,‘Separate financial

statements’ (as amended in 2011)

The standard removes the requirements of

consolidated financial statements from IAS 27

and those requirements are addressed in IFRS 10,

‘Consolidated financial statements’.

January 1, 2013

IAS 28,‘Investments in

associates and joint ventures’(as

amended in 2011)

As consequential amendments resulting from the

issuance of IFRS 11 , ‘Joint arrangements’, IAS

28 (revised) sets out the requirements for the

application of the equity method when

accounting for investments in joint ventures.

January 1, 2013

IFRS 13, ‘Fair value

measurement’

IFRS 13 aims to improve consistency and reduce

complexity by providing a precise definition of

fair value and a single source of fair value

measurement and disclosure requirements for use

across IFRSs. The requirements do not extend

the use of fair value accounting but provide

guidance on how it should be applied where its

use is already required or permitted by other

standards within IFRSs.

January 1, 2013

IAS 19 revised, ‘Employee

benefits’ (as amended in 2011)

The revised standard eliminates corridor

approach and requires actuarial gains and losses

to be recognised immediately in other

comprehensive income. Past service costs will be

recognised immediately in the period incurred.

Net interest expense or income, calculated by

applying the discount rate to the net defined

benefit asset or liability, replace the finance

charge and expected return on plan assets. The

return of plan assets, excluding net interest

expense, is recognised in other comprehensive

income.

January 1, 2013

Presentation of items of other

comprehensive income

(amendment to IAS 1)

The amendment requires profit or loss and other

comprehensive income (OCI) to be presented

separately in the statement of comprehensive

income. Also, the amendment requires entities to

separate items presented in OCI into two groups

based on whether or not they may be recycled to

profit or loss subsequently.

July 1, 2012

262


IFRIC 20, ‘Stripping costs in the

production phase of a surface

mine’

Stripping costs that meet certain criteria should

be recognised as the ‘stripping activity asset’. To

the extent that the benefit from the stripping

activity is realised in the form of inventory

produced, the entity shall account for the costs of

that stripping activity in accordance with IAS 2, ‘

Inventories’.

January 1, 2013

Disclosures—Offsetting

financial assets and financial

liabilities (amendment to IFRS

7)

The amendment requires disclosures to include

quantitative information that will enable users of

an entity's financial statements to evaluate the

effect or potential effect of netting arrangements.

January 1, 2013

Offsetting financial assets and

financial liabilities (amendment

to IAS 32)

The amendments clarify the requirements for

offsetting financial instruments on the statement

of financial position: (i) the meaning of 'currently

has a legally enforceable right to set off the

recognised amounts' ; and (ii) that some gross

settlement mechanisms with certain features may

be considered equivalent to net settlement.

January 1, 2014

Government loans (amendment

to IFRS 1)

The amendment provides exception to first-time

adopters to apply the requirements in IFRS 9,

'Financial instruments' , and IAS 20,

'Accounting for government grants and

disclosure of government assistance',

prospectively to government loans that exist at

the date of transition to IFRSs; and first-time

adopters should not recognise the corresponding

benefit of the government loan at a below-market

rate of insterest as a government grant.

January 1, 2013


2011

Amendments to IFRS 1, IAS 1, IAS 16, IAS 32

and IAS 34.

January 1, 2013

263


Consolidated financial

statements, joint arrangements

and disclosure of interests in

other entities: Transition

guidance (amendments to IFRS

10, IFRS 11 and IFRS 12)

The amendment clarifies that the date of initial

application is the first day of the annual period in

which IFRS 10, 11 and 12 is adopted.

January 1, 2013

Investment entities

(amendments to IFRS 10, IFRS

12 and IAS 27)

The amendments define ‘Investment Entities’and their

characteristics. The parent company that meets the

definition of investment entities should measure its

subsidiaries using fair value through profit of loss

instead of consolidating them.

January 1, 2014

IFRIC 21, ‘Levies’ The interpretation addresses the accounting for levies

imposed by governments in accordance with legislation

(other than income tax). A liability to pay a levy shall

be recognised in accordance with IAS 37, ‘Provisions,

contingent liabilities and contingent assets’.

January 1, 2014

Recoverable amount disclosures

for non-financial assets

(amendments to IAS 36)

The amendments remove the requirement to disclose

recoverable amount when a cash generating unit (CGU)

contains goodwill or intangible assets with indefinite

useful lives that were not impaired.

January 1, 2014

Novation of derivatives and

continuation of hedge

accounting (amendments to IAS

39)

The amendment states that the novation of a hedging

instrument would not be considered an expiration or

termination giving rise to the discontinuation of hedge

accounting when the hedging instrument that is being

novated complies with specified criteria.

January 1, 2014

IFRS 9 "Financial assets: hedge

accounting" and admendments to

IFRS9, IFRS7 and IAS39

1. IFRS 9 relaxes the requirements for hedged items

and hedging instruments and removes the bright line of

effectiveness to better align hedge accounting with the

risk management activities of an entity.

2. An entity can elect to early adopt the requirement to

recognise the changes in fair value attributable to

changes in an entity's own credit risk from financial

liabilities that are designated under the fair value option

in ‘other comprehensive income’.

November 19,

2013

(Not mandatory)

264

The Group is assessing the potential impact of the new standards and amendments above and has not yet been able to reliably estimate their impact on the consolidated financial statements.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

A.These consolidated financial statements are the first consolidated financial statements prepared by the Group in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

B. In the preparation of the balance sheet of January 1, 2012 (the Group’s date of transition to IFRSs) (“the opening IFRS balance sheet”), the Group has adjusted the amounts that were reported in the consolidated financial statements in accordance with previous R.O.C. GAAP. Please refer to Note 15 for the impact of transitioning from R.O.C. GAAP to IFRSs on the Group’s financial position, financial performance and cash flows.

(2) Basis of preparation

A.Except for the following items, these consolidated 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.


Services related contributions

from employees or third parties

(admendments to IAS 19R)

The amendment allows contributions from employees

or third parties that are linked to service, and do not

vary with the length of employee service, to be

deducted from the cost of benefits earned in the period

that the service is provided. Contributions that are

linked to service, and vary according to the length of

employee service, must be spread over the service

period using the same attribution method that is applied

to the benefits.

July 1, 2014


2012

Amendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS

16, IAS 24 and IAS 38.

July 1, 2014

Improvements to IFRSs 2011- Amendments to IFRS 1, IFRS 3, IFRS 13 and IAS 40. July 1, 2014

265

(d)Defined benefit liabilities recognized based on the net amount of pension fund assets plus unrecognized past service cost and unrecognized actuarial losses, and less unrecognized actuarial gains and present value of defined benefit obligation.

B.The preparation of financial statements in compliance with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

A.Basis for preparation of consolidated financial statements:

(a)All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies. In general, control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. The existence and effect of potential voting rights that are currently exercisable or convertible have been considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

(b)Inter-company transactions, balances and unrealized gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

(c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

(d)Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity.

(e)When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. Any difference between fair value and carrying amount is recognized in profit or loss. All amounts previously recognized in other comprehensive income in relation to the subsidiary are reclassified to profit or loss, on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognized in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

266

B.Subsidiaries included in the consolidated financial statements:

Name of Investor Name of Subsidiary Main Business ActivitiesDecember

31, 2013

December

31, 2012

January 1,

2012Description

CTCI Corp. Advanced Control

& System Inc.

Design and installation

of software

49.80 50.92 52.09 Note 1

CTCI Corp. GRQ Investment

Corp.

Real estate and leasing

business

100.00 100.00 100.00

CTCI Corp. Innovest Investment

Corp.

Investments 100.00 100.00 100.00

CTCI Corp. E&C Engineering

Corp.

Planning and design of

construction projects

97.09 97.09 97.09

CTCI Corp. Resources

Engineering

Service Inc.

Planning, design and

supervision of

mechanical and

electrical engineering

projects

93.14 93.14 93.14

CTCI Corp. CTAS Corp. Business development and

related engineering

services and planning

100.00 100.00 100.00

CTCI Corp. CTCI Singapore

Pte. Ltd.



100.00 100.00 100.00

CTCI Corp.

GRQ Investment

Corp.

Innovest Investment

Corp.

Advanced Vision

Technology Inc.

Consulting services for

installation of auto-control

facilities

- - 100.00 Note 4

Innovest Investment

Corp.

GRQ Investment

Corp.

Sino Environmental

Service Corp.

E&C Engineering

Corp.

Resources

Engineering

Service Inc.

CTCI Chemical

Corp.

Manufacturing of

chemical products

75.49 75.49 75.49

Ownership (%)

267


31, 2013

December

31, 2012

January 1,

2012Description

CTCI Corp.

Innovest Investment

Corp.

GRQ Investment

Corp.

KD Holding Corp. Investments 61.10 64.08 66.34

KD Holding Corp.

Sino Environmental

Service Corp.

Leading Energy

Corp.

Environmental

engineering

100.00 100.00 100.00

KD Holding Corp. HD Resources

Management

Corp.

Environmental

engineering

100.00 100.00 100.00

KD Holding Corp.

HD Resources

Management Corp.

Sino Environmental

Services Corp.

Environmental

engineering

93.16 93.16 93.16

KD Holding Corp. Fortune Energy

Corp.

Environmental

engineering

75.00 75.00 75.00

KD Holding Corp.

HD Resources

Management Corp.

Yuan Ding

Resources

Management

Corp.

Environmental

engineering

100.00 - - Note 5

Sino Environmental

Services Corp.

Xiang Ding

Environment

Consultant

(Shanghai) Co., Ltd.

Environmental

engineering

100.00 - - Note 6

CTCI Corp.

Sino Environmental

Services Corp.

Sinogal – Waste

Services Co., Ltd.

Environmental

engineering

60.00 60.00 60.00

CTCI Chemical Corp. Chung Ding

Chemical Corp.

Trading of chemical

materials

100.00 100.00 100.00

Chung Ding Chemical

Corp.

Zhuhai Chung Ding

Chemical Corp.

Trading of chemical

materials

100.00 100.00 100.00

CTCI Corp. CTCI Overseas

(BVI) Corp.

Investment, planning and

design of construction

100.00 100.00 100.00

CTCI Overseas (BVI)

Corp.

CTCI Overseas Co.,

Ltd.


Construction projects

100.00 100.00 100.00

CTCI Overseas Co.,

Ltd.

Jing Ding

Engineering &

Construction Co.,

Ltd.



100.00 100.00 100.00

CTCI Overseas Co.,

Ltd.

CIMAS

Engineering

Company



50.00 50.00 50.00 Note 1、2

CTCI Overseas Co.,

Ltd.

Universal (BVI)

Engineering Corp.



100.00 100.00 100.00

Ownership (%)

268


31, 2013

December

31, 2012

January 1,

2012Description

CTCI Overseas Co.,

Ltd.

CIPEC

Construction

Company Inc.



40.00 40.00 40.00 Note 1、2

CTCI Overseas Co.,

Ltd.

CINDA

Engineering &

Construction

Private Limited



100.00 100.00 100.00 Note 2

CTCI Corp.

CTCI Overseas Co.,

Ltd.

CTCI and Partners

Company Limited



100.00 60.00 60.00 Note 2

CTCI Corp.

CTCI Overseas Co.,

Ltd.

CTCI Arabia Ltd. Design and construction

of chemical factories

100.00 100.00 100.00

E&C Engineering

Corp.

CTCI Overseas Co.,

Ltd.

Shang Ding

Engineering &

Construction Co.,

Ltd.

Consulting services for


100.00 100.00 100.00

Shang Ding

Engineering &

Construction Co.,

Ltd.

Shanghai XuanLi

Trading Co., Ltd.

General trade 100.00 100.00 100.00

CTCI Corp.

CTCI Overseas Co.,

Ltd.

CTCI Engineering

& Construction

Sdn. Bhd.



100.00 100.00 100.00 Note 2

CTCI Engineering &

Construction Sdn.

Bhd.

CTCI MALAYSIA

Sdn. Bhd.



20.00 20.00 20.00 Note 1、2

CTCI Corp.

Superiority (Thailand)

Co.,Ltd.

CTCI (Thailand)

Co., Ltd.



100.00 100.00 100.00

Advanced Control &

System Inc.

Century Ahead Ltd. Investments 100.00 100.00 100.00

Century Ahead Ltd. Advanced Control

& Information

Technologies Ltd.

Computer skills services 100.00 100.00 100.00

Century Ahead Ltd. Beijing Hau-Ding

Boutong

Technology Ltd.

Computer skills services - - 50.00 Note 4

E&C Engineering

Corp.

Synergy

Engineering Corp.



100.00 100.00 100.00

Universal (BVI)

Engineering Corp.

Superiority

(Thailand) Co.,Ltd



100.00 100.00 100.00

CTCI Corp. CTCI Machinery

Corp.



100.00 100.00 100.00

Ownership (%)

269

Note 1： Being the Company’s controlled entities, these subsidiaries that were under 50%

owned by the Company directly or indirectly were included in the consolidated financial statements as of and for the years ended December 31, 2013 and 2012.

Note 2： This company is audited by other independent accountants.

Note 3：Except for Note 2, the branch offices of Qatar and ABU DHABI were audited by

other independent accountants.

Note 4：Advanced Vision Technology Inc. and Beijing Hau-Ding Boutong Technology Ltd.

were liquidated in May, 2012.

Note 5：Established through the joint investment of subsidiary- KD Holding Corp. and

sub-subsidiary-HD Resources Management Corp. on December, 2013.

Note 6：Established as a new investment on October, 2013.

C.Subsidiaries not included in the consolidated financial statements：None.

D.Adjustments for subsidiaries with different balance sheet date：None.

E. Nature and extent of the restrictions on fund remittance from subsidiaries to the parent

company: None.

(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan Dollars, which is the Company’s functional and the Group’s 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 recognized 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 recognized 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 recognized in profit or loss as part of the fair value gain 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 recognized 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.

270

B.Translation of foreign operations

(a)The operating results and financial position of all the group 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 recognized in other comprehensive income.

(b)When a 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.

(5) Classification of current and non-current items

A.As the operating cycle for construction contracts usually exceeds one year, the Company uses the

operating cycle (typically 3～4 years) as its criteria for classifying current and non-current assets

and liabilities related to construction contracts. For other assets and liabilities, the criterion is

one year.

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 realized, 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 realized 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.

(6) 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 that meet the definition above and are held for the purpose of meeting short-term cash

commitments in operations are classified as cash equivalents.

271

(7) 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 or financial

assets designated as at fair value through profit or loss on initial recognition. Financial assets

are classified in this category of held for trading if acquired principally for the purpose of selling

in the short-term. Derivatives are also categorized as financial assets held for trading unless they

are designated as hedges. Financial assets that meet one of the following criteria are designated

as at fair value through profit or loss on initial recognition:

(a)Hybrid (combined) contracts; or

(b)They eliminate or significantly reduce a measurement or recognition inconsistency; or

(c)They are managed and their performance is evaluated on a fair value basis, in accordance

with a documented risk management or investment strategy.

B.On a regular way purchase or sale basis, financial assets held for trading are recognized and

derecognized using trade date accounting. Financial assets designated as at fair value through

profit or loss on initial recognition are recognized and derecognized using trade date accounting.

C.Financial assets at fair value through profit or loss are initially recognized 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 recognized in profit or loss.


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 recognized and

derecognized using trade date accounting.

C.Available-for-sale financial assets are initially recognized 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 recognized 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’.

(9) 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 recognized at fair value and subsequently measured at amortized

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 effect of discounting is immaterial.

(10) Impairment of financial assets

A.The Group 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

272

assets that can be reliably estimated.

B.The criteria that the Group uses to determine whether there is objective evidence of 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 Group, for economic or legal reasons relating to the borrower’s financial difficulty,

granted the borrower a concession that a lender would not otherwise consider;

(d)It becomes probable that the borrower will enter bankruptcy or other financial

reorganization;

(e)The disappearance of an active market for that financial asset because of financial

difficulties;

(f)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;

(g)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

(h)A significant or prolonged decline in the fair value of an investment in an equity instrument

below its cost.

C.When the Group 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 amortized 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 recognized in profit or loss. If, in a

subsequent period, the amount of the impairment loss decreases and the decrease can be

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

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

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

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

loss is recognized and reversed by adjusting the carrying amount of the asset directly.

(b)Financial assets measured at cost


carrying amount and the present value of estimated future cash flows discounted at current

market return rate of similar financial asset, and is recognized in profit or loss. Impairment

loss recognized for this category shall not be reversed subsequently. Impairment loss is

recognized by adjusting the carrying amount of the asset through the use of an impairment

allowance account.

(c)Available-for-sale financial assets


273

acquisition cost (less any principal repayment and amortization) and current fair value, less

any impairment loss on that financial asset previously recognized 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 recognized, then

such impairment loss is reversed through profit or loss. Impairment loss of an investment

in an equity instrument recognized in profit or loss shall not be reversed through profit or

loss. Impairment loss is recognized and reversed by adjusting the carrying amount of the

asset through the use of an impairment allowance account. (11) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the moving average method. The item by item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(12) Construction contracts A.IAS 11, ‘Construction Contracts’, defines a construction contract as a contract specifically

negotiated for the construction of an asset. If the outcome of a construction contract can be estimated reliably and it is probable that this contract would make a profit, contract revenue should be recognized by reference to the stage of completion of the contract activity, using the percentage-of-completion method of accounting, over the contract term. Contract costs are expensed as incurred. The stage of completion of a contract is measured by the proportion of contract costs incurred for work performed to date to the estimated total costs for the contract. An expected loss where total contract costs will exceed total contract revenue on a construction contract should be recognized as an expense as soon as such loss is probable. If the outcome of a construction contract cannot be estimated reliably, contract revenue should be recognized only to the extent of contract costs incurred that it is probable will be recoverable.

B.Contract revenue should include the revenue arising from variations from the original contract work, claims and incentive payments that are agreed by the customer and can be measured reliably.

C.The excess of the cumulative costs incurred plus recognized profits (less recognized losses) over the progress billings on each construction contract is presented as an asset within ‘receivables from customers on construction contracts’. While, the excess of the progress billings over the cumulative costs incurred plus recognized profits (less recognized losses) on each construction contract is presented as a liability within ‘payables to customers on construction contracts’.

(13) Investments accounted for using the equity method / associates A.Associates are all entities over which the Group 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 recognized at cost.

B.The Group’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made

274

payments on behalf of the associate. C.When changes in an associate’s equity that are not recognized in profit or loss or other

comprehensive income of the associate and such changes not affecting the Group’s ownership percentage of the associate, the Group recognizes change in ownership interests in the associate in ‘capital surplus’ in proportion to its ownership.

D.Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealized 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 Group.

E.In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group’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 Group’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized 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.

(14) Joint ventures－Jointly controlled entities

The Group’s interest in jointly controlled entities is accounted for in the consolidated financial statements using the equity method. Unrealized profits and losses arising from the transactions between the Group and its joint venture are eliminated to the extent of the Group’s interest in the joint venture. However, when the transaction provides evidence of a reduction in the net realisable value of current assets or an impairment loss, all such losses shall be recognised immediately.

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

the construction period are capitalized. B.Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset,

as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. 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:

275

Buildings 3 ~ 50 years

Machinery 2 ~ 20 years

Transportation equipment 2 ~ 10 years

Office equipment 2 ~ 10 years


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 48 years.

(17) Intangible assets

Computer software is stated at cost and amortized on a straight-line basis over its estimated

useful life of 3 to 5 years.


The Group 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 recognized for the amount

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

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

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

impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss.


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

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

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

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

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

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

than what the depreciated or amortised historical cost would have been if the impairment had

not been recognised.

(20) Borrowings

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.

(21) 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 recognized initially at fair value and

subsequently measured at amortized cost using the effective interest method. However,

short-term accounts payable without bearing interest are subsequently measured at initial

invoice amount as effect of discounting is immaterial.

(22) Financial liabilities at fair value through profit or loss

A.Financial liabilities at fair value through profit or loss are financial liabilities held for trading or

276

financial liabilities designated as at fair value through profit or loss on initial recognition.

Financial liabilities are classified in this category of held for trading if acquired principally for

the purpose of repurchasing in the short-term. Derivatives are also categorized as financial

liabilities held for trading unless they are designated as hedges.

B.Financial liabilities at fair value through profit or loss are initially recognized at fair value.

Related transaction costs are expensed in profit or loss. These financial liabilities are

subsequently remeasured and stated at fair value, and any changes in the fair value of these

financial liabilities are recognized in profit or loss.

(23) 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.

(24) 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 recognized amounts and there is an

intention to settle on a net basis or realize the asset and settle the liability simultaneously.

(25) Financial liabilities and equity instruments

Bonds payable

Convertible corporate bonds issued by the Group contain conversion options (that is, the bondholders have the right to convert the bonds into the Group’s common shares by exchanging a fixed amount of cash for a fixed number of common shares), call options and put options. The Group classifies the bonds payable and derivative features embedded in convertible corporate bonds on initial recognition as a financial asset, a financial liability or an equity instrument (‘capital surplus—stock warrants’) in accordance with the substance of the contractual arrangement and the definitions of a financial asset, a financial liability and an equity instrument.

Convertible corporate bonds are accounted for as follows:

(a)Call options and put options embedded in convertible corporate bonds are recognized initially

at net fair value as ‘financial assets or financial liabilities at fair value through profit or loss’.

They are subsequently remeasured and stated at fair value on each balance sheet date; the

gain or loss is recognized as ‘gain or loss on valuation of financial assets or financial liabilities at

fair value through profit or loss’.

(b)Bonds payable of convertible corporate bonds is initially recognized at fair value and

subsequently stated at amortized cost. Any difference between the proceeds 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.

(c)Conversion options embedded in convertible corporate bonds issued by the Group, which

meet the definition of an equity instrument, are initially recognized in ‘capital surplus—stock

warrants’ at the residual amount of total issue price less amounts of ‘financial assets or

financial liabilities at fair value through profit or loss’ and ‘bonds payable—net’ as stated

above. Conversion options are not subsequently remeasured.

(d)Any transaction costs directly attributable to the issuance of convertible corporate bonds are

allocated to the liability and equity components in proportion to the allocation of proceeds.

277

(e)When bondholders exercise conversion options, the liability component of the bonds

(including ‘bonds payable’ and ‘financial assets or financial liabilities at fair value through

profit or loss’) shall be remeasured on the conversion date. The book value of common shares

issued due to the conversion shall be based on the adjusted book value of the

above-mentioned liability component plus the book value of capital surplus - stock warrants.

(26) Financial guarantee contracts

A financial guarantee contract is a contract that requires the Group to make specified payments

to reimburse the holder for a loss it incurs because a specified debtor fails to make payment

when due in accordance with the original or modified terms of a debt instrument. A financial

guarantee contract is initially recognized at its fair value adjusted for transaction costs on the

trade date. After initial recognition, the financial guarantee is measured at the higher of the

initial fair value less cumulative amortization and the best estimate of the amount required to

settle the present obligation on each balance sheet date.

(27) Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into

and are subsequently remeasured at their fair value.

(28) Provisions

Provisions (decommissioning) are recognized when the Group 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

recognized as interest expense. Provisions are not recognized for future operating losses.

(29) 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

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

B.Pensions

(a)Defined contribution plans

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

they are due on an accrual basis. Prepaid contributions are recognized as an asset to the

extent of a cash refund or a reduction in the future payments.

(b)Defined benefit plans

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

Group in current period or prior periods. 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 the terms of related pension liability; when there is no deep market in

278

high-quality corporate bonds, the Group uses interest rates of government bonds (at the

balance sheet date) instead. ii) Actuarial gains and losses arising on defined benefit plans are recognized in profit or loss

using the ‘corridor’ method. iii)Past service costs are recognized immediately in profit or loss if vested immediately; if

not, the past service costs are amortized on a straight-line basis over the vesting period. C.Employees’ bonus and directors’ and supervisors’ remuneration

Employees’ bonus and directors’ and supervisors’ remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. However, if the accrued amounts for employees’ bonus and directors’ and supervisors’ remuneration are different from the actual distributed amounts as resolved by the stockholders at their stockholders’ meeting subsequently, the differences should be recognized based on the accounting for changes in estimates. The Group calculates the number of shares of employees’ stock bonus based on the fair value per share at the previous day of the stockholders’ meeting held in the year following the financial reporting year, and after taking into account the effects of ex-rights and ex-dividends.

(30) 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 recognized is based on the number of equity instruments that eventually vest.

(31) Income tax A.The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or

loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.

B.The current income tax charge 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 recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. 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 realized or the deferred income tax liability is settled.

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

279

taxable profit will be available against which the temporary differences can be utilized. At each balance sheet date, unrecognized and recognized 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 recognized amounts and there is an intention to settle on a net basis or realize 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 realize 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, employees’ training costs 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.

(32) Share capital

A.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.

B.Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(33) 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.

(34) Revenue recognition

The Group provides construction services. Revenue from delivering services is recognized under the percentage-of-completion method when the outcome of services provided can be estimated reliably. The stage of completion of a service contract is measured by the proportion of contract costs incurred for services performed as of the financial reporting date to the estimated total costs for the service contract. If the outcome of a service contract cannot be estimated reliably, contract revenue should be recognized only to the extent that contract costs incurred are likely to be recoverable.

(35) Service concession arrangements

A.The Group contracted with the government (grantor) a service concession arrangement whereby the Group shall provide construction of the government’s infrastructure assets for public services and operate those assets during the term of the arrangement, and when the term of the operating period expires, the underlying infrastructure assets will be transferred to the government without consideration. The Group 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 recognizes such allocated amounts as revenues in accordance with IAS 11, ‘Construction Contracts’, and

280

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 recognized at its fair value. Such considerations are recognized 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. The Group recognizes a financial asset to the extent that it has an unconditional contractual right to receive cash or another financial asset from or at the direction of the grantor for the construction services, and recognizes an intangible asset to the extent that it receives a right (a license) to charge users of the public service.

(36) Government grants

Government grants are recognised at their fair value only when there is reasonable assurance that the Group will comply with any conditions attached to the grants and the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises expenses for the related costs for which the grants are intended to compensate.

(37) Operating segments

The Group’s operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

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

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. The information is addressed below:

Critical accounting estimates and assumptions

A.Realisability of deferred income tax assets

Deferred income tax assets are recognized only to the extent that it is probable that future taxable

profit will be available against which the deductible temporary differences can be utilized.

Assessment of the realisability of deferred income tax assets involves critical accounting

judgements and estimates of the management, including the assumptions of expected future sales

revenue growth rate and profit rate, tax exempt duration, available tax credits, tax planning, etc.

Any variations in global economic environment, industy environment, and laws and regulations

might cause material adjustments to deferred income tax assets.

The Group’s recognised deferred income tax assets were $449,881 as of December 31, 2013.

B. Financial assets – impairment assessment of financial assets without active market

The Group assesses the impairment of an investment of financial instruments as soon as there is

any indication that it might have been impaired and its carrying amount cannot be recoverable. The

281

Group assesses the recoverable amounts of financial assets without active market based on the

present value of expected cash dividends receivable from the investee and future cash flows from

the disposal of the investee, with present value of similar financial instruments at balance sheet

date, and analyses the reasonableness of related assumptions.

As of December 31, 2013, the Group recognised financial assets measured at cost, net of

impairment loss, amounting to $584,153.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

A.The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote. The Group’s maximum exposure to credit risk at balance sheet date is the carrying amount of all cash and cash equivalents.

B.Details of the Group’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 – current

A.The Group recognized net (loss)/gain of ($17,331) and $119,017 for the years ended December 31, 2013 and 2012, respectively.

B.As of December 31, 2013 and 2012, the trading items and contract information of derivatives are as follows:


Cash on hand and petty cash 323,018$ 139,228$ 124,704$

Checking accounts and demand deposits 2,233,221 6,061,739 4,599,788

Time deposits 6,770,787 8,988,350 12,046,567

9,327,026$ 15,189,317$ 16,771,059$


Current items:

Financial assets held for trading

Mutual funds 805,250$ 1,730,580$ 3,568,700$

Non-hedging derivatives 37,209 64,813 90,187

842,459 1,795,393 3,658,887

Valuation adjustment of financial assets

held for trading756 6,335 11,419)(

Total 843,215$ 1,801,728$ 3,647,468$

Finacial liablities held for trading

Non-hedging derivatives $ 20,061 $ 6,800 24,462$

282

The Group entered into forward foreign exchange contracts to sell or buy forward foreign exchange to hedge exchange rate risk of import or export proceeds. However, these forward foreign exchange contracts are not adopting the hedging accounting because these do not conform to all the conditions.

Contract Period


sell (5 items)

USD 3,775,000 2013.07.22~2015.03.24


buy (1 items)

CHF 1,000,000 2013.10.22~2014.03.03


buy (7 items)

USD 3,600,000 2013.04.24~2014.07.18


buy (1 items)

MYR 3,509,000 2013.11.25~2014.04.21

Forward exchange contract-buy (1 items) GBP 1,000,000 2013.09.13~2014.09.17


Forward exchange contract-sell (2 items) SGD 2,000,000 2013.07.18~2014.01.27

Forward exchange contract-buy (5 items) CHF 9,000,000 2013.07.10~2014.09.15

Forward exchange contract-sell (1 items) THB 64,100,000 2013.07.22~2014.06.16



Contract Period



Forward exchange contract-buy (1 item) GBP 1,000,000 2012.12.13~2013.06.17

Forward exchange contract-buy (2 items) CNY 20,531,000 2012.12.05~2013.01.30

Foreign exchange swap contract (2 items) EUR 4,000,000 2012.01.31~2013.02.01

Foreign exchange swap contract (1 item) THB 63,175,000 2012.06.14~2013.06.18



December 31, 2013

Contract Amount

December 31, 2012

Contract Amount

Contract Period


Forward exchange contract-buy (1 item) GBP 500,000 2011.12.30~2012.02.03


buy (4 items)

EUR 4,500,000 2011.12.28~2012.03.28


buy (2 items)

GBP 2,000,000 2011.07.28~2012.08.01

Foreign exchange swap contract (9 items) EUR 23,700,000 2011.06.10~2012.12.10


January 1, 2012

Contract Amount

283

C.Due to the global financial crisis in year 2008, listed (TSE and OTC) stocks amounting to $165,500 which were initially classified as “financial assets at fair value through profit or loss” were reclassified to “available-for-sale financial assets” on July 1, 2008, in accordance with paragraph 50 (c) of IAS 39. The relevant information is set forth below:

(a)The above reclassified assets which have not yet been disposed of were as follows:

(b)The changes in fair value of the above listed stocks that were recognized in profit or loss and other comprehensive income were $0 and $43,222, respectively, for the year ended December 31, 2013, and were $0 and $23,709, respectively, for the year ended December 31, 2012. And the accumulated total changes in fair value of the above listed stocks that were recognized in profit or loss and other comprehensive income before January 1, 2012 were $0 and $12,706, respectively.

(c)If the above listed stocks had not been reclassified to “available-for-sale financial assets” on July 1, 2008, the gain (loss) from change in fair value of those assets should have been recognized for the following periods:


The amounts that the Group recognized profit or loss in other comprehensive income due to the

changes in fair value were $51,916 and $31,057 for the years ended December 31, 2013 and 2012,

respectively.


Book value/Fair value Book value/Fair value Book value/Fair value

Listed (TSE or OTC)

stocks245,137$ 201,915$ 178,206$

For the year ended

December 31, 2013

For the year ended

December 31, 2012

Listed (TSE or OTC) stocks 43,222$ 23,709$


Current items:

Listed (TSE or OTC)

stocks

438,141$ 586,065$ 485,846$

Valuation adjustment

of available-for-sale

financial assets 166,589 88,517 80,855

604,730$ 674,582$ 566,701$

284

(4) Financial assets measured at cost

A.Based on the Group’s intention, its investment in stocks should be classified as available-for-sale financial assets. However, as these investments are not traded in active markets, the fair value of the investment cannot be measured reliably. The Group classified those stocks as ‘financial assets measured at cost’.

B.As the operating results of investee companies accounted for under the cost method had deteriorated, their net worth has declined significantly. The Company expects that the probability of a recovery in its net worth is remote. As a result, loss on decline in market value of $82,536 and $79,000 were recognized for the years ended December 31, 2013 and 2012, respectively.

As of December 31, 2013, 2012 and January 1, 2012, no financial assets measured at cost held by the Group were pledged to others.

(5) Notes and accounts receivable

For the long-term receivables due in one year, please refer to Note 6 (11) for detailed information.


Non-current items:

Unlisted stocks 967,689$ 980,201$ 1,014,075$

Accumulated impairment-

financial assets measured

at cost

383,536)( 302,981)( 245,790)(

584,153$ 677,220$ 768,285$


Notes receivable 3,244,527$ 9,747$ 23,715$

Accounts receivable 4,257,970 4,007,169 4,873,486

Long-term receivable due in

one year 228,507 219,726 211,316

Less:Allowance for bad debts 118,607)( 40,674)( 48,114)(

7,612,397$ 4,195,968$ 5,060,403$

285

(6) Construction in progress

As of December 31, 2013, December 31, 2012 and January 1, 2012, the retainage relating to

construction contracts amounted to $13,068, $122,762 and $111,008, respectively; the advances

received before the related construction work is performed amounted to $0, $0 and $10,000,

respectively.

(7) Prepayments

(8) Investments accounted for under the equity method

A. Details are as follows:


Aggregate costs incurred

plus recognised profits

(less recognised losses)

287,366,273$ 279,119,273$ 237,250,069$

Less: progress billings 280,421,228)( 278,219,825)( 242,532,916)(

Net balance sheet position

for construction in

progress

6,945,045$ 899,448$ 5,282,847)($

Presented as:

Receivables from customers

on construction contracts

12,372,269$ 13,328,195$ 7,966,486$

Payables to customers on

construction contracts 5,427,224)( 12,428,747)( 13,249,333)(

6,945,045$ 899,448$ 5,282,847)($


Prepayment for materials 1,847,244$ 1,942,688$ 2,043,747$

Prepayment for construction

in progress 823,694 1,068,838 670,320

Others 332,053 555,778 671,118

3,002,991$ 3,567,304$ 3,385,185$


Pan Asia Corp. 565,307$ 517,797$ 491,689$

G.D. Development Corp. 91,019 41,422 46,895


Technology Co., Ltd. 18,007 19,660 -

TECA Engineering Pte. Ltd. 669 2,020 -

675,002$ 580,899$ 538,584$

286

B. Profits and losses recognised under the equity method is as follows:

C.The financial information of the Group’s principal associates and joint ventures is summarized below:

D.In February, 2012, Sino Environmental Service Corp. and Guangzhou Environment Protection Investment Co., Ltd. invested and owned 49% of GranSino Environmental Technology Co., Ltd. amounting to $10,874 (USD $367,500).

E.The Group holds the joint venture – G.D. Development Corp. by 50% shares and its main activity is environmental engineering.

F.CTCI Singapore Pte. Ltd. invested and owned 25% of TECA Engineering Pte. Ltd. amounting to $2,968 (SGD $125,000) in December, 2011 and April, 2012.

G.The above investments accounted for under the equity method, Pan Asia Corp. and TECA, were recognized based on the financial statements which have been audited by other auditors as of December 31, 2013 and 2012.



Pan Asia Corp. 75,105$ 70,868$

G.D. Development Corp. 1,413 1,651)(


Technology Co., Ltd. 1,114)( 8,917

TECA Engineering Pte. Ltd. 1,345)( 945)(

74,059$ 77,189$

Assets Liabilities Revenue Profit/(Loss) % interest held

December 31, 2013

Pan Asia Corp. 3,094,303$ 1,422,789$ 5,376,069$ 219,157$ 34.27%

G.D. Development Corp. 581,095 399,057 54,258 2,826 50.00%


Technology Co., Ltd. 88,862 52,113 59,386 4,283)( 49.00%

TECA 2,915 219 - 5,379)( 25.00%

December 31, 2012

Pan Asia Corp. 2,627,877$ 1,116,943$ 4,874,123$ 206,793$ 34.27%

G.D. Development Corp. 328,416 245,572 10,744 3,302)( 50.00%


Technology Co., Ltd. 107,703 67,582 124,049 18,198 49.00%

TECA 9,459 1,375 - 3,707)( 25.00%

January 1, 2012

Pan Asia Corp. 3,151,088$ 1,716,336$ 34.27%

G.D. Development Corp. 228,602 134,811 50.00%

287



Transportation

equipment

Office

equipment

Prepayments


At January 1, 2013

Cost 3,198,088$ 3,944,176$ 693,158$ 213,478$ 281,468$ 349,656$ 295,193$ 8,975,217$

Accumulated

depreciation - 721,858)( 461,021)( 178,312)( 174,783)( - 150,928)( 1,686,902)(

3,198,088$ 3,222,318$ 232,137$ 35,166$ 106,685$ 349,656$ 144,265$ 7,288,315$

Year ended December 31,

2013

Opening net book

amount

3,198,088$ 3,222,318$ 232,137$ 35,166$ 106,685$ 349,656$ 144,265$ 7,288,315$

Additions - 34,553 30,496 25,821 8,677 29,793 37,484 166,824

Disposals 1,881)( 45)( 574)( 749)( 2,583)( - 1,011)( 6,843)(


Reclassifications - 339,427 679 6,021 4,197 350,553)( 229 -

Net exchange

differences 2,085)( 38,596 334)( 1,507 2,794)( 129 15,058 50,077

Closing net book

amount 3,194,122$ 3,460,646$ 181,666$ 39,616$ 80,781$ 29,025$ 164,975$ 7,150,831$


Cost 3,194,122$ 4,330,883$ 676,097$ 217,137$ 259,150$ 29,025$ 295,027$ 9,001,441$

Accumulated

depreciation - 870,237)( 494,431)( 177,521)( 178,369)( - 130,052)( 1,850,610)(

3,194,122$ 3,460,646$ 181,666$ 39,616$ 80,781$ 29,025$ 164,975$ 7,150,831$

288


Transportation

equipment

Office

equipment

Prepayments


At January 1, 2012

Cost 3,198,839$ 3,849,714$ 653,341$ 314,755$ 310,950$ 124,912$ 272,425$ 8,724,936$

Accumulated

depreciation - 549,102)( 406,531)( 253,256)( 147,136)( - 120,594)( 1,476,619)(

3,198,839$ 3,300,612$ 246,810$ 61,499$ 163,814$ 124,912$ 151,831$ 7,248,317$

Year ended December 31,

2012

Opening net book

amount

3,198,839$ 3,300,612$ 246,810$ 61,499$ 163,814$ 124,912$ 151,831$ 7,248,317$

Additions - 90,788 77,732 4,484 44,050 224,423 10,339 451,816

Disposals - - 1,771)( 4,820)( 3,570)( - 4,479)( 14,640)(


Reclassifications - - 29,523 6,820 4,998 49,325)( 7,984 -

Net exchange

differences 751)( 16,326)( 9,644)( 8,204)( 40,831)( 49,646 3,596 22,514)(

Closing net book

amount 3,198,088$ 3,222,318$ 232,137$ 35,166$ 106,685$ 349,656$ 144,265$ 7,288,315$


Cost 3,198,088$ 3,944,176$ 693,158$ 213,478$ 281,468$ 349,656$ 295,193$ 8,975,217$

Accumulated

depreciation - 721,858)( 461,021)( 178,312)( 174,783)( - 150,928)( 1,686,902)(

3,198,088$ 3,222,318$ 232,137$ 35,166$ 106,685$ 349,656$ 144,265$ 7,288,315$

289

A.In October, 2011, Jing Ding Engineering & Construction Co., Ltd. signed a contract with Beijing Gin Mai Real Estate Development Corp. to acquire an office building and national land-use right for $353,283 (RMB $71,543,680). As of December 31, 2013, the title of the office building and national land-use right has not yet been approved by the government, thus the transfer of ownership is incomplete.

B.The Group’s buildings include major building components which are depreciated over 50 years.

C.Please refer to Note 8 for the details of pledged property, plant and equipment.



At January 1, 2013

Cost 718,428$ 126,572$ 845,000$


718,428$ 120,497$ 838,925$





At December 31, 2013 718,428$ 126,572$ 845,000$

Cost - 11,859)( 11,859)(



At January 1, 2012

Cost 718,428$ 126,572$ 845,000$

Accumulated depreciation - - -

718,428$ 126,572$ 845,000$





At December 31, 2012 718,428$ 126,572$ 845,000$

Cost - 6,075)( 6,075)(


290

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

B. The fair value of the investment property held by the Group as of December 31, 2013, December 31, 2012 and January 1, 2012 were all $950,000, $845,000 and $845,000, respectively, which was revalued by independent valuers. Valuations were made using the income approach with key assumptions as follows:

C. Please refer to Note 8 for the details of pledged investment property.

(11) Other non-current assets

A.Long-term receivables: The Group contracted with the government (grantor) a service concession arrangement. The consideration receivable from the grantor in respect of the service concession arrangement is recognized at its fair value. Such consideration is recognized as a financial asset based on the way of the consideration from the grantor to the operator being made as specified in the arrangement. The consideration receivable from the grantor is recognized as accounts receivable if it is expected to be realized within 12 months after the balance sheet date (please refer to Note 6(5)), and is recognized as long-term accounts receivable if it is expected to be realized more than 12 months after the balance sheet date. The major terms of the arrangement are as follows: (a)The subsidiary, Leading Energy Corp., obtained the operation for the construction of Wujih

For the year ended

December 31, 2013

For the year ended

December 31, 2012

Rental revenue from the lease of the

investment property 17,930$ 28,122$


investment property that generated

rental income in the period 2,950$ 3,099$


investment property that did not

generate rental income in the period 2,834$ 2,977$


Gross margin 2.61% 2.69% 2.69%

Growth rate 8.00% 4.00% 4.00%

Discount rate 3.63% 4.20% 4.20%


Long-term receivables 3,432,327$ 3,655,654$ 3,881,221$

Long-term prepaid rents 69,877 75,769 81,885

Restricted bank deposits 107,868 51,143 150,200

Refundable deposits 119,866 152,292 123,179

Others 167,387 145,488 151,797

3,897,325$ 4,080,346$ 4,388,282$

291

Refuse Incineration Plant by build - operate - transfer (BOT) mode since April, 2000. In September, 2000, the “Waste incineration, Taichung City commission contract” between Leading Energy Corp. and Taichung Government had been signed. The operating period is for 20 years starting from September 6, 2004. However, according to the contract, if it is expired in advance or extended during construction or operation, duration of the operation will be deemed to be matured or extended, but not to exceed 50 years. In order to work the “Waste incineration Taichung City commission contract”, Leading Energy Corp. obtained the land-use right that has continued for 20 years since the plant began operation.

(b)The subsidiary, Fortune Energy Corp., obtained the operation for the construction of Miaoli County Refuse Incineration Plant by build - operate - transfer (BOT) mode since August, 2002. In September, 2002, the “Waste incineration commission contract” between Fortune Energy Corp. and Miaoli County Government had been signed. The operating period is for 20 years starting from February 29, 2008. However, according to the contract, if it is expired in advance or extended during construction or operation, duration of the operation will be deemed to be matured or extended. In order to work the “Waste incineration Miaoli County commission contract”, Fortune Energy Corp. obtained the land-use right of Miaoli Refuse Incineration Plant. Therefore duration of the land – use right is from September 13, 2002 to March 12, 2026.

(c)Leading Energy Corp. and Fortune Energy Corp. need to comply with the guarantee tonnage of waste from government according to the contract during construction or operation.

(d)Per service cost is calculated and adjusted based on the “Waste incineration commission contract”, “Index of average regular earnings of employees-manufacturing” and “Consumer price index”.

B.Long – term prepaid rents due to Leading Energy Corp. and Fortune Energy Corp. were obtained for the land-use rights according to the “BOT Agreement”.

(12) Short-term borrowings

Type of borrowings December 31, 2013 Interest rate range Collateral

Unsecured borrowings

Sumitomo Mitsui Banking 74,625$ 0.87% -

Corporation

Citibank 815,790 0.85%~4.14% -

Mizuho Bank, Ltd. 101,550 9.65% -

991,965$

Type of borrowings December 31, 2012 Interest rate range Collateral


Mega International

Commercial Bank

362,878$ 0.95%～1.09% -

SinoPac Bank 276,269 1.51% -

Citibank 86,819 1.51%~1.61% -

HSBC Bank 23,313 5.04% -

Mizuho Bank, Ltd. 103,594 9.00% -

852,873$

292


(14) Other payables

Type of borrowings January 1, 2012 Interest rate range Collateral


Cathay United Bank 211,534$ 1.91%~2.30% -

First Bank 84,729 1.10% -

Banco Nacional

Ultramarino 33,539 2.01% -

329,802

Secured borrowings

SinoPac Bank 302,340 1.67%~2.00% Guarantee Notes

Submitted

632,142$


Materials payable 8,463,885$ 5,365,235$ 5,879,057$

Sub-contract costs payable 4,432,621 5,218,273 4,937,011

Maintenance costs payable 278,086 273,586 311,794

Equipment burying costs

payable 31,436 26,613 56,258

Others 142,128 178,598 85,791

13,348,156$ 11,062,305$ 11,269,911$


Accrued payroll 1,462,643$ 1,607,630$ 1,544,310$

Accrued employee bonuses, 115,441 184,055 205,347

directors' and supervisors'

remuneration

Accrued insurance 80,905 70,324 77,184

Accrued pension 36,771 26,538 20,107

Accrued building costs 238,609 300,058 69,245

Others 754,438 601,963 578,307

2,688,807$ 2,790,568$ 2,494,500$

293

(15) Other current liabilities/Bonds payable

A.KD Holding Corp. issued unsecured convertible bonds in November, 2010. Relevant information

is as follows:

The Company issued zero-coupon, five-year unsecured convertible bond with the principal

amount of $500,000. The outstanding period of the bond is from November 15, 2010 to

November 15, 2015. The bonds were listed on the GreTai Securities Market.

(a)Conversion right and objectives: The bonds shall be converted using the conversion price at

the conversion time.

(b)Conversion periods: The bonds are convertible at anytime from December 16, 2010 to

November 5, 2015.

(c)Conversion price adjustment: The initial conversion price per share was set at NT$135.58 (in

dollars). After the issuance of the bonds, the conversion price can be adjusted downward

based on the terms of the contract. As of December 31, 2013, the conversion price of the

convertible bond is adjusted to NT$114.73 (in dollars).

(d)Redemption:

i. Redemption at maturity: The bonds will be redeemed at the principal amount.

ii. Redemption at the option of the Company: The Company may redeem the bonds, in

whole but not in part, on or after December 16, 2010 to October 6, 2015 at the principal

amount, provided that the bonds may not be so redeemed, unless (i) the closing price of

the shares on the Taiwan Over-The-Counter Securities Exchange, for a period of 30

consecutive trading days, is at least 30% of the conversion price or (ii) at least 90% in

principal amount of the bonds has already been converted, redeemed or purchased and

cancelled.


Current items:

Long-term liability- current

portion

498,282$ 478,573$ 440,601$

Receipt in advance 90,544 57,528 67,506

Adjustment of electricity

sales

256,220 138,936 36,547

Others 109,143 95,768 283,546

954,189 770,805 828,200

Unsecured convertible bonds

payable

34,200 311,600 -

Less: Discount of bonds

payable 1,000)( 13,635)( -

987,389$ 1,068,770$ 828,200$

Bonds payable

Unsecured convertible bonds

payable

-$ -$ 432,600$

Less: Discount of bonds

payable - - 25,318)(

-$ -$ 407,282$

294

iii.Redemption at the option of bondholders: The Company will redeem the bonds, in whole

or in part, at the option of the holder of any bond on November 15, 2013.

(e)Under the terms of the bonds, the rights and obligations of the new shares converted from

convertible bonds are the same as the issued and outstanding common stock.

(f)The fair value of convertible option was separated from bonds payable, and was recognized

in “capital surplus from stock warrants” amounting to $38,643 in accordance with IAS No. 32.

The fair value of put options and call options due to market value change of conversion

object embedded in bonds payable was separated from bonds payable, and was recognized

in “financial assets/liabilities as fair value through profit or loss” in net amount in

accordance with IAS No. 39 because the economic characteristics and risks of the embedded

derivatives were not closely related to those of the host contracts. The effective interest rate

of bonds payable was 1.57% after separation.

B.On December 31, 2013, the fair value of put and call options embedded in bonds payable was

recognized in“Financial assets at fair value through profit or loss - current” amounting to $520.

295

(16) Long-term loans

Type of borrowings

Borrowing period and

repayment term

Interest

rate range Collateral

Financing

amount

Actual using

amount December 31, 2013 Note

Mega International

Commercial Bank

secured borrowings

Borrowing period is from

November, 2012 to

November, 2015; interest

is repayable monthly.

1.50% Machineries and

other equipment

constructed or

acquired

550,000$ 466,640$ 211,094$ Leading Energy Corp. commits to maintain the

following financial ratios and criteria during the

period of the contract when the refuse incineration

plant has been already operating successfully for 2

years since the operating period:

i) Current ratio is above 100%,

ii) Debt ratio is under 190%,

iii) Time interest earned is above 120%.


September , 2010 to

April, 2020; interest is

repayable monthly.


other equipment

constructed or

acquired and time

deposits

1,500,000$ 1,286,000$ 840,000 Fortune Energy Corp. committed to maintain the

following financial ratios and criteria during the

period of the contract:


ii) Debt ratio is under 190%,

iii) Time interest earned is above 150%.

The Shanghai

Commercial and

Savings Bank

secured borrowings


December 22, 2009 to

December 22, 2014;

interest is repayable

monthly.

1.50%~1.80% Buildings and

equipment

USD 4,000,000 USD 4,000,000 28,335 Shang Ding Engineering & Construction Co., Ltd.

commits to maintain the following financial ratios

and criteria during the continuing period of the

contract:


ii) Financial debt ratio is under 190%,

iii) Net asset value is above RMB$100 million.

Taiwan Cooperative

Bank secured

borrowings


April 23, 2009 to

April 23, 2029; interest is

repayable monthly.

1.57%~1.69% Land and Buildings 3,600,000$ 3,433,150$ 2,715,150

3,794,579

Less: Current portion 498,282)(

3,296,297$

296

Type of borrowings


repayment term

Interest


Financing

amount

Actual using

amount December 31, 2012 Note

Mega International

Commercial Bank

secured borrowings


November, 2012 to

November, 2015; interest

is repayable monthly.


other equipment

constructed or

acquired

550,000$ 466,640$ 466,640$ Related arrangement of borrowing of Leading

Energy Corp. is same as the note as of December

31, 2013.


September , 2010 to


repayable monthly.

1.48%~1.57% Machineries and

other equipment

constructed or

acquired and time

deposits

1,500,000$ 1,286,000$ 998,400 Related arrangement of borrowing of Fortune

Energy Corp. is same as the note as of December

31, 2013.

The Shanghai

Commercial and

Savings Bank

secured borrowings



December 22, 2014;


monthly.

1.50%~1.82% Buildings and

equipment

USD 4,000,000 USD 4,000,000 55,165 Related arrangement of borrowing of Shang Ding

Engineering & Construction Co., Ltd. is same as the

note as of December 31, 2013.

Taiwan Cooperative

Bank secured

borrowings


April 23, 2009 to


repayable monthly.

1.60%~1.685% Land and Buildings 3,600,000$ 3,433,150$ 2,865,150

4,385,355


3,906,782$

297

Type of borrowings


repayment term

Interest


Financing

amount

Actual using

amount January 1, 2012 Note

Mega International

Commercial Bank

secured borrowings


October , 2012 to

October, 2015; interest is

repayable monthly.


other equipment

constructed or

acquired and time

deposits

2,000,000$ 1,950,000$ 679,140$ Related arrangement of borrowing of Leading

Energy Corp. is same as the note as of December 31,

2013.


September , 2010 to


repayable monthly.


other equipment

constructed or

acquired and time

deposits

1,500,000$ 1,286,000$ 1,180,400 Related arrangement of borrowing of Fortune

Energy Corp. is same as the note as of December 31,

2013.

The Shanghai

Commercial and

Savings Bank

secured borrowings



December 22, 2014;


monthly.

1.30% Buildings and

equipment

USD 4,000,000 USD 4,000,000 85,324 Related arrangement of borrowing of Shang Ding

Engineering & Construction Co., Ltd. is same as the

note as of December 31, 2013.

Taiwan Cooperative

Bank secured

borrowings


April 23, 2009 to


repayable monthly.

1.60% Land and Buildings 3,600,000$ 3,433,150$ 3,009,150

4,954,014


4,513,413$

298

(17) Other non-current liabilities

(18) Pensions

A.Defined benefit pension plan

(a)The Company and its domestic subsidiaries have 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.

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


Accrued pension liabilities 2,202,991$ 1,889,912$ 1,472,647$

Deposits received 207,538 209,615 214,543

Accrued recovery costs 98,405 97,908 98,633

Others 6,255 10,112 14,229

2,515,189$ 2,207,547$ 1,800,052$


Present value of funded 4,882,811$ 4,981,593$ 4,810,824$

obligations

Fair value of plan assets 2,020,805)( 1,926,720)( 1,902,739)(

2,862,006 3,054,873 2,908,085

Present value of unfunded 658,354)( 1,164,223)( 1,434,639)(

obligations

Unrecognised prior service cost 946)( 1,080)( 1,216)(

Net liability in the balance sheet 2,202,706$ 1,889,570$ 1,472,230$

Liability in the balance sheet 2,202,991$ 1,889,912$ 1,472,647$

Asset in the balance sheet 285$ 342$ 417$

299

(c) Changes in present value of funded obligations are as follows:

(d) Changes in fair value of plan assets are as follows:

(e) Amounts of expenses recognised in comprehensive income statements are as follows:

(f) Details of cost and expenses recognised in comprehensive income statements are as follows:

(g)The Bank of Taiwan was commissioned to manage the Fund of the Group’s and domestic

subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment



Present value of funded 4,981,593$ 4,810,824$

obligations at January 1

Current service cost 62,205 69,370


Actuarial loss 10,092 224,165

Benefits paid 94,775)( 175,303)(

Direct payments 151,658)( 31,057)(

Present value of funded 4,882,811$ 4,981,593$

obligations at December 31



Fair value of plan assets at January 1 1,926,720$ 1,902,739$

Expected return on plan assets 28,901 30,333

Actuarial loss 5,271)( 4,854)(

Employer contributions 165,230 173,805

Benefits paid 94,775)( 175,303)(

Fair value of plan assets at December 31 2,020,805$ 1,926,720$



Current service cost 62,205$ 69,370$


Expected return on plan assets 28,901)( 30,333)(

Actuarial loss 521,232 499,435

Prior service cost 135 135

Current pension costs 630,025$ 622,201$



Operating costs 506,980$ 519,224$

General and administrative expenses 111,440 91,342

Research and development expenses 11,605 11,635

630,025$ 622,201$

300

and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. The constitution of fair value of plan assets as of December 31, 2013 and 2012 is given in the Annual Labor Retirement Fund Utilisation Report published by the government. Expected return on plan assets was a projection of overall return for the obligations period, which was estimated based on historical returns and by reference to the status of Labor Retirement Fund utilisation by the Labor Pension Fund Supervisory Committee and taking into account the effect that the Fund’s minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks.

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

(i)Historical information of experience adjustments was as follows:

(j)Expected contributions to the defined benefit pension plans of the Group within one year

from December 31, 2013 amounted to $371,570. B.Defined contribution pension plan

(a)Effective July 1, 2005, the Company and its domestic subsidiaries have 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 and its domestic subsidiaries contribute 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 defined contribution pension plans of the Group for the years ended December 31, 2013 and 2012 were $202,272 and $194,356, respectively.

For the year ended For the year ended For the year ended

December 31, 2013 December 31, 2012 December 31, 2011

Discount rate 1.80%~2.00% 1.50% 1.30%~3.00%

Future salary increases 1.90%~4.25% 2.50%~4.25% 1.30%~4.25%

Expected return on plan assets 1.80%~3.50% 1.50% 1.30%~1.80%



Present value of funded obligations 4,882,811$ 4,981,593$

Fair value of plan assets 2,020,805)( 1,926,720)(

Surplus in the plan 2,862,006$ 3,054,873$

Experience adjustments on plan liabilities 194,632$ 70,084$

Experience adjustments on plan assets 5,271)($ 4,854)($

301

(c)Some overseas subsidiaries adopted a defined benefit pension plan, covering all regular employees. Appropriation of pension cost for the years ended December 31, 2013 and 2012 were $71,748 and $80,353, respectively.

(19) Share-based payment-employee compensation

A.The Company

(a)As of December 31, 2013 and 2012, the Company’s share-based payment arrangements were as follows:

(b)The above employee stock options are set forth below:

i.Details of the first plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:


Quantity

granted

Contract

period

Vesting

conditions


stock options

2007.09.28 16,000

units



stock options

2008.08.27 21,000

units



stock options

2009.07.08 21,000

units



stock options

2010.06.18 22,000

units


No. of units Weighted-average No. of units Weighted-average

(shares in exercise price (shares in exercise price

Stock options thousand) (in dollars) thousand) (in dollars)







one unit of option

- - - -

Options waived 82.00)( - 35.00)( -



Options outstanding


Options exercisable



2013 2012

302


ii.Details of the second plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:











one unit of option

- - - -

Options waived 6.25)( - 65.250)( -



Options outstanding


Options exercisable



2013 2012

303

iii.Details of the third plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:











one unit of option

- - - -

Options waived 33.50)( - 133.50)( -



Options outstanding


Options exercisable



2013 2012

304

iv.Details of the fourth plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:


(c)The weighted-average stock price of stock options at exercise dates for the years ended December 31, 2013 and 2012 was NT$54.67 and NT$53.87, respectively.










one unit of option

- - - -

Options waived 124.500)( - 209.250)( -



Options outstanding


Options exercisable



2013 2012

305

(d)As of December 31, 2013, December 31, 2012 and January 1, 2012, the range of exercise prices of stock options outstanding was NT$14.60～NT$26.00, NT$13.50～NT$27.30, and


as follows:

(e)For the stock options granted before January 1, 2008 with compensation cost accounted for using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option-pricing model. The information is as follows:

(f)For the stock options granted after January 1, 2008 with compensation cost accounted for using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option-pricing model. The information was as follows:

(g)Expenses incurred on share-based payment transactions are shown below:










Type of


Exercise

price

Expected

price

volatility

rate

Expected

vesting

period

Expected

dividend

yield

rate

Risk free

interest

rate

Fair value

per unit

First plan of

employee stock

options

2007.9.28 NT$ 25.3 NT$ 25.3 37.04% 4.5 years 0% 2.57% NT$ 8.77

Type of

arrangement

Grant

date

Stock

price

Exercise

price

Expected

price

volatility

rate

Expected

vesting

period

Expected

dividend

yield

rate

Risk free

interest

rate

Fair value

per unit

Second plan of

employee stock

options

2008.8.27 NT$ 21.9 NT$ 21.9 36.05% 4.5 years 0% 2.41% NT$ 7.37

Third plan of

employee stock

options

2009.7.08 NT$ 28.9 NT$ 28.9 36.45% 4.5 years 0% 0.94% NT$ 9.13

Fourth plan of

employee stock

options

2010.6.18 NT$ 32.8 NT$ 32.8 36.22% 4.5 years 0% 0.93% NT$ 10.30




306

B.Subsidiary – Advanced Control & System Inc.

(a)As of December 31, 2013 and 2012, the subsidiary’s share-based payment transactions are set forth below:


i.Details of the first plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:


Quantity

granted

Contract

period

Vesting

conditions


stock options

2007.10.01 600

units

6

years

Service of

2 to 4 years


stock options

2008.10.17 600

units

6

years

Service of

2 to 4 years


stock options

2009.08.14 600

units

6

years

Service of

2 to 4 years


stock options

2010.06.23 600

units

6

years

Service of

2 to 4 years

Fifth plan of employee

stock options

2011.06.22 600

units

6

years

Service of

2 to 4 years




Options outstanding at beginning

of period26.75 NT$14.60 80.00 NT$20.00


Distribution of stock dividends /

adjustments for number of shares

granted for one unit of option

- - - -

Options waived - - - -

Options exercised 26.75)( NT$14.60 0.50)( NT$17.75

Options revoked - - 52.8)( -

Options outstanding at end of period - - 26.75 NT$14.60

Options exercisable at end of period - - 29.25 NT$14.60


2013 2012

307

ii.Details of the second plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:

iii.Details of the third plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:





of period

70.25 NT$12.10 296.00 NT$13.10





- - - -

Options waived - - - -



Options outstanding at end of period 8.75 NT$11.20 70.25 NT$12.10

Options exercisable at end of period 8.75 NT$11.20 70.25 NT$12.10


2013 2012





of period

261.00 NT$21.20 406.75 NT$22.90





- - - -

Options waived 9.50)( - - -






2013 2012

308

iv.Details of the fourth plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:

v.Details of the fifth plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:





of period470.25 NT$48.20 589.00 NT$52.20





- - - -







2013 2012





of period592.00 NT$55.10 598.00 NT$59.70





- - - -

Options waived 24.00)( - 6.00)( -

Options exercised 52.50)( NT$51.30 - -



Options exercisable at end of period 189.75 NT$50.90 -


2013 2012

309


(d)As of December 31, 2013, December 31, 2012 and January 1, 2012, the range of exercise prices of stock options outstanding was NT$11.20～NT$50.90, NT$12.10～NT$55.10 and


as follows:

(e)For the stock options granted before January 1, 2008 with compensation cost accounted for using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option-pricing model. The information is as follows:





stock options0.67years 1.67 years 2.67 years







Type of


Exercise

price

Expected

price

volatility

rate

Expected

vesting

period

Expected

dividend

yield

rate

Risk free

interest

rate

Fair value

per unit

First plan of

employee stock

options

2007.10.1 NT$ 30.20 NT$ 30.20 48.34% 4.40

years

0% 2.57% NT$ 12.76

310

(f)For the stock options granted after January 1, 2008 with compensation cost accounted for using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option-pricing model. The information is as follows:

(g)Expenses incurred on share-based payment transactions are shown below:

C.Subsidiary – KD Holding Corp. (a)As of December31, 2013 and 2012, the subsidiary’s share-based payment transactions are

set forth below:

Type of


Exercise

price

Expected

price

volatility

rate

Expected

vesting

period

Expected

dividend

yield

rate

Risk

free

interest

rate

Fair value

per unit

Second plan of

employee stock

options

2008.10.17 NT$ 15.20 NT$ 15.20 43.75% 4.55 years 0% 1.86% NT$ 5.88

Third plan of

employee stock

options

2009.08.14 NT$26.55 NT$ 26.55 43.64% 4.55 years 0% 0.84% NT$ 9.84

Fourth plan of

employee stock

options

2010.06.23 NT$58.10 NT$ 58.10 45.68% 4.55 years 0% 0.93% NT$ 22.49

Fifth plan of

employee stock

options

2011.06.22 NT$63.40 NT$ 63.40 44.41% 4.50 years 0% 1.07% NT$ 23.95

For the year ended

December 31, 2013

For the year ended

December 31, 2012


Type of arrangement Grant date Quantity granted

Contract

period

Vesting

conditions

First plan of

employee stock

options

2008.9.12 1200

units

6 years Service of

2 years

Second plan of

employee stock

options

2009.7.16 1200

units

6 years Service of

2 years

Third plan of

employee stock

options

2010.6.18 1200

units

6 years Service of

2 years

Fourth plan of

employee stock

options

2011.6.17 1200

units

6 years Service of

2 years

Fifth plan of

employee stock

options

2012.6.28 1200

units

6 years Service of

2 years

311


i)Details of the first plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:





beginning of period

130.00 NT$35.10 379.50 NT$37.20



adjustments for number of

shares granted for one unit of

option

- - - -

Options waived 1.50)( - 7.75)( -



Options outstanding

at end of period 32.25 NT$33.20 130.00 NT$35.10

Options exercisable

at end of period32.25 NT$33.20 130.00 NT$35.10


2013 2012

312

ii)Details of the second plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:

iii)Details of the third plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:





of period

439.00 NT$60.00 670.00 NT$63.60




shares granted for one unit

of option

- - - -

Options waived 2.50)( - 13.75)( -



Options outstanding at end of

period 189.50 NT$56.80 439.00 NT$60.00

Options exercisable at end of

period 189.50 NT$56.80 154.25 NT$60.00


2013 2012





of period

867.75 NT$79.40 1,165.00 NT$84.20





of option

- - - -

Options waived 4.25)( - 21.00)( -




period 592.25 NT$75.20 867.75 NT$79.40


period 164.00 NT$75.20 151.00 NT$79.40


2013 2012

313

iv)Details of the fourth plan of employee stock options outstanding as of December 31, 2013 and 2012 are set forth below:

v)Details of the fifth plan of employee stock options outstanding as of December 31, 2013 and 2012 is set forth below:





of period

1,163.00 NT$132.10 1,184.00 NT$140.10





of option

- - - -

Options waived 8.00)( - 21.00)( -

Options exercised 243.25)( NT$127.60 - -



period 911.75 NT$125.10 1,163.00 NT$132.10


period 190.25 NT$125.10 -


2013 2012





of period

1,200.00 NT$136.70 - -

Options granted - - 1,200.00 NT$145.00




of option

- - - -


Options exercised - - - -



period 1,189.00 NT$129.40 1,200.00 NT$136.70


period - - -


2013 2012

314


(d)As of December 31, 2013, December 31, 2012 and January 1, 2012, the range of exercise prices of stock options outstanding was NT$33.2～NT$129.4, NT$35.1～NT$136.7 and


as follows:

(e)For the stock options granted after January 1, 2008 with compensation cost accounted for

using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option-pricing model. The information is as follows:











stock options4.50 years 5.50 years -

Type of


Exercise

price

Expected

price

volatility

rate

Expected

vesting

period

Expected

dividend

yield

rate

Risk free

interest

rate

Fair value

per unit

First plan of

employee stock

options

2008.9.12 NT$91.5 NT$41.5 33.68% 2.58

years

0% 0.49% NT$51.50

Second plan of

employee stock

options

2009.7.16 NT$91.5 NT$ 71.0 33.68% 3.42

years

0% 0.67% NT$ 32.56

Third plan of

employee stock

options

2010.6.18 NT$94.0 NT$ 94.0 33.68% 4.50

years

0% 0.93% NT$ 27.66

Fourth plan of

employee stock

options

2011.6.17 NT$146.0 NT$146.0 38.65% 4.50

years

0% 1.05% NT$48.82

Fifth plan of

employee stock

options

2012.06.28 NT$145.0 NT$ 145.0 33.63% 4.50

years

0% 1.00% NT$42.79

315

Note: Subsidiary – KD Holding Corp. has been officially listed in the OTC market on May 27, 2010 whose net value was measured at fair value before being listed in the OTC market and measured at market value after being listed in the OTC market. The compensation cost for employee stock options in 2008 and 2009 had been adjusted retroactively.

(f)Expenses incurred on share-based payment transactions are shown below:

(20) Share capital

A.As of December 31, 2013 and 2012, the Company’s authorized capital was $9,000,000, (including 800,000 thousand shares reserved for employee stock options), the paid-in capital was $7,474,343 , and 747,434,298 shares with a par value of NT$10 per share. Movements in the number of the Company’s ordinary shares outstanding are as follows:

B.Treasury shares

For the year ended

December 31, 2013

For the year ended

December 31, 2012


For the year ended

December 31, 2013

For the year ended

December 31, 2012

At January 1 734,995,923 712,653,913

Employee stock options

exercised 12,438,375 22,342,010

At December 31 747,434,298 734,995,923



Corp.

1,028 $ 10



December 31, 2013



Corp.

1,028 $ 10



December 31, 2012



Corp.

1,028 $ 10



January 1, 2012

316

(21) Capital surplus

A.Pursuant to the R.O.C. Company Law, 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 capitalised 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.

B.Please refer to Note 6 (19) for the capital reserve – employee stock options. (22) Retained earnings

A.In accordance with the Company’s Articles of Incorporation, 10% of the Company’s annual net income, after paying all taxes and dues and deducting losses of prior years, if any, should be set aside as legal reserve, except when the legal reserve is over total assets. Subsequently, when the reduction in equity is reversed, the Company may return the special reserve to undistributed earnings in the current year. The remaining balance and the cumulative undistributed earnings from prior years are called disposable cumulative undistributed




At January 1, 2013 2,284,925$ 5,043$ 34,730$ 413,844$ 17,085$ 2,238$ 2,757,865$

Difference between - - 137,924 - - - 137,924


in a subsidiary and its carrying amount


common stock

- - - - 13,099)( - 13,099)(




At December 31, 2013 2,488,469$ 5,043$ 172,654$ 397,019$ 3,986$ 2,914$ 3,070,085$




At January 1, 2012 1,909,440$ 5,043$ -$ 427,928$ 23,249$ 1,728$ 2,367,388$

Difference between - - 34,730 - - - 34,730


in a subsidiary and its carrying amount


common stock

- - - - 6,164)( - 6,164)(




At December 31, 2012 2,284,925$ 5,043$ 34,730$ 413,844$ 17,085$ 2,238$ 2,757,865$

2013 2012

At January 1 3,075,527$ 2,721,369$

Profit attributable to owners of

the parent

1,641,730 2,445,282

Set aside as legal reserve 239,244)( 226,273)(

Reversal of special reserve 56,585 130,580

Cash dividends 2,102,403)( 1,995,431)(

At December 31 2,432,195$ 3,075,527$

317

earnings. The net income after legal reserve shall be allocated as follows: (a)At least 2% of the balance as employees’ bonus; (b)2% of the balance as remuneration to directors and supervisors; and (c)After paying employees’ bonus and remuneration to directors and supervisors, the

remaining balance may be distributed as stockholders’ dividends. (d)No less than 50% of the remaining balance and the cumulative undistributed earnings from

prior years may be distributed as stockholders’ dividends, of which at least 20% shall be in the form of cash dividends, upon the approval of the stockholders.

B.Legal reserve only can be used to cover the losses and issue new stocks or cash dividends proportionately according to the stock ratio. The latter should be by an amount under 25% of legal reserve exceeding issued and outstanding capital.

C.The new Taiwan imputation tax system requires that any undistributed current earnings derived on or after January 1, 1998 of the Company are subject to an additional 10% corporate income tax if the earnings are not distributed in the following year.

D.Special reserve

(a)In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

(b)The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently. Such amounts are reversed upon disposal or reclassified if the assets are investment property of land, and reversed over the use period if the assets are investment property other than land.

E.The appropriation of 2012 and 2011 earnings had been resolved at the Board of Directors meeting on June 28, 2013 and the stockholders’ meeting on June 27, 2012, respectively. Details are summarized below:

Amount

Dividends

per share

(in NT dollars) Amount

Dividends

per share

(in NT dollars)

Legal reserve 239,244$ -$ 226,273$ -$

Reversal of 56,585)( - 130,580)( -

special reserve

Cash dividends 2,102,403 2.85 1,995,431 2.80

Total 2,285,062$ 2.85$ 2,091,124$ 2.80$

2012 2011

318

F.The appropriation of 2013 earnings has been resolved at the Board of Directors’ meeting on March 28, 2014. Details are summarized below:

As of March 28, 2014, the abovementioned appropriation of 2013 earnings has not been approved by the stockholders.

G.On June 28, 2013, the abovementioned 2012 earnings appropriation and capitalization of capital surplus was approved by the Board of Directors with the issue date on August 4, 2013. In addition, due to the exercising of the Company’s employee stock options which would result in a change of outstanding common stock, the Board of Directors amended the dividend ratio from NT$2.85 per share to NT$2.84 per share on July 12, 2013.

H.For the years ended December 31, 2013 and 2012, employees’ bonus was accrued at $88,815 and $132,407, respectively; directors’ and supervisors’ remuneration was accrued at $15,000 and $15,000 respectively. Employees’ bonus and directors’ and supervisors’ remuneration of 2012 as resolved by the stockholders were in agreement with those amounts recognized in the 2012 financial statements.

I.Information about the appropriation of employees’ bonus and directors’ and supervisors’ remuneration by the Company as proposed by the Board of Directors and resolved by the stockholders will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(23) Operating revenue

Amount

Dividends

per share

(in NT dollars)

Legal reserve 164,173$ -$

Cash dividends 1,747,341 2.33

Total 1,911,514$ 2.33$

2013



Construction contract revenue 48,392,841$ 56,907,898$

Service revenue 3,395,698 3,176,119

Other operating revenue 433,419 438,145

Total 52,221,958$ 60,522,162$

319

(24) Expense by nature

(25) Employee benefit expense

(26) Other income



Materials 19,841,977$ 25,145,493$

Subcontract costs 17,401,088 18,881,673

Employee benefit expense 9,199,384 9,167,186

Temporary equipment 768,506 817,387

Depreciation charges on property,

plant and equipment 353,326 380,739

Amortisation charges on buried

equipment 346,897 334,322

Amortisation on intangible assets 137,598 143,385

Others 1,807,407 2,414,329

Total 49,856,183$ 57,284,514$



Salaries and wages 7,464,177$ 7,426,285$

Employee stock options 70,878 123,188

Labor and health insurance fees 484,831 385,265

Pension costs 904,045 896,910

Other personnel expenses 275,453 335,538

9,199,384$ 9,167,186$



Interest income 77,754$ 115,805$

Rental income 3,406 4,066

Dividend income 40,075 41,819

Others 54,244 85,848

175,479$ 247,538$

320

(27) Income tax

A.Income tax expense

(a)Components of income tax expense:

B.Reconciliation between income tax expense and accounting profit:



Current tax:

Current tax on profits for the period 389,645$ 775,269$

Adjustments in respect of prior years 27,124)( 66,917)(

Total current tax 362,521 708,352

Deferred tax:

Origination and reversal of temporary

differences 113,208 106,826)(

Impact of change in tax rate 1,595)( 1,646

Total deferred tax 111,613 105,180)(




Tax calculated based on profit before tax

and statutory tax rate 655,435$ 859,575$

Effects from items disallowed by tax

regulation 125,759)( 166,519)(

Prior year income tax overestimated 27,124)( 66,917)(

Tax-exempt income 31,485)( 31,751)(

Additional 10% tax on unappropriated

earnings 10,737 17,161

Reduction of expense for R&D investments 7,670)( 8,377)(


321

C.Amounts of deferred tax assets or liabilities as a result of temporary differences, loss carryforwards and investment tax credits are as follows:

January 1

Recognised in



－Deferred tax assets:

Unrealized loss on financial instruments 510$ -$ 510$

Unrealized construction loss 212,394 194,171)( 18,223

Unrealized bad debts 17,170 151 17,321

Short-term paid absences

(holiday leave) 31,344 4,937 36,281

Unrealized repair cost 8,393 542 8,935

Unrealized impairment loss 3,529 77 3,606

Unrealized labor contract loss 14,825 5,796)( 9,029

Unrealized loss for market price decline and

slow-moving inventories 1,213 622)( 591

Unrealized membership fees of the golf club 918 - 918

Unrealized accrued expense - 9,505 9,505

Urealized labor pension 269,123 56,203 325,326

Others 13,499 6,137 19,636

572,918 123,037)( 449,881

－Deferred tax liabilities:

Unrealised exchange (gain) loss 1,448)($ 7,400)($ 8,848)($

Unrealized investment income from

foreign equity investments 263,141)( 9,498 253,643)(

Urealized gain on concession 140,212)( 6,658)( 146,870)(

Others 27,681)( 14,389 13,292)(

432,482)( 9,829 422,653)(

Total 140,436$ 113,208)($ 27,228$


322

January 1

Recognised in



－Deferred tax assets:

Unrealized loss on financial instruments 510$ -$ 510$

Unrealized construction loss 119,709 92,685 212,394

Over limit of allowance for doubtful accounts 293 293)( -


Short-term paid absences

(holiday leave) 29,058 2,286 31,344

Unrealized repair cost 7,488 905 8,393

Unrealized impairment loss 3,606 77)( 3,529

Unrealized labor contract loss 7,006 7,819 14,825

Unrealized loss for market price decline and

slow-moving inventories 893 320 1,213

Unrealized membership fees of the golf club 918 - 918

Urealized labor pension 198,688 70,435 269,123

Others 14,650 1,151)( 13,499

399,989 172,929 572,918

－Deferred tax liabilities:

Unrealised exchange (gain) loss 12,054)($ 10,606$ 1,448)($

Unrealized investment income from

foreign equity investments 203,226)( 59,915)( 263,141)(

Urealized gain on concession 131,797)( 8,415)( 140,212)(

Others 19,302)( 8,379)( 27,681)(

366,379)( 66,103)( 432,482)(

Total 33,610$ 106,826$ 140,436$


323

D.Expiration dates of unused net operating loss carryfoward and amounts of unrecognised deferred tax assets are as follows:

E.The amounts of deductible temporary difference that are not recognised as deferred tax assets are

as follows:

F.As of December 31, 2013, the Company’s income tax returns through 2011 have been assessed and approved by the Tax Authority.

Amount filed/ Unrecognised

Year incurred assessed Unused amount deferred tax assets Usable until year

2010 2,342$ 144$ 144$ 2020

2012 34,617 32,784 32,784 2022

2013 154,975 154,975 154,975 2023

191,934$ 187,903$ 187,903$



2010 2,211$ 506$ 506$ 2020

2012 34,137 33,407 33,407 2022

36,348$ 33,913$ 33,913$



2009 8,900$ 8,900$ 8,900$ 2019

2010 2,669 2,669 2,669 2020

2011 2,008 2,008 2,008 2021

13,577$ 13,577$ 13,577$

December 31, 2013

December 31, 2012

January 1, 2012


Deductible temporary

differences 206,196$ 107,057$ 98,050$

324

G.The Company and its subsidiaries obtained income tax exemption as follows:

H.Unappropriated retained earnings:

As of December 31, 2013, December 31, 2012 and January 1, 2012, the balance of the imputation tax credit account was $284,858, $287,042 and $70,796, respectively. The creditable tax rate was 20.03% for 2012 and is estimated to be 15.34% for 2013.

I.As of December 31, 2013, details of the loss carryforwards of the Company’s subsidiaries are as follows：

Applicable laws 2013 2012

The Company Regulations governing the application of the

incentive for a five- year exemption from profit-

seeking enterprise income tax to the investments

made by enterprise in the manufacturing industry

and the technical service industry between July 1,

2008 and December 31, 2009

2011.01.01~

2015.12.31

45,658$ 166,290$

Fortune Energy

Corp.

Regulations Governing Application of Profit-

seeking Enterprise Income Tax Exemption to

Private Institutions Participation in Public

Infrastructure Projects

2011.01.01~

2015.12.31

166,707 167,079

Advance

Control &

System Inc.

Regulations for Encouraging Manufacturing

Enterprises and Technical Service Enterprises in the

Newly Emerging, Important and Strategic Industries

2011.01.01~

2016.12.31

7,641 12,860

Period of

tax exemption

Tax exemption amount

for the years ended December 31,


Earnings generated in and

before 1997

47,819$ 47,819$ 47,819$

Earnings generated in and

after 1998

2,384,376 3,027,708 2,673,550

Year of Loss Incurred Amount Expiry Year

2010 144$ 2020

2012 32,784 2022

2013 154,975 2023

187,903$

325

(28) Earnings per share

Weighted-average




Profit attributable to the ordinary

shareholders of the parent 1,641,730$ 739,611 2.22$


Assumed conversion of all

dilutive potential

ordinary shares




shareholders of the parent plus

assumed conversion of all

dilutive potential

ordinary shares 1,641,730$ 755,091 2.17$

Weighted-average




Profit attributable to the ordinary

shareholders of the parent 2,445,282$ 720,660 3.39$


Assumed conversion of all

dilutive potential

ordinary shares




shareholders of the parent plus

assumed conversion of all

dilutive potential

ordinary shares 2,445,282$ 747,216 3.27$



326

(29) Operating leases The Group’s future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

7. RELATED PARTY TRANSACTIONS

Significant transactions and balances with related parties

A.Sales of services:

The price on the construction contracts entered into with related parties are set throught negotiation by both parties. The collection terms were approximately the same as those with third parties.

B.Purchases of services:

The terms of sub-contracting projects with related parties were approximately the same as those with third parties.

C.Accounts receivable:

D.Accounts payable:


Not later than one year 38,026$ 59,190$ 30,918$

Later than one year but not

later than five years 142,103 131,448 59,679

Later than five years 134,103 131,029 116,468

314,232$ 321,667$ 207,065$



Associates 38,643$ 55,191$

Other related parties 27,771 24,186


over the entity 1,795 3,090

68,209$ 82,467$



Associates 153,687$ -$


Associates 3,448$ 18,021$ -$

Other related parties - - 165


over the entity 688 525 1,510

4,136$ 18,546$ 1,675$


Associates 16,134$ -$ 176,165$

327

E.Other receivables:

Certain accounts receivable from related parties which are not on regular collection terms, were reclassified to “other receivables-related parties” whose ageing is from 121 to 365 days.

F. Loans to related parties: (a)Receivables from related parties

The loans to associates are repayable monthly and carry interest at 1.6%~2% per annual for the years ended December 31, 2013 and 2012, respectively.

(b)Interest income

G.Rental expense

H.Provision of endorsements and guarantees

I.Key management compensation


Associates 38,199$ 31,843$ 26$


Joint venture 29,036$ 20,030$ -$



Joint venture 404$ 272$


Joint venture 254,853$ 64,750$ 22,500$

2013 2012

Salaries and other short-term 200,335$ 195,594$

employee benefits

Post-employment benefits 7,837 8,167

Share-based payments 19,844 20,698

Other long-term benefits 482 481

228,498$ 224,940$


Lessor Leased assets Rental amount 2013 2012

Entities with significant Land / Buildings $689/month/semiannual 8,372 $ 8,372 $

influence over the entity payment


328

8. PLEDGED ASSETS

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

In addition to those items which have been disclosed in Note 6(11)、(16)、(29), the significant

contingent liabilities and unrecognised contract commitments of the Group as of December 31, 2013 were as follows:

(1)Guarantee

A.The Group had outstanding notes payable for security deposits under various construction projects amounting to $7,164,784.

B.The Group had outstanding notes payable for bank financing amounting to $75,227,832.

(2)The Group had unused and outstanding letters of credit of $1,265,351.

(3)The Group had outstanding commitments for construction subcontracts and services contracts amounting to $17,267,813.

(4)The Group had issued contracts for acquisition of inventory amounting to $669,438.

(5) As of December 31, 2013, the subsidiaries had issued service contracts for operation amounting to $44,499.

(6)The Environmental Protection Bureau of the Kaohsiung Municipal Government (the “EPB”) filed a civil suit against the Company in 2002 claiming damages in the amount of $61,021 plus 5% of interest due to a revenue loss caused by a power outage during the warranty period of a waste-to-energy plant designed and constructed by the Company. The Company disputed the claim. The Taiwan High Court Kaohsiung Branch rendered a judgement in favor of EPB for the damage claim of $55,856. On the other hand, the Company won the lawsuit for a counterclaim on EPB for unpaid bonus amounting to $76,662. As a result, the judgement orders EPB to pay the Company $20,806 plus 5% interest starting from the settlement date until October 13, 2006. This case is currently being handled by the Taiwan High Court Kaohsiung Branch for the year ended December 31, 2013 as the second appeal No. 16. As of December 31, 2013, the Group has not

Pledged assets December 31, 2013 December 31, 2012 January 1, 2012 Purpose

Other current assets

Pledged bank deposits 981$ 108$ 273,685$

Guarantee for wages 57,383 33,299 42,775 Guarantee for wages

Other non-current assets

Pledged time deposits 107,868 51,143 150,200 Guarantee for oil expense and

long-term borrowings

Refundable deposits 119,866 152,292 123,179 Guarantee for oil expense, rent,

golf certificates, tender bonds,

construction contracts, and wages

Long-term prepaid rent 67,201 73,177 79,153 Guarantee for long-term borrowings

Property, plant and 4,341,544 4,584,299 4,659,838 Guarantee for construction

equipment contracts, tender bond, short-term

and long-term borrowings

Investment property 833,141 838,925 845,000 Guarantee for long-term borrowings

5,527,984$ 5,733,243$ 6,173,830$

Guarantee for oil expense, bank

guarantee,construction contracts

and tender bonds

Book value

329

paid or recognised any compensation loss. According to the Group’s lawyer, amongst the damages claimed by the civil suit filed by the Environmental Protection Bureau of the Kaohsiung Government (the “EPB”), $55,856 is from the EPB’s damage claim resulting from the defects of CTCI’s generator, which is a responsibility for completion of the contract, because the EPB’s damage claim has passed the effective period of 1 year set by the Civil Code Article 498 Time of Exclusion Clause or Article 514 Limitation Period Plea, the damage claim had extinguished. As for the counterclaim by CTCI on the EPB for unpaid bonus of $76,662, there was an agreement for speeding up the construction progress by both sides, thus the first instance judgement decided to adopt the same terms.

(7)The Company had a joint procurement project with Mitsubishi Heavy Industries, Ltd. in 1997. The construction was completed on February 19, 2001 and accepted by the Environmental Protection Administration (the “EPA”) on May 16, 2011. According to the contract, the Company provided warranty deposit amounting to $141,690 on the materials of the equipment. As the Kaohsiung County government, the user of the incineration, had a dispute with the operating manufacturer, the EPB rejected to repay the deposit. The EPA availed of the warranty deposit on February 4, 2010. As a result, the Company had to remit $73,253 to the procurement department of Bank of Taiwan Co., Ltd. Consequently, the Company took action to cancel the deposit of $ 141,690 and filed a lawsuit requiring EPA to repay the $73,253 amount. The EPA indicated that it had repaid $9,299 to the Company in 2010. Therefore, the Company reduced the lawsuit claim to $63,954 plus interest of $117 and damage loss of $2,421. The case was passed back to the the Taiwan High Court after being handled by the Supreme Court, thus is currently being handled by the Taiwan High Court for the year ended December 31, 2013.

According to the Company’s lawyer, the outcome of the case is still uncertain and it is difficult to estimate any potential gain or loss on the case.

10. SIGNIFICANT DISASTER LOSS None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE Please see Note 6 (22) F. for detailed information on the apporopriation of 2013 earnings that had been resolved at the Board of Directors’ meeting on March 28, 2014.

12. OTHERS (1)Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated balance sheet. The gearing ratios as of December 31, 2013, December 31, 2012 and January 1, 2012 were as follows:

330

(2)Financial instruments

A.Fair value information of financial instruments


Total borrowings 4,819,744$ 5,536,193$ 5,993,438$

Total equity 18,945,489$ 18,564,301$ 17,285,175$

Gearing ratio 25.44% 29.82% 34.67%


Financial assets:



or loss

Held for trading 806,006 806,006





Notes receivable 3,244,527 3,244,527


Other receivables 242,668 242,668


December 31, 2013


Financial assets:



or loss

Held for trading 1,736,915 1,736,915





Notes receivable 9,747 9,747




December 31, 2012

331


Financial assets:



or loss

Held for trading 3,557,281 3,557,281





Notes receivable 23,715 23,715




January 1, 2012



Short-term borrowings 991,965$ 991,965$


profit or loss




Other payables 2,688,807 2,688,807

Bonds payable 33,200 33,200

Long-term borrowings (including current

portion)

3,794,579 3,794,579


December 31, 2013

332

B.Financial risk management policies

(a)The Group’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 Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial position and financial performance.

(b)Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering





profit or loss




Other payables 2,790,568 2,790,568



portion)

4,385,355 4,385,355


December 31, 2012





profit or loss




Other payables 2,494,500 2,494,500



portion)

4,954,014 4,954,014


January 1, 2012

333

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

i.The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD and EUR. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

ii.Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The group companies are required to hedge their entire foreign exchange risk exposure with the Group treasury. To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the Group use forward foreign exchange contracts, transacted with Group treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

iii.The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.

iv.The Group’s businesses involve some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: NTD; other certain subsidiaries’ functional currency: USD, RMB, etc.). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

334

Foreign Currency

Amount


(Foreign currency:


Financial assets

Monetary items

USD：NTD 41,330$ 29.8500 1,233,701$

EUR：NTD 10,698 41.2600 441,399

JPY：NTD 501,549 0.2852 143,042

GBP：NTD 64 49.4500 3,165

THB：NTD 49,555 0.9140 45,293

MOP：NTD 8,564 3.6810 31,524

HKD：NTD 705 3.8600 2,721

SGD：NTD 2,365 23.6700 55,980

CAD：NTD 71 28.1200 1,997

RMB：NTD 345,611 4.9380 1,706,627

SEK：NTD 554 4.5800 2,537

CHF：NTD 2,099 33.6600 70,652

EUR：USD 1,764 1.3822 2,438

USD：RMB 1,396 6.0450 8,439

USD：THB 152 32.6586 4,964

USD：SAR 4,534 3.7500 17,003

USD：SGD 3,034 1.2611 3,826

USD：MYR 244 3.2788 800

EUR：SAR 54 5.1834 280


Monetary items

USD：NTD 11,869 29.8500 354,290

EUR：NTD 1,122 41.2600 46,294

JPY：NTD 53,940 0.2852 15,384

SAR：NTD 286 7.8987 2,259

THB：NTD 2,612 0.9140 2,387

CHF：NTD 47 33.6600 1,582

USD：RMB 3,000 6.0450 18,135

Non-monetary items

Investment under the equity method

RMB：NTD 3,647 4.9380 18,007

SGD：NTD 28 23.6700 669

December 31, 2013

335

Foreign Currency

Amount


(Foreign currency:


Financial assets

Monetary items

USD：NTD 105,131$ 29.03 3,051,953$

EUR：NTD 19,985 38.48 769,023

JPY：NTD 504,853 0.34 171,650

GBP：NTD 1,938 46.82 90,737

THB：NTD 415,138 0.95 394,381

USD：THB 1,920 30.59 58,733

RMB：NTD 28,184 4.66 131,337

CHF：NTD 2,252 31.83 71,681

EUR：USD 7,282 1.33 9,685

THB：USD 63,571 0.03 1,907

RMB：USD 10,644 0.16 1,703

USD：SAR 8,320 3.75 31,200

USD：SGD 5,095 1.22 6,216


Monetary items

EUR：NTD 1,927 38.48 74,151

JPY：NTD 282,630 0.34 96,094

USD：NTD 17,042 29.03 494,729

GBP：USD 1,760 1.61 2,834

THB：USD 33,616 0.03 1,008

EUR：USD 2,902 1.33 3,860

USD：RMB 7,118 6.66 47,406

USD：SAR 65,000 3.75 243,750

Non-monetary items


RMB：NTD 4,217 4.66 19,662

SGD：NTD 85 23.75 2,020

December 31, 2012

336

Foreign Currency

Amount


(Foreign currency:


Financial assets

Monetary items

USD：NTD 54,816$ 30.26 1,658,732$

EUR：NTD 22,587 39.19 885,185

JPY：NTD 413,184 0.39 161,142

GBP：NTD 52 46.76 2,432

THB：NTD 197,946 0.96 190,028

EUR：USD 525 1.30 683

JPY：USD 8,117 0.01 81

GBP：USD 447 1.55 693

THB：USD 62,652 0.03 1,880

RMB：USD 10,655 0.16 1,705

USD：VND 2,652 21,614.29 57,321,097

USD：THB 1,975 31.69 62,588


Monetary items

EUR：NTD 1,317 39.19 51,613

GBP：NTD 397 46.76 18,564

JPY：NTD 29,714 0.39 11,588

USD：NTD 17,853 30.26 540,232

EUR：HKD 515 1.30 670

JPY：HKD 9,889 0.01 99

GBP：HKD 122 1.55 189

January 1, 2012

337

Degree of

Variation

Effect on Profit

or Loss

Effect on Other

Comprehensive

Income

(Foreign currency:


Financial assets

Monetary items

USD：NTD 1% 12,337$ -$

EUR：NTD 1% 4,414 -

JPY：NTD 1% 1,430 -

GBP：NTD 1% 32 -

THB：NTD 1% 453 -

AUD：NTD 1% 1 -

MOP：NTD 1% 315 -

HKD：NTD 1% 27 -

SGD：NTD 1% 560 -

CAD：NTD 1% 20 -

RMB：NTD 1% 17,066 -

SEK：NTD 1% 25 -

CHF：NTD 1% 707 -

EUR：USD 1% 24 -

USD：RMB 1% 84 -

USD：THB 1% 50 -

USD：SAR 1% 170 -

USD：SGD 1% 38 -

USD：MYR 1% 8 -

EUR：SAR 1% 3 -


Monetary items

USD：NTD 1% 3,543 -

EUR：NTD 1% 463 -

JPY：NTD 1% 154 -

SAR：NTD 1% 23 -

THB：NTD 1% 24 -

CHF：NTD 1% 16 -

USD：RMB 1% 181 -

Non-monetary items


RMB：NTD 1% 180 -

SGD：NTD 1% 7 -


338

Degree of

Variation

Effect on Profit

or Loss

Effect on Other

Comprehensive

Income

(Foreign currency:


Financial assets

Monetary items

USD：NTD 1% 30,520$ -$

EUR：NTD 1% 7,690 -

JPY：NTD 1% 1,717 -

GBP：NTD 1% 907 -

THB：NTD 1% 3,944 -

USD：THB 1% 587 -

RMB：NTD 1% 1,313 -

CHF：NTD 1% 717 -

EUR：USD 1% 97 -

THB：USD 1% 19 -

RMB：USD 1% 17 -

USD：SAR 1% 312 -

USD：SGD 1% 62 -


Monetary items

EUR：NTD 1% 742 -

JPY：NTD 1% 961 -

USD：NTD 1% 4,947 -

GBP：USD 1% 28 -

THB：USD 1% 10 -

EUR：USD 1% 39 -

USD：RMB 1% 474 -

USD：SAR 1% 2,438 -

Non-monetary items


RMB：NTD 1% 197 -

SGD：NTD 1% 20 -

December 31, 2012


339

Price risk

The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet either as available-for-sale or at fair value through profit or loss. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

Interest rate risk

The Group’s interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. During the years ended December 31, 2013 and 2012, the Group’s borrowings at variable rate were denominated in NTD and USD.

(b)Credit risk

i.Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors.

ii.The credit quality information of financial assets that are neither past due nor impaired is as follows:

Group 1：Government or state- owned enterprise.

Group 2：Listed companies.

Group 3：The company does not belong to group 1 or group 2.



December 31, 2013


Notes and accounts receivable 862,385$ 194,126$ 1,036,190$

December 31, 2012



January 1, 2012

340

iii.Movements on the Group provision for impairment of accounts receivable are as follows:

iv.The ageing analysis of financial assets that were past due but not impaired is as follows:

(c)Liquidity risk

i.Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets.

2013

At January 1 40,674$

Reversal of impairment -

Provision for impairment 77,933

At December 31 118,607$

2012

At January 1 48,114$

Reversal of impairment 7,440)(

Provision for impairment -

At December 31 40,674$


Accounts receivable

Up to 30 days 821,836$ 361,693$ 245,307$

31 to 90 days 2,702,545 84,866 91,459

91 to 180 days 14,882 1,440,355 995,352

Over 181 days 372,340 216,353 220,381

3,911,603$ 2,103,267$ 1,552,499$

341

ii.The table below analyses the Group’s non-derivative financial liabilities and net-settled 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 and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.



Short-term borrowings 991,965$ -$

Notes payable 5,518 -

Accounts payable 13,324,589 39,701


Bonds payable 33,200 -

Long-term borrowings (including

current portion)

498,282 3,296,297




Short-term borrowings 852,873$ -$




Bonds payable 297,965 -


current portion)

478,573 3,906,782



January 1, 2012 Less than 1 year More than 1 year

Short-term borrowings $ 632,142 $ -




Bonds payable - 407,282


current portion)

440,601 4,513,413


342

(d)Cash flow risk from variations of rates

There is no significant cash flow risk from variations of rates since accounts payable are due less than one year.

Derivative financial liabilities:

December 31, 2013

Interest rate swaps (net-settled) $ - $ 11,151

Forward exchange contracts 3,423 673


Less than

3 months

Between

3 months

and 1 year

December 31, 2012

Less than

3 months

Between

3 months

and 1 year

Interest rate swaps (net-settled) $ 1,354 $ 2,929

Forward exchange contracts 358 81

Commodity swap contracts 503 1,575

January 1, 2012

Less than

3 months

Between

3 months

and 1 year


Forward exchange contracts 4,842 -

Commodity swap contracts 5,470 14,150

343

(3)Fair value estimation

A.The table below analyses financial instruments measured at fair value, by valuation method. The different levels have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within level 1 that are observable for the

asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3: Inputs for the asset or liability that is not based on observable market data.

The following table presents the Group’s financial assets and liabilities that are measured at fair

value as of December 31, 2013, December 31, 2012 and January 1, 2012.


Financial assets:

Financial assets at

fair value through

profit or loss

　Mutual funds 806,006$ -$ -$ 806,006$


assets

- 36,689 520 37,209

Available-for-sale

financial assets


Total 1,410,736$ 36,689$ 520$ 1,447,945$



fair value through

profit or loss


liabilities -$ 20,061$ -$ 20,061$

344


Financial assets:

Financial assets at

fair value through

profit or loss

　Mutual funds 1,736,915$ -$ -$ 1,736,915$


assets

- 62,445 2,368 64,813

Available-for-sale

financial assets


Total 2,411,497$ 62,445$ 2,368$ 2,476,310$



fair value through

profit or loss


liabilities -$ 6,800$ -$ 6,800$

January 1, 2012 Level 1 Level 2 Level 3 Total

Financial assets:

Financial assets at

fair value through

profit or loss

　Mutual funds 3,557,281$ -$ -$ 3,557,281$


assets

- 86,121 4,066 90,187

Available-for-sale

financial assets


Total 4,123,982$ 86,121$ 4,066$ 4,214,169$



fair value through

profit or loss


liabilities -$ 24,462$ -$ 24,462$

345

B.The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the closing price. These instruments are included in level 1. Instruments included in level 1 comprise primarily equity instruments and debt instruments classified as financial assets/financial liabilities at fair value through profit or loss or available-for-sale financial assets.

C.The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

D.If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

E.Specific valuation techniques used to value financial instruments include:

(a)Quoted market prices or dealer quotes for similar instruments.

(b)The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value.

(c)Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

346

13.SUPPLEMENTARY DISCLOSURES (1) Significant transactions information

A. Loans to others:

Number

General

ledger

account

Maximum

outstanding

balance during

the year ended

December 31,

2013

Balance at

December 31,

2013

Actual

amount

drawn Interest

Nature of

loan

Amount of

transactions

with the

borrower

Reason

for short-term

financing

Allowance

for

doubtful

Limit on

loans

granted to

a single

party

Ceiling on

total loans

granted

(Note 1) Creditor Borrower (Note 2) (Note 3) (Note 8) down rate (Note 4) (Note 5) (Note 6) accounts Item Value (Note 7) (Note 7) Footnote

0 CTCI CTCI

(Thailand)

CO., Ltd.

Other

receivables-

related

parties

500,000$ 447,750$ 82,260$ 0.810% 2 -$ For

operational

need

-$ - -$ 3,294,423$ 6,588,845$ -

0 CTCI CTCI Arabia

Ltd.

Other

receivables-

related

parties

2,318,800 2,313,375 1,716,375 0.782~0.827% 2 - For

operational

need

- - - 3,294,423 6,588,845 -

0 CTCI CTCI

Machinery

Corp.

Other

receivables-

related

parties

1,200,000 1,200,000 770,000 1% 2 - For

operational

need

- - - 3,294,423 6,588,845 -

0 CTCI E & C

Engineering

Corp.

Other

receivables-

related

parties

200,000 200,000 - 1% 2 - For

operational

need

- - - 3,294,423 6,588,845 -

0 CTCI ShangDing

Engineering &

Construction

Co., Ltd.

Other

receivables-

related

parties

89,760 89,550 89,550 0.782% 2 - For

operational

need

- - - 3,294,423 6,588,845 -

0 CTCI Jing Ding

Engineering &

Construction Co.,

Ltd.

Other

receivables-

related

parties

149,600 149,250 - 0.782% 2 - For

operational

need

- - - 3,294,423 6,588,845 -

Collateral

347

Number

General

ledger

account

Maximum

outstanding

balance during

the year ended

December 31,

2013

Balance at

December 31,

2013

Actual

amount

drawn Interest

Nature of

loan

Amount of

transactions

with the

borrower

Reason

for short-term

financing

Allowance

for

doubtful

Limit on

loans

granted to

a single

party

Ceiling on

total loans

granted


Collateral


Sdn. Bhd.

Other

receivables-

related

parties

537,300$ 537,300$ 10,448$ 0.79% 2 -$ For

operational

need

-$ - -$ 3,294,423$ 6,588,845$ -

0 CTCI Resources

Engineering

Service Inc.

Other

receivables-

related

parties

100,000 100,000 20,000 1% 2 - For

operational

need

- - - 3,294,423 6,588,845 -

1 CTCI Overseas

Co.,Ltd.

CIPEC

Construction Inc.

Other

receivables-

related

parties

13,420 13,340 13,340 0.822% 2 - For

operational

need

- - - 818,239 818,239 -

1 CTCI Overseas

Co.,Ltd.

ShangDing

Engineering &

Construction

Co., Ltd.

Other

receivables-

related

parties

290,690 288,948 288,948 0.782-0.825% 2 - For

operational

need

- - - 818,239 818,239 -

1 CTCI Overseas

Co.,Ltd.

Superiority

(Thailand) Co., Ltd.

Other

receivables-

related

parties

64,450 - - 0.967% 2 - For

operational

need

- - - 818,239 818,239 -

2 Universal

Engineering

(BVI)

Corporation

Superiority

(Thailand) Co., Ltd.

Other

receivables-

related

parties

62,264 58,741 58,741 0.822% 2 - For

operational

need

- - - 87,220 87,220 -

2 Universal

Engineering

(BVI)

Corporation

CTCI Overseas

Co.,Ltd.

Other

receivables-

related

parties

23,880 23,880 23,880 0.788% 2 - For

operational

need

- - - 87,220 87,220 -

2 Universal

Engineering

(BVI)

Corporation

CIPEC

Construction Inc.

Other

receivables-

related

parties

13,239 - - 0.967% 2 - For

operational

need

- - - 87,220 87,220 -

348

Number

General

ledger

account

Maximum

outstanding

balance during

the year ended

December 31,

2013

Balance at

December 31,

2013

Actual

amount

drawn Interest

Nature of

loan

Amount of

transactions

with the

borrower

Reason

for short-term

financing

Allowance

for

doubtful

Limit on

loans

granted to

a single

party

Ceiling on

total loans

granted


Collateral

3 KD Holding

Corp.

G.D. Development

Corporation

Other

receivables-

related

parties

100,000$ 100,000$ 29,000$ 1.6~2% 2 -$ For

operational

need

-$ - -$ 400,545$ 1,602,182$ -

4 Jing Ding

Engineering &

Construction

Co., Ltd.

ShangDing

Engineering &

Construction

Co., Ltd.

Other

receivables-

related

parties

48,870 24,690 24,690 2.6% 2 - For

operational

need

- - - 535,447 535,447 -

5 Resources

Engineering

Service

Inc.

E & C

Engineering

Corp.

Other

receivables-

related

parties

40,000 - - 1% 2 - For

operational

need

- - - 33,937 135,748 -

349

Note 1: The numbers filled in for the loans provided by the Company or subsidiaries are as follows:



Note 2: Fill in the name of account in which the loans are recognised, such as receivables-related parties, current account with stockholders, prepayments, temporary payments, etc.

Note 3: Fill in the year-to-date maximum outstanding balance of loans to others as of the reporting period

Note 4:.The numbers filled in for the nature of loans are as follows:

(1) Business association is labeled as “1”

(2) Short-term financing is labeled as “2”.

Note 5: Fill in business association amount when nature of loan belongs to business association.

Note 6: Fill in purpose of loan when nature of loan belongs to short-term financing, for example, repayment of loan, acquisition of equipment, working capital, etc.

Note 7: The calculation and amount on ceiling of loans are as follows:

[The company]

(1) The limit on loans granted to a single party shall not exceed 20% of the Company’s net assets value.



(1) The limit on loans granted to a single party by domestic subsidiaries and overseas subsidiaries shall not exceed 10% and 40% of the Company’s net value, respectively.


Note 8: The amounts of funds to be loaned to others which have been approved by the board of directors of a public company in accordance with Article 14, Item 1 of the “Regulations Govering Loaning of Funds and Making of Endorsements/Guarantees by public Companies” should be included in its published balance of loans to others at the end of the reporting period to reveal the risk of loaning the public company bears, even though they have not yet been appropriated. However, this balance should excluded the loans repaid when repayments are done subsequently to reflect the risk adjustment. In addition, if the board of directors of a public company has authorised the chairman to loan funds in instalments or in revolving within certain lines and within one year in accordance with Article 14, Item 2,of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”, the published balance of loans to others at the end of the reporting period should also include these lines of loaning approved by the board of directors, and these lines of loaning should not be excluded from this balance even though the loans are repaid subsequently, for taking into consideration they could be loaned again thereafter.

350

B. Provision of endorsements and guarantees to others:

Number Endorser/

Relationship

with the

endorser/

guarantor

Limit on

endorsements

/guarantees

provided for a

single party

Maximum

outstanding

endorsement/

guarantee

amount during

the year ended

December 31, 2013

Outstanding

endorsement/

guarantee

amount at

December 31,

2013

Actual

amount

drawn down

Amount of

endorsements

/guarantees

secured with



amount to net asset

value of the

endorser/guarantor

Ceiling on

total amount

of

endorsements/

guarantees

provided

Provision of

endorsements/

guarantees by

parent

company to

subsidiary

Provision of

endorsements

/guarantees

by subsidiary

to parent

company

Provision of

endorsements/

guarantees to

the party in

Mainland

China


0 CTCI CTCI

(Thailand)

CO., Ltd.

3 $ 49,416,339 3,869,237$ 2,813,637$ 772,357$ -$ 17.08% $ 98,832,678 Y N N -

0 CTCI CTCI Overseas

Co., Ltd.

3 49,416,339 11,488,683 7,110,062 2,742,959 - 43.16% 98,832,678 Y N N -

0 CTCI Jing Ding

Engineering &

Construction

Co., Ltd.

3 49,416,339 798,892 777,573 145,938 - 4.72% 98,832,678 Y N Y -

0 CTCI CINDA

Engineering &

Construction

Private Limited

3 49,416,339 2,260,533 2,181,179 966,063 - 13.24% 98,832,678 Y N N -

0 CTCI ShangDing

Engineering &

Construction

Co., Ltd.

3 49,416,339 1,574,244 500,823 25,855 - 3.04% 98,832,678 Y N Y -

0 CTCI CTCI Arabia Ltd. 3 49,416,339 6,448,579 6,160,622 2,189,591 - 37.40% 98,832,678 Y N N -

0 CTCI CTCI Singapore

Pte. Ltd.

2 49,416,339 491,689 486,087 71,934 - 2.95% 98,832,678 Y N N -

0 CTCI Advanced

Control &

Information

Technology

Systems Inc.

3 49,416,339 11,824 11,753 - - 0.07% 98,832,678 Y N Y -

0 CTCI CTCI Machinery

Corp.

2 49,416,339 326,908 326,908 292,752 - 1.98% 98,832,678 Y N N -

Party being

endorsed/guaranteed

351

Number Endorser/

Relationship

with the

endorser/

guarantor

Limit on

endorsements

/guarantees

provided for a

single party

Maximum

outstanding

endorsement/

guarantee

amount during

the year ended

December 31, 2013

Outstanding

endorsement/

guarantee

amount at

December 31,

2013

Actual

amount

drawn down

Amount of

endorsements

/guarantees

secured with



amount to net asset

value of the

endorser/guarantor

Ceiling on

total amount

of

endorsements/

guarantees

provided

Provision of

endorsements/

guarantees by

parent

company to

subsidiary

Provision of

endorsements

/guarantees

by subsidiary

to parent

company

Provision of

endorsements/

guarantees to

the party in

Mainland

China


Party being

endorsed/guaranteed

0 CTCI Sinogal-Waste

Services Corp.

6 $ 49,416,339 16,666$ -$ -$ -$ - $ 98,832,678 Y N N -

0 CTCI CIMAS

Engineering Co.,

Ltd.

3 49,416,339 409,200 388,050 - - 2.36% 98,832,678 Y N N -

0 CTCI CTCI Chemical

Corp.

3 49,416,339 41,260 41,260 4,260 - 0.25% 98,832,678 Y N N -

0 CTCI E&C Engineering

Corp.

2 49,416,339 41,260 41,260 1,704 - 0.25% 98,832,678 Y N N -

0 CTCI Universal

Engineering

(BVI) Corporation

3 49,416,339 30,030 29,850 836 - 0.18% 98,832,678 Y N N -


Sdn. Bhd.

3 49,416,339 1,518,005 1,518,005 557,730 - 9.22% 98,832,678 Y N N -

1 Advanced

Control &

System Inc.

Century Ahead

Ltd.

2 530,144 18,018 17,910 - - 3.38% 1,060,288 Y N N -

2 E&C Engineering

Corp.

Synergy

Engineering

Corporation

2 2,223,775 50,000 50,000 - - 6.75% 4,447,551 N N N -

2 E&C Engineering

Corp.

CTCI Machinery

Corp.

5 2,223,775 1,230,407 1,230,407 1,230,407 - 165.99% 4,447,551 N N N -

2 E&C Engineering

Corp.

Resources

Engineering

Service Inc.

5 2,223,775 28,249 28,080 28,080 - 3.79% 4,447,551 N N N -

2 E&C Engineering

Corp.

ShangDing

Engineering &

Construction

Co., Ltd.

5 2,223,775 276,940 276,940 276,940 - 37.36% 4,447,551 N N Y -

352

Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:



Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following nine categories; fill in the number of category

Number Endorser/

Relationship

with the

endorser/

guarantor

Limit on

endorsements

/guarantees

provided for a

single party

Maximum

outstanding

endorsement/

guarantee

amount during

the year ended

December 31, 2013

Outstanding

endorsement/

guarantee

amount at

December 31,

2013

Actual

amount

drawn down

Amount of

endorsements

/guarantees

secured with



amount to net asset

value of the

endorser/guarantor

Ceiling on

total amount

of

endorsements/

guarantees

provided

Provision of

endorsements/

guarantees by

parent

company to

subsidiary

Provision of

endorsements

/guarantees

by subsidiary

to parent

company

Provision of

endorsements/

guarantees to

the party in

Mainland

China


Party being

endorsed/guaranteed

3 Sino

Environmental

Service Corp.

Sinogal-Waste

Services Corp.

6 $ 1,436,542 16,666$ -$ -$ -$ - 2,154,813$ N N N -

4 CTCI Machinery

Corp.

E&C Engineering

Corp.

5 798,667 404,033 404,033 404,033 - 151.77% 1,597,334 N N N -

4 CTCI Machinery

Corp.

Resources

Engineering

Service Inc.

5 798,667 16,251 9,010 9,010 - 3.38% 1,597,334 N N N -

5 Resources

Engineering

Service Inc.

CTCI Machinery

Corp.

5 1,018,125 629,000 629,000 629,000 - 185.34% 2,036,249 N N N -

5 Resources

Engineering

Service Inc.

CTCI 5 1,018,125 39,600 24,800 24,800 - 7.31% 2,036,249 N Y N -

6 CTCI Chemical

Corp.

Resources

Engineering

Service Inc.

5 507,292 77,422 20,935 20,935 - 12.38% 1,014,584 N N N -

6 CTCI Chemical

Corp.

CTCI Machinery

Corp.

5 507,292 230,473 230,473 230,473 - 136.30% 1,014,584 N N N -

7 ShangDing

Engineering &

Construction

Co., Ltd.

Shanghai XuanLi

Trading Co.,

Ltd.

2 1,554,416 249,249 247,755 24,099 - 47.81% 3,108,832 N N Y -

8 KD Holding Corp. G.D.

Development

Corporation

6 8,010,908 254,853 254,853 142,273 - 6.36% 12,016,362 N N N -

353

each case belongs to:

(1)Having business relationship.

(2)The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/guaranteed subsidiary.

(3)The endorser/guarantor parent company and its subsidiaries jointly own more than 50% voting shares of the endorsed/guaranteed company.

(4)The endorsed/guaranteed parent company directly or indirectly owns more than 50% voting shares of the endorser/guarantor subsidiary.

(5)Mutual guarantee of the trade as required by the construction contract.

(6)Due to joint venture, each shareholder provides endorsements/guarantees to the endorsed/guaranteed company in proportion to its ownership.


[The company]

(1)The limit on endorsements and guarantees granted to a single party shall not exceed 300% of the Company’s net assets value in last financial statement which was reviewed or audited by accountant.

(2)The ceiling on total endorsements and guarantees shall not exceed 600% of the Company’s net assts value in last financial statement which was reviewed or autored by accountant.


(1)The limit on endorsements and guarantees granted to a single party shall not exceed 100% to 300% of the Company’s net assets value in last financial statement which was reviewed or audited by accountant.

(2)The ceiling on total endorsements and guarantees shall not exceed 200% to 600% of the Company’s net assets value in last financial statement which was reviewed or audited by accountant.

Note 4:Fill in the year-to-date maximum outstanding balance of endorsements/guarantees provided as of the reporting period.

Note 5:Once endorsement/guarantee contracts or promissory notes are signed/issued by the endorser/guarantor company to the banks, the endorser/guarantor company bears endorsement/guarantee liabilities. And all other events involve endorsements and guarantees should be included in the balance of outstanding endorsements and guarantees.

Note 6:Fill in the actual amount of endorsements/guarantees used by the endorsed/guaranteed company.

Note 7:Fill in “Y” for those cases of provision of endorsements/guarantees by listed parent company to subsidiary and provision by subsidiary to listed parent company, and provision to the party in Mainland China.

354

C. Holding of marketable securities at the end of the period:

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


CTCI Fund Manulife Superior Selection

China Fund



loss-current

- 21,844$ - 21,156$ -

CTCI Fund BlackRock Global Allocation

fund, etc.



loss-current

- 59,225 - 60,146 -

CTCI Fund Eastspring Inv Well Pool

Money Market, etc.



loss-current

- 350,605 - 350,843 -

431,674 432,145$

Adjustment 471

432,145$

CTCI Common Stock China Steel Chemical Corp. The Company’s

President is the

supervisor

Available-for-sale


1,776,916 100,615$ - 293,191$ -

CTCI Common Stock Gintech Energy Corporation. The Company's

President is

the director

Available-for-sale


1,696,499 79,977 - 57,681 -

CTCI Common Stock Hon Hai Precision Ind. Corp.

etc.

- Available-for-sale


- 15,621 - 19,722 -

196,213 370,594$

Adjustment 174,381

370,594$

(Note 1)


securities issuer

(Note 2)


355

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


(Note 1)


securities issuer

(Note 2)


CTCI Common Stock Core Pacific City Co., Ltd. The Company is

the director

Financial assets

measured at

cost - non-current

36,000,000 360,000$ 2.26 190,000$ -

CTCI Common Stock Utech Solar Corporation. The Company is

the director

Financial assets

measured at

cost - non-current

24,000,000 330,000 15.00 129,877 -

CTCI Common Stock CDIB & Partners Investment

Hol

The Company is

the director

Financial assets

measured at

cost - non-current

27,000,000 250,000 2.48 250,000 -

CTCI Common Stock Metro Consulting Service

Corp., etc.

- Financial assets

measured at

cost - non-current

- 6,000 - 3,000 -

Less:Accumulated impairment 373,123)( 572,877$

572,877$

Sino Environmental

Services Corp.


Money Market Fund



loss-current

2,708,946 36,000$ - 36,000$ -

Sino Environmental

Services Corp.

Common Stock CTCI Corp. The Company Available-for-sale


1,028 49 - 49 -

Sino Environmental

Services Corp.


the Company's

director

Available-for-sale


438,000 20,265 - 20,265 -

Sino Environmental

Services Corp.


President is

the director

Available-for-sale


575,000 19,550 - 19,550 -

356

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


(Note 1)


securities issuer

(Note 2)


Advanced Control &

System Inc.


Money Market Fund



loss-current

11,931,558 158,563$ - 158,563$ -

Advanced Control &

System Inc.

Fund Capital Money Market Fund - Financial assets at fair


loss-current

2,823,198 44,500 - 44,500 -

Advanced Control &

System Inc.

Fund Jih Sun Money Market Fund - Financial assets at fair


loss-current

691,735 10,000 - 10,000 -

Advanced Control &

System Inc.

Common Stock Taiwan Cement Corp. - Available-for-sale


825,980 38,202 - 38,202 -

Advanced Control &

System Inc.

Common Stock Gintech Energy Corporation. - Available-for-sale


737,000 25,058 - 25,058 -

E&C Engineering

Corp.

Common Stock Titan Technology Venture

Capital Investment Corp.

- Financial assets

measured at

cost - non-current

31,345 200 2.50 200 -

E&C Engineering

Corp.


Market Fund



loss-current

4,087,606 50,013 - 50,013 -

Innovest Investment Corp. Common Stock Global Strategic Investment

Inc, etc.

- Financial assets

measured at

cost - non-current

- 2,900 - 2,900 -

357

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


(Note 1)


securities issuer

(Note 2)


Innovest Investment Corp. Common Stock Gintech Energy Corporation. The Company's

President is

the director

Available-for-sale


277,000 9,418$ - 9,418$ -

Innovest Investment Corp. Common Stock CTCI Corp. The Company Available-for-sale


344,436 16,636 0.05 16,636 -

GRQ Investment Corp. Common Stock CTCI Corp. The Company Available-for-sale


912,170 44,058 0.12 44,058 -

GRQ Investment Corp. Common Stock Advanced Control &

System Inc.

Subsidiary Available-for-sale


324,417 17,875 1.42 17,875 -

GRQ Investment Corp. Fund Schroder China bond Fund - Financial assets at fair


loss-current

- 12,095 - 12,095 -

GRQ Investment Corp. Common Stock Gintech Energy Corporation. The Company's

President is

the director

Available-for-sale


819,000 27,846 - 27,846 -

CTCI Chemical Corp. Fund Polaris De-Bao Money Market

Fund, etc.



loss-current

663,333 9,036 - 9,036 -

HD Resources

Management Corp.


Market Fund



loss-current

899,000 11,003 - 11,003 -

HD Resources

Management Corp.


the Company's

director

Available-for-sale


435,000 20,133 - 20,133 -

358

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


(Note 1)


securities issuer

(Note 2)



Service Inc.


President is

the director

Available-for-sale


872,000 29,648$ - 29,648$ -


Service Inc.

Common Stock Global Strategic Investment - Financial assets

measured at

cost - non-current

700,000 7,000 - 7,000 -

Leading Energy Corp. Fund Taishin Great China Fund - Financial assets at fair


loss-current

500,000 5,140 - 5,140 -

Leading Energy Corp. Fund Capital Money Market Fund - Financial assets at fair


loss-current

1,777,000 28,002 - 28,002 -

Leading Energy Corp. Common Stock Taiwan Cement Corp. The president is

the Company's

director

Available-for-sale


432,280 19,993 - 19,993 -

KD Holding Corp. Common Stock Taiwan Cement Corp. The president is

the Company's

director

Available-for-sale


180,000 8,315 - 8,315 -

KD Holding Corp. Common Stock Gintech Energy Corporation. The Company's

President is

the director

Available-for-sale


462,000 15,708 - 15,708 -

KD Holding Corp. Common Stock TSC Venture Management.

Inc.

- Financial assets

measured at

cost - non-current

270,000 - 5.88 - -

359

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities within the scope of IAS 39 ‘Financial Instruments: Recognition and Measurement.’

Note 2: Leave the column blank if the issuer of marketable securities is non-related party.

Note 3: Fill in the amount after adjusted at fair value and deducted by accumulated impairment for the marketable securities measured at fair value; fill in the acquisition cost or amortised cost deducted by accumulated impairment for the marketable securities not measured at fair value.

Note 4: The number of shares of securities and their amounts pledged as security or pledged for loans and their restrictions on use under some agreements should be stated in the footnote if the securities presented herein have such conditions.

Footnote

Securities held by

Type of

marketable


General

ledger account

Number of

shares

Book value

(Note 3)

Ownership


(Note 1)


securities issuer

(Note 2)


KD Holding Corp. Common Stock TeamWIN Opto-Electronics

Co., Ltd.

- Financial assets

measured at

cost - non-current

150,000 848$ 2.46 848$ -

Fortune Energy Corp. Fund Capital Money Market Fund - Financial assets at fair


loss-current

634,000 10,000 - 10,000 -

CTCI (Tailand) Co., Ltd. Common Stock CHIYODA (Tailand) Co., Ltd. - Financial assets

measured at

cost - non-current

3,600 328 - 328 -

360

D. Aggregate purchases or sales of the same securities reaching NT$300 million or 20% of paid-in capital or more:




CTCI Corp. Eastspring Investors

Well

Pool Money Market

Fund



loss-current

- N/A 11,386,150 $ 149,961 26,673,794 $ 354,000 36,921,679 $ 489,785 $ 488,845 $ 940 1,138,265 $ 15,116

CTCI Corp. Polaris De-Bao

Money Market

Fund



loss-current

- N/A - - 92,411,838 1,082,000 92,411,838 1,083,106 1,082,000 1,106 - -

CTCI Corp. Jih Sun Money

Market Fund



loss-current

- N/A 5,570,720 80,000 78,374,754 1,130,000 74,231,100 1,070,646 1,069,687 959 9,714,374 140,313

CTCI Corp. Taishin 1699

Money Market

Fund



loss-current

- N/A - - 58,502,227 770,000 58,502,227 770,537 770,000 537 - -

CTCI Corp. FSTIC Money

Market Fund



loss-current

- N/A - - 16,838,532 250,000 16,838,532 250,093 250,000 93 - -

CTCI Corp. Capital Money

Market Fund



loss-current

- N/A 15,989,564 250,000 93,492,599 1,470,000 103,452,806 1,627,169 1,625,011 2,158 6,029,357 94,989

CTCI Corp. UPAMC James

Bond Money

Market Fund



loss-current

- N/A 15,434,728 250,000 18,470,219 300,000 33,904,947 550,957 550,000 957 - -

CTCI Corp. Fubon Chi-Hsiang

Money Market

Fund



loss-current

- N/A - - 14,755,743 225,000 14,755,743 225,096 225,000 96 - -

CTCI Corp. Fuh Hwa Money

Market Fund



loss-current

- N/A - - 28,440,244 400,000 28,440,244 400,123 400,000 123 - -

CTCI Corp. Yuanta Wan Tai

Money Market

Fund



loss-current

- N/A - - 54,016,008 798,000 54,016,008 798,453 798,000 453 - -

CTCI Corp. Mega Diamond

Money Market

Fund



loss-current

- N/A - - 36,809,387 450,000 28,616,626 350,000 349,813 187 8,192,761 100,187

CTCI Corp. China Steel

Chemical Corp.

Available-for-sale


- N/A 2,426,916 139,837 - - 650,000 111,555 39,222 72,333 1,776,916 100,615

Disposal (Note 3)


361

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities.

Note 2: Fill in the columns the counterparty and relationship if securities are accounted for under the equity method; otherwise leave the columns blank.

Note 3: Aggregate purchases and sales amounts should be calculated separately at their market values to verify whether they individually reach NT$100 million or 20% of paid-in capital or more.


E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.




Disposal (Note 3)


KD Holding

Corp.

UPAMC James

Bond Money

Market Fund



loss-current

- N/A - $ - 26,521 $ 432,000 26,521 $ 432,191 $ 432,000 $ 191 - $ -

KD Holding

Corp.

Yuanta Wan Tai

Money Market

Fund



loss-current

- N/A 6,502 95,225 20,314 300,000 26,816 396,328 395,225 1,103 - -

Sino

Environmental

Services Corp.

Jih Sun Money

Market Fund



loss-current

- N/A 4,875 70,000 14,501 209,000 19,376 279,330 279,000 330 - -

362

G. Purchases or sales transactions with related parties reaching NT$100 million or 20% of paid-in capital or more:


Relationship

with the

counterparty

Purchases

(sales)Amount

Percentage of

total

purchases

(sales)


Percentage of

total

notes/accounts

receivable

(payable)

Footnote


subsidiaries

Subsidiary (Sales) 467,380)($ (1%) Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

268,501$ 6% -


subsidiaries

Subsidiary Purchases 347,507 1% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

48,833)( - -

CTCI Corp. SINO Environmental Services Corp. Subsidiary Purchases 342,652 1% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

91,311)( (1%) -

CTCI Corp. Advanced Control & System Inc. Subsidiary Purchases 738,600 3% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

246,131)( 2% -

CTCI Corp. CTCI Machinery Corp. Subsidiary Purchases 235,281 1% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

70,681)( (1%) -

CTCI Corp. CTCI Singapore Pte. Ltd. Subsidiary Purchases 585,838 2% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

- - -

Transaction



party transactions

Notes/accounts


363


Relationship

with the

counterparty

Purchases

(sales)Amount

Percentage of

total

purchases

(sales)


Percentage of

total

notes/accounts

receivable

(payable)

Footnote

CTCI Corp. Resources Engineering Service Inc. Subsidiary Purchases 207,014$ 1% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

223,013)( (2%) -

Leading Energy

Corp.


selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

40,396 55% -

Leading Energy

Corp.


selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

48,508)( (93%) -

Sino

Environmental

Service Corp.

CTCI Corp. The Company (Sales) 342,652)( (13%) Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

73,493 17% -

Sino

Environmental

Service Corp.


selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

64,115 15% -

Sino

Environmental

Service Corp.

Leading Energy Corp. Subsidiary (Sales) 222,778)( (9%) Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

48,508 11% -

Transaction



party transactions

Notes/accounts


364

Note 1: If terms of related-party transactions are different from third-party transactions, explain the differences and reasons in the ‘Unit price’ and ‘Credit term’ columns.

Note 2: In case related-party transaction terms involve advance receipts (prepayments) transactions, explain in the footnote the reasons, contractual provisions, related amounts, and differences in types of transactions compared to third-party transactions.



Relationship

with the

counterparty

Purchases

(sales)Amount

Percentage of

total

purchases

(sales)


Percentage of

total

notes/accounts

receivable

(payable)

Footnote

Sino

Environmental

Service Corp.

Fortune Energy Corp. Subsidiary (Sales) 159,514)( (6%) Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

27,593 6% -

Sino

Environmental

Service Corp.

CTCI Chemical Corp. Subsidiary Purchases 122,919 5% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

19,690)( (4%) -

HD Resources

Management

Corp.


selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

64,115)( (61%) -

HD Resources

Management

Corp.

Leading Energy Corp. Subsidiary Purchases 233,711 31% Standards

selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

40,396)( (38%) -

Fortune Energy

Corp.


selling price

and collection

terms

Negotiated

by

both parties

No significant

difference

27,593)( (99%) -

Transaction



party transactions

Notes/accounts


365

H.Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more:

Note 1：Other accounts receivable arise from lending capital.

Creditor Counterparty

Relationship

with the

counterparty

Balance as at

December 31,

2013 (Note 1)

Turnover

rateAmount

Action

taken

Amount

collected

subsequent to

the

balance sheet

date

CTCI Corp. CTCI Overseas(BVI)

Corp. and its subsidiaries

Subsidiary 286,501$ 0.722 476,213$ Active

Collection

-$ -$

CTCI Corp. CTCI Arabia Ltd. Subsidiary 1,716,375 Note 1 - - - -

CTCI Corp. CTCI Machinery Corp. Subsidiary 770,000 Note 1 - - - -

CTCI Overseas Co., Ltd. Shang Ding Engineering

& Construction Co., Ltd.

Subsidiary 288,948 Note 1 - - - -

Overdue receivables

Allowance for

doubtful

accounts

366

I. Derivative financial instruments：

a) For the year ended December 31, 2013, CTCI Corp. had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $2,786,467. The valuation gain generated from settled and un-settled forward exchange contract was $18,342, which was included in non-operating gain.

b) For the year ended December 31, 2013, CTCI Corp. had entered into swap contracts with a bank to hedge the risk on commitment in foreign currency amounting to $2,312,665. The valuation loss generated from settled and unsettled swap contracts was $23,268, which was included in non-operating loss.

c) For the year ended December 31, 2013, CTCI Corp. had entered into forward commodity contracts with a bank to hedge the risk on fluctuations in price of material and supplies amounting to $2,235,312. The valuation loss generated from settled and un-settled forward commodity contract was $108,532, which was included in non-operating loss.

d) For the year ended December 31, 2013, E&C Engineering Corp. had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $79,608. The valuation gain generated from settled and un-settled forward exchange contract was $228, which was included in non-operating gain.

e) For the year ended December 31, 2013, Universal Engineering Co. had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $61,013. The valuation gain generated from settled and un-settled forward exchange contract was $3,349, which was included in non-operating gain.

f) For the year ended December 31, 2013, CTCI MALYSIA had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $63,262. The valuation gain generated from settled and un-settled forward exchange contract was $506, which was included in non-operating gain.

g) For the year ended December 31, 2013, CTCI Overseas Co., Ltd,. had entered into swap contracts with a bank to hedge the risk on commitment in foreign currency amounting to $215,734. The valuation loss generated from settled and un-settled forward exchange contract was $4,087, which was included in non-operating loss.

h) For the year ended December 31, 2013, CTCI Chemical Corp. had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $198,546. The valuation gain generated from settled and un-settled forward exchange contract was $748, which was included in non-operating gain.

i) For the year ended December 31, 2013, Jing Ding Engineering & Construction Co., Ltd.had entered into forward exchange contracts with a bank to hedge the risk on commitment in foreign currency amounting to $96,094. The valuation loss generated from settled and un-settled forward exchange contract was $865, which was included in non-operating loss.

367

J. Significant inter–company transcations for the year ended December 31, 2013.

0 CTCI Corp. CTCI Overseas Co., Ltd. 1Accounts

receivable $ 268,501

Negotiated by

both parties0.55%

0 "CTCI Overseas (BVI)

Corp. and its subsidiaries1 Sales revenue 467,380 " 0.89%

1 Advanced Control & System Inc. CTCI Corp. 2 " 738,600 " 1.50%

2 CTCI Machinery Corp. " 2 " 235,281 " 0.59%

3 CTCI Singapore Pte. Ltd. " 2 " 585,838 " 1.34%

4 CTCI Overseas Co., Ltd. " 2 " 347,507 " 0.85%

5 Sino Environmental Services Corp. HD Resource Management Corp. 3 " 380,318 " 10.00%

5 " CTCI Corp. 2 " 342,652 "

5 " Leading Energy Corp. 3 " 222,778 " 6.00%

5 " Fortune Energy Corp. 3 " 159,514 " 4.00%

6 Leading Energy Corp. HD Resource Management Corp. 3 " 233,711 " 6.00%

7 Resources Engineering Service Inc. CTCI Corp. 2 " 207,014 " 0.42%

8 CTCI Chemicals Corp. Sino Environmental Services Corp. 2 " 122,919 "

0 CTCI Corp. CTCI Arabia Ltd. 1Other

receivables1,716,375 " 3.51%

" " CTCI Machinery Corp. 1 " 770,000 " 1.58%

4CTCI Overseas Co., Ltd. Shang Ding Engineering &

Construction Co., Ltd.3 " 288,948 " 0.59%

Number


Relationship

(Note 2)

Transaction

General ledger

accountAmount

Transaction

terms

Percentage of

consolidated total

operating revenues

or total assets

(Note 3)

368



Partial

construction

billings

$ 24,172,014Negotiated by

both parties49.49%

1 Advanced Control & System Inc. CTCI Corp. 2 " 3,715,987 " 7.61%

" "CTCI Overseas (BVI)

Corp. and its subsidiaries3 " 764,259 " 1.56%

2 CTCI Machinery Corp. CTCI Corp. 2 " 1,988,476 " 4.07%

7 Resources Engineering Service Inc. " 2 " 160,505 " 0.33%



Long-term

receivable476,213 " 0.98%

0 CTCI Corp. GRQ Investment Corp. 1Refundable

deposits128,300 Not applicable Not applicable

0 CTCI Corp. CTCI (Thailand) Co., Ltd. 1 Guarantee 2,813,637 " "

0 " CTCI Overseas Co., Ltd. 1 " 7,110,062 " "

0 "Jing Ding Engineering &


0 "CINDA Engineering & Construction

Private Limited1 " 2,181,179 " "



0 " CTCI Arabia Ltd. 1 " 6,160,622 " "

0 " CTCI Singapore Pte. Ltd. 1 " 486,087 " "

0 " CTCI Machinery Corp. 1 " 326,908 " "

0 " CIMAS Engineering Co., Ltd. 1 " 385,060 " "

0 " CTCI Malaysia Sdn. Bhd. 1 " 1,518,005 " "

Number


Relationship

(Note 2)

Transaction

General ledger

accountAmount

Transaction

terms

Percentage of

consolidated total

operating revenues

or total assets

(Note 3)

369

Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

(1) Parent company is ‘0’.


Note 2: Relationship between transaction company and counterparty is classified into the following three categories;

(1) Parent company to subsidiary.

(2) Subsidiary to parent company.

(3) Subsidiary to subsidiary.

Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to

consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for

income statement accounts.

Note 4: The Company may decide to disclose or not to disclose transaction details in this table based on the Materiality Principle.

2 CTCI Machinery Corp. E&C Engineering Corp. 3 Guarantee $ 404,033 Not applicable Not applicable

7 Resources Engineering Service Inc. CTCI Machinery Corp. 3 " 629,000 " "

8 CTCI Chemicals Corp. " 3 " 230,473 " "

9Shang Ding Engineering &

Construction Co., Ltd.Shanghai XuanLi Trading Co., Ltd. 3 " 247,755 " "

10 KD Holding Corp. G. D. Development Corp. 3 " 254,853 " "

11 E&C Engineering Corp. CTCI Machinery Corp. 3 " 1,230,407 " "



Transaction

terms

Percentage of

consolidated total

operating revenues

or total assets

(Note 3)

Number


Relationship

(Note 2)

Transaction

General ledger

accountAmount

370

(2) Information on investees

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value

CTCI E&C

Engineering

Corp.



power, thermal power,

fire pumped storage


others related to

engineering.

$ 456,251 $ 456,251 59,098,624 97.09 $ 722,012 $ 11,013 $ 10,690

CTCI Resources

Engineering

Service Inc.


and gas, marbal and




mechanical and

electrical equipment.

15,957 15,957 16,765,048 93.14 316,070 26,298 24,492

CTCI Advanced

Control &

System Inc.

Taiwan Systems planning, design,

integration, and

engineering for various

IT systems etc.

44,409 44,409 11,444,842 49.80 262,283 98,354 49,255

CTCI GRQ Investment

Corp.

Taiwan General investment. 1,690,000 1,690,000 169,000,000 100.00 2,465,309 83,107 83,107

CTCI Innovest

Investment Corp.

Taiwan General investment. 100,000 100,000 10,000,000 100.00 132,527 12,740 12,740

CTCI KD Holding

Corp.

Taiwan General investment. 938,889 938,889 38,457,105 60.67 2,428,779 620,318 384,941

CTCI CTCI (Thailand)

Co., Ltd.

Thailand Design and building of


116,894 116,894 1,249,500 49.00 99,837 2,382 1,167


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

371

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

CTCI CTCI Machinery

Corp.

Taiwan Secondary processing

of steel, piping, heat

treatment, manufacture

of pollution control

equipment and non-

destructive testing etc.

$ 120,000 $ 120,000 12,100,000 100.00 $ 266,222 $ 82,347 $ 82,347

CTCI CTCI Arabia Ltd. Arabia Construction and


storage tanks and

hemical plant.

23,312 23,312 500 50.00 ( 507,187) ( 1,065,085) ( 532,542)

CTCI Sinogal-Waste

Services Corp.


recycling site and


mechanical and

equipment etc.

4,958 4,958 - 30.00 28,740 62,017 18,659

CTCI CTCI Singapore

Pte. Ltd.

Singapore Investment and planning


152,254 152,254 5,100,000 100.00 173,101 21,716 21,716

CTCI CTCI and Partners

Company

Limited



storage

tanks and chemical

plant.

15,755 - - 40.00 14,413 ( 2,977) ( 1,191)

CTCI CTCI Overseas

(BVI) Corp.



308,554 308,554 6,740,000 100.00 2,141,154 303,500 303,500

372

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

CTCI CTCI Engineering

& Construction

Sdn. Bhd., etc.

Taiwan Wholesale and retail of

information software;

computer equipment

installation and

information processing

etc.

$ - $ - - - $ 19,623 $ 7,114 $ 4,816

CTCI Pan Asia Corp. Taiwan Input of foreign labors

and technologies,

technical cooperation

with foreign

construction

business, and

construction of

engineering

construction etc.

71,543 71,543 37,530,631 34.27 565,307 219,157 75,105

$ 9,128,190 $ 538,802

GRQ

Investment

Corp.

CTCI Chemical

Corp.

Taiwan Manufacture wholesale,


chemicals.

13,522 13,522 480,661 6.77 $ 11,583 $ 45,446 $ 3,077

GRQ

Investment

Corp.

KD Holding

Corp.

Taiwan General investment. 11,270 11,270 243,918 0.38 15,228 620,318 2,357

373

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

GRQ

Investment

Corp.

Resources

Engineering

Service Inc.


and gas, marbal and




mechanical and electrical

equipment.

$ 23 $ 23 1,000 0.01 $ 35 $ 26,298 $ 3

Innovest

Investment

Corp.

CTCI Chemical

Corp.



chemicals.

32,153 32,153 1,657,207 23.34 39,932 45,446 10,607

Innovest

Investment

Corp.

KD Holding

Corp.

Taiwan General investment. 1,374 1,374 32,132 0.05 2,004 620,318 310

Innovest

Investment

Corp.

E&C

Engineering

Corp.



power,thermal power,

fire pumped storage


others related to

engineering.

11 - 1,000 - 12 11,013 -

Sino

Environmental

Services Corp.

CTCI Chemical

Corp.



chemicals.

24,851 24,851 1,910,241 26.90 45,495 45,446 12,227

Sino

Environmental

Services Corp.

Leading Energy

Corp.




cogeneration etc.

17,600 17,600 1,760,000 2.00 33,137 232,836 4,657

374

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

Sino

Environmental

Services Corp.

Sinogal-Waste

Services Corp.


recycling site and


mechanical and

equipment etc.

$ 4,964 $ 4,964 - 30.00 $ 28,739 $ 62,017 $ 18,659

Sino

Environmental

Services Corp.

Fortune Energy

Corp.




cogeneration etc.

13 - 1,000 0.01 13 180,638 -

Sino

Environmental

Services Corp.

G.D. Development

Company



manufacturing.

8 - 1,000 0.01 8 2,826 -

HD Resources

Management

Corp.

Sino

Environmental

Services Corp.


recycling site and


mechanical and

equipment etc.

53 - 1,000 0.01 25 292,166 -

HD Resources

Management

Corp.

Yuan Ding

Resources

Management

Corp.


other environmental

service,


service etc.

400 - 400,000 40.00 369 ( 78) ( 31)

CTCI Chemical

Corp.

Chung Ding

Chemical Corp.

Samoa Manufacture participation

and sale of chemicals

etc.

45,084 45,084 1,400,000 100.00 69,784 1,500 1,500

375

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

KD Holding

Corp.

HD Resources

Management

Corp.

Taiwan International trade and

environmental service of

waste disposal,

equipment installation

and mechanical

installation etc.

$ 20,000 $ 20,000 2,000,000 100.00 $ 71,246 $ 21,004 $ 21,004

KD Holding

Corp.

Leading Energy

Corp.




cogeneration etc.

993,485 993,485 86,240,000 98.00 1,623,721 232,836 228,179

KD Holding

Corp.

Sino

Environmental

Services Corp.


recycling site and


mechanical and

equipment etc.

339,921 339,982 14,065,936 93.15 672,846 292,166 272,190

KD Holding

Corp.

Fortune Energy

Corp.




cogeneration etc.

1,012,483 1,012,500 56,249,000 75.00 968,605 180,638 135,478

KD Holding

Corp.

G.D. Development

Company



manufacturing.

95,500 50,000 9,549,000 49.99 91,019 2,826 1,413

KD Holding

Corp.

Yuan Ding

Resources

Management

Corp.


other environmental

service,


service etc.

600 - 600,000 60.00 553 ( 78) ( 47)

376

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

CTCI Overseas

(BVI) Corp.

CTCI Overseas

Co., Ltd.

Hong Kong Investment and planning


$ 276,815 $ 276,815 6,740,000 100.00 $ 1,957,953 $ 238,651 $ 238,651

CTCI Overseas

Co., Ltd.

CTCI Arabia Ltd. Arabia Construction and


storage

tanks and chemical

plant.

22,610 22,610 500 50.00 ( 507,250) ( 1,065,085) ( 532,543)

CTCI Overseas

Co., Ltd.

Universal (BVI)

Engineering

Corp.



1,694 1,694 50,000 100.00 218,049 3,596 3,596

CTCI Overseas

Co., Ltd.

CIPEC

Construction Inc.

Philippines Construction and


storage tanks and chemical

plant.

663 663 10,000 40.00 564 ( 2,175) ( 870)

CTCI Overseas

Co., Ltd.

CIMAS

Engineering

Corp.

Vietnam Chemical, petrochemical,

feasibility study &




construction &

commissioning.

26,330 26,330 - 50.00 49,159 2,692 1,346

CTCI Overseas

Co., Ltd.

CTCI Engineering

& Construction

Sdn. Bhd.

Malaysia Design, survey,

construction and

inspection of various

engineering and

construction projects.

2,879 2,879 300,000 40.00 8,923 5,744 2,298

377

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

CTCI Overseas

Co., Ltd.

CTCI and Partners

Company

Limited


maintenance of

refinery, storage

tanks and chemical

plant.

$ 25,585 $ 25,585 3,000,000 60.00 $ 21,622 ($ 2,977) ($ 1,786)

CTCI Overseas

Co., Ltd.

CINDA

Engineering &

Construction

Private Limited

India Chemical, petrochemical,

feasibility atudy &




construction &

commissioning.

31,022 31,022 8,000,000 100.00 190,201 44,741 44,741

Universal (BVI)

Engineering

Corp.

Superiority

(Thailand) Co.,

Ltd.

Thailand Investment and building of

related engineering.

151 151 2,156 100.00 ( 30,312) 401 401

Superiority

(Thailand) Co.,

Ltd.

CTCI Thailand

Co., Ltd.

Thailand Design and planting of


12,628 12,628 1,300,500 51.00 27,295 2,382 1,215

Advanced

Control &

System Inc.

Century Ahead

Ltd.

Samoa Professional investment

company.

25,097 25,097 750,000 100.00 16,109 1,298 1,298

Century Ahead

Ltd.

Advance Control

& Information

Technologies

Ltd.

China Computer technology

services.

23,679 23,679 - 100.00 14,789 1,293 1,293

378

Main


business

activities

December 31,

2013

December 31,

2012

Number of

shares

Ownership

(%) Book value


Net profit (loss)

of the investee for

the year ended

December 31,

2013

Investment income


the Company for the

year ended

December 31, 2013

E&C

Engineering

Corp.

Synergy

Engineering

Corp.

BVI Design and planning of


$ 3,159 $ 3,159 100,000 100.00 $ 26,653 $ 832 $ 832

E&C

Engineering

Corp.

CTCI Chemical

Corp.



chemicals.

7,354 7,354 656,360 9.24 16,396 45,446 4,199

Shang Ding

Engineering &

Construction

Co., Ltd.

Shanghai XuanLi

Trading Corp.

China General trade. 23,748 23,748 - 100.00 37,064 10,589 10,589

Resources

Engineering

Services Inc.

CTCI Chemical

Corp.



chemicals.

7,354 7,354 656,360 9.24 15,089 45,446 4,199

CTCI Singapore

Pte. Ltd.

TECA

Engineering

Pte. Ltd.

Singapore Design and planning of


2,969 2,969 125,000 25.00 670 ( 5,379) ( 1,345)

379

(3) Information on investments in Mainland China

A) The related information of investment in Mainland China is as follows:

Remitted

to Mainland

China

Remitted

back to Taiwan

Jing Ding

Engineering &

Construction Co.,

Ltd.

Design, survey, construction

and inspection of various

engineering and construction

projects, plants, machinery

and equipment, and

environmental protection

projects.

$ 342,115 2 $ 313,998 $ - -$ $ 313,998 $ 281,060 100.00 281,060$ 1,338,397$ $ 3,302 Note 3

Shang Ding

Engineering &

Construction Co.,

Ltd.

Design, survey, construction and

inspection of various engineering

and construction projects.

592,787 2 534,974 - - 534,974 (140,871) 99.44 (140,082) 498,110 23,530 "

Zhuhai Chung

Ding Chemical

Corp.

Trading of chemical materials 46,218 2 46,218 - - 46,218 1,326 75.49 1,001 42,334 - Note 4

Advanced Control

& Information

Technologies

Ltd.

Computer technology services 22,215 2 22,215 - - 22,215 1,293 49.80 644 7,365 - Note 5

GranSino

Environmental

Technology Co.,

Ltd.

Consultation and development of

sanitation technology, maintenance

of environmental pollution disposal

equipment, management of

construction, and retail business,

etc.

22,193 1 10,874 - - 10,874 (4,282) 27.69 1,186)( 10,176 1,567 -

Xiang Ding

Environment

Consultant


Technical development, advisory

and service in environmental field;

environmental pollution control

equipment and related parts

wholesale, import and export, etc.

4,147 1 - 4,147 - 4,147 102 56.92 58 2,476 - -

Footnote

Investee in

Mainland

China

Main business activitiesPaid-in

capital

Investment

method

（Note ）

Accumulated amount

of remittance from

Taiwan to Mainland

China of January 1,

2013

Amount remitted fromTaiwan to

Mainland China/Amount remitted

back to Taiwan for the year ended

December 31, 2013

Accumulated

amount

of remittance from

Taiwan to Mainland

China as of

December 31, 2013

Ownership held by

the Company

(direct or indirect)

Investment income

(loss) recognised

by the Company

for the year ended

December 31, 2013

Book value of

investments in

Mainland China

as of December

31, 2013

Accumulated amount

of investment income

remitted back to

Taiwan as of

December 31, 2013

Net income of

investee as of

December 31,2013

380

Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:

(1)Directly invest in a company in Mainland China.

(2)Through investing in an existing company in the third area, which then invested in the investee in Mainland China.

(3)Others.

Note 2: In the ‘Investment income (loss) recognised by the Company for the year ended December 31, 2013’ column:

(1)It should be indicated if the investee was still in the incorporation arrangements and had not yet any profit during this period.

(2)Indicate the basis for investment income (loss) recognition in the number of one of the following three categories:

A.The financial statements that are audited and attested by international accounting firm which has cooperative relationship with accounting firm in R.O.C.

B.The financial statements that are audited by R.O.C. parent company’s CPA.

C.Others.

Note 3: Invested by CTCI Overseas Co., Ltd.

Note 4: Invested by Chung Ding Chemical Corp.

Note 5: Invested by Century Ahead Ltd.

Company name

Accumulated amount of

remittance from Taiwan to

Mainland China

as of December 31, 2013

Investment amount approved by


the Ministry of Economic

Affairs (MOEA)

Ceiling on investments in

Mainland China imposed by


MOEA

CTCI 932,426$ 1,003,668$ 9,883,268$

381

B) Significant transactions conducted with investee in Mainland China directly or indirectly through other companies in third areas.

% % %

Maximum balance

during the year ended

December 31, 2013

Balance at

December

31, 2013

Interest

rate

Interest during

the year ended

December 31,

2013

2.00 - 13.97 - - - - -

0.20 - 1.96 - - - - -

Investee in Mainland

China

Sales (Purchases)Property

transactions

Accounts receivable

(payable)

Provision of

endorsements

/guarantees or

collaterals

-

Others

Amount Amount

Balance at

December

31, 2013

Balance at

December

31, 2013

Purpose

Financing


Technology Co., Ltd.38,643$ - 41,646$ -

-

Xiang Ding

Environment Consultant


5,831 - 5,831 -

382

14. SEGMENTAL FINANCIAL INFORMATION

(1) General information

A.The Company has identified which segments should be reported based on the information used by the Board of Directors to make decisions.

B.The Board of Directors classify reportable segments as construction engineering department, environmental resource department, sales department and other operating department.

(2) Measurement of segmental financial information

The Board of Directors evaluates the performance of segments based on segmental income. Interest revenues and expenses cannot be attributed to any segment because such activity is handled by the Company’s financial department.

(3) Segmental income, assets and liabilities of segments

The segmental financial information provided to the Board of Directors is as follows:

Construction

Engineering

Department

Environmental

Resource

Department

Sales

Department

Other Operating

Department Total

External revenues 48,392,841$ 3,395,698$ 132,307$ 301,112$ 52,221,958$

Internal revenues 3,197,581 1,186,315 - 498,314 4,882,210

Segmental revenues 51,590,422$ 4,582,013$ 132,307$ 799,426$ 57,104,168$

Segmental income 1,213,502$ 825,748$ 15,676$ 170,338$ 2,225,264$

Depreciation and

amortization 326,847)($ 29,355)($ 465)($ 134,257)($ 490,924)($


Construction

Engineering

Department

Environmental

Resource

Department

Sales

Department

Other Operating

Department Total

External revenues 56,907,898$ 3,176,119$ 86,904$ 351,241$ 60,522,162$

Internal revenues 2,399,107 1,404,433 - 497,226 4,300,766

Segmental revenues 59,307,005$ 4,580,552$ 86,904$ 848,467$ 64,822,928$

Segmental income 2,130,892$ 755,559$ 8,319$ 200,967$ 3,095,737$

Depreciation and

amortization 343,386)($ 37,633)($ 234)($ 142,871)($ 524,124)($


383

(4) Reconciliation information of segmental income

Intra-segment sales are arm’s length transactions. The measurement of external revenues reported to the Board of Directors is consistent with revenues in the statement of comprehensive income. The reconciliation information of income from continuing operations before income tax and segmental income is as follows:

(5) Financial information by industry

Detail of the revenue is as follows:



Segmental income 2,225,264$ 3,095,737$

Adjustment and elimination 140,511 141,911

Investment income accounted for

under the equity method74,059 77,189

Interest revenue 77,754 115,805

Unrealized (loss) gain on financial

instruments

17,331)( 119,017

Gain on disposal of investments 93,263 1,191

Foreign exchange gain (loss) 104,214 54,409)(

Interest expense 106,126)( 97,765)(

Others 81,698)( 54,711

Income from continuing

operations before income tax 2,509,910$ 3,453,387$



Constuction engineering service

revenue

48,392,841$ 56,907,898$

Enviromental resource service

revenue

3,395,698 3,176,119

Sales revenue 132,307 86,904

Others operating revenue 301,112 351,241

Total 52,221,958$ 60,522,162$

384

(6) Financial information by geographic area

The geographic area information of 2013 and 2012 is as follows:

(7) Major customers’ information

The customers accounting for more than 10% of the Company’s operationg revenues for the years ended December 31, 2013 and 2012 are as follows:

Areas Revenue

Non-current

asset Revenue

Non-current

asset

Taiwan 42,160,857$ 10,172,601$ 45,401,557$ 9,243,499$

Asia 10,053,976 1,822,929 15,118,707 3,070,557

America 7,125 533 1,898 389

Total 52,221,958$ 11,996,063$ 60,522,162$ 12,314,445$

For the year ended December 31, 2013 For the year ended December 31, 2012

Customer Revenue Segment Revenue Segment

F 11,947,476$ Construction

Engineering

Department

2,966,478$ Construction

Engineering

Department

C 6,087,036 Construction

Engineering

Department

12,088,306 Construction

Engineering

Department

For the year ended December 31, 2013 For the year ended December 31, 2012

385

15. INITIAL APPLICATION OF IFRSs

These consolidated financial statements are the first consolidated financial statements prepared by the Group in accordance with the IFRSs. The Group has adjusted the amounts as appropriate that are reported in the previous R.O.C. GAAP consolidated financial statements to those amounts that should be presented under IFRSs in the preparation of the opening IFRS balance sheet. Information about exemptions elected by the Group, exceptions to the retrospective application of IFRSs in relation to initial application of IFRSs, and how it affects the Group’s financial position, operating results and cash flows in transition from R.O.C. GAAP to the IFRSs is set out below:

(1) Exemptions elected by the Group

A)Business combination

For business combinations that occurred before the transition date, the Company decided not to adopt retroactively the rules in accordance with IFRS 3, “Business Combination.”

B) Share- based payment transactions

For all grants of equity instruments and the settled liabilities arising from share-based payments before the transition date, the Company decided not to adopt retroactively the rules in accordance with IFRS 2, “Share- based Payment.”

C) Deemed cost

The Company elected to measure an item of investment property at the date of transition to IFRSs at its fair value and use that fair value as its deemed cost at that date.

D)Cumulative translation differences

The cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRSs. After the translation, exchange differences will be measured in accordance with IAS 21, “The Effects of Changes in Foreign Exchange Rates.”

E) Borrowing costs

The Company applied the transitional provisions set out in paragraphs 27 and 28 of IAS 23, as revised in 2007 from the transition date.

F) Employee benefits

The Group has elected to recognise all cumulative actuarial gains and losses relating to all employee benefit plans in ‘retained earnings’ at the transition date, and to disclose the information of present value of defined benefit obligation, fair value of plan assets, gain or loss on plan assets and experience adjustments under the requirements of paragraph 120A (P), IAS 19, ‘Employee Benefits’, based on their prospective amounts for financial periods from the transition date.

(2) Except for derecognition of financial assets and financial liabilities and hedge accounting to which exceptions to the retrospective application of IFRSs specified in IFRS 1 are not applied as they have no relation with the Group, other exceptions to the retrospective application are set out below:

A)Accounting estimates Accounting estimates made under IFRSs on January 1, 2012 are consistent with those made under R.O.C. GAAP on that day.

386

B)Non-controlling interest

Requirements of IAS 27 (amended in 2008) that shall be applied prospectively are as follows:

(a)Requirements concerning total comprehensive income (loss) attributed to owners of the parent and non-controlling interest, even which results in a loss to non-controlling interest;

(b)Requirements that change in interest ownership of the parent in a subsidiary while control is retained is accounted for as an equity transaction with the parent; and

(c)Requirements concerning the parent’s loss of control over a subsidiary.

(3) Requirement to reconcile from R.O.C. GAAP to IFRSs at the time of initial application

IFRS 1 requires that an entity should prepare reconciliations for equity, comprehensive income and cash flows for the comparative periods. Reconciliations for equity and comprehensive income for the comparative periods as to transition from R.O.C. GAAP to IFRSs is shown below:

387

A) Reconciliation for equity on January 1, 2012:

R.O.C Reclassifications

Express

differences

Effect of

transition

from R.O.C.

GAAP (Note 1) (Note 2) GAAP to IFRSs IFRSs Remark

Accounts receivable 4,825,372$ -$ -$ 211,316$ 5,036,688$ (2)


-current176,683 - - 176,683)( - (5)

Prepayments 3,385,642 - 874)( 417 3,385,185 (1)


under equity method505,720 - 46,895 14,031)( 538,584 (1)

Property, plant and equipment 10,691,671 - 111,432)( 3,331,922)( 7,248,317 (2)(3)(4)

Investment property - - - 845,000 845,000 (3)

Deferred pension cost 980 - - 980)( - (1)

Leased assets 160,890 - - 160,890)( - (4)

Deferred charges 151,797 - - 151,797)( - (11)


- non current8,094 - 300 391,595 399,989 (1)(5)

Long-term notes and other

receivables8,145 - - 3,873,076 3,881,221 (2)

Other intangible assets 96,225 - 7,106)( 81,885)( 7,234 (10)

Long-term prepayments - - - 81,885 81,885 (10)

Others 31,848,334 - 3,810)( 151,797 31,996,321 (11)

Total assets 51,859,553$ -$ 76,027)($ 1,636,898$ 53,420,424$

Accrued pension liabilities 1,618,503$ -$ -$ 145,856)($ 1,472,647$ (1)


- non current35,054 - 300 331,025 366,379 (2)(3)(5)

Others 34,408,880 43,300)( 69,357)( - 34,296,223

Total liabilities 36,062,437 43,300)( 69,057)( 185,169 36,135,249


investments198,070 - - 198,070)( - (6)

Special reserve 187,164 - - 778,163 965,327 (8)

Unappropriated earnings 2,317,423 - - 403,946 2,721,369 (1)(2)(3)

(6)(7)(8)


adjustments133,625 - - 133,625)( - (7)

Unrecognised pension cost 338,227)( - - 338,227 - (1)

Non-controlling interest 1,634,843 43,300 6,970)( 263,088 1,934,261 (1)(2)

Others 11,664,218 - - - 11,664,218

Total stockholders' equity 15,797,116 43,300 6,970)( 1,451,729 17,285,175


stockholders' equity51,859,553$ -$ 76,027)($ 1,636,898$ 53,420,424$

388

Note 1: Certain accounts in the financial statements as of and for the year ended January 1, 2012 have been reclassified to conform to the presentation adopted in the financial statements as of and for the year ended December 31, 2013.

Note 2: Pursuant to EITF 79-059, when the Company and other companies have the same number of voting rights, which are equal to 50%, of a joint venture, it should be included in the consolidated financial statements proportionately according to the ownership percentage before January 1, 2013. From January 1, 2013, the Company has elected to apply investments accounted for under the equity method and adjust prior financial statements retrospectively.

389

B) Reconciliation for equity on December 31, 2012:

R.O.C Reclassifications

Express

differences

Effect of

transition

from R.O.C.

GAAP (Note 1) (Note 2) GAAP to IFRSs IFRSs Remark

Accounts receivable 3,967,052$ -$ 557)($ 219,726$ 4,186,221$ (2)


-current281,777 - - 281,777)( - (5)

Prepayments 3,569,141 - 2,179)( 342 3,567,304 (1)


under equity method545,307 - 41,423 5,831)( 580,899 (1)(9)

Property, plant and equipment 10,508,302 2,694 151,036)( 3,071,645)( 7,288,315 (2)(3)(4)

Investment property - 2,694)( - 841,619 838,925 (3)

Deferred pension cost 4,792 - - 4,792)( - (1)

Leased assets 160,349 - - 160,349)( - (4)

Deferred charges 125,032 - - 125,032)( - (11)


- non current6,390 - 156)( 566,684 572,918 (1)(5)

Long-term notes and other

receivables

2,304 - - 3,653,350 3,655,654 (2)

Other intangible assets 85,235 - 7,076)( 75,769)( 2,390 (10)

Long-term prepayments - - - 75,769 75,769 (10)

Others 32,886,832 - 9,941 125,032 33,021,805 (11)

Total assets 52,142,513$ -$ 109,640)($ 1,757,327$ 53,790,200$

Accrued pension liabilities 1,943,112$ -$ -$ 53,200)($ 1,889,912$ (1)


- non current16,905 - 362 415,215 432,482 (1)(2)(3)(5)

Others 33,006,561 - 103,056)( - 32,903,505

Total liabilities 34,966,578 - 102,694)( 362,015 35,225,899


investments232,800 - - 232,800)( - (6)

Capital surplus-difference

between proceeds on

acquisition of or disposal of

equity interest in a subsidiary

and its carrying amount

- - - 34,730 34,730 (6)

Special reserve 56,584 - - 778,163 834,747 (8)

Unappropriated earnings 2,618,735 - - 456,792 3,075,527 (1)(2)(3)

(6)(7)(8)(9)


adjustments

92,246 - - 133,625)( 41,379)( (7)

Unrecognised pension cost 212,565)( - - 212,565 - (1)

Non-controlling interest 1,883,406 - 6,946)( 279,487 2,155,947 (1)(2)

Others 12,504,729 - - - 12,504,729

Total stockholders' equity 17,175,935 - 6,946)( 1,395,312 18,564,301


stockholders' equity52,142,513$ -$ 109,640)($ 1,757,327$ 53,790,200$

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Note 1: Certain accounts in the financial statements as of and for the year ended December 31, 2012 have been reclassified to conform to the presentation adopted in the financial statements as of and for the year ended December 31, 2013.

Note 2: Pursuant to EITF 79-059, when the Company and other companies have the same number of voting rights, which are equal to 50%, of a joint venture, it should be included in the consolidated financial statements proportionately according to the ownership percentage before January 1, 2013. From January 1, 2013, the Company has elected to apply investments accounted for under the equity method and adjust prior financial statements retrospectively.

391

C) Reconciliation for comprehensive income for the year ended December 31, 2012:

R.O.C

GAAP

Express

differences

(Note)

Effect of transition

from R.O.C.

GAAP to IFRSs IFRSs Remark

Operating revenue 60,738,850$ 5,372)($ 211,316)($ 60,522,162$ (2)

Operating costs 55,622,784)( 2,664 257,437 55,362,683)( (2)(3)

Gross profit 5,116,066 2,708)( 46,121 5,159,479

Operating expenses

General & administrative

expenses1,847,226)( 2,707 37,375 1,807,144)( (1)

Research and

development expenses114,687)( - - 114,687)(

Operating profit 3,154,153 1)( 83,496 3,237,648

Non-operating revenue and

expenses

Other income 247,290 248 - 247,538

Other gains and losses 11,232)( 9 - 11,223)(

Finance costs 99,138)( 1,373 - 97,765)(

Share of profit of associates

and joint ventures

accounted for under

equity method 78,344 1,651)( 496 77,189 (1)(9)

Profit before income tax 3,369,417 22)( 83,992 3,453,387

Income tax expense 588,998)( 21 14,195)( 603,172)( (1)(2)(3)

Profit for the period from

continuing operations2,780,419$ 1)($ 69,797$ 2,850,215$

Other comprehensive income

Exchange difference on

translation of foreign

financial statements

- - 55,909)( 55,909)(

Unrealized gain (loss) on

valuation of available-

for-sale financial assets

- - 31,057 31,057

Total comprehensive income

for the period2,780,419$ 1)($ 44,945$ 2,825,363$

Profit attributable to:

Owners of the parent 2,392,436$ -$ 52,846$ 2,445,282$

Non-controlling interest 387,983 1)( 16,951 404,933

2,780,419$ 1)($ 69,797$ 2,850,215$

Total comprehensive

income attributable to:

Owners of the parent 2,392,436$ -$ 46,538$ 2,438,974$

Non-controlling interest 387,983 1)( 1,593)( 386,389

2,780,419$ 1)($ 44,945$ 2,825,363$

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Note: Pursuant to EITF 79-059, when the Company and other companies have the same number of voting rights, which are equal to 50%, of a joint venture, it should be included in the consolidated financial statements proportionately according to the ownership percentage before January 1, 2013. From January 1, 2013, the Company has elected to apply investments accounted for under the equity method and adjust prior financial statements retrospectively.

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The reasons for reconciliation are as follows:

1) The discount rate used to calculate pensions shall be determined with reference to the factors specified in R.O.C. SFAS 18, paragraph 23. However, IAS 19, “Employee Benefits”, requires an entity to determine the rate used to discount employee benefits with reference to market yields on high quality corporate bonds that match the currency at the end day of the reporting period and duration of its pension plan; when there is no deep market in corporate bonds, an entity is required to use market yields on government bonds (at the end day of the reporting period) instead.

In accordance with current accounting standards in R.O.C., net periodic pension costs are recognised using a corridor approach. In accordance with IAS 19 “Employee Benefits”, the Company can elect to use a corridor approach or to recognise all cumulative actuarial gains and losses at the date of transition to IFRSs.

In accordance with current accounting standards in R.O.C. the excess of the accumulated benefits obligation over the fair value of the pension plan (fund) assets at the balance sheet date is the minimum amount of pension liability that is required to be recognised on the balance sheet (“minimum pension liability”). However, IAS 19, “Employee Benefits”, has no regulation regarding the minimum pension liability.

The abovementioned differences between R.O.C. GAAP and IFRSs resulted in a decrease in deferred pension cost by $980, accrued pension liabilities by $145,856, unappropriated earnings by $174,779, long-term investments accounted for under the equity method by $14,031, and increase in prepaid expenses by $417, deferred income tax assets - non-current by $32,451, unrecognised pension cost by $338,227, and non-controlling interest by $265 at the date of transition.

The abovementioned difference between R.O.C. and IFRSs resulted in an increase in deferred income tax assets - non-current by $627, long-term investments accounted for under the equity method by $8,420, deferred income tax liabilities - non-current by $6,981, accrued pension liabilities by $92,656, gain on investments by $716, income tax expense by $6,354, and decrease in unrealized pension cost by $125,662, prepaid expense by $75, deferred pension cost by $3,812, operating expenses by $37,375, and non-controlling interest by $552, the effect of abovementioned increase in unappropriated earnings by $32,053 and decrease in non-controlling interest by $316 for the year ended December 31, 2012.

2) The Company contracted with the government to provide construction of the government’s infrastructure assets for public services and operate those assets for 50 years after construction is completed. When the term of operating period expired, the underlying infrastructure assets will be transferred to the government without consideration. The current accounting standards in R.O.C. regulate that costs incurred in the construction shall be recognized as acquisition costs of fixed assets and amortized over the operating period. In accordance with IFRIC 12, “Service Concession Arrangements“, construction service and operating service concession arrangement shall be allocated to construction services and operating services based on their relative fair value, and the operator subsequently recognizes and measures revenue in accordance with IAS 11, “Construction Contracts” and IAS 18, “Revenue”, respectively, for the services it performs. The fair value is determined based on the way the grantor pays considerations to the operator specified in the agreement, and recognised as intangible assets or financial assets.

394

The abovementioned difference between R.O.C. GAAP and IFRSs resulted in an increase in accounts receivable by $211,316, long-term receivables by $3,873,076, deferred income tax liabilities - non-current by $131,797, unappropriated earnings by $380,655, and non-controlling interest by $262,823 and decrease in property, plant and equipment by $3,309,117 at the date of transition.

The abovementioned difference between R.O.C. and IFRSs resulted in an increase in accounts receivable by $8,410, property, plant and equipment by $260,818, deferred income tax liabilities by $8,415, income tax expense by $8,415, and decrease in long-term receivables by $219,726, operating revenues by $211,316, operating costs by $260,818 for the year ended of December 31, 2012. The abovementioned difference also resulted in the increase in unappropriated earnings by $23,820 and non-controlling interest by $17,267 for the year ended of December 31, 2012.

3) In accordance with the exemption under IFRS 1, “First-time Adoption of International Financial Reporting Standards” and “Rules Governing the Preparation of Financial Statements by Securities Issuers”, that the Company will apply in 2013, for an item of investment property which was recognised as property, plant and equipment and revaluated in accordance with R.O.C GAAP before transition date, the Company elected to measure it using its fair value at the date of transition to IFRSs and use that fair value as its deemed cost at that date.

The abovementioned difference between R.O.C. GAAP and IFRSs resulted in an increase in investment property by $845,000, unappropriated earnings by $644,538, and deferred income tax liabilities - non-current by $16,767, and decrease in property, plant and equipment by $183,695 at the date of transition.

The abovementioned difference between R.O.C. and IFRSs resulted in an increase in operating costs by $3,381, and a decrease in deferred income tax liabilities by $574, investment property by $3,381, and income tax expense by $574 for the year ended December 31, 2012. The abovementioned difference also resulted in the decrease in unappropriated earnings by $2,807 for the year ended of December 31, 2012.

4) In accordance with current accounting standards in R.O.C., the Company’s property that is leased to others is presented under the ‘Other assets’ account. In accordance with IAS 16, “Property, Plant and Equipment”, property that meets the nature of the transaction is classified and accounted for as ‘Property, plant and equipment’. The abovementioned difference between R.O.C. GAAP and IFRSs resulted in an increase in property, plant and equipment by $160,890 and decrease in leased assets by $160,890 at the date of transition.

In addition, this also resulted in an increase in leased assets by $541 and a decrease in property, plant and equipment by $541 for the year ended December 31, 2012.

5) In accordance with current accounting standards in R.O.C., a deferred tax asset or liability should, according to the classification of its related assets or liability, be classified as current or noncurrent. However, a deferred tax asset or liability that is not related to an asset or liability for financial reporting, should be classified as current or noncurrent according to the expected time period to realise or settle a deferred tax assets or liability. However, under IAS 1, “Presentation of Financial Statements”, an entity should not classify a deferred tax asset or liability as current. In addition, according to IAS 12. 74(a) and 75, when legally enforceable right to off-set current tax assets against current income tax liabilities exist, deferred income tax

395

assets can be off-set against deferred income tax liabilities. However, the legally enforceable right cannot be executed by the entities under Taiwan tax regulations. In accordance with IAS 12, “Income Taxes”, a deferred tax asset should be recognised if, and only if, it is considered highly probable that it will be realised. Therefore, that will result in a decrease in deferred income tax assets - current by $176,683, and an increase in deferred income tax assets - non-current by $359,144, deferred income tax liabilities by $182,461 at the date of transition.

In addition, this also resulted in an increase of deferred income tax assets-non-current by $174,462, deferred income tax liabilities- non-current by $69,368 and a decrease in deferred income tax assets- current by $105,094 for the year ended December 31, 2012.

6) In accordance with current accounting standards in R.O.C., when an investee company issues new stocks, the shareholders’ share ratio changes as a result of acquiring the stock proportionately according to the share ratio. If equity capital of the investment company increase or decrease due to the abovementioned transaction, the amount of increase or decrease in equity capital is accounted for as capital reserve. However, in accordance with “Rules Governing the Preparation of Financial Statements by Securities Issuers” that the Company will apply in 2013, the capital surplus – long-term investment should be deemed to be zero at the date of transition to IFRSs. That will result in a decrease in capital surplus – long-term investment by $198,070, and increase in unappropriated earnings by $198,070 at the date of transition.

As the investee companies remain controlled for the year ended December 31, 2012, the capital surplus - long-term investment of $34,730 is reclassified to capital surplus – difference between proceeds on acquisition of or disposal of equity interest in a subsidiary and its carrying amount.

7) Pursuant to current accounting standards in R.O.C., as the Company is not a foreign company, it does not need to determine its functional currency. However, after transition to IFRSs, each of the Group’s entities (including the parent company) included in the consolidated financial statements should determine its functional currency. The cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRSs. Therefore, that will result in a decrease in cumulative translation adjustment by $133,625, and an increase in unappropriated earnings by $133,625 at the date of transition.

8) Pursuant to the regulations of Jin-Guan-Zheng-Fa-Zi Order No. 1010012865 of the Financial Supervisory Commission, when a public company adopts IFRSs for the first-time, the amount from the unrealised incremental value from revaluation and cumulative translation adjustment adjusted to unappropriated earnings arising from exemptions elected in accordance with IFRS 1 should have the same amount of legal reserve set aside. The Company will recognise legal reserve amounting to $778,163 due to the effect of exemption on unappropriated earnings at the date of transition.

9) The Company recognized short-term paid absence (holiday leave) adjustments of the investee companies according to its percentage of shareholdings. This resulted in the decrease in long-term equity investments accounted for under the equity method by $220, and gain on investments by $220 for the year ended December 31, 2012. The effect of the abovementioned resulted in the decrease in unappropriated earnings by $220 for the year ended December 31, 2012.

396

10) In accordance with current accounting standards in R.O.C., the Company’s land-use right that is leased to others is presented in “Intangible assets” account. In accordance with IAS 17 ,“Leases”, land-use right is classified and accounted for as ‘Long-term prepayments’. As a result, land-use right is reclassified to long-term prepayments amounting to $81,885 at the date of transition.

In addition, this also resulted in a decrease in long-term prepayments by $6,116 for the year ended December 31, 2012.

11) In accordance with current accounting standards in R.O.C., the Company’s computer software that is leased to others is presented in “Deferred charges” account. However, under IFRS, this is classified and accounted for as “Other non-current assets”. As a result, deferred charges are reclassified to other non-current assets amounting to $151,797 at the date of transition.

In addition, this also resulted in a decrease in non-current assets by $26,765 for the year ended December 31, 2012.

12) Major adjustments to the consolidated statement of cash flows for the year ended December 31, 2012:

a)The transition from R.O.C. GAAP to IFRSs has no effect on the Group’s cash flows reported.

b)The reconciliation between R.O.C. GAAP and IFRSs has no net effect on the Group’s cash flows reported.

397

6.6 Impact of the Financial Distress Occurred to the Company and Affiliates in the Recent Years until the Annual Report being published: None

VII. Review of Financial Conditions, Operating Results, and Risk Management 7.1 Analysis of Financial Status 7.1.1 Analysis of Financial Status Unit: NT$ thousands

Year Item

2013 2012 Difference Remark

(Note 1) Amount %

Current Assets 35,132,199 39,644,718 (4,512,519) -11.38

Properties, Plants and Equipment

7,983,972 8,127,240 (143,268) -1.76

Intangible Assets 114,766 106,859 7,907 7.40

Other Assets 5,606,361 5,911,383 (305,022) -5.16

Total Assets 48,837,298 53,790,200 (4,952,902) -9.21

Current Liabilities 23,657,670 28,679,088 (5,021,418) -17.51

Non-current Liabilities 6,234,139 6,546,811 (312,672) -4.78

Total Liabilities 29,891,809 35,225,899 (5,334,090) -15.14

Equity attributable to owners of the parent

16,472,113 16,408,354 63,759 0.39

Capital stock 7,474,343 7,349,960 124,383 1.69

Capital surplus 3,070,085 2,757,865 312,220 11.32

Retained Earnings 5,709,982 6,170,655 (460,673) -7.47

Other equity interest 229,538 141,709 87,829 61.98 Note 2

Treasury stocks (11,835) (11,835) 0 0.00

Non-controlling interest 2,473,376 2,155,947 317,429 14.72

Total Equity 18,945,489 18,564,301 381,188 2.05

Note 1: The analysis is not applicable when the difference percentage does not exceed 20% and is less NT10, 000 thousands.

Note 2: The increase in other equity interest resulted from valuation adjustment of available-for-sale financial assets.

398

7.1.2 The evaluation basis of the balance sheet valuation items Item B/S valuation item Evaluation reference Evaluation basis 1 Monetary assets

denominated in foreign currency

Spot rate on balance sheet date

Compute exchange gain or loss based on the spot rate

2 Financial instruments carried at fair value, available for sales and derivatives

Fair market value on balance sheet date

Evaluate based on the fair market value

3 Allowances for doubtful accounts

Historical records and credit references

Item1: Low risk, Foreign inverter and others a. 2% for A/R that are 61-180 days

overdue b. 2.5% for A/R that are 181-360 days

overdue c. 100% for A/R balance that are more

than 361 days overdue Item2: medium risk

a. 2.5% for A/R that are 61-180 days overdue

b. 3% for A/R that are 181-360 days overdue

c. 100% for A/R balance that are more than 361 days overdue

Not applicable to related-party receivables If a trading partner is exposed to particular credit risk, the Company may conduct an assessment on the trading partner based on its actual situation and recognize an allowance for doubtful accounts according to the trading Partner’s risk level

4 Allowances for inventory valuation and obsolescence losses

Not applicable to our company

Not applicable to our company

399

7.2 Analysis of Financial Performance

1. Analysis of Financial Performance Unit: NT$ thousands

Year Item

2012 2011 Difference Remark

(Note) Amount %

Operating Revenue 52,221,958 60,522,162 (8,300,204) -13.71

Operating Costs (48,004,905) (55,362,683) (7,357,778) -13.29

Gross Profit 4,217,053 5,159,479 (942,426) -18.27

Operating Expenses (1,851,278) (1,921,831) (70,553) -3.67

Operating Income 2,365,775 3,237,648 (871,873) -26.93 Note 3

Non-operating Income and expenses 144,135 215,739 (71,604) -33.19 Note 2

Profit before Income Tax 2,509,910 3,453,387 (943,477) -27.32 Note 3

Income Tax Expense (474,134) (603,172) (129,038) -21.39 Note 3

Non-controlling Interest (394,046) (404,933) (10,887) -2.69

Income attributable to owners of the parent 1,641,730 2,445,282 (803,552) -32.86 Note 3

Note: The analysis is not applicable when the difference percentage does not exceed 20% and is less NT10,000 thousands.

2. The analysis of the differences：

Consolidated net non-operating profit has decreased in valuation loss on financial assets 3. Analysis of gross profit:

Compared to last year, consolidated sales have decreased by 13.71% with a 18.27% decrement on gross profit of 2013. It was because new projects this year were not near completion that led to less sales and gross profit as compared to the same period on last year, hence decreased in the gross profit, profit before income tax, income tax expense and net income.

4. The explanation of occurred or expected operational, policy, market status, economic environment and other internal and external: None

5. The drivers of the following year that affect company expected operating revenue: The operating revenue of the following year is expected to be flat compared to 2013 accounting to the backlog.

7.3 Analysis of Cash Flow

7.3.1 Cash Flow Analysis for the Past 2 Year

Unit: NT$ thousands

Year Item

2013/12/31 2012/12/31 Difference ratio (%)

Cash Flow Ratio (%) -13.54 6.43 (3.11)

Fund Flow Adequacy Ratio (%) 112.88 173.39 (0.35)

Cash Re-investment Ratio (%) -13.15 -1.92 (5.85)

Explanation to changes: 1. Cash flow ratio decreased due to net cash used in operating activities. 2. Fund flow adequacy ratio decreased due to net cash used in operating activities. 3. Cash re-investment ratio decreased due to net cash used in operating activities.

7.3.2 Analysis of Cash Liquidity

The cash outflow of Year 2013 is NT$5,862,291 Thousand Dollars. The cash balance in the end of the year is NT$9,327,026 Thousand Dollars. Cash liquidity is fine.

400

7.3.3 Analysis of Cash Liquidity for the Coming Year

Unit: NT$ thousands

Cash Balance at Beginning for the Year

Expected Net Cash Flow from

Operating Activities

Expected Cash Inflow

(Outflow)

Expected Cash Surplus (Deficit)

Leverage of Expected Cash Deficit

Investment Plans Investment Plans

9,327,026 4,544,628 (110,352) 9,216,406 - -

1. Analysis of change in cash flow in Year 2014: (1) Operating activities: The sufficient backlog of CTCI Group and cost down policy will create net

cash inflow. (2) Investing activities: The expected cash outflow is mainly due to new business investment. (3) Financing activities: The expected cash outflow is mainly due to cash dividends distribution.

2. Liquidity analysis and remedial measures against cash deficit: N/A

7.4 Major Capital Expenditure Items: None 7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the

Investment Plans for the Coming Year The Company has established subsidiaries in China, Thailand, Malaysia, Vietnam, India, the Middle East, U.S.A., Singapore; branches in Italy and Qatar; CTCI Co. Korea Liaison Office and CTCI Indonesia representative office. To strengthen global market position, CTCI would keep assessing overseas markets and future growth, and expand its global footprints timely to enhance the international competitiveness.

7.6 Analysis of Risk Management 7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance,

and Future Response Measures A. Interest rate

Unit：NT$ Thousands

Item 2013 2012

Net Interest Income/Expense (A1) (28,372) 18,040

Investment gain on money market fund (A2)

14,970 21,875

Sales(B) 52,221,958 60,522,162

Net Income before Tax(C) 2,509,910 3,453,387

A1/B(%) A2/B(%) (0.05) 0.03 0.03 0.04

A1/C(%) A2/C(%) (1.13) 0.60 0.52 0.63

Besides equity products or deposits, the Company invests inactive money mainly in money market fund, which highly correlates with market interest rates. However, the investment gain on money market fund is not credited to interest income but to gain on disposal of investment. Therefore, to analyze the effects of changes in interest rates should consolidate interest income/expense and gain on disposal of money market fund. As CBC didn’t raise the rediscount rate and interest rates on accommodations in 2013, the interest rate on deposit didn’t change a lot. However, the inactive money of the company decreased in 2013, the total net interest income and investment gain on money market fund in 2013 are NT$ (13,402) thousand. For inactive money, the Company will continue to look for higher-yield financial products with safety and proper liquidity to achieve the purpose of earning stable investment profits.

401

B. Foreign exchange rates Unit：NT$ Thousands

Item 2013 2012

Net Foreign Exchange Gain/Loss(A) 104,214 (54,409)

Sales (B) 52,221,958 60,522,162

Net Income before Tax (C) 2,509,910 3,453,387

A/B(%) 0.20 (0.09)

A/C(%) 4.15 (1.58)

The business line of CTCI includes engineering design, procurement, fabrication, construction, supervision, project management, test & commissioning and environmental protection. All business work can be separated into two parts as domestic projects and overseas projects according to its location. For cash-in side, domestic projects are usually signed in Taiwan dollar, and sometimes in other foreign currencies; overseas projects are usually signed in US dollar and local currency. For cash-out side, the currencies of payment are usually decided by service location or procurement region. Therefore, the Company must keep appropriate foreign assets and liabilities to operate general activities. Thus the appreciation or depreciation of major currencies, like US dollar, Japanese Yen, and Euro, will influence foreign exchange profit/loss of the Company. To lower the influence on changes in foreign exchange rates, the Company adopts natural hedge strategy, concluding contracts in different currencies or asking multiple-currency contracts to cover major payment in different currencies. For other FX exposure, the Company also has concrete methods to hedge the risks. Thus, the changes in foreign exchange rates little affect the income of the Company. According to above table, the ratios of foreign exchange profit/loss to sales and net income before tax are slight. That means the changes in foreign exchange rates have limited influence on the sales and net income before tax. The concrete methods to hedge FX risks as below, a. To know well update trends of major currencies, and adjust FX position timely. b. To create internal hedge effect by netting foreign receivables and payables. c. For payment in foreign currencies, to forecast the direction of payment currencies and analyze the

potential profit and loss of foreign exchange, and then choose leads or lags strategy to hedge FX risks and achieve the goal of saving costs.

d. In order to allocate optimal capital position, to open foreign currency deposit accounts to collect foreign income and convert it into new Taiwan dollar or other strong currencies based on actual cash flow demand or FX tendency.

e. To use forward contracts or other tools to hedge FX risks. C. Inflation

Item 2013 2012

CPI 102.74 101.93

Annual Change of CPI 0.79 1.93

Construction Cost Indices 100.49 100.83

Annual Change of Construction Cost Indices -0.34 0.83

profit margin 8.08 8.52 Source：Directorate General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.(Taiwan)/ Base year 2011

Due to the industry nature, the analysis of inflation should be referred to not only CPI but also Construction Cost Indices. The consumer price index of 2013 is up to 102.74, and the annual growth rate is 0.79%. DGBAS estimates CPI of 2014 will be 1.07%. But Taiwan Institute of Economic Research view on CPI of 2014 will be 1.53%. The total Construction Cost Indices of 2013 fell 0.34%. Among the elements of CCI, the prices of metal products drop most since the weakness of base metal. The Company would do the best to take potential inflation into account during whole project period

http://eng.stat.gov.tw/public/Data/1151634271.xls




402

in bidding stage. However the profits will still be eroded once the price increase is more than expected. The Company will continue to watch price changes closely, and reflect them to project contract quotation simultaneously; furthermore the Company also executes derivatives to hedge operational risks from potential inflation.

7.6.2 Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions The Company is devoted to develop EPC service business and does not engage in high-risk and high-leveraged investment. As for lending to others, guarantees and derivatives transactions all are executed according to the Company’s “Rules Governing Procedure for Loaning of Funds”, ”Rules Governing Procedure for Making of Endorsements or Guarantees” and “The Procedure for Acquisition and Disposition of Assets”.

7.6.3 Future Research & Development Projects and Corresponding Budget A. Current Project Progress (as of end of March, 2014), Budget and Estimated Time to Finish

Item Project Name Current Progress

(%) Budget

Estimated Time

to Finish

1 The Application Research of Mobile Device Integrated with Smart Tag in Turnkey Project

25 11,480,000 2014.12.31

2 The Integration Research of Visualization Plant and Engineering Technology Information

25 7,480,000 2014.12.31

3 The application Research of System Handover Information Management Platform

26 19,080,000 2014.12.31

4 AP Service 15 544,000 2014.12.31

5 Turnkey Project Material Information Integration and Application

25 6,120,000 2014.12.31

6 The Research of Using Quantitative Risk Assessment to Improve Process Safety

16 1,832,000 2014.12.31

7 EPC Turnkey Project Design Information Integration and Handover Technology Research

25 4,080,000 2014.12.31

8 Amine Absorber Design Research and Application 25 1,360,000 2014.12.31

9 The Establishment of The Process Front End Design Procedure

25 1,360,000 2014.12.31

10 Process Design Software Research and Application 25 4,080,000 2014.12.31

11 Structure in Line with The Economic Design of The New Specification

25 5,440,000 2014.12.31

12 BIM in Building Engineering Integration Application Research

25 5,440,000 2014.12.31

13 The Connection Design of Steel Tube Column and Steel Beam

25 4,085,000 2014.12.31

14 Equipment Project Application System Development 25 2,040,000 2014.12.31

15 Pressure Vessel Design Program Enhancement 25 2,040,000 2014.12.31

16 Tank Design Program Improvement 10 1,360,000 2014.12.31

17 The Research of I&CS Material and MH Estimation Management System

25 5,304,000 2014.12.31

18 Industrial Instrument Wireless Control Technology Application

25 1,088,000 2014.12.31

19 Instrumentation Underground Wiring Layout Automatic Design Technology Research

25 3,536,000 2014.12.31

403

Item Project Name Current Progress

(%) Budget

Estimated Time

to Finish

20 The Establishment of Piping Module Design Database for Unit Equipment

25 2,040,000 2014.12.31

21 5D Engineering Design Development and Application 25 8,185,000 2014.12.31

22 Automatic Piping Material Take-off Program Development during Proposal Stage

25 9,540,000 2014.12.31

23 Electrical Design Data integration and CAD Application Research

25 4,800,000 2014.12.31

24 MRT Main Substation Harmonic Filter Optimization Design Application

25 4,080,000 2014.12.31

25 Establishing Commissioning Expert System 25 680,000 2014.12.31

26 The Seamless Integration of Commissioning and EPCK (STARTUP FLAWLESS)

15 1,360,000 2014.12.31

B. Major Factor to Influence Future RD Success

a. Right RD Strategy and Definition of Key Performance Index b. Good Communication with Users to Make Sure Production Meet Market Requirement c. Stable RD Resource to Accomplish Development Task Effectively d. Accurate Progress Control to Ensure the Timeliness of RD Results

7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance

and Sales None

7.6.5 Effects of and Response to Changes in Technology and in Industry Relating to Corporate Finance

and Sales None

7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s

Response Measures None

7.6.7 Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans

None 7.6.8 Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans

Not Applicable 7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive

Customer Concentration None

7.6.10 Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings

by Directors, Supervisors, or Shareholders with Shareholdings of over 10% The fluctuated security price and the possibility of changing directors are the effect and risk, and strengthening company’s information transparency is the countermeasure. The Company has established functional committees beneath Board of Directors, such as Remuneration Committee, Corporate Governance Committee, Audit Committee and Quality, Security, Health, Environmental Protection & CSR Committee, to strengthen Board of Directors functions, furthermore, to promote the corporate governance.

404

7.6.11 Effects of, Risks Relating to and Response to Changes in Control over the Company

None 7.6.12 Litigation or Non-litigation Matters A. CTCI was an EPC contractor in the Southern District Waste Management Plant Project. Environmental

Protection Bureau, Kaohsiung City Government, R.O.C. claimed for consequential damages in the amount of NTD 55,856 thousands and the interest with the rate of 5% per year for malfunction in machines provided by Siemens, subcontractors of CTCI, and CTCI counterclaimed for the reward of acceleration in the amount of NTD 76,662 thousands for early completion and was awarded NTD 20,806 thousands after offset by the decision of Taiwan Kaohsiung District Court. Afterwards, both parties appealed to Taiwan High Court and CTCI was awarded a partial winning and a partial lose verdict. Both parties appealed to Taiwan Supreme Court but it was remanded by Taiwan Supreme Court. Taiwan High Court sustained the judgment of Taiwan Kaohsiung District Court. This lawsuit is remanded by Taiwan Supreme Court twice and now is under the trial of Taiwan High Court. There is no material impact to CTCI’s finance as well as business development so far.

B. CTCI Corporation and Mitsubishi Heavy Industries, Ltd. were joint venture in the Kaohsiung Country Ren-Wu Resource Recovery Plant Project. The project completed on February 19, 2000 and accepted by Environmental Protection Administration on May 16, 2000. CTCI claimed for release of the guarantee bond in the amount of NTD 141,690 thousands, Environmental Protection Administration, however, declined the request due to one unsolved dispute between Kaohsiung City Government and O&M Contractor. After CTCI remitted in NTD 73,253 thousands to bank for exempting from the execution of the guarantee bond and filed a lawsuit to Taiwan Kaohsiung District Court, Environmental Protection Administration returned the amount of NTD 9,299 thousands to CTCI. As a result, CTCI reduced the claim amount to NTD 63,954 thousands, with the interest in the amount of NTD 117 thousands and the liquated damages in the amount of NTD 2,421 thousands. CTCI was then awarded a winning adjudication except for the liquated damages in the amount of NTD 1,708 thousands has been rejected. Afterwards, the Environmental Protection Administration appealed to the Taiwan High Court but failed. Further, the Environmental Protection Administration continued to appeal to the Taiwan Supreme Court. This lawsuit is remanded by Taiwan Supreme Court twice and now is under the trial of Taiwan High Court. There is no material impact to CTCI’s finance as well as business development so far.

C. CTCI Corporation, Ishikawajima-Harima Heavy Industries Co., Ltd., Resource Engineering Services Inc. and East Construction Industry Co., Ltd were joint venture in the CPC Northern LNG Receiving Terminal Project and entered into a contract on July 23, 2004. CTCI claimed for additional costs, including direct and indirect costs, in the total amount of NTD 82,390 thousands for delay resulted from CPC Corporation’s contractor for another project and filed a lawsuit to Taipei District Court on March 5, 2010. After reviewing related document itself, CTCI reduced the claim amount to NTD 71,448,016 on March 1, 2011. The judgment of Taipei District Court is not awarded to CTCI. CTCI appealed to Taiwan High Court. The lawsuit now is under the trial of Taiwan High Court. There is no material impact to CTCI’s finance as well as business development so far.

D. CTCI Corporation, Ishikawajima-Harima Heavy Industries Co., Ltd., Resource Engineering Services Inc. and East Construction Industry Co., Ltd were joint venture in the CPC Northern LNG Receiving Terminal Project and entered into a contract on July 23, 2004. CPC Corporation alleged it has limited budget and cannot pay the compensation of price escalation, so CTCI claimed for compensation of price escalation in the amount of USD 7,983 thousands and NTD 384,159 thousands and filed a lawsuit to Taipei District Court on March 5, 2010. The judgment of Taipei District Court is not awarded to CTCI. CTCI appealed to Taiwan High Court but overruled by Taiwan High Court. This lawsuit now is under the trial of Taiwan Supreme Court. There is no material impact to CTCI’s finance as well as business development so far.

405

7.6.13 Risk management organization framework A. Organization chart

B. Descriptions of duties and responsibilities a. Risk Management Implementation Committee

The Risk Management Implementation Committee represents the supervising unit of the Company in risk management. The Committee is chaired by President and is staffed with the Executive Vice Presidents and department heads (or deputy risk management representative). The Committee takes the responsibility to draw up risk management policies and guidelines, convene meetings on a regular basis to study the issues linked with risk management, superintend the implementation of rectification programs and report to the Audit Committee about major items of risks.

b. Secretarial Work: The Secretary takes charge of the secretarial business as the major coordinating and contacting point in risk management. The Secretary assumes the responsibility to assemble risk files, promulgate risk management related rules and regulations, promote and coordinate for risk management activities, sponsor risk management review meetings, draw up the annual operating plans and team up with the Auditors’ Office to work out annual audit highlights, assemble reports about implementation of risk management to assure continual and uninterrupted performance of the risk management.

c. Auditing Office: On the grounds of the annual audit highlights aiming at the risk management mechanism and operation, the Office implements objective and independent audit to assure effective performance of the risk management system.

d. The risk management representatives of departments and projects: The risk management representatives of departments are assigned by the department heads to help department heads take charge of identification, assessment, disposal, detection and control of the risks of the respective departments, transmit relevant information and messages to the department members; help department heads assemble the risk management information and data and submit them to the Risk Management Implementation Committee. The risk management representatives of projects are served by Project Control Managers to help the Project Managers in identification, assessment, disposal, detection and control of the risks of the respective projects, transmit relevant information and messages to the department members; help project managers assemble the risk management information and data and submit them to the Assistant Managers of the Project Offices.

Secretarial Work

Board of Directors

Auditing Dept.

Risk Management Implementation Committee

Risk Management Representatives of Departments and Projects

All Empolyees

Audit Committee

406

e. All employees: The all employees faithfully comply with the Company’s policies to carry out the business operation and report the potential major risks to the respective supervisors.

7.6.14 Other Major Risks

Competiveness is enhanced with CTCI tracking international business and economic conditions and assessing the impact on corporate finance, sales and business implementation which is responded to through various means including the control of cash flows to facilitate capital turnover; development of new markets for added business; and strengthened core technology which including project management and quality control.

7.7 Other: None

407

VIII. Special Disclosure 8.1 Summary of Affiliated Companies 8.1.1 Consolidated Business Report of Affiliates

(1) Organizational chart of the affiliates

Organizational Chart of the Affiliates(Domestic)

CTCI Corporation

49.58%

Advanced Control &

Systems Inc.

97.09%

E&C Engineering Corporation

100%

InnovestInvestment Corporation

100%


100%

CTCI Machinery

Corporation

34.27%

Pan Asia Corporation

100%

HD Resources Management Corporation

23.34%

CTCI Chemicals Corporation

9.24%

9.24%

6.77%

26.90%

98%

Leading Energy Corporation

2%

93.14%


0.01%

59.99%

KD Holding Corporation

0.05%

0.38%

60%

Yuan Ding Resources

Management Corporation

40%

April 30, 2014

75%

Fortune Energy Corporation

93.15%

Sino Environmental

Services Corporation

408

Organizational Chart of the Affiliates(Overseas)

CTCI Corporation

Ad

vance

d

Co

ntro

l &

System

s Inc.

E&C

En

gine

erin

g

KD

Ho

ldin

g C

orp

oratio

n

Sino

En

viron

me

ntal

Service

s C

orp

oratio

n

CTC

I C

he

micals

Co

rpo

ration

Inn

ove

stIn

vestm

en

t C

orp

oratio

n

100%Ce

ntu

ry Ah

ead

Ltd.

100%

Ad

vance

d C

on

trol

& In

form

ation

Te

chn

olo

gies Ltd

.

100%

Syne

rgy En

gine

erin

g Co

rp.

100%

Shan

ghai X

uan

LiTrad

ing C

o.,Ltd

19.24%

Shan

g Din

g En

gine

erin

g &

Co

nstru

ction

Co

., Ltd

.

80.76%

30%

SINO

GA

L -W

aste

Service

s Co

., Ltd.

30%

CTC

I Co

rpo

ration

Q

atar Bran

ch

CTC

I Co

rpo

ration

AB

U D

HA

BI B

ranch

50%

CTC

I Arab

ia Ltd.

50%

100%CTC

I Ove

rseas (B

VI)

Co

rpo

ration

60%CTC

I Engin

ee

ring &

C

on

structio

n Sd

n.

Bh

d.

40%

49%CTC

I (Thailan

d) C

o.,

Ltd.

51%

100%

CTA

S Co

rpo

ration

CTC

I Co

rpo

ration

Ko

rea Liaiso

n O

ffice

CTC

I Co

rpo

ration

Italian

Bran

ch

100%

Ch

un

g din

g C

he

mical C

orp

.

100%CTC

I Singap

ore

Pte

.Ltd

.

100%

Zhu

haiC

hu

ng D

ing

Ch

em

ical Co

rp.

100%

CTC

I Ove

rseas C

o.,

Ltd.

100%

Un

iversal

Engin

ee

ring (B

VI)

Co

rpo

ration

50%CIM

AS En

gine

erin

g C

o., Ltd

.100%C

IND

A E&

C P

vt. Ltd.

100%

Jingd

ing

Engin

ee

ring &

C

on

structio

n C

o.,

Ltd.

49%

Sup

erio

rity(Th

ailand

)

20%

CTC

I Malaysia Sd

n.

Bh

d.

100%

Xian

g Din

g En

viron

me

ntal

Co

nsu

ltant

(shan

ghai) C

o., Ltd

.

40%CTC

I & P

artne

rs Co

., Ltd

.

60%

39.99%CIP

EC C

on

structio

n

Inc.

April 30, 2014

409

(2) General information of the affiliates: Unit : $Thousands

Company Date of

Incorporation Address

Common Stock Issued

Major Business Activities

Pan Asia Corporation 1965.09.23 7Fl, 219, Sec. 4, Zhongxiao East Rd., Taipei NTD 1,095,136 Consultation, plan and design of engineering plan.

E&C Engineering Corporation 1980.05.27 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei NTD 608,720 Design, management, and planting of nuclear power, thermal power, fire pumped storage power generation and others related to engineering.

Resources Engineering Services Inc. 1984.05.29 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei NTD 180,000 Mining of geology, seas oil and gas, marble and rare; planning, design, monitor of civil, traffic environment and various mechanical and electrical equipment.

Advanced Control & Systems Inc. 1987.08.03 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei NTD 230,840 Systems planning, design, integration, and engineering for various IT systems etc.

Sino Environmental Services Corporation

1994.05.24 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei NTD 151,000 Management of waste recycling site and maintenance of related mechanical and equipment etc.

GRQ Investment Corporation 1999.02.24 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei NTD 1,690,000 Real Estate Commerce/Real Estate Rental and Leasing

Innovest Investment Corporation 1999.02.05 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei NTD 100,000 General investment.

KD Holding Corporation 1999.12.13 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei NTD 633,891 General investment.

Leading Energy Corporation 2000.05.19 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei NTD 880,000 Environmental service of waste disposal device installation, steam power cogeneration etc.

Fortune Energy Corporation 2002.11.07 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei NTD 750,000 Environmental service of waste disposal device installation, steam power cogeneration etc.

CTCI Chemicals Corporation. 1999.08.04 10Fl, 89, Sec. 6, Zhongshan North Rd., Taipei NTD 71,000 Manufacture, wholesale, and retail of industrial chemicals.


2001.06.01 No.69, Ln. 373, Changchun St., Wuri Dist., Taichung City, Taiwan

NTD 20,000 International trade and environmental service of waste disposal, equipment installation and mechanical installation etc.

CTCI (Thailand) Co., Ltd. 1987.08.15 19

th Floor, 400 Phairojkijja Tower, Bangna-Trad

Road KM.4, Tambol Bangna, Amphoe Prakanong, Bangkok 10260 Thailand

THB 255,000 Design and planting of petrochemical plant.

CTCI Overseas (BVI) Corporation 1997.04.30 P.O.Box 662, Road Town, Tortola British Virgin Islands

HKD 67,400 Investment and planning of related engineering.

410

CTCI Overseas Co., Ltd. 1993.06.01 Suite 1801-5,18/F.,Tower 2,China Hong Kong City, 33 Canton Road,Tsim Sha Tsui, Kowloon Hong Kong

HKD 67,400 Investment and planning of related engineering.

Jingding Engineering & Construction Co., Ltd.

1993.02.17 10F Royal City International Centre, No. 136, Andingmenwai Street, Dongcheng District, Beijing

USD 10,600 Design, survey, construction and inspection of various engineering and construction projects, plants, machinery and equipment, and environmental protection projects etc.


1998.08.17 SUITE 22-03B, 22nd Fl., Menara Tan & Tan 207 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia

MYR 750 Investment and planning of related engineering.

CIMAS Engineering Co., Ltd. 2001.03.28 7

th Floor, HITCBuilding, 239 Xuan Thuy Road, Cau

Giay district, Hanoi,Vietnam USD 3,600

Chemical, petrochemical, feasibility study & planning, engineering design, procurement & fabrication, erection.

Century Ahead Ltd. 2000.10.12 Offshore Chambers, P.O.Box 217, Apia, Samoa USD 942 Investment and planning of related engineering.

Chung ding Chemical Corp. 1999.02.12 Offshore Chambers, P.O.Box 217, Apia, Samoa USD 1,400 Manufacture, wholesale, and retail of industrial chemicals.

Zhuhai Chung Ding Chemical Corp. 2002.07.12 Room 204, Block 9, No. 68, Langbai Road, Nanshui Township, Jin Wan District, Zhu Hai City, Guangdong Province

USD 1,400 Manufacture, wholesale, and retail of industrial chemicals.

CTCI Arabia Ltd. 2002.10.27 P.O.Box 1962 Al Khobar 31952 Kindom of Saudi Arabia

SAR 5,000 Investment and planning of related engineering.

Shang Ding Engineering & Construction Co., Ltd.

2003.09.24 7Fl, 26, Lane 168, Daduhe Road, Putuo District, Shanghai

USD 16,680 Design, survey, construction and inspection of various engineering and construction projects

Advanced Control & Information Technologies Ltd.

2001.09.21 7Fl, 26, Lane 168, Daduhe Road, Putuo District, Shanghai

USD 750 Computer technology services.

CTCI Machinery Corporation 2007.03.14 5, Xinggong Rd., Dashe Dist., Kaohsiung NTD 121,000 Secondary processing of steel, piping, heat treatment, manufacture of pollution control equipment and non-destructive testing etc.

Synergy Engineering Corp. 1998.12.31 P.O. Box 662, Wickhams Cay, Road Town, Tortola British Virgin Islands

USD 100 Design and planning of engineering projects.

Superiority (Thailand) Co., Ltd 2006.01.01 19

th Floor, Phairojkijja Tower, No. 400 Bangna-Trad

Road, K.M.4, Bangna, Bangkok 10260 Thailand THB 350 Investment and planning of related engineering.

Universal Engineering (BVI) Corporation

2003.03.06 Akara Bldg.,24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands.

USD 50 Investment and planning of related engineering.

CIPEC Construction Inc. 2003.07.03 Unit 402 SEDCCO 1 Building Roda St. Legaspi Village Makati City, Philippine.

PHP 2,500 Investment and planning of related engineering.

411

CINDA Engineering & Construction Pvt. Ltd.

2008.08.08 B-92, 9th Floor, Himalaya House, 23 Kasturba Gandhi Marg, New Delhi – 110001

INR 80,000 Chemical, petrochemical, feasibility study & planning, engineering design, procurement & fabrication, erection, construction & commission.

CTCI Malaysia Sdn. Bhd. 2002.06.04 SUITE 22-03B, 22nd Fl., Menara Tan & Tan 207 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia

MYR 750

To carry on in the country of Malaysia and elsewhere the trade or business of owners, designers, contractors, constructors, fabricator, builders repairers and operators of industrial plants and parts and accessories therefore and all other items or things which are or may be used in connection therewith.

SINOGAL - Waste Services Co., Ltd. 2009.06.25 Rua Dr. Pedro Jose Lobo, ns 1-3, Edificio Banco Luso Internacional,15 andar, salas 1501 e 1510, em Macau

MOP 4,000 Management of waste recycling site and maintenance of related mechanical and equipment etc.

Shanghai XuanLi Trading Co.,Ltd 2009.07.17 Room 701, 7Fl, 26, Lane 168, Daduhe Road, Putuo District, Shanghai

CNY 5,000 General trade.

CTAS Corporation 2009.10.02 9555 West Sam Houston Pkwy South, Suite 420 Houston, Texas 77099

USD 100 Business development and related engineering services and planning

CTCI and Partners Company Limited 2009.09.14 P.O.Box 1962 Al Khobar 31952 Kindom of Saudi Arabia

SAR 5,000

To carry out contracting works in the fields of gas and oil, constructing refineries petrochemical manufactories, and water treatment plants, and installing industrial equipment, and operating and maintaining them, and carrying out all other related works.

CTCI Singapore Pte. Ltd. 2011.01.10 8 Cross street #11-00 PWC Building Singapore USD 5,100 construction service, consultancy and investment oldings

Yuan Ding Resources Management Corp.

2013.12.13 6F., No.132, Xingshan Rd., Taipei NTD 1,000 Waste services, waste clear, other environmental services, and environmental pollution services, etc.

Xiang Ding Environmental Consultant (shanghai) Co., Ltd.

2013.10.25 Room 2206-G,NO.89,East Yunling Rd., Putuo District, Shanghai city

USD 140 Technical development, advisory and service in environmental field; environmental pollution control equipment and related parts wholesale, import and export, etc.

412

(3) Common Shareholders of the Company and Its Subsidiaries or Its Affiliates with Actual of Deemed Control: None

(4) Industries covered by the business operated by all affiliates:

The business of the Company and its subsidiaries and affiliates provide include engineering, chemical and investment

(5) Directors, supervisors, and general managers of the Company and affiliates

Company Title Name of Representative Shareholding

Shares %


Chairman CTCI Corporation Representative: Shou-Wei Lou

59,098,624 97.09

Director CTCI Corporation Representative: Y. S. Liao John H. Lin Pao-Yao Pan Jean-Louis Chen C. C. Lin S. L. Yang

59,098,624 97.09

Supervisor CTCI Corporation Representative: Shu-Chu Hung

1,000 0.00

President Y. S. Liao


Chairman CTCI Corporation Representative: Ming-Ta Kao

16,765,048 93.13

Director CTCI Corporation Representative: Michael Chung Michael Yang Ming-Shan Yu Ching-Hsiang Tseng Jiann-Long Huang Chi-Min Chien

16,765,048 93.13

Supervisor GRQ Investment Corporation Representative: Andrew Tsai

1,000 0.01

President Michael Chung

Advanced Control & Systems Inc.

Chairman CTCI Corporation Representative: Hwei-Nan Yih

11,444,842 49.58

Director CTCI Corporation Representative: John T. Yu Bao-Lang Chen Yin-Fan Liu

11,444,842 49.58

Charles Y. Huang

Hong-Jen Wu 90,403 0.39

Hou-Sheng Chan

Supervisor Viet-Foo Wu

Hsiao-Hui Wang

Hung-I Chen 364,000 1.58

President Yin-Fan Liu 40,522 0.18

413


Shares %


Chairman KD Holding Corporation Representative: J.J. Liao

14,065,936 93.15

Director KD Holding Corporation Representative: Eric Tiao Kai Lee Todd Chen Daniel Hsin-I Ting Wayne C.S. Chang Donald Yu

14,065,936 93.15

Supervisor HD Resource Management Corporation Representative: SH Lin

1,000 0.01

President Eric Tiao


Chairman CTCI Corporation Representative: Mark W. H. Yang

169,000,000 100.00

Director CTCI Corporation Representative: John T. Yu Ho-Chuang Lee Steve Jean Jim-Druan Chen

169,000,000 100.00

Supervisor CTCI Corporation Representative: J.S. Wu

169,000,000 100.00

President Patrick Lin


Chairman CTCI Corporation Representative: Michael Yang

10,000,000 100.00

Director CTCI Corporation Representative: Bo-Wen Liu Sharon Chiang Leon Chen Tien-Nan Pan

10,000,000 100.00

Supervisor CTCI Corporation Representative: C. F. Chiou

10,000,000 100.00

President Patrick Lin

KD Holding Corporation

Chairman CTCI Corporation Representative: John H. Lin

38,457,105 60.67

Director CTCI Corporation Representative: Andy Sheu

38,457,105 60.67

Wen-Whe Pan Yang-Min Liu

Independent Director

Sidney Hsin-Huai Chow Tan Ho-Chen Shean-Bii Chiu

Supervisor Parkwell Investment Limited Representative: Joyce Yu-Yi Huang

1,068,000 1.68

Ming-Cheng Hsiao

Yingying Liao

President Donald Yu

414


Shares %

CTCI Chemicals Corporation.

Chairman Innovest Investment Corporation Representative: Steven Chang

1,657,207 23.34

Director Innovest Investment Corporation Representative: Shirley Chou P. C. Chen Mark H.C. Jen Michael C. Chang Joe C.L. Chen Michael Yang

1,657,207 23.34

Supervisor Innovest Investment Corporation Representative: Teh-Ming Tao

1,657,207 23.34

Roentec Company Limited Representative: Han-Bin Li

407,396 5.74

President Steven Chang

Leading Energy Corporation

Chairman KD Holding Corporation Representative: Donald Yu

86,240,000 98.00

Director KD Holding Corporation Representative: Perry Yeh Weapon Wu Cheng-Shen Wang Ming-Tang Tsai

86,240,000 98.00

Supervisor Sino Environmental Services Corporation Representative: Chang-Hong Lin

1,760,000 2.00

President Perry Yeh



2,000,000 100.00

Director KD Holding Corporation Representative: Yun-Peng Shih Ai-Cheng Ho Chun-Jung Hung Sheng-Jung Chiang

2,000,000 100.00

Supervisor KD Holding Corporation Representative: Jung-Yu Han

2,000,000 100.00

President Yun-Peng Shih

Fortune Energy Corporation


56,249,000 75.00

Director KD Holding Corporation Representative: Forest M.H. Lin Po-Chien Wang Feng-Hui Lee

56,249,000 75.00

Topco Scientific Co., Ltd. Representative: Fa-Siang Tan

18,700,000 24.93

Supervisor KD Holding Corporation Representative: Yan-Long Lee

56,249,000 75.00

Topco Scientific Co., Ltd. Representative: Su-Qing Lu

18,700,000 24.93

President Perry Yeh

415


Shares %

Pan Asia Corporation

Chairman Veterans Affairs Commission, Executive Yuan Representative: Jian-Jhong Guo

26,128,918 23.86

Director Veterans Affairs Commission, Executive Yuan Representative: Jin-Man Tsai Jyun-De Wu Hai-Ching Lin Hsiao-Chen Chang

26,128,918 23.86

CTCI Corporation Representative: John T. Yu P. C. Chen Michael Yang Chen-San Hu

34,431,772 34.27

Tong-An Lin 46,239 0.04

Supervisor Taiwan Cement Corporation Representative: Chien-Chiang Huang

5,937,130 5.42

Universal Investment Corporation Representative: Chih-Yuan Hou

2,969,190 2.71

Chia Hsin Cement Corporation Representative: Yung-Chih Huang

2,601,165 2.38

Asia Cement Corporation Representative: Wei-Kun Chou

1,484,589 1.36

President Tong-An Lin 46,239 0.04

CTCI Machinery Corporation

Chairman CTCI Corporation Representative: Jenny C.L. Wei

12,100,000 100.00

Director CTCI Corporation Representative: Tung-Chih Huang Tzu-Jung Tseng Yuan-Shuang Kuan John H. Lin Kuo-Yuan Chang Wen-Shen Hsueh

12,100,000 100.00

Supervisor CTCI Corporation Representative: Chey-Chan Lee

12,100,000 100.00

President Tung-Chih Huang

CTCI (Thailand) Co., Ltd.

Director CTCI Corporation Representative: John H. Lin Hope Sun Andy Sheu Michael Hong Mark W. H. Yang M. H. Wang

1,249,500 49.00

Superiority (Thailand) Co.,Ltd Representative: Rungthip Chin Thira Jaturonrassamee

1,300,500 51.00

CTCI Overseas (BVI) Corporation

Director CTCI Corporation Representative: Andy Sheu M. H. Wang Mark W. H. Yang

6,740,000 100.00

416


Shares %

CTCI Overseas Co., Ltd.

Director CTCI Overseas (BVI) Corporation Representative: John T. Yu John H. Lin Andy Sheu Jin-Wen Chang

6,740,000 100.00

Jingding Engineering & Construction Co., Ltd.

Chairman CTCI Overseas Co., Ltd. Representative: Ching-Lin Hsu

USD 10,600,000 100.00

Director CTCI Overseas Co., Ltd. Representative: John T. Yu Tieh-Shih Chang Mark W. H. Yang Shen-Peng Liao

USD 10,600,000 100.00

Supervisor CTCI Overseas Co., Ltd. Representative: Hen-Hsin Ko

USD 10,600,000 100.00

President Tieh-Shih Chang


Chairman CTCI Overseas Co., Ltd. Representative: Shou-Wei Lou

USD 13,470,000 80.76

Director E&C Engineering Corporation Representative: John H. Lin Patrick Lin

USD 3,210,000 19.24

CTCI Overseas Co., Ltd. Representative: Yi-Meng Chen

USD 13,470,000 80.76

Supervisor CTCI Overseas Co., Ltd. Representative: David Wang

USD 13,470,000 80.76

President Yi-Meng Chen


Chairman CTCI Corporation Representative: P. C. Chen

450,000 60.00

Director CTCI Corporation Representative: Ming-Gen Lee Steven C.H. Wu Rick Wu

450,000 60.00

CTCI Overseas Co., Ltd. 300,000 40.00

President Steven C.H. Wu

CTCI Arabia Ltd. Chairman CTCI Corporation Representative: M. H. Wang

SAR 2,500,000 50.00

Director CTCI Corporation Representative: Andy Sheu C.L. Yen

SAR 2,500,000 50.00

CTCI Overseas Co., Ltd. Representative: James Wang T.M. Wang En-Cheng Lin

SAR 2,500,000 50.00

President James Wang

417


Shares %

CIMAS Engineering Co., Ltd.

Chairman Vietnam Machinery Erection Corporation Representative: Hoang Minh Khoi

USD 1,188,000 33.00

Vice Chairman

CTCI Overseas Co., Ltd. Representative: Andy Sheu

USD 1,800,000 50.00

BOM Members

CTCI Overseas Co., Ltd. Representative: John H. Lin Ming-Shyan Lee

USD 1,800,000 50.00

Vietnam Machinery Erection Corporation Representative: Nguyen Viet Hung

USD 1,188,000 33.00

Sincerity Engineering Co., Ltd. Representative: Yang Yi-Chung

USD 612,000 17.00

General Director Ming-Shyan Lee

Chung ding Chemical Corp.

Chairman CTCI Chemicals Corporation Representative: Steven Chang

1,400,000 100.00

Director CTCI Chemicals Corporation Representative: Richard Yao

1,400,000 100.00

Century Ahead Ltd.

Director Advanced Control & Systems Inc. Representative: Hwei-Nan Yih Yin-Fan Liu Ai-Cheng Ho

USD 750,000 100.00

Zhuhai Chung Ding Chemical Corp.

Chairman Chung ding Chemical Corp. Representative: Steven Chang

USD 1,400,000 100.00

Director Chung ding Chemical Corp. Representative: Michael C. Chang P. C. Chen Mark H.C. Jen Richard Yao

USD 1,400,000 100.00

President David Hwang

Superiority (Thailand) Co., Ltd

Director Universal Engineering BVI Representative: John H. Lin Hope Sun

THB 171,500 49.00

3 independent shareholders Representative: Rungthip Chin

THB 178,500 51.00


Chairman Century Ahead Ltd. Representative: Hwei-Nan Yih

USD 750,000 100.00

Director Century Ahead Ltd. Representative: Benjamin C. N. Tsai Yin-Fan Liu

USD 750,000 100.00

Supervisor Century Ahead Ltd. Representative: Chuan-Ju Shen

USD 750,000 100.00

President Zong-Kuan Su

SINOGAL - Waste Services Co., Ltd.

Chairman Helder Jose Moura Dos Santos MOP 800,000 20.00

Director Pereira Taveira Pinto, Carlos Manuel MOP 800,000 20.00

CTCI Corporation MOP 1,200,000 30.00

Sino Environmental Services Corporation MOP 1,200,000 30.00

Director Donald Yu J.J. Liao Patrick Lin

President Shun-Sheng Wang

418


Shares %

CIPEC Construction Inc.

Chairman CTCI Overseas Co., Ltd. Representative: M.L. Lee

9,998 40

Director CTCI Overseas Co., Ltd. Representative: Wen-Pin Lo

9,998 40

Accuracy Representative: Priscilla S. Alfonso Randolph Ang Grace Z. Fernandez

15,000 60

President Priscilla S. Alfonso

Synergy Engineering Corporation

Chairman E&C Engineering Corporation Representative: Shou-Wei Lou

100,000 100

Managing Director

Y. S. Liao

CTCI Malaysia Sdn. Bhd.

Chairman Sumber Mampu Sdn. Bhd. Representative: Mohamed Nor Bin Abu

Bakar

600,000 80.00

Director CTCI E&C Sdn. Bhd. Representative: Kevin S.P. Jen Ting-Chuang Li

150,000 20.00

Sumber Mampu Sdn. Bhd. Representative: Kamaruddin Bin Anuer, Muhammad Anas Bin

Marjunit

600,000 80.00

CINDA Engineering & Construction Pvt. Ltd.

Chairman Director

John H. Lin Dingo Ku Jsh-hong Tsai

INR 8,000,000 100.00

Shanghai XuanLi Trading Co.,Ltd

Chairman Shang Ding E&C Co., Ltd. Representative: Shou-Wei Lou

CNY 5,000,000 100.00

Director Shang Ding E&C Co., Ltd. Representative: Yi-Meng Chen Yu-Li Zhu

Supervisor Shang Ding E&C Co., Ltd. Representative: Y. S. Liao

President Yi-Meng Chen

CTAS Corporation Chairman Director

Andy Sheu M. H. Wang Sean Hsu

100,000

100.00

President Sean Hsu

CTCI and Partners Company Limited

Chairman CTCI Overseas Co., Ltd. Representative: John H. Lin

3,000,000 60.00

CTCI Corporation 2,000,000 40.00 Managing Director

James Wang

Universal Engineering (BVI) Co.,

Chairman John H. Lin 50,000 100.00

CTCI Singapore Pte. Ltd.

Chairman John H. Lin 5,100,000 100.00

Director Steven C.H. Wu Lee Wei Hsiung

Managing Director

Steven C.H. Wu

419


Shares %

Yuan Ding Resources Management Corp.


60,000 60.00

Director KD Holding Corporation Representative: Yun-Peng Shih Yu-Jheng Huang

60,000 60.00

Supervisor HD Resource Management Corporation Representative: Patrick Lin

40,000 40.00

President Yun-Peng Shih


Chairman Sino Environmental Services Corporation Representative: Donald Yu

USD 140,000 100.00

Supervisor Sino Environmental Services Corporation Representative: Patrick Lin

USD 140,000 100.00

President Jin-Yiu Hsueh

420

8.1.2 Operation overview of the Company and affiliates

Unit: NT$ Thousands

Company Common

Stock Issued Total Assets

Total Liabilities

Total Stockholders’

Equity

Total Operating Revenue

Operating Income (Loss)

Net Income (Loss)


E&C Engineering Corporation $ 608,720 $ 2,758,588 $ 2,017,330 $ 741,258 $ 3,481,722 $ 248,854 $ 11,013 $ 0.18

Resources Engineering Services Inc. 180,000 925,251 585,876 339,375 1,866,890 23,820 26,298 1.46

Advanced Control & Systems Inc. 229,805 1,169,411 639,266 530,145 1,122,980 108,057 98,354 4.28

Sino Environmental Services Corporation 151,000 1,566,535 844,288 722,247 2,553,391 299,891 292,166 19.34

GRQ Investment Corporation 1,690,000 5,367,184 2,880,222 2,486,962 315,822 121,172 83,107 0.49

Innovest Investment Corporation 100,000 138,494 232 138,262 12,237 10,458 12,740 1.27

KD Holding Corporation 635,464 4,062,113 56,659 4,005,454 658,217 607,715 620,318 6.40

Leading Energy Corporation 880,000 2,043,935 387,077 1,656,858 589,835 282,223 232,836 2.65

CTCI Chemicals Corporation 71,000 244,412 75,314 169,098 444,014 52,199 45,446 6.40

CTCI (Thailand) Co., Ltd. 233,070 432,452 228,703 203,749 638,130 2,802 2,247 0.88

CTCI Overseas (BVI) Corporation 258,107 2,070,008 30 2,069,978 - (627) 305,127 45.37

CTCI Overseas Co., Ltd. 258,107 3,254,453 1,208,855 2,045,598 1,698,968 510,734 305,664 -

Jingding Engineering & Construction Co., Ltd. 361,768 2,139,996 801,378 1,338,618 1,816,779 369,392 281,061 3.84

CTCI Engineering & Construction Sdn. Bhd. 6,828 80,434 58,129 22,305 208,545 4,980 5,745 7.66

Fortune Energy Corporation 750,000 2,230,577 939,104 1,291,473 378,117 194,490 180,638 2.41

HD Resources Management Corporation 20,000 274,090 202,844 71,246 795,829 22,971 21,004 10.50

CTCI Arabia Ltd. 39,800 1,901,349 2,915,716 (1,014,375) 2,508,069 (1,047,632) (1,070,899) -

Synergy Engineering Corporation 2,908 26,718 65 26,653 - (134) 832 2.86

Chung ding Chemical Corp. 43,997 69,914 130 69,784 - (211) 1,500 -

Zhuhai Chung Ding Chemical Corp. 56,291 57,686 1,610 56,076 28,937 1,872 1,353 -

CIMAS Engineering Co., Ltd. 95,271 147,626 48,814 98,812 149,664 2,476 2,667 -

421

Company Common

Stock Issued Total Assets

Total Liabilities

Total Stockholders’

Equity

Total Operating Revenue

Operating Income (Loss)

Net Income (Loss)


Century Ahead Ltd. 23,678 16,110 - 16,110 - (30) 1,298 -


26,292 16,530 1,741 14,789 11,633 1,536 1,320 -

CIPEC Construction Inc. 1,723 15,280 13,872 1,408 - (967) (2,086) -

Universal Engineering(BVI) Corporation 1,493 248,412 30,357 218,055 - (90) 3,612 72.24


609,411 2,217,119 1,698,980 518,139 601,669 (167,913) (143,896) (11.66)

CTCI Machinery Corporation 121,000 1,676,483 1,410,260 266,223 2,344,704 104,081 82,347 -

CINDA Engineering & Construction Pvt. Ltd. 38,632 604,739 415,438 189,302 1,736,712 86,227 42,558 5.32

SINOGAL - Waste Services Co., Ltd. 14,724 491,914 396,116 95,797 511,895 63,037 62,349 -

Shanghai XuanLi Trading Co.,Ltd 24,690 72,859 35,795 37,064 79,859 14,107 10,816 21.63

Pan Asia Corporation 1,095,137 3,094,303 1,422,789 1,671,514 5,376,069 263,144 219,157 2.00

CTCI Malaysia Sdn. Bhd. 6,828 544,829 522,979 21,859 1,226,973 17,489 5,089 7.00

Superiority (Thailand) Co., Ltd 320 28,730 59,062 (30,332) - (253) 379 0.00

CTAS Corporation 2,985 7,164 925 6,239 7,164 1,642 1,373 14.00

CTCI and Partners Company Limited 39,800 46,709 10,674 36,035 - (2,993) (2,993) -

CTCI Singapore Pte. Ltd. 153,145 330,054 158,234 171,821 733,415 14,439 20,380 -


4,147 11,067 6,717 4,350 8,073 170 102 -

Yuan Ding Resources Management Corp. 1,000 1,000 78 922 - (78) (78) -

422

8.1.3 The related information on the endorsements or guarantees for others, lending to others and derivative financial instruments of affiliates: A. Endorsements or guarantees for others: (as of March 31st, 2014) Unit: NT$ thousands

No. (Note 1)

Guarantor

Guarantee

The Ceiling on guarantee for single

enterprise

The highest balance

during the period (Note 4)

Ending balance

as of March

31st,2013

Assets pledged for guarantee

Ratio of the accumulated guarantee to the net asset value of the

Company as of March

31st,2014

Ceiling on total guarantee amount (Note 3) Name

Relationship with the company

(Note 2)

1

Advanced Control &

Systems Inc. (ACS)

Century Ahead Limited

2

100% of the net worth from the latest audited financial statements of ACS

18,278 18,278 - 3.45

The ceiling for total guarantee is $1,060,288, 200% of the net worth from the latest audited financial statements of ACS.

2 E&C

Engineering Corporation

Synergy Engineering

Corp. 2

300% of the net worth from the latest audited financial statements of E&C Engineering Corp.

50,000 50,000 - 6.97

The ceiling for total guarantee is $4,304,296, 600% of the net worth from the latest audited financial statements of E&C Engineering Corp.

2 E&C


Shang Ding Engineering & Construction

Co., Ltd

5


282,156 274,865 - 38.32


2 E&C



5


1,230,407 1,230,407 - 171.51


2 E&C



5


28,656 28,656 - 3.99


423

3 CTCI

Machinery Corporation


5

300% of the net worth from the latest audited financial statements of CTCI Machinery Corporation

404,033 404,033 - 151.57

The ceiling for total guarantee is $1,599,437, 600% of the net worth from the latest audited financial statements of CTCI Machinery Corp.

3 CTCI

Machinery Corporation


5

300% of the net worth from the latest audited financial statements of CTCI Machinery Corporation

1,360 1,360 - 0.51

The ceiling for total guarantee is $1,599,437, 600% of the net worth from the latest audited financial statements of CTCI Machinery Corp.

4 Resources

Engineering Services Inc.


5

300% of the net worth from the latest audited financial statements of Resources Engineering Services Inc.

634,800 634,800 - 183.64

The ceiling for total guarantee is $2,074,041, 600% of the net worth from the latest audited financial statements of Resources Engineering Services Inc.

5 CTCI

Chemicals Corporation


5

300% of the net worth from the latest audited financial statements of CTCI Chemicals Corporation

230,473 230,473 - 134.71

The ceiling for total guarantee is $1,026,527, 600% of the net worth from the latest audited financial statements of CTCI Chemicals Corporation.

5 CTCI

Chemicals Corporation


5

300% of the net worth from the latest audited financial statements of CTCI Chemicals Corporation

21,173 21,173 - 12.38

The ceiling for total guarantee is $1,026,527, 600% of the net worth from the latest audited financial statements of CTCI Chemicals Corporation.

6

Shang Ding Engineering

& Construction

Co., Ltd

Shanghai XuanLi Trading Co., Ltd

2

300% of the net worth from the latest audited financial statements of Shang Ding Engineering & Construction Co., Ltd

252,843 252,843 - 48.46

The ceiling for total guarantee is $3,130,397, 600% of the net worth from the latest audited financial statements of Shang Ding Engineering & Construction Co., Ltd.

424

7 KD Holding Corporation

G.D. Development Corporation

6

200% of the net worth from the latest audited financial statements of KD Holding Corporation

254,853 246,870 - 6.16

The ceiling for total guarantee is $12,016,362, 300% of the net worth from the latest audited financial statements of KD Holding Corporation.

Note 1: 1.Company：0

2.Subsidiaries：Please fill in the number with a sequence.

Note 2: Eligibility of endorsements or Guarantees：

1. A company with which it does business. 2. A company in which the company directly or indirectly holds more than 50%of the voting shares. 3. A company and subsidiaries totally holds more than 50% of the voting shares. 4. A company directly and indirectly holds more than 50% of the voting shares in the company. 5. Contract required. 6. The relationship of Joint venture.


Note 4: Fill in the maximum outstanding balance of endorsements/guarantees provided during the year ended March 31, 2014.

425

B. Lending to others: (as of March 31st, 2014)

No. (Note.1)

Lender Borrower Account item

(Note.2)

The highest balance during period

(Note.3)

Ending balance

as of March

31st,2014 (Note 8)

Interest rate

Nature of

Lending (Note.4)

Amount for

operation (Note.5)

Reason of short-term financing (Note.6)

Allowance for bad debts

Collateral Limit on lending

for single enterprise (Note.7)

Ceiling for total

amount (Note.7)

Name Value

1 CTCI

Overseas Corp. Ltd.


& Construction

Co., Ltd

Accounts receivable-related

parties 355,808 355,808

0.775%~

0.814% 2 0

For operational

needs 0 NA 0 820,872 820,872

1 CTCI

Overseas Corp. Ltd.

CIPEC Construction

Inc.


parties 13,614 13,614 0.822% 2 0

For operational

needs 0 NA 0 820,872 820,872

2

Universal Engineering

(BVI) Corporation

Superiority (Thailand) Company Limited


parties 60,338 60,338 0.822% 2 0

For operational

needs 0 NA 0 133,516 133,516

2

Universal Engineering

(BVI) Corporation

CTCI Overseas Corp. Ltd.


parties 24,370 24,370 0.788% 2 0

For operational

needs 0 NA 0 133,516 133,516

3 KD Holding Corporation

G.D. Development Corporation


parties 100,000 100,000 1.6% 2 0

For operational

needs 0 NA 0 416,599 1,666,395

4

JingDing Engineering

& Construction

Co., Ltd.


& Construction

Co., Ltd


parties 25,155 24,505 2.6% 2 0

For operational

needs 0 NA 0 418,053 418,053

426

Note 1： Number for items explain as follows：

■Company：0

■ Subsidiaries：Please fill in the number with a sequence.

Note 2： This item is for account receivable-related parties, owner’s equity, prepayments, temporary payments etc. If any item belong to Lending to others

needs to be filled in this column. Note 3： The highest balance during period

Note 4： Description for Lending to others as follows：

■1：Having business relationship

■2：Operational needs

Note 5： Belongs to item 1, please fill in the amount for operation.

Note 6： Belongs to item 2, please explain the reason and lending purpose of short-term financing. For example, repayment for loans, purchasing equipments,

or needs for operations and working capital, etc. Note 7： Please fill in the limit of amount on lending to single enterprise and total limit of amount on lending to others by the Company, according to the

stipulation of the Procedures of Lending to Others, and express the calculation of the aforesaid figures in the column of remarks. Note 8： The amounts of funds to be loaned to others which have been approved by the board of directors of a public company in accordance with Article 14,

Item 1 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies” should be included in its published balance of loans to others at the end of the reporting period to reveal the risk of loaning the public company bears, even though they have not yet been appropriated. However, this balance should exclude the loans repaid when repayments are done subsequently to reflect the risk adjustment. In addition, if the board of directors of a public company has authorized the chairman to loan funds in installments or in revolving within certain lines and within one year in accordance with Article 14, Item 2 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”, the published balance of loans to others at the end of the reporting period should also include these lines of loaning approved by the board of directors, and these lines of loaning should not be excluded from this balance even though the loans are repaid subsequently, for taking into consideration they could be loaned again thereafter.

427

C. Derivative Transactions Information: a. Derivatives transactions by the Dec. 31, 2013

(1) Up to December 31, 2013, CTCI Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 2,786,467 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange gain of aforesaid forward contracts is 18,342 thousand, listed in non-operating income.

(2) Up to December 31, 2013, CTCI Corporation engaged in FX SWAP transactions to hedge the risks from FX commitment. Total contract amount is 2,312,665 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid SWAP contracts is 23,268 thousand, listed in non-operating expense.

(3) Up to December 31, 2013, CTCI Corporation engaged in Commodity SWAP transactions to hedge the risks from fluctuation in raw material prices. Total contract amount is 2,235,312 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid SWAP contracts is 108,532 thousand, listed in non-operating expense.

(4) Up to December 31, 2013, CTCI Overseas Corporation Limited engaged in FX SWAP transactions to hedge the risks from FX commitment. Total contract amount is 215,734 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid SWAP contracts is 4,087 thousand, listed in non-operating expense.

(5) Up to December 31, 2013, CTCI Chemicals Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 198,546 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange gain of aforesaid forward contracts is 748 thousand, listed in non-operating income.

(6) Up to December 31, 2013, JingDing Engineering & Construction Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 96,094 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 865 thousand, listed in non-operating expense.

(7) Up to December 31, 2013, E&C Engineering Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 79,608 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange gain of aforesaid forward contracts is 228 thousand, listed in non-operating income.

(8) Up to December 31, 2013, Universal Engineering Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 61,013 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange gain of aforesaid forward contracts is 3,349 thousand, listed in non-operating income.

(9) Up to December 31, 2013, CTCI Malaysia Sdn. Bhd. engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 63,262 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange gain of aforesaid forward contracts is 506 thousand, listed in non-operating income.

b. Derivatives transactions by the Mar. 31, 2014 (1) Up to March 31, 2014, CTCI Corporation engaged in FX forward transactions to hedge

the risks from FX commitment. Total contract amount is 874,217 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 1,269 thousand, listed in non-operating expense.

(2) Up to March 31, 2014, CTCI Corporation engaged in FX SWAP transactions to hedge the risks from FX commitment. Total contract amount is 897,060 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid SWAP contracts is 16,086 thousand, listed in non-operating expense.

428

(3) Up to March 31, 2014, CTCI Corporation engaged in Commodity SWAP transactions to hedge the risks from fluctuation in raw material prices. Total contract amount is 774,525 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid SWAP contracts is 47,889 thousand, listed in non-operating expense.

(4) Up to March 31, 2014, CTCI Overseas Corporation Limited engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 205,485 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 771 thousand, listed in non-operating expense.

(5) Up to March 31, 2014, CTCI Chemicals Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 80,123 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange gain of aforesaid forward contracts is 1,503 thousand, listed in non-operating income.

(6) Up to March 31, 2014, E&C Engineering Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 29,350 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange gain of aforesaid forward contracts is 683 thousand, listed in non-operating income.

(7) Up to March 31, 2014, Universal Engineering Corporation engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 61,013 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange loss of aforesaid forward contracts is 1,347 thousand, listed in non-operating expense.

(8) Up to March 31, 2014, CTCI Malaysia Sdn. Bhd. engaged in FX forward transactions to hedge the risks from FX commitment. Total contract amount is 63,262 thousand. As the counter-party has good credit, the financial risk is limited. The total exchange gain of aforesaid forward contracts is 11 thousand, listed in non-operating income

8.1.4 Consolidated Financial Statements of Affiliated Enterprises of the Company: None

8.1.5 Affiliation Report: None

429

8.2 Private Placement Securities in the Most Recent Years: None 8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years:

Unit: NT$ thousands; Shares; %

Name of subsidiary

Stock capital

collected

Fund source

Shareholding ratio of the

company (%)

Date of acquisition or

disposition

Shares and

amount acquired

Shares and amount disposed

of

Investment gain (loss)

Shareholdings & amount in the most recent

year

Mortgage

Endorsement amount made

for the subsidiary

Amount loaned to

the subsidiary


$151,000 own reserves

93.16 1997.08

50,000 $1,764

1,028

$61 None None None

1997.10 50,000 $2,021

$258

1997.10 50,000 $1,893

1997.12 50,000 $1,780

1997.12 100,000

$3,673 $185

1998.08 50,000 $3,092

1998.12

Stock dividend 11,500

1998.12 61,000 $3,112

$45

1999.12 971,160 $31,475

1999.12 831,560 $26,951

$721

2001.12 505,871 $13,256

2002.12 645,000

2004.08

Stock dividend 9

2005.10

Stock dividend 9

430

2006.10

Stock dividend 7

2007.10 Stock dividend

20


12


$1,690,000 own reserves

100 1999.03 550,000 $21,878

912,170 $53,818

None None None

1999.03 200,000

$8,104 $303

1999.04 450,000 $19,056

1999.04 450,000 $18,791

$586

1999.05 350,000 $14,677

1999.05 620,000 $27,053

$831

1999.06 776,000 $28,919

1999.07


1999.07 15,000

$584 $18

1999.08 100,000

$3,044

2000.02 427,000 $14,663

$1,274


68,220


108,060

2004.08

Stock dividend

8,710

431

2005.10



6,954


18,539


10,816


$100,000 own reserves

100 1999.04

328,000 $14,198

344,436 $20,322

None None None

1999.04 105,000

$4,582 $108

1999.05 350,000 $14,826

1999.05 400,000 $17,881

$769

1999.06 250,000

$9,659

1999.07


2000.02 308,840

$8,841 $420

2000.07


2001.07


2004.08


2005.10


2006.10


2007.10


2008.09


432

8.4 Other Supplementary Information 8.4.1 KPI by industry:

A. KPI for conclusion of contract, operating revenue and gross profit The KPI for conclusion of contract, operating revenue and gross profit with respect to “Refining and petro-chemical” and “Non-refining and petro-chemical” in 2013 is specified as following:

Item Conclusion of Contract (Unit : NT$100 million)

Operating Revenue (Unit : NT$100 million)

Gross Profit (%)

Refining and petro-chemical

214.59 208.43 3.66

Non-refining and petro-chemical

305.60 175.12 6.80

B. Operating performance

a. The new contract amount, operating revenue and net profit exceed those in 2013. b. To expand the international business, the Company aims at winning contracts for no less

than three construction projects of more than USD 300 million. C. Utilization of information

a. Our plan to deliver ERP system to all subsidiaries has been completed, we continued to meet local customization needs and improve workflow process.

b. To develop SCM and international procurement performance management system, then enhance engineering procurement management capabilities.

c. To build paperless work environment, achieving carbon reduction effect. For example, paperless meeting can make smooth internal communication, and on-line workflow system can improve office automation speeds.

D. Corporate governance

a. To enhance the risk audit operation and project enforcers’ risk concept b. To increase the Company’s governance transparency, information disclosure scores and

rating. E. Social responsibility

a. Concern about safety and health environment, carry out HSE management system. b. Aggressively build positive ties throughout the community and promote activities of the arts

and education. c. Foster engineering expertise with close attention employee training and education and the

exchange of knowledge which also enhances Industry-academic cooperation d. Provide employment opportunities, assist job related activities and build long term ties with

marginally listed workers. e. Offer a friendly workplace, health promotion activities in order to improve the physical and

mental health of the employee.

433

f. KPI for energy saving and carbon reduction and health management:

Item KPI in 2013 Performance KPI in 2014

Water consumption in the workplace

Less than 10.16M3/person (average water consumption over the years)

10.8 M3/person No increase in the consumption ratio based upon the (average amount consumed over the years)

Power consumption in workplace

Less than 6,560,737 degree (average amount consumed electricity over the years)

6,311,179 degree No increase in the consumption ratio based upon the average amount used over the years.

Health management - Promotion

More than 12 seminars

15 seminars More than 12 seminars

g. To enhance the urgent response ability, there are a total of 33 qualified first-aid personnel.

8.4.2 Material Event Impact on Shareholders' Equity or Share Price in Recent Years until the Annual

Report being published None

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